10-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

þ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2009

or

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 000-51397

Federal Home Loan Bank of New York

(Exact name of registrant as specified in its charter)

Federal	13-6400946
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)
101 Park Avenue
New York, New York	10178
(Address of principal executive offices)	(Zip code)

(212) 681-6000
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:
Class B Stock, putable, par value $100
(Title of class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No þ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. þ

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o	Accelerated filer o	Non-accelerated filer þ	Smaller reporting company o
		(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No þ

Registrant’s stock is not publicly traded and is only issued to members of the registrant. Such stock is issued and redeemed at par value, $100 per share, subject to certain regulatory and statutory limits. At June 30, 2009, the aggregate par value of the common stock held by members of the registrant was approximately $5,370,279,100. At February 28, 2010, 49,148,524 shares of common stock were outstanding.

Federal Home Loan Bank of New York
2009 Annual Report on Form 10-K
Table of Contents

PART I
ITEM 1. BUSINESS	3
ITEM 1A. RISK FACTORS	28
ITEM 1B. UNRESOLVED STAFF COMMENTS	32
ITEM 2. PROPERTIES	32
ITEM 3. LEGAL PROCEEDINGS	32
ITEM 4. (REMOVED AND RESERVED)	32
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES	33
ITEM 6. SELECTED FINANCIAL DATA	34
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	37
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	177
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	183
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	276
ITEM 9A. CONTROLS AND PROCEDURES	276
ITEM 9B. OTHER INFORMATION	276
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE	280
ITEM 11. EXECUTIVE COMPENSATION	291
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS	335
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE	337
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES	340
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES	341
SIGNATURES	343
Exhibit 10.05
Exhibit 10.07
Exhibit 10.08
Exhibit 10.09
Exhibit 10.10
Exhibit 10.11
Exhibit 10.12
Exhibit 12.01
Exhibit 31.01
Exhibit 31.02
Exhibit 32.01
Exhibit 32.02
Exhibit 99.01
Exhibit 99.02

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ITEM 1. BUSINESS.

General

The Federal Home Loan Bank of New York (“FHLBNY” or “the Bank”) is a federally chartered corporation, exempt from federal, state and local taxes except real property taxes. It is one of twelve district Federal Home Loan Banks (“FHLBanks”). The FHLBanks are U.S. government-sponsored enterprises (“GSEs”), organized under the authority of the Federal Home Loan Bank Act of 1932, as amended (“FHLBank Act”). Each FHLBank is a cooperative owned by member institutions located within a defined geographic district. The members purchase capital stock in the FHLBank and generally receive dividends on their capital stock investment. The FHLBNY’s defined geographic district is New Jersey, New York, Puerto Rico, and the U.S. Virgin Islands. The FHLBNY provides a readily available, low-cost source of funds for its member institutions. The FHLBNY does not have any wholly or partially owned subsidiaries, nor does it have an equity position in any partnerships, corporations, or off-balance-sheet special purpose entities. The Bank does have two grantor trusts related to employee benefits programs, and these are more fully described in Note 16 — Employee Retirement Plans to the audited financial statements.

The FHLBNY obtains its funds from several sources. A primary source is the issuance of FHLBank debt instruments, called consolidated obligations, to the public. The issuance and servicing of consolidated obligations are performed by the Office of Finance, a joint office of the FHLBanks. These debt instruments represent the joint and several obligations of all the FHLBanks. Additional sources of FHLBNY funding are member deposits, other borrowings, and the issuance of capital stock. Deposits may be accepted from member financial institutions and federal instrumentalities.

The FHLBNY combines private capital and public sponsorship as a GSE to provide its member financial institutions with a reliable flow of credit and other services for housing and community development. By supplying additional liquidity to its members, the FHLBNY enhances the availability of residential mortgages and community investment credit.

Members of the FHLBNY must purchase FHLBNY stock according to regulatory requirements. (For more information, see Note 11 — Mandatorily redeemable capital stock and Note 13 — Capital to the audited financial statements). The business of the cooperative is to provide liquidity for our members (primarily in the form of loans referred to as “advances”) and to provide a return on members’ investment in FHLBNY stock in the form of a dividend. Since the members are both stockholders and customers, the Bank operates such that there is a trade-off between providing value to them via low pricing for advances with a relatively lower dividend versus higher advances pricing with a relatively higher dividend. The FHLBNY is managed to deliver balanced value to members, rather than to maximize profitability or advance volume through low pricing.

All federally insured depository institutions, insured credit unions and insurance companies engaged in residential housing finance can apply for membership in the FHLBank in their district. All members are required to purchase capital stock in FHLBNY as a condition of membership. For the year ending December 31, 2009, community financial institutions are defined as FDIC-insured depository institutions having average total assets of $1.0 billion. Annually, the Federal Housing Finance Agency (“Finance Agency”), formerly the Federal Housing Finance Board (“Finance Board”), will adjust the total assets “cap” to reflect any percentage increase in the preceding year’s Consumer Price Index.

A member of another FHLBank or a financial institution that is not a member of any FHLBank may also hold FHLBNY stock as a result of having acquired an FHLBNY member. Because the Bank operates as a cooperative, the FHLBNY conducts business with related parties in the normal course of business and considers all members and non-member stockholders as related parties in addition to the other FHLBanks. (For more information, see Note 20 — Related party transactions to the audited financial statements. See also Item 13 — Certain Relationships and Related Transactions, and Director Independence in this Form 10-K).

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The FHLBNY’s primary business is making collateralized loans or advances to members and also the principal factor that impacts the financial condition of the FHLBNY. The FHLBNY also serves the public through its mortgage programs, which enable FHLBNY members to liquefy certain mortgage loans by selling them to the Bank. The FHLBNY also provides members with such correspondent services as safekeeping, wire transfers, depository and settlement services. Non-members that have acquired members have access to these services up to the time that their advances outstanding have been prepaid or have matured.

As of July 2008, the FHLBNY is supervised and regulated by the Federal Housing Finance Agency (“Finance Agency”), which is an independent agency in the executive branch of the U.S. government. The Finance Agency’s mission statement is to provide effective supervision, regulation and housing mission oversight of Fannie Mae, Freddie Mac and the Federal Home Loan Banks to promote their safety and soundness, support housing finance and affordable housing, and to support a stable and liquid mortgage market. However, while the Finance Agency establishes regulations governing the operations of the FHLBanks, the Bank functions as a separate entity with its own management, employees and board of directors.

The FHLBNY’s website is www.fhlbny.com. The FHLBNY has adopted, and posted on its website, a Code of Business Conduct and Ethics applicable to all of its employees and directors.

Market Area

The FHLBNY’s market area is the same as its membership district — New Jersey, New York, Puerto Rico, and the U.S. Virgin Islands. Institutions that are members of the FHLBNY must have their principal places of business within this market area but may also operate elsewhere. The FHLBNY had 331 and 311 members at December 31, 2009 and 2008.

The most recent market analysis performed in 2009 indicated that in the Bank’s district, there are 29 banks and thrifts and nearly 600 credit unions eligible for membership but have not joined. Of these, the FHLBNY considers approximately 75 as appropriate candidates for membership. An appropriate candidate for membership is an institution that is likely to do sufficient advance business with the FHLBNY within a reasonable period of time, so that the stock the potential member will likely to be required to purchase, under the provisions of membership, will not dilute the dividend on the existing members’ stock. Characteristics that identify attractive candidates include an asset base of $100 million or greater ($50 million for credit unions), an established practice of wholesale funding, a high loan-to-deposit ratio, strong asset growth, sufficient eligible collateral, and management that had experience with the FHLBanks during previous employment.

The FHLBNY actively markets membership through personal calling and promotional materials. The FHLBNY competes for business by offering competitively priced products and financial flexibility afforded by membership. Institutions join the FHLBNY primarily for access to a reliable source of liquidity.

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Advances are an attractive source of liquidity because they permit members to pledge relatively non-liquid assets, such as 1-4 family, multifamily and commercial real estate mortgages held in portfolio, to create liquidity for the member. Advances are attractively priced because of the FHLBNY’s access to capital markets as a Government Sponsored Enterprise and the FHLBNY’s strategy of providing balanced value to members.

The following table summarizes the FHLBNY’s members by type of institution.

	Commercial		Thrift		Credit		Insurance
	Banks		Institutions		Unions		Companies		Total
December 31, 2009		160		112		54		5		331
December 31, 2008		151		115		40		5		311

Business Segments

The FHLBNY manages and reports on its operations as a single business segment. Senior management and the FHLBNY’s Board of Directors review enterprise-wide financial information in order to make operating decisions and assess performance. All of the FHLBNY’s revenues are derived from U.S. operations. For more information, see Note 21 — Segment Information and concentration to the audited financial statements accompanying this report.

The FHLBNY’s cooperative structure permits it to expand and contract with demand for advances and changes in membership. When advances are paid down, either because the member no longer needs the funds or because the member has been acquired by a non-member and the former member decides to prepay advances, the stock associated with the advances is immediately redeemed. When advances are paid before maturity, the FHLBNY collects fees that make the FHLBNY financially indifferent to the prepayment. The FHLBNY’s operating expenses are very low, about 6.0-8.0 basis points on average assets. Dividend capacity, which is a function of net income and the amount of stock outstanding, is largely unaffected by the prepayment, since future stock and future income are reduced more or less proportionately. We believe that the FHLBNY will be able to meet its financial obligations and continue to deliver balanced value to members even if demand for advances drops significantly or if members are lost to acquisitions.

Products and Services

The FHLBNY offers to its members several correspondent banking services as well as safekeeping services. The fee income that is generated from these services is not significant. The FHLBNY also issues standby letters of credit on behalf of members for a fee. The total of income derived from such services was about $4.2 million for the year ended December 31, 2009, about $3.4 million in 2008 and $3.3 million in 2007. On an infrequent basis, the FHLBNY may act as an intermediary to purchase derivative instruments for members.

The FHLBNY provides the Mortgage Partnership Finance^® program to its members as another service. For more information, see Acquired Member Assets Programs in this report. However, the FHLBNY does not expect the program to become a significant factor in its operations. The interest revenues derived from this program and another inactive mortgage program aggregated $72.0 million for the year ended December 31, 2009 and $77.9 million and $78.9 million for the years ended December 31, 2008 and 2007. The revenues were not a significant source of Net interest income for the FHLBNY.

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The FHLBNY’s short-term investments certificates of deposits, Federal funds sold and interest-earning deposits placed with high-rated financial institutions provide immediate liquidity to satisfy members’ needs for funds. Investments in mortgage-backed securities, classified as held-to-maturity or available-for-sale, and housing finance agency bonds, classified as held-to-maturity, provide additional earnings to enhance dividend potential for members. As a cooperative, the FHLBNY strives to provide its members a reasonable return on their investment in the FHLBNY’s capital stock. The interest income derived from investments aggregated $0.5 billion, $1.0 billion and $1.2 billion for the years ended December 31, 2009, 2008 and 2007 and represented 27.7%, 23.4% and 25.2% of total interest income for those years.

However, advances to members are the primary focus of the FHLBNY’s operations, and are also the principal factor that impacts the financial condition of the FHLBNY. Revenues from advances to members are the largest and the most significant element in the FHLBNY’s operating results. Providing advances to members, supporting the products and associated collateral and credit operations, and funding and swapping the funds are the focus of the FHLBNY’s operations.

Advances

The FHLBNY offers a wide range of credit products to help members meet local credit needs, manage interest rate and liquidity risk, and serve their communities. The Bank’s primary business is making secured loans, called advances, to its members. These advances are available as short- and long-term loans with adjustable-variable-and fixed-rate features (including option-embedded and amortizing advances).

Advances to members, including former members, constituted 82.4% and 79.4% of the FHLBNY’s Total assets of $114.5 billion and $137.5 billion at December 31, 2009 and 2008. In terms of revenues, interest income derived from advances was $1.3 billion, $3.0 billion, and $3.5 billion, representing 68.4%, 74.7% and 73.2% of total interest income for the years ended December 31, 2009, 2008 and 2007. These metrics have remained relatively stable over time. Most of the FHLBNY’s critical functions are directed at supporting the borrowing needs of the FHLBNY’s members, monitoring the members’ associated collateral positions, and providing member support operations.

Members use advances as a source of funding to supplement their deposit-gathering activities. Advances borrowed by members have grown substantially in recent years because many members have not been able to increase their deposits in their local markets as quickly as they have increased their assets. To close this funding gap, members have preferred to obtain reasonably priced advances rather than increasing their deposits by offering higher rates or foregoing asset growth. Because of the wide range of advance types, terms, and structures available to them, members have also used advances to enhance their asset/liability management. As a cooperative, the FHLBNY prices advances at minimal net spreads above the cost of its funding in order to deliver more value to members.

The FHLBNY’s members are required by the FHLBank Act to pledge collateral to secure their advances. Eligible collateral includes: (1) one-to-four-family and multi-family mortgages; (2) Treasury and U.S. government agency securities; (3) mortgage-backed securities; and (4) certain other collateral that is real estate-related, provided that such collateral has a readily ascertainable value and that the FHLBNY can perfect a security interest in that collateral. The FHLBNY also has a statutory lien priority with respect to certain member assets under the FHLBank Act as well as a claim on FHLBNY capital stock held by its members.

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Highlights of the Bank’s Advances offered to members are as follows (outstanding par amounts of Advances by product type are disclosed in a table in the MD&A section captioned Financial Condition: Assets, Liabilities, Capital, Commitments and Contingencies):

• Overnight Line of Credit Program (“OLOC”): The OLOC program gives members a short-term, flexible, readily accessible revolving line of credit for immediate liquidity needs. OLOC Advances mature on the next business day, at which time the advance is repaid. Interest is calculated on a 360-day basis, charged daily, and priced at a spread to the prevailing Federal funds rate.

• Fixed-Rate Advances: Fixed-Rate Advances are flexible funding tools that can be used by members to meet short- to long-term liquidity needs. Terms vary from 2 days to 30 years.

• Adjustable-Rate Credit Advances (“ARC”): ARC advances are medium- and long-term loans that can be pegged to a variety of indices, such as 1-month LIBOR, 3-month LIBOR, the Federal funds rate, or Prime. Members use an ARC advance to manage interest rate and basis risks by efficiently matching the interest rate index and repricing characteristics of floating-rate assets and liabilities. The interest rate is set and reset (depending upon the maturity of the advance and the type of index) at a spread to that designated index.

• Amortizing Advances: Amortizing Advances are medium- or long-term, fixed-rate loans with fixed amortizing schedules structured to match the payment characteristics of a mortgage loan or portfolio of mortgage loans held by the member. Terms offered are from one to 30 years with constant principal and interest payments.

• Putable Advances: Putable advances are medium- to long-term loans that are structured so the member sells the Bank an option or a strip of options. If the advance is put by the Bank at the end of the lockout period, the member has the option to pay off the advance or request replacement funding with an advance product of their choice at the current market rates as established by the Bank.

Letters of Credit

The FHLBNY may issue standby financial letters of credit (“Letters of Credit”) on behalf of members to facilitate members’ residential and community lending, provide members with liquidity, or assist members with asset/liability management. Where permitted by law, members may utilize FHLBNY letters of credit to collateralize deposits made by units of state and local governments (“municipal deposits”). The FHLBNY’s underwriting and collateral requirements for securing Letters of Credit are the same as its requirements for securing advances.

Derivatives

To assist members in managing their interest rate and basis risks in both rising and falling interest-rate environments, the FHLBNY will act as an intermediary between the member and derivatives counterparty. The FHLBNY does not act as a dealer and views this as an additional service to its members. Amounts of such transactions have not been material. Participating members must comply with the FHLBNY’s documentation requirements and meet the Bank’s underwriting and collateral requirements.

Acquired Member Assets Programs

Utilizing a risk-sharing structure, the FHLBanks are permitted to acquire certain assets from or through their members. These initiatives are referred to as Acquired Member Assets (“AMA”) programs. At the FHLBNY, the Acquired Member Assets initiative is the Mortgage Partnership Finance (“MPF^®”) Program, which provides members with an alternative to originating and selling long-term, fixed-rate mortgages in the secondary market. In the MPF Program, the FHLBNY purchases conforming fixed-rate mortgages originated or purchased by its members. Members are then paid a fee for assuming a portion of the credit risk of the mortgages acquired by the FHLBNY. Members assume credit risk by providing a credit enhancement to the FHLBNY or providing and paying for a supplemental mortgage insurance policy insuring the FHLBNY for some portion of the credit risk involved. This provides a double-A equivalent level of creditworthiness on the mortgages. The amount of this credit enhancement is fully collateralized by the member. The FHLBNY assumes the remainder of the credit risk along with the interest rate risk of holding the mortgages in its portfolio.

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In a typical MPF Program, the Participating Financial Institution (“PFI”) sells previously closed loans to the FHLBNY. In the past, the FHLBNY has also purchased loans on a flow basis (referred to as “table-funding,” which means that the PFI uses the FHLBNY’s funds to make the mortgage loan to the borrower). The PFI closes the loan “as agent” for the FHLBNY. Table funded loans are restricted to the Mortgage Partnership Finance 100 product (“MPF 100”). The Finance Agency specifically authorized table funded loans in its regulations authorizing the MPF Program and the only product initially offered for the first two years of the MPF Program was for table funded loans. The Finance Agency’s initial resolutions were specifically extended by the Acquired Member Assets Regulations.

The Acquired Member Assets Regulation does not specifically address the disposition of Acquired Member Assets. The main intent of that regulation is the purchase of assets for investment rather than for trading purposes. However, the FHLBanks have the legal authority to sell Mortgage Partnership Finance loans pursuant to the granting of incidental powers in Section 12 of the FHLBank Act. Section 12(a) of the FHLBank Act specifically provides that each FHLBank “shall have all such incidental powers, not inconsistent with the provisions of this chapter, as are customary and usual in corporations generally.” General corporate law principles permit the sale of investments.

On September 23, 2008, the FHLBank of Chicago announced the launch of the MPF Xtra product which provides participating FHLBanks and PFIs with an additional new balance sheet mortgage sale alternative. Loans sold to the FHLBank of Chicago through the MPF Xtra product will concurrently be sold to Fannie Mae, as a third party investor, and will not be held on the FHLBank of Chicago’s balance sheet. Unlike other MPF products, under the MPF Xtra product PFIs are not required to provide credit enhancement and would not receive credit enhancement fees. As of December 31, 2009, the FHLBNY has not participated in this product.

The FHLBNY also holds participation interests in residential and community development mortgage loans through its Community Mortgage Asset (“CMA”) program. Acquisitions of participations under the Community Mortgage Asset program were suspended indefinitely in November 2001.

Mortgage Partnership Finance Program

Introduction

The Bank invests in mortgage loans through the MPF Program, which is a secondary mortgage market structure under which eligible mortgage loans are purchased or funded from or through Participating Financial Institution members (“PFIs”) and purchase participations in pools of eligible mortgage loans are purchased from other FHLBanks (collectively, “MPF” or “MPF Loans”). MPF Loans are conforming conventional and Government i.e., insured or guaranteed by the Federal Housing Administration (“FHA”), the Department of Veterans Affairs (“VA”), the Rural Housing Service of the Department of Agriculture (“RHS”) or the Department of Housing and Urban Development (“HUD”) fixed rate mortgage loans secured by one-to-four family residential properties with maturities ranging from 5 to 30 years or participations in such mortgage loans. MPF Loans that are Government loans, are collectively referred to as “MPF Government Loans.”

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There are currently five MPF Loan products from which PFIs may choose. Four of these products (Original MPF, MPF 125, MPF Plus and MPF Government) are closed loan products in which the Bank purchases loans that have been acquired or have already been closed by the PFI with its own funds. However, under the MPF 100 product, the Bank “table funds” MPF Loans that is, the Bank provides the funds through the PFI as the Bank’s agent to make the MPF Loan to the borrower. The PFI performs all the traditional retail loan origination functions under this and all other MPF products. With respect to the MPF 100 product, the Bank is considered the originator of the MPF Loan for accounting purposes since the PFI is acting as our agent when originating this MPF Loan. This product is no longer offered by the Bank and the last asset acquired under this program was on July 27, 2009.

The FHLBank of Chicago developed the MPF Program in order to help fulfill the housing mission and to provide an additional source of liquidity to FHLBank members that choose to sell mortgage loans into the secondary market rather than holding them in their own portfolios. Finance Agency regulations define the acquisition of Acquired Member Assets (“AMA”) as a core mission activity of the FHLBanks. In order for MPF Loans to meet the AMA requirements, the purchase and funding are structured so that the credit risk associated with MPF Loans is shared with PFIs.

The MPF Program enables other FHLBanks, including the FHLBNY, to purchase and fund MPF Loans with their member PFIs. In addition, the FHLBank of Chicago (“MPF Provider”) provides programmatic and operational support to those FHLBanks that participate in the program (“MPF Banks”). The current MPF Banks are the Federal Home Loan Banks of: Boston, Des Moines, New York, Pittsburgh, and Topeka.

MPF Banks generally acquire whole loans from their respective PFIs but may also acquire them from a member PFI of another MPF Bank with permission of the PFI’s respective MPF Bank or may acquire participations from another MPF Bank. The FHLBNY has not purchased loans from another FHLBank since January 2000.

The MPF Program is designed to allocate the risks of MPF Loans among the MPF Banks and PFIs and to take advantage of their respective strengths. PFIs have direct knowledge of their mortgage markets and have developed expertise in underwriting and servicing residential mortgage loans. By allowing PFIs to originate MPF Loans, whether through retail or wholesale operations and to retain or acquire servicing of MPF Loans, the MPF Program gives control of those functions that most impact credit quality to PFIs. The MPF Banks are responsible for managing the interest rate risk, prepayment risk and liquidity risk associated with owning MPF Loans.

For conventional MPF Loan products, PFIs assume or retain a portion of the credit risk on the MPF Loans they cause to be funded by or they sell to an MPF Bank by providing credit enhancement (“CE Amount”) either through a direct liability to pay credit losses up to a specified amount or through a contractual obligation to provide supplemental mortgage guaranty insurance. The PFI’s CE Amount covers losses for MPF Loans under a master commitment in excess of the MPF Bank’s first loss account. PFIs are paid a credit enhancement fee (“CE Fee”) for managing credit risk and in some instances all or a portion of the CE Fee may be performance based. See “Credit Enhancement Structure — MPF Loan Credit Risk” for a detailed discussion of the credit enhancement, risk sharing arrangements and loan product information for the MPF Program.

MPF Provider

The FHLBank of Chicago (“MPF Provider”) establishes the eligibility standards under which an MPF Bank member may become a PFI, the structure of MPF Loan products and the eligibility rules for MPF Loans. In addition, the MPF Provider manages the pricing and delivery mechanism for MPF Loans and the back-office processing of MPF Loans in its role as master servicer and master custodian. The MPF Provider has engaged Wells Fargo Bank N.A. as the vendor for master servicing and as the primary custodian for the MPF Program. The MPF Provider has also contracted with other custodians meeting MPF Program eligibility standards at the request of certain PFIs. These other custodians are typically affiliates of PFIs and in some cases a PFI acts as self-custodian.

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The MPF Provider publishes and maintains the MPF Origination Guide and MPF Servicing Guide (together “MPF Guides”), which detail the requirements PFIs must follow in originating or selling and servicing MPF Loans. The MPF Provider maintains the infrastructure through which MPF Banks may fund or purchase MPF Loans through their PFIs. This infrastructure includes both a telephonic delivery system and a web-based delivery system accessed through the eMPF^® website. In exchange for providing these services, the MPF Provider receives a fee from each of the MPF Banks.

PFI Eligibility

Members and eligible housing associates may apply to become a PFI of their respective MPF Bank. If a member is an affiliate of a holding company which has another affiliate that is an active PFI, the member is only eligible to become a PFI if it is a member of the same MPF Bank as the existing PFI. The MPF Bank reviews the general eligibility of the member, its servicing qualifications and ability to supply documents, data and reports required to be delivered by PFIs under the MPF Program. The member and its MPF Bank sign an MPF Program Participating Financial Institution Agreement (“PFI Agreement”) that provides the terms and conditions for the sale or funding of MPF Loans, including required credit enhancement, and establishes the terms and conditions for servicing MPF Loans. All of the PFI’s obligations under the PFI Agreement are secured in the same manner as the other obligations of the PFI under its regular advances agreement with the MPF Bank. The MPF Bank has the right under the advances agreement to request additional collateral to secure the PFI’s obligations.

Mortgage Standards

Mortgage loans delivered under the MPF Program must meet the underwriting and eligibility requirements in the MPF Guides, as amended by any waiver granted to a PFI exempting it from complying with specified provisions of the MPF Guides. PFIs may utilize an approved automated underwriting system or underwrite MPF Loans manually. The current underwriting and eligibility guidelines under the MPF Guides with respect to MPF Loans are broadly summarized as follows:

• Mortgage characteristics. MPF Loans must be qualifying 5- to 30-year conventional or Government fixed-rate, fully amortizing mortgage loans, secured by first liens on owner-occupied one-to-four unit single-family residential properties and single unit second homes. Conventional loan size, which is established annually as required by Federal Housing Finance Agency regulations, may not exceed the loan limits permitted to be set except in areas designated by the Department of Housing and Urban Development (“HUD”) as High-Cost Areas where the permitted loan size is higher. Condominium, planned unit development and manufactured homes are acceptable property types as are mortgages on leasehold estates (though manufactured homes must be on land owned in fee simple by the borrower).

• Loan-to-Value Ratio and Primary Mortgage Insurance. The maximum loan-to-value ratio (“LTV”) for conventional MPF Loans must not exceed 95%. AHP mortgage loans may have LTVs up to 100% (but may not exceed 105% total LTV, which compares the property value to the total amount of all mortgages outstanding against a property). Government MPF Loans may not exceed the LTV limits set by the applicable federal agency. Conventional MPF Loans with LTVs greater than 80% require certain amounts of mortgage guaranty insurance (“MI”), called primary MI.

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• Documentation and Compliance with Applicable Law. The mortgage documents and mortgage transaction must comply with all applicable laws and mortgage loans must be documented using standard Fannie Mae/Freddie Mac Uniform Instruments.

• Ineligible Mortgage Loans. The following types of mortgage loans are not eligible for delivery under the MPF Program: (1) mortgage loans that are not ratable by S&P; (2) mortgage loans not meeting the MPF Program eligibility requirements as set forth in the MPF Guides and agreements; and (3) mortgage loans that are classified as high cost, high rate, high risk, Home Ownership and Equity Protection Act (HOEPA) loans or loans in similar categories defined under predatory lending or abusive lending laws.

The MPF Guides also contain MPF Program policies which include anti-predatory lending policies, eligibility requirements for PFIs such as insurance requirements and annual certification requirements, loan documentation and custodian requirements, as well as detailing the PFI’s servicing duties and responsibilities for reporting, remittances, default management and disposition of properties acquired by foreclosure or deed in lieu of foreclosure.

A majority of the states, and some municipalities, have enacted laws against mortgage loans considered predatory or abusive. Some of these laws impose a liability for violations not only on the originator, but also upon purchasers and assignees of mortgage loans. The FHLBNY takes measures that are considered reasonable and appropriate to reduce the Bank’s exposure to potential liability under these laws and we are not aware of any claim, action or proceeding asserting that the Bank may be liable under these laws. However, the Bank can not be certain that it will never have any liability under predatory or abusive lending laws.

MPF Loan Deliveries

In order to deliver mortgage loans under the MPF Program, the PFI and MPF Bank will enter into a best efforts master commitment (“Master Commitment”) which provides the general terms under which the PFI will deliver mortgage loans to an MPF Bank, including a maximum loan delivery amount, maximum CE amount and expiration date. PFIs may then request to enter into one or more mandatory funding or purchase commitments (each, a “Delivery Commitment”), which is a mandatory commitment of the PFI to sell or originate eligible mortgage loans. Each MPF Loan delivered must conform to specified ranges of interest rates, maturity terms and business days for delivery (which may be extended for a fee) detailed in the Delivery Commitment or it will be rejected by the MPF Provider. Each MPF Loan under a Delivery Commitment is linked to a Master Commitment so that the cumulative credit enhancement level can be determined for each Master Commitment.

The sum of MPF Loans delivered by the PFI under a specific Delivery Commitment may be subject to a pair off fee if it exceeds the amount specified in the Delivery Commitment fee. Delivery Commitments that are not fully funded by their expiration dates are subject to pair-off fees (fees charged to a PFI for failing to deliver the amount of loans specified in a Delivery Commitment) or extension fees (fees charged to a PFI for extending the deadline to deliver loans on a Delivery Commitment).

In connection with each sale to or funding by an MPF Bank, the PFI makes customary representations and warranties in the PFI Agreement and under the MPF Guides that includes eligibility and conformance of the MPF Loans with the requirements in the MPF Guides, compliance with predatory lending laws and the integrity of the data transmitted to the MPF Provider. Once an MPF Loan is funded or purchased, the PFI must deliver a qualifying promissory note and certain other required documents to the designated custodian, who reports to the MPF Provider whether the documentation package matches the funding information transmitted to the MPF Provider and otherwise meets MPF Program requirements.

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In the role of the MPF Provider, the FHLBank of Chicago conducts an initial quality assurance review of a selected sample of MPF Loans from each PFI’s initial MPF Loan delivery. Thereafter, it performs periodic reviews of a sample of MPF Loans to determine whether the reviewed MPF Loans complied with the MPF Program requirements at the time of acquisition. Any exception that indicates a negative trend is discussed with the PFI and can result in the suspension or termination of a PFI’s ability to deliver new MPF Loans if the concern is not adequately addressed.

When a PFI fails to comply with the requirements of the PFI Agreement, MPF Guides, applicable law or terms of the mortgage documents, the PFI may be required to provide an indemnification covering related losses or to repurchase the MPF Loans which are impacted by such failure if it cannot be cured. Reasons for which a PFI could be required to repurchase an MPF Loan may include but are not limited to MPF Loan ineligibility, breach of representation or warranty under the PFI Agreement or the MPF Guides, failure to deliver the required MPF Loan document package to an approved custodian, servicing breach or fraud.

The Bank does not currently conduct quality assurance reviews of MPF Government loans. The PFI is required to deliver an enforceable Government Agency insurance certificate or loan guaranty.

In addition, the PFI may purchase out of the pools of delinquent MPF Government Loans, which is customary in the industry. The repurchase price is equal to the current scheduled principal balance and accrued interest on the MPF Government Loan

Also, just as for conventional MPF Loans, if a PFI fails to comply with the requirements of the PFI Agreement, MPF Guides, applicable law or terms of mortgage documents, the PFI may be required to repurchase the MPF Government Loans which are impacted by such failure.

The FHLBNY has not experienced any losses related to a PFI’s failure to repurchase conventional MPF Loans or MPF Government Loans where PFIs were required to make repurchases under the terms of the MPF Guides.

MPF Products

A variety of MPF Loan products have been developed to meet the differing needs of PFIs. There are currently six MPF products that PFIs may choose from: Original MPF, MPF 100, MPF 125, MPF Plus, MPF Government and MPF Xtra. The products have different credit risk sharing characteristics based upon the different levels for the FLA and CE Amount and the types of CE Fees (performance based or fixed amount). The table below provides a comparison of the MPF products. The Bank does not offer new master commitments for the MPF 100 product and does not offer the MPF Xtra product to its members.

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MPF Product Comparison Table

		PFI Credit			Servicing
		Enhancement	Credit	Credit	Fee
	MPF Bank	Size	Enhancement	Enhancement	retained
Product Name	FLA 1	Description	Fee to PFI	Fee Offset 2	by PFI
Original MPF	3 to 5 basis points/added each year based on the unpaid balance	Equivalent to “AA”	9 to 11 basis points/year — paid monthly	No	25 basis points/year
MPF 100	100 basis points fixed based on the size of the loan pool at closing	After FLA to “AA”	7 to 10 basis points/year — paid monthly; performance based after 2 or 3 years	Yes — After first 2 to 3 years	25 basis points/year
MPF 125	100 basis points fixed based on the size of the loan pool at closing	After FLA to “AA”	7 to 10 basis points/year — paid monthly; performance based	Yes	25 basis points/year
MPF Xtra	N/A	N/A	N/A	N/A	25 basis points/year
MPF Plus	Sized to equal expected losses	0-20 bps after FLA and SMI to “AA”	6 to 7 basis points/year fixed plus 6 to 7 basis points/year; performance based (delayed for 1 year); all fees paid monthly	Yes	25 basis points/year
MPF Government	N/A	N/A (Unreimbursed Servicing Expenses)	N/A	N/A	44 basis points/year plus 2 basis points/year3

1	MPF Program Master Commitments participated in or held by the Bank as of December 31, 2009.
2	Future payouts of performance-based credit enhancement fees are reduced when losses are allocated to the FLA.
3	For Government Loan Master Commitments issued after February 1, 2007, only the customary 0.44% (44 basis points) per annum servicing fee is paid based on the outstanding aggregate principal balance of the MPF Government Loans.

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MPF Loan Participations

While the FHLBNY may purchase participation interests in MPF Loans from other MPF Banks and may also sell participation interests to other MPF Banks at the time MPF Loans are acquired, the FHLBNY has not purchased or sold any interest in MPF loans since July 2004. The Bank’s intent is to hold all MPF Loans for its portfolio.

The FHLBNY is responsible for evaluating, monitoring, and certifying to any participating MPF Bank the creditworthiness of each PFI initially, and at least annually thereafter. The FHLBNY is responsible for ensuring that adequate collateral is available from each of its PFIs to secure any direct obligation portion of the PFI’s CE Amount. The Bank is also responsible for enforcing the PFI’s obligations under its PFI Agreement.

Under the MPF Program, participation percentages for MPF Loans may range from 100 percent to be retained by the Bank to 100 percent participated to another MPF Bank. The participation percentages do not change during the period that a Master Commitment is open unless the MPF Banks contractually agree to change their respective shares. If the specified participation percentage in a Master Commitment never changes, then the percentage for risk-sharing of losses will remain unchanged throughout the life of the Master Commitment.

The risk sharing and rights of the Owner Bank and participating MPF Bank(s) are as follows:

• each pays its respective pro rata share of each MPF Loan acquired under a Delivery Commitment and related Master Commitment based upon the participation percentage in effect at the time;

• each receives its respective pro rata share of principal and interest payments and is responsible for credit enhancement fees based upon its participation percentage for each MPF Loan under the related Delivery Commitment;

• each is responsible for its respective pro rata share of First Loss Account (“FLA”) exposure and losses incurred with respect to the Master Commitment based upon the overall risk sharing percentage for the Master Commitment; and

• each may economically hedge its share of the Delivery Commitments as they are issued during the open period.

The FLA and CE Amount apply to all the MPF Loans in a Master Commitment regardless of participation arrangements, so an MPF Bank’s share of credit losses is based on its respective participation interest in the entire Master Commitment. For example, assume a MPF Bank’s specified participation percentage was 25 percent under a $100 million Master Commitment and that no changes were made to the Master Commitment. The MPF Bank risk sharing percentage of credit losses would be 25 percent. In the case where an MPF Bank changes its initial percentage in the Master Commitment, the risk sharing percentage will also change. For example, if an MPF Bank were to acquire 25 percent of the first $50 million and 50 percent of the second $50 million of MPF Loans delivered under a Master Commitment, the MPF Bank would share in 37.5 percent of the credit losses in that $100 million Master Commitment, while it would receive principal and interest payments on the individual MPF Loans that remain outstanding in a given month, some in which it may own a 25 percent interest and the others in which it may own a 50 percent interest.

Effective May 2004, the FHLBNY retains 100 percent of loans acquired from its PFIs for its own investment.

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MPF Servicing

The PFI or its servicing affiliate generally retains the right and responsibility for servicing MPF Loans it delivers. The PFI is responsible for collecting the borrower’s monthly payments and otherwise dealing with the borrower with respect to the MPF Loan and the mortgaged property. Based on monthly reports the PFI is required to provide the master servicer, appropriate withdrawals are made from the PFI’s deposit account with the applicable MPF Bank. In some cases, the PFI has agreed to advance principal and interest payments on the scheduled remittance date when the borrower has failed to pay, provided that the collateral securing the MPF Loan is sufficient to reimburse the PFI for advanced amounts. The PFI recovers the advanced amounts either from future collections or upon the liquidation of the collateral securing the MPF Loans.

If an MPF Loan becomes delinquent, the PFI is required to contact the borrower to determine the cause of the delinquency and whether the borrower will be able to cure the default. The MPF Guides permit certain types of forbearance plans and the Guides also provide for certain types of temporary modification plans.

Upon any MPF Loan becoming 90 days or more delinquent, the master servicer monitors and reviews the PFI’s default management activities for that MPF Loan, including timeliness of notices to the mortgagor, forbearance proposals, property protection activities, and foreclosure referrals, all in accordance with the MPF Guides. Upon liquidation of any MPF Loan and submission of each realized loss calculation from the PFI, the master servicer reviews the realized loss calculation for conformity with the primary mortgage insurance requirements, if applicable, and conformity to the cost and timeliness standards of the MPF Guides. The master servicer disallows the reimbursement to the PFI of any servicing advances related to the PFI’s failure to perform in accordance with the MPF Guides. If there is a loss on a conventional MPF Loan, the loss is allocated based on the Master Commitment and shared in accordance with the risk sharing structure for that particular Master Commitment. The servicer re-pays any gain on sale of real-estate owned property to the MPF Bank or, in the case of participation, to the MPF Banks based upon their respective interest in the MPF Loan. However, the amount of the gain is available to reduce subsequent losses incurred under the Master Commitment before such losses are allocated between the MPF Bank and the PFI.

The MPF Provider monitors the PFI’s compliance with MPF Program requirements throughout the servicing process and will bring any material concerns to the attention of the MPF Bank. Minor lapses in servicing are charged to the PFI. Major lapses in servicing could result in a PFI’s servicing rights being terminated for cause and the servicing of the particular MPF Loans being transferred to a new, qualified servicing PFI. In addition, the MPF Guides require each PFI to maintain errors and omissions insurance and a fidelity bond and to provide an annual certification with respect to its insurance and its compliance with the MPF Program requirements.

Although PFIs or their servicing affiliates generally service the MPF Loans delivered by the PFI, certain PFIs choose to sell the servicing rights on a concurrent basis (servicing released) or in a bulk transfer to another PFI which is permitted with the consent of the MPF Banks involved. One PFI has been designated to acquire servicing under the MPF Program’s concurrent sale of servicing option. In addition, several PFIs have acquired servicing rights on a concurrent servicing released basis or bulk transfer basis without the direct support from the MPF Program.

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Credit Enhancement Structure

Overview

The MPF Bank and PFI share the risk of credit losses on MPF Loans by structuring potential losses on conventional MPF Loans into layers with respect to each Master Commitment. The first layer or portion of credit losses that an MPF Bank is potentially obligated to incur is determined based upon the MPF Product selected by the PFI and is referred to as the “First Loss Account” (“FLA”). The FLA functions as a tracking mechanism for determining the point after which the PFI, in its role as credit enhancer, would be required to cover losses. The FLA is not a cash collateral account and does not give an MPF Bank any right or obligation to receive or pay cash or other collateral. For MPF products with performance based credit enhancement fees (“CE Fees”), the MPF Bank may withhold CE Fees to recover losses at the FLA level essentially transferring a portion of the first layer risk of credit loss to the PFI.

The portion of credit losses that a PFI is potentially obligated to incur is referred to as its credit enhancement amount (“CE Amount”). The PFI’s CE Amount represents a direct liability to pay credit losses incurred with respect to a Master Commitment or the requirement of the PFI to obtain and pay for a supplemental mortgage guaranty insurance (“SMI”) policy insuring the MPF Bank for a portion of the credit losses arising from the Master Commitment. The PFI may procure SMI to cover losses equal to all or a portion of the CE Amount (except that losses generally classified as special hazard losses are covered by the PFI’s direct liability or the MPF Bank, not by SMI). The final CE Amount is determined once the Master Commitment is closed (i.e., when the maximum amount of MPF Loans are delivered or the expiration date has occurred). For a description of how the PFI’s CE Amount is determined, see “Credit Risk — MPF Program Credit Risk — Setting Credit Enhancement Levels.”

The PFI receives a CE Fee in exchange for providing the CE Amount which may be used to pay for SMI. CE Fees are paid monthly and are determined based on the remaining unpaid principal balance of the MPF Loans under the Master Commitment. The CE Fee and CE Amount may vary depending on the MPF product selected. CE Fees payable to a PFI as compensation for assuming credit risk are recorded as an offset to MPF Loan interest income when paid by the Bank. The Bank also pays performance CE Fees which are based on actual performance of the pool of MPF Loans in each Master Commitment. To the extent that losses in the current month exceed performance CE Fees accrued, the remaining losses may be recovered from withholding future performance CE Fees payable to the PFI.

Loss Allocation

Credit losses on conventional MPF Loans not absorbed by the borrower’s equity in the mortgaged property, property insurance or primary mortgage insurance are allocated between the MPF Bank and PFI as follows:

• First, to the MPF Bank, up to an agreed upon amount, called a First Loss Account.

Original MPF. The FLA starts out at zero on the day the first MPF Loan under a Master Commitment is purchased but increases monthly over the life of the Master Commitment at a rate that ranges from 0.03% to 0.05% (3 to 5 basis points) per annum based on the month end outstanding aggregate principal balance of the Master Commitment. The FLA is structured so that over time, it should cover expected losses on a Master Commitment, though losses early in the life of the Master Commitment could exceed the FLA and be charged in part to the PFI’s CE Amount.

MPF 100 and MPF 125. The FLA is equal to 1.00% (100 basis points) of the aggregate principal balance of the MPF Loans funded under the Master Commitment. Once the Master Commitment is fully funded, the FLA is intended to cover expected losses on that Master Commitment, although the MPF Bank may economically recover a portion of losses incurred under the FLA by withholding performance CE Fees payable to the PFI.

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MPF Plus. The FLA is equal to an agreed upon number of basis points of the aggregate principal balance of the MPF Loans funded under the Master Commitment that is not less than the amount of expected losses on the Master Commitment. Once the Master Commitment is fully funded, the FLA is intended to cover expected losses on that Master Commitment, although the MPF Bank may economically recover a portion of losses incurred under the FLA by withholding performance CE Fees payable to the PFI.

• Second, to the PFI under its credit enhancement obligation, losses for each Master Commitment in excess of the FLA, if any, up to the CE Amount. The CE Amount may consist of a direct liability of the PFI to pay credit losses up to a specified amount, a contractual obligation of the PFI to provide SMI or a combination of both. For a description of the CE Amount calculation, see “Setting Credit Enhancement Levels,” below.

• Third, any remaining unallocated losses are absorbed by the MPF Bank.

With respect to participation interests, MPF Loan losses allocable to the MPF Bank are allocated amongst the participating MPF Banks pro ratably based upon their respective participation interests in the related Master Commitment. For a description of the risk sharing by participant MPF Banks see “MPF Program — MPF Loan Participations.”

Setting Credit Enhancement Levels

Finance Board regulations require that MPF Loans be sufficiently credit enhanced so that the Bank’s risk of loss is limited to the losses of an investor in an “AA” rated mortgage-backed security, unless the Bank maintains additional retained earnings in addition to a general allowance for losses. The MPF Provider also analyzes the risk characteristics of each MPF Loan (as provided by the PFI) using S&P’s LEVELS^® model in order to determine the required CE Amount for a loan or group of loans to be funded or acquired by an MPF Bank (“MPF Program Methodology”). The PFI’s CE Amount (including the SMI policy for MPF Plus) is calculated using the MPF Program Methodology to equal the difference between the amount needed for the Master Commitment to have a rating equivalent to a “AA” rated mortgage-backed security and our initial FLA exposure (which is zero for the Original MPF product). The FHLBNY determines the FLA exposure by taking the initial FLA and reducing it by the estimated value of any performance based CE Fees that would be payable to the PFI.

For MPF Plus, the PFI is required to provide an SMI policy covering the MPF Loans in the Master Commitment and having a deductible initially equal to the FLA. Depending upon the amount of the SMI policy (determined in part by the amount of the CE Fees paid to the PFI), the PFI may or may not have any direct liability on the CE Amount.

The Bank will recalculate the estimated credit rating of a Master Commitment if there is evidence of a decline in credit quality of the related MPF Loans.

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Credit Enhancement Fees

The structure of the CE Fee payable to the PFI depends upon the product type selected. For Original MPF, the PFI is paid a monthly CE Fee between 0.09% and 0.11% (9 to 11 basis points) per annum and paid monthly based on the aggregate outstanding principal balance of the MPF Loans in the Master Commitment.

For MPF 100 and MPF 125, the PFI is paid a monthly CE Fee between 0.07% and 0.10% (7 and 10 basis points) per annum and paid monthly on the aggregate outstanding principal balance of the MPF Loans in the Master Commitment. The PFI’s monthly CE Fee is performance based in that it is reduced by losses charged to the FLA. For MPF 100, the CE Fee is fixed for the first two or three years of a Master Commitment and thereafter becomes performance based. For MPF 125, the CE Fee is performance based for the entire life of the Master Commitment.

For MPF Plus, the performance based portion of the CE Fee is typically between 0.06% and 0.07% (6 and 7 basis points) per annum and paid monthly on the aggregate outstanding balance of the MPF Loans in the Master Commitment. The performance based CE Fee is reduced by losses charged to the FLA and is paid one year after accrued based on monthly outstanding balances. The fixed portion of the CE Fee is typically 6-7 basis points per annum and paid monthly on the aggregate outstanding principal balance of the MPF Loans in the Master Commitment. The lower performance CE Fee is generally for Master Commitments without a direct PFI CE amount.

Only MPF Government Loans are eligible for sale under the MPF Government Product. The PFI provides and maintains insurance or a guarantee from the applicable federal agency (i.e., the FHA, VA, RHS or HUD) for MPF Government Loans and the PFI is responsible for compliance with all federal agency requirements and for obtaining the benefit of the applicable insurance or guarantee with respect to defaulted MPF Government Loans. Monthly, the PFI receives the customary 0.44% (44 basis points) per annum servicing fee that is retained by the PFI on a monthly basis based on the outstanding aggregate principal balance of the MPF Loans. In addition, for Master Commitments issued prior to February 1, 2007, the PFI is paid a monthly government loan fee equal to 0.02% (2 basis points) per annum based on the month end outstanding aggregate balance of the Master Commitment. Only PFIs that are licensed or qualified to originate and service Government loans by the applicable federal agency or agencies and that maintain a mortgage loan delinquency ratio that is acceptable to the Bank and that is comparable to the national average and/or regional delinquency rates as published by the Mortgage Bankers Association are eligible to sell and service MPF Government Loans under the MPF Program.

Credit Risk Exposure on MPF Loans

The Bank’s credit risk on MPF Loans is the potential for financial loss due to borrower default and depreciation in the value of the real estate collateral securing the MPF Loan, offset by the PFI’s credit enhancement protection. Under the MPF Program, the PFI’s credit enhancement protection (“CEP Amount”) may take the form of a contingent performance based CE Fee whereby such fees are reduced by losses up to a certain amount arising under the Master Commitment and the CE Amount (which represents a direct liability to pay credit losses incurred with respect to that Master Commitment or may require the PFI to obtain and pay for an SMI policy insuring the MPF Bank for a portion of the credit losses arising from the Master Commitment). Under the AMA Regulation, any portion of the CE Amount that is a PFI’s direct liability must be collateralized by the PFI in the same way that advances are collateralized. The PFI Agreement provides that the PFI’s obligations under the PFI Agreement are secured along with other obligations of the PFI under its regular advances agreement and further, that the FHLBNY may request additional collateral to secure the PFI’s obligations.

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The Bank also faces credit risk of loss on MPF Loans to the extent such losses are not recoverable from the PFI either directly or indirectly through performance based CE Fees, or from an SMI insurer, as applicable. However, because the typical MPF Loan to value ratio is less than 100% and PMI covers loan to value ratios in excess of 80%, a significant decline in value of the underlying property would have to occur before the Bank would be exposed to credit losses.

Correspondent Banking Services

The FHLBNY offers its members an array of correspondent banking services, including depository services, wire transfers, settlement services, and safekeeping services. Depository services include processing of customer transactions in “Overnight Investment Accounts”, the interest-bearing demand deposit account each customer has with the FHLBNY. All customer-related transactions (e.g., deposits, Federal Reserve Bank settlements, advances, securities transactions, and wires) are posted to these accounts each business day. Wire transfers include processing of incoming and outgoing domestic and foreign wire transfers, including third-party transfers. Settlement services include automated clearinghouse and other transactions received through the FHLBNY’s accounts at the Federal Reserve Bank as correspondent for its members and passed through to customers’ Overnight Investment Accounts at the FHLBNY. Through a third party, the FHLBNY offers customers a range of securities custodial services, such as settlement of book entry (electronically held) and physical securities. The FHLBNY encourages members to access these products through 1Link^sm, an Internet-based delivery system developed as a proprietary service by the FHLBNY. Members access the 1Link system to obtain account activity information or process wire transfers, book transfers, security safekeeping and advance transactions.

Affordable Housing Program and Other Mission Related Programs

Federal Housing Finance Agency regulation Part 952.5 (a) (“Community Investment Cash Advance Programs”) states in general that each FHLBank shall establish an Affordable Housing Program in accordance with Part 951, and a Community Investment Program. As more fully discussed under the section “Assessments” in this Form 10-K, annually, the 12 FHLBanks, including the FHLBNY, must set aside for the Affordable Housing Program the greater of $100 million or 10 percent of regulatory defined net income.

The FHLBank may also offer a Rural Development Advance program, an Urban Development Advance program, and other Community Investment Cash Advance programs.

Affordable Housing Program (“AHP”). The FHLBNY meets this requirement by allocating 10 percent of its previous year’s regulatory defined net income to its Affordable Housing Program each year. The Affordable Housing Program helps members of the FHLBNY meet their Community Reinvestment Act responsibilities. The program gives members access to cash grants and subsidized, low-cost funding to create affordable rental and home ownership opportunities, including first-time homebuyer programs. Within each year’s AHP allocation, the FHLBNY has established a set-aside program for first-time homebuyers called the First Home Club^sm. A total of 15% of each AHP allocation has been set aside for this program. Household income qualifications for the First Home Club are the same as for the competitive AHP. Qualifying households can receive matched funds at a 4:1 ratio, up to $7,500, to help with closing costs and/or down payment assistance. Households are also required to attend counseling seminars that address personal budgeting and home ownership skills training.

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Other Mission Related Activities. The Community Investment Program (“CIP”), Rural Development Advance, and Urban Development Advance are community-lending programs that provide additional support to members in their affordable housing and economic development lending activities. These community-lending programs support affordable housing and economic development activity within low- and moderate-income neighborhoods and other activities that benefit low- and moderate-income households. Through the Community Investment Program, Rural Development Advance, and Urban Development Advance programs, the FHLBNY provides reduced-interest-rate advances to members for lending activity that meets the program requirements. The FHLBNY also provides letters of credit (“Letters of Credit”) in support of projects that meet the CIP, Rural Development Advance, and Urban Development Advance program requirements. The project-eligible Letters of Credit are offered at reduced fees. Providing community lending programs (Community Investment Project, Rural Development Advance, Urban Development Advance, and Letters of Credit) at advantaged pricing that is discounted from the FHLBNY’s market interest rates and fees represents an additional allocation of the FHLBNY’s income in support of affordable housing and community economic development efforts. In addition, overhead costs and administrative expenses associated with the implementation of the FHLBNY’s Affordable Housing and community lending programs are absorbed as general operating expenses and are not charged back to the AHP allocation. The foregone interest and fee income, as well as the administrative and operating costs are above and beyond the annual income contribution to the AHP Loans offered under these programs.

Investments

The FHLBNY maintains portfolios of investments to provide additional earnings and for liquidity purposes. Investment income also bolsters the FHLBNY’s capacity to fund Affordable Housing Program projects, to cover operating expenditures, and to satisfy the Resolution Funding Corporation (REFCORP) assessment. For more information, see Assessments in this report. To help ensure the availability of funds to meet member credit needs, the FHLBNY maintains a portfolio of short-term investments issued by highly-rated financial institutions. The investments include overnight Federal funds, term Federal funds, interest-bearing deposits, and certificates of deposit. The FHLBNY further enhances interest income by holding long-term investments classified as either held-to-maturity or as available-for-sale. These portfolios primarily consist of mortgage-backed securities issued by government-sponsored mortgage enterprises and U.S. government agencies. The FHLBNY’s securities portfolio also includes a smaller portfolio of privately issued mortgage-backed and residential asset-backed securities, which were primarily acquired prior to 2004. Investments in mortgage-backed securities must carry, at the time of acquisition, the highest credit ratings from Moody’s Investors Service (“Moody’s”) or Standard & Poor’s (“S&P”). The FHLBNY also has investments in housing-related obligations of state and local governments and their housing finance agencies, which are required to carry ratings of AA or higher at time of acquisition. Housing-related obligations help to liquefy mortgages that finance low- and moderate-income housing. The long-term investment portfolio generally provides the FHLBNY with higher returns than those available in the short-term money markets. For more information about investments, see section Asset Quality and Concentration — Advances, Investment Securities, Mortgage Loans, and Counterparty Risks, in this MD&A.

The FHLBNY is prohibited from investing in certain types of securities, including:

• Instruments such as common stock that represent ownership in an entity. Exceptions include stock in small business investment companies and certain investments targeted at low-income persons or communities;

• Instruments issued by non-U.S. entities, other than those issued by U.S. branches and agency offices of foreign commercial banks; and

• Non-investment-grade debt instruments. Exceptions include certain investments targeted at low-income persons or communities and instruments that were downgraded after purchase.

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The FHLBNY also limits the book value of the FHLBNY’s investments in mortgage-backed and residential asset-backed securities, collateralized mortgage obligations (“CMOs”), Real Estate Mortgage Investment Conduits “REMICs”), and other eligible asset-backed securities, collectively mortgage-backed securities or “MBS”, to not exceed 300 percent of the Bank’s previous month-end regulatory capital on the day it purchases the securities. At the time of purchase, all securities purchased must carry the highest rating assigned by Moody’s or S&P.

The FHLBNY is prohibited from purchasing:

• Interest-only or principal-only stripped mortgage-backed securities;

• Residual-interest or interest-accrual classes of collateralized mortgage obligations (CMOs) and real estate mortgage investment conduits (REMICs);

• Fixed-rate or floating-rate mortgage-backed securities that, on the trade date are at rates equal to their contractual caps and whose average lives vary by more than six years under an assumed instantaneous interest rate change of 300 basis points; and

• Non-U.S. dollar denominated securities.

Debt Financing — Consolidated Obligations

The primary source of funds for the FHLBNY is the sale of debt securities, known as consolidated obligations, in the U.S. and Global capital markets. Consolidated obligations are the joint and several obligations of the FHLBanks, backed only by the financial resources of the twelve FHLBanks. Consolidated obligations are not obligations of the United States, and the United States does not guarantee them. Consolidated obligations are currently rated Aaa/P-1 by Moody’s and AAA/ A-1+ by S&P. These are the highest ratings available for such debt from a Nationally Recognized Statistical Rating Organization (“NRSRO”). These ratings indicate that the FHLBanks have an extremely strong capacity to meet their commitments to pay principal and interest on consolidated obligations and that the consolidated obligations are judged to be of the highest quality with minimal credit risk. The ratings on the FHLBanks’ consolidated obligations also reflect the FHLBank System’s status as a government-sponsored enterprise (“GSE”). These ratings have not been affected by rating actions taken with respect to individual FHLBanks. The FHLBNY is also currently rated Aaa/P-1 by Moody’s and AAA/ A-1+ by S&P. Investors should note that a rating issued by an NRSRO is not a recommendation to buy, sell or hold securities and that the ratings may be revised or withdrawn by the NRSRO at any time. Investors should evaluate the rating of each NRSRO independently.

At December 31, 2009 and 2008, the par amounts of consolidated obligations outstanding, bonds and discount notes, for all 12 FHLBanks aggregated $0.9 trillion and $1.3 trillion. In comparison, the par amounts of the FHLBNY’s consolidated obligations outstanding at December 31, 2009 and 2008 aggregated $104.2 billion and $127.4 billion.

Although the FHLBNY is primarily liable for its portion of consolidated obligations (i.e., those issued on its behalf), the FHLBNY is also jointly and severally liable with the other FHLBanks for the payment of principal and interest on the consolidated obligations of all the FHLBanks. If the principal or interest on any consolidated obligation issued on behalf of the FHLBNY is not paid in full when due, the following rules apply: the FHLBNY may not pay dividends to, or redeem or repurchase shares of stock from, any member or non-member stockholder until the Finance Agency, the regulator of the FHLBanks, approves the FHLBNY’s consolidated obligation payment plan or other remedy and until the FHLBNY pays all the interest or principal currently due under all its consolidated obligations. The Finance Agency, at its discretion, may require any FHLBank to make principal or interest payments due on any consolidated obligations.

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To the extent that a FHLBank makes any payment on a consolidated obligation on behalf of another FHLBank, the paying FHLBank shall be entitled to reimbursement from the non-complying FHLBank. However, if the Finance Agency determines that the non-complying FHLBank is unable to make the payment, then the Finance Agency may allocate the outstanding liability among the remaining FHLBanks in proportion to each FHLBank’s participation in all consolidated obligations outstanding or on any other basis determined by the Finance Agency.

Finance Agency regulations state that the FHLBanks must maintain, free from any lien or pledge, the following types of assets in an amount at least equal to the face amount of consolidated obligations outstanding:

• Cash;

• Obligations of, or fully guaranteed by, the United States;

• Secured advances;

• Mortgages that have a guaranty, insurance, or commitment from the United States or any agency of the United States;

• Investments described in section 16(a) of the FHLBank Act, including securities that a fiduciary or trust fund may purchase under the laws of the state in which the FHLBank is located; and

• Other securities that are rated Aaa by Moody’s or AAA by Standard & Poor’s.

The FHLBanks issue consolidated obligations through the Office of Finance (“OF”, or the “Office of Finance”), which has authority to issue joint and several debt on behalf of the FHLBanks. Consolidated obligations are distributed through dealers selected by the OF using various methods including competitive auction and negotiations with individual or syndicates of underwriters. Some debt issuance is in response to specific inquiries from underwriters. Many consolidated obligations are issued with the FHLBank concurrently entering into derivatives agreements, such as interest rate swaps. To facilitate issuance, the Office of Finance may coordinate communication between underwriters, individual FHLBanks, and financial institutions executing derivative agreements with the FHLBanks.

Issuance volume is not concentrated with any particular underwriter.

The Office of Finance may reject the FHLBNY’s request, and the requests of other FHLBanks, to raise funds through the issuance of consolidated obligations on particular terms and conditions if the Office of Finance determines that its action is consistent with its Finance Agency’s mandated policies that require consolidated obligations to be issued efficiently and at the lowest all-in cost of funds over time. The FHLBNY has never been denied access under this policy for all periods reported.

The Office of Finance also services all outstanding debt; provides the FHLBanks with rating information received from Nationally Recognized Statistical Rating Organizations (“NRSROs”) for counterparties to which the FHLBanks have unsecured credit exposure; serves as a source of information for the FHLBanks on capital market developments; administers the Resolution Funding Corporation and the Financing Corporation; and manages the FHLBanks’ relationship with the rating agencies with respect to the consolidated obligations.

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Consolidated obligation Bonds. Consolidated obligation bonds satisfy the FHLBNY’s long-term funding requirements. Typically, the maturity of these securities ranges from one to ten years, but the maturity is not subject to any statutory or regulatory limit. Consolidated obligation bonds can be fixed or adjustable rate and callable or non-callable. Consolidated obligation bonds can be issued and distributed through negotiated or competitively bid transactions with underwriters approved by the Office of Finance or members of a selling group.

The FHLBanks also conduct the TAP Issue Program for fixed-rate, non-callable bonds. This program combines bond issues with specific maturities by reopening these issues daily during a three-month period through competitive auctions. The goal of the TAP program is to aggregate frequent smaller issues into a larger bond issue that may have greater secondary market liquidity.

The FHLBanks also participate in the “Global Issuances Program”. The Global Issuance Program commenced in 2002 through the Office of Finance with the objective of providing funding to FHLBanks at lower interest costs than consolidated bonds issued through the TAP program because issuances occur less frequently, are larger in size, and are placed by dealers to investors via a syndication process.

Consolidated obligation Discount Notes. Consolidated obligation discount notes provide the FHLBNY with short-term funds. These notes have maturities of up to one year and are offered daily through a dealer-selling group. The notes are sold at a discount from their face amount and mature at par.

On a daily basis, FHLBanks may request that specific amounts of discount notes with specific maturity dates be offered by the Office of Finance for sale through the dealer-selling group. One or more other FHLBanks may also request that amounts of discount notes with the same maturities be offered for sale for their benefit on the same day. The Office of Finance commits to issue discount notes on behalf of the participating FHLBanks when dealers submit orders for the specific discount notes offered for sale. The FHLBanks receive funding based on the time of the request, the rate requested for issuance, and the trade settlement and maturity dates. If all terms of the request are the same except for the time of the request, then a FHLBank may receive from zero to 100 percent of the proceeds of the sale of the discount notes issued depending on: the time of the request; the maximum costs the FHLBank or other FHLBanks, if any, participating in the same issuance of discount notes are willing to pay for the discount notes; and the amount of orders for the discount notes submitted by dealers.

Twice weekly, FHLBanks may also request that specific amounts of discount notes with fixed maturity dates of 4, 9, 13, and 26 weeks be offered by the Office of Finance through a competitive auction conducted with securities dealers in the discount note selling group. One or more of the FHLBanks may also request that amounts of those same discount notes be offered for sale for their benefit through the same auction. The discount notes offered for sale through competitive auction are not subject to a limit on the maximum costs the FHLBanks are willing to pay. The FHLBanks receive funding based on their requests at a weighted average rate of the winning bids from the dealers. If the bids submitted are less than the total of the FHLBanks’ requests, a FHLBank receives funding based on that FHLBank’s capital relative to the capital of other FHLBanks offering discount notes.

Regardless of the method of issuance, the Office of Finance can only issue consolidated obligations when an FHLBank provides a request for and agrees to accept the funds.

Deposits

The FHLBank Act allows the FHLBNY to accept deposits from its members, and other FHLBanks and government instrumentalities. For the FHLBNY, member deposits are also a source of funding, but the FHLBNY does not rely on member deposits to meet its funding requirements. For members, deposits are a low-risk earning asset that may satisfy their regulatory liquidity requirements. The FHLBNY offers several types of deposit programs to its members, including demand and term deposits.

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Retained Earnings and Dividends

The FHLBNY’s Board of Directors adopted a Retained Earnings and Dividend Policy in order 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. The objective of the Retained Earnings and Dividend Policy is to preserve the value of the members’ investment in the Bank.

The FHLBNY may pay dividends from retained earnings and current income. The FHLBNY’s Board of Directors may declare and pay dividends in either cash or capital stock. Dividends and the dividend policy of the FHLBNY are subject to Finance Agency regulations and policies.

To preserve the value of the members’ investments, the level of retained earnings should be sufficient to: (1) protect the members’ paid in capital from losses related to market, credit, operational, and other risks (including legal and accounting) within a defined confidence level under normal operating conditions; and (2) provide members with a reasonable dividend. The FHLBNY’s level of retained earnings should provide management with a high degree of confidence that reasonably foreseeable losses will not impair paid in capital thereby preserving the par value of the stock, and to be available to supplement dividends when earnings are low or losses occur.

As of December 31, 2009, management had determined that the amount of retained earnings, net of losses in Accumulated other comprehensive income (loss) (“AOCI”), necessary to achieve the objectives based on the risk profile of the FHLBNY’s balance sheet was $358.1 million. Actual retained earnings as of December 31, 2009 were $688.9 million and losses in AOCI at December 31, 2009 were $144.5 million. The December 31, 2008 target was $212.2 million. Actual retained earnings at December 31, 2008 were $382.9 million and losses in AOCI at December 31, 2008 were $101.2 million. Management has not determined at this time its expected dividend payout ratios in 2010. Management is also in the process of re-evaluating the retained earnings target due to prevailing market conditions. The new methodology is likely to establish a higher retained earnings target.

The following table summarizes the impact of dividends on the FHLBNY’s retained earnings for the years ended December 31, 2009, 2008, and 2007 (in thousands):

	2009			2008			2007
Retained earnings, beginning of year	$	382,856		$	418,295		$	368,688
Net Income for the year		570,755			259,060			323,105
		953,611			677,355			691,793
Dividend paid in the year 1		(264,737	)		(294,499	)		(273,498	)
Retained earnings, end of year	$	688,874		$	382,856		$	418,295

¹ Dividends are not accrued at quarter end; they are declared and paid subsequent to the end of the quarter.

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Competition

Demand for advances is affected by, among other things, the availability and cost to members of alternate sources of liquidity, including retail deposits, wholesale deposits, repurchase agreements, and various government lending programs. Because members generally grow their assets at a faster pace than they grow retail deposits and capital, the FHLBNY competes with other suppliers of wholesale funding, both secured and unsecured, to fill the members’ potential funding gaps. Such other suppliers of funding may include investment banking firms, commercial banks, regional broker-dealers, the U.S. Government and firms capitalizing on wholesale funding platforms (e.g. “CDARS” the Certificate of Deposit Account Registry Service). Certain members may have access to alternative wholesale funding sources such as through lines of credit, wholesale CD programs, brokered CD’s and sales of securities under agreements to repurchase. Large members may also have independent access to the national and global credit markets. Government programs created to stabilize the funding markets, including the Troubled Asset Relief Program (“TARP”), the Federal Reserve’s Term Auction Facility (“TAF”), and the Temporary Liquidity Guarantee Program (“TLGP”) have been a moderate source of competition for the FHLBNY. The availability of alternative funding sources can vary as a result of market conditions, member creditworthiness, availability of collateral and suppliers’ appetite for the business as well as other factors.

The FHLBNY competes for funds raised through the issuance of unsecured debt in the national and global debt markets. Competitors include Federal National Mortgage Association (“Fannie Mae”), Federal Home Loan Mortgage Corp. (“Freddie Mac”) and other Government Sponsored Enterprises, as well as corporate, sovereign, and supranational entities. Increases in the supply of competing debt products could, in the absence of increases in demand, result in higher debt costs or lesser amounts of debt issued at the same cost than otherwise would be the case. In addition, the availability and the cost of funds can be adversely affected by regulatory initiatives that could reduce demand for Federal Home Loan Bank system debt. Although the available supply of funds has kept pace with the funding needs of the FHLBNY’s members, there can be no assurance that this will continue to be the case indefinitely.

In addition, the sale of callable debt and the simultaneous execution of callable derivatives that mirror the debt have been an important source of competitively priced funding for the FHLBNY. Therefore, the liquidity of markets for callable debt and derivatives are an important determinant of the FHLBNY’s relative cost of funds. There is considerable competition among high credit quality issuers in the markets for callable debt and derivatives. There can be no assurance that the current breadth and depth of these markets will be sustained.

The FHLBNY competes for the purchase of mortgage loans held-for-portfolio. For single-family products, the FHLBNY competes primarily with Fannie Mae and Freddie Mac principally on the basis of price, products, structures, and services offered.

Competition among the twelve member banks of the Federal Home Loan Bank system (“FHLBanks”) is limited. A bank holding company with multiple banking charters may operate in more than one Federal Home Loan Bank district. If the member has a centralized treasury function, it is possible that there could be competition for advances. A limited number of FHLBNY member institutions are subsidiaries of financial holding companies with multiple charters and FHLBank memberships. The FHLBNY does not believe, however, that the amount of advances borrowed, or the amount of capital stock held, is material in the context of its competitive environment. Certain large member financial institutions, operating in the FHLBNY’s district, may borrow unsecured Federal funds from other FHLBanks. The FHLBNY is not prohibited by regulation from purchasing short-term investments from its members, but the current practice is not to permit members to borrow unsecured funds from the FHLBNY.

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An indirect but growing source of competition is the acquisition of a FHLBNY member bank by a member of another FHLBank. Under Finance Agency regulations, if the charter residing within our district is dissolved, the acquired institution is no longer a member of the FHLBNY and cannot borrow additional funds from the FHLBNY. In addition, the non-member may not renew advances when they mature. Former members of the FHLBNY, who by virtue of being acquired attained non-member status, had advances borrowed and outstanding of $2.3 billion and $2.7 billion at December 31, 2009 and 2008, respectively. Such non-members also held capital stock, which was reported as mandatorily redeemable capital stock of $126.3 million and $143.1 million at December 31, 2009 and 2008, and classified as a liability in the Statements of Condition.

Oversight, Audits, and Examinations

The FHLBNY is supervised and regulated by the Federal Housing Finance Agency (“Finance Agency”), which was created on July 30, 2008, when the President signed into law the Housing and Economic Recovery Act of 2008. The Act created a regulator with all of the authorities necessary to oversee vital components of our country’s secondary mortgage markets — Fannie Mae, Freddie Mac, and the Federal Home Loan Banks. In addition, this law combined the staffs of the Office of Federal Housing Enterprise Oversight (OFHEO), the Federal Housing Finance Board (FHFB), and the GSE mission office at the Department of Housing and Urban Development (“HUD”). The establishment of the Finance Agency will promote a stronger, safer U.S. housing finance system, affordable housing and community investment through safety and soundness oversight of Fannie Mae, Freddie Mac and the Federal Home Loan Banks.

The FHLBNY carries out its statutory mission only through activities that comply with the rules, regulations, guidelines, and orders issued under the Federal Housing Enterprises Financial Safety and Soundness Act Housing Act and the FHLBank Act.

The Government Corporation Control Act provides that, before a government corporation may issue and offer obligations to the public, the Secretary of the Treasury shall prescribe the form, denomination, maturity, interest rate, and conditions of the obligations; the way and time issued; and the selling price. The U.S. Department of the Treasury receives the Finance Agency’s annual report to Congress, monthly reports reflecting securities transactions of the FHLBanks, and other reports reflecting the operations of the FHLBanks.

The FHLBNY has an internal audit department; the FHLBNY’s Board of Directors has an Audit Committee. An independent registered public accounting firm audits the annual financial statements of the FHLBNY. The independent registered public accounting firm conducts these audits following auditing standards established by the Public Company Accounting Oversight Board (United States). The FHLBanks, the Finance Agency, and Congress all receive the audit reports. The FHLBNY must also submit annual management reports to Congress, the President, the Office of Management and Budget, and the Comptroller General. These reports include: Statements of financial condition, operations, and cash flows; a Statement of internal accounting and administrative control systems; and the Report of the independent registered public accounting firm on the financial statements and internal controls over financial reporting.

The Comptroller General has authority under the FHLBank Act to audit or examine the Finance Agency and the FHLBanks, including the FHLBNY, and to decide the extent to which they fairly and effectively fulfill the purpose of the FHLBank Act. Furthermore, the Government Corporation Control Act provides that the Comptroller General may review any audit of the FHLBNY’s financial statements conducted by a registered independent public accounting firm. If the Comptroller General conducts such a review, then he or she must report the results and provide his or her recommendations to Congress, the Office of Management and Budget and the FHLBNY. The Comptroller General may also conduct his or her own audit of any financial statements of the FHLBNY.

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Personnel

As of December 31, 2009 the FHLBNY had 259 full-time and 5 part-time employees. At December 31, 2008, there were 247 full-time and 4 part-time employees. The employees are not represented by a collective bargaining unit, and the FHLBNY considers its relationship with its employees to be good.

Tax Status

The FHLBanks, including the FHLBNY, are exempt from ordinary federal, state, and local taxation except for local real estate tax.

Assessments

Resolution Funding Corporation (“REFCORP”) Assessments. Although the FHLBNY is exempt from ordinary federal, state, and local taxation except for local real estate tax, it is required to make payments to REFCORP.

REFCORP was established by Act of Congress in 1989 to help facilitate the U.S. government’s bailout of failed financial institutions. The REFCORP assessments are used by the Treasury to pay a portion of the annual interest expense on long-term obligations issued to finance a portion of the cost of the bailout. Principal on those long-term obligations will be paid from a segregated account containing zero-coupon U.S. government obligations, which were purchased using funds that Congress directed the FHLBanks to provide for that purpose.

The FHLBNY and each FHLBank is required to make payments to REFCORP (20% of annual GAAP net income after payment of AHP assessments) until the total amount of payments actually made by all twelve FHLBanks is equivalent to a $300 million annual annuity whose final maturity date is April 15, 2030. The cash payments are generally made based on preliminary GAAP net income amounts due to the timing requirement of the payment. Any FHLBank with a net loss for a quarter is not required to pay the REFCORP assessment for that quarter. The Finance Agency will shorten or lengthen the period during which the FHLBanks must make payments to REFCORP depending on actual payments relative to the referenced annuity. In addition, the Finance Agency, in consultation with the U.S. Secretary of the Treasury, selects the appropriate discounting factors used in calculating the annuity.

As a result of the payments by all twelve FHLBanks through the fourth quarter of 2009, the overall period during which the FHLBanks must continue to make quarterly payments was April 15, 2012, effective December 31, 2009. This date assumes that the FHLBanks will pay exactly $300 million annually after December 31, 2009 until the annuity is fully satisfied. This compares to the outside date of April 15, 2013, effective at December 31, 2008, based on REFCORP payments made through 2008. The cumulative amount to be paid to REFCORP by the FHLBNY is not determinable at this time because it depends on the future earnings of all FHLBanks and interest rates. If the FHLBNY experienced a net loss during a quarter, but still had net income for the year, the Bank’s obligation to the REFCORP would be calculated based on the Bank’s full year net income. If the FHLBNY had net income in subsequent quarters, it would be required to contribute additional amounts to meet its calculated annual obligation. If the FHLBNY experienced a net loss for a full year, the FHLBNY would have no obligation to the REFCORP for the year.

Affordable Housing Program (“AHP” or “Affordable Housing Program”) Assessments. Section 10(j) of the FHLBank Act requires each FHLBank to establish an Affordable Housing Program. Each FHLBank provides subsidies in the form of direct grants and below-market interest rate advances to members who use the funds to assist in the purchase, construction, or rehabilitation of housing for very low-, low-, and moderate-income households. Annually, the FHLBanks must set aside for the AHP the greater of $100.0 million or 10 percent of regulatory defined net income. Regulatory defined net income is GAAP net income before interest expense related to mandatorily redeemable capital stock and the assessment for Affordable Housing Program, but after the assessment for REFCORP. The exclusion of interest expense related to mandatorily redeemable capital stock is a regulatory interpretation of the Finance Agency. The FHLBNY accrues the AHP expense monthly.

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The FHLBNY charges the amount set aside for Affordable Housing Program to income and recognizes the amounts set aside as a liability. The Bank relieves the AHP liability as members use subsidies. In periods where the FHLBNY’s regulatory defined net income before Affordable Housing Program and REFCORP is zero or less, the amount of AHP liability is equal to zero, barring application of the following. If the result of the aggregate 10 percent calculation described above is less than $100 million for all 12 FHLBanks, then the Act requires the shortfall to be allocated among the FHLBanks based on the ratio of each FHLBank’s income before Affordable Housing Program and REFCORP to the sum of the income before Affordable Housing Program and REFCORP of the 12 FHLBanks. There was no shortfall in the years ended 2009, 2008, or 2007.

ITEM 1A. RISK FACTORS

The following risk factors along with all of the other information set forth in this Annual Report on Form 10-K, including the financial statements and accompanying notes, should be considered. If any of the events or developments described in this section were to occur, the business, financial condition or results of operations could be adversely affected.

The FHLBNY’s funding depends on its ability to access the capital markets. The FHLBNY’s primary source of funds is the sale of consolidated obligations in the capital markets. The FHLBNY’s ability to obtain funds through the sale of consolidated obligations depends in part on prevailing conditions in the capital markets, which are beyond the FHLBNY’s control. Accordingly, the FHLBNY may not be able to obtain funding on acceptable terms, if at all. If the FHLBNY cannot access funding when needed on acceptable terms, its ability to support and continue operations could be adversely affected, which could negatively affect its financial condition and results of operations.

Changes in the credit ratings on FHLBank System consolidated obligations may adversely affect the cost of consolidated obligations, which could adversely affect FHLBNY’s financial condition and results of operations. FHLBank System consolidated obligations have been assigned Aaa/P-1 and AAA/A-1+ ratings by Moody’s and S&P. Rating agencies may from time to time change a rating or issue negative reports, which may adversely affect the cost of funds of one or more FHLBanks, including the FHLBNY, and the ability to issue consolidated obligations on acceptable terms. A higher cost of funds or the impairment of the ability to issue consolidated obligations on acceptable terms could also adversely affect the FHLBNY’s financial condition and results of operations.

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The FHLBNY relies upon derivative instrument transactions to reduce its interest-rate risk, and changes in its credit ratings may adversely affect its ability to enter into derivative instrument transactions on acceptable terms. The FHLBNY’s financial strategies are highly dependent on its ability to enter into derivative instrument transactions on acceptable terms to reduce its interest-rate risk. Rating agencies may from time to time change a rating or issue negative reports, which may adversely affect the FHLBNY’s ability to enter into derivative instrument transactions with acceptable parties on satisfactory terms in the quantities necessary to manage its interest-rate risk on consolidated obligations or other financial instruments. This could negatively affect the FHLBNY’s financial condition and results of operations.

The FHLBanks are governed by federal laws and regulations, which could change or be applied in a manner detrimental to the FHLBNY’s operations. The FHLBanks are government-sponsored enterprises (“GSEs”), organized under the authority of the FHLBank Act, and, as such, are governed by federal laws and regulations of the Finance Agency, an independent agency in the executive branch of the federal government. From time to time, Congress has amended the FHLBank Act in ways that have significantly affected the FHLBanks and the manner in which the FHLBanks carry out their housing finance mission and business operations. New or modified legislation enacted by Congress or regulations adopted by the Finance Agency could have a negative effect on the FHLBanks’ ability to conduct business or its cost of doing business.

Changes in regulatory or statutory requirements or in their application could result in, among other things, changes in: the FHLBNY’s cost of funds; retained earnings requirements; debt issuance; dividend payment limits and the form of dividend payments; capital redemption and repurchase limits; permissible business activities; the size, scope; or nature of the FHLBNY’s lending, investment, or mortgage purchase program activities; or increased compliance costs. Changes that restrict dividend payments, the growth of the FHLBNY’s current business, or the creation of new products or services could negatively affect the FHLBNY’s results of operations and financial condition. Further, the regulatory environment affecting members could be changed in a manner that would negatively affect their ability to acquire or own FHLBNY’s capital stock or take advantage of an FHLBNY’s products and services.

As a result of these factors, the FHLBank System may have to pay a higher rate of interest on consolidated obligations to make them attractive to investors. If the FHLBNY maintains its existing pricing on advances, the resulting increase in the cost of issuing consolidated obligations could cause the FHLBNY’s advances to be less profitable and reduce their net interest margins (the difference between the interest rate received on advances and the interest rate paid on consolidated obligations). If, in response to this decrease in net interest margin, the FHLBNY changes the pricing of its advances, the advances may no longer be attractive to its members, and outstanding advances balances may decrease. In either case, the increased cost of issuing consolidated obligations could negatively affect the FHLBNY’s financial condition and results of operations.

Changes in interest rates could significantly affect the FHLBNY’s financial condition and results of operations. The FHLBNY realizes income primarily from the spread between interest earned on its outstanding advances, investments and shareholders’ capital, and interest paid on its consolidated obligations and other liabilities. Although the FHLBNY uses various methods and procedures to monitor and manage its exposure to changes in interest rates, the FHLBNY may experience instances when either its interest-bearing liabilities will be more sensitive to changes in interest rates than interest-earning assets, or vice versa. In either case, interest rate movements contrary to the FHLBNY’s position could negatively affect its financial condition and results of operations. Moreover, the effect of changes in interest rates can be exacerbated by prepayment and extension risk, which is the risk that mortgage related assets will be refinanced by the mortgagor in low interest rate environments or will remain outstanding longer then expected at below market yields when interest rates increase.

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A loss or change of business activities with large members could adversely affect the FHLBNY’s results of operations and financial condition. Withdrawal of one or more large members from the FHLBNY’s membership could result in a reduction of the FHLBNY’s total assets, capital, and net income. If one or more of the FHLBNY’s large members were to prepay its advances or repay the advances as they came due and no other advances were made to replace them, it could also result in a reduction of the FHLBNY’s total assets, capital, and net income. The timing and magnitude of the effect of a reduction in the amount of advances would depend on a number of factors, including:

• the amount and the period over which the advances were prepaid or repaid;

• the amount and timing of any corresponding decreases in activity-based capital;

• the profitability of the advances;

• the size and profitability of the FHLBNY’s short- and long-term investments; and

• the extent to which consolidated obligations matured as the advances were prepaid or repaid.

The FHLBNY’s financial condition and results of operations could be adversely affected by FHLBNY’s exposure to credit risk. The FHLBNY’s has exposure to credit risk in that the market value of an obligation may decline as a result of deterioration in the creditworthiness of the obligor or the credit quality of a security instrument. In addition, the FHLBNY assumes secured and unsecured credit risk exposure associated with the risk that a borrower or counterparty could default and the FHLBNY could suffer a loss if it could not fully recover amounts owed to it on a timely basis. A credit loss, if material, could have an adverse effect on the FHLBNY’s financial condition and results of operations, and the value of FHLBank membership.

The FHLBNY may not be able to meet its obligations as they come due or meet the credit and liquidity needs of its members in a timely and cost-effective manner. The FHLBNY seeks to be in a position to meet its members’ credit and liquidity needs and pay their obligations without maintaining excessive holdings of low-yielding liquid investments or being forced to incur unnecessarily high borrowing costs. In addition, the FHLBNY maintains a contingency liquidity plan designed to enable it to meet its obligations and the liquidity needs of members in the event of operational disruptions or short-term disruptions in the capital markets. The FHLBNY’s ability to manage its liquidity position or its contingency liquidity plan may not enable it to meet its obligations and the credit and liquidity needs of its members, which could have an adverse effect on the FHLBNY’s financial condition and results of operations.

The FHLBNY faces competition for advances, loan purchases, and access to funding, which could adversely affect its businesses and the FHLBNY’s efforts to make advance pricing attractive to its members may affect earnings. The FHLBNY’s primary business is making advances to its members, and the Bank competes with other suppliers of wholesale funding, both secured and unsecured, including investment banks, commercial banks and, in certain circumstances, other FHLBanks. The FHLBNY’s members have access to alternative funding sources, which may offer more favorable terms than the FHLBNY on its advances, including more flexible credit or collateral standards. The FHLBNY may make changes in policies, programs, and agreements affecting members from time to time, including, affecting the availability of and conditions for access to advances and other credit products, the MPF Program, the AHP, and other programs, products, and services, could cause members to obtain financing from alternative sources. In addition, many competitors are not subject to the same regulations, which may enable those competitors to offer products and terms that the FHLBNY is not able to offer.

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The availability to the FHLBNY’s members of alternative funding sources that are more attractive may significantly decrease the demand for the FHLBNY’s advances. Lowering the price of the advances to compete with these alternative funding sources may decrease the profitability of advances. A decrease in the demand for the FHLBNY’s advances or a decrease in the FHLBNY’s profitability on advances could adversely affect the FHLBNY’s financial condition and results of operations.

Certain FHLBanks, including the FHLBNY, also compete, primarily with Fannie Mae and Freddie Mac, for the purchase of mortgage loans from members. Some FHLBanks may also compete with other FHLBanks with which their members have a relationship through affiliates. The FHLBNY offers the MPF Program to its members. Competition among FHLBanks for MPF program business may be affected by the requirement that a member and its affiliates can sell loans into the MPF Program through only one FHLBank relationship at a time. Increased competition can result in a reduction in the amount of mortgage loans the FHLBNY is able to purchase and, therefore, lower income from this part of their businesses.

The FHLBanks, including the FHLBNY, also compete with the U.S. Department of the Treasury, Fannie Mae, Freddie Mac, and other GSEs, as well as corporate, sovereign, and supranational entities, for funds raised through the issuance of unsecured debt in the national and global debt markets. Increases in the supply of competing debt products may, in the absence of increases in demand, result in higher debt costs or lower amounts of debt issued at the same cost than otherwise would be the case. Increased competition could adversely affect the FHLBNY’s ability to have access to funding, reduce the amount of funding available to the FHLBNY, or increase the cost of funding available to the FHLBNY. Any of these effects could adversely affect the FHLBNY’s financial condition and results of operations.

The FHLBNY relies heavily on information systems and other technology. The FHLBNY relies heavily on its information systems and other technology to conduct and manage its business. If the FHLBNY experiences a failure or interruption in any of these systems or other technology, the FHLBNY may be unable to conduct and manage its business effectively, including its advance and hedging activities. Although the FHLBNY has implemented a business continuity plan, it may not be able to prevent, timely and adequately address, or mitigate the negative effects of any failure or interruption, which could adversely affect its member relations, risk management, and profitability and could negatively affect the FHLBNY’s financial condition and results of operations.

Economic downturns and changes in federal monetary policy could have an adverse effect on the FHLBNY’s business and its results of operations. The FHLBNY’s businesses and results of operations are sensitive to general business and economic conditions. These conditions include short- and long-term interest rates, inflation, money supply, fluctuations in both debt and equity capital markets, and the strength of the United States economy and the local economies in which the FHLBNY conducts its business. If any of these conditions deteriorate, the FHLBNY’s businesses and results of operations could be adversely affected. For example, a prolonged economic downturn could result in members becoming delinquent or defaulting on their advances. In addition, the FHLBNY’s business and results of operations are significantly affected by the fiscal and monetary policies of the federal government and its agencies, including the Federal Reserve Board, which regulates the supply of money and credit in the United States. The Federal Reserve Board’s policies directly and indirectly influence the yield on interest-earning assets and the cost of interest-bearing liabilities.

The FHLBNY may become liable for all or a portion of the consolidated obligations of the FHLBanks, which could negatively impact the FHLBNY’s financial condition and results of operations. The FHLBNY is jointly and severally liable along with the other Federal Home Loan Banks for the consolidated obligations issued on behalf of the Federal Home Loan Banks through the Office of Finance. Dividends on, redemption of, or repurchase of shares of the FHLBNY’s capital stock can not occur unless the principal and interest due on all consolidated obligations have been paid in full. If another Federal Home Loan Bank were to default on its obligation to pay principal or interest on any consolidated obligations, the Finance Agency may allocate the outstanding liability among one or more of the remaining Federal Home Loan Banks on a pro rata basis or on any other basis the Finance Agency may determine. As a result, the FHLBNY’s ability to pay dividends on, to redeem, or to repurchase shares of capital stock could be affected by the financial condition of one or more of the other Federal Home Loan Banks. However, no Federal Home Loan Bank has ever defaulted on its debt since the FHLB System was established in 1932.

31

ITEM 1B. UNRESOLVED STAFF COMMENTS.

None

ITEM 2. PROPERTIES.

The FHLBNY occupies approximately 41,000 square feet of leased office space at 101 Park Avenue, New York, New York. The FHLBNY also maintains 30,000 square feet of leased office space at 30 Montgomery Street, Jersey City, New Jersey, principally as an operations center and off-site back-up facility.

ITEM 3. LEGAL PROCEEDINGS.

From time to time, the Federal Home Loan Bank of New York is involved in disputes or regulatory inquiries that arise in the ordinary course of business. At the present time, there are no material pending legal proceedings against the Bank that would significantly impact the Bank’s financial condition, results of operations or cash flows.

As previously disclosed in Part I, Item 3 of the FHLBNY’s 2008 Annual Report on Form 10-K filed on March 27, 2009, an event of default occurred on September 15, 2008 under outstanding derivative contracts with a notional amount of $16.5 billion between Lehman Brothers Special Financing Inc. (“LBSF”) and the Bank when credit support provider Lehman Brothers Holdings Inc. (“LBHI”) commenced a case under Chapter 11 of Title 11 of the United States Code (the “Bankruptcy Code”). LBSF commenced a case under Chapter 11 of the Bankruptcy Code on October 3, 2008. The net amount that was due to the Bank after giving effect to obligations due to LBSF was approximately $65 million as of September 30, 2008. The Bank has fully reserved the LBSF receivables as the bankruptcies of LBSF and LBHI make the timing and the amount of the recovery uncertain.

As previously disclosed in Part II, Item 1 of the FHLBNY’s Quarterly Report on Form 10-Q filed on November 13, 2009, the FHLBNY filed a proof of claim of approximately $65 million as a creditor in connection with the bankruptcy proceedings. It is possible that, in the course of the bankruptcy proceedings, the FHLBNY may recover some amount in a future period. However, because the timing and the amount of such recovery remain uncertain, the Bank has not recorded an estimated recovery in its financial statements.

ITEM 4. (REMOVED AND RESERVED).

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PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

All of the stock of the FHLBNY is owned by its members. Stock may also be held by former members as a result of having acquired by a non-member institution. The FHLBNY conducts its business in advances and mortgages exclusively with its stockholder members and housing associates. There is no established marketplace for FHLBNY stock as FHLBNY stock is not publicly traded. It may be redeemed at par value upon request, subject to regulatory limits. The par value of all FHLBNY stock is $100 per share. These shares of stock in the FHLBNY are registered under the Securities Exchange Act of 1934, as amended. At December 31, 2009 the FHLBNY had 331 members. Total capital stock held by members was 50,589,563 shares and 1,262,942 shares held by former members. Capital stock held by former members is classified as a liability, and deemed to be mandatorily redeemable under the accounting guidance for certain financial instruments with characteristics of both liabilities and equity. At December 31, 2008, the FHLBNY had 311 members and 55,857,000 shares of stock held by members, and 1,431,214 shares held by former members.

Recent FHLBNY quarterly cash dividends are outlined in the table below. No dividends were paid in the form of stock. Dividend payments and earnings retention are subject to modification by the FHLBNY’s Board of Directors, at its discretion, and within the regulatory framework promulgated by the Finance Agency. The FHLBNY’s Retained Earnings and Dividends Policy outlined in the section titled Retained Earnings and Dividends under Part I, Item 1 of this Annual Report on Form 10-K provides additional information.

Dividends from a calendar quarter’s earnings are paid subsequent to the end of that calendar quarter as summarized below (dollars in thousands):

	2009						2008					2007
Month Paid	Amount		Dividend Rate			Month Paid	Amount		Dividend Rate			Amount		Dividend Rate
November	$	75,139		5.60	%	October	$	45,748		3.50	%	$	78,810		8.05	%
August		75,862		5.60		July		78,810		6.50			68,840		7.50
May		77,293		5.60		April		88,182		7.80			67,280		7.50
January		43,180		3.00		January		94,404		8.40			67,203		7.00
	$	271,474					$	307,144				$	282,133

Dividends accrued for non-members are classified as interest expense and are associated with mandatorily redeemable capital stock held by former members. In the table above, payments to former members are also included as dividends paid. Dividends accrued for former members were $7.5 million, $9.0 million, and $11.7 million for the years ended December 31, 2009, 2008 and 2007.

Issuer Purchases of Equity Securities

In accordance with correspondence from the Office of Chief Counsel of the Division of Corporate Finance of the U.S. Securities and Exchange Commission dated August 26, 2005, the FHLBNY is exempt from disclosures of unregistered sales of common equity securities or securities issued through the Office of Finance that otherwise would have been required under item 701 of the SEC’s Regulation S-K. By the same no-action letter, the FHLBNY is also exempt from disclosure of securities repurchases by the issuer that otherwise would have been required under Item 703 of Regulation S-K.

33

ITEM 6. SELECTED FINANCIAL DATA.

Statements of Condition	December 31,
(dollars in millions)	2009			2008			2007			2006			2005
Investments (1)	$	16,222		$	14,195		$	25,034		$	20,503		$	20,945
Interest bearing balance at FRB *		—			12,169			—			—			—
Advances		94,349			109,153			82,090			59,012			61,902
Mortgage loans held-for-portfolio, net of allowance for credit losses (2)		1,318			1,458			1,492			1,483			1,467
Total assets		114,461			137,540			109,245			81,579			84,761
Deposits and borrowings		2,631			1,452			1,606			2,266			2,650
Consolidated obligations, net
Bonds		74,008			82,257			66,326			62,043			56,769
Discount notes		30,828			46,330			34,791			12,191			20,510
Total consolidated obligations		104,836			128,587			101,117			74,234			77,279
Mandatorily redeemable capital stock		126			143			239			110			18
AHP liability		144			122			119			102			91
REFCORP liability		24			5			24			17			14
Capital stock		5,059			5,585			4,368			3,546			3,590
Retained earnings		689			383			418			369			291
Accumulated other comprehensive income (loss)		(145	)		(101	)		(35	)		(11	)		4
Total capital		5,603			5,867			4,751			3,904			3,885
Equity to asset ratio (3)		4.90	%		4.27	%		4.35	%		4.79	%		4.58	%

34

Statements of Condition	Years ended December 31,
Averages (dollars in millions)	2009			2008			2007			2006		2005
Investments (1)	$	15,987		$	22,253		$	22,155		$	19,431	$	19,347
Interest bearing balance at FRB *		6,046			1,322			—			—		—
Advances		98,966			92,617			65,454			64,658		63,446
Mortgage loans		1,386			1,465			1,502			1,471		1,360
Total assets		125,461			119,710			89,961			86,319		85,254
Interest-bearing deposits and other borrowings		2,095			2,003			2,202			1,709		2,100
Consolidated obligations, net
Bonds		71,860			81,342			63,277			60,932		56,975
Discount notes		41,496			28,349			18,956			18,382		20,654
Total consolidated obligations		113,356			109,691			82,233			79,314		77,629
Mandatorily redeemable capital stock		137			166			146			51		56
AHP liability		135			122			108			95		84
REFCORP liability		21			6			10			9		7
Capital stock		5,244			4,923			3,771			3,737		3,604
Retained earnings		558			381			362			313		247
Accumulated other comprehensive income (loss)		(106	)		(74	)		(17	)		1		4
Total capital		5,696			5,230			4,116			4,051		3,855

Operating Results and other data
(dollars in millions)	Years ended December 31,
(except earnings and dividends per share)	2009			2008			2007			2006			2005
Net interest income (4)	$	701		$	694		$	499		$	470		$	395
Net income		571			259			323			285			230
Dividends paid in cash (7)		265			294			273			208			162
AHP expense		64			30			37			32			26
REFCORP expense		143			65			81			71			58
Return on average equity (5)		10.02	%		4.95	%		7.85	%		7.04	%		5.97	%
Return on average assets		0.45	%		0.22	%		0.36	%		0.33	%		0.27	%
Other income (loss)	$	164		$	(267	)	$	14		$	(13	)	$	(18	)
Operating expenses		76			66			67			63			59
Finance Agency and Office of Finance		8			7			5			5			6
Total other expenses		84			73			72			68			65
Operating expenses ratio (6)		0.06	%		0.06	%		0.07	%		0.07	%		0.07	%
Earnings per share	$	10.88		$	5.26		$	8.57		$	7.63		$	6.36
Dividend per share	$	4.95		$	6.55		$	7.51		$	5.59		$	4.50
Headcount (Full/part time)		264			251			246			232			221

(1)	Investments include held-to-maturity securities, available for-sale securities, Federal funds, loans to other FHLBanks, and other interest bearing deposits.
(2)	Allowances for credit losses were $4.5 million, $1.4 million, $0.6 million, $0.6 million, and $0.6 million for the years ended December 31, 2009, 2008, 2007, 2006, and 2005.
(3)	Equity to asset ratio is capital stock plus retained earnings and Accumulated other comprehensive income (loss) as a percentage of total assets.
(4)	Net interest income is net interest income before the provision for credit losses on mortgage loans.
(5)	Return on average equity is net income as a percentage of average capital stock plus average retained earnings and average Accumulated other comprehensive income (loss).
(6)	Operating expenses as a percentage of total average assets.
(7)	Excludes dividends accrued to non-members classified as interest expense under the accounting standards for certain financial instruments with characteristics of both liabilities and equity.
*	FRB program commenced in October 2008. On July 2, 2009, the Bank was no longer eligible to collect interest on excess balances. The average balance is annualized YTD.

35

Supplementary financial data for each quarter for the years ended December 31, 2009 and 2008 are presented below (in thousands):

	2009 (unaudited)
	4th Quarter		3rd Quarter		2nd Quarter		1st Quarter
Interest income	$	307,742	$	379,530	$	504,256	$	666,159
Interest expense		192,627		225,678		303,997		434,777
Net interest income		115,115		153,852		200,259		231,382
Provision (Recovery) for credit losses		1,142		598		925		443
Other income (loss)		41,419		57,444		74,654		(9,147	)
Other expenses and assessments		59,423		70,479		87,560		73,653
		19,146		13,633		13,831		83,243
Net income	$	95,969	$	140,219	$	186,428	$	148,139

	2008 (unaudited)
	4th Quarter			3rd Quarter			2nd Quarter			1st Quarter
Interest income	$	1,035,467		$	936,938		$	910,555		$	1,175,919
Interest expense		809,898			779,265			752,750			1,022,468
Net interest income		225,569			157,673			157,805			153,451
Provision (Recovery) for credit losses		558			(31	)		216			30
Other income (loss)		(144,760	)		(85,430	)		(38,643	)		1,374
Other expenses and assessments		35,187			32,484			44,964			54,571
		180,505			117,883			83,823			53,227
Net income	$	45,064		$	39,790		$	73,982		$	100,224

Interim period — Infrequently occurring items recognized.

2009- There were no infrequently occurring items that were material in any interim period in 2009.

2008- In September 2008, Lehman Brothers Holding Inc. (“LBHI”) and Lehman Brothers Special Financing Inc., (“LBSF”) filed for protection under Chapter 11 of the U.S. Bankruptcy Code. LBSF, a, derivative counterparty to the FHLBNY defaulted on the contractual terms of its agreement with regard to $16.5 billion in notional amounts of interest rate swap and derivative contracts. The net amount that is due to the FHLBNY after giving effect to obligations that are due LBSF was approximately $64.5 million, and the FHLBNY has fully reserved the receivables as the bankruptcy of LBHI and LBSF make the timing and the amount of the recovery uncertain. The provision has been recorded as a charge to Other income (loss) in the third quarter of 2008. On an after-assessment basis, the provision reduced third quarter 2008 Net income by $47.4 million, or $0.91 per share of capital.

36

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Forward-Looking Statements

Statements contained in this Annual Report on Form 10-K, including statements describing the objectives, projections, estimates, or predictions of the Federal Home Loan Bank of New York (“FHLBNY” or “Bank”) may be “forward-looking statements.” These statements may use forward-looking terminology, such as “anticipates,” “believes,” “could,” “estimates,” “may,” “should,” “will,” or other variations on these terms or their negatives. The Bank cautions that, by their nature, forward-looking statements are subject to a number of risks or uncertainties, including the Risk Factors set forth in Item 1A and the risks set forth below, and that actual results could differ materially from those expressed or implied in these forward-looking statements. As a result, you are cautioned not to place undue reliance on such statements. The Bank does not undertake to update any forward-looking statement herein or that may be made from time to time on behalf of the Bank.

Forward-looking statements include, among others, the following:

• the Bank’s projections regarding income, retained earnings, and dividend payouts;

• the Bank’s expectations relating to future balance sheet growth;

• the Bank’s targets under the Bank’s retained earnings plan; and

• the Bank’s expectations regarding the size of its mortgage-loan portfolio, particularly as compared to prior periods.

Actual results may differ from forward-looking statements for many reasons, including but not limited to:

• changes in economic and market conditions;

• changes in demand for Bank advances and other products resulting from changes in members’ deposit flows and credit demands or otherwise;

• an increase in advance prepayments as a result of changes in interest rates or other factors;

• the volatility of market prices, rates, and indices that could affect the value of collateral held by the Bank as security for obligations of Bank members and counterparties to interest-rate-exchange agreements and similar agreements;

• political events, including legislative developments that affect the Bank, its members, counterparties, and/or investors in the COs of the FHLBanks;

• competitive forces including, without limitation, other sources of funding available to Bank members, other entities borrowing funds in the capital markets, and the ability to attract and retain skilled employees;

• the pace of technological change and the ability of the Bank to develop and support technology and information systems, including the internet, sufficient to manage the risks of the Bank’s business effectively;

• changes in investor demand for COs and/or the terms of interest-rate-exchange-agreements and similar agreements;

• timing and volume of market activity;

• ability to introduce new or adequately adapt current Bank products and services and successfully manage the risks associated with those products and services, including new types of collateral used to secure advances;

37

• risk of loss arising from litigation filed against one or more of the FHLBanks;

• realization of losses arising from the Bank’s joint and several liability on COs;

• risk of loss due to fluctuations in the housing market;

• inflation or deflation; and

• issues and events within the FHLBank System and in the political arena that may lead to regulatory, judicial, or other developments that may affect the marketability of the COs, the Bank’s financial obligations with respect to COs, and the Bank’s ability to access the capital markets.

Risks and other factors could cause actual results of the Bank to differ materially from those implied by any forward-looking statements. These risk factors are not exhaustive. The Bank operates in a changing economic and regulatory environments, and new risk factors will emerge from time to time. Management cannot predict such new risk factors nor can it assess the impact, if any, of such new risk factors on the business of the Bank or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those implied by any forward-looking statements.

38

Organization of Management’s Discussion and Analysis (“MD&A”).

The FHLBNY’s MD&A is designed to provide information that will assist the readers in better understanding the FHLBNY’s financial statements, the changes in key items in the Bank’s financial statements from year to year, the primary factors driving those changes as well as how accounting principles affect the FHLBNY’s financial statements. The MD&A is organized as follows:

	Page
Executive Overview		41
2009 Highlights		42
2010 Business Outlook		45
Trends in the Financial Markets		47
Recently Issued Accounting Standards and Interpretations		48
Significant Accounting Policies and Estimates		48
Legislative and Regulatory Developments		58
Financial Condition — Assets, Liabilities, Capital, Commitments and Contingencies		72
Advances		74
Investments		82
Mortgage Loans Held-for-Portfolio		90
Deposit Liabilities		91
Debt Financing Activity and Consolidated Obligations		92
Rating Actions With Respect to the FHLBNY		103
Mandatorily Redeemable Capital Stock		103
Capital Resources		104
Stockholders’ Capital and Dividend		106
Derivative Instruments and Hedging Activities		108
Liquidity		116
Results of Operations		121
Net Income		121
Interest Income		124
Interest Expense		126
Net Interest Income		127
Earnings Impact of Derivatives and Hedging activities		138
Operating Expenses		143
Asset Quality and Concentration -
Advances, Investment Securities, Mortgage Loans, and Counterparty Risks		145
Commitments, Contingencies and Off-Balance Sheet Arrangements		174
Quantitative and Qualitative Disclosures about Market Risk		177

39

MD&A TABLE REFERENCE

Table		Description	Page
	-	Selected Financial Data		34
	1	Market Interest Rates		47
	2	Statements of Condition — Year-Over-Year Comparison		72
	3	Advances by Product Type		75
	4	Advances Outstanding by Year of Maturity		77
	5	Advances by Interest-Rate Payment Terms		78
	6	Variable-Rate Advances		78
	7	Advances by Call Date		81
	8	Investments by Categories		83
	9	Mortgage-Backed Securities — By Issuer		84
	10	Available-for-Sale Securities Composition		85
	11	External Rating of the Held-to-Maturity Portfolio		86
	12	External Rating of the Available-for-Sale Portfolio		86
	13	Mortgage-Backed Securities Weighted Average Rates by Contractual Maturities		87
	14	Mortgage Loans by Loan Type		90
	15	Mortgage Loans — Conventional and Insured Loans		91
	16	Mortgage Loans — Allowance for Credit Losses		91
	17	Consolidated Obligation Bonds by Type		95
	18	Consolidated Obligation Bonds — Maturity or Next Call Date		101
	19	Discount Notes Outstanding		102
	20	FHLBNY Ratings		103
	21	Derivative Hedging Strategies		109
	22	Derivative Financial Instruments by Hedge Designation		110
	23	Derivative Financial Instruments by Product		111
	24	Derivatives Counterparty Notional Balance by Credit Ratings		113
	25	Deposit Liquidity		118
	26	Operational Liquidity		118
	27	Contingency Liquidity		119
	28	Unpledged Asset		120
	29	FHFA MBS Limits		120
	30	Interest Income — Principal Sources		124
	31	Impact of Interest Rate Swaps on Interest Income Earned from Advances		124
	32	Interest Expenses — Principal Categories		126
	33	Consolidated Obligations — Interest Expenses		126
	34	Impact of Interest Rate Swaps on Consolidated Obligation Interest Expense		127
	35	Components of Net Interest Income		128
	36	Net Interest Adjustments from Hedge Qualifying Interest-Rate Swaps		130
	37	GAAP Versus Economic Basis — Contrasting Net Interest Income, Net Income Spread and Return on Earning Assets		131
	38	Spread and Yield Analysis		132
	39	Rate and Volume Analysis		133
	40	Other Income		136
	41	Earnings Impact of Derivatives and Hedging Activities — By Financial Instrument Type		138
	42	Earnings Impact of Derivatives — By Hedge Type		139
	43	Accumulated Other Comprehensive Income (Loss) to Current Period Income From Cash Flow Hedges		142
	44	Other Expenses		143
	45	Operating Expenses		143
	46	Affordable Housing Program Liabilities		144
	47	REFCORP		144
	48	Advances and Mortgage Loan Portfolios		145
	49	Collateral Supporting Advances to Members		148
	50	Collateral Supporting Member Obligations Other Than Advances		148
	51	Location of Collateral Held		149
	52	Top Ten Advance Holders		150
	53	Year-Over-Year Change in Investments		151
	54	NRSRO Held-to-Maturity Securities		152
	55	NRSRO Available-for-Sale Securities		154
	56	Carrying Value Basis of Held-to-Maturity Mortgage-Backed Securities by Issuer		156
	57	Non-Agency Private Label Mortgage — And Asset-Backed Securities		157
	58	Monoline Insurance Protection on Credit Impaired PLMBS		158
	59	PLMBS by Year of Securitization and External Rating		159
	60	Weighted-Average Market Price of MBS		161
	61	PLMBS Security Types Delinquencies		163
	62	MPF by Loss Layers		164
	63	Mortgage Loans — Past Due		165
	64	Mortgage Loans — Interest Short-Fall		166
	65	Mortgage Loans — Allowance for Credit Losses		166
	66	Top Five Participating Financial Institutions — Concentration		168
	67	Roll-Forward First Loss Account		169
	68	Credit Exposure by Counterparty Credit Rating		172
	69	Contractual Obligations and Other Commitments		176

40

Executive Overview

This overview of management’s discussion and analysis highlights selected information and may not contain all of the information that is important to readers of this Form 10-K. For a more complete understanding of events, trends and uncertainties, as well as the liquidity, capital, credit and market risks, and critical accounting estimates, affecting the Federal Home Loan Bank of New York (“FHLBNY” or “Bank”), this Form 10-K should be read in its entirety.

Cooperative business model. As a cooperative, the FHLBNY seeks to maintain a balance between its public policy mission and its ability to provide adequate returns on the capital supplied by its members. The FHLBNY achieves this balance by delivering low-cost financing to members to help them meet the credit needs of their communities and by paying a dividend on the members’ capital stock. Reflecting the FHLBNY’s cooperative nature, the FHLBNY’s financial strategies are designed to enable the FHLBNY to expand and contract in response to member credit needs. The FHLBNY invests its capital in high quality, short- and medium-term financial instruments. This strategy allows the FHLBNY to maintain sufficient liquidity to satisfy member demand for short- and long-term funds, repay maturing consolidated obligations, and meet other obligations. The dividends paid by FHLBNY are largely the result of the FHLBNY’s earnings on invested member capital, net earnings on advances to members, mortgage loans and investments, offset in part by the FHLBNY’s operating expenses and assessments. FHLBNY’s board of directors and management determine the pricing of member credit and dividend policies based on the needs of its members and the cooperative.

Historical Perspective. The fundamental business of the FHLBNY is to provide member institutions and housing associates with advances and other credit products in a wide range of maturities to meet their needs. Congress created the FHLBanks in 1932 to improve the availability of funds to support home ownership. Although the FHLBanks were initially capitalized with government funds, members have provided all of the FHLBanks’ capital for over 50 years.

To accomplish its public purpose, the FHLBanks, including the FHLBNY, offer a readily available, low-cost source of funds, called advances, to member institutions and certain housing associates. Congress originally granted access to advances only to those institutions with the potential to make and hold long-term, amortizing home mortgage loans. Such institutions were primarily federally and state chartered savings and loan associations, cooperative banks, and state-chartered savings banks (thrift institutions). FHLBanks and its member thrift institutions are an integral part of the home mortgage financing system in the United States.

However, a variety of factors, including a severe recession, record-high interest rates, and deregulation, resulted in significant financial losses for thrift institutions in the 1980s. In response to the significant cost borne by the American taxpayer to resolve the failed thrift institutions, Congress restructured the home mortgage financing system in 1989 with the passage of the Financial Institutions Reform, Recovery and Enforcement Act (“FIRREA”). Through this legislation, Congress reaffirmed the housing finance mission of the FHLBanks and expanded membership eligibility in the FHLBanks to include commercial banks and credit unions with a commitment to housing finance.

Different FHLBank Business Strategies. Each FHLBank is operated as a separate entity with its own management, employees and board of directors. In addition, all FHLBanks operate under the Finance Agency’s supervisory and regulatory framework. However, each FHLBank’s management and board of directors determine the best approach for meeting its business objectives and serving its members. As such, the management and board of directors of each FHLBank have developed different business strategies and initiatives to fulfill that FHLBank’s mission, and they re-evaluate these strategies and initiatives from time to time.

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Business segment. The FHLBNY manages its operations as a single business segment. Advances to members are the primary focus of the FHLBNY’s operations and the principal factor that impacts its operating results. The FHLBNY is exempt from ordinary federal, state, and local taxation except for local real estate tax. It is required to make payments to Resolution Funding Corporation (“REFCORP”), and set aside a percentage of its income towards an Affordable Housing Program (“AHP”). Together they are referred to as assessments.

Explanation of the use of certain non-GAAP measures of Interest Income and Expense, Net Interest income and margin. The FHLBNY has presented its results of operations in accordance with U.S. generally accepted accounting principles. The FHLBNY has also presented certain information regarding its Interest Income and Expense, Net Interest income and Net Interest spread that combines interest expense on debt with net interest paid on interest rate swaps associated with debt that were hedged on an economic basis. These are non-GAAP financial measures used by management that the FHLBNY believes are useful to investors and members of the FHLBNY in understanding the Bank’s operational performance and business and performance trends. Although the FHLBNY believes these non-GAAP financial measures enhance investor and members’ understanding of the Bank’s business and performance, these non-GAAP financial measures should not be considered an alternative to GAAP. When discussing non-GAAP measures, the Bank has provided GAAP measures in parallel.

2009 Highlights

The FHLBNY reported 2009 Net income of $570.8 million, or $10.88 per share compared with 2008 Net income of $259.1 million or $5.26 per share. The return on average equity, which is Net income divided by average Capital stock, Retained earnings, and Accumulated other comprehensive income (loss) (“AOCI”), was 10.02% in 2009, compared with 4.95% in 2008.

Net income in 2009 benefited from net gains of $164.7 million from derivatives and hedging activities in contrast to a net loss of $199.3 million in 2008. The derivatives and hedging gains in 2009 were principally from favorable fair value changes of (1) Interest rate swaps designated in economic hedges of consolidated obligation bonds, and (2) Interest rate caps designated in economic hedges of certain GSE issued capped floating-rate MBS. The principal components of the gains and losses from derivatives and hedging activities in 2009 were:

Net fair value gains of $86.8 million were due to the (1) reversal of almost all fair value losses recorded at December 31, 2008 on $25.0 billion of basis swaps designated as economic hedges of floating-rate debt, and (2) fair value gains of interest rate swaps executed in 2009 and also designated as economic hedges of debt.

• Changes in the fair values of the basis swaps and other derivatives designated as economic hedges were marked to fair value through earnings with no offsetting changes in fair values of the hedged financial instruments. The FHLBNY had issued floating-rate debt primarily in 2008 that were either indexed to 1-month LIBOR, or the prime and the daily Federal funds rate, and the swaps were executed to synthetically convert the cash flows to 3-month LIBOR rates. In 2009, $23.0 billion of basis swaps matured and almost all previously recorded fair value losses reversed. When interest rate swaps are held to their contractual maturity (or put/call dates), nearly all of the cumulative net fair value gains and losses that are unrealized will generally reverse over time, and fair value changes will sum to zero. The fair value basis of the remaining $2.0 billion of such swaps was not significant as the bonds were nearing maturity.

• Additional fair value gains were recorded in 2009 on $19.1 billion of new swaps executed in 2009 ($13.1 billion fixed-for-floating rate swaps, and $6.0 billion of basis swaps) and designated as economic hedges of short-term non-callable bonds. In an upward sloping yield curve environment, the pay fixed-rate, receive LIBOR-indexed swaps were in an unrealized fair value gain positions at December 31, 2009. The swaps will mature in 2010 and unrealized gains will reverse.

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Changes in fair values of purchased interest rate caps in 2009 contributed $63.3 million fair value gains. Fair value of interest rate caps are impacted by the level of interest rate, volatility (variability of interest rates), and term to maturity. Long-term rates have been rising and in this interest rate environment, purchased caps will show favorable fair value gains. Such gains are unrealized and will also reverse if the caps are held to their contractual maturities.

Net interest income in 2009 was $700.6 million, slightly higher than $694.5 million in 2008. Net interest income is the primary contributor to Net income for the FHLBNY. Two opposing factors were at play in 2009. The interest spread between yields from interest-earning assets and the cost of debt widened favorably by 8 basis points. Gains were partly offset by a significant decline in earnings from member capital in the very low interest yielding environment for short-term investment. Through most of 2009 the Bank funded a significant percentage of its balance sheet assets by issuing discount notes and short-term debt at advantageous spreads. Discount notes have maturities ranging from overnight to 365 days.

Net interest spread, which is the difference between yields on interest-earning assets and yields on interest-costing liabilities, improved by 8 basis points in 2009 primarily as a result of tactical funding adjustments made by the FHLBNY in reaction to the very fluid and changing demand for the FHLBank bonds and discount notes in 2009. The improved margin was almost entirely offset by significant decline in interest income earned from the deployment of members’ capital and net non-interest bearing liabilities (“deployed capital”) to fund interest-earning assets in the very low interest rate environment in 2009 for short-term investments. The average deployed capital of $9.1 billion in 2009 could potentially have earned 149 basis points, the aggregate yield on earning assets. In 2008, average members’ capital was $6.7 billion but potentially earned 342 basis points. Deployed capital is typically utilized to fund short-term, liquid investments, and the yields from such assets declined even more steeply in 2009.

With credit markets gradually returning to normalcy, investor demand for FHLBanks’ consolidated obligation bonds has been strong and provided the opportunity for increase in new issues specifically in the fourth quarter of 2009. Discount notes remained in demand and spreads were sufficiently attractive for the FHLBNY to shift its funding mix to higher utilization of discount notes. Early in the third quarter of 2009, the pricing of discount notes deteriorated and the FHLBNY shifted its funding mix again and maturing discount notes were replaced by the issuances of short-term bonds. With 3-month LIBOR yielding less than 30 basis points, discount notes spreads to LIBOR contracted making issuances of short-term bullets and short lockouts more attractive funding vehicles for the FHLBNY. Also as a result of the steepening of the yield curve, investors are showing increasing interest in callable step-up bonds. Diversity of investor interest in FHLBank debt products is also a positive indicator.

Nonetheless, investor appetite for longer-term debt continued to be lukewarm, and investor concerns ranged from investing in housing-related investments to the fact that spreads were not at attractive levels. Such sentiments and market conditions have generally made it uneconomical for the FHLBanks to issue longer-term debt. Further, the yields demanded by investors for longer-term FHLBank debt and spreads between 3-month LIBOR and FHLBank long-term debt yield have remained at levels that make it too expensive for the FHLBNY to issue term debt and offer longer-term advances to members even if there was sufficient investor demand for such debt.

In 2009, the FHLBNY identified credit impairment on 17 of its private-label mortgage-backed securities. Cash flow assessments of the expected credit performance identified future losses in its private-label mortgage-backed securities for other-than-temporary impairment (“OTTI”) at each interim quarterly period in 2009 and at December 31, 2009. In assessing the expected credit performance of these securities, the Bank determined it was likely it would not fully recover the amortized cost basis of 17 private-label held-to-maturity mortgage-backed securities, and the securities were deemed to be OTTI. Cumulative OTTI of $20.8 million in credit impairment were charged to earnings in 2009.

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The charges represented the credit loss component of OTTI. The amount of non-credit OTTI at December 31, 2009 was a cumulative loss of $110.6 million in AOCI, a component of stockholders’ equity. Although 14 of the 17 securities that have been credit impaired in 2009 are insured by bond insurers, Ambac and MBIA, the Bank’s analysis of the two bond insurers concluded that for the 14 insured securities, future credit losses due to projected collateral shortfalls would not be fully supported by the two bond insurers. See Note 1 — Significant Accounting Policies and Estimates and Note 4 — Held-to-maturity securities to the audited financial statements accompanying this report for more information about impairment methodology and bond insurer analysis.

Operating Expenses of the FHLBNY were $76.1 million in 2009, up from $66.3 million in 2008. The FHLBNY was also assessed for its share of the operating expenses for the Finance Agency and the Office of Finance, and those totaled $8.1 million in 2009, up from $6.4 million in 2008.

REFCORP assessment payments totaled $142.7 million in 2009, up from $64.8 million in 2008. Affordable Housing Program (“AHP”) assessments set aside from income totaled $64.3 million in 2009, up from $29.8 million in 2008. Assessments are calculated on Net income before assessments and the increases were due to the significant increase in 2009 Net income as compared to 2008. For more information about REFCORP and AHP assessments see the section Assessments in this Form 10-K.

Cash dividends were paid to stockholders in each of the quarters of 2009 and averaged $4.95 per share of capital stock (par value $100) for the full year. In 2008, they averaged $6.55 per share. Dividend payouts in 2009 were reduced to increase retained earnings.

Advances borrowed by members stood at $94.3 billion at December 31, 2009, a decline of $14.8 billion from the outstanding balance at December 31, 2008. Member demand for short-term fixed-rate advances, adjustable-rate advances, and overnight borrowings declined and maturing advances were not replaced.

Shareholders’ equity, the sum of Capital stock, Retained earnings, and AOCI was $5.6 billion at December 31, 2009, a decline of $264.1 million from December 31, 2008, primarily as a result of decline in members’ Capital stock. Capital stock at December 31, 2009 was $5.1 billion, a decline of $526.7 million as compared to December 31, 2008. The decrease in Capital stock was consistent with decrease in advances borrowed by members since members are required to purchase stock as a prerequisite to membership and to hold FHLBNY stock as a percentage of advances borrowed from the FHLBNY. The Bank’s current practice is to redeem stock in excess of the amount necessary to support advance activity on a daily basis. As a result, the amount of capital stock outstanding varies in line with members’ outstanding advance borrowings. Retained earning was $688.9 million, up by $306.0 million from December 31, 2008. Dividends paid out of retained earnings amounted to $264.7 million in 2009, compared to $294.5 million in 2008. AOCI was a loss of $144.5 million at December 31, 2009 compared to a loss of $101.2 million at December 31, 2008 and was comprised of net unrealized losses from recording the non-credit component of OTTI on held-to-maturity securities, unrecognized losses from cash flow hedging activities, additional liabilities on employee pension plans, and net unrealized fair value losses on available-for-sale securities.

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2010 Business Outlook

The following forward-looking statements are based upon the current beliefs and expectations of the FHLBNY’s management and are subject to risks and uncertainties which could cause the FHLBNY’s actual results to differ materially from those set forth in such forward-looking statements.

The FHLBNY expects its earnings to decline in 2010 to levels more typical of the years before 2009, primarily as a result of lower net interest margins on the Bank’s earnings from core assets, primarily advances and investments in mortgage-backed securities, as the Bank does not expect the funding advantages experienced in 2009 to continue in 2010.

Advances — Management is unable to predict the timing and extent of the expected recovery in the U.S. economy, particularly the recovery in the housing market, or an expectation of continued stability in the financial markets. Against that backdrop, the management of the Bank believes it is also difficult to predict member demand for advances, which is the primary focus of the FHLBNY’s operations and the principal factor that impacts its operating results.

Generally, the growth or decline in advances is reflective of demand by members for both short-term liquidity and long-term funding driven by economic factors such as availability to the Bank’s members of alternative funding sources that are more attractive, the interest rate environment, and the outlook for the economy. Members may choose to prepay advances, which may require prepayment fees, based on their expectations of interest rate changes and demand for liquidity. Demand for advances may also be influenced by the dividend payout rate to members on their capital stock investment in the FHLBNY. Members are required to invest in FHLBNY’s capital stock in the form of membership stock and activity-based stock, which a member is required to purchase in order to borrow advances. Advance volume is also influenced by merger activity where members are either acquired by non-members or acquired by members of another FHLBank. When FHLBNY members are acquired by members of another FHLBank or a non-member, they no longer qualify for membership in the FHLBNY, which cannot renew outstanding advances or provide new advances to non-members. Subsequent to the merger, maturing advances may not be replaced, which has an immediate impact on short-term and overnight advance lending if the former member borrowed such advances.

Earnings — In 2010, existing high-yielding fixed-rate MBS and some intermediate-term advances will pay down or mature, and it is unlikely they will be replaced by equivalent high yielding assets, and this will tend lower the overall yield on total assets. The FHLBNY expects general advance demand from members to likely to decline, and specifically, the Bank expects limited demand for large intermediate-term advances because many members have previously filled their needs with the FHLBNY, and other members have significant amounts of intermediate-term advances that were borrowed from the FHLBNY several years ago. The FHLBNY anticipates that such members are probably considering prepaying those borrowings, or to not replacing them at maturity. Members that have expressed interest in intermediate-term borrowing have not been significant borrowers in the past. Other members may be hesitant to act early in 2010 or until evidence is stronger that market interest rates are set to rise. Without the ability to make funding decisions early in the 2010, the FHLBNY may lose the potential opportunities to profitably fund these advance types early in the year when funding spreads are still relatively reasonable for the FHLBNY. As result of these factors, the FHLBNY expects demand for advance borrowing by members to decline and at the same time, expects the net margins from new advances to narrow.

The FHLBNY earns income from investing its members’ capital and non-interest bearing liabilities, together referred to as deployed capital, to fund interest-earning assets. The two principal factors that impact earnings from deployed capital are the average amount of capital outstanding in a period and the interest rate environment in the period, which in turn impacts yields on earning assets. These factors determine the potential earnings from deployed capital, and both factors are subject to change. The Bank cannot predict with certainty the level of earnings from capital. In a lower interest rate environment, deployed capital, which consists of capital stock, retained earnings, and net non-interest bearing liabilities, will provide relatively lower income. On the other hand, if member borrowings grow, capital will grow and provide a higher potential for earnings.

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Demand for FHLBank debt — The FHLBNY’s primary source of funds is the sale of consolidated obligations in the capital markets, and its ability to obtain funds through the sale of consolidated obligations depends in part on prevailing conditions in the capital markets, which are beyond the FHLBNY’s control. The FHLBNY may not be able to obtain funding on acceptable terms, if at all given the extraordinary market conditions and structural changes in the debt market. If the FHLBNY cannot access funding when needed on acceptable terms, its ability to support and continue operations could be adversely affected, which could negatively affect its financial condition and results of operations. The pricing of the FHLBanks’ longer-term debt remains at levels that are still sub-optimal, relative to LIBOR. To the extent the FHLBanks receive sub-optimal funding, the Bank’s member institutions may, in turn, experience higher costs for advance borrowings. To the extent the FHLBanks may not be able to issue long-term debt at economical spreads relative to the 3-month LIBOR rate; the Bank’s member institutions’ borrowing choices may also be limited.

A significant amount of FHLBank bonds matured in 2009 and were refinanced successfully. In 2010, the refunding needs to replace maturing FHLBank bonds will be significant. If the bond market cannot support the refunding volumes, it will put greater pressure on the FHLBank bonds and investors may demand higher yields. Alternatively, the FHLBanks may resort to the issuance of discount notes, which have maturities of up to a year only, to fill any refunding gap. Discount notes may themselves face increased challenges as competition increases from Treasury bills as the Treasury funds the multiple programs implemented for the current crises, or if demand for discount notes declines. The impact of the recession may reduce member demand for liquidity and may reduce pressure on the FHLBanks to refinance maturing bonds in 2010.

Credit Impairment of Mortgage-backed securities — Cumulative other-than-temporary credit impairment charges of $20.8 million were recorded for the FHLBNY’s MBS portfolios in 2009. However, 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 ability of monoline insurers to support the insured securities that are dependent on insurance is negatively impacted by their future financial performance, additional OTTI would have to be recognized, which would negatively impact the FHLBNY’s Net income.

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Trends in the Financial Markets

Conditions in Financial Markets. The primary external factors that affect net interest income are market interest rates and the general state of the economy. The following table presents changes in key rates over the course of 2009 and 2008 (rates in percent):

Table 1: Market Interest Rates

	Year-to-date December 31,
	2009			2008			2009			2008
	Average			Average			Ending Rate			Ending Rate
Federal Funds Rate		0.25	%		2.08	%		0.25	%		0.25	%
3-month LIBOR		0.69			2.93			0.25			1.43
2-year U.S. Treasury		0.94			2.00			1.14			0.77
5-year Treasury		2.18			2.79			2.68			1.55
10-year Treasury		3.24			3.64			3.84			2.21
15-year residential mortgage note rate		4.59			5.88			4.57			5.11
30-year residential mortgage note rate		5.03	%		6.24	%		5.08	%		5.28	%

Impact of general level of interest rates on the FHLBNY. The level of interest rates during a reporting period impacts the FHLBNY’s profitability, due primarily to the relatively shorter-term structure of earning assets and the impact of interest rates on invested capital. As of December 31, 2009 and 2008, investments, excluding mortgage-backed securities and state and local housing agency obligations, had stated maturities of less than one year. The FHLBNY also used derivatives to effectively change the repricing characteristics of a significant proportion of its advances and consolidated obligation debt to match shorter-term LIBOR rates that repriced at three-month or less intervals. Consequently, the current level of short-term interest rates, as represented by the overnight Federal funds target rate and the 3-month LIBOR rate, has an impact on the FHLBNY’s profitability.

The level of interest rates also directly affects the FHLBNY’s earnings on invested capital. Compared to other banking institutions, the FHLBNY operates at comparatively low net spreads between the yield it earns on assets and its cost of liabilities. Therefore, the FHLBNY generates a relatively higher proportion of its income from the investment of member-supplied capital at the average asset yield. As a result, changes in asset yields tend to have a greater effect on FHLBNY’s profitability than they do on the profitability of other banking institutions.

In summary, the FHLBNY’s average asset yields and the returns on capital invested in these assets largely reflect the short-term interest rate environment because the maturities of FHLBNY assets are generally short-term in nature, have rate resets that reference short-term rates, or have been hedged with derivatives in which a short-term rate is received.

Changes in rates paid on consolidated obligations and the spread of these rates relative to LIBOR and U.S. Treasury securities may also impact FHLBNY’s profitability. The rate and price at which the FHLBNY is able to issue consolidated obligations, and their relationship to other products such as Treasury securities and LIBOR, change frequently and are affected by a multitude of factors including: overall economic conditions; volatility of market prices, rates, and indices; the level of interest rates and shape of the Treasury curve; the level of asset swap rates and shape of the swap curve; supply from other issuers (including GSEs such as Fannie Mae and Freddie Mac, supra/sovereigns, and other highly-rated borrowers); the rate and price of other products in the market such as mortgage-backed securities, repurchase agreements, and commercial paper; investor preferences; the total volume, timing, and characteristics of issuance by the FHLBanks; the amount and type of advance demand from the FHLBNY’s members; political events, including legislation and regulatory action; press interpretations of market conditions and issuer news; the presence of inflation or deflation; actions by the Federal Reserve; and currency exchange rates.

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Recently Issued Accounting Standards and Interpretations, and Significant Accounting Policies and Estimates.

Recently issued Accounting Standards and Interpretations

For a discussion of recently issued accounting standards and interpretations, see the audited financial statements accompanying this report (specifically, Note 1 — Recently issued Accounting Standards and Interpretations).

Significant Accounting Policies and Estimates

The FHLBNY has identified certain accounting policies that it believes are significant because they require management to make subjective judgments about matters that are inherently uncertain and because of the likelihood that materially different amounts would be reported under different conditions or by using different assumptions. These policies include estimating the liabilities for pension, and estimating fair values of certain assets and liabilities, evaluating the impairment of the Bank’s securities portfolios, estimating the allowance for credit losses on the advance and mortgage loan portfolios, accounting for derivatives and hedging activities, and amortization of premiums and accretion of discounts. The Bank has discussed each of these significant accounting policies, the related estimates and its judgment with the Audit Committee of the Board of Directors. For additional discussion regarding the application of these and other accounting policies, see Note 1 to the Bank’s audited financial statements included in this report.

Fair Value Measurements and Disclosures

The accounting standards on fair value measurements and disclosures discuss how entities should measure fair value based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources or those that can be directly corroborated to market sources, while unobservable inputs reflect the FHLBNY’s market assumptions. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction in the principal or most advantageous market for the asset or liability between market participants at the measurement date. This definition is based on an exit price rather than transaction or entry price.

Valuation Techniques — Three valuation techniques are prescribed under the fair value measurement standards — Market approach, Income approach and Cost approach. Valuation techniques for which sufficient data is available and that are appropriate under the circumstances should be used.

In determining fair value, FHLBNY uses various valuation methods, including both the market and income approaches.

• Market approach — This technique uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities.

• Income approach — This technique uses valuation techniques to convert future amounts (for example, cash flows or earnings) to a single present amount (discounted), based on assumptions used by market participants. The present value technique used to measure fair value depends on the facts and circumstances specific to the asset or liability being measured and the availability of data.

• Cost approach — This approach is based on the amount that currently would be required to replace the service capacity of an asset (often referred to as current replacement cost).

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The accounting guidance on fair value measurements and disclosures establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability, and would be based on market data obtained from sources independent of FHLBNY. Unobservable inputs are inputs that reflect FHLBNY’s assumptions about the parameters market participants would use in pricing the asset or liability, and would be based on the best information available in the circumstances.

The fair value hierarchy is broken down into three levels based on the reliability of inputs as follows:

Level 1 — Quoted prices for identical instruments in active markets.

Level 2 — Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-based valuations in which all significant inputs and significant parameters are observable in active markets.

Level 3 — Valuations based upon valuation techniques in which significant inputs and significant parameters are unobservable.

The availability of observable inputs can vary from product to product and is affected by a wide variety of factors including, for example, the characteristics peculiar to the transaction. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by FHLBNY in determining fair value is greatest for instruments categorized as Level 3. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purpose the level in the fair value hierarchy within which the fair value measurement falls is determined based on the lowest level input that is significant to the fair value measurement in its entirety.

At December 31, 2009 and 2008, the FHLBNY measured and recorded fair values using the above guidance for derivatives, available-for-sale securities, consolidated obligation bonds that were designated and recorded at fair value using the fair value option (“FVO”). At December 31, 2009 and 2008, the Bank had designated consolidated obligation debt of $6.0 billion and $983.0 million under the FVO accounting. Held-to-maturity securities determined to be credit impaired or OTTI at December 31, 2009 were also measured at fair value on a non-recurring basis. Recorded fair values of OTTI securities were $42.9 million at December 31, 2009. No fair values were recorded on a non-recurring basis at December 31, 2008.

Fair values of all derivatives were computed and recorded in the Statements of Condition using quantitative models and employed multiple market inputs including interest rates, prices and indices to generate continuous yield or pricing curves and volatility factors. These multiple market inputs were predominantly actively quoted and verifiable through external sources, including brokers and market transactions.

Fair values of mortgage-backed securities (classified as held-to-maturity or available-for-sale), were computed consistent with the guidance from the MBS Pricing Committee (“Pricing Committee”) (See Pricing of mortgage-backed securities in Note 1 — Significant Accounting Polices and Estimates to the audited financial statements accompanying this report), and the FHLBNY updated its pricing methodology used to estimate the fair value of mortgage-backed securities starting in the interim periods ended September 30, 2009 and at December 31, 2009. Under the approved methodology, the FHLBNY requested prices for all mortgage-backed securities from four specific third-party vendors. Prior to the change, the FHLBNY used three of the four vendors specified by the Pricing Committee. Depending on the number of prices received from the four vendors for each security, the FHLBNY selects a median or average price as defined by the methodology. The methodology also incorporates variance thresholds to assist in identifying median or average prices that may require further review by the FHLBNY. In certain limited instances (i.e., prices are outside of variance thresholds or the third-party services do not provide a price), the FHLBNY will obtain a price from securities dealers that is deemed most appropriate after consideration of all relevant facts and circumstances that would be considered by market participants. The incorporation of the Pricing Committee guidelines did not have a significant impact in the FHLBNY’s estimate of the fair values of its investment securities at implementation of the methodologies as of September 30, 2009.

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In addition to the instruments carried at fair value as described above, a significant percentage of fixed-rate advances and consolidated obligation bonds were hedged to mitigate the risk of fair value changes that are attributable solely to changes in LIBOR, the designated benchmark interest rate for the FHLBNY, and accounted under hedge accounting rules in a fair value hedging relationship. To the extent the FHLBNY’s valuation model is used to calculate changes in the benchmark fair values of hedged items, the inputs have a significant effect on the reported carrying values of assets and liabilities and the related income and expense; the use of different inputs could result in materially different net income and reported carrying values. When the FHLBNY deems that a hedge relationship is either not operationally practical or considers the hedge may not be highly effective as defined under hedge accounting standards, the FHLBNY may designate certain derivatives as economic hedges of advances and consolidated obligation bonds and discount notes.

In addition to those items that are carried at fair value, the Bank estimates fair values for its other financial instruments for disclosure purposes. The Bank’s fair value measurement methodologies for assets and liabilities that are carried at fair value are more fully described in Note 1 — Significant Accounting Policies and Estimates, and Note 18 — Fair Values of Financial Instruments to the audited financial statements accompanying this report.

The FHLBNY’s pricing models are subject to annual validation and the Bank periodically reviews and refines, as appropriate, its assumptions and valuation methodologies to reflect market indications as closely as possible. The Bank believes it has the appropriate personnel, technology, and policies and procedures in place to enable it to value its financial instruments in a reasonable and consistent manner and in accordance with established accounting policies.

Other-than-temporary impairment — Accounting and Governance Policies, Impairment analysis, Pricing of mortgage-backed securities, and Bond insurer methodology.

The FHLBNY evaluates its investments on a quarterly basis for impairment and determines if unrealized losses are temporary based in part on the creditworthiness of the issuers and the underlying collateral. A security is considered impaired if its fair value is less than its amortized cost basis. Amortized cost basis includes adjustments made to the cost of an investment for accretion, amortization, collection of cash, previous OTTI recognized in earnings and fair value hedge accounting adjustments. If management has made a decision to sell such an “impaired” security, OTTI is considered to have occurred. If a decision to sell the impaired investment has not been made, but management concludes that it is more likely than not that it will be required to sell such a security before recovery of the amortized cost basis of the security, an OTTI is also considered to have occurred.

Even if management does not intend to sell such an impaired security, an OTTI has occurred if analysis determines that a credit loss exists. The difference between the present value of the cash flows expected to be collected and the amortized cost basis is a credit loss. To determine if a credit loss exists, management compares the present value of the cash flows expected to be collected to the amortized cost basis of the security. If the present value of the cash flows expected to be collected is less than the security’s amortized cost, an OTTI exists, irrespective of whether management will be required to sell such a security. The Bank’s methodology to calculate the present value of expected cash flows is to discount the expected cash flows (principal and interest) of a fixed-rate security that is deemed as OTTI by using its effective interest rate as of the date it was acquired. For a variable-rate security that is evaluated for OTTI, the expected cash flows are computed using a forward-rate curve, which are then discounted using the forward rates.

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However, if management determines that OTTI exists only because of a credit loss (even if it does not intend to sell or it will not be required to sell such a security), the amount of impairment related to credit loss is recorded in earnings and the amount of loss related to factors other than credit loss is recognized as a component of AOCI.

If the FHLBNY determines that OTTI has occurred, it accounts for the investment security as if it had been purchased on the measurement date of the other-than-temporary impairment. The investment security is written down to fair value, which becomes its new amortized cost basis. The new amortized cost basis is not adjusted for subsequent recoveries in fair value.

For securities designated as available-for-sale, subsequent unrealized changes to the fair values (other than OTTI) are recorded in AOCI. For securities designated as held-to-maturity, the amount of OTTI recorded in AOCI for the non-credit component of OTTI is amortized prospectively over the remaining life of the securities based on the timing and amounts of estimated future cash flows. Amortization out of AOCI is offset by an increase in the carrying value of securities until the securities are repaid or are sold or subsequent OTTI is recognized in earnings.

If subsequent evaluation indicates a significant increase in cash flows greater than previously expected to be collected or if actual cash flows are significantly greater than previously expected, the increases are accounted for as a prospective adjustment to the accretable yield through interest income. In subsequent periods, if the fair value of the investment security has further declined below its then-current carrying value and there has been a decrease in the estimated cash flows the FHLBNY expects to collect, the FHLBNY will recognize additional OTTI.

OTTI Governance Committee — During the first quarter of 2009, the Finance Agency required the FHLBanks to develop and utilize FHLBank System-wide modeling assumptions for purposes of producing cash flow analyses used in the OTTI assessment for private label residential MBS. During the second quarter of 2009, the FHLBanks enhanced the overall OTTI process by creating an OTTI Governance Committee (“OTTI Committee”). The OTTI Committee provides a formal process by which the FHLBanks can provide input on and approve assumptions. The OTTI Committee is responsible for reviewing and approving the key assumptions including interest rate and housing prices along with related modeling inputs and methodologies to be used to generate cash flow projections. The OTTI Committee requires the FHLBanks to run the OTTI analysis on a common platform, and to perform OTTI analysis on sample securities to ensure that the OTTI analysis produces consistent results, among the FHLBanks. The FHLBNY has utilized the FHLBank of San Francisco to run its OTTI analysis of its private label residential MBS classified as prime and the FHLBank of Chicago to run its private label residential MBS classified as subprime. For about 50 percent of the FHLBNY’s private label MBS where sufficient underlying loan level collateral data was not available to the specific loan performance models used by the two FHLBanks in order to determine the assumptions under the OTTI Committee’s approach, the two FHLBanks were not able to generate cash flow projections at December 31, 2009. Beginning with the quarter ended September 30, 2009, and at December 31, 2009, the FHLBNY performed its OTTI analysis by cash flow testing 100 percent of it private-label MBS, and utilized the results of the OTTI analysis performed by the two FHLBanks to benchmark the results of its own OTTI testing, and concluded that results were consistent. At December 31, 2008, and at the two interim quarters ended June 30, 2009, the FHLBNY’ methodology was to analyze all its private-label MBS to isolate securities that were considered to be at risk of OTTI and to perform cash flow analysis on securities at risk of OTTI.

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The FHLBNY performed its OTTI analysis on monoline insurers (bond insurers) in a manner consistent with the methodology approved by the OTTI Committee. In the third quarter of 2009 the FHLBanks also formed the MBS Pricing Governance Committee, which was responsible for developing a fair value methodology for mortgage-backed securities that all FHLBanks could adopt. Consistent with the guidance from the Pricing Committee, the FHLBNY updated its methodology used to estimate the fair value of mortgage-backed securities starting with the interim period ended September 30, 2009 and at December 31, 2009. Under the approved methodology, the FHLBNY requests prices for all mortgage-backed securities from four specific third-party vendors. Prior to the change, the FHLBNY used three of the four vendors specified by the Pricing Committee. Depending on the number of prices received from the four vendors for each security, the FHLBNY selects a median or average price as defined by the methodology. The methodology also incorporates variance thresholds to assist in identifying median or average prices that may require further review by the FHLBNY. In certain limited instances (i.e., prices are outside of variance thresholds or the third-party services do not provide a price), the FHLBNY will obtain a price from securities dealers that is deemed most appropriate after consideration of all relevant facts and circumstances that would be considered by market participants. The incorporation of the Pricing Committee guidelines did not have a significant impact in the FHLBNY’s estimate of the fair values of its investment securities as of September 30, 2009, the implementation date, or subsequently. For more information about the OTTI Governance Committee, see Significant Accounting Policies and Estimates in Note 1 to the audited financial statements accompanying this report.

Bond Insurer analysis — Certain held-to-maturity private-label MBS owned by the FHLBNY are insured by third-party bond insurers (“monoline insurers”). The bond insurance on these investments guarantees the timely payments of principal and interest if these payments cannot be satisfied from the cash flows of the underlying mortgage pool. The FHLBNY performs cash flow credit impairment tests on all of its private-label insured securities, and the analysis of the MBS protected by such third-party insurance looks first to the performance of the underlying security, and considers its embedded credit enhancements in the form of excess spread, overcollateralization, and credit subordination, to determine the collectability of all amounts due. If the embedded credit enhancement protections are deemed insufficient to make timely payment of all amounts due, then the FHLBNY considers the capacity of the third-party bond insurer to cover any shortfalls. Certain monoline insurers have been subject to adverse ratings, and weakening financial performance measures. In estimating the insurers’ capacity to provide credit protection in the future to cover any shortfall in cash flows expected to be collected for securities deemed to be OTTI, the FHLBNY has developed a methodology to assess the ability of the monoline insurers to meet future insurance obligations. The methodology establishes boundaries that can be used on a consistent basis, and includes both quantitative and qualitative factors. The methodology calculates the length of time a monoline is expected to remain financially viable to pay claims for securities insured. It employs for the most part, publicly available information to identify cash flows used up by a monoline for insurance claims. Based on the monoline’s existing insurance reserves, the methodology attempts to predict the length of time over which the monoline’s claims-paying resources could sustain bond insurance losses. The methodology provides an indicator of a point in time in the future when the monoline’s claim-paying resources are estimated to be exhausted. For more information about monoline insurer assessment methodology, see Note 1 — Significant Accounting Policies and Estimates to the audited financial statements accompanying this report.

GSE issued securities — The FHLBNY evaluates its individual securities issued by Fannie Mae and Freddie Mac or a government agency by considering the creditworthiness and performance of the debt securities and the strength of the GSE’s guarantees of the securities. Based on the Bank’s analysis, GSE and agency issued securities are performing in accordance with their contractual agreements. The Housing Act contains provisions allowing the U.S. Treasury to provide support to Fannie Mae and Freddie Mac. In September 2008, the U.S. Treasury and the Finance Agency placed Fannie Mae and Freddie Mac into conservatorship in an attempt to stabilize their financial conditions and their abilities to support the secondary mortgage market. The FHLBNY believes that it will fully recover its investments in GSE and agency issued securities given the current levels of collateral and credit enhancements and guarantees that exist to protect the investments.

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Provision for Credit Losses

The provision for credit losses for advances (none) and mortgage loans, including those acquired under the Mortgage Partnership Finance Program (MPF), represents management’s estimate of the probable credit losses inherent in these two portfolios. Determining the amount of the provision for credit losses is considered a critical accounting estimate because management’s evaluation of the adequacy of the provision is subjective and requires significant estimates, including the amounts and timing of estimated future cash flows, estimated losses based on historical loss experience, and consideration of current economic trends, all of which are susceptible to change. The FHLBNY’s assumptions and judgments on its provision for credit losses are based on information available as of the date of the financial statements. Actual losses could differ from these estimates.

Advances — No provisions for credit losses were required. The FHLBNY has policies and procedures in place to manage its credit risk effectively. Outlined below are the underlying assumptions that the FHLBNY uses for evaluating its exposure to credit loss.

• Monitoring the creditworthiness and financial condition of the institutions to which it lends funds.

• Reviewing the quality and value of collateral pledged by members.

• Estimating borrowing capacity based on collateral value and type for each member, including assessment of margin requirements based on factors such as cost to liquidate and inherent risk exposure based on collateral type.

• Evaluating historical loss experience.

Significant changes to any of the factors described above could materially affect the FHLBNY’s provision for losses on advances. For example, the FHLBNY’s current assumptions about the financial strength of any member may change due to various circumstances, such as new information becoming available regarding the member’s financial strength or future changes in the national or regional economy. New information may require the FHLBNY to place a member on credit watch and require collateral to be delivered, adjust its current margin requirement, or provide for losses on advances.

The FHLBNY is required by Finance Agency regulations to obtain sufficient collateral on advances to protect against losses, and to accept only certain kinds of collateral on its advances, such as U.S. government or government-agency securities, residential mortgage loans, deposits in the FHLBNY, and other real estate related assets. The FHLBNY has never experienced a credit loss on an advance. Based on the collateral held as security for advances, management’s credit analyses, and prior repayment history, no allowance for credit losses on advances was deemed necessary by management at December 31, 2009, 2008, and 2007.

At December 31, 2009, 2008 and 2007, the FHLBNY had rights to collateral, either loans or securities, on a member-by-member basis, with an estimated liquidation value in excess of outstanding advances.

Mortgage Loans — MPF Program. The FHLBNY has policies and procedures in place to manage its credit risk effectively. These include:

• Evaluation of members to ensure that they meet the eligibility standards for participation in the MPF Program.

• Evaluation of the purchased and originated loans to ensure that they are qualifying conventional, conforming fixed-rate, first lien mortgage loans with fully amortizing loan terms of up to 30 years, secured by owner-occupied, single-family residential properties.

• Estimation of loss exposure and historical loss experience to establish an adequate level of loss reserves.

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The FHLBNY places a mortgage loan on non-accrual status when the collection of the contractual principal or interest is 90 days or more past due. When a mortgage loan is placed on non-accrual status, accrued but uncollected interest is reversed against interest income. The FHLBNY records cash payments received on non-accrual loans as a reduction of principal.

Allowance for credit losses on MPF Program loans, which are classified either under regulatory criteria (Special Mention, Sub-standard, or Loss) or past due, are segregated from the aggregate pool. If adversely classified, or on non-accrual status, MPF loans, except Federal Housing Administration and Veterans Administration insured loans, are analyzed under liquidation scenarios on a loan level basis and identified losses greater than $1,000 are fully reserved. Federal Housing Administration and Veterans Administration insured mortgage loans have minimal inherent credit risk; risk generally arises mainly from the servicer defaulting on their obligations. Federal Housing Administration and Veterans Administration mortgage loans, if adversely classified will have reserves established only in the event of a default of a Participating Financial Institution. Reserves are based on the estimated costs to recover any uninsured portion of the MPF loan.

Mortgage loans, other than those included in large groups of smaller-balance homogeneous loans, are considered impaired when, based on current information and events, it is probable that the FHLBNY will be unable to collect all principal and interest amounts due according to the contractual terms of the mortgage loan agreements.

Management of the FHLBNY identifies inherent losses through analysis of the conventional loans (loss analysis excludes Federal Housing Administration and Veterans Administration insured loans) that are not adversely classified or past due. Reserves are based on the estimated costs to recover any portion of the MPF loans that are not FHA and VA insured.

When a mortgage loan is foreclosed, the FHLBNY will charge to the loan loss reserve account any excess of the carrying value of the loan over the net realizable value of the foreclosed loan.

The FHLBNY also holds participation interests in residential and community development mortgage loans through its Community Mortgage Asset (“CMA”) program. Acquisition of participations under the Community Mortgage Asset program were suspended indefinitely in November 2001, and the outstanding balance of Community Mortgage Asset loans was $3.9 million and $4.0 million at December 31, 2009 and 2008. If adversely classified, Community Mortgage Asset loans would require additional loan loss reserves based on the shortfall of the liquidation value of collateral to cover the remaining balance of the loan.

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Accounting for Derivatives

The Bank records and reports hedging activities under accounting standards for derivatives and hedging. In compliance with the standards, the accounting for derivatives requires the FHLBNY to make the following assumptions and estimates: (i) assessing whether the hedging relationship qualifies for hedge accounting, (ii) assessing whether an embedded derivative should be bifurcated, (iii) calculating the effectiveness of the hedging relationship, (iv) evaluating exposure associated with counterparty credit risk, and (v) estimating the fair value of the derivatives. The FHLBNY’s assumptions and judgments include subjective estimates based on information available as of the date of the financial statements and could be materially different based on different assumptions, calculations, and estimates.

The FHLBNY specifically identifies the hedged asset or liability and the associated hedging strategy. Prior to execution of each transaction, the FHLBNY documents the following items:

• Hedging strategy

• Identification of the item being hedged

• Determination of the accounting designation

• Determination of method used to assess the effectiveness of the hedge relationship

• Assessment that the hedge is expected to be effective in the future if designated as a qualifying hedge accounting standards for derivatives and hedging.

All derivatives are recorded on the Statements of Condition at their fair value and designated as either fair value or cash flow hedges for qualifying hedges or as non-qualifying hedges (economic hedges, or customer intermediations) under the accounting standards for derivatives and hedging. In an economic hedge, the Bank executes derivative contracts, which are economically effective in reducing risk, either because a qualifying hedge is not available or because the cost of a qualifying hedge is not economical.

Changes in the fair values of a derivative that qualifies as a fair value hedge are recorded in current period earnings or in AOCI if the derivative qualifies as a cash flow hedge.

In addition, the FHLBNY evaluates the products offered to its members and debt issued to investors to determine whether an embedded derivative exists under the accounting standards for derivatives and hedging. The evaluation includes reviewing the terms of the instrument to identify whether some or all of the cash flows or the value of other exchanges required by the instrument are similar to a derivative and should be bifurcated from the host contract. If it is determined that an embedded derivative should be bifurcated, the FHLBNY measures the fair value of the embedded derivative separately from the host contract and records the changes in fair value in earnings. The FHLBNY did not have to bifurcate any embedded derivative in any period reported.

Assessment of Effectiveness. Highly effective hedging relationships that use interest rate swaps as the hedging instrument to hedge a recognized asset or liability and that meet certain specific criteria under the accounting standards for derivatives and hedging qualify for an assumption of no ineffectiveness (also referred to as the “short-cut” method). The short-cut method allows the FHLBNY to assume that the change in fair value of the hedged item attributable to the benchmark interest rates (LIBOR for the Bank) equals the change in fair value of the derivative during the life of the hedge.

For a hedging relationship that does not qualify for the short-cut method, the FHLBNY measures its effectiveness by assessing and recording the change in fair value of the hedged item attributable to the risk being hedged separately from the change in fair value of the derivative. This method for measuring effectiveness is also referred to as the “long-haul” method. The FHLBNY designs effectiveness testing criteria based on its knowledge of the hedged item and hedging instrument that were employed to create the hedging relationship. The FHLBNY uses regression analyses to evaluate effectiveness results, which must fall within established tolerances. Effectiveness testing is performed at hedge inception, and on at least a quarterly basis for both prospective considerations and retrospective evaluations.

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Hedge Discontinuance. When a hedging relationship fails the effectiveness test, the FHLBNY immediately discontinues hedge accounting. In addition, the FHLBNY discontinues hedge accounting for a cash flow hedge when it is no longer probable that a forecasted transaction will occur in the original expected time period, or when the fair value hedge of a firm commitment no longer meets the required criteria of a firm commitment. The FHLBNY treats modifications of hedged items (e.g., reduction in par amounts, change in maturity date, and change in strike rates) that are other than minor as a termination of a hedge relationship. The FHLBNY records the effect of discontinuance of hedges to earnings as a Net realized and unrealized gain (loss) on derivatives and hedging activities in “Other income (loss)” in the Statements of income.

Accounting for Hedge Ineffectiveness. The FHLBNY quantifies and records the ineffectiveness portion of a hedging relationship as a Net realized and unrealized gain (loss) on derivatives and hedging activities in Other income (loss) in the Statements of income. Ineffectiveness for fair value hedging relationships is calculated as the difference in the change in fair value of the hedging instrument and the change in fair value of the hedged item that is attributable to the risk being hedged, which has been designated by the Bank as LIBOR. Ineffectiveness for anticipatory hedge relationships is recorded when the change in the fair value of the hedging instrument differs from the related change in the present value of the cash flows from the anticipated hedged item.

Credit Risk from Counterparties. The FHLBNY is subject to credit risk as a result of nonperformance by counterparties to the derivative agreements. The FHLBNY enters into master netting arrangements and bilateral security agreements with all active non-member derivative counterparties, which provide for delivery of collateral at specified levels to limit the FHLBNY’s net unsecured credit exposure to these counterparties. The FHLBNY makes judgments on each counterparty’s creditworthiness and estimates of collateral values in analyzing its credit risk for nonperformance by counterparties. Bilateral agreements consider the credit risks and the agreement specifies thresholds that change with changes in credit ratings. Typically, collateral is exchanged when fair values of derivative positions exceed the predetermined thresholds. To the extent that the fair values do not equal the collateral posted as a result of the thresholds in place, the FHLBNY or the derivative counterparty is exposed to credit risk in the event of a default. Also, to the extent that the posted collateral does not equal the replacement fair values of open derivative positions in a scenario such as a default, the FHLBNY or the derivative counterparty is exposed to credit risk. All extensions of credit, including those associated with the purchase or sale of derivatives to members of the FHLBNY, are fully secured by eligible collateral.

Recording of Derivatives and Hedged items. The FHLBNY records derivatives on trade date, but records the associated hedged consolidated obligations and advances on settlement date. Hedge accounting commences on trade date, at which time subsequent changes to the derivative’s fair value are recorded along with the offsetting changes in the fair value of the hedged item. On settlement date, the adjustments to the hedge items carrying amount are combined with the proceeds and become part of its total carrying amount.

The FHLBNY has defined its market settlement conventions for hedged items to be five business days or less for advances and thirty calendar days or less, using a next business day convention, for consolidated obligation bonds and discount notes. These market settlement conventions are the shortest period possible for each type of advance and consolidated obligation from the time the instruments are committed to the time they settle.

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The FHLBNY considers hedges of committed advances and consolidated obligations bonds eligible for the short-cut accounting, (hedges must meet certain specific criteria under the accounting standards for derivatives and hedging to qualify for an assumption of no ineffectiveness), as long as settlement of the committed asset or liability occurs within the shortest period possible for that type of instrument. The FHLBNY also believes the conditions of no ineffectiveness are met if the fair value of the swap is zero on the date the FHLBNY commits itself to issue the consolidated obligation bond.

Amortization of Premiums and Accretion of Discounts

The FHLBNY estimates prepayments for purposes of amortizing premiums and accreting discounts associated with certain investment securities in accordance with accounting guidance for investments in debt and equity securities, which requires premiums and discounts to be recognized in income at a constant effective yield over the life of the instrument. Because actual prepayments often deviate from the estimates, the FHLBNY periodically recalculates the effective yield to reflect actual prepayments to date.

• Adjustments of the effective yields for mortgage-backed securities are recorded on a retrospective basis, meaning as if the new estimated life of the security had been known at its original acquisition date. Changes in interest rates have a direct impact on prepayment speeds and estimated life, which will result in yield adjustments and can be a source of income volatility. Reductions in interest rates generally accelerate prepayments, which accelerate the amortization of premiums and reduce current earnings. Typically, declining interest rates also accelerate the accretion of discounts, thereby increasing current earnings. On the other hand, in a rising interest rate environment, prepayments will generally extend over a longer period, shifting some of the premium amortization and discount accretion to future periods.

• The Bank uses the contractual method to amortize premiums and accrete discounts on mortgage loans held-for-portfolio. The contractual method recognizes the income effects of premiums and discounts in a manner that is reflective of the actual behavior of the mortgage loans during the period in which the behavior occurs while also reflecting the contractual terms of the assets without regard to changes in estimated prepayments based upon assumptions about future borrower behavior.

For more information about amortization and accretion recorded in the Statements of Income see Note 4 — Held-to-maturity securities, Note 5 — Available-for-sale securities, and Note 7 — Mortgage loans held-for-portfolio to the audited financial statements accompanying this report.

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Legislative and Regulatory Developments

Housing and Economic Recovery Act

On July 30, 2008, the President of the United States signed into law the Housing and Economic Recovery Act of 2008 (“HERA”). As more fully discussed below, among other things, this legislation:

• established the Finance Agency effective on the date of enactment of HERA to regulate (i) Fannie Mae and Freddie Mac (collectively, the “Enterprises”), (ii) the FHLBanks (together with the Enterprises, the “Regulated Entities”) and (iii) the Office of Finance;

• eliminated the Office of Federal Housing Enterprise Oversight (“OFHEO”) and the Finance Board no later than one year after enactment and restricted their activities during such period to those necessary to wind up their affairs (on October 27, 2008, the Finance Agency announced that the formal integration of OFHEO and the Finance Board into the Finance Agency had been completed);

• established a director (“Director”) of the Finance Agency with broad authority over the Regulated Entities;

• amended certain aspects of the FHLBanks’ corporate governance;

• authorizes voluntary mergers of FHLBanks with the approval of the Director and permits the Director to liquidate a FHLBank;

• made, or requires the Director to study and report on, other changes regarding the membership and activities of the FHLBanks;

• provides that all regulations, orders, directives and determinations issued by the Finance Board and OFHEO prior to enactment of HERA immediately transfer to the Finance Agency and remain in force unless modified, terminated, or set aside by the Director; and

• granted the Secretary of the Treasury the temporary authority (through December 31, 2009 and subject to certain conditions) to purchase obligations and other securities issued by Fannie Mae, Freddie Mac, and the FHLBanks.

HERA requires the Finance Agency to issue a number of regulations, orders and reports. Since the enactment of HERA, the Finance Agency has issued certain of these regulations, orders and reports. Some of the more significant provisions of HERA, and the status of any actions required to be taken by the Finance Agency with respect thereto are summarized below. The full effect of this legislation on the Bank and its activities will become known only after all of the required regulations, orders, and reports are issued and finalized.

Structure of the Finance Agency

The Director of the Finance Agency is appointed by the President of the United States and confirmed by the Senate, and serves a five-year term. He or she may be removed only for cause. HERA provided that the Director of OFHEO at the time of enactment would serve as the Director of the Finance Agency until a permanent Director was appointed and confirmed. James Lockhart, the Director of OFHEO at the time of enactment of HERA, served as Director of the Finance Agency until his resignation in August 2009. Currently, Edward DeMarco, formerly Chief Operating Officer and Senior Deputy Director for Housing Mission and Goals for the Finance Agency, is serving as the Acting Director. At the date of this report, a permanent Director has not yet been appointed and confirmed.

HERA provides for three Deputy Directors of the Finance Agency. The Deputy Director of the Division of Enterprise Regulation is responsible for the safety and soundness regulation of Fannie Mae and Freddie Mac. The Deputy Director of the Division of FHLBank Regulation is responsible for the safety and soundness regulation of the FHLBanks. Finally, the Deputy Director for Housing Mission and Goals oversees the housing mission and goals of the Enterprises and the community and economic development mission of the FHLBanks.

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The Director of the Finance Agency, the Secretary of the Treasury, the Secretary of the Department of Housing and Urban Development, and the Chairman of the SEC constitute the Federal Housing Finance Oversight Board, and the Director serves as the chair of and consults with this board, which has no executive authority.

Finance Agency Assessments

The Finance Agency is funded entirely by assessments from the Regulated Entities. On September 30, 2008, the Finance Agency adopted a final rule establishing policy and procedures for the Finance Agency to impose assessments on the Regulated Entities (the “Assessments Rule”). Pursuant to the Assessments Rule, the Director allocates the annual assessment between the Enterprises and the FHLBanks, with the FHLBanks paying proportional shares of the assessment sufficient to provide for payment of the costs and expenses relating to the FHLBanks, as determined by the Director. Each FHLBank is required to pay a pro rata share of the annual assessment allocated to the FHLBanks based on the ratio between the FHLBank’s minimum required regulatory capital and the aggregate minimum required regulatory capital of all FHLBanks. A FHLBank’s minimum required regulatory capital is the highest amount of capital necessary for a FHLBank to comply with any of the capital requirements established by the Director and applicable to the FHLBank.

The Director may, at his or her discretion, increase the amount of a Regulated Entity’s assessment (i) if the Regulated Entity is not classified as adequately capitalized (to pay additional estimated costs of regulation of that Regulated Entity) or (ii) to cover costs of enforcement activities related to that Regulated Entity. The Director may also, at any time, collect an additional assessment from a Regulated Entity to otherwise cover the estimated amount of any deficiency as a result of increased costs of regulation of a Regulated Entity. The Director may require the Regulated Entity to pay such additional assessment immediately, rather than through an increase of the Regulated Entity’s next required payment. The Director may assess interest and penalties on any delinquent assessment payment and may enforce an assessment payment through a cease-and-desist proceeding or through civil money penalties.

Authority of the Finance Agency Director

The Director has broad authority to regulate the Regulated Entities, including the authority to set capital requirements, seek prompt corrective action, bring enforcement actions, put a Regulated Entity into receivership, and levy fines against the Regulated Entities and entity-affiliated parties. The HER Act defines an “entity-affiliated party” to include (i) officers, directors, employees, agents, and controlling shareholders of a Regulated Entity; (ii) any shareholder, affiliate, consultant, joint venture partner, and any other person that the Director determines participates in the conduct of the Regulated Entity’s affairs; (iii) any independent contractor of a Regulated Entity that knowingly or recklessly participates in any violation of law or regulation, any breach of fiduciary duty, or any unsafe or unsound practice; (iv) any not-for-profit corporation that receives its principal funding, on an ongoing basis, from any Regulated Entity; and (v) the Office of Finance.

In connection with this authority, on January 30, 2009, the Finance Agency adopted an interim final rule establishing capital classifications and critical capital levels for the FHLBanks (the “Capital Regulation”). On August 4, 2009, the Finance Agency adopted the interim final rule as a final regulation, subject to amendments meant to clarify certain provisions. On February 8, 2010, the Finance Agency issued a proposed rule with request for comment setting forth standards and procedures that the Director would apply in determining whether to impose a temporary increase in the minimum capital level of a FHLBank. Comments on the proposed rule may be submitted to the Finance Agency through April 9, 2010. For additional information regarding the Capital Regulation and the Bank’s capital requirements, see Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations — Risk-Based Capital Rules and Other Capital Requirements.

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Executive Compensation

HERA requires the Director to prohibit a FHLBank from providing compensation to its executive officers that is not reasonable and comparable with compensation for employees in similar businesses involving similar duties and responsibilities. Further, pursuant to the Capital Regulation, if a FHLBank is undercapitalized, the Director may also restrict executive officer compensation. The Capital Regulation defines “executive officer” to include a FHLBank’s (i) named executive officers identified in the FHLBank’s Annual Report on Form 10-K, (ii) other executives who occupy certain positions or who are in charge of certain subject areas and (iii) any other individual, without regard to title, who is in charge of a principal business unit, division or function or who reports directly to the FHLBank’s chairman, vice chairman, president or chief operating officer.

On June 5, 2009, the Finance Agency issued a proposed rule to set forth requirements and processes with respect to compensation provided to executive officers by a FHLBank. Comments on the proposed rule could be submitted to the Finance Agency through August 4, 2009.

If adopted as proposed, the proposed rule would allow the Director to review the compensation arrangements for any executive officer of a FHLBank at any time. The proposed rule would define “executive officer” as the Capital Regulation does (as set forth above). The Director could prohibit the FHLBank, and the FHLBank would be prohibited, from providing compensation to any such executive officer that is not reasonable and comparable with compensation for employees in other similar businesses involving similar duties and responsibilities. In determining whether such compensation is reasonable and comparable, the Director could consider any factors the Director considered relevant (including any wrongdoing on the part of the executive officer). However, the Director would not be able to prescribe or set a specified level or range of compensation.

With respect to compensation under review by the Director, the Director’s prior approval would be required for (i) a written arrangement that provided an executive officer a term of employment of more than six months or that provided compensation in connection with termination of employment, (ii) annual compensation, bonuses and other incentive pay of a FHLBank’s president and (iii) compensation paid to an executive officer, if the Director provided notice that the compensation of such executive officer would be subject to a specific review by the Director.

Separately, on October 27, 2009, the Finance Agency issued Advisory Bulletin 2009-AB-02, “Principles for Executive Compensation at the Federal Home Loan Banks and the Office of Finance” (“AB 2009-02”). In AB 2009-02, the Finance Agency outlines several principles for sound incentive compensation practices to which the FHLBanks should adhere in setting executive compensation policies and practices. Those principles are (i) executive compensation must be reasonable and comparable to that offered to executives in similar positions at other comparable financial institutions, (ii) executive incentive compensation should be consistent with sound risk management and preservation of the par value of a FHLBank’s capital stock, (iii) a significant percentage of an executive’s incentive-based compensation should be tied to longer-term performance and outcome-indicators, (iv) a significant percentage of an executive’s incentive-based compensation should be deferred and made contingent upon performance over several years and (v) the board of directors of each FHLBank and the Office of Finance should promote accountability and transparency in the process of setting compensation. In evaluating compensation at the FHLBanks, the Director will consider the extent to which an executive’s compensation is consistent with the above principles.

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Indemnification Payments and Golden Parachute Payments

The Director may also prohibit or limit, by regulation or order, any indemnification payment or golden parachute payment. In September 2008, the Finance Agency issued an interim final regulation relating to golden parachute payments (the “Golden Parachute Regulation”) and indicated it would publish a separate rulemaking relating to indemnification payments in the future. On January 29, 2009, the Finance Agency issued a final rule setting forth the factors to be considered by the Director in carrying out his or her authority to limit golden parachute payments to entity-affiliated parties (which factors are discussed below).

The Golden Parachute Regulation defines a “golden parachute payment” as any payment (or any agreement to make any payment) in the nature of compensation by any Regulated Entity for the benefit of any current entity-affiliated party that (i) is contingent on, or by its terms is payable on or after, the termination of such party’s primary employment or affiliation with the Regulated Entity and (ii) is received on or after the date on which one of the following events occurs (a “triggering event”): (a) the Regulated Entity became insolvent; (b) any conservator or receiver is appointed for the Regulated Entity; or (c) the Director determines that the Regulated Entity is in a troubled condition. Additionally, any payment that would be a golden parachute payment but for the fact that such payment was made before the date that a triggering event occurred will be treated as a golden parachute payment if the payment was made in contemplation of the triggering event.

The following types of payments are excluded from the definition of “golden parachute payment” under the Golden Parachute Regulation: (i) any payment made pursuant to a retirement plan that is qualified (or is intended within a reasonable period of time to be qualified) under section 401 of the Internal Revenue Code of 1986 or pursuant to a pension or other retirement plan that is governed by the laws of any foreign country; (ii) any payment made pursuant to a bona fide deferred compensation plan or arrangement that the Director determines, by regulation or order, to be permissible; or (iii) any payment made by reason of death or by reason of termination caused by the disability of an entity-affiliated party.

In determining whether to prohibit or limit a golden parachute payment, the Golden Parachute Regulation requires the Director to consider the following factors: (i) whether there is a reasonable basis to believe that an entity-affiliated party has committed any fraudulent act or omission, breach of trust or fiduciary duty, or insider abuse with regard to the Regulated Entity that has had a material effect on the financial condition of the Regulated Entity; (ii) whether there is a reasonable basis to believe that the entity-affiliated party is substantially responsible for the insolvency of the Regulated Entity, or the troubled condition of the Regulated Entity; (iii) whether there is a reasonable basis to believe that the entity-affiliated party has materially violated any applicable provision of Federal or State law or regulation that has had a material effect on the financial condition of the Regulated Entity; (iv) whether the entity-affiliated party was in a position of managerial or fiduciary responsibility; (v) the length of time that the party was affiliated with the Regulated Entity, and the degree to which the payment reasonably reflects compensation earned over the period of employment and the compensation involved represents a reasonable payment for services rendered; and (vi) any other factor the Director determines is relevant to the facts and circumstances surrounding the golden parachute payment, including any fraudulent act or omission, breach of fiduciary duty, violation of law, rule, regulation, order or written agreement, and the level of willful misconduct, breach of fiduciary duty, and malfeasance on the part of an entity-affiliated party.

Separately, on November 14, 2008, the Finance Agency proposed to amend the Golden Parachute Regulation to include provisions addressing prohibited and permissible indemnification payments in the event the Finance Agency were to institute an administrative proceeding or civil action through issuance of a notice of charges under regulations issued by the Director. The Finance Agency accepted comments on these proposed amendments that were received on or before December 29, 2008.

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On June 29, 2009, the Finance Agency issued a proposed rule to amend further the Golden Parachute Regulation to address in more detail prohibited and permissible indemnification payments and golden parachute payments. Comments on the proposed rule could be submitted to the Finance Agency through July 29, 2009.

With respect to indemnification payments, the proposed rule essentially re-proposed the November 14, 2008 amendments to the Golden Parachute Regulation. The proposed rule would delete one provision contained in the earlier proposed amendments, which provided that claims for employee welfare benefits or other benefits that are contingent, even if otherwise vested, when a receiver is appointed for any Regulated Entity, including any contingency for termination of employment, would not be provable claims or actual, direct compensatory damage claims against such receiver.

In addition to the payments described above that are excluded from the definition of “golden parachute payment,” the proposed rule would specify that “golden parachute payment” also does not include (i) any payment made pursuant to a benefit plan as defined in the proposed rule (which includes employee welfare benefit plans as defined in section 3(1) of the Employee Retirement Income Security Act of 1974); (ii) any payment made pursuant to a nondiscriminatory severance pay plan or arrangement that provides for payment of severance benefits of generally no more than 12 months’ prior base compensation to all eligible employees upon involuntary termination other than for cause, voluntary resignation, or early retirement, subject to certain exceptions; (iii) any severance or similar payment that is required to be made pursuant to a state statute or foreign law that is applicable to all employers within the appropriate jurisdiction (with the exception of employers that may be exempt due to their small number of employees or other similar criteria); or (iv) any other payment that the Director determines to be permissible. The proposed rule would also define “bona fide deferred compensation plan or arrangement” to clarify when a payment made pursuant to a deferred compensation plan or arrangement would be excluded from the definition of “golden parachute payment.”

The proposed rule would extend the prohibition against certain golden parachute payments to former entity-affiliated parties. With respect to potentially prohibited golden parachute payments, a Regulated Entity could agree to make or could make a golden parachute payment if (i) the Director determined that such a payment or agreement was permissible; (ii) such an agreement was made in order to hire a person to become an entity-affiliated party when the Regulated Entity was insolvent, had a conservator or receiver appointed for it, or was in a troubled condition (or the person was being hired in an effort to prevent one of these conditions from occurring), and the Director consented in writing to the amount and terms of the golden parachute payment; or (iii) with the Director’s consent, such a payment was made pursuant to an agreement that provided for a reasonable severance payment, not to exceed 12 months’ salary, to an entity-affiliated party in the event of a change in control of the Regulated Entity.

Differences between the Enterprises and FHLBanks

HERA requires the Director, before issuing any new regulation or taking other agency action of general applicability and future effect relating to the FHLBanks, to take into account the differences between the Enterprises and the FHLBanks with respect to the FHLBanks’ (i) cooperative ownership structure, (ii) mission of providing liquidity to members, (iii) affordable housing and community development mission, (iv) capital structure and (v) joint and several liability, as well as any other differences that the Director considers appropriate.

Corporate Governance of the FHLBanks

Under HERA, each FHLBank is governed by a board of directors of 13 persons or so many persons as the Director may determine. HERA divides directors of FHLBanks into two classes. One class is comprised of “member” directors who are elected by the member institutions of each state in the FHLBank’s district to represent that state. The other class is comprised of “independent” directors who are nominated by a FHLBank’s board of directors, after consultation with its affordable housing Advisory Council, and elected by the FHLBank’s members at-large.

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On September 26, 2008, the Finance Agency issued an interim final rule with request for comments regarding the eligibility and election of individuals to serve on the boards of directors of the FHLBanks. On October 7, 2009, the Finance Agency issued a final rule, effective November 6, 2009, regarding the eligibility and election of FHLBank directors. For information regarding the eligibility and election of the Bank’s Board of Directors, see Item 9B — Other Information and Item 10 — Directors, Executive Officers and Corporate Governance.

FHLBank Directors’ Compensation and Expenses

HERA repealed the prior statutory limits on compensation of directors of FHLBanks. As a result, FHLBank director fees are to be determined at the discretion of a FHLBank’s board of directors, provided such fees are required to be reasonable.

On October 23, 2009, the Finance Agency published a notice of proposed rulemaking, with a request for comments, regarding payment by FHLBanks of their directors’ compensation and expenses. Comments on the proposed rule could be submitted to the Finance Agency through December 7, 2009.

If adopted, the proposed rule would specify that each FHLBank may pay its directors reasonable compensation for the time required of them, and their necessary expenses, in the performance of their duties, as determined by the FHLBank’s board of directors. The compensation paid by a FHLBank to a director would be required to reflect the amount of time the director spent on official FHLBank business, subject to reduction as necessary to reflect lesser attendance or performance at board or committee meetings during a given year.

Pursuant to the proposed rule, the Director would review compensation paid by a FHLBank to its directors. The Director could determine that the compensation and/or expenses to be paid to the directors are not reasonable. In such case, the Director could order the FHLBank to refrain from making any further payments; provided, however, that such order would only be applied prospectively and would not affect any compensation or expense payments made prior to the date of the Director’s determination and order. To assist the Director in reviewing the compensation and expenses of FHLBank directors, each FHLBank would be required to submit to the Director by specified deadlines (i) the compensation anticipated to be paid to its directors for the following calendar year, (ii) the amount of compensation and expenses paid to each director for the immediately preceding calendar year and (iii) a copy of the FHLBank’s written compensation policy, along with all studies or other supporting materials upon which the board of directors relied in determining the level of compensation and expenses to pay to its directors.

For information regarding the compensation of the Bank’s directors, see Item 11 — Executive Compensation.

Community Development Financial Institutions (“CDFIs”)

HERA makes CDFIs that are certified under the Community Development Banking and Financial Institutions Act of 1994 eligible for membership in a FHLBank. A certified CDFI is a person (other than an individual) that (i) has a primary mission of promoting community development, (ii) serves an investment area or targeted population, (iii) provides development services in connection with equity investment or loans, (iv) maintains, through representation on its governing board or otherwise, accountability to residents of its investment area or targeted population, and (v) is not an agency or instrumentality of the United States or of any state or political subdivision of a state.

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On May 15, 2009, the Finance Agency issued a proposed rule to amend its membership regulations to authorize non-federally insured, CDFI Fund-certified CDFIs to become members of a FHLBank. On January 5, 2010, the Finance Agency issued a final rule establishing the eligibility and procedural requirements for CDFIs that wish to become FHLBank members. The newly-eligible CDFIs include community development loan funds, venture capital funds and state-chartered credit unions without federal insurance.

The Bank has not yet determined the number of CDFIs in its district, how many of them might seek to become members of the Bank, or the effect on the Bank of their becoming members.

Housing Goals

HERA requires the Director to establish housing goals with respect to the purchase of mortgages, if any, by the FHLBanks and to report annually to the United States Congress (“Congress”) on the FHLBanks’ performance in meeting such goals. In establishing the housing goals, the Director is required to consider the unique mission and ownership structure of the FHLBanks. To facilitate an orderly transition, the Director is charged with establishing interim housing goals for each of the two calendar years following the date of enactment of HERA.

Sharing of Information Regarding the FHLBanks

The HERA requires the Director to promulgate regulations under which he or she will make available to each FHLBank information regarding the other FHLBanks in order to enable the FHLBanks to assess their risk under their joint and several liability with respect to consolidated obligations and to comply with their disclosure obligations under the Exchange Act. Exceptions to such disclosure are provided with respect to information that is proprietary.

Exemptions from Certain SEC Laws and Regulations

The HERA exempts the FHLBanks from certain requirements under the Federal securities laws, including the Exchange Act, and the SEC’s related regulations. These exemptions arise from the distinctive nature and the cooperative ownership structure of the FHLBanks and parallel relief granted by the SEC to the FHLBanks in no-action letters issued at the time the FHLBanks registered with the SEC under the Exchange Act. In issuing future regulations, the SEC is directed by HERA to take account of the distinctive characteristics of the FHLBanks when evaluating (i) the accounting treatment with respect to payments to the Resolution Funding Corporation, (ii) the role of the combined financial statements of the FHLBanks, (iii) the accounting classification of redeemable capital stock, and (iv) the accounting treatment related to the joint and several nature of the obligations of the FHLBanks.

Liquidations, Voluntary Mergers, and Reduction in the Number of FHLBank Districts

HERA permits any FHLBank to voluntarily merge with another FHLBank with the approval of the Director and the boards of directors of the FHLBanks involved. The Director is required to promulgate regulations establishing the conditions and procedures for the consideration and approval of any voluntary merger, including the procedures for FHLBank member approval.

The Director is authorized on 30 days’ prior notice to liquidate or reorganize any FHLBank. A FHLBank that the Director proposes to liquidate or reorganize is entitled to contest the Director’s determination in a hearing on the record in accordance with the provisions of the Administrative Procedures Act.

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The Director is authorized to reduce the number of FHLBank districts to fewer than eight as a result of the merger of FHLBanks or the Director’s decision to liquidate a FHLBank. Prior law required that there be no fewer than eight and no more than twelve FHLBanks.

Community Financial Institutions (“CFIs”)

CFIs are redefined by HERA as FDIC-insured institutions with average total assets over the three-year period preceding measurement of less than $1.0 billion (up from the statutory amount of $500 million, with such amount inflation adjusted to $625 million immediately prior to enactment of HERA). The $1.0 billion amount will continue to be adjusted annually by the FHFA based on any increase in the Consumer Price Index. For 2010, the amount has been set by the FHFA at $1,029 million.

Loans for community development activities were added to loans for small business, small farm, and small agri-business as permissible purposes for advances to CFIs (including long-term advances). On February 23, 2010, the Finance Agency issued a proposed rule with request for comments to define certain terms and provide guidance necessary to assist the FHLBanks in accepting this type of collateral. Comments on the proposed rule may be submitted to the Finance Agency through April 26, 2010. The Bank has not yet determined the effect on the Bank of the inclusion of loans for community development activities by CFIs as loans eligible to support advances.

Public Use Data Base and Reporting to Congress

HERA requires the FHLBanks to report to the Director census tract level data regarding mortgages they purchase, if any. Such data are to be reported in a form consistent with other Federal laws, including the Home Mortgage Disclosure Act, and any other requirements that the Director imposes. The Director is required to report such data to Congress and, except with respect to proprietary information and personally identifiable information, to make the data available to the public.

Study of Securitization of Home Mortgage Loans by the FHLBanks

Within one year of the enactment of HERA, the Director was to provide to Congress a report on a study of securitization of home mortgage loans purchased from member financial institutions under the AMA programs of the FHLBanks. In conducting this study, the Director was required to consider (i) the benefits and risks associated with securitization of AMA, (ii) the potential impact of securitization upon the liquidity in the mortgage and broader credit markets, (iii) the ability of the FHLBanks to manage the risks associated with securitization, (iv) the impact of such securitization on the existing activities of the FHLBanks, including their mortgage portfolios and advances, and (v) the joint and several liability of the FHLBanks and the cooperative structure of the FHLBank System. In conducting the study, the Director was required to consult with the FHLBanks, the Office of Finance, representatives of the mortgage lending industry, practitioners in the structured finance field, and other experts as needed.

On February 27, 2009, the Finance Agency published a Notice of Concept Release with request for comments to garner information from the public for use in its study. On July 30, 2009, the Director provided to Congress the results of the Finance Agency’s study, including policy recommendations based on the Finance Agency’s analysis of the feasibility of the FHLBanks’ issuing mortgage-backed securities and of the benefits and risks associated with such a program. Based on the Finance Agency’s study and findings regarding FHLBank securitization, the Director did not recommend permitting the FHLBanks to securitize mortgages at this time.

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Study of FHLBank Advances

Within one year of the enactment of HERA, the Director was required to conduct a study and submit a report to Congress regarding the extent to which loans and securities used as collateral to support FHLBank advances are consistent with the Interagency Guidance on Nontraditional Mortgage Product Risks dated October 4, 2006 and the Statement on Subprime Mortgage Lending dated July 10, 2007 (collectively, the “Interagency Guidance”). The study was also required to consider and recommend any additional regulations, guidance, advisory bulletins or other administrative actions necessary to ensure that the FHLBanks are not supporting loans with predatory characteristics.

On August 4, 2009, the Finance Agency published the notice of study and recommendations required by HERA with respect to FHLBank collateral for advances and the Interagency Guidance. Comments on the notice of study and recommendations could be submitted to the Finance Agency through October 5, 2009.

AHP Funds to Support Refinancing of Certain Residential Mortgage Loans

For a period of two years following the enactment of HERA, FHLBanks are authorized to use a portion of their AHP funds to support the refinancing of residential mortgage loans owed by families with incomes at or below 80 percent of the median income for the areas in which they reside.

As required by HERA, on October 17, 2008, the Finance Agency issued an interim final rule with request for comments regarding the FHLBanks’ mortgage refinancing authority. This interim final rule amended the AHP regulation to allow a FHLBank to temporarily establish a homeownership set-aside program for the use of AHP grants by the FHLBank’s members to assist in the refinancing of a household’s mortgage loan under the HOPE for Homeowners Program of the Federal Housing Administration (“FHA”).

Based on the comments received on the interim final rule and the continuing adverse conditions of the mortgage market, on August 4, 2009, the Finance Agency issued a second interim final rule, with a request for comments, to broaden the scope of the FHLBanks’ mortgage refinancing authority and to allow the FHLBanks greater flexibility in implementing their mortgage refinancing authority. Comments on the second interim final rule could be submitted to the Finance Agency through October 5, 2009.

The second interim final rule amended the current AHP regulation to allow a FHLBank to temporarily establish a homeownership set-aside program for the use of AHP grants by the FHLBank’s members to assist in the refinancing of a household’s mortgage loan in order to prevent foreclosure. A loan is eligible to be refinanced with an AHP grant if the loan is secured by a first mortgage on the household’s primary residence, the loan is refinanced under a program offered by the United States Department of Agriculture, Fannie Mae, Freddie Mac, a state or local government, or a state or local housing finance agency (an “eligible targeted refinancing program”) and the loan meets certain other conditions.

The second interim final rule also authorizes a FHLBank, in its discretion, to set aside annually up to the greater of $4.5 million or 35 percent of the FHLBank’s annual required AHP contribution to provide funds to members participating in homeownership set-aside programs, including a mortgage refinancing set-aside program, provided that at least one-third of this set-aside amount is allocated to programs to assist first-time homebuyers. A FHLBank may accelerate to its current year’s AHP program (including its set-aside programs) from future annual required AHP contributions an amount up to the greater of $5 million or 20 percent of the FHLBank’s annual required AHP contribution for the current year. The FHLBank may credit the amount of the accelerated contribution against required AHP contributions over one or more of the subsequent five years.

The FHLBanks’ authority under the second interim final rule to establish and provide AHP grants under a mortgage refinancing homeownership set-aside program expires on July 30, 2010.

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Letters of Credit to Guarantee Bonds

The Bank’s credit services include letters of credit issued or confirmed on behalf of members for a variety of purposes, including as credit support for bonds or other debt instruments. Before enactment of HERA, the Bank did not generally issue or confirm letters of credit to support bonds or other debt instruments where the interest on such instruments was purportedly exempt from federal income taxes because such tax-exempt status was generally lost if the instruments were “federally guaranteed” under the Internal Revenue Code. The Bank’s letters of credit and confirmations were generally federal guarantees under the Internal Revenue Code, with an exception for guarantees in connection with debt issuances to support certain housing programs.

The HER Act authorizes FHLBanks, subject to certain conditions, to issue a letter of credit or confirmation in connection with the original issuance of tax-exempt bonds during the period from enactment of HERA to December 31, 2010, and to renew or extend any such letter of credit or confirmation, without the bonds potentially losing their tax-exempt status. A FHLBank may issue such letter of credit or confirmation without regard to the purpose of the issuance of the bonds (i.e., the bonds do not have to be issued solely to support certain housing programs).

Minorities, Women, and Diversity in the Workforce

HERA requires each Regulated Entity to establish or designate an Office of Minority and Women Inclusion that is responsible for carrying out all matters relating to diversity in management, employment, and business practices. On January 11, 2010, the Finance Agency issued a proposed rule to effect this provision of HERA. Comments on the proposed rule may be submitted to the Finance Agency through April 26, 2010.

Joint Offices

HERA repeals the provision in prior law that prohibited the FHLBanks from establishing any joint offices other than the Office of Finance. At the present time, the Bank does not plan to establish any joint office with one or more FHLBanks.

Temporary Authority of the Secretary of the Treasury

HERA granted the Secretary of the Treasury the temporary authority (through December 31, 2009) to purchase any obligations and other securities issued by the Regulated Entities, if he or she determined that such purchase was necessary to provide stability to financial markets, to prevent disruptions in the availability of mortgage finance, and to protect the taxpayers. For the FHLBanks, this temporary authorization supplemented the existing authority of the Secretary of the Treasury under the FHLB Act to purchase up to $4.0 billion of FHLBank obligations. Since 1977, the Treasury has not owned any of the FHLBanks’ consolidated obligations under this previous authority.

In connection with the Secretary of the Treasury’s authority under HERA, on September 9, 2008, the Bank entered into a Lending Agreement (the “Agreement”) with the Treasury. Each of the other 11 FHLBanks also entered into its own Lending Agreement with the Treasury that was identical to the Agreement entered into by the Bank (collectively, the “Agreements”). The FHLBanks entered into these Agreements in connection with the Treasury’s establishment of a Government Sponsored Enterprise Credit Facility that was designed to serve as a contingent source of liquidity for the Regulated Entities.

The Agreements terminated on December 31, 2009 when the temporary authority of the Secretary of the Treasury expired. None of the FHLBanks ever borrowed under the Agreements.

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Reporting of Fraudulent Financial Instruments

On June 17, 2009, the Finance Agency issued a proposed regulation to effect the provisions of HERA that require the FHLBanks to report to the Finance Agency any fraudulent loans or other financial instruments that they purchased or sold. On January 27, 2010, the Finance Agency issued a final regulation, effective February 26, 2010, regarding reporting by the FHLBanks of fraudulent financial instruments.

The final regulation requires a FHLBank to submit to the Director a timely written report upon discovery by the FHLBank that it has purchased or sold a fraudulent loan or financial instrument, or suspects a possible fraud relating to the purchase or sale of any loan or financial instrument. “Purchased or sold or relating to the purchase or sale” means any transaction involving a financial instrument including, but not limited to, any purchase, sale, other acquisition, or creation of a financial instrument by the member of a FHLBank to be pledged as collateral to the FHLBank to secure an advance by the FHLBank to that member, the pledging by a member to a FHLBank of such financial instrument to secure such an advance, the making of a grant by a FHLBank under its affordable housing program or community investment program, and the effecting of a wire transfer or other form of electronic payments transaction by the FHLBank. “Financial instrument” means any legally enforceable agreement, certificate, or other writing, in hardcopy or electronic form, having monetary value including, but not limited to, any agreement, certificate, or other writing evidencing an asset pledged as collateral to a FHLBank by a member to secure an advance by the FHLBank to that member. “Fraud” means a misstatement, misrepresentation or omission that cannot be corrected and that was relied upon by a FHLBank to purchase or sell a loan or financial instrument.

The final regulation requires each FHLBank to establish and maintain adequate and efficient internal controls, policies and procedures and an operational training program to discover and report fraud or possible fraud in connection with the purchase or sale of any loan or financial instrument. The FHFA is expected to provide additional guidance in the near future regarding the implementation of this regulation.

Other Regulatory Developments

Office of Finance

Effective with the enactment of HERA, the Finance Agency assumed responsibility from the Finance Board for supervising and regulating the Office of Finance. On August 4, 2009, the Finance Agency published a notice of proposed rulemaking, with a request for comments, regarding the Board of Directors of the Office of Finance. Initially, comments on the proposed rule could be submitted to the Finance Agency through October 5, 2009. On October 2, 2009, the Finance Agency extended the comment period until November 4, 2009.

The proposed rule would expand the Board of Directors of the Office of Finance to include all of the FHLBank presidents (currently, only two of the FHLBank presidents serve on the Office of Finance’s Board of Directors, including the Bank’s President and Chief Executive Officer). The Board of Directors of the Office of Finance would also include three to five independent directors (currently, the third director of the Office of Finance is required to be a private United States citizen with demonstrated expertise in financial markets). Each independent director would be required to be a United States citizen and the independent directors, as a group, would be required to have substantial experience in financial and accounting matters. An independent director could not (i) be an officer, director or employee of any FHLBank or any member of a FHLBank; (ii) be affiliated with any consolidated obligations selling or dealer group member under contract with the Office of Finance; (iii) hold shares or any financial interest in any FHLBank member or in any such dealer group member in an amount greater than the lesser of (A) $250,000 or (B) 0.01 percent of the market capitalization of the member or dealer (except that a holding company of a FHLBank member or a dealer group member will be deemed to be a member if the assets of the holding company’s member subsidiaries constitute 35 percent or more of the consolidated assets of the holding company). The Chair of the Board of Directors of the Office of Finance would be selected from among the independent directors.

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The independent directors of the Office of Finance would serve as the Audit Committee. Among other duties, the Audit Committee would be responsible for overseeing the audit function of the Office of Finance and the preparation and accuracy of the FHLBank System’s combined financial reports. For purposes of the combined financial reports, the Audit Committee would be responsible for ensuring that the FHLBanks adopt consistent accounting policies and procedures, such that the information submitted by the FHLBanks to the Office of Finance may be combined to create accurate and meaningful combined reports. The Audit Committee of the Office of Finance, in consultation with the Finance Agency, could establish common accounting policies and procedures for the information submitted by the FHLBanks to the Office of Finance for the combined financial reports where the Audit Committee determines such information provided by the FHLBanks is inconsistent and that consistent policies and procedures regarding that information are necessary to create accurate and meaningful combined financial reports. The Audit Committee would also have the exclusive authority to employ and contract for the services of an independent, external auditor for the FHLBanks’ annual and quarterly combined financial statements.

Currently, the FHLBanks are responsible for jointly funding the expenses of the Office of Finance, which are shared on a pro rata basis with one-third based on each FHLBank’s total outstanding capital stock (as of the prior month-end, excluding those amounts classified as mandatorily redeemable), one-third based on each FHLBank’s total debt issuance (during the current month), and one-third based on each FHLBank’s total consolidated obligations outstanding (as of the current month-end). The proposed rule would retain the FHLBanks’ responsibility for jointly funding the expenses of the Office of Finance, but each FHLBank’s respective pro rata share would be based on a reasonable formula approved by the Board of Directors of the Office of Finance, subject to review by the Finance Agency.

Temporary Liquidity Guarantee Program.

On October 23, 2009, the FDIC published in the Federal Register a final rule concerning the termination of the Debt Guarantee Program (“DGP”), a component of the Temporary Liquidity Guarantee Program (“TLGP”). For most insured depository institutions and other entities participating in this program, the DGP concluded on October 31, 2009, with the FDIC’s guarantee expiring no later than December 31, 2012. The final rule establishes a limited six-month emergency guarantee facility for entities that (following the termination of the DGP) become unable to issue non-guaranteed debt to replace maturing senior unsecured debt due to market disruptions or other circumstances beyond their control. This emergency guarantee facility is available to qualified entities on an application basis and is subject to such restrictions and conditions as the FDIC deems appropriate. If an entity’s application is approved, the FDIC will guarantee the applicant’s senior unsecured debt issued on or before April 20, 2010. The FDIC’s guarantee of such debt will extend through the earliest of the mandatory conversion date (for mandatory convertible debt), the stated maturity date or December 31, 2012. Debt guaranteed under the emergency guarantee facility will be subject to an annualized assessment rate equal to a minimum of 300 basis points.

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Statement of Policy on Qualifications for Failed Bank Acquisitions.

On September 2, 2009, the FDIC issued a final statement of policy, effective on August 26, 2009, providing guidance to private capital investors interested in acquiring or investing in failed insured depository institutions regarding the terms and conditions for such investments or acquisitions. This guidance applies to (1) private capital investors in certain companies that seek to assume deposit liabilities or both such deposit liabilities and assets from a failed insured depository institution and (2) private capital investors involved in applications for deposit insurance in conjunction with de novo charters issued in connection with the resolution of failed insured depository institutions. Additionally, this final statement of policy provides, among other measures, standards for capital support of an acquired depository institution; an agreement to a cross guarantee over substantially commonly-owned depository institutions; limits on transactions with affiliates; maintenance of continuity of ownership; and avoidance of secrecy law jurisdictions as investment channels, absent consolidated home country supervision.

Capital Classifications and Critical Capital Levels for the FHLBanks.

The Finance Agency issued a final rule, effective August 4, 2009, to implement certain provisions of the Housing Act that require the Director of the Finance Agency to establish criteria based on the amount and type of capital held by an FHLBank for each of the following capital classifications: adequately capitalized, undercapitalized, significantly undercapitalized and critically undercapitalized. This regulation defines critical capital levels for the FHLBanks, establishes the criteria for each of the capital classifications identified in the Housing Act and implements the Finance Agency’s prompt correction action authority over the FHLBanks. The Finance Agency may, in its discretion, otherwise determine to classify an FHLBank as less-than-adequately capitalized. On July 20, 2009, the Finance Agency published Advisory Bulletin 2009-AB-01 which identified preliminary FHLBank capital classifications as a form of supervisory correspondence that should be treated by an FHLBank as unpublished information. Under this Advisory Bulletin, preliminary FHLBank capital classifications should be publicly disclosed only if the information is material to that FHLBank’s financial condition and business operations, provided that the disclosure is limited to a recital of the factual content of the unpublished information. For more information and compliance with the risk based capital rule, see Note 13 — Capital to audited financial statements accompanying this report.

Record Retention.

On August 4, 2009, the Finance Agency issued a proposed rule that would require Freddie Mac, Fannie Mae, the FHLBanks and the Office of Finance to establish and maintain record retention programs to ensure that records are readily accessible for examination and other supervisory purposes. This proposed regulation seeks to assure strong record maintenance and availability for the security of these entities and to facilitate effective supervision. Comments on this proposed rule were due to the Finance Agency by October 5, 2009.

Money Market Fund Reform.

On July 8, 2009, the Securities and Exchange Commission (“SEC”) published a proposed rule on money market fund reform. The proposed reforms include the imposition of new liquidity requirements for money market funds. As proposed, agency securities, including certain FHLBank securities, would not be considered liquid assets for purposes of meeting the proposed liquidity requirements. If these requirements were adopted as proposed, money market fund demand for FHLBank consolidated discount notes could decrease. Comments on this proposed rule were due to the SEC by September 8, 2009.

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Guidance for Determining Other-Than-Temporary Impairment.

On April 28, 2009 and May 7, 2009, the Finance Agency provided the FHLBanks with guidance on the process for determining OTTI with respect to the FHLBanks’ holdings of private-label MBS and the FHLBanks’ first quarter 2009 adoption of new U.S. GAAP regarding OTTI on investment securities. The goal of this guidance was to promote consistency among all FHLBanks for determining OTTI for private-label MBS, based on the understanding that investors in the FHLBanks’ consolidated obligations could better understand and utilize the information in the FHLBanks’ combined financial reports if it is prepared on a more consistent basis. In order to achieve this goal and move to a common analytical framework, and recognizing that several FHLBanks intended to early adopt the new U.S. GAAP regarding OTTI on investment securities, the Finance Agency guidance required all FHLBanks to early adopt this new accounting treatment effective January 1, 2009 and, for purposes of making OTTI determinations beginning with the first quarter of 2009 and thereafter, to use a consistent set of key modeling assumptions and specified third-party models. For a discussion of the FHLBNY’s implementation of this OTTI guidance, see Note 1 — Significant Accounting Polices and Estimates to the audited financial statements accompanying the report.

During the second quarter of 2009, the FHLBanks created an OTTI Governance Committee with responsibility for reviewing and approving the key modeling assumptions, inputs and methodologies to be used by the FHLBanks to generate cash flow projections used in analyzing credit losses and determining OTTI for private-label MBS. The OTTI Governance Committee charter was approved on June 11, 2009 and provides a formal process by which the FHLBanks can provide input on and approve these key OTTI assumptions.

In accordance with the guidance provided by the OTTI Governance Committee, an FHLBank may engage another FHLBank to perform the cash flow analyses underlying its OTTI determinations. Each FHLBank is responsible for making its own determination of impairment and the reasonableness of assumptions, inputs and methodologies used, as well as performing the required present value calculations using appropriate historical cost bases and yields. FHLBanks that hold common private-label MBS are required to consult with one another to ensure that any decision that a commonly-held private-label MBS is other-than-temporarily impaired, including the determination of fair value and the credit loss component of the unrealized loss, is consistent among those FHLBanks.

In order to promote consistency in the application of the assumptions and implementation of the OTTI methodology, the FHLBanks have established control procedures whereby the FHLBanks that are performing cash flow analyses select a sample group of private-label MBS and each perform cash flow analyses on all such test MBS, using the assumptions approved by the OTTI Governance Committee. These FHLBanks exchange and discuss the results and make any adjustments necessary to achieve consistency among their respective cash flow models.

Finance Agency Releases Its First Strategic Plan.

On July 9, 2009, the Finance Agency released its first strategic plan since it was created. This strategic plan details the goals and objectives that will guide the Finance Agency over the next five years in its actions to restore the financial health of Fannie Mae and Freddie Mac, enhance the Federal Home Loan Bank System and contribute to the strength and stability of the United States’ housing finance market and affordable housing. This plan lists three goals of 1) safety and soundness, 2) housing mission and conservatorship, and 3) a resource management strategy which the Finance Agency will employ in fulfilling its mission to provide effective supervision, regulation and housing mission oversight of Fannie Mae, Freddie Mac and the FHLBanks to promote their safety and soundness, support housing finance and affordable housing and support a stable and liquid mortgage market.

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Financial Condition: Assets, Liabilities, Capital, Commitments and Contingencies (dollars in thousands):

Table 2: Statements of Condition — Year-Over-Year Comparison

	December 31,
					Net change in			Net change in
(Dollars in thousands)	2009		2008		dollar amount			percentage
Assets
Cash and due from banks	$	2,189,252	$	18,899	$	2,170,353		NM		%
Interest-bearing deposits		—		12,169,096		(12,169,096	)		(100.00	)
Federal funds sold		3,450,000		—		3,450,000			N/A
Available-for-sale securities		2,253,153		2,861,869		(608,716	)		(21.27	)
Held-to-maturity securities
Long-term securities		10,519,282		10,130,543		388,739			3.84
Certificates of deposit		—		1,203,000		(1,203,000	)		(100.00	)
Advances		94,348,751		109,152,876		(14,804,125	)		(13.56	)
Mortgage loans held-for-portfolio		1,317,547		1,457,885		(140,338	)		(9.63	)
Accrued interest receivable		340,510		492,856		(152,346	)		(30.91	)
Premises, software, and equipment		14,792		13,793		999			7.24
Derivative assets		8,280		20,236		(11,956	)		(59.08	)
Other assets		19,339		18,838		501			2.66
Total assets	$	114,460,906	$	137,539,891	$	(23,078,985	)		(16.78	)%
Liabilities
Deposits
Interest-bearing demand	$	2,616,812	$	1,333,750	$	1,283,062			96.20	%
Non-interest bearing demand		6,499		828		5,671			684.90
Term		7,200		117,400		(110,200	)		(93.87	)
Total deposits		2,630,511		1,451,978		1,178,533			81.17
Consolidated obligations
Bonds		74,007,978		82,256,705		(8,248,727	)		(10.03	)
Discount notes		30,827,639		46,329,906		(15,502,267	)		(33.46	)
Total consolidated obligations		104,835,617		128,586,611		(23,750,994	)		(18.47	)
Mandatorily redeemable capital stock		126,294		143,121		(16,827	)		(11.76	)
Accrued interest payable		277,788		426,144		(148,356	)		(34.81	)
Affordable Housing Program		144,489		122,449		22,040			18.00
Payable to REFCORP		24,234		4,780		19,454			406.99
Derivative liabilities		746,176		861,660		(115,484	)		(13.40	)
Other liabilities		72,506		75,753		(3,247	)		(4.29	)
Total liabilities		108,857,615		131,672,496		(22,814,881	)		(17.33	)
Capital		5,603,291		5,867,395		(264,104	)		(4.50	)
Total liabilities and capital	$	114,460,906	$	137,539,891	$	(23,078,985	)		(16.78	)%

Balance sheet overview

At December 31, 2009, the FHLBNY’s Total assets were $114.5 billion, a decrease of $23.1 billion, or 16.8 %, from December 31, 2008. The Bank’s balance sheet management strategy has been to keep balance sheet growth or decline in line with the changes in member demand for advances, which declined 13.6%.

Advances borrowed by members stood at $94.3 billion at December 31, 2009, a decline of $14.8 billion, or 13.6% from the outstanding balance at December 31, 2008. Member demand for advance borrowings has been concentrated in the longer-term fixed-rate advance products, and weaker demand for short-term fixed-rate and adjustable-rate borrowings. It appears that members are attempting to lock-in longer maturity borrowings at prevailing interest rates. Outstanding amounts of short-term fixed-rate advances, adjustable-rate advances, and overnight borrowings declined at December 31, 2009 compared to outstanding balances at December 31, 2008. Decline of $2.2 billion in the recorded fair value basis of hedged advances from the amounts recorded at December 31, 2008 was another factor in the decline in advances as reported in the Statements of Condition at December 31, 2009.

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At December 31, 2009, the FHLBNY also reduced its positions in short-term liquid investments as it deemed that member demand for additional liquidity had been met and market spreads from such investments would not meet the Bank’s risk reward leverage targets. At December 31, 2009, the Bank held for liquidity purposes, $2.2 billion in non-interest bearing cash deposits at the FRB, and $3.5 billion in Federal funds sold. In more volatile market conditions at December 31, 2008, the Bank had invested $12.2 billion in a temporary interest-bearing deposit program offered by the FRB (terminated effective July 1, 2009). An additional $1.2 billion was maintained in short-term certificates of deposit at December 31, 2008. Historically, the Bank has maintained a significant inventory of liquid Federal funds and short-term certificates deposits at highly rated financial institutions to ensure liquidity for its members’ borrowing needs, especially during volatile market conditions.

The FHLBNY made no acquisition for its available-for-sale portfolio in 2009, which consisted of GSE issued floating-rate MBS and an insignificant portfolio of bond and equity funds. Investments designated as available-for-sale are recorded at their fair values, with unrealized gains and losses recorded through AOCI, a component of equity. Market pricing of GSE issued MBS improved at December 31, 2009, and substantially all of the $64.4 million in net unrealized losses (temporary impairment) at December 31, 2008 were recovered. Available-for-sale securities (“AFS”) at fair value were $2.3 billion, net of unrealized losses of $3.4 million at December 31, 2009. At December 31, 2008, AFS at fair values were $2.9 billion, net of unrealized losses of $64.4 million. No securities designated as AFS were credit impaired at December 31, 2009 or 2008.

The FHLBNY’s held-to-maturity securities grew modestly in 2009. The FHLBNY acquired $3.5 billion of GSE issued MBS, ahead of pay downs of $2.8 billion. The Bank also acquired $25.0 million of a New York City Housing Development bond. Investments designated as held-to-maturity are recorded at carrying value. Carrying value is the amortized cost basis of the investment if a security is not determined to be OTTI. If a held-to-maturity security has been determined to be OTTI, amortized cost basis is adjusted to its fair value at the time of impairment and is the carrying value of the security. Carrying value is subsequently adjusted for accretion of non-credit portion of OTTI recorded in AOCI. Carrying value is not subsequently adjusted to fair value unless additional OTTI is recognized.

As a result of recognition of credit impairment during 2009, 17 held-to-maturity private-label securities were written down by $140.9 million, representing credit and non-credit losses (OTTI Losses). The cumulative credit impairment expenses recorded as a charge to earnings in 2009 was $20.8 million. The cumulative non-credit OTTI was recorded in AOCI, and the amount of non-credit OTTI remaining after accretion at December 31, 2009 was a net loss of $110.6 million. The carrying value of held-to-maturity MBS after recording the effects of OTTI was $9.8 billion (Amortized cost basis was $9.9 billion) at December 31, 2009. The Bank did not experience any OTTI during 2008, and the carrying value of held-to-maturity MBS at December 31, 2008, was $9.3 billion, equal to amortized cost in the absence of OTTI.

At December 31, 2009, balance sheet leverage of 20.4 times shareholders’ capital was lower than 23.4 times capital at December 31, 2008. The change in leverage reflects the Bank’s balance sheet management strategy of keeping the balance sheet change in line with the changes in member demand for advances. Increases or decreases in investments have a direct impact on leverage, but generally, growth in or shrinkage of advances does not significantly impact balance sheet leverage under existing capital stock management practices. This is because changes in shareholders’ capital are in line with changes in advances, and the ratio of assets to capital generally remains unchanged. Under existing capital management practices, members are required to purchase capital stock to support their borrowings from the Bank, and when capital stock is in excess of the amount that is required to support advance borrowings, the Bank redeems the excess capital stock immediately. Therefore, stockholders’ capital increases and decreases with members’ advance borrowings, and the capital to asset ratios remains relatively unchanged. As capital increases or declines in line with higher or lower volumes of advances, the Bank may also adjust its assets by increasing or decreasing holdings of short-term investments in certificates of deposit, and, to some extent, its positions in Federal funds sold, which it inventories to accommodate unexpected member needs for liquidity.

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In 2009 as in 2008, the primary source of funds for the FHLBNY continued to be through issuance of consolidated obligation bonds and discount notes. Discount notes are consolidated obligations with maturities up to one year, and consolidated bonds have maturities of one year or longer. The mix between the use of discount notes and bonds has fluctuated during the year, partly because of the market pricing of discount notes relative to the pricing of fixed-rate bonds with similar maturities and partly because of the price attractiveness of short-term callable and non-callable bonds that could be swapped back to 3 month LIBOR rates. In the current year first two quarters, the Bank increased its issuances of term discount notes mainly because of favorable investor demand and pricing relative to term funding. In the third quarter, discount note issuance was reduced. Issuance of floating-rate bonds declined in 2009 and maturing bonds were generally not replaced.

Advances

The FHLBNY’s primary business is making collateralized loans, known as “advances”, to members.

Reported book value of advances was $94.3 billion at December 31, 2009, compared to $109.2 billion at December 31, 2008. Advance book value included fair value basis adjustments of $3.6 billion at December 31, 2009, and it declined from $5.8 billion at December 31, 2008. Fair value basis adjustments of hedged advances were recorded under the hedge accounting provisions. When medium- and long-term interest rates rise, the fair values of fixed-rate advance move in the opposite direction.

Par amounts of advances outstanding have been steadily declining through the four quarters. Par amounts were $90.7 billion at December 31, 2009, $91.6 billion at September 30, 2009, $96.7 billion at mid-year, and $99.4 billion at March 31, 2009, down from $103.4 billion at December 31, 2008.

Generally, the growth or decline in advances is reflective of demand by members for both short-term liquidity and term funding driven by economic factors, such as availability to the Bank’s members of alternative funding sources that are more attractive, or by the interest rate environment and the outlook for the economy. Members may choose to prepay advances (which may incur prepayment penalty fees) based on their expectations of interest rate changes and demand for liquidity. Demand may also be influenced by the dividend payout to members on their capital stock investment in the FHLBNY. Members are required to invest in FHLBNY’s capital stock in the form of membership and activity stock. Advance volume is also influenced by merger activity where members are either acquired by non-members or acquired by members of another FHLBank. When FHLBNY members are acquired by members of another FHLBank or a non-member, they no longer qualify for membership and the FHLBNY may not offer renewals or additional advances to non-members. Subsequent to the merger, maturing advances may not be replaced, which has an immediate impact on short-term and overnight lending if the former member borrowed short-term and overnight advances.

The FHLBNY’s readiness to be a reliable provider of well-priced funds to our members reflects the FHLBNY’s ability to raise funding in the marketplace through the issuance of consolidated obligation bonds and discount notes to domestic and global investors.

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Advances — Product Types

The following table summarizes par values of advances by product type (dollars in thousands):

Table 3: Advances by Product Type

	December 31, 2009						December 31, 2008
				Percentage						Percentage
	Amounts			of total			Amounts			of total
Adjustable Rate Credit — ARCs	$	14,100,850			15.54	%	$	20,205,850			19.55	%
Fixed Rate Advances		71,943,468			79.29			71,860,685			69.51
Short-Term Advances		2,173,321			2.39			7,793,500			7.54
Mortgage Matched Advances		606,883			0.67			693,559			0.67
Overnight Line of Credit (OLOC) Advances		926,517			1.02			2,039,423			1.97
All other categories		986,661			1.09			786,710			0.76
Total par value		90,737,700			100.00	%		103,379,727			100.00	%
Discount on AHP Advances		(260	)					(330	)
Hedging adjustments		3,611,311						5,773,479
Total	$	94,348,751					$	109,152,876

Short-term fixed-rate advances, Adjustable-rate advances, and overnight borrowings have been the more significant products that have declined at December 31, 2009, relative to December 31, 2008.

Member demand for advance products

Adjustable Rate Advances (“ARC Advances”) — Demand for ARC advances in the current year has gradually declined through the course of 2009. Outstanding member borrowings were $20.2 billion at December 31, 2008, declined to $18.5 billion at March 31, 2009 and to $17.3 billion at June 30, 2009, and was $15.5 billion at September 30, 2009. Generally, the FHLBNY’s larger members have been the more significant borrowers of ARCs.

ARC advances are medium- and long-term loans that can be linked to a variety of indices, such as 1-month LIBOR, 3-month LIBOR, the Federal funds rate, or Prime. Members use ARC advances to manage interest rate and basis risks by efficiently matching the interest rate index and repricing characteristics of floating-rate assets. The interest rate is set and reset (depending upon the maturity of the advance and the type of index) at a spread to that designated index. Principal is due at maturity and interest payments are due at each reset date, including the final payment date.

Fixed-rate Advances — Fixed-rate advances, comprising putable and non-putable advances, were the largest category of advances.

Demand for long-term fixed-rate advances has been soft in the last three quarters of 2009 after a strong first quarter. In the first quarter this year, member demand increased and outstanding par balances grew to $74.0 billion. Since then, demand declined and balances have remained flat through the remainder of the year, with new fixed-rate borrowings replacing maturing advances or advances “put” by the FHLBNY.

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In the first quarter of 2009, primary demand was for fixed-rate advances collateralized by marketable securities (also referred to as Repo Advances due to the nature of the collateral). At March 31, 2009, borrowed amounts of such advances grew to $28.0 billion from $26.4 billion at December 31, 2008, and then declined to $26.1 billion at June 30, 2009. Amounts outstanding have remained almost unchanged at that level through the remainder of the year. Repo Advances are offered at a pricing advantage to members in recognition of the value of the liquid security collateral. Changes in such borrowings are a reflection of member preference to inventory their securities holdings. A significant component of Fixed-rate advances is putable advances, also referred to as “Convertible Advances”. Putable advances also include Repo Advances that have put or “convertible” option features. Member demand for the competitively priced putable advances has remained steady during the year, although slightly down from $43.4 billion at December 31, 2008. Members have replaced maturing putable advances and advances put by the FHLBNY. Outstanding amounts of putable advances were $41.4 billion at December 31, 2009; $42.0 billion at September 30, 2009, and $43.2 billion at June 30, 2009 and March 31, 2009. Historically, Fixed-rate, putable advances have been more competitively priced relative to fixed-rate “bullet” advances because of the “put” feature that the Bank purchases from the member, driving down the coupon on the advance. In the present interest rate environment, the price advantage is not significant because of constraints in offering longer-term-advances that has also narrowed the price advantage of putable advances. Fixed-rate advances are flexible funding tools that can be used by members to meet short- to long-term liquidity needs. Terms vary from two days to 30 years.

Short-term Advances — Demand for Short-term fixed-rate advances has been very weak and outstanding balances declined to $1.9 billion at September 30, 2009, a low point for the product, and ended the year 2009 up slightly to $2.2 billion at December 31, 2009. By way of contrast, the outstanding balance was $7.8 billion at December 31, 2008. Although demand for the product has been weak, balances declined unevenly during the year. In the first quarter of 2009, outstanding balances had declined to $4.6 billion. In the second quarter, because of stronger demand, balances grew to $5.2 billion.

Overnight Line of Credit (“OLOC Advances”) — Overnight borrowings were weak during the year and at December 31, 2009 and outstanding amounts declined.

The OLOC program gives members a short-term, flexible, readily accessible revolving line of credit for immediate liquidity needs. OLOC Advances mature on the next business day, at which time the advance is repaid.

Member demand for the OLOC Advances may also reflect the seasonal needs of certain member banks for their short-term liquidity requirements. Some large members also use OLOC advances to adjust their balance sheet in line with their own leverage targets.

Merger Activity

Merger activity is an important factor and, if significant, would contribute to an uneven pattern in advance balances. Merger activity may result in the loss of new business if the member is acquired by a non-member. The FHLBank Act does not permit new advances to replace maturing advances to former members. Advances held by members who are acquired by non-members may remain outstanding until their contractual maturities. Merger activity may also result in a decline in the advance book if the acquired member decides to prepay existing advances partially or in full depending on the post-merger liquidity needs.

One member was acquired by a non-member financial institution in the current year third quarter. The former member is not considered to have a significant borrowing potential. In the fourth quarter, a large member with a significant borrowing potential reorganized its charter and became a non-member, resulting in the reclassification of $49.4 million of capital stock to a liability as mandatorily redeemable stock. The FHLBNY repurchased the stock from the former member. There were no members acquired by non-members in the first two quarters of 2009. Four members were acquired by non-members in 2008.

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Early Prepayment of Advances

Early prepayment initiated by members and former members is another important factor that impacts advances to members. The FHLBNY charges a member a prepayment fee when the member prepays certain advances before the original maturity. Member initiated prepayments totaled $3.4 billion in par amount of advances in 2009, and the activity was primarily concentrated in the first quarter of this year, prepayments have not been significant during the remainder of the year. Member initiated prepayments totaled $4.1 billion in par amount of advances in 2008. The Bank recorded net prepayment fees of $22.9 million in 2009 and $21.7 million in 2008. For advances that are prepaid and hedged under hedge accounting rules, the FHLBNY generally terminates the hedging relationship upon prepayment and adjusts the prepayments fees received for the associated fair value basis of the hedged prepaid advance.

Advances — Maturities and coupons

The FHLBNY’s advances outstanding are summarized below by year of maturity (dollars in thousands):

Table 4: Advances Outstanding by Year of Maturity

	December 31,
	2009									2008
				Weighted 2									Weighted 2
				Average			Percentage						Average			Percentage
	Amount			Yield			of Total			Amount			Yield			of Total
Overdrawn demand deposit accounts	$	2,022			1.20	%		—	%	$	—			—	%		—	%
Due in one year or less		24,128,022			2.07			26.59			32,420,095			2.52			31.36
Due after one year through two years		10,819,349			2.73			11.92			16,150,121			3.71			15.62
Due after two years through three years		10,069,555			2.91			11.10			7,634,680			3.76			7.39
Due after three years through four years		5,804,448			3.32			6.40			6,852,514			3.74			6.63
Due after four years through five years		3,364,706			3.19			3.71			3,210,575			3.88			3.11
Due after five years through six years		2,807,329			3.91			3.09			836,689			3.74			0.81
Thereafter		33,742,269			3.78			37.19			36,275,053			3.96			35.08
Total par value		90,737,700			3.06	%		100.00	%		103,379,727			3.44	%		100.00	%
Discount on AHP advances 1		(260	)								(330	)
Hedging adjustments 1		3,611,311									5,773,479
Total	$	94,348,751								$	109,152,876

1

Discounts on AHP advances were amortized to interest income using the level-yield method and were not significant for all periods reported. Amortization of fair value basis adjustments for terminated hedges was a charge to interest income and amounted to ($0.8) million, ($2.0) million, and ($0.4) million for the years ended December 31, 2009, 2008 and 2007. All other amortization charged to interest income aggregated were not significant for all periods reported. Interest rates on AHP advances ranged from 1.25% to 4.00% at December 31, 2009 and 1.25% to 6.04% at December 31, 2008.

2

The weighed average yield is the weighted average coupon rates for advances, unadjusted for swaps. For floating-rate advances, the weighted average rate is the rate outstanding at the reporting dates.

In the interest rate environment at December 31, 2009 compared to 2008, coupons were lower but the greatest declines in yields were in the shorter-term advances because of the very low short-term rates at December 31, 2009. Contractual maturities of advances outstanding have remained relatively unchanged somewhat at December 31, 2009 compared to 2008, an indicator that members have generally not changed their borrowing terms with respect to the term to maturity. A slightly larger category of advances will mature within one year at December 31, 2009 relative to December 31, 2008.

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Advances — Interest Rate Terms

The following table summarizes interest-rate payment terms for advances (dollars in thousands):

Table 5: Advances by Interest-Rate Payment Terms

	December 31,
	2009						2008
				Percentage						Percentage
	Amount			of total			Amount			of total
Fixed-rate	$	76,634,828			84.46	%	$	83,173,877			80.45	%
Variable-rate		13,730,850			15.13			19,740,850			19.10
Variable-rate capped		370,000			0.41			465,000			0.45
Overdrawn demand deposit accounts		2,022			—			—			—
Total par value		90,737,700			100.00	%		103,379,727			100.00	%
Discount on AHP Advances		(260	)					(330	)
Hedging basis adjustments		3,611,311						5,773,479
Total	$	94,348,751					$	109,152,876

Fixed-rate borrowings remained popular with members but amounts borrowed have declined in line with the overall decline in member demand for advances. The product is popular with members and is reflected by an increasing percentage of total advances outstanding at December 31, 2009. Variable-rate advances outstanding declined in percentage terms and amounts outstanding. Member demand for adjustable-rate LIBOR-based funding has been weak as members may perceive the risk of a combination of an unsettled interest rate environment and a steepening yield curve to make variable-rate borrowing relatively unattractive from an interest-rate risk management perspective. Variable-rate capped advances also declined in a declining interest rate environment. Typically, capped ARCs are in demand by members in a rising rate environment as they would purchase cap options from the FHLBNY to limit borrowers’ interest rate exposure. With a capped variable-rate advance, the FHLBNY had offsetting purchased cap options that mirrored the terms of the caps sold to members, eliminating the FHLBNY’s exposure.

The following summarizes variable-rate advances by reference-index type (in thousands):

Table 6: Variable-Rate Advances

	December 31,
	2009		2008
LIBOR indexed	$	14,100,500	$	18,980,500
Overdrawn demand deposit accounts		2,022		—
Federal funds		—		1,225,000
Prime		350		350
Total	$	14,102,872	$	20,205,850

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Impact of Derivatives and hedging activities — Advances

The Bank hedges certain advances by the use of both cancellable and non-cancellable interest rate swaps. These qualify as fair value hedges under the derivatives and hedge accounting rules. Recorded fair value basis adjustments to advances in the Statements of Condition were a result of these hedging activities. The Bank hedges the risk of changes in the benchmark rate, which the FHLBNY has adopted as LIBOR and is also the discounting basis for computing changes in fair values of hedged advances. Net interest accruals from qualifying hedges under the derivatives and hedge accounting rules are recorded with interest income from advances in the Statements of Income. Fair value changes of qualifying hedged advances under the derivatives and hedge accounting rules are also recorded in the Statements of Income as a Net realized and unrealized gain (loss) on derivative and hedging activities, a component of Other income (loss). An offset is recorded as fair value basis adjustment to the carrying amount of the advances in the Statements of Condition.

The Bank primarily hedges putable or convertible advances and certain “bullet” fixed-rate advances that qualify under the hedging provisions of the accounting standards for derivatives and hedging. Notional amounts of advances hedged by the use of interest rate swaps in economic hedges were not significant.

At December 31, 2009, approximately $66.0 billion of interest rate swaps hedged advances compared to $62.3 billion at December 31, 2008. Except for an insignificant notional amount of derivatives that were designated as economic hedges of advances, the swaps were in a qualifying hedging relationship under the accounting standards for derivatives and hedging. Increased use of derivatives was consistent with the growth of fixed-rate advances, which the FHLBNY typically hedges to convert fixed-rate cash flows to LIBOR-indexed cash flows through the use of interest rate swaps.

Derivative transactions are employed to hedge fixed-rate advances in the following manner and to achieve the following principal objectives:

The FHLBNY:

• Makes extensive use of the derivatives to restructure interest rates on fixed-rate advances, both putable or convertible and non-putable (“bullet”), to better match the FHLBNY’s cash flows, to enhance yields, and to manage risk from a changing interest rate environment.

• Converts at the time of issuance, certain simple fixed-rate bullet and putable fixed-rate advances into synthetic floating-rate advances by the simultaneous execution of interest rate swaps that convert the cash flows of the fixed-rate advances to conventional adjustable rate instruments tied to an index, typically 3-month LIBOR.

• Uses derivatives to manage the risks arising from changing market prices and volatility of a fixed coupon advance by matching the cash flows of the advance to the cash flows of the derivative, and making the FHLBNY indifferent to changes in market conditions. Putable advances are typically hedged by an offsetting derivative with a mirror-image call option with identical terms.

• Adjusts the reported carrying value of hedged fixed-rate advances for changes in their fair value (“fair value basis” or “fair value”) that are attributable to the risk being hedged in accordance with hedge accounting rules. Amounts reported for advances in the Statements of Condition include fair value hedge basis adjustments.

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The most significant element that impacts balance sheet reporting of advances is the recording of fair value basis adjustments to the carrying value of advances in the Statements of Condition. In addition, when putable advances are hedged by cancellable swaps, the possibility of exercise of the call shortens the expected maturity of the advance. The impact of derivatives to the Bank’s income is discussed in this MD&A under “Results of Operations”. Fair value basis adjustments as measured under the hedging rules are impacted by both hedge volume, the interest rate environment, and the volatility of the rate environment.

Hedge volume — At December 31, 2009 and 2008 almost all putable fixed-rate advances were hedged by interest rate swaps that qualified under fair value hedge accounting rules. The Bank also hedges certain long-term, single maturity (bullet) advances to hedge fair value risk from changes in the benchmark rate.

Hedge volume as measured by the amount of notional amounts of interest rate swaps outstanding that hedged advances, both economic and under hedging provisions of the accounting standards for derivatives and hedging, increased to $66.0 billion at December 31, 2009, compared to $62.3 billion at December 31, 2008. These amounts included notional amounts of swaps of $0.1 billion and $0.6 billion at December 31, 2009 and 2008 that were designated as economic hedge of advances. Changes in fair values of the swaps designated as economic hedges were recorded through earnings without the offset of changes in the fair values of the advances.

The largest component of interest rate swaps hedging advances at December 31, 2009 was comprised of cancellable SWAPS that hedged $41.4 billion in putable advances, slightly below $43.4 billion at December 31, 2008. Generally, the Bank hedges almost all putable advances with a cancellable interest rate swap. The put option in the advance is owned by the FHLBNY and mirrors the cancellable swap option terms owned by the swap counterparty. The Bank’s putable advance, also referred to as a convertible advance, contains a put option purchased by the Bank from the member. Under the terms of the put option, the Bank has the right to terminate the advance at agreed upon dates. The period until the option is exercisable is known as the lockout period. If the advance is put by the FHLBNY at the end of the lockout period, the member can borrow an advance product of the member’s choice at the then prevailing market rates and at the then existing terms and conditions.

Consistent with the increase in non-putable advances borrowed by members to replace maturing advances, the FHLBNY also executed increasing amounts of plain vanilla, non-cancellable interest rate swaps in 2009. At December 31, 2009, non-cancellable swaps were $23.4 billion and cancellable swaps that were no longer cancellable totaled $2.3 billion. At December 31, 2008, non-cancellable swaps were $18.4 billion and cancellable swaps that were no longer cancellable totaled $1.4 billion.

In addition, certain LIBOR-indexed advances have “capped” coupons that are in effect sold to borrowers. The fair value changes of the sold caps are offset by fair value changes of purchased options (caps) with mirror-image terms. Fair value changes of caps due to changes in the benchmark rate and option volatilities are recorded in Other income (loss) as a Net realized and unrealized gain (loss) on derivatives and hedging activities in the Statements of Income. Notional amounts of purchased interest rate caps to “hedge” embedded caps were $0.4 billion and $0.5 billion at December 31, 2009 and 2008, and were designated as economic hedges of caps embedded in the variable-rate advances borrowed by members.

Fair value basis adjustments — The Bank uses interest rate derivatives to hedge the risk of changes in the benchmark rate, which the FHLBNY has adopted as LIBOR, and is also the discounting basis for computing changes in fair values of hedged advances. Recorded fair value basis adjustments in the Statements of Condition were associated with hedging activities under the hedge accounting provisions. Advances designated at inception as economic hedges do not have any basis adjustments and these were insignificant at December 31, 2009 and 2008. The reported book value of advances at December 31, 2009 included net fair value basis gains of $3.6 billion, compared to $5.8 billion at December 31, 2008 and represented net fair value basis adjustments under hedge accounting rules, and were primarily unrealized gains.

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Unrealized fair value basis gains were consistent with the forward yield curves at December 31, 2009 and December 31, 2008 that were projecting forward rates below the fixed-rate coupons of advances that had been issued in prior periods at the then prevailing higher interest-rate environment. Since hedged advances are typically fixed-rate, in a lower interest rate environment relative to the coupons of the advances, fixed-rate advances will exhibit net unrealized fair value basis gains. At December 31, 2009 and 2008, unrealized gains from fair value basis adjustments to advances were almost entirely offset by net fair value unrealized losses of the derivatives associated with the fair value hedges of advances, thereby achieving the Bank’s hedging objectives of mitigating fair value basis risk.

The net fair value basis adjustments of hedged advances in an unrealized gain position declined to $3.6 billion at December 31, 2009 from $5.8 billion at December 31, 2008 primarily as a result of the steepening of the yield curve at December 31, 2009 relative to December 31, 2008. The 3-month LIBOR rate was 25 basis points at December 31, 2009. Long-term rates steepened significantly at December 31, 2009, as illustrated by the yields of 2.68% and 3.38% on the 5-year and 7-year swap curves. At December 31, 2008, the 3-month LIBOR rate was 1.43% and the forward curve was only slightly positively sloped, with the 5-year swap rate at 1.55% and the 7-year at 1.81%.

Advances — Call Dates and exercise options

The table below offers a view of the advance portfolio with the possibility of the exercise of the put option that is controlled by the FHLBNY, and put dates are summarized into similar maturity tenors as the previous table that summarizes advances by contractual maturities (dollars in thousands).

Table 7: Advances by Call Date

	December 31,
				Percentage of						Percentage of
	2009			Total			2008			Total
Overdrawn demand deposit accounts	$	2,022			—	%	$	—			—	%
Due or putable in one year or less		56,978,134			62.79			63,251,007			61.18
Due or putable after one year through two years		14,082,199			15.52			18,975,821			18.36
Due or putable after two years through three years		8,991,805			9.91			10,867,530			10.51
Due or putable after three years through four years		5,374,048			5.92			5,293,364			5.12
Due or putable after four years through five years		2,826,206			3.12			2,728,075			2.64
Due or putable after five years through six years		158,329			0.18			230,189			0.22
Thereafter		2,324,957			2.56			2,033,741			1.97
Total par value		90,737,700			100.00	%		103,379,727			100.00	%
Discount on AHP advances		(260	)					(330	)
Hedging adjustments		3,611,311						5,773,479
Total	$	94,348,751					$	109,152,876

Contrasting advances by contractual maturity dates with potential put dates illustrates the impact of hedging on the effective duration of the Bank’s advances. For more information, see Table 4. The Bank’s advances borrowed by members include a significant amount of putable advances in which the Bank has purchased from members the option to terminate advances at agreed upon dates. At December 31, 2009, the notional amount of advances that were still putable (one or more pre-determined option exercise dates remaining) was $41.4 billion compared to $43.4 billion at December 31, 2008. Typically, almost all putable advances are hedged by cancellable interest rate swaps in which the derivative counterparty has the right to exercise and terminate the swap at par at agreed upon dates. Under current hedging practices, when the swap counterparty exercises its right to call the cancellable swap, the Bank would typically also exercise its right to put the advance at par. Under this hedging practice, on a put option basis, the potential exercised maturity is significantly accelerated, and is an important factor in the Bank’s current hedge strategy.

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Investments

The FHLBNY maintains investments for liquidity purposes, to manage capital stock repurchases and redemptions, to provide additional earnings, and to ensure the availability of funds to meet the credit needs of its members. The FHLBNY also maintains longer-term investment portfolios, which are principally mortgage-backed securities issued by government-sponsored mortgage agencies, a smaller portfolio of MBS issued by private enterprises, and securities issued by state or local housing finance agencies. Finance Agency regulations prohibit the FHLBanks, including the FHLBNY, from investing in certain types of securities and limit the investment in mortgage- and asset-backed securities.

Investments — Policies and practices

Finance Agency regulations limit investment in housing-related obligations of state and local governments and their housing finance agencies to obligations that carry ratings of double-A or higher. Mortgage- and asset-backed securities acquired must carry the highest ratings from Moody’s Investors Service (“Moody’s”) or Standard & Poor’s Rating Services (“S&P”) at the time of purchase. Finance Agency regulations further limit the mortgage- and asset-backed investments of each FHLBank to 300% of that FHLBank’s capital. The FHLBNY was within the 300% limit for all periods reported. The FHLBNY’s investment in mortgage-backed securities during all periods reported complied with FHLBNY’s Board-approved policy of acquiring mortgage-backed securities issued or guaranteed by the government-sponsored housing enterprises, or prime residential mortgages rated triple-A by both Moody’s and Standard & Poor’s rating services at acquisition.

The FHLBNY’s practice is not to lend unsecured funds to members, including overnight Federal funds sold and certificates of deposits. The FHLBNY does not preclude or specifically seek out investments any differently than it would in the normal course of acquiring securities for investments, unless it is prohibited by existing regulations. Unsecured lending to members is not prohibited by Finance Agency regulations or Board of Directors’ policy. The FHLBNY is prohibited from purchasing a consolidated obligation issued directly by another FHLBank, but may acquire consolidated obligations for investment in the secondary market after the bond settles. There were no investments in consolidated obligations by the FHLBNY at December 31, 2009 or 2008.

On March 24, 2008, the Board of Directors of the Federal Housing Finance Board, predecessor to the Finance Agency adopted Resolution 2008-08, which temporarily expanded the authority of a FHLBank to purchase mortgage-backed securities (“MBS”) under certain conditions. The resolution allowed a FHLBank to increase its investments in MBS issued by Fannie Mae and Freddie Mac by an amount equal to three times its capital, which is to be calculated in addition to the existing limit. The expanded authority permitted MBS investments to be as much as 600% of the FHLBNY’s capital. The FHLBNY has not exercised the expanded authority provided under the temporary regulations to purchase MBS issued by Fannie Mae and Freddie Mac.

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The following table summarizes changes in investments by categories (including held-to-maturity securities, available-for-sale securities, and money market investments) between December 31, 2009 and December 31, 2008. Amounts are after writing down the amortized cost basis of held-to-maturity impaired securities to fair values at the time of impairment. No securities classified as available-for-sale were OTTI. (dollars in thousands):

Table 8: Investments by Categories

	December 31,		December 31,		Dollar			Percentage
	2009		2008		Variance			Variance
State and local housing finance agency obligations 1	$	751,751	$	804,100	$	(52,349	)		(6.51	)%
Mortgage-backed securities
Available-for-sale securities, at fair value		2,240,564		2,851,683		(611,119	)		(21.43	)
Held-to-maturity securities, at carrying value		9,767,531		9,326,443		441,088			4.73
		12,759,846		12,982,226		(222,380	)		(1.71	)
Grantor trusts 2		12,589		10,186		2,403			23.59
Certificates of deposit 1		—		1,203,000		(1,203,000	)		(100.00	)
Federal funds sold		3,450,000		—		3,450,000		NA
Total investments	$	16,222,435	$	14,195,412	$	2,027,023			14.28	%

1	Classified as held-to-maturity securities, at carrying value
2	Classified as available-for-sale securities, at fair value and represents investments in registered mutual funds and other fixed-income securities maintained under the grantor trusts

Table 8 excludes $12.2 billion in interest-earning balance at Federal Reserve Bank of New York at December 31, 2008 ($0 at December 31, 2009)

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Long-term investments

At December 31, 2009 and 2008, investments with original long-term contractual maturities were comprised of mortgage- and asset-backed securities, and investment in securities issued by state and local housing agencies. These investments were classified as either held-to-maturity or available-for-sale securities in accordance with accounting standard on investments in debt and equity securities as amended by the guidance on recognition and presentation of other-than-temporary impairments. Several grantor trusts have been established and owned by the FHLBNY to fund current and potential future payments to retirees for supplemental pension plan obligations. The trust funds are invested in fixed-income and equity funds, which were classified as available-for-sale.

Mortgage-backed securities — By issuer

Issuer composition of held-to-maturity mortgage-backed securities was as follows (carrying values; dollars in thousands):

Table 9: Mortgage-Backed Securities — By Issuer

	December 31,		Percentage			December 31,		Percentage
	2009		of total			2008		of total
U.S. government sponsored enterprise residential mortgage-backed securities	$	8,482,139		86.84	%	$	7,577,036		81.24	%
U.S. agency residential mortgage-backed securities		171,531		1.76			6,325		0.07
U.S. agency commercial mortgage-backed securities		49,526		0.51			—		—
Private-label issued securities backed by home equity loans		417,151		4.27			636,466		6.83
Private-label issued residential mortgage-backed securities		444,906		4.55			609,908		6.54
Private-label issued commercial mortgage-backed securities		—		—			266,994		2.86
Private-label issued securities backed by manufactured housing loans		202,278		2.07			229,714		2.46
Total Held-to-maturity securities-mortgage-backed securities	$	9,767,531		100.00	%	$	9,326,443		100.00	%

Held-to-maturity mortgage- and asset-backed securities (“MBS”) — Government sponsored enterprise (“GSE”) and U.S. government agency issued MBS totaled $8.7 billion and $7.6 billion at December 31, 2009 and 2008. They represented 89.1% and 81.3% of total MBS classified as held-to-maturity at those dates. Privately issued mortgage-backed securities made up the remaining 10.9% and 18.7% at December 31, 2009 and 2008 and included asset-backed securities, and mortgage-pass-throughs and Real Estate Mortgage Investment Conduit bonds.

In 2009, the Bank acquired $3.5 billion of GSE and U.S. government agency issued MBS for the held-to-maturity portfolio. Securities acquired were triple-A rated. The Bank’s conservative purchasing practice over the years is evidenced by the high concentration of mortgage-backed securities issued by the GSEs.

Local and housing finance agency bonds — The FHLBNY had investments in primary public and private placements of taxable obligations of state and local housing finance authorities (“HFA”) classified as held-to-maturity. Investments in state and local housing finance bonds help to fund mortgages that finance low-and moderate-income housing. In 2009, the Bank acquired $25.0 million of a bond issued by a housing development agency.

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Available-for-sale securities — The FHLBNY classifies investments that it may sell before maturity as available-for-sale and carries them at fair value. Fair value changes are recorded in AOCI until the security is sold or is anticipated to be sold. Composition of FHLBNY’s available-for-sale securities was as follows (dollars in thousands):

Table 10: Available-for-Sale Securities Composition

	December 31,		Percentage			December 31,		Percentage
	2009		of total			2008		of total
Fannie Mae	$	1,544,500		68.93	%	$	1,854,989		65.05	%
Freddie Mac		696,064		31.07			996,694		34.95
Total AFS mortgage-backed securities		2,240,564		100.00	%		2,851,683		100.00	%
Grantor Trusts — Mutual funds		12,589					10,186
Total Available-for-sale portfolio	$	2,253,153				$	2,861,869

At December 31, 2009 and 2008, the entire AFS portfolio of mortgage-backed securities was comprised of securities issued by Fannie Mae and Freddie Mac. No acquisitions were added to the AFS portfolio in 2009. Two grantor trusts were established in 2007 to fund current and potential future payments to retirees for supplemental pension plan obligations. The trust funds are invested in money market funds, and fixed-income and equity funds, which are also designated as available-for-sale.

For more information and analysis with respect to investment securities, see Investment Quality in the section captioned Asset Quality and Concentration — Advances, Investment Securities, Mortgage Loans, and Counterparty Risks in this MD&A. Also see Notes 4 and 5 to the audited financial statements accompanying this report.

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External rating information of the held-to-maturity portfolio was as follows. (Carrying values; in thousands):

Table 11: External Rating of the Held-to-Maturity Portfolio

	December 31, 2009
									Below
									Investment
	AAA-rated		AA-rated		A-rated		BBB-rated		Grade		Total
Long-term securities
Mortgage-backed securities	$	9,205,018	$	299,314	$	65,921	$	31,261	$	166,017	$	9,767,531
State and local housing finance agency obligations		72,992		601,109		21,430		56,220		—		751,751
Total Long-term securities		9,278,010		900,423		87,351		87,481		166,017		10,519,282
Short-term securities
Certificates of deposit		—		—		—		—		—		—
Total	$	9,278,010	$	900,423	$	87,351	$	87,481	$	166,017	$	10,519,282

	December 31, 2008
	AAA-rated		AA-rated		A-rated		BBB-rated		Total
Long-term securities
Mortgage-backed securities	$	8,705,952	$	229,714	$	192,678	$	198,099	$	9,326,443
State and local housing finance agency obligations		74,881		672,999		—		56,220		804,100
Total Long-term securities		8,780,833		902,713		192,678		254,319		10,130,543
Short-term securities
Certificates of deposit		—		628,000		575,000		—		1,203,000
Total	$	8,780,833	$	1,530,713	$	767,678	$	254,319	$	11,333,543

External rating information of the available-for-sale portfolio was as follows (the carrying values of AFS investments are at fair values; in thousands):

Table 12: External Rating of the Available-for-Sale Portfolio

	December 31, 2009
	AAA-rated		AA-rated		A-rated		BBB-rated		Unrated		Total
Available-for-sale securities
Mortgage-backed securities	$	2,240,564	$	—	$	—	$	—	$	—	$	2,240,564
Other — Grantor trusts		—		—		—		—		12,589		12,589
Total	$	2,240,564	$	—	$	—	$	—	$	12,589	$	2,253,153

	December 31, 2008
	AAA-rated		AA-rated		A-rated		BBB-rated		Unrated		Total
Available-for-sale securities
Mortgage-backed securities	$	2,851,683	$	—	$	—	$	—	$	—	$	2,851,683
Other — Grantor trusts		—		—		—		—		10,186		10,186
Total	$	2,851,683	$	—	$	—	$	—	$	10,186	$	2,861,869

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Weighted average rates — Mortgage-backed securities

The following table summarizes weighted average rates and amounts by contractual maturities. A significant portion of the MBS portfolio consisted of floating-rate securities and the weighted average rates will change with changes in the indexed LIBOR rate (dollars in thousands):

Table 13: Mortgage-Backed Securities Weighted Average Rates by Contractual Maturities

	December 31, 2009					December 31, 2008
	Amortized		Weighted			Amortized		Weighted
	Cost		Average rate			Cost		Average rate
Mortgage-backed securities
Due in one year or less	$	—		—	%	$	257,999		7.39	%
Due after one year through five years		2,663		6.25			—		—
Due after five years through ten years		1,140,153		4.78			1,142,000		4.76
Due after ten years		10,977,950		3.21			10,839,087		4.24
Total mortgage-backed securities	$	12,120,766		3.36	%	$	12,239,086		4.36	%

Credit Impairment analysis (Other-than-temporary Impairment — OTTI)

In each interim quarterly period in 2009, management evaluated its portfolio of private-label mortgage-backed securities for credit impairment. Beginning with the quarter ended September 30, 2009, and at December 31, 2009, the FHLBNY performed its OTTI analysis by cash flow testing 100% of it private-label MBS. At December 31, 2008, and at the two interim quarters ended June 30, 2009, the FHLBNY’s methodology was to analyze all its private-label MBS to isolate securities that were considered to be at risk of OTTI and to perform cash flow analysis on securities at risk of OTTI. As a result of the evaluations, the FHLBNY recognized credit impairment OTTI related losses in each quarter of 2009. Cumulatively, 17 private-label held-to-maturity securities were deemed to be credit impaired in 2009. No credit impairment was observed in 2008 or 2007. Cumulative credit impairment losses of $20.8 million were recorded as a charge to 2009 income. The charge included credit losses of certain MBS that were determined to be OTTI in a previous quarter of 2009. The amount of non-credit OTTI was a loss of $110.6 million in AOCI at December 31, 2009. Of the 17 credit impaired securities, 14 securities are insured by bond insurers, Ambac and MBIA. The Bank’s analysis of the two bond insurers concluded that future credit losses due to projected collateral shortfalls of the impaired securities would not be fully supported by the two bond insurers. For more information see Notes 1 and 4 to audited financial statements accompanying this report.

Based on detailed cash flow credit analysis on a security level at December 31, 2009, the Bank has concluded that other than the 17 securities determined to be credit impaired during 2009, the gross unrealized losses for the remainder of Bank’s investment securities were primarily caused by interest rate changes, credit spread widening and reduced liquidity, and the securities were temporarily impaired as defined under the new guidance for recognition and presentation of other-than-temporary impairment.

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Fair values of investment securities

In an effort to achieve consistency among all of the FHLBanks on the pricing of investments in mortgage-backed securities, in the third quarter of 2009 the FHLBanks formed the MBS Pricing Governance Committee which was responsible for developing a fair value methodology for mortgage-backed securities that all FHLBanks could adopt. Consistent with the guidance from the Governance Committee, the FHLBNY changed the methodology used to estimate the fair value of mortgage-backed securities as of September 30, 2009. Under the approved methodology, the Bank requests prices for all mortgage-backed securities from four specified third-party vendors, and, depending on the number of prices received for each security, selected a median or average price as defined by the methodology. The methodology also incorporates variance thresholds to assist in identifying median or average prices that may require further review. Prior to the adoption of the new pricing methodology, the Bank used a similar process that utilized three third-party vendors and similar variance thresholds. This change in pricing methodology did not have a significant impact on the Bank’s estimated fair values of its mortgage-backed securities.

While the FHLBNY adopted this common methodology, the fair values of mortgage-backed investment securities are still estimated by FHLBNY’s management which remains responsible for the selection and application of its fair value methodology and the reasonableness of assumptions and inputs used. The four specialized pricing services use pricing models or quoted prices of securities with similar characteristics. Inputs into the pricing models employed by pricing services for most of the Bank’s investments are market based and observable and are considered Level 2. The valuation techniques used by pricing services employ cash flow generators and option-adjusted spread models. Pricing spreads used as inputs in the models are based on new issue and secondary market transactions if the securities are traded in sufficient volumes in the secondary market.

The valuation of the Bank’s private-label securities that are all designated as held-to-maturity may require pricing services to use significant inputs that are subjective and may be considered to be Level 3 because the inputs may not be market based and observable. At December 31, 2009 and 2008, all private-label mortgage-backed securities were classified as held-to-maturity and were recorded in the balance sheet at their carrying values. Carrying value of a security is the same as its amortized cost, unless the security is determined to be OTTI. In the period the security is determined to be OTTI, its carrying value is generally adjusted down to its fair value.

For a comparison of carrying values and fair values of mortgage-backed securities, see Notes 4 and 5 to the audited financial statements accompanying this report.

In the fourth quarter of 2009, eight held-to-maturity private-label mortgage-backed securities were deemed to be credit impaired, and included six that were previously determined to be credit impaired. The fair values of securities determined to be OTTI as of December 31, 2009 and recorded as their carrying values in the Statement of Condition at December 31, 2009 were $42.9 million, and were considered to be Level 3 financial instruments within the fair value hierarchy. This determination was made based on management’s view that the private-label instruments may not have an active market because of the specific vintage of the impaired securities as well as inherent conditions surrounding the trading of private-label mortgage-backed securities; fair values of the securities were determined by management using third party specialized vendor pricing services that made appropriate adjustments to observed prices of comparable securities that were being transacted in an orderly market.

For more information about the corroboration and other analytical procedures performed by the FHLBNY, see Note 1 — Significant Accounting Policies and Estimates, and Note 18 — Fair values of financial instruments to the audited financial statements accompanying this report. Examples of securities priced under such a valuation technique, which are classified within Level 2 of the valuation hierarchy and valued using the “market approach” as defined in the accounting standards for fair value measurements and disclosures, include GSE issued collateralized mortgage obligations and money market funds.

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Short-term investments

The FHLBNY typically maintains substantial investments in high quality, short- and intermediate-term financial instruments, such as certificates of deposits as well as overnight and term Federal funds sold to highly rated financial institutions. These investments provide the liquidity necessary to meet members’ credit needs. Short-term investments also provide a flexible means of implementing the asset/liability management decisions to increase liquidity. The Bank invests in certificates of deposits with maturities not exceeding 270 days and issued by major financial institutions. Certificates of deposit are recorded at amortized cost basis and designated as held-to maturity investment.

Interest-bearing balances at the Federal Reserve Bank of New York — In October 2008, the Board of Governors of the Federal Reserve System directed the Federal Reserve Banks (“FRB”) to pay interest on balances in excess of certain required reserve and clearing balances. At December 31, 2008, the Bank had invested $12.2 billion in excess balances placed with the FRB as an interest-bearing deposit. Effective July 2, 2009, the FHLBNY no longer collected interest on excess balances with the FRB. The FRB will pay interest only on required reserves. Effective July 2, 2009 and at December 31, 2009, the cash at the FRB was classified as Cash and due from banks as the balances did not earn interest.

Federal funds sold — Historically, the FHLBNY has been a provider of Federal funds to its members, allowing the FHLBNY to warehouse and provide balance sheet liquidity to meet unexpected member borrowing demands. At December 31, 2009, Federal funds sold totaled $3.5 billion. At December 31, 2009, the Bank’s liquid funds were maintained at the FRB.

Certificates of deposits — At December 31, 2009, the FHLBNY had no investments outstanding in certificates of deposits. At December 31, 2008, certificates of deposits at highly-rated financial institutions, all maturing within 270 days or less, were $1.2 billion. Low yields and credit risk factors did not justify investments in certificates of deposits at December 31, 2009. Average investment in certificates of deposit in 2009 was $0.7 billion, compared to $6.6 billion in 2008.

Cash collateral pledged — Cash deposited by the FHLBNY as pledged collateral to derivative counterparties is reported as a deduction to Derivative liabilities in the Statements of Condition. The FHLBNY generally executes derivatives with major banks and broker-dealers and typically enters into bilateral collateral agreements. When the FHLBNY’s derivatives are in a net unrealized loss position as a liability from the FHLBNY’s perspective, counterparties are exposed and the Bank would be called upon to pledge cash collateral to mitigate the counterparties’ credit exposure. Collateral agreements include certain thresholds and pledge requirements that are generally triggered if exposures exceed the agreed upon thresholds. At December 31, 2009 and 2008, the Bank had deposited $2.2 billion and $3.8 billion in interest-earning cash as pledged collateral to derivative counterparties. Typically, such pledges earn interest at the overnight Federal funds rate.

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Mortgage Loans held-for-portfolio

At December 31, 2009 and 2008, the portfolio of mortgage loans was comprised of investments in Mortgage Partnership Finance loans (“MPF” or “MPF Program”) and Community Mortgage Asset loans (“CMA”). More details about the MPF program can be found in Mortgage Partnership Finance Program under the caption Acquired Member Assets Program in this MD&A. In the CMA program, the FHLBNY holds participation interests in residential and community development mortgage loans. Acquisition of participations under the CMA program was suspended indefinitely in November 2001 and the loans are being paid down under their contractual terms.

MPF Program — The amortized cost basis of loans in the MPF program was $1.3 billion and $1.5 billion at December 31, 2009 and 2008. Paydowns slightly outpaced acquisitions in 2009 as the FHLBNY acquired $150.1 million in new loans and paydowns were $285.8 million. The FHLBNY does not expect the MPF loans to increase substantially, and the Bank provides this product to its members as another alternative for them to sell their mortgage production. Included in the portfolio of MPF loans held-for-portfolio were $30.6 million and $36.8 million in loans at December 31, 2009 and 2008 that had been “table-funded” and therefore considered originated by the Bank. In a table-funded loan (MPF 100 product), the PFI uses the FHLBNY’s funds to make the mortgage loan to the borrower, and as credit protection, the PFI closes the loan “as agent” for the FHLBNY. The FHLBNY funded its last loan in this product on July 27, 2009. The Bank does not offer this table-funded product currently.

CMA Program — The amortized cost basis of loans in the CMA program, which has not been active since 2001 and has been declining steadily over time, was $3.9 million at December 31, 2009, down by $ 0.1 million from December 31, 2008.

Mortgage loans by loan type

The following table presents information on mortgage loans held-for-portfolio (dollars in thousands):

Table 14: Mortgage Loans by Loan Type

	December 31,
				Percentage of						Percentage of
	2009			Total			2008			Total
Real Estate:
Fixed medium-term single-family mortgages	$	388,072			29.43	%	$	467,845			32.15	%
Fixed long-term single-family mortgages		926,856			70.27			983,493			67.58
Multi-family mortgages		3,908			0.30			4,009			0.27
Total par value		1,318,836			100.00	%		1,455,347			100.00	%
Unamortized premiums		9,095						10,662
Unamortized discounts		(5,425	)					(6,310	)
Basis adjustment 1		(461	)					(408	)
Total mortgage loans held-for-portfolio		1,322,045						1,459,291
Allowance for credit losses		(4,498	)					(1,406	)
Total mortgage loans held-for-portfolio after allowance for credit losses	$	1,317,547					$	1,457,885

¹ Represents fair value basis of open and closed delivery commitments.

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Mortgage loans — Conventional and insured loans.

The following classifies mortgage loans between conventional loans and loans insured by FHA/VA (in thousands):

Table 15: Mortgage Loans — Conventional and Insured Loans

	December 31,
	2009		2008
Federal Housing Administration and Veteran Administration insured loans	$	5,975	$	6,983
Conventional loans		1,308,953		1,444,356
Others		3,908		4,008
Total par value	$	1,318,836	$	1,455,347

Mortgage loans — credit losses

Roll-forward of the allowance for credit losses was as follows (in thousands):

Table 16: Mortgage Loans — Allowance for Credit Losses

	Years ended December 31,
	2009			2008		2007
Beginning balance	$	1,406		$	633	$	593
Charge-offs		(16	)		—		—
Provision for credit losses on mortgage loans		3,108			773		40
Ending balance	$	4,498		$	1,406	$	633

Deposit Liabilities

Deposit liabilities comprised of member deposits and, from time-to-time, may also include unsecured overnight borrowings from other FHLBanks.

Member deposits — The FHLBNY operates deposit programs for the benefit of its members. Deposits are primarily short-term in nature with the majority maintained in demand accounts that reprice daily based upon rates prevailing in the overnight Federal funds market. Members’ liquidity preferences are the primary determinant of the level of deposits. Deposits at December 31, 2009, including demand and term, totaled $2.6 billion, compared to $1.5 billion at December 31, 2008. Fluctuations in member deposits have little impact on the Bank and are not a significant source of liquidity for the Bank.

Borrowings from other FHLBanks — The Bank borrows from other FHLBanks, generally for a period of one day. There were no borrowings outstanding at December 31, 2009 and 2008. The average amount borrowed from another FHLBank was $0.4 million in 2009. All transactions were at market terms.

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Debt Financing Activity and Consolidated Obligations

Consolidated obligations, which are the joint and several obligations of the FHLBanks, are the principal funding source for the FHLBNY’s operations and consist of consolidated bonds and consolidated discount notes. Discount notes are consolidated obligations with maturities of up to 365 days, and consolidated bonds have maturities of one year or longer. Member deposits, capital, and to a lesser extent borrowings from other FHLBanks, are also funding sources.

Consolidated Obligation Liabilities

The issuance and servicing of consolidated obligations debt are performed by the Office of Finance, a joint office of the FHLBanks established by the Finance Agency. Each FHLBank independently determines its participation in each issuance of consolidated obligations based on, among other factors, its own funding and operating requirements, maturities, interest rates, and other terms available for consolidated obligations in the market place. Although the FHLBNY is primarily liable for its portion of consolidated obligations (i.e., those issued on its behalf), the FHLBNY is also jointly and severally liable with the other FHLBanks for the payment of principal and interest on the consolidated obligations of all the FHLBanks. The FHLBanks, including the FHLBNY, have emphasized diversification of funding sources and channels as the need for funding from the capital markets has grown.

The two major debt programs offered by the Office of Finance are the Global Debt Program and the TAP issue programs as described below. The FHLBNY participates in both programs.

The Global Debt Program provides the FHLBanks with the ability to distribute debt into multiple primary markets across the globe. The FHLBank global debt issuance facility has been in place since July 1994. FHLBank global bonds are known for their variety and flexibility; all can be customized to meet changing market demand with different structures, terms and currencies. Global Debt Program bonds are available in maturities ranging from one year to 30 years with the majority of global issues between one and five years. The most common Global Debt Program structures are bullets, floaters and fixed-rate callable bonds with maturities of one through ten years. Issue sizes are typically from $500 million to $5 billion and individual bonds can be reopened to meet additional demand. Bullets are the most common global bonds, particularly in sizes of $3 billion or larger.

In mid-1999, the Office of Finance implemented the TAP issue program on behalf of the FHLBanks. This program consolidates domestic bullet bond issuance through daily auctions of common maturities by reopening previously issued bonds. Effectively, the program has reduced the number of separate FHLBanks bullet issues and individual issues have grown as large as $1.0 billion. The increased issue sizes have a number of market benefits for investors, dealers and the 12 FHLBanks. TAP issues have improved market awareness, expanded secondary market trading opportunities, improved liquidity and stimulated greater demand from investors and dealers seeking high-quality Government Sponsored Enterprises securities with U.S. Treasury-like characteristics. The TAP issues follow the same 3-month quarterly cycles used for the issuance of “on-the-run” Treasury securities and also have semi-annual coupon payment dates (March, June, September and December). The coupons for new issues are determined by the timing of the first auction during a given quarter.

The FHLBanks also issue global consolidated obligations-bonds. Effective in January 2009, a debt issuance process was implemented by the FHLBanks and the Office of Finance to provide a scheduled monthly issuance of global bullet consolidated obligations-bonds. As part of this process, management from each of the FHLBanks will determine and communicate a firm commitment to the Office of Finance for an amount of scheduled global debt to be issued on its behalf. If the FHLBanks’ orders do not meet the minimum debt issue size, the proceeds are allocated to all FHLBanks based on the larger of the FHLBank’s commitment or allocated proceeds based on the individual FHLBank’s capital to total system capital. If the FHLBanks’ commitments exceed the minimum debt issue size, the proceeds are allocated based on relative capital of the FHLBanks’ with the allocation limited to the lesser of the allocation amount or actual commitment amount. The Finance Agency and the U.S. Secretary of the Treasury have oversight over the issuance of FHLBank debt through the Office of Finance. The FHLBanks can, however, pass on any scheduled calendar slot and not issue any global bullet consolidated obligations- bonds upon agreement of eight of the 12 FHLBanks.

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In the third quarter of 2008, each FHLBank, including the FHLBNY, entered into a Lending Agreement with the U.S. Treasury in connection with the U.S. Treasury’s establishment of the Government Sponsored Enterprise Credit Facility (“GSECF”), as authorized by the Housing Act. The GSECF was designed to serve as a contingent source of liquidity for the housing government-sponsored enterprises, including each of the 12 FHLBanks. Any borrowings by one or more of the FHLBanks under the GSECF would be considered consolidated obligations with the same joint and several liability as all other consolidated obligations. The terms of any borrowings would be agreed to at the time of issuance. Loans under the Lending Agreement were to be secured by collateral acceptable to the U.S. Treasury, which consisted of FHLBank advances to members that had been collateralized in accordance with regulatory standards and mortgage-backed securities issued by Fannie Mae or Freddie Mac. Each FHLBank was required to submit to the Federal Reserve Bank of New York, acting as fiscal agent of the U.S. Treasury, a list of eligible collateral updated on a weekly basis. As of December 31, 2009 and 2008, the FHLBNY had provided the U.S. Treasury listings of advance collateral amounting to $10.3 billion and $16.3 billion, which provided for maximum borrowings of $9.0 billion and $14.2 billion at December 31, 2009 and 2008. The amount of collateral can be increased or decreased (subject to the approval of the U.S. Treasury) at any time through the delivery of an updated listing of collateral. As of December 31, 2009, no FHLBank had drawn on this available source of liquidity. The GSECF authorization expired on December 31, 2009.

The FHLBanks, including the FHLBNY, continue to issue debt that is both competitive and attractive in the marketplace. In addition, the FHLBanks continuously monitor and evaluate their debt issuance practices to ensure that consolidated obligations are efficiently and competitively priced.

Consolidated obligations are issued with either fixed- or variable-rate coupon payment terms that use a variety of indices for interest rate resets. These indices include the London Interbank Offered Rate (“LIBOR”), Constant Maturity Treasury (“CMT”), 11th District Cost of Funds Index (“COFI”), Prime rate, the Federal funds rate, and others. In addition, to meet the expected specific needs of certain investors in consolidated obligations, both fixed- and variable-rate bonds may also contain certain features that will result in complex coupon payment terms and call options. When the FHLBNY cannot use such complex coupons to hedge its assets, FHLBNY enters into derivative transactions containing offsetting features that effectively convert the terms of the bond to those of a simple variable-rate bond.

The consolidated obligations, beyond having fixed- or variable-rate coupon payment terms, may also be Optional Principal Redemption Bonds (callable bonds) that the FHLBNY may redeem in whole or in part at its discretion on predetermined call dates according to the terms of the bond offerings.

Highlights — Debt issuance and funding management

The primary source of funds for the FHLBNY continued to be through issuance of consolidated bonds and discount notes. Reported amounts of consolidated obligations outstanding, comprising of bonds and discount notes, at December 31, 2009 and December 31, 2008, were $104.8 billion and $128.6 billion, and funded 91.6% and 93.5% of Total assets at those dates. These financing ratios have remained substantially unchanged over the years at around 90%, indicative of the stable funding strategy pursued by the FHLBNY.

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Investor demand for FHLBank debt — The cost of term debt issuance has continued to be under pressure in 2009. Key investors from Asia have continued to reduce acquisitions of FHLBank debt and have very limited participation in recent debt issuances. Domestic banks, flush with cash, and the more active international investors have been participants in the market for FHLBank debt in 2009. The FHLBanks were disproportionately exposed to the money market fund industry through most of 2009 as discussed further below.

Following the conservatorship of Fannie Mae and Freddie Mac, market pricing of FHLBank issued debt indicated that market participants believe that obligations of the two GSEs offer lower credit risk than FHLBank debt obligations, which are generally grouped into the same GSE asset class as Fannie Mae and Freddie Mac. As a result, investors were more likely to require a premium to acquire FHLBank debt relative to debt issued by Fannie Mae and Freddie Mac. GSE debt pricing itself was under competitive pressure with the FDIC announcing guarantees to debt offered by commercial banks and other financial institutions. However, the Federal Reserve’s program of purchasing GSE debt for up to $200 billion helped to narrow the spreads of GSE debt to U.S. Treasuries from the levels existing earlier in the year.

At the height of the credit crises, money market funds and other domestic fund managers became key investors of FHLBank short-term debt and discount notes, considered as safe, high-quality, liquid investments that were attractively priced on a risk-adjusted basis relative to U.S. Treasury bills. For fund managers, discount notes were fundamental to balancing investment returns and protecting the $1.00 constant net asset value for money funds, since discount notes mature at a par amount of $1.00 as well. While the demand from the money market sector had positive implications for FHLBank debt, it put further pressure on sharply increased demand for even shorter bond maturities. Money market funds were maintaining average investment maturities of 50 days with a ceiling of 90 days as mandated under certain regulatory provisions. With credit markets returning to normalcy, money market fund balances have been in decline, and may result in lower volumes of issuances of discount notes. Investors are continuing to focus on competitively priced FHLBank high-quality, liquid assets, and the near-term outlook should create attractive funding opportunities for FHLBank shorter-term debt.

The outlook for the issuances of longer-term debt is still uncertain. It still remains uneconomical for the FHLBanks to issue longer-term debt. Yields demanded by investors for longer-term FHLBank debt and spreads between 3-month LIBOR and FHLBank long-term debt yield have remained at levels that make it expensive for the FHLBNY to issue term debt and offer longer-term advances to members even if there was sufficient investor demand for such debt. That scenario appears to be gradually changing at least with respect to funding costs for 5-year and shorter maturity debt. In the second half of 2009, the FHLBanks successfully placed more term debt in the form of Global Bond offerings and callable debt, but it is too early to predict if this trend will continue.

While investors are gradually seeking out a variety of FHLBank debt structures and this signals well for the FHLBank consolidated obligations, the shifts in demand within the variety of shorter-term FHLBank issued debt structures appear to be more to allow investors to re-align their investment preferences (non-callable, callable, step-up bonds, or discount notes) to the rapidly changing interest rate conditions. Investors are still unwilling to shift to longer-term issuances at yields that are economical for the FHLBanks. Investor demand in the first two quarters of 2009 had been for ultra short-term bullet and callable bonds, short-term floating-rate bonds, and discount notes. In the third quarter, demand shifted away from floaters and ultra short-term discount notes to longer maturity discount notes and short-term non-callable bonds. In the fourth quarter of 2009, the continuing deterioration of LIBOR levels for longer term discount notes drove bond investors away from this sector of the FHLBank discount notes, and the FHLBanks scaled back on large issuances of term discount notes, and instead relied on the issuances of discount notes with shortest maturities whenever necessary. Also in the fourth quarter of 2009, FHLBank issuances of short-term bullet debt were scaled back as investor interest was much more in the comparable callable FHLBank debt and callable step-up bonds. With the gradual steepening of the yield curve, step-up bond coupons became more attractive, and investors saw opportunities to hedge their yields in a rising rate environment. But unless investors recommit to the term funding market in sufficient volume, the FHLBanks will continue to meet financing needs in the very short end of the funding market.

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Debt extinguishment — No debt was transferred to another FHLBank in 2009. In the current year third quarter, the FHLBNY retired $0.5 billion through a debt buyback from an unrelated financial institution at a loss of $69.5 thousand. In 2008, the Bank did not extinguish any consolidated obligation bonds.

Consolidated obligation bonds

The following summarizes types of bonds issued and outstanding (dollars in thousands):

Table 17: Consolidated Obligation Bonds by Type

	December 31,
				Percentage of						Percentage of
	2009			Total			2008			Total
Fixed-rate, non-callable	$	48,647,625			66.31	%	$	36,367,875			44.92	%
Fixed-rate, callable		8,374,800			11.42			4,828,300			5.96
Step Up, non-callable		53,000			0.07			—			—
Step Up, callable		3,305,000			4.51			73,000			0.09
Step Down, callable		—			—			15,000			0.02
Single-index floating rate		12,977,500			17.69			39,670,000			49.01
Total par value		73,357,925			100.00	%		80,954,175			100.00	%
Bond premiums		112,866						63,737
Bond discounts		(33,852	)					(39,529	)
Fair value basis adjustments		572,537						1,254,523
Fair value basis adjustments on terminated hedges		2,761						7,857
Fair value option valuation adjustments and accrued interest		(4,259	)					15,942
Total bonds	$	74,007,978					$	82,256,705

Tactical changes in the funding mix

The FHLBNY has consistently demonstrated the ability to seek out the most attractively priced funding the capital market has to offer by being flexible in the debt structure the Bank is willing to offer in order to meet the borrowing needs of its members and to achieve management’s asset/liability goals. As investor demand in the current year third quarter shifted from discount notes and floating-rate debt to fixed-rate “bullet” and callable debt, the FHLBNY has also been opportunistic in pursuing the debt structure most in demand at a reasonable price consistent with the Bank’s asset/liability match.

In 2009, the FHLBNY issued fixed-rate and discount notes in a mix of issuances to achieve its asset/liability management goals and be responsive to the changing market dynamics. The funding mix has resulted in a greater diversity of debt structures and funding alternatives, indicative of the flexibility of the Bank’s funding tactics in a volatile environment. The issuance of bonds has been the primary financing vehicle for the Bank, although the use of term and overnight discount notes remain a vital source of funding requirements because of the ease of issuance of discount notes as a flexible funding tool for day-to-day operations.

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Hedge ratio, or the percentage of debt hedged versus debt not hedged, and the mix between the use of non-cancellable and cancellable interest rate swaps to hedge bonds reflects the Bank’s balance sheet management preferences and the attractiveness of the pricing of cancellable swaps. The ratio of discount notes to bonds is another balance sheet management tool and that too is predicated on factors such as asset-liability cash-gap management and the attractiveness of the pricing of discount notes. In prior years, the use of term discount notes generally had declined because of the relative pricing advantage of issuing floating- rate, LIBOR-indexed debt or by issuing short-term callable debt and swapping out the fixed-rate cash flows for LIBOR-indexed cash flows by the simultaneous execution of cancellable interest rate swaps.

To accommodate members’ funding needs at reasonable spreads, the FHLBNY has been responsive to investor preferences and changing demands, the FHLBNY has continued to make tactical adjustments to its funding strategy. In the first two quarters of 2009 in response to strong investor demand for shorter-term FHLBank bonds and discount notes, the FHLBNY sharply increased its issuances of discount notes and short-term non-callable “bullet bonds” (single maturity at end). In the third quarter of 2009, as discount note pricing became relatively unattractive, the FHLBNY reduced its issuances of discount notes. The FHLBNY will continue to refine and adjust its funding tactics and as conditions in the debt market changes, the FHLBNY will also react promptly.

The principal tactical funding strategy changes employed in executing issuances of debt are outlined below:

• Discount notes — Average outstanding balances of discount notes, a measure of volume, was $24.7 billion in the third quarter of 2008, and increased to $34.5 billion in the fourth quarter of 2008. In response to market demand for shorter-term debt in the first two quarters of 2009, the Bank increased its issuance of discount notes. Volume grew dramatically to $46.2 billion and $48.7 billion in the first and second quarters of 2009. Starting very early in the third quarter of 2009, discount note pricing became relatively unfavorable, and the FHLBNY did not replace a significant portion of its maturing term-discount notes. The 1-month LIBOR reset lower, spreads to LIBOR tightened, and both negatively impacted pricing. Average outstanding balance of discount notes was allowed to decline to $39.5 billion in the third quarter of 2009, and to $31.7 billion in the fourth quarter of 2009. The utilization rate of discount notes to fund total assets, which is one measure of the Bank’s funding tactics, was 36.6% at June 30, 2009, a high for the year, declined to 26.9% at December 31, 2009. The comparable utilization rate at December 31, 2008 was 33.7%.

In the first two quarters of 2009, the FHLBNY had also relied more on overnight and very short-term discount notes to take advantage of lower funding costs of overnight issuance of discount notes. In the third quarter of 2009, the FHLBNY reduced its issuance of overnight discount notes, partly as a result of the Federal Reserve’s action to eliminate interest on excess reserves which provided a ready source of a risk-free asset to fund with discount notes, partly as a result of tightening of spreads, and partly because the FHLBNY determined that term discount notes would better match its regulatory liquidity profile. At June 30, 2009, overnight discount notes outstanding were $11.3 billion. In contrast, overnight discount notes declined to $1.5 billion at September 30, 2009, and no overnight discount notes were outstanding at December 31, 2009.

• Floating rate bonds — Floating-rate bonds have declined steadily through the four quarters in 2009, and maturing bonds were not replaced because of marketplace perception of a pricing advantage of comparable GSE issued LIBOR-indexed floaters. FHLBank floating-rate bonds were extensively used in 2008, when the Bank issued floating-rate debt, indexed to 1-month LIBOR, Prime, and Fed effective rates, an innovative shift in funding tactics to take advantage of the historically wide spread between 3-month LIBOR and other indices. By executing interest rate swaps concurrently with the issuances of the floating-rate bonds and swapping the non-3 month LIBOR indices for 3-month LIBOR, the Bank effectively created variable funding that was indexed to 3-month LIBOR.

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• Non-callable bonds — Non-callable bonds were the primary funding vehicle for the FHLBNY in 2009. Issuances of non-callable debt are predicated partly on pricing of such debt and investor demand, and partly on the need to achieve asset/liability management goals. The Bank has made a strong effort to issue fixed-rate longer-term debt and lock-in the relative low rates in the current interest-rate environment. This has been a challenge as investor appetite for term debt has continued to be lukewarm, given investor preference for discount notes, short-term bullets and short lock-out callable debt. Investor demand for non-callable debt has been uneven through 2009. In the second and third quarters of 2009, investors were receptive to the FHLBank non-callable bonds as an alternative to comparable debt available in the capital markets. Execution pricing for non-callable bonds was perceived as relatively more favorable. Responding to favorable investor demand, the FHLBNY increased the issuance of medium-term non-callable bonds. Non-callable bonds were $35.4 billion at March 31, 2009, grew to $41.5 billion at June 30, 2009 and to $47.5 billion at September 30, 2009. Since then, investor demand shifted to FHLBank issued short-term fixed-rate callable debt, and callable step-up bonds. As a result, issuances of non-callable bonds grew only marginally to $48.6 billion at December 31, 2009.

• Callable-bonds — FHLBank longer-term fixed-rate callable-bonds, which had been considered by investors to be competitively priced, have not been an attractive investment asset for investors over the last several years, and continued to be under price pressure through most of 2009. The Bank’s use of funding with longer-term callable debt declined because of the erosion of their price advantage and weak demand. From time to time, the FHLBank has also issued fixed-rate callable bonds with a one-year maturity and a short lockout call option. This debt structure had grown in demand primarily from domestic money market funds as it offered an alternative investment to 3-month discount notes at an attractive pricing to similar maturity discount notes. During most of 2008 and 2009, issuances of such debt were limited. Early in the third quarter of 2009, short lockout callables (with call dates as short as 3 months from issue date) were once again sought out by investors, who saw a pricing advantage over similar maturity discount notes. In response, issuance volume increased and outstanding balances grew from $3.3 billion at June 30, 2009 to $4.8 billion at September 30, 2009, and to $8.4 billion at December 31, 2009.

With a callable bond, the Bank purchases a call option from the investor and the option allows the Bank to terminate the bond at predetermined call dates at par. When the Bank purchases the call option from investors, it typically lowers the cost to the investor, who has traditionally been receptive to callable-bond yields offered by the FHLBNY. The Bank may also issue callable debt on an unswapped basis in a financing strategy to match the estimated prepayment characteristics of mortgage-backed securities and mortgage loans held-for-portfolio. As estimated lives and prepayment speeds of MBS and mortgage loans change with changes in the interest rate environment, those same factors are also likely to impact the call exercise feature of callable debt. These factors tend to shorten or lengthen the effective lives of the debt with changes in the interest rate environment, thereby achieving an offset to the prepayment options of MBS and mortgage loans.

• Callable step-up bonds — In the third quarter of 2009, the FHLBNY acquired $1.5 billion of callable step-up bonds, primarily with Bermudan call options, and outstanding balances grew to $3.3 billion at December 31, 2009, up from only $73.0 million at December 31, 2008. In the third quarter of 2009, short-term LIBOR rates reset lower. From the 12-month point and beyond, the yield curve steepened. Typically, as short and long-term rates diverge, step-up bonds become more popular as they offer a coupon structure that reflects the shape of the yield curve. Demand for callable step-up bonds in a variety of maturities has been steady during the fourth quarter of 2009, and the FHLBanks have responded by increasing the issuances of such bond structures.

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Impact of hedging fixed-rate consolidated obligation bonds

The Bank hedges certain fixed-rate debt by the use of both cancellable and non-cancellable interest rate swaps in fair value hedges under the accounting standards for derivatives and hedging. The Bank may also hedge the anticipatory issuance of bonds under the provisions of “cash flow” hedging rules as provided in the accounting standards for derivatives and hedging though none were outstanding at December 31, 2009 or 2008.

Net interest accruals from qualifying interest rate swaps under the derivatives and hedge accounting rules are recorded together with interest expense of consolidated obligation bonds in the Statements of Income. Fair value changes of debt in a qualifying fair value hedge are recorded in Other income (loss) as a Net realized and unrealized gain (loss) on derivative and hedging activities; an offset is recorded as a fair value basis adjustment to the carrying amount of the debt in the balance sheet. Net interest accruals associated with derivatives not qualifying under derivatives and hedge accounting rules are recorded in Other income (loss) as a Net realized and unrealized gain (loss) on derivatives and hedging activities.

Derivatives are employed to hedge consolidated bonds in the following manner to achieve the indicated principal objectives:

The FHLBNY:

• Makes extensive use of the derivatives to restructure interest rates on consolidated obligation bonds, both callable and non-callable, to better meet its members’ funding needs, to reduce funding costs, and to manage risk in a changing market environment.

• Converts, at the time of issuance, certain simple fixed-rate bullet and callable bonds into synthetic floating-rate bonds by the simultaneous execution of interest rate swaps that convert the cash flows of the fixed-rate bonds to conventional adjustable rate instruments tied to an index, typically 3-month LIBOR.

• Uses derivatives to manage the risk arising from changing market prices and volatility of a fixed coupon bond by matching the cash flows of the bond to the cash flows of the derivative and making the FHLBNY indifferent to changes in market conditions. Except when issued to fund MBS and MPF loans, callable bonds are typically hedged by an offsetting derivative with a mirror-image call option and identical terms.

• Adjusts the reported carrying value of hedged consolidated bonds for changes in their fair value (“fair value basis adjustments” or “fair value”) that are attributable to the risk being hedged in accordance with hedge accounting rules. Amounts reported for consolidated obligation bonds in the Statements of Condition include fair value basis adjustments.

• Lowers its funding cost by the issuance of a callable bond and the execution of an associated interest rate swap with mirrored call options, which results in funding at a lower cost than the FHLBNY would otherwise have achieved. The issuance of callable bonds and the simultaneous swapping with a derivative instrument depends on the price relationships in both the bond and the derivatives markets.

The most significant element that impacts balance sheet reporting of debt is the recording of fair value basis and valuation adjustments. In addition, when callable bonds are hedged by cancellable swaps, the possibility of exercise of the call shortens the expected maturity of the bond. The impact of hedging debt on recorded interest expense is discussed in this MD&A under “Results of Operations”. Its impact as a risk management tool is discussed under Item 7A Quantitative and Qualitative Disclosures about Market Risk.

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Fair value basis and valuation adjustments — The Bank uses interest rate derivatives to hedge the risk of changes in the benchmark rate, which the FHLBNY has adopted as LIBOR, and is also the discounting basis for computing changes in fair values of hedged advances. The Bank recorded net unrealized fair value losses of $0.6 billion and $1.3 billion as part of the carrying values of consolidated obligation bonds in the Statements of Condition at December 31, 2009 and 2008. Under the derivatives and hedge accounting provisions, the reported carrying value of consolidated obligation bonds is adjusted for changes in their fair value basis attributable to the risk being hedged.

Carrying values of bonds designated under the fair value option, are also adjusted for valuation adjustments to recognize changes in the full fair value of the bonds elected under the fair value option and measured under the accounting standards for fair value measurements and disclosures. At December 31, 2009, the unrealized fair value basis recorded was a gain of $4.3 million, net of interest accrued payable of $2.9 million. At December 31, 2008, the unrealized fair value basis was a loss of $15.9 million, including interest accrued payable of $7.6 million.

Changes in fair value basis reflect changes in the term structure of interest rates, the shape of the yield curve at the measurement dates, the value and implied volatility of call options of callable bonds, and from the growth or decline in hedge volume.

Hedge volume — As of December 31, 2009 and 2008, the Bank had hedged $32.9 billion ($26.1 billion non-callable; $6.8 billion callable) and $22.1 billion ($20.0 billion non-callable; $2.1 billion callable) of fixed-rate consolidated bonds to hedge fair value risk from changes in the benchmark rate. Almost all callable bonds were hedged by cancellable swaps at December 31, 2009 and 2008. These hedges were in qualifying hedge relationships under the provisions of the accounting standards for derivatives and hedging. These hedges effectively converted the fixed-rate exposure of the bonds to a variable-rate exposure, generally indexed to 3-month LIBOR. The Bank’s callable bonds contain a call option purchased by the Bank from the investor. Under the terms of the call option, the Bank has the right to terminate the bond at agreed upon dates.

At December 31, 2009, outstanding par value of consolidated obligation bonds elected under the fair value option was $6.0 billion compared to $983.0 million at December 31, 2008.

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Summarized below are debt that were economically hedged by interest-rate swaps with matching terms at December 31, 2009 and 2008. At inception of the hedges, the Bank did not believe that the hedges would be highly effective in offsetting fair value changes between the derivative and the bonds (hedged item), and the FHLBNY accounted for the derivatives as freestanding (economic hedge). Hedges deemed at inception as economic do not generate basis adjustments for the hedged instruments since their carrying values are not adjusted for fair value changes.

Principal economic hedges are summarized below. At inception of the hedges, the Bank did not believe that the hedges would be highly effective in offsetting fair value changes between the derivative and the bonds and accounted for the derivatives as freestanding derivatives.

Floating-rate debt — At December 31, 2009, the FHLBNY had hedged $8.0 billion of floating-rate bonds that were indexed to interest rates other than 3-month LIBOR by entering into swap agreements with derivative counterparties that synthetically converted the floating rate debt cash flows to 3-month LIBOR. The comparable floating-rate debt that was economically hedged at December 31, 2008 was $25.0 billion.

Fixed-rate debt — At December 31, 2009, the FHLBNY had hedged $13.1 billion of short-term fixed-rate debt compared to $4.5 billion at December 31, 2008.

Discount notes — At December 31, 2009 and 2008, the Bank had hedged $3.8 billion and $7.5 billion of discount notes to mitigate fair value risk.

FVO economic hedge — At December 31, 2009, the FHLBNY had hedged $6.0 billion of short-term bonds designated under the FVO, compared to $983.0 million at December 31, 2008.

Impact of changes in interest rate — The carrying amounts of consolidated obligation bonds included fair value basis losses of $0.6 billion at December 31, 2009, compared to fair value basis losses of $1.3 billion at December 31, 2008. Changes in fair value basis reflect changes in the term structure of interest rates, the shape of the yield curve at the measurement dates, and the value and implied volatility of call options of callable bonds.

Unrealized fair value basis losses at December 31, 2009 and 2008 were consistent with the forward yield curves at those dates that were projecting forward rates below the fixed-rate coupons of bonds hedged under the derivatives and hedge accounting rules and bonds designated under the FVO. Most of the hedged bonds had been issued in prior periods at the then prevailing higher interest-rate environment. Since such bonds are typically fixed-rate, in a declining interest rate environment, fixed-rate bonds exhibit unrealized fair value basis losses recorded under the derivatives and hedge accounting rules. Unrealized losses from fair value basis adjustments on hedged bonds were almost entirely offset by net fair value unrealized gains from derivatives associated with the hedged bonds, thereby achieving the Bank’s hedging objectives of mitigating fair value basis risk. The net fair value basis adjustments of hedged bonds in an unrealized loss position declined to $0.6 billion at December 31, 2009 from $1.3 billion at December 31, 2008 primarily as a result of the steepening of the yield curve at December 31, 2009 relative to December 31, 2008. The 3-month LIBOR rate was 25 basis points at December 31, 2009. Long-term rates steepened significantly at December 31, 2009, as illustrated by the yields of 2.68% and 3.38% on the 5-year and 7-year swap curves. At December 31, 2008, the 3-month LIBOR rate was 1.43% and the forward curve was only slightly positively sloped, with the 5-year swap rate at 1.55% and the 7-year at 1.81%.

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Consolidated obligation bonds — maturity or next call date

Swapped, callable bonds contain an exercise date or a series of exercise dates that may result in a shorter redemption period. Thus, issuance of a callable bond with an associated callable swap significantly alters the contractual maturity characteristics of the original bond and introduces the possibility of an exercise call date that is significantly shorter than the contractual maturity. The following table summarizes consolidated bonds outstanding by years to maturity or next call date (dollars in thousands):

Table 18: Consolidated Obligation Bonds — Maturity or Next Call Date

	December 31,
				Percentage						Percentage
	2009			of total			2008			of total
Year of Maturity or next call date
Due or callable in one year or less	$	50,481,350			68.82	%	$	53,034,550			65.51	%
Due or callable after one year through two years		11,352,200			15.48			15,472,350			19.11
Due or callable after two years through three years		4,073,575			5.55			4,843,700			5.98
Due or callable after three years through four years		3,606,250			4.91			1,445,575			1.79
Due or callable after four years through five years		1,325,800			1.81			2,954,450			3.65
Due or callable after five years through six years		529,050			0.72			684,800			0.85
Thereafter		1,989,700			2.71			2,518,750			3.11
Total par value		73,357,925			100.00	%		80,954,175			100.00	%
Bond premiums		112,866						63,737
Bond discounts		(33,852	)					(39,529	)
Fair value basis adjustments		572,537						1,254,523
Fair value basis adjustments on terminated hedges		2,761						7,857
Fair value option valuation adjustments and accrued interest		(4,259	)					15,942
Total bonds	$	74,007,978					$	82,256,705

Because of the decline in the balance of callable bonds outstanding at December 31, 2009, the impact of call options was not a significant factor in the potential for shortening the duration of the bond to the first call exercise date. Based on potential call exercise date of the remaining callable bonds on pre-determined call dates, it was probable that some 84.3% of bonds outstanding at December 31, 2009 may get called or mature within two years, compared to 77.4% on a contractual maturity date basis. Call options are owned and exercisable by the Bank and are generally either a one-time option or quarterly. The Bank’s current practice is to exercise its option to call a bond when the swap counterparty exercises its option to call the callable swap hedging the callable bond.

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Discount Notes

Consolidated obligation discount notes provide the FHLBNY with short-term and overnight funds. Discount notes have maturities of up to one year and are offered daily through a dealer-selling group; the notes are sold at a discount from their face amount and mature at par. Through a sixteen-member selling group, the Office of Finance, acting on behalf of the twelve Federal Home Loan Banks, offers discount notes. In addition, the Office of Finance offers discount notes in four standard maturities in two auctions each week. The FHLBNY used discount notes to fund short-term advances, longer-term advances with short repricing intervals, convertible advances and money market investments.

The following summarizes discount notes issued and outstanding (dollars in thousands):

Table 19: Discount Notes Outstanding

	December 31,
	2009			2008
Par value	$	30,838,104		$	46,431,347
Amortized cost	$	30,827,639		$	46,329,545
Fair value basis adjustments		—			361
Total	$	30,827,639		$	46,329,906
Weighted average interest rate		0.15	%		1.00	%

In the current year first two quarters, the Bank had increased its holdings of term discount notes mainly because of favorable investor demand and pricing relative to term funding. In the current year third quarter, discount notes pricing was relatively less attractive as a funding vehicle given alternative funding options and the Bank reduced its reliance on discount notes, particularly the use of overnight discount notes, partly as a result of the Federal Reserve’s action to eliminate interest on excess reserves which provided a readily available risk-free asset which could be funded profitably by discount notes, and partly because the FHLBNY determined that term discount notes would better match its regulatory liquidity profile. In the current year first two quarters, the Bank issued $736.2 billion of discount notes; in contrast, in the third and fourth quarters the Bank issued $78.4 billion and $47.6 billion.

Generally, discount notes are utilized in funding short-term advances, some long-term advances as well as held-to-maturity and money market investments. The efficiency of issuing discount notes continues to be another factor in its use as a popular funding vehicle as discount notes can be issued any time and in a variety of amounts and maturities in contrast to other short-term funding sources, such as the issuance of callable debt with an associated interest rate derivative with matching terms. The importance of the instrument in day-to-day funding operations is illustrated by the very significant volume of the cash flows generated by discount note issuance. In 2009 the Bank issued $862.2 billion in discount notes. In the same period, cash flows from the issuance of consolidated obligation bonds were $54.5 billion. Contrasting transaction volumes between bonds and discount notes provides an indication that discount notes continued to be an important source of short-term funding.

As of December 31, 2009, no discount notes were hedged under the accounting standards for derivatives and hedging. At December 31, 2008, the Bank had hedged $779.0 million of discount notes to hedge fair value risk from changes in the benchmark rate in qualifying hedge relationships. The Bank generally hedges discount notes in economic hedges to convert the fixed-rate exposure of the discount notes to a variable-rate exposure, generally indexed to 3-month LIBOR. At December 31, 2009 and 2008, the Bank had also had executed economic hedges of $3.8 billion and $7.5 billion of discount notes to mitigate fair value risk.

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Rating actions with respect to the FHLBNY are outlined below:

Table 20: FHLBNY Ratings

Short-Term Ratings:

	Moody’s Investors Service		S & P
Year	Outlook	Rating	Short-Term Outlook		Rating
2009	June 19, 2009 - Affirmed	P-1	July 13, 2009	Short-Term rating affirmed	A-1+
	February 2, 2009 - Affirmed	P-1
2008	October 29, 2008 - Affirmed	P-1	June 16, 2008	Short-Term rating affirmed	A-1+
	April 17, 2008 - Affirmed	P-1

Long-Term Ratings:

	Moody’s Investors Service		S & P
Year	Outlook	Rating	Long-Term Outlook			Rating
2009	June 19, 2009 - Affirmed	Aaa/Stable	July 13, 2009	Long-Term rating affirmed	outlook stable	AAA/Stable
	February 2, 2009 - Affirmed	Aaa/Stable
2008	October 29, 2008 - Affirmed	Aaa/Stable	June 16, 2008	Long-Term rating affirmed	outlook stable	AAA/Stable
	April 17, 2008 - Affirmed	Aaa/Stable

Mandatorily Redeemable Capital Stock

The FHLBNY’s capital stock is redeemable at the option of both the member and the FHLBNY subject to certain conditions. Such capital is considered to be mandatorily redeemable and a liability under the accounting guidance for certain financial instruments with characteristics of both liabilities and equity. Dividends related to capital stock classified as mandatorily redeemable are accrued at an estimated dividend rate and reported as interest expense in the Statements of Income. Mandatorily redeemable capital stock at December 31, 2009 and 2008 represented stock held primarily by former members who were no longer members by virtue of being acquired by members of other FHLBanks. Under existing practice, such stock will be repurchased when the stock is no longer required to support outstanding transactions with the FHLBNY.

The FHLBNY reclassifies the stock subject to redemption from equity to liability once a member: irrevocably exercises a written redemption right; gives notice of intent to withdraw from membership; or attains non-member status by merger or acquisition, charter termination, or involuntary termination from membership.

At December 31, 2009 and 2008, the amounts of mandatorily redeemable stock classified as a liability stood at $126.3 million and $143.1 million. Two members became non-members in 2009. One member’s borrowing potential was significant. In 2008, four members became non-members, due to merger and two were considered to have significant borrowing potential had the merger not occurred.

Capital stock held by non-members will be repurchased at maturity of the advances borrowed by non-members. In accordance with Finance Agency regulations, non-members cannot renew their advance borrowings at maturity. Such capital is considered to be a liability and mandatorily redeemable and subject to the provisions under the accounting guidance for certain financial instruments with characteristics of both liabilities and equity.

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Under the provisions of the Bank’s Capital Plan, a notice of intent to withdraw from membership must be provided to the FHLBNY five years prior to the withdrawal date. At the end of such a five-year period, the FHLBNY will redeem the capital stock unless it is needed to meet any applicable minimum stock investment requirements. Under current practice, the FHLBNY redeems all stock in excess of that required to support outstanding advances. The practice of redeeming excess capital stock also applies to the redemption of mandatorily redeemable stock held by former members in excess of amounts required to support advances outstanding to the former members. Typically, mandatorily redeemable capital stock would remain outstanding as a liability until the stock is no longer required to support outstanding advances to the former member, which is generally at maturity of the advance.

The Bank repurchased $66.7 million of mandatorily redeemable capital stock in 2009, $160.2 million in 2008, and $58.3 million in 2007. As non-member advances matured in their normal course, and were not replaced under Finance Agency rules, the Bank also repurchased the excess stock of the former members.

Expected redemption — Total outstanding capital stock considered as mandatorily redeemable at December 31, 2009 and 2008 were $126.3 million and $143.1 million. If present practice of redeeming excess stock continues, the Bank expects $102.5 million to be redeemed in 2010, $16.8 million in 2011, and the remaining $7.0 million beginning in 2013 and thereafter, in step with the expected maturities of advances outstanding to non-members. Prepayment of the advances may accelerate the redemption. Should the Bank modify its present practice of redeeming excess stock and exercise its rights under the Capital Plan, the redemption of non-member stock may take up to five years from the date the member became a non-member. For additional discussions about redemption rights of members and non-members, and interest paid on capital stock deemed to be mandatorily redeemable, see Notes 1, 11 and 13 to the audited financial statements accompanying this report.

Capital Resources

The FHLBanks, including FHLBNY, have a unique cooperative structure. To access FHLBNY’s products and services, a financial institution must be approved for membership and purchase capital stock in FHLBNY. The member’s stock requirement is based on the amount of mortgage-related assets on the member’s balance sheet and its use of FHLBNY advances, as prescribed by the FHLBank Act, which reflects the value of having ready access to FHLBNY as a reliable source of low-cost funds. FHLBNY stock can be issued, exchanged, redeemed and repurchased only at its stated par value of $100 per share. The shares are not publicly traded.

At December 31, 2009, total capital stock $100 par value, putable and issued and held by members was 50,590,000 shares compared to 55,857,000 shares at December 31, 2008. Members are required to purchase FHLBNY stock in proportion to the volume of advances borrowed. Decrease in capital stock is in line with the decrease in advances borrowed by members.

Capital Structure

The Finance Agency established risk-based and leverage capital requirements for the 12 FHLBanks, including the FHLBNY. The rules also described the different classes of stock that the FHLBNY may issue, along with the rights and preferences that are associated with each class of stock. The Gramm-Leach-Bliley Act of 1999 (“GLB Act”) allows for the FHLBNY to have two classes of stock, each class may have sub-classes. Under the GLB Act, membership is voluntary for all members. Members that withdraw from the FHLBNY may not reapply for membership of any FHLBank for five years from the date of withdrawal. Membership without interruption between two FHLBanks is not considered to be a termination of membership for this purpose.

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The FHLBNY offers two classes of Class B capital stock. The FHLBNY’s capital stock consists of membership stock and activity-based stock. From time to time, the FHLBNY may issue or repurchase capital stock with new members, current members, or under certain circumstances with former members or their successors as necessary to allow the FHLBNY to satisfy the minimum capital requirements established by the GLB Act. Class B1 stock is issued to meet membership stock purchase requirements. Class B2 stock is issued to meet activity-based requirements. The FHLBNY requires member institutions to maintain Class B1 stock based on a percentage of the member’s mortgage-related assets and Class B2 stock-based on a percentage of advances and acquired member assets outstanding with the FHLBNY and certain commitments outstanding with the FHLBNY. Class B1 and Class B2 stockholders have the same voting rights and dividend rates.

Class B2 stock — Each member is required to maintain a certain minimum investment in capital stock of the FHLBNY. The minimum investment will be determined by a membership requirement and an activity-based requirement. Each member is required to maintain a certain minimum investment in membership stock for as long as the institution remains a member of the FHLBNY. Typically, membership stock is based upon the amount of the member’s residential mortgage loans and its other mortgage-related assets. Under current policy, membership stock is 0.20% of the member’s mortgage-related assets as of the previous calendar year-end. FHLBNY could determine that all of the membership stock formerly held by the member becomes excess stock, which would give the FHLBNY the discretion, but not the obligation, to repurchase that stock prior to the expiration of the five-year notice period.

Class B1 stock — In addition, each member is required to purchase activity-based stock in proportion to the volume of certain transactions between the member and the FHLBNY. Activity-based stock is equal to the sum of a specified percentage between 4.0% and 5.0% multiplied by the outstanding principal balance of advances and the outstanding principal balance of MPF loans. Under the current regulations, which became effective on December 1, 2005, the specified percentages is 4.5% for both advances and MPF loans, with the provision that the specific requirements for MPF loans are effective for transactions entered into after December 1, 2005, the date when the existing Capital Plan went into effect.

Upon five years’ written notice, a member can elect to have the FHLBank redeem its capital stock, subject to certain conditions and limitations. The FHLBNY can repurchase excess stock of both sub-classes at their discretion at any time prior to the end of the redemption period, provided that FHLBNY will continue to meet its regulatory capital requirements after the repurchase.

The FHLBNY may adjust the stock ownership requirements from time to time within the limits established in the Capital Plan. The FHLBNY may also modify capital stock ownership requirements outside these limits by modifying the Capital Plan with the approval of the Bank’s regulators, the Finance Agency. The shares of capital stock offered to members will be issued at par value and will not trade in any market. Redemptions and repurchases of such stock by the FHLBNY, and any transfers of such stock, must also be made at par value.

The Finance Agency has confirmed that mandatorily redeemable shares of its capital stock will not be included in the definition of total capital for purposes of determining the FHLBank’s compliance with Finance Agency regulatory capital requirements, calculating its mortgage securities investment authority (300 percent of total capital), calculating its unsecured credit exposure to other Government Sponsored Enterprises (100 percent of total capital), or calculating its unsecured credit limits to other counterparties (various percentages of total capital depending on the rating of the counterparty).

Capital Standards

The GLB Act specifies that the FHLBanks must meet certain minimum capital standards, including the maintenance of a minimum level of permanent capital sufficient to cover the credit, market, and operations risks to which the FHLBanks are subject. The FHLBNY must maintain: (1) a total capital ratio of at least 4.0%; (2) a leverage capital ratio of at least 5.0%; and (3) permanent capital in an amount equal to or greater than the “risk-based capital requirement” specified in the Finance Agency’s regulations. The capital requirements are described in greater detail below.

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The total capital ratio is the ratio of the FHLBNY’s total capital to its total assets. Total capital is the sum of: (1) capital stock; (2) retained earnings; (3) the general allowance for losses (if any); and (4) such other amounts (if any) that the Finance Agency may decide are appropriate to include. Finance Agency regulations require that the FHLBNY maintain a minimum total capital ratio of 4%.

The leverage ratio is the weighted ratio of total capital to total assets. For purposes of determining this weighted average ratio, total capital is computed by multiplying the FHLBNY’s permanent capital by 1.5 and adding to this product all other components of total capital. Finance Agency regulations require that the FHLBNY maintain a minimum leverage ratio of 5.0%.

The Finance Agency issued a final rule, effective August 4, 2009, to implement certain provisions of the Housing Act that require the Director of the Finance Agency to establish criteria based on the amount and type of capital held by an FHLBank for each of the following capital classifications: adequately capitalized, undercapitalized, significantly undercapitalized and critically undercapitalized. This regulation defines critical capital levels for the FHLBanks, establishes the criteria for each of the capital classifications identified in the Housing Act and implements the Finance Agency’s prompt correction action authority over the FHLBanks. On July 20, 2009, the Finance Agency published Advisory Bulletin 2009-AB-01 which identified preliminary FHLBank capital classifications as a form of supervisory correspondence that should be treated by an FHLBank as unpublished information. Under this Advisory Bulletin, preliminary FHLBank capital classifications should be publicly disclosed only if the information is material to that FHLBank’s financial condition and business operations, provided that the disclosure is limited to a recital of the factual content of the unpublished information. (See Note 13 to the audited financial statements accompanying this report for the FHLBNY’s compliance with risk based capital rules).

The FHLBNY meets the “adequately capitalized” classification, which is the highest rating, under the Capital Rule. However, the Finance Agency has discretion to reclassify an FHLBank and to modify or add to the corrective action requirements for a particular capital classification, therefore management cannot predict the impact, if any, the Capital Rule will have on the Bank.

Stockholders’ Capital and Dividend

Stockholders’ Capital — Stockholders’ Capital comprised of capital stock, retained earnings and Accumulated other comprehensive income (loss), and decreased by $264.1 million to $5.6 billion at December 31, 2009.

Capital stock— Capital stock, par value $100, was $5.1 billion at December 31, 2009, down from $5.6 billion at December 31, 2008. The decrease in capital stock was consistent with decreases in advances borrowed by members. Since members are required to purchase stock as a percentage of advances borrowed from the FHLBNY, a decline in advances will typically result in a decline in capital stock. In addition, under our present practice, stock in excess of the amount necessary to support advance activity is redeemed daily by the FHLBNY. Therefore, the amount of capital stock outstanding varies directly with members’ outstanding borrowings under the provisions requiring members to purchase stock to support borrowings and its practice of redeeming excess capital stock.

Retained earnings — Retained earnings rose to $688.9 million at December 31, 2009 up from $382.9 million at December 31, 2008. Net income in 2009 was $570.8 million, and $264.7 million in dividend payments were made to members. Net income in 2008 was $259.1 million, and dividend payments were $294.5 million. For more information about the Bank’s retained earnings policy, refer to the section Retained Earnings and Dividend in this report.

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Accumulated other comprehensive income (loss) — Accumulated other comprehensive income (loss) was an accumulated net loss of $144.5 million at December 31, 2009. The principal components are summarized below. Also see, Note 14 to the audited financial statements accompanying this report.

• Net unrealized fair value losses declined to $3.4 million at December 31, 2009, compared to a loss of $64.4 million at December 31, 2008. Unrealized fair value losses on available-for-sale securities reversed almost entirely at December 31, 2009 from a year earlier, resulting in a favorable change of $61.0 million.

• In 2009 based on the management’s determination of a decrease in cash flows expected to be collected (cash flow shortfall) 17 held-to-maturity private-label MBS were determined to be OTTI, and the Bank recorded non-credit component losses in AOCI. At December 31, 2009, the amount of net loss in AOCI was $110.6 million. No OTTI was recognized in prior years.

• Net unrealized losses from cash flow hedges of $22.7 million ($30.2 million at December 31, 2008) were principally from terminated hedges of anticipated issuances of debt. These unrealized losses will be recorded in future periods as an expense over the terms of the hedged bonds as a yield adjustment to the fixed coupons of the debt. Over the next 12 months it is expected that $6.9 million of net losses will be reclassified as a charge to earnings.

• Minimum additional actuarially determined liabilities due on the Bank’s supplemental pension plans of $7.9 million at December 31, 2009 ($6.6 million at December 31, 2008).

Dividend — As a cooperative, the FHLBNY seeks to maintain a balance between its public policy mission of providing low-cost funds to its members and providing its members with adequate returns on their capital invested in FHLBNY stock. The FHLBNY also has to balance its mission with a goal to strengthen its financial position through an increase in the level of retained earnings. The FHLBNY’s dividend policy takes these factors into consideration — the need to enhance retained earnings while reasonably compensating members for the use of their capital and to provide low-cost advances. By Finance Agency regulation, dividends may be paid out of current earnings or previously retained earnings. The FHLBNY may be restricted from paying dividends if it is not in compliance with any of its minimum capital requirements or if payment would cause the FHLBNY to fail to meet any of its minimum capital requirements. In addition, the FHLBNY may not pay dividends if any principal or interest due on any consolidated obligations has not been paid in full, or, under certain circumstances, if the FHLBNY fails to satisfy certain liquidity requirements under applicable Finance Agency regulations. None of these restrictions applied to the FHLBNY for any period presented in this Form 10-K.

Dividends are computed based on the weighted average stock outstanding during the quarter and are declared and paid subsequent to the end of the quarter. In 2009, four dividends were paid for a total of $4.95 per share, or 45.5% of net earnings per share, compared to $6.55 per share, or 124.5% of net earnings per share in 2008. In 2007, $7.51 per share was paid, or 87.6% of net earnings per share.

Dividends paid in the first quarter of 2010 for the fourth quarter of 2009 was 5.60% (annualized).

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Derivative Instruments and Hedging Activities

Interest rate swaps, swaptions, and cap and floor agreements (collectively, derivatives) enable the FHLBNY to manage its exposure to changes in interest rates by adjusting the effective maturity, repricing frequency, or option characteristics of financial instruments. The FHLBNY, to a limited extent, also uses interest rate swaps to hedge changes in interest rates prior to debt issuance and essentially lock in the FHLBNY’s funding cost.

Finance Agency regulations prohibit the speculative use of derivatives. The FHLBNY does not take speculative positions with derivatives or any other financial instruments, or trade derivatives for short-term profits. The FHLBNY does not have any special purpose entities or any other types of off-balance sheet conduits.

The notional amounts of derivatives are not recorded as assets or liabilities in the Statements of Condition, rather the fair values of all derivatives are recorded as either a derivative asset or a derivative liability. Although notional principal is a commonly used measure of volume in the derivatives market, it is not a meaningful measure of market or credit risk since the notional amount does not change hands (other than in the case of currency swaps, of which the FHLBNY has none).

All derivatives are recorded on the Statements of Condition at their estimated fair values and designated as either fair value or cash flow hedges for qualifying hedges, or as non-qualifying hedges (economic hedges or customer intermediations) under the accounting standards for derivatives and hedging. In an economic hedge, the Bank retains or executes derivative contracts, which are economically effective in reducing risk. Such derivatives are designated as economic hedges either because a qualifying hedge is not available, the difficulty to demonstrate that the hedge would be effective on an ongoing basis as a qualifying hedge, or the cost of a qualifying hedge is not economical. Changes in the fair value of a derivative are recorded in current period earnings for a fair value hedge, or in AOCI for the effective portion of fair value changes of a cash flow hedge.

Interest income and interest expense from interest rate swaps used for hedging are reported together with interest on the instrument being hedged if the swap qualifies for hedge accounting. If the swap is designated as an economic hedge, interest accruals are recorded in Other income (loss) as a Net realized and unrealized gain (loss) on derivatives and hedging activities.

The FHLBNY uses derivatives in three ways: (1) as a fair value or cash flow hedge of an underlying financial instrument or as a cash flow hedge of a forecasted transaction; (2) as intermediation hedges to offset derivative positions (e.g., caps) sold to members; and (3) as an economic hedge, defined as a non-qualifying hedge of an asset or liability and used as an asset/liability management tool. The FHLBNY uses derivatives to adjust the interest rate sensitivity of consolidated obligations to more closely approximate the sensitivity of assets or to adjust the interest rate sensitivity of advances to more closely approximate the sensitivity of liabilities. In addition, the FHLBNY uses derivatives to: offset embedded options in assets and liabilities to hedge the market value of existing assets, liabilities, and anticipated transactions; or to reduce funding costs. For additional information see Note 17 — Derivatives and hedging activities to the audited financial statements accompanying this report.

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The following table summarizes the principal derivatives hedging strategies as of December 31, 2009 and 2008:

Table 21: Derivative Hedging Strategies

			December 31, 2009		December 31, 2008
			Notional Amount		Notional Amount
Derivatives/Terms	Hedging Strategy	Accounting Designation	(in millions)		(in millions)
Pay fixed, receive floating interest rate swap	To convert fixed rate on a fixed rate advance to a LIBOR floating rate	Economic Hedge of fair value risk	$	123	$	618
Pay fixed, receive floating interest rate swap cancelable by counterparty	To convert fixed rate on a fixed rate advance to a LIBOR floating rate putable advance	Fair Value Hedge	$	40,252	$	41,824
Pay fixed, receive floating interest rate swap no longer cancelable by counterparty	To convert fixed rate on a fixed rate advance to a LIBOR floating rate no-longer putable	Fair Value Hedge	$	2,283	$	1,405
Pay fixed, receive floating interest rate swap non-cancelable	To convert fixed rate on a fixed rate advance to a LIBOR floating rate non-putable	Fair Value Hedge	$	23,367	$	18,444
Purchased interest rate cap	To offset the cap embedded in the variable rate advance	Economic Hedge of fair value risk	$	390	$	465
Receive fixed, pay floating interest rate swap	To convert fixed rate consolidated obligation bond debt to a LIBOR floating rate	Economic Hedge of fair value risk	$	13,113	$	4,515
Receive fixed, pay floating interest rate swap cancelable by counterparty	To convert fixed rate consolidated obligation bond debt to a LIBOR floating rate callable bond	Fair Value Hedge	$	6,785	$	2,148
Receive fixed, pay floating interest rate swap no longer cancelable	To convert fixed rate consolidated obligation bond debt to a LIBOR floating rate no-longer callable	Fair Value Hedge	$	108	$	373
Receive fixed, pay floating interest rate swap non-cancelable	To convert fixed rate consolidated obligation bond debt to a LIBOR floating rate non-callable	Fair Value Hedge	$	25,982	$	19,609
Receive fixed, pay floating interest rate swap (non-callable)	To convert the fixed rate consolidated obligation discount note debt to a LIBOR floating rate.	Fair Value Hedge	$	—	$	779
Receive fixed, pay floating interest rate swap (non-callable)	To convert the fixed rate consolidated obligation discount note debt to a LIBOR floating rate.	Economic Hedge of fair value risk	$	3,784	$	7,509
Basis swap	To convert non-LIBOR index to LIBOR to reduce interest rate sensitivity and repricing gaps.	Economic Hedge of cash flows	$	6,035	$	14,360
Basis swap	To convert 1M LIBOR index to 3M LIBOR to reduce interest rate sensitivity and repricing gaps.	Economic Hedge of cash flows	$	1,950	$	10,590
Receive fixed, pay floating interest rate swap cancelable by counterparty	Fixed rate callable bond converted to a LIBOR floating rate; matched to callable bond accounted for under fair value option.	Fair Value Option	$	5,690	$	583
Receive fixed, pay floating interest rate swap no longer cancelable	Fixed rate callable bond converted to a LIBOR floating rate; matched to bond no-longer callable accounted for under fair value option.	Fair Value Option	$	—	$	400
Receive fixed, pay floating interest rate swap non-cancelable	Fixed rate callable bond converted to a LIBOR floating rate; matched to non-callable bond accounted for under fair value option.	Fair Value Option	$	350	$	—
Pay fixed, receive floating interest rate swap	Economic hedge on the Balance Sheet	Economic Hedge	$	1,050	$	1,050
Receive fixed, pay floating interest rate swap	Economic hedge on the Balance Sheet	Economic Hedge	$	1,050	$	1,050
Purchased interest rate cap	Economic hedge on the Balance Sheet	Economic Hedge	$	1,892	$	1,892
Intermediary positions Interest rate swaps and caps	To offset interest rate swaps and caps executed with members by executing offsetting derivatives with counterparties	Economic Hedge of fair value risk	$	320	$	300

The accounting designation “economic” hedges represented derivative transactions under hedge strategies that do not qualify for hedge accounting but are an approved risk management hedge.

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Derivatives Financial Instruments by hedge designation

The following table summarizes the notional amounts and estimated fair values of derivative financial instruments (excluding accrued interest) by hedge designation.

The table also provides a reconciliation of fair value basis gains and (losses) of derivatives to the Statements of Condition (in thousands):

Table 22: Derivatives Financial Instruments by Hedge Designation

	December 31, 2009					December 31, 2008
			Estimated					Estimated
	Notional		Fair Value			Notional		Fair Value
Interest rate swaps
Derivatives in fair value hedging relationships	$	98,776,447	$	(3,056,718	)	$	84,582,796	$	(4,531,004	)
Derivatives not designated as hedging instruments		27,104,963		31,723			39,691,142		(76,412	)
Derivatives matching bonds designated under FVO		6,040,000		(2,632	)		983,000		7,699
Interest rate caps/floors
Economic-fair value changes		2,282,000		71,494			2,357,000		8,174
Mortgage delivery commitments (MPF)
Economic-fair value changes		4,210		(39	)		10,395		(108	)
Other
Intermediation		320,000		352			300,000		484
Total	$	134,527,620	$	(2,955,820	)	$	127,924,333	$	(4,591,167	)
Total derivatives, excluding accrued interest			$	(2,955,820	)			$	(4,591,167	)
Cash collateral pledged to counterparties				2,237,028					3,836,370
Cash collateral received from counterparties				—					(61,209	)
Accrued interest				(19,104	)				(25,418	)
Net derivative balance			$	(737,896	)			$	(841,424	)
Net derivative asset balance			$	8,280				$	20,236
Net derivative liability balance				(746,176	)				(861,660	)
Net derivative balance			$	(737,896	)			$	(841,424	)

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Derivative Financial Instruments by Product

The following table summarizes the notional amounts and estimated fair values of derivative financial instruments (excluding accrued interest) by product and type of accounting treatment. The categories of “Fair value,” “Commitment,” and “Cash flow” hedges represented derivative transactions accounted for as hedges. The category of “Economic” hedges represented derivative transactions under hedge strategies that did not qualify for hedge accounting treatment but were an approved risk management strategy.

The table also provides a reconciliation of fair value basis gains and (losses) of derivatives to the Statements of Condition (in thousands):

Table 23: Derivative Financial Instruments by Product

	December 31, 2009					December 31, 2008
			Total estimated					Total estimated
			fair value					fair value
			(excluding					(excluding
	Total notional		accrued			Total notional		accrued
	amount		interest)			amount		interest)
Derivatives designated as hedging instruments
Advances-fair value hedges	$	65,901,667	$	(3,622,141	)	$	61,673,607	$	(5,758,653	)
Consolidated obligations-fair value hedges		32,874,780		565,423			22,909,189		1,227,649
Derivatives not designated as hedging instruments
Advances-economic hedges		513,089		(196	)		1,082,700		(24,520	)
Consolidated obligations-economic hedges		24,881,874		36,954			36,973,442		(45,884	)
MPF loan-commitments		4,210		(39	)		10,395		(108	)
Balance sheet		1,892,000		71,494			1,892,000		8,164
Intermediary positions-economic hedges		320,000		352			300,000		484
Balance sheet-macro hedges swaps		2,100,000		(5,035	)		2,100,000		(5,998	)
Derivatives matching bonds designated under FVO
Interest rate swaps-consolidated obligations-bonds		6,040,000		(2,632	)		983,000		7,699
Total notional and fair value	$	134,527,620	$	(2,955,820	)	$	127,924,333	$	(4,591,167	)
Total derivatives, excluding accrued interest			$	(2,955,820	)			$	(4,591,167	)
Cash collateral pledged to counterparties				2,237,028					3,836,370
Cash collateral received from counterparties				—					(61,209	)
Accrued interest				(19,104	)				(25,418	)
Net derivative balance			$	(737,896	)			$	(841,424	)
Net derivative asset balance			$	8,280				$	20,236
Net derivative liability balance				(746,176	)				(861,660	)
Net derivative balance			$	(737,896	)			$	(841,424	)

Derivative Credit Risk Exposure

In addition to market risk, the FHLBNY is subject to credit risk in derivative transactions because of the potential for non-performance by the counterparties, which could result in the FHLBNY having to acquire a replacement derivative from a different counterparty at a cost. The FHLBNY also is subject to operational risks in the execution and servicing of derivative transactions.

The degree of counterparty credit risk may depend, among other factors, on the extent to which netting procedures and/or the provision of collateral are used to mitigate the risk. Seventeen counterparties (Fifteen non-members and two members) represented 100% of the total notional amount of the FHLBNY’s outstanding derivative transactions at December 31, 2009. See Table 24 below.

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Risk measurement — Although notional amount is a commonly used measure of volume in the derivatives market, it is not a meaningful measure of market or credit risk since derivative counterparties do not exchange the notional amount (except in the case of foreign currency swaps of which the FHLBNY has none). Counterparties use the notional amounts of derivative instruments to calculate contractual cash flows to be exchanged. The fair value of a derivative in a gain position is a more meaningful measure of the FHLBNY’s current market exposure on derivatives. The FHLBNY estimates exposure to credit loss on derivative instruments by calculating the replacement cost, on a present value basis, to settle at current market prices all outstanding derivative contracts in a gain position, net of collateral pledged by the counterparty to mitigate the FHLBNY’s exposure. All derivative contracts with non-members are also subject to master netting agreements or other right of offset arrangements.

Exposure — At December 31, 2009 and 2008, the Bank’s credit risk, representing derivatives in a fair value gain position was approximately $8.3 million and $20.2 million. At December 31, 2009, the fair values of derivatives in a gain position were below the collateral threshold and derivative counterparties pledged no cash to the FHLBNY. At December 31, 2008, derivative counterparties had pledged $61.2 million in cash as collateral to the FHLBNY. The credit risk at December 31, 2009 and 2008 included $0.8 million and $0.7 million in net interest receivable.

In determining credit risk, the FHLBNY considers accrued interest receivable and payable, and the legal right to offset assets and liabilities by counterparty. The FHLBNY attempts to mitigate its exposure by requiring derivative counterparties to pledge cash collateral, if the amount of exposure is above the collateral threshold agreements.

At December 31, 2009, the FHLBNY had posted $2.2 billion in cash as collateral to derivative counterparties to mitigate derivatives in a net fair value liability (unfavorable) position. The FHLBNY is exposed to the extent that a counterparty may not repay the posted cash collateral to the FHLBNY due to unforeseen circumstances, such as bankruptcy. In such an event, the FHLBNY would then exercise its rights under the “International Swaps and Derivatives Association agreement” (“ISDA”) to replace the derivatives in a liability position (gain position for the acquiring counterparty) with another available counterparty in exchange for cash delivered to the FHLBNY. To the extent that the fair values of the replacement derivatives are less than the cash collateral posted, the FHLBNY may not receive cash equal to the amount posted.

Risk mitigation — The FHLBNY attempts to mitigate derivative counterparty credit risk by contracting only with experienced counterparties with investment-grade credit ratings. Annually, the FHLBNY’s management and Board of Directors review and approve all non-member derivative counterparties. Management monitors counterparties on an ongoing basis for significant business events, including ratings actions taken by nationally recognized statistical rating organizations. All approved derivatives counterparties must enter into a master ISDA agreement with the FHLBNY and, in addition, execute the Credit Support Annex to the ISDA agreement that provides for collateral support at predetermined thresholds. These annexes contain enforceable provisions for requiring collateral on certain derivative contracts that are in gain positions. The annexes also define the maximum net unsecured credit exposure amounts that may exist before collateral delivery is required. Typically, the maximum amount is based upon an analysis of individual counterparty’s rating and exposure. The FHLBNY also attempts to manage counterparty credit risk through credit analysis, collateral management and other credit enhancements, such as guarantees, and by following the requirements set forth in the Finance Agency’s regulations.

Despite these risk mitigating policies and processes, on September 15, 2008, an event of default occurred under outstanding derivative contracts with total notional amounts of $16.5 billion between Lehman Brothers Special Financing Inc. (“LBSF”) and the FHLBNY when credit support provider Lehman Brothers Holdings Inc. commenced a filing under Chapter 11 of the U.S. Bankruptcy Code. The Bank had deposited $509.6 million with LBSF as cash collateral. Since the default, the FHLBNY has replaced most of the derivatives that had been executed between LBSF and the FHLBNY through new agreements with other derivative counterparties. The Lehman bankruptcy proceedings are ongoing.

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Derivatives Counterparty Credit Ratings

The following table summarizes the FHLBNY’s credit exposure by counterparty credit rating (in thousands, except number of counterparties).

Table 24: Derivatives Counterparty Notional Balance by Credit Ratings

	December 31, 2009
					Total Net
	Number of		Notional		Exposure at		Net Exposure after
Credit Rating	Counterparties		Balance		Fair Value		Cash Collateral 3
AAA		—	$	—	$	—	$	—
AA		7		45,652,167		684		684
A		8		88,711,243		—		—
Members (Note1 and Note2)		2		160,000		7,596		7,596
Delivery Commitments		—		4,210		—		—
Total		17	$	134,527,620	$	8,280	$	8,280

	December 31, 2008
					Total Net
	Number of		Notional		Exposure at		Net Exposure after
Credit Rating	Counterparties		Balance		Fair Value		Cash Collateral 3
AAA		1	$	9,167,456	$	—	$	—
AA		6		39,939,946		—		—
A		7		78,656,536		64,890		3,681
Members (Note1 and Note2)		3		150,000		16,555		16,555
Delivery Commitments		—		10,395		—		—
Total		17	$	127,924,333	$	81,445	$	20,236

Note 1:	Fair values of $7.6 million and $16.6 million comprising of intermediated transactions with members and interest-rate caps sold to members (with capped floating-rate advances) were collateralized at December 31, 2009 and December 31, 2008.
Note 2:	Members are required to pledge collateral to secure derivatives purchased by the FHLBNY as an intermediary on behalf of its members. Eligible collateral includes: (1) one-to-four-family and multi-family mortgages; (2) U.S. Treasury and government-agency securities; (3) mortgage-backed securities; and (4) certain other collateral which is real estate-related and has a readily ascertainable value, and in which the FHLBNY can perfect a security interest. As a result of the collateral agreements with its members, the FHLBNY believes that its maximum credit exposure due to the intermediated transactions was $0 at December 31, 2009 and December 31, 2008.
Note 3:	As reported in the Statements of Condition.

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Accounting for Derivatives — Hedge Effectiveness

An entity that elects to apply hedge accounting is required to establish at the inception of the hedge the method it will use for assessing the effectiveness of the hedging derivative and the measurement approach for determining the ineffective portion of the hedge. Those methods must be consistent with the entity’s approach to managing risk. At inception and during the life of the hedging relationship, management must demonstrate that the hedge is expected to be highly effective in offsetting changes in the hedged item’s fair value or the variability in cash flows attributable to the hedged risk.

Effectiveness is determined by how closely the changes in the fair value of the hedging instrument offset the changes in the fair value or cash flows of the hedged item relating to the risk being hedged. Hedge accounting is permitted only if the hedging relationship is expected to be highly effective at the inception of the hedge and on an ongoing basis. Any ineffective portions are to be recognized in earnings immediately, regardless of the type of hedge. An assessment of effectiveness is required whenever financial statements or earnings are reported, and at least once every three months. FHLBNY assesses hedge effectiveness in the following manner:

• Inception prospective assessment. Upon designation of the hedging relationship and on an ongoing basis, FHLBNY is required to demonstrate that it expects the hedging relationship to be highly effective. This is a forward-looking consideration. The prospective assessment at designation uses sensitivity analysis employing an option adjusted valuation model to generate changes in market value of the hedged item and the swap. These projected market values are then analyzed over multiple instantaneous, parallel rate shocks. The hedge is expected to be highly effective if the change in fair value of the swap divided by the change in the fair value of the hedged item is within the 80% -125% dollar value offset boundaries. See additional description of regression analysis in following paragraphs.

• Ongoing prospective assessment. For purposes of assessing effectiveness on an ongoing basis, the Bank will utilize the regression results from its retrospective assessment as a means of demonstrating that it expects all “long-haul” hedge relationships to be highly effective in future periods (i.e., it will use the regression for both its ongoing prospective and retrospective assessment).

• Retrospective assessment. At least quarterly, FHLBNY will be required to determine whether the hedging relationship was highly effective in offsetting changes in fair value or cash flows through the date of the periodic assessment. This is an evaluation of the past experience.

FHLBNY uses a statistical method commonly referred to as regression analysis to analyze how a single dependent variable is affected by the changes in one (or more) independent variables. If the two variables are highly correlated, then movements of one variable can be reasonably expected to trigger similar movements in the other variable. Thus, regression analysis serves to measure the strength of empirical relationships and assessing the probability of hedge effectiveness. The FHLBNY tests the effectiveness of the hedges by regressing the changes in the net present value of future cash flows (“NPV”) of the derivative against changes in the net present value of the hedged transaction, typically an advance or a consolidated obligation.

The regression model being used is:

∆V_h = a + b∆V_H

where ∆V_h is the change in the net present value of the hedging item, ∆V_H is the change in the net present value of the hedged transaction, a is the ‘intercept’ of the regression and b is the ‘slope’ of the regression.

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The coefficient b should have a value very close to -1 if the hedging transaction is effective. At the same time, a should be very close to zero.

To determine whether a hedging transaction is effective requires checking whether, overall, the postulated linear model ‘fits’ the data well and whether the estimates of the parameters a and b come close enough to their hypothesized values that we can feel confident that it would be wrong to reject those hypothesized values.

The standard measure of overall fit is the so-called ‘coefficient of determination’ (also nicknamed ‘R-squared’ because it is equal to the square of the coefficient of linear correlation). R-squared can be as low as 0 and as high as 1.0. An R-squared equal to 0 means that the changes in the dependent variable are totally unrelated to the changes in the independent variable. An R-squared of 1.0 implies perfect correlation. In this case, the assumed model explains the data perfectly. The changes in the independent variable ‘map’ onto the changes in the dependent variable exactly as ‘predicted’ by the model. This is a situation rarely observed in real-life situations. In practical situations, an R-squared equal to or in excess of .80 indicates a very good fit of the model. Accordingly, FHLBNY has determined that to consider the hedge relationship to be highly effective, the R-squared of the regression would have to be at least equal to .80.

An assumed model can be accepted only if the main hypotheses on which it rests cannot be rejected. In the context of regression analysis, hypothesis testing is a procedure that seeks to determine whether the estimated values of the parameters of the model (a and b) are close enough to their hypothesized values (zero for a and -1 for b) that it would be unreasonable to reject those hypotheses. The Bank employs the most commonly used test statistic called the F-test statistic, the Fisher probability distribution function. This standard F-Test incorporates all the variance of errors of the regression line. The FHLBNY has determined that to consider the hedge relationship to be highly effective, the F-Test statistic associated with regression errors must fall within a specified the interval.

An equivalent approach to hypothesis testing consists of defining an ‘acceptance region’ around the hypothesized value of the parameter(s) being estimated. If the estimated value of the parameter falls within the acceptance region, the hypothesis is not rejected. If it falls outside of the acceptance region, the hypothesis is rejected. FHLBNY has determined that to consider the hedge relationship to be highly effective, the estimate of the slope of the regression (b) must fall within an acceptance region ranging from -1.25 to -.80.

Discontinuation of hedge accounting

If a derivative no longer qualifies as a fair value or a cash flow hedge, the FHLBNY discontinues hedge accounting prospectively and reports the derivative in the Statement of Condition at its fair value and records fair value gains and losses in earnings until the derivative matures. If the FHLBNY was to discontinue a cash flow hedge, previously deferred gains and losses in AOCI would be recognized in current earnings at the time the hedged transaction affects earnings. For discontinued fair value hedges, the FHLBNY no longer adjusts the carrying value (basis) of the hedged item, typically an advance or a bond, for changes in their fair values. The FHLBNY then amortizes previous fair value adjustments to the basis of the hedged item over the life of the hedged item (for callable as well as non-callable previously hedged advances and bonds).

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Embedded derivatives

Before a trade is executed, the FHLBNY’s procedures require the identification and evaluation of embedded derivatives, if any, under accounting standards for derivatives and hedging. This evaluation will consider if the economic characteristics and the risks of the embedded derivative instrument are not clearly and closely related to the economic characteristic and risks of the host contract. At December 31, 2009, 2008 and 2007, the FHLBNY had no embedded derivatives that were required to be separated from the “host” contract because their economic or risk characteristics were not clearly and closely related to the economic characteristics and risks of the host contract.

Aggregation of similar items

The FHLBNY has de minimis amounts of similar advances that are hedged in aggregate as a portfolio. For such hedges, the FHLBNY performs a similar asset test to ensure the hedged advances share the risk exposure for which they are designated as being hedged. Other than a very limited number of portfolio hedges, the FHLBNY’s other hedged items and derivatives are hedged as separately identifiable instruments.

Measurement of hedge ineffectiveness

The FHLBNY calculates the fair values of its derivatives and associated hedged items using discounted cash flows and other adjustments to incorporate volatilities of future interest rates and options, if embedded, in the derivative or the hedged item. For each financial statement reporting period, the FHLBNY measures the changes in the fair values of all derivatives, and changes in fair value of the hedged items attributable to the risk being hedged unless the FHLBNY has assumed no ineffectiveness (referred to as the “short-cut method”) and reports changes through current earnings. For hedged items eligible for the short-cut method, the FHLBNY treats the change in fair value of the derivative as equal to the change in the fair value of the hedged item attributable to the change in the benchmark interest rate. To the extent the change in the fair value of the derivative is not equal to the change in the fair value of the hedged item when not using the short-cut method, the resulting difference represents hedge ineffectiveness, and is reported through current earnings.

Liquidity

The FHLBNY’s primary source of liquidity is the issuance of consolidated obligation bonds and discount notes. To refinance maturing consolidated obligations, the Bank relies on the willingness of the investors to purchase new issuances. The FHLBNY has access to the discount note market and the efficiency of issuing discount notes is an important factor as a source of liquidity since discount notes can be issued any time and in a variety of amounts and maturities. Member deposits and capital stock purchased by members are another source of funds. Short-term unsecured borrowings from other FHLBanks and in the Federal funds market provide additional sources of liquidity. With the passage of the Housing Act on July 30, 2008, the U.S. Treasury is authorized to purchase obligations issued by the FHLBanks, in any amount deemed appropriate by the U.S. Treasury. This temporary authorization expired December 31, 2009 and supplemented the existing limit of $4 billion. See Note 19 to the audited financial statements accompanying this report for discussion of the U.S. Treasury’s establishment of the Government Sponsored Enterprise Credit Facility (GSECF), which was designed to serve as a contingent source of liquidity for the FHLBanks via issuance of consolidated obligations to the U.S. Treasury.

The FHLBNY’s liquidity position remains in compliance with all regulatory requirements and management does not foresee any changes to that position.

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Finance Agency Regulations — Liquidity

Beginning December 1, 2005, with the implementation of the Capital Plan, the Financial Management Policy rules of the Finance Agency with respect to liquidity were superseded by regulatory requirements that are specified in Parts 917 and 965 of Finance Agency regulations and are summarized below.

Each FHLBank shall at all times have at least an amount of liquidity equal to the current deposits received from its members that may be invested in:

• Obligations of the United States;

• Deposits in banks or trust companies; or

• Advances with a maturity not to exceed five years.

In addition, each FHLBank shall provide for contingency liquidity which is defined as the sources of cash an FHLBank may use to meet its operational requirements when its access to the capital markets is impeded. The FHLBNY met its contingency liquidity requirements and liquidity in excess of requirements is summarized in the table titled Contingency Liquidity.

Violations of the liquidity requirements would result in non-compliance penalties under discretionary powers given to the Finance Agency under applicable regulations, which include other corrective actions.

Liquidity Management

The FHLBNY actively manages its liquidity position to maintain stable, reliable, and cost-effective sources of funds, while taking into account market conditions, member demand, and the maturity profile of the FHLBNY’s assets and liabilities. The FHLBNY recognizes that managing liquidity is critical to achieving its statutory mission of providing low-cost funding to its members. In managing liquidity risk, the FHLBNY is required to maintain certain liquidity measures in accordance with the FHLBank Act and policies developed by the FHLBNY management and approved by the FHLBNY’s Board of Directors. The specific liquidity requirements applicable to the FHLBNY are described in the next four sections:

Deposit Liquidity. The FHLBNY is required to invest an aggregate amount at least equal to the amount of current deposits received from the FHLBNY’s members in: (1) obligations of the U.S. government; (2) deposits in banks or trust companies; or (3) advances to members with maturities not exceeding five years. In addition to accepting deposits from its members, the FHLBNY may accept deposits from other FHLBank or from any other governmental instrumentality.

Deposit liquidity is calculated daily. Quarterly average reserve requirements and actual reserves are summarized below during each quarter in 2009 and 2008 (in millions). The FHLBNY met its requirements at all times.

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Table 25: Deposit Liquidity

	Average Deposit		Average Actual
For the quarters ended	Reserve Required		Deposit Liquidity		Excess
December 31, 2009	$	2,364	$	53,089	$	50,725
September 30, 2009		2,189		55,890		53,701
June 30, 2009		2,190		57,886		55,696
March 31, 2009		1,753		63,267		61,514
December 31, 2008		2,022		66,246		64,224
September 30, 2008		1,657		55,038		53,381
June 30, 2008		2,239		51,053		48,814
March 31, 2008		2,091		47,764		45,673

Operational Liquidity. The FHLBNY must be able to fund its activities as its balance sheet changes from day to day. The FHLBNY maintains the capacity to fund balance sheet growth through its regular money market and capital market funding activities. Management monitors the Bank’s operational liquidity needs by regularly comparing the Bank’s demonstrated funding capacity with its potential balance sheet growth. Management then takes such actions as may be necessary to maintain adequate sources of funding for such growth.

Operational liquidity is measured daily. The FHLBNY met the requirements at all times. The following table summarizes excess operational liquidity by each quarter in 2009 and 2008 (in millions):

Table 26: Operational Liquidity

	Average Balance Sheet		Average Actual
For the quarters ended	Liquidity Requirement		Operational Liquidity		Excess
December 31, 2009	$	6,710	$	16,388	$	9,678
September 30, 2009		18,348		22,205		3,857
June 30, 2009		11,925		25,904		13,979
March 31, 2009		9,543		20,893		11,350
December 31, 2008		8,226		14,827		6,601
September 30, 2008		7,548		21,337		13,789
June 30, 2008		7,440		20,018		12,578
March 31, 2008		5,229		18,232		13,003

Contingency Liquidity. The FHLBNY is required by Finance Agency regulations to hold “contingency liquidity” in an amount sufficient to meet its liquidity needs if it is unable, by virtue of a disaster, to access the consolidated obligation debt markets for at least five business days. Contingency liquidity includes (1) marketable assets with a maturity of one year or less; (2) self-liquidating assets with a maturity of one year or less; (3) assets that are generally acceptable as collateral in the repurchase market; and (4) irrevocable lines of credit from financial institutions receiving not less than the second-highest credit rating from a nationally recognized statistical rating organization. The FHLBNY consistently exceeded the regulatory minimum requirements for contingency liquidity.

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Contingency liquidity is reported daily. The FHLBNY met the requirements at all times. The following table summarizes excess contingency liquidity by each quarter in 2009 and 2008 (in millions):

Table 27: Contingency Liquidity

	Average Five Day		Average Actual
For the quarters ended	Requirement		Contingency Liquidity		Excess
December 31, 2009	$	2,188	$	15,309	$	13,121
September 30, 2009		2,962		16,676		13,714
June 30, 2009		11,877		21,030		9,153
March 31, 2009		7,443		18,709		11,266
December 31, 2008		4,727		12,930		8,203
September 30, 2008		4,210		18,795		14,585
June 30, 2008		3,948		17,186		13,238
March 31, 2008		4,887		16,382		11,495

The FHLBNY sets standards in its risk management policy that address its day-to-day operational and contingency liquidity needs. These standards enumerate the specific types of investments to be held by the FHLBNY to satisfy such liquidity needs and are outlined above. These standards also establish the methodology to be used by the FHLBNY in determining the FHLBNY’s operational and contingency needs. Management continually monitors and projects the FHLBNY’s cash needs, daily debt issuance capacity, and the amount and value of investments available for use in the market for repurchase agreements. Management uses this information to determine the FHLBNY’s liquidity needs and to develop appropriate liquidity plans.

Other Liquidity Contingencies. As discussed more fully under the section Debt Financing - Consolidated Obligations, the FHLBNY is primarily liable for consolidated obligations issued on its behalf. The FHLBNY is also jointly and severally liable with the other FHLBanks for the payment of principal and interest on the consolidated obligations of all the FHLBanks. If the principal or interest on any consolidated obligation issued on behalf of the FHLBNY is not paid in full when due, the following rules apply: the FHLBNY may not pay dividends to, or redeem or repurchase shares of stock of any member or non-member stockholder until the Finance Agency approves the FHLBNY’s consolidated obligation payment plan or other remedy and until the FHLBNY pays all the interest or principal currently due on all its consolidated obligations. The Finance Agency, at its discretion, may require any FHLBank to make principal or interest payments due on any consolidated obligations.

The par amount of the outstanding consolidated obligations of all 12 FHLBanks was $0.9 trillion and $1.3 trillion at December 31, 2009 and 2008. The FHLBNY does not believe that it will be called upon to pay the consolidated obligations of another FHLBank in the future.

Finance Agency regulations also state that the FHLBanks must maintain, free from any lien or pledge, the following types of assets in an amount at least equal to the amount of consolidated obligations outstanding:

• Cash;

• Obligations of, or fully guaranteed by, the United States;

• Secured advances;

• Mortgages that have any guaranty, insurance, or commitment from the United States or any agency of the United States;

• Investments described in section 16(a) of the FHLBank Act, including securities that a fiduciary or trust fund may purchase under the laws of the state in which the FHLBank is located; and

• Other securities that are rated Aaa by Moody’s or AAA by Standard & Poor’s.

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Leverage Limits and Unpledged Asset Requirements

The FHLBNY met the Finance Agency’s requirement that unpledged assets, as defined under regulations, exceed the total of consolidated obligations as follows (in thousands):

Table 28: Unpledged Asset

	December 31,
	2009			2008
Consolidated Obligations:
Bonds	$	74,007,978		$	82,256,705
Discount Notes		30,827,639			46,329,906
Total consolidated obligations		104,835,617			128,586,611
Unpledged assets
Cash		2,189,252			18,899
Less: Member pass-through reserves at the FRB		(29,331	)		(31,003	)
Secured Advances 1		94,348,751			109,152,876
Investments 1		16,222,615			26,364,661
Mortgage loans		1,317,547			1,457,885
Accrued interest receivable on advances and investments		340,510			492,856
Less: Pledged Assets		(2,045	)		(2,669	)
		114,387,299			137,453,505
Excess unpledged assets	$	9,551,682		$	8,866,894

1

At December 31, 2009, the Bank pledged $2.0 million to the FDIC see Note 4- Held-to-maturity securities. The Bank also provided to the U.S. Treasury a listing of $10.3 billion in advances with respect to a lending agreement. See Note 19 — Commitments and Contingencies.

Finance Agency regulations require the FHLBanks to maintain, in the aggregate, unpledged qualifying assets equal to the consolidated obligations outstanding. Qualifying assets are defined as cash; secured advances; assets with an assessment or rating at least equivalent to the current assessment or rating of the consolidated obligations; obligations, participations, mortgages, or other securities of or issued by the United States or an agency of the United States; and such securities in which fiduciary and trust funds may invest under the laws of the state in which the FHLBank is located.

Purchases of MBS. Finance Agency investment regulations limit the purchase of mortgage-backed securities to 300% of capital. The FHLBNY was in compliance with the regulation at all times.

Table 29 :FHFA MBS Limits

	December 31, 2009						December 31, 2008
	Actual			Limits			Actual			Limits
Mortgage securities investment authority 1		213	%		300	%		207	%		300	%

¹ The measurement date is on a one-month “look-back” basis.

On March 24, 2008, the Board of Directors of the Federal Housing Finance Board (“Finance Board”), predecessor to the Finance Agency, adopted Resolution 2008-08, which temporarily expands the authority of a FHLBank to purchase mortgage-backed securities (“MBS”) under certain conditions. The resolution allows an FHLBank to increase its investments in MBS issued by Fannie Mae and Freddie Mac by an amount equal to three times its capital, which is to be calculated in addition to the existing regulatory limit. The expanded authority would permit MBS to be as much as 600% of the FHLBNY’s capital.

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All mortgage loans underlying any securities purchased under this expanded authority must be originated after January 1, 2008. The Finance Board believed that such loans are generally of higher credit quality than loans originated at an earlier time, particularly in 2005 and 2006. The loans underlying any Fannie Mae and Freddie Mac issued MBS acquired pursuant to the new authority must be underwritten to conform to standards imposed by the federal banking agencies in the “Interagency Guidance on Nontraditional Mortgage Product Risks” dated October 4, 2006 and the “Statement on Subprime Mortgage Lending” dated July 10, 2007.

The FHLBank must notify the Finance Agency of its intention to exercise the new authority (Resolution 2008-08) at least 10 business days in advance of its first commitment to purchase additional Agency MBS. Currently, the Bank has not notified or exercised Resolution 2008-08, therefore no separate calculation was required.

Results of Operations

The following section provides a comparative discussion of the FHLBNY’s results of operations for the three-year period ended December 31, 2009. For a discussion of the Critical accounting estimates used by the FHLBNY that affect the results of operations, see section in the MD&A captioned Significant Accounting Policies and Estimates, and Recently Issued Accounting Standards.

Net Income

The FHLBNY manages its operations as a single business segment. Advances to members are the primary focus of the FHLBNY’s operations, and are the principal factor that impacts its operating results. Interest income from advances is the principal source of revenue. The primary expenses are interest paid on consolidated obligations debt, operating expenses, principally administrative and overhead expenses, and “assessments” on net income. The FHLBNY is exempt from ordinary federal, state, and local taxation except for local real estate tax. It is required to make payments to REFCORP and set aside funds from its income towards an Affordable Housing Program (“AHP”), together referred to as assessments. Other significant factors affecting the Bank’s Net income include the volume and timing of investments in mortgage-backed securities, debt repurchases and associated losses, and earnings from shareholders’ capital.

Net income — 2009 versus 2008.

The FHLBNY reported 2009 Net income of $570.8 million, or $10.88 per share, compared with 2008 Net income of $259.1 million, or $5.26 per share. Net income was after the deduction of AHP and REFCORP assessments, which are a fixed percentage of the FHLBNY’s pre-assessment income.

Net interest income before the provision for credit losses, a key metric for the FHLBNY, was $700.6 million for 2009, up slightly by $6.1 million, or 0.9% from the prior year. Net interest income is the primary contributor to Net income for the FHLBNY.

Decline in the cost of debt relative to earnings from advances and investments was one factor that drove 2009 Net interest income. The Bank shifted its funding mix in 2009 and funded a significant percentage of its assets utilizing discount notes and short-term debt at advantageous spreads. While yields earned from assets and yields paid on liabilities declined 193 basis points in a lower interest rate environment in 2009, relative to 2008, aggregate funding cost declined by 201 basis points. An increase in transaction volume as measured by average earning assets was another factor. Earning assets averaged $124.8 billion in 2009, up from $118.7 billion in 2008.

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Net interest spread, which is the difference between yields on interest-earning assets and yields on interest-costing liabilities, improved by 8 basis points in 2009 as a result of these favorable conditions and tactical funding adjustments. The favorable result was almost entirely offset by significant decline in interest income earned from the deployment of members’ capital and net non-interest bearing liabilities, together referred to as deployed capital, to fund interest-earning assets. The average deployed capital was $9.1 billion in 2009, and it potentially could have earned 149 basis points, the aggregate yield on earning assets in 2009. In 2008, average deployed capital was $6.7 billion but potentially could have earned a significantly higher yield of 342 basis points in 2008. Member capital in specific is typically utilized to fund short-term liquid investments, and the yields from such assets declined steeply in 2009. The potential earnings from investing members’ equity is typically lower in a low interest rate environment as in 2009, relative to 2008.

Net income in 2009 benefited from net gains of $164.7 million from derivatives and hedging activities in contrast to a net loss of $199.3 million in 2008. In order to manage the FHLBNY’s interest rate risk profile, management of the FHLBNY routinely uses derivatives to manage the interest rate risk inherent in the Bank’s assets and liabilities. The gains in 2009 were principally from favorable fair value changes of interest rate swaps designated in economic hedges of consolidated obligation bonds, and interest rate caps designated in economic hedges of certain GSE issued capped floating-rate MBS.

• Swaps designated as economic hedges were primarily interest rate basis swaps executed to reduce the FHLBNY’s debt expense exposure to changes in the 3-month LIBOR rates. The FHLBNY had issued floating-rate debt that were either indexed to 1-month LIBOR, prime, or the daily Federal funds rate, and the swaps synthetically converted the combined debt and swap cash flows to 3-month LIBOR rates. The basis swaps and other interest rate swaps were designated as economic hedges, because management could not establish with certainty that the hedges would be highly effective hedges in future periods, or the hedges had ceased to be highly effective hedges, or the operational burden of establishing hedge accounting was significant. The derivatives designated as economic hedges are marked to fair value through earnings with no offsetting changes in fair values of the hedged financial instruments. Favorable fair value gains of interest rate swaps in 2009 were primarily the reversal of fair value losses recorded in 2008 from swaps that had matured or were nearing maturity in 2009. When interest rate swaps are held to their contractual maturity (or put/call dates), nearly all of the cumulative net fair value gains and losses that are unrealized will generally reverse over time, and fair value changes will sum to zero.

• Purchased interest rate caps also exhibited fair value gains in 2009. Fair values of interest rate caps are impacted by the level of interest rates, volatility (variability of interest rates), and terms to maturity. Long-term rates have been rising and in this interest rate environment, purchased caps will show favorable fair value gains. Such gains are unrealized and will also reverse if the caps are held to their contractual maturities.

Year-over-year increase in 2009 Net income is further explained by the 2008 loss of $47.4 million ( on an after assessment basis), or $0.97 per share of capital as result of the bankruptcy of Lehman Brothers Special Financing (“LBSF”), a derivative counterparty to the FHLBNY which defaulted under the contractual terms of its agreement with FHLBNY on $16.5 billion in notional amount of derivatives outstanding at the time of bankruptcy.

In 2009, the FHLBNY identified credit impairment in 17 of its private-label mortgage-backed securities. Cash flow assessments of the expected credit performance of its private-label mortgage-backed securities for OTTI at each interim quarterly period in 2009 and at December 31, 2009 identified future losses. In assessing the expected credit performance of these securities, the Bank determined it was likely it would not fully recover the amortized cost of the 17 private-label held-to-maturity mortgage-backed securities, and the securities were deemed to be OTTI. Cumulative OTTI of $20.8 million in credit impairment charges were charged to earnings in 2009. In the first three quarters of 2009, the Bank had recorded cumulative credit impairment charges of $14.3 million. In the fourth quarter, credit impairment charges of $6.5 million were charged to earnings when management identified additional credit impairment on eight private-label mortgage-backed securities. Six of the eight securities had previously been deemed to be credit impaired in the interim periods in 2009. At December 31, 2009, the amount of non-credit OTTI, remaining after accretion, was a cumulative loss of $110.6 million in AOCI, a component of stockholders’ equity.

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Although 14 of the 17 securities that have been credit impaired in 2009 are insured by bond insurers, Ambac Assurance Corp (“Ambac”) and MBIA Insurance Corp (“MBIA”), the Bank’s analysis of the two bond insurers concluded that for the 14 insured securities, future credit losses due to projected collateral shortfalls would not be fully supported by the two bond insurers. For more information about impairment methodology and bond insurer analysis, see Note 1 — Significant Accounting Policies and Estimates, and Note 4 — Held-to-maturity securities to the audited financial statements accompanying this report.

Operating Expenses of the FHLBNY were $76.1 million in 2009, up from $66.3 million in 2008. The FHLBNY was also assessed for its share of the operating expenses for the Finance Agency and the Office of Finance, which totaled $8.1 million in 2009, up from $6.4 million in 2008.

REFCORP assessment totaled $142.7 million in 2009, up from $64.8 million in 2008. Affordable Housing Program (“AHP”) assessments set aside from income totaled $64.3 million in 2009, up from $29.8 million in 2008. Assessments are calculated on Net income before assessments and the increases were due to a significant increase in 2009 Net income compared to 2008. For more information about REFCORP and AHP assessments see the section Assessments in this Form 10-K.

The return on average equity, which is Net income divided by average Capital stock, Retained earnings, and AOCI was 10.02% in 2009, compared with 4.95% in 2008. Net earnings per share was $10.88 in 2009, compared with $5.26 in 2008.

Net income — 2008 versus 2007.

The FHLBNY reported 2008 Net income of $259.1 million, or $5.26 per share, compared with Net income of $323.1 million, or $8.57 per share, for 2007. The decrease in 2008 Net income year-over-year was mainly attributed to a credit loss provision of $64.5 million against receivables due from Lehman Brothers Special Financing Inc. (“LBSF”). The LBSF provision on an after assessment basis reduced 2008 Net income by $47.4 million, or $0.97 per share of capital.

Net interest income before the provision for credit losses was $694.5 million for 2008, up by $195.1 million, or 39.1 % from the prior year. Reported Net realized and unrealized loss from hedging activities was a loss of $199.3 million in 2008, compared to a gain of $18.4 million in 2007. The reported hedging loss in 2008 was primarily due to the accounting designation of swaps as economic hedges that necessitated the recording of unfavorable changes in their fair values without the offsetting benefit of favorable fair value changes of the economically hedged financial instrument. Operating Expenses were $66.3 million in 2008, slightly down by $0.3 million, from $66.6 million in 2007. REFCORP assessments were $64.8 million in 2008, down by $16.0 million, from 2007. AHP assessments were $29.8 million, down by $7.4 million, from 2007. Since assessments are calculated on Net income before assessments and the decrease was due to lower Net income in 2008 compared to 2007. The return on average equity in 2008 was 4.95%, compared with 7.85% in 2007. Net earnings per share in 2008 was $5.26, compared to $8.57 per share in 2007.

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Interest Income — 2009, 2008, and 2007

Interest income from advances and investments in mortgage-backed securities are the principal sources of income for the FHLBNY. Changes in both rate and intermediation volume (average interest-yielding assets) explain the change in the current year from the prior year. The principal categories of Interest Income by year are summarized below (dollars in thousands):

Table 30: Interest Income — Principal Sources

	December 31,						Percentage			Percentage
	2009		2008		2007		Variance 2009			Variance 2008
Interest Income
Advances	$	1,270,643	$	3,030,799	$	3,495,312		(58.08	)%		(13.29)	%
Interest-bearing deposits		19,865		28,012		3,333		(29.08	)		740.44
Federal funds sold		3,238		77,976		192,845		(95.85	)		(59.57	)
Available-for-sale securities		28,842		80,746		—		(64.28	)		N/A
Held-to-maturity securities
Long-term securities		461,491		531,151		596,761		(13.11	)		(10.99	)
Certificates of deposit		1,626		232,300		408,308		(99.30	)		(43.11	)
Mortgage loans held-for-portfolio		71,980		77,862		78,937		(7.55	)		(1.36	)
Loans to other FHLBanks and other		2		33		9		(93.94	)		266.67
Total interest income	$	1,857,687	$	4,058,879	$	4,775,505		(54.23	)%		(15.01	)%

Reported Interest Income in the Statements of Income was adjusted for the cash flows associated with interest rate swaps in which the Bank generally pays fixed-rate cash flows to derivative counterparties and, in exchange, the Bank receives variable-rate LIBOR-indexed cash flows fixed-rate cash flows, which typically mirror the fixed-rate coupon received from advances borrowed by members.

Impact of hedging advances — The FHLBNY executes interest rate swaps to modify the effective interest rate terms of many of its fixed-rate advance products and typically all of its convertible or putable advances. In these swaps, the FHLBNY effectively converts a fixed-rate stream of cash flows from its fixed-rate advances to a floating-rate stream of cash flows, typically indexed to LIBOR. These cash flow patterns from derivatives were in line with the Bank’s interest rate risk management practices and effectively converted fixed-rate cash flows of hedged advances to LIBOR indexed cash flows. Derivative strategies are used to manage the interest rate risk inherent in fixed-rate advances and are designed to protect future interest income.

The table below summarizes interest income earned from advances and the impact of interest rate derivatives (in thousands):

Table 31: Impact of Interest Rate Swaps on Interest Income Earned from Advances

	Years ended December 31,
	2009			2008			2007
Advance Interest Income
Advance interest income before adjustment for interest rate swaps	$	3,062,649		$	3,483,979		$	3,139,311
Net interest adjustment from interest rate swaps 1		(1,792,006	)		(453,180	)		356,001
Total Advance interest income reported	$	1,270,643		$	3,030,799		$	3,495,312

¹ Interest portion only

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In compliance with the terms of the swap agreement, the FHLBNY pays the swap counterparty fixed-rate cash flows, which typically mirrors the coupon on the advance. In return, the swap counterparty pays the FHLBNY a pre-determined spread plus the prevailing LIBOR, which by agreement resets generally every three months. In the table above, the unfavorable cash flow patterns of the interest rate swaps are indicative of the declining LIBOR rates (obligation of the swap counterparty) compared to fixed-rate obligation of the FHLBNY. The Bank is generally indifferent to changes in the cash flow patterns as it typically hedges its fixed-rate consolidated obligation debt, which is the Bank’s primary funding base, and achieves it overall net interest spread objective.

Under GAAP, net interest adjustments from derivatives as reported in the table above may be offset against the hedged financial instrument (e.g. advance) only if the derivative is in a hedge qualifying relationship. If the hedge does not qualify for hedge accounting, and the Bank designates the hedge as an economic hedge, the net interest adjustments from derivatives are not recorded with the advance revenues. Instead, the net interest adjustments from swaps are recorded in Other income (loss) as a Net realized and unrealized gains from derivatives and hedging activities. Thus, the accounting designation of a hedge may have a significant impact on reported Interest income from advances. There were no material amounts of net interest adjustments from interest rate swaps designated as economic hedges of advances that were reported in Other income in the current year or prior years related to swaps associated with advances.

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Interest Expense — 2009, 2008, and 2007

The FHLBNY’s primary source of funding is through the issuance of consolidated obligation bonds and discount notes in the global debt markets. Consolidated obligation bonds are medium- and long-term, while discount notes are short-term instruments. To fund its assets, the FHLBNY considers its interest rate risk and liquidity requirements in conjunction with consolidated obligation buyers’ preferences and capital market conditions when determining the characteristics of debt to be issued. Typically the Bank has used fixed-rate callable and non-callable bonds to fund mortgage-related assets and advances. Discount notes are issued to fund advances and investments with shorter-interest rate reset characteristics.

The principal categories of Interest Expense are summarized by year below. Changes in both rate and intermediation volume (average interest-costing liabilities), the mix of debt issuances between bonds and discount notes, and the impact of hedging strategies explain the changes in interest expense. (dollars in thousands):

Table 32: Interest Expenses — Principal Categories

	December 31,						Percentage			Percentage
	2009		2008		2007		Variance 2009			Variance 2008
Interest Expense
Consolidated obligations-bonds	$	953,970	$	2,620,431	$	3,215,560		(63.59	)%		(18.51	)%
Consolidated obligations-discount notes		193,041		697,729		937,534		(72.33	)		(25.58	)
Deposits		2,512		36,193		106,777		(93.06	)		(66.10	)
Mandatorily redeemable capital stock		7,507		8,984		11,731		(16.44	)		(23.42	)
Cash collateral held and other borrowings		49		1,044		4,516		(95.31	)		(76.88	)
Total interest expense	$	1,157,079	$	3,364,381	$	4,276,118		(65.61	)%		(21.32	)%

The principal components of interest expense paid by type of consolidated obligation bonds and discount notes are summarized below (dollars in thousands):

Table 33: Consolidated Obligations — Interest Expenses

	Years ended December 31,
				Percentage						Percentage					Percentage
	2009			of total			2008			of total			2007		of total
Fixed-rate Bonds	$	1,360,419			79.71	%	$	2,052,066			56.13	%	$	2,710,748		68.13	%
Floating-rate Bonds		153,198			8.98			906,452			24.79			330,710		8.31
Discount Notes		193,041			11.31			697,729			19.08			937,534		23.56
		1,706,658			100.00	%		3,656,247			100.00	%		3,978,992		100.00	%
Net Impact of interest rate swaps		(559,647	)					(338,087	)					174,102
Reported Interest Expense	$	1,147,011					$	3,318,160					$	4,153,094

Recorded interest expense in the Statements of Income is adjusted for the cash flows associated with interest rate swaps in which the Bank generally pays variable-rate LIBOR-indexed cash flows to derivative counterparties and, in exchange, the Bank receives fixed-rate cash flows, which typically mirror the fixed-rate coupon payments to investors holding the debt. The Bank generally hedges its long-term fixed-rate bonds and almost all fixed-rate callable bonds with hedges that generally qualify for hedge accounting. In the current and prior years, the Bank economically hedged certain floating-rate bonds that were not indexed to 3-month LIBOR, and certain short-term fixed-rate debt and discount notes because it believed that the hedges would not be highly effective in offsetting changes in the fair values of the debt and the swap, and would not therefore qualify for hedge accounting.

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Impact of hedging debt — The FHLBNY issues both fixed-rate callable and non-callable debt. Typically, the Bank issues callable debt with the simultaneous execution of cancellable interest rate swaps to modify the effective interest rate terms and the effective durations of its fixed-rate callable debt. A substantial percentage of non-callable fixed-rate debt is also swapped to “plain vanilla” LIBOR-indexed cash flows.

These hedging strategies benefit the Bank in two principal ways: (1) fixed-rate callable bond in conjunction with interest rate swap containing a call feature that mirrors the option embedded in the callable bond enables the FHLBNY to meet its funding needs at yields not otherwise directly attainable through the issuance of callable debt; and, (2) the issuance of fixed-rate debt and the simultaneous execution of an interest rate swap converts the debt to an adjustable-rate instrument tied to an index, typically 3-month LIBOR. Derivative strategies are used to manage the interest rate risk inherent in fixed-rate debt and certain floating-rate debt that are not indexed to 3-month LIBOR rates. The strategies are designed to protect future interest income. The economic hedge of debt tied to indices other than 3-month LIBOR (Prime, Federal funds, and 1-month LIBOR) is designed to effectively convert the cash flows of the debt to 3-month LIBOR.

The table below summarizes interest expense paid on consolidated obligation bonds and discount notes and the impact of interest rate swaps (in thousands):

Table 34: Impact of Interest Rate Swaps on Consolidated Obligation Interest Expense

	Years ended December 31,
	2009			2008			2007
Consolidated bonds and discount notes-Interest expense
Bonds-Interest expense before adjustment for swaps	$	1,513,617		$	2,958,518		$	3,041,458
Discount notes-Interest expense before adjustment for swaps		193,041			697,729			937,534
Net interest adjustment for interest rate swaps 1		(559,647	)		(338,087	)		174,102
Total Consolidated bonds and discount notes-interest expense reported	$	1,147,011		$	3,318,160		$	4,153,094

¹ Interest portion only

Net interest income — 2009, 2008, and 2007

Net interest income is the principal source of revenue for the Bank, and represents the difference between interest income from interest-earning assets and interest expense paid on interest-costing liabilities. Net interest income is impacted by a variety of factors: member demand for advances and investment activity, the yields from advances and investments, and the cost of consolidated obligation debt that is issued by the Bank to fund advances and investments. The execution of interest rate swaps in the derivative market at a constant spread to LIBOR, in effect converting fixed-rate advances and fixed-rate debt to conventional adjustable-rate instruments indexed to LIBOR, results in an important intermediation for the Bank between the capital markets and the swap market. The intermediation has typically permitted the Bank to raise funds at lower costs than would otherwise be available through the issuance of simple fixed- or floating-rate debt in the capital markets. The FHLBNY deploys hedging strategies to protect future net interest income, but may reduce income in the short-run, although the FHLBNY expects them to benefit future periods. Income earned from assets funded by member capital and retained earnings, referred to as “deployed capital”, which are non-interest bearing, is another important contributor for the FHLBNY. All of these factors may fluctuate based on changes in interest rates, demand by members for advances, investor demand for debt issued by the FHLBNY the change in the spread between the yields on advances and investments, and the cost of financing these assets by the issuance of debt to investors.

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The following table summarizes key changes in the components of Net interest income for the three years ended December 31, 2009, 2008 and 2007 (dollars in thousands):

Table 35: Components of Net interest income

	December 31,						Percentage			Percentage
	2009		2008		2007		Variance 2009			Variance 2008
Interest Income
Advances	$	1,270,643	$	3,030,799	$	3,495,312		(58.08	)%		(13.29	)%
Interest-bearing deposits		19,865		28,012		3,333		(29.08	)		740.44
Federal funds sold		3,238		77,976		192,845		(95.85	)		(59.57	)
Available-for-sale securities		28,842		80,746		—		(64.28	)		N/A
Held-to-maturity securities
Long-term securities		461,491		531,151		596,761		(13.11	)		(10.99	)
Certificates of deposit		1,626		232,300		408,308		(99.30	)		(43.11	)
Mortgage loans held-for-portfolio		71,980		77,862		78,937		(7.55	)		(1.36	)
Loans to other FHLBanks and other		2		33		9		(93.94	)		266.67
Total interest income		1,857,687		4,058,879		4,775,505		(54.23	)		(15.01	)
Interest Expense
Consolidated obligations-bonds		953,970		2,620,431		3,215,560		(63.59	)		(18.51	)
Consolidated obligations-discount notes		193,041		697,729		937,534		(72.33	)		(25.58	)
Deposits		2,512		36,193		106,777		(93.06	)		(66.10	)
Mandatorily redeemable capital stock		7,507		8,984		11,731		(16.44	)		(23.42	)
Cash collateral held and other borrowings		49		1,044		4,516		(95.31	)		(76.88	)
Total interest expense		1,157,079		3,364,381		4,276,118		(65.61	)		(21.32	)
Net interest income before provision for credit losses	$	700,608	$	694,498	$	499,387		0.88	%		39.07	%

Net interest income

2009 Net interest income before provision for credit losses on mortgage loans was $700.6 million, up slightly by $6.1 million, or 0.9% from the prior year. 2008 Net interest income was $694.5 million, up significantly from $499.4 million in 2007. Net interest income is directly impacted by transaction volumes, as measured by average balances of interest earning assets, and by the prevailing balance sheet yields, as measured by coupons on earning assets minus yields paid on interest costing liabilities net of the cash flows paid or received on interest rate derivatives that qualified under hedge accounting rules.

Net interest income in 2009 was virtually flat year-over-year primarily because the benefits from the 8 basis points improvement in Net interest spread and $6.1 billion increase in transaction volume were almost entirely offset by significantly lower earnings from deployed capital (shareholders’ equity and net non-interest costing liabilities) in a historically low interest rate environment for short-term investments.

Net interest income in 2008 grew year-over-year by 39.1% due to the extraordinary increase in advance volume up by 41.5%. Net interest income grew by $202.9 million year-over-year due to an increase in overall transaction volumes. Deployed capital grew as members purchased additional FHLBNY stock and the higher stock balances offset to a large degree the unfavorable impact from earnings from deployed capital in a lower interest rate environment in 2008, relative to 2007.

For more information, see Table 38: Spread and Yield Analysis and Table 39: Rate and Volume Analysis.

The Bank deploys hedging strategies to protect future net interest income that may reduce income in the short-term. On a GAAP basis, the impact of derivatives was to reduce 2009 Net interest income by $1.2 billion, compared to also an unfavorable but a significantly smaller impact of $115.1 million in 2008. In 2007, the impact of derivatives employed to hedge interest rate risk made a positive contribution of $181.9 million to Net interest income. For more information, see Table 36: Net Interest Adjustments from Hedge Qualifying Interest-Rate Swaps.

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In 2009 and 2008, certain hedging strategies were designated as economic hedges, primarily as hedges of FHLBNY debt. Under existing accounting rules, the interest income or expense generated from the derivatives designated as economic hedges are not reported as a component of Net interest income although they have an economic impact on Net interest income. Under GAAP, interest income or expense from such derivatives are recorded as derivative gains and losses in Other income (loss) as a Net realized and unrealized gain (loss) from derivatives and hedging activities. In 2009, on an economic basis, the economic impact of derivatives would have been to increase GAAP 2009 Net interest income by $8.0 million. In 2008, on an economic basis, the impact would have been to decrease GAAP 2008 Net interest expense by $127.1 million. In 2007, the impact was not material. The reporting classification of interest income or expense associated with swaps designated as economic hedges as either a component of Net interest income or Other income as gains or losses from hedging activities has no impact on Net income.

On a GAAP basis, 2009 Net interest income was $700.6 million, compared to $708.6 million on an economic basis. GAAP basis 2008 Net interest income was $694.5 million, compared to $567.4 million on an economic basis. In 2007, GAAP Net interest income of $499.4 million was not significantly different from economic Net interest income because of the insignificant amounts of economic hedges in 2007.

Earning assets — Transaction volume grew modestly in 2009. Average outstanding interest-earning assets increased by $6.1 billion, to $124.8 million in 2009. Member demand for advances as measured by average outstanding balances grew to $99.0 billion in 2009, up by $6.3 billion. In 2008, average earning assets grew to $118.7 billion, up by $29.5 billion, or 33.0% from 2007, driven by the surge in member demand for advances during the height of the dislocation in the credit markets.

Interest costing liabilities — In 2009 as in 2008, the Bank utilized a greater percentage of discount notes to fund its assets than in the preceding year. Discount notes, which are short-term, are typically lower costing liabilities. Average discount notes grew to $41.5 billion in 2009, an increase of 46.4%, compared to $28.3 billion in 2008. The comparable average was $19.0 billion in 2007. Weighted average yields paid on discount notes in 2009 was 47 basis points, significantly lower than 246 basis points paid in 2008, and 495 basis points paid in 2007. The positive spread between the yield on discount notes and the weighted average yield on total interest-earning assets was 102 basis points and 96 basis points in 2009 and 2008, compared to 40 basis points in 2007, illustrating the significant advantage in 2009 and 2008 of employing discount notes as a funding instrument.

Earnings from member capital — The FHLBNY earns income from investing its members’ capital to fund interest-earning assets. Member capital increased in 2009 and 2008 associated with the continued demand for advances borrowed by members. As a result, deployed capital, which is capital stock, retained earnings and net non-interest bearing liabilities grew and provided the FHLBNY with a significant source of income even as the potential for earning interest income declined with successive years of declining interest rates. Earnings from deployed capital are sensitive to changes in short-term interest rates. An average deployed capital of $9.1 billion in 2009 potentially could have earned 149 basis points, the aggregate yield on earning assets in the year. In 2008, average deployed capital was $6.7 billion but potentially could have earned 342 basis points. Deployed capital is typically utilized to fund short-term liquid investments, and the yields from such assets declined even more sharply in 2009, further exacerbating the decline in earning potential. In 2007, average deployed capital was $4.5 billion, significantly lower than the average in 2008, but earned a higher yield of 535 basis points. Based on an assumption that deployed capital was invested to earn 149 basis points, the annualized yield on aggregate earning assets in 2009, the Bank’s potential earnings from deployed capital was $136.3 million in 2009. The comparable potential earnings contributions from deployed capital in 2008 was $230.7 million and $241.9 million in 2007. Typically, the Bank earns relatively lower income in a lower interest rate environment on a given amount of average deployed capital.

129

Net interest spread — Net interest spread is the difference between annualized yields on interest-earning assets and yields on interest-bearing liabilities. The Bank deploys hedging strategies to protect future net interest income that may reduce income in the short-term. As discussed previously, on a GAAP basis, net interest income and expenses from hedge qualifying interest rate swaps are recorded as a component of Net interest spread. A significant amount of hedging strategies were designated in 2009 and 2008 as economic hedges, and under existing accounting rules, the interest income or expense associated with such derivatives is not reported as a component of Net interest spread although they have an economic impact on Net interest income. On a GAAP basis, 2009 Net interest spread earned was 49 basis points, up by 8 basis points from 41 basis points in 2008, and 30 basis points in 2007. The 2009 Net interest spread benefited from the shift in funding mix to more short-term debt and discount notes to fund the FHLBNY’s assets, which more than offset the decline in earnings from deployed capital. In 2008, decline in earnings from deployed capital had a lesser impact. The Bank also utilized a greater percentage of discount notes in 2008 than in 2007 and was a factor in the 11 basis points improvement in Net spread in 2008.

On an economic basis (Non-GAAP), the Bank estimates that had the Bank recorded swap interest, from swaps designated as economic hedges, as part of Net interest income, the 2009 Net interest spread would have improved by 1 basis point to 50 basis points, and reduced the 2008 Net interest spread by 11 basis points to 30 basis points. The impact would have been de minimis in 2007.

As measured on a GAAP basis, the 2009 return on average earning-assets (“ROA”) declined to 56 basis points compared to 59 basis points in 2008, and 56 basis points in 2007. ROA is a measure of the efficiency of the use of earning assets. On an economic basis (Non-GAAP), the 2009 ROA would have improved slightly to 57 basis points. The 2008 ROA would have declined to 48 basis points, and the 2007 ROA would have remained unchanged at 56 basis points. For more information, see Table 37.

The following table summarizes the impact of net interest adjustments from hedge qualifying interest-rate swaps (in thousands):

Table 36: Net Interest Adjustments from Hedge Qualifying Interest-Rate Swaps

	Years ended December 31,
	2009			2008			2007
Interest Income	$	3,649,693		$	4,512,059		$	4,419,504
Net interest adjustment from interest rate swaps		(1,792,006	)		(453,180	)		356,001
Reported interest income		1,857,687			4,058,879			4,775,505
Interest Expense		1,716,726			3,702,468			4,102,016
Net interest adjustment from interest rate swaps		(559,647	)		(338,087	)		174,102
Reported interest expense		1,157,079			3,364,381			4,276,118
Net interest income (Margin)	$	700,608		$	694,498		$	499,387
Net interest adjustment — interest rate swaps	$	(1,232,359	)	$	(115,093	)	$	181,899

The Bank deploys hedging strategies to protect future net interest income that may reduce income in the short-term. Net interest accruals of derivatives designated in a fair value or cash flow hedge qualifying under the derivatives and hedge accounting rules were recorded as adjustments to the interest income or interest expense of the hedged assets or liabilities, and had a significant impact on Net interest income. On a GAAP basis, the impact of derivatives was to reduce 2009 Net interest income by $1.2 billion, compared to also an unfavorable but a significantly smaller impact of $115.1 million in 2008. In 2007, the impact of derivatives employed to hedge interest rate risk made a positive contribution of $181.9 million to 2007 Net interest income.

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The following table contrasts Net interest income, Net income spread and Return on earning assets between GAAP and economic basis (dollar amounts in thousands):

Table 37: GAAP Versus Economic Basis — Contrasting Net Interest Income, Net Income Spread and Return on Earning Assets

	Years ended December 31,
	2009								2008									2007
	Amount		ROA			Net Spread			Amount			ROA			Net Spread			Amount		ROA			Net Spread
GAAP net interest income	$	700,608		0.56	%		0.49	%	$	694,498			0.59	%		0.41	%	$	499,387		0.56	%		0.30	%
Interest income (expense)
Swaps not designated in a hedging relationship		8,026		0.01			0.01			(127,056	)		(0.11	)		(0.11	)		1,887		—			—
Economic net interest income	$	708,634		0.57	%		0.50	%	$	567,442			0.48	%		0.30	%	$	501,274		0.56	%		0.30	%

Explanation of the use of certain non-GAAP measures of Interest Income and Expense, Net Interest income and margin. The FHLBNY has presented its results of operations in accordance with U.S. generally accepted accounting principles. The FHLBNY has also presented certain information regarding its Interest Income and Expense, Net Interest income and Net Interest spread that combines interest expense on debt with net interest paid on interest rate swaps associated with debt that were hedged on an economic basis. These are non-GAAP financial measures used by management that the FHLBNY believes are useful to investors and members of the FHLBNY in understanding the Bank’s operational performance as well as business and performance trends. Although the FHLBNY believes these non-GAAP financial measures enhance investor and members’ understanding of the Bank’s business and performance, these non-GAAP financial measures should not be considered an alternative to GAAP. When discussing non-GAAP measures, the Bank has provided GAAP measures in parallel.

In 2009 and 2008, significant amounts of swaps were designated as economic hedges of consolidated obligation debt in a hedging strategy that converted floating-rate debt indexed to 1-month LIBOR, the Prime rate, and the Federal Funds Effective rate to 3-month LIBOR cash flows. The Bank also economically hedged certain short-term fixed-rate debt and discount notes that it also believed would not be highly effective in offsetting changes in the fair values of the debt and the swap. In compliance with accounting standards for derivatives and hedging, interest income and expense from such derivatives were recorded as derivative gains and losses in Other income (loss) as a Net realized and unrealized gain (loss) from derivatives and hedging activities.

131

Spread and Yield Analysis

Average balance sheet information is presented below as it is more representative of activity throughout the periods presented. For most components of the average balances, a daily weighted average was calculated for the period. When daily weighted average balance information was not available, a simple monthly average balance was calculated. Average yields were derived by dividing income by the average balances of the related assets and average costs are derived by dividing expenses by the average balances of the related liabilities.

Table 38: Spread and Yield Analysis

	Years ended December 31,
	2009							2008							2007
			Interest							Interest							Interest
	Average		Income/					Average		Income/					Average		Income/
(dollars in thousands)	Balance		Expense		Rate 1			Balance		Expense		Rate 1			Balance		Expense		Rate 1
Earning Assets:
Advances	$	98,965,716	$	1,270,643		1.28	%	$	92,616,501	$	3,030,799		3.27	%	$	65,454,319	$	3,495,312		5.34	%
Certificates of deposit and other		3,263,671		6,096		0.19			7,802,425		251,600		3.22			7,689,475		411,641		5.35
Federal funds sold and other overnight funds		8,386,126		18,635		0.22			4,333,408		86,688		2.00			3,741,385		192,845		5.15
Investments		12,761,836		490,333		3.84			12,441,712		611,897		4.92			10,798,926		596,761		5.53
Mortgage and other loans		1,386,964		71,980		5.19			1,467,561		77,895		5.31			1,502,320		78,946		5.25
Total interest-earning assets	$	124,764,313	$	1,857,687		1.49	%	$	118,661,607	$	4,058,879		3.42	%	$	89,186,425	$	4,775,505		5.35	%
Funded By:
Consolidated obligations-bonds	$	71,860,494	$	953,970		1.33		$	81,341,452	$	2,620,431		3.22		$	63,276,726	$	3,215,560		5.08
Consolidated obligations-discount notes		41,495,955		193,041		0.47			28,349,373		697,729		2.46			18,956,390		937,534		4.95
Interest-bearing deposits and other borrowings		2,121,718		2,561		0.12			2,058,389		37,237		1.81			2,285,523		111,293		4.87
Mandatorily redeemable capital stock		137,126		7,507		5.47			166,372		8,984		5.40			146,286		11,731		8.02
Total interest-bearing liabilities		115,615,293		1,157,079		1.00	%		111,915,586		3,364,381		3.01	%		84,664,925		4,276,118		5.05	%
Capital and other non-interest-bearing funds		9,149,020		—					6,746,021		—					4,521,500		—
Total Funding	$	124,764,313	$	1,157,079				$	118,661,607	$	3,364,381				$	89,186,425	$	4,276,118
Net Interest Income/Spread			$	700,608		0.49	%			$	694,498		0.41	%			$	499,387		0.30	%
Net Interest Margin (Net interest income/Earning Assets)						0.56	%						0.59	%						0.56	%

¹ Reported yields with respect to advances and debt may not necessarily equal the coupons on the instruments as derivatives are extensively used to change the yield and optionality characteristics of the underlying hedged items. When fixed-rate debt is issued by the Bank and hedged with an interest rate derivative, it effectively converts the debt into a simple floating-rate bond. Similarly, the Bank makes fixed-rate advances to members and hedges the advance with a pay-fixed, receive-variable interest rate derivative that effectively converts the fixed-rate asset to one that floats with prevailing LIBOR rates. Average balance sheet information is presented as it is more representative of activity throughout the periods presented. For most components of the average balances, a daily weighted average balance is calculated for the period. When daily weighted average balance information is not available, a simple monthly average balance is calculated. Average yields are derived by dividing income by the average balances of the related assets and average costs are derived by dividing expenses by the average balances of the related liabilities. Yields and rates are annualized.

132

Rate and Volume Analysis

The Rate and Volume Analysis presents changes in interest income, interest expense, and net interest income that are due to changes in volumes and rates. The following tables present the extent to which changes in interest rates and changes in the volume of interest-earning assets and interest-bearing liabilities affected the FHLBNY’s interest income and interest expense (in thousands).

Table 39: Rate and Volume Analysis

2009 compared to 2008

	For the years ended
	December 31, 2009 vs. December 31, 2008
	Increase (decrease)
	Volume			Rate			Total
Interest Income
Advances	$	207,773		$	(1,967,929	)	$	(1,760,156	)
Certificates of deposit and other		(146,358	)		(99,146	)		(245,504	)
Federal funds sold and other overnight funds		81,073			(149,126	)		(68,053	)
Investments		15,744			(137,308	)		(121,564	)
Mortgage loans and other loans		(4,278	)		(1,637	)		(5,915	)
Total interest income		153,954			(2,355,146	)		(2,201,192	)
Interest Expense
Consolidated obligations-bonds		(305,431	)		(1,361,030	)		(1,666,461	)
Consolidated obligations-discount notes		323,561			(828,249	)		(504,688	)
Deposits and borrowings		1,146			(35,822	)		(34,676	)
Mandatorily redeemable capital stock		(1,579	)		102			(1,477	)
Total interest expense		17,697			(2,224,999	)		(2,207,302	)
Changes in Net Interest Income	$	136,257		$	(130,147	)	$	6,110

2008 compared to 2007

	For the years ended
	December 31, 2008 vs. December 31, 2007
	Increase (decrease)
	Volume			Rate			Total
Interest Income
Advances	$	1,450,481		$	(1,914,994	)	$	(464,513	)
Certificates of deposit and other		6,047			(166,088	)		(160,041	)
Federal funds sold and other overnight funds		30,516			(136,673	)		(106,157	)
Investments		90,782			(75,646	)		15,136
Mortgage loans and other loans		(1,827	)		776			(1,051	)
Total interest income		1,575,999			(2,292,625	)		(716,626	)
Interest Expense
Consolidated obligations-bonds		918,002			(1,513,131	)		(595,129	)
Consolidated obligations-discount notes		464,553			(704,358	)		(239,805	)
Deposits and borrowings		(11,060	)		(62,996	)		(74,056	)
Mandatorily redeemable capital stock		1,611			(4,358	)		(2,747	)
Total interest expense		1,373,106			(2,284,843	)		(911,737	)
Changes in Net Interest Income	$	202,893		$	(7,782	)	$	195,111

133

Allowance for Credit Losses

Allowance for credit losses were $4.5 million, $1.4 million and $0.6 million at December 31, 2009, 2008 and 2007 and were recorded as a reduction in the carrying value of Mortgage-loans held-for-maturity in the Statements of Condition. The FHLBNY believes the allowance for loan losses is adequate to reflect the losses inherent in the FHLBNY’s mortgage loan portfolio at December 31, 2009, 2008 and 2007. The Bank did not deem it necessary to provide a loan loss allowance for its advances to members.

Mortgage loans — The Bank recorded a provision of $3.1 million, $773.0 thousand, and $40.0 thousand in 2009, 2008, and 2007 in the Statements of Income, against its mortgage loans held-for-portfolio based on identification of inherent losses under a policy described more fully in the Note — 1 Significant Accounting Policies and Estimates to the audited financial statements accompanying this report. Charge offs were insignificant in all periods, and were substantially recovered through the credit enhancement provisions of MPF loans.

Advances — The FHLBNY’s credit risk from advances at December 31, 2009 and 2008 were concentrated in commercial banks, savings institutions and insurance companies. All advances were fully collateralized during their entire term. In addition, borrowing members pledged their stock in the FHLBNY as additional collateral for advances. The FHLBNY has not experienced any losses on credit extended to any member since its inception. Based on the collateral held as security and prior repayment history, no allowance for losses is currently deemed necessary.

Non-Interest Income (Loss)

The principal components of non-interest income are described below:

Service fees — Service fees are derived primarily from providing correspondent banking services to members and fees earned on standby letters of credit. Service fees have declined over the years due to declining demand for such services. The Bank does not consider income from such services as a significant element of its operations.

Net realized and unrealized gain (loss) on derivatives and hedging activities — The Bank may designate a derivative as either a hedge of: the fair value of a recognized fixed-rate asset or liability or an unrecognized firm commitment (fair value hedge); a forecasted transaction; or the variability of future cash flows of a floating-rate asset or liability (cash flow hedge). The Bank may also designate a derivative as an economic hedge, which does not qualify for hedge accounting under the accounting standards for derivatives and hedging.

Changes in the fair value of a derivative that qualifies as a fair value hedge under the accounting standards for derivatives and hedging and the offsetting gain or loss on the hedged asset or liability that is attributable to the hedged risk are recorded in Other income (loss) as a Net realized and unrealized gain (loss) on derivatives and hedging activities. To the extent that changes in the fair value of the derivative is not entirely offset by changes in the fair value of the hedged asset or liability, the net impact from hedging activities is recorded as hedge ineffectiveness.

Net interest accruals of derivatives designated in qualifying fair value or cash flow hedges under the accounting standards for derivatives and hedging are recorded as adjustments to the interest income or interest expense of the hedged assets or liabilities. Net interest accruals of derivatives that do not qualify for hedge accounting under the accounting standards for derivatives and hedging and interest received from in-the-money options are recorded in Other income (loss) as a Net realized and unrealized gain (loss) on derivatives and hedging activities.

134

The effective portion of changes in the fair value of a derivative that is designated and qualifies as a “cash flow” hedge under the accounting standards for derivatives and hedging are recorded in AOCI.

For all qualifying hedge relationships under the accounting standards for derivatives and hedging, hedge ineffectiveness resulting from differences between changes in fair values or cash flows of the hedged item and changes in fair value of the derivatives are recognized in Other income (loss) as a Net realized and unrealized gain (loss) on derivatives and hedging activities.

Net realized and unrealized gains and losses from qualifying hedging activities under the accounting standards for derivatives and hedging are typically impacted by changes in the benchmark interest rate (designated as LIBOR by the FHLBNY) and the degree of ineffectiveness of hedging relationships between the change in the fair value of derivatives and the change in the fair value of the hedged assets and liabilities attributable to changes in benchmark interest rate. Typically, such gains and losses represent hedge ineffectiveness between changes in the fair value of the hedged item and changes in the fair value of the derivative.

Redemption of financial instruments and extinguishment of debt — The Bank retires debt principally to reduce future debt costs when the associated asset is either prepaid or terminated early, and less frequently from prepayments of mortgage-backed securities. The Bank typically receives prepayment fees to make the FHLBNY economically indifferent to the prepayment. When assets are prepaid ahead of their expected or contractual maturities, the Bank also attempts to extinguish debt (consolidated obligation bonds) in order to realign asset and liability cash flow patterns. Bond retirement typically requires a payment of a premium resulting in a loss.

In 2009 the Bank sold certain AFS securities at a gain of $0.4 million. Additionally, in 2009 the Bank was asked to redeem a housing finance agency bond classified as held-to-maturity at a premium that resulted in a gain of $0.3 million. In 2008 the Bank was asked by the issuer to redeem two housing finance agency bonds classified as held-to-maturity at a premium that resulted in a gain of $1.1 million. The sales of securities classified as held-to-maturity were considered “in-substance maturities” in accordance with the provisions for the accounting of investments in debt and equity securities.

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The following table sets forth the main components of Other income (loss) (in thousands):

Table 40: Other Income

	Years ended December 31,
	2009			2008			2007
Other income (loss):
Service fees	$	4,165		$	3,357		$	3,324
Instruments held at fair value — Unrealized gain (loss)		15,523			(8,325	)		—
Total OTTI losses		(140,912	)		—			—
Portion of loss recognized in other comprehensive income		120,096			—			—
Net impairment losses recognized in earnings		(20,816	)		—			—
Net realized and unrealized gain (loss) on derivatives and hedging activities		164,700			(199,259	)		18,356
Net realized gain from sale of available-for-sale and redemption of held-to-maturity securities		721			1,058			—
Provision for derivative counterparty credit losses		—			(64,523	)		—
Other		77			233			(8,180	)
Total other income (loss)	$	164,370		$	(267,459	)	$	13,500

Earnings impact of Instruments held at fair value

Under the accounting standards for the fair value option (“FVO”) for financial assets and liabilities, the FHLBNY elected to carry certain consolidated obligation bonds at fair value in Other income (loss). The Bank records the unrealized gains and losses on these liabilities held at fair value. In general, transactions elected for the fair value option are in economic hedge relationships. The notional amounts of interest rate swaps executed and outstanding at December 31, 2009 and 2008 were $6.0 billion and $983.0 million and were executed to offset the fair value volatility of consolidated obligation bonds elected under the FVO. The principal balances of consolidated obligation bonds designated under the FVO were $6.0 billion and $983.0 million at December 31, 2009 and 2008 and were carried at fair value.

The fair value adjustments on consolidated obligation bonds carried at fair value in 2009 resulted in a net unrealized gain of $15.5 million and was reported in Other income (loss). In 2008, an unrealized loss of $8.3 million was recorded. No instruments were designated under the FVO prior to 2008. Fair value gains in 2009 were in part the result of the reversal of unrealized loss positions at the beginning of the year from maturing bonds (When bonds recorded at fair value are held to maturity, their cumulative fair value changes sum to zero at maturity), and in part due to unrealized fair value gains from $6.0 billion of bonds issued and designated under the FVO in 2009. Bonds are exhibiting unrealized fair value gains in a steepening interest rate environment at December 31, 2009. On an economic basis, these gains were partially offset by losses on derivatives that economically hedged the bonds. For more information, see Note 18 — Fair Values of Financial Instruments to the audited financial statements accompanying this report.

136

Net impairment losses recognized in earnings on held-to-maturity securities — Other-than-temporary impairment

In each interim quarterly period in 2009, management evaluated its portfolio of private-label mortgage-backed securities for credit impairment. As a result of the evaluations, the FHLBNY recognized credit impairment OTTI related losses in each quarter of 2009. Cumulatively, 17 private-label held-to-maturity securities were deemed to be OTTI in 2009. No credit impairment was observed in 2008 or 2007. Cumulative credit impairment losses of $20.8 million were recorded as charges to 2009 income. These charges included credit losses of certain MBS that were determined to be OTTI in a previous quarter of 2009.

The non-credit component of OTTI associated with the impairment recognized in 2009 was a cumulative loss of $110.6 million as of December 31, 2009, and was recorded as a deferred loss in AOCI. Of the 17 securities deemed OTTI in 2009, 14 securities are insured by bond insurers, Ambac and MBIA. The Bank’s analysis of the two bond insurers concluded that future credit losses due to projected collateral shortfalls of the impaired securities would not be fully supported by the two bond insurers. For more information see Notes 1 and 4 to the audited financial statements accompanying this report.

Based on detailed cash flow credit analysis on a security level at December 31, 2009, the Bank has concluded that other than the 17 securities determined to be credit impaired during 2009, gross unrealized losses for the remainder of Bank’s investment securities were primarily caused by interest rate changes, credit spread widening and reduced liquidity and the securities were temporarily impaired as defined under the new guidance for recognition and presentation of other-than-temporary impairment.

137

Earnings impact of derivatives and hedging activities — 2009, 2008, and 2007.

The following tables summarize the impact of hedging activities on earnings for each of the three years ended December 31, 2009, 2008, and 2007 (in thousands):

Table 41: Earnings Impact of Derivatives and Hedging Activities — By Financial Instrument Type

	December 31, 2009
							Consolidated			Consolidated
				MPF			Obligation			Obligation		Balance		Intermediary
Earnings Impact	Advances			Loans			Bonds			Discount Notes		Sheet		Positions			Total
Amortization/accretion of hedging activities reported in net interest income	$	(1,226	)	$	36		$	(1,980	)	$	361	$	—	$	—		$	(2,809	)
Net realized and unrealized gains (losses) on derivatives and hedging activities		(4,542	)		—			25,648			—		—		—			21,106
Net gains (losses) derivatives-FVO		—			—			(1,168	)		—		—		—			(1,168	)
Gains (losses)-economic hedges		(6,409	)		(20	)		52,311			33,606		65,321		(47	)		144,762
Reported in other income		(10,951	)		(20	)		76,791			33,606		65,321		(47	)		164,700
Total	$	(12,177	)	$	16		$	74,811		$	33,967	$	65,321	$	(47	)	$	161,891

	December 31, 2008
							Consolidated			Consolidated
				MPF			Obligation			Obligation			Balance			Intermediary
Earnings Impact	Advances			Loans			Bonds			Discount Notes			Sheet			Positions		Total
Amortization/accretion of hedging activities reported in net interest income	$	(2,472	)	$	81		$	(459	)	$	—		$	—		$	—	$	(2,850	)
Net realized and unrealized gains (losses) on derivatives and hedging activities		31,838			—			(43,539	)		(333	)		—			—		(12,034	)
Net gains (losses) derivatives-FVO		—			—			7,193			—			—			—		7,193
Gains (losses)-economic hedges		(22,656	)		(3	)		(159,686	)		8,142			(20,695	)		480		(194,418	)
Reported in other income		9,182			(3	)		(196,032	)		7,809			(20,695	)		480		(199,259	)
Total	$	6,710		$	78		$	(196,491	)	$	7,809		$	(20,695	)	$	480	$	(202,109	)

	December 31, 2007
							Consolidated			Consolidated
				MPF			Obligation			Obligation		Balance		Intermediary
Earnings Impact	Advances			Loans			Bonds			Discount Notes		Sheet		Positions		Total
Amortization/accretion of hedging activities reported in net interest income	$	(1,322	)	$	(159	)	$	854		$	—	$	—	$	—	$	(627	)
Net realized and unrealized gains (losses) on derivatives and hedging activities		7,968			—			(2,049	)		—		—		—		5,919
Gains (losses)-economic hedges		1,021			(171	)		11,517			43		—		27		12,437
Reported in other income		8,989			(171	)		9,468			43		—		27		18,356
Total	$	7,667		$	(330	)	$	10,322		$	43	$	—	$	27	$	17,729

Note: The FHLBNY did not designate any hedged item under the FVO in 2007.

138

Net realized and unrealized gain (loss) from derivatives and hedging activities — The FHLBNY reported the following net gains (losses) from derivatives and hedging activities (in thousands):

Table 42: Earnings Impact of Derivatives — By Hedge Type

	Years ended December 31,
	2009			2008			20072
Earnings impact of derivatives and hedging activities gain (loss):
Derivatives designated as hedging instruments 3
Cash flow hedges-ineffectiveness	$	—		$	(9	)	$	9
Fair value hedges-ineffectiveness		21,105			(12,025	)		5,910
Derivatives not designated as hedging instruments
Economic hedges-fair value changes-options		61,977			(40,773	)		(2,611	)
Net interest income-options		(5,798	)		101			3,630
Economic hedges-fair value changes-MPF delivery commitments		(20	)		(3	)		(171	)
Fair value changes-economic hedges 1		86,786			(45,239	)		9,695
Net interest expense-economic hedges 1		(1,051	)		(126,533	)		1,894
Balance sheet — Macro hedges swaps		2,869			18,029			—
Derivatives matched to bonds designated under FVO
Fair value changes-interest rate swaps/bonds		(1,168	)		7,193			—
Net impact on derivatives and hedging activities	$	164,700		$	(199,259	)	$	18,356

1	Includes de minimis amount of net gains on member intermediated swaps.
2	Presentation for prior periods have been conformed to match current period presentation and had no impact on the net gains (losses) on derivatives and hedging activities.
3	Net interest settlements from interest rate swaps hedging advances and consolidated obligations in a designated accounting relationship are recorded in interest income and interest expense. See Tables 31 and 32 for details.

Key components of hedging gains and losses recorded in the Statements of Income as a Net realized and unrealized gain (loss) from hedging activities were primarily due to:

• Hedge ineffectiveness from fair value hedges of advances and consolidated obligation liabilities that qualified for hedge accounting treatment. Hedge ineffectiveness is typically the difference between changes in fair values of hedged consolidated obligation bonds and advances due to changes in the benchmark rate (adopted as the 3-month LIBOR rate) and changes in the fair value of the associated derivatives.

• Fair value changes of interest rate swaps designated in economic hedges of consolidated obligation bonds, without the offsetting benefit of fair value changes of the hedged bonds.

• Fair value changes of interest rate caps designated in economic hedges of GSE issued capped floating-rate MBS. In a rising rate environment, purchased caps are exhibiting favorable fair value gains. Such gains are unrealized and will also reverse if the caps are held to their contractual maturities.

• Income or expense, primarily interest accruals, associated with the interest rate swaps designated as economic hedges.

Qualifying hedges under the accounting standards for derivatives and hedging - Hedge ineffectiveness occurs when changes in the fair value of the derivative and the associated hedged financial instrument, generally debt or an advance, do not perfectly offset each other. Hedge ineffectiveness is associated with changes in the benchmark interest rate and volatility, and the extent of the mismatch of the structures of the derivative and the hedged financial instrument.

139

In 2009, hedge ineffectiveness was a net fair value gain of $21.1 million. Fair value hedges of fixed-rate consolidated obligation bonds resulted in fair value gains of $25.6 million in 2009, and were partly offset by fair value losses of $4.5 million from hedges of fixed-rate advances. Hedging gains in 2009 in part were due to the reversal of 2008 fair value losses of debt hedges that matured in 2009 or were effectively matured when call options were exercised, and in part as a result of market volatility of interest rates causing fair values of hedged bonds to diverge from the swap fair values.

In 2008, fair value hedges of fixed-rate debt resulted in fair value losses of $43.8 million which were partly offset by fair value gains of $31.8 million from hedges of fixed-rate advances, for a net fair value loss of $12.0 million, and was mostly caused by the asymmetrical impact of interest rate volatility on hedged debt and swaps. In 2007, a net fair value gain of $5.9 million was recorded.

Economic hedges — An economic hedge represents derivative transactions that are an approved risk management hedge but may not qualify for hedge accounting treatment under the accounting standards for derivatives and hedging. When derivatives are designated as economic hedges, the fair value changes due to changes in the interest rate and volatility of rates are recorded through earnings without the offsetting change in the fair values of the hedged advances and debt as would be afforded under the derivatives and hedge accounting rules. In general, the FHLBNY’s derivatives are held to maturity or to their call or put dates. At inception, the fair value is “at market” and is generally zero. Until the derivative matures or is called or put on pre-determined dates, fair values will fluctuate with changes in the interest rate environment and volatility observed in the swap market. At maturity or scheduled call or put dates, the fair value will generally reverse to zero as the Bank’s derivatives settle at par. Therefore, nearly all of the cumulative net gains and losses that are unrealized at a point in time will reverse over the remaining contractual terms so that the cumulative gains or losses will sum to zero over the contractual maturity, scheduled call, or put dates.

However, interest income and expense have economic consequences since they result in exchanges of cash payments or receipts. If a derivative is prepaid prior to maturity or at predetermined call and put dates, they are settled at the then existing fair values in cash. Under hedge accounting rules, net swap interest expense and income associated with swaps in economic hedges of assets and liabilities are recorded as hedging losses and gains. On the other hand, when swaps qualify for hedge accounting treatment, interest income and interest expense from interest rate swaps are reported as a component of Net interest income together with interest on the instrument being hedged.

Economic hedges

Interest rate swaps — Fair value changes - In 2009, the primary economic hedges were:

• Interest rate “Basis swaps” that synthetically converted floating-rate funding based on Prime rate, Federal funds rate, and the 1-month LIBOR rate to 3-month LIBOR rate.

• Interest rate swaps hedging balance sheet risk.

• Interest rate swaps hedging discount notes and short-term fixed-rate consolidated obligation bonds.

• Interest rate swaps that had been de-designated as economic hedges of advances and bonds because the hedges had became ineffective.

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Changes in the fair values of interest rate swaps in economic hedges, often referred to as “one-sided marks”, resulted in net favorable fair value gains of $86.8 million in 2009, and a loss of $45.2 million in 2008. A gain of $9.7 million was recorded in 2007.

• In 2009, net fair value gains of $86.8 million were principally due to the reversal of almost all fair value losses recorded in the Statements of Condition at December 31, 2008 on $25.0 billion of basis swaps designated as economic hedges of consolidated obligation bonds. In 2009, $23.0 billion of basis swaps matured and almost all previously recorded fair value losses reversed. The fair value basis of the remaining $2.0 billion of such swaps was not significant as the bonds were nearing maturity. Additional fair value gains were recorded in 2009 on $19.1 billion of new swaps executed in 2009 ($13.1 billion fixed-for-floating rate swaps, and $6.0 billion of basis swaps) and designated as economic hedges of short-term non-callable bonds. In an upward sloping yield curve environment, the pay fixed-rate, receive LIBOR-indexed swaps were in an unrealized fair value gain positions at December 31, 2009. The swaps will mature in 2010 and unrealized gains will reverse.

• In 2008, net fair value losses of $45.2 million were principally due to:

• In 2008, $25.0 billion in notional amounts of basis swaps were executed to hedge floating-rate bonds indexed with spreads to 1-month LIBOR, Prime and the Federal funds effective rates. The basis swaps were designated as economic hedges. Simultaneous with the issuance of the debt, the Bank executed interest-rate basis swaps that required the swap counterparties to pay to the FHLBNY interest cash flows that matched the Bank’s interest payment obligations to investors on the debt — spreads to Prime, Federal funds effective rate and 1-month LIBOR. In exchange, the Bank was required to pay the swap counterparty a spread to the 3-month LIBOR index. This exchange of cash flows made the Bank indifferent to changes in the relationship between the 3-month LIBOR and the non-LIBOR indices from an economic perspective. Fair value changes of the swaps in relationship to 3-month LIBOR were “marked-to-market” without the benefit of offsetting changes in the fair values of the floating debt. In 2008, the historical relationships between 3-month LIBOR and the 1-month LIBOR rate, the Prime rate and the Federal funds effective rates were extraordinarily volatile. At December 31, 2008, the historical spreads narrowed from its historical levels causing the forward basis spreads to narrow as well and was the primary factor that explains the fair value losses in 2008.

• In 2008, certain swaps had to be de-designated in the third quarter of 2008 and subsequently re-designated. In the interim, the derivatives were designated as standalone and $20.8 million in fair value losses were recorded in the third and fourth quarters of 2008 due to extraordinary market volatility in that period.

• In 2007, certain short lock-out callable swaps had been designated as economic hedges of similar debt structures, and resulted in net fair value gains of $9.7 million.

Cash flows — from swaps are recorded as interest income or interest expense as a Net realized and unrealized gain (loss) on derivatives and hedging activities if the swap is designated as an economic hedge. If the swap qualifies for hedge accounting treatment, cash flows are recorded as a component of Net interest income. The classification of swap accruals, either as a component of Net interest income or derivatives and hedging activities, has no impact on Net income.

• In 2009, net interest expenses of $1.1 million were recorded as a component of derivatives and hedging activities. They represented the net cash flows from swaps that were designated as economic hedges of consolidated obligation bonds, discount notes, and a handful of advances.

141

• In 2008, net cash flow expense was very significant. Interest expenses of $126.5 million from swaps, primarily basis swaps, were recorded as a component of derivatives and hedging activities. Under the contractual terms of the basis swaps, the FHLBNY was receiving cash flows indexed to an agreed upon spread to the daily Federal funds effectives, the 1-month LIBOR rate, and Prime, and in return paying cash flows indexed to an agreed upon spread to the 3-month LIBOR rate. The daily Federal funds rates and the 1-month LIBOR rates were considerably lower in 2008 than the 3-month LIBOR rates, and resulted in net cash outflows. The formula for computing the cash flows of swaps indexed to the Prime rate also resulted in net cash outflows. These factors explain the significant expenses recorded in 2008.

• In 2007, the swap cash flows from swaps designated in economic hedges were favorable and net gains of $1.9 million were recorded.

Interest rate caps — Fair value changes of purchased caps contributed net unrealized gains of $63.3 million in 2009. In the rising interest rate environment at December 31, 2009, relative to December 31, 2008, the fair values of interest rate caps exhibited favorable fair value gains, which will reverse over the contractual life of the caps if held to maturity. In the second quarter of 2008, the Bank had purchased $1.9 billion of interest-rate caps with final maturities in 2018 and strikes ranging from 6.20% to 6.75% indexed mainly to 1-month LIBOR. The caps were purchased at a cost $46.9 million. In 2008, the aggregate fair values of purchased caps declined in a lower interest rate environment resulting in a net charge of $38.7 million in 2008.

Derivative gains and losses reclassified from Accumulated other comprehensive income (loss) to current period income — The following table summarizes changes in derivative gains and (losses) and reclassifications into earnings from AOCI in the Statements of Condition (in thousands):

Table 43: Accumulated Other Comprehensive Income (Loss) to Current Period Income from Cash Flow Hedges

	Years ended December 31,
Accumulated other comprehensive income/(loss) from cash flow hedges	2009			2008			2007
Beginning of period	$	(30,191	)	$	(30,215	)	$	(4,763	)
Net hedging transactions		—			(6,100	)		(26,114	)
Reclassified into earnings		7,508			6,124			662
End of period	$	(22,683	)	$	(30,191	)	$	(30,215	)

Cash Flow Hedges

In 2009, $7.5 million was reclassified from AOCI as an interest expense at the same time as the recognition of interest expense of the debt that had been hedged by the cash flow hedges in prior years.

There were no material amounts for the current or prior year that were reclassified from AOCI into earnings as a result of the discontinuance of cash flow hedges because it became probable that the original forecasted transactions would not occur by the end of the originally specified time period or within a two-month period thereafter. Ineffectiveness from hedges designated as cash flow hedges was not material in any periods reported in this Form 10-K. Over the next twelve months, it is expected that $6.9 million of net losses recorded in AOCI will be recognized as an interest expense.

142

Non-Interest Expense

Operating expenses included the administrative and overhead costs of operating the Bank and the operating costs of providing advances and managing collateral associated with the advances, managing the investment portfolios, and providing correspondent banking services to members.

The FHLBanks, including the FHLBNY, fund the cost of the Office of Finance, a joint office of the FHLBanks that facilitates issuing and servicing the consolidated obligations of the FHLBanks, preparation of the combined quarterly and annual financial reports, and certain other functions. The FHLBanks are also assessed the operating expenses of the Finance Agency, the regulator of the FHLBanks.

The following table sets forth the main components of Other expenses (in thousands):

Table 44: Other Expenses

	Years ended December 31,
	2009		2008		2007
Other expenses:
Operating	$	76,065	$	66,263	$	66,569
Finance Agency and Office of Finance		8,110		6,395		5,193
Total other expenses	$	84,175	$	72,658	$	71,762

Operating expenses rose 14.8% in 2009 to $76.1 million, and primarily represented the cost of adding staff, increased cost of employee benefits, and general inflationary increase in salary expenses. Consulting costs were also significant and they ranged from strategic to information systems planning and implementation. Consulting cost with respect to the implementation of OTTI caused increases in audit and audit related expenses. The cost of compliance remains a very significant overhead expense for the Bank. Between 2008 and 2007, operating expenses were virtually unchanged.

Operating Expenses

The following table sets forth the major categories of operating expenses (dollars in thousands):

Table 45: Operating Expenses

	Years ended December 31,
			Percentage					Percentage					Percentage
	2009		of total			2008		of total			2007		of total
Salaries and employee benefits	$	49,778		65.44	%	$	44,370		66.96	%	$	44,740		67.21	%
Temporary workers		162		0.21			282		0.43			125		0.19
Occupancy		4,347		5.71			4,079		6.16			3,957		5.94
Depreciation and leasehold amortization		5,405		7.11			4,971		7.50			4,498		6.76
Computer service agreements and contractual services		6,798		8.94			5,053		7.62			5,202		7.81
Professional and legal fees		3,274		4.30			2,469		3.73			2,538		3.81
Other *		6,301		8.29			5,039		7.60			5,509		8.28
Total operating expenses	$	76,065		100.00	%	$	66,263		100.00	%	$	66,569		100.00	%

* Other primarily represents- audit fees, director fees and expenses, insurance and telecommunications.

As of December 31, 2009, the FHLBNY had 259 full-time and 5 part-time employees. At December 31, 2008, the FHLBNY had 247 full-time and 4 part-time employees. At December 31, 2007, there were 238 full-time and 8 part-time employees.

143

Assessments

Each FHLBank is required to set aside a portion of earnings to fund its Affordable Housing Program (“AHP”) and to satisfy its Resolution Funding Corporation assessment (“REFCORP”). For more information, see “Affordable Housing Program and Other Mission Related Programs” and “Assessments” under Item 1 Business in this MD&A.

REFCORP assessment payments totaled $142.7 million in 2009, up from $64.8 million in 2008 and $80.8 million in 2007. Affordable Housing Program (“AHP”) assessments set aside from income totaled $64.3 million in 2009, up from $29.8 million in 2008 and $37.2 million in 2007. Assessments are calculated on Net income before assessments and the increases were due to significant increase in 2009 Net income compared to 2008 and 2007. For more information about REFCORP and AHP assessments see the section Assessments in this Form 10-K.

Affordable Housing Program obligations — The Bank fulfils its AHP obligations primarily through direct grants to members who use the funds to assist in the purchase, construction, or rehabilitation of housing for very low-, low-, and moderate-income households. Annually, the FHLBNY sets aside 10% from its pre-assessment regulatory defined net income for the Affordable Housing Program. Regulatory defined net income is GAAP net income before interest expense on mandatorily redeemable capital stock and the assessment for AHP, but after the assessment for REFCORP. The amounts set aside are considered as the Bank’s liability towards its Affordable Housing Program obligations. AHP grants and subsidies are provided to members out of this liability.

The following table provides roll-forward information with respect to changes in Affordable Housing Program liabilities (in thousands):

Table 46: Affordable Housing Program Liabilities

	Years ended December 31,
	2009			2008			2007
Beginning balance	$	122,449		$	119,052		$	101,898
Additions from current period’s assessments		64,251			29,783			37,204
Net disbursements for grants and programs		(42,211	)		(26,386	)		(20,050	)
Ending balance	$	144,489		$	122,449		$	119,052

REFCORP — The following table provides roll-forward information with respect to changes in REFCORP liabilities (in thousands):

Table 47: REFCORP

	Years ended December 31,
	2009			2008			2007
Beginning balance	$	4,780		$	23,998		$	17,475
Additions from current period’s assessments		142,689			64,765			80,776
Net disbursements to REFCORP		(123,235	)		(83,983	)		(74,253	)
Ending balance	$	24,234		$	4,780		$	23,998

144

Asset Quality and Concentration — Advances, Investment securities, Mortgage loans, and Counterparty risks

The FHLBNY incurs credit risk — the risk of loss due to default — in its lending, investing, and hedging activities. It has instituted processes to help manage and mitigate this risk. Despite such processes, some amount of credit risk will always exist. External events, such as severe economic downturns, declining real estate values (both residential and non-residential), changes in monetary policy, adverse events in the capital markets, and other developments, could lead to member or counterparty default or impact the creditworthiness of investments. Such events would have a negative impact upon the FHLBNY’s income and financial performance.

The Bank faced an event of default in 2008 with the bankruptcy of one of its derivative counterparties. On September 15, 2008, Lehman Brothers Holdings, Inc. (“LBHI”), the parent company of Lehman Brothers Special Financing Inc. (“LBSF”) and a guarantor of LBSF’s obligations, filed for protection under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court in the Southern District of New York. LBSF was a counterparty to FHLBNY on multiple derivative transactions with a total notional amount of $16.5 billion at the time of termination of the Bank’s derivative transactions with LBSF. The LBSF default was unforeseen and despite the Bank’s risk management practices and policies — selection of counterparties with strong reputation, collateral requirements and credit monitoring, and other processes, the default caused the Bank to reserve approximately $65 million as a charge to income in the third quarter of 2008 as the bankruptcy of LBHI and LBSF made the timing and the amount of the recovery uncertain.

The following table sets forth five year history of the FHLBNY’s advances and mortgage loan portfolios as of December 31, (in thousands):

Table 48: Advances and Mortgage Loan Portfolios

	2009		2008		2007		2006		2005
Advances	$	94,348,751	$	109,152,876	$	82,089,667	$	59,012,394	$	61,901,534
Mortgage loans before allowance for credit losses	$	1,322,045	$	1,459,291	$	1,492,261	$	1,484,012	$	1,467,525

Advances

The FHLBNY closely monitors the creditworthiness of the institutions to which it lends. The FHLBNY also closely monitors the quality and value of the assets that are pledged as collateral by its members. The FHLBNY periodically assesses the mortgage underwriting and documentation standards of its borrowing members. In addition, the FHLBNY has collateral policies and restricted lending procedures in place to manage its exposure to those members experiencing difficulty in meeting their capital requirements or other standards of creditworthiness.

The FHLBNY has not experienced any losses on advances extended to any member since its inception. The FHLBank Act affords any security interest granted to the FHLBNY by a member, or any affiliate of such member, priority over the claims and rights of any party (including any receiver, conservator, trustee, or similar party) having the rights of a lien creditor. However, the FHLBNY’s security interest is not entitled to priority over claims and rights that (1) would be entitled to priority under applicable law, or (2) are held by a bona fide purchaser for value or by parties that are secured by actual perfected security interests.

145

The FHLBNY’s members are required to pledge collateral to secure advances. Eligible collateral includes: (1) one-to-four-family and multi-family mortgages; (2) U.S. Treasury and government-agency securities; (3) mortgage-backed securities; and (4) certain other collateral which is real estate-related and has a readily ascertainable value, and in which the FHLBNY can perfect a security interest. The FHLBNY has the right to take such steps, as it deems necessary, to protect its secured position on outstanding advances, including requiring additional collateral (whether or not such additional collateral would otherwise be eligible to secure a loan). The FHLBNY also has a statutory lien under the FHLBank Act on the capital stock of its members, which serves as further collateral for members’ indebtedness to the FHLBNY.

The FHLBNY has established asset classification and reserve policies. All adversely classified assets of the FHLBNY will have a reserve established for probable losses. Based upon the collateral held as security and prior repayment histories, no allowance for losses on advances is currently deemed necessary by management.

The FHLBNY uses methodologies to identify and measure credit risk arising from: creditworthiness risk arising from members, counterparties, and other entities; collateral risk arising from type, quality, and lien status; and concentration risk arising from borrower, portfolio, geographic area, industry, or product type.

Creditworthiness Risk — Advances

The FHLBNY’s potential exposure to creditworthiness risk arises from the deterioration of the financial health of FHLBNY members. The FHLBNY manages its exposure to the creditworthiness of members by monitoring their collateral and advance levels daily and by analyzing their financial health each quarter.

Collateral Risk — Advances

The FHLBNY is exposed to collateral risk if it is unable to perfect its interest in pledged collateral, or when the liquidation value of pledged collateral does not fully cover the FHLBNY’s exposure. The FHLBNY manages this risk by pricing collateral on a weekly basis, performing on-site reviews of pledged mortgage collateral from time to time, and reviewing pledged portfolio concentrations on a quarterly basis. The FHLBNY requires that members pledge a specific amount of excess collateral above the par amount of their outstanding obligations. Members provide the FHLBNY with reports of pledged collateral and the FHLBNY evaluates the eligibility and value of the pledged collateral.

The FHLBNY’s loan and collateral agreements give the FHLBNY a security interest in assets held by borrowers that is sufficient to cover their obligations to the FHLBNY. The FHLBNY may supplement this security interest by imposing additional reporting, segregation or delivery requirements on the borrower. The FHLBNY assigns specific collateral requirements to a borrower, based on a number of factors. These include, but are not limited to: (1) the borrower’s overall financial condition; (2) the degree of complexity involved in the pledging, verifying, and reporting of collateral between the borrower and the FHLBNY, especially when third-party pledges, custodians, outside service providers and pledges to other entities are involved; and (3) the type of collateral pledged.

The FHLBNY has also established collateral maintenance levels for borrower collateral that are intended to help ensure that the FHLBNY has sufficient collateral to cover credit extensions and reasonable expenses arising from potential collateral liquidation and other unknown factors. Collateral maintenance levels are designated by collateral type and are periodically adjusted to reflect current market and business conditions. Maintenance levels for individual borrowers may also be adjusted, based on the overall financial condition of the borrower or another, third-party entity involved in the collateral relationship with the FHLBNY. Borrowers are required to maintain an amount of eligible collateral with a liquidation value at least equal to the borrower’s current collateral maintenance level. All borrowers that pledge mortgage loans as collateral are also required to provide, on a monthly or quarterly basis, a detailed listing of mortgage loans pledged. The FHLBNY uses this detailed reporting to monitor and track payment performance of the collateral and to assess the risk profile of the pledged collateral based on mortgage characteristics, geographic concentrations and other pertinent risk factors.

146

Drawing on current industry standards, the FHLBNY establishes collateral valuation methodologies for each collateral type and calculates the estimated liquidation value of the pledged collateral to determine whether a borrower has satisfied its collateral maintenance requirement. The FHLBNY evaluates liquidation values on a weekly basis.

The FHLBNY makes on-site review of borrowers in connection with the evaluation of the borrowers’ pledged mortgage collateral. This review involves a qualitative assessment of risk factors that includes an examination of legal documentation, credit underwriting, and loan-servicing practices on mortgage collateral. The FHLBNY has developed the on-site review process to more accurately value each borrower’s pledged mortgage portfolio based on current secondary-market standards. The results of the review may lead to adjustments in the estimated liquidation value of pledged collateral. The FHLBNY may also make additional market value adjustments to a borrower’s pledged mortgage collateral based on the quality and accuracy of the automated data provided to the FHLBNY. See Tables 49-51 for more information.

Credit Risk and Concentration Risk — Advances

While the FHLBNY has never experienced a credit loss on an advance, the expanded eligible collateral for Community Financial Institutions and non-member housing associates permitted, but not required, by the Finance Agency provides the potential for additional credit risk for the FHLBNY. It is the FHLBNY’s current policy not to accept “expanded” eligible collateral from Community Financial Institutions. The management of the FHLBNY has the policies and procedures in place to appropriately manage credit risk associated with the advance business. In extending credit to a member, the FHLBNY adheres to specific credit policy limits approved by its Board of Directors. The FHLBNY has not established limits for the concentrations of specific types of advances, but management reports the activity in advances to the Board each month. Each quarter, management reports the concentrations of convertible advances made to individual members. There were no past due advances and all advances were current at December 31, 2009 and December 31, 2008. Management does not anticipate any credit losses, and accordingly, the FHLBNY has not provided an allowance for credit losses on advances. The FHLBNY’s potential credit risk from advances is concentrated in commercial banks, savings institutions and insurance companies. At December 31, 2009 and December 31, 2008, the Bank had advances of $59.5 billion and $65.7 billion outstanding to ten member institutions, representing 65.6% and 63.5% of total advances outstanding, and sufficient collateral was held to cover the advances to these institutions.

Collateral Coverage of Advances

The FHLBNY lends to financial institutions involved in housing finance within its district. In addition, the FHLBNY is permitted, but not required, to accept collateral in the form of small business or agricultural loans (“expanded collateral”) from Community Financial Institutions (“CFIs”). Borrowing members pledge their capital stock of the FHLBNY as additional collateral for advances. All member obligations with the FHLBNY must be fully collateralized throughout their entire term. As of December 31, 2009 and 2008, the FHLBNY had rights to collateral with an estimated value greater than outstanding advances. Based upon the financial condition of the member, the FHLBNY:

• Allows a member to retain possession of the collateral assigned to the FHLBNY, if the member executes a written security agreement and agrees to hold such collateral for the benefit of the FHLBNY; or

• Requires the member specifically to assign or place physical possession of such collateral with the FHLBNY or its safekeeping agent.

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The following table summarizes pledged collateral in support of advances at December 31, 2009 and 2008 (in thousands):

Table 49: Collateral Supporting Advances to Members

			Underlying Collateral for Advances
					Securities and
	Advances 1		Mortgage Loans 2		Deposits 2		Total 2
December 31, 2009	$	90,737,700	$	111,346,235	$	49,564,456	$	160,910,691
December 31, 2008	$	103,379,727	$	129,887,513	$	54,067,104	$	183,954,617

Note1	Par value
Note2	Estimate market value

The level of over-collateralization is on an aggregate basis and may not necessarily be indicative of a similar level of over-collateralization on an individual transaction basis. At a minimum, each member pledged sufficient collateral to adequately secure the member’s outstanding obligation with the FHLBNY. In addition, most members maintain an excess amount of pledged collateral with the FHLBNY to secure future liquidity needs.

The following table summarizes pledged collateral in support of other member obligations (other than advances) at December 31, 2009 and 2008 (in thousands):

Table 50: Collateral Supporting Member Obligations Other Than Advances

			Underlying Collateral for Other Obligations
	Other				Securities and
	Obligations 1		Mortgage Loans 2		Deposits 2		Total 2
December 31, 2009	$	720,622	$	2,257,204	$	126,970	$	2,384,174
December 31, 2008	$	932,073	$	1,804,514	$	151,548	$	1,956,062

Note1	Standby financial letters of credit, derivatives and members’ credit enhancement guarantee amount (“MPFCE”)
Note2	Estimated market value

The outstanding member obligations consisted principally of standby letters of credit, and a small amount of collateralized value of outstanding derivatives, and members’ credit enhancement guarantee amount (“MPFCE”) on loans sold to the FHLBNY through the Mortgage Partnership Finance program. The FHLBNY’s underwriting and collateral requirements for securing Letters of Credit are the same as its requirements for securing advances.

148

The following table shows the breakdown of collateral pledged by members between those that were specifically listed and those in the physical possession or that of its safekeeping agent (in thousands):

Table 51: Location of Collateral Held

	Estimated Market Values
	Collateral in		Collateral
	Physical		Specifically		Collateral			Total Collateral
	Possession		Listed		Pledged for AHP			Received
December 31, 2009	$	57,660,864	$	105,714,763	$	(80,762	)	$	163,294,865
December 31, 2008	$	60,462,019	$	125,527,047	$	(78,387	)	$	185,910,679

The total of collateral pledged to the FHLBNY includes excess collateral pledged above the FHLBNY’s minimum collateral requirements. These minimum requirements range from 103% to 125% of outstanding advances, based on the collateral type. It is common for members to maintain excess collateral positions with the FHLBNY for future liquidity needs. Based on several factors (e.g. advance type, collateral type or member financial condition) members are required to comply with specified collateral requirements, including but not limited to, a detailed listing of pledged mortgage collateral and/or delivery of pledged collateral to FHLBNY or its designated collateral custodian(s). For example, all pledged securities collateral must be delivered to the FHLBNY’s nominee name at Citibank, N.A., the FHLBNY’s securities safekeeping custodian. Mortgage collateral that is required to be in the FHLBNY’s possession is typically delivered to the FHLBNY’s Jersey City, NJ facility. However, in certain instances, delivery to an FHLBNY approved custodian may be allowed.

149

Concentration analysis — Top Ten Advance Holders

The following table summarizes the top ten advance holders (dollars in thousands):

Table 52: Top Ten Advance Holders

	December 31, 2009
					Percentage of
			Par		Total Par Value
	City	State	Advances		of Advances			Interest Income
Hudson City Savings Bank, FSB*	Paramus	NJ	$	17,275,000		19.0	%	$	710,900
Metropolitan Life Insurance Company	New York	NY		13,680,000		15.1			356,120
New York Community Bank*	Westbury	NY		7,343,174		8.1			310,991
Manufacturers and Traders Trust Company	Buffalo	NY		5,005,641		5.5			97,628
The Prudential Insurance Company of America	Newark	NJ		3,500,000		3.9			93,601
Astoria Federal Savings and Loan Assn.	Lake Success	NY		3,000,000		3.3			120,870
Emigrant Bank	New York	NY		2,475,000		2.7			64,131
Doral Bank	San Juan	PR		2,473,420		2.7			86,389
MetLife Bank, N.A.	Bridgewater	NJ		2,430,500		2.7			46,142
Valley National Bank	Wayne	NJ		2,322,500		2.6			103,707
Total			$	59,505,235		65.6	%	$	1,990,479

* Officer of member bank also served on the Board of Directors of the FHLBNY.

	December 31, 2008
					Percentage of
			Par		Total Par Value
	City	State	Advances		of Advances			Interest Income
Hudson City Savings Bank, FSB*	Paramus	NJ	$	17,525,000		17.0	%	$	671,146
Metropolitan Life Insurance Company	New York	NY		15,105,000		14.6			260,420
Manufacturers and Traders Trust Company	Buffalo	NY		7,999,689		7.7			257,649
New York Community Bank*	Westbury	NY		7,796,517		7.5			337,019
Astoria Federal Savings and Loan Assn.	Lake Success	NY		3,738,000		3.6			151,066
The Prudential Insurance Company of America	Newark	NJ		3,000,000		2.9			13,082
Merrill Lynch Bank & Trust Co., FSB	New York	NY		2,972,000		2.9			68,625
Valley National Bank	Wayne	NJ		2,646,500		2.6			103,918
Emigrant Bank	New York	NY		2,525,000		2.4			64,116
Doral Bank	San Juan	PR		2,412,500		2.3			89,643
Total			$	65,720,206		63.5	%	$	2,016,684

* At December 31, 2008, officer of member bank also served on the Board of Directors of the FHLBNY.

150

Investment quality

At December 31, 2009, long-term investments were principally comprised of (1) Mortgage-backed securities classified as held-to-maturity at a carrying value of $9.8 billion, of which 89.1% comprised of securities issued by government sponsored enterprises and a U.S. government agency, (2) Mortgage-backed securities classified as available-for-sale securities at fair value basis of $2.2 billion, entirely GSE issued mortgage-backed securities. In addition, the FHLBNY had investments of $751.8 million in primary public and private placements of taxable obligations of state and local housing finance authorities classified as held-to-maturity.

At December 31, 2009, short-term investments consisted of Federal funds sold.

The FHLBNY’s investments are summarized below (dollars in thousands):

Table 53: Year-Over-Year Change in Investments

	December 31,		December 31,		Dollar			Percentage
	2009		2008		Variance			Variance
State and local housing finance agency obligations 1	$	751,751	$	804,100	$	(52,349	)		(6.51	)%
Mortgage-backed securities
Available-for-sale securities, at fair value		2,240,564		2,851,683		(611,119	)		(21.43	)
Held-to-maturity securities, at carrying value		9,767,531		9,326,443		441,088			4.73
		12,759,846		12,982,226		(222,380	)		(1.71	)
Grantor trusts 2		12,589		10,186		2,403			23.59
Certificates of deposit 1		—		1,203,000		(1,203,000	)		(100.00	)
Federal funds sold		3,450,000		—		3,450,000		NA
Total investments	$	16,222,435	$	14,195,412	$	2,027,023			14.28	%

1	Classified as held-to-maturity securities, at carrying value
2	Classified as available-for-sale securities, at fair value and represents investments in registered mutual funds and other fixed-income securities maintained under the grantor trusts

Investment rating

External ratings and the changes in a security’s external rating are factors in the FHLBNY’s assessment of impairment; a rating or a rating change alone is not necessarily indicative of impairment or absence of impairment.

Mortgage-backed securities — Mortgage-backed securities were classified as either Available-for-sale or Held-to-maturity.

Available-for-sale — At December 31, 2009 and 2008, all MBS classified as available-for-sale were rated triple-A by a Nationally Recognized Statistical Rating Organization (“NRSRO”). All available-for-sale securities were securities issued by Federal National Mortgage Association (“Fannie Mae”) and the Federal Home Loan Mortgage Corp. (“Freddie Mac”).

151

The following tables contain information about credit ratings of the Bank’s investments in Held-to-maturity and Available-for-sale securities at December 31, 2009 and 2008 (in thousands):

Table 54: NRSRO Held-to-Maturity Securities

External ratings — Held-to-maturity securities — December 31, 2009:

			NRSRO Ratings — December 31, 2009
											Below
	Carrying										Investment
Issued, guaranteed or insured:	Value		AAA		AA		A		BBB		Grade
Pools of Mortgages
Fannie Mae	$	1,137,514	$	1,137,514	$	—	$	—	$	—	$	—
Freddie Mac		335,369		335,369		—		—		—		—
Total pools of mortgages		1,472,883		1,472,883		—		—		—		—
Collateralized Mortgage Obligations/Real Estate Mortgage Investment Conduits
Fannie Mae		2,609,254		2,609,254		—		—		—		—
Freddie Mac		4,400,002		4,400,002		—		—		—		—
Ginnie Mae		171,531		171,531		—		—		—		—
Total CMOs/REMICs		7,180,787		7,180,787		—		—		—		—
Ginnie Mae-CMBS		49,526		49,526		—		—		—		—
Non-GSE MBS
CMOs/REMICs		444,906		319,583		12,510		38,332		—		74,481
Commercial mortgage-backed securities		—		—		—		—		—		—
Total non-federal-agency MBS		444,906		319,583		12,510		38,332		—		74,481
Asset-Backed Securities
Manufactured housing (insured)		202,278		—		202,278		—		—		—
Home equity loans (insured)		227,834		10,399		71,653		27,589		26,657		91,536
Home equity loans (uninsured)		189,317		171,840		12,873		—		4,604		—
Total asset-backed securities		619,429		182,239		286,804		27,589		31,261		91,536
Total mortgage-backed securities	$	9,767,531	$	9,205,018	$	299,314	$	65,921	$	31,261	$	166,017
Other
State and local housing finance agency obligations	$	751,751	$	72,992	$	601,109	$	21,430	$	56,220	$	—
Certificates of deposit		—		—		—		—		—		—
Total other	$	751,751	$	72,992	$	601,109	$	21,430	$	56,220	$	—
Total Held-to-maturity securities	$	10,519,282	$	9,278,010	$	900,423	$	87,351	$	87,481	$	166,017

152

External ratings — Held-to-maturity securities — December 31, 2008:

	Carrying		NRSRO Ratings — December 31, 2008
Issued, guaranteed or insured:	Value		AAA		AA		A		BBB
Pools of Mortgages
Fannie Mae	$	1,400,058	$	1,400,058	$	—	$	—	$	—
Freddie Mac		422,088		422,088		—		—		—
Total pools of mortgages		1,822,146		1,822,146		—		—		—
Collateralized Mortgage Obligations/Real Estate Mortgage Investment Conduits
Fannie Mae		2,032,050		2,032,050		—		—		—
Freddie Mac		3,722,840		3,722,840		—		—		—
Ginnie Mae		6,325		6,325		—		—		—
Total CMOs/REMICs		5,761,215		5,761,215		—		—		—
Non-GSE MBS
CMOs/REMICs		609,908		509,056		—		62,401		38,451
Commercial mortgage-backed securities		266,994		266,994		—		—		—
Total non-federal-agency MBS		876,902		776,050		—		62,401		38,451
Asset-Backed Securities
Manufactured housing (insured)		229,714		—		229,714		—		—
Home equity loans (insured)		376,587		86,662		—		130,277		159,648
Home equity loans (uninsured)		259,879		259,879		—		—		—
Total asset-backed securities		866,180		346,541		229,714		130,277		159,648
Total mortgage-backed securities	$	9,326,443	$	8,705,952	$	229,714	$	192,678	$	198,099
Other
State and local housing finance agency obligations	$	804,100	$	74,881	$	672,999	$	—	$	56,220
Certificates of deposit		1,203,000		—		628,000		575,000		—
Total other	$	2,007,100	$	74,881	$	1,300,999	$	575,000	$	56,220
Total Held-to-maturity securities	$	11,333,543	$	8,780,833	$	1,530,713	$	767,678	$	254,319

153

External ratings — Available-for-sale securities — December 31, 2009:

Table 55: NRSRO Available-for-Sale Securities

			NRSRO Ratings — December 31, 2009
Issued, guaranteed or insured:	Fair Value		AAA		AA		A
Pools of Mortgages
Fannie Mae	$	—	$	—	$	—	$	—
Freddie Mac		—		—		—		—
Total pools of mortgages		—		—		—		—
Collateralized Mortgage Obligations/Real Estate Mortgage Investment Conduits
Fannie Mae		1,544,500		1,544,500		—		—
Freddie Mac		696,064		696,064		—		—
Ginnie Mae		—		—		—		—
Total CMOs/REMICs		2,240,564		2,240,564		—		—
Non-GSE MBS
CMOs/REMICs		—		—		—		—
Commercial mortgage-backed securities		—		—		—		—
Total non-federal-agency MBS		—		—		—		—
Asset-Backed Securities
Manufactured housing (insured)		—		—		—		—
Home equity loans (insured)		—		—		—		—
Home equity loans (uninsured)		—		—		—		—
Total asset-backed securities		—		—		—		—
Total AFS mortgage-backed securities	$	2,240,564	$	2,240,564	$	—	$	—
Other
Fixed income funds, equity funds and cash equivalents *	$	12,589
Total Available-for-sale securities	$	2,253,153

* Unrated

154

External ratings — Available-for-sale securities — December 31, 2008:

			NRSRO Ratings — December 31, 2008
Issued, guaranteed or insured:	Fair Value		AAA		AA		A
Pools of Mortgages
Fannie Mae	$	—	$	—	$	—	$	—
Freddie Mac		—		—		—		—
Total pools of mortgages		—		—		—		—
Collateralized Mortgage Obligations/Real Estate Mortgage Investment Conduits
Fannie Mae		1,854,989		1,854,989		—		—
Freddie Mac		996,694		996,694		—		—
Ginnie Mae		—		—		—		—
Total CMOs/REMICs		2,851,683		2,851,683		—		—
Non-GSE MBS
CMOs/REMICs		—		—		—		—
Commercial mortgage-backed securities		—		—		—		—
Total non-federal-agency MBS		—		—		—		—
Asset-Backed Securities
Manufactured housing (insured)		—		—		—		—
Home equity loans (insured)		—		—		—		—
Home equity loans (uninsured)		—		—		—		—
Total asset-backed securities		—		—		—		—
Total AFS mortgage-backed securities	$	2,851,683	$	2,851,683	$	—	$	—
Other
Fixed income funds, equity funds and cash equivalents *	$	10,186
Total Available-for-sale securities	$	2,861,869

* Unrated

155

Fannie Mae and Freddie Mac Securities

The FHLBNY’s mortgage-backed securities were predominantly issued by Fannie Mae and Freddie Mac.

The Housing Act contains provisions allowing the U.S. Treasury to provide support to Fannie Mae and Freddie Mac. Fannie Mae and Freddie Mac are in conservatorship, with the Finance Agency named as conservator, who will manage Fannie Mae and Freddie Mac in an attempt to stabilize their financial conditions and their ability to support the secondary mortgage market.

Available-for-sale securities — All MBS outstanding at December 31, 2009 and 2008 and classified as AFS were issued by Fannie Mae and Freddie Mac.

Held-to-maturity securities — Comprised of 89.1% and 81.3% of MBS also issued by Fannie Mae, Freddie Mac and a government agency at December 31, 2009 and 2008.

The following table summarizes the carrying value basis of held-to-maturity mortgage-backed securities by issuer (dollars in thousands):

Table 56: Carrying Value Basis of Held-to-Maturity Mortgage-Backed Securities by Issuer

	December 31,		Percentage			December 31,		Percentage
	2009		of total			2008		of total
U.S. government sponsored enterprise residential mortgage-backed securities
Fannie Mae	$	3,746,768		38.36	%	$	3,432,108		36.80	%
Freddie Mac		4,735,371		48.48			4,144,928		44.44
U.S. agency residential mortgage-backed securities		171,531		1.76			6,325		0.07
U.S. agency commercial mortgage-backed securities		49,526		0.51			—		—
Private-label issued securities		1,064,335		10.89			1,743,082		18.69
Total Held-to-maturity securities-mortgage-backed securities	$	9,767,531		100.00	%	$	9,326,443		100.00	%

156

Non-Agency Private label mortgage — and asset-backed securities

At December 31, 2009 and 2008, the Bank also held MBS that were privately issued. All private-label MBS were classified as held-to-maturity. The following table summarizes private-label mortgage- and asset-backed securities by fixed- or variable-rate coupon types (Unpaid principal balance; in thousands):

Table 57: Non-Agency Private Label Mortgage — And Asset-Backed Securities

	December 31, 2009						December 31, 2008
			Variable						Variable
Private-label MBS	Fixed Rate		Rate		Total		Fixed Rate		Rate		Total
Private-label RMBS
Prime	$	435,913	$	4,359	$	440,272	$	596,430	$	4,811	$	601,241
Alt-A		7,229		3,713		10,942		9,129		4,177		13,306
Total PL RMBS		443,142		8,072		451,214		605,559		8,988		614,547
Private-label CMBS
Prime		—		—		—		266,860		—		266,860
Total PL CMBS		—		—		—		266,860		—		266,860
Home Equity Loans
Subprime		437,042		108,801		545,843		504,565		132,135		636,700
Total Home Equity Loans		437,042		108,801		545,843		504,565		132,135		636,700
Manufactured Housing Loans
Subprime		202,299		—		202,299		229,738		—		229,738
Total Manufactured Housing Loans		202,299		—		202,299		229,738		—		229,738
Total UPB of private-label MBS	$	1,082,483	$	116,873	$	1,199,356	$	1,606,722	$	141,123	$	1,747,845

Unpaid principal balance (UPB) is also known as the current face or par amount of a mortgage-backed security.

Other-Than-Temporary Impaired Securities

In each interim quarterly period in 2009, management evaluated its portfolio of private-label mortgage-backed securities for credit impairment. Beginning with the quarter ended September 30, 2009, and again at December 31, 2009, the FHLBNY performed its OTTI analysis by cash flow testing 100 percent of it private-label MBS. At December 31, 2008, and at the two interim quarters ended June 30, 2009, the FHLBNY’ methodology was to analyze all its private-label MBS to isolate securities that were considered to be at risk of OTTI and to perform cash flow analysis on securities at risk of OTTI. As a result of the evaluations, the FHLBNY recognized credit impairment OTTI related losses in each quarter of 2009. Cumulatively, 17 private-label held-to-maturity securities were deemed to be credit impaired in 2009. No credit impairment was recognized in 2008 or 2007. Cumulative credit impairment losses of $20.8 million were recorded as a charge to 2009 income. The charge included credit losses of certain MBS that were determined to be OTTI in a previous quarter of 2009. The amount of non-credit OTTI remaining after accretion at December 31, 2009 was a cumulative loss of $110.6 million in AOCI.

Based on detailed cash flow credit analysis on a security level, the Bank has concluded that other than the 17 securities determined to be credit impaired at December 31, 2009, gross unrealized losses for the remainder of Bank’s investment securities were primarily caused by interest rate changes, credit spread widening and reduced liquidity, and the securities were temporarily impaired as defined under the new guidance for recognition and presentation of other-than-temporary impairment. For more information see Notes 1 and 4 to the audited financial statements accompanying this report.

157

Fourteen of the 17 securities that were deemed credit impaired in 2009 are insured by bond insurers, Ambac and MBIA. The Bank’s analysis of the two bond insurers concluded that future credit losses due to projected collateral shortfalls of the impaired securities would not be fully supported by the two bond insurers.

The following table summarizes the key characteristics of the 16 credit impaired and unimpaired securities insured by MBIA and Ambac (in thousand):

Table 58: Monoline Insurance Protection on Credit Impaired PLMBS

			December 31, 2009
			Insurer MBIA						Cumulative OTTI Recorded
	No. of		Amortized		Carrying		Fair		Credit			Non-credit
Ratings	Securities		Cost Basis		Value		Value		Loss			Loss
Impaired*		2	$	29,051	$	19,679	$	17,161	$	(5,370	)	$	(10,075	)
Unimpaired		1		2,885		2,886		2,276		—			—
Total		3	$	31,936	$	22,565	$	19,437	$	(5,370	)	$	(10,075	)

			December 31, 2009
			Insurer Ambac						Cumulative OTTI Recorded
	No. of		Amortized		Carrying		Fair		Credit			Non-credit
Ratings	Securities		Cost Basis		Value		Value		Loss			Loss
Impaired*		12	$	185,156	$	115,083	$	127,470	$	(13,255	)	$	(77,705	)
Unimpaired		1		11,019		11,019		6,386		—			—
Total		13	$	196,175	$	126,102	$	133,856	$	(13,255	)	$	(77,705	)

* OTTI

158

The following table presents additional information of the fair values and gross unrealized losses of PLMBS by year of securitization and external rating at December 31, 2009 (in thousands):

Tables 59: PLMBS by Year of Securitization and External Rating

	December 31, 2009
	Unpaid Principal Balance
											Below				Gross
	Ratings										Investment		Amortized		Unrealized					Total OTTI
Private-label MBS	Subtotal		Triple-A		Double-A		Single-A		Triple-B		Grade		Cost		(Losses)			Fair Value		Losses
RMBS
Prime
2006	$	63,276	$	—	$	—	$	38,689	$	—	$	24,587	$	62,654	$	(2,396	)	$	60,258	$	—
2005		82,982		28,687		—		—		—		54,295		80,996		(1,708	)		79,288		(3,204	)
2004 and earlier		294,014		281,240		12,774		—		—		—		292,773		(3,696	)		289,958		—
Total RMBS Prime		440,272		309,927		12,774		38,689		—		78,882		436,423		(7,800	)		429,504		(3,204	)
Alt-A
2004 and earlier		10,942		10,942		—		—		—		—		10,944		(938	)		10,006		—
Total RMBS		451,214		320,869		12,774		38,689		—		78,882		447,367		(8,738	)		439,510		(3,204	)
CMBS
Prime
2004 and earlier		—		—		—		—		—		—		—		—			—		—
HEL
Subprime
2004 and earlier		545,843		205,480		91,782		48,838		43,035		156,708		525,260		(151,818	)		373,442		(137,708	)
Manufactured Housing Loans
Subprime
2004 and earlier		202,299		—		202,299		—		—		—		202,278		(37,101	)		165,177		—
Total PLMBS	$	1,199,356	$	526,349	$	306,855	$	87,527	$	43,035	$	235,590	$	1,174,905	$	(197,657	)	$	978,129	$	(140,912	)

159

The following table presents additional information of the fair values and gross unrealized losses of PLMBS by year of securitization and external rating at December 31, 2008 (in thousands):

	December 31, 2008
	Unpaid Principal Balance
	Ratings										Amortized		Unrealized
Private-label MBS	Subtotal		Triple-A		Double-A		Single-A		Triple-B		Cost		(Losses)			Fair Value
RMBS
Prime
2006	$	101,843	$	—	$	—	$	62,968	$	38,875	$	100,851	$	(20,544	)	$	80,308
2005		110,334		110,334		—		—		—		108,254		(5,415	)		102,839
2004		168,166		168,166		—		—		—		168,173		(8,363	)		159,810
2003 and earlier		220,898		220,898		—		—		—		219,318		(6,722	)		212,596
Total RMBS Prime		601,241		499,398		—		62,968		38,875		596,596		(41,044	)		555,553
Alt-A
2003 and earlier		13,306		13,306		—		—		—		13,310		(1,662	)		11,648
Total RMBS		614,547		512,704		—		62,968		38,875		609,906		(42,706	)		567,201
CMBS
Prime
2003 and earlier		266,860		266,860		—		—		—		266,994		(127	)		267,016
HEL
Subprime
2003 and earlier		636,700		346,631		—		130,404		159,665		636,466		(224,069	)		412,397
Manufactured Housing Loans
Subprime
2003 and earlier		229,738		—		229,738		—		—		229,714		(75,418	)		154,296
Total PLMBS	$	1,747,845	$	1,126,195	$	229,738	$	193,372	$	198,540	$	1,743,080	$	(342,320	)	$	1,400,910

160

Weighted-average market price offers an analysis of unrealized loss percentage; a comparison of the weighted-average credit support to weighted-average collateral delinquency percentage is another indicator of the credit support available to absorb potential cash flow shortfalls.

Table 60: Weighted-Average Market Price of MBS

	December 31, 2009
	Original
	Weighted-			Weighted-			Weighted-Average
	Average Credit			Average Credit			Collateral
Private-label MBS	Support %			Support %			Delinquency %
RMBS
Prime
2006		3.74	%		5.16	%		5.47	%
2005		2.67			3.82			2.32
2004 and earlier		1.58			2.82			0.79
Total RMBS Prime		2.10			3.35			1.75
Alt-A
2004 and earlier		10.73			32.35			11.22
Total RMBS		2.30			4.05			1.98
CMBS
Prime
2004 and earlier		—			—			—
HEL
Subprime
2004 and earlier		57.86			65.34			17.40
Manufactured Housing Loans
Subprime
2004 and earlier		57.78			55.56			3.64
Total Private-label MBS		36.95	%		40.63	%		9.28	%

Definitions:

Original Weighted-Average Credit Support percentage represents the arithmetic mean of a cohort of securities by vintage; credit support is defined as the credit protection level at the time the mortgage-backed securities closed. Support is expressed as a percentage of the sum of: subordinate bonds, reserve funds, guarantees, overcollateralization, divided by the original collateral balance.

Weighted-Average Credit Support percentage represents the arithmetic mean of a cohort of securities by vintage; credit support is defined as the credit protection level as of the mortgage-backed securities most current payment date. Support is expressed as a percentage of the sum of: subordinate bonds, reserve funds, guarantees, overcollateralization, divided by the most current unpaid collateral balance.

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Weighted-average collateral delinquency percentage represents the arithmetic mean of a cohort of securities by vintage: collateral delinquency is defined as the sum of the unpaid principal balance of loans underlying the mortgage-backed security where the borrower is 60 or more days past due, or in bankruptcy proceedings, or the loan is in foreclosure, or has become real estate owned divided by the aggregate unpaid collateral balance.

	December 31, 2008
	Original
	Weighted-			Weighted-			Weighted-Average
	Average Credit			Average Credit			Collateral
Private-label MBS	Support %			Support %			Delinquency %
RMBS
Prime
2006		3.71	%		4.56	%		0.86	%
2005		2.68			3.26			1.00
2004		2.05			2.86			0.40
2003 and earlier		1.21			2.17			0.27
Total RMBS Prime		2.14			2.97			0.54
Alt-A
2003 and earlier		10.22			31.60			10.56
Total RMBS		2.31			3.59			0.76
CMBS
Prime
2003 and earlier		26.69			38.73			—
HEL
Subprime
2003 and earlier		58.31			65.66			12.53
Manufactured Housing Loans
Subprime
2003 and earlier		58.26			55.99			1.88
Total Private-label MBS		33.79	%		38.45	%		5.08	%

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External ratings are just one factor that is considered in analyzing if a security is other-than-temporarily impaired. The table below compares delinquency percentage across PLMBS security types, ratings and gross unrealized losses (dollars in thousands):

Table 61: PLMBS Security Types Delinquencies

	December 31, 2009								December 31, 2008
			Gross			Weighted-Average					Gross			Weighted-Average
	Amortized		Unrealized			Collateral			Amortized		Unrealized			Collateral
Private-label MBS	Cost		(Losses)			Delinquency %1			Cost		(Losses)			Delinquency %1
RMBS
Prime
Rated Triple A	$	308,639	$	(4,499	)		0.69	%	$	495,744	$	(20,500	)		0.48	%
Rated Double A		12,510		—			1.38			—		—			—
Rated Single A		38,332		(1,000	)		4.64			62,401		(12,027	)		0.76
Rated Triple B		—		—			—			38,451		(8,517	)		1.01
Below Investment Grade		76,942		(2,301	)		4.55			—		—			—
Total of RMBS Prime		436,423		(7,800	)		1.75			596,596		(41,044	)		0.54
Alt-A
Rated Triple A		10,944		(938	)		11.22			13,310		(1,662	)		10.56
Total of RMBS		447,367		(8,738	)		1.98			609,906		(42,706	)		0.76
CMBS
Prime
Rated Triple A		—		—			—			266,994		(127	)		—
HEL
Subprime
Rated Triple A		204,356		(54,224	)		18.26			346,541		(105,673	)		13.54
Rated Double A		91,074		(22,534	)		10.96			—		—			—
Rated Single A		46,792		(15,930	)		16.32			130,277		(50,977	)		5.68
Rated Triple B		41,902		(15,798	)		13.18			159,648		(67,419	)		15.96
Below Investment Grade		141,136		(43,332	)		21.53			—		—			—
Total of HEL Subprime		525,260		(151,818	)		17.40			636,466		(224,069	)		12.53
Manufactured Housing Loans
Subprime
Rated Double A		202,278		(37,101	)		3.64			229,714		(75,418	)		1.88
Grand Total	$	1,174,905	$	(197,657	)		9.28	%	$	1,743,080	$	(342,320	)		5.08	%

¹ Weighted-average collateral delinquency rate is determined based on the underlying loans that are 60 days or more past due. The reported delinquency percentage represents weighted-average based on the dollar amounts of the individual securities in the category and their respective delinquencies. Combined weighted-average collateral delinquency rates are calculated based on UPB amount.

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Mortgage Loans — Held-for-portfolio

The following table summarizes Mortgage Partnership Finance Loans (“MPF” or “Mortgage Partnership Finance program”) by loss layer structure product types (in thousands):

Table 62: MPF by Loss Layers

	December 31,
	2009		2008		2007
Original MPF	$	280,312	$	197,516	$	153,939
MPF 100		30,542		36,838		40,532
MPF 125		392,097		467,479		433,864
MPF 125 Plus		606,002		742,523		847,091
Other		9,883		10,991		8,359
Total MPF Loans *	$	1,318,836	$	1,455,347	$	1,483,785

* Par amount of total mortgage loan held-for-portfolio includes CMA, par amount at December 31, 2009 was $3.9 million

Original MPF — The first layer of losses are applied to the First Loss Account provided by the Bank. The member then provides a credit enhancement up to “AA” rating equivalent. Credit losses beyond the first two layers, though a remote possibility, would be absorbed by the FHLBNY.

MPF 100 — The first layer of losses is applied to the First Loss Account provided by the Bank. Losses incurred in the First Loss Account are deducted from credit enhancement fees payable to the member after the third year. The member then provides a credit enhancement up to “AA” rating equivalent less the amount placed in the FLA. Losses incurred in the FLA that are not recovered through credit enhancement fees (should the pool liquidate prior to repayment of losses) would be absorbed by the Bank. Credit losses beyond the first two layers, though a remote possibility, would be absorbed by the FHLBNY.

MPF 125 — The first layer of losses is applied to the First Loss Account provided by the Bank. Losses incurred in the First Loss Account are deducted from the credit enhancement fees payable to the member. The member then provides a credit enhancement up to “AA” rating equivalent less the amount placed in the FLA. Losses incurred in the FLA that are not recovered through credit enhancement fees (should the pool liquidate prior to repayment of losses) would be absorbed by the Bank. Credit losses beyond the first two layers, though a remote possibility would be absorbed by the FHLBNY.

MPF Plus — The first layer of losses is applied to the First Loss Account (“FLA”) in an amount equal to a specified percentage of loans in the pool as of the sale date. Losses incurred in the First Loss Account are deducted from the credit enhancement fees payable to the member. Losses incurred in the FLA that are not recovered through credit enhancement fees (should the pool liquidate prior to repayment of losses) would be absorbed by the Bank. The member acquires an additional Credit Enhancement (“CE”) coverage through a supplemental mortgage insurance policy (“SMI”) to cover second-layer losses that exceed the deductible (“FLA”) of the Supplemental Mortgage Insurance policy. Losses not covered by the First Loss Account or Supplemental Mortgage Insurance coverage will be paid by the member’s Credit Enhancement obligation up to “AA” rating equivalent. Losses that exceeded the Credit Enhancement obligation, though a remote possibility, would be absorbed by the Bank.

Federal Housing Administration/Veteran Administration Insured Loans — The Participating Financial Institution provides and maintains (“FHA/VA”) insurance for FHA/VA mortgage loans; the Participating Financial Institution is responsible for compliance with all FHA/VA requirements and for obtaining the benefit of the FHA/VA insurance or the insurance with respect to defaulted mortgage loans.

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Collateral types and general description of the primary mortgage loans are as follows:

• MPF single-family fully amortizing residential loans are comprised of “Fixed 15” years or less, greater than 15 years but less than or equal to 20 years and greater than 20 years but less than or equal to 30 years maturity. Property types consist of 1-4 family attached, detached, and planned unit developments, condominiums, and non-mobile manufactured housing properties.

• Multi-family portfolio consists of “Ten-year balloon” notes collateralized by multi-family units from 5 to 1000 units in the metropolitan area of New York City. These participations were purchased under Community Mortgage Asset program, which has been suspended indefinitely and the portfolio is running off. Loans were underwritten to debt service coverage not to be less than 125% and a loan-to-value ratio not to exceed 75%.

Limitations on the MPF portfolio are the loan lending limits established by Finance Agency.

Participating Financial Institutions (“PFI”) may use whichever underwriting system they choose. While MPF loans generally conform to criteria for sale such as used by Freddie Mac and Fannie Mae, in addition, each loan is created or sold only if the lender is willing to share in the management of that loan’s credit risk. Participating Financial Institutions contact the Federal Home Loan Bank of Chicago, the MPF Provider, to credit enhance and sell loans into the MPF program. The credit enhancement software used by the Mortgage Partnership Finance provider for MPF analyzes the risk characteristics of each loan and determines the amount of credit enhancement required, but the decision whether to deliver the loan into the Mortgage Partnership Finance Program is made solely by the Participating Financial Institution.

Most PFIs service loans on an actual/actual form of remittance which requires the PFI to remit whatever amounts it collects. Participating Financial Institutions participating in the Mortgage Partnership Finance Plus product must service loans on a scheduled/scheduled form of remittance which requires the Participating Financial Institution to remit each month whatever scheduled interest and scheduled principal payments are due, whether the amounts are collected. The PFI must remit scheduled interest and scheduled principal whether or not mortgage payments are received.

Mortgage loans — Past due

In the FHLBNY’s outstanding mortgage loans held-for-portfolio, non-performing loans and loans 90 days or more past due and accruing interest were as follows (in thousands):

Table 63: Mortgage Loans — Past Due

	December 31,
	2009		2008
Mortgage loans, net of provisions for credit losses	$	1,317,547	$	1,457,885
Non-performing mortgage loans held-for-portfolio	$	16,007	$	4,792
Mortgage loans past due 90 days or more and still accruing interest	$	570	$	507

Non-performing mortgage loans were conventional mortgage loans that were placed on non-accrual/non-performing status when the collection of the contractual principal or interest from the borrower was 90 days or more past due. FHLBNY considers conventional loans (excluding Federal Housing Administration (“FHA”) and Veteran Administration (“VA”) insured loans) that are 90 days or more past due as non-accrual loans. FHA and VA insured loans that were past due 90 days or more were not significant at any period reported, and interest was still being accrued because of VA and FHA insurance. No loans were impaired at December 31, 2009, 2008 and 2007 other than the non-accrual loans.

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Mortgage loans — Interest on Non-performing loans

The FHLBNY’s interest contractually due and actually received for non-performing loans were as follows (in thousands):

Table 64: Mortgage Loans — Interest Short-Fall

	Years ended December 31,
	2009		2008
Interest contractually due 1	$	714	$	168
Interest actually received		626		146
Shortfall	$	88	$	22

¹ The Bank does not recognize interest received as income from uninsured loans past due 90-days or greater.

Non-performing mortgage loans were conventional mortgage loans that were placed on non-accrual/non-performing status when the collection of the contractual principal or interest from the borrower was 90 days or more past due. FHLBNY considers conventional loans (excluding Federal Housing Administration (“FHA”) and Veteran Administration (“VA”) insured loans) that are 90 days or more past due as non-accrual loans. FHA and VA insured loans that were past due 90 days or more were not significant at any period reported, and interest was still being accrued because of VA and FHA insurance. No loans were impaired in any periods in this report other than the non-accrual loans.

Mortgage Loans — Allowance for Credit Losses

Roll-forward information with respect to allowances for credit losses was as follows (in thousands):

Table 65: Mortgage Loans — Allowance for Credit Losses

	Years ended December 31,
	2009			2008		2007
Beginning balance	$	1,406		$	633	$	593
Charge-offs		(16	)		—		—
Provision for credit losses on mortgage loans		3,108			773		40
Ending balance	$	4,498		$	1,406	$	633

The First Loss Account memorializes the first tier of credit exposure of the FHLBNY. It is not an indication of inherent losses in the loan portfolio and is not a loan loss reserve. The FHLBNY is responsible for losses up to this “first loss level”. Losses beyond this layer are absorbed through credit enhancement provided by the member participating in the Mortgage Partnership Finance Program. All residual credit exposure is FHLBNY’s responsibility. In 2009 and 2008, charge offs were $22.7 thousand and $21.2 thousand. Of these amounts, charge offs in 2009 of $16.1 thousand were not recovered. No charge offs were incurred in 2007. There were 14 foreclosures completed in 2009.

In limited circumstances, the FHLBNY may require the PFI to repurchase loans. When a PFI fails to comply with the requirements of the PFI Agreement, MPF Guides, applicable law or terms of mortgage documents, the PFI may be required to repurchase the MPF Loans which are impacted by such failure. Reasons for which a PFI could be required to repurchase an MPF Loan may include but are not limited to MPF Loan in-eligibility, failure to perfect collateral with an approved custodian, a servicing breach, fraud, or other misrepresentation.

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For conventional MPF Loans in the years ended December 31, 2009, 2008 and 2007, the PFIs were required to repurchase 2, 5, and 10 loans for a total of $0.3 million, $1.2 million, and $1.9 million in each of those years. The FHLBNY has not experienced any losses related to conventional MPF Loan repurchases by the PFI.

Mortgage Loans — Credit Risk

Through the MPF program, the FHLBNY invests in home mortgage loans originated by or through members or approved state and local housing finance agencies (“housing associates”). The FHLBNY purchases these mortgages loans under the Finance Agency’s Acquired Member Assets (“AMA”) regulation. These assets may include: whole loans eligible to secure advances (excluding mortgages above the conforming-loan limit); whole loans secured by manufactured housing; or bonds issued by housing associates.

In the MPF program, the FHLBNY purchases conventional mortgage loans from its participating members, referred to as Participating Financial Institutions (“PFI”). Federal Housing Administration (“FHA”) and Veterans Administration (“VA”) insured loans outstanding at December 31, 2009 and 2008 were $6.0 million, and $7.0 million, representing 0.45% and 0.48%, of the remaining outstanding mortgage loans held-for-portfolio.

The Bank performs periodic reviews of its portfolio to identify the potential for losses inherent in the portfolio and determine the likelihood of collection of the principal and interest. Mortgage loans that are past due and either classified under regulatory criteria (Sub-standard, doubtful or Loss), are separated from the aggregate pool, and evaluated separately for impairment. The FHLBNY bases its provision for credit losses on its estimate of probable credit losses inherent in the MPF portfolio without considering the private mortgage insurance and other credit enhancement features that accompany the MPF loans (but not the “First Loss Account”) to provide credit assurance to the FHLBNY. If adversely classified, or in non-accrual status, reserves for conventional mortgage loans, except FHA and VA insured loans, are analyzed under liquidation scenarios on a loan level basis, and identified losses are fully reserved.

When a loan is foreclosed and the Bank takes possession of real estate, the Bank will charge to the loan loss reserve account any excess of the carrying value of the loan over the net realizable value of the foreclosed loan.

FHA and VA insured mortgage loans have minimal inherent credit risk; risk of such loans generally arises from servicers defaulting on their obligations. FHA and VA insured mortgage loans, if adversely classified, will have reserves established only in the event of a default of a PFI. Reserves are based on the estimated costs to recover any uninsured portion of the MPF loan.

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Participating Financial Institutions Risk

The members or housing associates that are approved as Participating Financial Institutions continue to bear a significant portion of the credit risk through credit enhancements that they provide to the FHLBNY. The Acquired Member Assets regulation requires that these credit enhancements be sufficient to protect the FHLBNY from excess credit risk exposure. Specifically, the FHLBNY exposure must be no greater than it would be with an asset rated in the fourth-highest credit rating category by a Nationally Recognized Statistical Rating Organization, or such higher rating category as the FHLBNY may require. The Mortgage Partnership Finance program is constructed to provide the Bank with assets that are credit-enhanced to the second-highest credit rating category (double-A).

The top five Participating Financial Institutions (PFI) and the outstanding MPF loan balances are listed below (dollars in thousands):

Table 66: Top Five Participating Financial Institutions — Concentration

	December 31, 2009
	Mortgage		Percent of Total
	Loans		Mortgage Loans
Manufacturers and Traders Trust Company	$	607,072		46.17	%
Astoria Federal Savings and Loan Association		220,268		16.75
Elmira Savings and Loan F.A.		61,663		4.69
Ocean First Bank		51,277		3.90
CFCU Community Credit Union		42,344		3.22
All Others		332,304		25.27
Total 1	$	1,314,928		100.00	%

	December 31, 2008
	Mortgage		Percent of Total
	Loans		Mortgage Loans
Manufacturers and Traders Trust Company	$	743,853		51.25	%
Astoria Federal Savings and Loan Association		264,516		18.23
Elmira Savings and Loan F.A.		80,241		5.53
Ocean First Bank		61,890		4.26
The Lyons National Bank		27,269		1.88
All Others		273,569		18.85
Total 1	$	1,451,338		100.00	%

Note¹ Totals do not include CMA loans.

Mortgage Loans — Potential Credit Losses

Par amount of conventional MPF loans outstanding were $1.3 billion, $1.4 billion, and $1.5 billion at December 31, 2009, 2008 and 2007. The par value of Federal Housing Administration and Veteran Administration insured loans outstanding were $6.0 million, $7.0 million, and $8.4 million at December 31, 2009, 2008 and 2007.

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The FHLBNY and the Participating Financial Institution share the credit risks of the uninsured Mortgage Partnership Finance loans by structuring potential credit losses into layers. Collectability of the loans is first supported by liens on the real estate securing the loan. For conventional mortgage loans, additional loss protection is provided by private mortgage insurance required for Mortgage Partnership Finance loans with a loan-to-value ratio of more than 80% at origination, which is paid for by the borrower. Credit losses are first absorbed by FHLBNY up to the level of the First Loss Account for which the maximum exposures were estimated to be $13.9 million, $13.8 million, and $12.9 million at December 31, 2009, 2008 and 2007. For all MPF products, other than the MPF Original product, the FHLBNY is entitled to recover any “first losses” incurred from the member up to the amount of credit enhancement fees to be paid by the FHLBNY to the member. The member is responsible for the second loss layer. The member may also arrange for supplemental mortgage insurance (“SMI”) through a third party insurance provider as a credit support to cover the member’s second loss. The amounts that members were directly responsible in the second loss layer are estimated to be $18.1 million, $14.3 million, and $10.9 million at December 31, 2009, 2008 and 2007. The amounts of second loss covered through SMI support were an additional $17.9 million at December 31, 2009 and $19.0 million at December 31, 2008 and 2007. The FHLBNY is again responsible for any residual losses.

The following table provides roll-forward information with respect to the First Loss Account (in thousands):

Table 67: Roll-Forward First Loss Account

	Years ended December 31,
	2009			2008			2007
Beginning balance	$	13,765		$	12,947		$	12,162
Additions		192			839			785
Charge-offs		(23	)		(21	)		—
Recoveries		—			—			—
Ending balance	$	13,934		$	13,765		$	12,947

The aggregate amount of the First Loss Account is memorialized and tracked but is neither recorded nor reported as a credit loss reserve in the FHLBNY’s financial statements. If “second losses” beyond this layer are incurred, they are absorbed through a credit enhancement provided by the Participating Financial Institutions. The credit enhancement held by PFIs ensures that the lender retains a credit stake in the loans it originates. For managing this risk, Participating Financial Institutions receive monthly “credit enhancement fees” from the FHLBNY.

Mortgage Loans — Credit Enhancement

The amount of the credit enhancement is computed with the use of a Standard & Poor’s model to determine the amount of credit enhancement necessary to bring a pool of uninsured loans to “AA” credit risk. The credit enhancement becomes an obligation of the Participating Financial Institution. For taking on the credit enhancement obligation, the Participating Financial Institution receives a credit enhancement fee that is paid by the FHLBNY. For certain Mortgage Partnership Finance products, the credit enhancement fee is accrued and paid each month. For other Mortgage Partnership Finance products, the credit enhancement fee is accrued monthly and is paid monthly after the FHLBNY has accrued 12 months of credit enhancement fees. Credit enhancement fees charged against interest income from mortgage loans was $1.6 million in 2009, and $1.7 million in 2008 and 2007. The FHLBNY incurred a loss in the amount of $16.1 thousand which took place in a MPF Original product where the Bank’s FLA was not reimbursed from credit enhancement fees. The Bank also suffered a loss in an MPF Plus product in the amount of $6.6 thousand that was fully recovered from credit enhancement fees.

The portion of the credit enhancement that is an obligation of the Participating Financial Institution (“PFI”) must be fully secured with pledged collateral. A portion of the credit enhancement may also be covered by insurance, subject to limitations specified in the Acquired Member Assets regulation. Each member or housing associate that participates in the Mortgage Partnership Finance program must meet financial performance criteria established by the FHLBNY. In addition, each approved PFI must have a financial review performed by the FHLBNY on an annual basis.

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The second layer is that amount of credit obligation that the Participating Financial Institution has taken on which will equate the loan to a double-A rating. The FHLBNY pays a Credit Enhancement fee to the Participating Financial Institution for taking on this obligation. The FHLBNY assumes all residual risk.

As of December 31, 2009, 2008 and 2007, the FHLBNY held Mortgage Partnership Finance loans collateralized by real estate in 51 states and territories. At December 31, 2009, there was a concentration of loans (73.5% by number of loans and 66.7% by amounts outstanding) in New York State, which is to be expected since the largest two PFIs are located in New York. At December 31, 2008, there was a concentration of loans (73.3% by number of loans and 69.8% by amounts outstanding) in New York State. At December 31, 2007, there was a concentration of loans (71.8% by numbers of loans, and 68.4% by amounts outstanding) in New York State.

The FHLBNY also holds participation interests in residential and community development mortgage loans through its pilot Community Mortgage Asset program. Acquisitions of participations under the Community Mortgage Asset program were suspended indefinitely in November 2001. Participation interests in Community Mortgage Asset loans are reviewed at least annually.

Mortgage Loans — Allowance for Credit Losses

Management performs periodic reviews of its portfolio to identify the losses inherent within the portfolio and to determine the likelihood of collection of the portfolio. Mortgage loans that are classified either under regulatory criteria (Special Mention, Sub-standard, or Loss) or past due are separated from the aggregate pool, and evaluated separately for impairment.

If adversely classified, or on non-accrual status, reserves for mortgage loans, except Federal Housing Administration and Veterans Administration insured loans, are analyzed under liquidation scenarios on a loan level basis, and identified losses are fully reserved. Federal Housing Administration and Veterans Administration insured mortgage loans have minimal inherent credit risk; risk generally arises mainly from the servicer defaulting on their obligations. Federal Housing Administration and Veterans Administration mortgage loans, if adversely classified will have reserves established only in the event of a default of a Participating Financial Institution. Reserves are based on the estimated costs to recover any uninsured portion of the Mortgage Partnership Finance loan.

Management of the FHLBNY identifies inherent losses through analysis of the conventional loans (not Federal Housing Administration and Veterans Administration insured loans) that are not classified or past due.

The FHLBNY also holds participation interest in residential and community development mortgage loans through its Community Mortgage Asset program. Acquisition of participations under the Community Mortgage Asset program was suspended indefinitely in November 2001, and the outstanding balance was down to $3.9 million at December 31, 2009 from $4.0 million at December 31, 2008. If adversely classified, Community Mortgage Asset loans will have additional reserves established based on the shortfall of the underlying estimated liquidation value of collateral to cover the remaining balance of the Community Mortgage Asset loan. Reserve values are calculated by subtracting the estimated liquidation value of the collateral (after sale value) from the current remaining balance of the Community Mortgage Asset Loan.

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Credit Risk Exposure on MPF Loans — Mortgage insurer default risk

Credit risk on MPF loans is the potential for financial loss due to borrower default or depreciation in the value of the real estate collateral securing the MPF Loan, offset by the PFI’s credit enhancement protection, which may take the form of a contingent performance based credit enhancement fees as well as the credit enhancement amount. The credit enhancement amount is a direct liability of the PFI to pay credit losses; the PFI may also arrange with an insurer for a SMI policy insuring a portion of the credit losses. To the extent credit losses are not recoverable from PMI, the FHLBNY has potential credit exposure should the loan default and the PFI directly or indirectly is unable to recover credit losses.

The MPF Program uses certain mortgage insurance companies to provide both primary mortgage insurance (“PMI”) and supplemental mortgage insurance (“SMI”) for MPF loans. The FHLBNY is exposed to the performance of mortgage insurers to the extent PFI’s rely on insurer credit protection. Credit exposure is defined as the total of PMI and SMI coverage written by a mortgage insurer on MPF loans held by FHLBNY that are delinquent.

All mortgage insurance providers have had their external ratings for insurer financial strength downgraded below AA- by one or more NRSROs since December 31, 2008. If a mortgage insurer fails to fulfill its obligations, the FHLBNY may bear any remaining loss of the borrowers’ default on the related mortgage loans not covered by the PFI.

The FHLBNY has stopped accepting new loans under master commitments with SMI from mortgage insurers that no longer meet MPF insurer requirements. If an SMI provider is downgraded below an “AA-” rating under the MPF Plus product, the PFI has six months to either replace the SMI policy or provide its own undertaking; or it may forfeit its performance based CE Fees. If a PMI provider is downgraded, the FHLBNY may request the servicer to obtain replacement PMI coverage with a different provider. However, it is possible that replacement coverage may be unavailable or result in additional cost to the FHLBNY.

Derivative counterparty ratings

The FHLBNY is subject to credit risk due to the risk of nonperformance by counterparties to the derivative agreements. The FHLBNY transacts most of its derivatives with large banks and major broker-dealers. Some of these banks and broker-dealers or their affiliates buy, sell, and distribute consolidated obligations. The FHLBNY is also subject to operational risks in the execution and servicing of derivative transactions. The degree of counterparty credit risk may depend, among other factors, on the extent to which netting procedures and/or the provision of collateral are used to mitigate the risk. The FHLBNY manages counterparty credit risk through credit analysis and collateral requirements and by following the requirements set forth in Finance Agency’s regulations. The contractual or notional amount of derivatives reflects the involvement of the FHLBNY in the various classes of financial instruments, but it does not measure the credit risk exposure of the FHLBNY, and the maximum credit exposure of the FHLBNY is substantially less than the notional amount. The maximum credit risk is the estimated cost of replacing derivatives in favorable fair value gain positions if the counterparty defaults and the related collateral, if any, is of insufficient value to the FHLBNY.

When derivative counterparties are exposed (derivatives are in a net liability position), the FHLBNY will be called upon to deposit cash collateral with the counterparty. The FHLBNY had deposited $2.2 billion and $3.8 billion with derivative counterparties as cash collateral at December 31, 2009 and 2008. The FHLBNY is exposed to the risk of derivative counterparties defaulting on the terms of the derivative contracts and failing to return cash deposited with counterparties. If such an event was to occur, the FHLBNY would be forced to replace derivatives by executing similar derivative contracts with other counterparties. To the extent that the FHLBNY receives cash from the replacement trades that is less than the amount of cash deposited with the defaulting counterparty, the FHLBNY is exposed. Derivative counterparties holding the FHLBNY’s cash as pledged collateral were rated single-A and better at December 31, 2009, and based on credit analyses and collateral requirements, the management of the FHLBNY does not anticipate any credit losses on its derivative agreements.

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The FHLBNY uses collateral agreements to mitigate counterparty credit risk in derivatives. When the FHLBNY has more than one derivative transaction outstanding with a counterparty, and a legally enforceable master netting agreement exists with the counterparty, the exposure, less collateral held, represents the appropriate measure of credit risk. Substantially all derivative contracts are subject to master netting agreements or other right of offset arrangements.

The following table summarizes the FHLBNY’s credit exposure by counterparty credit rating (in thousands, except number of counterparties).

Table 68: Credit Exposure by Counterparty Credit Rating

	December 31, 2009
					Total Net
	Number of		Notional		Exposure at		Net Exposure after
Credit Rating	Counterparties		Balance		Fair Value		Cash Collateral 3
AAA		—	$	—	$	—	$	—
AA		7		45,652,167		684		684
A		8		88,711,243		—		—
Members (Note1 and Note2)		2		160,000		7,596		7,596
Delivery Commitments		—		4,210		—		—
Total		17	$	134,527,620	$	8,280	$	8,280

	December 31, 2008
					Total Net
	Number of		Notional		Exposure at		Net Exposure after
Credit Rating	Counterparties		Balance		Fair Value		Cash Collateral 3
AAA		1	$	9,167,456	$	—	$	—
AA		6		39,939,946		—		—
A		7		78,656,536		64,890		3,681
Members (Note1 and Note2)		3		150,000		16,555		16,555
Delivery Commitments		—		10,395		—		—
Total		17	$	127,924,333	$	81,445	$	20,236

Note 1:	Fair values of $7.6 million and $16.6 million comprising of intermediated transactions with members and interest-rate caps sold to members (with capped floating-rate advances) were collateralized at December 31, 2009 and December 31, 2008.
Note 2:	Members are required to pledge collateral to secure derivatives purchased by the FHLBNY as an intermediary on behalf of its members. Eligible collateral includes: (1) one-to-four-family and multi-family mortgages; (2) U.S. Treasury and government-agency securities; (3) mortgage-backed securities; and (4) certain other collateral which is real estate-related and has a readily ascertainable value, and in which the FHLBNY can perfect a security interest. As a result of the collateral agreements with its members, the FHLBNY believes that its maximum credit exposure due to the intermediated transactions was $0 at December 31, 2009 and December 31, 2008.
Note 3:	As reported in the Statements of Condition.

172

Risk measurement — Although notional amount is a commonly used measure of volume in the derivatives market, it is not a meaningful measure of market or credit risk since derivative counterparties do not exchange the notional amount (except in the case of foreign currency swaps of which the FHLBNY has none). Counterparties use the notional amounts of derivative instruments to calculate contractual cash flows to be exchanged. The fair value of a derivative in a gain position is a more meaningful measure of the FHLBNY’s current market exposure on derivatives. The FHLBNY estimates exposure to credit loss on derivative instruments by calculating the replacement cost, on a present value basis, to settle at current market prices all outstanding derivative contracts in a gain position, net of collateral pledged by the counterparty to mitigate the FHLBNY’s exposure. All derivative contracts with non-members are also subject to master netting agreements or other right of offset arrangements.

Exposure — In determining credit risk, the FHLBNY considers accrued interest receivable and payable, and the legal right to offset assets and liabilities by counterparty. The FHLBNY attempts to mitigate its exposure by requiring derivative counterparties to pledge cash collateral, if the amount of exposure is above the collateral threshold agreements. At December 31, 2009, the fair values of derivatives in a gain position were below the threshold and derivative counterparties pledged no cash to the FHLBNY. At December 31, 2008, derivative counterparties had pledged $61.2 million in cash as collateral to the FHLBNY.

At December 31, 2009, the FHLBNY had posted $2.2 billion in cash as collateral to derivative counterparties to mitigate derivatives in a net fair value liability (unfavorable) position. The FHLBNY is exposed to the extent that a counterparty may not re-pay the posted cash collateral to the FHLBNY under unforeseen circumstances, such as bankruptcy; in such an event the FHLBNY would then exercise its rights under the “International Swaps and Derivatives Association agreement” (“ISDA”) to replace the derivatives in a liability position (gain position for the acquiring counterparty) with another available counterparty in exchange for cash delivered to the FHLBNY. To the extent that the fair values of the replacement derivatives are less than the cash collateral posted, the FHLBNY may not receive cash equal to the amount posted received.

Derivative counterparty ratings — The Bank’s credit exposures at December 31, 2009, in a gain position, were primarily to member institutions on whose behalf the FHLBNY had acted as an intermediary or had sold interest rate caps, at the request of members, to create capped floating rate advance borrowings. The exposures were collateralized under standard collateral agreements with the FHLBNY’s member. Acting as an intermediary, the Bank had also purchased equivalent notional amounts of derivatives from unrelated derivative counterparties.

Risk mitigation — The FHLBNY attempts to mitigate derivative counterparty credit risk by contracting only with experienced counterparties with investment-grade credit ratings. Annually, the FHLBNY’s management and Board of Directors review and approve all non-member derivative counterparties. Management monitors counterparties on an ongoing basis for significant business events, including ratings actions taken by nationally recognized statistical rating organizations. All approved derivatives counterparties must enter into a master ISDA agreement with the FHLBNY and, in addition, execute the Credit Support Annex to the ISDA agreement that provides for collateral support at predetermined thresholds. These annexes contain enforceable provisions for requiring collateral on certain derivative contracts that are in gain positions. The annexes also define the maximum net unsecured credit exposure amounts that may exist before collateral delivery is required. Typically, the maximum amount is based upon an analysis of individual counterparty’s rating and exposure. The FHLBNY also attempts to manage counterparty credit risk through credit analysis, collateral management and other credit enhancements, such as guarantees, and by following the requirements set forth in the Finance Agency’s regulations.

Despite these risk mitigating policies and processes, on September 15, 2008, an event of default occurred under outstanding derivative contracts with total notional amounts of $16.5 billion between Lehman Brothers Special Financing Inc. (“LBSF”) and the FHLBNY when credit support provider Lehman Brothers Holdings Inc. commenced a filing under Chapter 11 of the U.S. Bankruptcy Code on September 15, 2008. Since the default, the FHLBNY has replaced most of the derivatives that had been executed between LBSF and the FHLBNY through new agreements with other derivative counterparties. The Lehman bankruptcy proceedings are ongoing.

173

Commitments, Contingencies and Off-Balance Sheet Arrangements

Consolidated obligations — Joint and several liability

Although the Bank is primarily liable only for its portion of consolidated obligations (i.e., those consolidated obligations issued on its behalf and those that have been transferred/assumed from other FHLBanks), it is also jointly and severally liable with the other FHLBanks for the payment of principal and interest on all of the consolidated obligations issued by the FHLBanks.

The Finance Agency, in its discretion, may require any FHLBank to make principal or interest payments due on any consolidated obligation, regardless of whether there has been a default by a FHLBank having primary liability. To the extent that a FHLBank makes any payment on a consolidated obligation on behalf of another FHLBank, the paying FHLBank shall be entitled to reimbursement from the FHLBank with primary liability. The FHLBank with primary liability would have a corresponding liability to reimburse the FHLBank providing assistance to the extent of such payment and other associated costs (including interest to be determined by the Finance Agency). However, if the Finance Agency determines that the primarily liable FHLBank is unable to satisfy its obligations, then the Finance Agency may allocate the outstanding liability among the remaining FHLBanks on a pro rata basis in proportion to each FHLBank’s participation in all consolidated obligations outstanding, or on any other basis that the Finance Agency may determine. No FHLBank has ever failed to make a payment on a consolidated obligation for which it was the primary obligor; as a result, the regulatory provisions for directing other FHLBanks to make payments on behalf of another FHLBank or allocating the liability among other FHLBanks have never been invoked. Consequently, the Bank has no means to determine how the Finance Agency might allocate among the other FHLBanks the obligations of a FHLBank that is unable to pay consolidated obligations for which such FHLBank is primarily liable. In the event the Bank is holding a consolidated obligation as an investment for which the Finance Agency would allocate liability among the 12 FHLBanks, the Bank might be exposed to a credit loss to the extent of its share of the assigned liability for that particular consolidated obligation (the Bank did not hold any consolidated obligations of other FHLBanks as investments at December 31, 2009). If principal or interest on any consolidated obligation issued by the FHLBank System is not paid in full when due, the Bank may not pay dividends to, or repurchase shares of stock from, any shareholder of the Bank.

Although the FHLBNY is primarily liable for those consolidated obligations issued on its behalf, it is also jointly and severally liable with the other FHLBanks for the payment of principal and interest on the consolidated obligations of all the FHLBanks. If the principal or interest on any consolidated obligation issued on behalf of the FHLBNY is not paid in full when due, the FHLBNY may not pay dividends to, or redeem or repurchase shares of stock from, any member or non-member stockholder until the Finance Agency approves the FHLBNY’s consolidated obligation payment plan or another remedy, and until the FHLBNY pays all the interest and principal currently due under all its consolidated obligations. The par amounts of the outstanding consolidated obligations of all 12 FHLBanks were $0.9 trillion, $1.3 trillion and $1.2 trillion at December 31, 2009, 2008 and 2007.

174

The Finance Agency, at its discretion, may require any FHLBank to make principal or interest payments due on any consolidated obligations. To the extent that an FHLBank makes any payment on a consolidated obligation on behalf of another FHLBank, the paying FHLBank shall be entitled to reimbursement from the non-complying FHLBank. However, if the Finance Agency determines that the non-complying FHLBank is unable to make the payment, then the Finance Agency may allocate the outstanding liability among the remaining FHLBanks in proportion to each FHLBank’s participation in all consolidated obligations outstanding or on any other basis determined by the Finance Agency. As discussed more fully in Note 19 to the financial statements, the FHLBNY does not believe that it will be called upon to pay the consolidated obligations of another FHLBank in the future. Accordingly, the FHLBNY has not recognized a liability for its joint and several obligations related to other FHLBanks’ consolidated obligations at December 31, 2009 or December 31, 2008.

Because the FHLBNY is jointly and severally liable for debt issued by other FHLBanks, the FHLBNY has not identified consolidated obligations outstanding by primary obligor. The FHLBNY does not believe that the identification of particular banks as the primary obligors on these consolidated obligations is relevant because all FHLBanks are jointly and severally obligated to pay all consolidated obligations. The identity of the primary obligor does not affect the FHLBNY’s investment decisions. The FHLBNY’s ownership of consolidated obligations in which other FHLBanks are primary obligors does not affect the FHLBNY’s “guarantee” on consolidated obligations as there is no automatic legal right of offset. Even if the FHLBNY were to claim an “offset,” the FHLBNY would still be jointly and severally obligated for any debt service shortfall caused by the FHLBanks’ failure to pay.

Off-balance sheet arrangements with respect to derivatives are discussed in detail in Note 17 to the audited financial statements accompanying this report.

175

The following table summarizes contractual obligations and other commitments as of December 31, 2009 (in thousands):

Table 69: Contractual Obligations and Other Commitments

(For more information, see Note 19 to the audited financial statements accompanying this report.)

	December 31, 2009
	Payments due or expiration terms by period
	Less than		One year		Greater than three		Greater than
	one year		to three years		years to five years		five years		Total
Contractual Obligations
Consolidated obligations-bonds at par 1	$	40,896,550	$	23,430,775	$	6,091,550	$	2,939,050	$	73,357,925
Mandatorily redeemable capital stock 1		102,453		16,766		2,118		4,957		126,294
Premises (lease obligations) 2		3,060		6,161		5,413		6,427		21,061
Total contractual obligations		41,002,063		23,453,702		6,099,081		2,950,434		73,505,280
Other commitments
Standby letters of credit		667,554		9,139		15,023		6,199		697,915
Consolidated obligations-bonds/ discount notes traded not settled		2,145,000		—		—		—		2,145,000
Firm commitment-advances		100,000		—		—		—		100,000
Open delivery commitments (MPF)		4,210		—		—		—		4,210
Total other commitments		2,916,764		9,139		15,023		6,199		2,947,125
Total obligations and commitments	$	43,918,827	$	23,462,841	$	6,114,104	$	2,956,633	$	76,452,405

1

Callable bonds contain exercise date or a series of exercise dates that may result in a shorter redemption period. Mandatorily redeemable capital stock is categorized by the dates at which the corresponding advances outstanding mature. Excess capital stock is redeemed at that time, and hence, these dates better represent the related commitments than the put dates associated with capital stock, under which stock may not be redeemed until the later of five years from the date the member becomes a nonmember or the related advance matures.

2

Immaterial amount of commitments for equipment leases are not included.

176

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market Risk Management. Market risk or interest rate risk (“IRR”) is the risk of loss to market value or future earnings that may result from changes in the interest rate environment. Embedded in IRR is a tradeoff of risk versus reward wherein the FHLBNY could earn higher income by having higher IRR through greater mismatches between its assets and liabilities at the cost of potentially significant declines in market value and future income if the interest rate environment turned against the FHLBNY’s expectations. The FHLBNY has opted to retain a modest level of IRR which allows it to preserve its capital value while generating steady and predictable income. In keeping with that philosophy, the FHLBNY’s balance sheet consists of predominantly short-term and LIBOR-based assets and liabilities. More than 80 percent of the FHLBNY’s financial assets are either short-term or LIBOR-based, and a similar percentage of its liabilities are also either short-term or LIBOR based. These positions protect the FHLBNY’s capital from large changes in value arising from interest rate or volatility changes.

The primary tool used by management to achieve the desired risk profile is the use of interest rate exchange agreements (“Swaps”). All the LIBOR-based advances are long-term advances that are swapped to 3- or 1-month LIBOR or possess adjustable rates which periodically reset to a LIBOR index. Similarly, a majority of the long-term consolidated obligations are swapped to 3- or 1-month LIBOR. These features create a relatively steady income that changes in concert with prevailing interest rate changes to maintain a spread to short-term rates.

Despite its conservative philosophy, IRR does arise from a number of aspects of the FHLBNY’s portfolio. These include the embedded prepayment rights, refunding needs, rate resets between the FHLBNY’s short-term assets and liabilities, and basis risks arising from differences between the yield curves associated with the FHLBNY’s assets and its liabilities. To address these risks, the FHLBNY uses certain key IRR measures including re-pricing gaps, duration of equity (“DOE”), value at risk (“VaR”), net interest income (“NII”) at risk, key rate durations (“KRD”), and forecasted dividend rates.

Risk Measurements. The FHLBNY’s Risk Management Policy sets up a series of risk limits that the FHLBNY calculates on a regular basis. The risk limits are as follows:

• The option-adjusted DOE is limited to a range of +/- four years in the rates unchanged case and to a range of +/- six years in the +/-200bps shock cases. Due to the low interest rate environment beginning in early 2008, the December 2008, March 2009, June 2009, September 2009, and December 2009 rates were too low for a meaningful parallel down-shock measurement.

• The one-year cumulative re-pricing gap is limited to 10 percent of total assets.

• The sensitivity of expected net interest income over a one-year period is limited to a - -15 percent change under both the +/-200bps shocks compared to the rates unchanged case.

• The potential decline in the market value of equity is limited to a 10 percent change under the +/-200bps shocks.

• KRD exposure at any of nine term points (3-month, 1-year, 2-year, 3-year, 5-year, 7-year, 10-year, 15-year, and 30-year) is limited to between +/-12 months.

177

The FHLBNY’s portfolio, including its derivatives, is tracked and the overall mismatch between assets and liabilities is summarized by using a DOE measure. The FHLBNY’s last five quarterly DOE results are shown in years in the table below (note that, due to the on-going low interest rate environment, there was no down-shock measurement performed between the fourth quarter of 2008 and the fourth quarter of 2009):

	Base Case DOE		-200bps DOE		+200bps DOE
December 31, 2008		-2.05		N/A		1.44
March 31, 2009		-2.24		N/A		1.23
June 30, 2009		-0.83		N/A		1.67
September 30, 2009		-0.39		N/A		3.88
December 31, 2009		0.42		N/A		3.68

The DOE has remained within its limits. Duration indicates any cumulative re-pricing/maturity imbalance in the FHLBNY’s financial assets and liabilities. A positive DOE indicates that, on average, the liabilities will re-price or mature sooner than the assets while a negative DOE indicates that, on average, the assets will re-price or mature earlier than the liabilities. The FHLBNY measures its DOE using software that incorporates any optionality within the FHLBNY’s portfolio using well-known and tested financial pricing theoretical models.

The FHLBNY does not solely rely on the DOE measure as a mismatch measure between its assets and liabilities. It also performs the more traditional gap measure that subtracts re-pricing/maturing liabilities from re-pricing/maturing assets over time. The FHLBNY observes the differences over various horizons, but has set a 10 percent of assets limit on cumulative re-pricings at the one-year point. This quarterly observation of the one-year cumulative re-pricing gap is provided in the table below and all values are below 10 percent of assets; well within the limit:

	One Year Re-
	pricing Gap
December 31, 2008	$9.764 Billion
March 31, 2009	$7.593 Billion
June 30, 2009	$5.936 Billion
September 30, 2009	$5.480 Billion
December 31, 2009	$4.626 Billion

178

The FHLBNY’s review of potential interest rate risk issues also includes the effect of changes in interest rates on expected net income. The FHLBNY projects asset and liability volumes and spreads over a one-year horizon and then simulates expected income and expenses from those volumes and other inputs. The effects of changes in interest rates are measured to test whether the FHLBNY has too much exposure in its net interest income over the coming twelve-month period. To measure the effect, the change to the spread in the shocks is calculated and compared against the base case and subjected to a -15 percent limit. The quarterly sensitivity of the FHLBNY’s expected net interest income under both +/-200bps shocks over the next twelve months is provided in the table below (note that, due to the on-going low interest rate environment, the down-shock measurement was not performed between the fourth quarter of 2008 and the fourth quarter of 2009):

	Sensitivity in		Sensitivity in
	the -200bps		the +200bps
	Shock		Shock
December 31, 2008		N/A		24.73	%
March 31, 2009		N/A		13.11	%
June 30, 2009		N/A		0.43	%
September 30, 2009		N/A		9.23	%
December 31, 2009		N/A		4.53	%

Aside from net interest income, the other significant impact on changes in the interest rate environment is the potential impact on the value of the portfolio. These calculated and quoted market values are estimated based upon their financial attributes including optionality and then re-estimated under the assumption that interest rates suddenly rise or fall by 200bps. The worst effect, whether it is the up or the down shock, is compared to the internal limit of 10 percent. The quarterly potential maximum decline in the market value of equity under these 200bps shocks is provided below (note that, due to the on-going low interest rate environment the down-shock measurement was not performed between the fourth quarter of 2008 and the fourth quarter of 2009):

	Down-shock		+200bps Change in
	Change in MVE		MVE
December 31, 2008		N/A		-0.43	%
March 31, 2009		N/A		1.01	%
June 30, 2009		N/A		-1.81	%
September 30, 2009		N/A		-4.68	%
December 31, 2009		N/A		-5.08	%

As noted, the potential declines under these shocks are within the FHLBNY’s limits of a maximum 10 percent.

179

The following table displays the FHLBNY’s maturity/re-pricing gaps as of December 31, 2009 (in millions):

	Interest Rate Sensitivity
	December 31, 2009
			More than			More than			More than
	Six months		six months to			one year to			three years to			More than
	or less		one year			three years			five years			five years
Interest-earning assets:
Non-MBS Investments	$	8,621	$	124		$	371		$	249		$	587
MBS Investments		6,773		903			2,420			1,167			879
Adjustable-rate loans and advances		14,101		—			—			—			—
Net unswapped		29,495		1,027			2,791			1,416			1,466
Fixed-rate loans and advances		9,588		7,853			16,124			8,254			34,814
Swaps hedging advances		63,852		(6,722	)		(14,389	)		(7,950	)		(34,791	)
Net fixed-rate loans and advances		73,441		1,131			1,735			304			23
Loans to other FHLBanks		—		—			—			—			—
Total interest-earning assets	$	102,935	$	2,158		$	4,526		$	1,720		$	1,489
Interest-bearing liabilities:
Deposits	$	2,590	$	—		$	—		$	—		$	—
Discount notes		28,770		2,057			—			—			—
Swapped discount notes		1,422		(1,422	)		—			—			—
Net discount notes		30,193		635			—			—			—
Consolidated Obligation Bonds
FHLB bonds		25,717		16,014			22,829			6,033			2,844
Swaps hedging bonds		39,617		(14,298	)		(19,513	)		(4,501	)		(1,305	)
Net FHLB bonds		65,334		1,716			3,316			1,532			1,539
Total interest-bearing liabilities	$	98,117	$	2,351		$	3,316		$	1,532		$	1,539
Post hedge gaps 1:
Periodic gap	$	4,819	$	(193	)	$	1,210		$	188		$	(50	)
Cumulative gaps	$	4,819	$	4,626		$	5,837		$	6,024		$	5,974

Note: Numbers may not add due to rounding.
1	Repricing gaps are estimated at the scheduled rate reset dates for floating rate instruments, and at maturity for fixed rate instruments. For callable instruments, the repricing period is estimated by the earlier of the estimated call date under the current interest rate environment or the instrument’s contractual maturity.

180

The following tables display the FHLBNY’s maturity/re-pricing gaps as of December 31, 2008 (in millions):

	Interest Rate Sensitivity
	December 31, 2008
			More than			More than			More than
	Six months		six months to			one year to			three years to			More than
	or less		one year			three years			five years			five years
Interest-earning assets:
Non-MBS Investments	$	18,298	$	405		$	404		$	126		$	259
MBS Investments		6,938		2,940			1,801			350			209
Adjustable-rate loans and advances		20,206		—			—			—			—
Net unswapped		45,442		3,345			2,206			475			468
Fixed-rate loans and advances		21,972		3,725			14,712			7,539			35,226
Swaps hedging advances		56,677		(2,842	)		(11,801	)		(6,864	)		(35,170	)
Net fixed-rate loans and advances		78,649		882			2,911			675			56
Loans to other FHLBanks		—		—			—			—			—
Total interest-earning assets	$	124,091	$	4,227		$	5,117		$	1,151		$	524
Interest-bearing liabilities:
Deposits	$	1,497	$	15		$	—		$	—		$	—
Discount notes		43,981		2,348			—			—			—
Swapped discount notes		2,031		(2,031	)		—			—			—
Net discount notes		46,012		318			—			—			—
Consolidated Obligation Bonds
FHLB bonds		36,367		16,153			19,613			5,405			3,441
Swaps hedging bonds		32,833		(14,640	)		(13,571	)		(3,178	)		(1,445	)
Net FHLB bonds		69,200		1,513			6,043			2,227			1,996
Total interest-bearing liabilities	$	116,709	$	1,846		$	6,043		$	2,227		$	1,996
Post hedge gaps 1:
Periodic gap	$	7,382	$	2,382		$	(926	)	$	(1,076	)	$	(1,472	)
Cumulative gaps	$	7,382	$	9,764		$	8,837		$	7,761		$	6,289

Note: Numbers may not add due to rounding.
1	Repricing gaps are estimated at the scheduled rate reset dates for floating rate instruments, and at maturity for fixed rate instruments. For callable instruments, the repricing period is estimated by the earlier of the estimated call date under the current interest rate environment or the instrument’s contractual maturity.

181

Operational Risk Management. Operational risk is the risk of loss resulting from the failures or inadequacies of internal processes, people, and systems, or resulting from external events. Operational risks include those arising from fraud, human error, computer system failures and a wide range of external events — from adverse weather to terrorist attacks. The management of these risks is the responsibility of the senior managers at the operating level. To assist them in discharging this responsibility and to ensure that operational risk is managed consistently throughout the organization, the FHLBNY has developed an operational risk management framework, which evolves as warranted by circumstances and changing conditions. The FHLBNY’s Operational Risk Management framework defines the core governing principles for operational risk management and provides the framework to identify, control, monitor, measure, and report operational risks in a consistent manner across the FHLBNY.

Risk and Control Self-Assessment. FHLBNY’s Risk and Control Self-Assessment incorporates standards for risk and control self-assessment which apply to all businesses and establish Risk and Control Self-Assessment as the process for identifying the risks inherent in a business’ activities and for evaluating and monitoring the effectiveness of the controls over those risks. It is the policy of the FHLBNY to require businesses and staff functions to perform a Risk and Control Self-Assessment on a periodic basis. The Risk and Control Self-Assessment must include documentation of the control environment as well as policies for assessing risks and controls, testing commensurate with risk level and tracking corrective action for control breakdowns or deficiencies. The Risk and Control Self-Assessment also must require periodic reporting to senior management and to the Board’s Audit and Risk Management Committees.

182

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

	PAGE
Financial Statements
Management’s Assessment of Internal Control over Financial Reporting		184
Report of Independent Registered Public Accounting Firm		185
Statements of Condition as of December 31, 2009 and 2008		186
Statements of Income for the years ended December 31, 2009, 2008 and 2007		187
Statements of Capital for the years ended December 31, 2009, 2008 and 2007		188
Statements of Cash Flows for the years ended December 31, 2009, 2008 and 2007		189
Notes to Financial Statements		191
Supplementary Data
Supplementary financial data for each full quarter within the two years ended December 31, 2009, are included in Item 6. SELECTED FINANCIAL DATA.		34

183

Federal Home Loan Bank of New York

Management’s Assessment of Internal Control over Financial Reporting

The management of the Federal Home Loan Bank of New York (the “Bank”) is responsible for establishing and maintaining adequate internal control over financial reporting. The Bank’s internal control over financial reporting is designed by, or under the supervision of, the Principal Executive Officer and the Principal Financial Officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with accounting principles generally accepted in the United States of America.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate. The Bank’s management assessed the effectiveness of the Bank’s internal control over financial reporting as of December 31, 2009. In making this assessment, it used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control-Integrated Framework. Based on its assessment, management of the Bank determined that as of December 31, 2009, the Bank’s internal control over financial reporting was effective based on those criteria.

PricewaterhouseCoopers LLP, the Bank’s independent registered public accounting firm that audited the accompanying Financial Statements has also issued an audit report on the effectiveness of internal control over financial reporting. Their report, which expresses an unqualified opinion on the effectiveness of the Bank’s internal control over financial reporting as of December 31, 2009, appears on the following page.

184

Federal Home Loan Bank of New York

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of the Federal Home Loan Bank of New York:

In our opinion, the accompanying statements of condition and the related statements of income, of capital and of cash flows present fairly, in all material respects, the financial position of the Federal Home Loan Bank of New York (the “Bank”) at December 31, 2009 and 2008, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2009, in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Bank maintained, in all material respects, effective internal control over financial reporting as of December 31, 2009, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Bank’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express opinions on these financial statements and on the Bank’s internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

As discussed in Note 1 to the financial statements, effective January 1, 2009, the Bank adopted guidance that revises the recognition and reporting requirements for other-than-temporary impairments of debt securities classified as held-to-maturity.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

PricewaterhouseCoopers LLP
New York, NY
March 25, 2010

185

Federal Home Loan Bank of New York

Statements of Condition (in thousands, except par value)
As of December 31, 2009 and 2008

	December 31,
	2009			2008
Assets
Cash and due from banks (Note 2)	$	2,189,252		$	18,899
Interest-bearing deposits (Note 3)		—			12,169,096
Federal funds sold		3,450,000			—
Available-for-sale securities, net of unrealized losses of $3,409 and $64,420 at December 31, 2009 and 2008 (Note 5)		2,253,153			2,861,869
Held-to-maturity securities (Note 4)
Long-term securities		10,519,282			10,130,543
Certificates of deposit		—			1,203,000
Advances (Note 6)		94,348,751			109,152,876
Mortgage loans held-for-portfolio, net of allowance for credit losses of $4,498 and $1,406 at December 31, 2009 and 2008 (Note 7)		1,317,547			1,457,885
Accrued interest receivable		340,510			492,856
Premises, software, and equipment		14,792			13,793
Derivative assets (Note 17)		8,280			20,236
Other assets		19,339			18,838
Total assets	$	114,460,906		$	137,539,891
Liabilities and capital
Liabilities
Deposits (Note 8)
Interest-bearing demand	$	2,616,812		$	1,333,750
Non-interest bearing demand		6,499			828
Term		7,200			117,400
Total deposits		2,630,511			1,451,978
Consolidated obligations, net (Note 10)
Bonds (Includes $6,035,741 and $998,942 at December 31, 2009 and 2008 at fair value under the fair value option)		74,007,978			82,256,705
Discount notes		30,827,639			46,329,906
Total consolidated obligations		104,835,617			128,586,611
Mandatorily redeemable capital stock (Note 11)		126,294			143,121
Accrued interest payable		277,788			426,144
Affordable Housing Program (Note 12)		144,489			122,449
Payable to REFCORP (Note 12)		24,234			4,780
Derivative liabilities (Note 17)		746,176			861,660
Other liabilities		72,506			75,753
Total liabilities		108,857,615			131,672,496
Commitments and Contingencies (Notes 10, 12, 17 and 19)
Capital (Note 13)
Capital stock ($100 par value), putable, issued and outstanding shares:
50,590 and 55,857 at December 31, 2009 and 2008		5,058,956			5,585,700
Retained earnings		688,874			382,856
Accumulated other comprehensive income (loss) (Note 14)
Net unrealized loss on available-for-sale securities		(3,409	)		(64,420	)
Non-credit portion of OTTI on held-to-maturity securities, net of accretion		(110,570	)		—
Net unrealized loss on hedging activities		(22,683	)		(30,191	)
Employee supplemental retirement plans (Note 16)		(7,877	)		(6,550	)
Total capital		5,603,291			5,867,395
Total liabilities and capital	$	114,460,906		$	137,539,891

The accompanying notes are an integral part of these financial statements.

186

Federal Home Loan Bank of New York

Statements of Income (in thousands, except per share data)
Years Ended December 31, 2009, 2008, and 2007

	2009			2008			2007
Interest income
Advances (Note 6)	$	1,270,643		$	3,030,799		$	3,495,312
Interest-bearing deposits (Note 3)		19,865			28,012			3,333
Federal funds sold		3,238			77,976			192,845
Available-for-sale securities (Note 5)		28,842			80,746			—
Held-to-maturity securities (Note 4)
Long-term securities		461,491			531,151			596,761
Certificates of deposit		1,626			232,300			408,308
Mortgage loans held-for-portfolio (Note 7)		71,980			77,862			78,937
Loans to other FHLBanks and other (Note 20)		2			33			9
Total interest income		1,857,687			4,058,879			4,775,505
Interest expense
Consolidated obligations-bonds (Note 10)		953,970			2,620,431			3,215,560
Consolidated obligations-discount notes (Note 10)		193,041			697,729			937,534
Deposits (Note 8)		2,512			36,193			106,777
Mandatorily redeemable capital stock (Note 11)		7,507			8,984			11,731
Cash collateral held and other borrowings (Note 20)		49			1,044			4,516
Total interest expense		1,157,079			3,364,381			4,276,118
Net interest income before provision for credit losses		700,608			694,498			499,387
Provision for credit losses on mortgage loans		3,108			773			40
Net interest income after provision for credit losses		697,500			693,725			499,347
Other income (loss)
Service fees		4,165			3,357			3,324
Instruments held at fair value — Unrealized gain (loss) (Note 18)		15,523			(8,325	)		—
Total OTTI losses		(140,912	)		—			—
Portion of loss recognized in other comprehensive income		120,096			—			—
Net impairment losses recognized in earnings		(20,816	)		—			—
Net realized and unrealized gain (loss) on derivatives and hedging activities (Note 17)		164,700			(199,259	)		18,356
Net realized gain from sale of available-for-sale and redemption of held-to-maturity securities (Notes 4 and 5)		721			1,058			—
Provision for derivative counterparty credit losses (Notes 17 and 19)		—			(64,523	)		—
Other		77			233			(8,180	)
Total other income (loss)		164,370			(267,459	)		13,500
Other expenses
Operating		76,065			66,263			66,569
Finance Agency and Office of Finance		8,110			6,395			5,193
Total other expenses		84,175			72,658			71,762
Income before assessments		777,695			353,608			441,085
Affordable Housing Program (Note 12)		64,251			29,783			37,204
REFCORP (Note 12)		142,689			64,765			80,776
Total assessments		206,940			94,548			117,980
Net income	$	570,755		$	259,060		$	323,105
Basic earnings per share (Note 15)	$	10.88		$	5.26		$	8.57
Cash dividends paid per share	$	4.95		$	6.55		$	7.51

The accompanying notes are an integral part of these financial statements.

187

Federal Home Loan Bank of New York

Statements of Capital (in thousands, except per share data)
Years Ended December 31, 2009, 2008, and 2007

										Accumulated
	Capital Stock1									Other						Total
	Class B						Retained			Comprehensive			Total			Comprehensive
	Shares			Par Value			Earnings			Income (Loss)			Capital			Income (Loss)
Balance, December 31, 2006		35,463		$	3,546,253		$	368,688		$	(10,548	)	$	3,904,393
Proceeds from sale of capital stock		32,535			3,253,548			—			—			3,253,548
Redemption of capital stock		(22,448	)		(2,244,849	)		—			—			(2,244,849	)
Shares reclassified to mandatorily redeemable capital stock		(1,870	)		(186,981	)		—			—			(186,981	)
Cash dividends ($7.51 per share) on capital stock		—			—			(273,498	)		—			(273,498	)
Net Income		—			—			323,105			—			323,105		$	323,105
Net change in Accumulated other comprehensive income (Loss):
Net unrealized loss on available-for-sale securities		—			—			—			(373	)		(373	)		(373	)
Hedging activities		—			—			—			(25,452	)		(25,452	)		(25,452	)
Employee supplemental retirement plans		—			—			—			698			698			698
																$	297,978
Balance, December 31, 2007		43,680		$	4,367,971		$	418,295		$	(35,675	)	$	4,750,591
Proceeds from sale of capital stock		51,315		$	5,131,525		$	—		$	—		$	5,131,525
Redemption of capital stock		(38,490	)		(3,849,038	)		—			—			(3,849,038	)
Shares reclassified to mandatorily redeemable capital stock		(648	)		(64,758	)		—			—			(64,758	)
Cash dividends ($6.55 per share) on capital stock		—			—			(294,499	)		—			(294,499	)
Net Income		—			—			259,060			—			259,060		$	259,060
Net change in Accumulated other comprehensive income (Loss):
Net unrealized loss on available-for-sale securities		—			—			—			(64,047	)		(64,047	)		(64,047	)
Hedging activities		—			—			—			24			24			24
Employee supplemental retirement plans		—			—			—			(1,463	)		(1,463	)		(1,463	)
																$	193,574
Balance, December 31, 2008		55,857		$	5,585,700		$	382,856		$	(101,161	)	$	5,867,395
Proceeds from sale of capital stock		32,095		$	3,209,506		$	—		$	—		$	3,209,506
Redemption of capital stock		(36,864	)		(3,686,402	)		—			—			(3,686,402	)
Shares reclassified to mandatorily redeemable capital stock		(498	)		(49,848	)		—			—			(49,848	)
Cash dividends ($4.95 per share) on capital stock		—			—			(264,737	)		—			(264,737	)
Net Income		—			—			570,755			—			570,755		$	570,755
Net change in Accumulated other comprehensive income (Loss):
Non-credit portion of OTTI on held-to-maturity securities, net of accretion		—			—			—			(110,570	)		(110,570	)		(110,570	)
Net unrealized gain on available-for-sale securities		—			—			—			61,011			61,011			61,011
Hedging activities		—			—			—			7,508			7,508			7,508
Employee supplemental retirement plans		—			—			—			(1,327	)		(1,327	)		(1,327	)
																$	527,377
Balance, December 31, 2009		50,590		$	5,058,956		$	688,874		$	(144,539	)	$	5,603,291

¹ Putable stock

The accompanying notes are an integral part of these financial statements.

188

Federal Home Loan Bank of New York

Statements of Cash Flows — (in thousands)
Years Ended December 31, 2009, 2008, and 2007

	2009			2008			2007
Operating activities
Net Income	$	570,755		$	259,060		$	323,105
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization:
Net premiums and discounts on consolidated obligations, investments, mortgage loans and other adjustments		(120,715	)		(78,409	)		106,372
Concessions on consolidated obligations		7,006			8,772			12,810
Premises, software, and equipment		5,405			4,971			4,498
Provision for derivative counterparty credit losses		—			64,523			—
Provision for credit losses on mortgage loans		3,108			773			40
Net realized (gains) from redemption of held-to-maturity securities		(281	)		(1,058	)		—
Net realized (gains) from sale of available-for-sale securities		(440	)		—			—
Credit impairment losses on held-to-maturity securities		20,816			—			—
Change in net fair value adjustments on derivatives and hedging activities		188,151			(386,416	)		(6,387	)
Change in fair value adjustments on financial instruments held at fair value		(15,523	)		8,325			—
Net change in:
Accrued interest receivable		152,345			69,467			(156,200	)
Derivative assets due to accrued interest		246,371			185,343			70,134
Derivative liabilities due to accrued interest		(252,684	)		78,731			(7,538	)
Other assets		814			(67,367	)		(18	)
Affordable Housing Program liability		22,040			3,397			17,155
Accrued interest payable		(153,033	)		(222,109	)		(79,345	)
REFCORP liability		19,454			(19,218	)		6,522
Other liabilities		(1,575	)		3,813			(18,483	)
Total adjustments		121,259			(346,462	)		(50,440	)
Net cash provided (used) by operating activities		692,014			(87,402	)		272,665
Investing activities
Net change in:
Interest-bearing deposits		13,768,437			(15,609,066	)		(396,400	)
Federal funds sold		(3,450,000	)		4,381,000			(720,000	)
Deposits with other FHLBanks		(25	)		(67	)		(10	)
Premises, software, and equipment		(6,404	)		(5,610	)		(6,545	)
Held-to-maturity securities:
Long-term securities
Purchased		(3,511,033	)		(2,284,435	)		(1,080,245	)
Repayments		2,919,664			2,334,966			2,044,987
In-substance maturities		77,701			102,390			—
Net change in certificates of deposit		1,203,000			9,097,200			(4,709,200	)
Available-for-sale securities:
Purchased		(710	)		(3,244,495	)		(13,704	)
Proceeds		543,924			335,314			—
Proceeds from sales		132,461			653			144
Advances:
Principal collected		370,709,084			596,335,124			397,682,249
Made		(358,067,057	)		(619,122,796	)		(419,285,033	)
Mortgage loans held-for-portfolio:
Principal collected		285,888			170,272			165,262
Purchased and originated		(150,058	)		(138,255	)		(175,148	)
Principal collected on other loans made		—			—			113
Loans to other FHLBanks
Loans made		(472,000	)		(661,000	)		(55,000	)
Principal collected		472,000			716,000			—
Net cash provided (used) by investing activities		24,454,872			(27,592,805	)		(26,548,530	)

The accompanying notes are an integral part of these financial statements.

189

Federal Home Loan Bank of New York
Statements of Cash Flows — (in thousands)
Years Ended December 31, 2009, 2008, and 2007

	2009			2008			2007
Financing activities
Net change in:
Deposits and other borrowings 1	$	772,634		$	328,165		$	(766,373	)
Short-term loans from other FHLBanks:
Proceeds from loans		135,000			1,260,000			662,000
Payments for loans		(135,000	)		(1,260,000	)		(662,000	)
Consolidated obligation bonds:
Proceeds from issuance		54,502,275			62,035,840			42,535,228
Payments for maturing and early retirement		(62,024,547	)		(47,118,882	)		(38,180,904	)
Payments for transfers to other FHLBanks		—			—			(490,884	)
Consolidated obligation discount notes:
Proceeds from issuance		862,167,891			686,114,086			441,178,795
Payments for maturing		(877,586,478	)		(674,495,767	)		(418,707,804	)
Capital stock:
Proceeds from issuance		3,209,506			5,131,525			3,253,548
Payments for redemption / repurchase		(3,686,402	)		(3,849,038	)		(2,244,849	)
Redemption of Mandatorily redeemable capital stock		(66,675	)		(160,233	)		(58,335	)
Cash dividends paid 2		(264,737	)		(294,499	)		(273,498	)
Net cash (used) provided by financing activities		(22,976,533	)		27,691,197			26,244,924
Net increase (decrease) in cash and cash equivalents		2,170,353			10,990			(30,941	)
Cash and cash equivalents at beginning of the period		18,899			7,909			38,850
Cash and cash equivalents at end of the period	$	2,189,252		$	18,899		$	7,909
Supplemental disclosures:
Interest paid	$	1,401,932		$	2,821,378		$	3,419,404
Affordable Housing Program payments 3	$	42,211		$	26,386		$	20,050
REFCORP payments	$	123,235		$	83,983		$	74,253
Transfers of mortgage loans to real estate owned	$	1,400		$	755		$	356
Portion of non-credit OTTI losses on held-to-maturity securities	$	120,096		$	—		$	—

1	Cash flows from derivatives considered as financing activity — $343,018 cash out-flows in 2009; $450,393 cash in-flows in 2008; and $0 in 2007.
2	Does not include payments to holders of Mandatorily redeemable capital stock.
3	AHP payments = (beginning accrual - ending accrual) + AHP assessment for the period; payments represent funds released to the Affordable Housing Program.

The accompanying notes are an integral part of these financial statements.

190

Federal Home Loan Bank of New York
Notes to Financial Statements

Background

The Federal Home Loan Bank of New York (“FHLBNY” or “the Bank”) is a federally chartered corporation, exempt from federal, state and local taxes except real property taxes. It is one of twelve district Federal Home Loan Banks (“FHLBanks”). The FHLBanks are U.S. government-sponsored enterprises (“GSEs”), organized under the authority of the Federal Home Loan Bank Act of 1932, as amended (“FHLBank Act”). Each FHLBank is a cooperative owned by member institutions located within a defined geographic district. The members purchase capital stock in the FHLBank and receive dividends on their capital stock investment. The FHLBNY’s defined geographic district is New Jersey, New York, Puerto Rico, and the U.S. Virgin Islands. The FHLBNY provides a readily available, low-cost source of funds for its member institutions. The FHLBNY does not have any wholly or partially owned subsidiaries, nor does it have an equity position in any partnerships, corporations, or off-balance-sheet special purpose entities.

The FHLBNY obtains its funds from several sources. A primary source is the issuance of FHLBank debt instruments, called consolidated obligations, to the public. The issuances and servicing of consolidated obligations are performed by the Office of Finance, a joint office of the FHLBanks. These debt instruments represent the joint and several obligations of all the FHLBanks. Additional sources of FHLBNY funding are member deposits and the issuance of capital stock. Deposits may be accepted from member financial institutions and federal instrumentalities.

Members of the cooperative must purchase FHLBNY stock according to regulatory requirements (For more information, see Note 11 — Mandatorily Redeemable Capital Stock and Note 13 — Capital). The business of the cooperative is to provide liquidity for the members (primarily in the form of loans referred to as “advances”) and to provide a return on members’ investment in FHLBNY stock in the form of a dividend. Since the members are both stockholders and customers, the Bank operates such that there is a trade-off between providing value to them via low pricing for advances with a relatively lower dividend versus higher advances pricing with a relatively higher dividend. The FHLBNY is managed to deliver balanced value to members, rather than to maximize profitability or advance volume through low pricing.

All federally insured depository institutions, insured credit unions and insurance companies engaged in residential housing finance can apply for membership in the FHLBank in their district. All members are required to purchase capital stock in the FHLBNY as a condition of membership. A member of another FHLBank or a financial institution that is not a member of any FHLBank may also hold FHLBNY stock as a result of having acquired an FHLBNY member. Because the Bank operates as a cooperative, the FHLBNY conducts business with related parties in the normal course of business and considers all members and non-member stockholders as related parties in addition to the other FHLBanks. See Note 20 — Related party transactions.

The FHLBNY’s primary business is making collateralized advances to members which is the principal factor that impacts the financial condition of the FHLBNY.

Since July 30, 2008, the FHLBNY has been supervised and regulated by the Federal Housing Finance Agency (“Finance Agency”), which is an independent agency in the executive branch of the U.S. government. With the passage of the “Housing and Economic Recovery Act of 2008” (“Housing Act”), the Finance Agency was established and became the new independent Federal regulator (the “Regulator”) of the FHLBanks, effective July 30, 2008. The Federal Housing Finance Board (“Finance Board”), the FHLBanks’ former regulator, was merged into the Finance Agency as of October 27, 2008. The Finance Board was abolished one year after the date of enactment of the Housing Act. Finance Board regulations, orders, determinations and resolutions remain in effect until modified, terminated, set aside or superseded in accordance with the Housing Act by the FHFA Director, a court of competent jurisdiction or by operation of the law.

191

Federal Home Loan Bank of New York
Notes to Financial Statements

As of July 2008, the FHLBNY is supervised and regulated by the Federal Housing Finance Agency (“Finance Agency”), which is an independent agency in the executive branch of the U.S. government. The Finance Agency’s mission statement is to provide effective supervision, regulation and housing mission oversight of Fannie Mae, Freddie Mac and the Federal Home Loan Banks to promote their safety and soundness, support housing finance and affordable housing, and to support a stable and liquid mortgage market. However, while the Finance Agency establishes regulations governing the operations of the FHLBanks, the Bank functions as a separate entity with its own management, employees and board of directors.

Tax Status

The FHLBanks, including the FHLBNY, are exempt from ordinary federal, state, and local taxation except for local real estate taxes.

Assessments

Resolution Funding Corporation (“REFCORP”) Assessments. Although the FHLBNY is exempt from ordinary federal, state, and local taxation except for local real estate taxes, it is required to make payments to REFCORP.

REFCORP was established by Congress in 1989 to help facilitate the U.S. government’s bailout of failed financial institutions. The REFCORP assessments are used by the U.S. Treasury to pay a portion of the annual interest expense on long-term obligations issued to finance a portion of the cost of the bailout. Principal of those long-term obligations is paid from a segregated account containing zero-coupon U.S. government obligations, which were purchased using funds that Congress directed the FHLBanks to provide for that purpose in 1989.

Each FHLBank is required to pay 20 percent of income calculated in accordance with accounting principles generally accepted in the U.S. (“GAAP”) after the assessment for the Affordable Housing Program, but before the assessment for REFCORP. The Affordable Housing Program and REFCORP assessments are calculated simultaneously because of their dependence on each other. The FHLBNY accrues its REFCORP assessment on a monthly basis.

The Resolution Funding Corporation has been designated as the calculation agent for the Affordable Housing Program and REFCORP assessments. Each FHLBank provides the amount of quarterly income before Affordable Housing Program and REFCORP assessments and other information to the Resolution Funding Corporation, which then performs the calculations for each quarter end.

192

Federal Home Loan Bank of New York
Notes to Financial Statements

Affordable Housing Program (“AHP”) Assessments. Section 10(j) of the FHLBank Act requires each FHLBank to establish an Affordable Housing Program. Each FHLBank provides subsidies in the form of direct grants and below-market interest rate advances to members who use the funds to assist in the purchase, construction, or rehabilitation of housing for very low-, low-, and moderate-income households. Annually, the FHLBanks must set aside for the Affordable Housing Program the greater of $100 million or 10 percent of regulatory defined net income. Regulatory defined net income is GAAP net income before interest expense related to mandatorily redeemable capital stock under the accounting guidance for certain financial instruments with characteristics of both liabilities and equity, and the assessment for Affordable Housing Program, but after the assessment for REFCORP. The exclusion of interest expense related to mandatorily redeemable capital stock is a regulatory interpretation of the Finance Agency. The FHLBNY accrues the AHP expense monthly.

Note 1. Significant Accounting Policies and Estimates, and Recently Issued Accounting Standards and Interpretations.

Significant Accounting Policies and Estimates

The FHLBNY has identified certain accounting policies that it believes are significant because they require management to make subjective judgments about matters that are inherently uncertain and because of the likelihood that materially different amounts would be reported under different conditions or by using different assumptions. These policies include estimating the allowance for credit losses on the advance and mortgage loan portfolios, evaluating the impairment of the Bank’s securities portfolios, estimating the liabilities for employee benefit programs, and estimating fair values of certain assets and liabilities.

Fair Value Measurements and Disclosures — The accounting standard on fair value measurements and disclosures discusses how entities should measure fair value based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources or those that can be directly corroborated to market sources, while unobservable inputs reflect the FHLBNY’s market assumptions. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction in the principal or most advantageous market for the asset or liability between market participants at the measurement date. This definition is based on an exit price rather than transaction or entry price.

Valuation Techniques — Three valuation techniques are prescribed under the fair value measurement standards — Market approach, Income approach and Cost approach. Valuation techniques for which sufficient data is available and that are appropriate under the circumstances should be used.

In determining fair value, FHLBNY uses various valuation methods, including both the market and income approaches.

• Market approach — This technique uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities.

• Income approach — This technique uses valuation techniques to convert future amounts (for example, cash flows or earnings) to a single present amount (discounted), based on assumptions used by market participants. The present value technique used to measure fair value depends on the facts and circumstances specific to the asset or liability being measured and the availability of data.

• Cost approach — This approach is based on the amount that currently would be required to replace the service capacity of an asset (often referred to as current replacement cost).

193

Federal Home Loan Bank of New York
Notes to Financial Statements

The accounting guidance on fair value measurements and disclosures establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability, and would be based on market data obtained from sources independent of FHLBNY. Unobservable inputs are inputs that reflect FHLBNY’s assumptions about the parameters market participants would use in pricing the asset or liability, and would be based on the best information available in the circumstances.

The fair value hierarchy is broken down into three levels based on the reliability of inputs as follows:

Level 1 — Quoted prices for identical instruments in active markets.

Level 2 — Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-based valuations in which all significant inputs and significant parameters are observable in active markets.

Level 3 — Valuations based upon valuation techniques in which significant inputs and significant parameters are unobservable.

The availability of observable inputs can vary from product to product and is affected by a wide variety of factors including, for example, the characteristics peculiar to the transaction. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by FHLBNY in determining fair value is greatest for instruments categorized as Level 3. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purpose the level in the fair value hierarchy within which the fair value measurement falls is determined based on the lowest level input that is significant to the fair value measurement in its entirety.

At December 31, 2009 and 2008, the FHLBNY measured and recorded fair values using the above guidance for derivatives, available-for-sale securities, and certain consolidated obligation bonds that were designated under the fair value option accounting (“FVO”). At December 31, 2009 and 2008, the Bank had designated consolidated obligation debt of $6.0 billion and $983.0 million under the FVO. Held-to-maturity securities determined to be credit impaired or OTTI at December 31, 2009 were also measured at fair value on a non-recurring basis. Recorded fair values of OTTI securities were $42.9 million at December 31, 2009. No fair values were recorded on a non-recurring basis at December 31, 2008.

Fair Values of Derivative positions — The FHLBNY is an end-user of over-the-counter (“OTC”) derivatives to hedge assets and liabilities under hedge accounting rules to mitigate fair value risks. In addition, the Bank records the fair value of an insignificant amount of mortgage-delivery commitments as derivatives. For additional information, see Note 17 - Derivatives and hedging activities.

Valuations of derivative assets and liabilities reflect the value of the instrument including the value associated with counterparty risk. Derivative values also take into account the FHLBNY’s own credit standing. The computed fair values of the FHLBNY’s OTC derivatives take into consideration the effects of legally enforceable master netting agreements that allow the FHLBNY to settle positive and negative positions and offset cash collateral with the same counterparty on a net basis. The agreements include collateral thresholds that reflect the net credit differential between the FHLBNY and its derivative counterparties. On a contract-by-contract basis, the collateral and netting arrangements sufficiently mitigated the impact of the credit differential between the FHLBNY and its derivative counterparties to an immaterial level such that an adjustment for nonperformance risk was not deemed necessary. Fair values of the derivatives were computed using quantitative models and employed multiple market inputs including interest rates, prices and indices to generate continuous yield or pricing curves and volatility factors. These multiple market inputs were predominantly actively quoted and verifiable through external sources, including brokers and market transactions.

194

Federal Home Loan Bank of New York
Notes to Financial Statements

Fair Values of investments classified as available-for-sale securities — Changes in the values of available-for-sale securities are recorded in Accumulated other comprehensive income (loss), a component of members’ capital, with an offset to the recorded value of the investments in the Statements of Condition. The Bank’s investments classified as available-for-sale (“AFS”) are comprised of mortgage-backed securities that are GSE issued, variable-rate, collateralized mortgage obligations and are marketable at their recorded fair values. A small percentage of the AFS portfolio at December 31, 2009 and 2008 consisted of investments in equity and bond mutual funds held by grantor trusts owned by the FHLBNY. The unit prices, or the “Net asset values,” of the underlying mutual funds were available through publicly viewable web sites and the units were marketable at recorded fair values.

The fair values of these investment securities are estimated by management using specialized pricing services that employ pricing models or quoted prices of securities with similar characteristics. Inputs into the pricing models are market based and observable. Examples of securities, which would generally be classified within Level 2 of the valuation hierarchy and valued using the “market approach” as defined under the accounting standard for fair value measurements and disclosures, include GSE issued collateralized mortgage obligations and money market funds.

See Note 18 — Fair Values of financial instruments — for additional disclosures about fair values and Levels associated with assets and liabilities recorded on the Bank’s Statements of Condition at December 31, 2009 and 2008.

Fair Value of held-to-maturity securities on a Nonrecurring Basis — Certain held-to-maturity investment securities are measured at fair value on a nonrecurring basis; that is, they are not measured at fair value on an ongoing basis but are subject to fair-value adjustments when there is evidence of other-than-temporary impairment. In accordance with the guidance on recognition and presentation of other-than-temporary impairment, certain held-to-maturity mortgage-backed securities were determined to be credit impaired at December 31, 2009 and the securities were recorded at their fair values of $42.9 million on a non-recurring basis. For more information, see Note 4 — Held-to-maturity securities.

Financial Assets and Financial Liabilities recorded under the Fair Value Option — The accounting standards on the fair value option for financial assets and liabilities, created a fair value option (“FVO”) allowing, but not requiring, an entity to irrevocably elect fair value as the initial and subsequent measurement attribute for certain financial assets and financial liabilities with changes in fair value recognized in earnings as they occur. In the third quarter of 2008 and thereafter, the FHLBNY has elected the FVO designation for certain consolidated obligation bonds. The changes in fair values of the designated bonds are economically hedged by interest rate swaps. See Note 18 — Fair Values of financial instruments for more information.

Investments

Early adoption by the FHLBNY of the guidance on disclosures about the fair value of financial instruments at January 1, 2009 required the Bank to incorporate certain clarifications and definitions in its investment policies. The new guidance amends the accounting rules for investments in debt and equity securities, and is primarily intended to provide greater clarity to investors about the credit and noncredit component of an Other-than-temporary impairment (“OTTI”) event and to more effectively communicate when an OTTI event has occurred. The new guidance has been incorporated in the Bank’s investment policies as summarized below.

195

Federal Home Loan Bank of New York
Notes to Financial Statements

Held-to-maturity securities — The FHLBNY classifies investments for which it has both the ability and intent to hold to maturity as held-to-maturity investments. Such investments are recorded at amortized cost basis, which includes adjustments made to the cost of an investment for accretion and amortization of discounts and premiums, collection of cash, and fair value hedge accounting adjustments. If a held-to-maturity security is determined to be OTTI, the amortized cost basis of the security is adjusted for credit losses. Amortized cost basis of a held-to-maturity OTTI security is further adjusted for impairment related to all other factors (also referred to as the non-credit component of OTTI) and recognized in Accumulated other comprehensive income (loss); the adjusted amortized cost basis is the carrying value of the OTTI security as reported in the Statements of Condition. Carrying value for a held-to-maturity security that is not OTTI is its amortized cost basis.

Under the accounting guidance for investments in debt and equity securities, changes in circumstances may cause the FHLBNY to change its intent to hold certain securities to maturity without calling into question its intent to hold other debt securities to maturity in the future. Thus, the sale or transfer of a held-to-maturity security due to changes in circumstances, such as evidence of significant deterioration in the issuer’s creditworthiness or changes in regulatory requirements, is not considered inconsistent with its original classification. Other events that are isolated, nonrecurring, and unusual for the FHLBNY that could not have been reasonably anticipated may cause the FHLBNY to sell or transfer a held-to-maturity security without necessarily calling into question its intent to hold other debt securities to maturity. The Bank did not transfer or sell any held-to-maturity securities due to changes in circumstances in 2009, 2008 or 2007.

In accordance with accounting guidance for investments in debt and equity securities, sales of debt securities that meet either of the following two conditions may be considered as maturities for purposes of the classification of securities: (1) the sale occurs near enough to its maturity date (or call date if exercise of the call is probable) such that interest rate risk is substantially eliminated as a pricing factor and the changes in market interest rates would not have a significant effect on the security’s fair value, or (2) the sale of a security occurs after the FHLBNY has already collected a substantial portion (at least 85 percent) of the principal outstanding at acquisition.

Available-for-sale securities — The FHLBNY classifies investments that it may sell before maturity as available-for-sale and carries them at fair value.

Until available-for-sale securities (“AFS”) are sold or expected to be sold, changes in fair values are recorded in Accumulated other comprehensive income (loss) as Net unrealized gain or (loss) on available-for-sale securities. If available-for-sale securities had been hedged under a fair value hedge qualifying for hedge accounting, the FHLBNY would record the portion of the change in fair value related to the risk being hedged in Other income (loss) as a Net realized and unrealized gain (loss) on derivatives and hedging activities together with the related change in the fair value of the derivative, and would record the remainder of the change in Accumulated other comprehensive income (loss) as a Net unrealized gain (loss) on available-for-sale securities. If available-for-sale securities had been hedged under a cash flow hedge qualifying for hedge accounting, the FHLBNY would record the effective portion of the change in value of the derivative related to the risk being hedged in Accumulated other comprehensive income (loss) (“AOCI”) as a Net unrealized gain (loss) on derivatives and hedging activities. The ineffective portion would be recorded in Other income (loss) and presented as a Net realized and unrealized gain (loss) on derivatives and hedging activities.

196

Federal Home Loan Bank of New York
Notes to Financial Statements

The FHLBNY computes the amortization and accretion of premiums and discounts on mortgage-backed securities using the level-yield method over the estimated lives of the securities. The FHLBNY’s estimated life method requires a retrospective adjustment of the effective yield each time the FHLBNY changes the estimated life as if the new estimate had been known at the original acquisition date of the asset.

The FHLBNY computes the amortization and accretion of premiums and discounts on investments other than mortgage-backed securities using the level-yield method to the contractual maturities of the investments.

The FHLBNY computes gains and losses on sales of investment securities using the specific identification method and includes these gains and losses in Other income (loss). The FHLBNY treats securities purchased under agreements to resell as collateralized financings because the counterparty retains control of the securities.

Other-than-temporary impairment (“OTTI”) — Accounting and Governance Policies — Impairment analysis, Pricing of mortgage-backed securities, and Bond insurer methodology.

The FHLBNY regularly evaluates its investments for impairment and determines if unrealized losses are temporary based in part on the creditworthiness of the issuers, and in part on the underlying collateral within the structure of the security and the cash flows expected to be collected on the security. A security is considered impaired if its fair value is less than its amortized cost basis. If management has made a decision to sell such an impaired security, OTTI is considered to have occurred. If a decision to sell the impaired investment has not been made, but management concludes that it is more likely than not that it will be required to sell such a security before recovery of the amortized cost basis of the security, an OTTI is also considered to have occurred.

Even if management does not intend to sell such an impaired security, an OTTI has occurred if cash flow analysis determines that a credit loss exists. The difference between the present value of the cash flows expected to be collected and the amortized cost basis is a credit loss. To determine if a credit loss exists, management compares the present value of the cash flows expected to be collected to the amortized cost basis of the security. If the present value of the cash flows expected to be collected is less than the security’s amortized cost, an OTTI exists, irrespective of whether management will be required to sell such a security. The Bank’s methodology to calculate the present value of expected cash flows is to discount the expected cash flows (principal and interest) of a fixed-rate security, that is being evaluated for OTTI, by using the effective interest rate of the security as of the date it was acquired. For a variable-rate security that is evaluated for OTTI, the expected cash flows are computed using a forward-rate curve. To calculate the present value of expected cash flows of a variable-rate security, the cash flows are discounted using the forward rates.

If management determines that it intends to sell a security in an unrealized loss position or can no longer assert that it will not be required to sell such as security before recovery of the amortized cost basis of the security, the entire impairment is considered OTTI and is recorded as a charge to earnings in the period management reaches such a decision.

However, if management determines that OTTI exists only because of a credit loss (even if it does not intend to sell or it will not be required to sell such a security), the amount of OTTI related to credit loss will affect earnings and the amount of loss related to factors other than credit loss is recognized as a component of AOCI.

197

Federal Home Loan Bank of New York
Notes to Financial Statements

If the FHLBNY determines that OTTI has occurred, it accounts for the investment security as if it had been purchased on the measurement date of the other-than-temporary impairment. The investment security is written down to fair value, which becomes its new amortized cost basis. The new amortized cost basis is not adjusted for subsequent recoveries in fair value.

For securities designated as available-for-sale, subsequent unrealized changes to the fair values (other than OTTI) are recorded in AOCI. For securities designated as held-to-maturity, the amount of OTTI recorded in AOCI for the non-credit component of OTTI is amortized prospectively over the remaining life of the securities based on the timing and amounts of estimated future cash flows. Amortization out of AOCI is offset by an increase in the carrying value of securities until the securities are repaid or are sold or subsequent OTTI is recognized in earnings.

If subsequent evaluation indicates a significant increase in cash flows greater than previously expected to be collected or if actual cash flows are significantly greater than previously expected, the increases are accounted for as a prospective adjustment to the accretable yield through interest income. In subsequent periods, if the fair value of the investment security has further declined below its then-current carrying value and there has been a decrease in the estimated cash flows the FHLBNY expects to collect, the FHLBNY will deem the security as OTTI.

OTTI FHLBank System Governance Committee — On April 28, 2009, and May 7, 2009, the Finance Agency, the FHLBanks’ regulator, provided the FHLBanks with guidance on the process for determining OTTI with respect to the FHLBanks’ holdings of private-label MBS and their adoption of the guidance for recognition and presentation of other-than-temporary impairment in the first quarter of 2009. The goal of the guidance is to promote consistency among all FHLBanks in the process for determining OTTI for private-label MBS.

Beginning with the second quarter of 2009, consistent with the objectives of the Finance Agency, the FHLBanks formed an OTTI Governance Committee (“OTTI Committee”) with the responsibility for reviewing and approving key modeling assumptions, inputs, and methodologies to be used by the FHLBanks to generate the cash flow projections used in analyzing credit losses and determining OTTI for private-label MBS. The OTTI Committee charter was approved on June 11, 2009, and provides a formal process by which the FHLBanks can provide input on and approve the assumptions.

Although a FHLBank may engage another FHLBank to perform its OTTI analysis under the guidelines of the OTTI Committee, each FHLBank is responsible for making its own determination of impairment and the reasonableness of assumptions, inputs, and methodologies used and for performing the required present value calculations using appropriate historical cost bases and yields. FHLBanks that hold the same private-label MBS are required to consult with one another to make sure that any decision that a commonly held private-label MBS is other-than-temporarily impaired, including the determination of fair value and the credit loss component of the unrealized loss, is consistent among those FHLBanks.

The OTTI Committee’s role and scope with respect to the assessment of credit impairment for the FHLBNY’s private-label MBS are discussed further in the section “Impairment analysis of mortgage-backed securities”.

198

Federal Home Loan Bank of New York
Notes to Financial Statements

FHLBank System Pricing Committee — In an effort to achieve consistency among the FHLBanks’ pricing of investments of mortgage-backed securities, in the third quarter of 2009, the FHLBanks also formed the MBS Pricing Governance Committee, which was responsible for developing a fair value methodology for mortgage-backed securities that all FHLBanks could adopt. Consistent with the guidance from the Pricing Committee, the FHLBNY updated its methodology used to estimate the fair value of mortgage-backed securities starting with the interim period ended September 30, 2009. Under the approved methodology, the FHLBNY requests prices for all mortgage-backed securities from four specific third-party vendors. Prior to the change, the FHLBNY used three of the four vendors specified by the Pricing Committee. Depending on the number of prices received from the four vendors for each security, the FHLBNY selects a median or average price as defined by the methodology. The methodology also incorporates variance thresholds to assist in identifying median or average prices that may require further review by the FHLBNY. In certain limited instances (i.e., when prices are outside of variance thresholds or the third-party services do not provide a price), the FHLBNY obtains a price from securities dealers that is deemed most appropriate after consideration of all relevant facts and circumstances that would be considered by market participants. Prices for CUSIPs held in common with other FHLBanks are reviewed for consistency. The incorporation of the Pricing Committee guidelines did not have a significant impact in the FHLBNY’s estimate of the fair values of its investment securities at implementation of the policy as of September 30, 2009.

Bond Insurer analysis — Certain held-to-maturity private-label MBS owned by the FHLBNY are insured by third-party bond insurers (“monoline insurers”). The bond insurance on these investments guarantees the timely payments of principal and interest if these payments cannot be satisfied from the cash flows of the underlying mortgage pool. The FHLBNY performs cash flow credit impairment tests on all of its private-label insured securities, and the analysis of the MBS protected by such third-party insurance looks first to the performance of the underlying security, and considers its embedded credit enhancements in the form of excess spread, overcollateralization, and credit subordination, to determine the collectability of all amounts due. If the embedded credit enhancement protections are deemed insufficient to make timely payment of all amounts due, then the FHLBNY considers the capacity of the third-party bond insurer to cover any shortfalls.

Certain monoline insurers have been subject to adverse ratings, rating downgrades, and weakening financial performance measures. In estimating the insurers’ capacity to provide credit protection in the future to cover any shortfall in cash flows expected to be collected for securities deemed to be OTTI, the FHLBNY has developed a methodology to assess the ability of the monoline insurers to meet future insurance obligations.

The methodology calculates the length of time a monoline is expected to remain financially viable to pay claims for securities insured. It employs, for the most part, publicly available information to identify cash flows used up by a monoline for insurance claims. Based on the monoline’s existing insurance reserves, the methodology attempts to predict the length of time over which the monoline’s claims-paying resources could sustain bond insurance losses. The methodology establishes boundaries that can be used on a consistent basis, and includes both quantitative factors and qualitative considerations that management utilizes to estimate the period of time that it is probable that the Bank’s insured securities will receive cash flow support from the monolines.

For the FHLBNY’s insured securities that are deemed to be credit impaired absent insurer protection, the methodology compares the timing and amount of the cash flow shortfall to the timing of when a monoline’s claim-paying resource is deemed exhausted. The analysis quantifies both the timing and the amount of cash flow shortfall that the insurer is unlikely to be able to cover. However, estimation of an insurer’s financial strength to remain viable over a long time horizon requires significant judgment and assumptions. Predicting when the insurers may no longer have the ability to perform under their contractual agreements, then comparing the timing and amounts of cash flow shortfalls of securities that are credit impaired absent insurer protection requires significant judgment.

199

Federal Home Loan Bank of New York
Notes to Financial Statements

For reasons outlined in previous paragraphs, the FHLBNY believes that bond insurance is an inherent aspect of credit support within the structure of the security itself and it is appropriate to include insurance in its evaluation of expected cash flows and determination of OTTI. The FHLBNY has also established that the terms of insurance enable the insurance to travel with the security if the security is sold in the future. Currently, the monolines that provide insurance for the Bank’s securities are going concerns and are honoring claims with their existing capital resources. Within the boundaries set in the methodology outlined above, the Bank believes it is appropriate to assert that insurer credit support can be relied upon over a certain period of time. As with all assumptions, changes to these assumptions may result in materially different outcomes and the realization of additional other-than-temporary impairment charges in the future.

Impairment analysis of mortgage-backed securities

Securities with a fair value below amortized cost basis are considered impaired. Determining whether a decline in fair value is OTTI requires significant judgment. The FHLBNY evaluates its individual held-to-maturity investment in private-label issued mortgage- and asset-backed securities for OTTI on a quarterly basis. As part of this process, the FHLBNY assesses if it has the intent to sell the security or it is more likely than not that it will be required to sell the impaired investment before recovery of its amortized cost basis. To assess whether the entire amortized cost basis of the FHLBNY’s private-label MBS will be recovered in future periods, beginning with the quarters ended September 30, 2009 and at December 31, 2009, the Bank performed OTTI analysis by cash flow testing 100 percent of its 54 private-label MBS at September 30, 2009 and December 31, 2009. At December 31, 2008, and at the first two quarters of 2009, the FHLBNY’ methodology was to analyze all its private-label MBS to isolate securities that were considered to be at risk of OTTI and to perform cash flow analysis on securities at risk of OTTI.

At December 31, 2008, the FHLBNY’s screening and monitoring process, which included pricing, credit rating and credit enhancement coverage, had identified 21 private-label MBS with weak performance measures indicating the possibility of OTTI, and were cash flow tested for credit impairment. See Note 4 — Held-to-maturity securities for more information about credit impaired securities.

Cash flow analysis derived from the FHLBNY’s own assumptions — Assessment for OTTI employed by the FHLBNY’s own techniques and assumptions were determined primarily using historical performance data of the 54 private-label MBS. These assumptions and performance measures were benchmarked by comparing to performance parameters from “market consensus”, to data obtained from specialized consulting services, and to the assumptions and parameters provided by the OTTI Committee for the FHLBNY’s private-label MBS, which represented about 50 percent of the FHLBNY’s private-label MBS portfolio.

The FHLBNY’s analysis was performed using an internal process, as described below, to develop bond performance parameters and a third party model was used to generate expected cash flows to be collected. The Bank’s internal process calculated the historical average of each bond’s prepayments, defaults, and loss severities, and considered other factors such as delinquencies and foreclosures. Management’s assumptions were primarily based on historical performance statistics extracted from reports from trustees, loan servicer reports and other sources. In arriving at historical performance assumptions, which is the FHLBNY’s expected case assumptions, the FHLBNY also considered various characteristics of each security including, but not limited to, the following: the credit rating and related outlook or status; the creditworthiness of the issuers of the debt securities; the underlying type of collateral; the year of securitization or vintage, the duration and level of the unrealized loss, credit enhancements, if any; and other collateral-related characteristics such as FICO^® credit scores, and delinquency rates. The relative importance of this information varies based on the facts and circumstances surrounding each security as well as the economic environment at the time of assessment.

200

Federal Home Loan Bank of New York
Notes to Financial Statements

Each bond’s performance parameters, primarily prepayments, defaults and loss severities, which were calculated by the Bank’s internal approach were then input into a third party specialized cash flow model that allocated the projected collateral level losses to the various security classes in the securitization structure in accordance with its prescribed cash flow and loss allocation rules. In a securitization in which the credit enhancements for the senior securities were derived from the presence of subordinate securities, losses were generally allocated first to the subordinate securities until their principal balance was reduced to zero.

If the security is insured by a bond insurer and the security relies on the insurer for support either currently or potentially in future periods, the FHLBNY performed another analysis to assess the financial strength of the monoline insurers. The results of the insurer financial analysis (“monoline burn-out period”) were then incorporated in the third-party cash flow model, as a key input. If the cash flow model projected cash flow shortfalls (credit impairment) on an insured security, the monoline’s burn-out period, an end date for credit support, was then input to the cash flow model. The end date, also referred to as the burn-out date, provided the necessary information as an input to the cash flow model for the continuation of cash flows up till the burn-out date. Any cash flow shortfalls that occurred beyond the “burn-out” date were considered to be not recoverable and the insured security was then deemed to be credit impaired.

Role and scope of the OTTI Governance Committee

Starting with the third quarter, the OTTI Committee has adopted guidelines that each FHLBank should assess credit impairment by cash flow testing of 100 percent of private-label securities that are within its scope. Of the 54 private-label MBS owned by the FHLBNY, 27 MBS backed by sub-prime loans, home equity loans, and manufactured housing loans were deemed to be outside the scope of the OTTI Committee because sufficient loan level collateral data was not available to determine the assumptions under the OTTI Committee’s approach described below. The remaining 27 securities were modeled in the OTTI Committee common platform. The FHLBNY developed key modeling assumptions and forecasted cash flows using the FHLBNY’s own assumptions for 100 percent of its private-label MBS.

Cash flow derived from the OTTI Committee common platform — Consistent with the guidelines provided by the OTTI Committee, the FHLBNY has contracted with the FHLBanks of San Francisco and Chicago to perform cash-flow analyses for the securities within the scope of the OTTI Committee as a means of benchmarking the FHLBNY’s own cash flow analysis. FHLBank of San Francisco cash flow tested 13 private-label prime residential MBS, with total unpaid principal balance of $372.9 million at December 31, 2009. The FHLBank of Chicago cash flow tested 14 private-label home equity residential mortgage-backed subprime securities, with total unpaid principal balance of $187.7 million at December 31, 2009. Although the FHLBNY has engaged the two FHLBanks to perform the cash flow analysis for the 27 private-label MBS, the FHLBNY is ultimately responsible for making its own determination of impairment and the reasonableness of assumptions, inputs, and methodologies used and performing the required present value calculations using appropriate historical cost bases and yields.

The two FHLBanks performed cash flow analysis for the FHLBNY’s private-label securities in scope using two third-party models to establish the modeling assumptions and calculate the forecasted cash flows in the structure of the MBS. The first model considered borrower characteristics and the particular attributes of the loans underlying a security in conjunction with assumptions about future changes in home prices and interest rates, to project prepayments, defaults and loss severities. A significant input to the first model was the forecast of future housing price changes for the relevant states and core based statistical areas (“CBSAs”), which were based upon an assessment of the individual housing markets. CBSA refers collectively to metropolitan and micropolitan statistical areas as defined by the United States Office of Management and Budget; as currently defined, a CBSA must contain at least one urban area with a population of 10,000 or more people. The FHLBanks’ housing price forecast at December 31, 2009 assumed CBSA level current-to-through home price declines ranging from 0 percent to 15 percent over the next 9 to 15 months. Thereafter, home prices were projected to increase 0 percent in the first six months, 0.5 percent in the next six months, 3 percent in the second year and 4 percent in each subsequent year.

201

Federal Home Loan Bank of New York
Notes to Financial Statements

The month-by-month projections of future loan performance derived from the first model, which reflected projected prepayments, defaults and loss severities, were then input into a second model that allocated the projected loan level cash flows and losses to the various security classes in the securitization structure in accordance with its prescribed cash flow and loss allocation rules. In a securitization in which the credit enhancement for the senior securities was derived from the presence of subordinate securities, losses were generally allocated first to the subordinate securities until their principal balance was reduced to zero.

The projected cash flows were based on a number of assumptions and expectations, and the results of these models can vary significantly with changes in assumptions and expectations. The scenario of cash flows determined based on model approach described above reflects a best estimate scenario and includes a base case current-to-through housing price forecast and a base case housing price recovery path described in the prior paragraph. The cash flows tested on the securities within the scope of the OTTI Committee resulted in the credit impairment of three securities, which were also deemed to be credit impaired by the FHLBNY’s cash flow analysis.

GSE issued securities — The FHLBNY evaluates its individual securities issued by Fannie Mae and Freddie Mac or a government agency by considering the creditworthiness and performance of the debt securities and the strength of the GSE’s guarantees of the securities. Based on the Bank’s analysis, GSE and agency issued securities are performing in accordance with their contractual agreements. The Housing Act contains provisions allowing the U.S. Treasury to provide support to Fannie Mae and Freddie Mac. In September 2008, the U.S. Treasury and the Finance Agency placed Fannie Mae and Freddie Mac into conservatorship in an attempt to stabilize their financial conditions and their ability to support the secondary mortgage market. The FHLBNY believes that it will recover its investments in GSE and agency issued securities given the current levels of collateral and credit enhancements and guarantees that exist to protect the investments.

Federal Funds Sold

Federal funds sold represents short-term, unsecured lending to major banks and financial institutions. The amount of unsecured credit risk that may be extended to individual counterparties is commensurate with the counterparty’s credit quality, which is determined by management based on the credit ratings of counterparty’s debt securities or deposits as reported by Nationally Recognized Statistical Rating Organizations. Federal funds sold are recorded at cost on settlement date and interest is accrued using contractual rates.

Advances

The FHLBNY reports advances at amortized cost, net of unearned commitment fees, discounts and premiums, (discounts are generally associated with advances for the Affordable Housing Program) and any hedging adjustments. The FHLBNY records interest on advances to income as earned, and amortizes the premium and accretes the discounts on advances to interest income using a level-yield methodology. Following the requirements of the Federal Home Loan Bank Act of 1932 (“FHLBank Act”), as amended, the FHLBNY obtains sufficient collateral on advances to protect it from losses. The FHLBank Act limits eligible collateral to certain investment securities, residential mortgage loans, cash or deposits with the FHLBNY, and other eligible real estate related assets. Borrowing members pledge their capital stock of the FHLBNY as additional collateral for advances. As Note 6-Advances more fully describes, community financial institutions (FDIC-insured institutions with assets of $1.0 billion or less during 2009) are subject to more expanded statutory collateral rules for small business and agricultural loans. The FHLBNY has not incurred any credit losses on advances since its inception. Based upon financial condition of its borrowers, the collateral held as security on the advances and repayment history, management of the FHLBNY believes that an allowance for credit losses on advances is unnecessary.

202

Federal Home Loan Bank of New York
Notes to Financial Statements

Prepayment Fees on advances

The FHLBNY charges a member a prepayment fee when the member prepays certain advances before the original maturity. The FHLBNY records prepayment fees net of fair value basis adjustments included in the book basis of the advance as interest income from advances. From time to time, the FHLBNY will enter into an agreement with a member to modify the terms of an existing advance. The FHLBNY evaluates whether the modified advance meets the accounting criteria to qualify as a modification of an existing advance or as a new advance in accordance with provisions under creditor’s accounting for a modification or exchange of debt instruments. If the new advance qualifies as a modification of the existing hedged advance, the hedging fair value adjustments and the net prepayment fee on the prepaid advance are recorded in the carrying value of the modified advance and amortized over the life of the modified advance as interest income from advances.

For advances that are hedged and meet the accounting standards for derivatives and hedging, the FHLBNY terminates the hedging relationship upon prepayment and records the associated fair value gains and losses, adjusted for the prepayment fees, in interest income. If the FHLBNY funds a new advance to a member concurrent with the prepayment of a previous advance to that member, the FHLBNY evaluates whether the new advance qualifies as a modification of the original advance. The evaluation includes analysis of (i) whether the effective yield on the new advance is at least equal to the effective yield for a comparable advance to a similar member that is not refinancing or restructuring and (ii) whether the modification of the original advance is more than minor. If the new advance qualifies as a modification of the original hedged advance, the fair value gains or losses of the advance and the prepayment fees are included in the carrying amount of the modified advance, and gains or losses and prepayment fees are amortized to interest income over the life of the modified advance using the level-yield method. If the modified advance is also hedged and the hedge meets the hedging criteria in accordance with accounting standards for derivatives and hedging, basis adjustments continue to be made after the modification, and subsequent value changes attributable to hedged risks are recorded in Other income (loss) as Net realized and unrealized gain (loss) on derivatives and hedging activities.

If the FHLBNY determines that the transaction does not qualify as a modification of an existing advance, it is treated as an advance termination with subsequent funding of a new advance and the net prepayment fees are recorded as interest income from advances.

203

Federal Home Loan Bank of New York
Notes to Financial Statements

Mortgage Loans Held-for-portfolio

The FHLBNY participates in the Mortgage Partnership Finance program^® (“MPF” ^®) by purchasing and originating conventional mortgage loans from its participating members, hereafter referred to as Participating Financial Institutions (“PFI”). Federal Housing Administration (“FHA”) and Veterans Administration (“VA”) insured loans purchased were not a significant total of the outstanding mortgage loans held-for-portfolio at December 31, 2009 and 2008. The FHLBNY manages the liquidity, interest rate and prepayment option risk of the MPF loans, while the PFIs retain servicing activities. The FHLBNY and the PFI share the credit risks of the uninsured MPF loans by structuring potential credit losses into layers. Collectability of the loans is first supported by liens on the real estate securing the loan. For conventional mortgage loans, additional loss protection is provided by private mortgage insurance required for MPF loans with a loan-to-value ratio of more than 80 percent at origination, which is paid for by the borrower. Credit losses are absorbed by the FHLBNY to the extent of the First Loss Account (“FLA”) for which the maximum exposure is estimated to be $13.9 million and $13.8 million at December 31, 2009 and 2008. The aggregate amount of FLA is memorialized and tracked but is neither recorded nor reported as a loan loss reserve in the FHLBNY’s financial statements. If “second losses” beyond this layer are incurred, they are absorbed through a credit enhancement provided by the PFI. The credit enhancement held by PFIs ensures that the lender retains a credit stake in the loans it sells to the FHLBNY or originates as an agent for the FHLBNY (only relates to MPF 100 product). For assuming this risk, PFIs receive monthly “credit enhancement fees” from the FHLBNY.

The amount of the credit enhancement is computed with the use of a Standard & Poor’s model to determine the amount of credit enhancement necessary to bring a pool of uninsured loans to “AA” credit risk. The credit enhancement becomes an obligation of the PFI. For certain MPF products, the credit enhancement fee is accrued and paid each month. For other MPF products, the credit enhancement fee is accrued and paid monthly after the FHLBNY has accrued 12 months of credit enhancement fees.

Delivery commitment fees are charged to a PFI for extending the scheduled delivery period of the loans. Pair-off fees may be assessed and charged to PFI when the settlement of the delivery commitment (1) fails to occur, or (2) the principal amount of the loans purchased by the FHLBNY under a delivery commitment is not equal to the contract amount beyond established limits.

The FHLBNY records credit enhancement fees as a reduction to mortgage loan interest income. The FHLBNY records other non-origination fees, such as delivery commitment extension fees and pair-off-fees, as derivative income over the life of the commitment. All such fees were inconsequential for all periods reported. The FHLBNY defers and amortizes premiums, costs, and discounts as interest income using the level yield method to the loan’s contractual maturities. The FHLBNY classifies mortgage loans as held-for-portfolio and, accordingly, reports them at their principal amount outstanding, net of premiums, costs and discounts, which is the fair value of the mortgage loan on settlement date.

The FHLBNY places a mortgage loan on non-accrual status when the collection of the contractual principal or interest is 90 days or more past due. When a mortgage loan is placed on non-accrual status, accrued but uncollected interest is reversed against interest income.

Allowance for credit losses on mortgage loans. The Bank reviews its portfolio to identify the losses inherent within the portfolio and to determine the likelihood of collection of the principal and interest. Mortgage loans, that are either classified under regulatory criteria (Special Mention, Sub-standard, or Loss) or past due, are separated from the aggregate pool and evaluated separately for impairment.

The allowance for credit losses on mortgage loans was $4.5 million and $1.4 million as of December 31, 2009 and 2008.

204

Federal Home Loan Bank of New York
Notes to Financial Statements

The Bank identifies inherent losses through analysis of the conventional loans (FHA and VA are insured loans, and excluded from the analysis) that are not adversely classified or past due. Reserves are based on the estimated costs to recover any portions of the MPF loans that are not FHA and VA insured. When a loan is foreclosed, the Bank will charge to the loan loss reserve account for any excess of the carrying value of the loan over the net realizable value of the foreclosed loan.

If adversely classified, or on non-accrual status, reserves for conventional mortgage loans, except FHA and VA insured loans, are analyzed under liquidation scenarios on a loan level basis, and identified losses are reserved. FHA and VA insured mortgage loans have minimal inherent credit risk; risk generally arises mainly from the servicers defaulting on their obligations. FHA and VA insured mortgage loans, if adversely classified, would have reserves established only in the event of a default of a PFI, and would be based on aging, collateral value and estimated costs to recover any uninsured portion of the MPF loan.

The FHLBNY also holds participation interests in residential and community development mortgage loans through its Community Mortgage Asset (“CMA”) program. Acquisition of participations under the CMA program was suspended indefinitely in November 2001, and the outstanding balance was approximately $3.9 million and $4.0 million at December 31, 2009 and 2008. If adversely classified, CMA loans will have additional reserves established based on the shortfall of the underlying estimated liquidation value of collateral to cover the remaining balance of the CMA loan. Reserve values are calculated by subtracting the estimated liquidation value of the collateral (after sale value) from the current remaining balance of the CMA loan.

Mandatorily Redeemable Capital Stock

Generally, the FHLBNY’s capital stock is redeemable at the option of both the member and the FHLBNY, subject to certain conditions, and is subject to the provisions under the accounting guidance for certain financial instruments with characteristics of both liabilities and equity. Dividends related to capital stock classified as mandatorily redeemable stock are accrued at an estimated dividend rate and reported as interest expense in the Statements of Income.

Mandatorily redeemable capital stock at December 31, 2009 and 2008 represented stocks held by former members who were no longer members by virtue of being acquired by members of another FHLBank. Under existing practice, such stock will be repurchased when the stock is no longer required to support outstanding transactions with the FHLBNY. The FHLBNY repurchases excess stock upon the receipt of a request for redemption of such stock from a member, and the member’s stock is typically repurchased by the Bank by the next business day.

Redemption rights under the Capital Plan

Under the FHLBNY’s Capital Plan, no provision is available for the member to request the redemption of stock in excess of the stock required to support the member’s business transactions with the FHLBNY. This type of stock is referred to as “Activity-Based Stock” in the Capital Plan. However, the FHLBNY may at its discretion repurchase excess Activity-Based Stock. Separately, the member may request the redemption of Membership Capital Stock (the capital stock representing the member’s basic investment in the FHLBNY) in excess of the member’s Membership Stock purchase requirement, and the FHLBNY may also in its discretion repurchase such excess stock.

Under the Capital Plan, a notice of intent to withdraw from membership must be provided to the FHLBNY five years prior to the withdrawal date. At the end of such five-year period, the FHLBNY will redeem such stock unless it is needed to meet any applicable minimum stock investment requirements in the Capital Plan (e.g., to help secure any remaining advances) or if other limitations apply as specified in the Capital Plan.

205

Federal Home Loan Bank of New York
Notes to Financial Statements

The redemption notice may be cancelled by giving written notice to the FHLBNY at any time prior to the expiration of the five-year period. Also, the notice will be automatically cancelled if, within five business days of the expiration of the five-year period, the member would be unable to meet its minimum stock investment requirements following such redemption. However, if the member rescinds the redemption notice during the five-year period (or if the notice is automatically cancelled), the FHLBNY may charge a $500 cancellation fee, which may be waived only if the FHLBNY’s Board of Directors determines that the requesting member has a bona fide business reason to do so and the waiver is consistent with Section 7(j) of the FHLBank Act. Section 7(j) requires that the FHLBNY’s Board of Directors administer the affairs of the FHLBNY fairly and impartially and without discrimination in favor of or against any member.

Accounting considerations under the Capital Plan

There are three triggering events that could cause the FHLBNY to repurchase capital stock.

• a member requests redemption of excess membership stock;

• a member delivers notice of its intent to withdraw from membership; or

• a member attains non-member status (through merger into or acquisition by a non-member, or involuntary termination from membership).

The member’s request to redeem excess Membership Stock will be considered to be revocable until the stock is repurchased. Since the member’s request to redeem excess Membership Stock can be withdrawn by the member without penalty, the FHLBNY considers the member’s intent regarding such request to not be substantive in nature and therefore no reclassification to a liability will be made at the time the request is delivered.

Under the Capital Plan, when a member delivers a notification of its intent to withdraw from membership, the reclassification from equity to a liability will become effective upon receipt of the notification. The FHLBNY considers the member’s intent regarding such notification to be substantive in nature and, therefore, reclassification to a liability will be made at the time the notification of the intent to withdraw is delivered. There was one request for voluntary withdrawal and one termination from membership due to insolvency during 2009 and none during 2008. When a member is acquired by a non-member, the FHLBNY reclassifies stock of former members to a liability on the day the member’s charter is dissolved.

In compliance with the accounting guidance for certain financial instruments with characteristics of both liabilities and equity, the FHLBNY reclassifies stock subject to mandatory redemption from equity to a liability once a member exercises a written redemption right, gives notice of intent to withdraw from membership, or attains non-member status by merger or acquisition, charter termination, or involuntary termination from membership. Shares of capital stock meeting this definition are reclassified to a liability at fair value. Unpaid dividends related to capital stock reclassified as a liability are accrued at an estimated dividend rate and reported as interest expense in the Statements of Income. The repurchase of these mandatorily redeemable financial instruments is reflected as a cash outflow in the financing activities section of the Statements of Cash Flows.

The Bank reports capital stock subject to mandatory redemption at the redemption value of the stock, which is par plus accrued estimated dividends. Accrued estimated dividends were not material and were included with interest payable in the Statements of Condition. The FHLBanks have a unique cooperative structure. Stocks can only be acquired and redeemed at par value. Shares are not traded and no market mechanism exists for the exchange of stock outside the cooperative structure.

206

Federal Home Loan Bank of New York
Notes to Financial Statements

Affordable Housing Program

The FHLBank Act requires each FHLBank to establish and fund an AHP (see Note 12 — Affordable Housing Program and REFCORP). The FHLBNY charges the required funding for AHP to earnings and establishes a liability. The AHP funds provide subsidies to members to assist in the purchase, construction, or rehabilitation of housing for very low-, low-, and moderate-income households. The FHLBNY also issues AHP advances at interest rates below the customary interest rates for non-subsidized advances. When the FHLBNY makes an AHP advance, the present value of the variation in the cash flow caused by the difference between the AHP advance interest rate and the Bank’s related cost of funds for comparable maturity funding is charged against the AHP liability. The amounts are then recorded as a discount on the AHP advance, and were inconsequential for all years reported. As an alternative, the FHLBNY has the authority to make the AHP subsidy available to members as a grant.

AHP assessment is based on a fixed percentage of income before assessments and before adjustment for dividends associated with mandatorily redeemable capital stock. Dividend payments are reported as interest expense in accordance with the accounting guidance for certain financial instruments with characteristics of both liabilities and equity. If the FHLBNY incurs a loss for the entire year, no AHP assessment or assessment credit is due or accrued, as explained more fully in Note 12 - - Affordable Housing Program and REFCORP.

Commitment Fees

The FHLBNY records the present value of fees receivable from standby letters of credit as an asset and an offsetting liability for the obligation. Fees, which are generally received for one year in advance, are recorded as unrecognized standby commitment fees (deferred credit) and amortized monthly over the commitment period. The FHLBNY amortizes fees received to income using the level-yield method. The amount of fees was not significant for each of the periods reported.

Derivatives

The contractual or notional amount of derivatives reflects the involvement of the FHLBNY in the various classes of financial instruments. The notional amount of derivatives does not measure the credit risk exposure of the FHLBNY, and the maximum credit exposure of the FHLBNY is substantially less than the notional amount. The maximum credit risk is the estimated cost of replacing favorable interest-rate swaps, forward agreements, mandatory delivery contracts for mortgage loans, and purchased caps and floors if the derivative counterparties default and the related collateral, if any, is of insufficient value to the FHLBNY. Accounting for derivatives is addressed under accounting standards for derivatives and hedging. All derivatives are recognized on the balance sheet at their estimated fair values, including accrued unpaid interest as either a derivative asset or a derivative liability net of cash collateral received from and pledged to derivative counterparties.

Each derivative is designated as one of the following:

(1) a qualifying ¹ hedge of the fair value of a recognized asset or liability or an unrecognized firm commitment (a “fair value” hedge);

(2) a qualifying ¹ hedge of a forecasted transaction or the variability of cash flows that are to be received or paid in connection with a recognized asset or liability (a “cash flow” hedge);

(3) a non-qualifying ¹ hedge of an asset or liability (“economic hedge”) for asset-liability management purposes; or

(4) a non-qualifying ¹ hedge of another derivative (an “intermediation” hedge) that is offered as a product to members or used to offset other derivatives with non-member counterparties.

¹ Note: The terms “qualifying” and “non-qualifying” refer to accounting standards for derivatives and hedging.

207

Federal Home Loan Bank of New York
Notes to Financial Statements

The FHLBNY had no foreign currency assets, liabilities or hedges in 2009, 2008 or 2007.

Changes in the fair value of a derivative that is designated and qualifies as a fair value hedge, along with changes in the fair value of the hedged asset or liability that are attributable to the hedged risk (including changes that reflect losses or gains on firm commitments), are recorded in current period’s earnings in Other income (loss) as a Net realized and unrealized gain (loss) on derivatives and hedging activities.

Changes in the fair value of a derivative that is designated and qualifies as a cash flow hedge, to the extent that the hedge is effective, are reported in AOCI, a component of equity, until earnings are affected by the variability of the cash flows of the hedged transaction (i.e., until the recognition of interest on a variable rate asset or liability is recorded in earnings).

The FHLBNY records derivatives on trade date, but records the associated hedged consolidated obligations and advances on settlement date. Hedge accounting commences on trade date, at which time subsequent changes to the derivative’s fair value are recorded along with the offsetting changes in the fair value of the hedged item attributable to the risk being hedged. On settlement date, the basis adjustments to the hedged item’s carrying amount are combined with the principal amounts and the basis becomes part of the total carrying amount of the hedged item.

The FHLBNY has defined its market settlement conventions for hedged items to be five business days or less for advances and thirty calendar days or less, using a next business day convention, for consolidated obligations bonds and discount notes. These market settlement conventions are the shortest period possible for each type of advance and consolidated obligation from the time the instruments are committed to the time they settle.

The FHLBNY considers hedges of committed advances and consolidated obligation bonds eligible for the “short cut” provisions, under accounting standards for derivatives and hedging, as long as settlement of the committed asset or liability occurs within the market settlement conventions for that type of instrument. A short-cut hedge is a highly effective hedging relationship that uses an interest rate swap as the hedging instrument to hedge a recognized asset or liability and that meets the criteria under the accounting standards for derivatives and hedging to qualify for an assumption of no ineffectiveness. To meet the short-cut provisions that assumes no ineffectiveness, the FHLBNY expects the fair value of the swap to be zero on the date the FHLBNY designates the hedge.

For both fair value and cash flow hedges that qualify for hedge accounting treatment, any hedge ineffectiveness (which represents the amount by which the change in the fair value of the derivative differs from the change in the fair value of the hedged item or the variability in the cash flows of the forecasted transaction) are recorded in current period’s earnings in Other income (loss) as a Net realized and unrealized gain (loss) on derivatives and hedging activities. The differentials between accruals of interest income and expense on derivatives designated as fair value or cash flow hedges that qualify for hedge accounting treatment are recognized as adjustments to the interest income or expense of the hedged advances and consolidated obligations.

Changes in the fair value of a derivative not qualifying as a hedge are recorded in current period earnings with no fair value adjustment to the asset or liability being hedged. Both the net interest and the fair value adjustments on the derivative are recorded in Other income (loss) as a Net realized and unrealized gain (loss) on derivatives and hedging activities. Interest income and expense and changes in fair values derivatives designated as economic hedges (also referred to as standalone hedges), or as intermediated derivatives for members are also recorded in the manner described above.

208

Federal Home Loan Bank of New York
Notes to Financial Statements

The FHLBNY routinely issues debt and makes advances in which a derivative instrument is “embedded.” Upon execution of these transactions, the FHLBNY assesses whether the economic characteristics of the embedded derivative are clearly and closely related to the economic characteristics of the remaining component of the advance or debt (the host contract) and whether a separate, non-embedded instrument with the same terms as the embedded instrument would meet the definition of a derivative instrument. If the FHLBNY determines that (1) the embedded derivative has economic characteristics that are not clearly and closely related to the economic characteristics of the host contract and (2) a separate, standalone instrument with the same terms would qualify as a derivative instrument, the embedded derivative would be separated from the host contract as prescribed for hybrid financial instruments under accounting standards for derivatives and hedge accounting, and carried at fair value. However, if the entire contract (the host contract and the embedded derivative) is to be measured at fair value, the changes in fair value would be reported in current earnings (such as an investment security classified as “trading”; or, if the FHLBNY cannot reliably identify and measure the embedded derivative for purposes of separating that derivative from its host contract, the entire contract would be carried on the balance sheet at fair value and no portion of the contract would be designated as a hedging instrument. The FHLBNY had no financial instruments with embedded derivatives that required bifurcation at December 31, 2009 and 2008.

When hedge accounting is discontinued because the FHLBNY determines that the derivative no longer qualifies as an effective fair value hedge of an existing hedged item, the FHLBNY continues to carry the derivative on the balance sheet at its fair value, ceases to adjust the hedged asset or liability for changes in fair value, and amortizes the cumulative basis adjustment on the hedged item into earnings over the remaining life of the hedged item using the level-yield methodology.

When hedge accounting is discontinued because the FHLBNY determines that the derivative no longer qualifies as an effective cash flow hedge of an existing hedged item, the FHLBNY continues to carry the derivative on the balance sheet at its fair value and reclassifies the basis adjustment in AOCI to earnings when earnings are affected by the existing hedge item, which is the original forecasted transaction. Under limited circumstances, when the FHLBNY discontinues cash flow hedge accounting because it is no longer probable that the forecasted transaction will occur in the originally expected period plus the following two months, but it is probable the transaction will still occur in the future, the gain or loss on the derivative remains in AOCI and is recognized into earnings when the forecasted transaction affects earnings. However, if it is probable that a forecasted transaction will not occur by the end of the originally specified time period or within two months after that, the gains and losses that were included in AOCI are recognized immediately in earnings.

When hedge accounting is discontinued because the hedged item no longer meets the definition of a firm commitment, the FHLBNY would continue to carry the derivative on the balance sheet at its fair value, removing from the balance sheet any asset or liability that was recorded to recognize the firm commitment and recording it as a gain or loss in current period earnings.

Cash Collateral associated with Derivative Contracts

The Bank reports derivative assets and derivative liabilities in its Statements of Condition after giving effect to legally enforceable master netting agreements with derivative counterparties, which include interest receivable and payable on derivative contracts and the fair values of the derivative contracts. The Bank records cash collateral received and paid in the Statements of Condition as Derivative assets and liabilities in the following manner — Cash collateral pledged by the Bank is reported as a deduction to Derivative liabilities; cash collateral received from derivative counterparties is reported as a deduction to Derivative assets. No securities were either pledged or received as collateral for derivatives at December 31, 2009 or 2008.

209

Federal Home Loan Bank of New York
Notes to Financial Statements

Premises, Software and Equipment

The Bank computes depreciation using the straight-line method over the estimated useful lives of assets ranging from three to seven years. Leasehold improvements are amortized on a straight-line basis over the lesser of their useful lives or the terms of the underlying leases, which range up to eight years. The Bank capitalizes improvements and major renewals but expenses ordinary maintenance and repairs when incurred. The Bank includes gains and losses on disposal of premises and equipment in Other income (loss).

Concessions on Consolidated Obligations

Concessions are paid to dealers in connection with the issuance of certain consolidated obligation bonds and discount notes. The Office of Finance prorates the amount of the concession to the FHLBNY based upon the percentage of the debt issued that is assumed by the FHLBNY. Concessions paid on consolidated obligations designated under the Fair Value Option (“FVO”) accounting standards are expensed as incurred. Concessions paid on consolidated obligations not designated under the FVO, are deferred and amortized, using a level-yield methodology, over the terms to maturity or the estimated lives of the consolidated obligations. The FHLBNY charges to expense as incurred the concessions applicable to the sale of consolidated obligation discount notes because of their short maturities; amounts are recorded in consolidated obligations interest expense.

Discounts and Premiums on Consolidated Obligations

The FHLBNY expenses the discounts on consolidated obligation discount notes, using the level-yield method, over the term of the related notes and amortizes the discounts and premiums on callable and non-callable consolidated bonds, also using the level-yield method, over the contractual term to maturity of the consolidated obligation bonds.

Resolution Funding Corporation (“REFCORP”) Assessments

Although the FHLBNY is exempt from ordinary federal, state, and local taxation except for local real estate tax, it is required to make payments to REFCORP. Each FHLBank is required to pay 20 percent of income calculated in accordance with accounting principles generally accepted in the U.S. (“GAAP”) after the assessment for Affordable Housing Program, but before the assessment for the REFCORP. The Affordable Housing Program and REFCORP assessments are calculated simultaneously because of their interdependence on each other. The FHLBNY accrues its REFCORP assessment on a monthly basis.

The FHLBanks will expense this amount until the aggregate amounts actually paid by all twelve FHLBanks are equivalent to a $300 million annual annuity whose final maturity date is April 15, 2030, at which point the required payment of each FHLBank to REFCORP will be fully satisfied. The Finance Agency, in consultation with the Secretary of the U.S. Treasury, selects the appropriate discounting factors to be used in this annuity calculation. Because the assessment is based on net income at all the FHLBanks, which cannot be forecasted with reasonable certainty, the timing of the satisfaction of the REFCORP assessment cannot be predicted.

REFCORP assessment, as discussed above, is based on a fixed percentage of net income after AHP assessment. If a full-year loss is incurred, no assessment or assessment credit is due or accrued.

Finance Agency and Office of Finance Expenses

The FHLBNY is assessed for its proportionate share of the costs of operating the Finance Agency and the Office of Finance. The Finance Agency is authorized to impose assessments on the FHLBanks including FHLBNY, in amounts sufficient to pay the Finance Agency’s annual operating expenses.

210

Federal Home Loan Bank of New York
Notes to Financial Statements

The Office of Finance is also authorized to impose assessments on the FHLBanks, including the FHLBNY, in amounts sufficient to pay the Office of Finance’s annual operating and capital expenditures. Each FHLBank is assessed a prorated amount based on the amount of capital stock outstanding, the volume of consolidated obligations issued, and the amount of consolidated obligations outstanding as a percentage of the total of the items for all 12 FHLBanks.

Earnings per Common Share

Basic earnings per share is computed by dividing income available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflect the potential dilution that could occur if convertible securities or other contracts to issue common stock were converted or exercised into common stock. Capital stock classified as mandatorily redeemable capital stock is excluded from this calculation. Basic and diluted earnings per share are the same as the Bank has no additional potential common shares that may be dilutive.

Cash Flows

In the Statements of Cash Flows, the FHLBNY considers Cash and due from banks to be cash and cash equivalents. Federal funds sold, certificates of deposits, and interest-earning balances at the Federal Reserve Banks are reported in the Statements of Cash Flows as investing activities. Cash collateral pledged is reported as a deduction to Derivative liabilities and cash collateral received is reported as a deduction to Derivative assets in the Statements of Condition. In the Statements of Cash Flows, cash collateral pledged or received is reported as net changes in investing and financing activities.

Cash flows from a derivative instrument that is accounted for as a fair value or cash flow hedge, including those designated as economic hedges, are reflected as cash flows from operating activities provided that the derivative instrument does not include an other-than-insignificant financing element at inception.

In the third quarter of 2008, the Bank replaced a significant amount of derivative contracts that had been executed with Lehman Brothers Special Financing Inc. (“LBSF”), when LBSF filed for bankruptcy. The derivatives were replaced at terms that were generally “off-market” and required the derivative counterparties to pay cash to the FHLBNY to assume the derivatives which were primarily in a gain position from the perspective of the counterparties. All cash inflows and outflows of the replacement trades were reported as a financing activity at the inception of the trades in the Statements of Cash Flows. Consistent with the accounting provisions of derivatives and hedge accounting, the interest rate exchanges at each payment dates are reported as a financing activity as well because the derivatives contained a financing element considered to be more-than-insignificant at inception.

The Bank treats gains and losses on debt extinguishments as an operating activity and reports the cash payments from the early retirement of debt net of these amounts under financing activity in the Statements of Cash Flows.

Recently issued Accounting Standards and Interpretations

Accounting for the Consolidation of Variable Interest Entities — On June 12, 2009, the Financial Accounting Standards Board (“FASB”) issued guidance to improve financial reporting by enterprises involved with variable interest entities (“VIEs”) and to provide more relevant and reliable information to users of financial statements. This guidance amends the manner in which entities evaluate whether consolidation is required for VIEs. The guidance also requires that an entity continually evaluate VIEs for consolidation, rather than making such an assessment based upon the occurrence of triggering events. Additionally, the guidance requires enhanced disclosures about how an entity’s involvement with a VIE affects its financial statements and its exposure to risks. This guidance is effective as of the beginning of each reporting entity’s first annual reporting period that begins after November 15, 2009 (January 1, 2010 for the FHLBNY), for interim periods within that first annual reporting period, and for interim and annual reporting periods thereafter. Earlier application is prohibited. The FHLBNY is evaluating the impact of this pronouncement on its financial statements, results of operations and cash flows, which is not expected to be significant.

211

Federal Home Loan Bank of New York
Notes to Financial Statements

Accounting for Transfers of Financial Assets — On June 12, 2009, the FASB issued guidance, which is intended to improve the relevance, representational faithfulness, and comparability of the information that a reporting entity provides in its financial reports about a transfer of financial assets; the effects of a transfer on its financial position, financial performance, and cash flows; and a transferor’s continuing involvement in transferred financial assets. Key provisions of the guidance include: (i) the removal of the concept of qualifying special purpose entities: (ii) the introduction of the concept of a participating interest, in circumstances in which a portion of a financial asset has been transferred; and (iii) the requirement that to qualify for sale accounting, the transferor must evaluate whether it maintains effective control over transferred financial assets either directly or indirectly. The guidance also requires enhanced disclosures about transfers of financial assets and the transferor’s continuing involvement. This guidance is effective as of the beginning of each reporting entity’s first annual reporting period that begins after November 15, 2009 (January 1, 2010 for the FHLBNY), for interim periods within that first annual reporting period and for interim and annual reporting periods thereafter. Earlier application is prohibited. The FHLBNY is evaluating the effect of the adoption of this guidance on its financial condition, results of operations and cash flows, which is not expected to be significant.

Codification of Accounting Standards — On June 29, 2009, the FASB established FASB’s Accounting Standards Codification (“Codification”) as the single source of authoritative GAAP recognized by the FASB to be applied by nongovernmental entities. SEC rules and interpretive releases are also sources of authoritative GAAP for SEC registrants. The Codification is effective for interim and annual periods ending after September 15, 2009. The FHLBNY adopted the Codification for the period ended September 30, 2009. As the Codification is not intended to change or alter previous GAAP, its adoption did not affect the FHLBNY’s financial condition, results of operations or cash flows.

Subsequent Events — On February 25, 2010, the FASB issued final guidance establishing general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued (FASB ASC 855-10). This guidance sets forth: (1) the period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements; (2) the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements; and (3) the disclosures that an entity should make about events or transactions that occurred after the balance sheet date. This guidance does not apply to subsequent events or transactions that are within the scope of other applicable GAAP that provide different guidance on the accounting treatment for subsequent events or transactions. This guidance is effective for interim and annual financial periods ending after June 15, 2009. The FHLBNY adopted this guidance in the quarter ended June 30, 2009. Its adoption resulted in additional disclosures in the financial statements in Form 10-Q for the interim periods ended June 30, 2009 and September 30, 2009. For more information, see Note 22 — Subsequent events.

Enhanced Disclosures about Derivative Instruments and Hedging Activities — On March 19, 2008, the FASB issued guidance which is intended to improve financial reporting about derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand their effects on an entity’s financial position, financial performance, and cash flows (FASB ASC 815-10-65-1). The standard is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008 (January 1, 2009 for the FHLBNY). Since the new guidance only requires additional disclosures concerning derivatives and hedging activities, its adoption as of January 1, 2009 did not have an effect on our financial condition, results of operations or cash flows. The expanded disclosures related to this guidance are included in Note 17 — Derivatives and hedging activities.

212

Federal Home Loan Bank of New York
Notes to Financial Statements

In September 2008, the FASB issued guidance to require enhanced disclosures about credit derivatives and guarantees and amend the existing guidance on guarantor’s accounting and disclosure requirements for guarantees, including indirect guarantees of indebtedness of others (FASB ASC 460-10) to exclude credit derivative instruments accounted for at fair value under the accounting standard for derivatives and hedge accounting (FASB ASC 815-10). The new guidance is effective for financial statements issued for reporting periods ending after November 15, 2008. Since the new guidance only requires additional disclosures concerning credit derivatives and guarantees, its adoption as of January 1, 2009 did not have an effect on our financial condition, results of operations or cash flows.

Recognition and Presentation of Other-Than-Temporary Impairments — On April 9, 2009, the FASB issued guidance for recognition and presentation of other-than-temporary impairment (OTTI) (FASB ASC 320-10-65-1). The new guidance is intended to provide greater clarity to investors about the credit and noncredit component of an OTTI event and to more effectively communicate when an OTTI event has occurred. The guidance applies to debt securities and requires that the total OTTI be presented in the statement of income with an offset for the amount of impairment that is recognized in other comprehensive income (loss), which is the noncredit component. Noncredit component losses are to be recorded in other comprehensive income (loss) if an investor can assert that (a) it does not have the intent to sell, or (b) it is not more likely than not that it will have to sell the security prior to its anticipated recovery, and (c) it expects to recover the amortized cost basis of the security. The guidance was applicable for all entities beginning with the quarter ended June 30, 2009, with earlier adoption at January 1, 2009 permitted. The FHLBNY early adopted this guidance at January 1, 2009, and has recorded OTTI on its securities under the new rules. No cumulative effect transition adjustment was recorded since the FHLBNY had no OTTI securities prior to 2009. The expanded disclosures related to the new guidance are included in Note 4 - Held-to-maturity securities and Note 5 — Available-for-sale securities.

Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly — On April 9, 2009, the FASB issued guidance, which clarifies the approach to, and provides additional factors to consider in estimating fair value when the volume and level of activity for the asset or liability have significantly decreased (FASB ASC 820-10-65-4). It also includes guidance on identifying circumstances that indicate a transaction is not orderly. The guidance is effective and should be applied prospectively for financial statements issued for interim and annual reporting periods ending after June 15, 2009, with early adoption permitted for reporting periods ending after March 15, 2009. If an entity elected to early adopt this guidance, it must also have concurrently adopted the OTTI guidance. The FHLBNY elected to early adopt this guidance effective January 1, 2009. The enhanced disclosures related to this guidance are included in Note 18 — Fair Values of financial instruments.

Reclassifications

Certain amounts in the 2008 and 2007 financial statements have been reclassified to conform to the 2009 presentation.

213

Federal Home Loan Bank of New York
Notes to Financial Statements

Note 2. Cash and due from banks

Cash on hand, cash items in the process of collection, and amounts due from correspondent banks and the Federal Reserve Banks are included in cash and due from banks.

Compensating balances

The Bank maintained average required clearing balances with the Federal Reserve Banks of approximately $1.0 million for the years ended December 31, 2009 and 2008. The Bank uses earnings credits on these balances to pay for services received from the Federal Reserve Banks.

Pass-through deposit reserves

The Bank acts as a pass-through correspondent for member institutions required to deposit reserves with the Federal Reserve Banks. Pass-through reserves deposited with Federal Reserve Banks were $29.3 million and $31.0 million as of December 31, 2009 and 2008. The Bank includes member reserve balances in Other liabilities in the Statements of Condition.

Note 3. Interest-bearing deposits

In October 2008, the Board of Governors of the Federal Reserve System directed the Federal Reserve Banks (“FRB”) to pay interest on balances in excess of certain required reserve and clearing balances. The formula for calculating interest earned is based on average excess balances over the calculation period; rates are generally tied to the Federal funds rate. At December 31, 2008, the Bank had invested $12.2 billion in excess balances placed with the FRB as interest-bearing deposit. Effective July 2, 2009, the FHLBNY no longer collected interest on excess balances with the FRB. The FRB will pay interest only on required reserves. At December 31, 2009, the cash at the FRB was classified as Cash and Due from Banks as the balances did not earn interest.

Note 4. Held-to-maturity securities

Held-to-maturity securities consist of mortgage- and asset-backed securities (collectively mortgage-backed securities or “MBS”), state and local housing finance agency bonds, and short-term certificates of deposits issued by highly rated banks and financial institutions.

At December 31, 2009 and 2008, the FHLBNY had pledged MBS with an amortized cost basis of $2.0 million and $2.7 million to the FDIC in connection with deposits maintained by the FDIC at the FHLBNY.

214

Federal Home Loan Bank of New York
Notes to Financial Statements

Mortgage-backed securities — The FHLBNY’s investments in MBS are predominantly government sponsored enterprise issued securities. The carrying value of investments in mortgage-backed securities issued by Federal National Mortgage Association (“Fannie Mae”) and the Federal Home Loan Mortgage Corp. (“Freddie Mac”) (together, government sponsored enterprises or “GSEs”) and a U.S. government agency at December 31, 2009 was $8.7 billion, or 89.1% of the total MBS classified as held-to-maturity. The comparable carrying value of GSE issued MBS at December 31, 2008 was $7.6 billion, or 81.3% of total MBS classified as held-to-maturity. The carrying value (amortized cost less non-credit component of OTTI) of privately issued mortgage- and asset-backed securities at December 31, 2009 and 2008 was $1.1 billion and $1.7 billion. Privately issued MBS primarily included asset-backed securities, mortgage pass-throughs and Real Estate Mortgage Investment Conduit bonds, and securities supported by manufactured housing loans.

Certificates of deposits — Investments in certificates of deposit are also classified as held-to-maturity. All such investments mature within one year. There was no investment in certificates of deposits at December 31, 2009. The amortized cost basis of certificates of deposit was $1.2 billion at December 31, 2008.

State and local housing finance agency bonds — Investments in primary public and private placements of taxable obligations of state and local housing finance authorities (“HFA”) were classified as held-to-maturity and the amortized cost basis was $751.8 million and $804.1 million at December 31, 2009 and 2008.

215

Federal Home Loan Bank of New York
Notes to Financial Statements

Major Security Types

Amortized cost basis, as defined under the recently issued guidance on recognition and presentation of other-than-temporary impairment, includes adjustments made to the cost of an investment for accretion, amortization, collection of cash, and fair value hedge accounting adjustments. If a held-to-maturity security is determined to be OTTI, the amortized cost basis of the security is adjusted for previous OTTI recognized in earnings. Amortized cost basis of a held-to-maturity OTTI security is further adjusted for impairment related to all other factors (also referred to as the non-credit component of OTTI) recognized in AOCI, and the adjusted amortized cost basis is the carrying value of the OTTI security reported in the Statements of Condition. Carrying value of a held-to-maturity security that is not OTTI is its amortized cost basis.

The amortized cost basis, the gross unrecognized holding gains and losses, the fair values of held-to-maturity securities, and OTTI recognized in AOCI were as follows (in thousands):

	December 31, 2009
	Amortized							Gross		Gross
	Cost		OTTI			Carrying		Unrecognized		Unrecognized			Fair
Issued, guaranteed or insured:	Basis		in OCI			Value		Holding Gains		Holding Losses			Value
Pools of Mortgages
Fannie Mae	$	1,137,514	$	—		$	1,137,514	$	38,378	$	—		$	1,175,892
Freddie Mac		335,368		—			335,368		12,903		—			348,271
Total pools of mortgages		1,472,882		—			1,472,882		51,281		—			1,524,163
Collateralized Mortgage Obligations/Real Estate Mortgage Investment Conduits
Fannie Mae		2,609,254		—			2,609,254		70,222		(2,192	)		2,677,284
Freddie Mac		4,400,003		—			4,400,003		128,952		(3,752	)		4,525,203
Ginnie Mae		171,531		—			171,531		245		(1,026	)		170,750
Total CMOs/REMICs		7,180,788		—			7,180,788		199,419		(6,970	)		7,373,237
Ginnie Mae-CMBS		49,526		—			49,526		62		—			49,588
Non-GSE MBS
CMOs/REMICs		447,367		(2,461	)		444,906		2,437		(7,833	)		439,510
Commercial MBS		—		—			—		—		—			—
Total non-federal-agency MBS		447,367		(2,461	)		444,906		2,437		(7,833	)		439,510
Asset-Backed Securities
Manufactured housing (insured)		202,278		—			202,278		—		(37,101	)		165,177
Home equity loans (insured)		307,279		(79,445	)		227,834		12,795		(25,136	)		215,493
Home equity loans (uninsured)		217,981		(28,664	)		189,317		3,436		(34,804	)		157,949
Total asset-backed securities		727,538		(108,109	)		619,429		16,231		(97,041	)		538,619
Total MBS	$	9,878,101	$	(110,570	)	$	9,767,531	$	269,430	$	(111,844	)	$	9,925,117
Other
State and local housing finance agency obligations	$	751,751	$	—		$	751,751	$	3,430	$	(11,046	)	$	744,135
Certificates of deposit		—		—			—		—		—			—
Total other	$	751,751	$	—		$	751,751	$	3,430	$	(11,046	)	$	744,135
Total Held-to-maturity securities	$	10,629,852	$	(110,570	)	$	10,519,282	$	272,860	$	(122,890	)	$	10,669,252

216

Federal Home Loan Bank of New York
Notes to Financial Statements

	December 31, 2008
	Amortized		Gross		Gross
	Cost		Unrealized		Unrealized			Fair
Issued, guaranteed or insured:	Basis		Holding Gains		Holding Losses			Value
Pools of Mortgages
Fannie Mae	$	1,400,058	$	26,789	$	—		$	1,426,847
Freddie Mac		422,088		7,860		—			429,948
Total pools of mortgages		1,822,146		34,649		—			1,856,795
Collateralized Mortgage Obligations/Real Estate Mortgage Investment Conduits
Fannie Mae		2,032,051		51,138		(125	)		2,083,064
Freddie Mac		3,722,840		101,595		(30	)		3,824,405
Ginnie Mae		6,325		—		(187	)		6,138
Total CMOs/REMICs		5,761,216		152,733		(342	)		5,913,607
Non-GSE MBS
CMOs/REMICs		609,907		—		(42,706	)		567,201
Commercial mortgage-backed securities		266,994		149		(127	)		267,016
Total non-federal-agency MBS		876,901		149		(42,833	)		834,217
Asset-Backed Securities
Manufactured housing (insured)		229,714		—		(75,418	)		154,296
Home equity loans (insured)		376,587		—		(144,957	)		231,630
Home equity loans (uninsured)		259,879		—		(79,112	)		180,767
Total asset-backed securities		866,180		—		(299,487	)		566,693
Total mortgage-backed securities	$	9,326,443	$	187,531	$	(342,662	)	$	9,171,312
Other
State and local housing finance agency obligations	$	804,100	$	6,573	$	(47,512	)	$	763,161
Certificates of deposit		1,203,000		328		—			1,203,328
Total other	$	2,007,100	$	6,901	$	(47,512	)	$	1,966,489
Total Held-to-maturity securities	$	11,333,543	$	194,432	$	(390,174	)	$	11,137,801

217

Federal Home Loan Bank of New York
Notes to Financial Statements

Unrealized Losses

The following tables summarize held-to-maturity securities with fair values below their amortized cost basis. The fair values and gross unrealized holding losses are aggregated by major security type and by the length of time individual securities have been in a continuous unrealized loss position as follows (in thousands):

	December 31, 2009
	Less than 12 months					12 months or more					Total
	Estimated		Unrealized			Estimated		Unrealized			Estimated		Unrealized
	Fair Value		Losses			Fair Value		Losses			Fair Value		Losses
Non-MBS Investment Securities
State and local housing finance agency obligations	$	212,112	$	(8,611	)	$	43,955	$	(2,435	)	$	256,067	$	(11,046	)
Total Non-MBS		212,112		(8,611	)		43,955		(2,435	)		256,067		(11,046	)
MBS Investment Securities
MBS — Other US Obligations
Ginnie Mae		122,359		(1,020	)		2,274		(6	)		124,633		(1,026	)
MBS-GSE
Fannie Mae		780,645		(2,192	)		—		—			780,645		(2,192	)
Freddie Mac		814,881		(3,752	)		—		—			814,881		(3,752	)
Total MBS-GSE		1,595,526		(5,944	)		—		—			1,595,526		(5,944	)
MBS-Private-Label		113,140		(1,523	)		765,445		(196,134	)		878,585		(197,657	)
Total MBS		1,831,025		(8,487	)		767,719		(196,140	)		2,598,744		(204,627	)
Total	$	2,043,137	$	(17,098	)	$	811,674	$	(198,575	)	$	2,854,811	$	(215,673	)

	December 31, 2008
	Less than 12 months					12 months or more					Total
	Estimated		Unrealized			Estimated		Unrealized			Estimated		Unrealized
	Fair Value		Losses			Fair Value		Losses			Fair Value		Losses
Non-MBS Investment Securities
State and local housing finance agency obligations	$	78,261	$	(16,065	)	$	84,108	$	(31,447	)	$	162,369	$	(47,512	)
Total Non-MBS		78,261		(16,065	)		84,108		(31,447	)		162,369		(47,512	)
MBS Investment Securities
MBS — Other US Obligations
Ginnie Mae		6,137		(187	)		—		—			6,137		(187	)
MBS-GSE
Fannie Mae		3,452		(125	)		—		—			3,452		(125	)
Freddie Mac		1,102		(30	)		32		—			1,134		(30	)
Total MBS-GSE		4,554		(155	)		32		—			4,586		(155	)
MBS-Private-Label		509,273		(115,061	)		718,321		(227,259	)		1,227,594		(342,320	)
Total MBS		519,964		(115,403	)		718,353		(227,259	)		1,238,317		(342,662	)
Total	$	598,225	$	(131,468	)	$	802,461	$	(258,706	)	$	1,400,686	$	(390,174	)

218

Federal Home Loan Bank of New York
Notes to Financial Statements

Redemption terms

The amortized cost and estimated fair value of held-to-maturity securities, by contractual maturity, were as follows (in thousands). Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment fees.

	December 31, 2009				December 31, 2008
	Amortized		Estimated		Amortized		Estimated
	Cost		Fair Value		Cost		Fair Value
State and local housing finance agency obligations
Due in one year or less	$	2,820	$	2,869	$	—	$	—
Due after one year through five years		9,315		9,338		17,665		18,209
Due after five years through ten years		62,065		62,766		60,400		55,060
Due after ten years		677,551		669,162		726,035		689,892
State and local housing finance agency obligations		751,751		744,135		804,100		763,161
Mortgage-backed securities
Due in one year or less		—		—		257,999		258,120
Due after one year through five years		2,661		2,645		—		—
Due after five years through ten years		1,140,154		1,172,718		1,142,000		1,149,541
Due after ten years		8,735,286		8,749,754		7,926,444		7,763,651
Mortgage-backed securities		9,878,101		9,925,117		9,326,443		9,171,312
Certificates of deposit
Due in one year or less		—		—		1,203,000		1,203,328
Certificates of deposit		—		—		1,203,000		1,203,328
Total Held-to-maturity securities	$	10,629,852	$	10,669,252	$	11,333,543	$	11,137,801

The amortized cost of held-to-maturity securities included discounts of $29.8 million ($38.3 million at December 31, 2008) and premiums of $14.9 million ($18.5 million at December 31, 2008). In 2009, accretion of $6.4 million, net of amortization, was recorded to interest income. In 2008 and 2007, amortization expenses, net of accretion were charges to interest income of $1.8 million and $1.9 million.

219

Federal Home Loan Bank of New York
Notes to Financial Statements

Interest rate payment terms

The following table summarizes interest rate payment terms of long-term securities classified as held-to-maturity (in thousands):

	December 31, 2009
	Amortized		OTTI			Carrying
	Cost Basis		in OCI			Value
Mortgage-backed securities
CMO
Fixed	$	4,281,206	$	(5,047	)	$	4,276,159
Floating		3,089,976		—			3,089,976
CMO Total		7,371,182		(5,047	)		7,366,135
Pass Thru
Fixed		2,396,776		(104,146	)		2,292,630
Floating		110,143		(1,377	)		108,766
Pass Thru Total		2,506,919		(105,523	)		2,401,396
Total MBS		9,878,101		(110,570	)		9,767,531
State and local housing finance agency obligations
Fixed		173,781		—			173,781
Floating		577,970		—			577,970
		751,751		—			751,751
Total Held-to-maturity securities	$	10,629,852	$	(110,570	)	$	10,519,282

	December 31, 2008
	Amortized		OTTI		Carrying
	Cost Basis1		in OCI		Value
Mortgage-backed securities
CMO
Fixed	$	6,213,857	$	—	$	6,213,857
Floating		17,406		—		17,406
CMO Total		6,231,263		—		6,231,263
Pass Thru
Fixed		2,960,477		—		2,960,477
Floating		134,703		—		134,703
Pass Thru Total		3,095,180		—		3,095,180
Total MBS		9,326,443		—		9,326,443
State and local housing finance agency obligations
Fixed		240,820		—		240,820
Floating		563,280		—		563,280
		804,100		—		804,100
Total Held-to-maturity securities	$	10,130,543	$	—	$	10,130,543

¹ Does not include short-term investments classified as HTM.

220

Federal Home Loan Bank of New York
Notes to Financial Statements

Impairment analysis of GSE issued securities — The FHLBNY evaluates its individual securities issued by Fannie Mae, Freddie Mac and a government agency by considering the creditworthiness and performance of the debt securities and the strength of the GSE’s guarantees of the securities. Based on the Bank’s analysis, GSE and agency issued securities are performing in accordance with their contractual agreements. The Housing Act contains provisions allowing the U.S. Treasury to provide support to Fannie Mae and Freddie Mac. In September 2008, the U.S. Treasury and the Finance Agency placed Fannie Mae and Freddie Mac into conservatorship in an attempt to stabilize their financial conditions and their ability to support the secondary mortgage market. The FHLBNY believes that it will recover its investments in GSE and agency issued securities given the current levels of collateral, credit enhancements and guarantees that exist to protect the investments.

Impairment analysis of held-to-maturity non-agency private-label mortgage- and asset-backed securities (“PLMBS”) — To assess whether the entire amortized cost bases of the Bank’s private-label MBS will be recovered, the Bank performed cash flow analysis for 100 percent of the FHLBNY’s private-label MBS outstanding at December 31, 2009, including private-label MBS that were determined to be other-than-temporarily impaired in previous reporting periods in 2009.

Year ended December 31, 2008 — The Bank did not experience any OTTI during 2008 or 2007. At December 31, 2008, the FHLBNY’s screening and monitoring process, which included pricing, credit rating and credit enhancement coverage, had identified 21 private-label MBS with weak performance measures indicating the possibility of OTTI. Bonds selected through the screening process were cash flow tested for credit impairment. Fourteen of the securities were determined to be impaired absent bond insurer support to meet scheduled cash flows in the future. Based on financial analysis of the bond insurers at December 31, 2008, it was determined that Ambac Assurance Corp. (“Ambac”) and MBIA Insurance Corp. (“MBIA”) had the ability to meet future claims, and the 14 bonds were determined to be credit-protected by the two insurers, and no OTTI charge was deemed necessary. The remaining securities were considered to be only temporarily impaired based on cash flow analysis at December 31, 2008.

Year ended December 31, 2009 — In the interim periods ended March 31, 2009 and June 30, 2009, the FHLBNY had employed its screening procedures and identified private-label MBS with weak performance measures. Bonds selected through the screening process were cash flow tested for credit impairment. In the third quarter of 2009 and at December 31, 2009, the FHLBNY cash flow tested 100 percent of its private-label MBS to identify credit impairment.

Private-label mortgage-backed securities that are insured by monoline insurers were also cash flow tested for credit impairment at December 31, 2009, including monoline insured securities that were previously determined to be credit impaired. Predicting when bond insurers may no longer have the ability to perform under their contractual agreements is a key impairment measurement parameter which the FHLBNY continually adjusts to factor the changing operating conditions at Ambac and MBIA. In a series of rating actions in 2009, MBIA and Ambac have been downgraded to below investment grade. Financial information, cash flows and results of operations from the two monolines have been closely monitored and analyzed by the management of FHLBNY. In each subsequent interim period, the FHLBNY management has incrementally shortened the period it believes the two monolines can continue to provide insurance support as a result of the changing operating conditions at Ambac and MBIA, and the FHLBNY’s analysis had estimated that the period of support to be no more than 18 months at December 31, 2009. The FHLBNY performs this analysis and makes a re-evaluation of the bond insurance support period quarterly. Changes to these and other key assumptions may result in materially different outcomes and the realization of additional other-than-temporary impairment charges in the future.

221

Federal Home Loan Bank of New York
Notes to Financial Statements

Certain uninsured bonds were also determined to be credit impaired based on cash flow shortfall in the interim periods of 2009. In many instances, the FHLBNY’s cash flow analysis observed additional credit impairment also referred to as credit re-impairments. Observed historical performance parameters of certain securities had deteriorated in 2009, and these factors had increased loss severities in the cash flow analyses of those private-label MBS. Recorded cumulative credit impairment of uninsured and insured securities during 2009 is summarized in the table below.

The table below summarizes the key characteristics of the impact of securities determined to be OTTI during 2009, including securities determined to be OTTI in the fourth quarter of 2009 (dollars in thousands):

			December 31, 2009																		As of December 31, 2009
			Insurer MBIA				Insurer Ambac				Uninsured				OTTI						Gross Unrecognized Losses
Security					Fair				Fair				Fair		Credit			Non-credit			Less than			More than
Classification	Count		UPB		Value		UPB		Value		UPB		Value		Loss			Loss			12 months			12 months
RMBS-Prime*		1	$	—	$	—	$	—	$	—	$	54,295	$	51,715	$	(438	)	$	(2,766	)	$	(1,187	)	$	—
HEL Subprime*		16		34,425		17,161		198,532		127,470		80,774		53,783		(20,378	)		(117,330	)		—			(13,674	)
Total		17	$	34,425	$	17,161	$	198,532	$	127,470	$	135,069	$	105,498	$	(20,816	)	$	(120,096	)	$	(1,187	)	$	(13,674	)

* RMBS-Prime — Private-label MBS supported by prime residential loans; HEL Subprime — MBS supported by home equity loans.

The table below summarizes the key characteristics of the securities that were deemed OTTI in the fourth quarter of 2009 (dollars in thousands):

			Q4 2009 activity																		As of December 31, 2009
			Insurer MBIA				Insurer Ambac				Uninsured				OTTI						Gross Unrecognized Losses
Security					Fair				Fair				Fair		Credit			Non-credit			Less than		More than
Classification	Count		UPB		Value		UPB		Value		UPB		Value		Loss			Loss			12 months		12 months
RMBS-Prime*		—	$	—	$	—	$	—	$	—	$	—	$	—	$	—		$	—		$	—	$	—
HEL Subprime*		8		—		—		89,092		53,027		20,118		12,874		(6,540	)		(16,212	)		—		(2,663	)
Total		8	$	—	$	—	$	89,092	$	53,027	$	20,118	$	12,874	$	(6,540	)	$	(16,212	)	$	—	$	(2,663	)

* RMBS-Prime — Private-label MBS supported by prime residential loans; HEL Subprime — MBS supported by home equity loans.

Based on the results of its cash flow analyses of 100 percent of its held-to-maturity private-label MBS in the fourth quarter of 2009, the FHLBNY determined that it was likely that it will not fully recover the amortized cost of eight of its private-label MBS and, accordingly, these securities were deemed to be OTTI at December 31, 2009.

The eight credit impaired securities included six securities that had been credit impaired in previous quarters of 2009. At December 31, 2009, the total unpaid principal balance of the six securities was $64.6 million and the carrying value prior to impairment was $36.0 million. The additional credit impairment charge recorded at December 31, 2009 for the six securities was $5.8 million. Five of the six securities are insured by bond insurer Ambac. The total unpaid principal balance of the five insured securities was $60.8 million and the carrying value prior to impairment was $33.8 million. The Bank’s analysis of Ambac’s resources and its claim paying ability resulted in the shortening of the length of time to 18 months over which the Bank estimates that Ambac’s claims-paying resource could sustain Ambac’s insurance losses, and additional credit losses were recognized on the five securities insured by Ambac.

The cash flow analysis at December 31, 2009 also identified two securities that were previously not determined to be OTTI. Credit impairment was $0.7 million, and non-credit OTTI was $16.2 million; unpaid principal balance and carrying value prior to impairment was $44.6 million; carrying value after OTTI was $27.7 million, which is the fair value of the two securities at December 31, 2009, the date of the write-down.

222

Federal Home Loan Bank of New York
Notes to Financial Statements

The table below summarizes the weighted average and range of Key Base Assumptions for securities determined to be OTTI in 2009:

	Key Base Assumption — OTTI Securities
	CDR				CPR				Loss Severity %
	Range		Average		Range		Average		Range		Average
RMBS-Prime*		2.0		2.0		14.0		14.0		40.0		40.0
HEL Subprime*		3.55-16.80		7.7		2.00-16.80		6.3		51.1-100.0		86.8

*	RMBS-Prime — Private-label MBS supported by prime residential loans;
	HEL Subprime — MBS supported by home equity loans.
**	Conditional Prepayment Rate (CPR): 1-((1-SMM^12) where, SMM is defined as the “Single Monthly Mortality (SMM)” = (Voluntary partial and full prepayments + repurchases + Liquidated Balances)/Beginning Principal Balance — Scheduled Principal). Voluntary prepayment excludes the liquidated balances mentioned above.
**	Conditional Default Rate (CDR): 1-((1-MDR)^12) where, MDR is defined as the “Monthly Default Rate (MDR)” = (Beginning Principal Balance of Liquidated Loans)/(Total Beginning Principal Balance).
**	Loss Severity (Principal and interest in the current period) = Sum (Total Realized Loss Amount)/Sum (Beginning Principal and interest Balance of Liquidated Loans).
**	If the present value of cash flows expected to be collected (discounted at the security’s effective yield) is less than the amortized cost basis of the security, an other-than-temporary impairment is considered to have occurred because the entire amortized cost basis of the security will not be recovered. The Bank considers whether or not it will recover the entire amortized cost of the security by comparing the present value of the cash flows expected to be collected from the security (discounted at the security’s effective yield) with the amortized cost basis of the security.

Monoline support — The FHLBNY has identified certain MBS that have been determined to be credit impaired despite credit protection from Ambac and MBIA to meet scheduled payments in the future. Cash flows on certain insured securities are currently experiencing cash flow shortfalls. Ambac and MBIA are paying claims in order to meet current cash flow deficiency within the structure of the securities.

Monoline Analysis and Methodology — The two monoline insurers have been subject to adverse ratings, rating downgrades, and weakening financial performance measures. A rating downgrade implies an increased risk that the insurer will fail to fulfill its obligations to reimburse the investor for claims under the insurance policies. Monoline insurers are segmented into two categories of claims paying ability — (1) Adequate, and (2) At Risk. These categories represent an assessment of an insurer’s ability to perform as a financial guarantor.

Adequate. Monolines determined to possess “adequate” claims paying ability are expected to provide full protection on their insured private-label mortgage-backed securities. Accordingly, bonds insured by monolines with adequate ability to cover written insurance are run with full financial guarantee set to “on” in the cashflow model.

At Risk. For monolines with at risk coverage, further analysis is performed to establish an expected case regarding the time horizon of the monoline’s ability to fulfill its financial obligations and provide credit support. Accordingly, bonds insured by monolines in the at risk category are run with a partial financial guarantee in the cashflow model. This partial claim paying condition is expressed in the cashflow model by specifying a “guarantee ignore” date. The ignore date is based on the “burnout period” calculation method.

223

Federal Home Loan Bank of New York
Notes to Financial Statements

Burnout Period. The projected time horizon of credit protection provided by an insurer is a function of claims paying resources and anticipated claims in the future. This assumption is referred to as the “burnout period” and is expressed in months, and is computed by dividing each (a) insurers’ total claims paying resources by the (b) “burnout rate” projection. This variable uses monthly or aggregate dollar amount of claims each insurer has paid most recently, and additional qualitative information pertinent to the financial guarantor.

Based on the methodology, the Bank has classified FSA (name changed in 2009 to Assured Guaranty Municipal Corp.) as adequate, and MBIA and Ambac as “at risk”. The Bank analyzed the going-concern basis of Ambac and MBIA and their financial strength to perform with respect to their contractual obligations for the securities owned by the FHLBNY; the monolines are currently performing under the terms of their contractual agreements with respect to the FHLBNY’s insured bonds. However, estimation of an insurer’s financial strength to remain viable over a long time horizon requires significant judgment and assumptions. Predicting when the insurers may no longer have the ability to perform under their contractual agreements, then comparing the timing and amounts of cash flow shortfalls of securities that are credit impaired to when insurer protection may not be available, and determining credit impairment requires significant judgment.

The monoline analysis methodology resulted in the following “Protection time horizon” dates for Ambac and MBIA during 2009:

	Protection time horizon calculation
	Ambac		MBIA
December 31, 2009
Burnout period (months)		18		18
Coverage ignore date		6/30/2011		6/30/2011
September 30, 2009
Burnout period (months)		83		31
Coverage ignore date		7/31/2016		3/31/2012
June 30, 2009
Burnout period (months)		105		32
Coverage ignore date		3/1/2018		2/1/2012
March 31, 2009
Burnout period (months)		116		50
Coverage ignore date		11/30/2018		5/31/2018

224

Federal Home Loan Bank of New York
Notes to Financial Statements

The following table provides rollforward information of the credit component of OTTI recognized as a charge to earnings related to held-to-maturity securities for which a significant portion of the OTTI (non-credit component) was recognized in AOCI (in thousands):

	December 31,
	2009		2008
Beginning balance	$	—	$	—
Additions to the credit component for OTTI loss not previously recognized		20,816		—
Additional credit losses for which an OTTI charge was previously recognized		—		—
Increases in cash flows expected to be collected, recognized over the remaining life of the securities		—		—
Ending balance	$	20,816	$	—

With respect to the Bank’s remaining investments, the Bank believes no OTTI exists. The Bank’s conclusion is based upon multiple factors: bond issuers’ continued satisfaction of their obligations under the contractual terms of the securities; the estimated performance of the underlying collateral; the evaluation of the fundamentals of the issuers’ financial condition; and the estimated support from the monoline insurers under the contractual terms of insurance. Management has not made a decision to sell such securities at December 31, 2009. Management has also concluded that it is more likely than not that it will not be required to sell such securities before recovery of the amortized cost basis of the securities. Based on factors outlined above, the FHLBNY believes that the remaining securities classified as held-to-maturity were not other-than-temporarily impaired as of December 31, 2009.

However, without recovery in the near term such that liquidity returns to the mortgage-backed securities market and spreads return to levels that reflect underlying credit characteristics, 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 identified at December 31, 2009 as dependent on insurance is further negatively impacted by the insurers’ future financial performance, additional OTTI may be recognized in future periods.

The FHLBNY evaluated its credit impaired private-label MBS under a base case (or best estimate) scenario, and also performed a cash flow analysis for each of those securities under a more adverse external assumption that forecasted a larger home price decline and a slower rate of housing price recovery. The stress test scenario and associated results do not represent the Bank’s current expectations and therefore should not be construed as a prediction of the Bank’s future results, market conditions or the actual performance of these securities.

The results of the adverse case scenario are presented below alongside the FHLBNY’s expected outcome for the credit impaired securities (the base case) (dollars in thousands):

	For the year ended December 31, 2009
	Actual Results — Base Case HPI Scenario								Pro-forma Results — Adverse HPI Scenario
	# of				OTTI related to		OTTI related to		# of				OTTI related to		OTTI related to
	Securities		UPB		credit loss		non-credit loss		Securities		UPB		credit loss		non-credit loss
RMBS Prime		1	$	54,295	$	438	$	2,461		3	$	117,571	$	699	$	4,595
Alt-A		—		—		—		—		—		—		—		—
HEL Subprime		16		313,731		20,378		108,109		16		313,731		23,163		105,324
Total		17	$	368,026	$	20,816	$	110,570		19	$	431,302	$	23,862	$	109,919

225

Federal Home Loan Bank of New York
Notes to Financial Statements

Note 5. Available-for-sale securities

Major Security types — The unamortized cost, gross unrealized gains, losses, and the fair value of investments classified as available-for-sale were as follows (in thousands):

	December 31, 2009
	Amortized						Gross		Gross
	Cost		OTTI		Carrying		Unrealized		Unrealized			Fair
	Basis		in OCI		Value		Gains		Losses			Value
Cash equivalents	$	1,230	$	—	$	1,230	$	—	$	—		$	1,230
Equity funds		8,995		—		8,995		57		(1,561	)		7,491
Fixed income funds		3,672		—		3,672		196		—			3,868
Mortgage-backed securities
CMO-Floating		2,242,665		—		2,242,665		6,937		(9,038	)		2,240,564
Total	$	2,256,562	$	—	$	2,256,562	$	7,190	$	(10,599	)	$	2,253,153

	December 31, 2008
	Amortized						Gross		Gross
	Cost		OTTI		Carrying		Unrealized		Unrealized			Fair
	Basis		in OCI		Value		Gains		Losses			Value
Cash equivalents	$	835	$	—	$	835	$	—	$	—		$	835
Equity funds		8,978		—		8,978		—		(3,516	)		5,462
Fixed income funds		3,833		—		3,833		66		(10	)		3,889
Mortgage-backed securities
CMO-Floating		2,912,643		—		2,912,643		364		(61,324	)		2,851,683
Total	$	2,926,289	$	—	$	2,926,289	$	430	$	(64,850	)	$	2,861,869

There were no AFS mortgage-backed securities supported by commercial loans at December 31, 2009 and 2008.

Unrealized Losses — MBS securities classified as available-for-sale securities (in thousands):

	December 31, 2009
	Less than 12 months				12 months or more					Total
	Estimated		Unrealized		Estimated		Unrealized			Estimated		Unrealized
	Fair Value		Losses		Fair Value		Losses			Fair Value		Losses
Mortgage-backed securities
MBS-GSE
Fannie Mae	$	—	$	—	$	1,006,860	$	(6,394	)	$	1,006,860	$	(6,394	)
Freddie Mac		—		—		662,237		(2,644	)		662,237		(2,644	)
Total MBS-GSE		—		—		1,669,097		(9,038	)		1,669,097		(9,038	)
Total Temporarily Impaired	$	—	$	—	$	1,669,097	$	(9,038	)	$	1,669,097	$	(9,038	)

	December 31, 2008
	Less than 12 months					12 months or more					Total
	Estimated		Unrealized			Estimated		Unrealized			Estimated		Unrealized
	Fair Value		Losses			Fair Value		Losses			Fair Value		Losses
Mortgage-backed securities
MBS-GSE
Fannie Mae	$	1,662,928	$	(35,047	)	$	142,630	$	(3,539	)	$	1,805,558	$	(38,586	)
Freddie Mac		957,617		(21,744	)		39,077		(994	)		996,694		(22,738	)
Total MBS-GSE		2,620,545		(56,791	)		181,707		(4,533	)		2,802,252		(61,324	)
Total Temporarily Impaired	$	2,620,545	$	(56,791	)	$	181,707	$	(4,533	)	$	2,802,252	$	(61,324	)

226

Federal Home Loan Bank of New York
Notes to Financial Statements

Amortized cost of available-for-sale securities includes adjustments made to the cost basis of an investment for accretion, amortization, collection of cash, previous OTTI recognized in earnings and/or fair value hedge accounting adjustments. There were no AFS securities determined to be OTTI at December 31, 2009 or 2008. No AFS securities were hedged at December 31, 2009 and 2008. Amortization of discounts recorded to income were $5.2 million, $3.8 million, and $0 for the years ended December 31, 2009, 2008, and 2007.

Management of the FHLBNY has concluded that gross unrealized losses at December 31, 2009 and 2008, as summarized in the table above, were caused by interest rate changes, credit spreads widening and reduced liquidity in the applicable markets. The FHLBNY has reviewed the investment security holdings and determined, based on creditworthiness of the securities and including any underlying collateral and/or insurance provisions of the security, that unrealized losses in the analysis above represent temporary impairment.

Impairment analysis on Available-for-sale securities — The Bank’s portfolio of mortgage-backed securities classified as available-for-sale (“AFS”) is comprised entirely of securities issued by GSEs collateralized mortgage obligations which are “pass through” securities. The FHLBNY evaluates its individual securities issued by Fannie Mae and Freddie Mac by considering the creditworthiness and performance of the debt securities and the strength of the government-sponsored enterprises’ guarantees of the securities. Based on the Bank’s analysis, GSE securities are performing in accordance with their contractual agreements. The Housing Act contains provisions allowing the U.S. Treasury to provide support to Fannie Mae and Freddie Mac. The U.S. Treasury and the Finance Agency placed Fannie Mae and Freddie Mac into conservatorship in an attempt to stabilize their financial conditions and their ability to support the secondary mortgage market. The FHLBNY believes that it will recover its investments in GSE issued securities given the current levels of collateral, credit enhancements, and guarantees that exist to protect the investments. Management has not made a decision to sell such securities at December 31, 2009 or subsequently. Management also concluded that it is more likely than not that it will not be required to sell such securities before recovery of the amortized cost basis of the security. The FHLBNY believes that these securities were not other-than-temporarily impaired as of December 31, 2009 or 2008. The Bank established certain grantor trusts to fund current and future payments under certain supplemental pension plans and these are classified as available-for-sale. The grantor trusts invest in money market, equity and fixed-income and bond funds. Investments in equity and fixed-income funds are redeemable at short notice, and realized gains and losses from investments in the funds were not significant. No available-for-sale-securities had been pledged at December 31, 2009 or 2008.

Redemption terms

The amortized cost and estimated fair value of securities classified as available-for-sale, by contractual maturity, were as follows (in thousands). Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment fees.

	December 31, 2009				December 31, 2008
	Amortized		Fair		Amortized		Fair
	Cost Basis		Value		Cost Basis		Value
Mortgage-backed securities
GSE issued Pass-throughs Due after ten years	$	2,242,665	$	2,240,564	$	2,912,643	$	2,851,683
Fixed income funds, equity funds and cash equivalents*		13,897		12,589		13,646		10,186
Total	$	2,256,562	$	2,253,153	$	2,926,289	$	2,861,869

* Determined to be redeemable at anytime.

227

Federal Home Loan Bank of New York
Notes to Financial Statements

Interest rate payment terms

The following table summarizes interest rate payment terms of securities classified as available-for-sale securities (in thousands):

	December 31,
	2009				2008
	Amortized Cost		Carrying Value		Amortized Cost		Carrying Value
Mortgage-backed securities
Mortgage pass-throughs-GSE issued
Variable-rate*	$	2,242,665	$	2,240,564	$	2,912,643	$	2,851,683
Fixed-rate		—		—		—		—
		2,242,665		2,240,564		2,912,643		2,851,683
Fixed income funds, equity funds and cash equivalents		13,897		12,589		13,646		10,186
Total	$	2,256,562	$	2,253,153	$	2,926,289	$	2,861,869

* LIBOR Indexed

Note 6. Advances

Redemption terms

Contractual redemption terms and yields of advances were as follows (dollars in thousands):

	December 31,
	2009									2008
				Weighted 2									Weighted 2
				Average			Percentage						Average			Percentage
	Amount			Yield			of Total			Amount			Yield			of Total
Overdrawn demand deposit accounts	$	2,022			1.20	%		—	%	$	—			—	%		—	%
Due in one year or less		24,128,022			2.07			26.59			32,420,095			2.52			31.36
Due after one year through two years		10,819,349			2.73			11.92			16,150,121			3.71			15.62
Due after two years through three years		10,069,555			2.91			11.10			7,634,680			3.76			7.39
Due after three years through four years		5,804,448			3.32			6.40			6,852,514			3.74			6.63
Due after four years through five years		3,364,706			3.19			3.71			3,210,575			3.88			3.11
Due after five years through six years		2,807,329			3.91			3.09			836,689			3.74			0.81
Thereafter		33,742,269			3.78			37.19			36,275,053			3.96			35.08
Total par value		90,737,700			3.06	%		100.00	%		103,379,727			3.44	%		100.00	%
Discount on AHP advances 1		(260	)								(330	)
Hedging adjustments 1		3,611,311									5,773,479
Total	$	94,348,751								$	109,152,876

1

Discounts on AHP advances were amortized to interest income using the level-yield method and were not significant for all periods reported. Amortization of fair value basis adjustments for terminated hedges was a charge to interest income and amounted to ($0.8) million, ($2.0) million, and ($0.4) million for the years ended December 31, 2009, 2008 and 2007. All other amortization charged to interest income aggregated were not significant for all periods reported. Interest rates on AHP advances ranged from 1.25% to 4.00% at December 31, 2009 and 1.25% to 6.04% at December 31, 2008.

2

The weighed average yield is the weighted average coupon rates for advances, unadjusted for swaps. For floating-rate advances, the weighted average rate is the rate outstanding at the reporting dates.

228

Federal Home Loan Bank of New York
Notes to Financial Statements

Impact of putable advances on advance maturities

The Bank offers putable advances to members. With a putable advance, the Bank effectively purchases a put option from the member that allows the Bank to terminate the fixed-rate advance, which is normally exercised when interest rates have increased from those prevailing at the time the advance was made. When the Bank exercises the put option, it will offer to extend additional credit to members at the then prevailing market rates and terms. Typically, the Bank will hedge putable advances with cancellable interest rate swaps with matching terms and will sell the exercise option that will allow swap counterparties to terminate the swaps at the same predetermined exercise dates as the advances. As of December 31, 2009 and 2008, the Bank had putable advances outstanding totaling $41.4 billion and $43.4 billion, representing 45.6% and 42.0% of par amounts of advances outstanding at those dates.

The table below offers a view of the advance portfolio with the possibility of the exercise of the put option that is controlled by the FHLBNY, and put dates are summarized into similar maturity tenors as the previous table that summarizes advances by contractual maturities (dollars in thousands):

	December 31,
				Percentage of						Percentage of
	2009			Total			2008			Total
Overdrawn demand deposit accounts	$	2,022			—	%	$	—			—	%
Due or putable in one year or less		56,978,134			62.79			63,251,007			61.18
Due or putable after one year through two years		14,082,199			15.52			18,975,821			18.36
Due or putable after two years through three years		8,991,805			9.91			10,867,530			10.51
Due or putable after three years through four years		5,374,048			5.92			5,293,364			5.12
Due or putable after four years through five years		2,826,206			3.12			2,728,075			2.64
Due or putable after five years through six years		158,329			0.18			230,189			0.22
Thereafter		2,324,957			2.56			2,033,741			1.97
Total par value		90,737,700			100.00	%		103,379,727			100.00	%
Discount on AHP advances		(260	)					(330	)
Hedging adjustments		3,611,311						5,773,479
Total	$	94,348,751					$	109,152,876

Security Terms

The FHLBNY lends to financial institutions involved in housing finance within its district. In addition, the FHLBNY is permitted, but not required, to accept collateral in the form of small business or agricultural loans (“expanded collateral”) from Community Financial Institutions (“CFIs”). CFIs are defined in the Housing Act as those institutions that have, as of the date of the transaction at issue, less than $1.0 billion in average total assets over the three years preceding that date (subject to annual adjustment by the Finance Agency director based on the consumer price index). It is the FHLBNY’s policy not to accept such expanded collateral for advances. Borrowing members pledge their capital stock of the FHLBNY as additional collateral for advances. As of December 31, 2009 and 2008, the FHLBNY had rights to collateral with an estimated value greater than outstanding advances. Based upon the financial condition of the member, the FHLBNY:

(1)	Allows a member to retain possession of the collateral assigned to the FHLBNY, if the member executes a written security agreement and agrees to hold such collateral for the benefit of the FHLBNY; or
(2)	Requires the member specifically to assign or place physical possession of such collateral with the FHLBNY or its safekeeping agent.

229

Federal Home Loan Bank of New York
Notes to Financial Statements

Beyond these provisions, Section 10(e) of the FHLBank Act affords any security interest granted by a member to the FHLBNY priority over the claims or rights of any other party. The two exceptions are claims that would be entitled to priority under otherwise applicable law or perfected security interests. All member obligations with the Bank were fully collateralized throughout their entire term. The total of collateral pledged to the Bank includes excess collateral pledged above the Bank’s minimum collateral requirements. These minimum requirements range from 103 percent to 125 percent of outstanding advances, based on the collateral type. It is common for members to maintain excess collateral positions with the Bank for future liquidity needs. Based on several factors (e.g. advance type, collateral type or member financial condition) members are required to comply with specified collateral requirements, including but not limited to, a detailed listing of pledged mortgage collateral and/or delivery of pledged collateral to the Bank or its designated collateral custodian(s). For example, all pledged securities collateral must be delivered to the Bank’s nominee name at Citibank, N.A., its securities safekeeping custodian. Mortgage collateral that is required to be in the Bank’s possession is typically delivered to the Bank’s Jersey City, New Jersey facility. However, in certain instances, delivery to a Bank approved custodian may be allowed. In both instances, the members provide periodic listings updating the information of the mortgage collateral in possession.

As of December 31, 2009, members had pledged a total of $163.3 billion ($186.0 billion at December 31, 2008). At a minimum, each member pledged sufficient collateral to adequately collateralize their outstanding obligations with the Bank. At December 31, 2009, $57.7 billion of collateral ($60.5 billion at December 31, 2008) was in the Bank’s physical possession or that of its safekeeping agent(s); $105.7 billion ($125.5 billion at December 31, 2008) was specifically listed. Under this collateralization arrangement, the member holds or engaged a third party custodian for physical possession of specific collateral pledged to the FHLBNY but the member provides listings of loans pledged to the FHLBNY with detailed loan information such as loan amount, payments, maturity date, interest rate, loan-to-value, collateral type, FICO scores, etc.

Credit Risk

The FHLBNY has never experienced a credit loss on an advance. The management of the Bank has policies and procedures in place to appropriately manage credit risk. There were no past due advances and all advances were current for each of the periods ended December 31, 2009 and 2008. Management does not anticipate any credit losses, and accordingly, the Bank has not provided an allowance for credit losses on advances. The Bank’s potential credit risk from advances is concentrated in commercial banks, savings institutions and insurance companies.

Concentration of advances outstanding — Advances to the FHLBNY’s top ten borrowing member institutions aggregated $59.5 billion ($65.7 billion at December 31, 2008), representing 65.6% (63.5% at December 31, 2008) of the par amounts of advances outstanding at December 31, 2009. The FHLBNY held sufficient collateral to cover the advances to all of these institutions, and it does not expect to incur any credit losses.

230

Federal Home Loan Bank of New York
Notes to Financial Statements

Interest Rate Payment Terms

The following table summarizes interest rate payment terms for advances (dollars in thousands):

	December 31,
	2009						2008
				Percentage						Percentage
	Amount			of total			Amount			of total
Fixed-rate	$	76,634,828			84.46	%	$	83,173,877			80.45	%
Variable-rate		13,730,850			15.13			19,740,850			19.10
Variable-rate capped		370,000			0.41			465,000			0.45
Overdrawn demand deposit accounts		2,022			—			—			—
Total par value		90,737,700			100.00	%		103,379,727			100.00	%
Discount on AHP Advances		(260	)					(330	)
Hedging basis adjustments		3,611,311						5,773,479
Total	$	94,348,751					$	109,152,876

Variable-rate advances were mainly indexed to the London Interbank Offered Rate (“LIBOR”) or the Federal funds effective rate.

Note 7. Mortgage loans held-for-portfolio

Mortgage Partnership Finance program loans, or (MPF) constitute the majority of the mortgage loans held-for-portfolio. The MPF program involves investment by the FHLBNY in mortgage loans that are purchased from or originated through its participating financial institutions (“PFIs”). The members retain servicing rights and may credit-enhance the portion of the loans participated to the FHLBNY. No intermediary trust is involved. Mortgage loans that are considered to have been originated by the FHLBNY were $30.5 million and $36.8 million at December 31, 2009 and 2008. Mortgage loans also included loans in the Community Mortgage Asset program (“CMA”), which has been inactive since 2001. In the CMA program, FHLBNY participated in residential, multi-family and community economic development mortgage loans originated by its members. Outstanding balances of CMA loans were $3.9 million and $4.0 million at December 31, 2009 and 2008.

The following table presents information on mortgage loans held-for-portfolio (dollars in thousands):

	December 31,
				Percentage of						Percentage of
	2009			Total			2008			Total
Real Estate:
Fixed medium-term single-family mortgages	$	388,072			29.43	%	$	467,845			32.15	%
Fixed long-term single-family mortgages		926,856			70.27			983,493			67.58
Multi-family mortgages		3,908			0.30			4,009			0.27
Total par value		1,318,836			100.00	%		1,455,347			100.00	%
Unamortized premiums		9,095						10,662
Unamortized discounts		(5,425	)					(6,310	)
Basis adjustment 1		(461	)					(408	)
Total mortgage loans held-for-portfolio		1,322,045						1,459,291
Allowance for credit losses		(4,498	)					(1,406	)
Total mortgage loans held-for-portfolio after allowance for credit losses	$	1,317,547					$	1,457,885

¹ Represents fair value basis of open and closed delivery commitments.

The estimated fair values of the mortgage loans as of December 31, 2009 and 2008 are reported in Note 18 — Fair Values of financial instruments.

231

Federal Home Loan Bank of New York
Notes to Financial Statements

Loans insured by the Federal Housing Administration and Veteran Administration were $6.0 million and $7.0 million at December 31, 2009 and 2008. Conventional mortgages and loans in the CMA program constituted the remaining balance of mortgage loans held-for-portfolio.

The FHLBNY and its members share the credit risk of MPF loans by structuring potential credit losses into layers (See Note 1 — Significant Accounting Policies). The first layer is typically 100 basis points but varies with the particular MPF program. The amount of the first layer, or First Loss Account or “FLA”, was estimated as $13.9 million and $13.8 million at December 31, 2009 and 2008. The FLA is not recorded or reported as a reserve for loan losses as it serves as a memorandum or information account. The FHLBNY is responsible for absorbing the first layer. The second layer is that amount of credit obligations that the Participating Financial Institution (“PFI”) has taken on which will equate the loan to a double-A rating. The FHLBNY pays a Credit Enhancement fee to the PFI for taking on this obligation. The FHLBNY assumes all residual risk. Credit Enhancement fees accrued were $1.6 million for year ended December 31, 2009, and $1.7 million for each of the years ended December 31, 2008 and 2007, and reported as a reduction to mortgage loan interest income. The amount of charge-offs in each period reported was insignificant and it was not necessary for the FHLBNY to recoup any losses from the PFIs.

The following provides roll-forward analysis of the allowance for credit losses (in thousands):

	Years ended December 31,
	2009			2008		2007
Beginning balance	$	1,406		$	633	$	593
Charge-offs		(16	)		—		—
Provision for credit losses on mortgage loans		3,108			773		40
Ending balance	$	4,498		$	1,406	$	633

As of December 31, 2009 and 2008, the FHLBNY had $16.0 million and $4.8 million of non-accrual loans. Mortgage loans are considered impaired when, based on current information and events, it is probable that the FHLBNY will be unable to collect all principal and interest amounts due according to the contractual terms of the mortgage loan agreements. As of December 31, 2009 and 2008, the FHLBNY had no investment in impaired mortgage loans, other than the non-accrual loans.

The following table summarizes mortgage loans held-for-portfolio, all Veterans Administrations insured loans, past due 90 days or more and still accruing interest (in thousands):

	December 31, 2009		December 31, 2008
Secured by 1-4 family	$	570	$	507

232

Federal Home Loan Bank of New York
Notes to Financial Statements

Note 8. Deposits

The FHLBNY accepts demand, overnight and term deposits from its members. A member that services mortgage loans may deposit in the FHLBNY funds collected in connection with the mortgage loans, pending disbursement of such funds to the owners of the mortgage loans.

The following table summarizes term deposits (in thousands):

	December 31, 2009		December 31, 2008
Due in one year or less	$	7,200	$	117,400
Total term deposits	$	7,200	$	117,400

Note 9. Borrowings

Securities sold under agreements to repurchase

The FHLBNY did not have any securities sold under agreement to repurchase as of December 31, 2009 or 2008. Terms, amounts and outstanding balances of borrowings from other Federal Home Loan Banks are described under Note 20 — Related party transactions.

Note 10. Consolidated obligations

Consolidated obligations are the joint and several obligations of the FHLBanks and consist of bonds and discount notes. The FHLBanks issue consolidated obligations through the Office of Finance as their fiscal agent. Consolidated bonds are issued primarily to raise intermediate- and long-term funds for the FHLBanks and are not subject to any statutory or regulatory limits on maturity. Consolidated discount notes are issued primarily to raise short-term funds. Discount notes sell at less than their face amount and are redeemed at par value when they mature.

The Finance Agency, at its discretion, may require any FHLBank to make principal or interest payments due on any consolidated obligations. Although it has never occurred, to the extent that an FHLBank would make a payment on a consolidated obligation on behalf of another FHLBank, the paying FHLBank would be entitled to reimbursement from the non-complying FHLBank. However, if the Finance Agency determines that the non-complying FHLBank is unable to satisfy its obligations, then the Finance Agency may allocate the outstanding liability among the remaining FHLBanks on a pro rata basis in proportion to each FHLBank’s participation in all consolidated obligations outstanding, or on any other basis the Finance Agency may determine.

Based on management’s review, the FHLBNY has no reason to record actual or contingent liabilities with respect to the occurrence of events or circumstances that would require the FHLBNY to assume an obligation on behalf of other FHLBanks. The par amounts of the FHLBanks’ outstanding consolidated obligations, including consolidated obligations held by the FHLBanks, were approximately $0.9 trillion and $1.3 trillion as of December 31, 2009 and 2008.

Finance Agency regulations require the FHLBanks to maintain, in the aggregate, unpledged qualifying assets equal to the consolidated obligations outstanding. Qualifying assets are defined as cash; secured advances; assets with an assessment or rating at least equivalent to the current assessment or rating of the consolidated obligations; obligations, participations, mortgages, or other securities of or issued by the United States or an agency of the United States; and securities in which fiduciary and trust funds may invest under the laws of the state in which the FHLBank is located.

233

Federal Home Loan Bank of New York
Notes to Financial Statements

The FHLBNY met the qualifying unpledged asset requirements in each of the years reported as follows:

	December 31, 2009			December 31, 2008
Percentage of unpledged qualifying assets to consolidated obligations		109	%		107	%

To provide the holders of consolidated obligations issued before January 29, 1993 (prior bondholders) with the protection equivalent to that provided under the FHLBanks’ previous leverage limit of twelve times the FHLBanks’ capital stock, prior bondholders have a claim on the qualifying assets [Special Asset Account (SAA)] if capital stock is less than 8.33% of consolidated obligations. As of December 31, 2009 and 2008, the combined FHLBanks’ capital stock was 5.7% and 4.1% of the par value of consolidated obligations outstanding, and the SAA balance was approximately $5 thousand and $6 thousand at December 31, 2009 and 2008. Further, the regulations require each FHLBank to transfer qualifying assets in the amount of its allocated share of the FHLBanks’ SAA to a trust for the benefit of the prior bondholders, if its capital-to-assets ratio falls below 2.0%. No transfer has been made because the ratio has never been below 2.0%.

General Terms

FHLBank consolidated obligations are issued with either fixed- or variable-rate coupon payment terms that use a variety of indices for interest rate resets. These indices include the London Interbank Offered Rate (“LIBOR”), Constant Maturity Treasury (“CMT”), 11th District Cost of Funds Index (“COFI”), and others. In addition, to meet the expected specific needs of certain investors in consolidated obligations, both fixed- and variable-rate bonds may also contain certain features that may result in complex coupon payment terms and call options. When such consolidated obligations are issued, the FHLBNY may enter into derivatives containing offsetting features that effectively convert the terms of the bond to those of a simple variable- or fixed-rate bond.

Consolidated obligations, beyond having fixed-rate or simple variable-rate coupon payment terms, may also include Optional Principal Redemption Bonds (callable bonds) that the FHLBNY may redeem in whole or in part at its discretion on predetermined call dates, according to the terms of the bond offerings.

With respect to interest payment terms, consolidated bonds may also have step-up, or step-down terms. Step-up bonds generally pay interest at increasing fixed rates for specified intervals over the life of the bond. Step-down bonds pay interest at decreasing fixed rates. These bonds generally contain provisions enabling the FHLBNY to call bonds at its option on predetermined exercise dates at par.

234

Federal Home Loan Bank of New York
Notes to Financial Statements

The following summarizes consolidated obligations issued by the FHLBNY and outstanding at December 31, 2009 and 2008 (in thousands):

	December 31, 2009			December 31, 2008
Consolidated obligation bonds-amortized cost	$	73,436,939		$	80,978,383
Fair value basis adjustments		572,537			1,254,523
Fair value basis on terminated hedges		2,761			7,857
Fair value option valuation adjustments and accrued interest		(4,259	)		15,942
Total Consolidated obligation-bonds	$	74,007,978		$	82,256,705
Discount notes-amortized cost	$	30,827,639		$	46,329,545
Fair value basis adjustments		—			361
Total Consolidated obligation-discount notes	$	30,827,639		$	46,329,906

Redemption Terms of consolidated obligation bonds

The following is a summary of consolidated bonds outstanding by year of maturity (dollars in thousands):

	December 31,
	2009									2008
				Weighted									Weighted
				Average			Percentage						Average			Percentage
Maturity	Amount			Rate 1			of total			Amount			Rate 1			of total
One year or less	$	40,896,550			1.34	%		55.75	%	$	49,568,550			1.93	%		61.23	%
Over one year through two years		15,912,200			1.69			21.69			16,192,550			3.20			20.00
Over two years through three years		7,518,575			2.28			10.25			5,299,700			3.73			6.55
Over three years through four years		3,961,250			3.49			5.40			2,469,575			4.75			3.05
Over four years through five years		2,130,300			4.27			2.90			3,352,450			3.99			4.14
Over five years through six years		644,350			5.15			0.88			989,300			5.06			1.22
Thereafter		2,294,700			5.06			3.13			3,082,050			5.35			3.81
Total par value		73,357,925			1.87	%		100.00	%		80,954,175			2.64	%		100.00	%
Bond premiums		112,866									63,737
Bond discounts		(33,852	)								(39,529	)
Fair value basis adjustments		572,537									1,254,523
Fair value basis adjustments on terminated hedges		2,761									7,857
Fair value option valuation adjustments and accrued interest		(4,259	)								15,942
Total bonds	$	74,007,978								$	82,256,705

¹ Weighted average rate represents the weighted average coupons of bonds, unadjusted for swaps. The weighted average coupon of bonds outstanding at December 31, 2009 and 2008, represent contractual coupons payable to investors.

Amortization of bond premiums and discounts resulted in net reduction of interest expense of $29.9 million, $14.1 million, and $1.8 million in 2009, 2008 and 2007. Amortization of basis adjustments from terminated hedges were $7.0 million, $5.9 million and $2.1 million, and were recorded as an expense in 2009, 2008, and 2007.

Debt extinguished

During 2009, the FHLBNY retired $500.0 million of consolidated obligation bonds at a cost that exceeded book value by $69.5 thousand, which was recorded as a loss. The bonds retired were associated with the prepayment of advances for which prepayment fees were received. During the year ended December 31, 2008, the FHLBNY did not retire any consolidated bonds. In 2007, debt transferred and retired totaled $626.2 million at a cost that exceeded book value by $8.6 million.

235

Federal Home Loan Bank of New York
Notes to Financial Statements

Transfers of consolidated bonds to other FHLBanks

The Bank may transfer certain bonds at negotiated market rates to other FHLBanks to meet the FHLBNY’s asset and liability management objectives. There were no transfers in 2009 and 2008. See Note 20 — Related party transactions for more information.

Impact of callable bonds on consolidated bond maturities

The Bank issues callable bonds to investors. With a callable bond, the Bank effectively purchases an option from the investor that allows the Bank to terminate the consolidated obligation bond at pre-determined option exercise dates, which is normally exercised when interest rates have decreased from those prevailing at the time the bonds were issued. Typically, the Bank will hedge callable bonds with cancellable interest rate swaps with matching terms and will sell the exercise option that will allow swap counterparties to terminate the swaps at the same predetermined exercise dates as the bonds. As of December 31, 2009 and 2008, the Bank had callable bonds totaling $11.7 billion and $4.9 billion, representing 15.9% and 6.1% of par amounts of consolidated bonds outstanding at those dates.

The following summarizes bonds outstanding by year of maturity or next call date (dollars in thousands):

	December 31,
				Percentage						Percentage
	2009			of total			2008			of total
Year of Maturity or next call date
Due or callable in one year or less	$	50,481,350			68.82	%	$	53,034,550			65.51	%
Due or callable after one year through two years		11,352,200			15.48			15,472,350			19.11
Due or callable after two years through three years		4,073,575			5.55			4,843,700			5.98
Due or callable after three years through four years		3,606,250			4.91			1,445,575			1.79
Due or callable after four years through five years		1,325,800			1.81			2,954,450			3.65
Due or callable after five years through six years		529,050			0.72			684,800			0.85
Thereafter		1,989,700			2.71			2,518,750			3.11
Total par value		73,357,925			100.00	%		80,954,175			100.00	%
Bond premiums		112,866						63,737
Bond discounts		(33,852	)					(39,529	)
Fair value basis adjustments		572,537						1,254,523
Fair value basis adjustments on terminated hedges		2,761						7,857
Fair value option valuation adjustments and accrued interest		(4,259	)					15,942
Total bonds	$	74,007,978					$	82,256,705

236

Federal Home Loan Bank of New York
Notes to Financial Statements

Callable and non-callable consolidated obligation bonds

The FHLBNY uses fixed-rate callable debt to finance callable advances and mortgage-backed securities. Simultaneous with the debt issuance, the FHLBNY may also execute a cancellable interest-rate swap (in which the FHLBNY pays variable and receives fixed) with a call feature that mirrors the option embedded in the debt (a sold callable swap). The combined sold callable swap and callable debt allow the Bank to provide members attractively priced, fixed-rate advances (in thousands):

	December 31,
	2009		2008
Non-callable	$	61,678,125	$	76,037,875
Callable		11,679,800		4,916,300
Total par value	$	73,357,925	$	80,954,175

Interest rate payment terms

The following summarizes types of bonds issued and outstanding (in thousands).

	December 31,
				Percentage of						Percentage of
	2009			Total			2008			Total
Fixed-rate, non-callable	$	48,647,625			66.31	%	$	36,367,875			44.92	%
Fixed-rate, callable		8,374,800			11.42			4,828,300			5.96
Step Up, non-callable		53,000			0.07			—			—
Step Up, callable		3,305,000			4.51			73,000			0.09
Step Down, callable		—			—			15,000			0.02
Single-index floating rate		12,977,500			17.69			39,670,000			49.01
Total par value		73,357,925			100.00	%		80,954,175			100.00	%
Bond premiums		112,866						63,737
Bond discounts		(33,852	)					(39,529	)
Fair value basis adjustments		572,537						1,254,523
Fair value basis adjustments on terminated hedges		2,761						7,857
Fair value option valuation adjustments and accrued interest		(4,259	)					15,942
Total bonds	$	74,007,978					$	82,256,705

Discount notes

Consolidated discount notes are issued to raise short-term funds. Discount notes are consolidated obligations with original maturities up to one year. These notes are issued at less than their face amount and redeemed at par when they mature. The FHLBNY’s outstanding consolidated discount notes were as follows (dollars in thousands):

	December 31,
	2009			2008
Par value	$	30,838,104		$	46,431,347
Amortized cost	$	30,827,639		$	46,329,545
Fair value basis adjustments		—			361
Total	$	30,827,639		$	46,329,906
Weighted average interest rate		0.15	%		1.00	%

237

Federal Home Loan Bank of New York
Notes to Financial Statements

Note 11. Mandatorily redeemable capital stock

Generally, the FHLBNY’s capital stock is redeemable at the option of either the member or the FHLBNY subject to certain conditions, and is subject to the provisions under the accounting guidance for certain financial instruments with characteristics of both liabilities and equity.

The FHLBNY is a cooperative whose member financial institutions own almost all of the FHLBNY’s capital stock. Member shares cannot be purchased or sold except between the Bank and its members at its $100 per share par value. Also, the FHLBNY does not have equity securities that trade in a public market. Future filings with the SEC will not be in anticipation of the sale of equity securities in a public market as the FHLBNY is prohibited by law from doing so, and the FHLBNY is not controlled by an entity that has equity securities traded or contemplated to be traded in a public market. Therefore, the FHLBNY is a nonpublic entity based on the definition given in the accounting guidance for certain financial instruments with characteristics of both liabilities and equity. In addition, although the FHLBNY is a nonpublic entity, the FHLBanks issue consolidated obligations that are traded in the public market. Based on this factor, the FHLBNY complies with the provisions of the accounting guidance for certain financial instruments with characteristics of both liabilities and equity as a nonpublic SEC registrant.

In accordance with the accounting guidance for certain financial instruments with characteristics of both liabilities and equity, the FHLBNY reclassifies the stock subject to redemption from equity to a liability once a member: irrevocably exercises a written redemption right; gives notice of intent to withdraw from membership; or attains non-member status by merger or acquisition, charter termination, or involuntary termination from membership. Under such circumstances, the member shares will then meet the definition of a mandatorily redeemable financial instrument and are reclassified to a liability at fair value. Dividends on member shares are accrued and also classified as a liability in the Statements of Condition and reported as interest expense in the Statements of Income. The repayment of these mandatorily redeemable financial instruments, once settled, is reflected as financing cash outflows in the Statements of Cash Flows. In compliance with the accounting guidance, dividends on mandatorily redeemable capital stock in the amounts of $7.5 million, $9.0 million and $11.7 million were recorded as interest expense for the years ended December 31, 2009, 2008 and 2007.

If a member cancels its notice of voluntary withdrawal, the FHLBNY will reclassify the mandatorily redeemable capital stock from a liability to equity. After the reclassification, dividends on the capital stock will no longer be classified as interest expense.

At December 31, 2009 and 2008, mandatorily redeemable capital stock of $126.3 million and $143.1 million were held by former members who had attained non-member status by virtue of being acquired by non-members. A small number of members had also become non-members by relocating their charters to outside the FHLBNY’s membership district.

238

Federal Home Loan Bank of New York
Notes to Financial Statements

Anticipated redemptions of mandatorily redeemable capital stock were as follows (in thousands):

	December 31,
	2009		2008
Redemption less than one year	$	102,453	$	38,328
Redemption from one year to less than three years		16,766		83,159
Redemption from three years to less than five years		2,118		14,646
Redemption after five years or greater		4,957		6,988
Total	$	126,294	$	143,121

Anticipated redemptions assume the Bank will follow its current practice of daily redemption of capital in excess of the amount required to support advances. Commencing January 1, 2008, the Bank may also redeem, at its discretion, non-members’ membership stock.

Voluntary withdrawal from membership — As of December 31, 2009, one member had formally notified the Bank of its intent to withdraw from membership and voluntarily redeem its capital stock, and redemption requests for stock remained pending at December 31, 2009. Additionally, there was one termination due to insolvency from membership during 2009. These amounts were not significant.

Members acquired by non-members — Two members became non-members in 2009. When a member is acquired by a non-member, the FHLBNY reclassifies stock of a member to a liability on the day the member’s charter is dissolved. Under existing practice, the FHLBNY repurchases stock held by former members if such stock is considered “excess” and is no longer required to support outstanding advances. Membership stock held by former members is reviewed and repurchased annually.

The following table provides roll-forward information with respect to changes in mandatorily redeemable capital stock liabilities (in thousands):

	December 31,
	2009			2008			2007
Beginning balance	$	143,121		$	238,596		$	109,950
Capital stock subject to mandatory redemption reclassified from equity		49,848			64,758			186,981
Redemption of mandatorily redeemable capital stock 1		(66,675	)		(160,233	)		(58,335	)
Ending balance	$	126,294		$	143,121		$	238,596
Accrued interest payable	$	2,029		$	1,260		$	4,921

1	Redemption includes repayment of excess stock.
	(The annualized accrual rates were 5.60%, 3.50% and 8.05% for 2009, 2008 and 2007)

Note 12. Affordable Housing Program and REFCORP

The FHLBank Act requires each FHLBank to establish an AHP. Each FHLBank provides subsidies in the form of direct grants and below-market interest rate advances to members who use the funds to assist the purchase, construction, or rehabilitation of housing for very low-, low-, and moderate-income households. Annually, the FHLBanks must set aside for the AHP the greater of $100 million or 10 percent of regulatory defined net income. The FHLBNY charges the amount set aside for AHP to income and recognizes it as a liability. The FHLBNY relieves the AHP liability as members use the subsidies. If the result of the aggregate 10 percent calculation described above is less than $100 million for all twelve FHLBanks, then the FHLBank Act requires the shortfall to be allocated among the FHLBanks based on the ratio of each FHLBank’s income before AHP and REFCORP to the sum of the income before AHP and REFCORP of the twelve FHLBanks. There was no shortfall in 2009, 2008 or 2007. The FHLBNY had outstanding principal in AHP-related advances of $2.1 million and $5.0 million as of December 31, 2009 and 2008.

239

Federal Home Loan Bank of New York
Notes to Financial Statements

Regulatory income is defined as income before assessments, and before interest expense related to mandatorily redeemable capital stock under the accounting guidance for certain financial instruments with characteristics of both liabilities and equity, but after the assessment for REFCORP. The exclusion of interest expense related to mandatorily redeemable capital stock is a regulatory interpretation by the Finance Agency. The AHP and REFCORP assessments are calculated simultaneously because of their interdependence on each other. Each FHLBank accrues this expense monthly based on its income before assessments. A FHLBank reduces its AHP liability as members use subsidies.

If a FHLBank experienced a loss during a quarter, but still had income for the year, the FHLBank’s obligation to the AHP would be calculated based on the FHLBank’s year-to-date income. If the FHLBank had income in subsequent quarters, it would be required to contribute additional amounts to meet its calculated annual obligation. If the FHLBank experienced a loss for a full year, the FHLBank would have no obligation to the AHP for the year unless the aggregate 10 percent calculation described above was less than $100 million for all 12 FHLBanks, if it were, each FHLBank would be required to assure that the aggregate contribution of the FHLBanks equals $100 million. The pro ration would be made on the basis of an FHLBank’s income in relation to the income of all FHLBanks for the previous year. Each FHLBank’s required annual AHP contribution is limited to its annual net earnings.

The following provides roll-forward information with respect to changes in Affordable Housing Program liabilities (in thousands):

	Years ended December 31,
	2009			2008			2007
Beginning balance	$	122,449		$	119,052		$	101,898
Additions from current period’s assessments		64,251			29,783			37,204
Net disbursements for grants and programs		(42,211	)		(26,386	)		(20,050	)
Ending balance	$	144,489		$	122,449		$	119,052

Each FHLBank is required to pay to REFCORP 20 percent of income calculated in accordance with GAAP after the assessment for AHP, but before the assessment for REFCORP. The AHP and REFCORP assessments are calculated simultaneously because of their interdependence on each other. Each FHLBank accrues its REFCORP assessment on a monthly basis. REFCORP has been designated as the calculation agent for AHP and REFCORP assessments. Each FHLBank provides its net income before AHP and REFCORP to REFCORP, which then performs the calculations for each quarter end. The FHLBanks will continue to be obligated to pay these amounts until the aggregate amounts actually paid by all 12 FHLBanks are equivalent to a $300 million annual annuity (or a scheduled payment of $75 million per quarter) whose final maturity date is April 15, 2030, at which point the required payment of each FHLBank to REFCORP will be fully satisfied. The cumulative amount to be paid to REFCORP by each FHLBank is not determinable at this time because it depends on the future earnings of all FHLBanks and interest rates. If a FHLBank experienced a net loss during a quarter, but still had net income for the year, the FHLBank’s obligation to REFCORP would be calculated based on the FHLBank’s year-to-date GAAP net income. If the FHLBank had net income in subsequent quarters, it would be required to contribute additional amounts to meet its calculated annual obligation. If the FHLBank experienced a net loss for a full year, the FHLBank would have no obligation to REFCORP for the year.

240

Federal Home Loan Bank of New York
Notes to Financial Statements

The Finance Agency is required to extend the term of the FHLBanks’ obligation to REFCORP for each calendar quarter in which the FHLBanks’ quarterly payment falls short of $75 million.

Note 13. Capital

The FHLBanks, including the FHLBNY, have a cooperative structure. To access FHLBNY’s products and services, a financial institution must be approved for membership and purchase capital stock in FHLBNY. The member’s stock requirement is generally based on its use of FHLBNY products, subject to a minimum membership requirement, as prescribed by the FHLBank Act and the FHLBNY Capital Plan. FHLBNY stock can be issued, exchanged, redeemed and repurchased only at its stated par value of $100 per share. It is not publicly traded. An option to redeem capital stock that is greater than a member’s minimum requirement is held by both the member and the FHLBNY.

Under the Gramm-Leach-Bliley Act of 1999 (“GLB Act”) and the Finance Agency’s capital regulations, the FHLBNY’s Capital Plan offers two sub-classes of Class B capital stock, Class B1 and Class B2. Class B1 stock is issued to meet membership stock purchase requirements. Class B2 stock is issued to meet activity-based requirements. The FHLBNY requires member institutions to maintain Class B1 stock based on a percentage of the member’s mortgage-related assets and Class B2 stock-based on a percentage of advances and acquired member assets outstanding with the FHLBank and certain commitments outstanding with the FHLBank. Class B1 and Class B2 stockholders have the same voting rights and dividend rates.

Members can redeem Class A stock by giving six months’ notice, and redeem Class B stock by giving five year’s notice. Only “permanent” capital, defined as retained earnings and Class B stock, satisfies the FHLBank risk-based capital requirement. In addition, the GLB Act specifies a 5.0 percent minimum leverage ratio based on total capital and a 4.0 percent minimum capital ratio that does not include the 1.5 weighting factor applicable to the permanent capital that is used in determining compliance with the 5.0 percent minimum leverage ratio.

Capital Plan under GLB Act

The FHLBNY implemented its current capital plan on December 1, 2005 through the issuance of Class B stock. The conversion was considered a capital exchange and was accounted for at par value. Members’ capital stock held immediately prior to the conversion date was automatically exchanged for an equal amount of Class B Capital Stock, comprised of Membership Stock (referred to as “Subclass B1 Stock”) and Activity-Based Stock (referred to as “Subclass B2 Stock”).

Any member that withdraws from membership must wait five years from the divestiture date for all capital stock that is held as a condition of membership unless the institution has cancelled its notice of withdrawal prior to that date and before being readmitted to membership in any FHLBank. Commencing in 2008, the Bank at its discretion may repay a non-member’s membership stock before the end of the five-year waiting period.

241

Federal Home Loan Bank of New York
Notes to Financial Statements

The FHLBNY is subject to risk-based capital rules. Specifically, the FHLBNY is subject to three capital requirements under its capital plan. First, the FHLBNY must maintain at all times permanent capital in an amount at least equal to the sum of its credit risk, its market risk, and operations risk capital requirements calculated in accordance with the FHLBNY policy, rules, and regulations of the Finance Agency. Only permanent capital, defined as Class B stock and retained earnings, satisfies this risk-based capital requirement. The Finance Agency may require the FHLBNY to maintain a greater amount of permanent capital than is required as defined by the risk-based capital requirements. In addition, the FHLBNY is required to maintain at least a 4.0% total capital-to-asset ratio and at least a 5.0% leverage ratio at all times. The leverage ratio is defined as the sum of permanent capital weighted 1.5 times and nonpermanent capital weighted 1.0 time divided by total assets. The FHLBNY was in compliance with the aforementioned capital rules and requirements for all periods presented.

On December 12, 2007 the Finance Board (predecessor to the Finance Agency) approved amendments to the FHLBNY’s ’s capital plan. The amendments allow the FHLBNY to recalculate the membership stock purchase requirement any time after 30 days subsequent to a merger. The amendments also permit the FHLBNY to use a zero mortgage asset base in performing the calculation, which recognizes the fact that the corporate entity that was once its member no longer exists. As a result of these amendments, the FHLBNY could determine that all of the membership stock formerly held by the member becomes excess stock, which would give the FHLBNY the discretion, but not the obligation, to repurchase that stock prior to the expiration of the five-year notice period.

The following table summarizes the Bank’s risk-based capital ratios (dollars in thousands):

	December 31, 2009						December 31, 2008
	Required 4			Actual			Required 4			Actual
Regulatory capital requirements:
Risk-based capital 1	$	606,716		$	5,874,125		$	650,333		$	6,111,676
Total capital-to-asset ratio		4.00	%		5.14	%		4.00	%		4.44	%
Total capital 2	$	4,578,436		$	5,878,623		$	5,501,596		$	6,113,082
Leverage ratio		5.00	%		7.70	%		5.00	%		6.67	%
Leverage capital 3	$	5,723,045		$	8,815,685		$	6,876,995		$	9,168,920

1	Actual “Risk-based capital” is capital stock and retained earnings plus mandatorily redeemable capital stock. Section 932.2 of the Finance Agency’s regulations also refers to this amount as “Permanent Capital.”
2	Required “ Total capital” is 4% of total assets. Actual “Total capital” is “Actual Risk-based capital” plus allowance for credit losses. Does not include reserves for the Lehman Brothers receivable which is a specific reserve.
3	Actual Leverage capital is “Risk-based capital” times 1.5 plus allowance for loan losses.
4	Required minimum.

The Finance Agency has indicated that the accounting treatment for certain shares determined to be mandatorily redeemable will not be included in the definition of total capital for purposes of determining the Bank’s compliance with regulatory capital requirements, calculating mortgage securities investment authority (300 percent of total capital), calculating unsecured credit exposure to other GSEs (100 percent of total capital), or calculating unsecured credit limits to other counterparties (various percentages of total capital depending on the rating of the counterparty).

242

Federal Home Loan Bank of New York
Notes to Financial Statements

Note 14. Total comprehensive income

Total comprehensive income is comprised of Net income and Accumulated other comprehensive income (loss) (“AOCI”), which includes unrealized gains and losses on available-for-sale securities, cash flow hedging activities, employee supplemental retirement plans, and the non-credit portion of OTTI on HTM securities. Changes in AOCI and total comprehensive income were as follows for each of the three years ended December 31, 2009 (in thousands):

				Non-credit									Accumulated
	Available-			OTTI on HTM			Cash			Supplemental			Other					Total
	for-sale			securities,			flow			Retirement			Comprehensive			Net		Comprehensive
	securities			net of accretion			hedges			Plans			Income (Loss)			Income		Income
Balance, December 31, 2006	$	—		$	—		$	(4,763	)	$	(5,785	)	$	(10,548	)
Net change		(373	)		—			(25,452	)		698			(25,127	)	$	323,105	$	297,978
Balance, December 31, 2007		(373	)		—			(30,215	)		(5,087	)		(35,675	)
Net change		(64,047	)		—			24			(1,463	)		(65,486	)	$	259,060	$	193,574
Balance, December 31, 2008		(64,420	)		—			(30,191	)		(6,550	)		(101,161	)
Net change		61,011			(110,570	)		7,508			(1,327	)		(43,378	)	$	570,755	$	527,377
Balance, December 31, 2009	$	(3,409	)	$	(110,570	)	$	(22,683	)	$	(7,877	)	$	(144,539	)

Note 15. Earnings per share of capital

The following table sets forth the computation of earnings per share (dollars in thousands except per share amounts):

	December 31,
	2009			2008			2007
Net income	$	570,755		$	259,060		$	323,105
Net income available to stockholders	$	570,755		$	259,060		$	323,105
Weighted average shares of capital		53,807			50,894			39,178
Less: Mandatorily redeemable capital stock		(1,371	)		(1,664	)		(1,463	)
Average number of shares of capital used to calculate earnings per share		52,436			49,230			37,715
Net earnings per share of capital	$	10.88		$	5.26		$	8.57

Basic and diluted earnings per share of capital are the same. The FHLBNY has no dilutive potential common shares or other common stock equivalents.

243

Federal Home Loan Bank of New York
Notes to Financial Statements

Note 16. Employee retirement plans

The Bank participates in the Pentegra Defined Benefit Plan for Financial Institutions (“DB Plan”). The DB Plan is a tax-qualified multiple-employer defined benefit pension plan that covers all officers and employees of the Bank. For accounting purposes, the DB Plan is a multi-employer plan and does not segregate its assets, liabilities, or costs by participating employer. The Bank also participates in the Pentegra Defined Contribution Plan for Financial Institutions, a tax-qualified defined contribution plan. The Bank’s contributions are a matching contribution equal to a percentage of voluntary employee contributions, subject to certain limitations.

In addition, the Bank maintains a Benefit Equalization Plan (“BEP”) that restores defined benefits and contribution benefits to those employees who have had their qualified defined benefit and defined contribution benefits limited by IRS regulations. The contribution component of the BEP is a supplemental defined contribution plan. The plan’s liability consists of the accumulated compensation deferrals and accrued interest on the deferrals. The BEP is an unfunded plan. The Bank has established several grantor trusts to meet future benefit obligations and current payments to beneficiaries in supplemental pension plans. The Bank also offers a Retiree Medical Benefit Plan, which is a postretirement health benefit plan. There are no funded plan assets that have been designated to provide postretirement health benefits. The Board of Directors of the FHLBNY approved certain amendments to the Retiree Medical Benefit Plan effective as of January 1, 2008. The amendments did not have a material impact on reported results of operations or financial condition of the Bank.

On January 1, 2009, the Bank offered a Nonqualified Deferred Compensation Plan to certain officer employees and to the members of the Board of Directors of the Bank. Participants in the plan would elect to defer all or a portion of their compensation earned for a minimum period of five years. This benefit plan and other nonqualified supplemental pension plans were terminated effective November 10, 2009. Plan terminations had no material effect on the Bank’s financial results, financial position or cash flows for all reported periods.

Retirement Plan Expenses — Summary

The following table presents employee retirement plan expenses for the years ended (in thousands):

	December 31,
	2009		2008		2007
Defined Benefit Plan	$	5,506	$	5,872	$	6,006
Benefit Equalization Plan (defined benefit)		2,059		1,878		1,908
Defined Contribution Plan and BEP Thrift		1,772		721		1,346
Postretirement Health Benefit Plan		1,017		990		2,377
Total retirement plan expenses	$	10,354	$	9,461	$	11,637

244

Federal Home Loan Bank of New York
Notes to Financial Statements

Benefit Equalization Plan (BEP)

The plan’s liability consisted of the accumulated compensation deferrals and accrued interest on the deferrals. There were no plan assets that have been designated for the BEP plan.

The accrued pension costs for the Bank’s BEP plan were as follows (in thousands):

	December 31,
	2009			2008
Accumulated benefit obligation	$	16,103		$	14,030
Effect of future salary increase		3,289			3,392
Projected benefit obligation		19,392			17,422
Unrecognized prior service cost		380			523
Unrecognized net (loss)		(6,464	)		(6,158	)
Accrued pension cost	$	13,308		$	11,787

Components of the projected benefit obligation for the Bank’s BEP plan were as follows (in thousands):

	December 31,
	2009			2008
Projected benefit obligation at the beginning of the year	$	17,422		$	15,031
Service		610			614
Interest		1,053			944
Benefits paid		(537	)		(392	)
Actuarial loss		844			1,225
Projected benefit obligation at the end of the year	$	19,392		$	17,422

The measurement date used to determine current period projected benefit obligation for the BEP plan was December 31, 2009.

Amounts recognized in the Statements of Condition for the Bank’s BEP plan were as follows (in thousands):

	December 31,
	2009			2008
Unrecognized (gain)/loss	$	6,464		$	6,158
Prior service cost		(380	)		(523	)
Accumulated other comprehensive loss	$	6,084		$	5,635

Changes in the BEP plan assets were as follows (in thousands):

	December 31,
	2009			2008
Fair value of the plan assets at the beginning of the year	$	—		$	—
Employer contributions		537			392
Benefits paid		(537	)		(392	)
Fair value of the plan assets at the end of the year	$	—		$	—

245

Federal Home Loan Bank of New York
Notes to Financial Statements

Components of the net periodic pension cost for the defined benefit component of the BEP, an unfunded plan, were as follows (in thousands):

	December 31,
	2009			2008			2007
Service cost	$	610		$	614		$	626
Interest cost		1,053			944			880
Amortization of unrecognized prior service cost		(143	)		(143	)		(112	)
Amortization of unrecognized net loss		539			463			514
Net periodic benefit cost	$	2,059		$	1,878		$	1,908

Other changes in benefit obligations recognized in AOCI were as follows (in thousands):

	December 31,
	2009			2008
Net loss (gain)	$	845		$	1,225
Prior service cost (benefit)		—			—
Amortization of net loss (gain)		(539	)		(463	)
Amortization of prior service cost (benefit)		143			143
Amortization of net obligation		—			—
Total recognized in other comprehensive income	$	449		$	905
Total recognized in net periodic benefit cost and other comprehensive income	$	2,508		$	2,783

The net transition obligation (asset), prior service cost (credit), and the estimated net loss (gain) for the BEP plan that are expected to be amortized from AOCI into net periodic benefit cost over the next fiscal year are shown in the table below (in thousands):

	December 31,
	2010			2009
Expected amortization of net (gain)/loss	$	578		$	539
Expected amortization of prior service cost/(credit)	$	(67	)	$	(143	)
Expected amortization of transition obligation/(asset)	$	—		$	—

Key assumptions and other information for the actuarial calculations to determine current year’s benefit obligations for the FHLBNY’s BEP plan were as follows (dollars in thousands):

	2009			2008			2007
Discount rate *		5.87	%		6.14	%		6.37	%
Salary increases		5.50	%		5.50	%		5.50	%
Amortization period (years)		8			8			8
Benefits paid during the year	$	(537	)	$	(392	)	$	(346	)

* The discount rate was based on the Citigroup Pension Liability Index at December 31, 2009 and adjusted for duration.

246

Federal Home Loan Bank of New York
Notes to Financial Statements

Future BEP plan benefits to be paid were estimated to be as follows (in thousands):

Years	Payments
2010	$	739
2011		971
2012		999
2013		1,038
2014		1,118
2015-2019		6,370
Total	$	11,235

The net periodic benefit cost for 2010 is expected to be $2.3 million ($2.1 million in 2009).

Postretirement Health Benefit Plan

The FHLBNY has a postretirement health benefit plan for retirees called the Retiree Medical Benefit Plan. Assumptions used in determining the accumulated postretirement benefit obligation (“APBO”) included a discount rate of 6.14%. At December 31, 2009, the effect of a percentage point increase in the assumed healthcare trend rates would be an increase in postretirement benefit expense of $255.2 thousand ($230.5 thousand at December 31, 2008) and in APBO of $2.4 million ($2.1 million at December 31, 2008). At December 31, 2009, the effect of a percentage point decrease in the assumed healthcare trend rates would be a decrease in postretirement benefit expense of $208.4 thousand ($188.6 thousand at December 31, 2008) and in APBO of $2.0 million ($1.7 million at December 31, 2008). Employees over the age of 55 are eligible provided they have completed ten years of service after age 45.

Components of the accumulated postretirement benefit obligation for the postretirement health benefits plan for the years ended December 31, 2009 and 2008 were (in thousands):

	December 31,
	2009			2008
Accumulated postretirement benefit obligation at the beginning of the year	$	14,357		$	13,109
Service cost		566			505
Interest cost		867			820
Actuarial loss		(628	)		(184	)
Benefits paid, net of participants’ contributions		(410	)		(296	)
Change in plan assumptions		1,089			403
Accumulated postretirement benefit obligation at the end of the year		15,841			14,357
Unrecognized net gain		—			—
Accrued postretirement benefit cost	$	15,841		$	14,357

Changes in postretirement health benefit plan assets were (in thousands):

	December 31,
	2009			2008
Fair value of plan assets at the beginning of the year	$	—		$	—
Employer contributions		410			296
Benefits paid, net of participants’ contributions and subsidy received		(410	)		(296	)
Fair value of plan assets at the end of the year	$	—		$	—

247

Federal Home Loan Bank of New York
Notes to Financial Statements

Amounts recognized in AOCI for the Bank’s postretirement benefit obligation were (in thousands):

	December 31,
	2009			2008
Prior service cost/(credit)	$	(2,835	)	$	(3,566	)
Net loss/(gain)		4,628			4,481
Accrued pension cost	$	1,793		$	915

The net transition obligation (asset), prior service cost (credit), and estimated net loss (gain) for the postretirement health benefit plan are expected to be amortized from AOCI into net periodic benefit cost over the next fiscal year are shown in the table below (in thousands);

	December 31,
	2010			2009
Expected amortization of net (gain)/loss	$	314		$	312
Expected amortization of prior service cost/(credit)	$	(731	)	$	(731	)
Expected amortization of transition obligation/(asset)	$	—		$	—

Components of the net periodic benefit cost for the postretirement health benefit plan were (in thousands):

	December 31,
	2009			2008			2007
Service cost (benefits attributed to service during the period)	$	566		$	505		$	727
Interest cost on accumulated postretirement health benefit obligation		867			820			903
Amortization of loss		315			396			319
Additional gain on recognition of plan amendment		—			—			611
Amortization of prior service cost/(credit)		(731	)		(731	)		(183	)
Net periodic postretirement health benefit cost	$	1,017		$	990		$	2,377

Other changes in benefit obligations recognized in AOCI were as follows (in thousands):

	December 31,
	2009			2008
Net loss (gain)	$	462		$	218
Prior service cost (benefit)		—			—
Amortization of net loss (gain)		(315	)		(396	)
Amortization of prior service cost (benefit)		731			731
Amortization of net obligation		—			—
Total recognized in other comprehensive income	$	878		$	553
Total recognized in net periodic benefit cost and other comprehensive income	$	1,895		$	1,543

The measurement date used to determine current year’s benefit obligation was December 31, 2009.

248

Federal Home Loan Bank of New York
Notes to Financial Statements

Key assumptions and other information to determine current year’s obligation for the FHLBNY’s postretirement health benefit plan were as follows:

	2009			2008			2007
Weighted average discount rate at the end of the year		5.87	%		6.14	%		6.37	%
Health care cost trend rates:
Assumed for next year		10.00	%		7.00	%		7.00	%
Pre 65 Ultimate rate		5.00	%		5.00	%		4.50	%
Pre 65 Year that ultimate rate is reached		2016			2011			2010
Post 65 Ultimate rate		6.00	%		5.50	%		5.00	%
Post 65 Year that ultimate rate is reached		2016			2016			2016
Alternative amortization methods used to amortize
Prior service cost	Straight - line			Straight - line			Straight - line
Unrecognized net (gain) or loss	Straight - line			Straight - line			Straight - line

The discount rate was based on the Citigroup Pension Liability Index at December 31, 2009 and adjusted for duration.

Future postretirement benefit plan expenses to be paid were estimated to be as follows (in thousands):

Years	Payments
2010	$	555
2011		641
2012		733
2013		806
2014		879
2015-2019		5,484
Total	$	9,098

The Bank’s postretirement health benefit plan accrual for 2010 is expected to be $1.1 million ($1.0 million in 2009).

Note 17. Derivatives and hedging activities

General — The FHLBNY may enter into interest-rate swaps, swaptions, and interest-rate cap and floor agreements to manage its exposure to changes in interest rates. The FHLBNY may also use callable swaps to potentially adjust the effective maturity, repricing frequency, or option characteristics of financial instruments to achieve risk management objectives. The FHLBNY uses derivatives in three ways: by designating them as a fair value or cash flow hedge of an underlying financial instrument or a forecasted transaction that qualifies for hedge accounting treatment; by acting as an intermediary; or by designating the derivative as an asset-liability management hedge (i.e., an “economic hedge”). For example, the FHLBNY uses derivatives in its overall interest-rate risk management to adjust the interest-rate sensitivity of consolidated obligations to approximate more closely the interest-rate sensitivity of assets (both advances and investments), and/or to adjust the interest-rate sensitivity of advances, investments or mortgage loans to approximate more closely the interest-rate sensitivity of liabilities. In addition to using derivatives to manage mismatches of interest rates between assets and liabilities, the FHLBNY also uses derivatives: to manage embedded options in assets and liabilities; to hedge the market value of existing assets and liabilities and anticipated transactions; to hedge the duration risk of prepayable instruments; and to reduce funding costs where possible.

249

Federal Home Loan Bank of New York
Notes to Financial Statements

In an economic hedge, a derivative hedges specific or non-specific underlying assets, liabilities or firm commitments, but the hedge does not qualify for hedge accounting under the accounting standards for derivatives and hedging; it is, however, an acceptable hedging strategy under the FHLBNY’s risk management program. These strategies also comply with the Finance Agency’s regulatory requirements prohibiting speculative use of derivatives. An economic hedge introduces the potential for earnings variability due to the changes in fair value recorded on the derivatives that are not offset by corresponding changes in the value of the economically hedged assets, liabilities, or firm commitments. The FHLBNY will execute an interest rate swap to match the terms of an asset or liability that is elected under the Fair Value Option and the swap is also considered as an economic hedge to mitigate the volatility of the FVO designated asset or liability due to change in the full fair value of the designated asset or liability. In the third quarter of 2008 and periodically thereafter, the FHLBNY elected the FVO for certain consolidated obligation bonds and executed interest rate swaps to offset the fair value changes of the bonds.

The FHLBNY, consistent with Finance Agency’s regulations, enters into derivatives to manage the market risk exposures inherent in otherwise unhedged assets and funding positions. The FHLBNY utilizes derivatives in the most cost efficient manner and may enter into derivatives as economic hedges that do not qualify for hedge accounting under the accounting standards for derivatives and hedging. As a result, when entering into such non-qualified hedges, the FHLBNY recognizes only the change in fair value of these derivatives in Other income (loss) as a Net realized and unrealized gain (loss) on derivatives and hedging activities with no offsetting fair value adjustments for the hedged asset, liability, or firm commitment.

Hedging activities

Consolidated Obligations — The FHLBNY manages the risk arising from changing market prices and volatility of a consolidated obligation by matching the cash inflows on the derivative with the cash outflow on the consolidated obligation. While consolidated obligations are the joint and several obligations of the FHLBanks, one or more FHLBanks may individually serve as counterparties to derivative agreements associated with specific debt issues. For instance, in a typical transaction, fixed-rate consolidated obligations are issued for one or more FHLBanks, and each of those FHLBanks could simultaneously enter into a matching derivative in which the counterparty pays to the FHLBank fixed cash flows designed to mirror in timing and amount the cash outflows the FHLBank pays on the consolidated obligations. Such transactions are treated as fair value hedges under the accounting standards for derivatives and hedging. The FHLBNY has elected the Fair Value Option (“FVO”) for certain consolidated obligation bonds and these were measured under the accounting standards for fair value measurements. To mitigate the volatility resulting from changes in fair values of bonds designated under the FVO, the Bank has also executed interest rate swaps.

The FHLBNY had issued variable-rate consolidated obligations bonds indexed to 1 month-LIBOR, the U.S. Prime rate, or Federal funds rate and simultaneously execute interest-rate swaps (“basis swaps”) to hedge the basis risk of the variable rate debt to 3-month LIBOR, the FHLBNY’s preferred funding base. The interest rate basis swaps were accounted as economic hedges of the floating-rate bonds because the FHLBNY deemed that that the operational cost of designating the hedges under accounting standards for derivatives and hedge accounting would outweigh the accounting benefits.

The issuance of the consolidated obligation fixed-rate bonds to investors and the execution of interest rate swaps typically results in cash flow pattern in which the FHLBNY has effectively converted the bonds’ cash flows to variable cash flows that closely match the interest payments it receives on short-term or variable-rate advances. From time-to-time, this intermediation between the capital and swap markets has permitted the FHLBNY to raise funds at a lower cost than would otherwise be available through the issuance of simple fixed- or floating-rate consolidated obligations in the capital markets. The FHLBNY does not issue consolidated obligations denominated in currencies other than U.S. dollars.

250

Federal Home Loan Bank of New York
Notes to Financial Statements

Advances — With a putable advance borrowed by a member, the FHLBNY may purchase from the member a put option that enables the FHLBNY to effectively convert an advance from fixed-rate to floating-rate if interest rates increase by terminating the advance and extending additional credit on new terms. The FHLBNY may hedge a putable advance by entering into a cancelable interest rate swap in which the FHLBNY pays to the swap counterparty fixed-rate cash flows and receives variable-rate cash flows. This type of hedge is treated as a fair value hedge under the accounting standards for derivatives and hedging. The swap counterparty can cancel the swap on the put date, which would normally occur in a rising rate environment, and the FHLBNY can terminate the advance and extend additional credit to the member on new terms.

The optionality embedded in certain financial instruments held by the FHLBNY can create interest-rate risk. When a member prepays an advance, the FHLBNY could suffer lower future income if the principal portion of the prepaid advance were reinvested in lower-yielding assets that would continue to be funded by higher-cost debt. To protect against this risk, the FHLBNY generally charges a prepayment fee that makes it financially indifferent to a borrower’s decision to prepay an advance. When the Bank offers advances (other than short-term) that members may prepay without a prepayment fee, it usually finances such advances with callable debt. The Bank has not elected the FVO for any advances.

Mortgage Loans — The FHLBNY invests in mortgage assets. The prepayment options embedded in mortgage assets can result in extensions or reductions in the expected maturities of these investments, depending on changes in estimated prepayment speeds. Finance Agency regulations limit this source of interest-rate risk by restricting the types of mortgage assets the Bank may own to those with limited average life changes under certain interest-rate shock scenarios and by establishing limitations on duration of equity and changes in market value of equity. The FHLBNY may manage against prepayment and duration risk by funding some mortgage assets with consolidated obligations that have call features. In addition, the FHLBNY may use derivatives to manage the prepayment and duration variability of mortgage assets. Net income could be reduced if the FHLBNY replaces the mortgages with lower yielding assets and if the Bank’s higher funding costs are not reduced concomitantly.

The FHLBNY manages the interest rate and prepayment risks associated with mortgages through debt issuance. The FHLBNY issues both callable and non-callable debt to achieve cash flow patterns and liability durations similar to those expected on the mortgage loans. The FHLBNY analyzes the duration, convexity and earnings risk of the mortgage portfolio on a regular basis under various rate scenarios. The Bank has not elected the FVO for any mortgage loans.

Firm Commitment Strategies — Mortgage delivery commitments are considered derivatives under the accounting standards for derivatives and hedging, and the FHLBNY accounts for them as freestanding derivatives, and records the fair values of mortgage loan delivery commitments on the balance sheet with an offset to current period earnings. Fair values were de minimis for all periods reported.

The FHLBNY may also hedge a firm commitment for a forward starting advance through the use of an interest-rate swap. In this case, the swap will function as the hedging instrument for both the firm commitment and the subsequent advance. The basis movement associated with the firm commitment will be added to the basis of the advance at the time the commitment is terminated and the advance is issued. The basis adjustment will then be amortized into interest income over the life of the advance.

251

Federal Home Loan Bank of New York
Notes to Financial Statements

If a hedged firm commitment no longer qualified as a fair value hedge, the hedge would be terminated and net gains and losses would be recognized in current period earnings. There were no material amounts of gains and losses recognized due to disqualification of firm commitment hedges in 2009, 2008 and 2007.

Forward Settlements — There were no forward settled securities at December 31, 2009 or at December 31, 2008 that would settle outside the shortest period of time for the settlement of such securities.

Anticipated Debt Issuance — The FHLBNY enters into interest-rate swaps on the anticipated issuance of debt to “lock in” a spread between the earning asset and the cost of funding. The swap is terminated upon issuance of the debt instrument, and amounts reported in Accumulated other comprehensive income (loss) are reclassified to earnings in the periods in which earnings are affected by the variability of the cash flows of the debt that was issued.

Intermediation — To meet the hedging needs of its members, the FHLBNY acts as an intermediary between the members and the other counterparties. This intermediation allows smaller members access to the derivatives market. The derivatives used in intermediary activities do not qualify for hedge accounting under the accounting standards for derivatives and hedging, and are separately marked-to-market through earnings. The net impact of the accounting for these derivatives does not significantly affect the operating results of the FHLBNY.

Derivative agreements in which the FHLBNY is an intermediary may arise when the FHLBNY: (1) enters into offsetting derivatives with members and other counterparties to meet the needs of its members, and (2) enters into derivatives to offset the economic effect of other derivative agreements that are no longer designated to either advances, investments, or consolidated obligations. The notional principal of interest rate swaps in which the FHLBNY was an intermediary was $320.0 million and $300.0 million as of December 31, 2009 and 2008; fair values of the swaps sold to members net of the fair values of swaps purchased from derivative counterparties were not material at December 31, 2009 and 2008. Collateral with respect to derivatives with member institutions includes collateral assigned to the FHLBNY as evidenced by a written security agreement and held by the member institution for the benefit of the FHLBNY.

Economic hedges — At December 31, 2009, economic hedges comprised primarily of: (1) short- and medium-term interest rate swaps that hedged the basis risk (Prime rate, Fed fund rate, and the 1-month LIBOR index) of variable-rate bonds issued by the FHLBNY. These swaps were considered freestanding and changes in the fair values of the swaps were recorded through income. The FHLBNY believes the operational cost of designating the basis hedges in a qualifying hedge would outweigh the benefits of applying hedge accounting. (2) Interest rate caps acquired in the second quarter of 2008 to hedge balance sheet risk, primarily certain capped floating-rate investment securities, were considered freestanding derivatives with fair value changes recorded through Other income (loss) as a Net realized and unrealized gain or loss on derivatives and hedging activities. (3) Interest rate swaps hedging balance sheet risk. (4) Interest rate swaps that had previously qualified as hedges under the accounting standards for derivatives and hedging, but had been subsequently de-designated from hedge accounting as they were assessed as being not highly effective hedges. (5) Interest rate swaps executed to offset the fair value changes of bonds designated under the FVO.

The FHLBNY is not a derivatives dealer and does not trade derivatives for short-term profit.

252

Federal Home Loan Bank of New York
Notes to Financial Statements

Credit Risk — The FHLBNY is subject to credit risk due to the risk of nonperformance by counterparties to the derivative agreements. The FHLBNY transacts most of its derivatives with large banks and major broker-dealers. Some of these banks and broker-dealers or their affiliates buy, sell, and distribute consolidated obligations. The FHLBNY is also subject to operational risks in the execution and servicing of derivative transactions. The degree of counterparty risk on derivative agreements depends on the extent to which master netting arrangements are included in such contracts to mitigate the risk. The FHLBNY manages counterparty credit risk through credit analysis and collateral requirements and by following the requirements set forth in Finance Board’s regulations. In determining credit risk, the FHLBNY considers accrued interest receivables and payables, and the legal right to offset assets and liabilities by counterparty.

The contractual or notional amount of derivatives reflects the involvement of the FHLBNY in the various classes of financial instruments, but it does not measure the credit risk exposure of the FHLBNY, and the maximum credit exposure of the FHLBNY is substantially less than the notional amount. The maximum credit risk is the estimated cost of replacing favorable interest-rate swaps, forward agreements, mandatory delivery contracts for mortgage loans, and purchased caps and floors (“derivatives”) if the counterparty defaults and the related collateral, if any, is of insufficient value to the FHLBNY.

The FHLBNY uses collateral agreements to mitigate counterparty credit risk in derivatives. When the FHLBNY has more than one derivative transaction outstanding with a counterparty, and a legally enforceable master netting agreement exists with the counterparty, the exposure, less collateral held, represents the appropriate measure of credit risk. Substantially all derivative contracts are subject to master netting agreements or other right of offset arrangements. At December 31, 2009 and 2008, the Bank’s credit risk, representing derivatives in a fair value gain position was approximately $8.3 million and $20.2 million after the recognition of any cash collateral held by the FHLBNY. The credit risk at December 31, 2009 and 2008 included $0.8 million and $0.7 million in net interest receivable.

Derivative counterparties are also exposed to credit losses resulting from potential nonperformance risk of FHLBNY with respect to derivative contracts. Exposure to counterparties is measured by derivatives in a fair value loss position from the FHLBNY’s perspective, which from the counterparties’ perspective is a gain. At December 31, 2009 and 2008, exposure to counterparties after offsetting cash collateral pledged by the FHLBNY was $746.2 million and $861.7 million. The FHLBNY had deposited $2.2 billion and $3.8 billion with derivative counterparties as cash collateral at December 31, 2009 and 2008. The FHLBNY is exposed to the risk of derivative counterparties defaulting on the terms of the derivative contracts and failing to return cash deposited with counterparties. If such an event were to occur, the FHLBNY would be forced to replace derivatives by executing similar derivative contracts with other counterparties. To the extent that the FHLBNY receives cash from the replacement trades that is less than the amount of cash deposited with the defaulting counterparty, the FHLBNY’s cash pledged is exposed to credit risk. Derivative counterparties holding the FHLBNY’s cash as pledged collateral were rated single-A and better at December 31, 2009, and based on credit analyses and collateral requirements, the management of the FHLBNY does not anticipate any credit losses on its derivative agreements.

253

Federal Home Loan Bank of New York
Notes to Financial Statements

Impact of the bankruptcy of Lehman Brothers

On September 15, 2008, Lehman Brothers Holdings, Inc. (“LBHI”), the parent company of Lehman Brothers Special Financing Inc. (“LBSF”) and a guarantor of LBSF’s obligations filed for protection under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court in the Southern District of New York. LBSF was a counterparty to FHLBNY on multiple derivative transactions under International Swap Dealers Association, Inc. master agreements with a total notional amount of $16.5 billion at the time of termination of the FHLBanks’ derivative transactions with LBSF. The net amount that is due to the Bank after giving effect to obligations that are due LBSF was approximately $65 million, and the Bank has fully reserved the LBSF receivables as the bankruptcy of LBHI and LBSF make the timing and the amount of the recovery uncertain. The loss was reported as a charge to Other Income (loss) in the 2008 Statement of Income as a Provision for derivative counterparty credit losses. The FHLBNY filed on September 22, 2009 a proof of claim of $64.5 million as a creditor in connection with the bankruptcy proceedings. It is possible that, in the course of the bankruptcy proceedings, the FHLBNY may recover some amount in a future period. However, because the timing and the amount of such recovery remains uncertain, the FHLBNY has not recorded any estimated recovery in its financial statements. The amount, if any that the Bank actually recovers will ultimately be decided in the course of the bankruptcy proceedings.

The following tables represented outstanding notional balances and estimated fair values of the derivatives outstanding at December 31, 2009 and 2008 (in thousands):

	December 31, 2009
	Notional Amount of					Derivative
	Derivatives		Derivative Assets			Liabilities
Fair value of derivatives instruments
Derivatives in fair value hedging relationships
Interest rate swaps	$	98,776,447	$	854,699		$	(3,974,207	)
Total derivatives in hedging relationships	$	98,776,447	$	854,699		$	(3,974,207	)
Derivatives not designated as hedging instruments
Interest rate swaps	$	33,144,963	$	147,239		$	(73,450	)
Interest rate caps or floors		2,282,000		77,999			(7,525	)
Mortgage delivery commitments		4,210		—			(39	)
Other*		320,000		1,316			(956	)
Total derivatives not designated as hedging instruments	$	35,751,173	$	226,554		$	(81,970	)
Total derivatives before netting and collateral adjustments	$	134,527,620	$	1,081,253		$	(4,056,177	)
Netting adjustments			$	(1,072,973	)	$	1,072,973
Cash collateral and related accrued interest				—			2,237,028
Total collateral and netting adjustments			$	(1,072,973	)	$	3,310,001
Total reported on the Statements of Condition			$	8,280		$	(746,176	)

* Other: Comprised of swaps intermediated for members.

254

Federal Home Loan Bank of New York
Notes to Financial Statements

	December 31, 2008
	Notional Amount of					Derivative
	Derivatives		Derivative Assets			Liabilities
Fair value of derivatives instruments
Derivatives in fair value hedging relationships
Interest rate swaps	$	84,582,796	$	1,640,507		$	(6,117,173	)
Total derivatives in hedging relationships	$	84,582,796	$	1,640,507		$	(6,117,173	)
Derivatives not designated as hedging instruments
Interest rate swaps	$	40,674,142	$	222,615		$	(370,876	)
Interest rate caps or floors		2,357,000		16,318			(8,360	)
Mortgage delivery commitments		10,395		2			(110	)
Other*		300,000		10,186			(9,694	)
Total derivatives not designated as hedging instruments	$	43,341,537	$	249,121		$	(389,040	)
Total derivatives before netting and collateral adjustments	$	127,924,333	$	1,889,628		$	(6,506,213	)
Netting adjustments			$	(1,808,183	)	$	1,808,183
Cash collateral and related accrued interest				(61,209	)		3,836,370
Total collateral and netting adjustments			$	(1,869,392	)	$	5,644,553
Total reported on the Statements of Condition			$	20,236		$	(861,660	)

* Other: Comprised of swaps intermediated for members.

The categories —“Fair value”, “Mortgage delivery commitment”, and “Cash Flow” hedges — represent derivative transactions in hedging relationships. If any such hedges do not qualify for hedge accounting under the accounting standards for derivatives and hedging, they are classified as “Economic” hedges. Changes in fair values of economic hedges are recorded through the income statement without the offset of corresponding changes in the fair value of the hedged item. Changes in fair values of qualifying derivative transactions designated in fair value hedges are recorded through the income statement with the offset of corresponding changes in the fair values of the hedged items. The effective portion of changes in the fair values of derivatives designated in a qualifying cash flow hedge is recorded in Accumulated other comprehensive income (loss).

Earnings impact of derivatives and hedging activities

Net realized and unrealized gain (loss) on derivatives and hedging activities

Gains and losses from hedging activities designated as fair value hedges are recorded as a Net realized and unrealized gain (loss) on derivatives and hedging activities in Other income (loss) in the Statements of Income. Net ineffectiveness from fair value hedges was a gain of $21.1 million in 2009, a loss of $12.0 million in 2008 and a gain of $5.9 million in 2007. Ineffectiveness from hedges designated as cash flow hedges were not material for periods in this report.

Amortization of basis resulting from modified advance hedges amounted to gains of $0.4 million, $0.5 million and $1.0 million for the years ended December 31, 2009, 2008 and 2007.

255

Federal Home Loan Bank of New York
Notes to Financial Statements

The FHLBNY reported the following net gains (losses) from derivatives and hedging activities (in thousands):

	Years ended December 31,
	2009			2008			2007
	Gain (Loss)			Gain (Loss)			Gain (Loss)
Derivatives designated as hedging instruments
Interest rate swaps
Advances	$	(4,542	)	$	31,838		$	7,968
Consolidated obligations-bonds		25,647			(43,530	)		(2,058	)
Consolidated obligations-discount notes		—			(333	)		—
Net gain (loss) related to fair value hedge ineffectiveness		21,105			(12,025	)		5,910
Net gain (loss) related to cash flow hedge ineffectiveness		—			(9	)		9
Derivatives not designated as hedging instruments
Economic hedges
Interest rate swaps
Advances		4,491			(20,833	)		2
Consolidated obligations-bonds		92,070			(38,763	)		9,622
Consolidated obligations-discount notes		(9,643	)		13,895			52
Member intermediation		(132	)		462			19
Balance sheet-macro hedges swaps		2,869			18,029			—
Accrued interest-swaps		(1,136	)		(126,551	)		1,887
Accrued interest-intermediation		85			18			7
Caps and floors
Advances		(1,353	)		(2,050	)		(2,611	)
Balance sheet		63,330			(38,723	)		—
Accrued interest-options		(5,798	)		101			3,630
Mortgage delivery commitments		(20	)		(3	)		(171	)
Swaps matching instruments designated under FVO
Consolidated obligations-bonds		(10,330	)		7,698			—
Accrued interest on FVO swaps		9,162			(505	)		—
Net gain (loss) related to derivatives not designated as hedging instruments		143,595			(187,225	)		12,437
Net gain (loss) on derivatives and hedging activities	$	164,700		$	(199,259	)	$	18,356

256

Federal Home Loan Bank of New York
Notes to Financial Statements

The components of hedging gains and losses for the year ended December 31, 2009 are summarized below (in thousands):

	December 31, 2009
										Effect of
										Derivatives on
	Gain (Loss) on			Gain (Loss) on						Net Interest
	Derivative			Hedged Item			Earnings Impact			Income 1
Derivatives designated as hedging instruments
Interest rate swaps
Advances	$	2,147,467		$	(2,152,009	)	$	(4,542	)	$	(1,793,232	)
Consolidated obligations-bonds		(655,908	)		681,555			25,647			559,647
Consolidated obligations-notes		—			—			—			474
Fair value hedges — Net impact		1,491,559		$	(1,470,454	)		21,105			(1,233,111	)
Cash flow hedges ineffectiveness		—			—			—			—
Derivatives not designated as hedging instruments
Interest rate swaps
Advances		4,491			—			4,491			—
Consolidated obligations-bonds		92,070			—			92,070			—
Consolidated obligations-notes		(9,643	)		—			(9,643	)		—
Member intermediation		(132	)		—			(132	)		—
Balance sheet-macro hedges swaps		2,869			—			2,869			—
Accrued interest-swaps		(1,136	)		—			(1,136	)		—
Accrued interest-intermediation		85			—			85			—
Caps and floors
Advances		(1,353	)		—			(1,353	)		—
Member intermediation Balance sheet		63,330			—			63,330			—
Accrued interest-options		(5,798	)		—			(5,798	)		—
Mortgage delivery commitments		(20	)		—			(20	)		—
Swaps matching instruments designated under FVO
Advances		—			—			—			—
Consolidated obligations-bonds		(10,330	)		—			(10,330	)		—
Consolidated obligations — discount notes		—			—			—			—
Accrued interest on FVO swaps		9,162			—			9,162			—
Total	$	1,635,154		$	(1,470,454	)	$	164,700		$	(1,233,111	)

¹ Represents interest expense and income generated from hedge qualifying interest-rate swaps that were recorded with interest income and expense of the hedged bonds, discount notes, and advances.

257

Federal Home Loan Bank of New York
Notes to Financial Statements

The components of hedging gains and losses for the year ended December 31, 2008 are summarized below (in thousands):

	December 31, 2008
										Effect of
										Derivatives on
	Gain (Loss) on			Gain (Loss) on						Net Interest
	Derivative			Hedged Item			Earnings Impact			Income 1
Derivatives designated as hedging instruments
Interest rate swaps
Advances	$	(4,362,202	)	$	4,394,040		$	31,838		$	(455,652	)
Consolidated obligations-bonds		963,271			(1,006,801	)		(43,530	)		338,087
Consolidated obligations-notes		29			(362	)		(333	)		161
Fair value hedges ineffectiveness		(3,398,902	)	$	3,386,877			(12,025	)		(117,404	)
Cash flow hedges ineffectiveness		(9	)		—			(9	)		—
Derivatives not designated as hedging instruments
Interest rate swaps
Advances		(20,833	)		—			(20,833	)		—
Consolidated obligations-bonds		(38,763	)		—			(38,763	)		—
Consolidated obligations-notes		13,895			—			13,895			—
Member intermediation		462			—			462			—
Balance sheet-macro hedges swaps		18,029			—			18,029			—
Accrued interest-swaps		(126,551	)		—			(126,551	)		—
Accrued interest-intermediation		18			—			18			—
Caps and floors
Advances		(2,050	)		—			(2,050	)		—
Balance sheet		(38,723	)		—			(38,723	)		—
Accrued interest-options		101			—			101			—
Mortgage delivery commitments		(3	)		—			(3	)		—
Swaps matching instruments designated under FVO
Consolidated obligations-bonds		7,698			—			7,698			—
Accrued interest on FVO swaps		(505	)		—			(505	)		—
Total	$	(3,586,136	)	$	3,386,877		$	(199,259	)	$	(117,404	)

¹ Represents interest expense and income generated from hedge qualifying interest-rate swaps that were recorded with interest income and expense of the hedged bonds, discount notes, and advances.

258

Federal Home Loan Bank of New York
Notes to Financial Statements

The components of hedging gains and losses for the year ended December 31, 2007 are summarized below (in thousands):

	December 31, 2007
										Effect of
										Derivatives on
	Gain (Loss) on			Gain (Loss) on						Net Interest
	Derivative			Hedged Item			Earnings Impact			Income 1
Derivatives designated as hedging instruments
Interest rate swaps
Advances	$	(1,488,421	)	$	1,496,389		$	7,968		$	354,679
Consolidated obligations-bonds		412,247			(414,305	)		(2,058	)		(174,102	)
Consolidated obligations-notes		—			—			—			—
Fair value hedges ineffectiveness		(1,076,174	)	$	1,082,084			5,910			180,577
Cash flow hedges ineffectiveness		9			—			9			—
Derivatives not designated as hedging instruments
Interest rate swaps
Advances		2			—			2			—
Consolidated obligations-bonds		9,622			—			9,622			—
Consolidated obligations-notes		52			—			52			—
Member intermediation		19			—			19			—
Balance sheet-macro hedges swaps		—			—			—			—
Accrued interest-swaps		1,887			—			1,887			—
Accrued interest-intermediation		7			—			7			—
Caps and floors
Advances		(2,611	)		—			(2,611	)		—
Balance sheet		—			—			—			—
Accrued interest-options		3,630			—			3,630			—
Mortgage delivery commitments		(171	)		—			(171	)		—
Total	$	(1,063,728	)	$	1,082,084		$	18,356		$	180,577

Note: The FHLBNY did not designate any hedged item under the FVO in 2007.
1	Represents interest expense and income generated from hedge qualifying interest-rate swaps that were recorded with interest income and expense of the hedged bonds, discount notes, and advances.

Cash Flow hedges

There were no material amounts in 2009, 2008 and 2007 that were reclassified into earnings as a result of the discontinuance of cash flow hedges because it became probable that the original forecasted transactions would not occur by the end of the originally specified time period or within a two-month period thereafter. The maximum length of time over which the Bank typically hedges its exposure to the variability in future cash flows for forecasted transactions is between three and six months. No cash flow hedges were outstanding at December 31, 2009 or 2008, although the Bank had executed cash flow hedges during 2008.

The effective portion of the gain or loss on swaps designated and qualifying as a cash flow hedging instrument is reported as a component of AOCI and reclassified into earnings in the same period during which the hedged forecasted bond expenses affect earnings. The balances in AOCI from terminated cash flow hedges represented net realized losses of $22.7 million and $30.2 million at December 31, 2009 and 2008. At December 31, 2009, it is expected that over the next 12 months about $6.9 million ($7.5 million at December 31, 2008) of net losses recorded in AOCI will be recognized as a charge to earnings as a yield adjustment to interest expense of consolidated bonds.

259

Federal Home Loan Bank of New York
Notes to Financial Statements

The effect of cash flow hedge related derivative instruments for the years ended December 31, 2009, 2008, and 2007 were as follows (in thousands):

	December 31, 2009
	OCI
	Gains/(Losses)
			Location:	Amount		Ineffectiveness
	Recognized		Reclassified to	Reclassified to		Recognized in
	in OCI 1		Earnings 1	Earnings 1		Earnings
The effect of cash flow hedge related to Interest rate swaps
Advances	$	—	Interest Income	$	—	$	—
Consolidated obligations-bonds		—	Interest Expense		7,508		—
Total	$	—		$	7,508	$	—

	December 31, 2008
	OCI
	Gains/(Losses)
				Location:	Amount		Ineffectiveness
	Recognized			Reclassified to	Reclassified to		Recognized in
	in OCI 1, 2			Earnings 1	Earnings 1		Earnings
The effect of cash flow hedge related to Interest rate swaps
Advances	$	—		Interest Income	$	—	$	—
Consolidated obligations-bonds		(6,109	)	Interest Expense		6,124		9
Total	$	(6,109	)		$	6,124	$	9

	December 31, 2007
	OCI
	Gains/(Losses)
				Location:	Amount		Ineffectiveness
	Recognized			Reclassified to	Reclassified to		Recognized in
	in OCI 1, 2			Earnings 1	Earnings 1		Earnings
The effect of cash flow hedge related to Interest rate swaps
Advances	$	—		Interest Income	$	—	$	—
Consolidated obligations-bonds		(26,105	)	Interest Expense		662		(9	)
Total	$	(26,105	)		$	662	$	(9	)

1	Effective portion
2	Represents effective portion of basis adjustments to AOCI in periods 2009, 2008, and 2007 from cash flowhedging transactions.

260

Federal Home Loan Bank of New York
Notes to Financial Statements

Note 18. Fair Values of financial instruments

Items Measured at Fair Value on a Recurring Basis

The following table presents for each hierarchy level (see note below), the FHLBNY’s assets and liabilities that were measured at fair value on its Statements of Condition at December 31, 2009 and 2008 (in thousands):

	December 31, 2009
											Netting
	Total			Level 1		Level 2			Level 3		Adjustments
Assets
Available-for-sale securities	$	2,253,153		$	—	$	2,253,153		$	—	$	—
Derivative assets(a)		8,280					1,081,253					(1,072,973	)
Total assets at fair value	$	2,261,433		$	—	$	3,334,406		$	—	$	(1,072,973	)
Liabilities
Consolidated obligations:
Bonds(b)	$	(6,035,741	)	$	—	$	(6,035,741	)	$	—	$	—
Derivative liabilities(a)		(746,176	)		—		(4,056,177	)		—		3,310,001
Total liabilities at fair value	$	(6,781,917	)	$	—	$	(10,091,918	)	$	—	$	3,310,001

	December 31, 2008
											Netting
	Total			Level 1		Level 2			Level 3		Adjustments
Assets
Available-for-sale securities	$	2,861,869		$	—	$	2,861,869		$	—	$	—
Derivative assets(a)		20,236			—		1,386,859			—		(1,366,623	)
Other assets		—			—		—			—		—
Total assets at fair value	$	2,882,105		$	—	$	4,248,728		$	—	$	(1,366,623	)
Liabilities
Consolidated obligations:
Bonds(b)	$	(998,942	)	$	—	$	(998,942	)	$	—	$	—
Derivative liabilities(a)		(861,660	)		—		(5,978,026	)		—		5,116,366
Total liabilities at fair value	$	(1,860,602	)	$	—	$	(6,976,968	)	$	—	$	5,116,366

	Level 1 — Quoted prices in active markets for identical assets.
	Level 2 — Significant other observable inputs.
	Level 3 — Significant unobservable inputs.
(a)	Derivative assets and liabilities were interest-rate contracts, except for de minimis amount of mortgage delivery contracts.
(b)	Based on its analysis of the nature of risks of the FHLBNY’s debt measured at fair value, the FHLBNY has determined that presenting the debt as a single class is appropriate.

261

Federal Home Loan Bank of New York
Notes to Financial Statements

Items Measured at Fair Value on a Nonrecurring Basis

Certain assets and liabilities would be measured at fair value on a nonrecurring basis, and for the FHLBNY, such items may include mortgage loans in foreclosure, or mortgage loans and held-to-maturity securities written down to fair value. At December 31, 2009, the Bank measured and recorded the fair values on a nonrecurring basis of held-to-maturity investment securities deemed to be OTTI; that is, they are not measured at fair value on an ongoing basis but are subject to fair-value adjustments in certain circumstances (for example, when there is evidence of other-than-temporary impairment — OTTI) in accordance with the guidance on recognition and presentation of other-than-temporary impairment. The nonrecurring measurement basis related to certain private-label held-to-maturity mortgage-backed securities that were determined to be OTTI. The held-to-maturity OTTI securities were recorded at their fair values of $42.9 million at December 31, 2009. For more information see Note 4 — Held-to-maturity securities.

No fair values were recorded on a non-recurring basis at December 31, 2008.

The following table summarizes the fair values of MBS for which a non-recurring change in fair value was recorded at December 31, 2009 (in thousands):

									Credit Loss *
	Fair Value		Level 1		Level 2		Level 3		December 31, 2009
Held-to-maturity securities
Private-label residential MBS	$	42,922	$	—	$	—	$	42,922	$	20,816
Total	$	42,922	$	—	$	—	$	42,922	$	20,816

* Note: Cumulative credit losses of $20.8 million include credit losses on Held-to-maturity securities that were OTTI in previous quarters of 2009. For Held-to-maturity securities that were previously credit impaired but no additional credit impairment were deemed necessary at December 31, 2009, the securities were recorded at their carrying values and not re-adjusted to their fair values. At December 31, 2009, the FHLBNY also wrote down certain MBS to their fair values ($42.9 million) when it was determined that the securities were credit impaired at December 31, 2009, and their carrying values prior to write-down ($59.9 million) were in excess of their fair values.

262

Federal Home Loan Bank of New York
Notes to Financial Statements

Estimated fair values — Summary Tables

The carrying value and estimated fair values of the FHLBNY’s financial instruments as of December 31, 2009 and 2008 were as follows (in thousands):

	December 31, 2009				December 31, 2008
	Carrying		Estimated		Carrying		Estimated
Financial Instruments	Value		Fair Value		Value		Fair Value
Assets
Cash and due from banks	$	2,189,252	$	2,189,252	$	18,899	$	18,899
Interest-bearing deposits		—		—		12,169,096		12,170,681
Federal funds sold		3,450,000		3,449,997		—		—
Available-for-sale securities		2,253,153		2,253,153		2,861,869		2,861,869
Held-to-maturity securities
Long-term securities		10,519,282		10,669,252		10,130,543		9,934,473
Certificates of deposit		—		—		1,203,000		1,203,328
Advances		94,348,751		94,624,708		109,152,876		109,421,358
Mortgage loans held-for-portfolio, net		1,317,547		1,366,538		1,457,885		1,496,329
Accrued interest receivable		340,510		340,510		492,856		492,856
Derivative assets		8,280		8,280		20,236		20,236
Other financial assets		3,412		3,412		2,713		2,713
Liabilities
Deposits		2,630,511		2,630,513		1,451,978		1,452,648
Consolidated obligations:
Bonds		74,007,978		74,279,737		82,256,705		82,533,048
Discount notes		30,827,639		30,831,201		46,329,906		46,408,907
Mandatorily redeemable capital stock		126,294		126,294		143,121		143,121
Accrued interest payable		277,788		277,788		426,144		426,144
Derivative liabilities		746,176		746,176		861,660		861,660
Other financial liabilities		38,832		38,832		38,594		38,594

The following table summarizes the activity related to consolidated obligation bonds for which the Bank elected the fair value option (in thousands):

	Years ended December 31,
	2009			2008
Balance, beginning of the period	$	(998,942	)	$	—
New transaction elected for fair value option		(10,100,000	)		(1,014,000	)
Maturities and terminations		5,043,000			31,000
Change in fair value		15,523			(8,325	)
Change in accrued interest		4,678			(7,617	)
Balance, end of the period	$	(6,035,741	)	$	(998,942	)

The FHLBNY designated certain debt under the FVO for the first time in 2008.

263

Federal Home Loan Bank of New York
Notes to Financial Statements

The following table presents the change in fair value included in the Statements of Income for the consolidated obligation bonds designated in accordance with the accounting standards on the fair value option for financial assets and liabilities (in thousands):

	Years ended December 31,
	2009							2008
	Interest expense on			Net gain(loss) due		Total change in fair value		Interest expense on			Net gain(loss) due			Total change in fair value
	consolidated			to changes in fair		included in current		consolidated			to changes in fair			included in current period
	obligation bonds			value		period earnings		obligation bonds			value			earnings
Consolidated obligations-bonds	$	(10,869	)	$	15,523	$	4,654	$	(7,835	)	$	(8,325	)	$	(16,160	)

The following table compares the aggregate fair value and aggregate remaining contractual fair value and aggregate remaining contractual principal balance outstanding of consolidated obligation bonds for which the fair value option has been elected (in thousands):

	Years ended December 31,
	2009							2008
					Fair value							Fair value
	Principal Balance		Fair value		over/(under)			Principal Balance		Fair value		over/(under)
Consolidated obligations-bonds	$	6,040,000	$	6,035,741	$	(4,259	)	$	983,000	$	998,942	$	15,942

Notes to Estimated Fair Values of financial instruments

The fair value of financial instruments that is an asset is defined as the price FHLBNY would receive to sell an asset in an orderly transaction between market participants at the measurement date. A financial liability’s fair value is defined as the amount that would be paid to transfer the liability to a new obligor, not the amount that would be paid to settle the liability with the creditor. Where available, fair values are based on observable market prices or parameters, or derived from such prices or parameters. Where observable prices are not available, valuation models and inputs are utilized. These valuation techniques involve some level of management estimation and judgment, the degree of which is dependent on the price transparency for the instruments or markets and the instruments’ complexity.

The fair values of financial assets and liabilities reported in the tables above are discussed below. For additional information also see Significant Accounting Policies and Estimates in Note 1. The Fair Value Summary Tables above do not represent an estimate of the overall market value of the FHLBNY as a going concern, which would take into account future business opportunities and the net profitability of assets versus liabilities.

264

Federal Home Loan Bank of New York
Notes to Financial Statements

The estimated fair value amounts have been determined by the FHLBNY using procedures described below. Because an active secondary market does not exist for a portion of the FHLBNY’s financial instruments, in certain cases, fair values are not subject to precise quantification or verification and may change as economic and market factors and evaluation of those factors change.

Cash and due from banks

The estimated fair value approximates the recorded book balance.

Interest-bearing deposits and Federal funds sold

The FHLBNY determines estimated fair values of certain short-term investments by calculating the present value of expected future cash flows from the investments. The discount rates used in these calculations are the current coupons of investments with similar terms.

Investment securities

The fair value of mortgage-backed investment securities is estimated by management using information from specialized pricing services that use pricing models or quoted prices of securities with similar characteristics. Inputs into the pricing models employed by pricing services for most of the Bank’s investments are market based and observable and are considered Level 2. The valuation techniques used by pricing services employ cash flow generators and option-adjusted spread models. Pricing spreads used as inputs in the models are based on new issue and secondary market transactions if securities that are traded in sufficient volumes in the secondary market. The valuation of the Bank’s private-label securities that are all designated as held-to-maturity may require pricing services to use significant inputs that are subjective and are generally considered to be Level 3 because the inputs may not be market based and observable. Beginning with the current year third quarter, the FHLBNY requests prices for all mortgage-backed securities from four specific third-party vendors. Prior to the change, the FHLBNY used three vendors. The adoption of the fourth pricing vendor had no material impact on the financial results, financial position or cash flows of the Bank. Depending on the number of prices received from the four vendors for each security, the FHLBNY selects a median or average price. The Bank’s pricing methodology also incorporates variance thresholds to assist in identifying median or average prices that may require further review. In certain limited instances (i.e., prices are outside of variance thresholds or the third-party services do not provide a price), the FHLBNY will obtain a price from securities dealers that is deemed most appropriate after consideration of all relevant facts and circumstances that would be considered by market participants.

In accordance with the amended guidance under the accounting standards for investments in debt and equity securities, certain held-to-maturity private-label mortgage-backed securities were written down to their fair value as a result of a recognition of OTTI in 2009. The OTTI impaired securities are classified in the table of items measured at fair value on a nonrecurring basis as Level 3 financial instruments in accordance with the accounting standards for fair value measurements and disclosures, and valuation hierarchy as of December 31, 2009. This determination was made based on management’s view that the private-label instruments may not have an active market because of the specific vintage of the securities as well as inherent conditions surrounding the trading of private-label mortgage-backed securities. Fair values of these securities were determined by management using third party specialized vendor pricing services that made appropriate adjustments to observed prices of comparable securities that were being transacted in orderly market. Certain held-to-maturity private-label MBS deemed to be OTTI at December 31, 2009 were recorded at their fair values of $42.9 million.

The fair value of housing finance agency bonds is estimated by management using information primarily from specialized dealers.

265

Federal Home Loan Bank of New York
Notes to Financial Statements

The FHLBNY routinely performs a comparison analysis of pricing to understand pricing trends and to establish a means of validating changes in pricing from period-to-period. In addition, the Bank runs pricing through prepayment models to test the reasonability of pricing relative to changes in the implied prepayment options of the bonds. Separately, the Bank performs comprehensive credit analysis, including the analysis of underlying cash flows and collateral. The FHLBNY believes such methodologies — valuation comparison, review of changes in valuation parameters, and credit analysis — mitigate the effects of the credit crisis, which has tended to reduce the availability of certain observable market pricing or has caused the widening of the bid/offer spread of certain securities.

Advances

The fair values of advances are computed using standard option valuation models. The most significant inputs to the valuation model are (1) consolidated obligation debt curve, published by the Office of Finance and available to the public, and (2) LIBOR swap curves and volatilities. The Bank considers both these inputs to be market based and observable as they can be directly corroborated by market participants.

Mortgage loans

The fair value of MPF loans and loans in the inactive CMA programs are priced using a valuation technique referred to as the “market approach”. Loans are aggregated into synthetic pass-through securities based on product type, loan origination year, gross coupon and loan term. Thereafter, these are compared against closing “TBA” prices extracted from independent sources. All significant inputs to the loan valuations are market based and observable.

Accrued interest receivable and payable

The estimated fair values approximate the recorded book value because of the relatively short period of time between their origination and expected realization.

Derivative assets and liabilities

The FHLBNY’s derivatives are traded in the over-the-counter market. Discounted cash flow analysis is the primary methodology employed by the FHLBNY’s valuation models to measure and record the fair values of its derivative positions. The valuation technique is considered as an “Income approach”. Derivatives are valued using industry-standard option adjusted valuation models that utilize market inputs, which can be corroborated, from widely accepted third-party sources. The Bank’s valuation model utilizes a modified Black-Karasinski model that assumes that rates are distributed log normally. The log-normal model precludes interest rates turning negative in the model computations. Significant market based and observable inputs into the valuation model include volatilities and interest rates. These derivative positions are classified within Level 2 of the valuation hierarchy, and include interest rate swaps, swaptions, interest rate caps and floors, and mortgage delivery commitments.

The FHLBNY employs control processes to validate the fair value of its financial instruments, including those derived from valuation models. These control processes are designed to ensure that the values used for financial reporting are based on observable inputs wherever possible. In the event that observable inputs are not available, the control processes are designed to ensure that the valuation approach utilized is appropriate and consistently applied and that the assumptions are reasonable. These control processes include reviews of the pricing model’s theoretical soundness and appropriateness by specialists with relevant expertise who are independent from the trading desks or personnel who were involved in the design and selection of model inputs. Additionally, groups that are independent from the trading desk, or personnel involved in the design and selection of model inputs participate in the review and validation of the fair values generated from the valuation model. The FHLBNY maintains an ongoing review of its valuation models and has a formal model validation policy in addition to procedures for the approval and control of data inputs.

266

Federal Home Loan Bank of New York
Notes to Financial Statements

The valuation of derivative assets and liabilities reflect the value of the instrument including the values associated with counterparty risk and would also take into account the FHLBNY’s own credit standing and non-performance risk. The Bank has collateral agreements with all its derivative counterparties and enforces collateral exchanges at least weekly. The computed fair values of the FHLBNY’s derivatives took into consideration the effects of legally enforceable master netting agreements that allow the FHLBNY to settle positive and negative positions and offset cash collateral with the same counterparty on a net basis. The Bank and each derivative counterparty have bilateral collateral thresholds that take into account both the Bank’s and counterparty’s credit ratings. As a result of these practices and agreements and the FHLBNY’s assessment of any change in its own credit spread, the Bank has concluded that the impact of the credit differential between the Bank and its derivative counterparties was sufficiently mitigated to an immaterial level that no credit adjustments were deemed necessary to the recorded fair value of derivative assets and derivative liabilities in the Statements of Condition at December 31, 2009 and 2008.

Deposits

The FHLBNY determines estimated fair values of deposits by calculating the present value of expected future cash flows from the deposits. The discount rates used in these calculations are the current cost of deposits with similar terms.

Consolidated obligations

The FHLBNY estimates fair values based on the cost of raising comparable term debt and prices its bonds and discount notes off of the current consolidated obligations market curve, which has a daily active market. The fair values of consolidated obligation debt (bonds and discount notes) are computed using a standard option valuation model using market based and observable inputs: (1) consolidated obligation debt curve that is available to the public and published by the Office of Finance, and (2) LIBOR curve and volatilities. Model adjustments that are not “market-observable” are not considered significant.

Mandatorily redeemable capital stock

The FHLBNY considers the fair value of capital subject to mandatory redemption, as the redemption value of the stock, which is generally par plus accrued estimated dividend. The FHLBNY has a cooperative structure. Stock can only be acquired by members at par value and redeemed at par value. Stock is not traded publicly and no market mechanism exists for the exchange of stock outside the cooperative structure.

Note 19. Commitments and contingencies

The FHLBanks have joint and several liability for all the consolidated obligations issued on their behalf. Accordingly, should one or more of the FHLBanks be unable to repay their participation in the consolidated obligations, each of the other FHLBanks could be called upon to repay all or part of such obligations, as determined or approved by the Finance Agency. Neither the FHLBNY nor any other FHLBank has ever had to assume or pay the consolidated obligations of another FHLBank. The FHLBNY does not believe that it will be called upon to pay the consolidated obligations of another FHLBank in the future. Under the provisions of accounting standard for guarantees, the Bank would have been required to recognize the fair value of the FHLBNY’s joint and several liability for all the consolidated obligations, as discussed above. However, the FHLBNY considers the joint and several liabilities as similar to a related party guarantee, which meets the scope exception under the accounting standard for guarantees. Accordingly, the FHLBNY has not recognized the fair value of a liability for its joint and several obligations related to other FHLBanks’ consolidated obligations at December 31, 2009 and 2008. The par amount of the twelve FHLBanks’ outstanding consolidated obligations, including the FHLBNY’s, were approximately $0.9 trillion and $1.3 trillion at December 31, 2009 and 2008.

267

Federal Home Loan Bank of New York
Notes to Financial Statements

Standby letters of credit are executed for a fee on behalf of members to facilitate residential housing, community lending, and members’ asset/liability management or to provide liquidity. A standby letter of credit is a financing arrangement between the FHLBNY and its member. Members assume an unconditional obligation to reimburse the FHLBNY for value given by the FHLBNY to the beneficiary under the terms of the standby letter of credit. The FHLBNY may, in its discretion, permit the member to finance repayment of their obligation by receiving a collateralized advance. Outstanding standby letters of credit were approximately $697.9 million and $908.6 million as of December 31, 2009 and 2008, respectively and had original terms of up to 15 years, with a final expiration in 2019. Standby letters of credit are fully collateralized. Unearned fees on standby letters of credit were recorded in Other liabilities and were not significant as of December 31, 2009 and 2008. Based on management’s credit analyses and collateral requirements, the FHLBNY does not deem it necessary to have any provision for credit losses on these commitments and letters of credit.

During the third quarter of 2008, each FHLBank, including the FHLBNY, entered into a Lending Agreement with the U.S. Treasury in connection with the U.S. Treasury’s establishment of the Government Sponsored Enterprise Credit Facility (GSECF), as authorized by the Housing Act. The GSECF was designed to serve as a contingent source of liquidity for the housing government-sponsored enterprises, including each of the 12 FHLBanks. Any borrowings by one or more of the FHLBanks under the GSECF would be considered consolidated obligations with the same joint and several liability as all other consolidated obligations. The terms of any borrowings would be agreed to at the time of issuance. Loans under the Lending Agreement are to be secured by collateral acceptable to the U.S. Treasury, which consisted of FHLBank advances to members that had been collateralized in accordance with regulatory standards and mortgage-backed securities issued by Fannie Mae or Freddie Mac. Each FHLBank was required to submit to the Federal Reserve Bank of New York, acting as fiscal agent of the U.S. Treasury, a list of eligible collateral updated on a weekly basis. As of December 31, 2009 and 2008, the FHLBNY had provided the U.S. Treasury listings of advance collateral amounting to $10.3 billion and $16.3 billion, which provided for maximum borrowings of $9.0 billion and $14.2 billion at December 31, 2009 and 2008. The amount of collateral can be increased or decreased (subject to the approval of the U.S. Treasury) at any time through the delivery of an updated listing of collateral. As of December 31, 2009, no FHLBank had drawn on this available source of liquidity. This temporary authorization expired on December 31, 2009.

Under the MPF program, the Bank was unconditionally obligated to purchase $4.2 million and $10.4 million in mortgage loans at December 31, 2009 and 2008. Commitments are generally for periods not to exceed 45 business days. Such commitments entered into after June 30, 2003 were recorded as derivatives at their fair value under the accounting standards for derivatives and hedging. In addition, the FHLBNY had entered into conditional agreements under “Master Commitments” with its members in the MPF program to purchase mortgage loans in aggregate of $484.6 million and $246.9 million as of December 31, 2009 and 2008.

268

Federal Home Loan Bank of New York
Notes to Financial Statements

The FHLBNY executes derivatives with major banks and broker-dealers and enters into bilateral collateral agreements. When counterparties are exposed, the Bank would typically pledge cash collateral to mitigate the counterparty’s credit exposure. To mitigate the counterparties’ exposures, the FHLBNY deposited $2.2 billion and $3.8 billion in cash with derivative counterparties as pledged collateral at December 31, 2009 and 2008, and these amounts were reported as a deduction to Derivative liabilities. At December 31, 2008, the FHLBNY was also exposed to credit risk associated with outstanding derivative transactions measured by the replacement cost of derivatives in a gain position. The Bank’s credit exposure at December 31, 2009 was below the threshold agreements with derivative counterparties and no collateral was required to be pledged by counterparties. At December 31, 2008, the Bank’s credit exposure was reduced by cash collateral of $61.2 million delivered by derivatives counterparties and held by the Bank, and was recorded as a deduction to Derivative assets.

The FHLBNY charged to operating expenses net rental costs of approximately $3.4 million, $3.2 million, and $3.1 million for years ended December 31, 2009, 2008 and 2007. Lease agreements for FHLBNY premises generally provide for increases in the basic rentals resulting from increases in property taxes and maintenance expenses. Such increases are not expected to have a material effect on the FHLBNY’s results of operations or financial condition.

The following table summarizes contractual obligations and contingencies as of December 31, 2009 (in thousands):

	December 31, 2009
	Payments due or expiration terms by period
	Less than		One year		Greater than three		Greater than
	one year		to three years		years to five years		five years		Total
Contractual Obligations
Consolidated obligations-bonds at par 1	$	40,896,550	$	23,430,775	$	6,091,550	$	2,939,050	$	73,357,925
Mandatorily redeemable capital stock 1		102,453		16,766		2,118		4,957		126,294
Premises (lease obligations) 2		3,060		6,161		5,413		6,427		21,061
Total contractual obligations		41,002,063		23,453,702		6,099,081		2,950,434		73,505,280
Other commitments
Standby letters of credit		667,554		9,139		15,023		6,199		697,915
Consolidated obligations-bonds/ discount notes traded not settled		2,145,000		—		—		—		2,145,000
Firm commitment-advances		100,000		—		—		—		100,000
Open delivery commitments (MPF)		4,210		—		—		—		4,210
Total other commitments		2,916,764		9,139		15,023		6,199		2,947,125
Total obligations and commitments	$	43,918,827	$	23,462,841	$	6,114,104	$	2,956,633	$	76,452,405

1

Callable bonds contain exercise date or a series of exercise dates that may result in a shorter redemption period. Mandatorily redeemable capital stock is categorized by the dates at which the corresponding advances outstanding mature. Excess capital stock is redeemed at that time, and hence, these dates better represent the related commitments than the put dates associated with capital stock, under which stock may not be redeemed until the later of five years from the date the member becomes a nonmember or the related advance matures.

2

Immaterial amount of commitments for equipment leases not included.

The FHLBNY does not anticipate any credit losses from its off-balance sheet commitments and accordingly no provision for losses is required.

269

Federal Home Loan Bank of New York
Notes to Financial Statements

Note 20. Related party transactions

The FHLBNY is a cooperative and the members own almost all of the stock of the Bank. Stock that is not owned by members is held by former members. The majority of the members of the Board of Directors of the FHLBNY are elected by and from the membership. The FHLBNY conducts its advances business almost exclusively with members. The Bank considers its transactions with its members and non-member stockholders as related party transactions in addition to transactions with other FHLBanks, the Office of Finance, and the Finance Agency. All transactions with all members, including those whose officers may serve as directors of the FHLBNY, are at terms that are no more favorable than comparable transactions with other members. The FHLBNY may from time to time borrow or sell overnight and term Federal funds at market rates to members.

Debt Transfers

During 2009 and 2008, there was no transfer of consolidated obligation bonds to other FHLBanks. In 2007, the Bank transferred par amounts of $487.0 million, and recorded losses of $4.6 million. Amounts transferred were in exchange for a cash price that represented the fair market values of the bonds. No bonds were transferred to the FHLBNY from another FHLBank in 2009 and 2008.

At trade date, the transferring bank notifies the Office of Finance of a change in primary obligor for the transferred debt.

Advances sold or transferred

No advances were transferred/sold to the FHLBNY or from the FHLBNY to another FHLBank in 2009, 2008 and 2007.

MPF Program

In the MPF program, the FHLBNY may participate out certain portions of its purchases of mortgage loans from its members. Transactions are at market rates. The FHLBank of Chicago, the MPF provider’s cumulative share of interest in the FHLBNY’s MPF loans at December 31, 2009 was $101.2 million ($125.0 million at December 31, 2008) from inception of the program through mid-2004. Since 2004, the FHLBNY has not shared its purchases with the FHLBank of Chicago. Fees paid to the FHLBank of Chicago were $0.6 million in each of the years ended December 31, 2009, 2008 and 2007.

Mortgage-backed Securities

No mortgage-backed securities were acquired from other FHLBanks during the periods in this report.

Intermediation

Notional amounts of $320.0 million and $300.0 million were outstanding at December 31, 2009 and 2008 in which the FHLBNY acted as an intermediary to sell derivatives to members. These were offset by identical transactions with unrelated derivatives counterparties. Net fair value exposures of these transactions at December 31, 2009 and 2008 were not material. The intermediated derivative transactions were fully collateralized.

Loans to other Federal Home Loan Banks

In 2009, the FHLBNY extended two overnight loans for a total of $472.0 million to other FHLBanks. In 2008, the Bank made four overnight loans for a total of $661.0 million. Generally, loans made to other FHLBanks are uncollateralized. Interest income from such loans was $1.9 thousand , $31.0 thousand and $2.0 thousand for the years ended December 31, 2009, 2008 and 2007.

270

Federal Home Loan Bank of New York
Notes to Financial Statements

Borrowings from other Federal Home Loan Banks

The FHLBNY borrows from other FHLBanks, generally for a period of one day. Such borrowings averaged $0.4 million, $5.5 million and $3.0 million for the years ended December 31, 2009, 2008 and 2007. There were no borrowings outstanding as of December 31, 2009 and 2008. Interest expense for the years ended December 31, 2009, 2008 and 2007 was $0.4 thousand, $159.4 thousand and $146.0 thousand.

The following tables summarize outstanding balances with related parties at December 31, 2009 and 2008, and transactions for each of the years ended December 31, 2009, 2008 and 2007 (in thousands):

Related Party: Outstanding Assets, Liabilities and Capital

	December 31, 2009				December 31, 2008
	Related		Unrelated		Related		Unrelated
Assets
Cash and due from banks	$	—	$	2,189,252	$	—	$	18,899
Interest-bearing deposits		—		—		—		12,169,096
Federal funds sold		—		3,450,000		—		—
Available-for-sale securities		—		2,253,153		—		2,861,869
Held-to-maturity securities
Long-term securities		—		10,519,282		—		10,130,543
Certificates of deposit		—		—		—		1,203,000
Advances		94,348,751		—		109,152,876		—
Mortgage loans 1		—		1,317,547		—		1,457,885
Accrued interest receivable		299,684		40,826		433,755		59,101
Premises, software, and equipment		—		14,792		—		13,793
Derivative assets 2		—		8,280		—		20,236
Other assets 3		179		19,160		153		18,685
Total assets	$	94,648,614	$	19,812,292	$	109,586,784	$	27,953,107
Liabilities and capital
Deposits	$	2,630,511	$	—	$	1,451,978	$	—
Consolidated obligations		—		104,835,617		—		128,586,611
Mandatorily redeemable capital stock		126,294		—		143,121		—
Accrued interest payable		16		277,772		814		425,330
Affordable Housing Program 4		144,489		—		122,449		—
Payable to REFCORP		—		24,234		—		4,780
Derivative liabilities 2		—		746,176		—		861,660
Other liabilities 5		29,330		43,176		31,003		44,750
Total liabilities	$	2,930,640	$	105,926,975	$	1,749,365	$	129,923,131
Capital		5,603,291		—		5,867,395		—
Total liabilities and capital	$	8,533,931	$	105,926,975	$	7,616,760	$	129,923,131

1	Includes insignificant amounts of mortgage loans purchased from members of another FHLBank.
2	Derivative assets and liabilities include insignificant fair values due to intermediation activities on behalf of members.
3	Includes insignificant amounts of miscellaneous assets that are considered related party.
4	Represents funds not yet disbursed to eligible programs.
5	Related column includes member pass-through reserves at the Federal Reserve Bank.

271

Federal Home Loan Bank of New York
Notes to Financial Statements

Related Party: Income and Expense transactions

	Years ended December 31,
	2009				2008				2007
	Related		Unrelated		Related		Unrelated		Related		Unrelated
Interest income
Advances	$	1,270,643	$	—	$	3,030,799	$	—	$	3,495,312	$	—
Interest-bearing deposits 1		—		19,865		—		28,012		—		3,333
Federal funds sold		—		3,238		—		77,976		—		192,845
Available-for-sale securities		—		28,842		—		80,746		—		—
Held-to-maturity securities
Long-term securities		—		461,491		—		531,151		—		596,761
Certificates of deposit		—		1,626		—		232,300		—		408,308
Mortgage loans 2		—		71,980		—		77,862		—		78,937
Loans to other FHLBanks and other		2		—		33		—		7		2
Total interest income	$	1,270,645	$	587,042	$	3,030,832	$	1,028,047	$	3,495,319	$	1,280,186
Interest expense
Consolidated obligations	$	—	$	1,147,011	$	—	$	3,318,160	$	—	$	4,153,094
Deposits		2,512		—		36,193		—		106,777		—
Mandatorily redeemable capital stock		7,507		—		8,984		—		11,731		—
Cash collateral held and other borrowings		—		49		163		881		146		4,370
Total interest expense	$	10,019	$	1,147,060	$	45,340	$	3,319,041	$	118,654	$	4,157,464
Service fees	$	4,165	$	—	$	3,357	$	—	$	3,324	$	—

1	Includes de minimis amounts of interest income from MPF service provider.
2	Includes de minimis amounts of mortgage interest income from loans purchased from members of another FHLBank.

Note 21. Segment information and concentration

The FHLBNY manages its operations as a single business segment. Management and the FHLBNY’s Board of Directors review enterprise-wide financial information in order to make operating decisions and assess performance. Advances to large members constitute a significant percentage of FHLBNY’s advance portfolio and its source of revenues.

The FHLBNY has a unique cooperative structure and is owned by member institutions located within a defined geographic district. The Bank’s market is the same as its membership district which includes New Jersey, New York, Puerto Rico, and the U.S. Virgin Islands. Institutions that are members of the FHLBNY must have their principal places of business within this market, but may also operate elsewhere. The FHLBNY’s primary business is making low-cost, collateralized loans, known as “advances,” to its members. Members use advances as a source of funding to supplement their deposit-gathering activities. As a cooperative, the FHLBNY prices advances at minimal net spreads above the cost of its funding to deliver maximum value to members. Advances to large members constitute a significant percentage of FHLBNY’s advance portfolio and its source of revenues.

272

Federal Home Loan Bank of New York
Notes to Financial Statements

The FHLBNY’s total assets and capital could significantly decrease if one or more large members were to withdraw from membership or decrease business with the Bank. Members might withdraw or reduce their business as a result of consolidating with an institution that was a member of another FHLBank, or for other reasons. The FHLBNY has considered the impact of losing one or more large members. In general, a withdrawing member would be required to repay all indebtedness prior to the redemption of its capital stock. Under current conditions, the FHLBNY does not expect the loss of a large member to impair its operations, since the FHLBank Act of 1999 does not allow the FHLBNY to redeem the capital of an existing member if the redemption would cause the FHLBNY to fall below its capital requirements. Consequently, the loss of a large member should not result in an inadequate capital position for the FHLBNY. However, such an event could reduce the amount of capital that the FHLBNY has available for continued growth. This could have various ramifications for the FHLBNY, including a possible reduction in net income and dividends, and a lower return on capital stock for remaining members.

273

Federal Home Loan Bank of New York
Notes to Financial Statements

The top ten advance holders at December 31, 2009, 2008 and 2007, and associated interest income for the years then ended are summarized as follows (dollars in thousands):

	December 31, 2009
					Percentage of
			Par		Total Par Value
	City	State	Advances		of Advances			Interest Income
Hudson City Savings Bank, FSB*	Paramus	NJ	$	17,275,000		19.0	%	$	710,900
Metropolitan Life Insurance Company	New York	NY		13,680,000		15.1			356,120
New York Community Bank*	Westbury	NY		7,343,174		8.1			310,991
Manufacturers and Traders Trust Company	Buffalo	NY		5,005,641		5.5			97,628
The Prudential Insurance Company of America	Newark	NJ		3,500,000		3.9			93,601
Astoria Federal Savings and Loan Assn.	Lake Success	NY		3,000,000		3.3			120,870
Emigrant Bank	New York	NY		2,475,000		2.7			64,131
Doral Bank	San Juan	PR		2,473,420		2.7			86,389
MetLife Bank, N.A.	Bridgewater	NJ		2,430,500		2.7			46,142
Valley National Bank	Wayne	NJ		2,322,500		2.6			103,707
Total			$	59,505,235		65.6	%	$	1,990,479

* Officer of member bank also served on the Board of Directors of the FHLBNY.

	December 31, 2008
					Percentage of
			Par		Total Par Value
	City	State	Advances		of Advances			Interest Income
Hudson City Savings Bank, FSB*	Paramus	NJ	$	17,525,000		17.0	%	$	671,146
Metropolitan Life Insurance Company	New York	NY		15,105,000		14.6			260,420
Manufacturers and Traders Trust Company	Buffalo	NY		7,999,689		7.7			257,649
New York Community Bank*	Westbury	NY		7,796,517		7.5			337,019
Astoria Federal Savings and Loan Assn.	Lake Success	NY		3,738,000		3.6			151,066
The Prudential Insurance Company of America	Newark	NJ		3,000,000		2.9			13,082
Merrill Lynch Bank & Trust Co., FSB	New York	NY		2,972,000		2.9			68,625
Valley National Bank	Wayne	NJ		2,646,500		2.6			103,918
Emigrant Bank	New York	NY		2,525,000		2.4			64,116
Doral Bank	San Juan	PR		2,412,500		2.3			89,643
Total			$	65,720,206		63.5	%	$	2,016,684

* At December 31, 2008, officer of member bank also served on the Board of Directors of the FHLBNY.

	December 31, 2007
					Percentage of
			Par		Total Par Value
	City	State	Advances		of Advances			Interest Income
Hudson City Savings Bank, FSB*	Paramus	NJ	$	14,191,000		17.6	%	$	461,568
New York Community Bank*	Westbury	NY		8,138,625		10.1			326,012
Manufacturers and Traders Trust Company	Buffalo	NY		6,505,625		8.1			247,104
HSBC Bank USA, National Association	New York	NY		5,508,585		6.8			240,347
Metropolitan Life Insurance Company	New York	NY		4,555,000		5.7			81,724
Astoria Federal Savings and Loan Assn.*	Lake Success	NY		3,548,000		4.4			124,045
Valley National Bank	Wayne	NJ		2,223,000		2.8			67,548
RBS Citizens, National Association	Providence	NJ		1,750,000		2.2			87,266
Doral Bank	San Juan	PR		1,422,500		1.8			57,686
R-G Premier Bank of Puerto Rico	San Juan	PR		1,379,970		1.6			72,994
Total			$	49,222,305		61.1	%	$	1,766,294

* At December 31, 2007, officer of member bank also served on the Board of Directors of the FHLBNY.

274

Federal Home Loan Bank of New York
Notes to Financial Statements

The following table summarizes capital stock held by members who were beneficial owners of more than 5 percent of the FHLBNY’s outstanding capital stock as of February 28, 2010 and December 31, 2009 (shares in thousands):

		Number		Percent
	February 28, 2010	of shares		of total
Name of beneficial owner	Principal Executive Office Address	owned		capital stock
Hudson City Savings Bank *	West 80 Century Road, Paramus, NJ 07652		8,748		17.43	%
Metropolitan Life Insurance Company	200 Park Avenue, New York, NY 10166		7,419		14.78
New York Community Bank *	615 Merrick Avenue, Westbury, NY 11590		3,777		7.53
Manufacturers and Traders Trust Company	One M&T Plaza, Buffalo, NY 14203		2,934		5.85
			22,878		45.59	%

		Number		Percent
	December 31, 2009	of shares		of total
Name of beneficial owner	Principal Executive Office Address	owned		capital stock
Hudson City Savings Bank*	West 80 Century Road, Paramus, NJ 07652		8,748		16.87	%
Metropolitan Life Insurance Company	200 Park Avenue, New York, NY 10166		7,419		14.31
New York Community Bank*	615 Merrick Avenue, Westbury, NY 11590		3,777		7.28
Manufacturers And Traders Trust Company	One M&T Plaza, Buffalo, NY 14203		2,952		5.69
			22,896		44.15	%

* Officer of member bank also serves on the Board of Directors of the FHLBNY.

Note 22. Subsequent events

Under the final guidance issued by the FASB in February 2010, subsequent events for the FHLBNY are events or transactions that occur after the balance sheet date but before financial statements are issued. There are two types of subsequent events:

a. The first type consists of events or transactions that provide additional evidence about conditions that existed at the date of the balance sheet, including the estimates inherent in the process of preparing financial statements (that is, recognized subsequent events).

b. The second type consists of events that provide evidence about conditions that did not exist at the date of the balance sheet but arose after that date (that is, nonrecognized subsequent events).

The FHLBNY has evaluated subsequent events through the date of this report and no significant subsequent events were identified.

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

None.

ITEM 9A. CONTROLS AND PROCEDURES.

(a)

Evaluation of Disclosure Controls and Procedures: An evaluation of the Bank’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Act”)) was carried out under the supervision and with the participation of the Bank’s President and Chief Executive Officer, Alfred A. DelliBovi, and Senior Vice President and Chief Financial Officer, Patrick A. Morgan, at December 31, 2009. Based on this evaluation, they concluded that as of December 31, 2009, the Bank’s disclosure controls and procedures were effective at a reasonable level of assurance in ensuring that the information required to be disclosed by the Bank in the reports it files or submits under the Act is (i) accumulated and communicated to the Bank’s management (including the President and Chief Executive Officer and Senior Vice President and Chief Financial Officer) in a timely manner, and (ii) recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.

(b)

Changes in Internal Control Over Financial Reporting: There were no changes in the Bank’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Act) during the Bank’s fourth quarter that have materially affected, or are reasonably likely to materially affect, the Bank’s internal control over financial reporting.

Management’s Report on Internal Control over Financial Reporting and the Report of Independent Registered Public Accounting Firm thereon are set forth in Part II , Item 8 of the Annual Report on Form 10-K and incorporated herein by reference.

ITEM 9B. OTHER INFORMATION.

Pursuant to the answer to Question 6 of the SEC’s Compliance and Disclosure Interpretations published on January 20, 2010, the following information is provided below rather than in the “Submission of Matters to a Vote of Security Holders” Item, which was removed from Form 10-K as of February 28, 2010.

Submission Of Matters To A Vote Of Security Holders

Under the Federal Home Loan Bank Act, the only matter that is submitted to Federal Home Loan Bank shareholders for a vote is the annual election of FHLBank Directors. Consistent with the foregoing, the only matter involving a vote of Federal Home Loan Bank of New York (“FHLBNY”) shareholders in 2009 was an election of certain Independent Directors, which occurred in the last quarter of 2009. The FHLBNY conducted these elections in order to fill two Independent Director seats whose terms were set to expire on December 31, 2009. As a result, incumbent Independent Directors Mr. Michael M. Horn and Mr. Joseph J. Melone were elected by the eligible members of the FHLBNY on November 13, 2009 to serve as Independent Directors for, respectively, four and two-year terms commencing January 1, 2010. This election was conducted in accordance with Federal Housing Finance Agency (“FHFA” or “Finance Agency”) regulations governing the Director election process.

276

Separately, the terms of three Member Director seats were set to expire on December 31, 2009. However, elections among the FHLBNY’s membership were not held to fill these seats. Instead, due to a lack of any other nominees to fill these seats and in accordance with FHFA regulations, incumbent Member Directors Mr. James W. Fulmer, Chairman, President and CEO, The Bank of Castile, Batavia, NY and Ms. Katherine J. Liseno, President and CEO, Metuchen Savings Bank, Metuchen, NJ were declared elected by the Bank on August 27, 2009 to serve as Member Directors representing, respectively, New York and New Jersey, for four-year terms commencing January 1, 2010. Further, due to a lack of any nominees to fill the Member Director seat representing Puerto Rico and the U.S. Virgin Islands, the FHLBNY’s Board, in accordance with FHFA regulations, designated incumbent Member Director Mr. José Ramon González on December 17, 2009 to fill this seat for a four year term commencing on January 1, 2010.

More detailed information about the Bank’s Director election process is set forth below.

Eligibility to Vote in Director Elections

Voting rights of shareholders with regard to the election of Directors are established through Finance Agency regulations. Specifically, holders of stock that were members of the FHLBNY as of the record date — December 31st of the year immediately preceding an election — are eligible to participate in the election process. Each eligible member is entitled to cast one vote for each share of stock that the member was required to hold as of the record date; however, the number of votes that each member may cast for each Directorship can not exceed the average number of shares of stock that were required to be held as of the record date by all members in the state where the member is located. The Director election process is conducted by mail; no in-person meetings of the members are held.

Member Directors

Eligible members may nominate persons who are officers or directors of FHLBNY members in their states to serve as Member Directors (formerly known as “elected directors” prior to the adoption of the Housing and Economic Recovery Act of 2008, or “HERA”, in 2008) on the FHLBNY’s Board of Directors. After the slate of nominees is finalized, eligible members (i.e., the members of the FHLBNY as of December 31^st of the prior year) may then vote to fill the open director seats in the state in which their principal place of business is located.

The number of Member Directorships on the Board is allocated by state and such allocation is performed by the Finance Agency each year in accordance with provisions of the Federal Home Loan Bank Act located at 12 U.S.C. 1427. This allocation is based primarily on the number of shares of capital stock required to be held by the members in each state in the Bank’s district as of the end of the calendar year preceding the election. Throughout 2009, and continuing through the date of this Report on Form 10-K, the Bank had ten Member Director positions on its Board. Of these ten Member Director positions, five were allocated to New York, four to New Jersey and one to Puerto Rico and the U.S. Virgin Islands.

277

The table below shows the total number of Member Directorships designated by the Finance Agency for each state in the Bank’s district for 2009 and for 2010, and the number of director positions that were required to be filled in the course of the Bank’s 2009 election of Member Directors:

	Total Member		Member Directorships
	Directorships		Up For Election During
State	for 2009 and for 2010		the 2009 Election Process
New Jersey		4		1
New York		5		1
Puerto Rico & U.S. Virgin Islands		1		1
District Total		10		3

2009 Member Director Election Results

In response to a call for nominations for Member Director seats with terms commencing on January 1, 2010, only one nomination each was received for the open Member Director seats representing, respectively, New York and New Jersey. Finance Agency regulations for the election of Directors provide that, if for any voting State, the number of nominees for the Member Directorships for that State is equal to or fewer than the number of such directorships to be filled in that year’s election, the Bank shall deliver a notice to the members in the affected voting State (in lieu of including any member directorship nominees on an election ballot for that State) indicating that such nominees shall be deemed elected without further action, due to an insufficient number of nominees to warrant balloting. Thereafter, the Bank shall declare elected all such eligible nominees. As such, incumbent Member Directors Mr. James W. Fulmer and Ms. Katherine J. Liseno were declared elected by the Bank on August 27, 2009 to serve as Member Directors representing, respectively, New York and New Jersey for four-year terms commencing January 1, 2010.

Further, during the course of the call for nominations for Member Director seats, the FHLBNY did not receive any nominations for the one open Member Director seat representing Puerto Rico and U.S. Virgin Islands members. The FHFA’s director election regulations provide that any Member Directorship that is not filled due to a lack of nominees shall be filled by the FHLBank’s Board of Directors. Therefore, on December 17, 2009, the FHLBNY’s Board designated incumbent Member Director Mr. José Ramon González to fill the Puerto Rico/U.S. Virgin Islands Member Directorship effective January 1, 2010.

Other Information Regarding the Composition of the Member Directors During 2009 and 2010

Apart from the Member Directors named above, each of the following Member Directors served on the Board throughout 2009, their terms continued into 2010, and they remain on the Board as of the date of this Report on Form 10-K: Joseph R. Ficalora, Jay M. Ford, Ronald E. Hermance, Kevin J. Lynch, Thomas M. O’Brien, John M. Scarchilli and George Strayton.

Independent Directors

In addition to the aforementioned group of Member Directors, the remainder of the FHLBNY’s Directors consist of “Independent Directors”. These are Directors who are not an officer or a director of a member institution of the FHLBNY. All Independent Directors (other than the subset of Independent Directors known as “Public Interest” Directors described below) must have experience in, or knowledge of, one or more of the following areas: auditing and accounting, derivatives, financial management, organizational management, project development, risk management practices, and the law. In addition, there is a subset of Independent Directorships known as “Public Interest” Directorships. Public Interest Directors must have more than four years experience representing consumer or community interests in banking services, credit needs, housing or consumer financial protection. Each FHLBank must have at least two Public Interest Directors on its Board. Unlike the Member Directors, the Independent Directors do not represent the interests of a particular state, and so the entire membership votes for them.

278

Until the middle of 2008, the Board of Directors of a FHLBank submitted the names of potential ‘appointed’ directors (the former name of the Directors now known as Independent Directors) to the Federal Housing Finance Board (the predecessor of the Finance Agency) for the regulator’s consideration. The ultimate determination of whether a person was eligible to serve as an appointed director and the selection of the appointed directors remained solely within the discretion of the Federal Housing Finance Board. However, the enactment of HERA on July 30, 2008 resulted in (i) the renaming of appointed directors as ‘Independent Directors; (ii) the elimination of the ability of the FHLBank’s regulator to appoint any Director to the Board of a FHLBank, resulting in the FHLBank’s membership being given the power to elect all FHLBank Directors; and (iii) the imposition of a requirement that the Boards of each FHLBank, in consultation with their Affordable Housing Advisory Committees, and subject to the review of the Finance Agency, submit the names of Independent Director candidates to eligible Bank members for a vote.

2009 Independent Director Election Results

In the last quarter of 2009, the FHLBNY conducted elections in order to fill two Independent Director seats whose terms were set to expire on December 31, 2009. As a result, on November 13, 2009, the eligible members of the FHLBNY elected incumbent Independent Directors Mr. Michael M. Horn and Mr. Joseph J. Melone to serve as Independent Directors of the FHLBNY for, respectively, four and two-year terms commencing January 1, 2010. Mr. Horn received 7,952,648 votes and Mr. Melone received 7,015,289 votes, respectively. (Under FHFA regulations, Mr. Horn received the longer term as he received more votes.) There were no other candidates. 13,964,581 votes were not cast.

Other Information Regarding the Composition of the Independent Directors During 2009 and 2010

Apart from the Independent Directors described above, each of the following Independent Directors served on the Board throughout 2009, their terms continued into 2010, and they remain on the Board as of the date of this Report on Form 10-K: Anne Evans Estabrook, Richard S. Mroz, C. Cathleen Raffaeli, Edwin C. Reed and DeForest B. Soaries, Jr. (Ms. Estabrook and Mr. Reed are the Public Interest Directors on the Board.)

In accordance with the provisions of HERA, the FHLBNY is exempt from the filing of information and proxy statements.

279

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

2009 and 2010 Board of Directors

The FHLBank Act, as amended by the Housing and Economic Recovery Act of 2008 (“HERA”), provides that an FHLBank’s board of directors is to comprise thirteen directors, or such other number as the Director of the Federal Housing Finance Agency determines appropriate. For 2009 and 2010, the FHFA Director designated seventeen directorships for the Bank, ten of which are Member Directorships and seven of which are Independent Directorships.

All individuals serving as Bank directors must be United States citizens. A majority of the directors serving on the Board must be Member Directors and at least two-fifths must be Independent Directors.

A Member Directorship may be held only by an officer or director of a member institution that is located within the Bank’s district and that meets all minimum regulatory capital requirements. There are no other qualification requirements. Member Directors are, generally speaking, elected by Bank stockholders in, respectively, New York, New Jersey, and Puerto Rico and the U.S. Virgin Islands. The Bank’s Board of Directors is, as a general rule, not permitted to nominate or elect Member Directors; however, the Board may appoint a director to fill a vacant Member Directorship in the event that no nominations are received from members in the course of the Member Director election process. Each member institution that is required to hold stock as of the record date, which is December 31 of the year prior to the year in which the election is held, may nominate and/or vote for representatives from member institutions in its respective state to fill open Member Directorships. The Finance Agency’s election regulation provides that no director, officer, employee, attorney or agent of the Bank, other than in a personal capacity, may support the nomination or election of a particular individual for a Member Directorship.

An Independent Directorship may be held, generally speaking, only by an individual who is a bona fide resident of the Bank’s district, who is not a director, officer, or employee of a member institution or of any person that receives advances from the Bank, and who is not an officer of any FHLBank. At least two Independent Directors must be “public interest” directors. Public interest directors, as defined by Finance Agency regulations, are Independent Directors who have at least four years of experience representing consumer or community interests in banking services, credit needs, housing or consumer financial protection. Pursuant to Finance Agency regulations, each Independent Director must either satisfy the aforementioned requirements to be a public interest director, or have knowledge or experience in one or more of the following areas: auditing and accounting, derivatives, financial management, organizational management, project development, risk management practices, and the law.

Bank members are permitted to identify candidates to be considered by the Bank to be included on the Independent Director nominee slate. The Bank’s Board of Directors is then required by Finance Agency regulations to consult with the Bank’s Affordable Housing Advisory Council (“Advisory Council”) in establishing the nominee slate. (The Advisory Council is an advisory body consisting of fifteen persons residing in the Bank’s district appointed by the Bank’s Board, the members of which are drawn from community and not-for-profit organizations that are actively involved in providing or promoting low and moderate income housing or community lending. The Advisory Council provides advice on ways in which the Bank can better carry out its housing finance and community lending mission.) After the nominee slate is approved by the Board, the slate is then presented to the Bank’s membership for a district-wide vote. The election regulation permits the Bank’s directors, officers, attorneys, employees, agents, and Advisory Council to support the candidacy of the board of director’s nominees for Independent Directorships.

The following table sets forth information regarding each of the directors of the FHLBNY who served on the Board during the period from January 1, 2009 through the date of this annual report on Form 10-K. All persons in the below table served continuously on the Board from January 1, 2009 through the date of this annual report on Form 10-K. Footnotes are used to specifically identify those directors who served on the Board in 2009 and who were also elected to serve by Bank members, the Board or the Bank for a new term on the Board commencing January 1, 2010. The footnotes also provide additional information about the Directors who served as Chair and Vice Chair of the Board during the aforementioned time period. After the table is biographical information for each director.

280

No director has any family relationship with any other director or executive officer of the Bank. In addition, no director or executive officer has an involvement in any legal proceeding required to be disclosed pursuant to Item 401(f) of Regulation S-K.

							Expiration
			Bank		Start of		of Current		Represents
	Age as of		Director		Current Term		Term		Bank	Director
Director Name	3/25/2010		Since		1/1/		12/31/		Members in	Type
Michael M. Horn (Chair) a		70		4/2007		2010		2013	2nd District	Independent
José Ramon González (Vice Chair) b		55		1/2004		2010		2013	PR & USVI	Member
Anne Evans Estabrook		65		1/2004		2008		2010	2nd District	Independent
Joseph R. Ficalora		63		1/2005		2008		2010	NY	Member
Jay M. Ford		60		6/2008		2009		2012	NJ	Member
James W. Fulmer c		58		1/2007		2010		2013	NY	Member
Ronald E. Hermance, Jr.		62		1/2005		2008		2010	NJ	Member
Katherine J. Liseno c		65		1/2004		2010		2013	NJ	Member
Kevin J. Lynch		63		1/2005		2008		2010	NJ	Member
Joseph J. Melone d		78		4/2007		2010		2011	2nd District	Independent
Richard S. Mroz		48		3/2002		2008		2010	2nd District	Independent
Thomas M. O’Brien		59		4/2008		2009		2012	NY	Member
C. Cathleen Raffaeli		53		4/2007		2009		2012	2nd District	Independent
Edwin C. Reed		56		4/2007		2009		2012	2nd District	Independent
John M. Scarchilli		58		8/2006		2008		2010	NY	Member
DeForest B. Soaries, Jr.		58		1/2009		2009		2011	2nd District	Independent
George Strayton		66		6/2006		2009		2011	NY	Member

a	Mr. Horn served on the Board as an Independent Director throughout 2009, and his term expired on December 31, 2009. On November 17, 2009, he was elected by the Bank’s membership to serve as an Independent Director for a new four year term commencing January 1, 2010. In addition, Mr. Horn became Board Chair on May 13, 2008, and this term expired on December 31, 2009. On December 17, 2009, the Board elected Mr. Horn to serve as Board Chair for a new two year term commencing January 1, 2010.
b	Mr. González served on the Board as a Member Director representing the interests of Puerto Rico and U.S. Virgin Island members throughout 2009, and his term expired on December 31, 2009. On December 17, 2009, he was elected by the Board to serve as a Member Director for a new four year term commencing January 1, 2010. As no nominations were received from the Bank’s members in Puerto Rico and the U.S. Virgin Islands during the course of the Bank’s 2009 Member Director election process, the Board had the authority under Finance Agency regulations to fill this position. Mr. Gonzalez’ current term as Vice Chair of the Board began on January 1, 2009 and continues through and until December 31, 2010.
c	Mr. Fulmer and Ms. Liseno served on the Board as Member Directors representing the interests of, respectively, New York and New Jersey members throughout 2009, and their terms expired on December 31, 2009. On August 27, 2009, they were declared elected by the Bank in accordance with Finance Agency regulations to serve as Member Directors for new four year terms commencing January 1, 2010. No Member Director election was held among the Bank’s membership in 2009 in, respectively, New York and New Jersey as no other nominations (except for those nominating Mr. Fulmer and Ms. Liseno) were received from the Bank’s members in those states during the course of the Bank’s 2009 director election process.
d	Mr. Melone served on the Board as an Independent Director throughout 2009, and his term expired on December 31, 2009. On November 17, 2009, he was elected by the Bank’s membership to serve as an Independent Director for a new two year term commencing January 1, 2010.

Mr. Horn (Chair) has been a partner in the law firm of McCarter & English, LLP since 1990. He has served as the Commissioner of Banking for the State of New Jersey and as the New Jersey State Treasurer. He was also a member of the New Jersey State Assembly and served a member of the Assembly Banking Committee. In addition, Mr. Horn served on New Jersey’s Executive Commission on Ethical Standards as both as its Vice Chair and Chairman, was appointed as a State Advisory Member of the Federal Financial Institutions Examination Council, and was a member of the Municipal Securities Rulemaking Board. Mr. Horn is counsel to the New Jersey Bankers Association, chairman of the Bank Regulatory Committee of the Banking Law Section of the New Jersey State Bar Association, and a Fellow of the American Bar Foundation. He served as a director of Ryan Beck & Co. through February 27, 2007. Mr. Horn’s legal and regulatory experience, as indicated by his background, support his qualifications to serve on the Bank’s Board of Directors as an Independent Director.

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Mr. González (Vice Chair) was President and Chief Executive Officer of Santander BanCorp and Banco Santander Puerto Rico from October 2002 until August 2008. Since 2000, he has served as a Director of Santander BanCorp and he has served as a Director of Bank member Banco Santander Puerto Rico since 2002. Mr. González joined the Santander Group in August 1996 as President and Chief Executive Officer of Santander Securities Corporation. He later served as Executive Vice President and Chief Financial Officer of Santander BanCorp and in April 2002 was named President and Chief Operating Officer. Mr. González is a past President of the Puerto Rico Bankers Association and a past president of the Securities Industry Association of Puerto Rico. Mr. González was at Credit Suisse First Boston from 1983 to 1986 as Vice President of Investment Banking, and from 1989 to 1995 as President and Chief Executive Officer of the firm’s Puerto Rico subsidiary. From 1986 to 1989, Mr. González was President and Chief Executive Officer of the Government Development Bank for Puerto Rico. From 1980 to 1983, he was in the private practice of law in San Juan, Puerto Rico with the law firm of O’Neill & Borges.

Ms. Estabrook has been chief executive of Elberon Development Co. in Cranford, New Jersey since 1984. It, together with its affiliated companies, own approximately two million square feet of rental property. Most of the property is industrial with the remainder serving commercial and retail tenants. She is the past chairman of the New Jersey Chamber of Commerce and, until June 2007, served on its executive committee, and chaired its nominating committee. She previously served as a director on the board of New Brunswick Savings Bank. Ms. Estabrook also served as a member of the Lay Board of the Delbarton School in Morristown for 15 years, including five years as chair. Since 2005, Ms. Estabrook has served as a Director of New Jersey American Water Company, Inc. Ms. Estabrook is also currently a member and Secretary of the Board of Trustees of Catholic Charities, serves on its Executive Committee and its Audit Committee, and Chairs its Finance Committee and Building and Facilities Committees. She is on the Board of Overseers of the Weill Cornell Medical School, is a Trustee of St. Barnabas Corporation, and is also on the Board of Trustees of Monmouth Medical Center, where she serves on its Executive and Community Action Committees, and Chairs the Children’s Hospital Committee. Ms. Estabrook serves as a Member of the Liberty Hall Museum Board at Kean University in Union, NJ and serves on the Council of the New Jersey Performing Arts Center (NJPAC). Ms. Estabrook was serving on the Board as an Appointed Director and a public interest director designated by the Federal Housing Finance Board at the time of the adoption of HERA in mid-2008. Finance Agency rules provide that Appointed Directors are deemed to be Independent Directors while they serve out the remainder of their terms, and any persons who were designated as public interest directors prior to HERA may retain that status until their term expires.

Mr. Ficalora has been President and Chief Executive Officer and a Director of New York Community Bancorp, Inc. since its inception on July 20, 1993 and President and Chief Executive Officer and a Director of its primary subsidiaries, Bank member New York Community Bank (“New York Community”) and Bank member New York Commercial Bank (“New York Commercial”), since January 1, 1994 and December 30, 2005, respectively. On January 1, 2007, he was appointed Chairman of New York Community Bancorp, Inc., New York Community and New York Commercial, a position he previously held at New York Community Bancorp, Inc. from July 20, 1993 through July 31, 2001 and at New York Community from May 20, 1997 through July 31, 2001. Since 1965, when he joined New York Community (formerly Queens County Savings Bank), Mr. Ficalora has held increasingly responsible positions, crossing all lines of operations. Prior to his appointment as President and Chief Executive Officer of New York Community in 1994, Mr. Ficalora served as President and Chief Operating Officer (beginning in October 1989); before that, he served as Executive Vice President, Comptroller and Secretary. A graduate of Pace University with a degree in business and finance, Mr. Ficalora provides leadership to several professional banking organizations. In addition to previously serving as a member of the Executive Committee and as Chairman of the former Community Bankers Association of New York State, Mr. Ficalora is a Director of the New York State Bankers Association and Chairman of its Metropolitan Area Division. Mr. Ficalora also serves as a member of the Board of Directors of the Thrift Institutions Advisory Council of the Federal Reserve Board in Washington, D.C., and previously served as a member of the Thrift Institutions Advisory Panel of the Federal Reserve Bank of New York. In addition, he is a member of the Board of Directors of the American Bankers Association, RSI Retirement Trust and also of Peter B. Cannell and Co., Inc., an investment advisory firm that became a subsidiary of New York Community in 2004. Mr. Ficalora has previously served as a director of Computhrift Corporation, Chairman and board member of the New York Savings Bank Life Insurance Fund, President and Director of the MSB Fund and President and Director of the Asset Management Fund Large Cap Equity Institutional Fund, Inc. Mr. Ficalora has been a member of the Board of Directors of the Queens Chamber of Commerce since 1990 and a member of its Executive Committee since April 1992. In addition, Mr. Ficalora is President of the Queens Library Foundation Board, and serves on the Boards of Directors of the Queens Borough Public Library, the New York Hall of Science, Flushing Cemetery, and on the Advisory Council of the Queens Museum of Art. He previously served on the Board of Trustees of the Queens College Foundation and the Queens Museum of Art.

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Mr. Ford has been President and Chief Executive Officer of Bank member Crest Savings Bank, headquartered in Wildwood, New Jersey since 1993. He has worked in the financial services industry in southern New Jersey for over forty years. Mr. Ford served as the 2003-04 chairman of the New Jersey League of Community Bankers (“New Jersey League”), and has also served as a member of the New Jersey League’s Executive and Conference Committees, Committee on Examination and Supervision, and Association Political Election Committee. Mr. Ford served as Chairman of the Community Bank Council of the Federal Reserve Bank of Philadelphia in 1998-1999. He also served on the board of directors of America’s Community Bankers (“ACB”) and on ACB’s Audit, Finance & Investment, and Professional Development & Education Committees. Mr. Ford serves on the boards of the Cape Regional Medical Center Foundation, Main Street Wildwood and the Doo Wop Preservation League and has previously served as a director and treasurer of Habitat for Humanity, Cape May County from 1996 to 2001, and as Divisional Chairman of the March of Dimes for Atlantic and Cape May Counties from 1997 to 1999. In December 2000, he was appointed by Governor Christine Todd Whitman to the New Jersey Department of Banking & Insurance Study Commission. Mr. Ford is a graduate of Marquette University with a degree in accounting and is a member of the American Institute of Certified Public Accountants and the New Jersey Society of CPAs.

Mr. Fulmer has been a director of Bank member The Bank of Castile since 1988, the Chairman since 1992, Chief Executive Officer since 1996, and President since 2002. Mr. Fulmer has also been Vice Chairman of Tompkins Financial Corporation, the parent company of The Bank of Castile, since 2007 and has served as President and a Director of Tompkins Financial Corporation since 2000. Since 2001, he has served as Chairman of the Board of Tompkins Insurance Agencies, Inc. and, since 2006, he has served as Chairman of AM&M Financial Services, Inc., both subsidiaries of Tompkins Financial Corporation. In addition, since 1999, Mr. Fulmer has served as director of Bank member Mahopac National Bank, which is also a subsidiary of Tompkins Financial Corporation. He served as the President and Chief Executive Officer of Letchworth Independent Bancshares Corporation from 1991 until its merger with Tompkins Financial Corporation in 1999. Before joining The Bank of Castile, Mr. Fulmer held various executive positions with Fleet Bank of New York (formerly known as Security New York State Corporation and Norstar Bank) for approximately 12 years. He is an active community leader, serving as a member of the Board of Directors of the Erie & Niagara Insurance Association, Cherry Valley Insurance Company, United Memorial Medical Center in Batavia, New York, WXXI Public Broadcasting Council, and the Genesee County Economic Development Center. Mr. Fulmer is a former director of the Monroe Title Corporation and the Catholic Heath System of Western New York. He is also a former president of the Independent Bankers Association of New York State and a former member of the Board of Directors of the New York Bankers Association.

Mr. Hermance, Chairman, President and Chief Executive Officer of Bank member Hudson City Savings Bank, Paramus, New Jersey, has over 20 years of service with that institution. He joined Hudson City as Senior Executive Vice President and Chief Operating Officer and was also named to the Board of Directors. In 1997, he was promoted to President, and on January 1, 2002, he became Chief Executive Officer. On January 1, 2005, Mr. Hermance assumed the title of Chairman in addition to President and Chief Executive Officer. Mr. Hermance carries similar titles in Hudson City Bancorp, the parent company, which trades on NASDAQ. He serves as a member of the Thrift Institutions Advisory Panel of the Federal Reserve Bank of New York, and as a trustee of St. John Fisher College.

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Ms. Liseno has been President and Chief Executive Officer of Bank member Metuchen Savings Bank since 1979, having begun her career with the bank in 1962. She currently serves on the New Jersey Bankers Association’s Government Relations Committee, and she also currently serves on the Board of the Thrift Institutions Community Investment Corp. (TICIC), a subsidiary of the New Jersey Bankers Association. Ms. Liseno is also a trustee of the Jersey Bankers Political Action Committee (JEBPAC), formerly known as the Savings Association Political Election Committee of the New Jersey Bankers Association (SAPEC-NJ). Ms. Liseno was a member of the Legislative and Regulatory Affairs Committee of the New Jersey League of Community Bankers (“New Jersey League”), the predecessor of the New Jersey Bankers Association; she also served on the New Jersey League’s Executive Committee and was the Chairman of the Board of Governors of the New Jersey League. Ms. Liseno also served on the Board of Bankers Cooperative Group, Inc. She is also past president of the Central Jersey Savings League.

Mr. Lynch has been President and Chief Executive Officer of Bank member Oritani Bank, headquartered in the Township of Washington, New Jersey, since July 1, 1993. He has also been President and Chief Executive Officer of Oritani Financial Corporation, the holding company of Oritani Bank, since 1998. Mr. Lynch has also served as Chair of the two aforementioned entities since August of 2006; prior to that time, he served as a Director. Mr. Lynch is a former Chairman of the New Jersey League of Community Bankers and served as a member of its Board of Governors for several years and also served on the Board of its subsidiary, the Thrift Institutions Community Investment Corp. (TICIC). Mr. Lynch is a member of the Professional Development and Education Committees of the American Bankers Association. He has been a member of the Board of Directors of the Pentegra Defined Benefit Plan For Financial Institutions since 1997, was Chair of that Board in 2004 and 2005 and was Vice Chair in 2002 and 2003. He has also been a member of the Board of Pentegra Services, Inc. since 2007. He is a member of the American Bar Association and a former member of the Board of Directors of Bergen County Habitat for Humanity. Mr. Lynch is also a member of the Board of Directors of the Hackensack Main Street Business Alliance. Prior to appointment to his current position at Oritani Bank in 1993, Mr. Lynch was Vice President and General Counsel of a leasing company and served as a director of Oritani Bank. Mr. Lynch earned a Juris Doctor degree from Fordham University, an LLM degree from New York University, an MBA degree from Rutgers University and a BA in Economics from St. Anselm’s College.

Mr. Melone has been chairman emeritus of The Equitable Companies, Incorporated since April 1998. Prior to that, he was President and Chief Executive Officer of The Equitable Companies from 1996 until his retirement in April 1998 and, from 1990 until his retirement in April 1998, he was Chairman and Chief Executive Officer of its principal insurance subsidiary, The Equitable Life Assurance Society of the United States (“Equitable Life”). Prior to joining Equitable Life in 1990, Mr. Melone was president of The Prudential Insurance Company of America. He is a former Huebner Foundation fellow, and previously served as an associate professor of insurance at The Wharton School of the University of Pennsylvania and research director at The American College. Mr. Melone is a Chartered Life Underwriter, Chartered Financial Consultant and Chartered Property and Casualty Underwriter. He is currently Chairman of the Board of Horace Mann Educators, Inc., and also serves on the boards of Newark Museum, Newark, New Jersey, the Greater New York City Council of Boy Scouts, Auburn Theological Seminary, New York City, New York, and St. Barnabas Medical Center, Livingston, New Jersey. Until August of 2007, Mr. Melone served on the board of directors of BISYS; until December of 2007, he served on the board of directors of Foster Wheeler. Mr. Melone has held other leadership positions in a number of insurance industry associations, as well as numerous civic organizations. He received his bachelor’s, master’s and doctoral degrees from the University of Pennsylvania. Mr. Melone’s financial and other management experience, as indicated by his background described above, support his qualifications to serve on the Bank’s Board of Directors as an Independent Director.

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Mr. Mroz, of Haddonfield, New Jersey, is a government and public affairs consultant and lawyer. For six years, until December 31, 2006, Mr. Mroz was Of Counsel to the law firm of Stradley Ronon Stevens & Young, LLP. On January 1, 2007, he became president of Salmon Ventures, Ltd., which is a non-legal government, regulatory and public affairs consulting firm. Mr. Mroz represents clients in New Jersey and nationally in connection with legislative, regulatory and business development affairs. Mr. Mroz, as a governmental affairs agent, is an advocate for clients in the utility, real estate, insurance and banking industries for federal, state, and local regulatory, administrative, and legislative matters. He also became Of Counsel to the law firm of Gruccio, Pepper, DeSanto & Ruth on April 1, 2007. In his law practice he concentrates on real estate, corporate and regulatory issues. He has a distinguished record of community and public service. Mr. Mroz is the former Chief Counsel to New Jersey Governor Christine Todd Whitman, serving in that position in 1999 and 2000. Prior to that, he served in various capacities in the Whitman Administration, including Special Counsel, Director of the Authorities, and member of the Governor’s Transition Team. He served as County Counsel for Camden County, New Jersey, from 1991 to 1994. Mr. Mroz is also active in community affairs, serving on the board of directors for the New Jersey Alliance for Action and Volunteers for America, Delaware Valley. Mr. Mroz currently serves as counsel to the New Jersey Conference of Mayors, and was former counsel to the Delaware River Bay Authority and to the Atlantic City Hotel and Lodging Association. He is also the solicitor for the Waterford Township, N.J., Planning Board. He has been a frequent commentator on Philadelphia radio and TV stations regarding election and political issues. Mr. Mroz was serving on the Board as an Appointed Director designated by the Federal Housing Finance Board at the time of the adoption of HERA in mid-2008. Finance Agency rules provide that Appointed Directors are deemed to continue as Independent Directors while they serve out the remainder of their terms.

Mr. O’Brien joined Bank member State Bank of Long Island as President and CEO in November of 2006, following six years serving as the President and CEO of Atlantic Bank of New York. Since November of 2006, he has also served as a director of State Bancorp, Inc., the holding company of State Bank of Long Island. Mr. O’Brien has served as Vice Chairman of North Fork Bancorporation as well as Chairman of the Board, President and CEO of North Side Savings Bank. Mr. O’Brien is a past Chairman of the New York Bankers Association. He serves as an independent trustee of Prudential Insurance Company’s Mutual Fund Complex, a trustee of the Catholic Healthcare System of New York and Catholic Healthcare Foundation, and a trustee of Niagara University. He has been a trustee of Molloy College, a member of the National Advisory Board of Fannie Mae and an advisory board member for Neighboring Housing Services of New York City.

Ms. Raffaeli has been the President and Managing Director of the Hamilton White Group, LLC since 2002. The Hamilton White Group is an investment and advisory firm dedicated to assisting companies grow their businesses, pursue new markets and acquire capital. From 2004 to 2006, she was also the President and Chief Executive Officer of the Cardean Learning Group. Additionally, she served as the President and Chief Executive Officer of Proact Technologies, Inc. from 2000 to 2002 and Consumer Financial Network from 1998 to 2000. Ms. Raffaeli also served as the Executive Director of the Commercial Card Division of Citicorp and worked in executive positions in Citicorp’s Global Transaction Services and Mortgage Banking Divisions from 1994 to 1998. She has also held senior positions at Chemical Bank and Merrill Lynch. Ms. Raffaeli serves on the Board of Directors of E*Trade, American Home Mortgage Holdings, Inc., and Indecomm Global, a privately held company. Ms. Raffaeli’s financial and other management experience, as indicated by her background described above, support her qualifications to serve on the Bank’s Board of Directors as an Independent Director.

Rev. Reed is the founder and CEO of GGT Development LLC, a company which started in May of 2009. The strategic plan of the corporation focuses on the successful implementation of housing and community development projects, including affordable housing projects, schools, and multi-purpose facilities. He has been involved in development projects totaling more than $125 million. He formerly served as Chief Executive Officer of the Greater Allen Development Corporation from July 2007 through March 2009. The Greater Allen Development Corporation and its related development entities rehabilitated communities through its involvement in affordable housing projects, mixed use commercial/residential projects, and other development opportunities. Rev. Reed previously was the Chief Financial Officer of Greater Allen AME Cathedral, located in Jamaica, Queens, New York, from 1996 to July 2007. From 1986 to 1995, Rev. Reed served as the campaign manager and Chief of Staff for Congressman Floyd H. Flake. Prior to becoming involved in public policy, Rev. Reed managed the $6 billion liquid asset portfolio for General Motors and was a financial analyst for Chevrolet, Oldsmobile, Pontiac, Cadillac, Buick and GM of Canada. Rev. Reed gained his initial financial experience as a banker at First Tennessee Bank in Memphis, Tennessee. Rev. Reed earned a Masters of Business Administration from Harvard Business School, a Bachelor of Business Administration from Memphis State University and a Masters of Divinity at Virginia Union University. He currently serves on the following organizations in the following positions: Chairman of Audit Committee, Board of Trustees, Hofstra University; Chairman, Jamaica Business Resource Center; Secretary/Treasurer, Outreach Project; Board Member, JP Morgan Chase Bank National Community Advisory Board; and Board Member, Wheelchair Charities; and Director and Treasurer, New Directions Local Development Corp. Rev. Reed’s experience in representing community interests in housing, as indicated by his background described above, support his qualifications to serve on the Bank’s Board of Directors as a public interest director and Independent Director.

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Mr. Scarchilli has been President and Chief Executive Officer of Bank member Pioneer Savings Bank, headquartered in Troy, New York, since 1997 and is a member of the Board of Trustees. Mr. Scarchilli is a graduate of Hudson Valley Community College in Troy and has a Bachelor’s Degree in Accounting from Siena College. Mr. Scarchilli also serves as President, CEO and Director of Pioneer Commercial Bank and serves as Chairman of the Board of PSB Financial Services, Inc., both wholly-owned subsidiaries of Pioneer Savings Bank. He is also a Director of the New York Bankers Association and was Chairman of that Association through February 9, 2009. He was a Director of the American Bankers Association, a national banking trade organization, in 2008. Mr. Scarchilli serves as a member of the Thrift Institutions Advisory Panel of the Federal Reserve Bank of New York, serves as a Director on the Banking Board of the New York State Banking Department, and also serves as a Director of the Independent Bankers Association of New York State. Through January 8, 2007, Mr. Scarchilli served as a Director of Asset Management Fund Large Cap Equity Fund Institutional Fund, Inc. In 2005, Mr. Scarchilli served as a trustee on the RSI Retirement Trust Board. Mr. Scarchilli also serves on numerous not-for-profit boards in the local community. He is a Director of the Center for Economic Growth and Co-Chair of Troy 20/20. Additionally, he serves as a member of the Audit and Compliance Committee of Ordway Research Institute.

Dr. Soaries has been the Senior Pastor of the First Baptist Church of Lincoln Gardens in Somerset, New Jersey since November 1990. A pioneer of faith-based community development, Dr. Soaries has led First Baptist in the construction of a new $20 million church complex and the formation of many not-for-profit entities to serve the community surrounding the church. Highlights of Dr. Soaries’ ministry include recruiting 333 families to become foster parents to 531 children; helping 216 children find adoptive parents; constructing 145 new homes for low and moderate income residents to own; redeveloping 150,000 square feet of commercial real estate; operating a “green jobs” training program; serving hundreds of youth in an after school center and homework club; forming a youth entrepreneurship program; organizing a community development credit union; implementing a strategy to help 1,000 families become debt-free; and creating a program designed to help homeowners recover homes lost through foreclosure. From January 12, 1999 to January 15, 2002, Dr. Soaries served as New Jersey’s 30th Secretary of State. In 2004 he also served as the first chairman of the United States Election Assistance Commission, having been appointed by the President and confirmed by the United States Senate. Dr. Soaries’ project development experience, as indicated by his background described above, support his qualifications to serve on the Bank’s Board of Directors as an Independent Director.

Mr. Strayton has been President, Chief Executive Officer and a Director of Bank member Provident Bank, an independent full service community bank with $3.0 billion in assets headquartered in Montebello, New York, since 1986. He is also President, Chief Executive Officer and a Director of Provident New York Bancorp, the holding company of Provident Bank, and of Provident Municipal Bank. Mr. Strayton is currently a director of the New York Bankers Association and a member of the Government Affairs Committee of the American Bankers Association. He also currently serves on the Thrift Institutions Advisory Panel of the Federal Reserve Bank of New York. Further, he serves as a director of Orange & Rockland Utilities and the New York Business Development Corporation. Mr. Strayton’s career includes chairmanships of the Community Bankers Association of New York State, St. Thomas Aquinas College, Rockland Business Association, Rockland County Boy Scouts of America, and Rockland United Way, among other local organizations.

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Executive Officers

The following sets forth the executive officers of the FHLBNY at December 31, 2009 and as of the date of this annual report on Form 10-K. The Bank has determined that its executive officers are those officers who are members of the Bank’s internal Management Committee. All Bank officers are “at will” employees and do not serve for a fixed term.

						Management
		Age as of		Employee of		Committee
Executive officer	Position held	3/27/2010		Bank since		member since
Alfred A. DelliBovi	President & Chief Executive Officer		64		11/30/92		03/31/04
Eric P. Amig	Senior Vice President & Director of Bank Relations		51		02/01/93		01/01/09
G. Robert Fusco *	Senior Vice President, CIO & Head of Enterprise Services		51		03/02/87		05/01/09
Adam Goldstein	Senior Vice President & Head of Marketing & Sales		36		07/14/97		03/20/08
Robert R. Hans **	Senior Vice President & Head of Technology & Support Services		60		01/03/72		03/31/04
Paul B. Héroux	Senior Vice President & Head of Member Services		51		02/27/84		03/31/04
Peter S. Leung	Senior Vice President & Chief Risk Officer		55		01/20/04		03/31/04
Patrick A. Morgan	Senior Vice President & Chief Financial Officer		69		02/16/99		03/31/04
Kevin M. Neylan	Senior Vice President & Head of Strategy and Business Development		52		04/30/01		03/31/04
Craig E. Reynolds	Senior Vice President & Head of Asset Liability Management		61		06/27/94		03/31/04

*	Left employment 1/8/93; rehired 5/10/93
**	Retired 4/30/09

Alfred A. DelliBovi was elected President of the Federal Home Loan Bank of New York in November 1992. As President, he serves as the Chief Executive Officer and directs the Bank’s overall operations to facilitate the extension of credit products and services to the Bank’s member-lenders. Since 2005, Mr. DelliBovi has been a member of the Board of Directors of the Pentegra Defined Contribution Plan for Financial Institutions; he previously served on this board from 1994 through 2000. Since October, 2009, he has served on the Board of Directors of the Pentegra Defined Benefit Plan for Financial Institutions; he previously served on this board from 2001 through 2003. In addition, Mr. DelliBovi was appointed by the U.S. Department of the Treasury in September 2006 to serve as a member of the Directorate of the Resolution Funding Corporation, and he was appointed Chairman in September 2007; he served on this board until October 2009. In November 2009, Mr. DelliBovi was appointed to serve as Chair of the Board of the Financing Corporation (“FICO”). Mr. DelliBovi previously served on the FICO Board as Chair from November 2002 through November 2003, and also served as Vice Chair of the FICO Board from November 1996 to November 1997. Prior to joining the Bank, Mr. DelliBovi served as Deputy Secretary of the U.S. Department of Housing and Urban Development from 1989 until 1992. In May 1992, President Bush appointed Mr. DelliBovi Co-Chairman of the Presidential Task Force on Recovery in Los Angeles. Mr. DelliBovi served as a senior official at the U.S. Department of Transportation in the Reagan Administration, was elected to four terms in the New York State Assembly, and earned a Master of Public Administration degree from Bernard M. Baruch College, City University of New York.

Eric P. Amig has served as Director of Bank Relations since joining the Bank in February 1993. From 1985 through January 1993, he worked in the U.S. Department of Housing and Urban Development; during this time he served as Special Assistant to the Deputy Secretary from 1990-1993. Mr. Amig has also served as a legislative aide in the Pennsylvania State Senate and House of Representatives.

287

Adam Goldstein was named Head of Marketing and Sales in March 2008; in this role, he leads the Sales, Marketing Communications and Business Research and Development efforts at the Bank. He joined the Bank in June 1997 and has held a number of key positions in the Bank’s sales and marketing areas. In addition to an undergraduate degree from the SUNY College at Oneonta and an M.B.A. in Financial Marketing from SUNY Binghamton University, Mr. Goldstein has received post-graduate program certifications in Business Excellence from Columbia University, in Management Development from Cornell University, and in Management Practices from New York University.

G. Robert Fusco was named Chief Information Officer and Head of Technology and Support Services in May 2009, after the retirement of Robert R. Hans. In June 2009, he reorganized the Technology and Support Services area as Enterprise Services and he is now currently CIO and Head of Enterprise Services. Mr. Fusco is responsible for all of the Bank’s technology, telecommunications, records management, business continuity and facilities services. Mr. Fusco has been with the Bank since April, 1987. During his 22 years at the Bank, he has held various management positions in Information Technology, including IT Director starting in 2000, Chief Technology Officer starting in 2006, and CIO in 2008. Mr. Fusco received an undergraduate degree from the State University of New York at Stony Brook. He has earned numerous post-graduate technical and management certifications throughout his career, and is a graduate of the American Bankers Association National Graduate School of Banking. Prior to joining the Bank, Mr. Fusco held positions at Citicorp and the Federal Reserve Bank of New York.

Robert R. Hans was named Head of Technology and Support Services in March 2004; in that role, he was, until his retirement from the Bank in April, 2009, responsible for the Bank’s Information Technology and Corporate Services areas. Mr. Hans was with the FHLBNY for more than 35 years, primarily working in management positions in bank operations and technology.

Paul B. Héroux was named Head of Member Services in March 2004; in this role, he oversees several functions at the Bank, including Credit and Correspondent Services, Collateral Services, Acquired Member Assets and Community Investment/Affordable Housing Operations. Mr. Héroux joined the Bank in 1984 as a Human Resources Generalist and served as the Director of Human Resources from 1988 to 1990. In his tenure with the Bank, he has held other key positions including Director of Financial Operations and Chief Credit Officer. He received an undergraduate degree from St. Bonaventure University and is a graduate of the Columbia Senior Executive Program. Prior to joining the Bank, Mr. Héroux held positions at Merrill Lynch & Co. and E.F. Hutton & Co.

Peter S. Leung joined the Bank as Chief Risk Officer in January 2004. Mr. Leung has more than twenty-three years experience in the Federal Home Loan Bank System. Prior to joining the Bank, Mr. Leung was the Chief Risk Officer of the Federal Home Loan Bank of Dallas for three years, and the Associate Director and then Deputy Director of the Office of Supervision of the Federal Housing Finance Board for a total of 11 years. He also served as an examiner with the Federal Home Loan Bank of Seattle and with the Office of Thrift Supervision for a total of four years in the 1980’s. Mr. Leung is a CPA and has an undergraduate degree from SUNY at Buffalo and an M.B.A. from City University, Seattle, Washington.

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Patrick A. Morgan was named the Chief Financial Officer in March 2004. Mr. Morgan joined the FHLBNY in 1999 after more than fifteen years in the financial services industry including working for one of the largest international banks in the U.S. Prior to that, Mr. Morgan was a senior audit manager with one of the Big Four public accounting firms. He is a CPA and a member of the New York State Society of CPAs and the American Institute of CPAs.

Kevin M. Neylan was named Head of Strategy and Business Development in January 2009. He was previously Head of Strategy and Organizational Performance from January 2005 to December 2008, and was Director, Strategy and Organizational Performance from January 2004 to December 2004. Mr. Neylan is responsible for developing and monitoring the execution of the Bank’s business strategy. He is also responsible for overseeing the Bank’s Sales and Marketing, Human Resources and Legal functions. Mr. Neylan had approximately twenty years of experience in the financial services industry prior to joining the Bank in April 2001. He was a partner in the financial service consulting group of one of the Big Four accounting firms. He holds an M.S. in corporate strategy from the MIT Sloan School of Management.

Craig E. Reynolds was named Head of Asset Liability Management in March 2004. Prior to this position, he served as Treasurer of the Bank. Mr. Reynolds joined the FHLBNY in 1994 after more than 22 years in banking, with almost half this time spent working abroad in international banking. He was the treasurer of a U.S. bank’s branch in Tokyo and later resided in Riyadh, Saudi Arabia as the treasurer of a Saudi Arabian bank for over five years. He received an undergraduate degree from Manhattan College in the Bronx, New York.

289

Section 16 (a) Beneficial Ownership Reporting Compliance

In accordance with correspondence from the Office of Chief Counsel of the Division of Corporation Finance of the U.S. Securities and Exchange Commission dated August 26, 2005, Directors, officers and 10% stockholders of the Bank are exempted from Section 16 of the Securities Exchange Act of 1934 with respect to transactions in or ownership of Bank capital stock.

Audit Committee

The Audit Committee of the FHLBNY’s Board of Directors is primarily responsible for overseeing the services performed by the FHLBNY’s independent registered public accounting firm and internal audit department, evaluating the FHLBNY’s accounting policies and its system of internal controls and reviewing significant financial transactions. For the period from January 1, 2009 through the date of the filing of this annual report on Form 10-K, the members of the Audit Committee included: Anne E. Estabrook (Chair), Katherine J. Liseno (Vice Chair), Joseph R. Ficalora, Jay M. Ford, José R. González, Michael M. Horn, Joseph J. Melone and John M. Scarchilli. As of the date of the filing of this annual report on Form 10-K, the members of the Audit Committee are: Anne Evans Estabrook (Chair), Katherine J. Liseno (Vice Chair), Joseph R. Ficalora, Jay M. Ford, José R. González, Michael M. Horn, Joseph J. Melone and John M. Scarchilli.

Audit Committee Financial Expert

The FHLBNY’s Board of Directors has determined that for the period from January 1, 2009 through the date of the filing of this annual report on Form 10-K, José R González of the FHLBNY’s Audit Committee qualified as an “audit committee financial expert” under Item 407 (d) of Regulation S-K but was not considered “independent” as the term is defined by the rules of the New York Stock Exchange.

Code of Ethics

It is the duty of the Board of Directors to oversee the Chief Executive Office and other senior management in the competent and ethical operation of the FHLBNY on a day-to-day basis and to assure that the long-term interests of the shareholders are being served. To satisfy this duty, the directors take a proactive, focused approach to their position, and set standards to ensure that the FHLBNY is committed to business success through maintenance of the highest standards of responsibility and ethics. In this regard, the Board has adopted a Code of Business Conduct and Ethics that applies to all employees as well as the Board. The Code of Business Conduct and Ethics is posted on the Corporate Governance Section of the FHLBNY’s website at http://www.fhlbny.com. The FHLBNY intends to disclose any changes in or waivers from its Code of Business Conduct and Ethics by filing a Form 8-K or by posting such information on its website.

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ITEM 11. EXECUTIVE COMPENSATION.

Compensation Discussion and Analysis

Introduction

About the Bank’s Mission

The mission of the Federal Home Loan Bank of New York (“Bank”) is to advance housing opportunity and local community development by maximizing the capacity of its community-based member-lenders to serve their markets.

The Bank meets its mission by providing its members with access to economical wholesale credit and technical assistance through the provision of credit products, mortgage finance programs, housing and community development programs and correspondent services, all of which are intended to increase the availability of home finance to families of all incomes.

Achieving the Bank’s Mission

The Bank operates in a very competitive market for financial talent. Without the capability to attract, motivate and retain talented employees, the ability of the Bank to fulfill its mission would be in jeopardy. All employees, and particularly senior and middle management, are frequently required to perform multiple tasks requiring a variety of skills. The Bank’s employees not only have the appropriate talent and experience to execute the Bank’s mission, but they also possess skill sets that are difficult to find in the marketplace. In this regard, as of December 31, 2009, the Bank employed 258 employees, a relatively small workforce for a New York City-based financial institution that had, as of that date, $114.5 billion in assets.

Compensation and Human Resources Committee Oversight of Compensation

Compensation is a key element in attracting, motivating and retaining talent. In this regard, it is the role of the Compensation and Human Resource Committee (“C&HR Committee”) of the Bank’s Board of Directors (“Board”) to:

1. review and recommend to the Board changes regarding the Bank’s compensation and benefits programs for employees and retirees;

2. review and approve individual performance ratings and related merit increases for the Bank’s Chief Executive Officer and for the other Management Committee members;

3. review salary adjustments for Bank officers;

4. review and approve annually the Bank’s Incentive Compensation Plan (“Incentive Plan”), year-end Plan results and Plan award payouts;

5. advise the Board on compensation, benefits and human resources matters affecting Bank employees;

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6. review and discuss with Bank management the Compensation Discussion and Analysis (“CD&A”) to be included in the Bank’s Form 10-K and determine whether to recommend to the Board that the CD&A be included in the Form 10-K; and

7. review and monitor compensation arrangements for the Bank’s executives so that the Bank continues to retain, attract, motivate and align quality management consistent with the investment rationale and performance objectives contained in the Bank’s annual business plan and budget, subject to the direction of the Board.

The Board has delegated to the C&HR Committee the sole authority to retain and replace, and approve fees and other retention terms for: i) any compensation and benefits consultant to be used to assist in the evaluation of Chief Executive Officer’s compensation, and ii) any other advisors that it shall deem necessary to assist it in fulfilling its duties. The Charter of the C&HR Committee is available at the Corporate Governance section of the Bank’s web site located at www.fhlbny.com.

The role of Bank management (including executive officers) with respect to compensation is limited to administering Board-approved programs and providing proposals for the consideration of the C&HR Committee. No member of Bank management serves on the Board or any Board committee.

Finance Agency Oversight of Executive Compensation

Notwithstanding the role of the C&HR Committee discussed in this CD&A, Section 1113 of the Housing and Economic Recovery Act of 2008 (“HERA”) requires that the Director of the Federal Housing Finance Agency (“Finance Agency”) prohibit a FHLBank from paying compensation to its executive officers that is not reasonable and comparable to that paid for employment in similar businesses involving similar duties and responsibilities. In connection with the fulfillment of these responsibilities, the Finance Agency on October 1, 2008 directed the FHLBanks to submit all compensation actions involving an NEO to the Finance Agency for review at least four weeks in advance of any planned board of directors’ decision with respect to those actions.

Compensation decisions for all of the Bank’s NEOs require action of the C&HR Committee of the Board of Directors. However, for purposes of complying with the four-week review period required by the Finance Agency’s October 1, 2008 letter prior to the taking of final action by the C&HR Committee, the Bank submitted to the regulator on November 23, 2009 proposed 2009 merit-related base pay increases for 2010; further, the Bank submitted to the regulator on December 23, 2009, proposed 2009 incentive award payments to be paid in 2010. The aforementioned merit-related base pay increases were implemented and incentive award payments made after the expiration of the four-week period and following final approval by the Compensation and Human Resources Committee.

In addition, on October 28, 2009, the Finance Agency issued Advisory Bulletin 2009-AB-02, “Principles for Executive Compensation at the Federal Home Loan Banks and the Office of Finance.” The Advisory Bulletin contains a set of principles so that the Federal Home Loan Banks can understand the basis for whatever feedback the Federal Housing Finance Agency offers on compensation generally and incentive compensation in particular. The principles outlined in the Advisory Bulletin include the following:

1. Executive compensation must be reasonable and comparable to that offered to executives in similar positions at other comparable financial institutions.

2. Executive incentive compensation should be consistent with sound risk management and preservation of the par value of the Bank’s capital stock.

3. A significant percentage of an executive’s incentive-based compensation should be tied to longer-term performance and outcome-indicators.

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4. A significant percentage of an executive’s incentive-based compensation should be deferred and made contingent upon performance over several years.

5. The board of directors of each FHLBank and the OF should promote accountability and transparency in the process of setting compensation.

How the Bank Stays Competitive in the Labor Market

The C&HR Committee-recommended and Board-approved Compensation Policy acknowledge and take into account the Bank’s business environment and factors the Bank takes into account to remain competitive in its labor market. The major components of the Compensation Policy, which is currently in effect, include the following:

• Maintenance of an overall greater emphasis on base salary and benefits (versus annual and long-term incentives) than would be typical of regional/commercial banks.

• The use of regional/commercial banks (see the peer group list in Section I below) as the primary peer group for benchmarking at the 50^th percentile of the peer group total compensation (a) cash compensation (i.e., base salary, and, for exempt employees, “variable” or “at risk” short-term incentive compensation); and (b) health and welfare programs and other benefits), discounted for purposes of establishing competitive pay levels by 15% to account for the incremental value provided by the Bank’s benefit programs.

• A philosophical determination to match Bank officer positions one position level down versus commercial/regional banks. The rationale is that officer positions at commercial/regional banks are one level more significant than at the Bank because they may manage multiple business lines in multiple locations. In contrast, the Bank generally recruits senior level positions from a ‘divisional’ level at commercial/regional banks and not the higher ‘corporate’ level.

• The targeting of cash compensation pay at the 75^th percentile of the FHLBanks where regional/commercial bank data is not available. The 15% discount to account for the incremental value provided by the Bank’s benefit programs will not be applied to benchmark results from the other FHLBanks, as the other FHLBanks offer similar benefits.

• A commitment to conduct detailed cash compensation benchmarking for approximately one-third of the Bank’s Officer positions each year. (In this regard, the Bank collects information regarding benchmarking from Aon as well as a variety of other reputable sources.)

• A commitment to evaluate the value of total compensation delivered to employees including base pay, incentive compensation, retirement and health & welfare benefits in determining market competitiveness every third year.

Additional factors that the Bank takes into account to remain competitive in its labor market include, but are not limited to:

• Geographical area — The New York Metropolitan area is a highly competitive market for talent in the financial disciplines;

• Cost of living — The New York Metropolitan area has a high cost of living that may require compensation premiums for some positions, particularly at more junior levels; and

• Availability of/demand for talent — Recruiting critical positions with high market demand typically requires a recruiting premium to entice an individual to change firms.

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The Bank’s Total Compensation Program

In response to the challenging environment that the Bank operates in, compensation and benefits at the Bank consist of the following components: (a) cash compensation (i.e., base salary, and, for exempt employees, “variable” or “at risk” short-term incentive compensation); (b) retirement-related benefits (i.e., the Qualified Defined Benefit Plan; the Qualified Defined Contribution Plan; and the Nonqualified Defined Benefit Portion of the Benefit Equalization Plan (“DB BEP”)) and (c) health and welfare programs and other benefits which are listed in Section IV C below. These components, along with certain benefits described in the next paragraph, comprised the Bank’s total compensation program for 2009, and are discussed in detailed in Section IV below.

In addition, in the category of retirement-related benefits, the Bank offered the Nonqualified Defined Contribution Portion of the Benefits Equalization Plan (“DC BEP”), a Nonqualified Deferred Compensation Plan (“NQDCP”) and a Nonqualified Profit Sharing Plan (“NQPSP”) through and until November 10, 2009. A discussion of these plans, and the reasons for their termination, can be found in Section IV of this CD&A.

This CD&A provides information related to the Bank’s total compensation program provided to its named executive officers (or “NEOs”) for 2009 — that is, the Bank’s Principal Executive Officer (“PEO”), Principal Financial Officer (“PFO”) and the three most highly-compensated executive officers other than the PEO and PFO. The information includes, among other things, the objectives of the Bank’s total compensation program and the elements of compensation the Bank provides to its NEOs. These compensation programs are not exclusive to the NEOs; they also apply to all Bank employees as explained throughout the CD&A.

I. Objectives of the Bank’s total compensation program

The objectives of the Bank’s total compensation program (described above) are to help motivate employees to achieve consistent and superior results over a long period of time for the Bank, and to provide a program that allows the Bank to compete for and retain talent that otherwise might be lured away from the Bank.

2006 — 2007 Aon Compensation and Benefit Study

On June 29, 2006, the Committee engaged compensation specialists Aon Consulting, Inc., and its subsidiary, McLagan Partners, Inc., which focuses on executive compensation (collectively, “Aon”), to perform a broad and comprehensive review of all the Bank’s compensation and benefits programs for all employees, including NEOs. To assist the C&HR Committee’s review of the process behind, and the conclusions of the Aon’s study, the Committee engaged another compensation and benefits consultant, Pearl Meyers and Partners (“Pearl Meyers”), to serve as a ‘check and balance’ with regard to the process. (Aon Consulting, Inc. had, previous to this engagement, been retained by the Bank with regard to matters pertaining to retiree medical benefits reporting, and had also been involved with a review of actuarial assumptions and valuations used by the administrator of the Bank’s Defined Benefit and Benefit Equalizations Plans. McLagan Partners, Inc. had also been previously engaged by the Bank for compensation consulting purposes. Aon continued providing the services listed above to the Bank in 2009.)

Aon was specifically instructed by the C&HR Committee to: (i) determine how the Bank’s compensation and benefit programs and level of rewards were compared to and aligned with the market; (ii) ascertain the current and projected costs of each Bank benefit and identify ways to control these costs; (iii) determine the optimal mix of compensation and benefits for the Bank; and (iv) determine if there were alternative benefit structures that should be considered. Aon was informed of the Bank’s continued desire to attract, motivate and retain talented employees.

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A major undertaking for Aon during the review process was to identify the Bank’s peer group for “benchmarking” purposes (that is, for purposes of comparing levels of benefits and compensation). Aon weighed a number of factors in order to arrive at the selection of a peer group. Among the factors considered were firms that were either business competitors or labor market competitors (focusing attention on firms either headquartered or having major offices in the same or similar geographic markets), and firms similar in size (assets, revenues and employee population) to the Bank. Through Aon’s experience working with other Home Loan Banks and through direct interviews with the Bank’s senior management, Aon identified the current and future skill sets needed to meet the Bank’s business objectives and also noted that the Bank tended to hire employees from and lose employees to certain institutions.

While “Wall Street” firms were considered for use as benchmark peers, Aon recommended they not be used because of an inconsistency between business compensation models. The rationale was that these firms tend to base their compensation levels to a significant extent on activities that carry a high degree of risk and commensurate level of return. In contrast, the Bank, as a Federally-regulated provider of liquidity to financial institutions, operates using a low risk/return business model. Based on these considerations, Aon recommended that the Bank’s peer group should be regional and commercial banks.

In addition, Aon proposed that Bank officer positions be matched one position level down versus commercial/regional banks. Aon’s rationale was that officer positions at commercial/regional banks are one level more significant than at the Bank because they manage multiple business lines in multiple locations. In contrast, the Bank only has two locations and one main business segment. Therefore, the Bank generally recruits senior level positions from a “divisional” level at commercial/regional banks as opposed to the higher “corporate” level of such organizations. The C&HR Committee and the Board agreed with these recommendations.

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A representative list of the peer group that was used in the Aon study in 2007 is set forth in the table below. For the firms listed below that had multiple lines of business, the Bank benchmarked total compensation against the wholesale banking functions at those companies.

Australia & New	Cargill	GMAC	Royal Bank of Canada
Zealand Banking	CIBC World Markets	HSBC Bank	Royal Bank of
Group	Citigroup	HSBC Corporate,	Scotland/Greenwich
ABN AMRO	Citizens Bank	Investment Banking	Capital
Allied Irish Bank	Commerzbank	& Markets	Societe Generale
The Bank of Nova	Commonwealth Bank	Hypo Vereinsbank	Standard Chartered Bank
Scotia	of Australia	ING Bank	Sumitomo Mitsui
Banco Santander	DVB Bank	JP Morgan Chase	Banking Corporation
Bank of New	DZ Bank	KeyCorp	SunTrust Banks
York/Mellon	Deutsche Bank	Lloyds TSB	TD Securities
Bank of Tokyo —	Dresdner Kleinwort	M&T Bank	Wachovia Corporation
Mitsubishi UFJ	Wasserstein	Corporation	Wells Fargo Bank
Bank of America	Fifth Third Bank	Mizuho Corporate	WestLB
BMO Financial	Fortis Financial	Bank, Ltd.	Westpac Banking
Group	Services LLC	National Australia	Corporation
BNP Paribas	GE Commercial	Bank
Brown Brothers	Finance	Rabobank Nederland
Harriman
The CIT Group

Note: Benchmarking data from international banks only contained results from their New York operations.

Compensation and Benefits Study Results

Aon’s review was presented to the Board on August 3, 2007. The results of the study completed by Aon indicated that the Bank’s:

• cash compensation was generally below the Bank’s peer groups and heavily weighted towards base pay (Note: the Bank is prohibited by law from offering equity-based compensation, and the Bank does not offer long-term incentives);

• added together, cash compensation and retirement-related benefits were slightly above the Bank’s peers (and heavily weighted towards benefits);

• added together, cash compensation, retirement-related benefits and health & welfare benefits were generally above the Bank’s peers and heavily weighted towards benefits; and

• the mix of compensation and benefits was consistent with the risk-averse culture of the Bank.

Aon’s recommendations to the Board took into account the C&HR Committee’s direction to Aon that, to the extent possible:

• the dominant features of the Bank’s current compensation and benefits program which stressed fixed compensation over variable to support the Bank’s risk-averse culture should be retained;

• greater weight on benefits vs. competitor peer group should be retained; and

• heavier reliance on base pay vs. incentive pay should be retained.

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To help better align the Bank’s total compensation program with its peer group, Aon recommended, and the Board approved, changes to the Bank’s retirement plan for certain active employees effective as of July 1, 2008, and changes to the Bank’s health and welfare plans effective as of January 1, 2008 for all active employees and certain employees who retired on or after January 1, 2008. Aon also recommended the establishment of a Nonqualified Profit Sharing Plan that became effective July 1, 2008 for certain Bank employees. The changes to the Bank plans made at that time as a result of the Aon study are discussed in more detail in section IV B.

Pearl Meyers stated during the aforementioned August 3, 2007 meeting that the Bank’s peer group had been correctly identified; that the level of compensation and all alternatives had been explored; and that the outcome was reasonable. Pearl Meyers was also of the view that the Committee appropriately exercised its fiduciary duties throughout the process.

While Aon interviewed members of management and conducted focus sessions with various employees at all levels to gather information during the course of the study, the C&HR Committee and the Board acted on Aon’s recommendations independently of the Bank’s management and employees.

II. The Bank’s total compensation program is designed to reward for performance and employee longevity, to balance risk and returns, and to compete with compensation programs offered by the Bank’s competitors

The Bank’s total compensation program is designed to attract, retain and motivate employees and to reward employees based on Bank overall performance achievement as compared to the Bank’s goals and individual employee performance. The Bank also strives to ensure that its employees are compensated fairly and consistent with employees in the Bank’s peer group.

All of the elements of the Bank’s total compensation program are available to all employees, including NEOs, except with respect to: 1) the Bank’s Incentive Plan; and 2) the Bank’s nonqualified plans. Participation in the Incentive Plan is offered to all exempt (non-hourly) employees. Exempt employees constituted 86% of all Bank employees as of year-end 2009.

Participation in the Benefit Equalization Plan is offered to employees at the rank of Vice President and above who exceed income limitations established by the Internal Revenue Code (“IRC”) for three out of five consecutive years and who are also approved for inclusion by the Bank’s Nonqualified Plan Committee. The Bank’s Thrift Plan Component of the BEP was terminated on November 10, 2009. Participation in the Bank’s Nonqualified Profit Sharing Plan, which was established on July 1, 2008, was (until the plan was terminated on November 10, 2009), offered to all Non-Grandfathered employees who had five years of Bank service and who were members of the Benefit Equalization Plan. Participation in the Bank’s Nonqualified Deferred Compensation Plan is offered to members of the Board and Bank employees at a rank of Assistant Vice President and higher. The Bank’s Nonqualified Deferred Compensation Plan was also terminated on November 10, 2009.

All exempt employees are eligible to receive annual incentive awards through participation in the Incentive Plan. These awards are based on a combination of Bank performance results and individual performance results. The better the Bank and/or the employee perform, the higher the employee’s potential award is likely to be, up to a predetermined limit. In addition, the better the employee’s performance, the greater the employee’s annual salary increase is likely to be, up to a predetermined limit.

The Bank is prohibited by law from offering equity-based compensation, and the Bank does not currently offer long-term incentives. However, many of the firms in the Bank’s peer group do offer these types of compensation. The Bank’s total compensation program takes into account the existence of these other types of compensation by offering a defined benefit and defined contribution plan to help the Bank effectively compete for talent. The Bank’s defined benefit and defined contribution plans are designed to reward employees for continued strong performance over their careers — that is, the longer an employee works at the Bank, the greater the benefit the employee is likely to accumulate. Senior and mid-level employees are generally long-tenured and would not want to endanger their pension benefits by inappropriately stretching rules to achieve a short-term financial gain.

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The Bank does not structure any of its compensation plans in a way that inappropriately encourages risk taking to achieve payment. As described in Section IV A 2 below, the rationale for having the equally-weighted Bankwide goals of Return and Risk within the Bank’s Incentive Plan is to motivate management to take a balanced approach to managing risks and returns in the course of managing the Bank’s business, while at the same time ensuring that the Bank fulfills its mission.

In addition, the Bank’s defined benefit and defined contribution plans are designed to reward employees for continued strong performance over their careers — that is, the longer an employee works at the Bank, the greater the benefit the employee is likely to accumulate. This combined with the Bank’s compensation philosophy and the structure of the Bank’s compensation programs helps to ensure that the compensation paid to employees at termination of employment from the Bank is aligned with the interest of the shareholders of the Bank.

III. The elements of total compensation

The Bank’s total compensation program consists of the following components: (a) cash compensation (i.e., base salary, and, for exempt employees, “variable” or “at risk” short-term incentive compensation); (b) retirement-related benefits (i.e., the Qualified Defined Benefit Plan; the Qualified Defined Contribution Plan; and the Nonqualified Defined Benefit Portion of the Benefit Equalization Plan (“DB BEP”)) and (c) health and welfare programs and other benefits which are listed in Section IV C below. In addition, as mentioned in the Introduction section of this CD&A, in the category of retirement-related benefits, the Bank offered the Nonqualified Defined Contribution Portion of the Benefits Equalization Plan, a Nonqualified Deferred Compensation Plan and a Nonqualified Profit Sharing Plan through and until November 10, 2009. Together, these components comprised the Bank’s total compensation program for 2009, and they are discussed in detailed in Section IV below.

IV. Explanation of why the Bank chooses to provide each element of total compensation

The Bank’s Compensation Policy

As a result of the Aon study and recommendations described above, the Board approved a revised Compensation Policy in November 2007 designed to help ensure that the Bank provides competitive compensation necessary to retain and motivate current employees while attracting the talent needed to successfully execute the Bank’s current and future business plans. The major components of the revised Compensation Policy, which is currently in effect, include the following:

• Maintenance of an overall greater emphasis on base salary and benefits (versus annual and long-term incentives) than would be typical of regional/commercial banks.

• The use of regional/commercial banks (see the peer group list in Section I above) as the primary peer group for benchmarking at the 50^th percentile of the peer group total compensation (a) cash compensation (i.e., base salary, and, for exempt employees, “variable” or “at risk” short-term incentive compensation); and (b) health and welfare programs and other benefits), discounted for purposes of establishing competitive pay levels by 15% to account for the incremental value provided by the Bank’s benefit programs.

• A philosophical determination to match Bank officer positions one position level down versus commercial/regional banks. The rationale is that officer positions at commercial/regional banks are one level more significant than at the Bank because they may manage multiple business lines in multiple locations. In contrast, the Bank generally recruits senior level positions from a ‘divisional’ level at commercial/regional banks and not the higher ‘corporate’ level.

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• The targeting of cash compensation pay at the 75^th percentile of the FHLBanks where regional/commercial bank data is not available. The 15% discount to account for the incremental value provided by the Bank’s benefit programs will not be applied to benchmark results from the other FHLBanks, as the other FHLBanks offer similar benefits.

• A commitment to conduct detailed cash compensation benchmarking for approximately one-third of the Bank’s Officer positions each year. (In this regard, the Bank collects information regarding benchmarking from Aon as well as a variety of other reputable sources.)

• A commitment to evaluate the value of total compensation delivered to employees including base pay, incentive compensation, retirement and health & welfare benefits in determining market competitiveness every third year.

Additional factors that the Bank will take into account during the benchmarking process to ensure the Bank remains competitive in its labor market include:

• Geographical area — New York City is a highly competitive market.

• Cost of living — The New York Metropolitan area has a high cost of living that may require compensation premiums for some positions, particularly at more junior levels.

• Availability of/demand for talent — Recruiting critical positions with high market demand typically requires a recruiting premium to entice an individual to change firms.

The next total compensation and benefits evaluation is scheduled to begin in 2011, three years after the date the Bank completed the final implementation of Board-approved total compensation program design changes — July 1, 2008. It should be noted that, due to the fact that the Bank conducts detailed benchmarking for only one-third of the Bank’s Officer positions on an annual basis (including the NEOs), the effectiveness of the benchmarking program of the Bank can be demonstrated only once every three years.

2009 Compensation Benchmarking Analysis

The Bank performed its annual benchmarking analysis in October 2009 of 24 Bank officer positions using compensation data (base pay and incentive compensation) from Aon. Aon reported that benchmarking compensation in 2009 in general was complicated as a result of an aberration in the poor performance of regional/commercial banks, the decreases in compensation in the financial market in general and the Bank’s strong financial results.

Aon reviewed the results with the view that the Bank’s conservative compensation philosophy limits the upside in incentive compensation by capping incentive pay as a percentage of base salary while bonuses provided by competitors of the Bank can be very high when times are good. Therefore, Aon believed it would seem inherently inconsistent to adjust employee compensation downward in an unprecedented “low watermark year” in the market while the Bank limits the amount of compensation increases when there are good years in the market.

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As a result, management decided to propose to the Committee that there be no adjustments for 2010 to the salaries of the officer positions that were benchmarked in 2009. The Committee agreed, and decided that if the information related to benchmarked compensation in 2010 was similar to the results of 2009, then the Bank’s compensation structure and benchmarking process should be reviewed and may need to change to reflect the market.

The following is an explanation of why the Bank chooses to provide each element of compensation.

A. Cash Compensation

1. Base Pay

The goal of offering competitive base pay is to make the Bank successful in attracting, motivating and retaining the talent needed to execute the Bank’s business strategies.

In addition to the benchmarking process provided for in the Bank’s Compensation Policy as described above, a performance-based merit increase program exists for all employees that has a direct impact on base pay. Generally, employees receive merit increases on an annual basis. Such merit increases are based upon the attainment of a performance rating of “Outstanding,” “Exceeds Requirements,” or “Meets Requirements” achieved on individual performance evaluations. Merit guidelines are determined each year and distributed to managers. These guidelines establish the maximum merit increase percentage permissible for employee performance during that year. In October of 2008, the C&HR Committee determined that merit-related officer base pay increases for 2009 would be 3.5% for officers rated ‘Meets Requirements’; 4.5% for officers rated ‘Exceeds Requirements’; and 5.5% for officers rated ‘Outstanding’ for their performance in 2008. In October of 2009, the C&HR Committee determined that merit-related officer base pay increases for 2010 would be 3.0% for officers rated ‘Meets Requirements’; 3.5% for officers rated ‘Exceeds Requirements’; and 4.5% for officers rated ‘Outstanding’ for their performance in 2009.

2.  Incentive Plan

The objective of the Bank’s Incentive Plan is to motivate exempt employees to perform at a high level and take actions that: i) support the Bank’s strategies, ii) lead to the attainment of the Bank’s business plan, and iii) fulfill the Bank’s mission. Funding for the Bank’s Incentive Plan is approved by the Board as part of the annual business plan process. By including goals that seek to balance risk and return, the Bank’s Incentive Plan is designed to work in a variety of economic conditions.

Aon reported in the course of its 2006 study of the Bank’s compensation and benefit programs (described earlier in Section I above), that most firms in the Bank’s peer group provide their employees with annual short-term incentives. As such, for the Bank not to offer this element of compensation would put it at a distinct disadvantage with respect to its competitors for new talent, and also pose a challenge with respect to the retention of key employees.

There are two types of performance measures that impact upon Incentive Plan awards received by participants: i) Bankwide performance goals, and ii) individual performance goals (which can include work performed as part of a group) established and measured through the annual performance evaluation process.

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The Bankwide goals are designed to help management focus on what it needs to accomplish for the success of the cooperative. The 2009 Bankwide goals are organized into three broad categories:

Goals Category	Weighting			Goal	Goal Basis
Business Effectiveness		80	%	Return	Dividend Capacity as forecasted in the Bank’s 2009 business plan. (50% of the category)
				Risk	Enterprise Risk Level in the Bank’s 2009 business plan balance sheet as measured by the methodology used to calculate the Bank’s retained earnings target. (50% of the category)
Mission Effectiveness		10	%	Mission	The Bank’s achievements in specific areas of housing and community development activities.
Growth Effectiveness		10	%	New Members	Number of new members and other activities during 2009 to position the Bank for future growth and mission fulfillment.

The goal measures in the Business Effectiveness and Growth Effective goal categories were approved by the Board’s Compensation and Human Resources Committee in March 2009, and the goal measures in the Mission Effectiveness goal category was approved by the Board’s Housing Committee in March 2009; all of the goal measures were reported to the Board. A description of these goal categories is set forth below:

Business Effectiveness Goal Category

The Return and Risk Goals that make up the Business Effectiveness Goal are linked and create a beneficial tension through the tradeoffs in managing one versus the other. These goals are weighted exactly the same; this motivates management to act in ways that are aligned with the Board’s wishes as the Bank understands them, i.e., to have management achieve forecasted returns while managing risks to stay within the prescribed risk parameters. In addition, and again consistent with management’s understanding of the Board’s wishes, this set of goals will not motivate management to increase Dividend Capacity if doing such would require imprudently increasing the risk in the balance sheet.

Return Goal

Provide value to shareholders through the dividend. The Return Goal is based on Dividend Capacity.

Risk Goal

The Risk Goal is intended to encourage management to balance those actions taken to enhance earnings (i.e., Dividend Capacity) with actions that are needed to maintain appropriate risk levels in the business.

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Growth Effectiveness Goal Category

The Growth Effectiveness Goal Category is intended to set the stage for future growth. The Bank believes that recruiting new members now will, over time, create additional advances usage.

Mission Effectiveness Goal Category

The Mission Effectiveness Goal Category is intended to help ensure the Bank’s achievement of mission-related community development activities.

Bankwide Goals — Weighting Based on Employee Rank

The Bank believes that employees at higher ranks have a greater impact on the achievement of Bankwide goals than employees at lower ranks. Therefore, employees at higher ranks have a greater weighting placed on the Bankwide performance component of their Incentive Plan award opportunities as opposed to the individual performance component. For the Bank’s Chief Executive Officer and the other Management Committee members (a group that includes all of the NEOs), the overall incentive compensation opportunity is weighted 90% on Bankwide performance goals and 10% on individual performance goals. There are differences among the NEOs with regard to their individual performance goals; however, these differences do not have a material impact on the amount of incentive compensation payout.

When employees are individually evaluated, they receive one of five performance ratings: “Outstanding”; “Exceeds Requirements”; “Meets Requirements”; “Needs Improvement” or “Unsatisfactory”. Incentive Plan participants that are rated as “Exceeds Requirements” or “Outstanding” on their individual performance evaluations receive an additional 3% or 6%, respectively, of their base salary added to their Incentive Plan award.

Incentive Plan awards are only paid to participants who have attained at least a specified threshold rating within the “Meets Requirements” category on their individual performance evaluations and do not have any unresolved disciplinary matters in their record.

Participants will receive an individual Incentive Plan award payment even if Bankwide goal results are such that no payments are awarded for the Bankwide portion of the Incentive Plan.

The Incentive Plan is administered by the Chief Executive Officer, subject to any requirements for review and approval by the C&HR Committee that the Committee may establish. In all areas not specifically reserved by the Committee for its review and approval, the decisions of the Chief Executive Officer or his designee concerning the Incentive Plan are binding on the Bank and on all Incentive Plan participants

B. Retirement Benefits

Introduction

The Qualified Defined Benefit Plan; Qualified Defined Contribution Plan; Nonqualified Defined Benefit Portion of the Benefit Equalization Plan; Nonqualified Defined Contribution Portion of the Benefits Equalization Plan; Nonqualified Profit Sharing Plan; and Nonqualified Deferred Compensation Plan were elements of the Bank’s total compensation program in 2009 intended to help encourage the accumulation of wealth by qualified employees, including NEOs, over a long period of time.

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These benefits (in addition to the Health and Welfare Programs and Other Benefits noted in Section IV C below) were part of the Bank’s strategy to compete for and retain talent that might otherwise be lured away from the Bank by competing financial enterprises who offer their employees long-term incentives and equity-sharing opportunities — forms of compensation that the Bank does not offer.

The Qualified Defined Benefit Plan was amended for eligible Bank employees as of July 1, 2008 and, as a consequence, the terms of the Nonqualified Defined Benefit Portion of the Benefit Equalization Plan for certain Bank employees also changed as of that date, since the Nonqualified Defined Benefit Portion of the Benefit Equalization Plan mirrors the structure of the Qualified Defined Benefit Plan.

On November 10, 2009, the Bank’s Board decided, upon recommendations by Aon Consulting, Inc., to terminate the Nonqualified Defined Contribution Portion of the Benefits Equalization Plan, the Nonqualified Deferred Compensation Plan and the Nonqualified Profit Sharing Plan. The termination of these plans was the result of several factors, i.e.: information from Aon that suggests a trend toward companies closing these plans; a belief that the benefits these plans were to provide to employees would be less valuable if taxes were higher in the future; and uncertainty as to whether these plans would be repudiated in the unlikely event of a conservatorship or receivership of the Bank. As can be seen in the financial reports included in this Annual Report on Form 10-K, the Bank remained financially healthy and performed very well during 2009. However, the potential for joint and several liability that exists among the FHLBanks also creates the potential, however remote, that if one or more of the Home Loan Banks were taken into conservatorship or receivership, then all of the remaining FHLBanks might be placed into conservatorship or receivership as well.

Regulations adopted pursuant to Section 409A of the IRC provide in general that the distribution of accrued vested balances can be made to participants starting twelve months after the termination of nonqualified plans such as those maintained by the Bank. As such, distributions will be paid on November 12, 2010 to the individuals who participated in the Nonqualified Defined Contribution Portion of the BEP, Nonqualified Profit Sharing Plan, and Nonqualified Deferred Compensation Plan.

The Bank’s Nonqualified Plan Committee administers various operational and ministerial matters pertaining to the Benefit Equalization Plan, the Nonqualified Profit Sharing Plan and Nonqualified Deferred Compensation Plan. These matters include, but are not limited to, approving employees as participants of the BEP and approving the payment method of benefits. The Nonqualified Plan Committee is chaired by the Chair of the C&HR Committee; other members include another Board Director who is a member of the C&HR Committee, the Bank’s Chief Financial Officer, and the Bank’s Director of Human Resources. The Nonqualified Plan Committee reports its actions to the C&HR Committee by submitting its meeting minutes to the C&HR Committee on a regular basis for its information.

i) Qualified Defined Benefit Plan

The Pentegra Qualified Defined Benefit Plan for Financial Institutions (“DB Plan”), as adopted by the Bank, is an IRS-qualified defined benefit plan which covers all Bank employees who have achieved four months of service. The DB Plan is part of a multiple-employer defined benefit program administered by Pentegra Services.

Bank participants, who as of July 1, 2008 had five years of DB Plan service and were age 50 years or older, are provided with a benefit of 2.50% of a participant’s highest consecutive 3-year average earnings, multiplied by the participant’s years of benefit service, not to exceed 30 years. Earnings are defined as base salary plus short-term incentives, and overtime, subject to the annual Internal Revenue Code limit. These participants are identified herein as “Grandfathered”.

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For all other participants (identified herein as “Non-Grandfathered”), the DB Plan provides a benefit of 2.0% (as opposed to 2.5% provided to Grandfathered participants) of a participant’s highest consecutive 5-year average earnings (as opposed to consecutive 3-year average earnings as previously provided to Grandfathered participants), multiplied by the participant’s years of benefit service, not to exceed 30 years. The Normal Form of Payment is a life annuity (i.e., an annuity paid until the death of the participant), as opposed to a guaranteed twelve year payout as previously provided to Grandfathered participants. Also, cost of living adjustments (“COLAs”) are no longer provided on future accruals (as opposed to a 1% simple interest COLA beginning at age 66 as previously provided).

The table below summarizes the DB Plan changes affecting the Non-Grandfathered employees that went into effect on July 1, 2008. For purposes of the following table, please note the following definitions:

“Defined Benefit Plan” — An Internal Revenue Code qualified deferred compensation arrangement that pays an employee and his/her designated beneficiary upon retirement a lifetime annuity or the lump sum actuarial equivalent of that annuity.

Benefit Multiplier — The annuity paid from the Bank’s DB Plan is calculated on an employee’s years of service, up to a maximum of 30 years, multiplied by 2.5% per year. Beginning July 1, 2008, the Benefit Multiplier changed to 2.0% for Non-Grandfathered Employees.

Final Average Pay Period — Is that period of time that an employee’s salary is used in the calculation of that employee’s benefit. For Grandfathered Employees, the Benefit Multiplier, 2.5%, is multiplied by the average of the employee’s three highest consecutive years of salary multiplied by that employee’s years of service, not to exceed thirty years at the date of termination. For Non-Grandfathered Employees, benefits accrued before July 1, 2008, the Benefit Multiplier mirrored the Grandfathered Employees. After July 1, 2008 a Benefits Multiplier of 2% is multiplied by the employee’s years of service (total service not to exceed thirty years) multiplied by the average of the employee’s five highest consecutive years of salary is used

Normal Form of Payment — The DB Plan must state the form of the annuity to be paid to the retiring employee. For unmarried Grandfathered retirees, the Normal Form of Payment as a life annuity with a 12 year guaranteed payment (“Guaranteed 12 Year Payout”) which means that if the unmarried Grandfathered retiree dies prior to receiving 12 years of annuity payments, the retiree’s beneficiary will receive a lump sum equal to the remaining unpaid payments in the 12 year period. For married Grandfathered retirees, the Normal Form of Payment is a 50% joint and survivor annuity which provides a continuation of half of the monthly annuity to the surviving beneficiary. The initial 50% Joint and Survivor Annuity monthly payment is actuarially equivalent to the 12 year guarantee payment provided to single retirees under the formula. Effective July 1, 2008, the DB Plan provides single Non-Grandfathered retirees with a straight “Life Annuity” as the Normal Form of Payment, which means that, once a retiree dies, the annuity terminates. For married Non-Grandfathered retirees, the Normal Form of Payment will be a 50% Joint and Survivor Annuity that is actuarially equivalent to the straight Life Annuity.

Cost of Living Adjustments (or “COLAs”) — Once a Grandfathered Employee retiree reaches age 65, in each succeeding year he/she will receive an extra payment annually equal to one percent of the original benefit amount multiplied by the number of years in pay status after age 65. As of July 1, 2008, this adjustment is no longer offered to Non-Grandfathered Employees on benefits accruing after that date.

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Early Retirement Subsidy:

Grandfathered Employees

There is a subsidy or benefit enhancement for Grandfathered Employee retirees who retire prior to normal retirement age (65). Any participant who retires early and elects to draw pension benefits prior to age 65, and who has a combined age and length of service of at least 70 years, will realize a reduction of 1.5% to his/her early retirement benefit for each year benefits commence earlier than age 65. If that employee had not accumulated a total of 70 years, the reduction would be 3% for each year benefits commence earlier than age 65.

Non-Grandfathered Employees

Effective as of July 1, 2008, if an employee on the date of his/her retirement, before 65, had accumulated a total of 70 or more years, the reduction will be 3% every year between his/her age and age 65. However, if a Non-Grandfathered Employee on the date of his/her retirement, before 65, had not accumulated 70 or more years, the reduction will be the actuarial equivalent between his/her age and age 65. At early retirement, the new early retirement factors will apply to the Non-Grandfathered Employee’s total service benefit. The retiree will be entitled to receive the greater of this early retirement benefit or the early retirement benefit accrued as of July 1, 2008 under the old plan formula.

Vesting — Grandfathered Employees are entitled, starting with the second year of employment service, to 20% of his/her accumulated benefit per year. As a result, after the sixth year of employment service, an employee will be entitled to 100% of his/her accumulated benefit. Non-Grandfathered Employees who entered the DB Plan on or after July 1, 2008 will not receive such benefit until such employee has completed five years of employment service. At that point, the employee will be entitled to 100% of his/her accumulated benefit. The term “5 Year Cliff” is a reference to the foregoing provision. Grandfathered and Non-Grandfathered Employees already participating in the DB Plan prior to July 1, 2008 will vest at 20% per year starting with the second year through the fourth year of employment service and will be accelerated to 100% vesting after the fifth year.

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DEFINED BENEFIT PLAN	GRANDFATHERED	NON-GRANDFATHERED
PROVISIONS	EMPLOYEES	EMPLOYEES
Benefit Multiplier	2.5%	2.0%
Final Average Pay Period	High 3 Year	High 5 Year
Normal Form of Payment	Guaranteed 12 Year Payout	Life Annuity
Cost of Living Adjustments	1% Per Year Cumulative Commencing at Age 66	None
Early Retirement Subsidy<65:
a) Rule of 70	1.5% Per Year	3% Per Year
b) Rule of 70 Not Met	3% Per Year	Actuarial Equivalent
*Vesting	20% Per Year Commencing	5 Year Cliff
	Second Year of Employment

* Greater of DB Plan Vesting or New Plan Vesting applied to employees participating in the DB Plan prior to July 1, 2008.

Earnings under the Bank’s DB Plan continue to be defined as base salary plus short-term incentives, and overtime, subject to the annual IRC limit. The IRC limit on earnings for calculation of the DB Plan benefit for 2009 was $245,000.

The DB Plan pays monthly annuities, or a lump sum amount available at or after age 59-1/2, calculated on an actuarial basis, to vested participants or the beneficiaries of deceased vested participants. Annual benefits provided under the DB Plan also are subject to IRC limits, which vary by age and benefit payment option selected.

ii) Nonqualified Defined Benefit Portion of the Benefit Equalization Plan

Employees at the rank of Vice President and above who exceed income limitations established by the IRC for three out of five consecutive years and who are also approved for inclusion by the Bank’s Nonqualified Plan Committee are eligible to participate in the BEP, commonly referred to as a “Supplemental Employee Retirement Plan,” a non-qualified retirement plan that in many respects mirrors the DB Plan.

The primary objective of the Nonqualified Defined Benefit Portion of the BEP is to ensure that participants receive the full amount of benefits to which they would have been entitled under the DB Plan in the absence of limits on maximum benefits levels imposed by the IRC.

The Nonqualified Defined Benefit Portion of the BEP utilizes the identical benefit formulas applicable to the Bank’s DB Plan. In the event that the benefits payable from the Bank’s DB Plan have been reduced or otherwise limited by government regulations, the employee’s “lost” benefits are payable under the terms of the defined benefit portion of the BEP.

The Nonqualified Defined Benefit Portion of the BEP is an unfunded arrangement. However, the Bank established grantor trusts to assist in financing the payment of benefits under these plans. The trust were approved by the Nonqualified Plan Committee in March of 2006 and established in June of 2007.

Although other nonqualified plans were terminated on November 10, 2009, the Nonqualified Defined Benefit Portion of the BEP was not terminated on that day, and remains in effect as of the date of this Annual Report on Form 10-K.

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iii) Qualified Defined Contribution Plan

Bank employees who have met the eligibility requirements contained in the Pentegra Qualified Defined Contribution Plan for Financial Institutions (“DC Plan”) can choose to contribute to the DC Plan, a retirement savings plan qualified under the IRC. Employees are eligible for membership in the DC Plan on the first day of the month coinciding with or next following the date the employee completes 3 full calendar months of employment.

An employee may contribute 1% to 19% of base salary into the DC Plan, up to IRC limitations. The IRC limit for 2009 was $16,500 for employees under the age of 50. An additional “catch up” contribution of $5,500 is permitted under IRC rules for employees who attain age 50 before the end of the calendar year. The Bank matches up to 100% of the first 3% of the employee’s contribution through the third year of employment; 150% of the first 3% of contribution during the fourth and fifth years of employment; and 200% of the first 3% of contribution starting with the sixth year of employment.

iv) Nonqualified Defined Contribution Portion of the Benefit Equalization Plan

Also an unfunded arrangement through a grantor trust, Employees who were at the rank of Vice President and above who exceed income limitations established by the IRS for three out of five consecutive years and who are also approved for inclusion by the Bank’s Nonqualified Plan Committee were eligible to participate in a Nonqualified Defined Contribution Portion of the Benefit Equalization Plan (which is a separate portion of the aforementioned BEP). The Nonqualified Defined Contribution Portion of the BEP ensured, among other things, that participants whose benefits under the DC Plan would otherwise be restricted under certain provisions of the IRC were able to make elective pre-tax deferrals and to receive the same Bank match relating to such deferrals as would have been received under the DC Plan.

As previously noted, the Nonqualified Defined Contribution Portion of the BEP was terminated as of November 10, 2009. All plan assets will be paid out to individual participants in a lump sum distribution on November 12, 2010. Most of the plan assets that will be paid out had been previously contributed by the participants.

In addition, as a result of this termination, the Board voted on January 21, 2010, based on a recommendation from Aon, to:

*	Provide to the participants of the Nonqualified Defined Contribution Portion of the BEP as of November 10, 2009, with respect to 2009, an additional cash payment on the second payroll following the end of 2009 in an amount equal to 6% of base pay in excess of IRS limitations for 2009 less amounts included for the DC BEP for 2009; and
*	Beginning in 2010, provide to the participants of the Nonqualified Defined Contribution Portion of the BEP as of November 10, 2009, an additional annual cash payment on the first or second payroll following the end of a calendar year in an amount equal to 6% of base pay in excess of IRS limitations for such prior year.

v) Nonqualified Profit Sharing Plan

The Bank’s Nonqualified Profit Sharing Plan was designed to address the compensation inequities that affected a group of highly compensated employees (including one NEO) who were negatively affected by the changes to the Bank’s Qualified Defined Benefit Plan formula and who would have been compensated less than employees in similar positions in the Bank’s peer group.

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All Non-Grandfathered employees who had five years of Bank service and were members of the BEP were entitled to participate in the Bank’s Nonqualified Profit Sharing Plan. The Nonqualified Profit Sharing Plan credited participants with 8% of salary (defined as base pay plus any Incentive Plan award) conditioned on the Bank achieving its threshold targets for certain Bank-wide performance goals used in the Bank’s Incentive Plan. The credit to participants into the Nonqualified Profit Sharing Plan will be held in a deferred account for participants and paid in a lump sum six months after termination of a participant’s employment. The Nonqualified Profit Sharing Plan was established on July 1, 2008 therefore only provided participants with a half of year of credit for 2008. 4% was allocated to the participants. This was an unfunded arrangement through the grantor trust.

As previously noted, the Nonqualified Profit Sharing Plan was terminated, which was based on a recommendation from Aon, as of November 10, 2009. All plan assets will be paid out to individual participants in a lump sum distribution on November 12, 2010. The accrued assets will include the calculation of the 2008 and 2009 plan years.

In addition, as a result of this termination, the Board voted on January 21, 2010 to provide annually to participants in the Nonqualified Profit Sharing Plan as of November 10, 2009, in 2010 and thereafter, an amount equal to 8% of the prior year’s base pay and short term incentive payment to the extent the requirements under the Bank’s Short Term Incentive Plan have been achieved. The 8% payment will not be used to calculate an employee’s pension amount.

vi) Nonqualified Deferred Compensation Plan

The Bank’s Board of Directors approved the establishment of a Nonqualified Deferred Compensation Plan, effective January 1, 2009, for the Board and Bank employees at a rank of Assistant Vice President and higher. A Nonqualified Deferred Compensation Plan is a vehicle that a corporation establishes for its Directors and employees for the purpose of enabling them to defer the present taxation of compensation to a date in the future — for example, when these individuals retire and would presumably be in a lower tax bracket. In addition, Directors and certain employees have the ability to have interest on their deferred compensation calculated based on the performance of investment vehicles of their own choosing, using a menu of investment choices similar to that of a 401(k) plan.

The Bank did not provide a match on these deferrals. All deferred monies were the property of the Bank until distribution to the Directors and employees and thus subject to claims of Bank creditors until distribution.

A grantor trust similar to those in operation for the BEP was established by the Nonqualified Plan Committee for the Nonqualified Deferred Compensation Plan in December 2008.

As previously noted, the Nonqualified Deferred Compensation Plan was terminated as of November 10, 2009. Any assets that were contributed by the participants will be paid out on November 12, 2010.

C. Health and Welfare Programs and Other Benefits

In addition to the foregoing, the Bank offers a comprehensive benefits package for all regular employees (including NEOs) which include the following significant benefits:

Medical and Dental

Employees can choose preferred provider, open access or managed care medical. All types of medical coverage include a prescription benefit. Dental plan choices include preferred provider or managed care. Employees contribute to cover a portion of the costs for these benefits.

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Retiree Medical

The Bank offers eligible employees medical coverage when they retire. Employees are eligible to participate in the Retiree Medical Benefits Plan if they are at least 55 years old with 10 years of Bank service when they retire from active service.

Under the Plan as in effect since May 1, 1995, retirees who retire before age 62 pay the full Bank premium for the coverage they had as employees until they attain age 62. Thereafter, they contribute a percentage of the Bank’s premium based on their total completed years of service (no adjustment is made for partial years of service) on a “Defined Benefit” basis, as defined below, as follows:

Completed
Years of	Percentage of Premium
Service	Paid by Retiree
10		50.0	%
11		47.5	%
12		45.0	%
13		42.5	%
14		40.0	%
15		37.5	%
16		35.0	%
17		32.5	%
18		30.0	%
19		27.5	%
20 or more		25.0	%

The premium paid by retirees upon becoming Medicare-eligible (either at age 65 or prior thereto as a result of disability) is a premium reduced to take into account the status of Medicare as the primary payer of the medical benefits of Medicare-eligible retirees.

As a result of the Aon study described above and the recommendations that resulted from such study, the Board directed that certain changes in the Plan be made, effective January 1, 2008. Employees who, on December 31, 2007, had 5 years of service and were age 60 or older were not affected by this change. These employees are identified herein as “Grandfathered.” However, for all other employees, identified herein as “Non-Grandfathered,” the Plan premium-payment requirements beginning at age 62 were changed. From age 62 until the retiree or a covered dependent of the retiree becomes Medicare-eligible (usually at age 65 or earlier, if disabled), the Bank will contribute $45 per month toward the premium of a Non-Grandfathered retiree multiplied by the number of years of service earned by the retiree after age 45 and by the number of individuals (including the retiree, the retiree’s spouse, and each other dependent of the retiree) covered under the Plan.

After the retiree or a covered dependent of the retiree becomes Medicare-eligible, the Bank’s contribution toward the premium for the coverage of the Medicare-eligible individual will be reduced to $25 per month. The $45 and $25 amounts were fixed for the 2008 calendar year. Each year thereafter, these amounts will increase by a cost-of-living adjustment (“COLA”) factor not to exceed 3% and were $46.35 and $25.75 for 2009.

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The table below summarizes the Retiree Medical Benefits Plan changes that affect Non-Grandfathered employees who retire on or after January 1, 2008. For purposes of the following table and the preceding discussion on the Retiree Medical Benefits Plan, the following definitions have been used:

Defined Benefit — A medical plan in which the Bank provides medical coverage to a retired employee and collects from the retiree a monthly fixed dollar portion of the premium for the coverage elected by the employee.

Defined Dollar Plan— A medical plan in which the Bank provides medical coverage to a retired employee up to a fixed Bank cost for the coverage elected by the employee and the retiree assumes all costs above the Bank’s stated contribution.

	Provisions for
	Grandfathered	Provisions for Non-Grandfathered
	Retirees	Retirees
Plan Type	Defined Benefit	Defined Dollar Plan
Medical Plan Formula	1) Same coverage offered to active employees prior to age 65	1) Retiree, (and covered individual), is eligible for $45/month x years of service after age 45, and has attainted the age of 62. There is a 3% Cost of Living Adjustment each year
	2) Supplement Medicare coverage for retirees Age 65 and over	2) Retiree, (and covered individual), is eligible for $25/month x years of service after age 45 and after age 65. There is a 3% Cost of Living Adjustment each year
Employer
Cost Share Examples:	0% for Pre-62	$0 for Pre-62 Pre-65/Post-65
10 years of service after age 45	50% for Post-62	$5400/$3000
15 years of service after age 45	62.5% for Post-62	$8100/$4500
20 years of service after age 45	75% for Post-62	$10800/$6000

Vision Care

Employees can choose from two types of coverage offered. Basic vision care is offered at no charge to employees. Employees contribute to the cost for the enhanced coverage.

Life Insurance

Group Term Life insurance providing a death benefit of twice an employee’s annual salary (including incentive compensation) is provided at no cost to the employee other than taxation of coverage in excess of $50,000.

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Additional Life Insurance

Additional Life Insurance is provided to two NEOs (the Bank President and the Head of Member Services) who, in 2003, were participants in the Bank’s Split Dollar life insurance program, as consideration for their assigning to the Bank their portion of their Split Dollar life insurance policy with the Bank. The Bank’s Split Dollar life insurance program was terminated in 2003.

This Additional Life Insurance policy is paid by the Bank; however, each individual owns the policy. The Bank purchased these policies in 2003 for 15 years and locked in the premiums for the duration of the policies. When the policies expire in 2018, there is an option to renew, though the rate will be subject to change.

Retiree Life Insurance

Retiree Life Insurance provides a death benefit in relation to the amount of coverage one chooses at the time of retirement. The continued benefit is calculated by the insurance broker and is paid for by the retiree. Coverage can be chosen in $1000 increments up to a maximum of $20,000.

Business Travel Accident Insurance

Business Travel & Accident insurance provides a death benefit at no cost to the employee.

Short and Long Term Disability Insurance

Short and long term disability insurance is provided at no cost to the employee.

Supplemental Short Term Disability Coverage

The Bank provides for supplemental short term disability coverage at no cost to the employee. This coverage provides 66.67% (up to a maximum of $1000 per week) of a person’s salary while they are on disability leave. Once state disability coverage is confirmed, the Bank reduces any supplemental calculations by the amount payable from the Short Term Disability provider.

Flexible Spending Accounts

Flexible spending accounts in accordance with IRC rules are provided to employees to allow tax benefits for certain medical expenses, dependent medical expenses, mass transit expenses associated with commuting and parking expenses associated with commuting. The administrative costs for these accounts are paid by the Bank.

Employee Assistance Program

Employee assistance counseling is available at no cost to employees.

Educational Development Assistance

Educational Development Assistance provides tuition reimbursement, subject to the satisfaction of certain conditions.

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Voluntary Life Insurance

Employees are afforded the opportunity to purchase additional life insurance for themselves and their eligible dependents.

Long Term Care

Employees are afforded the opportunity to purchase Long Term Care insurance for themselves and their eligible dependents.

Fitness Club Reimbursement

Fitness club reimbursement, up to $350 per year, is available subject to the satisfaction of certain criteria.

Severance Plan

The Bank has a formal Board-approved Severance Plan available to all Bank employees who work twenty or more hours a week and have at least one year of employment.

Perquisites

Perquisites are as a benefit an insubstantial and insignificant amount of compensation totaling less than $10,000 for the year 2009 per NEO for all such expenditures.

Reimbursement for Financial Counseling Costs Incurred in 2010 for Participants in Terminated Plans

As a result of the termination as of November 10, 2009 of each of the Defined Contribution Portion of the Bank’s Benefit Equalization Plan, the Bank’s Nonqualified Deferred Compensation Plan, and the Bank’s Nonqualified Profit Sharing Plan, the Board voted on January 21, 2010 to authorize the Bank to reimburse participants receiving payments from these plans in 2010 in an amount up to $12,500 for financial counseling costs incurred by such participants in 2010. This offer of reimbursement, which was based on a recommendation from Aon, was believed to be appropriate due to the potentially significant sums that the plan participants might receive when monies from the terminated plans are distributed on November 12, 2010.

V. Explanation of how the Bank determines the amount and, where applicable, the formula for each element of compensation

Please see subsection IV directly above for an explanation of the mechanisms used by the Bank to determine employee compensation.

VI. Explanation of how each element of compensation and the Bank’s decisions regarding that element fit into the Bank’s overall compensation objectives and affect decisions regarding other elements of compensation

The Committee believes it has developed a unified, coherent system of compensation.

The Bank’s compensation and benefits program consists of the following components: (a) cash compensation (i.e., base salary, and, for exempt employees, “variable” or “at risk” short-term incentive compensation); (b) retirement-related benefits (i.e., Qualified Defined Benefit Plan; Qualified Defined Contribution Plan; and Nonqualified Defined Benefit Portion of the Benefit Equalization Plan; and (c) health and welfare programs and other benefits which are listed in Section IV C above. In addition, in the category of retirement-related benefits, as discussed above, the Bank offered the Nonqualified Defined Contribution Portion of the Benefits Equalization Plan, a Nonqualified Deferred Compensation Plan and a Nonqualified Profit Sharing Plan through and until November 10, 2009. Together, these components comprised the Bank’s total compensation program for 2009, and they are discussed in detail in Section IV above.

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The Bank’s overall objective with regard to its compensation and benefits program is to motivate employees to achieve consistent and superior results over a long period of time for the Bank, and to provide a program that allows the Bank to compete for and retain talent that otherwise might be lured away from the Bank.

As the Bank makes changes to one element of the compensation and benefits program mix, the C&HR Committee considers the impact on the other elements of the mix. In this regard, the C&HR Committee strives to maintain programs that keep the Bank within the parameters of its Compensation Policy.

The Bank notes that differences in compensation levels that may exist among the NEOs are primarily attributable to the benchmarking process. The Board does have the power to adjust compensation from the results of the benchmarking process; however, this power is not normally exercised.

COMPENSATION COMMITTEE REPORT

The Compensation and Human Resources Committee (“Committee”) of the Board of Directors of the Bank has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management and, based on such review and discussions, the Committee recommended to the Board that the Compensation Discussion and Analysis be included in the Bank’s annual report on Form 10-K for the year 2009.

THE COMPENSATION AND HUMAN RESOURCES COMMITTEE

C. Cathleen Raffaeli, Chair
James W. Fulmer
José R. González
Katherine J. Liseno
Kevin J. Lynch
Richard S. Mroz
Thomas M. O’Brien

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Executive Compensation

The table below summarizes the total compensation earned by each of the Named Executive Officers for the years ended December 31, 2009, December 31, 2008 and December 31, 2007 (in whole dollars):

Summary Compensation Table for Fiscal Years 2009, 2008 and 2007

													Change in
											Non-Equity		Pension Value		All Other
											Incentive		and Nonqualified		Compensation
											Plan		Deferred		(4,5,6,7,8,9,10,11)
							Stock		Option		Compensation		Compensation		(D,E,F,G,H, I,J)
Name and Principal Position	Year		Salary (13) (14)		Bonus		Awards		Awards		(1)(A)(a)		(2,3) (B,C) (b,c)		(d,e,f,g,h,i,j)		Total
Alfred A. DelliBovi		2009	$	649,494		—		—		—	$	503,592	$	1,010,379	$	72,917	$	2,236,382
President &		2008	$	615,634		—		—		—	$	379,938	$	1,092,000	$	76,328	$	2,163,900
Chief Executive Officer (PEO)		2007	$	583,539		—		—		—	$	421,964	$	479,000	$	75,855	$	1,560,358
Peter S. Leung		2009	$	423,294		—		—		—	$	239,805	$	323,067	$	41,095	$	1,027,261
Senior Vice President,		2008	$	405,066		—		—		—	$	181,414	$	328,000	$	49,045	$	963,525
Chief Risk Officer		2007	$	387,623		—		—		—	$	204,407	$	499,000	$	46,917	$	1,137,947
Paul B. Héroux		2009	$	300,980		—		—		—	$	170,511	$	282,434	$	45,464	$	799,389
Senior Vice President,		2008	$	288,019		—		—		—	$	128,993	$	400,000	$	57,200	$	874,212
Head of Member Services		2007	$	275,616		—		—		—	$	145,342	$	171,000	$	43,425	$	635,383
Patrick A. Morgan		2009	$	319,154		—		—		—	$	180,807	$	172,000	$	34,552	$	706,513
Senior Vice President,		2008	$	305,411		—		—		—	$	136,782	$	268,000	$	36,933	$	747,126
Chief Financial Officer (PFO)		2007	$	292,259		—		—		—	$	154,118	$	279,000	$	31,184	$	756,561
Kevin M. Neylan (12)		2009	$	310,415		—		—		—	$	175,856	$	185,411	$	41,596	$	713,278
Senior Vice President, Head of Strategy & Business Development

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Footnotes for Summary Compensation Table for the Year Ending December 31, 2009

1	Bonuses are not provided by the Bank. However, the non-equity incentive plan compensation in the above table may be considered by some to be deemed a “bonus”.
2	Change in Pension Value for the Pentegra Defined Benefit Plan for Financial Institutions:

A. DelliBovi — $224,000
P. Leung — $143,000
P. Morgan — $104,000
P. Héroux — $192,000
K. Neylan — $91,000

³ Change in Pension Value for the Nonqualified Defined Benefit Portion of the Benefit Equalization Plan:

A. DelliBovi — $575,000
P. Leung — $145,000
P. Morgan — $60,000
P. Héroux — $60,000
K. Neylan — $57,000

⁴ Change in Nonqualified Deferred Compensation Earnings:

A. DelliBovi — $211,379
P. Leung — $35,067
P. Morgan — $8,000
P. Héroux — $30,434
K. Neylan — $37,411

5	For all Named Executive Officers, includes these items paid by the Bank for all employees: amount of funds matched by the Bank in connection with the Pentegra Defined Contribution Plan for Financial Institutions, payment of group term life insurance premium, payment of long term disability insurance premium, payment of health insurance premium, payment of dental insurance premium, payment of vision insurance premium and payment of employee assistance program premium.
6	Includes these items paid by the Bank for all eligible officers: amount of funds matched by the Bank in connection with the Nonqualified Defined Contribution Portion of the Benefit Equalization Plan (amount of funds matched for A. DelliBovi was $21,999, for P. Leung $15,526, for P. Morgan $9,724, for Paul Heroux $1,722 and for K. Neylan $6,715).
7	For A. DelliBovi, includes value of leased automobile ($8,100).
8	For Paul Heroux, includes payment of this item paid by the Bank for all eligible employees: Years of Service Award.
9	For P. Leung, P. Heroux, and K. Neylan, includes payment of this item paid by the Bank for all eligible officers: officer physical examination.
10	For A. DelliBovi and P. Héroux, includes this item paid by the Bank for all eligible officers: payment of term life insurance premium.
11	For P. Heroux and for K. Neylan, includes payment of this item paid by the Bank for all employees: fitness center reimbursement.
12	K. Neylan is a new NEO in 2009.
13	Figures represent salaries approved by the Bank’s Board of Directors for the year 2009.

Footnotes for Summary Compensation Table for the Year Ending December 31, 2008

A	Bonuses are not provided by the Bank. However, the non-equity incentive plan compensation in the above table may be considered by some to be deemed a “bonus”.
B	Change in Pension Value for the Pentegra Defined Benefit Plan for Financial Institutions:

A. DelliBovi — $151,000
P. Morgan — $74,000
P. Leung — $105,000
P. Héroux — $156,000

^C Change in Pension Value for the Nonqualified Defined Benefit Portion of the Bank’s Benefit Equalization Plan:

A. DelliBovi — $941,000
P. Morgan — $194,000
P. Leung — $223,000
P. Héroux — $244,000

^D For all Named Executive Officers, includes these items paid by the Bank for all employees: amount of funds matched by the Bank in connection with the Pentegra Defined Contribution Plan for Financial Institutions, payment of group term life insurance premium, payment of long term disability insurance premium, payment of health insurance premium, payment of aggregate and individual “stop loss” coverage (i.e., insurance to protect the Bank against significant insurance claims paid under its self-insured health insurance plan), payment of health and dental administrative charges (i.e., network medical utilization charges, network medical administrative charges, and dental indemnity administrative charges), payment of dental insurance premium, payment of vision insurance premium and payment of employee assistance program premium.

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E	For A. DelliBovi, P. Morgan, and P. Leung, includes these items paid by the Bank for all eligible officers: amount of funds matched by the Bank in connection with the Nonqualified Defined Contribution Portion of the Benefit Equalization Plan (amount of funds matched for A. DelliBovi was $23,407, for P. Morgan $9,908 and for P. Leung $17,016).
F	For A. DelliBovi, includes value of leased automobile ($8,100).
G	For A. DelliBovi, includes payment of this item paid by the Bank for all eligible employees: Years of Service Award.
H	For A. DelliBovi, includes payment of this item paid by the Bank for all eligible officers: officer physical examination.
I	For A. DelliBovi and P. Héroux, includes this item paid by the Bank for all eligible officers: payment of term life insurance premium.
j	For P. Heroux, includes payment of this item paid by the Bank for all eligible employees: Nonqualified Profit Sharing Plan.
14	Figures represent salaries approved by the Bank’s Board of Directors for the year 2008. Figures previously reported in the Bank’s 10-K for 2008 used information reflecting actual salaries received in the year 2008.

Footnotes for Summary Compensation Table for the Year Ending December 31, 2007

a	Bonuses are not provided by the Bank. However, the non-equity incentive plan compensation in the above table may be considered by some to be deemed a “bonus”.
b	Change in Pension Value for the Pentegra Defined Benefit Plan for Financial Institutions:

A. DelliBovi — $126,000
P. Morgan — $91,000
P. Leung — $51,000
P. Héroux — $67,000

^c Change in Pension Value for the Nonqualified Defined Benefit Portion of the Bank’s Benefit Equalization Plan:

A. DelliBovi — $353,000
P. Morgan — $188,000
P. Leung — $448,000
P. Héroux — $104,000

d	For all Named Executive Officers, includes these items paid by the Bank for all employees: amount of funds matched by the Bank in connection with the Pentegra Defined Contribution Plan for Financial Institutions, payment of group term life insurance premium, payment of long term disability insurance premium, payment of health insurance premium, payment of aggregate and individual “stop loss” coverage (i.e., insurance to protect the Bank against significant insurance claims paid under its self-insured health insurance plan), payment of health and dental administrative charges (i.e., network medical utilization charges, network medical administrative charges, and dental indemnity administrative charges), payment of dental insurance premium, and payment of employee assistance program premium.
e	For A. DelliBovi, P. Leung, and P. Héroux , includes these items paid by the Bank for all eligible officers: amount of funds matched by the Bank in connection with the Nonqualified Defined Contribution Portion of the Benefit Equalization Plan (amount of funds matched for A. DelliBovi was $22,839, for P. Leung $15,994 and for P. Héroux $4,732).
f	For A. DelliBovi, P. Leung, and P. Morgan, includes this item paid by the Bank for all participating employees: payment of vision insurance premium.
g	For A. DelliBovi, includes value of leased automobile ($11,856).
h	For P. Héroux, includes payment of this item paid by the Bank for all eligible officers: officer physical examination.
i	For A. DelliBovi,and P. Héroux, includes this item paid by the Bank for all eligible officers: payment of term life insurance premium.
j	For P. Héroux, includes payment of this item paid by the Bank for all eligible employees: fitness center membership reimbursement.

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The following table sets forth information regarding all incentive plan award opportunities made available to Named Executive Officers for the fiscal year 2009 (in whole dollars):

Grants of Plan-Based Awards for Fiscal Year 2009
															All Other		All Other		Exercise		Grant
															Stock		Option		or		Date
															Awards:		Awards:		Base		Fair Value
			Estimated Future Payouts						Estimated Future Payouts						Number of		Number of		Price of		of Stock
			Under Non-Equity Incentive						Under Equity Incentive						Shares of		Securities		Option		and Option
	Grant		Plan Awards (2) (3)						Plan Awards						Stock		Underlying		Awards		Awards
Name	Date (1)		Threshold		Target		Maximum		Threshold		Target		Maximum		or Units		Options		($/Sh)		($/Sh)
Alfred A. DelliBovi		03/18/09	$	142,889	$	259,798	$	493,615		—		—		—		—		—		—		—
Peter S. Leung		03/18/09	$	69,844	$	126,988	$	241,278		—		—		—		—		—		—		—
Paul B. Héroux		03/18/09	$	49,662	$	90,294	$	171,559		—		—		—		—		—		—		—
Patrick A. Morgan		03/18/09	$	52,660	$	95,746	$	181,918		—		—		—		—		—		—		—
Kevin M. Neylan		03/18/09	$	51,218	$	93,125	$	176,937		—		—		—		—		—		—		—

1	On this date, the Board of Directors’ Compensation and Human Resources Committee approved the 2009 Incentive Compensation Plan (“ICP”). Approval of the ICP does not mean a payout is guaranteed.
2	Figures represent an assumed rating attained by the NEO of at least a specified threshold rating within the “Meets Requirements” category for the Named Executive Officers with respect to their individual performance.
3	Amounts represent potential awards under the 2009 Incentive Compensation Plan; actual amounts awarded are reflected in the Summary Compensation Table above.

Employment Arrangements

The Bank is an “at will” employer and does not provide written employment agreements to any of its employees. However, employees, including Named Executive Officers (or “NEOs”), receive (a) cash compensation (i.e., base salary, and, for exempt employees, “variable” or “at risk” short-term incentive compensation); (b) retirement-related benefits (i.e., Qualified Defined Benefit Plan; Qualified Defined Contribution Plan; and Nonqualified Defined Benefit Portion of the Benefit Equalization Plan; and (c) health and welfare programs and other benefits. In addition, in the category of retirement-related benefits, the Bank offered the Nonqualified Defined Contribution Portion of the Benefits Equalization Plan, a Nonqualified Deferred Compensation Plan and a Nonqualified Profit Sharing Plan through and until November 10, 2009. Other benefits, which are available to all regular employees, include medical, dental, vision care, life, business travel accident, and short and long term disability insurance, flexible spending accounts, an employee assistance program, educational development assistance, voluntary life insurance, long term care insurance, fitness club reimbursement and severance pay. An additional benefit offered to all officers, age 40 or greater, or who are at Vice President rank or above, is a physical examination every 18 months.

The annual base salaries for the Named Executive Officers are as follows (whole dollars):

	2009 (1)		2010 (2)
Alfred A. DelliBovi	$	649,494	$	678,721
Patrick A. Morgan		319,154		330,324
Peter S. Leung		423,294		438,109
Paul B. Héroux		300,980		311,514
Kevin M. Neylan		310,415		321,280

The 2010 increases in the base salaries of the NEOs from 2009 were based on their 2009 performance.

¹ Figures represent salaries approved by the Bank’s Board of Directors for the year 2009.
² Figures represent salaries approved by the Bank’s Board of Directors for the year 2010.

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A performance-based merit increase program exists for all employees that has an impact on base pay. Generally, employees receive merit increases on an annual basis. Such merit increases are based upon the attainment of a performance rating of “Outstanding,” “Exceeds Requirements,” or “Meets Requirements” achieved on individual performance evaluations. Merit guidelines are determined each year and distributed to managers. These guidelines establish the maximum merit increase percentage permissible for employee performance during that year. In October of 2008, the C&HR Committee determined that merit-related officer base pay increases for 2009 would be 3.5% for officers rated ‘Meets Requirements’; 4.5% for officers rated ‘Exceeds Requirements’; and 5.5% for officers rated ‘Outstanding’ for their performance in 2008. In October of 2009, the C&HR Committee determined that merit-related officer base pay increases for 2010 would be 3.0% for officers rated ‘Meets Requirements’; 3.5% for officers rated ‘Exceeds Requirements’; and 4.5% for officers rated ‘Outstanding’ for their performance in 2009.

See the “Grant of Plan-Based Awards” table for 2009 incentive compensation opportunity information.

Short-Term Incentive Compensation Plan (“Incentive Plan”)

The objective of the Bank’s Incentive Plan is to motivate exempt employees to perform at a high level and take actions that: i) support the Bank’s strategies, ii) lead to the attainment of the Bank’s business plan, and iii) fulfill the Bank’s mission. Funding for the Bank’s Incentive Plan is approved by the Board as part of the annual business plan process. By including goals that seek to balance risk and return, the Bank’s Incentive Plan is designed to work in a variety of economic conditions.

Aon reported in the course of its 2006 study of the Bank’s compensation and benefit programs (described earlier in Section I of the above Compensation Discussion and Analysis), that most firms in the Bank’s peer group provide their employees with annual short-term incentives. As such, for the Bank not to offer this element of compensation would put it at a distinct disadvantage with respect to its competitors for new talent, and also pose a challenge with respect to the retention of key employees.

There are two types of performance measures that impact upon Incentive Plan awards received by participants: i) Bankwide performance goals, and ii) individual performance goals (which can include work performed as part of a group) established and measured through the annual performance evaluation process.

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The Bankwide goals are designed to help management focus on what it needs to accomplish for the success of the cooperative. The 2009 Bankwide goals were organized into three broad categories:

Goals Category	Weighting			Goal	Goal Basis
Business Effectiveness		80	%	Return	Dividend Capacity as forecasted in the Bank’s 2009 business plan. (50% of the category)
				Risk	Enterprise Risk Level in the Bank’s 2009 business plan balance sheet as measured by the methodology used to calculate the Bank’s retained earnings target. (50% of the category)
Mission Effectiveness		10	%	Mission	The Bank’s achievements in specific areas of housing and community development activities.
Growth Effectiveness		10	%	New Members	Number of new members and other activities during 2009 to position the Bank for future growth and mission fulfillment.

The goal measures in the Business Effectiveness and Growth Effective goal categories were approved by the Board’s Compensation and Human Resources Committee in March 2009. The goal measures in the Mission Effectiveness goal category was approved by the Board’s Housing Committee in March 2009. All of the goal measures were reported to the Board. A description of these goal categories is set forth below:

Business Effectiveness Goal Category

The Return and Risk Goals that make up the Business Effectiveness Goal are linked and create a beneficial tension through the tradeoffs in managing one versus the other. These goals are weighted exactly the same. This motivates management to act in ways that are aligned with the Board’s wishes as the Bank understands them (i.e., to have management achieve forecasted returns while managing risks to stay within the prescribed risk parameters). In addition, and again consistent with management’s understanding of the Board’s wishes, this set of goals will not motivate Bank management to increase Dividend Capacity if doing such would require imprudently increasing the risk in the Bank’s balance sheet.

Return Goal

Provide value to shareholders through the dividend. The Return Goal is based on Dividend Capacity.

Risk Goal

The Risk Goal is intended to encourage management to balance those actions taken to enhance earnings (i.e., Dividend Capacity) with actions that are needed to maintain appropriate risk levels in the business.

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Growth Effectiveness Goal Category

The Growth Effectiveness Goal Category is intended to set the stage for future growth. The Bank believes that recruiting new members now will, over time, create additional advances usage.

Mission Effectiveness Goal Category

The Mission Effectiveness Goal Category is intended to help ensure the Bank’s achievement of mission-related community development activities.

Bankwide Goals — Weighting Based on Employee Rank

The Bank believes that employees at higher ranks have a greater impact on the achievement of Bankwide goals than employees at lower ranks. Therefore, employees at higher ranks have a greater weighting placed on the Bankwide performance component of their Incentive Plan award opportunities as opposed to the individual performance component. For the Bank’s Chief Executive Officer and the other Management Committee members (a group that includes all of the NEOs), the overall incentive compensation opportunity is weighted 90% on Bankwide performance goals and 10% on individual performance goals. There are differences among the NEOs with regard to their individual performance goals. However, these differences do not have a material impact on the amount of incentive compensation payout.

When employees are individually evaluated, they receive one of five performance ratings: “Outstanding”; “Exceeds Requirements”; “Meets Requirements”; “Needs Improvement” or “Unsatisfactory”. Incentive Plan participants that are rated as “Exceeds Requirements” or “Outstanding” on their individual performance evaluations receive an additional 3% or 6%, respectively, of their base salary added to their Incentive Plan award.

Incentive Plan awards are only paid to participants who have attained at least a specified threshold rating within the “Meets Requirements” category on their individual performance evaluations and do not have any unresolved disciplinary matters in their record.

Participants will receive an individual Incentive Plan award payment even if Bankwide goal results are such that no payments are awarded for the Bankwide portion of the Incentive Plan.

The Incentive Plan is administered by the Chief Executive Officer, subject to any requirements for review and approval by the C&HR Committee that the Committee may establish. In all areas not specifically reserved by the Committee for its review and approval, the decisions of the Chief Executive Officer or his designee concerning the Incentive Plan are binding on the Bank and on all Incentive Plan participants.

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Qualified Defined Contribution Plan

Bank employees who have met the eligibility requirements contained in the Pentegra Qualified Defined Contribution Plan for Financial Institutions (“DC Plan”) can choose to contribute to the DC Plan, a retirement savings plan qualified under the IRC. Employees are eligible for membership in the DC Plan on the first day of the month coinciding with or next following the date the employee completes 3 full calendar months of employment.

An employee may contribute 1% to 19% of base salary into the DC Plan, up to IRC limitations. The IRC limit for 2009 was $16,500 for employees under the age of 50. An additional “catch up” contribution of $5,500 is permitted under IRC rules for employees who attain age 50 before the end of the calendar year. The Bank matches up to 100% of the first 3% of the employee’s contribution through the third year of employment; 150% of the first 3% of contribution during the fourth and fifth years of employment; and 200% of the first 3% of contribution starting with the sixth year of employment.

Additional Information

Additional information about compensation and benefits are provided in the discussions immediately following the below pension and compensation tables.

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OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
AND OPTION EXERCISES AND STOCK VESTED

The tables disclosing (i) outstanding option and stock awards and (ii) exercises of stock options and vesting of restricted stock for Named Executive Officers are omitted because all employees of Federal Home Loan Banks are prohibited by law from holding capital stock issued by a Federal Home Loan Bank. As such, these tables are not applicable.

PENSION BENEFITS

The table below shows the present value of accumulated benefits payable to each of the Named Executive Officers, the number of years of service credited to each such person, and payments during the last fiscal year (if any) to each such person, under the Pentegra Defined Benefit Plan for Financial Institutions and the Nonqualified Defined Benefit Portion of the Benefit Equalization Plan (amounts in whole dollars):

	Pension Benefits for Fiscal Year 2009
		Number of		Present Value			Payment During
	Plan	Years Credited		of Accumulated			Last
Name	Name	Service [1]		Benefit [2]		Fiscal Year
Alfred A. DelliBovi	Pentegra Defined Benefit Plan for Financial Institutions Qualified Plan		16.75	$	1,156,000			—
	Nonqualified Defined Benefit Portion of the Benefit Equalization Plan		16.75	$	3,823,000			—
Peter S. Leung	Pentegra Defined Benefit Plan for Financial Institutions Qualified Plan		12.50	$	560,000			—
	Nonqualified Defined Benefit Portion of the Benefit Equalization Plan (3)		12.50	$	816,000			—
Paul B. Héroux	Pentegra Defined Benefit Plan for Financial Institutions Qualified Plan		25.50	$	832,000			—
	Nonqualified Defined Benefit Portion of the Benefit Equalization Plan		25.50	$	699,000			—
Patrick A. Morgan	Pentegra Defined Benefit Plan for Financial Institutions Qualified Plan		10.50	$	734,000			—
	Nonqualified Defined Benefit Portion of the Benefit Equalization Plan		10.50	$	672,000			—
Kevin M. Neylan	Pentegra Defined Benefit Plan for Financial Institutions Qualified Plan		8.33	$	303,000			—
	Nonqualified Defined Benefit Portion of the Benefit Equalization Plan		8.33	$	246,000			—

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1	Number of years of credited service pertains to eligibility/participation in the qualified plan. Years of credited service for the Nonqualified Defined Benefit Portion of the Benefit Equalization Plan are the same as for the Pentegra Defined Benefit Plan for Financial Institutions Qualified Plan. However, the dates of eligible enrollment for both the Qualified and Nonqualified Defined Benefit plans may differ because enrollment eligibility in the nonqualified plan is much more stringent than for the qualified plan.
2	As of 12/31/2009.
3	Mr. Leung’s 12.5 years of credited service includes 3.6 years of credited service working for the Office of Thrift Supervision; 3.0 years of credited service working for the Federal Home Loan Bank of Dallas (including two months of severance) and 5.9 years of credited service working for the Federal Home Loan Bank of New York.

The following discussions provide more information with respect to the compensation and pension benefits tables in the preceding pages.

Qualified Defined Benefit Plan

The Pentegra Qualified Defined Benefit Plan for Financial Institutions (“DB Plan”), as adopted by the Bank, is an IRS-qualified defined benefit plan which covers all Bank employees who have achieved four months of service. The DB Plan is part of a multiple-employer defined benefit program administered by Pentegra Services.

Bank participants, who as of July 1, 2008 had five years of DB Plan service and were age 50 years or older, are provided with a benefit of 2.50% of a participant’s highest consecutive 3-year average earnings, multiplied by the participant’s years of benefit service, not to exceed 30 years. Earnings are defined as base salary plus short-term incentives, and overtime, subject to the annual Internal Revenue Code limit. These participants are identified herein as “Grandfathered”

For all other participants (identified herein as “Non-Grandfathered”), the DB Plan provides a benefit of 2.0% (as opposed to 2.5% provided to Grandfathered participants) of a participant’s highest consecutive 5-year average earnings (as opposed to consecutive 3-year average earnings as previously provided to Grandfathered participants), multiplied by the participant’s years of benefit service, not to exceed 30 years. The Normal Form of Payment is a life annuity (i.e., an annuity paid until the death of the participant), as opposed to a guaranteed twelve year payout as previously provided to Grandfathered participants. Also, cost of living adjustments (“COLAs”) are no longer provided on future accruals (as opposed to a 1% simple interest COLA beginning at age 66 as previously provided).

The table below summarizes the DB Plan changes affecting the Non-Grandfathered employees that went into effect on July 1, 2008. For purposes of the following table, please note the following definitions:

“Defined Benefit Plan” — An Internal Revenue Code qualified deferred compensation arrangement that pays an employee and his/her designated beneficiary upon retirement a lifetime annuity or the lump sum actuarial equivalent of that annuity.

Benefit Multiplier — The annuity paid from the Bank’s DB Plan is calculated on an employee’s years of service, up to a maximum of 30 years, multiplied by 2.5% per year. Beginning July 1, 2008, the Benefit Multiplier changed to 2.0 for Non-Grandfathered Employees.

Final Average Pay Period — Is that period of time that an employee’s salary is used in the calculation of that employee’s benefit. For Grandfathered Employees, the Benefit Multiplier, 2.5%, is multiplied by the average of the employee’s three highest consecutive years of salary multiplied by that employee’s years of service, not to exceed thirty years at the date of termination. For Non-Grandfathered Employees, benefits accrued before July 1, 2008, the Benefit Multiplier mirrored the Grandfathered Employees. After July 1, 2008 a Benefits Multiplier of 2% is multiplied by the employee’s years of service (total service not to exceed thirty years) multiplied by the average of the employee’s five highest consecutive years of salary is used.

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Normal Form of Payment — The DB Plan must state the form of the annuity to be paid to the retiring employee. For unmarried Grandfathered retirees, the Normal Form of Payment as a life annuity with a 12 year guaranteed payment (“Guaranteed 12 Year Payout”) which means that if the unmarried Grandfathered retiree dies prior to receiving 12 years of annuity payments, the retiree’s beneficiary will receive a lump sum equal to the remaining unpaid payments in the 12 year period. For married Grandfathered retirees, the Normal Form of Payment is a 50% joint and survivor annuity which provides a continuation of half of the monthly annuity to the surviving beneficiary. The initial 50% Joint and Survivor Annuity monthly payment is actuarially equivalent to the 12 year guarantee payment provided to single retirees under the formula. Effective July 1, 2008, the DB Plan provides single Non-Grandfathered retirees with a straight “Life Annuity” as the Normal Form of Payment, which means that, once a retiree dies, the annuity terminates. For married Non-Grandfathered retirees, the Normal Form of Payment will be a 50% Joint and Survivor Annuity that is actuarially equivalent to the straight Life Annuity.

Cost of Living Adjustments (or “COLAs”) — Once a Grandfathered Employee retiree reaches age 65, in each succeeding year he/she will receive an extra payment annually equal to one percent of the original benefit amount multiplied by the number of years in pay status after age 65. As of July 1, 2008, this adjustment is no longer offered to Non-Grandfathered Employees on benefits accruing after that date.

Early Retirement Subsidy:

Grandfathered Employees

There is a subsidy or benefit enhancement for Grandfathered Employee retirees who retire prior to normal retirement age (65). Any participant who retires early and elects to draw pension benefits prior to age 65, and who has a combined age and length of service of at least 70 years, will realize a reduction of 1.5% to his/her early retirement benefit for each year benefits commence earlier than age 65. If that employee had not accumulated a total of 70 years, the reduction would be 3% for each year benefits commence earlier than age 65.

Non-Grandfathered Employees

Effective as of July 1, 2008, if an employee on the date of his/her retirement, before 65, had accumulated a total of 70 or more years, the reduction will be 3% every year between his/her age and age 65. However, if a Non-Grandfathered Employee on the date of his/her retirement, before 65, had not accumulated 70 or more years, the reduction will be the actuarial equivalent between his/her age and age 65. At early retirement, the new early retirement factors will apply to the Non-Grandfathered Employee’s total service benefit. The retiree will be entitled to receive the greater of this early retirement benefit or the early retirement benefit accrued as of July 1, 2008 under the old plan formula.

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Vesting — Grandfathered Employees are entitled, starting with the second year of employment service, to 20% of his/her accumulated benefit per year. As a result, after the sixth year of employment service, an employee will be entitled to 100% of his/her accumulated benefit. Non-Grandfathered Employees who entered the DB Plan on or after July 1, 2008 will not receive such benefit until such employee has completed five years of employment service. At that point, the employee will be entitled to 100% of his/her accumulated benefit. The term “5 Year Cliff” is a reference to the foregoing provision. Grandfathered and Non-Grandfathered Employees already participating in the DB Plan prior to July 1, 2008 will vest at 20% per year starting with the second year through the fourth year of employment service and will be accelerated to 100% vesting after the fifth year.

DEFINED BENEFIT PLAN	GRANDFATHERED	NON-GRANDFATHERED
PROVISIONS	EMPLOYEES	EMPLOYEES
Benefit Multiplier	2.5%	2.0%
Final Average Pay Period	High 3 Year	High 5 Year
Normal Form of Payment	Guaranteed 12 Year Payout	Life Annuity
Cost of Living Adjustments	1% Per Year Cumulative Commencing at Age 66	None
Early Retirement Subsidy<65:
a) Rule of 70	1.5% Per Year	3% Per Year
b) Rule of 70 Not Met	3% Per Year	Actuarial Equivalent
*Vesting	20% Per Year Commencing Second Year of Employment	5 Year Cliff

* Greater of DB Plan Vesting or New Plan Vesting applied to employees participating in the DB Plan prior to July 1, 2008.

Earnings under the Bank’s DB Plan continue to be defined as base salary plus short-term incentives, and overtime, subject to the annual IRC limit. The IRC limit on earnings for calculation of the DB Plan benefit for 2009 was $245,000.

The DB Plan pays monthly annuities, or a lump sum amount available at or after age 59-1/2, calculated on an actuarial basis, to vested participants or the beneficiaries of deceased vested participants. Annual benefits provided under the DB Plan also are subject to IRC limits, which vary by age and benefit payment option selected.

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Nonqualified Defined Benefit Portion of the Benefit Equalization Plan

Employees at the rank of Vice President and above who exceed income limitations established by the IRC for three out of five consecutive years and who are also approved for inclusion by the Bank’s Nonqualified Plan Committee are eligible to participate in the BEP, commonly referred to as a “Supplemental Employee Retirement Plan,” a non-qualified retirement plan that in many respects mirrors the DB Plan.

The primary objective of the Nonqualified Defined Benefit Portion of the BEP is to ensure that participants receive the full amount of benefits to which they would have been entitled under the DB Plan in the absence of limits on maximum benefits levels imposed by the IRC.

The Nonqualified Defined Benefit Portion of the BEP utilizes the identical benefit formulas applicable to the Bank’s DB Plan. In the event that the benefits payable from the Bank’s DB Plan have been reduced or otherwise limited by government regulations, the employee’s “lost” benefits are payable under the terms of the defined benefit portion of the BEP.

The Nonqualified Defined Benefit Portion of the BEP is an unfunded arrangement. However, the Bank established grantor trusts to assist in financing the payment of benefits under these plans. The trust were approved by the Nonqualified Plan Committee in March of 2006 and established in June of 2007.

Although other nonqualified plans were terminated on November 10, 2009, the Nonqualified Defined Benefit Portion of the BEP was not terminated on that day, and remains in effect as of the date of this Annual Report on Form 10-K.

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NONQUALIFIED DEFERRED COMPENSATION

The following table discloses contributions to nonqualified deferred compensation plans, each Named Executive Officer’s withdrawals (if any), aggregate earnings and year-end balances in such plans (whole dollars):

	Nonqualified Deferred Compensation for Fiscal Year 2009
	Executive		Registrant		Aggregate		Aggregate		Aggregate
	Contributions in		Contributions in		Earnings in		Withdrawals/		Balance at
Name	Last FY (1)		Last FY (2)		Last FY		Distributions		Last FYE
Alfred A. DelliBovi	$	11,016	$	21,999	$	211,379		—	$	1,124,656
Patrick A. Morgan	$	33,144	$	9,724	$	8,000		—	$	86,209
Paul B. Héroux	$	1,479	$	1,722	$	30,434		—	$	173,805
Peter S. Leung	$	51,138	$	15,526	$	35,067		—	$	199,552
Kevin M. Neylan	$	17,425	$	6,715	$	37,411		—	$	232,271

1	These amounts are included in the “Salary” column of the Summary Compensation Table; these amounts would have been paid as salary but for deferral into the Nonqualified Defined Contribution portion of the Benefit Equalization Plan.
2	These totals are also included in the “All Other Compensation” column of the Summary Compensation Table.

Nonqualified Defined Contribution Portion of the Benefit Equalization Plan

Also an unfunded arrangement through a grantor trust, employees who were at the rank of Vice President and above who exceed income limitations established by the IRS for three out of five consecutive years and who are also approved for inclusion by the Bank’s Nonqualified Plan Committee were eligible to participate in a Nonqualified Defined Contribution Portion of the Benefit Equalization Plan (which is a separate portion of the aforementioned BEP). The Nonqualified Defined Contribution Portion of the BEP ensured, among other things, that participants whose benefits under the DC Plan would otherwise be restricted under certain provisions of the IRC were able to make elective pre-tax deferrals and to receive the same Bank match relating to such deferrals as would have been received under the DC Plan.

As previously noted in the Compensation Discussion and Analysis, the Nonqualified Defined Contribution Portion of the BEP was terminated as of November 10, 2009. All plan assets will be paid out to individual participants in a lump sum distribution on November 12, 2010. Most of the plan assets that will be paid out had been previously contributed by the participants.

In addition, as a result of this termination, the Board voted on January 21, 2010, based on a recommendation from Aon, to:

*	Provide to the participants of the Nonqualified Defined Contribution Portion of the BEP as of November 10, 2009, with respect to 2009, an additional cash payment on the second payroll following the end of 2009 in an amount equal to 6% of base pay in excess of IRS limitations for 2009 less amounts included for the DC BEP for 2009; and
*	Beginning in 2010, provide to the participants of the Nonqualified Defined Contribution Portion of the BEP as of November 10, 2009, an additional annual cash payment on the first or second payroll following the end of a calendar year in an amount equal to 6% of base pay in excess of IRS limitations for such prior year.

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Nonqualified Profit Sharing Plan

The Bank’s Nonqualified Profit Sharing Plan was designed to address the compensation inequities that affected a group of highly compensated employees (including one NEO) who were negatively affected by the changes to the Bank’s Qualified Defined Benefit Plan formula and who would have been compensated less than employees in similar positions in the Bank’s peer group.

All Non-Grandfathered employees who had five years of Bank service and were members of the BEP were entitled to participate in the Bank’s Nonqualified Profit Sharing Plan. The Nonqualified Profit Sharing Plan credited participants with 8% of salary (defined as base pay plus any Incentive Plan award) conditioned on the Bank achieving its threshold targets for certain Bank-wide performance goals used in the Bank’s Incentive Plan. The credit to participants into the Nonqualified Profit Sharing Plan will be held in a deferred account for participants and paid in a lump sum six months after termination of a participant’s employment. The Nonqualified Profit Sharing Plan was established on July 1, 2008 therefore only provided participants with a half of year of credit for 2008. 4% was allocated to the participants. This was an unfunded arrangement through the grantor trust.

As previously noted in the Compensation Discussion and Analysis, the Nonqualified Profit Sharing Plan was terminated, which was based on a recommendation from Aon, as of November 10, 2009. All plan assets will be paid out to individual participants in a lump sum distribution on November 12, 2010. The accrued assets will include the calculation of the 2008 and 2009 plan years.

In addition, as a result of this termination, the Board voted on January 21, 2010 to provide annually to participants in the Nonqualified Profit Sharing Plan as of November 10, 2009. In 2010 and thereafter, an amount equal to 8% of the prior year’s base pay and short term incentive payment to the extent the requirements under the Bank’s Short Term Incentive Plan have been achieved. The 8% payment will not be used to calculate an employee’s pension amount.

Nonqualified Deferred Compensation Plan

The Bank’s Board of Directors approved the establishment of a Nonqualified Deferred Compensation Plan, effective January 1, 2009, for the Board and Bank employees at a rank of Assistant Vice President and higher. A Nonqualified Deferred Compensation Plan is a vehicle that a corporation establishes for its Directors and employees for the purpose of enabling them to defer the present taxation of compensation to a date in the future — for example, when these individuals retire and would presumably be in a lower tax bracket. In addition, Directors and certain employees have the ability to have interest on their deferred compensation calculated based on the performance of investment vehicles of their own choosing, using a menu of investment choices similar to that of a 401(k) plan.

The Bank did not provide a match on these deferrals. All deferred monies were the property of the Bank until distribution to the Directors and employees and thus subject to claims of Bank creditors until distribution.

A grantor trust similar to those in operation for the BEP was established by the Nonqualified Plan Committee for the Nonqualified Deferred Compensation Plan in December 2008.

As previously noted in the Compensation Discussion and Analysis, the Nonqualified Deferred Compensation Plan was terminated as of November 10, 2009. Any assets that were contributed by the participants will be paid out on November 12, 2010.

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DISCLOSURE REGARDING TERMINATION AND CHANGE IN CONTROL PROVISIONS

Severance Plan

The Bank has a formal Board-approved Severance Plan (“Severance Plan”) available to all Bank employees who work twenty or more hours a week and have at least one year of employment.

Severance benefits are paid to employees who:

(i) are part of a reduction in force;

(ii) have resigned from the Bank following a reduction in salary grade, level, or rank;

(iii) refuse a transfer of fifty miles or more;

(iv) have their position eliminated; or

(v) are unable to perform his/her duties in a satisfactory manner and is warranted that the employee would not be discharged for cause.

An Officer of the Bank shall be eligible for two (2) weeks of severance benefits for each six month period of service with the Bank, but not less than six (6) weeks of severance benefits. Non-officers are eligible for severance benefits in accordance with different formulas.

An Officer is eligible to receive severance benefits, in the aggregate for all six month periods of service, whether or not continuous, totaling more than the lesser of (i) thirty-six (36) weeks or (ii) two (2) times the lesser of (a) the sum of the employee’s annualized compensation based upon his or her annual rate of pay for services as an employee for the year preceding the year in which the employment of the employee by the Bank terminated (adjusted for any increase during that year that was expected to continue indefinitely if the employment of the employee had not terminated) or (b) the maximum amount that may be taken into account under a qualified plan pursuant to Section 401(a)(17) of the IRC for the year in which the employment of the employee terminated.

Payment of severance benefits under the Severance Plan is contingent on an employee executing a severance agreement which includes a release of any claim the employee may have against the Bank and any present and former director, officer and employee of the Bank.

The following table describes estimated severance payout information for each NEO assuming that severance would have occurred on December 31, 2009:

	Number of weeks Used to		2009 Annual
	Calculate Severance Amount		Base Salary		Severance Amount
Alfred A. DelliBovi		36	$	649,494	$	449,650
Peter S. Leung		24	$	423,294	$	195,366
Patrick A. Morgan		36	$	319,154	$	220,953
Paul B. Héroux		36	$	300,980	$	208,371
Kevin M. Neylan		36	$	310,415	$	214,903

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The severance benefits payable under the Severance Plan shall be paid as salary, coinciding with the normal payroll cycle, for a period of time equal to the number of weeks of severance benefits for which the employee is eligible, commencing with the first payroll period following the termination of employment of the employee and the receipt by the Bank of an agreement signed by the employee, and shall be subject to withholding of Federal and State income taxes and other employment taxes based upon the number of withholding allowances.

Notwithstanding the foregoing, benefits under the severance plan may be paid from time to time through methods other then the payment method described above.

In addition, former employees receiving severance benefits also receive, if applicable, life insurance for the severance period and, if the former employee elects to purchase health insurance continuation coverage through the Bank, reimbursement during the severance period covering the difference between (i) the cost to the former employee of such health insurance continuation coverage and (ii) what the cost of such health insurance coverage would have been had the former employee remained employed with the Bank. Reimbursements are made monthly coinciding with the monthly invoice processing and upon receipt of payment by the employee receiving severance.

Life insurance premiums paid on behalf of employees on severance are paid monthly by the Bank, coinciding with the monthly invoice processing.

Other Potential Post-Employment Payments

The Bank maintains no arrangements which contain “change in control” provisions.

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DIRECTOR COMPENSATION

The following table summarizes the compensation paid by the Bank to each of its Directors for the year ended December 31, 2009 (whole dollars):

									Change in Pension
									Value and
									Nonqualified
	Fees						Non-Equity		Deferred		All
	Earned or		Stock		Option		Incentive Plan		Compensation		Other
Name	Paid in Cash		Awards		Awards		Compensation		Earnings		Compensation		Total
Michael M. Horn	$	60,000	$	—	$	—	$	—	$	—	$	—	$	60,000
José R. González		55,000		—		—		—		—		—		55,000
Anne E. Estabrook		50,000		—		—		—		—		—		50,000
Joseph R. Ficalora		45,000		—		—		—		—		—		45,000
Jay M. Ford		45,000		—		—		—		—		—		45,000
James W. Fulmer		45,000		—		—		—		—		—		45,000
Ronald E. Hermance, Jr.		50,000		—		—		—		—		—		50,000
Katherine J. Liseno		45,000		—		—		—		—		—		45,000
Kevin J. Lynch		50,000		—		—		—		—		—		50,000
Joseph J. Melone		11,250		—		—		—		33,750		—		45,000
Richard S. Mroz		50,000		—		—		—		—		—		50,000
Thomas M. O’Brien		45,000		—		—		—		—		—		45,000
C. Cathleen Raffaeli		50,000		—		—		—		—		—		50,000
Edwin C. Reed		45,000		—		—		—		—		—		45,000
John M. Scarchilli		45,000		—		—		—		—		—		45,000
DeForest B. Soaries, Jr.		45,000		—		—		—		—		—		45,000
George Strayton		50,000		—		—		—		—		—		50,000
	$	786,250	$	—	$	—	$	—	$	33,750	$	—	$	820,000

Director Compensation Policy: Director Fees

The Board establishes on an annual basis a Director Compensation Policy governing compensation for Board meeting attendance. This policy is established in accordance with the provisions of the Federal Home Loan Bank Act (“Bank Act”) and related Federal Housing Finance Agency regulations. The Bank Act previously provided for strict annual limits on the total amount of compensation that could be paid to directors. However, as a result of the enactment of the Housing and Economic Recovery Act of 2008, these statutory annual limits were removed, thus leaving the determination of director compensation limits up to each FHLBank’s Board of Directors beginning in 2009.

In connection with setting director compensation for 2009, the Bank participated in an FHLB System review of director compensation which included a director compensation study prepared by McLagan Partners. The McLagan study included a separate analysis of director compensation for small asset size commercial banks, Farm Credit Banks and S&P 1500 firms. The study recommended setting payments at the lower end of the commercial bank benchmarks, with additional payments for the Chair, Vice Chair and Committee Chair positions. The Board concurred with these recommendations. In revisiting the matter of setting Director compensation in late 2009, the Board determined that no changes to the annual Director compensation limits were merited for 2010.

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Below are tables summarizing the Director fees established by the Board and the annual compensation limits that were set by the Board for 2009. Following these tables are additional tables summarizing the Director fees established by the Board and the annual compensation limits set by the Board for 2010.

Director Fees — 2009 (in whole dollars)

	Fees For Board Service
	(Paid Quarterly
Position	in Arrears)
Chairman	$	15,000
Vice Chairman	$	13,750
Committee Chair *	$	12,500
All Other Directors	$	11,250

Director Annual Compensation Limits — 2009 (in whole dollars)

Position	Annual Limit
Chairman	$	60,000
Vice Chairman	$	55,000
Committee Chair	$	50,000
All Other Directors	$	45,000

Director Fees — 2010 (in whole dollars)

	Fees For Each Board
	Meeting Attended
	(Paid Quarterly
Position	in Arrears)
Chairman	$	6,000
Vice Chairman	$	5,500
Committee Chair *	$	5,000
All Other Directors	$	4,500

Director Annual Compensation Limits — 2010 (in whole dollars)

Position	Annual Limit
Chairman	$	60,000
Vice Chairman	$	55,000
Committee Chair	$	50,000
All Other Directors	$	45,000

* A Committee Chair does not receive any additional payment if he or she serves as the Chair of more than one Board Committee. In addition, the Board Chair and Board Vice Chair does not receive any additional compensation if they serve as a Chair of one or more Board Committees.

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In 2009, the Directors were able to participate in the Nonqualified Deferred Compensation Plan described in more detail above under the heading “Nonqualified Deferred Compensation Plan”. As described earlier in Item 11, this Plan was terminated effective as of November 10, 2009.

Director Compensation Policy: Director Expenses

The Director Compensation Policy also authorizes the FHLBNY to reimburse Directors for necessary and reasonable travel, subsistence, and other related expenses incurred in connection with the performance of their official duties. For expense reimbursement purposes, Directors’ official duties can include:

• Meetings of the Board and Board Committees

• Meetings requested by the Federal Housing Finance Agency

• Meetings of Federal Home Loan Bank System committees

• Federal Home Loan Bank System director orientation meetings

• Meetings of the Council of Federal Home Loan Banks and Council committees

• Attendance at other events on behalf of the Bank with prior approval of the Board of Directors

The following table, which is included here pursuant to FHFA regulations, includes information about reimbursed expenses for 2009 (whole dollars):

	Directors’ Expenses
	Reimbursed
Name	(Paid in Cash)
Michael M. Horn	$	3,908
José R. González		17,801
Anne E. Estabrook		4,121
Joseph R. Ficalora		420
Jay M. Ford		3,207
James W. Fulmer		5,678
Ronald E. Hermance, Jr.		—
Katherine J. Liseno		2,759
Kevin J. Lynch		2,955
Joseph J. Melone		2,359
Richard S. Mroz		3,793
Thomas M. O’Brien		1,160
C. Cathleen Raffaeli		—
Edwin C. Reed		1,868
John M. Scarchilli		1,332
DeForest B. Soaries, Jr.		—
George Strayton		1,156
	$	52,517

Total expenses incurred by the FHLBNY for Board expenses, including amounts reimbursed in cash to Directors, totaled $134,000, $124,000, and $183,000 in 2009, 2008 and 2007, respectively.

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RISKS ARISING FROM COMPENSATION PRACTICES

The Bank does not believe that risks arising from the Bank’s compensation policies with respect to its employees are reasonably likely to have a material adverse effect on the Bank. The Bank does not structure any of its compensation plans in a way that inappropriately encourages risk taking to achieve payment.

As an example, all exempt employees are eligible to receive annual incentive awards through participation in the Bank’s incentive compensation plan. Incentive plans are often the type of compensation awards which promote risk. At the Bank, these awards are based on a combination of Bank performance results and individual performance results. The better the Bank and/or the employee perform, the higher the employee’s potential award is likely to be, up to a predetermined limit. Therefore, individual risk taking will not reward the employee if the Bank, as a whole, does not perform at a high level. This encourages cooperative, risk-averse activity. Further, as described in Section IV A 2 of the above Compensation Discussion and Analysis, the rationale for having the equally-weighted Bankwide goals of Return and Risk within the Bank’s incentive plan is to motivate management to take a balanced approach to managing risks and returns in the course of managing the Bank’s business, while at the same time ensuring that the Bank fulfills its mission.

In addition, the Bank is prohibited by law from offering equity-based compensation, and the Bank does not currently offer long-term incentives. However, many of the firms in the Bank’s peer group do offer these types of compensation. The Bank’s total compensation program takes into account the existence of these other types of compensation by offering defined benefit and defined contribution plans to help the Bank effectively compete for talent. The Bank’s defined benefit and defined contribution plans are designed to reward employees for continued strong performance over the course of their careers — that is, the longer an employee works at the Bank, the greater the benefit the employee is likely to accumulate. Senior and mid-level employees are generally long-tenured and the Bank believes that these employees would not want to endanger their pension benefits by inappropriately stretching rules to achieve a short-term financial gain.

Thus, the general risk-averse culture of the Bank, which is reflected in the Bank’s compensation policies, leads the Bank to believe that any risks arising from the Bank’s compensation policies with respect to its employees are not reasonably likely to have a material adverse effect on the Bank.

Compensation Committee Interlocks and Insider Participation

The following persons served on the Board’s Compensation and Human Resources Committee during all or some of the period from January 1, 2009 through the date of this annual report on Form 10-K: James W. Fulmer, José R. González, Katherine J. Liseno, Kevin J. Lynch, Richard Mroz, Thomas O’Brien and C. Cathleen Raffaeli. During this period, no interlocking relationships existed between any member of the FHLBNY’s Board of Directors or the Compensation and Human Resources Committee and any member of the board of directors or compensation committee of any other company, nor did any such interlocking relationship existed in the past. Further, no member of the Compensation and Human Resources Committee listed above is or was formerly an officer or an employee of the Bank.

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

FHLBNY stock can only be held by member financial institutions. No person, including directors and executive officers of the FHLBNY, may own the Bank’s capital stock. As such, the FHLBNY does not offer any compensation plan to any individuals under which equity securities of the Bank are authorized for issuance. The following tables provide information about those members who were beneficial owners of more than 5% of the FHLBNY’s outstanding capital stock (shares in thousands) as of:

		Number		Percent
	February 28, 2010	of shares		of total
Name of beneficial owner	Principal Executive Office Address	owned		capital stock
Hudson City Savings Bank *	West 80 Century Road, Paramus, NJ 07652		8,748		17.43	%
Metropolitan Life Insurance Company	200 Park Avenue, New York, NY 10166		7,419		14.78
New York Community Bank *	615 Merrick Avenue, Westbury, NY 11590		3,777		7.53
Manufacturers and Traders Trust Company	One M&T Plaza, Buffalo, NY 14203		2,934		5.85
			22,878		45.59	%

		Number		Percent
	December 31, 2009	of shares		of total
Name of beneficial owner	Principal Executive Office Address	owned		capital stock
Hudson City Savings Bank *	West 80 Century Road, Paramus, NJ 07652		8,748		16.87	%
Metropolitan Life Insurance Company	200 Park Avenue, New York, NY 10166		7,419		14.31
New York Community Bank *	615 Merrick Avenue, Westbury, NY 11590		3,777		7.28
Manufacturers And Traders Trust Company	One M&T Plaza, Buffalo, NY 14203		2,952		5.69
			22,896		44.15	%

* Officer of member bank also serves on the Board of Directors of the FHLBNY.

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The following table sets forth information with respect to capital stock outstanding to members whose officers or directors served as Directors of the FHLBNY as of December 31, 2009, the most practicable date for the information provided (shares in thousands):

				Number		Percent
				of shares		of total
Name	Director	City	State	owned		capital stock
Hudson City Savings Bank	Ronald E. Hermance, Jr.	Paramus	New Jersey		8,748		16.87	%
New York Community Bank	Joseph R. Ficalora	Westbury	New York		3,777		7.28
Banco Santander Puerto Rico	José R. González	San Juan	Puerto Rico		554		1.07
Provident Bank	George Strayton	Montebello	New York		278		0.54
Oritani Bank	Kevin J. Lynch	Township of Washington	New Jersey		255		0.49
State Bank of Long Island	Thomas M. O’Brien	Jericho	New York		39		0.08
Crest Savings Bank	Jay M. Ford	Wildwood	New Jersey		27		0.05
The Bank of Castile	James W. Fulmer	Batavia	New York		27		0.05
Metuchen Savings Bank	Katherine J. Liseno	Metuchen	New Jersey		19		0.04
Pioneer Savings Bank	John M. Scarchilli	Troy	New York		17		0.03
					13,741		26.50	%

All capital stock held by each member of the FHLBNY is by law automatically pledged to the FHLBNY as additional collateral for all indebtedness of each such member to the FHLBNY.

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

Transactions with Related Persons

The FHLBNY is a cooperative and its customers own the entity’s capital stock. Capital stock ownership is a prerequisite to the transaction by members of any business with the FHLBNY. The majority of the members of the Board of Directors of the FHLBNY are Member Directors (i.e., directors elected by the Bank’s members who are officers or directors of Bank members). The remaining members of the Board are Independent Directors (i.e., directors elected by the Bank’s members who are not officers or directors of Bank members). The FHLBNY conducts its advances business almost exclusively with members. Therefore, in the normal course of business, the FHLBNY extends credit to members, whose officers or directors may serve as directors of the FHLBNY. All loans extended by the FHLBNY to such members are at market terms that are no more favorable to them than the terms of comparable transactions with other members. In addition, the FHLBNY also extends credit to members who own more than 5% of the FHLBNY’s stock. Under the provisions of Section 7(j) of the FHLBank Act (12 U.S.C. § 1427(j)), the Bank’s Board is required to administer the business of the Bank with its members without discrimination in favor of or against any member. For more information about transactions with stockholders, see Note 20 — Related Party Transactions, in the notes to the audited financial statements included in this Form 10-K.)

The review and approval of transactions with related persons is governed by the Bank’s written Code of Ethics and Business Conduct (“Code”), which is posted on the Corporate Governance Section of the FHLBNY’s website at http://www.fhlbny.com. Under the Code, each director is required to disclose to the Board of Directors all actual or apparent conflicts of interest, including any personal financial interest that he or she has, as well as such interests of any immediate family member or business associate of the director known to the director, in any matter to be considered by the Board of Directors or in which another person does, or proposes to do, business with the Bank. Following such disclosure, the Board of Directors is empowered to determine whether an actual conflict exists. In the event the Board of Directors determines the existence of a conflict with respect to any matter, the affected director must recuse himself or herself from all further considerations relating to that matter. Issues under the Code regarding conflicts of interests involving directors are administered by the Board or, in the Board’s discretion, the Board’s Corporate Governance Committee.

The Code also provides that, subject to certain limited exceptions for, among other items, interests arising through ownership of mutual funds and certain financial interests acquired prior to employment by the Bank, no Bank employee may have a financial interest in any Bank member. Extensions of credit from members to employees are acceptable that are entered into or established in the ordinary, normal course of business, so long as the terms are no more favorable than would be available in like circumstances to persons who are not employees of the Bank. Employees provide disclosures regarding financial interests and financial relationships on a periodic basis. These disclosures are provided to and reviewed by the Director of Human Resources, who is one of the Bank’s two Ethics Officers; the Ethics Officers have responsibility for enforcing the Code of Ethics with respect to employees on a day-to-day basis.

337

Director Independence

In General

During the period from January 1, 2009 through and including the date of this annual report on Form 10-K, the Bank had a total of 17 directors serving on its Board, 10 of whom were Member Directors (i.e., directors elected by the Bank’s members who are officers or directors of Bank members) and 7 of whom were Independent Directors (i.e., directors who were, until the enactment of the Housing and Economic Recovery Act of 2008, appointed by the Bank’s former safety and soundness regulator, the Federal Housing Finance Board, and who are now subject to election by the Bank’s members and not officers or directors of Bank members). All of the Bank’s directors were independent of management from the standpoint that they were not, and could not serve as, Bank employees or officers. Also, all individuals, including the Bank’s directors, are prohibited by law from personally owning stock or stock options in the Bank. In addition, the Bank is required to determine whether its directors are independent under two distinct director independence standards. First, Federal Housing Finance Agency (“Finance Agency”) regulations establish independence criteria for directors who serve as members of the Audit Committee of the Board of Directors. Second, the Securities and Exchange Commission’s (“SEC”) regulations require that the Bank’s Board of Directors apply the independence criteria of a national securities exchange or automated quotation system in assessing the independence of its directors.

Finance Agency Regulations Regarding Independence

The Finance Agency director independence standards prohibit individuals from serving as members of the Bank’s Audit Committee if they have one or more disqualifying relationships with the Bank or its management that would interfere with the exercise of that individual’s independent judgment. Under Finance Agency regulations, disqualifying relationships can include, but are not limited to: employment with the Bank at any time during the last five years; acceptance of compensation from the Bank other than for service as a director; being a consultant, advisor, promoter, underwriter or legal counsel for the Bank at any time within the last five years; and being an immediate family member of an individual who is or who has been within the past five years, a Bank executive officer. The Board of Directors has assessed the independence of all directors under the Finance Agency’s independence standards, regardless of whether they serve on the Audit Committee. From January 1, 2009 through and including the date of this Annual Report on Form 10-K, all of the persons who served as a director of the Bank, including all directors who served as members of the Audit Committee, were independent under these criteria.

NYSE Rules Regarding Independence

In addition, pursuant to SEC regulations, the Board has adopted the independence standards of the New York Stock Exchange (“NYSE”) to determine which of its directors are independent and which members of its Audit Committee are not independent.

After applying the NYSE independence standards, the Board has determined that all of the Bank’s Independent Directors who served at any time during the period from January 1, 2009 through and including the date of this annual report on Form 10-K (i.e., Anne Evans Estabrook, Michael M. Horn, Joseph J. Melone, Richard S. Mroz, C. Cathleen Raffaeli, Edwin C. Reed and DeForest B. Soaries, Jr.) were independent.

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Separately, the Board was unable to affirmatively determine that there were no material relationships (as defined in the NYSE rules) between the Bank and its Member Directors, and has therefore concluded that none of the Bank’s Member Directors who served at any time during the aforementioned period (i.e., Joseph R. Ficalora, Jay M. Ford, James W. Fulmer, Ronald E. Hermance, Katherine J. Liseno, Kevin J. Lynch, José R. González, Thomas M. O’Brien, John M. Scarchilli and George Strayton) were independent under the NYSE independence standards.

In making this determination, the Board considered the cooperative relationship between the Bank and its members. Specifically, the Board considered the fact that each of the Bank’s Member Directors are officers of a Bank member institution, and that each member institution has access to, and is encouraged to use, the Bank’s products and services.

Furthermore, the Board acknowledges that under NYSE rules, there are certain objective tests that, if not passed, would preclude a finding of independence. One such test pertains to the amount of business conducted with the Bank by the Member Director’s institution. It is possible that a Member Director could satisfy this test on a particular day. However, because the amount of business conducted by a Member Director’s institution may change frequently, and because the Bank generally desires to increase the amount of business it conducts with each member, the directors deemed it inappropriate to draw distinctions among the Member Directors based solely upon the amount of business conducted with the Bank by any director’s institution at a specific time.

Notwithstanding the foregoing, the Board believes that it functions as a governing body that can and does act with good judgment with respect to the corporate governance and business affairs of the Bank. The Board is aware of its statutory responsibilities under Section 7(j) of the Federal Home Loan Bank Act, which specifically provides that the Board of Directors of a Federal Home Loan Bank must administer the affairs of the Home Loan Bank fairly and impartially and without discrimination in favor of or against any member borrower.

The Board has a standing Audit Committee. For the reasons noted above, the Board has determined that none of the Member Directors who served at any time as members of the Bank’s Audit Committee during the period from January 1, 2009 through and including the date of this annual report on Form 10-K (Joseph R. Ficalora, Jay M. Ford, José R. González, Katherine J. Liseno, and John M. Scarchilli) were independent under the NYSE standards for audit committee members. The Board also determined that the Independent Directors who served at any time as members of the Bank’s Audit Committee during the period from January 1, 2009 through and including the date of this annual report on Form 10-K (Anne Evans Estabrook, Michael M. Horn and Joseph J. Melone) were independent under the NYSE independence standards for audit committee members.

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ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.

The following table sets forth the fees paid to the FHLBNY’s independent registered public accounting firm, PricewaterhouseCoopers, LLP (“PwC”), during years ended December 31, 2009, 2008 and 2007 (in thousands):

	20091		20081		2007
Audit Fees	$	1,139	$	1,341	$	1,163
Audit-related Fees		54		56		33
Tax Fees		57		—		—
All Other Fees		2		2		18
	$	1,252	$	1,399	$	1,214

¹ The 2009 and 2008 amounts in the table do not include the assessment from the Office of Finance (“OF”) for the Bank’s share of the audit fees of approximately $83 thousand and $36 thousand incurred in connection with the audit of the combined financial statements published by the OF.

Audit Fees

Audit fees relate to professional services rendered in connection with the audit of the FHLBNY’s annual financial statements, and review of interim financial statements included in quarterly reports on Form 10-Q.

Audit-Related Fees

Audit-related fees primarily relate to consultation services provided in connection with respect to certain accounting and reporting standards.

Tax Fees

Tax fees relate to consultation services provided primarily with respect to tax withholding matters.

All Other Fees

These other fees relate to PwC’s attendance at FHLBank Accounting Conferences, and access to PwC’s accounting research and reference tools.

Policy on Audit Committee Pre-approval of Audit and Non-Audit Services Performed by the Independent Registered Public Accounting Firm.

The FHLBNY has adopted an independence policy that prohibits its independent registered public accounting firm from performing non-financial consulting services, such as information technology consulting and internal audit services. This policy also mandates that the audit and non-audit services and related budget be approved by the Audit Committee in advance, and that the Audit Committee be provided with quarterly reporting on actual spending. In accordance with this policy, all services to be performed by PwC were pre-approved by the Audit Committee.

Subsequent to the enactment of the Sarbanes-Oxley Act of 2002 (the “Act”), the Audit Committee has met with PwC to further understand the provisions of that Act as it relates to independence. PwC will rotate the lead audit partner and other partners as appropriate in compliance with the Act. The Audit Committee will continue to monitor the activities undertaken by PwC to comply with the Act.

340

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a) 1. Financial Statements

The financial statements included as part of this Form 10-K are identified in the index to the Financial Statements appearing in Item 8 of this Form 10-K, which index is incorporated in this Item 15 by reference.

2. Financial Statement Schedules

Financial statement schedules have been omitted because they are not applicable or the required information is shown in the financial statements or notes, under Item 8, “Financial Statements and Supplementary Data.”

341

3. Exhibits

Exhibit			Filed with
No.		Description	this Form 10-K	Form	File No.	Date Filed
	3.01	Restated Organization Certificate of the Federal Home Loan Bank of New York (“Bank”)		8-K	000-51397	12/1/2005
	3.02	Bylaws of the Bank		8-K	000-51397	9/23/2009
	4.01	Amended and Restated Capital Plan of the Bank		10-K	000-51397	4/1/2009
	10.01	Bank 2008 Incentive Compensation Plan* a		10-Q	000-51397	5/14/2008
	10.02	Bank 2009 Incentive Compensation Plan* a		10-Q	000-51397	5/15/2009
	10.03	2008 Director Compensation Policy a		10-Q	000-51397	5/14/2008
	10.04	2009 Director Compensation Policy a		10-Q	000-51397	5/15/2009
	10.05	2010 Director Compensation Policy a	X
	10.06	Bank Severance Pay Plan a		10-K	000-51397	3/28/2008
	10.07	Qualified Defined Benefit Plan a	X
	10.08	Qualified Defined Contribution Plan a	X
	10.09	Bank Benefit Equalization Plan a	X
	10.10	Nonqualified Profit Sharing Plan a	X
	10.11	Nonqualified Deferred Compensation Plan a	X
	10.12	Compensatory Arrangements for Named Executive Officers a	X
	10.13	Federal Home Loan Banks P&I Funding and Contingency Plan Agreement		8-K	000-51397	6/27/2006
	10.14	Lending Facility with United States Treasury		8-K	000-51397	9/9/2008
	12.01	Computation of Ratio of Earnings to Fixed Charges	X
	31.01	Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for the President and Chief Executive Officer	X
	31.02	Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for the Senior Vice President and Chief Financial Officer	X
	32.01	Certification by the President and Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	X
	32.02	Certification by the Senior Vice President and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	X
	99.01	Audit Committee Report	X
	99.02	Audit Committee Charter	X

Notes:

*	Confidential treatment has been granted with respect to certain portions of this exhibit. Omitted portions have been filed separately with the Securities and Exchange Commission.
a	This exhibit includes a management contract, compensatory plan or arrangement required to be noted herein.

342

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Federal Home Loan Bank of New York
By:	/s/ Alfred A. DelliBovi
	Alfred A. DelliBovi
	President and Chief Executive Officer (Principal Executive Officer)

Date: March 25, 2010

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated below:

Signature	Title	Date
/s/ Alfred A. DelliBovi Alfred A. DelliBovi	President and Chief Executive Officer	March 25, 2010
(Principal Executive Officer)
/s/ Patrick A. Morgan Patrick A. Morgan	Senior Vice President and Chief Financial Officer	March 25, 2010
(Principal Financial Officer)
/s/ Backer Ali Backer Ali	Vice President and Controller	March 25, 2010
(Principal Accounting Officer)
/s/ Michael M. Horn Michael M. Horn	Chairman of the Board of Directors	March 25, 2010
/s/ José R. González José R. González	Vice Chairman of the Board of Directors	March 25, 2010
/s/ Anne Evans Estabrook Anne Evans Estabrook	Director	March 25, 2010
/s/ Joseph R. Ficalora Joseph R. Ficalora	Director	March 25, 2010

343

Signature	Title	Date
/s/ Jay M. Ford Jay M. Ford	Director	March 25, 2010
/s/ James W. Fulmer James W. Fulmer	Director	March 25, 2010
/s/ Ronald E. Hermance, Jr. Ronald E. Hermance, Jr.	Director	March 25, 2010
/s/ Katherine J. Liseno Katherine J. Liseno	Director	March 25, 2010
/s/ Kevin J. Lynch Kevin J. Lynch	Director	March 25, 2010
/s/ Joseph J. Melone Joseph J. Melone	Director	March 25, 2010
/s/ Richard S. Mroz Richard S. Mroz	Director	March 25, 2010
/s/ Thomas M. O’Brien Thomas M. O’Brien	Director	March 25, 2010
/s/ C. Cathleen Raffaeli C. Cathleen Raffaeli	Director	March 25, 2010
/s/ Edwin C. Reed Edwin C. Reed	Director	March 25, 2010
/s/ John M. Scarchilli John M. Scarchilli	Director	March 25, 2010
/s/ DeForest B. Soaries, Jr. DeForest B. Soaries, Jr.	Director	March 25, 2010
/s/ George Strayton George Strayton	Director	March 25, 2010

344

EX-10.05

Exhibit 10.05

2010 DIRECTOR COMPENSATION POLICY

Effective as of January 1, 2010

PURPOSE: The Director Compensation Policy (“Policy”) establishes meeting fees and sets forth the types of expenses that the Federal Home Loan Bank of New York (“FHLBNY”) will pay to the Board of Directors (“Board”) of the FHLBNY. The activities referred to in this Policy are those as to which the Board believes Director attendance is necessary and appropriate and which may be compensated. The Policy has been prepared in accordance with Section 7 of the Federal Home Loan Bank Act (“Bank Act”) and the regulations of the Federal Housing Finance Agency (“FHFA”) regarding Director compensation and expenses.

I. 2010 DIRECTOR FEES

A. Board Chairman

The maximum fee opportunity for 2010 for the Chairman of the Board shall be $60,000.

B. Board Vice Chairman

The maximum fee opportunity for 2010 for the Vice Chairman of the Board shall be $55,000.

C. Committee Chairs

The maximum fee opportunity for 2010 for a Director serving as a Committee Chair shall be $50,000; however, such Director shall not receive any additional fee opportunity if he or she serves as Chair of more than one Committee. The Board Chair and Board Vice Chair shall not receive any additional fee opportunity for serving as a Chair of one or more Board Committees.

D. Other Directors

The maximum fee opportunity for 2010 for Directors other than the Chairman, the Vice Chairman, and the Committee Chairs shall be $45,000.

E. Payments and Attendance

Each Director shall be paid an amount equal to one-tenth of such Director’s maximum fee opportunity as described above for each Board meeting attended by said Director in 2010. Such fees to be paid on a quarterly basis in arrears.

Consistent with the Bank’s Corporate Governance Policy, attendance is expected at all Board meetings (and, if on a Committee, at all meetings of such Committee).

II. EXPENSES

A. In General

1. Directors may be paid for reasonable travel, subsistence and other related expenses incurred in connection with the performance of their official duties as are payable to senior officers of the FHLBNY as specified in the FHLBNY’s current Travel Policy. However, under no circumstances shall Directors be paid for gift or entertainment expenses.

B. Board and Board Committee Meetings

1. Reimbursable expenses may be paid to Directors for attendance at Board and Committee meetings as established herein.

C. Stockholders’ Meetings

1. Reimbursement of reasonable expenses incurred by Directors attending FHLBNY stockholders’ meetings is permitted.

D. Industry Meetings

1. Reimbursement of independent Directors’ expenses incurred while attending industry meetings or annual conventions of trade associations on a national level is permitted provided that a specific objective has been identified and that attendance has been specifically pre-approved by the Board of Directors. Independent directors attending industry events on behalf of the FHLBNY should register and identify themselves as directors of the FHLBNY.

2. Reimbursement of member directors’ expenses incurred while in attendance at industry meetings or annual conventions of trade associations on a national level is not permissible, unless such attendance is incidental to a FHLBNY Board or Committee meeting.

E. Meetings Called by the Federal Housing Finance Agency

1. Reimbursement of reasonable expenses may be paid to all Directors participating in any meetings called by the FHFA.

F. Other Bank System Meetings

1. Reimbursement of reasonable expenses may be paid to all Directors who are invited to attend meetings of Federal Home Loan Bank System committees (e.g., the Chair/Vice Chair Conference); Federal Home Loan Bank System director orientation meetings; and meetings of the Council of Federal Home Loan Banks and Council committees.

G. Expenses of Spouses

1. Reimbursement of reasonable expenses incurred by a Director’s spouse while accompanying the Director to a meeting for which the Director’s own reasonable expenses can be reimbursed (as specified in Sections II B, C, D, E or F above) is permitted.

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III. PROCEDURES AND ADMINISTRATIVE MATTERS

A. Directors’ expense reports should be submitted to the Office of the Corporate Secretary no less than quarterly.

B. Payment for and reimbursement of allowable business expenses of the Directors will require the approval of the Corporate Secretary or Assistant Corporate Secretary.

C. Meetings of the Board and Committees thereof should usually be held within the district served by the FHLBNY. Under no circumstances shall such meetings be held in any location that is not within the district without prior approval of the Board. FHFA regulations prohibit any meetings of the Board of Directors (including committee, planning, or other business meetings) to be held outside the United States or its possessions and territories.

IV. METHODOLOGY

With regard to the methodology utilized to determine the amount of fees to be paid to Bank directors for 2010 as described herein, the Board has determined that it will use the same compensation schedule that was used in 2009. In turn, such fees had been determined in the fall of 2008 based in part on work performed by outside compensation consultants after the enactment of the Housing and Economic Recovery Act of 2008. The Board shall endeavor to review the issue of appropriate director compensation on an annual basis.

3

EX-10.07

Exhibit 10.07

PENTEGRA DEFINED BENEFIT PLAN
FOR FINANCIAL INSTITUTIONS

REGULATIONS

governing

THE COMPREHENSIVE RETIREMENT PROGRAM

26^th Revision, Effective June 1, 2007

(Subject to IRS Approval)

108 Corporate Park Drive • White Plains, NY 10604

PENTEGRA DEFINED BENEFIT PLAN FOR FINANCIAL INSTITUTIONS
Established December 1, 1943

A non-profit, IRS qualified, tax-exempt, pension plan and trust through which Federal Home Loan Banks, Savings and Loan Associations and similar institutions, or any other federally insured financial institutions (including those organizations serving them) may cooperate in providing for the retirement of their employees. These Regulations, including the Appendices attached hereto, contain the governing provisions of the Pentegra DB Plan’s Comprehensive Retirement Program, a plan which provides retirement and death benefits. All contributions to the Pentegra DB Plan are commingled, and all assets of the Pentegra DB Plan are invested on a pooled basis, without allocation to individual employers or employees. All amounts payable by the Pentegra DB Plan are a general charge upon all its assets.

Effective June 1, 2007 except as otherwise provided, the Pentegra Defined Benefit Plan for Financial Institutions’ Comprehensive Retirement Program is hereby amended and restated in its entirety to provide as follows:

TABLE OF CONTENTS

ARTICLE I DEFINITIONS	1
ARTICLE II PARTICIPATION AND MEMBERSHIP	13
Section 1. Employer Participation	13
Section 2. Employee Membership	14
ARTICLE III SERVICE	17
Section 1. Benefit Service	17
Section 2. Vesting Service	18
ARTICLE IV BASIC BENEFITS	19
Section 1. Normal Retirement	19
Section 2. Early Retirement	19
Section 3. Death Benefits	24
Section 4. Post-Age 65 Accruals	28
Section 5. Effect of Social Security Act	29
Section 6. Benefit Accrual Freeze	29
ARTICLE V BENEFIT FORMULAS AND ADDITIONAL BENEFITS	30
Section 1. Normal Retirement Benefit Formulas	30
Section 2. Early Retirement Factors	51
Section 3. Disability Retirement Benefit	52
Section 4. Additional Death Benefits	54
Section 5. Retirement Adjustment Payment	55
Section 6. Post-Retirement Supplements	56
Section 7. Supplemental Early Retirement Window Benefit	58
Section 8. Reduction in Accrual Rate for Certain Employees	61
ARTICLE VI OPTIONAL FORMS OF PAYMENT	62
Section 1. Options	62
Section 2. Conditions of Election	63
ARTICLE VII METHOD OF PAYMENT	64

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ARTICLE VIII RESTORATION OF A RETIREE TO SERVICE	76
ARTICLE IX CONTRIBUTIONS	77
Section 1. Engagement of Actuary	77
Section 2. Single Plan	77
Section 3. Contributions by Employers	77
Section 4. Administrative Expenses	78
Section 5. Contributions by Members	78
Section 6. Contribution Requirements for Benefit Improvements	80
Section 7. Return of Contributions to Employer	80
ARTICLE X EFFECTS OF VARIOUS EVENTS ON MEMBERSHIP AND SERVICE	82
Section 1. Termination of Membership	82
Section 2. Reinstatement of Membership and Service	82
Section 3. Inactive Membership	83
Section 4. Leaves of Absence	84
Section 5. Service With a Controlled Corporation	86
Section 6. Uniform Applicability of Rules	86
ARTICLE XI MISCELLANEOUS PROVISIONS	87
Section 1. Limitations on Benefits Required by the IRC	87
Section 2. Small Benefits	93
Section 3. Amounts Payable to Incompetents, Minors or Estates	94
Section 4. Non-alienation of Amounts Payable	94
Section 5. Unclaimed Benefits	94
Section 6. Top Heavy Provisions	95
Section 7. Transfer of Assets and Liabilities from Prior Plan	98
Section 8. Supplemental Retirement Allowance	99
ARTICLE XII WITHDRAWAL OF PARTICIPATING EMPLOYER	100
Section 1. General	100
Section 2. Notice and Effect	100
Section 3. Determination of Notional Plan Assets	101
Section 4. Determination of Plan Withdrawal Liabilities	104

ii

Section 5. Determination of Final Contribution Due by Withdrawing Employer	105
Section 6 Transfer of Assets and Liabilities Out of the Pentegra DB Plan	105
Section 7. Transfer of Excess Assets to a Qualified Successor Plan	105
Section 8. Restrictions on Qualified Successor Plan	106
Section 9. Partial Termination	107
Section 10. Special Procedures Upon Conservatorship or Receivership	107
Section 11. Miscellaneous Provisions	109
ARTICLE XIII TERMINATION OF THE TRUST	111
ARTICLE XIV ADMINISTRATION AND MANAGEMENT OF FUND	115
Section 1. Administration	115
Section 2. Dispute Resolution	117
Section 3. Management	118
Section 4. Information and Communications	121
ARTICLE XV AMENDMENTS	124
ARTICLE XVI INTERPRETATION	125

iii

REGULATIONS

As amended to June 1, 2007

ARTICLE I DEFINITIONS

The following words and phrases as used in these Regulations shall have the following meanings:

(1) Abbreviations used in the following text shall mean:

IRS	U.S. Internal Revenue Service
IRS Regulations	Regulations under the U.S. Internal Revenue Code
IRC	U.S. Internal Revenue Code of 1986, as amended
ERISA	Employee Retirement Income Security Act of 1974, as amended
PBGC	Pension Benefit Guaranty Corporation
DOL	U.S. Department of Labor

(2)	“Accumulated Contributions” — The amount of benefit standing to the credit of a Member representing the contributions made by the Member together with Regular Interest thereon as determined in accordance with ERISA.
(3)	“Actuarial Increase Adjustment Factor” — The monthly increase to the Member’s Retirement Allowance beginning as of the Member’s Normal Retirement Date. Such monthly increase shall be determined as follows:

Age	Adjustment
65-70	.8% per month
70-75	1.0% per month
75-80	1.2% per month
80-85	1.5% per month
85-90	1.9% per month
90-95	2.5% per month
95 and older	3.4% per month

1

(4) “Beneficiary” — In accordance with Article IV, Section 3 and applicable law, the person or persons, other than a Contingent Annuitant, designated to receive any amount payable upon the death of a Member or Retiree. Such designation may be made or changed only by the Member or Retiree on a form provided by, and filed with, the Pentegra DB Plan prior to the Member’s death. If no Beneficiary is designated, or if the designated Beneficiary predeceases the Member or Retiree, then (except as provided in Article IV, Section 3(C) or Article VI, Section 1, Option 2) any such amount payable shall be paid to the estate of such Member or Retiree upon the Member’s or Retiree’s death.

(5) “Benefit Service” — The period of Service counted in determining a Member’s benefits as described in Article III.

(6)	“Board” — The Board of Directors provided for in Article XIV to direct the operations of the Pentegra DB Plan.
(7)	“Break in Service” — A Period of Severance of at least 12 consecutive months.

(8) “CCL” — For purposes of Subsections (E), (F), (G), (H), (I), (J), (K), (L), (M), (N), (O), (P), (Q) and (S) of Article V, Section 1 (except as otherwise provided in the following paragraph), the average of the taxable wage bases in effect under Section 230 of the Social Security Act as of the beginning of each Plan Year included in the 35-year period ending with the last day of the calendar year preceding the calendar year in which the Member attains (or will attain) his social security retirement age, as defined in Section 415(b)(8) of the IRC. However, commencing with the Plan Year beginning on July 1, 1995, CCL shall mean the average of the taxable wage bases in effect under Section 230 of the Social Security Act as of the beginning of each Plan Year included in the 35-year period ending with the last day of the calendar year in which the Member attains (or will attain) his social security retirement age, as defined in Section 415(b)(8) of the IRC.

The taxable wage base for the current Plan Year and any subsequent Plan Year shall be assumed to be the same as the taxable wage base in effect as of the beginning of the Plan Year for which the determination is being made. In addition, a Member’s CCL for a Plan Year beginning before the 35-year period referred to in this paragraph shall be the taxable wage base in effect as of the beginning of such Plan Year.

For purposes of Subsections (G), (H), (I), (J), (K), (L), (M), (N), (O), (P), (Q) and (S) of Article V, Section 1, in lieu of the foregoing definition of CCL, an Employer may elect, on a uniform basis for its Members, to define CCL as the greater of $10,000 or one-half of the “covered compensation” (as defined in Section 1.401(l)-1(c)(7) of the IRS Regulations) of an individual who attains his social security retirement age in the calendar year in which the Plan Year begins.

2

(9)	“Career Average Salary” — The average annual Salary during the period of Benefit Service.
(10)	“Cash Balance Account” — The Cash Balance Account as defined in Article V, Section 1(R).

(11) “Change of Control” — A Buyout, Merger, or Substantial Change of Ownership. For this purpose, these terms shall have the following meaning:

“Buyout” — A transaction or series of related transactions by which the Employer is sold, either through the sale of a Controlling Interest in the Employer’s voting stock or through the sale of all or substantially all of the Employer’s assets, to a party not having a Controlling Interest in the Employer’s voting stock.

“Merger” — A transaction or series of transactions wherein the Employer is combined with another business entity, and after which the persons or entities who had owned, either directly or indirectly, a Controlling Interest in the Employer’s voting stock own less than a Controlling Interest in the voting stock of the combined entity.

“Controlling Interest” — The ownership, either directly or indirectly, of more than 20% of the Employer’s voting stock.

“Substantial Change of Ownership” — A transaction or series of transactions in which a Controlling Interest in the Employer is acquired by or for a person or persons or business entity, which person(s) or entity did not own, either directly or indirectly, a Controlling Interest in the Employer.

(12) “Commencement Date” — The date on which an Employer begins to participate in the Pentegra DB Plan’s Comprehensive Retirement Program.

(13) “Commuted Value” — The present value of a series of future installment payments discounted at the rate of 7% per annum.

3

(14) “Contingent Annuitant” — A person designated to receive a continuing allowance under one of the options of, and in accordance with, Article VI upon the death of a Retiree.

(15) “Disability Retirement Date” — The first day of the month coincident with or next following the date on which the Member separates from active employment by reason of disability.

(16) “Early Retirement Date” — The first day of the month coincident with or next following the Member’s termination of employment and the Member’s attainment of (i) age 45, (ii) age 55, or (iii) age 55 plus the completion of ten (10) years of Vesting Service, as designated by the Employer.

(17) “Effective Date” — Except as otherwise noted herein, the effective date of the Regulations, as amended and restated, is June 1, 2007.

(18) “Employee” — Unless an Employer elects otherwise or as necessary to satisfy the requirements of IRC Sections 410(b) and 401(a)(26) and the IRS Regulations thereunder, any person in the Service of an Employer who receives a Salary, and any Leased Employees. If an individual receives no income from an Employer other than commissions and such Employer does not elect to include commissions as Salary under Section (43) of this Article, then such individual shall not be treated as an Employee for purposes of the Regulations.

Employees classified by the Employer as independent contractors who are subsequently determined by the Internal Revenue Service to be Employees shall not be Members of the Pentegra DB Plan.

(19)	“Employer” — Any institution which has adopted the Regulations and participates in the Pentegra DB Plan, having applied, qualified and been approved in accordance with Article II, Section 1.
(20)	“Enrollment Date” — The date on which an Employee becomes a Member.

(21) “Equivalent Value” — A benefit of equivalent value when computed on the basis of tables, developed taking into account actuarial assumptions and interest rates, which tables were last adopted for this purpose by the Board and specified in Appendix A attached hereto or based upon an interest rate and mortality table designated by the Employer; provided, however, that the interest rate used to determine the Equivalent Value of a benefit for purposes of Article VII, Section 2(B) and Article XI, Section 2, shall not be greater than the rate prescribed under Article VII, Section 2(B).

4

(22) “High-5 Salary” — The average annual Salary over the 5 consecutive years of highest Salary during Benefit Service (or during all the years of Benefit Service if less than 5).

(23) “High-3 Salary” — The average annual Salary over the 3 consecutive years of highest Salary during Benefit Service (or during all the years of Benefit Service if less than 3).

(24) “Highly Compensated Employee” — For Plan Years beginning after December 31, 1996, an Employee or a Member (i) who is a five percent owner at any time during the look-back year or determination year, or (ii) (a) who is employed during the determination year and who during the look-back year received 415 Compensation (as defined in Article XI, Section 1(B)) from the Employer in excess of $80,000 (as adjusted pursuant to the IRC and IRS Regulations thereunder for changes in the cost of living), and (b) if elected by the Employer (by formal adoption) was in the top-paid group of Employees for such look-back year.

For this purpose, the determination year shall be the Plan Year. The look-back year shall be the calendar year ending within the determination year.

The top-paid group shall consist of the top twenty percent of the Employees when ranked on the basis of compensation paid by the Employer.

The determination of who is a Highly Compensated Employee will be made in accordance with Section 414(q) of the IRC and the IRS Regulations thereunder.

For Plan Years beginning after December 31, 1996, the family member aggregation rules of Section 414(q)(6) of the IRC (as in effect prior to the Small Business Job Protection Act of 1996) are eliminated.

(25) “Hour of Service” —

(A) Each hour for which an Employee is paid, or entitled to payment, for the performance of duties for an Employer. These hours will be credited to the Employee for the computation period in which the duties are performed; and

5

(B) Each hour for which an Employee is paid, or entitled to payment, by an Employer on account of a period of time during which no duties are performed (irrespective of whether the employment relationship has terminated) due to vacation, holiday, illness, incapacity (including disability), layoff, jury duty, military duty or leave of absence. No more than 501 Hours of Service will be credited under this Subsection (B) for any single continuous period (whether or not such period occurs in a single computation period). Hours under this Subsection (B) will be calculated and credited pursuant to Section 2530.200b-2 of the DOL Regulations which is incorporated herein by this reference; and

(C) Each hour for which back pay, irrespective of mitigation of damages, is either awarded or agreed to by an Employer. The same Hours of Service will not be credited both under Subsection (A) or (B), as the case may be, and under this Subsection (C). These hours will be credited to the Employee for the computation period or periods to which the award or agreement pertains rather than the computation period in which the award, agreement or payment is made.

Hours of Service will be credited for employment with other members of an affiliated service group (under IRC Section 414(m)), a controlled group of corporations (under IRC Section 414(b)), or a group of trades or businesses under common control (under IRC Section 414(c)), of which the Employer is a member, and any other entity required to be aggregated with such Employer pursuant to IRC Section 414(o).

Hours of Service will also be credited for any individual considered an Employee for purposes of the Regulations under IRC Section 414(n) or Section 414(o).

(26) “Leased Employee” — Effective July 1, 1997, any person (other than an employee of the recipient) who pursuant to an agreement between the recipient and any other person (“leasing organization”) has performed services for the recipient (or for the recipient and related persons determined in accordance with Section 414(n)(6) of the IRC) on a substantially full-time basis for a period of at least one year, and such services are performed under the primary direction or control by the recipient. Benefits provided a Leased Employee by the leasing organization which are attributable to services performed for the recipient employer shall be treated as provided by the recipient employer.

6

(27)	“Limitation Year” — For purposes of applying the limitations of Section 415 of the IRC, the “Limitation Year” shall be the twelve consecutive month period beginning January 1 and ending December 31.
(28)	“Member” — An Employee enrolled in the membership of the Pentegra DB Plan’s Comprehensive Retirement Program as provided in Article II, Section 2.
(29)	“Non-highly Compensated Employee” — An Employee who is not a Highly Compensated Employee.
(30)	“Normal Retirement Date” — The first day of the month coincident with or next following the Member’s 65th birthday or, if later, the date of his termination of employment; except that if the Member shall have attained age 65 before his Employer’s Commencement Date, than his Normal Retirement Date shall be such Member’s termination of employment.
(31)	“PBGC Interest Rate” — The interest rate used by the PBGC, as of the date of distribution, for purposes of determining the present value of a lump sum distribution on plan termination.
(32)	“Pension Equity Benefit” — The Pension Equity Benefit as defined in Article V, Section 1(S).
(33)	“Pentegra DB Plan” — The Pentegra Defined Benefit Plan for Financial Institutions (formerly known as the Financial Institutions Retirement Fund) consisting of and governed by the Regulations and Trust which together constitute a tax-qualified employee retirement benefit plan.
(34)	“Period of Severance” — A continuous period of time during which the Employee is not employed by an Employer and commences on an Employee’s severance from service date. An Employee’s severance from service date is the date the Employee retires, quits or is discharged or, if earlier, the 12 month anniversary of the date on which the Employee was otherwise first absent from service.
(35)	“Plan Year” — A 12-month period ending June 30.

7

(36) “Qualified Domestic Relations Order” — Any judgment, decree or order (including approval of a property settlement agreement) which has been determined by the Board to constitute a qualified domestic relations order within the meaning of Section 414(p)(1) of the IRC.

(37)

“Regular Interest” — Interest at the rate or rates adopted from time to time by the Board for the purpose of computing interest on the contributions made by a Member; provided, however, for Plan Years beginning on or after July 1, 1988 interest compounded annually at the rate of 120 percent of the applicable Federal mid-term rate as in effect under IRC Section 1274 for the first month of the Plan Year.

(38)

“Regulations” — The Regulations of the Pentegra DB Plan, as the same may be amended from time to time.

(39) “Required Beginning Date” — Effective for distributions made on or after January 1, 1997, the Required Beginning Date shall be the later of the April 1 of the calendar year following (i) the calendar year in which the Member attains age 70¹/2 or (ii) the calendar year in which the Member retires, except that the Required Beginning Date for a 5-percent owner shall be the April 1 of the calendar year following the calendar year in which such Member attains age 70¹/2.

Any Member, other than a 5-percent owner, attaining age 70¹/2 in years after 1995 who continues in service may elect by April 1 of the calendar year following the calendar year in which the Member attained age 70¹/2 (or by December 31, 1997 in the case of a Member attaining age 70¹/2 in 1996) to defer distributions until the April 1 of the calendar year following the calendar year in which the Member retires. If no such election is made, the Member will begin receiving distributions by the April 1 of the calendar year following the calendar year in which the Member attained age 70¹/2 (or by December 31, 1997 in the case of a Member attaining age 70¹/2 in 1996).

Any Member attaining age 70¹/2 in years prior to 1997 may elect to stop distributions and recommence distributions by the April 1 of the calendar year following the calendar year in which the Member retires. If such election is made, there is a new annuity starting date upon recommencement.

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A Member is treated as a 5-percent owner for purposes of this section if such Member is a 5-percent owner as defined in Section 416 of the IRC at any time during the Plan Year ending with or within the calendar year in which such 5-percent owner attains age 70¹/2.

Once distributions have begun to a 5-percent owner under this section, the distributions must continue, even if the Member ceases to be a 5-percent owner in a subsequent year.

(40) “Retiree” — A former Member who has been retired under Article IV or XII (including one who terminated with a vested benefit and deferred commencement of his Retirement Allowance).

(41) “Retirement Allowance” — The annual lifetime allowance payable to a Retiree under Articles IV and V.

(42) “Retirement Date” — The date as of which a Member becomes a Retiree under Article IV or XII.

(43) “Salary” — An Employer shall adopt, on a uniform basis for its Members and in accordance with the applicable provisions of the IRC and IRS Regulations, one of the following definitions of Salary:

(A) (1) Regular, basic salary or wage rate as of January 1 of the calendar year or the Member’s date of employment, if later.

(2) Regular, basic salary or wage rate as of January 1 of the calendar year or the Member’s date of employment, if later, plus overtime payments earned in the immediately preceding calendar year.

(3)	Regular, basic salary or wage rate as of January 1 of the calendar year, or the Member’s date of employment, if later, plus overtime payments and bonuses earned in the immediately preceding calendar year.
(4)	Salary, as defined in Paragraph (1), (2) or (3) of this Subsection (A), plus commissions earned in the immediately preceding calendar year, but not to exceed such amount of commissions as the Employer shall designate.

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(5) Salary, as defined in Paragraph (3) of this Subsection (A), but excluding one or more types of bonus earned in the immediately preceding calendar as is designated by the Employer.

(B) (1)   Regular, basic salary or wage rate as in effect for each month of the calendar year.

(2) Regular, basic salary or wage rate as in effect for each month of the calendar year, plus overtime payments earned in each such month.

(3)	Regular, basic salary or wage rate as in effect for each month of the calendar year, plus overtime payments and bonuses earned in each such month.
(4)	Salary, as defined in Paragraph (1), (2) or (3) of this Subsection (B), plus commissions earned in the current calendar year, but not to exceed such amount of commissions as the Employer shall designate.

(5) Salary, as defined in Paragraph (3) of this Subsection (B), but excluding one or more types of bonus earned in each month of the calendar year as is designated by the Employer.

(C) Total taxable compensation as reported on a Member’s IRS Form W-2 (exclusive of any compensation deferred from a prior year) for the calendar year.

For purposes of the definition of “Salary” under Subsection (B) or Subsection (C) of this Article I (43), Salary shall be deemed to be earned uniformly over each month of Benefit Service during the calendar year.

For purposes of the definition of “Salary,” Special Payments and contributions by the Employer under this or any other plan (other than before-tax contributions made on behalf of a Member to a cafeteria plan under Section 125 of the IRC or, effective for Plan Years beginning on or after January 1, 1998, qualified transportation fringe benefits under Section 132(f) of the IRC unless the Employer specifically elects to exclude such contributions or benefits) shall be excluded. Amounts voluntarily deferred by a Member under Section 401(k) of the IRC shall be included as Salary. If an Employer elects to include commissions in the definition of Salary adopted under this Article I (43), the amount of commissions to be included shall, at the Employer’s option which shall be uniformly applied, be reduced, but not below zero, to an amount by which a fixed dollar amount specified by the Employer exceeds the Member’s Salary excluding commissions. Accordingly, if a Member’s Salary, excluding commissions, equals or exceeds the applicable fixed dollar amount, then no commissions will be included as Salary.

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For all purposes of this Article I (43), only a Member’s first $200,000 (adjusted for cost of living in accordance with Section 401(a)(17) of the IRC) of Salary shall be taken into account. Effective July 1, 1994, “Salary,” as otherwise defined above, shall be limited to a Member’s first $150,000 (as adjusted for cost-of-living and otherwise limited or modified in accordance with Section 401(a)(17) of the IRC and applicable IRS rulings and IRS Regulations); provided, however that a Member’s accrued benefit determined in accordance with the Regulations shall not be less than the accrued benefit of such Member determined as of June 30, 1994.

Subject to the IRC, any definition of “Salary” adopted by an Employer under Section (43) of this Article I shall be applied to all years of a Member’s Benefit Service; provided, however, if an Employer so elects, the definition of Salary adopted under this Section (43) shall be applied only to a Member’s years of Benefit Service completed subsequent to the effective date of the Employer’s adoption of such definition of Salary.

(44) “Service” — Employment with an Employer. A period of employment shall commence or recommence as of the first day the Employee is credited with an Hour of Service. In accordance with DOL Regulations Section 2530.200b-2(b) and (c), Service includes (i) periods of vacation, (ii) periods of layoff, (iii) periods of absence authorized by an employer for sickness, temporary disability or personal reasons, and (iv) if and to the extent required by federal law, service in the Armed Forces of the United States.

In addition to the foregoing in this Section (44), Service shall include employment with other entities required to be aggregated with an Employer under IRC Section 414(b), (c), (m) or (o) and shall include an individual’s employment with an Employer during the period for which such individual is not eligible for membership in the Pentegra DB Plan’s Comprehensive Retirement Program pursuant to Article II, Section 2(B).

(45) “Special Payments” — Deferred compensation in the year deferred and in the year paid, vacation pay, severance pay, moving expenses, and fringe benefits.

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(46) “Spouse” — Except as otherwise provided by a Qualified Domestic Relations Order, the individual to whom a Member or Retiree was married on the earlier of (i) the date of his death or (ii) the first date of the period for which his Retirement Allowance commences.

(47) “Straight Life Annuity” — The normal Retirement Allowance elected by the Employer where all payments shall cease and no further amounts shall be due and payable upon the Retiree’s death.

(48) “Trust” — The Trust established in respect of the Regulations under the Declaration of Trust made as of July 15, 1943, as amended, in which the Regulations are incorporated by reference.

(49) “Trustee” — The Trustee of the Trust.

(50) “Vesting Service” — The period of Service counted in determining a Member’s eligibility for early retirement as described in Article III.

(51) The masculine pronoun wherever used shall include the feminine pronoun.

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ARTICLE II PARTICIPATION AND MEMBERSHIP

SECTION 1. EMPLOYER PARTICIPATION

Any federally insured financial institution or other organization serving it may apply to the Board for participation in the Pentegra DB Plan’s Comprehensive Retirement Program if (A) as of its Commencement Date and in accordance with Section 410(b) of the IRC and the IRS Regulations (i) the percentage of Non-highly Compensated Employees who will benefit under the Regulations is at least 70% of the percentage of Highly Compensated Employees who will benefit under the Regulations (excluding such employees as are permitted to be excluded under IRS Regulations), or (ii) the average benefit percentage test (as defined in Section 410(b)(2) of the IRC and the IRS Regulations) will be satisfied with respect to the Employer, and (B) as of its Commencement Date and in accordance with Section 401(a)(26) of the IRC and the IRS Regulations, at least 50 (or, if a lesser number results, 40%) of the Employer’s Employees will benefit under the Pentegra DB Plan. An Employer may, at its option, subject to the provisions of the Regulations and applicable law, adopt different features and provisions (a different basis of participation) for different definable groups of employees, including for employees acquired pursuant to a merger or acquisition. The Employer will be required to demonstrate that this Section 1 and all other applicable IRC and IRS Regulations continue to be satisfied following the adoption of a different basis of participation for separate and definable groups of employees. The applicant shall submit the formal application and all required information, and the Board, in its discretion, shall decide upon admittance and determine the Commencement Date. The Board may, in its discretion and at such times as it may determine, require an affirmative showing by an Employer of its continued compliance with the requirements of Sections 410(b), 401(a)(4), and Section 401(a)(26) of the IRC and IRS Regulations. Should an Employer determine that its basis of participation does not comply with the requirements of Section 410(b), 401(a)(4) or 401(a)(26) of the IRC and IRS Regulations, the Employer shall be permitted to expand membership in the Pentegra DB Plan to satisfy such requirements as long as such amendment complies with applicable law. Initial and continued participation shall be subject to continued compliance with the IRC and IRS Regulations in order that the Pentegra DB Plan be maintained as a trust qualified under Section 401(a) of the IRC. Notwithstanding anything in this Section 1 to the contrary, any Member of the Pentegra DB Plan’s Comprehensive Retirement Program who is transferred to a governmental or quasi-governmental agency serving the financial industry shall continue as a Member of the Pentegra DB Plan’s Comprehensive Retirement Program provided that such Member’s employing agency has adopted the Regulations.

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SECTION 2. EMPLOYEE MEMBERSHIP

(A) Every Employee, except as provided in Subsection (B) of this Section 2, shall be enrolled as a Member of the Pentegra DB Plan’s Comprehensive Retirement Program on the latest of:

(1) His Employer’s Commencement Date; or

(2)

The first day of the month coincident with or next following the date he is hired by his Employer; or

(3)

The first day of the month coincident with or next following the expiration of any waiting period established with the Pentegra DB Plan by his Employer and made uniformly applicable to its Employees, which period may not extend beyond the later of his completion of one year of Service or attainment of age 21. Such waiting period shall be inapplicable, however, in the cases of restoration and reinstatement of Service described in Article VIII and Article X, Section 2, respectively, except for those Employees who have received a complete distribution of their benefits on account of the withdrawal of their Employer from participation in the Pentegra DB Plan under Article XII or who have elected to transfer their accrued benefits to a qualified successor plan on account of such withdrawal from participation in the Pentegra DB Plan under Article XII; or

(4)

The first day of the month coincident with or next following the date he is no longer ineligible under Subsection (B) of this Section; or

(5)

In the case of an Employer with respect to whom Employees were excluded from eligibility for membership pursuant to Paragraph (1) of Subsection (B) of this Section 2, as in effect on June 30, 1988 (Employees hired on or after attainment of age 60 were ineligible), at such Employer’s option, with respect to any Employee who had attained age 60 prior to being hired and who has an Hour of Service on or after July 1, 1988 the applicable enrollment date otherwise provided under this Subsection (A) and determined without regard to Paragraph (1) of Subsection (B) of this Section 2 as in effect on June 30, 1988.

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(B) An Employee shall not be eligible for membership if he is in one of the following classes for which his Employer has requested, and the Pentegra DB Plan has granted, subject to continuing compliance with applicable provisions of the IRC and ERISA, exclusion:

(1)	Those who are covered by another designated pension plan of their Employer.
(2)	Those who are compensated on an hourly basis — whereby compensation for each pay period (without regard to paid absences) is determined by multiplying the hourly wage rate by the actual number of Hours of Service completed.
(3)	Those who are hired under a written agreement which (i) precludes membership in the Pentegra DB Plan and (ii) provides for a specific period of employment not in excess of one year.
(4)	Those Employees of an entity, designated by the Employer, who were employed by the designated entity immediately prior to the Employer’s acquisition of such entity.
(5)	Those who are hired on or after a date specified by the Employer.
(6)	Those who are Leased Employees.
(7)	Those who are employed at a bona-fide geographical location.
(8)	Those who are flex staff employees, which are defined for these purposes as Employees who are not regular full-time or part-time Employees.

(C) Every Employee, except as provided in Subsection (D) of this Section 2, shall, as a condition of his employment, agree to become a Member when eligible and shall be enrolled as a Member by his Employer as of the date he becomes eligible. However, no person shall under any circumstances become a Member unless and until his enrollment application is filed with, and accepted by, the Pentegra DB Plan.

(D) An Employee who is in Service on his Employer’s Commencement Date may elect not to become a Member by filing with the Pentegra DB Plan, within 60 days after he becomes eligible, written notice of such election wherein he waives all present and prospective benefits which he would otherwise have as a Member. An Employee who files such notice shall be excluded from membership upon receipt by the Pentegra DB Plan of such notice. Thereafter, he may become a Member only if he files an enrollment application within five years of the later of such Commencement Date or the date he becomes eligible for membership, and furnishes evidence of good health satisfactory to the Pentegra DB Plan.

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(E) If, on the date a Member is enrolled, his Employer does not expect him to complete at least 1,000 Hours of Service in the next 12 consecutive month period, the Member shall be placed forthwith on inactive membership under Article X, Section 3.

(F) Membership shall not confer any legal rights upon any Employee or other person against any Employer, nor shall it interfere with the right of any Employer to discharge any Employee.

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ARTICLE III SERVICE

SECTION 1. BENEFIT SERVICE

(A) Benefit Service is the period of Service counted in determining a Member’s benefits (subject to Articles IV and V). It is the sum of Membership Service and Prior Service.

(B) Membership Service is the years and months of Service rendered by a Member from his Enrollment Date to the date of termination of his membership, which date shall be the date immediately preceding his applicable Retirement Date. Subject to Article X, a Member shall be credited with one month of Membership Service for each calendar month of enrolled membership during which an Hour of Service is credited.

(C) Prior Service is the years and months of Service rendered by a Member through the day preceding his Employer’s Commencement Date, for which his Employer will allow credit on a uniform basis. At the Employer’s option (by formal adoption) and in a uniform and nondiscriminatory manner, an Employer shall have the right to count, as Prior Service under this Subsection (C), any period of Service not otherwise taken into account pursuant to this Article III.

Notwithstanding the foregoing, an Employer may, with the consent of the Pentegra DB Plan, determine as Prior Service of any Employee a period of his continuous employment with (i) an organization which has been merged or consolidated with, or substantially all the assets of which have been acquired by, the Employer and (ii) the Federal Home Loan Bank Board which preceded employment with such Employer, provided that such determination be uniformly applicable to all continuing Employees who have been employed by such organization and enrolled in the membership of the Pentegra DB Plan.

An Employer may, upon such terms and conditions as the Pentegra DB Plan and the IRS shall approve, provide benefits in respect of any person covered by a prior retirement plan of the Employer which was qualified under Section 401(a) of the IRC and in connection therewith transfer funds from such plan to the Pentegra DB Plan so long as such transferred funds are applied so that each Member affected thereby would receive a benefit immediately after the transfer, if the Pentegra DB Plan then terminated, at least equal to the benefit he would have received upon the termination of the prior plan immediately before such transfer.

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SECTION 2. VESTING SERVICE

For purposes of determining an Employee’s eligibility for early retirement under Article IV, Section 2, and subject to any adjustment required by Article X, an Employee will receive credit for the aggregate of all time period(s) commencing with the Employee’s first day of employment or reemployment with an Employer and ending on the date a Break in Service begins, except as otherwise provided in this Section 2. The first day of employment or reemployment is the first day the Employee performs an Hour of Service. An Employee will also receive credit for any Period of Severance of less than 12 consecutive months. Fractional periods of a year will be expressed in terms of days.

If an Employer is a member of an affiliated service group (under IRC Section 414(m)), a controlled group of corporations (under IRC Section 414(b)), or a group of trades or businesses under common control (under IRC Section 414(c)), or any other entity required to be aggregated with the employer pursuant to IRS Section 414(o), Vesting Service will be credited for any employment for any period of time for any other member of such group. Vesting Service will also be credited for any individual required under IRC Section 414(n) or Section 414(o) to be considered an Employee of an employer aggregated under IRC Section 414(b), (c), or (m).

Should an Employer that has never maintained a defined benefit pension plan commence participation in the Pentegra DB Plan, such Employer may elect (by formal adoption) not to grant to its Employees Vesting Service credit for any service preceding the Employer’s Commencement Date, except as required under Article X, Section 2. An Employer’s election not to provide prior Vesting Service credit shall not affect the Employer’s option to provide prior Benefit Service credit under Section 1 of this Article III for such Employees.

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ARTICLE IV BASIC BENEFITS

All the benefits described in Articles IV and V are provided on a uniform basis for the Members of an Employer, except as otherwise provided under Article II, Section 1 or under Article V, Section 8.

SECTION 1. NORMAL RETIREMENT

(A) Any Member who attains age 65 while in Service shall be fully vested and retired on his Normal Retirement Date.

(B) The annual normal Retirement Allowance payable as of a Member’s Normal Retirement Date shall be determined under the benefit formula elected by the Employer under Article V, Section 1. In the case of a Member who retires after attaining age 65, such Member’s Retirement Allowance shall be the greater of (i) the Member’s Retirement Allowance based on his years of Benefit Service as of his Retirement Date, or (ii) the Member’s Retirement Allowance as of the first day of the month coincident with or next following the later of (x) the Member’s attainment of age 65 or (y) the Member’s Employer’s Commencement Date, increased by the Actuarial Increase Adjustment Factor for benefit formulas defined in Article V, Sections 1(A) through 1(Q).

(C) In lieu of having his normal Retirement Allowance commence as of his Normal Retirement Date, a Member may elect to have such allowance commence in an increased amount as of the first day of any month subsequent to his Normal Retirement Date but not later than his Required Beginning Date. For benefit formulas defined in Article V, Sections 1(A) through 1(Q), the regular Retirement Allowance of such a Member shall be increased by the Actuarial Increase Adjustment Factor.

SECTION 2. EARLY RETIREMENT

(A) Any Member whose Service is terminated before attainment of age 65 and who has a nonforfeitable right to all or a portion of the Retirement Allowance provided by his Employer’s contributions may, upon written application filed with the Pentegra DB Plan, be retired as of his Early Retirement Date.

(B) (i) With respect to the benefit formulas described in Article V, Sections 1(A), 1(B), 1(C), 1(F), 1(J), 1(K), 1(L), 1(M), and 1(N), the annual early Retirement Allowance payable before age 65 shall be equal to a percentage of the annual Retirement Allowance otherwise payable as of the Member’s Normal Retirement Date, calculated on the basis of his Salary (Career Average, High-5 or High-3, whichever is applicable) and the Benefit Service as of his Early Retirement Date.

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(ii) With respect to the benefit formulas described in Article V, Sections 1(D), 1(E), 1(G), 1(H), 1(I), 1(O), 1(P), and 1(Q) the annual early Retirement Allowance payable before age 65 shall be equal to, as adjusted pursuant to the following sentence, a percentage of the annual Retirement Allowance otherwise payable as of the Member’s Normal Retirement Date calculated on the basis of his Salary (Career Average, High-5 or High-3, whichever is applicable) as of his Early Retirement Date and the Benefit Service he would have completed as of his Normal Retirement Date. The amount determined under the preceding sentence shall be multiplied by a fraction, the numerator of which is the actual years and months of Benefit Service the Member has completed as of his Early Retirement Date and the denominator of which is the number of years and months of Benefit Service which the Member would have completed as of his Normal Retirement Date.

(iii) With respect to the Cash Balance Account formulas described in Article V, Section 1(R), the annual early Retirement Allowance payable before age 65 shall be equal to a percentage of the normal Retirement Allowance amount determined at the Member’s Retirement Date under Article V, Section 2(A).

(iv) With respect to the Pension Equity Benefit formulas described in Article V, Section 1(S), the annual early Retirement Allowance payable before age 65 shall be equal to a percentage of the normal Retirement Allowance amount determined at the Member’s Retirement Date under Article V, Section 2(A).

(v) The percentage applied in Subsection (B)(i) through (B)(iv) of this Section 2 shall be further adjusted by the Member’s vesting percentage at early retirement from the following tables, as adopted by his Employer:

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TABLE I

Completed Years of	Vesting
Vesting Service	Percentage
Less than 5	0	%
5 or more	100	%

TABLE II

Completed Years of	Vesting
Vesting Service	Percentage
Less than 2	0	%
2	20	%
3	40	%
4	60	%
5	80	%
6 or more	100	%

TABLE III

Completed Years of	Vesting
Vesting Service	Percentage
Less than 2	0	%
2	20	%
3	40	%
4	60	%
5 or more	100	%

TABLE IV

Completed Years of	Vesting
Vesting Service	Percentage
Less than 3	0	%
3 or more	100	%

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TABLE V

Completed Years of	Vesting
Vesting Service	Percentage
Less than 3	0	%
3	20	%
4	40	%
5	60	%
6	80	%
7 or more	100	%

(C) In lieu of having his early Retirement Allowance commence at age 65 under Subsection (B) of this Section 2, a Member may elect to have such allowance commence in an increased amount as of the first day of any month subsequent to his attainment of age 65 but not later than his Required Beginning Date. The regular Retirement Allowance of such a Member shall be increased by the Actuarial Increase Adjustment Factor.

(D) In lieu of the Retirement Allowance payable at age 65 under Section 1, a Member may elect to have his early Retirement Allowance commence in a reduced amount as of the first day of any month coincident with or subsequent to his Early Retirement Date. Notwithstanding the above, if a Member elects to terminate employment pursuant to Article V, Section 7, such Member may elect to have his early Retirement Allowance commence in a reduced amount as of the first day of any month subsequent to his termination of employment. If a Member so elects, his annual early Retirement Allowance shall be equal to a percentage of his annual early Retirement Allowance otherwise payable under Subsection (B) of this Section 2. Such percentage shall be determined by the Member’s age at commencement of his Retirement Allowance using the factors adopted by his Employer pursuant to Article V, Section 2.

Notwithstanding anything in this Section 2 to the contrary, an Employer may elect to provide that any early Retirement Allowance which commences after a Member’s attainment of age 60 or 62, as designated by the Employer in its election, shall not be reduced because of the commencement of such allowance before the Member’s Normal Retirement Date; provided, however, an Employer may not elect to provide such an unreduced early Retirement Allowance if the Employer has elected to provide any of the normal retirement benefit formulas described in Article V, Section 1(E), (F), (G), (H), (I), (J), (K), (L), (M), (N),(O), (P), (Q), (R), or (S). In the case of an Employer’s election pursuant to this Subsection (D) to provide an unreduced early Retirement Allowance upon a Member’s attainment of age 60 or 62, as designated by the Employer, the early retirement factors adopted by the Employer shall apply to the commencement of the Member’s Retirement Allowance prior to the Member’s attainment of age 60 or 62, as applicable.

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(E) Notwithstanding anything in this Article IV to the contrary, in the case of a Member who has terminated Service with the Employer with a nonforfeitable interest in his Retirement Allowance (as determined in accordance with Article IV, Section 2(B)(iii)) and who is eligible for disability benefits under the Federal Social Security Act, such Member may elect to commence to receive his disability retirement benefits under this Section 2 regardless of the Member’s age at such time. In the event of the payment of such disability retirement benefits as provided in this Subsection (E), such benefits shall be the Equivalent Value of the disabled Member’s early Retirement Allowance as determined by the Pentegra DB Plan in accordance with the IRC, ERISA and applicable governmental regulations to reflect the early commencement of the payment thereof.

(F) Notwithstanding anything in this Article IV to the contrary, an Employer may, at its option, elect to fully vest the Retirement Allowances of Employees whose employment is terminated pursuant to a corporate transaction as long as such election does not discriminate in favor of Highly Compensated Employees.

(G) No amendment to an Employer’s vesting schedule shall directly or indirectly deprive a Member of his nonforfeitable rights to benefits accrued to the date of such amendment. In the event that the Employer amends the vesting schedule adopted under this Article IV, or if the Employer’s basis of participation in the Pentegra DB Plan is amended in any way that directly or indirectly affects the computation of a Member’s nonforfeitable benefit (including a change to or from a Top-Heavy vesting schedule), any Member who has completed at least 3 Years of Employment may elect to have his nonforfeitable benefit computed without regard to such amendment under the Pentegra DB Plan (a “Vesting Election”). Any Vesting Election shall be made by notifying the Board in writing within a reasonable period after the adoption of the amendment or change. The election period shall begin on the date such amendment is adopted or deemed to be made, as the case may be, and shall end no earlier than the latest of the following dates: (i) the date which is 60 days after the day such amendment is adopted; (ii) the date which is 60 days after the day such amendment or change becomes effective; or (iii) the date which is 60 days after the day the Member is given written notice of such amendment or change by the Pentegra DB Plan Office. Any such election, once made, shall be irrevocable.

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To the extent permitted under the IRC and IRS Regulations, the Employer may, at its option, elect to treat all Members who are eligible to make a Vesting Election as having made such Vesting Election if the vesting schedule resulting from such an election is more favorable than the Vesting Schedule that would apply pursuant to the Plan amendment. Furthermore, subject to the requirements of the applicable Regulations, the Employer may elect to treat all Members, who were employed by the Employer on or before the effective date of the change or amendment, as subject to the prior vesting schedule, provided such prior schedule is more favorable.

SECTION 3. DEATH BENEFITS

(A) Subject to the provisions of Subsections (B), (G) and (H) of this Section 3, upon the death of a Member who was survived by a Spouse and whose Employer has not elected a Straight Life Annuity as the payment form for the Member’s normal Retirement Allowance, the Equivalent Value of 120 monthly installments of his Retirement Allowance, determined as if he had retired as of the first day of the month during which he died, but not less than his Accumulated Contributions, if any, shall be paid in the form of a life annuity to such Spouse, as Beneficiary, unless such Spouse elects a lump sum or an installment form of payment under Subsection (D) of this Section 3; provided, however, that if such Member’s Spouse had consented in writing to the Member’s designation of a different Beneficiary, such death benefit will be paid to such designated Beneficiary. Any such non-spousal designation may be revoked by the Member without spousal consent at any time prior to the Member’s death. If a Member is not survived by a Spouse, such death benefit will be paid to his designated Beneficiary or, if there is no designated Beneficiary, to the Member’s estate. If the Member was not vested in all or a portion of his Retirement Allowance, no death benefit other than the refund of his Accumulated Contributions, if any, shall be payable.

(B) Upon the death of a Member who has a nonforfeitable right to all or a portion of his Retirement Allowance and who was survived by a Spouse entitled to receive the death benefit determined under Subsection (A) of this Section 3 or under Article V, Section 4, whichever is applicable, such death benefit shall not be less than the Equivalent Value of one-half of the Option 3 allowance under Article VI, Section 1, as if such Spouse had been designated Contingent Annuitant.

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Upon the death of a Member who has a nonforfeitable right to all or a portion of his Retirement Allowance and who was survived by a Spouse not entitled to a death benefit under Subsection (A) of this Section 3 or under Article V, Section 4, due to the Employer’s adoption of a Straight Life Annuity as the payment form for the Member’s normal Retirement Allowance, such spousal death benefit shall be equal to the Equivalent Value of one-half of the Option 3 allowance under Article VI, Section 1, as if such Spouse had been designated Contingent Annuitant.

(C) Upon the death of a Retiree who died before 120 monthly installments of his Retirement Allowance had been paid and was survived by a Spouse and at the time of his death no optional form of payment under Article VI was in effect, the Commuted Value of such unpaid installments shall be paid in a lump sum to his Spouse as Beneficiary; provided, however, that if such Retiree’s Spouse had consented in writing to the designation of a different Beneficiary, the death benefit will be paid to such designated Beneficiary. Any such non-spousal designation may be revoked by the Retiree without spousal consent at any time prior to the Retiree’s death. If a Retiree is not survived by a Spouse at the time of his death, the death benefit will be paid to his designated Beneficiary or, if there is no designated Beneficiary, to the Retiree’s estate.

Notwithstanding the preceding paragraph, if an Employer elects a Straight Life Annuity as the payment form for the Member’s normal Retirement Allowance, upon the death of a Retiree who was not survived by a Spouse, no death benefit other than a refund of Accumulated Contributions, if any, shall be payable, unless the Employer elects to provide a death benefit prior to commencement of benefit payments equal to the present value of the Member’s Accrued Benefit, or unless an optional form of payment under Article VI was in effect at the time of the Retiree’s death.

(D)   (1)  Upon written request filed with the Pentegra DB Plan by the Member or Retiree, or if no such request had been made prior to the time of death, then upon written application filed by the Beneficiary prior to payment of any amount on account of the death of the Member or Retiree, the lump sum payment provided for in Subsection (A), (B) or (C) of this Section 3 may be converted into installments over a period of up to 10 years for a spousal Beneficiary, or over a period of up to 5 years for a non-spousal Beneficiary, computed with interest as specified by the Pentegra DB Plan, and should the Beneficiary die before having received all such installments, the Equivalent Value of the unpaid installments using such interest rate shall be paid in a lump sum to the Beneficiary’s estate.

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(2) If a Member or Retiree dies before distribution of his Retirement Allowance commences, distribution of the Member’s or Retiree’s entire interest shall be completed by December 31 of the calendar year containing the fifth anniversary of the Member’s death except to the extent that an election is made to receive distributions in accordance with (a) or (b) below:

(a)	if any portion of the Member’s interest is payable to a designated Beneficiary, distributions may be made over the life or over a period certain not greater than the life expectancy of the designated Beneficiary commencing on or before December 31 of the calendar year immediately following the calendar year in which the Member died;
(b)	if the designated beneficiary is the Member’s surviving Spouse, the date distributions are required to begin in accordance with (a) above shall not be earlier than the later of (1) December 31 of the calendar year immediately following the calendar year in which the Member died and (2) December 31 of the calendar year in which the Member would have attained age 701/2.

If the Member has not made an election pursuant to this Subsection (D) by the time of his or her death, the Member’s designated Beneficiary must elect the method of distribution no later than the earlier of (1) December 31 of the calendar year in which distributions would be required to begin under this section, or (2) December 31 of the calendar year which contains the fifth anniversary of the date of death of the Member. If the Member has no designated Beneficiary, or if the designated Beneficiary does not elect a method of distribution, distribution of the Member’s entire interest must be completed by December 31 of the calendar year containing the fifth anniversary of the Member’s death. For purposes of this paragraph (2), if the Member’s or Retiree’s surviving Spouse dies after the Member or Retiree, but before payments to such Spouse begin, the provisions of this paragraph (2), with the exception of subparagraph (b) thereof, shall be applied as if the surviving Spouse was the Member or Retiree. Notwithstanding the foregoing, to the extent any Retirement Allowance provides for payments after a Retiree’s death, such payments shall be made in accordance with Section 401(a)(9) of the IRC, including the minimum distribution incidental benefit requirements of Section 1.401(a)(9)-2 of the proposed IRS Regulations.

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(E) Special provisions:

(i) If a Member who has a nonforfeitable right to all or a portion of his Retirement Allowance dies after termination of Service and prior to his Retirement Date, his death benefit shall be determined under Subsection (A) of this Section 3, or Article V, Section 4(A), whichever is applicable. If such a Member dies on or after his Retirement Date, the death benefit shall be determined under Subsection (B) of this Section 3 or Article V, Section 4(B), whichever is applicable.

(ii) If a disability Retiree dies within 90 days after his separation from active employment, his death benefit, if any, shall be determined under Subsection (A) of this Section 3, or Article V, Section 4(A), whichever is applicable, and shall be reduced (but not below zero) by the sum of any retirement payments made.

(F) Upon the death of a Retiree whose Retirement Allowance has commenced, any death benefit (if paid in installments) shall be distributed to his Beneficiary at least as rapidly as under the method being used as of the date of the Retiree’s death.

(G) In lieu of any death benefit otherwise payable under this Section 3, the Beneficiary of a Member who has a vested Cash Balance Account shall be entitled to a death benefit under this paragraph if the Member dies prior to the Member’s Retirement Date. If the Member’s Beneficiary is not his surviving Spouse, payment of the death benefit shall be made in a single lump sum payment equal to the vested Cash Balance Account as soon as practicable after the death of the Member. If the Member’s Beneficiary is his surviving Spouse, payment shall be made as an annuity for the life of the surviving Spouse unless the surviving Spouse elects to receive the vested Cash Balance Account as a lump sum payment. If the death benefit is paid as an annuity, it shall be the actuarial equivalent of the Cash Balance Account using the actuarial equivalent basis, as provided under Article V, Section 1(R)(1). Any other provision of the Pentegra DB Plan’s Regulations notwithstanding, if the value of the Member’s vested Cash Balance Account is not more than $1,000 ($3,500 prior to March 28, 2005) at his date of death, payment of the death benefit, attributable to such vested Cash Balance Account, shall be made to the Beneficiary in a single lump sum payment as soon as practicable.

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(H)

In lieu of any death benefit otherwise payable under this Section 3, the Beneficiary of a Member who has a vested Pension Equity Benefit shall be entitled to a death benefit under this paragraph if the Member dies prior to the Member’s Retirement Date. If the Member’s Beneficiary is not his surviving Spouse, payment of the death benefit shall be made in a single lump sum payment equal to the vested Pension Equity Benefit as soon as practicable after the death of the Member. If the Member’s Beneficiary is his surviving Spouse, payment shall be made as an annuity for the life of the surviving Spouse unless the surviving Spouse elects to receive the vested Pension Equity Benefit as a lump sum payment. If the death benefit is paid as an annuity, it shall be the actuarial equivalent of the Pension Equity Benefit using the actuarial equivalent basis, as provided under Article V, Section 1(R)(1). Any other provision of the Pentegra DB Plan’s Regulations notwithstanding, if the value of the Member’s vested Pension Equity Benefit is not more than $1,000 ($3,500 prior to March 28, 2005) at his date of death, payment of the death benefit, attributable to such vested Pension Equity Benefit, shall be made to the Beneficiary in a single lump sum payment as soon as practicable.

(I)

An Employer may at its option elect to provide a death benefit under this Section 3 (subject to the provisions of Subsection (B) of this Section 3) that is equal to either (i) or (ii), whichever is of greater value at time of the Member’s death, (i) the death benefit payable under either Article IV, Section 3(A) or Article V, Section 4(B), if either death benefit is applicable, or (ii) the lump sum value of the Member’s vested Retirement Allowance calculated in accordance with Article VII, Section 2(B). In the case of an Employer that has not requested, or the Pentegra DB Plan has not approved, that a lump sum settlement option be made available, the determination of the lump sum value of the Member’s vested Retirement Allowance (as provided in clause (ii) of the preceding sentence) shall be made as if a lump sum settlement option was made available with respect to such benefit under Article VII, Section 2(B).

SECTION 4. POST-AGE 65 ACCRUALS

Effective July 1, 1988, an Employee who had attained age 65 prior to July 1, 1988 will continue to accrue benefits in accordance with the Regulations. No benefits shall accrue with respect to such Employee’s Service which occurred after the Employee’s attainment of age 65 but prior to July 1, 1988; provided, however, an Employer may elect to provide benefit accruals with respect to such pre-July 1, 1988 Service.

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SECTION 5. EFFECT OF SOCIAL SECURITY ACT

Benefits being paid to a Retiree or a Beneficiary may not be decreased by reason of any post-separation Social Security benefit increase or by the increase of the Social Security Wage Base under Title II of the Federal Social Security Act. Benefits in which a former Member has a vested interest may not be decreased by reason of an increase in a benefit level or wage base under Title II of the Federal Social Security Act.

SECTION 6. BENEFIT ACCRUAL FREEZE

Notwithstanding anything in the Pentegra DB Plan’s Regulations to the contrary, if an Employer so elects, no benefits shall accrue on behalf of any Member with respect to such Employer on and after the effective date of such election. No employees of the Employer shall first become eligible to participate in the Pentegra DB Plan on or after the effective date of the election to freeze benefit accruals. In order to implement a freeze of benefit accruals under the Pentegra DB Plan, an Employer must comply with all of the rules and procedures prescribed by the Board and with applicable law.

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ARTICLE V BENEFIT FORMULAS AND ADDITIONAL BENEFITS

SECTION 1. NORMAL RETIREMENT BENEFIT FORMULAS

An Employer may provide, on a uniform basis for its Members, one of the following normal retirement benefit formulas:

(A)	Nonintegrated Benefit Formulas
	The product of:

(1)	An annual accrual rate equal to any rate not less than .25% and not greater than 3% (determined in .25% (.05% effective on and after June 5, 2004) increments), as designated by the Employer, multiplied by
(2)	The Member’s (a) Career Average Salary, (b) High-5 Salary or (c) High-3 Salary, as designated by the Employer, multiplied by
(3)	The number of years and months of Benefit Service.

(B)	Nonintegrated Benefit Formulas with a Benefit Service Cap
	The product of:

(1)	An annual accrual rate equal to any rate not less than .25% and not greater than 3% (determined in .25% (.05% effective on and after June 5, 2004) increments), as designated by the Employer, multiplied by
(2)	The Member’s (a) High-5 Salary or (b) High-3 Salary, as designated by the Employer, multiplied by
(3)	The number of years and months of Benefit Service up to a maximum of 20, 25, 30, 35, 40, 45 or 50 years, as designated by the Employer.

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(C)	Partial High-5 or High-3 Salary Benefit Formulas
	The greater of (1) or (2):

(1) The product of:

(i)	An annual accrual rate equal to any rate not less than .25% and not greater than 3% (determined in .25% (.05% effective on and after June 5, 2004) increments), as designated by the Employer, multiplied by
(ii)	The Member’s (a) High-5 Salary or (b) High-3 Salary, as designated by the Employer, multiplied by
(iii)	The number of years and months of Benefit Service, multiplied by
(iv)	Any percentage less than 100% but equal to or greater than 50%, as designated by the Employer.

(2) The product of:

(i)	An annual accrual rate equal to any rate not less than .25% and not greater than 3% (determined in .25% (.05% effective on and after June 5, 2004) increments), as designated by the Employer under Subsection (C)(1)(i) of this Section 1, multiplied by
(ii)	The Member’s Career Average Salary, multiplied by
(iii)	The number of years and months of Benefit Service.

(D)	Nonintegrated Fixed Percentage Formulas
	The product of:

(1)	Any percentage not less than 10% and not greater than 80%, as designated by the Employer, multiplied by
(2)	The Member’s (a) High-5 Salary or (b) High-3 Salary, as designated by the Employer, for each Member who completes a minimum number of years of Benefit Service equal to 25 or 30 years of Benefit Service as of his Normal Retirement Date, as designated by the Employer.

If a Member does not complete the required minimum number of years of Benefit Service as of his Normal Retirement Date, his Retirement Allowance under this Subsection (D) shall be multiplied by a fraction, the numerator of which is the number of years and months of Benefit Service completed as of his Normal Retirement Date and the denominator of which is the required minimum number of years of Benefit Service.

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(E)	1.5% Integrated Benefit Formula With Career Average Minimum
	The product of:

(1) 1.0% of the Member’s High-5 (or High-3, as designated by the Employer) Salary up to the CCL, plus 1.5% of the Member’s High-5 (or High-3) Salary above the CCL, multiplied by

(2) The number of years and months of Benefit Service.

(a)	In the event a Member has completed more than 35 years of Benefit Service as of his Normal Retirement Date, the Member’s Retirement Allowance, with respect to such years of Benefit Service in excess of 35, will be equal to 1.5% of the Member’s High-5 (or High-3) Salary, both above and below the CCL. At the Employer’s election, with respect to Benefit Service completed prior to the Employer’s adoption of the integrated benefit formula in this Section 1(E), the Retirement Allowance computed with respect to such Benefit Service shall be determined by applying an annual accrual rate of 1.5% of the Member’s High-5 (or High-3) Salary, both above and below the CCL. In no event will the Member’s normal Retirement Allowance computed under this Section 1(E) be less than the product of:
(b)	1.5%, multiplied by
(c)	The Member’s Career Average Salary, multiplied by
(d)	The number of years and months of Benefit Service.

(F) 2% Integrated Benefit Formula With Career Average Minimum

The product of:

(1) 1.5% of the Member’s High-5 (or High-3, as designated by the Employer) Salary up to the CCL, plus 2.0% of the Member’s High-5 (or High-3) Salary above the CCL, multiplied by

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(2) The number of years and months of Benefit Service.

	In the event a Member has completed more than 35 years of Benefit Service as of the date of his termination of employment, the Member’s Retirement Allowance, with respect to such years of Benefit Service in excess of 35, will be equal to 2.0% of the Member’s High-5 (or High-3) Salary, both above and below the CCL. At the Employer’s election, with respect to Benefit Service completed prior to the Employer’s adoption of the integrated benefit formula in this Section 1(F), the Retirement Allowance computed with respect to such Benefit Service shall be determined by applying an annual accrual rate of 2.0% of the Member’s High-5 (or High-3) Salary, both above and below the CCL.
	In no event will the Member’s normal Retirement Allowance computed under this Section 1(F) be less than the product of:
(a)	2.0%, multiplied by
(b)	The Member’s Career Average Salary, multiplied by
(c)	The number of years and months of Benefit Service.

(G)	1.5% Integrated Benefit Formula Without Career Average Minimum
	The product of:

(1)

1.0% of the Member’s High-5 (or High-3, or, effective on and after March 27, 2006, Career Average, as designated by the Employer) Salary up to the CCL, plus 1.5% of the Member’s High-5 (or High-3 or Career Average, as applicable) Salary above the CCL, multiplied by

(2)

The number of years and months of Benefit Service, up to a maximum, if any, specified by the Employer, of 20, 25, 30 or 35 years; provided that no maximum number of years and months of Benefit Service will apply if the Benefit Formula is based on Career Average Salary. In the event a Member has completed more than 35 years of Benefit Service as of his Normal Retirement Date and the Employer has not specified a maximum number of years of Benefit Service, or a maximum number of years of Benefit Service does not apply, the Member’s Retirement Allowance, with respect to Benefit Service in excess of 35 years, will be

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equal to 1.5% of the Member’s High-5 (or High-3 or, if Career Average Salary is used in the formula above, Career Average) Salary, both above and below the CCL. At the Employer’s election, with respect to Benefit Service completed prior to the Employer’s adoption of the integrated benefit formula in this Section 1(G), the Retirement Allowance computed with respect to such Benefit Service shall be determined by applying an annual accrual rate of 1.5% of the Member’s High-5 Salary (or High-3) Salary or, if Career Average Salary is used in the formula above, Career Average Salary)), both above and below the CCL.

(H)	1.75% Integrated Benefit Formula Without Career Average Minimum
	The product of:

(1)

1.25% of the Member’s High-5 (or High-3, or, effective on and after March 27, 2006, Career Average, as designated by the Employer) Salary up to the CCL, plus 1.75% of the Member’s High-5 (or High-3 or Career Average, as applicable) Salary above the CCL, multiplied by

(2)

The number of years and months of Benefit Service, up to a maximum, if any, specified by the Employer, of 20, 25, 30 or 35 years; provided that no maximum number of years and months of Benefit Service will apply if the Benefit Formula is based on Career Average Salary. In the event a Member has completed more than 35 years of Benefit Service as of his Normal Retirement Date and the Employer has not specified a maximum number of years of Benefit Service, or a maximum number of years of Benefit Service does not apply, the Member’s Retirement Allowance, with respect to Benefit Service in excess of 35 years, will be equal to 1.75% of the Member’s High-5 (or High-3 or, if Career Average Salary is used in the formula above, Career Average) Salary, both above and below the CCL. At the Employer’s election, with respect to Benefit Service completed prior to the Employer’s adoption of the integrated benefit formula provided in this Section 1(H), the Retirement Allowance computed with respect to such Benefit Service shall be determined by applying an annual accrual rate of 1.75% of the Member’s High-5 Salary (or High-3 Salary or, if Career Average Salary is used in the formula above, Career Average Salary), both above and below the CCL.

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(I)	1.85% Integrated Benefit Formula Without Career Average Minimum
	The product of:

(1) 1.25% of the Member’s High-5 (or High-3, or, effective on and after March 27, 2006, Career Average, as designated by the Employer) Salary up to the CCL, plus 1.85% of the Member’s High-5 (or High-3 or Career Average, as applicable) Salary above the CCL, multiplied by

(2) The number of years and months of Benefit Service, up to a maximum, if any, specified by the Employer, of 20, 25, 30 or 35 years; provided that no maximum number of years and months of Benefit Service will apply if the Benefit Formula is based on Career Average Salary. In the event a Member has completed more than 35 years of Benefit Service as of his Normal Retirement Date and the Employer has not specified a maximum number of years of Benefit Service, or a maximum number of years of Benefit Service does not apply, the Member’s Retirement Allowance, with respect to Benefit Service in excess of 35 years, will be equal to 1.85% of the Member’s High-5 (or High-3 or, if Career Average Salary is used in the formula above, Career Average) Salary, both above and below the CCL. At the Employer’s election, with respect to Benefit Service completed prior to the Employer’s adoption of the integrated benefit formula provided in this Section 1(I), the Retirement Allowance computed with respect to such Benefit Service shall be determined by applying an annual accrual rate of 1.85% of the Member’s High-5 Salary (or High-3 Salary or, if Career Average Salary is used in the formula above, Career Average Salary), both above and below the CCL.

(J) 2% Integrated Benefit Formula Without Career Average Minimum

The product of:

(1) 1.5% of the Member’s High-5 (or High-3, or, effective on and after March 27, 2006, Career Average, as designated by the Employer) Salary up to the CCL, plus 2.0% of the Member’s High-5 (or High-3 or Career Average, as applicable) Salary above the CCL, multiplied by

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(2) The number of years and months of Benefit Service, up to a maximum, if any, specified by the Employer, of 20, 25, 30 or 35 years; provided that no maximum number of years and months of Benefit Service will apply if the Benefit Formula is based on Career Average Salary. In the event a Member has completed more than 35 years of Benefit Service as of the date of his termination of employment and the Employer has not specified a maximum number of years of Benefit Service, or a maximum number of years of Benefit Service does not apply, the Member’s Retirement Allowance, with respect to Benefit Service in excess of 35 years, will be equal to 2.0% of the Member’s High-5 (or High-3 or, if Career Average Salary is used in the formula above, Career Average) Salary, both above and below the CCL. At the Employer’s election, with respect to Benefit Service completed prior to the Employer’s adoption of the integrated benefit formula in this Section 1(J), the Retirement Allowance computed with respect to such Benefit Service shall be determined by applying an annual accrual rate of 2.0% of the Member’s High-5 Salary (or High-3 Salary or, if Career Average Salary is used in the formula above, Career Average Salary), both above and below the CCL.

(K) 2.25% Integrated Benefit Formula Without Career Average Minimum

The product of:

(1) 1.75% of the Member’s High-5 (or High-3, or, effective on and after March 27, 2006, Career Average, as designated by the Employer) Salary up to the CCL, plus 2.25% of the Member’s High-5 (or High-3 or Career Average, as applicable) Salary above the CCL, multiplied by

(2) The number of years and months of Benefit Service, up to a maximum, if any, specified by the Employer, of 20, 25, 30 or 35 years; provided that no maximum number of years and months of Benefit Service will apply if the Benefit Formula is based on Career Average Salary. In the event a Member has completed more than 35 years of Benefit Service as of his Normal Retirement Date and the Employer has not specified a maximum number of years of Benefit Service, or a maximum number of years of Benefit Service does not apply, the Member’s Retirement Allowance, with respect to Benefit Service in excess of 35 years, will be equal to 2.25% of the Member’s High-5 (or High-3 or, if Career Average Salary is used in the formula above, Career Average) Salary, both above and below the CCL. At the Employer’s election, with respect to Benefit Service completed prior to the Employer’s adoption of the integrated benefit formula provided in this Section 1(K), the Retirement Allowance computed with respect to such Benefit Service shall be determined by applying an annual accrual rate of 2.25% of the Member’s High-5 Salary (or High-3 Salary or, if Career Average Salary is used in the formula above, Career Average Salary), both above and below the CCL.

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(L)	2.5% Integrated Benefit Formula Without Career Average Minimum
	The product of:

(1) 2.0% of the Member’s High-5 (or High-3, or, effective on and after March 27, 2006, Career Average, as designated by the Employer) Salary up to the CCL, plus 2.5% of the Member’s High-5 (or High-3 or Career Average, as applicable) Salary above the CCL, multiplied by

(2) The number of years and months of Benefit Service, up to a maximum, if any, specified by the Employer, of 20, 25, 30 or 35 years; provided that no maximum number of years and months of Benefit Service will apply if the Benefit Formula is based on Career Average Salary. In the event a Member has completed more than 35 years of Benefit Service as of his Normal Retirement Date and the Employer has not specified a maximum number of years of Benefit Service, or a maximum number of years of Benefit Service does not apply, the Member’s Retirement Allowance, with respect to Benefit Service in excess of 35 years, will be equal to 2.5% of the Member’s High-5 (or High-3 or, if Career Average Salary is used in the formula above, Career Average) Salary, both above and below the CCL. At the Employer’s election, with respect to Benefit Service completed prior to the Employer’s adoption of the integrated benefit formula provided in this Section 1(L), the Retirement Allowance computed with respect to such Benefit Service shall be determined by applying an annual accrual rate of 2.5% of the Member’s High-5 Salary (or High-3 Salary or, if Career Average Salary is used in the formula above, Career Average Salary), both above and below the CCL.

(M)	2.75% Integrated Benefit Formula Without Career Average Minimum
	The product of:

(1) 2.25% of the Member’s High-5 (or High-3, or, effective on and after March 27, 2006, Career Average, as designated by the Employer) Salary up to the CCL, plus 2.75% of the Member’s High-5 (or High-3 or Career Average, as applicable) Salary above the CCL, multiplied by

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(2) The number of years and months of Benefit Service, up to a maximum, if any, specified by the Employer, of 20, 25, 30 or 35 years; provided that no maximum number of years and months of Benefit Service will apply if the Benefit Formula is based on Career Average Salary. In the event a Member has completed more than 35 years of Benefit Service as of his Normal Retirement Date and the Employer has not specified a maximum number of years of Benefit Service, or a maximum number of years of Benefit Service does not apply, the Member’s Retirement Allowance, with respect to Benefit Service in excess of 35 years, will be equal to 2.75% of the Member’s High-5 (or High-3 or, if Career Average Salary is used in the formula above, Career Average) Salary, both above and below the CCL. At the Employer’s election, with respect to Benefit Service completed prior to the Employer’s adoption of the integrated benefit formula provided in this Section 1(M), the Retirement Allowance computed with respect to such Benefit Service shall be determined by applying an annual accrual rate of 2.75% of the Member’s High-5 Salary (or High-3 Salary or, if Career Average Salary is used in the formula above, Career Average Salary), both above and below the CCL.

(N) 3% Integrated Benefit Formula Without Career Average Minimum

The product of:

(1) 2.5% of the Member’s High-5 (or High-3, or, effective on and after March 27, 2006, Career Average, as designated by the Employer) Salary up to the CCL, plus 3.0% of the Member’s High-5 (or High-3 or Career Average, as applicable) Salary above the CCL, multiplied by

(2) The number of years and months of Benefit Service, up to a maximum, if any, specified by the Employer, of 20, 25, 30 or 35 years; provided that no maximum number of years and months of Benefit Service will apply if the Benefit Formula is based on Career Average Salary. In the event a Member has completed more than 35 years of Benefit Service as of his Normal Retirement Date and the Employer has not specified a maximum number of years of Benefit Service, or a maximum number of years of Benefit Service does not apply, the Member’s Retirement Allowance, with respect to Benefit Service in excess of 35 years, will be equal to 3% of the Member’s High-5 (or High-3 or, if Career Average Salary is used in the formula above, Career Average) Salary, both above and below the CCL. At the Employer’s election, with respect to Benefit Service completed prior to the Employer’s adoption of the integrated benefit formula provided in this Section 1(N), the Retirement Allowance computed with respect to such Benefit Service shall be determined by applying an annual accrual rate of 3.0% of the Member’s High-5 Salary (or High-3 Salary or, if Career Average Salary is used in the formula above, Career Average Salary), both above and below the CCL.

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(O) Integrated Fixed Percentage Formulas with 25 Years of Benefit Service Requirement

The product of:

(1) Any percentage commencing with 25% and not exceeding 62.5% (in increments of 6.25%), as designated by the Employer, of the Member’s High-5 (or High-3, as designated by the Employer) Salary up to the CCL, plus

(2) The sum of (i) the percentage designated in paragraph (1) of this Subsection (O) and (ii) 12.5% multiplied by the Member’s High-5 (or High-3) Salary above the CCL, for each Member who completes 25 years of Benefit Service as of his Normal Retirement Date.

If a Member does not complete 25 years of Benefit Service as of his Normal Retirement Date, his Retirement Allowance under this Section 1(O) shall be multiplied by a fraction, the numerator of which is the number of years and months of Benefit Service completed as of his Normal Retirement Date and the denominator of which is 25.

(P) Integrated Fixed Percentage Formulas with 30 Years of Benefit Service Requirement

The product of:

(1) Any percentage commencing with 30% and not exceeding 75% (in increments of 7.5%), as designated by the Employer, of the Member’s High-5 (or High-3, as designated by the Employer) Salary up to the CCL, plus

(2) The sum of (i) the percentage designated in paragraph (1) of this Subsection (P) and (ii) 15% multiplied by the Member’s High-5 (or High-3) Salary above the CCL, for each Member who completes 30 years of Benefit Service as of his Normal Retirement Date.

If a Member does not complete 30 years of Benefit Service as of his Normal Retirement Date his Retirement Allowance under this Section 1(P) shall be multiplied by a fraction, the numerator of which is the number of years and months of Benefit Service completed as of his Normal Retirement Date and the denominator of which is 30.

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(Q)	Integrated Fixed Percentage Formulas with 35 Years of Benefit Service Requirement
	The product of:

(1) Any percentage commencing with 35% and not exceeding 82.5% as designated by the Employer of the Member’s High-5 (or High-3, as designated by the Employer) Salary up to the CCL,

(2) The sum of (i) the percentage designated in paragraph (1) of this Subsection (Q) and (ii) 17.5% multiplied by the Member’s High-5 (or High-3) Salary above the CCL for each Member who completes 35 years of Benefit Service as of his Normal Retirement Date.

If a Member does not complete 35 years of Benefit Service as of his Normal Retirement Date, his Retirement Allowance under this Section 1(Q) shall be multiplied by a fraction, the numerator of which is the number of years and months of Benefit Service completed as of his Normal Retirement Date and the denominator of which is 35.

(R) Cash Balance Accounts

(1) In lieu of the benefits provided under any other Section of this Subsection 1, an Employer may elect to provide, for its eligible Members, benefits under this Section 1(R). A Member’s accrued benefit under this Section 1(R) shall be his Cash Balance Account calculated hereunder with hypothetical interest allocations to normal retirement age and then converted to the normal Retirement Allowance, but subject to the additional and minimum benefit provisions of (3) below. The Cash Balance Account is not an actual account to which Pentegra DB Plan assets and investment income are allocated. A Member’s Cash Balance Account balance shall be credited with interest at the rate specified in Subsection (2)(iv) to the Member’s Retirement Date. The normal Retirement Allowance at the Member’s normal retirement age shall be computed using the following actuarial basis:

(i) For Employers that offer a lump sum payment option under the Pentegra DB Plan, the “applicable mortality table” under Section 417(e)(3)(A)(ii)(I) of the IRC and the interest rate which shall be the yield on 30-year Treasury Constant Maturities (or such other analogous rate prescribed by the IRS); or

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(ii) for Employers that do not offer a lump sum payment option under the Pentegra DB Plan, the George B. Buck 1989 unisex mortality table and eight (8%) percent interest.

No employee contributions shall be required or allowed to a Cash Balance Account.

(2) A Member’s Cash Balance Account consists of the sum of the following hypothetical credits: a “Basic Employer Allocation,” a “Supplemental Employer Allocation” (if any), an “Initial Employer Allocation” (if any) and an “Interest Allocation” credited on the Cash Balance Account balance. These hypothetical allocations are determined as follows:

(i) Basic Employer Allocation. For each calendar year in which the Member has Salary, his Cash Balance Account shall receive, as of the last day of the calendar year, an allocation equal to the product of Salary and a percentage determined under one of the schedules enumerated below, as designated by the Employer,

(a)

Uniform Allocation Percentage. Any percentage between 4% and 15% (determined in 0.5% increments), as designated by the Employer.

(b)

Graded Allocation Percentage Depending on Attained Age with Increases of 1%. An initial percentage of 3% or more (in increments of 1%), as designated by the Employer, for ages 0 to 29, increasing by 1% for each “n” year age group thereafter but with no further increase after age 60. “n” may be 5 or 10 years as designated by the Employer. The attained age for this purpose will be determined as the Member’s age on his birthday in the year.

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(c)	Graded Allocation Percentage Depending on Attained Age with Increases of 2%. An initial percentage of 6% or more (in increments of 1%), as designated by the Employer, for ages 0 to 29, increasing by 2% for each 10 year age group thereafter but with no further increase after age 60. The attained age for this purpose will be determined as the Member’s age on his birthday in the year.
(d)	Graded Allocation Percentage Depending on Attained Age with Increases of 1%/2%. An initial percentage of 4% or more (in increments of 1%), as designated by the Employer, for ages 0 to 29, increasing by 1% for each of the next four 5-year age groups and by 2% for each 10-year age group thereafter but with no further increase after age 60. The attained age for this purpose will be determined as the Member’s age on his birthday in the year.
(e)	Graded Allocation Percentage Depending on Years of Benefit Service, with Increases of 1%. An initial percentage of 3% or more (in increments of 1%), as designated by the Employer, for the first “n” years of Benefit Service, increasing by 1% for each “n” years thereafter but with no further allocation after the “m“th year of Benefit Service. “n” may be 5 or 10 years, and “m” may be 20, 25, 30, 35, 40 or unlimited years of Benefit Service, both “n” and “m” as designated by the Employer.
(f)	Graded Allocation Percentage Depending on Years of Benefit Service, with Increases of 2%. An initial percentage of 6% or more (in increments of 1%), as designated by the Employer, for the first 10 Years of Benefit Service, increasing by 2% for each “n” years thereafter but with no further allocation after the “m“th year of Benefit Service. “n” may be 5 or 10 years and “m” may be 20, 25, 30, 35, 40 or unlimited years of Benefit Service, as designated by the Employer.

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(g)	Graded Allocation Percentage Depending on Years of Benefit Service with Increases of 1%/2%. An initial percentage of 4% or more (in increments of 1%), as designated by the Employer, for the first 5 Years of Benefit Service, increasing by 1% for each 5 years thereafter up to 20 years of Benefit Service, and increasing by 2% for each 10 years thereafter, but with no further allocation after the “m“th year of Benefit Service. “m” may be 20, 25, 30, 35, or 40 or unlimited years of Benefit Service, as designated by the Employer.
(h)	Graded Allocation Percentage Depending on Age-Service Points, with Increases of 1%. An initial percentage of 3% or more (in increments of 1%), as designated by the Employer, for any year in which the Member’s points total 29 or less, plus 1% for each additional 10 points, up to a maximum of “m” points. A Member’s points in a Plan Year shall be the sum of his age on his birthday in the year plus his whole years of Benefit Service as of the end of the year. “m” may be 60, 70, 80, 90 or 100, as designated by the Employer.
(i)	Graded Allocation Percentage Depending on Age-Service Points, with Increases of 2%. An initial percentage of 6% or more (in increments of 1%), as designated by the Employer, for any year in which the Member’s points total 29 or less, plus 2% for each additional 10 points up to a maximum of “m” points. A Member’s points in a Plan Year shall be the sum of his age on his birthday in the year plus his whole years of Benefit Service as of the end of the year. “m” may be 60, 70, 80, 90 or 100, as designated by the Employer.
(j)	Graded Allocation Percentage Depending on Age-Service Points, with Increases of 1%/2%. An initial percentage of 4% or more (in increments of 1%), as designated by the Employer, for any year in which the Member’s points total 29 or less, plus 1% for each additional 10 points up to a total of 69 points, plus 2% for each additional 10 points up to a maximum of “m” points. A Member’s points in a Plan Year shall be the sum of his age on his birthday in the year plus his whole years of Benefit Service as of the end of the year. “m” may be 60, 70, 80, 90 or 100, as designated by the Employer.

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(ii) Supplemental Employer Allocation. For each Plan Year in which the Member has Salary in excess of the taxable wage base (as defined for purposes of the Old Age Survivor Disability Insurance portion of the Federal Insurance Contribution Act tax) for such year, his Cash Balance Account shall receive, as of the last day of the Plan Year, an additional 0% to 3% (in increments of 0.5%), as designated by the Employer, of the Member’s Salary in excess of the taxable wage base in the year, (provided the percentage chosen does not cause the Pentegra DB Plan to violate the backloading rules in Section 411(b) of the IRC for any actual or potential Member).

(iii) Initial Employer Allocation. If the Employer so elects, each Member who accrued a retirement benefit under the Pentegra DB Plan at the date on which the Cash Balance Account becomes effective shall have his Cash Balance Account credited with an initial employer allocation equal to the actuarial equivalent lump sum present value of his accrued benefit under the Pentegra DB Plan, reduced by the value of any Employee contributions, with such accrued benefit measured by the Member’s normal Retirement Allowance commencing at his Normal Retirement Date under the Pentegra DB Plan. The initial employer allocation shall be credited to the Member’s Cash Balance Account on the first day of the first month in which his Employer elects to participate in this Cash Balance Account. For the purpose of this subparagraph, actuarial equivalent shall be based upon the actuarial equivalent basis as designated by the Employer.

(iv) Interest Allocation. Each plan month beginning after the Employer elects to participate in the Cash Balance Account and prior to the date the Member commences distribution under the Pentegra DB Plan, a Member’s Cash Balance Account shall receive an Interest Allocation calculated as set forth below.

(a) The annual interest rate used for a calendar year shall be determined as of the end of the prior calendar year and shall be one of the following, as designated by the Employer, or 4% if greater.

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(1)	The discount rate on 3-month Treasury Bills with a margin of an additional amount of 0 to 175 basis points (in 25 basis point increments), as designated by the Employer.
(2)	The discount rate on 6-month or 12-month Treasury Bills with a margin of an additional amount of 0 to 150 basis points (in 25 basis point increments), both as designated by the Employer.
(3)	The yield on 1-year Treasury Constant Maturities with a margin of an additional amount of 0 to 100 basis points (in 25 basis point increments), as designated by the Employer.
(4)	The yield on 2-year or 3-year Treasury Constant Maturities with a margin of an additional amount of 0 to 50 basis points (in 25 basis point increments), both as designated by the Employer.
(5)	The yield on 5-year or 7-year Treasury Constant Maturities with a margin of an additional amount of 0 or 25 basis points, both as designated by the Employer.
(6)	The yield on 10-year or longer Treasury Constant Maturities as designated by the Employer.
(7)	The change in the annual rate of the Consumer Price Index from the preceding year with a margin of an additional amount of 0 to 3% (in 0.5% increments), as designated by the Employer.

(b) Interest will be credited monthly as of the last business day of each month. Each Member’s Cash Balance Account will be increased by the monthly interest equivalent of the annual interest rate selected above.

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(3)

Additional and Minimum Benefits. A Member whose Employer does not elect to make an Initial Employer Allocation under (2)(iii) above shall have his accrued benefit increased by his accrued benefit immediately prior to the date on which the Cash Balance Account becomes effective, such additional accrued benefit being payable pursuant to the terms of his Employer’s agreement under the Pentegra DB Plan in effect on said date. A Member whose Employer makes an Initial Employer Allocation under (2)(iii) shall be entitled to an accrued benefit at least equal to his accrued benefit immediately prior to the date on which the Cash Balance Account becomes effective, such benefit being paid pursuant to the terms of his Employer’s agreement under the Pentegra DB Plan in effect on said date.

(4)

Special Transition Benefit. Provided that the Special Transition Benefit does not cause the plan to discriminate in favor of Highly Compensated Employees, the Employer may designate some or all of its Employees on the date the Cash Balance Account becomes effective to (i) continue to accrue benefits under the prior plan arrangement of the Employer for a designated period of time, (ii) provide an enhanced basis for determining the Initial Employer Allocation, or (iii) provide additional pay credits based upon a percentage of pay or based upon a percentage of pay for each year of Benefit Service.

(S) Pension Equity Benefit

(1)

In lieu of the benefits provided under any other Section of this Section 1, an Employer may elect to provide, on a uniform basis for its Members, benefits under this Section 1(S). A Member’s accrued benefit under this Section 1(S) shall be his Pension Equity Benefit calculated hereunder, and then converted to the Member’s normal Retirement Allowance, but subject to the additional and minimum benefit provisions of (3) below. The normal Retirement Allowance at normal retirement age shall be computed on the basis in Article V, Section 1(R)(1). No employee contributions shall be required or allowed in determining the amount of a Pension Equity Benefit.

(2)

A Member’s Pension Equity Benefit consists of the sum of a “Basic Employer Benefit,” a “Supplemental Employer Benefit” (if any) and an “Initial Employer Benefit” (if any). These benefits are determined as follows:

(i) Basic Employer Benefit. The Member’s High-5 Salary or High-3 Salary, as designated by the Employer, multiplied by the aggregate of the Member’s core percentages determined, for each year of Benefit Service of the Member, under one of the schedules below, as designated by the Employer.

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(a)	Uniform Core Percentage. Any percentage between 5% and 20% (determined in 0.25% increments), as designated by the Employer.
(b)	Graded Core Percentage Depending on Attained Age with Increases of 1%. An initial percentage of 3% or more (in increments of 1%), as designated by the Employer, for ages 0 to 29, increasing by 1% for each “n” year age group thereafter but with no further increase after age 60. “n” may be 5 or 10 years as designated by the Employer. The attained age for this purpose will be determined as the Member’s age on his birthday in the year.
(c)	Graded Core Percentage Depending on Attained Age with Increases of 2%. An initial percentage of 6% or more (in increments of 1%), as designated by the Employer, for ages 0 to 29, increasing by 2% for each 10 year age group thereafter but with no further increase after age 60. The attained age for this purpose will be determined as the Member’s age on his birthday in the year.
(d)	Graded Core Percentage Depending on Attained Age with Increases of 1%/2%. An initial percentage of 4% or more (in increments of 1%), as designated by the Employer, for ages 0 to 29, increasing by 1% for each of the next four 5-year age groups and by 2% for each 10-year age group thereafter but with no further increase after age 60. The attained age for this purpose will be determined as the Member’s age on his birthday in the year.
(e)	Graded Core Percentage Depending on Years of Service with Increases of 1%. An initial percentage of 3% or more (in increments of 1%), as designated by the Employer, for the first “n” years of Benefit Service, increasing by 1% for each “n” years thereafter but with no further allocation after the “m”th year of Benefit Service. “n” may be 5 or 10 years, and “m” shall be 20, 25, 30, 35, 40 or unlimited years of Benefit Service, both “n” and “m” as designated by the Employer.

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(f)	Graded Core Percentage Depending on Years of Service, with Increases of 2%. An initial percentage of 6% or more (in increments of 1%), as designated by the Employer, for the first 10 years of Benefit Service, increasing by 2% for each 10 years thereafter but with no further allocation after the “m“th year of Benefit Service. “m” shall be 20, 25, 30, 35, 40 or unlimited years of Benefit Service, as designated by the Employer.
(g)	Graded Core Percentage Depending on Years of Service, with Increases of 1%/2%. An initial percentage of 4% or more (in increments of 1%), as designated by the Employer, for the first 5 years of Benefit Service, increasing by 1% for each 5 years thereafter up to 20 years of Benefit Service, and increasing by 2% for each 10 years thereafter, but with no further allocation after the “m“th year of Benefit Service. “m” shall be 20, 25, 30, 35, 40 or unlimited years of Benefit Service, as designated by the Employer.
(h)	Graded Core Percentage Depending on Age-Service Points, with Increases of 1%. An initial percentage of 3% or more (in increments of 1%), as designated by the Employer, for any year in which the Member’s points total 29 or less, plus 1% for each additional 10 points, up to a maximum of “m” points. A Member’s points in a Plan Year shall be the sum of his age on his birthday in the year plus his whole years of Benefit Service as of the end of the year. “m” shall be 60, 70, 80, 90 or 100, as designated by the Employer.
(i)	Graded Core Percentage Depending on Age-Service Points, with Increases of 2%. An initial percentage of 6% or more (in increments of 1%), as designated by the Employer, for any year in which the Member’s points total 29 or less, plus 2% for each additional 10 points. A Member’s points in a Plan Year shall be the sum of his age on his birthday in the year plus his whole years of Benefit Service as of the end of the year. “m” shall be 60, 70, 80, 90 or 100, as designated by the Employer.

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(j) Graded Core Percentage Depending on Age-Service Points, with Increases of 1%/2%. An initial percentage of 4% or more (in increments of 1.0%), as designated by the Employer, for any year in which the Member’s points total 29 or less, plus 1% for each additional 10 points up to a total of 69 points, plus 2% for each additional 10 points. A Member’s points in a Plan Year shall be the sum of his age on his birthday in the year plus his whole years of Benefit Service as of the end of the year. “m” shall be 60, 70, 80, 90 or 100, as designated by the Employer.

(ii)

Supplemental Employer Benefit. The excess of the Member’s High-5 Salary or High-3 Salary, as designated by the Employer under (2)(i) above, over the Member’s CCL multiplied by the Member’s Excess Percentage. The Member’s Excess Percentage shall be calculated as 0% to 3% (in increments of 0.5%), as designated by the Employer (provided the percentage chosen does not cause the Pentegra DB Plan to violate the backloading rules of IRC Section 411(b) for any actual or potential Member), for each year of Benefit Service of the Member.

(iii)

Initial Employer Benefit. If the Employer so elects, each Member who accrued a retirement benefit under the Pentegra DB Plan at the date on which the Pension Equity Benefit becomes effective shall have the aggregate of his Core Percentages and the aggregate of his Supplemental Percentages increased to reflect what the percentages would have been had the Pension Equity Benefit been in effect during all the Member’s years of Benefit Service.

(3) Additional and Minimum Benefits. A Member whose Employer does not elect to make an initial employer benefit allocation under (2)(iii) above shall have his accrued benefit increased by his accrued benefit immediately prior to the date on which the Pension Equity Benefit becomes effective, such additional accrued benefit being payable pursuant to the terms of his Employer’s agreement under the plan on said date. A Member whose Employer makes an initial employer benefit allocation under (2)(iii) shall be entitled to an accrued benefit at least equal to his accrued benefit immediately prior to the date on which the Pension Equity Benefit becomes effective, such benefit being paid pursuant to the terms of his Employer’s agreement under the Pentegra DB Plan in effect on said date.

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(4) Special Transition Benefit. Provided that the Special Transition Benefit does not cause the Pentegra DB Plan to discriminate in favor of Highly Compensated Employees, the Employer may designate some or all of its Employees on the date the Pension Equity Benefit becomes effective to continue to accrue benefits under the prior plan arrangement of the Employer under the Pentegra DB Plan for a designated period of time.

For an Employer which had elected an integrated benefit formula prior to July 1, 1989, and which elects any of the integrated benefit formulas described in Subsection (E), (F), (G), (H), (I), (J), (K), (L), (M), (N), (O), (P), or (Q) of this Section 1, if a Member’s Retirement Allowance determined under the prior integration formula as of June 30, 1989 exceeds the Member’s Retirement Allowance determined under the applicable integration formula described in Subsection (E), (F), (G), (H), (I), (J), (K), (L), (M), (N), (O), (P), or (Q), then the higher Retirement Allowance will be payable.

Notwithstanding anything in this Section 1 to the contrary, in no event may an Employer’s election to provide any of the benefit formulas described in this Section 1 reduce a Member’s accrued benefit below the amount of such accrued benefit determined as of the day immediately preceding the effective date for the Employer’s election of such a benefit formula under this Section 1. In addition, a Member’s Retirement Allowance determined under the applicable integration formula described in Subsection (E), (F), (G), (H), (I), (J), (K), (L), (M), (N), (O), (P), (Q), and (S) shall conform to the cumulative permitted disparity limit and the annual overall permitted disparity limit as provided under the IRS Regulations.

Should an Employer elect a benefit formula under this Section 1 which provides that its Member’s Retirement Allowance will be calculated based upon Career Average Salary, the Employer may, at its option, elect to recalculate the Member’s Salary under the Pentegra DB Plan based upon the Member’s High-5 Salary or High-3 Salary, as designated by the Employer, for Benefit Service accrued to the effective date of such amendment, provided that in no event shall the Member’s recalculated benefit be less than the benefit calculated based upon the Member’s Career Average Salary for the benefit accrued to the date of such amendment.

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SECTION 2. EARLY RETIREMENT FACTORS

(A)	An Employer shall designate early retirement factors to determine a Member’s early retirement benefits or the Employer shall adopt one of the early retirement factor tables (with interpolation made to the nearest month) provided in Appendix E and attached hereto, except that if the Employer has adopted either the Cash Balance Account or the Pension Equity Benefit, the early retirement benefits shall be determined in accordance with the following paragraph.
	A Retiree’s Cash Balance Account or Pension Equity Benefit shall be paid in accordance with the normal Retirement Allowance designated by the Employer based upon the actuarial equivalent basis provided in Article V, Section 1(R)(1).
	If a Retiree is married at the time his Retirement Allowance commences under this Section, the Equivalent Value of his Retirement Allowance shall be paid as a qualified joint and survivor annuity with his spouse as Contingent Annuitant under Option 2 or 3 of Section 1 of Article VI as designated by the Retiree, unless such Spouse consents in writing to permit the Retiree to elect a different form of allowance. If a Retiree is not married at the time his Retirement Allowance commences, his Retirement Allowance shall be paid under the plan’s normal form of payment unless an optional form of allowance as described in Section 1 of Article VI is elected by the Retiree. Where an Employer has adopted a lump sum payment option and a Member elects to receive his Retirement Allowance attributable to his Cash Balance Account in the form of a lump sum payment, such payment shall be equal to the Retiree’s Cash Balance Account balance. Notwithstanding, in the event that the annual interest rate elected by the Employer under Article V, Section (1)(R)(2)(iv) falls below 4% in the year of the distribution, a Member shall be entitled to the greater of (1) his Cash Balance Account balance and, (2) the lump sum calculated by projecting his Cash Balance Account balance with a 4% interest to the Member’s Normal Retirement Date and discounted back to the date of distribution with such annual interest rate without regard to the 4% minimum.
	Where an Employer has adopted a lump sum payment option and a Member elects to receive his Retirement Allowance attributable to his Pension Equity Benefit in the form of a lump sum payment, such payment shall be equal to the Retiree’s Pension Equity Benefit.

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(B)

If an Employer provides an integrated benefit formula, as described in Subsection (E), (F), (G), (H), (I), (J), (K), (L), (M), (N), (O), (P), or (Q) of Section 1 of this Article V, and adopts the early retirement factor table described in Table I(B) or (C), II(B) or (C) or III(B) or (C) of Appendix E, then the early retirement factor with respect to a Member’s Retirement Allowance attributable to Salary up to the CCL and computed in accordance with the accrual rate described in Subsection (E)(1), (F)(1), (G)(1), (H)(1), (I)(1), (J)(1), (K)(1), (L)(1), (M)(1), (N)(1), (O)(1), (P)(1), or Q(1) of Section 1 of this Article V (whichever shall apply), but only with respect to such Salary, shall be the applicable early retirement factor described in Appendix A.

(C)

Any Employer may, at its option, elect to provide enhanced early retirement factors effective upon a Change of Control of the Employer.

SECTION 3. DISABILITY RETIREMENT BENEFIT

(A) If an Employer has provided this benefit since its Commencement Date, then each of its Members —

(i)	who is not an inactive Member or is not on a leave of absence, and for whom contributions have not been discontinued,
(ii)	who is separated from active employment by reason of disability after the earlier of one year of Membership Service or five years of Benefit Service but before attainment of age 65, and
(iii)	who is certified by physicians designated by the Pentegra DB Plan to have a physical or mental impairment which (a) prevents him from doing any substantial gainful activity for which he is fitted by education, training or experience, and (b) is expected to last at least 12 months from the date of such separation or to result in death, shall, upon notice to the Pentegra DB Plan within 13 months of such separation date, be retired as of his Disability Retirement Date. (Receipt of proof satisfactory to the Pentegra DB Plan within 13 months after the date of such separation that the Member is eligible for, or is receiving, disability insurance benefits under Title II of the Federal Social Security Act will be deemed presumptive evidence of entitlement to a disability Retirement Allowance under this Subsection (A).)

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	If an Employer adopts this benefit subsequent to its Commencement Date, then it shall be effective for each of its Members, subject to the above conditions, no earlier than one year after notification to the Pentegra DB Plan of its adoption. Effective as of December 5, 2003, notwithstanding anything to the contrary in this Article V, Section 3(A), a Member who would otherwise be eligible for a disability Retirement Allowance pursuant to this Section 3 if the Member had not been on a leave of absence immediately before his separation from active employment will be eligible for a disability Retirement Allowance pursuant to this Section 3, if immediately before the Member’s separation from active employment by reason of disability, the Member was on a medical leave of absence related to the physical or mental impairment that would otherwise cause the Member to be eligible for such disability Retirement Allowance.
(B)	The annual disability Retirement Allowance shall be the normal Retirement Allowance (determined under Article V, Section 1) on the basis of the Member’s Salary and Benefit Service to his Disability Retirement Date, but shall not be less than 30% of his High-5 Salary.
	In no event shall the disability Retirement Allowance exceed the Retirement Allowance that the disabled Member would have received if he had continued in Service to his Normal Retirement Date and his Salary at disability had continued to such date.
(C)	The Board may require any disability Retiree who has not attained age 65 to demonstrate continuing eligibility for disability retirement benefits as often as once a year. If such a Retiree refuses or cannot demonstrate to the satisfaction of the Board that he continues to be disabled within the definition of Subsection (A) of this Section 3, then his disability allowance shall be discontinued. The disability Retiree’s disability Retirement Allowance will also cease if and when he returns to substantial gainful activity for which he is fitted by education, training or experience. In either case, it may be resumed if it is subsequently determined by the Board that the conditions of Subsection (A) of this Section 3 are again satisfied.
(D)	If the Employer has adopted either the Cash Balance Account or the Pension Equity Benefit, then a Member who would otherwise qualify as disabled under (A) above shall not have his disability benefit calculated under subsection (B), but shall instead be treated as eligible for an early retirement benefit under Article V, Section 2. In lieu of the benefit described in the preceding sentence, an eligible Member may elect to receive the disability benefit to which he would have been entitled had he become disabled on the date his Employer adopted either the Cash Balance Account or the Pension Equity Benefit but without regard to the 30% of Salary minimum described in subsection (B) above. If the alternative benefit described in the preceding sentence is elected, the Cash Balance Account or the Pension Equity Benefit will continue to grow as if the Member had terminated with a vested benefit which he chose to defer.

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SECTION 4. ADDITIONAL DEATH BENEFITS

(A) In lieu of the basic death benefit, if any, provided under Article IV, Section 3(A), an Employer may adopt an active service death benefit which is payable upon the death of a Member in Service, for whom contributions have not been discontinued, to his Beneficiary in a lump sum equal to (i) plus (ii):

(i) 100% of the Member’s last 12 months’ Salary, plus an additional 10% of such Salary for each year of Benefit Service until a maximum of 300% is attained for 20 or more years of Benefit Service. If death occurs prior to the completion of one year of Benefit Service, this part of the benefit shall be 100% of the Member’s annual Salary as of his Enrollment Date if his Salary is determined under Section (43)(A) of Article I, or his annualized Salary based on all completed months of Benefit Service prior to death if Salary is determined under Section (43)(B) or Section (43)(C) of Article I.

(ii) The Member’s Accumulated Contributions, if any.

In no event shall such lump sum be less than the lump sum which would have been payable under either Article IV, Section 3(A) or Article V, Section 4(B), whichever is applicable.

(B)

In lieu of the basic death benefit, if any, provided under Article IV, Section 3(A), an Employer (or a successor to such Employer) which was participating in the Pentegra DB Plan as of June 30, 1983 may adopt the “12 Times” retirement benefit which is payable upon the death of a Retiree, who had not elected an optional form of payment under Article VI, in a lump sum equal to the excess, if any, of (i) over (ii):

(i) An amount equal to 12 times the Retiree’s annual allowance immediately prior to the commencement of his Retirement Allowance, or as of the first day of the month in which his death occurred if he died before having received any payment of such allowance.

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(ii) The sum of the Retirement Allowance payments he had received, if any.

	This benefit shall also be payable upon the death of a Member who was eligible for early retirement at the time of death in lieu of the benefit which would have been payable under Article IV, Section 3(A).
(C)	In lieu of the basic death benefit, if any, provided under Article IV, Section 3(A), an Employer may adopt an active service death benefit which is payable upon the death of a Member in Service, for whom contributions have not been discontinued, to his Beneficiary in a lump sum equal to (i) a multiple of the Member’s projected monthly Retirement Allowance which shall be not less than 50 times and not greater than 100 times the projected monthly Retirement Allowance plus (ii) the Member’s Accumulated Contributions, if any.
	In no event shall such lump sum be less than the lump sum which would have been payable under either Article IV, Section 3(A) or Article V, Section 4(B), whichever is applicable.
	Should an Employer elect to provide the active service death benefit under this subsection (C) of Section 4, such provision shall not be effective until one (1) year following the adoption by the Employer unless the Employer provided such death benefit prior to the Employer’s Commencement Date.

SECTION 5. RETIREMENT ADJUSTMENT PAYMENT

(A)

An Employer which was participating as of June 30, 1983 may provide this benefit to those of its Members who (i) were enrolled prior to July 1, 1983 and (ii) retire after attainment of age 55.

(B)

The Retirement Adjustment Payment shall be a single lump sum equal to three monthly installments of his Retirement Allowance (before any optional modification) determined and payable as of the date his Retirement Allowance payments commence. If a Retiree, who would otherwise be eligible to receive such a payment, dies prior to such date, his Retirement Adjustment Payment shall be determined as though his Retirement Allowance payments had commenced as of the first day of the month in which his death occurred, and shall be payable to his Beneficiary.

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SECTION 6. POST-RETIREMENT SUPPLEMENTS

(A)	(1) Annual 1%, 2% or 3% Increment:
	Subject to Section 11.1, an Employer may provide an annual increment which shall be paid to each of its Retirees who has attained age 66 and is receiving his annual Retirement Allowance. Each annual increment shall be an amount equal to 1%, 2% or 3%, as the Employer may elect, of the Retiree’s annual Retirement Allowance multiplied by the number of years from the calendar year in which he attained age 65 to the current year at the end of which such increment is payable. Upon the Retiree’s death, no further amount shall be payable in respect of this benefit, except that if he had elected a Contingent Annuitant under Article VI who is alive on the later of (a) the date of the Retiree’s death or (b) the date the Retiree would have attained age 66, such Contingent Annuitant shall thereafter be entitled to an annual increment equal to 1%, 2% or 3%, as the case may be, of the Contingent Annuitant’s annual allowance multiplied by the number of years from the calendar year in which the Retiree had attained age 65 (or would have attained age 65 if he died prior thereto) to the current year at the end of which such increment is payable. Upon the Contingent Annuitant’s death, no further amount shall be payable in respect of this benefit.
(2)	Subject to Section 11.1, an Employer may alternatively provide an annual increment which shall be paid to each of its Retirees who has retired on an Early Retirement Date (or retired and subsequently attained the age in the Early Retirement Date) as specified by the Employer and is receiving his annual Retirement Allowance. Each annual increment shall be an amount equal to 1%, 2% or 3%, as the Employer may elect, of the Retiree’s annual Retirement Allowance multiplied by the number of years from the calendar year in which he commences benefits to the current year at the end of which such increment is payable. Alternatively, the annual increment shall be an amount equal to 1%, 2% or 3%, as the Employer may elect, of the Employee’s annual Retirement Allowance each year prior to the attainment of age 66 and thereafter multiplied by the number of years from the calendar year in which he attained age 65 to the current year at the end of which the increment is payable. Further, if an Employer has elected that this subsection apply, notwithstanding the foregoing, the Employer shall

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provide an annual increment that shall be paid to each of its Retirees who commence benefits after the attainment of age 65 and is receiving his annual Retirement Allowance. That annual increment shall be an amount equal to 1%, 2% or 3%, as the Employer elects, of the Retiree’s annual Retirement Allowance multiplied by the number of years from the calendar year in which the Retiree attained age 65 to the current year at the end of which such increment is payable. Upon the Retiree’s death, no further amount shall be payable in respect of this benefit, except that if he had elected a Contingent Annuitant under Article VI who is alive on the later of (a) the date of the Retiree’s death or (b) the date the Retiree’s annual increment would have been payable had the retiree who had retired eligible for such increment lived, such Contingent Annuitant shall thereafter be entitled to an annual increment equal to 1%, 2% or 3%, as the case may be, of the Contingent Annuitant’s annual allowance multiplied by the number of years from the calendar year in which the Retiree commenced benefits (or had attained age 65 if the Retiree commences benefits after age 65, or would have attained age 65 if he died without having commenced benefits prior thereto) to the current year at the end of which such increment is payable (or, alternatively, equal to 1%, 2% or 3%, as the case may be, of the Contingent Annuitant’s annual allowance each year perior to when the Retiree would have attained age 66 and thereafter multiplied by the number of years from the calendar year in which the Retiree attained age 65 or would have attained age 65 to the current year at the end of which the increment is payable). Upon the Contingent Annuitant’s death, no further amount shall be payable in respect of this benefit.

(B)	Single Fixed Percentage Adjustment:
	Subject to Section 11.1, an Employer may provide, as of any January 1, a fixed percentage supplement for each of its then eligible Retirees, determined under one of the following formulas:

(a)	1% or more of the annual Retirement Allowance for each completed year of retirement after attainment of the minimum under one of the following formulas.
(b)	A single percentage uniformly applicable to all those eligible.

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For purposes of this Subsection (B), an eligible Retiree is one who (i) has retired prior to the effective date of the supplemental benefit described in this Subsection (B) and (ii) has attained the minimum age specified by his Employer. Such minimum age may be any age not less than 45 and not greater than 66, and shall apply uniformly to all Retirees of the Employer. The supplement shall be paid each January beginning with the effective date (providing the Retiree has begun receiving his annual allowance) and ending in the year in which the Retiree dies, except that if he had elected a Contingent Annuitant under Article VI who is alive on the date of the Retiree’s death, such Contingent Annuitant shall thereafter be entitled to an annual supplement determined by multiplying the fixed percentage by the Contingent Annuitant’s annual allowance and ending in the year in which the Contingent Annuitant dies. If the fixed percentage supplement provided for a Retiree is not paid due to the Retiree’s deferral of commencement of allowance payments, it shall be paid beginning with the January 1 coincident with or following the date his Retirement Allowance payments commence and shall be determined by multiplying the fixed percentage provided by the Employer by the annual Retirement Allowance determined at the time payments commence.

SECTION 7. SUPPLEMENTAL EARLY RETIREMENT WINDOW BENEFIT

(A)

Subject to the provisions of this Section 7 and Section 11.1, an Employer may provide for each Member who has satisfied the eligibility requirements specified in Subsection (D) of this Section 7, a supplemental early retirement window benefit determined pursuant to the formula elected in Subsection (E) of this Section 7 and payable in accordance with Articles IV and V. Any such supplemental early retirement window benefit shall not be deemed to be in lieu of any of the other additional benefits described in this Article V. A Member who does not meet the eligibility requirements of Subsection (D) of this Section 7 or who does not terminate employment within the time period described in Subsection (B) of this Section 7 will not be entitled to any additional benefits pursuant to this Section 7.

(B)

The Employer shall select a time period of not less than 45 days nor more than 90 days from the effective date of its adoption of the supplemental early retirement window benefit during which an eligible Member may elect such benefit. A Member must agree to retire during the period described in the preceding sentence in order to be eligible for the benefit, except that an Employer may, at its option, permit Employees who elect an early retirement window benefit to terminate employment at any time (or at any time during a period of time designated by the Employer) no later than six (6) months after the close of the window period described in the preceding sentence or, alternatively, to irrevocably designate a uniform termination date no later than six (6) months after the close of such window period.

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(C) In order for an Employer to provide a supplemental early retirement window benefit pursuant to this Section 7, the following conditions must be satisfied:

(1)	At least five (5) Members must be eligible for the supplemental early retirement window benefit during the election period described in Subsection (B) of this Section 7;
(2)	The Employer must comply with all procedural rules established by the Pentegra DB Plan with regard to the implementation and operation of such supplemental early retirement window benefit;
(3)	The Employer must indemnify the Pentegra DB Plan in a manner satisfactory to the Pentegra DB Plan against any and all losses and expenses incurred by the Pentegra DB Plan (including reasonable legal fees) arising out of the Employer’s adoption of the early retirement window benefit; and
(4)	Any other conditions which the Pentegra DB Plan, the IRS or any other governmental authority might require.

(D) An Employer must establish an eligibility requirement, uniformly applicable to all of its Employees, which must be satisfied by a Member as of the effective date of the adoption of the supplemental early retirement window benefit in order for the Member to be eligible for such benefit. The eligibility requirement referred to in the preceding sentence can be:

(1)	A minimum age of not less than 45;
(2)	A minimum total of age and Vesting Service of not less than 70; or
(3)	A minimum age of not less than 45 and a minimum number of years of Vesting Service where the specified years of Vesting Service of not less than five (5).

Notwithstanding anything in this Subsection (D) of this Section 7 to the contrary, an Employer may elect to restrict the eligibility for the supplemental early retirement window benefit under this Section 7 to (i) those Members who are Non-highly Compensated Employees, (ii) those Members who are not inactive Members, as described in Article X, Section 3, (iii) those Members employed at a bona-fide geographical location or in a certain job function or job classification designated by the Employer, (iv) those Highly Compensated Employees who are excluded by their title at the election of the Employer, or (v) those Members who provide the Employer with a valid waiver of certain legal rights of the Member, provided that in such case the Employer shall have the sole responsibility to determine whether any such waiver is valid and enforceable under applicable law.

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(E) Upon the termination of employment of an eligible Member who meets the eligibility requirements of Subsection (D) of this Section 7 within the period of time specified in Subsection (B) of this Section 7, the annual Retirement Allowance otherwise determined under Article IV and this Article V for such Member will be increased by the difference, if any, that results from determining such benefit based on one or more of the following:

(1)	the Benefit Service and Vesting Service credited to the Member as of his termination date, plus 1 to 10 years, as may be designated by the Employer in its election of this feature;
(2)	the early retirement reduction percentage (if any) based upon the Member’s actual age at commencement of his Retirement Allowance plus 1 to 10 years, as may be designated by the Employer in its election of this feature;
(3)	no early retirement reduction, or a 1.5% or 3% early retirement reduction percentage for each year the Retirement Allowance commences before the Member’s Normal Retirement Date, as may be designated by the Employer in its election of this feature; and/or
(4)	the addition of a fixed dollar amount, as may be designated by the Employer, to the Member’s normal Retirement Allowance payable at the Member’s age 65.

The adoption by an Employer of any of the features described in this Subsection (E) of this Section 7 shall apply uniformly to all Members employed by such Employer who meet the eligibility requirements of Subsection (D) of this Section 7. In no event shall an increase in a Member’s Retirement Allowance under the provisions of this Section 7 be deemed to increase such Member’s Vesting Service or Benefit Service for any other purposes under the Comprehensive Retirement Program. Notwithstanding the foregoing in this Subsection (E) of this Section 7, if an Employer has elected to provide normal retirement benefits on the basis of one of the integrated benefit formulas described in Subsection (E), (F), (G), (H), (I), (J), (K), (L), (M), (N), (O), (P), or (Q) of Section 1 of this Article V, the special early retirement reduction provided in Paragraph (2) of this Subsection (E) and the elimination of an early retirement reduction factor provided in Paragraph (3) of this Subsection (E) shall not apply; provided, however, such Employer may elect to provide any of such early retirement reductions but only with regard to a Member’s benefit which accrues with respect to the Member’s Salary up to the CCL.

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(F) The Pentegra DB Plan reserves the right to deny an Employer the right to adopt the supplemental early retirement window benefit described in this Section 7 if it determines, in its sole discretion, that the adoption by such Employer would result in the provision of benefits that would not satisfy the requirements of IRC Section 401(a)(4) (or any applicable IRS Regulations thereunder) or which would in any other way adversely affect the tax-qualified status of the Regulations and the tax-exempt status of the Trust under IRC Sections 401(a) and 501(a), respectively.

SECTION 8. REDUCTION IN ACCRUAL RATE FOR CERTAIN EMPLOYEES

An Employer may elect, on a prospective basis only, to reduce the benefit accrual rate which shall apply to the calculation of the normal retirement benefit with respect to certain Members, designated by the Employer, who constitute Highly Compensated Employees, provided that (i) the Employer certifies to the Pentegra DB Plan in writing that such a reduction in the benefit accrual rate is required by the Office of Thrift Supervision or such other regulatory authority and (ii) the IRS approves such a reduction in the benefit accrual rate. If an Employer elects, in accordance with this Section 8, to reduce the accrual rate of certain Members, the Employer shall, to the extent a cessation of future benefit accruals is not required, select one of the benefit formulas provided in Article V, Section 1 to apply with respect to the future accrual of benefits for such Members.

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ARTICLE VI OPTIONAL FORMS OF PAYMENT

SECTION 1. OPTIONS

Any Member or Retiree may elect, subject to Section 2 of this Article VI, to convert his Retirement Allowance and the death benefit, if applicable, described in Article IV, Section 3(A), Article IV, Section 3(B) or in Article V, Section 4(B), whichever is applicable, to a retirement benefit of Equivalent Value under one of the following options:

Option 1.	A larger Retirement Allowance during the Retiree’s life, but at his death all payments shall cease and no further amounts shall be due or payable. This option shall not apply to Members whose Employer adopted the Straight Life Annuity as the payment form for the Member’s normal Retirement Allowance.
Option 2.	A modified Retirement Allowance to be paid to the Retiree for his life and, after his death, an allowance at the same rate to be paid to his Contingent Annuitant (should the latter survive the Retiree) for life commencing on the first day of the month in which the Retiree’s death occurs. If both the Retiree and his Contingent Annuitant die before 120 monthly installments have been paid, the Commuted Value of such unpaid installments shall be paid in a lump sum to a Beneficiary designated by the Retiree, or, if there is no designated Beneficiary, to the estate of the survivor of the Retiree and his Contingent Annuitant (presuming the Retiree to be the survivor if they die within 24 hours of each other). Upon the death of the survivor of the Retiree and his Contingent Annuitant after 120 monthly installments have been paid, all payments shall cease and no further amounts shall be due or payable.
Option 3.	A modified Retirement Allowance to be paid to the Retiree for his life and, after his death, an allowance at one-half the rate to be paid to his Contingent Annuitant (should the latter survive the Retiree) for life commencing on the first day of the month in which the Retiree’s death occurs. Upon the death of the survivor of the Retiree and his Contingent Annuitant, all payments shall cease and no further amounts shall be due or payable.
Option 4.	A revised Retirement Allowance during the Retiree’s life with some other benefit payable upon his death, provided that such benefit be approved by the Pentegra DB Plan and be in compliance with the applicable provisions of the IRC, including Section 401(a)(9) thereof.

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SECTION 2. CONDITIONS OF ELECTION

(A)	The procedure for making an election or revocation with respect to any of the options described in Section 1 of this Article VI shall be in compliance with ERISA, the IRC and, as applicable, Section 14.4 and shall be communicated by the Pentegra DB Plan to the retiring Member. Thereafter the retiring Member shall have 90 days (or such longer period as may be required by ERISA) within which to make his election or revocation so long as it is filed with the Pentegra DB Plan prior to the date on which his Retirement Allowance commences.
(B)	If a retiring Member or his Contingent Annuitant dies before the date his Retirement Allowance commences or before the date he receives a lump sum settlement pursuant to Article VII, the benefit payable shall be the death benefit under Article IV or Article V, whichever is applicable, provided that such benefit shall not be less than the death benefit attributable to the form of payment, including a lump sum, elected or the regular form of payment, whichever is greater. If a disability Retiree whose allowance has already commenced dies during the 90 day period following the date of his separation from active employment, the election of any option shall be inoperative.
(C)	No election under Option 2, 3 or 4 of Section 1 of this Article VI may be made which would result in an allowance to the Retiree of less than 50% of the Retirement Allowance he would have received under Article VI, Section 1, Option 1.

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ARTICLE VII METHOD OF PAYMENT

SECTION 1.

If a Retiree is married at the time his Retirement Allowance commences, his Retirement Allowance shall be paid as a qualified joint and survivor annuity with his Spouse as Contingent Annuitant, as described in Article VI, Section 1, Option 2 or 3, as designated by the Retiree, unless such Spouse consents in writing to permit the Retiree to elect a different form of allowance. If a Retiree is not married at the time his Retirement Allowance commences, his Retirement Allowance shall be paid as a life annuity unless an optional form of allowance as described in Article VI is elected by the Retiree. If an optional form of allowance as described in Article VI is not in effect with respect to a Retiree, his Retirement Allowance shall be paid to him during his life. Upon his death, a death benefit shall be payable if a death benefit is provided in accordance with Article IV, Section 3(C) or, if adopted by such Retiree’s Employer, Article V, Section 4(B). For purposes of this Article VII, a Retiree is not married at the time that his Retirement Allowance commences if the Member or the Member’s Spouse has obtained a court order of legal separation which has been entered by a court of competent jurisdiction prior to commencing payment of his Retirement Allowance.

SECTION 2.

(A) Unless a proper election is received by the Pentegra DB Plan, all Retirement Allowances shall be payable in substantially equivalent monthly installments commencing as of his Required Beginning Date, except that:

(1)	A normal or early Retirement Allowance may be payable to a Retiree, by written election filed with the Pentegra DB Plan, as of the first day of any month next following his Retirement Date, and
(2)	An early Retirement Allowance may not be commenced until the Retiree’s Early Retirement Date, except as may otherwise be provided under Section 2(D) or 2 (E) of Article IV.

Such installments shall continue during the life of the Retiree (except as provided otherwise under Article V, Section 3(C)), and the last installment shall be due the first day of the month in which his death occurs; except that if optional modification under Article VI has become effective the provisions thereof shall apply, and the last installment payable to a surviving Contingent Annuitant designated under such Article shall be due the first day of the month in which such Contingent Annuitant’s death occurs.

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(B) Notwithstanding the preceding Subsection (A) of this Section 2, a Retirement Allowance may be converted to a single lump sum payment of the Equivalent Value of such allowance, if an eligible Retiree as described below so elects prior to receiving his first monthly retirement payment, in the following cases:

(a)

Where that portion of the regular Retirement Allowance which is attributable to the Employer’s contributions amounts to less than $600 per year on the date such Allowance would otherwise commence; or

(b)

Where the Employer has requested, and the Pentegra DB Plan has approved, that a lump sum settlement be available and uniformly applicable upon attainment of any age between (and including) 45 and 65 as specified by the Employer (but not earlier than the minimum age specified in Article IV, Section 2(D) for the commencement of an early Retirement Allowance) to those of its Retirees who meet the following condition:

(i) Receipt by the Pentegra DB Plan of a consent (in the form prescribed by the Pentegra DB Plan) of the Member’s Spouse, if any, that such lump sum settlement be paid to the Retiree. (In any case where an Employer adopts this option and subsequently ceases to exist as an independent entity, the Retirement Committee of the Board may, in its discretion, substitute itself for such Employer for the purposes of this Article VII.)

(c) Where the Employer has requested, and the Pentegra DB Plan has approved, that a lump sum settlement be available as described in the preceding paragraph, the Member may elect to have a portion of his Retirement Allowance commence in the form of an annuity with the remaining portion of his Retirement Allowance paid in the form of a partial lump sum with the lump sum portion determined at the election of the Member to be the Equivalent Value of 25%, 50%, or 75% of the Member’s total Retirement Allowance.

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Effective October 1, 1995, the interest rate and mortality table used to calculate lump sum settlements shall be the applicable interest rate and mortality table as determined under Section 417(e) of the IRC and in accordance with the stability period and look-back month provisions described below, except that an Employer may elect to continue to apply the interest rate described in Subparagraphs (1) and (2) of the subsequent paragraph and the mortality assumptions which were in effect under the Regulations prior to October 1,1995, in which case such pre-October interest rate and mortality assumptions shall apply until June 30, 2000.

For those Employers who elected not to apply the interest and mortality table prescribed under Section 417(e) of the IRC until July 1, 2000, in no event shall the interest rate used to calculate lump sum settlements prior to July 1, 2000 exceed:

(1)	The PBGC Interest Rate if the present value of the lump sum settlement using the PBGC Interest Rate is less than $25,000, or
(2)	120% of the PBGC Interest Rate if the present value of the lump sum settlement using the PBGC Interest Rate is $25,000 or greater; except that in no event shall such lump sum settlement computed pursuant to this Subparagraph (2) be reduced below $25,000.

Effective July 1, 2000, the interest rate for all lump sum settlements shall be the applicable interest rate described in Section 417(e) of the IRC. The applicable interest rate is the rate of interest on 30-year Treasury Securities (or such other rate as may be prescribed by the Commissioner) for the third calendar month preceding the first day of the stability period. The stability period shall be the calendar month period that contains the annuity starting date for the distribution and for which the applicable interest rate remains constant. The applicable mortality table shall be the mortality table as set forth in IRS Revenue Ruling 95-6, 1995-1 C.B.80; provided, however, for distributions with annuity starting dates on or after December 31, 2002, the applicable mortality table shall be the mortality table as set forth in IRS Revenue Ruling 2001-62.

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Following the effective date of the amendment of the Regulations to replace the interest rate assumption that is based on the PBGC Interest Rate, and with respect to the calculation of lump sum settlements for which the annuity starting date occurs in the one-year period commencing at the time the plan amendment is effective, such lump sum value shall be determined using, whichever results in the larger distribution, the applicable interest rate (within the meaning of Section 417(e) of the IRC) determined for the second month preceding the month that contains the annuity starting date or the applicable interest rate for the third calendar month preceding the calendar month that contains the annuity starting date.

(C)	In no event shall the lump sum settlement payable to a Member under Subsection (B) be less than the lump sum settlement value of the Member’s accrued benefit as of September 30, 1995, if any, calculated using an interest rate, determined by the Pentegra DB Plan by reference to the last month of a calendar quarter, which shall be the average of the 10 and 20-year U.S. Treasury Bond annual yields for such month, as reported in the Federal Reserve Statistical Release (H.15), rounded to the nearest .5%; provided, however, if the annual yield of 20-year U.S. Treasury Bonds is not published, such rate shall be the annual yield of 10-year U.S. Treasury Bonds. In the absence of the Federal Reserve Statistical Release, the Pentegra DB Plan may obtain such annual yields from any other source it deems appropriate. The rate so determined shall be applicable to settlements to be paid in the calendar quarter beginning three months later.
(D)	A lump sum settlement under Subsection (B) or (C) will be the present value, calculated on the basis of the specified interest rate, of the regular form of allowance which would otherwise be payable to the Retiree under the Regulations. It will be calculated and payable as of the date on which payment of the corresponding Retirement Allowance would otherwise commence, except that no settlement under Paragraph (b) of Subsection (B) is payable prior to the age specified therein.
(E)	No Retirement Allowance or lump sum settlement shall be increased on account of any delay in payment beyond the date specified in this Article VII due to the Retiree’s failure to properly file the application form furnished by the Pentegra DB Plan or to otherwise accept such payment.

SECTION 3.

Notwithstanding anything herein to the contrary, if the Equivalent Value of a Member’s vested benefit is zero, the Member shall be deemed to have received a distribution of such benefit upon termination of employment with his Employer and shall immediately forfeit the nonvested portion of his benefit.

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SECTION 4.

This Section 4 applies to distributions made on or after January 1, 1993. Solely to the extent required under applicable law and IRS Regulations, and notwithstanding any provision of the Regulations to the contrary that would otherwise limit a Distributee’s election under this Section 4, a Distributee may elect, at the time and in the manner prescribed by the Board, to have any portion of an Eligible Rollover Distribution paid directly to an Eligible Retirement Plan specified by the Distributee in a Direct Rollover.

For purpose of this Section 4, the following terms shall have the following meanings:

(A) Eligible Rollover Distribution: Solely to the extent required under applicable law and IRS Regulations, an Eligible Rollover Distribution is any distribution of all or any portion of the balance to the credit of the Distributee, except that an Eligible Rollover Distribution does not include: any distribution that is one of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the Distributee or the joint lives (or joint life expectancies) of the Distributee and the Distributee’s designated Beneficiary, or for a specified period of ten years or more; any distribution to the extent such distribution is required under Section 401(a)(9) of the IRC; and the portion of any distribution that is not includible in gross income (determined without regard to the exclusion for net unrealized appreciation with respect to employer securities).

(B) Eligible Retirement Plan: An Eligible Retirement Plan is an individual retirement account described in Section 408(a) of the IRC, an individual retirement annuity described in Section 408(b) of the IRC, an annuity plan described in Section 403(a) of the IRC, or a qualified trust described in Section 401(a) of the IRC that accepts the Distributee’s Eligible Rollover Distribution. However, in the case of an Eligible Rollover Distribution to a surviving Spouse, an Eligible Retirement Plan is an individual retirement account or individual retirement annuity. Notwithstanding anything herein to the contrary, with respect to a Distributee that is a non-spouse beneficiary of the Member, an Eligible Retirement Plan shall mean solely an individual retirement account (described in Section 408(a) of the IRC) or an individual retirement annuity (described in Section 408(b) of the IRC) and any rollover by such a Distributee shall only be in the form of a direct trustee to trustee transfer.

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	Notwithstanding anything herein to the contrary, with respect to a Distributee that is a non-spouse beneficiary of the Member, an Eligible Retirement Plan shall mean solely an individual retirement account (described in Section 408(a) of the IRC) or an individual retirement annuity (described in Section 408(b) of the IRC) and any rollover by such a Distributee shall only be in the form of a direct trustee to trustee transfer.
(C)	Distributee: A Distributee includes an Employee or former Employee. In addition, the Employee’s or former Employee’s surviving Spouse and the Employee’s or former Employee’s Spouse or former Spouse who is an alternate payee under a Qualified Domestic Relations Order are Distributees with regard to the interest of the Employee or former Employee. Effective April 1, 2007, a Distributee shall include any non- spouse beneficiary designated by a Member under the Pentegra DB Plan.
	Effective April 1, 2007, a Distributee shall also include any non-spouse beneficiary designated by a Member under the Pentegra DB Plan.
(D)	Direct Rollover: A Direct Rollover is a payment by the Pentegra DB Plan to the Eligible Retirement Plan specified by the Distributee.

SECTION 5.

Unless the Member elects otherwise, distribution of his Retirement Allowance will begin no later than the 60th day after the latest of the close of the Plan Year in which:

(i)	the Member attains age 65;
(ii)	occurs the 10th anniversary of the year in which the Member commenced participation in the Pentegra DB Plan; or,
(iii)	the Member terminates Service with his Employer.

Notwithstanding the foregoing, the failure of a Member and Spouse to consent to a distribution before the Member attains age 65 shall be deemed to be an election to defer commencement of payment of any benefit sufficient to satisfy this Section 5.

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SECTION 6.

Notwithstanding anything in this Article VII to the contrary, the provisions of this Section 6 will apply for purposes of determining required minimum distributions for calendar years beginning with the 2006 calendar year. All distributions required under this Section 6 will be determined and made in accordance with the Treasury regulations under Section 401(a)(9) of the IRC. Notwithstanding the other provisions of this Section 6, other than the preceding sentence, distributions may be made under a designation made before January 1, 1984, in accordance with section 242(b)(2) of the Tax Equity and Fiscal Responsibility Act (TEFRA) and the provisions of the Pentegra DB Plan that relate to section 242(b)(2) of TEFRA.

(A) Time and Manner of Distribution.

(1)	Required Beginning Date. The Member’s entire interest will be distributed, or begin to be distributed, to the Member no later than the Member’s Required Beginning Date.
(2)	Death of Member Before Distributions Begin. If the Member dies before distributions begin, the Member’s entire interest will be distributed, or begin to be distributed, not later than as follows:

(a)	If the Member’s surviving spouse (whose marriage to the Member was recognized for purposes of Federal law) is the Member’s sole Designated Beneficiary, then distributions to the surviving spouse will begin by December 31 of the calendar year immediately following the calendar year in which the Member died, or by December 31 of the calendar year in which the Member would have attained age 701/2, if later.
(b)	If the Member’s surviving spouse (whose marriage to the Member was recognized for purposes of Federal law) is not the Member’s sole designated beneficiary, then distributions to the designated beneficiary will begin by December 31 of the calendar year immediately following the calendar year in which the Member died.
(c)	If there is no designated beneficiary as of September 30 of the year following the year of the Member’s death, the Member’s entire interest will be distributed by December 31 of the calendar year containing the fifth anniversary of the Member’s death.

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(d) If the Member’s surviving spouse (whose marriage to the Member was recognized for purposes of Federal law) is the Member’s sole designated beneficiary and the surviving spouse dies after the Member but before distributions to the surviving spouse begin, this Subsection (A)(2), other than Subsection (2)(a), will apply as if the surviving spouse were the Member.

For purposes of this Subsection (A)(2) and Subsection (D), distributions are considered to begin on the Member’s Required Beginning Date (or, if Subsection (A)(2)(d) applies, the date distributions are required to begin to the surviving spouse (whose marriage to the Member was recognized for purposes of Federal law) under Subsection (A)(2)(a)). If annuity payments irrevocably commence to the Member before the Member’s Required Beginning Date (or to the Member’s surviving spouse (whose marriage to the Member was recognized for purposes of Federal law) before the date distributions are required to begin to the surviving spouse under Subsection (A)(2)(a)), the date distributions are considered to begin is the date distributions actually commence.

(3)

Form of Distribution. Unless the Member’s interest is distributed in the form of an annuity purchased from an insurance company or in a single sum on or before the Required Beginning Date, as of the first Distribution Calendar Year distributions will be made in accordance with Subsections (B), (C) and (D) of this Section 6. If the Member’s interest is distributed in the form of an annuity purchased from an insurance company, distributions thereunder will be made in accordance with the requirements of Section 401(a)(9) of the IRC and the Treasury regulations. Any part of the Member’s interest which is in the form of an individual account described in Section 414(k) of the IRC will be distributed in a manner satisfying the requirements of Section 401(a)(9) of the IRC and the Treasury regulations that apply to individual accounts.

(B) Determination of Amount to be Distributed Each Year.

(1) General Annuity Requirements. If the Member’s interest is paid in the form of annuity distributions under the Regulations, payments under the annuity will satisfy the following requirements:

(a) The annuity distributions will be paid in periodic payments made at intervals not longer than one year;

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(b)	The distribution period will be over a life (or lives) or over a period certain not longer than the period described in Subsections (C) or (D);
(c)	Once payments have begun over a period certain, the period certain will not be changed even if the period certain is shorter than the maximum permitted;
(d)	Payments will either be nonincreasing or increase only as follows:

(i)	By an annual percentage increase that does not exceed the
	annual percentage increase in a cost-of-living index that is based on prices of all items and issued by the Bureau of Labor Statistics;
(ii)	To the extent of the reduction in the amount of the Member’s payments to provide for a survivor benefit upon death, but only if the beneficiary whose life was being used to determine the distribution period described in Subsection (C) dies or is no longer the Member’s beneficiary pursuant to a qualified domestic relations order within the meaning of IRC Section 414(p);
(iii)	To provide cash refunds of employee contributions upon the Member’s death; or
(iv)	To pay increased benefits that result from an amendment to the Regulations.

(2) Amount Required to be Distributed by Required Beginning Date. The amount that must be distributed on or before the Member’s Required Beginning Date (or, if the Member dies before distributions begin, the date distributions are required to begin under Subsection (A)(2)(a) or (b)) is the payment that is required for one payment interval. The second payment need not be made until the end of the next payment interval even if that payment interval ends in the next calendar year. Payment intervals are the periods for which payments are received, e.g., bi-monthly, monthly, semi-annually, or annually. All of the Member’s benefit accruals as of the last date of the first Distribution Calendar Year will be included in the calculation of the amount of the annuity payments for payment intervals ending on or after the Member’s Required Beginning Date.

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(3) Additional Accruals After First Distribution Calendar Year. Any additional benefits accruing to the Member in a calendar year after the first Distribution Calendar Year will be distributed beginning with the first payment interval ending in the calendar year immediately following the calendar year in which such amount accrues.

(C) Requirements For Annuity Distributions That Commence During Member’s Lifetime.

(1)

Joint Life Annuities Where the Beneficiary Is Not the Member’s Spouse. If the Member’s interest is being distributed in the form of a joint and survivor annuity for the joint lives of the Member and a nonspouse beneficiary (or for the joint lives of the Member and a spouse whose marriage to the Member is not recognized for purposes of Federal law), annuity payments to be made on or after the Member’s Required Beginning Date to the designated beneficiary after the Member’s death must not at any time exceed the applicable percentage of the annuity payment for such period that would have been payable to the Member using the table set forth in Q&A-2 of Section 1.401(a)(9)-6T of the Treasury regulations. If the form of distribution combines a joint and survivor annuity for the joint lives of the Member and a nonspouse beneficiary (or for the joint lives of the Member and a spouse whose marriage to the Member is not recognized for purposes of Federal law), and a period certain annuity, the requirement in the preceding sentence will apply to annuity payments to be made to the designated beneficiary after the expiration of the period certain.

(2)

Period Certain Annuities. Unless the Member’s spouse (whose marriage to the Member is recognized for purposes of Federal law) is the sole designated beneficiary and the form of distribution is a period certain and no life annuity, the period certain for an annuity distribution commencing during the Member’s lifetime may not exceed the applicable distribution period for the Member under the Uniform Lifetime Table set forth in Section 1.401(a)(9)-9 of the Treasury regulations for the calendar year that contains the annuity starting date. If the annuity starting date precedes the year in which the Member reaches age 70, the applicable distribution period for the Member is the distribution period for age 70 under the Uniform Lifetime Table set forth in Section 1.401(a)(9)-9 of the Treasury regulations plus the excess of 70 over the age of the Member as of the Member’s birthday in the year that contains the annuity starting date. If the Member’s spouse (whose marriage to the Member is recognized for purposes of Federal law) is the Member’s sole designated beneficiary and the form of distribution is a period certain and no life annuity, the period certain may not exceed the longer of the Member’s applicable distribution period, as determined under this Subsection (C)(2), or the joint life and last survivor expectancy of the Member and the Member’s spouse as determined under the Joint and Last Survivor Table set forth in Section 1.401(a)(9)-9 of the Treasury regulations, using the Member’s and spouse’s attained ages as of the Member’s and spouse’s birthdays in the calendar year that contains the annuity starting date.

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(D) Requirements For Minimum Distributions Where Member Dies Before Date Distributions Begin.

(1) Member Survived by Designated Beneficiary. If the Member dies before the date distribution of his or her interest begins and there is a Designated Beneficiary, the Member’s entire interest will be distributed, beginning no later than the time described in Subsection (A)(2)(a) or (b), over the life of the Designated Beneficiary or over a period certain not exceeding:

(a)	Unless the annuity starting date is before the first Distribution Calendar Year, the Life Expectancy of the Designated Beneficiary determined using the beneficiary’s age as of the beneficiary’s birthday in the calendar year immediately following the calendar year of the Member’s death; or
(b)	If the annuity starting date is before the first Distribution Calendar Year, the Life Expectancy of the Designated Beneficiary determined using the beneficiary’s age as of the beneficiary’s birthday in the calendar year that contains the annuity starting date.

(2)

No Designated Beneficiary. If the Member dies before the date distributions begin and there is no Designated Beneficiary as of September 30 of the year following the year of the Member’s death, distribution of the Member’s entire interest will be completed by December 31 of the calendar year containing the fifth anniversary of the Member’s death.

(3)

Death of Surviving Spouse Before Distributions to Surviving Spouse Begin. If the Member dies before the date distribution of his or her interest begins, the Member’s surviving spouse (whose marriage to the Member is recognized for purposes of Federal law) is the Member’s sole designated beneficiary, and the surviving spouse dies before the distributions to the surviving spouse begin, this Subsection (D) will apply as if the surviving spouse were the Member, except that the time by which distributions must begin will be determined without regard to Subsection (A)(2)(a).

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(E) Definitions.

(1)	Designated Beneficiary. The individual who is designated as the “Beneficiary” under Subsection (4) of Article I of the Regulations and is the designated beneficiary under Section 401(a)(9) of the IRC and Section 1.401(a)(9)-1, Q&A-4, of the Treasury regulations.
(2)	Distribution Calendar Year. A calendar year for which a minimum distribution is required. For distributions beginning before the Member’s death, the first Distribution Calendar Year is the calendar year immediately preceding the calendar year which contains the Member’s Required Beginning Date. For distributions beginning after the Member’s death, the first Distribution Calendar Year is the calendar year in which distributions are required to begin pursuant to Subsection (A)(2).
(3)	Life Expectancy. Life expectancy as computed by use of the Single Life Table in Section 1.401(a)(9)-9 of the Treasury regulations.
(4)	Required Beginning Date. The date specified in Subsection (39) of Article I of the Regulations.

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ARTICLE VIII RESTORATION OF A RETIREE TO SERVICE

If a Retiree (or a terminated Member who is eligible for early retirement) is restored to Service at the rate of 1,000 or more Hours of Service a year, he shall be re-enrolled as an active Member as of his new employment date. If a Retiree returns to active membership he may, within six months following (i) his date of reemployment, or (ii) if such Retiree is first enrolled as an inactive Member pursuant to Article X, Section 3, his change in status to an active Member, make an irrevocable election to continue to receive the payment of his Retirement Allowance or to suspend the payment of his Retirement Allowance until his subsequent termination of Service or retirement in accordance with Section 2530.203-3 of the DOL Regulations; provided, however, if no such election is made, payment of such Member’s Retirement Allowance shall continue in the form of payment previously chosen. Upon subsequent retirement, (i) his benefit shall be based on his Benefit Service before and after his previous retirement and his Salary during such service, but shall be reduced by the Equivalent Value of the benefits provided by the Pentegra DB Plan, and (ii) any Retirement Adjustment Payment for which he is then eligible shall be reduced by the amount of any such payment made in respect of his previous retirement.

If a Retiree (or terminated Member who is eligible for early retirement) is restored to Service at the rate of less than 1,000 Hours of Service a year, he shall be re-enrolled as an inactive Member as of his new employment date. If it is determined that a Retiree, who was restored to Service at a rate of less than 1,000 Hours of Service per year, has completed at least 1,000 Hours of Service in any 12 consecutive month period, measured from the first day of such restoration to Service and then from each January 1 thereafter, Benefit Service shall be credited retroactively to the beginning of such period.

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ARTICLE IX CONTRIBUTIONS

SECTION 1. ENGAGEMENT OF ACTUARY

The Board shall engage an enrolled actuary to (i) recommend the actuarial funding method and the actuarial assumptions, tables, interest rates and other factors to be used in determining the cost of participating in the Pentegra DB Plan, (ii) perform an annual actuarial valuation of the liabilities to determine the minimum contributions required to be made in accordance with such valuation to avoid an accumulated funding deficiency and the maximum contributions permitted to be made without exceeding the full funding limitation under the IRC, and (iii) determine each Employer’s allocable share of the aggregate annual contribution to the Pentegra DB Plan which is approved by the Board. The Board may adopt and modify from time to time any actuarially sound funding method which conforms with IRC and IRS Regulations as the funding method for the Pentegra DB Plan.

SECTION 2. SINGLE PLAN

The Pentegra DB Plan is a single plan which provides benefits to Members of all Employers participating in the Pentegra DB Plan and their Beneficiaries. It is intended to satisfy the requirements of IRC Section 413(c) and IRS Regulation Section 1.414(1)-1(b)(1). Accordingly, all Pentegra DB Plan assets are available to pay benefits to all Members of the Pentegra DB Plan and their Beneficiaries.

SECTION 3. CONTRIBUTIONS BY EMPLOYERS

(A)

Each Employer shall contribute to the Pentegra DB Plan the amount determined in accordance with the annual actuarial valuation of the Pentegra DB Plan for such year, reflecting the benefits provided to its Employees under the Regulations. The contribution so determined may be proportionally increased as directed by the Board so that the total of all contributions remitted during the Plan Year from all participating Employers will not result in a funding deficiency under IRC Section 412.

(B)

In determining each Employer’s required contribution to the Pentegra DB Plan, the actuary shall take into account each Employer’s normal cost for the benefits provided to such Employer’s Members under the Regulations, an annual amortization of any unfunded accrued actuarial liabilities and an annual amortization of actuarial experience gains and losses. In addition, the actuary may take into account such other factors which it deems relevant to determine the cost of an Employer’s participation in the Pentegra DB Plan and which are otherwise in accordance with IRC Sections 412 and 413(c).

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(C)

Effective for Plan Years commencing before July 1, 1989, during any period when the Pentegra DB Plan is in full funding, the Board shall advise each Employer which is precluded from making contributions that would otherwise be required but for full funding, based on the advice of the actuary, of the amount of the contributions which would otherwise have been required. The future contribution requirements of each such Employer shall take into account an amortization of such unpaid contributions over such period of time and at such rate of interest as is determined by the Board.

(D)

Notwithstanding any provision of the Regulations to the contrary, an Employer that is exempt from taxation under the IRC may elect to make contributions to the Pentegra DB Plan in excess of the deduction limits under Section 404 of the IRC.

SECTION 4. ADMINISTRATIVE EXPENSES

Each Employer’s share of all proper charges and expenses of administering the Regulations, as determined by the Board in accordance with Section 1(I) of Article XIV shall be (i) charged against the assets of the Trust or (ii) remitted to the Pentegra DB Plan based upon a schedule determined by the Board, but not less frequently than annually.

SECTION 5. CONTRIBUTIONS BY MEMBERS

(A) No Member shall contribute to the Pentegra DB Plan unless his Employer elects to participate on a contributory basis thereby reducing its contributions under Section 3(A) of this Article IX. Each Member whose Employer does participate on such contributory basis shall contribute a level percentage of his Salary, as determined by the Board, provided that effective July 1, 2006, no Member contributions shall be required with respect to any Member who has attained his 65^th birthday. With respect to Members who have attained their 65^th birthdays, benefit accruals under the Pentegra DB Plan after such 65^th birthday shall not be reduced because of the cessation of Member contributions, but shall be funded through otherwise accumulated Pentegra DB Plan assets attributable to the Employer and Employer contributions.

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(B)	The Pentegra DB Plan shall certify to the Employer the contribution rate applicable to each of its enrolling Members, and the Employer shall deduct from the Member’s Salary his contribution based on such rate. All contributions of Members thus deducted shall be transmitted monthly by the Employer to the Pentegra DB Plan and, upon receipt by the Pentegra DB Plan, shall be credited to the individual accounts of the Members. Every Member shall be deemed to agree to the deductions provided for herein.
(C)	A Member’s Accumulated Contributions shall be fully vested but payable only in the form provided in the Regulations and in accordance with the spousal consent requirements of Article VII, Section 2 and IRC Sections 401(a)(11) and 417 and the IRS Regulations thereunder. For purposes of this provision, Accumulated Contributions as of any date may be commuted to a life annuity commencing on the Member’s Normal Retirement Date by multiplying such Accumulated Contributions by an appropriate conversion factor as determined by the Pentegra DB Plan in accordance with ERISA and Section 411 (c)(2) of the IRC.
(D)	A person whose membership is terminated for any reason other than by death or disability retirement shall, upon filing with the Pentegra DB Plan the designated form for giving notice thereof, be entitled to a refund of his Accumulated Contributions, if any, provided the spousal consent requirements are met as provided below:

(1) In the case of a person whose membership is terminated by a Break in Service (prior to vesting under Article IV), such refund shall be in lieu of all other benefits otherwise payable on his account. If the Member’s Accumulated Contributions amount to $1,000 ($3,500 prior to March 28, 2005) or less, such amounts will be paid in a lump sum upon such termination of Service. However, if the Member’s Accumulated Contributions amount to more than $1,000 ($3,500 prior to March 28, 2005), then if the Member does not elect to receive a refund of his Accumulated Contributions, such contributions shall be paid upon his attainment of age 65 in a lump sum, provided the Pentegra DB Plan receives the appropriate spousal consent therefor or, otherwise, in the form of a qualified joint and survivor annuity. If such a terminated Member dies before withdrawing his Accumulated Contributions, or receiving the first payment of such annuity, the amount of such Accumulated Contributions shall be paid to his Beneficiary.

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(2) In the case of a person whose membership is terminated upon early or normal retirement, such refund shall be payable only prior to the commencement of his Retirement Allowance and shall be in lieu of the actuarial equivalent of that portion of his retirement benefit which is attributable to such Accumulated Contributions. The remaining portion of such retirement benefit, if any, shall be calculated in accordance with ERISA and paid to him as provided in Article VII.

SECTION 6. CONTRIBUTION REQUIREMENTS FOR BENEFIT IMPROVEMENTS

Notwithstanding anything in the Regulations to the contrary, in the event an Employer elects a benefit improvement under the Regulations for which contributions may not be made by an Employer (subject to Section 404 of the IRC) on a tax-deductible basis, such election shall be effective only to the extent the Pentegra DB Plan determines that such benefit improvement may be adequately funded by such Employer, and to the extent the Pentegra DB Plan actuary determines it necessary (such determination being performed in a uniform and nondiscriminatory manner), the Employer satisfies a creditworthiness test (as prescribed by the Pentegra DB Plan) and executes a cash collateral agreement granting the Pentegra DB Plan a security interest in such assets as the Pentegra DB Plan may reasonably require.

SECTION 7. RETURN OF CONTRIBUTIONS TO EMPLOYER

(A)

The Pentegra DB Plan is created for the exclusive benefit of Members, their Beneficiaries and Contingent Annuitants. Except as provided in Subsections (B) and (C) of this Section 7, at no time prior to the satisfaction of all liabilities under the Pentegra DB Plan with respect to all Members and Retirees, their Beneficiaries and Contingent Annuitants shall any contributions to the Pentegra DB Plan by an Employer be returned by the Pentegra DB Plan to the Employer, subject to Article XIII(D)(2).

(B)

In the case of a contribution that is made by an Employer by reason of a mistake of fact as determined by the Board, such Employer may request the return to it of such contribution, provided such refund is made within one year after the payment of the contribution. In accordance with applicable law, earnings attributable to such contribution may not be returned to the Employer, but losses attributable thereto must reduce the amount to be returned to the Employer.

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(C) In the case of a contribution made by an Employer (other than an Employer that is exempt from taxation under the IRC), such contribution shall be conditioned upon the deductibility of the contribution by the Employer under Section 404 of the IRC. To the extent the deduction for such contribution is disallowed, in accordance with IRS Regulations, the Employer may request the return to it of such contribution, provided such refund is made within one year after the disallowance of the deduction. In accordance with applicable law, earnings attributable to such contribution may not be returned to the Employer, but losses attributable thereto must reduce the amount to be returned to the Employer.

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ARTICLE X EFFECTS OF VARIOUS EVENTS ON MEMBERSHIP AND SERVICE

SECTION 1. TERMINATION OF MEMBERSHIP

Membership shall cease upon date of retirement, death, Break in Service, or withdrawal of the Employer’s participation. For purposes of this Article X, a Break in Service commences when a non-vested Member’s Service is terminated.

SECTION 2. REINSTATEMENT OF MEMBERSHIP AND SERVICE

If a Member had a vested interest in his Retirement Allowance at the time of his termination, his Vesting Service shall be reinstated upon his reemployment. If a person whose membership is terminated by a Break in Service is again employed by an Employer, he shall be re-enrolled as a Member as of his new employment date, subject to the provisions of this Section 2.

Further, (i) if a non-vested Member’s Service is terminated and his Break in Service did not exceed 60 consecutive months, then his previous Vesting Service (and pervious Service for determining eligibility to participate) shall be reinstated upon his reemployment, and if such Break in Service did not exceed 12 consecutive months, he shall also be credited with Vesting Service (and pervious Service for determining eligibility to participate) for the period of such break upon his reemployment; (ii) if a non-vested Member’s Service is terminated and his Break in Service did exceed 60 consecutive months but did not exceed his previous Vesting Service, then his previous Vesting Service (and pervious Service for determining eligibility to participate) shall be reinstated upon his reemployment; and (iii) if a non-vested Member’s Service is terminated and such Member’s Break in Service did equal or exceed the greater of (x) 60 consecutive months or (y) his previous Vesting Service, then upon his reemployment he shall be treated as a new Employee for all purposes under the Regulations.

If an Employee receives a distribution or is deemed to receive a distribution pursuant to Article VII, Section 3 and the Employee is rehired by an Employer, he shall have the right to reinstate his Benefit Service and restore his retirement benefits (including all optional forms of benefits and subsidies relating to such benefits) to the extent forfeited upon the repayment to the Pentegra DB Plan of the full amount of the distribution plus interest, compounded annually from the date of distribution at the rate determined under Section 411(c)(2)(C) of the IRC. Such repayment must be made before the earlier of five (5) years after the first date on which the Member is reemployed by an Employer, or the date the Member incurs a Break in Service of at least 60 consecutive months.

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Solely for purposes of determining whether a Break in Service has occurred, an individual who has a maternity or paternity absence, as determined by the Pentegra DB Plan in accordance with the IRC and ERISA, that continues beyond the first anniversary of the first day of absence by reason of a maternity or paternity absence shall incur a Break in Service on the date of the second anniversary of the first day of such maternity or paternity absence; provided, that the individual timely provides the Pentegra DB Plan with such information as it shall require. For purposes of the Regulations, maternity or paternity absence shall mean an absence from work by reason of the individual’s pregnancy, the birth of the individual’s child or the placement of a child with the individual in connection with adoption of the child by such individual, or for purposes of caring for a child for the period immediately following such birth or placement.

In the event a Member is no longer part of an eligible class of Employees and becomes ineligible to participate but has not incurred a Break in Service, such Employee will participate immediately upon returning to an eligible class of Employees. If such Member incurs a Break in Service, eligibility will be determined under the Break in Service rules of the Regulations.

In the event an Employee who is not part of an eligible class of Employee becomes a part of an eligible class, such Employee will participate immediately if such Employee has satisfied the minimum age and service requirements provided in Section 2.2 and would have otherwise previously become a Member.

In the event a Member terminates employment when his Employer participates under the Pentegra DB Plan with a different basis of participation for employees hired on or after a specified date, such Member, upon reemployment, will participate under the Employer’s latest adopted basis of participation unless the Member’s Break in Service did not exceed 12 consecutive months. If the Member’s Break in Service did not exceed 12 consecutive months, such Member ‘s basis of participation shall be the basis under which he was covered prior to his termination of employment.

SECTION 3. INACTIVE MEMBERSHIP

If an Employer certifies to the Pentegra DB Plan that it expects a Member to complete less than 1,000 Hours of Service in the 12 consecutive month period commencing on his Enrollment Date (or any January 1 thereafter), he shall be deemed an “inactive Member.” This does not constitute a Break in Service. During a period of inactive membership (a) Vesting Service shall accrue, (b) Benefit Service shall not accrue, and (c) no contributions may be made by such inactive Member. If it is later determined that such Member has completed, or is expected to complete, at least 1,000 Hours of Service in any such period, then his regular membership shall be restored, and his Benefit Service shall be credited retroactively for such period. Inactive membership shall also be deemed to occur whenever a Member (a) is transferred from regular membership to a class of employees for which the Employer has requested, and the Pentegra DB Plan has granted, exclusion pursuant to Article II, or to a non-participating corporation which is a member of a controlled group of corporations of the Employer (within the meaning of Section 1563(a) of the IRC) or (b) receives no income from an Employer other than commissions and such Employer, which previously included commissions as Salary, elects not to include commissions as Salary under Article I, Section 42 of the Regulations.

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No benefit other than the refund of the Member’s Accumulated Contributions, if any, is payable on account of disability or death incurred during inactive membership, except that if the Member is eligible for early retirement and dies during such period, his Beneficiary shall be entitled to the death benefit which would have been payable under Article IV, Section 3(B) or Article V, Section 4(B), whichever is applicable. Notwithstanding anything to the contrary under the Regulations, if a Member becomes an “inactive Member,” he shall be permitted to elect to commence the payment of his Retirement Allowance at any time after his attainment of age 65 while an inactive Member. If an inactive Member has elected to commence the payment of his Retirement Allowance and, subsequent to the commencement of such allowance, the Member returns to active membership status and thus is no longer an inactive Member, such Member may elect to continue to receive his Retirement Allowance or to suspend the payment of his Retirement Allowance. Any benefits which accrue subsequent to the Member’s return to active Member status shall be deemed to be provided to the extent of the Equivalent Value of any benefits paid (taking into account only those payments made in accordance with the applicable normal form of Retirement Allowance payable under the Regulations) to the Member; provided, however, in no event shall the Member’s accrued benefit be reduced below such Member’s accrued benefit as of the close of the Plan Year immediately preceding the Plan Year in which such additional benefits accrue.

SECTION 4. LEAVES OF ABSENCE

(A) Service crediting and membership shall continue during any approved leave of absence, provided that the Employer notifies the Pentegra DB Plan of its intention to grant to a specific Employee or Member, pursuant to the Employer’s policy which is uniformly applicable to all its Employees under similar circumstances, one of the leaves of absence described in Subsection (B) of this Section 4, and agrees to notify the Pentegra DB Plan at the conclusion thereof.

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(B)	For purposes of the Regulations, the following are the only types of approved leaves of absence:
	TYPE 1
	Non-military leave granted to a Member for a period not in excess of one year during which contributions continue. Under this leave, Benefit Service continues to accrue and any benefit, except disability retirement, for which the Member is otherwise eligible may become payable during the period of the leave. Further, an Employer may elect that this leave be extended beyond the one-year period to cover a Member who is receiving payments under (i) a disability program of the Employer, or (ii) Title II of the Federal Social Security Act, but not beyond his Normal Retirement Date.
	TYPE 1A
	Special military leave granted to a Member who is required to report for military service pursuant to an involuntary call-up in the reserves. Under this leave, Benefit Service continues to accrue for the period of such military service and any benefit, except disability retirement, for which the Member is otherwise eligible may become payable during the period of the leave. This special military leave shall terminate upon the earlier to occur of (i) the Member’s reemployment or (ii) 90 days after the Member completes such military service.
	TYPE 2
	Non-military leave or layoff granted to a Member for a period not in excess of one year during which no contributions are made. Under this leave, Vesting Service continues to accrue, but Benefit Service ceases to accrue. Benefit Service shall recommence upon termination of the leave and resumption of contributions.
	TYPE 3
	Military or other governmental service leave granted to a Member from which he returns directly to the Service of an Employer. Under this leave, Vesting Service continues to accrue, but Benefit Service ceases to accrue. Benefit Service shall recommence upon termination of the leave. However, such Benefit Service as did not accrue by reason of the absence may be credited retroactively to the Member at the election of the Employer on a uniform basis or as otherwise required by applicable law.

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No benefit, other than a refund of the Member’s Accumulated Contributions, if any, is payable on account of disability or death incurred during a Type 2 or Type 3 leave under this Subsection (B), except that if the Member is eligible for early retirement and dies during any leave, his Beneficiary shall be entitled to the death benefit which would have been payable under Article IV, Section 3(B) or Article V, Section 4(B), whichever is applicable. At the termination of any leave, a Break in Service shall occur unless the Member is then vested or hired by an Employer.

(C)

Notwithstanding any provision of the Regulations to the contrary, effective December 12, 1994, contributions, benefits and service credits with respect to qualified military service will be provided in accordance with Section 414 (u) of the IRC.

SECTION 5. SERVICE WITH A CONTROLLED CORPORATION

In determining an Employee’s Service for purposes of eligibility for membership under Article II and for vesting under Article IV, all Service with a corporation which is a member of a controlled group of corporations of the Employer (within the meaning of Section 1563(a) of the IRC) shall be taken into account.

SECTION 6. UNIFORM APPLICABILITY OF RULES

Notwithstanding anything in the Regulations to the contrary, Service credited to each Employee and Member with respect to membership, vesting and benefits shall be determined by the Pentegra DB Plan on a basis uniformly applicable to each Employee or Member similarly situated, in accordance with ERISA.

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ARTICLE XI MISCELLANEOUS PROVISIONS

SECTION 1. LIMITATIONS ON BENEFITS REQUIRED BY THE IRC

(A)

In order that the Pentegra DB Plan be maintained as a qualified trust under the IRC, the benefits payable under the Regulations to or in respect of a Member shall be subject to the limitations set forth in this Section 1, notwithstanding any other provision of the Regulations. A Member’s benefits to which this Section 1 is applicable are those attributable to his Employer’s contributions (and contributions by Affiliates as defined in Article XI, Section 6(A)), but excluding to the maximum extent permissible under the IRC (i) any allowance payable under Article VI to his Spouse as Contingent Annuitant, and (ii) any benefit which is not directly related to his Retirement Allowance. All defined benefit plans (whether or not terminated) of an Employer and its Affiliates (as defined in Article XI, Section 6(A)) are to be treated as one defined benefit plan for purposes of applying the limitations on benefits described in this Section 1.

(B)

The benefits to which this Section 1 is applicable may not for any Limitation Year exceed the actuarial equivalent (calculated as of the date of commencement of the Member’s Retirement Allowance or his death, if earlier) of an annual single life annuity payable to the Member in an amount equal to the lesser of:

(i)

$90,000 (the “Dollar Limitation”), or

(ii)

100 percent of the Member’s High-3 Year Average Compensation (the “Compensation Limitation”), subject, however, to the following provisions of this Article XI. For purposes of this Article XI, “High-3 Year Average Compensation” means a Member’s average annual salary for the three consecutive years of Benefit Service during which his salary was highest (or for all the years of Benefit Service if less than 3). For purposes of determining a Member’s “High-3 Year Average Compensation” under this Subsection (B), a Member’s salary shall be his/her 415 Compensation.

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For all purposes under the Regulations, “415 Compensation” shall mean the compensation as required to be reported under Sections 6041, 6051, and 6052 of the IRC (Wages, tips and other compensation as reported on Form W-2). Compensation is defined as wages within the meaning of Section 3401(a) and all other payments of compensation to an employee by the employer (in the course of the employer’s trade or business) for which the employer is required to furnish the employee a written statement under Sections 6041(d), 6051(a)(3), and 6052. Compensation must be determined without regard to any rules under Section 3401(a) that limit the remuneration included in wages based on the nature or location of the employment or the services performed (such as the exception for agricultural labor in Section 3401(a)(2)). Effective January 1, 1998, for purposes of determining 415 Compensation, such compensation shall include any elective deferral (as defined in Section 402(g) (3) of the IRC), and any amount which is contributed or deferred by the Member’s Employer at the election of the Employee and which is not includible in the gross income of the Employees by reason of Sections 125, 457, and effective January 1, 1999, Section 132(f) (4) of the IRC.

(C) The limitations on the maximum amount of benefits contained in Subsection (B) of this Section 1 shall be adjusted as follows:

(1)

The Dollar Limitation shall be adjusted annually, for limitation years beginning after December 31, 1987, for increases in the cost-of-living on or after October 1, 1986 in accordance with the IRS Regulations.

(2)

In the case of a benefit beginning prior to a Member’s social security retirement age, as defined in Section 415(b)(8) of the IRC, the Dollar Limitation applicable to such benefit shall be reduced in accordance with the IRS Regulations to an amount which is equal to a single life annuity commencing at the same time which is the actuarial Equivalent Value of a straight life annuity equal to the Dollar Limitation commencing at the Member’s social security retirement age. The adjustment referred to in the preceding sentence shall be determined as follows:

(i) If the annual benefit commences before the Member’s social security retirement age, but on or after age 62, and the Member’s social security retirement age is 65, the dollar limitation for benefits commencing on or after age 62 is determined by reducing the defined benefit dollar limitation by 5/9 of one percent for each month by which benefits commence before the month in which the Member attains age 65.

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(ii)

If the annual benefit commences before the Member’s social security retirement age, but on or after age 62, and the Member’s social security retirement age is greater than 65, the dollar limitation for benefits commencing on or after age 62 is determined by reducing the defined benefit dollar limitation by 5/9 of one percent for each of the first 36 months and 5/12 of one percent for each of the additional months (up to 24 months) by which benefits commence before the month of the Member’s social security retirement age.

(iii)

If the annual benefit of a Member commences prior to age 62, the defined benefit dollar limitation shall be the actuarial equivalent, determined in accordance with IRC Section 415 and IRS Regulations, of an annual benefit beginning at age 62, as determined in (i) or (ii) above, reduced for each month by which benefits commence before the month in which the Member attains age 62. For Limitation Years beginning on or after January 1, 1995, such benefit may not exceed the lesser of the equivalent amount computed using the interest rate and mortality table (or tabular factor) used in the plan for actuarial equivalence for early retirement benefits, and the amount computed using 5 percent interest and the applicable mortality table (to the extent that the mortality decrement is used prior to age 62), regardless of whether the benefit is or is not subject to Section 417(e)(3) of the IRC.

(3) In the case of a benefit beginning after the Member’s social security retirement age, the Dollar Limitation shall be increased in accordance with the IRS Regulations to an amount which is equal to a single life annuity commencing at the same time which is the Equivalent Value of a single life annuity equal to the Dollar Limitation commencing at the social security retirement age. The maximum dollar limitation on benefits is the lesser of the equivalent amount computed using the interest rate and mortality table (or tabular factor) used in the Pentegra DB Plan’s Regulations for actuarial equivalence for late retirement benefits, and the amount computed using 5 percent interest and the applicable mortality table, regardless of whether the benefit is or is not subject to Section 417(e)(3) of the IRC.

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(4)

Notwithstanding the provisions of Subsection (B) and Paragraphs (1), (2) and (3) of this Subsection (C), the benefits payable to a Member from the Pentegra DB Plan shall not be deemed to exceed the limitations of such provisions if (i) the retirement benefits payable with respect to such Member under the Pentegra DB Plan and all other defined benefit plans of his Employer do not exceed $10,000 for the Plan Year, or for any prior Plan Year, and (ii) the Employer has not at any time maintained a defined contribution plan in which the Member participated. If the Member has fewer than 10 years of Service, the $10,000 benefit shall be multiplied by a fraction, the numerator of which is the Member’s years of Service (computed to fractional parts of a year) and the denominator of which is 10.

(5)

In accordance with the IRC and the Regulations, if the Member has fewer than 10 years of membership in the Pentegra DB Plan, the Dollar Limitation shall be multiplied by a fraction, the numerator of which is the number of years (computed to fractional parts of a year) of membership in the Pentegra DB Plan, and the denominator of which is 10. In the event a Member terminated employment with an Employer prior to August 3, 1992, the Dollar Limitation applicable to any amendment of the Regulations or election by the Employer under the Regulations, made on or after May 17, 1989 but before August 3, 1992, which improves benefits thereunder shall be subject to a separate 10 years of Pentegra DB Plan membership requirement based only on years of Pentegra DB Plan membership credited on or after the date of such amendment to, or election under, the Regulations; provided, however, an Employer may elect, no later than June 30, 1993, not to have a separate 10 years of Pentegra DB Plan membership requirement apply to such benefit improvement; and provided, further, such election may not apply to any such benefit improvement provided pursuant to an early retirement window benefit under Article V, Section 7 unless (i) the amount of the benefit improvement would be provided under a nonqualified plan providing benefits which otherwise would be payable under the Pentegra DB Plan but for certain legal restrictions, (ii) all such Members eligible for an early retirement window benefit under Article V, Section 7 are given notice that the portion of any such benefit which was restricted under the Pentegra DB Plan would be provided through a nonqualified plan, and (iii) the Employer indemnifies the Board, the Pentegra DB Plan, the employees of the Pentegra DB Plan and such other person or persons as may be designated by the Board in such manner as shall be acceptable to the Board in its sole discretion. In accordance with the IRC and the IRS Regulations, if the Member has fewer than 10 years of Service, the Compensation Limitation shall be multiplied by a fraction, the numerator of which is the Member’s years of Service (computed to fractional parts of a year) and the denominator of which is 10.

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(6)

In no event shall Paragraph (5) of this Subsection (C) reduce the Dollar Limitation and the Compensation Limitation to an amount less than one-tenth of the applicable limitation (determined without regard to such Paragraph (5)).

(7)

For Limitation Years beginning on or after January 1, 1995, the actuarial equivalent straight life annuity for purposes of applying the limitations under Section 415(b) of the IRC to benefits that are not subject to Section 417(e)(3) of the IRC is equal to the greater of the equivalent annual benefit computed using the interest rate and mortality table (or tabular factor) specified in the Pentegra DB Plan’s Regulations for actuarial equivalence for the particular form of benefit payable, and the equivalent annual benefit computed using a 5 percent interest rate assumption and the applicable mortality table. For benefits subject to Section 417(e)(3), the equivalent annual benefit shall be computed using the interest and mortality table (or tabular factor) specified in the Pentegra DB Plan’s Regulations for actuarial equivalence for the particular form of benefit payable, or the equivalent annual benefit shall be computed using the applicable interest rate and the applicable mortality table, with such applicable interest rate and applicable mortality table equal to the interest rate and mortality table specified in Article VII, Section 2(B); provided that for Limitation Years beginning on or after July 1, 2004 and prior to July 1, 2006, when applying the rule otherwise set forth in this sentence, “5.5 percent” shall be used in lieu of the applicable interest rate. Notwithstanding the foregoing, with respect to distributions commencing July 1, 2004 and before December 31, 2004, the amount payable in a form subject to Section 417(e)(3) of the IRC shall not be less than the amount permitted under this Section 1(BC)(7) using, when applying the rules of this paragraph to the adjustment of that benefit to a straight life annuity, the “applicable interest rate” under Section 417(e)(3) of the IRC in effect on June 30, 2004.

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Notwithstanding the foregoing, effective on and after July 1, 2006, if the benefit is subject to Section 417(e)(3) of the IRC, for purposes of applying the limitations of Section 415(b) of the IRC, the annual benefit shall be adjusted to an equivalent annual benefit in the form of a straight life annuity, which equivalent annual benefit shall be the greatest of (i) the equivalent annual benefit computed using the interest rate and mortality table (or tabular factor) specified in the Pentegra DB Plan’s Regulations for actuarial equivalence for the particular form of benefit payable; (ii) 105 percent of the equivalent annual benefit using the applicable interest rate and applicable mortality table; and (iii) the equivalent annual benefit using 5.5 percent interest rate and applicable mortality table, with such applicable interest rate and applicable mortality table equal to the interest rate and mortality table specified in Article VII, Section 2(B).

(D)	Notwithstanding the foregoing provisions of this Article XI, if a Member also participates in any defined contribution plan (as defined in Sections 414(i) and 415(k) of the IRC) maintained by the Employer (or any organization which is required to be aggregated with such Employer under Section 414(b), (c), (m) or (o) of the IRC), the sum of the Member’s “Defined Benefit Fraction” (as defined in IRC Section 415(e)(2)) and the Member’s “Defined Contribution Fraction” (as defined in IRC Section 415(e)(3)) shall not exceed 1.0. If a Member makes contributions to the Pentegra DB Plan, the amount of such contributions shall be treated as an annual addition to a qualified defined contribution plan for purposes of Section 415 of the IRC.
	Notwithstanding the above, effective for Limitation Years beginning on or after January 1, 2000, Section 415(e) of the IRC shall not apply.
(E)	Notwithstanding the foregoing provisions of this Article XI, if the maximum limitation on Retirement Allowances with respect to any individual who was a Member prior to July 1, 1987 and whose Retirement Allowance (determined without regard to any changes in the Regulations after May 5, 1986 and without regard to cost of living adjustments occurring after May 5, 1986) exceeds the limitations set forth in Subsection (B) of this Section 1, then, for purposes of such Subsection (B) and Sections 415(b) and (e) of the IRC, the Dollar Limitation with respect to such Member shall be equal to such Member’s Retirement Allowance as of June 30, 1987; provided that, such Member’s Retirement Allowance did not exceed the maximum limitation as in effect for all Plan Years commencing prior to July 1, 1987.

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(F) The Pentegra DB Plan may from time to time adjust or modify the maximum limitations applicable to a Member’s benefits under this Section 1 as may be required or permitted by the IRC or ERISA prior to the date that payment of any of such benefits commences.

SECTION 2. SMALL BENEFITS

Following a Retiree’s termination of employment, the Pentegra DB Plan shall pay a Retiree, who has not begun to receive his Retirement Allowance, a lump sum equal to the Equivalent Value of his regular Retirement Allowance if such lump sum does not exceed $1,000 ($3,500 prior to March 28, 2005). Such lump sum shall be in lieu of the Retirement Allowance which otherwise would be payable. If the Equivalent Value of a Member’s vested accrued benefit derived from Employer and Employee contributions exceeds (or at the time of any prior distribution exceeded) $1,000 ($3,500 prior to March 28, 2005), and the accrued benefit is immediately distributable, the Member and the Member’s Spouse (or where either the Member or the Spouse has died, the survivor) must consent to any distribution of such accrued benefit. The consent of the Member and the Member’s Spouse shall be obtained in writing within the 90-day period ending on the annuity starting date. The annuity starting date is the first day of the first period for which an amount is paid as an annuity or any other form. The Pentegra DB Plan shall notify the Member and the Member’s Spouse of the right to defer any distribution until the Member’s accrued benefit is no longer immediately distributable. Such notification shall include a general description of the material features, and an explanation of the relative values of, the optional forms of benefit available under the Pentegra DB Plan in a manner that would satisfy the notice requirements of IRC Section 417 (a) (3), and shall be provided no less than 30 days and no more than 90 days prior to the annuity starting date. However, distribution may commence less than 30 days after the notice described in the preceding sentence is given, provided the distribution is one to which Sections 401 (a) (11) and 417 of the IRC do not apply, the Pentegra DB Plan clearly informs the Member that the Member has a right to a period of at least 30 days after receiving the notice to consider the decision of whether or not to elect a distribution (and, if applicable, a particular distribution option), and the Member, after receiving the notice, affirmatively elects a distribution.

Notwithstanding the foregoing, only the Member need consent to the commencement of a distribution in the form of a qualified joint and survivor annuity while the accrued benefit is immediately distributable. Neither the consent of the Member nor the Member’s Spouse shall be required to the extent that a distribution is required to satisfy Section 401(a)(9) or Section 415 of the IRC.

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SECTION 3. AMOUNTS PAYABLE TO INCOMPETENTS, MINORS OR ESTATES

If the Pentegra DB Plan shall find that any person to whom any amount is payable under the Regulations is unable to care for his affairs because of illness or accident, or is a minor, or has died, then any payment due him or his estate (unless a prior claim therefor has been made by a duly appointed legal representative) may be paid to his Spouse, relative or any other person deemed by the Board to be a proper recipient on behalf of such person otherwise entitled to payment. Any such payment shall be a complete discharge of the liability of the Pentegra DB Plan therefor.

SECTION 4. NON-ALIENATION OF AMOUNTS PAYABLE

Except insofar as applicable law may otherwise require, or pursuant to the terms of a Qualified Domestic Relations Order, no amount payable under the Regulations shall be subject in any manner to alienation by anticipation, sale, transfer, assignment, bankruptcy, pledge, attachment, charge or encumbrance of any kind, and any attempt to so alienate shall be void; nor shall the Pentegra DB Plan in any manner be liable for or subject to the debts or liabilities of any persons entitled to any such amount payable; and further if for any reason any amount payable under the Regulations would not devolve upon such person entitled thereto, then the Board, in its discretion, may terminate his interest and hold or apply such amount for the benefit of such person or his dependents as it may deem proper.

SECTION 5. UNCLAIMED BENEFITS

If the Pentegra DB Plan cannot ascertain the whereabouts of any person to whom an amount is payable under the Regulations, and, if after 5 years from the date such payment is due, a notice of such payment is mailed to the address of such person, as last shown on the records of the Pentegra DB Plan, and within 3 months after such mailing such person has not filed with the Pentegra DB Plan written claim therefor, the Board may direct that such payment and all remaining payments and other benefits, if any, otherwise payable on his account be cancelled and, to the extent permitted by ERISA, be applied to reduce contributions. Upon cancellation, the Pentegra DB Plan shall have no further liability therefor, provided that any such amount payable shall be reinstated if such person subsequently makes a valid claim therefor.

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SECTION 6. TOP HEAVY PROVISIONS

The provisions of this Section 6 shall apply and supersede all other provisions in the Regulations inconsistent therewith during each Plan Year with respect to which an Employer’s plan constitutes a top heavy plan for purposes of the IRC.

(A) For purposes of this Section 6, the following terms shall have the meanings set forth below:

(1)	“Affiliate” — Any entity affiliated with any Employer within the meaning of Section 414(b), 414(c) or 414(m) of the IRC, except that for purposes of applying the provisions hereof with respect to the limitation on contributions, Section 415(h) of the IRC shall apply.
(2)	“Aggregation Group” — The group composed of each qualified retirement plan of the Employer or an affiliate in which a key employee is a participant and each other qualified retirement plan of the Employer or an affiliate which enables a plan of the Employer or an affiliate in which a key employee is a participant to satisfy Section 401(a)(4) or 410 of the IRC. In addition, the Board may choose to treat any other qualified retirement plan as a member of the aggregation group if such aggregation group will continue to satisfy Sections 401(a)(4) and 410 of the IRC with such plan being taken into account.
(3)	“Determination Date” — the last day of the preceding Plan Year or, in the case of the first Plan Year, the last day of such Plan Year.
(4)	“Key Employee” — A “key employee” as defined in Sections 416(i)(1) and (5) of the IRC and IRS Regulations. For purposes of Section 416 of the IRC and for determining who is a Key Employee, an Employer which is not a corporation shall be deemed to have “officers” only for Plan Years beginning after June 30, 1985. For purposes of determining who is a key employee, compensation shall mean 415 Compensation (as defined in Section 1(B) of this Article XI).

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(5) “Top Heavy Ratio” — is a fraction, the numerator of which is the sum of the present value of accrued benefits of all Key Employees as of the applicable Determination Date (including any part of any accrued benefit distributed in the five year period ending on the Determination Date), and the denominator of which is the sum of the present value of accrued benefits (including any part of any accrued benefits distributed in the five year period ending on the Determination Date). The accrued benefits of a Member who (i) is not a Key Employee but who was a Key Employee in the prior year, or (ii) has not been credited with at least one hour of Service with his Employer at any time during the five year period ending on the determination date will be disregarded. The calculation of the Top Heavy Ratio, and the extent to which distributions, rollovers, and transfers are taken into account will be made in accordance with Section 416 of the IRC and the IRS Regulations.

(B)	The Employer’s plan under the Pentegra DB Plan will be considered a top heavy plan for any Plan Year if the Employer’s plan is determined to be a top heavy plan as of the last day of the immediately preceding Plan Year. For purposes of determining whether an Employer is maintaining a plan under the Pentegra DB Plan which constitutes a top heavy plan, the present value of a Member’s Retirement Allowance shall be determined using 8% interest and the 1989 George B. Buck mortality table with a 50%/50% blend of the male and female mortality rates.
	The accrued benefit of a Member other than a Key Employee shall be determined under (i) the method, if any, that uniformly applies for accrual purposes under all defined benefit plans maintained by the Employer, or (ii) if there is no such method, as if such benefit accrued not more rapidly than the slowest accrual rate permitted under the fractional rule of Section 411(b)(1)(C) of the IRC.
	For purposes of Subsection (E)(1) of this Section 6, the present value of a Member’s Retirement Allowance shall be determined as of the last day of the immediately preceding Plan Year and shall include amounts distributed to or on behalf of the Member within the four immediately preceding Plan Years.
(C)	For any Plan Year that an Employer’s plan is determined to be a top heavy plan, only the first $200,000 (adjusted annually for years beginning on or after January 1, 1998, in accordance with IRS Regulations) (or, for Plan Years beginning on or after July 1, 1994, $150,000 (as adjusted for cost-of-living and otherwise limited or modified in accordance with Section 401(a)(17) of the IRC and applicable IRS rulings and IRS Regulations)) of compensation (as defined in Section 1.415-2(d) of the IRS Regulations) shall be credited to a Member for purposes of the Regulations.

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(D) If an Employer’s plan is a top heavy plan with respect to any Plan Year, the nonforfeitable percentage of the Retirement Allowance which is derived from Employer contributions on behalf of each Member who is credited with at least one Hour of Service on or after the date an Employer’s plan becomes top heavy shall not be less than the amount determined in accordance with Table II set forth in Article IV, Section 2(B)(v).

(E)	(1)	Subject to the provisions of Subsection (F) of this Section 6, if an Employer’s plan constitutes a top heavy plan, the Retirement Allowance derived from Employer contributions for each Member of the Employer who has completed a year of Membership Service and who is not a Key Employee shall not, at such point, be less than the product of (a) such Member’s average 415 Compensation (as defined in Section 1(B) of this Article XI), multiplied by the (b) lesser of (i) 2% multiplied by the number of years (computed to fractional parts of a year) of Membership Service with the Employer or (ii) 20%. For purposes of the preceding sentence, years of Membership Service shall not include any year of Membership Service credited with respect to Plan Years which began prior to January 1, 1984, or any other year of Membership Service credited with respect to a Plan Year during which the an Employer’s plan did not constitute a top heavy plan.
	(2)	For purposes of this Subsection (E), average 415 Compensation shall mean the average of a Member’s 415 Compensation for the period of five consecutive years of Service (or, if the Member does not have five consecutive years of Service, his actual number of consecutive years of Service) during which the Member had the greatest aggregate 415 Compensation.
(F)	(1)	For each Plan Year that an Employer’s plan is a top heavy plan, 1.0 shall be substituted for 1.25 as the multiplicand of the Dollar Limitation in determining the denominator of the Defined Benefit Fraction and of the Defined Contribution Fraction for purposes of Section 415(e) of the IRC, except that this paragraph shall not apply effective for Limitation Years beginning on or after January 1, 2000 due to the repeal of Section 415(e) of the IRC.

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(2) If, after substituting 90% for 60% wherever the latter appears in Section 416(g) of the IRC, an Employer’s plan is not determined to be a top heavy plan, the provisions of Paragraph (1) of this Subsection (F) shall not be applicable if the Retirement Allowance for each Member who is not a Key Employee is determined in accordance with Subsection (E)(1) of this Section 6, substituting 3% for 2% and 30% for 20% in this Subsection.

(G) The Board shall, to the maximum extent permitted by the IRC and in accordance with the governmental regulations, apply the provisions of this Section 6 by taking into account the benefits payable and the contributions made under the Pentegra Defined Contribution Plan for Financial Institutions (formerly known as the Financial Institutions Thrift Plan) or any other qualified plan maintained by an Employer, to prevent inappropriate omissions or required duplication of minimum contributions.

SECTION 7. TRANSFER OF ASSETS AND LIABILITIES FROM PRIOR PLAN

Provided that all benefits (including all optional forms of benefit) are protected in accordance with Section 411(d)(6) of the IRC (or any successor thereto) and the IRS Regulations thereunder, an Employer which adopts the Pentegra DB Plan may, with the approval of the Board and in accordance with such administrative procedures as the Board may adopt, transfer the assets and liabilities under a tax-qualified retirement plan maintained by such Employer (the “prior plan”) to the Pentegra DB Plan with respect to retirees currently receiving benefits and participants with deferred vested benefits under the prior plan. As a condition to the Pentegra DB Plan’s acceptance of such assets and liabilities under the prior plan, the Employer shall provide, in a form and manner acceptable to the Board, (i) an indemnification agreement by the Employer providing for the indemnification of the Board, the Pentegra DB Plan, employees of the Pentegra DB Plan and such other person or persons as may be designated by the Board, (ii) a representation by the Employer’s counsel that, among other things, the prior plan satisfies the requirements for qualification under the IRC, including, but not limited to Section 401(a) thereunder, and (iii) evidence, satisfactory to the Board, that the Employer satisfies the appropriate capital requirements under the Financial Institutions Reform, Recovery and Enforcement Act of 1989 or such other similar statutory or regulatory requirement.

In addition to protecting those prior retirement plan benefits as required in the preceding paragraph, an Employer may preserve any other retirement plan options which are not required to be protected under Section 411(d)(6) of the IRC which the Board, in its discretion, determines to be legal and administratively feasible.

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SECTION 8. SUPPLEMENTAL RETIREMENT ALLOWANCE

Each Member may elect to supplement his Retirement Allowance (the “Supplemental Retirement Allowance”) by electing to transfer assets held on the Member’s behalf in a defined contribution plan maintained by the Member’s Employer (or an Individual Retirement Account funded exclusively from a distribution from a qualified plan maintained (or previously maintained) by his Employer) to the Pentegra DB Plan if such election is made within one (1) year of the Member’s commencement of benefit payments under the Pentegra DB Plan and the Member did not elect to receive any portion of his Retirement Allowance in the form of a lump sum payment.

Upon receipt of the Member’s asset transfer, the Pentegra DB Plan shall convert the amount transferred to the applicable normal retirement form, subject to the right to elect an optional form of payment with spousal consent, if applicable. The factor used to convert the amount transferred to the applicable annuity payment form shall be determined by (i) the interest factor mandated by the Retirement Protection Act of 1994 which shall be the monthly average 30 Year Treasury rate (or such other analogous rate prescribed by the IRS) with a three month look back from the asset transfer date plus .75%, and (ii) the GAM 83 mortality table (or such other mortality table as required by the IRS).

Should a Member die after transferring assets to the Pentegra DB Plan pursuant to this Section 8 but prior to commencing payment of his Supplemental Retirement Allowance, the death benefit attributable to such transfer amount shall be paid in one lump sum to the Member’s Spouse as Beneficiary; provided, however, that if such Retiree is not married or the Retiree’s Spouse had consented in writing to the designation of a different Beneficiary, the transferred benefit will be paid to such designated Beneficiary.

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ARTICLE XII WITHDRAWAL OF PARTICIPATING EMPLOYER

SECTION 1. GENERAL

(A)	Any Employer may withdraw from the Pentegra DB Plan pursuant to the requirements of this Article XII and such other administrative procedures as may be adopted from time to time by the Pentegra DB Plan.
(B)	The provisions of this Article XII shall be effective with respect to any Employer withdrawal from the Pentegra DB Plan that occurs on or after July 1,2005.

SECTION 2. NOTICE AND EFFECT

(A)	Any Employer may withdraw from the Pentegra DB Plan by giving the Pentegra DB Plan written notice specifying a withdrawal date which shall be the last day of any calendar quarter that occurs at least 60 days following the receipt of such notice by the Pentegra DB Plan. Such date shall be referred to as the Date of Withdrawal (DOW).
(B)	An Employer’s withdrawal notice shall be deemed to be invalid unless the benefit accruals for its Employees are frozen on or before the specified DOW in accordance with the applicable provisions of the IRC, ERISA, or the rulings and regulations promulgated thereunder. The retirement benefits of each Employee who is a Member on the DOW based upon Salary and Benefit Service to such date shall be nonforfeitable as of the DOW.
(C)	The Pentegra DB Plan may require any Employer to withdraw if the Pentegra DB Plan determines that the Employer has failed to pay its contributions, charges or other assessments made by the Board, or to comply with any other provision of the Regulations or any other applicable provision of the IRC, ERISA, or the rulings and regulations promulgated thereunder. The withdrawal date specified by the Pentegra DB Plan shall be the last day of any calendar quarter that occurs at least 60 days after it has given the Employer written notice. Such date shall be referred to as the Date of Withdrawal (DOW). A withdrawal that is initiated pursuant to this Section 2(C) shall in all other respects be administered as if it had been initiated directly by the Employer pursuant to Article XII Section 2(A).
(D)	An Employer who has properly submitted a withdrawal notice may give the Pentegra DB Plan a written rescission of such withdrawal notice at any time prior to the transfer of its benefit obligations pursuant to Article XII, Section 6. Such rescission shall have no effect with respect to the actions the Employer has taken to cease benefit accruals pursuant to Article XII Section 1(B).

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(E) An Employer shall be deemed to have rescinded its withdrawal notice in the event that it fails, within a reasonable period of time, to comply with any administrative, funding or other workstep necessary to complete the withdrawal, as determined by the Pentegra DB Plan in its sole discretion. Such failures may include, but are not limited to, a failure to timely provide required information, a failure to timely execute documents, or a failure to timely remit any required contribution. The Pentegra DB Plan shall promptly notify an Employer of such deemed rescission. An Employer that has incurred a deemed rescission shall not be precluded from withdrawing from the Pentegra DB Plan as of a later DOW pursuant to the general notice requirements of this Section 2.

SECTION 3. DETERMINATION OF NOTIONAL PLAN ASSETS

(A) In connection with a request to withdraw, an Employer shall be credited for bookkeeping purposes with a notional amount of assets in the Pentegra DB Plan. Such amount shall be referred to as the Employer’s Notional Assets. An Employer’s Notional Assets shall be equal to the following:

(1)	The Employer’s Prior Market Value of Assets, plus or minus
(2)	Assumed Investment Earnings through the DOW, plus or minus
(3)	Asset Adjustments; plus or minus
(4)	Credited Investment Income from the DOW to the Date of Asset Transfer; plus or minus
(5)	Adjustments for Benefit Payments and Contributions

(B) An Employer’s Prior Market Value of Assets shall be equal to the fair market value of assets that the Employer was notionally allocated as of the actuarial valuation date used for purposes of compliance with the minimum funding standards of ERISA and the IRC coincident with or immediately preceding the DOW. To the extent such fair market value includes any contributions receivable from the Employer or is net of any benefits payable, such receivables and payables shall be disregarded.

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(C)

An Employer’s Assumed Investment Earnings through the DOW shall be equal to the investment earnings (or losses) that are assumed to have been earned on the Employer’s Prior Market Value of Assets between the relevant actuarial valuation date coincident with or immediately preceding the DOW and such DOW. The assumed investment earnings shall be calculated based on the actual rates of return for the assets of the Pentegra DB Plan to the extent such rates of return are readily determinable, or reasonable estimates of such rates of return, as determined by the Pentegra DB Plan in its sole discretion, in the event that actual rates of return are not readily determinable.

(D)

An Employer’s Asset Adjustments shall be equal to the sum of the Employer’s Orphan Adjustment, Plan Entry Adjustment, Withdrawal Charges and External Expense Adjustment and Pooled Gain or Loss Adjustment, determined as follows:

(1) An Employer’s Orphan Adjustment shall equal the Employer’s proportionate share of the estimated total cost to purchase insured annuities for all Orphans (as defined below)as of the DOW in excess of the fair value of assets that have previously been allocated to such Orphans. For purposes of determining the Orphan Adjustment, the following shall apply:

(i)	Notwithstanding the foregoing, an Employer that joined the Pentegra DB Plan on or after July 1, 2006 shall not have any Orphan Adjustment. The proportionate share for any other Employer shall be determined as the ratio of the Employer’s percentage points as provided in Schedule X (attached hereto) to the total of all percentage points for all Employers listed in Schedule X that have not previously withdrawn from the Pentegra DB Plan.
(ii)	For purposes of determining any Orphan Adjustment, the estimated total cost to purchase annuities shall be based on the present value of accrued benefits for all Orphans measured as of the actuarial valuation date coincident with or immediately preceding the DOW. Such present value shall be based on the assumptions stipulated by the PBGC under Section 4044 of ERISA for measuring the present value of benefits in a standard termination for a single employer plan. Such present value shall be increased with interest until the DOW using the immediate interest rate employed in the present value calculation.
(iii)	The fair value of assets that have previously been allocated to Orphans shall equal the fair value of assets allocated to the Orphans for purposes of developing minimum funding requirements for the Pentegra DB Plan under the IRC and ERISA as of the actuarial valuation date coincident with or immediately preceding the DOW. Such fair value of assets will be increased with interest until the DOW using the immediate interest rate employed in developing the present values pursuant to Article XII, Section 3(D)(1)(ii).

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For purposes of this Article XII, an “Orphan” is a Member or former Member with an accrued benefit under the Pentegra DB Plan whose Employer has previously withdrawn from the Pentegra DB Plan without establishing a qualified successor plan to which the liability for the Member’s or former Member’s benefits under the Pentegra DB Plan has been transferred.

(2)	An Employer’s Plan Entry Adjustment, which will always be a negative adjustment in the determination of the amount of Notional Assets, is calculated by multiplying the fair value of assets that the Employer had transferred to the Pentegra DB Plan by the percentage specified in Table XX (attached hereto) based on the Employer’s date of entry into the Pentegra DB Plan.
(3)	An Employer’s Withdrawal Charges and External Expense Adjustment shall equal the sum of the following:

(i)

An Employer’s Withdrawal Charge shall be equal to the regular annual administrative fee charged by the Pentegra DB Plan or, if greater, one-half percent (0.5%) of the Employer’s Plan Withdrawal Liabilities as defined in Section 4(B) determined assuming that the Pentegra DB Plan was fully funded on a plan termination basis as contemplated under IRC Section 414(l). An Employer who files a withdrawal notice but does not withdraw for any reason as of the designated DOW shall nevertheless be assessed a withdrawal charge, which shall be determined by the Pentegra DB Plan on a reasonable basis.

(ii)

An Employer’s External Expense Adjustment shall equal the actual external costs incurred by the Pentegra DB Plan in connection with the Employer’s request to withdraw. Such costs may include, but are not limited to, legal fees, actuarial fees, audit fees and investment fees. Such costs shall be charged to the Employer, irrespective of the date such costs arise. An Employer who files a withdrawal notice but does not withdraw for any reason as of the designated DOW shall nevertheless be assessed the full amount of all incurred external costs.

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(4) An Employer’s Pooled Gain or Loss Adjustment shall equal the pooled gain or loss that otherwise would have been allocated to the notional assets of the Pentegra DB Plan credited to the Employer as of the actuarial valuation date immediately following the DOW. Such adjustment shall only apply to an Employer that has selected a June 30^th DOW.

(E)

An Employer’s Credited Investment Income from the DOW to the Date of Asset Transfer shall be equal to the investment earnings that are assumed to have been earned on the sum of the values determined in Article XII, Sections 2(B), 2(C) and 2(D) between the DOW and the date(s) that assets are distributed pursuant to the operation of Article XII, Section 6. The assumed earnings shall be based on a fixed rate of interest equal to the Three Year Constant Maturity rate in effect for the week ending coincident with or immediately preceding the DOW, as published in the Federal Statistical Release. In the absence of the Release, the Pentegra DB Plan may obtain such rate from any other source it deems appropriate.

(F)

An Employer shall receive a positive asset adjustment with respect to any contribution that is made by the Employer that is not included in the Employer’s Prior Market Value of Assets. An Employer shall receive a negative asset adjustment with respect to any benefit payment made by the Pentegra DB Plan on behalf of the Employer’s Members that occurred after the date as of which the Employer’s Prior Market Value of Assets had been determined. In all cases, the Pentegra DB Plan shall allocate a pro-rata share of investment income or losses using reasonable methods to reflect the timing of such contributions and benefit payments, and in a manner that is consistent with Article XII, Sections 2(C) and 2(E).

SECTION 4. DETERMINATION OF PLAN WITHDRAWAL LIABILITIES

(A) A withdrawing Employer shall elect the method under which its liabilities with respect to its Members shall be satisfied effective as of the DOW. The allowable methods are:

(1)	The purchase of single premium insured annuities from one or more qualified insurance companies; or
(2)	The transfer of all Plan Withdrawal Liabilities with respect to such withdrawing Employer from the Pentegra DB Plan to a qualified successor plan.

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(B) An Employer’s Plan Withdrawal Liabilities shall be equal to the following:

(1)	In the case of an Employer that has elected annuity purchases, the total cost of all such purchases
(2)	In the case of an Employer that has elected to have assets and liabilities transferred to a qualified successor plan, the amount of assets that will be transferred to such qualified successor plan in accordance with IRC Section 414(l), ERISA Section 4044 and the provisions of this Article XII, pursuant to determinations made by the Pentegra DB Plan using reasonable procedures.

SECTION 5. DETERMINATION OF FINAL CONTRIBUTION DUE BY WITHDRAWING EMPLOYER

A withdrawing Employer shall be required to remit a final contribution to the Pentegra DB Plan as of the date insured annuity contracts are purchased (in the case of an Employer withdrawal without a qualified successor plan) or as of the date of transfer of Plan Withdrawal Liabilities (in the case of an Employer withdrawal with a qualified successor plan). The final contribution for a withdrawing Employer shall equal the excess, if any, of the Employer’s Plan Withdrawal Liabilities as defined in Article XII, Section 4(B) over the Employer’s Notional Assets as defined in Article XII, Section 3(A), as determined as of the date referred to in the preceding sentence of this Article XII, Section 5.

SECTION 6. TRANSFER OF ASSETS AND LIABILITIES OUT OF THE PENTEGRA DB PLAN

The Pentegra DB Plan shall purchase insured annuities or transfer assets and liabilities to a qualified successor plan as soon as administratively feasible following the receipt of any contributions due from the Employer pursuant to Article XII, Section 5 and such other documents, elections, certifications or other items as may be deemed necessary by the Pentegra DB Plan. Upon the Pentegra DB Plan’s purchase of insured annuity contracts or the transfer of assets and liabilities to a qualified successor plan, as the case may be, the Pentegra DB Plan shall have no liability for the benefit liabilities that are payable under such annuity contracts or that were transferred to the qualified successor plan.

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SECTION 7. TRANSFER OF EXCESS ASSETS TO A QUALIFIED SUCCESSOR PLAN

(A)

In the event that a withdrawing Employer has elected to have the liabilities for its Members transferred to a qualified successor plan, any excess of the Employer’s Notional Assets over the Employer’s Plan Withdrawal Liabilities shall be transferred to such qualified successor plan pursuant to Article XII, Section 7(B), but only to the extent that the Pentegra DB Plan determines that such transfer is permissible in accordance with IRC Section 414(l) and ERISA Section 4044 as of the DOW. To the extent that a transfer is permissible but in an amount less than the full value of the Employer’s excess assets, such lesser amount shall be transferred in lieu of the full amount of excess assets. To the extent that the Pentegra DB Plan determines that a transfer of any amount is impermissible, no transfer shall occur, and the withdrawing Employer and the qualified successor plan of such withdrawing Employer shall forfeit all rights with respect to such excess assets and such assets shall remain in the Pentegra DB Plan.

(B)

Any transfer of the full or limited amount of excess assets shall be made over a three-year period to the qualified successor plan of the withdrawn Employer. One-third of such amount shall be transferred to the qualified successor plan as of the first anniversary of the DOW. One-half of the remaining undistributed amount shall be transferred to the qualified successor plan as of the second anniversary of the DOW. The entirety of the remaining undistributed amount shall be transferred to the qualified successor plan as of the third anniversary of the DOW. Any portion of the excess assets that is held by the Pentegra DB Plan shall be credited with a fixed rate of investment earnings pursuant to Article XII, Section 3(E). Notwithstanding the preceding, in the event that the Employer terminates or otherwise fails to maintain the qualified successor plan prior to the completion of the transfer of excess assets, no further asset transfers shall occur, and any rights of the Withdrawing Employer or its qualified successor plan to the remaining excess assets shall be forfeited, and such assets shall remain in the Pentegra DB Plan.

SECTION 8. RESTRICTIONS ON QUALIFIED SUCCESSOR PLAN

A transfer of assets and liabilities of the Pentegra DB Plan to a qualified successor plan (whether by merger or consolidation with such qualified successor plan or otherwise) shall not be made unless each Member would, if either the Employer’s or Employers’ participation in the Pentegra DB Plan or such qualified successor plan then terminated, receive a benefit immediately after such transfer which (after taking account of any distributions or payments to them as part of the same transaction) is equal to or greater than the benefit the Member would have been entitled to receive immediately before such transfer if the Employer’s or Employers’ participation in the Pentegra DB Plan had then been terminated. The Pentegra DB Plan may also require appropriate indemnification from the Employer or Employers maintaining such qualified successor plan before making such a transfer.

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SECTION 9. PARTIAL TERMINATION

If any governmental authority or the Pentegra DB Plan determines that a partial termination (within the meaning of the IRC or ERISA) of the Pentegra DB Plan has occurred, then (i) the rights of all its affected Members to their retirement benefits accrued to the partial termination date shall be nonforfeitable, and (ii) such accrued retirement benefits shall be administered and distributed in accordance with the applicable provisions of the Pentegra DB Plan.

SECTION 10. SPECIAL PROCEDURES UPON CONSERVATORSHIP OR RECEIVERSHIP

(A) Notwithstanding anything in the Regulations to the contrary and in accordance with such administrative procedures, requirements and conditions as the Board shall adopt, if an Employer participating in the Pentegra DB Plan is placed into conservatorship or receivership by the Resolution Trust Corporation (the “RTC”) (or such other appropriate governmental authority), the provisions of this Section 10 shall apply.

(B)	(i)	If an Employer is placed into conservatorship by the RTC, such Employer’s participation in the Pentegra DB Plan will continue uninterrupted without any formal action by the RTC or the Employer and retirement benefits will continue to accrue for its Members.
	(ii)	If the Employer is placed into receivership by the RTC, the RTC will have sixty (60) days (unless within such 60-day period the RTC requests an extension for up to thirty (30) days and the Pentegra DB Plan in its sole discretion approves such request) from the date the Employer was placed into receivership to reaffirm the Employer’s participation in the Pentegra DB Plan in which event benefits shall continue to accrue from the date the Employer was placed into receivership. Alternatively, the RTC may elect to improve benefits as of the date of receivership in such manner as shall be prescribed by the Pentegra DB Plan, provided in such case the Employer has a sufficient accounting credit under the Pentegra DB Plan to offset the cost of such benefit improvements. The credit described in the preceding sentence, which for purposes of this Section 10 shall be referred to as “FECO,” represents with respect to an Employer an accounting credit entry on the books and records of the Pentegra DB Plan which may be applied solely to offset an Employer’s contribution obligations to the Pentegra DB Plan. FECO may not be transferred by the Pentegra DB Plan for an Employer’s general corporate use or otherwise in contravention of applicable law.

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(C)

If the RTC, on behalf of an Employer which is placed in receivership, elects to improve benefits, such Employer will be deemed to have withdrawn from the Pentegra DB Plan (following the election to improve benefits) without a qualified successor plan as of the date the Employer was placed into receivership. Alternatively, if the RTC neither reaffirms (within the time prescribed in Subsection (B) of this Section 10) the participation in the Pentegra DB Plan of an Employer which was placed into receivership nor elects to improve benefits, the Employer will be deemed to have withdrawn from the Pentegra DB Plan without a qualified successor plan as of the date the Employer was placed into receivership.

(D)

If an Employer which has a FECO is placed into conservatorship or receivership by the RTC and such Employer has not withdrawn (or has not been deemed to withdraw) from the Pentegra DB Plan without a qualified successor plan, the RTC may, in accordance with this Subsection (D) and such procedures as may be adopted by the Board, have the FECO made available under the Pentegra DB Plan to another entity (referred to as an “Acquirer”) if such Acquirer, in accordance with the Regulations, adopts the Pentegra DB Plan. The maximum amount of the FECO which the RTC may make available to an Acquirer is a fraction of the “available FECO,” the numerator of which is the PBGC value (as determined under IRC Section 414(l) and the IRS Regulations thereunder) of the accrued benefits of the Employees who are transferred to the Acquirer and the denominator of which is the PBGC value of the accrued benefits of all of the Employees of the Employer as of the date of the acquisition of such Employer by such Acquirer, inclusive of those Employees being transferred to the Acquirer. The “available FECO” is the total FECO attributable to the Employer as of the date of the acquisition, reduced by the amount of any FECO which could have been, but was not, made available to any previous Acquirer. The maximum amount of FECO that may be made available to an Acquirer shall not be reduced as a result of Employees being terminated by the RTC on or after the date of conservatorship or receivership. If an Acquirer does not elect to participate in the Pentegra DB Plan, there shall be deemed to occur a withdrawal by the Employer without a qualified successor plan with respect to the Employees who are transferred to the Acquirer and such Employees shall become 100% vested in their accrued benefit regardless of their number of years of Vesting Service. The RTC may apply any portion of the FECO remaining after an acquisition to fund the normal cost or to improve benefits with respect to those Employees who have not been transferred to the Acquirer and who continue to be employed by the Employer. The amount of any FECO which could have been, but was not, transferred to any previous Acquirer will be the first amount to be applied to fund the normal cost or to improve benefits with respect to those Employees who continue to be employed by the Employer. Any FECO remaining after the FECO attributable to an Employer’s participation in the Pentegra DB Plan is applied, as provided in this Subsection (D), shall remain in the Pentegra DB Plan.

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SECTION 11. MISCELLANEOUS PROVISIONS

(A)	Upon any Employer withdrawal, the Employer shall continue to make all contributions required to satisfy the minimum funding standards of the IRC and ERISA as determined by the Pentegra DB Plan. Any unpaid Employer contributions, charges or other assessments shall become immediately due and payable. All unpaid contributions of the Employer shall constitute a first lien on the Employer’s assets and may be recorded by the Pentegra DB Plan in any jurisdiction.
(B)	Upon any Employer withdrawal, the Pentegra DB Plan shall notify the IRS and any other appropriate governmental authority in such manner as applicable law may require. Subject to any conditions which the IRS or other appropriate governmental authority may impose, disposition shall be made in accordance with this Article XII.
(C)	In the event of an Employer withdrawal, no amount shall become payable by the Pentegra DB Plan on or after such Employer’s DOW to or in respect of any of its Members (including those on leave of absence and inactive as described in Article X) except as provided under the applicable provisions of the Pentegra DB Plan’s Regulations and no amount shall be payable to the Employer.
(D)	For purposes of this Article XII, a qualified successor plan is a defined benefit pension plan established by the withdrawing Employer which (i) has been determined by the IRS to be a qualified and tax-exempt plan and trust within the meaning of the IRC, (ii) has provided the Pentegra DB Plan with written certification by its appropriate fiduciaries that in the event of a transfer of assets and liabilities to such successor plan as described in this Article XII, the qualified successor plan shall be fully liable for the payment of all such transferred liabilities and that the Pentegra DB Plan shall not be liable for the payment of any part of such liabilities, (iii) is intended to be maintained indefinitely and (iv) meets such other requirements of the IRS, other appropriate governmental authority or of the Board which may apply.

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(E) Notwithstanding anything to the contrary contained herein, upon receipt by the Pentegra DB Plan of a request from a federal governmental entity, as statutory receiver for a withdrawn Employer, provided the federal governmental entity became statutory receiver for the withdrawn Employer following such Employer’s withdrawal from the Pentegra DB Plan and establishment of a qualified successor plan, the Pentegra DB Plan may, in its sole discretion and subject to any conditions provided herein or otherwise, accelerate the transfer of the remaining amount of any excess assets pursuant to Article XII, Section 7, if any, to the qualified successor plan maintained by the Employer for which such governmental entity acts as receiver. Any request by a federal governmental entity, as statutory receiver for a withdrawn Employer, to accelerate the transfer of the remaining amount of such excess assets shall be accompanied by a certification to the effect that such governmental entity was duly appointed as receiver, citing the statutory authority therefore, and that such appointment continues in effect as of the date of the accelerated payment request. Prior to any such accelerated payment of the excess assets, such governmental entity shall indemnify the Pentegra DB Plan, in such form and manner as is acceptable to the Pentegra DB Plan, for the full amount of all reasonable legal fees, costs and expenses (including damages) which arise from any claims made against the Pentegra DB Plan by participants under the qualified successor plan of the Employer in receivership because of the acceleration of payments by the Pentegra DB Plan.

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ARTICLE XIII TERMINATION OF THE TRUST

(A)

The Trust is the sole source of all benefits under the Regulations and shall continue, unless terminated as herein provided, until all assets of the Trust are distributed in accordance with the Regulations. The Trust and the benefit programs embodied in the Regulations may be terminated only upon a two-thirds vote of the Board and of the then participating Employers, in which event termination shall be effective on a date specified after at least 6 months’ notice to the Trustee and all members of the Board and Employers. In the event of such termination, (i) the rights of all Members to their Retirement Allowances accrued to the date of termination shall thereupon be nonforfeitable to the extent that such allowances have then been funded by such amount of assets determined by the Pentegra DB Plan to be properly allocable to such Members’ allowances, and (ii) the Board shall direct the Trustee to liquidate the assets of the Trust as promptly as it deems prudent. The Board shall notify the IRS, the PBGC and any other appropriate governmental authority of such termination at least 30 days prior to the termination date or at such other date as applicable law may require, and no distribution of the Trust’s assets shall be made until all applicable governmental approvals have been obtained by the Pentegra DB Plan.

(B)

The Board shall determine the Trust’s net funds remaining after providing for necessary expenses and shall then allocate such funds to the extent necessary and sufficient in the following order of priority:

(1)	Each Member, former Member, Retiree, and Beneficiary or Contingent Annuitant shall be entitled to a share equal to his Accumulated Contributions (or the Accumulated Contributions of the Member on whose behalf the individual is entitled to benefits), if any, less the sum of any allowances received.
(2)	Next, each Retiree, Beneficiary or Contingent Annuitant entitled to an immediate or deferred benefit on the termination date shall be entitled to a share equal to the actuarial liability attributable to his benefits reduced by his share under Paragraph (1) of this Subsection (B).

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(C) The Board shall then:

(1)	Determine as of the termination date, in the same manner as described in Article XII, Section 4, Subsection B, the actuarial liability established by the Pentegra DB Plan for each Employer group of Members as described in Article XII reduced by the amount of any allocations to such Members pursuant to Paragraph (1) of Subsection (B);
(2)	Determine the net funds remaining after providing for all allocations under Subsection (B) of this Article XIII;
(3)	Allocate such funds to all such groups of Members as of the termination date on the basis of the ratio of the actuarial liability computed for each group of Members to the total liability for such groups; and
(4)	Allocate such amounts to the individual Members in each group in accordance with the procedure set forth in Article XII, Section 7.

(D)	(1)	The amounts determined in accordance with Subsections (B) and (C) of this Article XIII shall, subject to the approval of the IRS, the PBGC and any other appropriate governmental authority, be distributed to the individuals described in such Subsections. Any surplus remaining in the Trust after such distribution shall then be distributed to the Employers in such manner as the Board shall deem equitable and appropriate.
	(2)	Notwithstanding anything in the Pentegra DB Plan’s Regulations to the contrary, before any distribution to Employers, if any surplus remains in the Trust after satisfaction of all liabilities, such remaining assets shall be equitably distributed to Members (or Beneficiaries) who made contributions to the Pentegra DB Plan under Article IX, Section (5) in accordance with the following formula:

The portion of the remaining assets which are attributable to Member contributions shall be equal to the product derived by multiplying (i) the market value of the total remaining assets, by (ii) a fraction where the numerator is the present value of all portions of the accrued benefits with respect to Members that are derived from Member contributions and the denominator is the present value of all benefits under the Pentegra DB Plan.

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Each person who is, as of the termination date, a Member under the Pentegra DB Plan, or an individual who has received, during the 3-year period ending with the termination date, a distribution from the Pentegra DB Plan of such individual’s entire nonforfeitable benefit in the form of a single sum distribution or in the form of irrevocable commitments purchased by the Pentegra DB Plan from an insurer, shall be treated as a Member with respect to the termination, if all or part of the nonforfeitable benefit with respect to such person is or was attributable to Member mandatory contributions.

(3)

Upon completion of the foregoing distributions, the Trustee shall be relieved of all further obligations under the Trust, but its powers shall continue so long as any assets remain in the Trust.

(E)	No asset or liability of the Trust shall in any event be merged, consolidated with or transferred by the Trust to any other plan unless such person affected thereby would, if such plan then terminated immediately after such event, receive thereunder a benefit which is equal to or greater than the benefit to which he would have been entitled if the Pentegra DB Plan had terminated immediately before such event.
(F)	Notwithstanding the provisions of this Article XIII, all allocations and distributions made pursuant to this Article XIII shall be made in accordance with Title IV of ERISA.
(G)	In the event of the termination of the Pentegra DB Plan, the benefits of any Highly Compensated Employee (and any highly compensated former employee, as defined in Section 414(q) of the IRC and IRS Regulations thereunder), shall be limited to a benefit that is nondiscriminatory under Section 401(a)(4) of the IRC.
	The annual payments to a Restricted Employee (as defined below) may not exceed an amount equal to the payments that would be made on behalf of such Restricted Employee under a single life annuity that is the actuarial equivalent of the sum of the Restricted Employee’s accrued benefit and his other benefits under the Pentegra DB Plan. However, the restriction described in the foregoing sentence shall not apply if:

(1) after payment to a Restricted Employee of all Benefits (as defined below), the value of the assets of the Pentegra DB Plan equals or exceed 110% of the value of current liabilities (as defined in Section 412(1)(7) of the IRC) under the Pentegra DB Plan; or

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(2)	the value of the Benefits for a Restricted Employee is less that 1% of the value of current liabilities (as defined in Section 412(1)(7) of the IRC) under the Pentegra DB Plan; or
(3)	the value of the Benefits for a Restricted Employee does not exceed $1,000.

For purposes of this Subsection (G), a “Restricted Employee” means a Member who is a Highly Compensated Employee (or highly compensated former employee of the Employer as defined in Section 414(q) of the IRC and the IRS Regulations thereunder). In any year, the total number of individuals who are subject to the restrictions described in Subsection (G) shall be limited to a group of not less than 25 Highly Compensated Employees and highly compensated former employees and the Employees included in the group shall be determined on the basis of such Employees with the greatest compensation.

For purposes of this Subsection (G), the term “Benefits” includes loans in excess of amounts set forth in Section 72(p)(2)(A) of the IRC, any periodic income, any withdrawal values payable to a living Employee, and any death benefits not provided for by insurance on the Restricted Employee’s life.

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ARTICLE XIV ADMINISTRATION AND MANAGEMENT OF FUND

SECTION 1. ADMINISTRATION

(A)	The general administration of the Pentegra DB Plan and the general responsibility for carrying out the provisions of the Regulations shall be placed in a Board of Directors who must be Members of the Pentegra DB Plan. The President of the Pentegra DB Plan shall be the chief administrative officer of the Pentegra DB Plan, a member ex officio of the Board and, for purposes of ERISA, the “plan administrator.” The Board shall constitute the “named fiduciary” for purposes of ERISA.
(B)	The Board may adopt, and amend from time to time, by-laws not inconsistent with the Trust and the Regulations and shall have such duties and exercise such powers as are provided in the Regulations, Trust and by-laws. The number of Directors, their method of election and their terms of office shall be governed by such by-laws. The Board shall hold an annual meeting each year and may hold additional meetings from time to time.
(C)	The Board shall select the Trustee of the assets of the Pentegra DB Plan and shall define the investment and other powers and duties of the Trustee and determine the terms and provisions of the Trust, and may, subject to the provisions of the Trust, appoint from time to time a successor trustee or trustees as the Board in its discretion shall determine. The Trust shall constitute a trust fund for the payment of benefits and expenses of the Pentegra DB Plan. All contributions, other income and property received by the Trust shall be held by the Trustee and invested, reinvested and disbursed in accordance with and subject to the provisions of the Trust and the Regulations. All benefits payable under the Regulations shall be payable from the Trust and from no other source. No person shall have interest in, or right to, any part of the corpus or income thereof, except to the extent expressly provided in the Regulations or the Trust.

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(D)	The Board shall elect a chairman and a vice-chairman of the Board and such officers of the Pentegra DB Plan as the Board deems desirable and shall define their duties. The Board shall elect annually from its membership an Executive Committee, a Retirement Committee, an Investment Committee, an Audit Committee, and a Nominating Committee and shall define their duties. It may appoint such other committees and arrange for and hire such actuarial, legal, accounting, auditing, investment manager or advisory, administrative, medical and other services as it deems appropriate to carry out the Regulations and may act in reliance upon the advice and actions of the persons or firms providing such services. The Board may establish, staff, equip and maintain a Pentegra DB Plan Office to assist it in the administration of the Regulations. The Board may authorize the Trustee or any committee, officer, employee or agent of the Pentegra DB Plan to perform any act pertaining to the Pentegra DB Plan or the administration thereof. The Board shall cause to be maintained proper accounts and accounting procedures, and shall submit an Annual Report on the operations of the Pentegra DB Plan to each Employer for the information of its Members.
(E)	The members of the Board shall use ordinary care and reasonable diligence in the performance of their duties and shall serve without compensation, but shall be reimbursed for any reasonable expenses incurred in their capacities as Board members. No bond or other security need be required of the Trustee or any Board member in any jurisdiction.
(F)	Each Employer, other than the Pentegra DB Plan Office, by its participation in the Comprehensive Retirement Program, agrees that each Board member, officer and employee of the Pentegra DB Plan shall be indemnified by the Employer for any liability, in excess of that which is covered by insurance, arising out of any act or omission to act in connection with the Regulations or the Trust except for fraud or willful misconduct. The obligation to pay any such expense shall be deemed an administrative expense of the Regulations and shall be allocated among the Employers, other than the Pentegra DB Plan Office, by the Board as nearly as practicable in the same proportions as the then current administrative expenses of the Pentegra DB Plan are borne by the Employers. No Board member or officer of the Pentegra DB Plan shall be personally liable by virtue of any contract or other instrument executed by him or on his behalf in such capacity nor for any mistake of judgment made in good faith.
(G)	No Employer shall under any circumstances or for any purpose be deemed an agent of the Board, the Trustee or the Pentegra DB Plan. Neither the Board nor the Trustee shall be required to enforce payment of any contributions payable under the Regulations.

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(H)

The Board shall adopt, and may change from time to time, actuarial or other tables and the interest rate or rates which shall be used in calculations under the Regulations, and shall establish the contribution rates as provided in Article IX. The actuary designated by the Board shall make an annual actuarial valuation of the Pentegra DB Plan’s benefit programs, and on the basis thereof shall recommend to the Board such tables and interest and contribution rates for its adoption.

(I)

The expenses of administering the Regulations including (i) the fees and expenses of the Trustee for performance of its duties under the Trust, (ii) the expenses incurred by the Board and the Pentegra DB Plan Office in the performance of their duties under the Regulations and the Trust, and (iii) all other proper charges and disbursements of the Trustee and the Pentegra DB Plan Office, shall be borne by the Employers in such proportions as shall be determined by the Board, but until paid by the Employers, all of such expenses shall be a charge against the assets of the Trust.

SECTION 2. DISPUTE RESOLUTION

(A)

The Board shall have the exclusive right and full discretionary authority to interpret the Regulations and any questions arising under or in connection with the administration of the Pentegra DB Plan, including without limitation, the authority to determine eligibility for employer participation, eligibility for membership and benefits, and the amount and mode of all contributions, benefits and other payments under the Regulations. The decisions or actions of the Board in respect thereof shall be final, conclusive and binding upon all persons having an interest in the Trust or under the Regulations or under any agreement with an insurance company or a financial institution constituting a part of the Regulations and the Trust.

(B)

The Board shall have full discretionary authority to delegate to the Retirement Committee, or any other committee of the Board or to the President, all or any part of the interpretative and decisional authority of the Board, described in Subsection (A) of this Section 2, with respect to the Regulations or the administration of the Pentegra DB Plan.

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(C) All disputed claims with respect to contributions, benefit eligibility and payments arising under the Regulations shall be submitted in writing to the President of the Pentegra DB Plan at the office of the Pentegra DB Plan. Within 90 days after receipt of such claim, the decision of the President with respect thereto shall be mailed to the claimant and shall be final, binding and conclusive; provided, however, if special circumstances require an extension of time for processing the claim, an additional 90 days from the end of the initial period shall be allowed for processing the claim, in which event the claimant shall be furnished with a written notice of the extension prior to the termination of the initial 90-day period indicating the special circumstances requiring an extension. The claimant may appeal such decision in writing to the Retirement Committee of the Board, at the office of the Pentegra DB Plan, within 60 days after the mailing to the claimant of such written decision of the President. Such written appeal shall contain all information which the claimant desires the Retirement Committee to consider and the Committee’s decision with respect thereto shall be mailed to the claimant within 60 days after its receipt of such appeal unless special circumstances require an extension of time for processing, in which event an additional 60 days shall be allowed for review and claimant shall be so notified in writing. The decision of the President, or in the case of an appeal, the decision of the Retirement Committee, in respect of such claim shall be final, binding and conclusive.

SECTION 3. MANAGEMENT

(A) The Board shall also have the power, acting directly or through the Trustee:

(1)

To purchase, lease for any term, invest or otherwise acquire an interest in any property, real, personal or mixed, and wherever situated, including, but not by way of limitation, real property, whether improved or unimproved, common and preferred stocks, bonds, notes, debentures, mortgages, mutual fund shares, futures, forwards, swaps and options contracts, and certificates of deposit issued by any financial institution including an Employer, without being limited to the class of securities in which trustees are authorized by law or any rules of court to invest trust funds and without regard to the proportion any such property may bear to the entire amount of the Pentegra DB Plan Trust;

(2)

To sell, exchange, manage, lend, lease for any term, improve, or otherwise dispose of, and grant options and security interests with respect to any such property of the Pentegra DB Plan, and any sale or other disposition may be public or private and upon such terms and conditions as the Board may deem best;

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(3)	To participate in any plan of reorganization, consolidation, merger, combination or other similar plan relating to such property, and to consent to or oppose any such plan and any action thereunder, or any contract, lease, mortgage, purchase, sale or other action by any legal entity;
(4)	To deposit any such property with any protective, reorganization or similar committee, to delegate discretionary power thereto and to pay part of its expenses and compensation and any assessments levied with respect to any such property so deposited;
(5)	To engage suitable employees, agents and professional consultants, and to pay their reasonable compensation and expenses;
(6)	To extend the time of payment of any obligations;
(7)	To enter into stand-by agreements for future investment of the Pentegra DB Plan Trust, either with or without a stand-by fee;
(8)	To exercise all conversion and subscription rights and all voting rights with respect to such property and to grant proxies, discretionary or otherwise;
(9)	To cause any investments to be registered and held in the name of one or more nominees of the Board or any custodian of such property, with or without the addition of words indicating that such investments are held in a fiduciary capacity, and to cause any such investments to be held in bearer form;
(10)	To collect and receive any and all money and other property due to the Pentegra DB Plan and to give full discharge and acquittance therefor;
(11)	To settle, compromise or submit to arbitration any claims, debts or damages due or owing to or from the Pentegra DB Plan; to commence or defend suits or legal proceedings whenever, in its judgment, any interest of the Pentegra DB Plan requires it; to represent the Pentegra DB Plan in all suits or legal proceedings in any court of law or equity or before any other body or tribunal; to abstain from the enforcement of any right or claim in its absolute discretion and to abandon, if it shall deem it advisable, any property held by the Pentegra DB Plan;

119

(12)	To hold uninvested, without liability for interest thereon, any money received by the Pentegra DB Plan until the same shall be invested or disbursed;
(13)	For purposes of the Pentegra DB Plan, to borrow money from others, to issue promissory notes of the Pentegra DB Plan for the same and to secure the repayment thereof by pledging any property of the Pentegra DB Plan and to enter into cash collateral agreements referred to in Article IX, Section 6;
(14)	To make any agency, trust, custodial, advisory, depository, management, administrative or other arrangement (i) with any bank or other financial institution for the deposit and safekeeping of the assets of the Pentegra DB Plan, and (ii) with any investment advisor or manager for the investment and reinvestment of the assets of the Pentegra DB Plan;
(15)	To transfer for investment purposes any part of the assets of the Pentegra DB Plan (i) to any group trust which meets the requirements of Sections 401(a) and 501(a) of the IRC, with the equitable share of the Pentegra DB Plan in the commingled assets of such trust being part of the Pentegra DB Plan under the Regulations, and (ii) to any group deposit administration annuity contract or other type of contract issued to the Pentegra DB Plan by one or more insurance companies, utilizing under any such contract, general, commingled, or separate investment accounts as the Investment Committee in its discretion shall determine, all such contracts being part of the Pentegra DB Plan under the Regulations;
(16)	To charge against and pay out of the Pentegra DB Plan (in accordance with ERISA and the IRC) (i) taxes of any and all kinds whatsoever which are levied or assessed upon or become payable in respect of the Pentegra DB Plan, the income from any property forming a part thereof, or any security transaction pertaining thereto, and (ii) the expenses incurred by the Board in the performance of its duties in respect of the Pentegra DB Plan and all other proper charges and disbursements of the Pentegra DB Plan;
(17)	To delegate powers, including, without limitation, discretionary powers with respect to any of the foregoing to any Committee of the Board or any officer or employee of the Pentegra DB Plan or investment advisor or manager, custodian or other agent;

120

(18)	To appoint any bank or trust company, wherever domiciled, as successor trustee under the Declaration of Trust, upon such terms and conditions as the Board deems advisable; and
(19)	Generally to do all acts, whether or not expressly authorized, which the Board may deem necessary or desirable for the administration, management and protection of the Pentegra DB Plan.

(B) Persons dealing with the Board or the Trustee shall be under no obligation to see to the proper application of any money paid or property delivered to the Pentegra DB Plan.

SECTION 4. INFORMATION AND COMMUNICATIONS

(A) Each Employer, Member, Retirement and Beneficiary shall file with the Pentegra DB Plan such pertinent information as the Pentegra DB Plan may require, and no Employer, Member, Retiree, Beneficiary or Contingent Annuitant shall have any rights or be entitled to any benefits from the Pentegra DB Plan unless such information is filed in the manner and form specified by the Pentegra DB Plan. The Pentegra DB Plan shall be fully protected in acting upon any such information and shall be under no duty to inquire into the accuracy or truth thereof, and the payment of any amount by the Pentegra DB Plan pursuant to such information shall constitute a complete discharge of the liability therefor. All notices, instructions and other communications shall be in writing and in such form as is prescribed from time to time by the Pentegra DB Plan, shall be mailed by first class mail or delivered personally, and shall be deemed to have been duly given and delivered only upon actual receipt thereof by the Pentegra DB Plan.

(B) (1) In the case of a qualified joint and survivor annuity as described in Article VII, Section 1, the Pentegra DB Plan shall provide each Member no less than 30 days and no more than 90 days prior to the annuity starting date a written explanation of: (i) the terms and conditions of a qualified joint and survivor annuity; (ii) the Member’s right to make and the effect of an election to waive the qualified joint and survivor annuity form of benefit; (iii) the rights of a Member’s Spouse; (iv) the right to make, and the effect of, a revocation of a previous election to waive the qualified joint and survivor annuity; and (v) the relative values of the various optional forms of benefit under the Pentegra DB Plan.

121

(2)	In the case of a preretirement survivor annuity as described in Article IV, Section 3(B), the Pentegra DB Plan shall provide each Member within the applicable period for such Member, a written explanation of the preretirement survivor annuity in such terms and in such a manner as would be comparable to the explanation provided for meeting the requirements of Paragraph (1) of this Subsection (B) applicable to a qualified joint and survivor annuity.
(3)	The applicable period for a Member is whichever of the following periods ends last: (i) the period beginning with the first day of the Plan Year in which the Member attains age 32 and ending with the close of the Plan Year preceding the Plan Year in which the Member attains age 35; (ii) a reasonable period ending after the individual becomes a Member; or (iii) a reasonable period ending after the preretirement survivor annuity first applies to the Member. Notwithstanding the foregoing, notice must be provided within a reasonable period ending after separation of service in the case of a Member who separates from service before attaining age 35.
(4)	For purposes of the preceding paragraph, a reasonable period ending after the enumerated events described in (ii), (iii) and (iv) is the end of the two year period beginning one year prior to the date the applicable event occurs and ending one year after that date. In the case of a Member who separates from service before the plan year in which age 35 is attained, notice shall be provided within the two year period beginning one year prior to separation and ending one year after separation. If such a Member thereafter returns to employment with the employer, the applicable period for such Member shall be redetermined.

122

(C)	A Member may, in accordance with this Subsection (C) elect to receive his Retirement Allowance in one of the optional forms described in Article VI. Any waiver of a qualified joint and survivor annuity or a preretirement survivor annuity shall not be effective unless: (a) the Member’s Spouse consents in writing to the election; (b) the election designates a specific alternate Beneficiary, including any class of beneficiaries or any contingent beneficiaries. which may not be changed without spousal consent (or the Spouse expressly permits designations by the Member without any further spousal consent); (c) the Member’s Spouse’s consent acknowledges the effect of the election; and (d) the Spouse’s consent is witnessed by a notary public. Additionally, a Member’s waiver of the qualified joint and survivor annuity will not be effective unless the election designates a form of benefit payment which may not be changed without spousal consent (or the Spouse expressly permits designations by the Member without any further spousal consent.) If it is established to the satisfaction of the Pentegra DB Plan that such written consent may not be obtained because there is no Spouse or the Spouse cannot be located, a waiver will be deemed a qualified election.
	Any consent by a Spouse obtained under this provision (or establishment that the consent of a Spouse may not be obtained) shall be effective only with respect to such Spouse. A consent that permits designations by the Member without any requirement of further consent by such Spouse must acknowledge that the Spouse has the right to limit consent to a specific Beneficiary, and a specific form of benefit where applicable, and that the Spouse voluntarily elects to relinquish either or both of such rights. A revocation of a prior waiver may be made by a Member without the consent of the Spouse at any time prior to the commencement of benefits. The number of revocations shall not be limited. No consent obtained under this provision shall be valid unless the Member has received notice as provided in Subsection (B) of this Article XIV, Section 4.
	Notwithstanding anything in the Regulations to the contrary, effective for distributions made on or after December 31, 1996, the 90-day period in which a Member may, with the written consent of his Spouse, elect in writing to receive his benefit in a single lump sum shall not end before the 30th day after the date on which explanations of the qualified joint and survivor annuity and preretirement survivor annuity are provided. A Member may elect (with any applicable spousal consent) to waive any requirement that the written explanation be provided at least 30 days before the annuity starting date (or to waive the 30-day requirement under the preceding sentence) if the distribution commences more than seven days after such explanation is provided.

123

ARTICLE XV AMENDMENTS

The Board reserves and shall have the right to amend the Regulations or the Trust at any time in whole or in part, for any reason, and without the consent of any Employer, or any Member or other person having an interest in the Trust, or under the Regulations, and each Employer by its adoption of the Regulations shall be deemed to have delegated this authority to the Board; but no amendment shall be adopted which would:

(i)	Raise the contribution rate of any Member since last becoming a Member unless he shall consent thereto; or
(ii)	Reduce the then accrued benefits of Members or Retirees, except to the extent necessary to maintain the Trust as a trust qualified under Section 401(a) of the IRC; or
(iii)	Permit any of the assets of the Trust (other than that required to pay taxes, if any, and the expenses described in Article XIV, Section 1(I) to the extent, if any, not paid by the Employers) to be used for or diverted to any purpose other than for the exclusive benefit of Members, Retirees, and their Beneficiaries and Contingent Annuitants under the Regulations, prior to the satisfaction of all liabilities with respect thereto.

124

ARTICLE XVI INTERPRETATION

The Regulations shall be construed in accordance with ERISA and the laws of the State of New York (without regard to the principles of the conflicts of laws thereof).

125

Table X

ALLOCATION OF ORPHAN ADJUSTMENT

Employer	Commencement		Percentage
Number	Date		Points
1000		12/1/1943		1.23	%
1001		4/1/1944		1.78	%
1004		1/1/1945		0.25	%
1006		1/1/1945		0.17	%
1007		1/1/1945		0.49	%
1020		12/1/1951		0.11	%
1023		7/1/1956		0.27	%
1024		7/1/1964		0.10	%
1025		7/1/1964		0.10	%
1026		6/1/1966		0.10	%
1027		5/1/1966		0.19	%
1030		7/1/1967		0.05	%
1032		10/1/1967		0.31	%
1034		3/1/1969		0.19	%
1037		6/1/1970		0.10	%
1046		7/1/1974		0.09	%
1055		10/1/1980		0.68	%
1059		6/1/1984		0.36	%
1063		7/1/1987		0.24	%
1064		6/1/1988		0.35	%
1067		9/1/1989		0.24	%
1069		7/1/1990		0.15	%
1070		11/1/1991		0.10	%
1072		1/1/1992		0.06	%
1073		5/1/1992		0.24	%
1074		1/1/1994		1.17	%
1077		7/1/1994		0.13	%
1079		1/1/1996		0.61	%
1080		1/1/1997		1.88	%
1082		1/1/1998		0.31	%
1083		1/1/1999		0.20	%
1084		9/1/2000		0.01	%
1085		1/1/2001		0.20	%
1086		7/1/2003		0.05	%
2000		12/1/1943		4.02	%
2003		1/1/1946		0.75	%
2006		3/1/1952		1.06	%

ALLOCATION OF ORPHAN ADJUSTMENT

Employer	Commencement		Percentage
Number	Date		Points
2009		1/1/1959		0.17	%
2012		1/1/1949		0.60	%
2018		5/1/1992		0.33	%
2019		1/1/1992		0.46	%
2021		10/1/1995		0.22	%
2022		7/1/1995		0.33	%
2023		1/1/1996		0.05	%
2025		4/1/1997		0.19	%
2026		7/1/1997		0.14	%
2027		7/1/1997		0.06	%
2029		10/1/1997		0.14	%
2030		1/1/1999		1.61	%
2032		7/1/2000		0.15	%
2033		1/1/2002		0.01	%
2037		1/1/2004		0.05	%
3000		12/1/1943		1.46	%
3011		1/1/1948		0.09	%
3012		1/1/1948		0.88	%
3014		1/1/1950		0.04	%
3019		7/1/1953		0.68	%
3023		7/1/1957		0.32	%
3024		1/1/1958		0.35	%
3031		1/1/1967		0.07	%
3032		2/1/1967		0.32	%
3036		3/1/1969		0.09	%
3052		5/1/1976		0.04	%
3054		10/1/1976		0.63	%
3063		12/1/1990		0.05	%
3067		3/1/1996		0.14	%
3068		1/1/1998		0.12	%
3069		10/1/1997		0.09	%
3072		1/1/1999		0.35	%
3073		7/1/1999		0.03	%
3074		1/1/2000		0.10	%
4000		8/1/1946		3.91	%
4007		2/1/1952		0.07	%
4018		5/1/1961		1.35	%

ALLOCATION OF ORPHAN ADJUSTMENT

Employer	Commencement		Percentage
Number	Date		Points
4026		12/1/1966		0.10	%
4033		5/1/1970		0.10	%
4036		1/1/1971		0.25	%
4053		7/1/1974		0.02	%
4066		9/1/1980		0.04	%
4079		9/1/1995		0.05	%
4082		1/1/1996		0.40	%
4084		7/1/1998		0.01	%
4085		2/1/2000		0.02	%
4087		1/1/2000		0.12	%
4088		1/1/2004		0.02	%
4089		1/1/2005		0.02	%
5000		12/1/1943		2.08	%
5001		1/1/1945		0.66	%
5002		2/1/1945		0.04	%
5010		1/1/1947		0.08	%
5021		6/1/1952		0.09	%
5026		9/1/1953		0.40	%
5031		2/1/1957		0.14	%
5034		1/1/1958		0.16	%
5042		5/1/1967		0.06	%
5044		7/1/1967		0.07	%
5045		9/1/1967		0.06	%
5047		8/1/1968		0.28	%
5049		1/1/1969		0.37	%
5050		2/1/1969		0.15	%
5051		2/1/1969		0.21	%
5065		1/1/1973		0.11	%
5072		7/1/1974		0.29	%
5079		5/1/1975		0.02	%
5080		7/1/1975		0.11	%
5083		11/1/1975		0.41	%
5089		1/1/1976		0.05	%
5091		1/1/1977		0.18	%
5092		1/1/1977		0.07	%
5093		12/1/1976		0.07	%
5111		1/1/1985		0.05	%

ALLOCATION OF ORPHAN ADJUSTMENT

Employer	Commencement		Percentage
Number	Date		Points
5118		1/1/1993		0.11	%
5121		7/1/1994		0.12	%
5123		1/1/1995		0.16	%
5125		1/1/2003		0.06	%
5126		1/1/2003		0.28	%
5127		1/1/2004		0.03	%
6000		12/1/1943		1.92	%
6016		1/1/1951		0.16	%
6026		5/1/1956		0.90	%
6028		9/1/1957		0.16	%
6033		10/1/1961		0.08	%
6037		5/1/1963		0.47	%
6040		1/1/1965		0.14	%
6041		1/1/1965		0.28	%
6042		5/1/1965		0.09	%
6043		3/1/1966		0.79	%
6044		1/1/1967		0.04	%
6049		8/1/1968		0.19	%
6050		7/1/1969		0.37	%
6062		10/1/1970		0.09	%
6070		12/1/1971		0.08	%
6071		12/1/1961		0.09	%
6075		11/1/1972		0.26	%
6077		1/1/1973		0.53	%
6079		1/1/1973		0.08	%
6086		9/1/1974		0.03	%
6087		7/1/1974		0.79	%
6092		8/1/1974		0.09	%
6093		5/1/1975		0.10	%
6099		1/1/1978		0.13	%
6107		1/1/1981		0.13	%
6110		7/1/1983		1.32	%
6113		12/1/1984		0.05	%
6115		12/1/1984		0.05	%
6116		1/1/1985		0.09	%
6120		1/1/1987		0.10	%
6121		1/1/1987		0.07	%

ALLOCATION OF ORPHAN ADJUSTMENT

Employer	Commencement		Percentage
Number	Date		Points
6123		1/1/1987		0.08	%
6124		11/1/1987		0.18	%
6125		7/1/1988		0.42	%
6126		3/1/1988		0.16	%
6128		7/1/1990		0.83	%
6129		7/1/1991		0.10	%
6130		1/1/1992		0.16	%
6132		1/1/1994		0.04	%
6135		1/1/1996		0.11	%
6136		7/1/1998		0.15	%
6138		1/1/2002		0.08	%
6139		1/1/2003		0.07	%
6140		1/1/2003		0.04	%
6141		7/1/2003		0.06	%
6142		1/1/2004		0.02	%
6143		7/1/2004		0.02	%
7000		12/1/1943		1.81	%
7011		9/1/1948		1.05	%
7015		12/1/1949		0.16	%
7018		1/1/1950		0.59	%
7027		4/1/1952		0.42	%
7031		3/1/1953		0.57	%
7036		1/1/1954		0.32	%
7048		1/1/1960		0.24	%
7053		9/1/1962		0.47	%
7056		5/1/1963		0.19	%
7060		6/1/1966		0.06	%
7064		1/1/1968		0.30	%
7065		2/1/1968		0.07	%
7069		6/1/1969		0.14	%
7086		12/1/1973		0.24	%
7088		12/1/1973		0.06	%
7089		2/1/1974		0.02	%
7099		1/1/1978		0.10	%
7100		1/1/1978		0.10	%
7101		7/1/1978		0.12	%
7109		2/1/1980		0.07	%

ALLOCATION OF ORPHAN ADJUSTMENT

Employer	Commencement		Percentage
Number	Date		Points
7113		10/1/1986		0.08	%
7114		12/1/1988		0.07	%
7115		7/1/1990		0.08	%
7117		12/1/1992		0.22	%
7118		7/1/1999		0.24	%
7119		7/1/2004		0.00	%
7120		4/1/2005		0.01	%
8000		1/1/1948		1.71	%
8001		10/1/1948		1.00	%
8006		4/1/1950		0.30	%
8026		2/1/1961		0.36	%
8029		1/1/1962		0.08	%
8031		4/1/1962		0.82	%
8051		1/1/1969		0.62	%
8054		3/1/1969		0.18	%
8066		1/1/1972		0.10	%
8085		7/1/1974		0.06	%
8087		9/1/1975		0.09	%
8103		5/1/1993		0.07	%
8104		7/1/2000		0.02	%
8105		1/1/2003		0.19	%
8106		1/1/2004		0.01	%
9000		12/1/1943		2.31	%
9006		6/1/1959		0.42	%
9007		7/1/1959		0.10	%
9017		1/1/1968		0.11	%
9026		4/1/1971		0.49	%
9037		3/1/1973		0.08	%
9045		9/1/1975		0.05	%
9057		1/1/1978		0.23	%
9062		1/1/1978		0.07	%
9071		1/1/1986		0.12	%
9072		7/1/1989		0.02	%
9073		4/1/1993		0.31	%
9074		6/1/1994		0.20	%
9076		6/1/2001		0.07	%
9077		6/1/2001		0.02	%

ALLOCATION OF ORPHAN ADJUSTMENT

Employer	Commencement		Percentage
Number	Date		Points
9078		1/1/2003		0.17	%
10000		12/1/1943		1.60	%
10008		1/1/1955		0.36	%
10019		7/1/1969		0.06	%
10022		3/1/1970		0.11	%
10026		1/1/1971		0.15	%
10031		1/1/1974		0.24	%
10035		1/1/1976		0.22	%
10038		1/1/1978		0.12	%
10046		1/1/1995		0.02	%
10047		7/1/1999		0.10	%
10048		12/1/2000		0.01	%
10049		1/1/2003		0.03	%
12000		4/1/1964		1.72	%
12004		4/1/1945		0.58	%
12023		1/1/1967		0.08	%
12026		1/1/1969		1.38	%
12028		1/1/1969		0.31	%
12033		2/1/1973		0.07	%
12042		6/1/1999		0.04	%
13000		1/1/1991		18.59	%
13001		12/1/1943		0.80	%
13002		12/1/1943		0.88	%
Totals				100.00	%

Table XX

HISTORY OF THE
RATIO OF MARKET TO ACTUARIAL VALUE OF ASSETS
(EXCLUDING THE CASH FLOW MATCH PORTFOLIO)

FOR THE PERIOD:	RATIO			ADJUSTMENT
Prior to 7/1/1989		100	%		0	%
7/1/1989 - 6/30/1990		109	%		9	%
7/1/1990 - 6/30/1991		107	%		7	%
7/1/1991 - 6/30/1992		107	%		7	%
7/1/1992 - 6/30/1993		111	%		11	%
7/1/1993 - 6/30/1994		114	%		14	%
7/1/1994 - 6/30/1995		107	%		7	%
7/1/1995 - 6/30/1996		112	%		12	%
7/1/1996 - 6/30/1997		114	%		14	%
7/1/1997 - 6/30/1998		121	%		21	%
7/1/1998 - 6/30/1999		132	%		32	%
7/1/1999 - 6/30/2000		120	%		20	%
7/1/2000 - 6/30/2001		120	%		20	%
On or after 7/1/2001		100	%		0	%

Table I

APPENDIX A

Adjusted ERF’s For Integrated Calculations

1.5% Integrated Formula

	— — — 3% ERF’s — — —												— — — 1.5% ERF’s — — —
	SSNRA 65				SSNRA 66				SSNRA 67				SSNRA 65				SSNRA 66				SSNRA 67
	YOB 1937 or Earlier				YOB 1938 to 1954				YOB 1955 or Later				YOB 1937 or Earlier				YOB 1938 to 1954				YOB 1955 or Later
AGE	10 C&C		12X		10 C&C		12X		10 C&C		12X		10 C&C		12X		10 C&C		12X		10 C&C		12X		AGE
65		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		65
64		0.970		0.970		0.970		0.970		0.970		0.970		0.985		0.985		0.985		0.985		0.985		0.985		64
63		0.940		0.940		0.940		0.940		0.940		0.940		0.970		0.970		0.970		0.970		0.970		0.970		63
62		0.910		0.910		0.910		0.910		0.910		0.910		0.955		0.955		0.955		0.955		0.955		0.965		62
61		0.880		0.880		0.880		0.880		0.880		0.880		0.940		0.940		0.940		0.940		0.953		0.962		61
60		0.850		0.850		0.850		0.850		0.850		0.850		0.925		0.925		0.926		0.935		0.952		0.959		60
59		0.820		0.820		0.820		0.820		0.820		0.824		0.910		0.911		0.928		0.935		0.953		0.959		59
58		0.790		0.790		0.790		0.790		0.796		0.802		0.905		0.910		0.929		0.934		0.953		0.958		58
57		0.760		0.760		0.760		0.760		0.775		0.778		0.905		0.911		0.930		0.935		0.954		0.959		57
56		0.730		0.730		0.730		0.732		0.756		0.760		0.906		0.910		0.931		0.935		0.959		0.963		56
55		0.700		0.700		0.709		0.714		0.734		0.739		0.907		0.911		0.934		0.938		0.960		0.964		55
54		0.670		0.670		0.689		0.691		0.713		0.716		0.911		0.914		0.936		0.939		0.961		0.963		54
53						0.668		0.668		0.688		0.691						0.935		0.939		0.958		0.961		53
52						0.641		0.643		0.662		0.665						0.933		0.936		0.955		0.957		52
51						0.615		0.617		0.633		0.636						0.930		0.933		0.949		0.951		51
50						0.587		0.589		0.604		0.607						0.924		0.926		0.942		0.944		50
49						0.558		0.559		0.574		0.576						0.917		0.919		0.934		0.936		49
48						0.527		0.528		0.543		0.544						0.910		0.910		0.925		0.926		48
47						0.496		0.496		0.511		0.511						0.901		0.902		0.916		0.916		47
46						0.463		0.464		0.477		0.477						0.890		0.891		0.903		0.905		46
45						0.429		0.430		0.442		0.443						0.879		0.880		0.892		0.893		45
44						0.410		0.411		0.422		0.423						0.868		0.868		0.880		0.880		44
43						0.390		0.391		0.401		0.402						0.390		0.391		0.401		0.402		43
42						0.369		0.369		0.380		0.380						0.369		0.369		0.360		0.360		42
41						0.347		0.347		0.357		0.357						0.347		0.347		0.357		0.357		41
40						0.325		0.325		0.335		0.335						0.325		0.325		0.335		0.335		40
39						0.318		0.318		0.327		0.327						0.318		0.318		0.327		0.327		39
38						0.309		0.310		0.317		0.318						0.309		0.310		0.317		0.318		38
37						0.300		0.301		0.308		0.309						0.300		0.301		0.308		0.309		37
36										0.299		0.300										0.299		0.300		36
35										0.289		0.290										0.289		0.290		35
34										0.279		0.280										0.279		0.280		34
33										0.268		0.268										0.268		0.268		33
32										0.257		0.257										0.257		0.257		32
31										0.246		0.246										0.246		0.246		31
30										0.235		0.235										0.235		0.235		30
29										0.224		0.224										0.224		0.224		29
28										0.212		0.212										0.212		0.212		28
27										0.200		0.200										0.200		0.200		27
26										0.188		0.188										0.188		0.188		26
25										0.176		0.176										0.178		0.176		25
24										0.163		0.163										0.163		0.163		24
23										0.151		0.151										0.151		0.151		23
22										0.138		0.138										0.138		0.138		22
21										0.125		0.125										0.125		0.125		21
20										0.113		0.113										0.113		0.113		20
19										0.099		0.099										0.099		0.099		19
18										0.086		0.086										0.086		0.088		18

Table II

APPENDIX A

Adjusted ERF’s For Integrated Calculations

1.75% Integrated Formula

	— — — 3% ERF’s — — —												— — — 1.5% ERF’s — — —
	SSNRA 65				SSNRA 66				SSNRA 67				SSNRA 65				SSNRA 66				SSNRA 67
	YOB 1937 or Earlier				YOB 1938 to 1954				YOB 1955 or Later				YOB 1937 or Earlier				YOB 1938 to 1954				YOB 1955 or Later
AGE	10 C&C		12X		10 C&C		12X		10 C&C		12X		10 C&C		12X		10 C&C		12X		10 C&C		12X		AGE
65		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		65
64		0.970		0.970		0.970		0.970		0.970		0.970		0.985		0.985		0.985		0.985		0.985		0.985		64
63		0.940		0.940		0.940		0.940		0.940		0.940		0.970		0.970		0.970		0.970		0.970		0.970		63
62		0.910		0.910		0.910		0.910		0.910		0.910		0.955		0.955		0.955		0.955		0.955		0.963		62
61		0.880		0.880		0.880		0.880		0.880		0.880		0.940		0.940		0.940		0.940		0.951		0.957		61
60		0.850		0.850		0.850		0.850		0.850		0.850		0.925		0.925		0.927		0.933		0.947		0.952		60
59		0.820		0.820		0.820		0.820		0.820		0.823		0.910		0.911		0.925		0.930		0.944		0.949		59
58		0.790		0.790		0.790		0.790		0.795		0.799		0.903		0.907		0.922		0.926		0.942		0.946		58
57		0.760		0.760		0.760		0.760		0.772		0.775		0.900		0.905		0.920		0.924		0.939		0.943		57
56		0.730		0.730		0.730		0.732		0.751		0.754		0.898		0.901		0.917		0.921		0.940		0.943		56
55		0.700		0.700		0.707		0.711		0.728		0.731		0.896		0.899		0.918		0.921		0.938		0.941		55
54		0.670		0.670		0.685		0.687		0.705		0.707		0.896		0.898		0.916		0.918		0.936		0.938		54
53						0.660		0.663		0.679		0.681						0.912		0.915		0.930		0.933		53
52						0.634		0.637		0.652		0.654						0.908		0.910		0.925		0.927		52
51						0.608		0.610		0.623		0.625						0.902		0.904		0.917		0.919		51
50						0.579		0.581		0.594		0.595						0.894		0.896		0.909		0.910		50
49						0.550		0.551		0.564		0.565						0.886		0.887		0.899		0.901		49
48						0.519		0.521		0.532		0.533						0.877		0.877		0.889		0.890		48
47						0.489		0.489		0.500		0.501						0.867		0.867		0.878		0.879		47
46						0.456		0.457		0.467		0.468						0.855		0.856		0.868		0.867		46
45						0.423		0.424		0.433		0.434						0.843		0.844		0.853		0.854		45
44						0.404		0.405		0.413		0.414						0.831		0.832		0.841		0.841		44
43						0.384		0.385		0.393		0.393						0.384		0.385		0.393		0.393		43
42						0.363		0.363		0.372		0.372						0.363		0.363		0.372		0.372		42
41						0.341		0.341		0.349		0.349						0.341		0.341		0.349		0.349		41
40						0.320		0.320		0.328		0.328						0.320		0.320		0.328		0.328		40
39						0.312		0.312		0.319		0.319						0.312		0.312		0.319		0.319		39
38						0.303		0.304		0.310		0.310						0.303		0.304		0.310		0.310		38
37						0.294		0.295		0.300		0.301						0.294		0.295		0.300		0.301		37
36										0.291		0.292										0.291		0.292		36
35										0.281		0.282										0.281		0.282		35
34										0.271		0.272										0.271		0.272		34
33										0.260		0.260										0.260		0.260		33
32										0.250		0.249										0.250		0.249		32
31										0.239		0.239										0.239		0.239		31
30										0.228		0.228										0.228		0.228		30
29										0.217		0.217										0.217		0.217		29
28										0.206		0.206										0.206		0.206		28
27										0.194		0.194										0.194		0.194		27
26										0.182		0.182										0.182		0.182		26
25										0.171		0.171										0.171		0.171		25
24										0.158		0.158										0.158		0.158		24
23										0.147		0.147										0.147		0.147		23
22										0.134		0.134										0.134		0.134		22
21										0.122		0.122										0.122		0.122		21
20										0.110		0.110										0.110		0.110		20
19										0.097		0.097										0.097		0.097		19
18										0.085		0.085										0.085		0.085		18

Table III

APPENDIX A

Adjusted ERF’s For Integrated Calculations

2.0% Integrated Formula

	— — — 3% ERF’s — — —												— — — 1.5% ERF’s — — —
	SSNRA 65				SSNRA 66				SSNRA 67				SSNRA 65				SSNRA 66				SSNRA 67
	YOB 1937 or Earlier				YOB 1938 to 1954				YOB 1955 or Later				YOB 1937 or Earlier				YOB 1938 to 1954				YOB 1955 or Later
AGE	10 C&C		12X		10 C&C		12X		10 C&C		12X		10 C&C		12X		10 C&C		12X		10 C&C		12X		AGE
65		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		65
64		0.970		0.970		0.970		0.970		0.970		0.970		0.985		0.985		0.985		0.985		0.985		0.985		64
63		0.940		0.940		0.940		0.940		0.940		0.940		0.970		0.970		0.970		0.970		0.970		0.970		63
62		0.910		0.910		0.910		0.910		0.910		0.910		0.955		0.955		0.955		0.955		0.955		0.962		62
61		0.880		0.880		0.880		0.880		0.880		0.880		0.940		0.940		0.940		0.940		0.949		0.954		61
60		0.850		0.850		0.850		0.850		0.850		0.850		0.925		0.925		0.927		0.932		0.943		0.948		60
59		0.820		0.820		0.820		0.820		0.820		0.823		0.910		0.911		0.922		0.927		0.938		0.943		59
58		0.790		0.790		0.790		0.790		0.794		0.798		0.901		0.905		0.918		0.921		0.934		0.937		58
57		0.760		0.760		0.760		0.760		0.770		0.772		0.897		0.901		0.913		0.917		0.929		0.933		57
56		0.730		0.730		0.730		0.731		0.748		0.750		0.892		0.895		0.909		0.911		0.928		0.930		56
55		0.700		0.700		0.706		0.709		0.723		0.726		0.888		0.891		0.906		0.909		0.923		0.926		55
54		0.670		0.670		0.682		0.684		0.699		0.700		0.885		0.888		0.803		0.904		0.919		0.921		54
53						0.657		0.659		0.672		0.674						0.897		0.899		0.912		0.914		53
52						0.630		0.632		0.645		0.646						0.890		0.892		0.905		0.907		52
51						0.603		0.605		0.616		0.617						0.884		0.885		0.896		0.895		51
50						0.574		0.578		0.588		0.588						0.875		0.876		0.888		0.887		50
49						0.545		0.548		0.558		0.557						0.865		0.866		0.876		0.877		49
48						0.514		0.516		0.525		0.526						0.855		0.855		0.865		0.866		48
47						0.484		0.484		0.494		0.494						0.844		0.844		0.854		0.854		47
46						0.452		0.452		0.461		0.462						0.831		0.832		0.841		0.841		46
45						0.419		0.420		0.428		0.428						0.819		0.820		0.828		0.829		45
44						0.400		0.400		0.408		0.408						0.807		0.807		0.815		0.815		44
43						0.380		0.380		0.387		0.388						0.380		0.360		0.387		0.388		43
42						0.359		0.367		0.367		0.366						0.359		0.359		0.367		0.366		42
41						0.338		0.338		0.345		0.344						0.338		0.338		0.345		0.344		41
40						0.317		0.317		0.323		0.323						0.317		0.317		0.323		0.323		40
39						0.309		0.309		0.315		0.314						0.309		0.309		0.315		0.314		39
38						0.299		0.300		0.305		0.305						0.299		0.300		0.305		0.305		38
37						0.290		0.291		0.295		0.296						0.290		0.291		0.295		0.296		37
36										0.286		0.287										0.286		0.287		36
35										0.276		0.277										0.276		0.277		35
34										0.268		0.267										0.266		0.267		34
33										0.255		0.255										0.255		0.255		33
32										0.245		0.245										0.245		0.245		32
31										0.234		0.234										0.234		0.234		31
30										0.223		0.223										0.223		0.223		30
29										0.213		0.213										0.213		0.213		29
28										0.201		0.201										0.201		0.201		28
27										0.190		0.190										0.190		0.190		27
26										0.179		0.179										0.179		0.179		26
25										0.167		0.167										0.167		0.167		25
24										0.155		0.155										0.155		0.155		24
23										0.144		0.144										0.144		0.144		23
22						,				0.132		0.132										0.132		0.132		22
21										0.120		0.120										0.120		0.120		21
20										0.109		0.109										0.109		0.109		20
19										0.096		0.096										0.096		0.096		19
18										0.084		0.084										0.084		0.084		18

Table IV

APPENDIX A

Adjusted ERF’s For Integrated Calculations

2.25% Integrated Formula

	— — — 3% ERF’s — — —												— — — 1.5% ERF’s — — —
	SSNRA 65				SSNRA 66				SSNRA 67				SSNRA 65				SSNRA 66				SSNRA 67
	YOB 1937 or Earlier				YOB 1938 to 1954				YOB 1955 or Later				YOB 1937 or Earlier				YOB 1938 to 1954				YOB 1955 or Later
AGE	10 C&C		12X		10 C&C		12X		10 C&C		12X		10 C&C		12X		10 C&C		12X		10 C&C		12X		AGE
65		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		65
64		0.970		0.970		0.970		0.970		0.970		0.970		0.985		0.985		0.985		0.985		0.985		0.985		64
63		0.940		0.940		0.940		0.940		0.940		0.940		0.970		0.970		0.970		0.970		0.970		0.970		63
62		0.910		0.910		0.910		0.910		0.910		0.910		0.955		0.955		0.955		0.955		0.955		0.961		62
61		0.880		0.880		0.880		0.880		0.880		0.880		0.940		0.940		0.940		0.940		0.948		0.952		61
60		0.850		0.850		0.850		0.850		0.850		0.850		0.925		0.925		0.927		0.931		0.940		0.945		60
59		0.820		0.820		0.820		0.820		0.820		0.822		0.910		0.911		0.921		0.924		0.934		0.938		59
58		0.790		0.790		0.790		0.790		0.793		0.797		0.901		0.904		0.914		0.917		0.928		0.931		58
57		0.760		0.760		0.760		0.760		0.768		0.770		0.894		0.898		0.908		0.911		0.922		0.925		57
56		0.730		0.730		0.730		0.731		0.745		0.747		0.889		0.891		0.902		0.905		0.919		0.921		56
55		0.700		0.700		0.705		0.708		0.720		0.722		0.883		0.885		0.898		0.900		0.913		0.915		55
54		0.670		0.670		0.681		0.682		0.695		0.696		0.878		0.880		0.893		0.894		0.907		0.908		54
53						0.655		0.656		0.668		0.669						0.886		0.888		0.899		0.901		53
52						0.627		0.629		0.640		0.641						0.878		0.880		0.891		0.892		52
51						0.600		0.601		0.610		0.612						0.870		0.872		0.881		0.882		51
50						0.571		0.572		0.581		0.582						0.860		0.861		0.871		0.871		50
49						0.541		0.542		0.551		0.552						0.850		0.851		0.860		0.860		49
48						0.511		0.512		0.520		0.521						0.839		0.839		0.848		0.848		48
47						0.480		0.481		0.489		0.489						0.828		0.828		0.836		0.837		47
46						0.449		0.449		0.457		0.457						0.815		0.816		0.823		0.823		46
45						0.416		0.417		0.424		0.424						0.802		0.803		0.810		0.810		45
44						0.397		0.398		0.404		0.404						0.790		0.790		0.796		0.797		44
43						0.377		0.378		0.383		0.384						0.377		0.378		0.383		0.384		43
42						0.356		0.358		0.363		0.363						0.356		0.356		0.363		0.363		42
41						0.335		0.335		0.341		0.341						0.335		0.335		0.341		0.341		41
40						0.314		0.314		0.320		0.320						0.314		0.314		0.320		0.320		40
39						0.306		0.306		0.311		0.311						0.306		0.306		0.311		0.311		39
38						0.297		0.297		0.301		0.302						0.297		0.297		0.301		0.302		38
37						0.287		0.288		0.292		0.292						0.287		0.288		0.292		0.292		37
36										0.282		0.283										0.282		0.283		36
35										0.272		0.273										0.272		0.273		35
34										0.262		0.263										0.262		0.263		34
33										0.252		0.252										0.252		0.252		33
32										0.241		0.241										0.241		0.241		32
31										0.231		0.231										0.231		0.231		31
30										0.220		0.220										0.220		0.220		30
29										0.209		0.209										0.209		0.209		29
28										0.198		0.198										0.198		0.198		28
27										0.187		0.187										0.187		0.187		27
26										0.176		0.176										0.176		0.176		26
25										0.165		0.165										0.165		0.165		25
24										0.153		0.153										0.153		0.153		24
23										0.142		0.142										0.142		0.142		23
22										0.130		0.130										0.130		0.130		22
21										0.119		0.119										0.119		0.119		21
20										0.107		0.107										0.107		0.107		20
19										0.095		0.095										0.095		0.095		19
18										0.083		0.083										0.083		0.083		18

Table V

APPENDIX A

Adjusted ERF’s For Integrated Calculations

2.5% Integrated Formula

	— — — 3% ERF’s — — —												— — — 1.5% ERF’s — — —
	SSNRA 65				SSNRA 66				SSNRA 67				SSNRA 65				SSNRA 66				SSNRA 67
	YOB 1937 or Earlier				YOB 1938 to 1954				YOB 1955 or Later				YOB 1937 or Earlier				YOB 1938 to 1954				YOB 1955 or Later
AGE	10 C&C		12X		10 C&C		12X		10 C&C		12X		10 C&C		12X		10 C&C		12X		10 C&C		12X		AGE
65		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		65
64		0.970		0.970		0.970		0.970		0.970		0.970		0.985		0.985		0.985		0.985		0.985		0.985		64
63		0.940		0.940		0.940		0.940		0.940		0.940		0.970		0.970		0.970		0.970		0.970		0.970		63
62		0.910		0.910		0.910		0.910		0.910		0.910		0.955		0.955		0.955		0.955		0.955		0.960		62
61		0.880		0.880		0.880		0.880		0.880		0.880		0.940		0.940		0.940		0.940		0.947		0.951		61
60		0.850		0.850		0.850		0.850		0.850		0.850		0.925		0.925		0.926		0.930		0.939		0.942		60
59		0.820		0.820		0.820		0.820		0.820		0.822		0.910		0.910		0.919		0.922		0.931		0.934		59
58		0.790		0.790		0.790		0.790		0.793		0.796		0.900		0.903		0.912		0.915		0.924		0.927		58
57		0.760		0.760		0.760		0.760		0.767		0.769		0.893		0.895		0.905		0.907		0.917		0.919		57
56		0.730		0.730		0.730		0.731		0.743		0.745		0.886		0.888		0.898		0.900		0.912		0.914		56
55		0.700		0.700		0.704		0.707		0.717		0.719		0.878		0.881		0.892		0.894		0.905		0.907		55
54		0.670		0.670		0.679		0.681		0.692		0.693		0.873		0.874		0.888		0.887		0.896		0.899		54
53						0.653		0.654		0.664		0.665						0.876		0.879		0.889		0.891		53
52						0.625		0.627		0.636		0.637						0.869		0.870		0.880		0.881		52
51						0.597		0.599		0.607		0.608						0.860		0.861		0.870		0.871		51
50						0.568		0.570		0.577		0.578						0.850		0.850		0.859		0.859		50
49						0.539		0.540		0.547		0.548						0.839		0.840		0.847		0.848		49
48						0.508		0.509		0.516		0.517						0.827		0.828		0.835		0.836		48
47						0.478		0.478		0.485		0.486						0.815		0.818		0.823		0.823		47
46						0.446		0.447		0.453		0.454						0.802		0.803		0.809		0.810		46
45						0.414		0.415		0.421		0.421						0.789		0.790		0.796		0.797		45
44						0.395		0.395		0.401		0.401						0.776		0.777		0.782		0.783		44
43						0.375		0.375		0.380		0.381						0.375		0.375		0.380		0.381		43
42						0.354		0.354		0.360		0.360						0.354		0.354		0.360		0.360		42
41						0.333		0.333		0.338		0.338						0.333		0.333		0.338		0.338		41
40						0.312		0.312		0.317		0.317						0.312		0.312		0.317		0.317		40
39						0.304		0.304		0.308		0.308						0.304		0.304		0.308		0.308		39
38						0.294		0.295		0.298		0.299						0.294		0.295		0.298		0.299		38
37						0.285		0.285		0.289		0.289						0.285		0.285		0.289		0.289		37
36										0.279		0.280										0.279		0.280		36
35										0.269		0.270										0.269		0.270		35
34										0.259		0.260										0.259		0.260		34
33										0.249		0.249										0.249		0.249		33
32										0.238		0.238										0.238		0.238		32
31										0.228		0.228										0.228		0.228		31
30										0.217		0.217										0.217		0.217		30
29										0.207		0.207										0.207		0.207		29
28										0.196		0.196										0.196		0.196		28
27										0.185		0.185										0.185		0.185		27
26										0.174		0.174										0.174		0.174		26
25										0.163		0.163										0.163		0.163		25
24										0.151		0.151										0.151		0.151		24
23										0.140		0.140										0.140		0.140		23
22										0.129		0.129										0.129		0.129		22
21										0.117		0.117										0.117		0.117		21
20										0.106		0.106										0.106		0.106		20
19										0.094		0.094										0.094		0.094		19
18										0.083		0.083										0.083		0.083		18

Table VI

APPENDIX A

Adjusted ERF’s For Integrated Calculations

2.75% Integrated Formula

	— — — 3% ERF’s — — —												— — — 1.5% ERF’s — — —
	SSNRA 65				SSNRA 66				SSNRA 67				SSNRA 65				SSNRA 66				SSNRA 67
	YOB 1937 or Earlier				YOB 1938 to 1954				YOB 1955 or Later				YOB 1937 or Earlier				YOB 1938 to 1954				YOB 1955 or Later
AGE	10 C&C		12X		10 C&C		12X		10 C&C		12X		10 C&C		12X		10 C&C		12X		10 C&C		12X		AGE
65		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		65
64		0.970		0.970		0.970		0.970		0.970		0.970		0.985		0.985		0.985		0.985		0.985		0.985		64
63		0.940		0.940		0.940		0.940		0.940		0.940		0.970		0.970		0.970		0.970		0.970		0.970		63
62		0.910		0.910		0.910		0.910		0.910		0.910		0.955		0.955		0.955		0.955		0.955		0.960		62
61		0.880		0.880		0.880		0.880		0.880		0.880		0.940		0.940		0.940		0.940		0.946		0.950		61
60		0.850		0.850		0.850		0.850		0.850		0.850		0.925		0.925		0.926		0.930		0.937		0.940		60
59		0.820		0.820		0.820		0.820		0.820		0.822		0.910		0.910		0.918		0.921		0.929		0.932		59
58		0.790		0.790		0.790		0.790		0.793		0.795		0.899		0.902		0.910		0.912		0.921		0.923		58
57		0.760		0.760		0.760		0.760		0.766		0.768		0.891		0.894		0.902		0.904		0.913		0.915		57
56		0.730		0.730		0.730		0.731		0.742		0.743		0.883		0.885		0.894		0.896		0.907		0.908		56
55		0.700		0.700		0.704		0.706		0.715		0.717		0.875		0.877		0.888		0.889		0.899		0.900		55
54		0.670		0.670		0.678		0.680		0.689		0.690		0.869		0.870		0.880		0.881		0.891		0.892		54
53						0.651		0.653		0.661		0.663						0.871		0.873		0.881		0.883		53
52						0.624		0.625		0.633		0.634						0.862		0.863		0.872		0.873		52
51						0.595		0.597		0.604		0.605						0.852		0.853		0.861		0.862		51
50						0.566		0.567		0.574		0.575						0.841		0.842		0.849		0.850		50
49						0.537		0.537		0.544		0.545						0.830		0.831		0.837		0.838		49
48						0.506		0.507		0.513		0.514						0.818		0.818		0.825		0.825		48
47						0.476		0.476		0.482		0.483						0.806		0.806		0.812		0.813		47
46						0.445		0.445		0.451		0.451						0.793		0.793		0.799		0.799		46
45						0.413		0.413		0.419		0.419						0.779		0.780		0.785		0.786		45
44						0.393		0.394		0.399		0.399						0.768		0.768		0.772		0.772		44
43						0.373		0.374		0.378		0.379						0.373		0.374		0.378		0.379		43
42						0.353		0.353		0.358		0.358						0.353		0.353		0.358		0.358		42
41						0.332		0.332		0.336		0.336						0.332		0.332		0.336		0.336		41
40						0.311		0.311		0.315		0.315						0.311		0.311		0.315		0.315		40
39						0.302		0.302		0.306		0.306						0.302		0.302		0.306		0.306		39
38						0.293		0.293		0.296		0.297						0.293		0.293		0.296		0.297		38
37						0.283		0.284		0.287		0.287						0.283		0.284		0.287		0.287		37
36										0.277		0.278										0.277		0.278		36
35										0.267		0.268										0.267		0.268		35
34										0.257		0.258										0.257		0.258		34
33										0.247		0.247										0.247		0.247		33
32										0.236		0.236										0.236		0.236		32
31										0.226		0.226										0.226		0.226		31
30										0.216		0.216										0.216		0.216		30
29										0.205		0.205										0.205		0.205		29
28										0.194		0.194										0.194		0.194		28
27										0.183		0.183										0.183		0.183		27
26										0.172		0.172										0.172		0.172		26
25										0.162		0.162										0.162		0.162		25
24										0.150		0.150										0.150		0.150		24
23										0.139		0.139										0.139		0.139		23
22										0.128		0.128										0.128		0.128		22
21										0.117		0.117										0.117		0.117		21
20										0.106		0.106										0.106		0.106		20
19										0.094		0.094										0.094		0.094		19
18										0.083		0.083										0.083		0.083		18

Table VII

APPENDIX A

Adjusted ERF’s For Integrated Calculations

3.00% Integrated Formula

	— — — 3% ERF’s — — —												— — — 1.5% ERF’s — — —
	SSNRA 65				SSNRA 66				SSNRA 67				SSNRA 65				SSNRA 66				SSNRA 67
	YOB 1937 or Earlier				YOB 1938 to 1954				YOB 1955 or Later				YOB 1937 or Earlier				YOB 1938 to 1954				YOB 1955 or Later
AGE	10 C&C		12X		10 C&C		12X		10 C&C		12X		10 C&C		12X		10 C&C		12X		10 C&C		12X		AGE
65		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		65
64		0.970		0.970		0.970		0.970		0.970		0.970		0.985		0.985		0.985		0.985		0.985		0.985		64
63		0.940		0.940		0.940		0.940		0.940		0.940		0.970		0.970		0.970		0.970		0.970		0.970		63
62		0.910		0.910		0.910		0.910		0.910		0.910		0.955		0.955		0.955		0.955		0.955		0.959		62
61		0.880		0.880		0.880		0.880		0.880		0.880		0.940		0.940		0.940		0.940		0.945		0.949		61
60		0.850		0.850		0.850		0.850		0.850		0.850		0.925		0.925		0.926		0.929		0.938		0.939		60
59		0.820		0.820		0.820		0.820		0.820		0.822		0.910		0.910		0.917		0.920		0.927		0.930		59
58		0.790		0.790		0.790		0.790		0.792		0.795		0.899		0.901		0.909		0.911		0.918		0.920		58
57		0.760		0.760		0.760		0.760		0.765		0.767		0.890		0.892		0.900		0.902		0.910		0.912		57
56		0.730		0.730		0.730		0.731		0.741		0.742		0.881		0.883		0.891		0.893		0.903		0.904		56
55		0.700		0.700		0.704		0.705		0.714		0.716		0.873		0.874		0.884		0.885		0.894		0.895		55
54		0.670		0.670		0.677		0.679		0.687		0.688		0.885		0.887		0.876		0.877		0.885		0.886		54
53						0.650		0.651		0.659		0.660						0.866		0.868		0.875		0.877		53
52						0.622		0.623		0.631		0.632						0.856		0.857		0.865		0.868		52
51						0.594		0.595		0.601		0.602						0.846		0.847		0.854		0.855		51
50						0.565		0.568		0.572		0.573						0.835		0.835		0.842		0.842		50
49						0.535		0.536		0.542		0.542						0.823		0.824		0.830		0.830		49
48						0.505		0.505		0.511		0.512						0.811		0.811		0.817		0.817		48
47						0.474		0.475		0.480		0.481						0.798		0.789		0.804		0.805		47
46						0.443		0.443		0.449		0.449						0.785		0.785		0.790		0.791		46
45						0.412		0.412		0.417		0.417						0.771		0.772		0.777		0.777		45
44						0.392		0.392		0.397		0.397						0.758		0.758		0.763		0.763		44
43						0.372		0.372		0.376		0.377						0.372		0.372		0.376		0.377		43
42						0.352		0.352		0.356		0.356						0.352		0.352		0.358		0.356		42
41						0.331		0.331		0.335		0.335						0.331		0.331		0.335		0.335		41
40						0.310		0.310		0.314		0.314						0.310		0.310		0.314		0.314		40
39						0.301		0.301		0.305		0.305						0.301		0.301		0.305		0.305		39
38						0.292		0.292		0.295		0.295						0.292		0.292		0.295		0.295		38
37						0.282		0.282		0.285		0.286						0.282		0.282		0.285		0.286		37
36										0.278		0.278										0.276		0.276		36
35										0.268		0.268										0.286		0.266		35
34										0.258		0.258										0.256		0.256		34
33										0.245		0.245										0.245		0.245		33
32										0.235		0.235										0.235		0.235		32
31										0.224		0.224										0.224		0.224		31
30										0.214		0.214										0.214		0.214		30
29										0.204		0.204										0.204		0.204		29
28										0.193		0.193										0.193		0.193		28
27										0.182		0.182										0.182		0.182		27
26										0.171		0.171										0.171		0.171		26
25										0.160		0.160										0.160		0.160		25
24										0.149		0.149										0.149		0.149		24
23										0.138		0.138										0.138		0.138		23
22										0.127		0.127										0.127		0.127		22
21										0.116		0.116										0.116		0.116		21
20										0.105		0.105										0.105		0.105		20
19										0.094		0.094										0.094		0.094		19
18										0.082		0.082										0.082		0.082		18

Appendix B

CONVERSION FACTORS WHERE NORMAL FORM = 10 C&C
1998 GBB89 ASSUMPTIONS

AGE	OPTION 1			OPTION 2			OPTION 3
19		1.001	%		0.990	%		0.990	%
20		1.001			0.990			0.990
21		1.001			0.989			0.990
22		1.001			0.988			0.990
23		1.001			0.987			0.990
24		1.001			0.986			0.990
25		1.001			0.985			0.990
26		1.001			0.984			0.990
27		1.001			0.983			0.990
28		1.001			0.982			0.990
29		1.001			0.981			0.990
30		1.002			0.980			0.990
31		1.002			0.979			0.989
32		1.002			0.978			0.989
33		1.002			0.977			0.988
34		1.002			0.976			0.987
35		1.002			0.975			0.987
36		1.002			0.973			0.986
37		1.002			0.971			0.985
38		1.002			0.969			0.984
39		1.002			0.967			0.983
40		1.003			0.965			0.982
41		1.003			0.963			0.981
42		1.003			0.961			0.980
43		1.003			0.959			0.979
44		1.003			0.957			0.977
45		1.004			0.955			0.975
46		1.004			0.952			0.974
47		1.005			0.949			0.973
48		1.005			0.946			0.972
49		1.006			0.943			0.971
50		1.007			0.940			0.970
51		1.008			0.936			0.968
52		1.009			0.932			0.966
53		1.010			0.928			0.964
54		1.011			0.924			0.962
55		1.012			0.920			0.960
56		1.015			0.914			0.957
57		1.018			0.908			0.954
58		1.021			0.902			0.951
59		1.024			0.896			0.948
60		1.027			0.890			0.945
61		1.032			0.884			0.942
62		1.037			0.878			0.939
63		1.042			0.872			0.936
64		1.047			0.866			0.933
65		1.052			0.860			0.930
FACTOR B					0.5	%		0.3	%
MAXIMUM					99	%		99	%

THE ABOVE FACTORS FOR OPTIONS 2 AND 3 ASSUME THE MEMBER AND THE CA ARE THE SAME AGE. WHEN THE AGES DIFFER:

ADD FACTOR B FOR EACH YEAR THE CA IS OLDER THAN THE MEMBER
SUBTRACT FACTOR B FOR EACH YEAR THE CA IS YOUNGER THAN THE MEMBER

OPTION 1 IS A LIFE ANNUITY, OPTION 2 IS A 100% J&S w/ 10 YEAR CERTAIN, OPTION 3 IS A 50% J&S

Appendix B

CONVERSION FACTORS WHERE NORMAL FORM = 10 C&C
1998 GBB89 ASSUMPTIONS

AGE	OPTION 1		OPTION 2			OPTION 3
66		1.061		0.853			0.926
67		1.070		0.846			0.922
68		1.079		0.839			0.918
69		1.088		0.832			0.914
70		1.097		0.825			0.910
71		1.112		0.815			0.906
72		1.127		0.805			0.902
73		1.142		0.795			0.898
74		1.157		0.785			0.894
75		1.172		0.775			0.890
76		1.196		0.764			0.887
77		1.220		0.753			0.884
78		1.244		0.742			0.881
79		1.268		0.731			0.878
80		1.292		0.720			0.875
81		1.329		0.706			0.872
82		1.366		0.692			0.869
83		1.403		0.678			0.866
84		1.440		0.664			0.863
85		1.477		0.650			0.860
86		1.529		0.633			0.858
87		1.581		0.616			0.856
88		1.633		0.599			0.854
89		1.685		0.582			0.852
90		1.737		0.565			0.850
FACTOR B				0.5	%		0.3	%
MAXIMUM				99	%		99	%

THE ABOVE FACTORS FOR OPTIONS 2 AND 3 ASSUME THE MEMBER AND THE CA ARE THE SAME AGE. WHEN THE AGES DIFFER:

ADD FACTOR B FOR EACH YEAR THE CA IS OLDER THAN THE MEMBER

SUBTRACT FACTOR B FOR EACH YEAR THE CA IS YOUNGER THAN THE MEMBER

OPTION 1 IS A LIFE ANNUITY, OPTION 2 IS A 100% J&S w/ 10 YEAR CERTAIN, OPTION 3 IS A 50% J&S

Appendix C

CONVERSION FACTORS WHERE NORMAL FORM = 12X
1998 GBB89 ASSUMPTIONS

AGE	OPTION 1			OPTION 2			OPTION 3
19		1.003	%		0.990	%		0.990	%
20		1.003			0.990			0.990
21		1.003			0.989			0.990
22		1.003			0.988			0.990
23		1.003			0.987			0.990
24		1.003			0.986			0.990
25		1.003			0.985			0.990
26		1.003			0.984			0.990
27		1.003			0.983			0.990
28		1.003			0.982			0.990
29		1.003			0.981			0.990
30		1.003			0.980			0.990
31		1.003			0.979			0.989
32		1.003			0.978			0.989
33		1.003			0.977			0.988
34		1.003			0.976			0.987
35		1.004			0.975			0.987
36		1.004			0.973			0.986
37		1.004			0.971			0.985
38		1.004			0.969			0.984
39		1.004			0.967			0.983
40		1.005			0.965			0.982
41		1.006			0.963			0.981
42		1.007			0.961			0.980
43		1.008			0.959			0.979
44		1.009			0.957			0.977
45		1.010			0.955			0.975
46		1.011			0.952			0.974
47		1.012			0.949			0.973
48		1.013			0.946			0.972
49		1.014			0.943			0.971
50		1.015			0.940			0.970
51		1.017			0.936			0.968
52		1.019			0.932			0.966
53		1.021			0.928			0.964
54		1.023			0.924			0.962
55		1.025			0.920			0.960
56		1.030			0.914			0.957
57		1.035			0.908			0.954
58		1.040			0.902			0.951
59		1.045			0.896			0.948
60		1.050			0.890			0.945
61		1.060			0.884			0.942
62		1.070			0.878			0.939
63		1.080			0.872			0.936
64		1.090			0.866			0.933
65		1.100			0.860			0.930
FACTOR B					0.5	%		0.3	%
MAXIMUM					99	%		99	%

THE ABOVE FACTORS FOR OPTIONS 2 AND 3 ASSUME THE MEMBER AND THE CA ARE THE SAME AGE. WHEN THE AGES DIFFER:

ADD FACTOR B FOR EACH YEAR THE CA IS OLDER THAN THE MEMBER
SUBTRACT FACTOR B FOR EACH YEAR THE CA IS YOUNGER THAN THE MEMBER

OPTION 1 IS A LIFE ANNUITY, OPTION 2 IS A 100% J&S w/ 10 YEAR CERTAIN, OPTION 3 IS A 50% J&S

Appendix C

CONVERSION FACTORS WHERE NORMAL FORM = 12X
1998 GBB89 ASSUMPTIONS

AGE	OPTION 1		OPTION 2			OPTION 3
66		1.120		0.853			0.926
67		1.140		0.846			0.922
68		1.160		0.839			0.918
69		1.180		0.832			0.914
70		1.200		0.825			0.910
71		1.224		0.815			0.906
72		1.248		0.805			0.902
73		1.272		0.795			0.898
74		1.296		0.785			0.894
75		1.320		0.775			0.890
76		1.368		0.764			0.887
77		1.416		0.753			0.884
78		1.464		0.742			0.881
79		1.512		0.731			0.878
80		1.560		0.720			0.875
81		1.628		0.706			0.872
82		1.696		0.692			0.869
83		1.764		0.678			0.866
84		1.832		0.664			0.863
85		1.900		0.650			0.860
86		2.000		0.633			0.858
87		2.100		0.616			0.856
88		2.200		0.599			0.854
89		2.300		0.582			0.852
90		2.400		0.565			0.850
FACTOR B				0.5	%		0.3	%
MAXIMUM				99	%		99	%

THE ABOVE FACTORS FOR OPTIONS 2 AND 3 ASSUME THE MEMBER AND THE CA ARE THE SAME AGE. WHEN THE AGES DIFFER:

ADD FACTOR B FOR EACH YEAR THE CA IS OLDER THAN THE MEMBER
SUBTRACT FACTOR B FOR EACH YEAR THE CA IS YOUNGER THAN THE MEMBER

OPTION 1 IS A LIFE ANNUITY, OPTION 2 IS A 100% J&S w/ 10 YEAR CERTAIN, OPTION 3 IS A 50% J&S

Appendix D

CONVERSION FACTORS WHERE NORMAL FORM = ST LIFE
1998 GBB89 ASSUMPTIONS

AGE	OPTION 1			OPTION 2			OPTION 3
19		0.999	%		0.990	%		0.990	%
20		0.999			0.990			0.990
21		0.999			0.989			0.990
22		0.999			0.988			0.990
23		0.999			0.987			0.990
24		0.999			0.986			0.990
25		0.999			0.985			0.990
26		0.999			0.984			0.990
27		0.999			0.983			0.990
28		0.999			0.982			0.990
29		0.999			0.981			0.990
30		0.998			0.980			0.990
31		0.998			0.979			0.989
32		0.998			0.978			0.989
33		0.998			0.977			0.988
34		0.998			0.976			0.987
35		0.998			0.975			0.987
36		0.998			0.973			0.986
37		0.998			0.971			0.985
38		0.998			0.969			0.984
39		0.998			0.967			0.983
40		0.997			0.965			0.982
41		0.997			0.963			0.981
42		0.997			0.961			0.980
43		0.997			0.959			0.979
44		0.997			0.957			0.977
45		0.996			0.955			0.975
46		0.996			0.952			0.974
47		0.995			0.949			0.973
48		0.995			0.946			0.972
49		0.994			0.943			0.971
50		0.993			0.940			0.970
51		0.992			0.936			0.968
52		0.991			0.932			0.966
53		0.990			0.928			0.964
54		0.989			0.924			0.962
55		0.988			0.920			0.960
56		0.985			0.914			0.957
57		0.982			0.908			0.954
58		0.979			0.902			0.951
59		0.977			0.896			0.948
60		0.974			0.890			0.945
61		0.969			0.884			0.942
62		0.964			0.878			0.939
63		0.960			0.872			0.936
64		0.955			0.866			0.933
65		0.951			0.860			0.930
FACTOR B					0.5	%		0.3	%
MAXIMUM					99	%		99	%

THE ABOVE FACTORS FOR OPTIONS 2 AND 3 ASSUME THE MEMBER AND THE CA ARE THE SAME AGE. WHEN THE AGES DIFFER:

ADD FACTOR B FOR EACH YEAR THE CA IS OLDER THAN THE MEMBER
SUBTRACT FACTOR B FOR EACH YEAR THE CA IS YOUNGER THAN THE MEMBER

OPTION 1 IS A 10 YEAR CERTAIN ANNUITY, OPTION 2 IS A 100% J&S w/ 10 YEAR CERTAIN, OPTION 3 IS A 50% J&S

Appendix D

CONVERSION FACTORS WHERE NORMAL FORM = ST LIFE
1998 GBB89 ASSUMPTIONS

AGE	OPTION 1		OPTION 2			OPTION 3
66		0.943		0.853			0.926
67		0.935		0.846			0.922
68		0.927		0.839			0.918
69		0.919		0.832			0.914
70		0.912		0.825			0.910
71		0.899		0.815			0.906
72		0.887		0.805			0.902
73		0.876		0.795			0.898
74		0.864		0.785			0.894
75		0.853		0.775			0.890
76		0.836		0.764			0.887
77		0.820		0.753			0.884
78		0.804		0.742			0.881
79		0.789		0.731			0.878
80		0.774		0.720			0.875
81		0.752		0.706			0.872
82		0.732		0.692			0.869
83		0.713		0.678			0.866
84		0.694		0.664			0.863
85		0.677		0.650			0.860
86		0.654		0.633			0.858
87		0.633		0.616			0.856
88		0.612		0.599			0.854
89		0.593		0.582			0.852
90		0.576		0.565			0.850
FACTOR B				0.5	%		0.3	%
MAXIMUM				99	%		99	%

THE ABOVE FACTORS FOR OPTIONS 2 AND 3 ASSUME THE MEMBER AND THE CA ARE THE SAME AGE. WHEN THE AGES DIFFER:

ADD FACTOR B FOR EACH YEAR THE CA IS OLDER THAN THE MEMBER
SUBTRACT FACTOR B FOR EACH YEAR THE CA IS YOUNGER THAN THE MEMBER

OPTION 1 IS A 10 YEAR CERTAIN ANNUITY, OPTION 2 IS A 100% J&S w/ 10 YEAR CERTAIN, OPTION 3 IS A 50% J&S

Table I (A)

APPENDIX E

ACTUARIAL EQUIVALENT EARLY RETIREMENT FACTORS @ AGE 65

AGE	0		1		2		3		4		5		6		7		8		9		10		11
20		0.004		0.004		0.004		0.004		0.004		0.004		0.005		0.005		0.005		0.005		0.005		0.005
21		0.005		0.005		0.005		0.005		0.005		0.005		0.006		0.006		0.006		0.006		0.006		0.006
22		0.006		0.006		0.006		0.006		0.006		0.006		0.007		0.007		0.007		0.007		0.007		0.007
23		0.007		0.007		0.007		0.007		0.007		0.007		0.008		0.008		0.008		0.008		0.008		0.008
24		0.008		0.008		0.008		0.008		0.008		0.008		0.009		0.009		0.009		0.009		0.009		0.009
25		0.009		0.009		0.009		0.009		0.009		0.009		0.010		0.010		0.010		0.010		0.010		0.010
26		0.010		0.011		0.012		0.013		0.013		0.014		0.015		0.016		0.017		0.018		0.018		0.019
27		0.020		0.021		0.022		0.023		0.023		0.024		0.025		0.026		0.027		0.028		0.028		0.029
28		0.030		0.031		0.032		0.033		0.033		0.034		0.035		0.036		0.037		0.038		0.038		0.039
29		0.040		0.041		0.042		0.043		0.043		0.044		0.045		0.046		0.047		0.048		0.048		0.049
30		0.050		0.051		0.052		0.053		0.053		0.054		0.055		0.056		0.057		0.058		0.058		0.059
31		0.060		0.061		0.062		0.063		0.063		0.064		0.065		0.066		0.067		0.068		0.068		0.069
32		0.070		0.071		0.072		0.073		0.073		0.074		0.075		0.076		0.077		0.078		0.078		0.079
33		0.080		0.081		0.082		0.083		0.083		0.084		0.085		0.086		0.087		0.088		0.088		0.089
34		0.090		0.091		0.092		0.093		0.093		0.094		0.095		0.096		0.097		0.098		0.098		0.099
35		0.100		0.101		0.102		0.103		0.103		0.104		0.105		0.106		0.107		0.108		0.108		0.109
36		0.110		0.111		0.112		0.113		0.113		0.114		0.115		0.116		0.117		0.118		0.118		0.119
37		0.120		0.121		0.122		0.123		0.123		0.124		0.125		0.126		0.127		0.128		0.128		0.129
38		0.130		0.131		0.132		0.133		0.133		0.134		0.135		0.136		0.137		0.138		0.138		0.139
39		0.140		0.141		0.142		0.143		0.143		0.144		0.145		0.146		0.147		0.148		0.148		0.149
40		0.150		0.151		0.152		0.153		0.153		0.154		0.155		0.156		0.157		0.158		0.158		0.159
41		0.160		0.161		0.162		0.163		0.163		0.164		0.165		0.166		0.167		0.168		0.168		0.169
42		0.170		0.171		0.172		0.173		0.173		0.174		0.175		0.176		0.177		0.178		0.178		0.179
43		0.180		0.181		0.182		0.183		0.183		0.184		0.185		0.186		0.187		0.188		0.188		0.189
44		0.190		0.191		0.192		0.193		0.193		0.194		0.195		0.196		0.197		0.198		0.198		0.199
45		0.200		0.203		0.205		0.208		0.210		0.213		0.215		0.218		0.220		0.223		0.225		0.228
46		0.230		0.233		0.235		0.238		0.240		0.243		0.245		0.248		0.250		0.253		0.255		0.258
47		0.260		0.263		0.265		0.268		0.270		0.273		0.275		0.278		0.280		0.283		0.285		0.288
48		0.290		0.293		0.295		0.298		0.300		0.303		0.305		0.308		0.310		0.313		0.315		0.318
49		0.320		0.323		0.325		0.328		0.330		0.333		0.335		0.338		0.340		0.343		0.345		0.348
50		0.350		0.353		0.355		0.358		0.360		0.363		0.365		0.368		0.370		0.373		0.375		0.378
51		0.380		0.383		0.385		0.388		0.390		0.393		0.395		0.398		0.400		0.403		0.405		0.408
52		0.410		0.413		0.415		0.418		0.420		0.423		0.425		0.428		0.430		0.433		0.435		0.438
53		0.440		0.443		0.445		0.448		0.450		0.453		0.455		0.458		0.460		0.463		0.465		0.468
54		0.470		0.473		0.475		0.478		0.480		0.483		0.485		0.488		0.490		0.493		0.495		0.498
55		0.500		0.503		0.507		0.510		0.513		0.517		0.520		0.523		0.527		0.530		0.533		0.537
56		0.540		0.543		0.547		0.550		0.553		0.557		0.560		0.563		0.567		0.570		0.573		0.577
57		0.580		0.583		0.587		0.590		0.593		0.597		0.600		0.603		0.607		0.610		0.613		0.617
58		0.620		0.623		0.627		0.630		0.633		0.637		0.640		0.643		0.647		0.650		0.653		0.657
59		0.660		0.663		0.667		0.670		0.673		0.677		0.680		0.683		0.687		0.690		0.693		0.697
60		0.700		0.705		0.710		0.715		0.720		0.725		0.730		0.735		0.740		0.745		0.750		0.755
61		0.760		0.765		0.770		0.775		0.780		0.785		0.790		0.795		0.800		0.805		0.810		0.815
62		0.820		0.825		0.830		0.835		0.840		0.845		0.850		0.855		0.860		0.865		0.870		0.875
63		0.880		0.885		0.890		0.895		0.900		0.905		0.910		0.915		0.920		0.925		0.930		0.935
64		0.940		0.945		0.950		0.955		0.960		0.965		0.970		0.975		0.980		0.985		0.990		0.995
65		1.000

Table I (B)

APPENDIX E

3% EARLY RETIREMENT FACTORS @ AGE 65

AGE	0		1		2		3		4		5		6		7		8		9		10		11
20		0.100		0.101		0.102		0.103		0.103		0.104		0.105		0.106		0.107		0.108		0.108		0.109
21		0.110		0.111		0.112		0.113		0.113		0.114		0.115		0.116		0.117		0.118		0.118		0.119
22		0.120		0.121		0.122		0.123		0.123		0.124		0.125		0.126		0.127		0.128		0.128		0.129
23		0.130		0.131		0.132		0.133		0.133		0.134		0.135		0.136		0.137		0.138		0.138		0.139
24		0.140		0.141		0.142		0.143		0.143		0.144		0.145		0.146		0.147		0.148		0.148		0.149
25		0.150		0.151		0.152		0.153		0.153		0.154		0.155		0.156		0.157		0.158		0.158		0.159
26		0.160		0.161		0.162		0.163		0.163		0.164		0.165		0.166		0.167		0.168		0.168		0.169
27		0.170		0.171		0.172		0.173		0.173		0.174		0.175		0.176		0.177		0.178		0.178		0.179
28		0.180		0.181		0.182		0.183		0.183		0.184		0.185		0.186		0.187		0.188		0.188		0.189
29		0.190		0.191		0.192		0.193		0.193		0.194		0.195		0.196		0.197		0.198		0.198		0.199
30		0.200		0.201		0.202		0.203		0.203		0.204		0.205		0.206		0.207		0.208		0.208		0.209
31		0.210		0.211		0.212		0.213		0.213		0.214		0.215		0.216		0.217		0.218		0.218		0.219
32		0.220		0.221		0.222		0.223		0.223		0.224		0.225		0.226		0.227		0.228		0.228		0.229
33		0.230		0.231		0.232		0.233		0.233		0.234		0.235		0.236		0.237		0.238		0.238		0.239
34		0.240		0.241		0.242		0.243		0.243		0.244		0.245		0.246		0.247		0.248		0.248		0.249
35		0.250		0.251		0.252		0.253		0.253		0.254		0.255		0.256		0.257		0.258		0.258		0.259
36		0.260		0.261		0.262		0.263		0.263		0.264		0.265		0.266		0.267		0.268		0.268		0.269
37		0.270		0.271		0.272		0.273		0.273		0.274		0.275		0.276		0.277		0.278		0.278		0.279
38		0.280		0.281		0.282		0.283		0.283		0.284		0.285		0.286		0.287		0.288		0.288		0.289
39		0.290		0.291		0.292		0.293		0.293		0.294		0.295		0.296		0.297		0.298		0.298		0.299
40		0.300		0.302		0.303		0.305		0.307		0.308		0.310		0.312		0.313		0.315		0.317		0.318
41		0.320		0.322		0.323		0.325		0.327		0.328		0.330		0.332		0.333		0.335		0.337		0.338
42		0.340		0.342		0.343		0.345		0.347		0.348		0.350		0.352		0.353		0.355		0.357		0.358
43		0.360		0.362		0.363		0.365		0.367		0.368		0.370		0.372		0.373		0.375		0.377		0.378
44		0.380		0.382		0.383		0.385		0.387		0.388		0.390		0.392		0.393		0.395		0.397		0.398
45		0.400		0.402		0.405		0.408		0.410		0.413		0.415		0.417		0.420		0.423		0.425		0.428
46		0.430		0.432		0.435		0.438		0.440		0.443		0.445		0.447		0.450		0.453		0.455		0.458
47		0.460		0.462		0.465		0.468		0.470		0.473		0.475		0.477		0.480		0.483		0.485		0.488
48		0.490		0.492		0.495		0.498		0.500		0.503		0.505		0.507		0.510		0.513		0.515		0.518
49		0.520		0.522		0.525		0.528		0.530		0.533		0.535		0.537		0.540		0.543		0.545		0.548
50		0.550		0.552		0.555		0.558		0.560		0.563		0.565		0.567		0.570		0.573		0.575		0.578
51		0.580		0.582		0.585		0.588		0.590		0.593		0.595		0.597		0.600		0.603		0.605		0.608
52		0.610		0.612		0.615		0.618		0.620		0.623		0.625		0.627		0.630		0.633		0.635		0.638
53		0.640		0.642		0.645		0.648		0.650		0.653		0.655		0.657		0.660		0.663		0.665		0.668
54		0.670		0.672		0.675		0.678		0.680		0.683		0.685		0.687		0.690		0.693		0.695		0.698
55		0.700		0.702		0.705		0.708		0.710		0.713		0.715		0.717		0.720		0.723		0.725		0.728
56		0.730		0.732		0.735		0.738		0.740		0.743		0.745		0.747		0.750		0.753		0.755		0.758
57		0.760		0.762		0.765		0.768		0.770		0.773		0.775		0.777		0.780		0.783		0.785		0.788
58		0.790		0.792		0.795		0.798		0.800		0.803		0.805		0.807		0.810		0.813		0.815		0.818
59		0.820		0.822		0.825		0.828		0.830		0.833		0.835		0.837		0.840		0.843		0.845		0.848
60		0.850		0.852		0.855		0.858		0.860		0.863		0.865		0.867		0.870		0.873		0.875		0.878
61		0.880		0.882		0.885		0.888		0.890		0.893		0.895		0.897		0.900		0.903		0.905		0.908
62		0.910		0.912		0.915		0.918		0.920		0.923		0.925		0.927		0.930		0.933		0.935		0.938
63		0.940		0.942		0.945		0.948		0.950		0.953		0.955		0.957		0.960		0.963		0.965		0.968
64		0.970		0.972		0.975		0.978		0.980		0.983		0.985		0.987		0.990		0.993		0.995		0.998
65		1.000

Table I (c)

APPENDIX E

R/70 & R/80 EARLY RETIREMENT FACTORS @ AGE 65

AGE	0		1		2		3		4		5		6		7		8		9		10		11
45		0.700		0.701		0.703		0.704		0.705		0.706		0.708		0.709		0.710		0.711		0.713		0.714
46		0.715		0.716		0.718		0.719		0.720		0.721		0.723		0.724		0.725		0.726		0.728		0.729
47		0.730		0.731		0.733		0.734		0.735		0.736		0.738		0.739		0.740		0.741		0.743		0.744
48		0.745		0.746		0.748		0.749		0.750		0.751		0.753		0.754		0.755		0.756		0.758		0.759
49		0.760		0.761		0.763		0.764		0.765		0.766		0:768		0.769		0.770		0.771		0.773		0.774
50		0.775		0.776		0.778		0.779		0.780		0.781		0.783		0.784		0.785		0.786		0.788		0.789
51		0.790		0.791		0.793		0.794		0.795		0.796		0.798		0.799		0.800		0.801		0.803		0.804
52		0.805		0.806		0.808		0.809		0.810		0.811		0.813		0.814		0.815		0.816		0.818		0.819
53		0.820		0.821		0.823		0.824		0.825		0.826		0.828		0.829		0.830		0.831		0.833		0.834
54		0.835		0.836		0.838		0.839		0.840		0.841		0.843		0.844		0.845		0.846		0.848		0.849
55		0.850		0.851		0.853		0.854		0.855		0.856		0.858		0.859		0.860		0.861		0.863		0.864
56		0.865		0.866		0.868		0.869		0.870		0.871		0.873		0.874		0.875		0.876		0.878		0.879
57		0.880		0.881		0.883		0.884		0.885		0.886		0.888		0.889		0.890		0.891		0.893		0.894
58		0.895		0.896		0.898		0.899		0.900		0.901		0.903		0.904		0.905		0.906		0.908		0.909
59		0.910		0.911		0.913		0.914		0.915		0.916		0.918		0.919		0.920		0.921		0.923		0.924
60		0.925		0.926		0.928		0.929		0.930		0.931		0.933		0.934		0.935		0.936		0.938		0.939
61		0.940		0.941		0.943		0.944		0.945		0.946		0.948		0.949		0.950		0.951		0.953		0.954
62		0.955		0.956		0.958		0.959		0.960		0.961		0.963		0.964		0.965		0.966		0.968		0.969
63		0.970		0.971		0.973		0.974		0.975		0.976		0.978		0.979		0.980		0.981		0.983		0.984
64		0.985		0.986		0.988		0.989		0.990		0.991		0.993		0.994		0.995		0.996		0.998		0.999
65		1.000

Table II (A)

APPENDIX E

ACTUARIAL EQUIVALENT EARLY RETIREMENT FACTORS UNREDUCED AGE 62

AGE	0		1		2		3		4		5		6		7		8		9		10		11
20		0.080		0.081		0.082		0.083		0.083		0.084		0.085		0.086		0.087		0.088		0.088		0.089
21		0.090		0.091		0.092		0.093		0.093		0.094		0.095		0.096		0.097		0.098		0.098		0.099
22		0.100		0.101		0.102		0.103		0.103		0.104		0.105		0.106		0.107		0.108		0.108		0.109
23		0.110		0.111		0.112		0.113		0.113		0.114		0.115		0.116		0.117		0.118		0.118		0.119
24		0.120		0.121		0.122		0.123		0.123		0.124		0.125		0.126		0.127		0.128		0.128		0.129
25		0.130		0.131		0.132		0.133		0.133		0.134		0.135		0.136		0.137		0.138		0.138		0.139
26		0.140		0.141		0.142		0.143		0.143		0.144		0.145		0.146		0.147		0.148		0.148		0.149
27		0.150		0.151		0.152		0.153		0.153		0.154		0.155		0.156		0.157		0.158		0.158		0.159
28		0.160		0.161		0.162		0.163		0.163		0.164		0.165		0.166		0.167		0.168		0.168		0.169
29		0.170		0.171		0.172		0.173		0.173		0.174		0.175		0.176		0.177		0.178		0.178		0.179
30		0.180		0.181		0.182		0.183		0.183		0.184		0.185		0.186		0.187		0.188		0.188		0.189
31		0.190		0.191		0.192		0.193		0.193		0.194		0.195		0.196		0.197		0.198		0.198		0.199
32		0.200		0.201		0.202		0.203		0.203		0.204		0.205		0.206		0.207		0.208		0.208		0.209
33		0.210		0.211		0.212		0.213		0.213		0.214		0.215		0.216		0.217		0.218		0.218		0.219
34		0.220		0.221		0.222		0.223		0.223		0.224		0.225		0.226		0.227		0.228		0.228		0.229
35		0.230		0.231		0.232		0.233		0.233		0.234		0.235		0.236		0.237		0.238		0.238		0.239
36		0.240		0.241		0.242		0.243		0.243		0.244		0.245		0.246		0.247		0.248		0.248		0.249
37		0.250		0.251		0.252		0.253		0.253		0.254		0.255		0.256		0.257		0.258		0.258		0.259
38		0.260		0.261		0.262		0.263		0.263		0.264		0.265		0.266		0.267		0.268		0.268		0.269
39		0.270		0.271		0.272		0.273		0.273		0.274		0.275		0.276		0.277		0.278		0.278		0.279
40		0.280		0.282		0.283		0.285		0.287		0.288		0.290		0.292		0.293		0.295		0.297		0.298
41		0.300		0.302		0.303		0.305		0.307		0.308		0.310		0.312		0.313		0.315		0.317		0.318
42		0.320		0.322		0.323		0.325		0.327		0.328		0.330		0.332		0.333		0.335		0.337		0.338
43		0.340		0.342		0.343		0.345		0.347		0.348		0.350		0.352		0.353		0.355		0.357		0.358
44		0.360		0.362		0.363		0.365		0.367		0.368		0.370		0.372		0.373		0.375		0.377		0.378
45		0.380		0.383		0.385		0.388		0.390		0.393		0.395		0.398		0.400		0.403		0.405		0.408
46		0.410		0.413		0.415		0.418		0.420		0.423		0.425		0.428		0.430		0.433		0.435		0.438
47		0.440		0.443		0.445		0.448		0.450		0.453		0.455		0.458		0.460		0.463		0.465		0.468
48		0.470		0.473		0.475		0.478		0.480		0.483		0.485		0.488		0.490		0.493		0.495		0.498
49		0.500		0.503		0.505		0.508		0.510		0.513		0.515		0.518		0.520		0.523		0.525		0.528
50		0.530		0.533		0.535		0.538		0.540		0.543		0.545		0.548		0.550		0.553		0.555		0.558
51		0.560		0.563		0.565		0.568		0.570		0.573		0.575		0.578		0.580		0.583		0.585		0.588
52		0.590		0.593		0.595		0.598		0.600		0.603		0.605		0.608		0.610		0.613		0.615		0.618
53		0.620		0.623		0.625		0.628		0.630		0.633		0.635		0.638		0.640		0.643		0.645		0.648
54		0.650		0.653		0.655		0.658		0.660		0.663		0.665		0.668		0.670		0.673		0.675		0.678
55		0.680		0.683		0.687		0.690		0.693		0.697		0.700		0.703		0.707		0.710		0.713		0.717
56		0.720		0.723		0.727		0.730		0.733		0.737		0.740		0.743		0.747		0.750		0.753		0.757
57		0.760		0.763		0.767		0.770		0.773		0.777		0.780		0.783		0.787		0.790		0.793		0.797
58		0.800		0.803		0.807		0.810		0.813		0.817		0.820		0.823		0.827		0.830		0.833		0.837
59		0.840		0.843		0.847		0.850		0.853		0.857		0.860		0.863		0.867		0.870		0.873		0.877
60		0.880		0.885		0.890		0.895		0.900		0.905		0.910		0.915		0.920		0.925		0.930		0.935
61		0.940		0.945		0.950		0.955		0.960		0.965		0.970		0.975		0.980		0.985		0.990		0.995
62		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000
63		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000
64		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000
65		1.000

Table II (B)

APPENDIX E

3% EARLY RETIREMENT FACTORS UNREDUCED AGE 62

AGE	0		1		2		3		4		5		6		7		8		9		10		11
20		0.190		0.191		0.192		0.193		0.193		0.194		0.195		0.196		0.197		0.198		0.198		0.199
21		0.200		0.201		0.202		0.203		0.203		0.204		0.205		0.206		0.207		0.208		0.208		0.209
22		0.210		0.211		0.212		0.213		0.213		0.214		0.215		0.216		0.217		0.218		0.218		0.219
23		0.220		0.221		0.222		0.223		0.223		0.224		0.225		0.226		0.227		0.228		0.228		0.229
24		0.230		0.231		0.232		0.233		0.233		0.234		0.235		0.236		0.237		0.238		0.238		0.239
25		0.240		0.241		0.242		0.243		0.243		0.244		0.245		0.246		0.247		0.248		0.248		0.249
26		0.250		0.251		0.252		0.253		0.253		0.254		0.255		0.256		0.257		0.258		0.258		0.259
27		0.260		0.261		0.262		0.263		0.263		0.264		0.265		0.266		0.267		0.268		0.268		0.269
28		0.270		0.271		0.272		0.273		0.273		0.274		0.275		0.276		0.277		0.278		0.278		0.279
29		0.280		0.281		0.282		0.283		0.283		0.284		0.285		0.286		0.287		0.288		0.288		0.289
30		0.290		0.291		0.292		0.293		0.293		0.294		0.295		0.296		0.297		0.298		0.298		0.299
31		0.300		0.301		0.302		0.303		0.303		0.304		0.305		0.306		0.307		0.308		0.308		0.309
32		0.310		0.311		0.312		0.313		0.313		0.314		0.315		0.316		0.317		0.318		0.318		0.319
33		0.320		0.321		0.322		0.323		0.323		0.324		0.325		0.326		0.327		0.328		0.328		0.329
34		0.330		0.331		0.332		0.333		0.333		0.334		0.335		0.336		0.337		0.338		0.338		0.339
35		0.340		0.341		0.342		0.343		0.343		0.344		0.345		0.346		0.347		0.348		0.348		0.349
36		0.350		0.351		0.352		0.353		0.353		0.354		0.355		0.356		0.357		0.358		0.358		0.359
37		0.360		0.361		0.362		0.363		0.363		0.364		0.365		0.366		0.367		0.368		0.368		0.369
38		0.370		0.371		0.372		0.373		0.373		0.374		0.375		0.376		0.377		0.378		0.378		0.379
39		0.380		0.381		0.382		0.383		0.383		0.384		0.385		0.386		0.387		0.388		0.388		0.389
40		0.390		0.392		0.393		0.395		0.397		0.398		0.400		0.402		0.403		0.405		0.407		0.408
41		0.410		0.412		0.413		0.415		0.417		0.418		0.420		0.422		0.423		0.425		0.427		0.428
42		0.430		0.432		0.433		0.435		0.437		0.438		0.440		0.442		0.443		0.445		0.447		0.448
43		0.450		0.452		0.453		0.455		0.457		0.458		0.460		0.462		0.463		0.465		0.467		0.468
44		0.470		0.472		0.473		0.475		0.477		0.478		0.480		0.482		0.483		0.485		0.487		0.488
45		0.490		0.492		0.495		0.498		0.500		0.503		0.505		0.507		0.510		0.513		0.515		0.518
46		0.520		0.522		0.525		0.528		0.530		0.533		0.535		0.537		0.540		0.543		0.545		0.548
47		0.550		0.552		0.555		0.558		0.560		0.563		0.565		0.567		0.570		0.573		0.575		0.578
48		0.580		0.582		0.585		0.588		0.590		0.593		0.595		0.597		0.600		0.603		0.605		0.608
49		0.610		0.612		0.615		0.618		0.620		0.623		0.625		0.627		0.630		0.633		0.635		0.638
50		0.640		0.642		0.645		0.648		0.650		0.653		0.655		0.657		0.660		0.663		0.665		0.668
51		0.670		0.672		0.675		0.678		0.680		0.683		0.685		0.687		0.690		0.693		0.695		0.698
52		0.700		0.702		0.705		0.708		0.710		0.713		0.715		0.717		0.720		0.723		0.725		0.728
53		0.730		0.732		0.735		0.738		0.740		0.743		0.745		0.747		0.750		0.753		0.755		0.758
54		0.760		0.762		0.765		0.768		0.770		0.773		0.775		0.777		0.780		0.783		0.785		0.788
55		0.790		0.792		0.795		0.798		0.800		0.803		0.805		0.807		0.810		0.813		0.815		0.818
56		0.820		0.822		0.825		0.828		0.830		0.833		0.835		0.837		0.840		0.843		0.845		0.848
57		0.850		0.852		0.855		0.858		0.860		0.863		0.865		0.867		0.870		0.873		0.875		0.878
58		0.880		0.882		0.885		0.888		0.890		0.893		0.895		0.897		0.900		0.903		0.905		0.908
59		0.910		0.912		0.915		0.918		0.920		0.923		0.925		0.927		0.930		0.933		0.935		0.938
60		0.940		0.942		0.945		0.948		0.950		0.953		0.955		0.957		0.960		0.963		0.965		0.968
61		0.970		0.972		0.975		0.978		0.980		0.983		0.985		0.987		0.990		0.993		0.995		0.998
62		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000
63		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000
64		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000
65		1.000

Table II (C)

APPENDIX E

R/70 & R/80 EARLY RETIREMENT FACTORS UNREDUCED AGE 62

AGE	0		1		2		3		4		5		6		7		8		9		10		11
45		0.745		0.746		0.748		0.749		0.750		0.751		0.753		0.754		0.755		0.756		0.758		0.759
46		0.760		0.761		0.763		0.764		0.765		0.766		0.768		0.769		0.770		0.771		0.773		0.774
47		0.775		0.776		0.778		0.779		0.780		0.781		0.783		0.784		0.785		0.786		0.788		0.789
48		0.790		0.791		0.793		0.794		0.795		0.796		0.798		0.799		0.800		0.801		0.803		0.804
49		0.805		0.806		0.808		0.809		0.810		0.811		0.813		0.814		0.815		0.816		0.818		0.819
50		0.820		0.821		0.823		0.824		0.825		0.826		0.828		0.829		0.830		0.831		0.833		0.834
51		0.835		0.836		0.838		0.839		0.840		0.841		0.843		0.844		0.845		0.846		0.848		0.849
52		0.850		0.851		0.853		0.854		0.855		0.856		0.858		0.859		0.860		0.861		0.863		0.864
53		0.865		0.866		0.868		0.869		0.870		0.871		0.873		0.874		0.875		0.876		0.878		0.879
54		0.880		0.881		0.883		0.884		0.885		0.886		0.888		0.889		0.890		0.891		0.893		0.894
55		0.895		0.896		0.898		0.899		0.900		0.901		0.903		0.904		0.905		0.906		0.908		0.909
56		0.910		0.911		0.913		0.914		0.915		0.916		0.918		0.919		0.920		0.921		0.923		0.924
57		0.925		0.926		0.928		0.929		0.930		0.931		0.933		0.934		0.935		0.936		0.938		0.939
58		0.940		0.941		0.943		0.944		0.945		0.946		0.948		0.949		0.950		0.951		0.953		0.954
59		0.955		0.956		0.958		0.959		0.960		0.961		0.963		0.964		0.965		0.966		0.968		0.969
60		0.970		0.971		0.973		0.974		0.975		0.976		0.978		0.979		0.980		0.981		0.983		0.984
61		0.985		0.986		0.988		0.989		0.990		0.991		0.993		0.994		0.995		0.996		0.998		0.999
62		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000
63		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000
64		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000
65		1.000

Table III (A)

APPENDIX E

ACTUARIAL EQUIVALENT EARLY RETIREMENT FACTORS UNREDUCED AGE 60

AGE	0		1		2		3		4		5		6		7		8		9		10		11
20		0.200		0.201		0.202		0.203		0.203		0.204		0.205		0.206		0.207		0.208		0.208		0.209
21		0.210		0.211		0.212		0.213		0.213		0.214		0.215		0.216		0.217		0.218		0.218		0.219
22		0.220		0.221		0.222		0.223		0.223		0.224		0.225		0.226		0.227		0.228		0.228		0.229
23		0.230		0.231		0.232		0.233		0.233		0.234		0.235		0.236		0.237		0.238		0.238		0.239
24		0.240		0.241		0.242		0.243		0.243		0.244		0.245		0.246		0.247		0.248		0.248		0.249
25		0.250		0.251		0.252		0.253		0.253		0.254		0.255		0.256		0.257		0.258		0.258		0.259
26		0.260		0.261		0.262		0.263		0.263		0.264		0.265		0.266		0.267		0.268		0.268		0.269
27		0.270		0.271		0.272		0.273		0.273		0.274		0.275		0.276		0.277		0.278		0.278		0.279
28		0.280		0.281		0.282		0.283		0.283		0.284		0.285		0.286		0.287		0.288		0.288		0.289
29		0.290		0.291		0.292		0.293		0.293		0.294		0.295		0.296		0.297		0.298		0.298		0.299
30		0.300		0.301		0.302		0.303		0.303		0.304		0.305		0.306		0.307		0.308		0.308		0.309
31		0.310		0.311		0.312		0.313		0.313		0.314		0.315		0.316		0.317		0.318		0.318		0.319
32		0.320		0.321		0.322		0.323		0.323		0.324		0.325		0.326		0.327		0.328		0.328		0.329
33		0.330		0.331		0.332		0.333		0.333		0.334		0.335		0.336		0.337		0.338		0.338		0.339
34		0.340		0.341		0.342		0.343		0.343		0.344		0.345		0.346		0.347		0.348		0.348		0.349
35		0.350		0.351		0.352		0.353		0.353		0.354		0.355		0.356		0.357		0.358		0.358		0.359
36		0.360		0.361		0.362		0.363		0.363		0.364		0.365		0.366		0.367		0.368		0.368		0.369
37		0.370		0.371		0.372		0.373		0.373		0.374		0.375		0.376		0.377		0.378		0.378		0.379
38		0.380		0.381		0.382		0.383		0.383		0.384		0.385		0.386		0.387		0.388		0.388		0.389
39		0.390		0.391		0.392		0.393		0.393		0.394		0.395		0.396		0.397		0.398		0.398		0.399
40		0.400		0.402		0.403		0.405		0.407		0.408		0.410		0.412		0.413		0.415		0.417		0.418
41		0.420		0.422		0.423		0.425		0.427		0.428		0.430		0.432		0.433		0.435		0.437		0.438
42		0.440		0.442		0.443		0.445		0.447		0.448		0.450		0.452		0.453		0.455		0.457		0.458
43		0.460		0.462		0.463		0.465		0.467		0.468		0.470		0.472		0.473		0.475		0.477		0.478
44		0.480		0.482		0.483		0.485		0.487		0.488		0.490		0.492		0.493		0.495		0.497		0.498
45		0.500		0.503		0.505		0.508		0.510		0.513		0.515		0.518		0.520		0.523		0.525		0.528
46		0.530		0.533		0.535		0.538		0.540		0.543		0.545		0.548		0.550		0.553		0.555		0.558
47		0.560		0.563		0.565		0.568		0.570		0.573		0.575		0.578		0.580		0.583		0.585		0.588
48		0.590		0.593		0.595		0.598		0.600		0.603		0.605		0.608		0.610		0.613		0.615		0.618
49		0.620		0.623		0.625		0.628		0.630		0.633		0.635		0.638		0.640		0.643		0.645		0.648
50		0.650		0.653		0.655		0.658		0.660		0.663		0.665		0.668		0.670		0.673		0.675		0.678
51		0.680		0.683		0.685		0.688		0.690		0.693		0.695		0.698		0.700		0.703		0.705		0.708
52		0.710		0.713		0.715		0.718		0.720		0.723		0.725		0.728		0.730		0.733		0.735		0.738
53		0.740		0.743		0.745		0.748		0.750		0.753		0.755		0.758		0.760		0.763		0.765		0.768
54		0.770		0.773		0.775		0.778		0.780		0.783		0.785		0.788		0.790		0.793		0.795		0.798
55		0.800		0.803		0.807		0.810		0.813		0.817		0.820		0.823		0.827		0.830		0.833		0.837
56		0.840		0.843		0.847		0.850		0.853		0.857		0.860		0.863		0.867		0.870		0.873		0.877
57		0.880		0.883		0.887		0.890		0.893		0.897		0.900		0.903		0.907		0.910		0.913		0.917
58		0.920		0.923		0.927		0.930		0.933		0.937		0.940		0.943		0.947		0.950		0.953		0.957
59		0.960		0.963		0.967		0.970		0.973		0.977		0.980		0.983		0.987		0.990		0.993		0.997
60		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000
61		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000
62		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000
63		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000
64		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000
65		1.000

Table III (B)

APPENDIX E

3% EARLY RETIREMENT FACTORS UNREDUCED AGE 60

AGE	0		1		2		3		4		5		6		7		8		9		10		11
20		0.250		0.251		0.252		0.253		0.253		0.254		0.255		0.256		0.257		0.258		0.258		0.259
21		0.260		0.261		0.262		0.263		0.263		0.264		0.265		0.266		0.267		0.268		0.268		0.269
22		0.270		0.271		0.272		0.273		0.273		0.274		0.275		0.276		0.277		0.278		0.278		0.279
23		0.280		0.281		0.282		0.283		0.283		0.284		0.285		0.286		0.287		0.288		0.288		0.289
24		0.290		0.291		0.292		0.293		0.293		0.294		0.295		0.296		0.297		0.298		0.298		0.299
25		0.300		0.301		0.302		0.303		0.303		0.304		0.305		0.306		0.307		0.308		0.308		0.309
26		0.310		0.311		0.312		0.313		0.313		0.314		0.315		0.316		0.317		0.318		0.318		0.319
27		0.320		0.321		0.322		0.323		0.323		0.324		0.325		0.326		0.327		0.328		0.328		0.329
28		0.330		0.331		0.332		0.333		0.333		0.334		0.335		0.336		0.337		0.338		0.338		0.339
29		0.340		0.341		0.342		0.343		0.343		0.344		0.345		0.346		0.347		0.348		0.348		0.349
30		0.350		0.351		0.352		0.353		0.353		0.354		0.355		0.356		0.357		0.358		0.358		0.359
31		0.360		0.361		0.362		0.363		0.363		0.364		0.365		0.366		0.367		0.368		0.368		0.369
32		0.370		0.371		0.372		0.373		0.373		0.374		0.375		0.376		0.377		0.378		0.378		0.379
33		0.380		0.381		0.382		0.383		0.383		0.384		0.385		0.386		0.387		0.388		0.388		0.389
34		0.390		0.391		0.392		0.393		0.393		0.394		0.395		0.396		0.397		0.398		0.398		0.399
35		0.400		0.401		0.402		0.403		0.403		0.404		0.405		0.406		0.407		0.408		0.408		0.409
36		0.410		0.411		0.412		0.413		0.413		0.414		0.415		0.416		0.417		0.418		0.418		0.419
37		0.420		0.421		0.422		0.423		0.423		0.424		0.425		0.426		0.427		0.428		0.428		0.429
38		0.430		0.431		0.432		0.433		0.433		0.434		0.435		0.436		0.437		0.438		0.438		0.439
39		0.440		0.441		0.442		0.443		0.443		0.444		0.445		0.446		0.447		0.448		0.448		0.449
40		0.450		0.452		0.453		0.455		0.457		0.458		0.460		0.462		0.463		0.465		0.467		0.468
41		0.470		0.472		0.473		0.475		0.477		0.478		0.480		0.482		0.483		0.485		0.487		0.488
42		0.490		0.492		0.493		0.495		0.497		0.498		0.500		0.502		0.503		0.505		0.507		0.508
43		0.510		0.512		0.513		0.515		0.517		0.518		0.520		0.522		0.523		0.525		0.527		0.528
44		0.530		0.532		0.533		0.535		0.537		0.538		0.540		0.542		0.543		0.545		0.547		0.548
45		0.550		0.552		0.555		0.558		0.560		0.563		0.565		0.567		0.570		0.573		0.575		0.578
46		0.580		0.582		0.585		0.588		0.590		0.593		0.595		0.597		0.600		0.603		0.605		0.608
47		0.610		0.612		0.615		0.618		0.620		0.623		0.625		0.627		0.630		0.633		0.635		0.638
48		0.640		0.642		0.645		0.648		0.650		0.653		0.655		0.657		0.660		0.663		0.665		0.668
49		0.670		0.672		0.675		0.678		0.680		0.683		0.685		0.687		0.690		0.693		0.695		0.698
50		0.700		0.702		0.705		0.708		0.710		0.713		0.715		0.717		0.720		0.723		0.725		0.728
51		0.730		0.732		0.735		0.738		0.740		0.743		0.745		0.747		0.750		0.753		0.755		0.758
52		0.760		0.762		0.765		0.768		0.770		0.773		0.775		0.777		0.780		0.783		0.785		0.788
53		0.790		0.792		0.795		0.798		0.800		0.803		0.805		0.807		0.810		0.813		0.815		0.818
54		0.820		0.822		0.825		0.828		0.830		0.833		0.835		0.837		0.840		0.843		0.845		0.848
55		0.850		0.852		0.855		0.858		0.860		0.863		0.865		0.867		0.870		0.873		0.875		0.878
56		0.880		0.882		0.885		0.888		0.890		0.893		0.895		0.897		0.900		0.903		0.905		0.908
57		0.910		0.912		0.915		0.918		0.920		0.923		0.925		0.927		0.930		0.933		0.935		0.938
58		0.940		0.942		0.945		0.948		0.950		0.953		0.955		0.957		0.960		0.963		0.965		0.968
59		0.970		0.972		0.975		0.978		0.980		0.983		0.985		0.987		0.990		0.993		0.995		0.998
60		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000
61		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000
62		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000
63		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000
64		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000
65		1.000

Table III (C)

APPENDIX E

R/70 & R/80 EARLY RETIREMENT FACTORS UNREDUCED AGE 60

AGE	0		1		2		3		4		5		6		7		8		9		10		11
45		0.775		0.776		0.778		0.779		0.780		0.781		0.783		0.784		0.785		0.786		0.788		0.789
46		0.790		0.791		0.793		0.794		0.795		0.796		0.798		0.799		0.800		0.801		0.803		0.804
47		0.805		0.806		0.808		0.809		0.810		0.811		0.813		0.814		0.815		0.816		0.818		0.819
48		0.820		0.821		0.823		0.824		0.825		0.826		0.828		0.829		0.830		0.831		0.833		0.834
49		0.835		0.836		0.838		0.839		0.840		0.841		0.843		0.844		0.845		0.846		0.848		0.849
50		0.850		0.851		0.853		0.854		0.855		0.856		0.858		0.859		0.860		0.861		0.863		0.864
51		0.865		0.866		0.868		0.869		0.870		0.871		0.873		0.874		0.875		0.876		0.878		0.879
52		0.880		0.881		0.883		0.884		0.885		0.886		0.888		0.889		0.890		0.891		0.893		0.894
53		0.895		0.896		0.898		0.899		0.900		0.901		0.903		0.904		0.905		0.906		0.908		0.909
54		0.910		0.911		0.913		0.914		0.915		0.916		0.918		0.919		0.920		0.921		0.923		0.924
55		0.925		0.926		0.928		0.929		0.930		0.931		0.933		0.934		0.935		0.936		0.938		0.939
56		0.940		0.941		0.943		0.944		0.945		0.946		0.948		0.949		0.950		0.951		0.953		0.954
57		0.955		0.956		0.958		0.959		0.960		0.961		0.963		0.964		0.965		0.966		0.968		0.969
58		0.970		0.971		0.973		0.974		0.975		0.976		0.978		0.979		0.980		0.981		0.983		0.984
59		0.985		0.986		0.988		0.989		0.990		0.991		0.993		0.994		0.995		0.996		0.998		0.999
60		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000
61		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000
62		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000
63		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000
64		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000
65		1.000

1/15 1/30 EARLY RETIREMENT FACTORS Appendix E Table IV

AGE	0		1		2		3		4		5		6		7		8		9		10		11
20		0.004		0.004		0.004		0.004		0.004		0.004		0.005		0.005		0.005		0.005		0.005		0.005
21		0.005		0.005		0.005		0.005		0.005		0.005		0.006		0.006		0.006		0.006		0.006		0.006
22		0.006		0.006		0.006		0.006		0.006		0.006		0.007		0.007		0.007		0.007		0.007		0.007
23		0.007		0.007		0.007		0.007		0.007		0.007		0.008		0.008		0.008		0.008		0.008		0.008
24		0.008		0.008		0.008		0.008		0.008		0.008		0.009		0.009		0.009		0.009		0.009		0.009
25		0.009		0.009		0.009		0.009		0.009		0.009		0.010		0.010		0.010		0.010		0.010		0.010
26		0.010		0.011		0.012		0.013		0.013		0.014		0.015		0.016		0.017		0.018		0.018		0.019
27		0.020		0.021		0.022		0.023		0.023		0.024		0.025		0.026		0.027		0.028		0.028		0.029
28		0.030		0.031		0.032		0.033		0.033		0.034		0.035		0.036		0.037		0.038		0.038		0.039
29		0.040		0.041		0.042		0.043		0.043		0.044		0.045		0.046		0.047		0.048		0.048		0.049
30		0.050		0.051		0.052		0.053		0.053		0.054		0.055		0.056		0.057		0.058		0.058		0.059
31		0.060		0.061		0.062		0.063		0.063		0.064		0.065		0.066		0.067		0.068		0.068		0.069
32		0.070		0.071		0.072		0.073		0.073		0.074		0.075		0.076		0.077		0.078		0.078		0.079
33		0.080		0.081		0.082		0.083		0.083		0.084		0.085		0.086		0.087		0.088		0.088		0.089
34		0.090		0.091		0.092		0.093		0.093		0.094		0.095		0.096		0.097		0.098		0.098		0.099
35		0.100		0.101		0.102		0.103		0.103		0.104		0.105		0.106		0.107		0.108		0.108		0.109
36		0.110		0.111		0.112		0.113		0.113		0.114		0.115		0.116		0.117		0.118		0.118		0.119
37		0.120		0.121		0.122		0.123		0.123		0.124		0.125		0.126		0.127		0.128		0.128		0.129
38		0.130		0.131		0.132		0.133		0.133		0.134		0.135		0.136		0.137		0.138		0.138		0.139
39		0.140		0.141		0.142		0.143		0.143		0.144		0.145		0.146		0.147		0.148		0.148		0.149
40		0.150		0.151		0.152		0.153		0.153		0.154		0.155		0.156		0.157		0.158		0.158		0.159
41		0.160		0.161		0.162		0.163		0.163		0.164		0.165		0.166		0.167		0.168		0.168		0.169
42		0.170		0.171		0.172		0.173		0.173		0.174		0.175		0.176		0.177		0.178		0.178		0.179
43		0.180		0.181		0.182		0.183		0.183		0.184		0.185		0.186		0.187		0.188		0.188		0.189
44		0.190		0.191		0.192		0.193		0.193		0.194		0.195		0.196		0.197		0.198		0.198		0.199
45		0.200		0.203		0.205		0.208		0.210		0.213		0.215		0.218		0.220		0.223		0.225		0.228
46		0.230		0.233		0.235		0.238		0.240		0.243		0.245		0.248		0.250		0.253		0.255		0.258
47		0.260		0.263		0.265		0.268		0.270		0.273		0.275		0.278		0.280		0.283		0.285		0.288
48		0.290		0.293		0.295		0.298		0.300		0.303		0.305		0.308		0.310		0.313		0.315		0.318
49		0.320		0.323		0.325		0.328		0.330		0.333		0.335		0.338		0.340		0.343		0.345		0.348
50		0.350		0.353		0.355		0.358		0.360		0.363		0.365		0.368		0.370		0.373		0.375		0.378
51		0.380		0.383		0.385		0.388		0.390		0.393		0.395		0.398		0.400		0.403		0.405		0.408
52		0.410		0.413		0.415		0.418		0.420		0.423		0.425		0.428		0.430		0.433		0.435		0.438
53		0.440		0.443		0.445		0.448		0.450		0.453		0.455		0.458		0.460		0.463		0.465		0.468
54		0.470		0.473		0.475		0.478		0.480		0.483		0.485		0.488		0.490		0.493		0.495		0.498
55		0.500		0.503		0.506		0.508		0.511		0.514		0.517		0.519		0.522		0.525		0.528		0.530
56		0.533		0.536		0.539		0.542		0.544		0.547		0.550		0.553		0.556		0.559		0.561		0.564
57		0.567		0.570		0.573		0.575		0.578		0.581		0.584		0.586		0.589		0.592		0.595		0.597
58		0.600		0.603		0.606		0.608		0.611		0.614		0.617		0.619		0.622		0.625		0.628		0.630
59		0.633		0.636		0.639		0.642		0.644		0.647		0.650		0.653		0.656		0.659		0.661		0.664
60		0.667		0.673		0.678		0.684		0.689		0.695		0.700		0.706		0.711		0.717		0.722		0.728
61		0.733		0.739		0.744		0.750		0.755		0.761		0.767		0.772		0.778		0.783		0.789		0.794
62		0.800		0.805		0.811		0.817		0.822		0.828		0.834		0.839		0.845		0.850		0.856		0.851
63		0.867		0.873		0.878		0.884		0.889		0.895		0.900		0.906		0.911		0.917		0.922		0.928
64		0.933		0.939		0.944		0.950		0.955		0.961		0.967		0.972		0.978		0.983		0.989		0.994
65		1.000

Appendix F

100% J&S W/O 10 YEAR CERTAIN
1998 GBB89 ASSUMPTIONS

AGE	OPTION 4
19		0.990	%
20		0.990
21		0.989
22		0.988
23		0.987
24		0.986
25		0.985
26		0.984
27		0.983
28		0.982
29		0.981
30		0.980
31		0.979
32		0.978
33		0.977
34		0.976
35		0.975
36		0.973
37		0.971
38		0.969
39		0.967
40		0.965
41		0.963
42		0.961
43		0.959
44		0.957
45		0.955
46		0.952
47		0.949
48		0.946
49		0.943
50		0.940
51		0.936
52		0.932
53		0.928
54		0.924
55		0.920
56		0.915
57		0.910
58		0.905
59		0.900
60		0.895
61		0.889
62		0.883
63		0.877
64		0.871
65		0.865
FACTOR B		0.5	%
MAXIMUM		0.99	%

WHEN THE MEMBER AND CA AGES DIFFER:

ADD FACTOR B FOR EACH YEAR THE CA IS OLDER THAN THE MEMBER

SUBTRACT FACTOR B FOR EACH YEAR THE CA IS YOUNGER THAN THE MEMBER

Appendix F

100% J&S W/O 10 YEAR CERTAIN
1998 GBB89 ASSUMPTIONS

AGE	OPTION 4
66		0.859
67		0.853
68		0.847
69		0.841
70		0.835
71		0.829
72		0.823
73		0.817
74		0.811
75		0.805
76		0.800
77		0.795
78		0.790
79		0.785
80		0.780
81		0.776
82		0.772
83		0.768
84		0.764
85		0.760
86		0.756
87		0.752
88		0.748
89		0.744
90		0.740
FACTOR B		0.5	%
MAXIMUM		0.99	%

WHEN THE MEMBER AND CA AGES DIFFER:

ADD FACTOR B FOR EACH YEAR THE CA IS OLDER THAN THE MEMBER

SUBTRACT FACTOR B FOR EACH YEAR THE CA IS YOUNGER THAN THE MEMBER

PENTEGRA RETIREMENT SERVICES

For employees who have attained age 50 and completed
5 years of vesting service as of July 1, 2008

Summary Plan Description

Pentegra Defined

Benefit Plan for

Financial Institutions

as adopted by:

FEDERAL HOME LOAN BANK OF NEW YORK

For employees who have attained age 50 and completed
5 years of vesting service as of July 1, 2008

SUMMARY PLAN DESCRIPTION
for
FEDERAL HOME LOAN BANK OF NEW YORK
New York, New York

July 1, 2008

PENTEGRA DEFINED BENEFIT PLAN FOR
FINANCIAL INSTITUTIONS
108 Corporate Park Drive
White Plains, NY 10604

For employees who have attained age 50 and completed
5 years of vesting service as of July 1, 2008

TO OUR MEMBERS:

We are pleased to present your Summary Plan Description. This Summary has been prepared to help you understand the retirement plan which is provided by your employer through its participation in the Pentegra Defined Benefit Plan for Financial Institutions (formerly known as the Financial Institutions Retirement Fund) (the “Pentegra DB Plan”).

The Pentegra DB Plan is a large, non-profit, tax-exempt pension trust which was created in 1943. It is administered by a professional staff under the direction of a Board of Directors comprised of presidents of Federal Home Loan Banks and officers of various participating employers.

The Pentegra DB Plan enables financial institutions and other organizations serving them to provide for the security of their employees. It invests the contributions made to it and, under its Comprehensive Retirement Program (a defined benefit pension Plan), it pays out retirement, disability and death benefits.

This Summary highlights the main benefit features of your retirement plan. The Pentegra DB Plan Regulations contain the governing provisions and should be consulted as official text in all cases. If there is any conflict between this Summary Plan Description and the Pentegra DB Plan’s Regulations, the Pentegra DB Plan’s Regulations will control. Either your employer or the Pentegra DB Plan will provide you with a copy of the Regulations at your request.

Finally, please note that wherever the masculine pronoun is used in this Summary, it is intended to include the feminine pronoun.

Board of Directors

Pentegra Defined Benefit Plan for

Financial Institutions

For employees who have attained age 50 and completed
5 years of vesting service as of July 1, 2008

TABLE OF CONTENTS

	Page
Employee Eligibility		1
Service and Salary		2
- Benefit Service		2
- Vesting Service		2
- Salary		2
Vesting		3
Retirement Benefits		4
- General		4
- Normal Retirement		4
- Late Retirement		4
- Early Retirement		5
- Disability Retirement		7
- Retirement Adjustment Payment		8
- Post-Retirement Increments		8
Death Benefit		9
- Death Benefit in Active Service		9
- Death Benefit in Retirement		9
Optional Forms of Retirement Benefit		10
- Direct Rollovers		10
Paying for Your Benefits		11
Your Personal Annual Statement		11
Reinstatement of Membership and Service		12
Leaves of Absence		13
Limitations on Benefits		14
Insurance of Benefits		15
Disputed Claims Procedure		15
Qualified Domestic Relations Orders (“QDROs”)		16
Statement of ERISA Rights		17
Other Plan Information		19

For employees who have attained age 50 and completed
5 years of vesting service as of July 1, 2008

EMPLOYEE ELIGIBILITY

Each employee must become a Member when eligible and will be enrolled by his employer at that time. An employee will be eligible for membership in the Comprehensive Retirement Program on the first day of the month following satisfaction of his employer’s waiting period, if any. Your employer’s current waiting period for new employees is:

Four (4) months of service

If an employee is expected to complete 1,000 hours of service in the 12 consecutive months following his enrollment date, he will be enrolled as an active Member and, as such, will be entitled to all the benefits described in this Summary. If the employee is not expected to complete 1,000 hours of service in this 12 consecutive month period, he will be enrolled as an inactive Member and, as such, will not accrue or be entitled to any retirement or death benefits (see Article X, Section 3 of the Regulations). Subsequently, the Member will be active or inactive depending on whether or not he completes 1,000 hours of service in each calendar year.

In counting hours, an employee will be credited with an hour of service for every hour for which he has a right to be paid. This includes vacation, sick leave, jury duty, etc., and any hours for which back pay may be due.

NOTE: Regardless of the above, an employee will not be eligible for membership while he is in a class of employees which his employer has obtained permission to exclude (see Article II, Section 2 of the Regulations). Any such classes which your employer now excludes are listed directly below. (If none are listed, this Note may be disregarded.)

1

For employees who have attained age 50 and completed
5 years of vesting service as of July 1, 2008

SERVICE AND SALARY

Your benefits are based on your benefit service and salary. The period of benefit service is the number of years and months of employment upon which benefits are determined under the Plan.

Benefit Service includes:

Prior Service — any or all employment prior to the date your employer joined the Pentegra DB Plan for which your employer has purchased credit.

plus

Membership Service (or future service) — period of employment as an active Member from enrollment to retirement, death or other termination.

For example, suppose a person joined his employer at age 35. Then 10 years later, when he was 45, his employer joined the Pentegra DB Plan and purchased credit for his 10 years of prior service. After 20 years of membership service he will reach retirement age 65. Altogether he will then have 30 years of benefit service:

Prior Service	+	Membership Service	=	Benefit Service
10 Years	+	20 Years	=	30 Years

The easy way to approximate how much benefit service you would have upon retirement at age 65 is to subtract from 65 whatever age you were when your benefit service began.

Vesting Service is the period used to determine whether or not an employee is vested and eligible for early retirement. Vesting is measured from the first day of the month in which you were employed. (Refer to Page 3 describing Vesting.)

Salary is your basic annual salary rate, plus overtime, bonuses, and commissions. Changes in your basic annual salary rate which occur during the calendar year are recognized. Salary also includes any pre-tax contributions to a Section 401(k) plan and, unless the employer elects otherwise, pre-tax contributions to a Section 125 cafeteria plan as well as Qualified Transportation Fringe benefits as defined under Section 132(f) of the Internal Revenue Code.

2

For employees who have attained age 50 and completed
5 years of vesting service as of July 1, 2008

VESTING

“Vested” means that you have a nonforfeitable right to a retirement benefit which you will not lose if you terminate your employment. A Member will become vested in accordance with the following schedule:

Completed Years	Vested
of Vesting Service	Percentage
Less than 2		0
2		20	%
3		40	%
4		60	%
5		100	%

Any Member who has reached age 65 is automatically 100% vested, regardless of the number of years of vesting service he has completed.

Any Member who terminates service after becoming fully or partially vested is entitled to receive a retirement benefit (see the “Retirement Benefits” section). If, for example, he is 100% vested upon termination of employment, he would be entitled to a retirement allowance at age 65 equal to 100% of the allowance accrued to his termination date. If he is 60% vested upon termination of employment, he would be entitled to a retirement allowance at age 65 equal to 60% of such accrued allowance. If he is not vested at termination, he will not be entitled to any retirement benefit.

NOTE: See Reinstatement of Membership and Service explained later.

3

For employees who have attained age 50 and completed
5 years of vesting service as of July 1, 2008

RETIREMENT BENEFITS

General:

The regular form of all retirement benefits provides a retirement allowance (see normal, early and disability retirement formulas) plus a retirement death benefit (explained later). Instead of choosing the regular form, you may select one of the optional forms as described in the “Optional Forms of Retirement Benefit” section of this Summary.

All retirement allowances are in addition to Social Security, and are payable in monthly installments for life. In addition, all retirement allowances must begin as of the April 1st of the calendar year following the later of (i) the calendar year in which you reach age 70¹/₂, or (ii) the calendar year in which you retire (“Required Beginning Date”). However, if you are a 5% owner, your Required Beginning Date is the April 1st of the calendar year following the calendar year in which you reach age 70¹/₂, even if you are still working.

Normal Retirement:

Upon termination of employment at or after age 65, you will be entitled to a normal retirement benefit. The formula for determining your normal retirement allowance is:

		Years of		High-3		Regular
		Benefit Service		Average		Annual
2.5%	X	(30 years maximum)	X	Salary	=	Allowance

Example: A Member had 30 years of Benefit Service at termination of employment and his average annual Salary for the three (3) consecutive years of highest Salary during Benefit Service (“High-3 Average Salary”) was $32,000. His annual retirement allowance would be determined as follows:

		Years of		High-3		Regular
		Benefit Service		Average		Annual
		(30 years maximum)		Salary		Allowance
2.5%	X	30 yrs. (=75%)	X	$ 32,000	=	$ 24,000

If you do not continue in your employer’s service after age 65, you may begin your normal retirement allowance as described above or you may defer commencement of your allowance until any time up to your Required Beginning Date, in which case your normal retirement allowance will be increased actuarially.

Late Retirement:

If you continue in employment beyond the Plan’s normal retirement age (65), you will receive a benefit determined under the employer’s benefit formula based on salary and benefit service earned beyond age 65 until actual termination of employment (regardless of age) without any increase for delayed payment. However, the benefit will not be less than the benefit you would have had at age (65) actuarially increased.

4

For employees who have attained age 50 and completed
5 years of vesting service as of July 1, 2008

Early Retirement:

If you leave your employer prior to age 65, after having become fully or partially vested (see Page 3), you will be entitled to an early retirement benefit. The retirement allowance payable at age 65 is equal to the vested amount of the normal retirement allowance accrued to your termination date.

Payment may begin as early as age 45, in which case the allowance otherwise payable at age 65 is reduced by applying an early retirement factor based on your age when payments begin (see below). Payment may also be deferred to any time up to your Required Beginning Date, in which case the retirement allowance payable at age 65 will be increased actuarially.

Rule of 70 Applies: If the sum of the Member’s age and years of vesting service at termination of employment is at least 70, his early retirement allowance will be the allowance payable at age 65, reduced by 1.5% for each year he is under age 65.

Example: A Member terminates employment at age 51 after 26 years of vesting service and 25 years of benefit service. His High-3 Average Salary over such a period is $28,000. His annual retirement allowance commencing at age 65 would be determined as follows:

		Years of		High-3		Regular
		Benefit Service		Average		Annual
		(30 years maximum)		Salary		Allowance
2.5%	X	25 yrs. (=62.5%)	X	$28,000	=	$17,500

Because the sum of the Member’s age and vesting service at termination is at least 70 (51 + 26 = 77), if the Member elects to have his retirement allowance begin immediately, the allowance payable at age 65 would be reduced as follows:

Regular					Regular Retirement
Retirement		Early Retirement			Allowance Payable
Allowance		Factor (Age 51)			Immediately (Age 51)
$17,500	X		79%	=	$13,825

NOTE: The reduction in the retirement allowance takes into account the likelihood that the allowance will be payable to a younger person for a longer period of time. The early retirement factor at age 51 is 79%. The other early retirement factors are:

Age When				Age When					Age When
Allowance				Allowance					Allowance
Begins	Factor			Begins		Factor			Begins		Factor
45		70.0	%		52		80.5	%		59		91.0	%
46		71.5	%		53		82.0	%		60		92.5	%
47		73.0	%		54		83.5	%		61		94.0	%
48		74.5	%		55		85.0	%		62		95.5	%
49		76.0	%		56		86.5	%		63		97.0	%
50		77.5	%		57		88.0	%		64		98.5	%
51		79.0	%		58		89.5	%		65		100.0	%

(Interpolation is made to the nearest month.)

5

For employees who have attained age 50 and completed
5 years of vesting service as of July 1, 2008

Rule of 70 Does Not Apply: If the sum of the Member’s age and years of vesting service at termination of employment does not add up to at least 70, his early retirement allowance will be the allowance payable at age 65, reduced by 3% for each year he is under age 65.

Example: A Member terminates employment at age 52 after 16 years of vesting service and 15 years of benefit service. His High-3 Average Salary over such period is $28,000. His annual retirement allowance commencing at age 65 would be determined as follows:

		Years of		High-3		Regular
		Benefit Service		Average		Annual
		(30 years maximum)		Salary		Allowance
2.5%	X	15 yrs. (=37.5%)	X	$28,000	=	$10,500

Because the sum of the Member’s age and vesting service at termination is less than 70 (52 + 16 = 68), if the Member elects to have his retirement allowance begin immediately, the allowance payable at age 65 would be reduced as follows:

Regular		Early		Regular Retirement
Retirement		Retirement		Allowance Payable
Allowance		Factor (Age 52)		Immediately (Age 52)
$10,500	X	61%	=	$6,405

NOTE: The reduction in allowance takes into account that the allowance to a younger person will probably be payable for a longer period of time. The early retirement factor at age 52 is 61%. The other early retirement factors are:

Age When				Age When					Age When
Allowance				Allowance					Allowance
Begins	Factor			Begins		Factor			Begins		Factor
45		40	%		52		61	%		59		82	%
46		43	%		53		64	%		60		85	%
47		46	%		54		67	%		61		88	%
48		49	%		55		70	%		62		91	%
49		52	%		56		73	%		63		94	%
50		55	%		57		76	%		64		97	%
51		58	%		58		79	%		65		100	%

(Interpolation is made to the nearest month.)

6

For employees who have attained age 50 and completed
5 years of vesting service as of July 1, 2008

Disability Retirement:

If, after completing one year of membership service or having been credited with five (5) years of benefit service (not counting service during a leave of absence) but before reaching age 65, you have to stop working because of a disability, you may be entitled to a disability retirement benefit. First, you must file an application with the Pentegra DB Plan within 13 months after the date you had to stop working. Second, you must satisfy either Test A or B below:

Test A — Certification by doctors designated by the Pentegra DB Plan that your disability (i) prevents you from doing the kind of work for which you are fitted or trained, and (ii) is expected to last at least 12 months from the date you had to stop working or to result in death.

or

Test B — Proof that you are eligible for disability insurance benefits under Title II of the Federal Social Security Act.

Generally, the annual disability retirement allowance payable immediately, and for as long as you are disabled, is the higher of (i) an amount equal to the normal retirement allowance accrued to your termination date, or (ii) 30% of average annual salary for the five (5) highest paid consecutive years of benefit service (“High-5 Average Salary”). However, it cannot be more than what your normal retirement allowance would have been if you had stayed in service to age 65.

You may be required to provide evidence as often as annually that you continue to be disabled.

NOTE: Notwithstanding the foregoing, if you are on a medical leave of absence which directly results in a subsequent disability, you may be entitled to a disability benefit.

7

For employees who have attained age 50 and completed
5 years of vesting service as of July 1, 2008

Retirement Adjustment Payment:

If you retire after age 55 (whether normal, early or disability retirement), you will be entitled to a one-time Retirement Adjustment Payment. Please note that under the provisions of the plan, you are deemed to be retired upon your termination of employment with a deferred vested benefit. The Retirement Adjustment Payment is a single lump sum equal to three months’ regular retirement allowance payable when your allowance begins.

To illustrate, the annual allowance upon normal retirement would be calculated as shown on Page 4. Assume the annual retirement allowance was $24,000, then in addition to such allowance, the Member would receive a Retirement Adjustment Payment as follows:

Regular								Retirement
Annual								Adjustment
Allowance								Payment
$24,000	+	12	=	$2000 (per month)	X	3	=	$6,000

NOTE: The Retirement Adjustment Payment only applies to Members enrolled in the Plan prior to July 1, 1983.

Post-Retirement Increments:

As a retiree, other than a disability retiree, who is receiving allowance payments, you will be entitled to a payment of 1% of your annual retirement allowance at the end of the calendar year in which you reach age 66. This is a cumulative increment so that the following year, when you are age 67, the payment will be 2%, then 3%, then 4%, etc. Such increasing payments will continue to be made as long as you live. For example:

Your	Increment			Annual		Incremental Payment
Age	Rate			Allowance		at Year-End
66		1	%	$	24,000	$	240
67		2	%	$	24,000	$	480
68		3	%	$	24,000	$	720

Your age is always measured at the end of the calendar year to determine your applicable rate.

NOTE: Each Post-Retirement Increment is based on the retirement allowance you actually receive. Similarly, it would continue in the same manner to your surviving contingent annuitant if you had elected such an optional form of retirement benefit (see Article VI of the Regulations) based on the contingent annuitant’s allowance.

8

For employees who have attained age 50 and completed
5 years of vesting service as of July 1, 2008

DEATH BENEFIT

In Active Service:

If a vested Member dies in active service, his beneficiary would be entitled to a lump sum death benefit equal to 100% of the Member’s last 12 months’ salary, plus an additional 10% of such salary for each year of benefit service until a maximum of 300% of such salary is reached for 20 or more years, plus a refund of his own contributions, if any, with interest.

Example: A Member dies after 15 years of benefit service and his last 12 months’ salary is $32,000. His beneficiary would get:

		Last 12 Months			Lump Sum
		Salary			Death Benefit
250% [(15/10=1.5)+1=2.5]	X	$	32,000	=	$80,000

Either the Member or beneficiary may elect to have his benefit or the retirement death benefit described below paid in the form of installments over a period of up to 10 years or a lifetime annuity. (See the Regulations for further explanation.)

If a Member dies after becoming eligible for early retirement, his beneficiary would receive the higher of (i) the active service death benefit described above, or (ii) the retirement death benefit described below (as if the Member had retired on the first day of the month in which he died).

In Retirement:

The regular form of all retirement benefits (normal, early or disability) includes not only a retirement allowance, but also a lump sum retirement death benefit which is 12 times the annual retirement allowance less the sum of such allowance payments made before death. Please note that this death benefit does not apply in the event you elect to receive your benefit under one of the “Optional Forms of Retirement Benefit” (see Page 10) in lieu of the regular form.

Example: A Member dies two (2) years after retirement. His regular annual retirement allowance was $10,000. The Member’s death benefit is illustrated below:

Annual				Initial Death			Allowance
Retirement				Benefit At			Payments			Lump Sum
Allowance				Retirement			For 2 Years			Death Benefit
$10,000	X	12	=	$	120,000	less	$	20,000	=	$100,000

All retirement allowances continue for life, even though under the regular form there would be no death benefit payable after 12 years.

NOTE: If a retiree should die before his allowance payments start (as in the case of an early or normal retiree with a deferred allowance), the death benefit would be 12 times the regular annual allowance which would have been payable had his allowance commenced as of the first day of the month in which he died.

9

For employees who have attained age 50 and completed
5 years of vesting service as of July 1, 2008

OPTIONAL FORMS OF RETIREMENT BENEFIT

At any time before your retirement allowance begins, you may elect to convert your regular retirement allowance and death benefit (described previously) to an optional form of benefit. The amount of each Option in which you are interested will be determined and communicated to you at retirement.

These Options are:

1 –	A higher allowance payable for life and no further benefit upon death.
2 –	A joint and survivor allowance which would continue at the rate of 100% to your contingent annuitant if he or she survives you. If both you and your contingent annuitant die before 120 monthly installments have been paid, the commuted value of such unpaid installments would be paid in a lump sum to your beneficiary.
3 –	A joint and survivor allowance which would continue at the rate of 50% to your contingent annuitant if he or she survives you.
4 –	A single lump sum settlement in lieu of any monthly allowance and death benefit. This Option may be elected if you retire after reaching age 59-1/2, or if you are an early retiree and defer commencement of your benefit until such age. The election of this Option requires the written consent of your spouse, if any.
5 –	A partial lump sum settlement equal to 25%, 50% or 75% of the total benefit and a monthly allowance for the remainder of the benefit which must commence at the time of the partial lump sum settlement. This Option may be elected if you retire after reaching age 59-1/2 or if you are an early retiree and defer commencement of your benefit until such age. The election of this Option requires written consent of your spouse, if any.

NOTE: The death benefit of a deceased retiree or Member who was eligible for early retirement, who (i) is survived by a spouse, and (ii) has not made any election with respect to his death benefit or retirement benefit, will be paid to the surviving spouse in an amount equal to a lifetime annuity of at least 50% of the retiree’s allowance as though he elected Option 3 above. This benefit may be paid in the form of a lump sum or in installments of equivalent value.

DIRECT ROLLOVERS

If you select payment option numbers 4 or 5 above, you may request that a direct rollover of all or a portion of the distribution be made to either an Individual Retirement Account (IRA) or another qualified plan, which is will to accept the transfer of assets and is permissible under the Pentegra DB Plan. A direct rollover will result in no tax being due until you withdraw the funds from the IRA or other qualified plan. Under certain circumstances, all or a portion of the amount to be distributed may not qualify for a direct rollover. For example, a distribution of less than $200 will not be eligible for a direct rollover. If you elect to receive the distribution, rather than request a direct rollover, then 20% of the distribution amount will be withheld for federal income tax purposes.

10

For employees who have attained age 50 and completed
5 years of vesting service as of July 1, 2008

PAYING FOR YOUR BENEFITS

All contributions made to the Plan on your behalf are actuarially determined. Your employer has elected to pay the full cost of your benefits. You, as an employee, do not contribute while on the “non-contributory basis.”

Special Note to any Member who has “Accumulated Contributions” with the Pentegra DB Plan:

If you made personal contributions to the Pentegra DB Plan while your present or previous employer was on the contributory basis and if those contributions have not been refunded to you, you are fully vested in the value of such contributions plus interest (“accumulated contributions”). This means that if you terminate employment, you may request a refund of such accumulated contributions. If you terminate before becoming fully or partially vested in a retirement benefit, the refund will be in lieu of all other benefits. If you terminate after becoming fully or partially vested in an early or normal retirement benefit (refer to Page 3 describing Vesting), the refund will be in lieu of that portion of your retirement benefit which is attributable to your accumulated contributions. The remaining portion, attributable to your employer’s contributions, will be payable as a reduced retirement benefit.

Your accumulated contributions will be shown on your Personal Annual Statement (see below).

YOUR PERSONAL ANNUAL STATEMENT
(Keeping You Informed)

Every year the Pentegra DB Plan prepares a Personal Annual Statement for each Member. This statement shows as of each January 1 your periods of accrued vesting and benefit service and the status of your retirement and death benefits. These statements are sent to your employer for distribution in or about the following March.

11

For employees who have attained age 50 and completed
5 years of vesting service as of July 1, 2008

REINSTATEMENT OF MEMBERSHIP AND SERVICE

If you leave employment before becoming vested (see Page 3), but become reemployed by the same or another employer participating in this Program, you will be reenrolled immediately.

If the period of your break in service (i.e., the period between your termination and reemployment) was not longer than 60 months, your previous Vesting Service will be reinstated upon your reemployment. If your break in service was not longer than 12 consecutive months, your previous Vesting Service will be reinstated upon your reemployment. In addition, you will also receive Vesting Service credit for the period of your break. If the period of your break in service exceeded 60 months but was not longer than the period of your Vesting Service before becoming vested, your previous Vesting Service will be reinstated upon your reemployment. If the period of your break in service was equal to or exceeded the greater of 60 consecutive months or your previous Vesting Service, upon reemployment you will be treated as a new employee upon reemployment. In other words, no prior Vesting Service will be credited to you.

The following chart should assist you in understanding your options:

Length of Break in Service for a	Vesting Service Prior to the
Non-Vested Member	Break in Service	Period of the Break in Service
Less than 60 consecutive months	Will be reinstated upon a Member’s reemployment.	Credit will not be given for the period of break in service.
Less than 12 consecutive months	Will be reinstated upon a Member’s reemployment.	Credit will be given for the period of the break in service.
More than 60 consecutive months, but not more than total Vesting Service up to the break in service	Will be reinstated upon a Member’s reemployment.	Credit will not be given for the period of the break in service.
More than the greater of:	Will NOT be reinstated upon a Member’s reemployment.	Credit will not be given for the period of break in service.
a)  60 consecutive months; or
b)  Total Vesting Service prior to the break in service		Upon reemployment, the Member will be considered a new employee.

Upon reinstatement of your Vesting Service, your previous Benefit Service will also be reinstated if you repay within five years of your reemployment or the date you incurred a break in service of at least 60 months, any accumulated contributions which were refunded to you with interest to the date of such repayment.

For example, if you terminated service and had completed one year (i.e., 12 months) of Vesting Service, you would not be vested in a retirement benefit and would be entitled only to a refund of your own contributions, if any, plus interest. However, if you returned to service with any participating employer within 60 months, your previous Vesting Service would be reinstated and your previous Benefit Service would also be reinstated if you repaid with interest any contributions that had been refunded to you.

If you leave employment with a vested benefit, commence receiving benefits, and then are reemployed as an active Member by a participating employer, you will be reenrolled immediately and given the option, within six months following reemployment as an active Member, to make an irrevocable election to continue to receive the payment of your Retirement Allowance or to suspend the payment until subsequent termination of service. If no election is made, the payment of your Retirement Allowance will continue in the form of payment previously chosen. Upon your subsequent retirement, your retirement benefit will be based upon your Benefit Service before and after your prior retirement and your Salary during that service, but will be actuarially reduced for any such benefit already paid.

12

For employees who have attained age 50 and completed
5 years of vesting service as of July 1, 2008

LEAVES OF ABSENCE

There are four types of approved leaves of absence which may be granted on a uniform basis by your employer while you are a Plan Member.

Type 1.	Non-military leave granted to a Plan Member for up to one year. Both vesting and benefit service continue to accrue during this leave.
Type 1-A.	Military leave granted to a Plan Member who is subject to qualified military service pursuant to an involuntary military call-up in the Reserves of the U.S. Armed Services. During this leave, contributions continue, if any, to be made. In addition, vesting and benefit service continue to accrue. To qualify for benefits under Type 1-A, in general, a Member must return to the service of his employer within 90 days of his discharge from military service.
Type 2.	Non-military granted to a Plan Member for up to one year during which all contributions are discontinued. During this leave, vesting service continues to accrue, but benefit service does not. The accrual of benefit service will resume when your leave terminates and your contributions resume.
Type 3.	Military leave to a Plan Member during which all contributions are discontinued. During this leave, vesting service continues to accrue, but benefit service generally does not. The accrual of benefit service will resume when your leave terminates and your contributions resume.

The following Table will assist you in understanding the Plan’s Leave of Absence provisions as described above.

			Vesting	Benefit
Type of Leave	Duration	Contributions	Service	Service
NON-MILITARY LEAVE:
1	Up to one year	Will continue to be made	Will continue to accrue	Will continue to accrue
2	Up to one year	Will be discontinued	Will continue to accrue	Will not continue to accrue
MILITARY LEAVE:
1-A	Can vary	Will continue to be made	Will continue to accrue	Will continue to accrue
3	Can vary	Will be discontinued	Will continue to accrue	Will not continue to accrue

13

For employees who have attained age 50 and completed
5 years of vesting service as of July 1, 2008

LIMITATIONS ON BENEFITS

• No benefit is payable by the Pentegra DB Plan unless the required contributions and application forms have been received by the Plan.

• Internal Revenue Service (IRS) requirements impose certain limitations on the amount of benefits that may be paid under this and other qualified retirement plans. (See Article XI of the Pentegra DB Plan Regulations.) These limitations normally affect only the highest-paid employees and are subject to adjustment in accordance with IRS regulations. The dollar limit on annual benefits payable from a defined benefit plan is $195,000 in 2009 ($185,000 in 2008), actuarially reduced for benefits commencing before age 62 and increased for benefits commencing after age 65. If an employee has less than 10 years of vesting service or is under age 65 when he retires, or if his employer has two (2) plans in effect, his benefits are subject to further restrictions.

• The Pentegra DB Plan, by law, cannot recognize annual compensation in excess of a certain dollar limit. The limit for the 2009 limitation year is $245,000 ($230,000 for the 2008 limitation year). After 2009, the compensation dollar limit may be adjusted by the IRS.

• If an employer should withdraw from the Pentegra DB Plan (see Article XII of the Regulations), and establish a comparable defined benefit plan as a qualified successor plan, all liabilities of such employer under the Pentegra DB Plan must be transferred to the qualified successor plan. If an employer should withdraw from the Pentegra DB Plan without establishing a qualified successor Plan, all liabilities of the employer under the Pentegra DB Plan must be annuitized through an insurance company selected by the Pentegra DB Plan. Limits may be imposed upon the benefits of certain higher-paid employees if an employer withdraws from the Pentegra DB Plan within 10 years after the later of its commencement date or the effective date of any change which increases benefits. (See Article XI, Section 1(c) of the Regulations).

• Amounts payable by the Pentegra DB Plan may not be assigned, and if any person entitled to a payment attempts to assign it, his interest in the amount payable may be terminated and held for the benefit of that person or his dependents.

• Your employer’s continued participation is subject to IRS qualifications and other regulations it may impose.

• The limitations on benefits imposed by the IRS are subject to changes on an annual basis.

14

For employees who have attained age 50 and completed
5 years of vesting service as of July 1, 2008

INSURANCE OF BENEFITS

Benefits under the Plan are insured by the Pension Benefit Guaranty Corporation (PBGC) if the Pentegra DB Plan terminates. Generally, the PBGC guarantees most vested normal retirement age benefits, early retirement benefits, and certain disability and survivor pensions. However, the PBGC does not guarantee all types of benefits under covered plans, and the amount of benefit protection is subject to certain limitations.

The PBGC guarantees vested benefits at the level in effect on the date of Plan termination. However, if prior to the termination of a plan, the employer has been participating for less than five (5) years, or if benefits have been increased within the past five years, the whole amount of the vested benefits or the vested increase may not be guaranteed. In addition, there is a ceiling on the amount of monthly benefit the PBGC guarantees, which is adjusted periodically. A withdrawal of your employer from participation in the Pentegra DB Plan is not a plan termination under this paragraph, and only those benefits provided under Article XII of the Pentegra DB Plan Regulations are payable in the event of such a withdrawal.

For more information on the PBGC insurance protection and its limitations, ask the Plan Administrator or the PBGC. Inquiries to the PBGC should be addressed to the PBGC’s Technical Assistance Division, 1200 K Street N.W., Suite 930, Washington, D.C. 20005 — 4026 or call 202-326-4000 (not a toll free number). TTY/TTD users may call the federal relay service toll free at 1-800-877-8339 and ask to be connected to 202-326-4000. Additional information about the PBGC’s pension insurance program is available through the PBGC’s website on the Internet at http://www.pbgc.gov.

DISPUTED CLAIMS PROCEDURE

If you disagree with the Pentegra DB Plan with respect to any benefit to which you feel you are entitled, you should make a written claim to the President of the Pentegra DB Plan, who holds discretionary authority to approve or deny the claim. If your claim is denied, you will receive written notice from him explaining the reason for the denial within 90 days after the claim is filed, which sets forth, in an understandable manner, the following information:

• The specific reason(s) for the denial of the claim;

• Reference to the specific plan provision on which the denial is based;

• A description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why that material or information is necessary; and

• A description of the Plan’s review procedures and the time limits applicable to those procedures, including a statement of the claimant’s right to bring a civil action under ERISA Section 502(a) following a denial on review.

The President’s decision will be final unless you appeal such decision in writing to the Retirement Committee of the Board of Directors of the Pentegra DB Plan at 108 Corporate Park Drive, White Plains, New York 10604, within 60 days after receiving the notice of denial. The written appeal should contain all information you wish to be considered. The Retirement Committee will review the claim within 60 days after the appeal is made. Its decision will be in writing, and will include the reason for such decision. The Committee’s decision will be final. In the case of a decision on appeal upholding the President’s initial denial of the claim, the President’s notice of its decision on appeal shall set forth, in an understandable manner, the following information:

• The specific reason(s) for the decision on appeal;

• Reference to the specific Plan provision on which the decision on appeal is based;

• A statement that the claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant to the claim for benefits; and

• A statement describing any voluntary appeal procedures (including voluntary arbitration or any other form of dispute resolution) offered by the Plan and the claimant’s right to obtain information sufficient to enable you or your beneficiary to make an informed judgment about whether to submit a benefit dispute to the voluntary level of appeal, and a statement of the claimant’s right to bring an action under ERISA Section 502(a).

15

For employees who have attained age 50 and completed
5 years of vesting service as of July 1, 2008

QUALIFIED DOMESTIC RELATIONS ORDERS (“QDROS”)

A QDRO is a judgment, decree or order which has been determined by the Pentegra DB Plan, in accordance with the procedures established under the Pentegra DB Plan’s Regulations, to constitute a QDRO under the Internal Revenue Code.

To obtain copies of the Pentegra DB Plan’s Model QDRO and QDRO Procedures free of charge, please contact the Plan Administrator. (Please refer to the “Other Plan Information” section of this Summary to obtain the Plan Administrator’s address and telephone number).

16

For employees who have attained age 50 and completed
5 years of vesting service as of July 1, 2008

STATEMENT OF ERISA RIGHTS

As a Member in the Comprehensive Retirement Program, you are entitled to certain rights and protections under the Employee Retirement Income Security Act of 1974 (ERISA). ERISA provides that all Members will be entitled to:

Receive Information About Your Plan and Benefits

• Examine, without charge, at the Plan Administrator’s office or at other specified locations, all documents governing the Plan, and a copy of the latest annual report (Form 5500 Series) filed by the Plan Administrator with the U.S. Department of Labor and available at the Public Disclosure Room of the Employee Benefits Security Administration.

• Obtain, upon written request to the Plan Administrator, copies of documents governing the operation of the Plan and copies of the latest annual report (Form 5500 Series) and updated summary plan description. The Administrator may make a reasonable charge for the copies.

• Receive a summary of the Plan’s annual financial report. The Plan Administrator is required by law to furnish each Member with a copy of this summary annual report.

• Obtain, without charge, a statement telling you whether you have a vested right to receive a pension at normal retirement (age 65) and if so, what your benefits would be at that time if you stop working under the Plan now. If you do not have a vested right to a pension, the statement will tell you how many more years you have to work to get such a right. This type of statement is provided automatically to each Member once a year (see “Your Personal Annual Statement” as described earlier).

Prudent Actions by Plan Fiduciaries

In addition to creating rights for Plan Members, ERISA imposes duties upon the people who are responsible for the operation of the Plan. The people who operate your Plan, called “fiduciaries” of the Plan, have a duty to do so prudently and in the interest of you and other Plan Members and beneficiaries. No one, including your employer or any other person, may fire you or otherwise discriminate against you in any way to prevent you from obtaining a pension benefit or exercising your rights under ERISA.

Enforce Your Rights

If your claim for a pension benefit is denied in whole or in part, you have a right to know why this was done, to obtain copies of documents relating to the decision without charge, and to appeal any denial, all within certain time schedules.

Under ERISA, there are steps you can take to enforce the above rights. For instance, if you request a copy of plan documents or the latest annual report from the Plan Administrator and do not receive them within 30 days, you may file suit in a Federal court. In such a case, the court may require the Plan Administrator to provide the materials and pay you up to $110 a day until you receive them, unless such materials were not sent for reasons beyond the Plan Administrator’s control. If you have a claim for benefits which is denied or ignored, in whole or in part, you may file suit in a state or Federal court.

In addition, if you disagree with the Plan Administrator’s decision (or lack thereof) concerning the qualified status of a domestic relations order, after you have complied with the remedies prescribed in the Plan’s QDRO Procedures and Disputed Claims Procedure outlined in this summary plan description, you may file suit in Federal court.

If it should happen that Plan fiduciaries misuse the Plan’s money, or if you are discriminated against for asserting your rights, you may seek assistance from the U. S. Department of Labor or, after you have complied with the Plan’s “Disputed Claims Procedure” outlined in this summary plan description, you may file suit in a Federal court. The court will decide who should pay court costs and legal fees. If you are successful, the court may order the person you have sued to pay these costs and fees. If you lose, the court may order you to pay these costs and fees (for example, if it finds your claim is frivolous).

17

For employees who have attained age 50 and completed
5 years of vesting service as of July 1, 2008

Assistance with Your Questions

If you have any questions about your Plan, you should contact the Plan Administrator. If you have any questions about this statement or your rights under ERISA, or if you need assistance in obtaining documents from the Plan Administrator, you should contact the nearest office of the Employee Benefits Security Administration, U.S. Department of Labor, listed in your telephone directory or the Division of Technical Assistance and Inquiries; Employee Benefits Security Administration, U.S. Department of Labor, 200 Constitution Avenue, N. W. Washington, D.C. 20210. You may also obtain certain publications about your rights and responsibilities under ERISA by calling the publications hotline of the Employee Benefits Security Administration.

This Statement of ERISA Rights is required by Federal law and regulations.

18

For employees who have attained age 50 and completed
5 years of vesting service as of July 1, 2008

OTHER PLAN INFORMATION

Plan Name:

Pentegra Defined Benefit Plan for Financial Institutions as adopted by
Federal Home Loan Bank of New York

Employer:

Federal Home Loan Bank of New York
101 Park Avenue
New York, NY 10178-0599

Telephone Number – 212-681-6000

Plan Sponsor:

The Comprehensive Retirement Program is sponsored by the –

Pentegra Defined Benefit Plan for Financial Institutions
108 Corporate Park Drive
White Plains, New York 10604
Telephone Number – 914-694-1300

Employer Identification Number – 13-5645888
Plan Number – 001
Plan Year End – June 30

Plan Administrator:

The Plan Administrator is the President of the Pentegra DB Plan, whose place of business is the office of the Pentegra Defined Benefit Plan for Financial Institutions. The President is also the person designated as agent for service of legal process. Service of legal process may also be made upon a Plan Trustee.

Board of Directors:

The composition of the Board changes from year to year, but you may refer to the most recent Annual Report (which is furnished to your employer) for a current listing of Directors and their places of business.

Participating Employers:

Upon receipt of a written request for information regarding whether a particular employer is a Member of this multiple employer arrangement, we will provide you with a statement as to whether such employer is a Member and, if so, the employer’s address.

19

		Pentegra Retirement Services
	Our difference is your advantage	108 Corporate Park Drive White Plains, NY 10604 (800) 872-3473
		www.pentegra.com

PENTEGRA  RETIREMENT  SERVICES

For Employees vested on or after July 1, 2008

Summary Plan Description

Pentegra Defined

Benefit Plan for

Financial Institutions

as adopted by:

FEDERAL HOME LOAN BANK OF NEW YORK

For Employees vested on or after July 1, 2008

SUMMARY PLAN DESCRIPTION
for
FEDERAL HOME LOAN BANK OF NEW YORK
New York, New York

July 1, 2008

PENTEGRA DEFINED BENEFIT PLAN FOR
FINANCIAL INSTITUTIONS
108 Corporate Park Drive
White Plains, NY 10604

For Employees vested on or after July 1, 2008

TO OUR MEMBERS:

We are pleased to present your Summary Plan Description. This Summary has been prepared to help you understand the retirement plan which is provided by your employer through its participation in the Pentegra Defined Benefit Plan for Financial Institutions (formerly known as the Financial Institutions Retirement Fund) (the “Pentegra DB Plan”).

The Pentegra DB Plan is a large, non-profit, tax-exempt pension trust which was created in 1943. It is administered by a professional staff under the direction of a Board of Directors comprised of presidents of Federal Home Loan Banks and officers of various participating employers.

The Pentegra DB Plan enables financial institutions and other organizations serving them to provide for the security of their employees. It invests the contributions made to it and, under its Comprehensive Retirement Program (a defined benefit pension Plan), it pays out retirement, disability and death benefits.

This Summary highlights the main benefit features of your retirement plan. The Pentegra DB Plan Regulations contain the governing provisions and should be consulted as official text in all cases. If there is any conflict between this Summary Plan Description and the Pentegra DB Plan’s Regulations, the Pentegra DB Plan’s Regulations will control. Either your employer or the Pentegra DB Plan will provide you with a copy of the Regulations at your request.

Finally, please note that wherever the masculine pronoun is used in this Summary, it is intended to include the feminine pronoun.

Board of Directors

Pentegra Defined Benefit Plan for

Financial Institutions

For Employees vested on or after July 1, 2008

TABLE OF CONTENTS

	Page
Employee Eligibility		1
Service and Salary		2
- Benefit Service		2
- Vesting Service		2
- Salary		2
Vesting		3
Retirement Benefits		4
- General		4
- Normal Retirement		4
- Late Retirement		4
- Early Retirement		5
- Disability Retirement		7
Death Benefit		8
- Death Benefit in Active Service		8
Optional Forms of Retirement Benefit		9
- Direct Rollovers		9
Paying for Your Benefits		10
Your Personal Annual Statement		10
Reinstatement of Membership and Service		11
Leaves of Absence		12
Limitations on Benefits		13
Insurance of Benefits		14
Disputed Claims Procedure		14
Qualified Domestic Relations Orders (“QDROs”)		15
Statement of ERISA Rights		16
Other Plan Information		18

For Employees vested on or after July 1, 2008

EMPLOYEE ELIGIBILITY

Each employee must become a Member when eligible and will be enrolled by his employer at that time. An employee will be eligible for membership in the Comprehensive Retirement Program on the first day of the month following satisfaction of his employer’s waiting period, if any. Your employer’s current waiting period for new employees is:

Four (4) months of service

If an employee is expected to complete 1,000 hours of service in the 12 consecutive months following his enrollment date, he will be enrolled as an active Member and, as such, will be entitled to all the benefits described in this Summary. If the employee is not expected to complete 1,000 hours of service in this 12 consecutive month period, he will be enrolled as an inactive Member and, as such, will not accrue or be entitled to any retirement or death benefits (see Article X, Section 3 of the Regulations). Subsequently, the Member will be active or inactive depending on whether or not he completes 1,000 hours of service in each calendar year.

In counting hours, an employee will be credited with an hour of service for every hour for which he has a right to be paid. This includes vacation, sick leave, jury duty, etc., and any hours for which back pay may be due.

NOTE: Regardless of the above, an employee will not be eligible for membership while he is in a class of employees which his employer has obtained permission to exclude (see Article II, Section 2 of the Regulations). Any such classes which your employer now excludes are listed directly below. (If none are listed, this Note may be disregarded.)

1

For Employees vested on or after July 1, 2008

SERVICE AND SALARY

Your benefits are based on your benefit service and salary. The period of benefit service is the number of years and months of employment upon which benefits are determined under the Plan.

Benefit Service includes:

Prior Service — any or all employment prior to the date your employer joined the Pentegra DB Plan for which your employer has purchased credit.

plus

Membership Service (or future service) — period of employment as an active member from enrollment to retirement, death or other termination.

For example, suppose a person joined his employer at age 35. Then 10 years later, when he was 45, his employer joined the Pentegra DB Plan and purchased credit for his 10 years of prior service. After 20 years of membership service he will reach retirement age 65. Altogether he will then have 30 years of benefit service:

Prior Service	+	Membership Service	=	Benefit Service
10 Years	+	20 Years	=	30 Years

The easy way to approximate how much benefit service you would have upon retirement at age 65 is to subtract from 65 whatever age you were when your benefit service began.

Vesting Service is the period used to determine whether or not an employee is vested and eligible for early retirement. Vesting is measured from the first day of the month in which you were employed. (Refer to Page 3 describing Vesting.)

Salary is your basic annual salary rate, plus overtime and bonuses. Changes in your basic annual salary rate which occur during the calendar year are recognized. Salary also includes any pre-tax contributions to a Section 401(k) plan and, unless the employer elects otherwise, pre-tax contributions to a Section 125 cafeteria plan as well as Qualified Transportation Fringe benefits as defined under Section 132(f) of the Internal Revenue Code.

2

For Employees vested on or after July 1, 2008

VESTING

“Vested” means that you have a nonforfeitable right to a retirement benefit which you will not lose if you terminate your employment. A Member will become vested in accordance with the following schedule:

Completed Years	Vested
of Vesting Service	Percentage
Less than 5		0
5 or more		100	%

Any Member who has reached age 65 is automatically 100% vested, regardless of the number of years of vesting service he has completed.

Any Member who terminates service after becoming fully vested is entitled to receive a retirement benefit (see the “Retirement Benefits” section). If, for example, he is 100% vested upon termination of employment, he would be entitled to a retirement allowance at age 65 equal to 100% of the allowance accrued to his termination date. If he is not vested at termination, he will not be entitled to any retirement benefit.

NOTE: See Reinstatement of Membership and Service explained later.

3

For Employees vested on or after July 1, 2008

RETIREMENT BENEFITS

General:

The regular form of all retirement benefits provides a retirement allowance (see normal, early and disability retirement formulas) payable for life. Instead of choosing the regular form, you may select one of the optional forms as described in the “Optional Forms of Retirement Benefit” section of this Summary.

All retirement allowances are in addition to Social Security, and are payable in monthly installments for life. In addition, all retirement allowances must begin as of the April 1st of the calendar year following the later of (i) the calendar year in which you reach age 70¹/₂, or (ii) the calendar year in which you retire (“Required Beginning Date”). However, if you are a 5% owner, your Required Beginning Date is the April 1st of the calendar year following the calendar year in which you reach age 70¹/₂, even if you are still working.

Normal Retirement:

Upon termination of employment at or after age 65, you will be entitled to a normal retirement benefit. The formula for determining your normal retirement allowance is:

				High-5
		Years of Benefit Service		Average		Retirement
2.0%	X	(30 years maximum)	X	Salary	=	Allowance

NOTE: Your total years of benefit service cannot exceed 30 years.

Example: A Member hired on July 1, 2008 had 15 years of benefit service at termination of employment and his average annual salary for the five (5) consecutive years of highest salary during benefit service (“High 5 Average Salary”) was $27,000. His annual retirement allowance would be determined as follows:

				High-5
		Years of Benefit Service		Average		Retirement
		(30 years maximum)		Salary		Allowance
2.0%	X	15 yrs. (=30%)	X	$27,000	=	$8,100

If you do not continue in your employer’s service after age 65, you may begin your normal retirement allowance as described above or you may defer commencement of your allowance until any time up to your Required Beginning Date, in which case your normal retirement allowance will be increased actuarially.

Late Retirement:

If you continue in employment beyond the Plan’s normal retirement age (65), you will receive a benefit determined under the employer’s benefit formula based on salary and benefit service earned beyond age 65 until actual termination of employment (regardless of age) without any increase for delayed payment. However, the benefit will not be less than the benefit you would have had at age (65) actuarially increased.

4

For Employees vested on or after July 1, 2008

Early Retirement:

If you leave your employer prior to age 65, after having become fully or partially vested (see Page 3), you will be entitled to an early retirement benefit. The retirement allowance payable at age 65 is equal to the vested amount of the normal retirement allowance accrued to your termination date.

Payment may begin as early as age 45, in which case the allowance otherwise payable at age 65 is reduced by applying an early retirement factor based on your age when payments begin (see below). Payment may also be deferred to any time up to your Required Beginning Date, in which case the retirement allowance payable at age 65 will be increased actuarially.

Rule of 70 Applies: If the sum of the Member’s age and years of vesting service at termination of employment is at least 70, his early retirement allowance will be the allowance payable at age 65, reduced by 3.0% for each year he is under age 65.

Example: A Member terminates employment at age 61 after 26 years of vesting service and 25 years of benefit service. His High-5 Average Salary over such a period is $40,000. His annual retirement allowance commencing at age 65 would be determined as follows:

		Years of Benefit Service		High-5		Retirement
		(30 years maximum)		Average Salary		Allowance
2.0%	X	25 yrs. (=50%)	X	$40,000	=	$20,000

Because the sum of the Member’s age and vesting service at termination is at least 70 (61 + 26 = 87), if the Member elects to have his retirement allowance begin immediately, the allowance payable at age 65 would be reduced as follows:

Regular				Regular Retirement
Retirement		Early Retirement		Allowance Payable
Allowance		Factor (Age 61)		Immediately (Age 61)
$20,000	X	88%	=	$17,600

NOTE: The reduction in the retirement allowance takes into account the likelihood that the allowance will be payable to a younger person for a longer period of time. The early retirement factor at age 61 is 88%. The other early retirement factors are:

Age When				Age When					Age When
Allowance				Allowance					Allowance
Begins	Factor			Begins		Factor			Begins		Factor
45		40	%		52		61	%		59		82	%
46		43	%		53		64	%		60		85	%
47		46	%		54		67	%		61		88	%
48		49	%		55		70	%		62		91	%
49		52	%		56		73	%		63		94	%
50		55	%		57		76	%		64		97	%
51		58	%		58		79	%		65		100	%

(Interpolation is made to the nearest month.)

5

For Employees vested on or after July 1, 2008

Rule of 70 Does Not Apply: If the sum of the Member’s age and years of vesting service at termination of employment does not add up to at least 70, his early retirement allowance payable at age 65, reduced by an actuarial Equivalent Reduction factor for each year he is under age 65.

Example: A Member terminates employment at age 52 after 16 years of vesting service and 15 years of benefit service. His High-5 Average Salary over such a period is $40,000. His annual retirement allowance commencing at age 65 would be determined as follows:

				High-5		Retirement
		Years of Benefit Service		Average Salary		Allowance
2.0%	X	15 yrs. (=30%)	X	$40,000	=	$12,000

Because the sum of the Member’s age and vesting service at termination is less than 70 (52 + 16 = 68), if the Member elects to have his retirement allowance begin immediately, the allowance payable at age 65 would be reduced as follows:

Regular		Early		Regular Retirement
Retirement		Retirement		Allowance Payable
Allowance		Factor (Age 52)		Immediately (Age 52):
$12,000	X	41%	=	$4,920

The factor is calculated by subtracting 6% for each year between ages 60 and 65; 4% for each year between ages 55 and 59, and 3% for each year between ages 45 and 54, as noted in the following table:

Age When				Age When					Age When					Age When
Allowance				Allowance					Allowance					Allowance
Begins	Factor			Begins		Factor			Begins		Factor			Begins		Factor
45		20	%		50		35	%		55		50	%		60		70	%
46		23	%		51		38	%		56		54	%		61		76	%
47		26	%		52		41	%		57		58	%		62		82	%
48		29	%		53		44	%		58		62	%		63		88	%
49		32	%		54		47	%		59		66	%		64		94	%
															65		100	%

(Interpolation is made to the nearest month.)

6

For Employees vested on or after July 1, 2008

Disability Retirement:

If, after completing one year of membership service or having been credited with five (5) years of benefit service (not counting service during a leave of absence) but before reaching age 65, you have to stop working because of a disability, you may be entitled to a disability retirement benefit. First, you must file an application with the Pentegra DB Plan within 13 months after the date you had to stop working. Second, you must satisfy either Test A or B below:

Test A — Certification by doctors designated by the Pentegra DB Plan that your disability (i) prevents you from doing the kind of work for which you are fitted or trained, and (ii) is expected to last at least 12 months from the date you had to stop working or to result in death.

or

Test B — Proof that you are eligible for disability insurance benefits under Title II of the Federal Social Security Act.

Generally, the annual disability retirement allowance payable immediately, and for as long as you are disabled, is the higher of (i) an amount equal to the normal retirement allowance accrued to your termination date, or (ii) 30% of average annual salary for the five (5) highest paid consecutive years of benefit service (“High-5 Average Salary”). However, it cannot be more than what your normal retirement allowance would have been if you had stayed in service to age 65.

You may be required to provide evidence as often as annually that you continue to be disabled.

NOTE: Notwithstanding the foregoing, if you are on a medical leave of absence which directly results in a subsequent disability, you may be entitled to a disability benefit.

7

For Employees vested on or after July 1, 2008

DEATH BENEFIT

In Active Service:

If a vested Member dies in active service, his beneficiary would be entitled to a lump sum death benefit equal to 100% of the Member’s last 12 months’ salary, plus an additional 10% of such salary for each year of benefit service until a maximum of 300% of such salary is reached for 20 or more years, plus a refund of his own contributions, if any, with interest.

Example: A Member dies after 15 years of benefit service and his last 12 months’ salary is $32,000. His beneficiary would get:

		Last 12 Months		Lump Sum
		Salary		Death Benefit
250% [(15/10=1.5)+1=2.5]	X	$32,000	=	$80,000

Either the Member or beneficiary may elect to have his benefit or the retirement death benefit described below paid in the form of installments over a period of up to 10 years or a lifetime annuity. (See the Regulations for further explanation.)

8

For Employees vested on or after July 1, 2008

OPTIONAL FORMS OF RETIREMENT BENEFIT

At any time before your retirement allowance begins, you may elect to convert your regular retirement allowance (an allowance payable for your lifetime) to an optional form of benefit. The amount of each Option in which you are interested will be determined and communicated to you at retirement.

These Options are:

1 –	An allowance payable for life. If you die before 120 monthly installments have been paid, the commuted value of such unpaid installments would be paid in a lump sum to your beneficiary.
2 –	A joint and survivor allowance which would continue at the rate of 100% to your contingent annuitant if he or she survives you. If both you and your contingent annuitant die before 120 monthly installments have been paid, the commuted value of such unpaid installments would be paid in a lump sum to your beneficiary.
3 –	A joint and survivor allowance which would continue at the rate of 50% to your contingent annuitant if he or she survives you.
4 –	A single lump sum settlement in lieu of any monthly allowance and death benefit. This Option may be elected if you retire after reaching age 59-1/2, or if you are an early retiree and defer commencement of your benefit until such age. The election of this Option requires the written consent of your spouse, if any.
5 –	A partial lump sum settlement equal to 25%, 50% or 75% of the total benefit and a monthly allowance for the remainder of the benefit which must commence at the time of the partial lump sum settlement. This Option may be elected if you retire after reaching age 59-1/2 or if you are an early retiree and defer commencement of your benefit until such age. The election of this Option requires written consent of your spouse, if any.

NOTE: The death benefit of a deceased retiree or Member who was eligible for early retirement, who (i) is survived by a spouse, and (ii) has not made any election with respect to his death benefit or retirement benefit, will be paid to the surviving spouse in an amount equal to a lifetime annuity of at least 50% of the retiree’s allowance as though he elected Option 3 above. This benefit may be paid in the form of a lump sum or in installments of equivalent value.

DIRECT ROLLOVERS

If you select payment option numbers 6 or 7 above, you may request that a direct rollover of all or a portion of the distribution be made to either an Individual Retirement Account (IRA) or another qualified plan, which is will to accept the transfer of assets and is permissible under the Pentegra DB Plan. A direct rollover will result in no tax being due until you withdraw the funds from the IRA or other qualified plan. Under certain circumstances, all or a portion of the amount to be distributed may not qualify for a direct rollover. For example, a distribution of less than $200 will not be eligible for a direct rollover. If you elect to receive the distribution, rather than request a direct rollover, then 20% of the distribution amount will be withheld for federal income tax purposes.

9

For Employees vested on or after July 1, 2008

PAYING FOR YOUR BENEFITS

All contributions made to the Plan on your behalf are actuarially determined. Your employer has elected to pay the full cost of your benefits. You, as an employee, do not contribute while on the “non-contributory basis.”

Special Note to any Member who has “Accumulated Contributions” with the Pentegra DB Plan:

If you made personal contributions to the Pentegra DB Plan while your present or previous employer was on the contributory basis and if those contributions have not been refunded to you, you are fully vested in the value of such contributions plus interest (“accumulated contributions”). This means that if you terminate employment, you may request a refund of such accumulated contributions. If you terminate before becoming fully or partially vested in a retirement benefit, the refund will be in lieu of all other benefits. If you terminate after becoming fully or partially vested in an early or normal retirement benefit (refer to Page 3 describing Vesting), the refund will be in lieu of that portion of your retirement benefit which is attributable to your accumulated contributions. The remaining portion, attributable to your employer’s contributions, will be payable as a reduced retirement benefit.

Your accumulated contributions will be shown on your Personal Annual Statement (see below).

YOUR PERSONAL ANNUAL STATEMENT
(Keeping You Informed)

Every year the Pentegra DB Plan prepares a Personal Annual Statement for each Member. This statement shows as of each January 1 your periods of accrued vesting and benefit service and the status of your retirement and death benefits. These statements are sent to your employer for distribution in or about the following March.

10

For Employees vested on or after July 1, 2008

REINSTATEMENT OF MEMBERSHIP AND SERVICE

If you leave employment before becoming vested (see Page 3), but become reemployed by the same or another employer participating in this Program, you will be reenrolled immediately.

If the period of your break in service (i.e., the period between your termination and reemployment) was not longer than 60 months, your previous Vesting Service will be reinstated upon your reemployment. If your break in service was not longer than 12 consecutive months, your previous Vesting Service will be reinstated upon your reemployment. In addition, you will also receive Vesting Service credit for the period of your break. If the period of your break in service exceeded 60 months but was not longer than the period of your Vesting Service before becoming vested, your previous Vesting Service will be reinstated upon your reemployment. If the period of your break in service was equal to or exceeded the greater of 60 consecutive months or your previous Vesting Service, upon reemployment you will be treated as a new employee upon reemployment. In other words, no prior Vesting Service will be credited to you.

The following chart should assist you in understanding your options:

Length of Break in Service for a	Vesting Service Prior to the
Non-Vested Member	Break in Service	Period of the Break in Service
Less than 60 consecutive months	Will be reinstated upon a Member’s reemployment.	Credit will not be given for the period of break in service.
Less than 12 consecutive months	Will be reinstated upon a Member’s reemployment.	Credit will be given for the period of the break in service.
More than 60 consecutive months, but not more than total Vesting Service up to the break in service	Will be reinstated upon a Member’s reemployment.	Credit will not be given for the period of the break in service.
More than the greater of:	Will NOT be reinstated upon a Member’s reemployment.	Credit will not be given for the period of break in service.
a) 60 consecutive months; or
b) Total Vesting Service prior to the break in service		Upon reemployment, the Member will be considered a new employee.

Upon reinstatement of your Vesting Service, your previous Benefit Service will also be reinstated if you repay within five years of your reemployment or the date you incurred a break in service of at least 60 months, any accumulated contributions which were refunded to you with interest to the date of such repayment.

For example, if you terminated service and had completed one year (i.e., 12 months) of Vesting Service, you would not be vested in a retirement benefit and would be entitled only to a refund of your own contributions, if any, plus interest. However, if you returned to service with any participating employer within 60 months, your previous Vesting Service would be reinstated and your previous Benefit Service would also be reinstated if you repaid with interest any contributions that had been refunded to you.

If you leave employment with a vested benefit, commence receiving benefits, and then are reemployed as an active Member by a participating employer, you will be reenrolled immediately and given the option, within six months following reemployment as an active Member, to make an irrevocable election to continue to receive the payment of your Retirement Allowance or to suspend the payment until subsequent termination of service. If no election is made, the payment of your Retirement Allowance will continue in the form of payment previously chosen. Upon your subsequent retirement, your retirement benefit will be based upon your Benefit Service before and after your prior retirement and your Salary during that service, but will be actuarially reduced for any such benefit already paid.

11

For Employees vested on or after July 1, 2008

LEAVES OF ABSENCE

There are four types of approved leaves of absence which may be granted on a uniform basis by your employer while you are a Plan Member.

Type 1.	Non-military leave granted to a Plan Member for up to one year. Both vesting and benefit service continue to accrue during this leave.
Type 1-A.	Military leave granted to a Plan Member who is subject to qualified military service pursuant to an involuntary military call-up in the Reserves of the U.S. Armed Services. During this leave, contributions continue, if any, to be made. In addition, vesting and benefit service continue to accrue. To qualify for benefits under Type 1-A, in general, a Member must return to the service of his employer within 90 days of his discharge from military service.
Type 2.	Non-military granted to a Plan Member for up to one year during which all contributions are discontinued. During this leave, vesting service continues to accrue, but benefit service does not. The accrual of benefit service will resume when your leave terminates and your contributions resume.
Type 3.	Military leave to a Plan Member during which all contributions are discontinued. During this leave, vesting service continues to accrue, but benefit service generally does not. The accrual of benefit service will resume when your leave terminates and your contributions resume.

The following Table will assist you in understanding the Plan’s Leave of Absence provisions as described above.

			Vesting	Benefit
Type of Leave	Duration	Contributions	Service	Service
NON-MILITARY LEAVE:
1	Up to one year	Will continue to be made	Will continue to accrue	Will continue to accrue
2	Up to one year	Will be discontinued	Will continue to accrue	Will not continue to accrue
MILITARY LEAVE:
1-A	Can vary	Will continue to be made	Will continue to accrue	Will continue to accrue
3	Can vary	Will be discontinued	Will continue to accrue	Will not continue to accrue

12

For Employees vested on or after July 1, 2008

LIMITATIONS ON BENEFITS

• No benefit is payable by the Pentegra DB Plan unless the required contributions and application forms have been received by the Plan.

• Internal Revenue Service (IRS) requirements impose certain limitations on the amount of benefits that may be paid under this and other qualified retirement plans. (See Article XI of the Pentegra DB Plan Regulations.) These limitations normally affect only the highest-paid employees and are subject to adjustment in accordance with IRS regulations. The dollar limit on annual benefits payable from a defined benefit plan is $195,000 in 2009 ($185,000 in 2008), actuarially reduced for benefits commencing before age 62 and increased for benefits commencing after age 65. If an employee has less than 10 years of vesting service or is under age 65 when he retires, or if his employer has two (2) plans in effect, his benefits are subject to further restrictions.

• The Pentegra DB Plan, by law, cannot recognize annual compensation in excess of a certain dollar limit. The limit for the 2009 limitation year is $245,000 ($230,000 for the 2008 limitation year). After 2009, the compensation dollar limit may be adjusted by the IRS.

• If an employer should withdraw from the Pentegra DB Plan (see Article XII of the Regulations), and establish a comparable defined benefit plan as a qualified successor plan, all liabilities of such employer under the Pentegra DB Plan must be transferred to the qualified successor plan. If an employer should withdraw from the Pentegra DB Plan without establishing a qualified successor Plan, all liabilities of the employer under the Pentegra DB Plan must be annuitized through an insurance company selected by the Pentegra DB Plan. Limits may be imposed upon the benefits of certain higher-paid employees if an employer withdraws from the Pentegra DB Plan within 10 years after the later of its commencement date or the effective date of any change which increases benefits. (See Article XI, Section 1(c) of the Regulations).

• Amounts payable by the Pentegra DB Plan may not be assigned, and if any person entitled to a payment attempts to assign it, his interest in the amount payable may be terminated and held for the benefit of that person or his dependents.

• Your employer’s continued participation is subject to IRS qualifications and other regulations it may impose.

• The limitations on benefits imposed by the IRS are subject to changes on an annual basis.

13

For Employees vested on or after July 1, 2008

INSURANCE OF BENEFITS

Benefits under the Plan are insured by the Pension Benefit Guaranty Corporation (PBGC) if the Pentegra DB Plan terminates. Generally, the PBGC guarantees most vested normal retirement age benefits, early retirement benefits, and certain disability and survivor pensions. However, the PBGC does not guarantee all types of benefits under covered plans, and the amount of benefit protection is subject to certain limitations.

The PBGC guarantees vested benefits at the level in effect on the date of Plan termination. However, if prior to the termination of a plan, the employer has been participating for less than five (5) years, or if benefits have been increased within the past five years, the whole amount of the vested benefits or the vested increase may not be guaranteed. In addition, there is a ceiling on the amount of monthly benefit the PBGC guarantees, which is adjusted periodically. A withdrawal of your employer from participation in the Pentegra DB Plan is not a plan termination under this paragraph, and only those benefits provided under Article XII of the Pentegra DB Plan Regulations are payable in the event of such a withdrawal.

For more information on the PBGC insurance protection and its limitations, ask the Plan Administrator or the PBGC. Inquiries to the PBGC should be addressed to the PBGC’s Technical Assistance Division, 1200 K Street N.W., Suite 930, Washington, D.C. 20005 — 4026 or call 202-326-4000 (not a toll free number). TTY/TTD users may call the federal relay service toll free at 1-800-877-8339 and ask to be connected to 202-326-4000. Additional information about the PBGC’s pension insurance program is available through the PBGC’s website on the Internet at http://www.pbgc.gov.

DISPUTED CLAIMS PROCEDURE

If you disagree with the Pentegra DB Plan with respect to any benefit to which you feel you are entitled, you should make a written claim to the President of the Pentegra DB Plan, who holds discretionary authority to approve or deny the claim. If your claim is denied, you will receive written notice from him explaining the reason for the denial within 90 days after the claim is filed, which sets forth, in an understandable manner, the following information:

• The specific reason(s) for the denial of the claim;

• Reference to the specific plan provision on which the denial is based;

• A description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why that material or information is necessary; and

• A description of the Plan’s review procedures and the time limits applicable to those procedures, including a statement of the claimant’s right to bring a civil action under ERISA Section 502(a) following a denial on review.

The President’s decision will be final unless you appeal such decision in writing to the Retirement Committee of the Board of Directors of the Pentegra DB Plan at 108 Corporate Park Drive, White Plains, New York 10604, within 60 days after receiving the notice of denial. The written appeal should contain all information you wish to be considered. The Retirement Committee will review the claim within 60 days after the appeal is made. Its decision will be in writing, and will include the reason for such decision. The Committee’s decision will be final. In the case of a decision on appeal upholding the President’s initial denial of the claim, the President’s notice of its decision on appeal shall set forth, in an understandable manner, the following information:

• The specific reason(s) for the decision on appeal;

• Reference to the specific Plan provision on which the decision on appeal is based;

• A statement that the claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant to the claim for benefits; and

• A statement describing any voluntary appeal procedures (including voluntary arbitration or any other form of dispute resolution) offered by the Plan and the claimant’s right to obtain information sufficient to enable you or your beneficiary to make an informed judgment about whether to submit a benefit dispute to the voluntary level of appeal, and a statement of the claimant’s right to bring an action under ERISA Section 502(a).

14

For Employees vested on or after July 1, 2008

QUALIFIED DOMESTIC RELATIONS ORDERS (“QDROS”)

A QDRO is a judgment, decree or order which has been determined by the Pentegra DB Plan, in accordance with the procedures established under the Pentegra DB Plan’s Regulations, to constitute a QDRO under the Internal Revenue Code.

To obtain copies of the Pentegra DB Plan’s Model QDRO and QDRO Procedures free of charge, please contact the Plan Administrator. (Please refer to the “Other Plan Information” section of this Summary to obtain the Plan Administrator’s address and telephone number).

15

For Employees vested on or after July 1, 2008

STATEMENT OF ERISA RIGHTS

As a Member in the Comprehensive Retirement Program, you are entitled to certain rights and protections under the Employee Retirement Income Security Act of 1974 (ERISA). ERISA provides that all Members will be entitled to:

Receive Information About Your Plan and Benefits

• Examine, without charge, at the Plan Administrator’s office or at other specified locations, all documents governing the Plan, and a copy of the latest annual report (Form 5500 Series) filed by the Plan Administrator with the U.S. Department of Labor and available at the Public Disclosure Room of the Employee Benefits Security Administration.

• Obtain, upon written request to the Plan Administrator, copies of documents governing the operation of the Plan and copies of the latest annual report (Form 5500 Series) and updated summary plan description. The Administrator may make a reasonable charge for the copies.

• Receive a summary of the Plan’s annual financial report. The Plan Administrator is required by law to furnish each Member with a copy of this summary annual report.

• Obtain, without charge, a statement telling you whether you have a vested right to receive a pension at normal retirement (age 65) and if so, what your benefits would be at that time if you stop working under the Plan now. If you do not have a vested right to a pension, the statement will tell you how many more years you have to work to get such a right. This type of statement is provided automatically to each Member once a year (see “Your Personal Annual Statement” as described earlier).

Prudent Actions by Plan Fiduciaries

In addition to creating rights for Plan Members, ERISA imposes duties upon the people who are responsible for the operation of the Plan. The people who operate your Plan, called “fiduciaries” of the Plan, have a duty to do so prudently and in the interest of you and other Plan Members and beneficiaries. No one, including your employer or any other person, may fire you or otherwise discriminate against you in any way to prevent you from obtaining a pension benefit or exercising your rights under ERISA.

Enforce Your Rights

If your claim for a pension benefit is denied in whole or in part, you have a right to know why this was done, to obtain copies of documents relating to the decision without charge, and to appeal any denial, all within certain time schedules.

Under ERISA, there are steps you can take to enforce the above rights. For instance, if you request a copy of plan documents or the latest annual report from the Plan Administrator and do not receive them within 30 days, you may file suit in a Federal court. In such a case, the court may require the Plan Administrator to provide the materials and pay you up to $110 a day until you receive them, unless such materials were not sent for reasons beyond the Plan Administrator’s control. If you have a claim for benefits which is denied or ignored, in whole or in part, you may file suit in a state or Federal court.

In addition, if you disagree with the Plan Administrator’s decision (or lack thereof) concerning the qualified status of a domestic relations order, after you have complied with the remedies prescribed in the Plan’s QDRO Procedures and Disputed Claims Procedure outlined in this summary plan description, you may file suit in Federal court.

If it should happen that Plan fiduciaries misuse the Plan’s money, or if you are discriminated against for asserting your rights, you may seek assistance from the U. S. Department of Labor or, after you have complied with the Plan’s “Disputed Claims Procedure” outlined in this summary plan description, you may file suit in a Federal court. The court will decide who should pay court costs and legal fees. If you are successful, the court may order the person you have sued to pay these costs and fees. If you lose, the court may order you to pay these costs and fees (for example, if it finds your claim is frivolous).

16

For Employees vested on or after July 1, 2008

Assistance with Your Questions

If you have any questions about your Plan, you should contact the Plan Administrator. If you have any questions about this statement or your rights under ERISA, or if you need assistance in obtaining documents from the Plan Administrator, you should contact the nearest office of the Employee Benefits Security Administration, U.S. Department of Labor, listed in your telephone directory or the Division of Technical Assistance and Inquiries; Employee Benefits Security Administration, U.S. Department of Labor, 200 Constitution Avenue, N. W. Washington, D.C. 20210. You may also obtain certain publications about your rights and responsibilities under ERISA by calling the publications hotline of the Employee Benefits Security Administration.

This Statement of ERISA Rights is required by Federal law and regulations.

17

For Employees vested on or after July 1, 2008

OTHER PLAN INFORMATION

Plan Name:

Pentegra Defined Benefit Plan for Financial Institutions as adopted by
Federal Home Loan Bank of New York

Employer:

Federal Home Loan Bank of New York
101 Park Avenue
New York, NY 10178-0599

Telephone Number – 212-681-6000

Plan Sponsor:

The Comprehensive Retirement Program is sponsored by the –

Pentegra Defined Benefit Plan for Financial Institutions
108 Corporate Park Drive
White Plains, New York 10604
Telephone Number – 914-694-1300

Employer Identification Number – 13-5645888
Plan Number – 001
Plan Year End – June 30

Plan Administrator:

The Plan Administrator is the President of the Pentegra DB Plan, whose place of business is the office of the Pentegra Defined Benefit Plan for Financial Institutions. The President is also the person designated as agent for service of legal process. Service of legal process may also be made upon a Plan Trustee.

Board of Directors:

The composition of the Board changes from year to year, but you may refer to the most recent Annual Report (which is furnished to your employer) for a current listing of Directors and their places of business.

Participating Employers:

Upon receipt of a written request for information regarding whether a particular employer is a Member of this multiple employer arrangement, we will provide you with a statement as to whether such employer is a Member and, if so, the employer’s address.

18

	Our difference is your advantage	Pentegra Retirement Services 108 Corporate Park Drive White Plains, NY 10604 (800) 872-3473
		www.pentegra.com

PENTEGRA RETIREMENT SERVICES

“Employees hired prior to July 1, 2008 who have not attained age 50 or have not
completed 5 years of vesting service as of July 1, 2008”

Summary Plan Description

Pentegra Defined
Benefit Plan for
Financial Institutions

as adopted by:

FEDERAL HOME LOAN BANK OF NEW YORK

“Employees hired prior to July 1, 2008 who have not attained age 50 or have not
completed 5 years of vesting service as of July 1, 2008”

SUMMARY PLAN DESCRIPTION
for
FEDERAL HOME LOAN BANK OF NEW YORK
New York, New York

July 1, 2008

PENTEGRA DEFINED BENEFIT PLAN FOR
FINANCIAL INSTITUTIONS
108 Corporate Park Drive
White Plains, NY 10604

“Employees hired prior to July 1, 2008 who have not attained age 50 or have not
completed 5 years of vesting service as of July 1, 2008”

TO OUR MEMBERS:

We are pleased to present your Summary Plan Description. This Summary has been prepared to help you understand the retirement plan which is provided by your employer through its participation in the Pentegra Defined Benefit Plan for Financial Institutions (formerly known as the Financial Institutions Retirement Fund) (the “Pentegra DB Plan”).

The Pentegra DB Plan is a large, non-profit, tax-exempt pension trust which was created in 1943. It is administered by a professional staff under the direction of a Board of Directors comprised of presidents of Federal Home Loan Banks and officers of various participating employers.

The Pentegra DB Plan enables financial institutions and other organizations serving them to provide for the security of their employees. It invests the contributions made to it and, under its Comprehensive Retirement Program (a defined benefit pension Plan), it pays out retirement, disability and death benefits.

This Summary highlights the main benefit features of your retirement plan. The Pentegra DB Plan Regulations contain the governing provisions and should be consulted as official text in all cases. If there is any conflict between this Summary Plan Description and the Pentegra DB Plan’s Regulations, the Pentegra DB Plan’s Regulations will control. Either your employer or the Pentegra DB Plan will provide you with a copy of the Regulations at your request.

Finally, please note that wherever the masculine pronoun is used in this Summary, it is intended to include the feminine pronoun.

Board of Directors

Pentegra Defined Benefit Plan for

Financial Institutions

“Employees hired prior to July 1, 2008 who have not attained age 50 or have not
completed 5 years of vesting service as of July 1, 2008”

TABLE OF CONTENTS

	Page
Employee Eligibility		1
Service and Salary		2
- Benefit Service		2
- Vesting Service		2
- Salary		2
Vesting		3
Retirement Benefits		4
- General		4
- Normal Retirement		4
- Late Retirement		5
- Early Retirement		6
- Disability Retirement		10
- Retirement Adjustment Payment		11
- Post-Retirement Increments		11
Death Benefit		12
- Death Benefit in Active Service		12
- Death Benefit in Retirement		12
Optional Forms of Retirement Benefit		14
- Direct Rollovers		14
Paying for Your Benefits		15
Your Personal Annual Statement		15
Reinstatement of Membership and Service		16
Leaves of Absence		17
Limitations on Benefits		18
Insurance of Benefits		19
Disputed Claims Procedure		19
Qualified Domestic Relations Orders (“QDROs”)		20
Statement of ERISA Rights		21
Other Plan Information		23

“Employees hired prior to July 1, 2008 who have not attained age 50 or have not
completed 5 years of vesting service as of July 1, 2008”

EMPLOYEE ELIGIBILITY

Each employee must become a Member when eligible and will be enrolled by his employer at that time. An employee will be eligible for membership in the Comprehensive Retirement Program on the first day of the month following satisfaction of his employer’s waiting period, if any. Your employer’s current waiting period for new employees is:

Four (4) months of service

If an employee is expected by his employer to complete 1,000 hours of service in the 12 consecutive months following his enrollment date, he will be enrolled as an active Member and, as such, will be entitled to the benefits described in this booklet. If the employee is not expected to complete 1,000 hours of service in this 12 consecutive month period, he will be enrolled as an inactive Member and, as such, he will not accrue or be entitled to any retirement or death benefits (see Article X, Section 3 of the Regulations). Subsequently, the Member will be active or inactive depending on whether or not he completes 1,000 hours of service in each calendar year.

In counting hours, an employee will be credited with an hour of service for every hour for which he has a right to be paid. This includes vacation, sick leave, jury duty, etc., and any hours for which back pay may be due.

NOTE: Regardless of the above, an employee will not be eligible for membership while he is in a class of employees which his employer has obtained permission to exclude (see Article II, Section 2 of the Regulations). Any such classes which your employer now excludes are listed directly below. (If none are listed, this Note may be disregarded.)

1

“Employees hired prior to July 1, 2008 who have not attained age 50 or have not
completed 5 years of vesting service as of July 1, 2008”

SERVICE AND SALARY

Your benefits are based on your benefit service and salary. The period of benefit service is the number of years and months of employment upon which benefits are determined under the Plan.

Benefit Service includes:

Prior Service — any or all employment prior to the date your employer joined the Pentegra DB Plan for which your employer has purchased credit.

plus

Membership Service (or future service) — period of employment as an active Member from enrollment to retirement, death or other termination.

For example, suppose a person joined his employer at age 35. Then 10 years later, when he was 45, his employer joined the Pentegra DB Plan and purchased credit for his 10 years of prior service. After 20 years of membership service he will reach the Plan’s normal retirement age (65) and will then have 30 years of benefit service:

Prior Service	+	Membership Service	=	Benefit Service
10 Years	+	20 Years	=	30 Years

The easy way to approximate how much benefit service you would have upon retirement at age 65 is to subtract from 65 whatever age you were when your benefit service began.

Vesting Service is the period used to determine whether or not an employee is vested and eligible for early retirement. Vesting is measured from the first day of the month in which you were employed. (Refer to Page 3 describing Vesting.)

Salary is your basic annual salary rate, plus overtime, bonuses and commissions. Changes in your basic annual salary rate which occur during the calendar year are recognized. Salary also includes any pre-tax contributions to a Section 401(k) plan and, unless the employer elects otherwise, pre-tax contributions to a Section 125 cafeteria plan as well as Qualified Transportation Fringe benefits as defined under Section 132(f) of the Internal Revenue Code.

2

“Employees hired prior to July 1, 2008 who have not attained age 50 or have not
completed 5 years of vesting service as of July 1, 2008”

VESTING

“Vested” means that you have a nonforfeitable right to a retirement benefit which you will not lose if you terminate your employment. A Member will become vested in accordance with the following schedule:

Completed Years	Vested
of Vesting Service	Percentage
Less than 2		0
2		20	%
3		40	%
4		60	%
5		100	%

Any Member who has reached age 65 is automatically 100% vested, regardless of the number of years of vesting service he has completed.

Any Member who terminates service after becoming fully or partially vested is entitled to receive a retirement benefit (see the “Retirement Benefits” section). If, for example, he is 100% vested upon termination of employment, he would be entitled to a retirement allowance at age 65 equal to 100% of the allowance accrued to his termination date. If he is 60% vested upon termination of employment, he would be entitled to a retirement allowance at age 65 equal to 60% of such accrued allowance. If he is not vested at termination, he will not be entitled to any retirement benefit.

NOTE: See Reinstatement of Membership and Service explained later.

3

“Employees hired prior to July 1, 2008 who have not attained age 50 or have not
completed 5 years of vesting service as of July 1, 2008”

RETIREMENT BENEFITS

General:

The regular form of all retirement benefits provides a retirement allowance (see normal, early and disability retirement formulas) payable for life. Instead of choosing the regular form, you may select one of the optional forms as described in the “Optional Forms of Retirement Benefit” section of this Summary.

All retirement allowances are in addition to Social Security, and are payable in monthly installments for life. In addition, all retirement allowances must begin as of the April 1st of the calendar year following the later of (i) the calendar year in which you reach age 70-1/2, or (ii) the calendar year in which you retire (“Required Beginning Date”). However, if you are a 5% owner, your Required Beginning Date is the April 1st of the calendar year following the calendar year in which you reach age 70-1/2, even if you are still working.

Normal Retirement:

Upon termination of employment at or after age 65, you will be entitled to a normal retirement benefit. The formula for determining your normal retirement allowance is:

(a)	2.5	%	X	Years of Benefit Service (up to June 30, 2008)	X	High-3 Average Salary at Termination	=	Retirement Allowance up to June 30, 2008
PLUS
				Years of Benefit Service		High-5		Retirement
				(from July 1, 2008 to		Average Salary at		Allowance after
(b)	2.0	%	X	termination of employment)	X	Termination	=	June 30, 2008
				(a) plus (b)	=	Regular Annual Retirement Allowance

NOTE: Your total years of Benefit Service in Steps (a) and (b) cannot exceed 30 years. In addition, please note that both the High-5 and High-3 Average Salary figures are calculated at the Member’s termination date.

FURTHER NOTE: The normal form of payment for your Retirement Allowance up to June 30, 2008 (as indicated in (a) above) will be a 12x payment . This portion of your benefit will also be eligible for cost-of-living adjustments, as explained on page 11 of this summary.

The normal form of payment for your Retirement Allowance after June 30, 2008 (as indicated in (b) above) will be a single life annuity and is not eligible for cost-of-living adjustments.

4

“Employees hired prior to July 1, 2008 who have not attained age 50 or have not
completed 5 years of vesting service as of July 1, 2008”

Example: A Member had 30 years of Benefit Service at termination of employment (25 years earned as of June 30, 2008) and his average annual Salary for the three (3) consecutive years of highest Salary during Benefit Service (“High-3 Average Salary”) was $32,000 and his average annual salary for the five (5) consecutive years of highest Salary during Benefit Service (“High-5 Average Salary”) was $27,000. His annual retirement allowance would be (a) plus (b), determined as follows:

						High-3			Retirement
				Years of Benefit Service		Average Salary			Allowance up to
				(up to June 30, 2008)		at Termination			June 30, 2008
(a)	2.5	%	X	25 yrs. (=62.5%)	X	$	32,000	=	$20,000
PLUS
				Years of Benefit Service		High-5			Retirement
				(from July 1, 2008 to		Average Salary			Allowance after
				termination of employment)		at Termination			June 30, 2008
(b)	2.0	%	X	5 yrs. (=10%)	X	$	27,000	=	$  2,700
	Regular Retirement Allowance:					(a) plus (b)		=	$22,700

If you do not continue in your employer’s service after age 65, you may begin your normal retirement allowance as described above or you may defer commencement of your allowance until any time up to your Required Beginning Date, in which case your normal retirement allowance will be increased actuarially.

Late Retirement:

If you continue in employment beyond the Plan’s normal retirement age (65), you will receive a benefit determined under the employer’s benefit formula based on salary and benefit service earned beyond age 65 until actual termination of employment (regardless of age) without any increase for delayed payment. However, the benefit will not be less than the benefit you would have had at age (65) actuarially increased.

5

“Employees hired prior to July 1, 2008 who have not attained age 50 or have not
completed 5 years of vesting service as of July 1, 2008”

Early Retirement:

If you leave your employer prior to age 65, after having become fully or partially vested (see Page 3), you will be entitled to an early retirement benefit. The retirement allowance payable at age 65 is equal to the vested amount of the normal retirement allowance accrued to your termination date.

Payment may begin as early as age 45, in which case the allowance otherwise payable at age 65 is reduced by applying an early retirement factor based on your age when payments begin (see below).

July 1, 2008 Protected Frozen Benefit:

Some plan provisions, such as early retirement factors, were protected on the frozen allowance up to June 30, 2008. This benefit is calculated as follows:

				High-3		Protected Frozen
		Years of Benefit Service		Average Salary at		Allowance up to
2.5%	X	(up to June 30, 2008)	X	June 30, 2008	=	6/30/2008

The Protected Retirement Benefit Allowance up to June 30, 2008 will not increase for future service accruals or salary increases. There is a “Protected Rule of 70” early retirement reduction on the frozen allowance up to June 30, 2008 and it is defined as follows:

Protected Rule of 70 on benefits accrued up to June 30, 2008:

1.	If the sum of the Member’s age and years of vesting service at termination of employment is at least 70, his early retirement allowance will be the allowance payable at age 65, reduced by 1.5% per year for each year he is under age 65.
2.	If the sum of the Member’s age and years of vesting service at termination of employment is less than 70, his early retirement allowance will be the allowance payable at age 65, reduced by 3% per year for each year he is under age 65.

For any benefits accrued after July 1, 2008 through the date of termination, a “New Rule of 70” applies. The “New Rule of 70” early retirement reduction is defined as follows:

New Rule of 70 on benefits accrued after June 30, 2008:

1.	If the sum of the Member’s age and years of vesting service at termination of employment is at least 70, his early retirement allowance will be the allowance payable at age 65, reduced by 3% per year for each year he is under age 65.
2.	If the sum of the Member’s age and years of vesting service at termination of employment is less than 70, his early retirement allowance will be the allowance payable at age 65, reduced by Actuarial Equivalent factors for each year he is under age 65. (see table after Example 2 below)

Example 1: A Member terminates employment at age 61 after 26 years of vesting service and 25 years of benefit service, where 10 years of service were earned up to June 30, 2008. His High-3 Average Salary at July 1, 2008 is $60,000, his High-3 Average Salary at termination is $78,000 and his High-5 Average Salary at termination is $74,000.

6

“Employees hired prior to July 1, 2008 who have not attained age 50 or have not
completed 5 years of vesting service as of July 1, 2008”

The Protected Frozen Allowance up to June 30, 2008 used to determine the Protected Rule of 70 early retirement reduction factors is determined as follows:

						High-3			Protected
				Years of Benefit Service		Average Salary up			Allowance up to
				(up to June 30, 2008)		to June 30, 2008			June 30, 2008
	2.5	%	X	10 yrs. (=25%)	X	$60,000		=		$15,000
His annual retirement allowance commencing at age 65 would be (a) plus (b), determined as follows:
						High-3			Retirement
				Years of Benefit Service		Average Salary at			Allowance up to
				(up to June 30, 2008)		Termination			June 30, 2008
(a)	2.5	%	X	10 yrs. (=25%)	X	$78,000		=		$19,500
PLUS
				Years of Benefit Service		High-5			Retirement
				(from July 1, 2008 to		Average Salary at			Allowance after
				termination of employment)		Termination			June 30, 2008
(b)	2.0	%	X	15 yrs. (=30%)	X	$	74,000	=		$22,200
	Regular Retirement Allowance:					(a) + (b)		=		$41,700

NOTE: Total Benefit Service is limited to 30 years.

Because the sum of the Member’s age and vesting service at termination is at least 70 (61 + 26 = 87), if the Member elects to have his retirement allowance begin immediately, the allowance payable at age 65 would be reduced as follows:

	Protected
	Frozen					Regular Retirement
	Allowance up to			Early Retirement		Allowance Payable
	June 30, 2008			Factor (Age 61)		Immediately (Age 61)
(a)	$	15,000	X	94% (1.5% / yr reduction)	=		$14,100

PLUS

	Regular
	Retirement				Regular Retirement
	Allowance up to		Early Retirement		Allowance Payable
	June 30, 2008		Factor (Age 61)		Immediately (Age 61)
(b)	$26,700*	X	88% (3% / yr reduction)	=		$23,496

* Excludes protected frozen allowance up to June 30, 2008 shown above ($15,000). The protected frozen allowance up to June 30, 2008 in (a) is entitled to the Protected Rule of 70 reduction factor and the remainder of the benefit in (b) is entitled to the New Rule of 70 reduction factor. ($41,700 = $15,000 + $26,700)

Immediate Retirement Allowance: (a) + (b) = $37,596

Example 2: A Member terminates employment at age 52 after 16 years of vesting service and 15 years of benefit service, where 10 years of service was earned up to June 30, 2008. His High-3 Average up to June 30, 2008 is $60,000, his High-3 Average Salary at termination is $78,000 and his High-5 Average Salary at termination is $74,000.

7

“Employees hired prior to July 1, 2008 who have not attained age 50 or have not
completed 5 years of vesting service as of July 1, 2008”

The Protected Allowance up to June 30, 2008 used to determine the Protected Rule of 70 early retirement reduction factors is determined as follows:

						High-3			Protected
				Years of Benefit Service		Average Salary up			Allowance up to
				(up to June 30, 2008)		to June 30, 2008			June 30, 2008
	2.5	%	X	10 yrs. (=25%)	X		$60,000	=		$15,000
His annual retirement allowance commencing at age 65 would be (a) plus (b), determined as follows:
									Retirement
				Years of Benefit Service		High-3			Allowance up to
				(up to June 30, 2008)		Average Salary			June 30, 2008
(a)	2.5	%	X	10 yrs. (=25%)	X		$78,000	=		$19,500
PLUS
				Years of Benefit Service					Retirement
				(from July 1, 2008 to		High-5			Allowance after
				termination of employment)		Average Salary			June 30, 2008
(b)	2.0	%	X	5 yrs. (=10%)	X		$74,000	=		$  7,400
			Regular Retirement Allowance:				(a) + (b)	=		$26,900

NOTE: Total Benefit Service is limited to 30 years.

Because the sum of the Member’s age and vesting service at termination is less than 70 (52 + 16 = 68), if the Member elects to have his retirement allowance begin immediately, the allowance payable at age 65 would be reduced as follows:

	Protected					Regular Retirement
	Allowance up to			Early Retirement		Allowance Payable
	June 30, 2008			Factor (Age 52)		Immediately (Age 52)
(a)		$15,000	X	61% (3% / yr reduction)	=		$9,150

	Regular				Regular Retirement
	Retirement		Early Retirement		Allowance Payable
	Allowance		Factor (Age 52)		Immediately (Age 52)
(b)	$11,900*	X	41% (AE reduction)	=		$4,879

* Excludes protected allowance up to June 30, 2008 shown above ($15,000). The protected allowance up to June 30, 2008 in (a) is entitled to the Protected Rule of 70 reduction factor and the remainder of the benefit in (b) is entitled to the New Rule of 70 reduction factor. ($26,900 = $15,000 + $11,900)

Immediate Retirement Allowance: (a) + (b) = $14,029

8

“Employees hired prior to July 1, 2008 who have not attained age 50 or have not
completed 5 years of vesting service as of July 1, 2008”

The Actuarial Equivalent Reduction factor is determined as follows:

Age When				Age When					Age When
Allowance				Allowance					Allowance
Begins	Factor			Begins		Factor			Begins		Factor
45		20	%		52		41	%		59		66	%
46		23	%		53		44	%		60		70	%
47		26	%		54		47	%		61		76	%
48		29	%		55		50	%		62		82	%
49		32	%		56		54	%		63		88	%
50		35	%		57		58	%		64		94	%
51		38	%		58		62	%		65		100	%

(Interpolation is made to the nearest month.)

9

“Employees hired prior to July 1, 2008 who have not attained age 50 or have not
completed 5 years of vesting service as of July 1, 2008”

Disability Retirement:

If, after completing one year of membership service or having been credited with five (5) years of benefit service (not counting service during a leave of absence) but before reaching age 65, you have to stop working because of a disability, you may be entitled to a disability retirement benefit. First, you must file an application with the Pentegra DB Plan within 13 months after the date you had to stop working. Second, you must satisfy either Test A or B below:

Test A — Certification by doctors designated by the Pentegra DB Plan that your disability (i) prevents you from doing the kind of work for which you are fitted or trained, and (ii) is expected to last at least 12 months from the date you had to stop working or to result in death.

or

Test B — Proof that you are eligible for disability insurance benefits under Title II of the Federal Social Security Act.

Generally, the annual disability retirement allowance payable immediately, and for as long as you are disabled, is the higher of (i) an amount equal to the normal retirement allowance accrued to your termination date, or (ii) 30% of average annual salary for the five (5) highest paid consecutive years of benefit service (“High-5 Average Salary”). However, it cannot be more than what your normal retirement allowance would have been if you had stayed in service to age 65.

You may be required to provide evidence as often as annually that you continue to be disabled.

NOTE: Notwithstanding the foregoing, if you are on a medical leave of absence which directly results in a subsequent disability, you may be entitled to a disability benefit.

10

“Employees hired prior to July 1, 2008 who have not attained age 50 or have not
completed 5 years of vesting service as of July 1, 2008”

Retirement Adjustment Payment:
(Applicable only to those enrolled prior to July 1, 1983)

If you retire after age 55 (whether normal, early or disability retirement), you will be entitled to a onetime Retirement Adjustment Payment. Please note that under the provisions of the Plan, you are deemed to be retired upon your termination of employment with a deferred vested benefit. The Retirement Adjustment Payment is a single lump sum equal to three months’ regular retirement allowance payable when your allowance commences.

To illustrate, the annual allowance upon normal retirement would be calculated as shown on Page 4. Assume the annual retirement allowance was $22,700. In addition to such allowance, the member would receive a Retirement Adjustment Payment as follows:

Regular							Retirement
Annual							Adjustment
Allowance							Payment
$22,700	/	12	=	$1,892 (per month)	X	3    =	$	5,676

NOTE: The Retirement Adjustment Payment only applies to your Frozen Protected Benefit that was earned up to June 30, 2008.

Post-Retirement Increments:

As a retiree, other than a disability retiree, who is receiving allowance payments you will be entitled to a payment of 1% of your annual retirement allowance at the end of the calendar year in which you attain age 66. This is a cumulative increment so that the following year, when you are age 67, the payment will be 2%, then 3%, then 4%, etc. Such increasing payments will continue to be made as long as you live. For example:

						Incremental
Your	Increment			Annual		Payment at
Age	Rate			Allowance		Year-End
66		1	%	$	22,700	$	227
67		2	%	$	22,700	$	454
68		3	%	$	22,700	$	681

Your age is always measured at the end of the calendar year to determine your applicable rate.

NOTE: Each Post-Retirement Increment is based on the retirement allowance you actually receive. Similarly, it would continue in the same manner to your surviving contingent annuitant if you had elected such an optional form of retirement benefit (see Article VI of the Regulations) based on the contingent annuitant’s allowance.

FURTHER NOTE: Post-Retirement Increments only apply to the portion of your Protected Frozen Benefit that was earned up to June 30, 2008.

11

“Employees hired prior to July 1, 2008 who have not attained age 50 or have not
completed 5 years of vesting service as of July 1, 2008”

DEATH BENEFIT

In Active Service:

If a vested Member dies in active service, his beneficiary would be entitled to a lump sum death benefit equal to 100% of the Member’s last 12 months’ salary, plus an additional 10% of such salary for each year of benefit service until a maximum of 300% of such salary is reached for 20 or more years, plus a refund of his own contributions, if any, with interest.

Example: A Member dies after 15 years of benefit service and his last 12 months’ salary is $32,000. His beneficiary would get:

		Last 12 Months		Lump Sum
		Salary		Death Benefit
250% [(15/10=1.5)+1=2.5]	X	$32,000	=	$80,000

Either the Member or beneficiary may elect to have his benefit or the retirement death benefit described below paid in the form of installments over a period of up to 10 years or a lifetime annuity. (See the Regulations for further explanation).

If a Member dies after becoming eligible for early retirement, his beneficiary would receive the higher of (i) the active service death benefit described above, or (ii) the retirement death benefit described below (as if the Member had retired on the first day of the month in which he died).

In Retirement:
(Applicable only to your Protected Frozen Allowance accrued up to June 30, 2008)

The regular form of all retirement benefits (normal, early or disability) includes not only a retirement allowance, but also a lump sum retirement death benefit which is 12 times the annual retirement allowance less the sum of such allowance payments made before death. Please note that this death benefit does not apply in the event you elect to receive your benefit under one of the “Optional Forms of Retirement Benefit” (see Page 13) in lieu of the regular form.

Example: A Member dies two (2) years after retirement. His regular annual retirement allowance was $10,000. The Member’s death benefit is illustrated below:

Annual				Initial Death			Allowance
Retirement				Benefit At			Payments			Lump Sum
Allowance				Retirement			For 2 Years			Death Benefit
$10,000	X	12	=	$	120,000	less	$	20,000	=	$100,000

All retirement allowances continue for life, even though under the regular form there would be no death benefit payable after 12 years.

NOTE: If a retiree should die before his allowance payments start (as in the case of an early or normal retiree with a deferred allowance), the death benefit would be 12 times the regular annual allowance which would have been payable had his allowance commenced as of the first day of the month in which he died.

FURTHER NOTE: The retirement death benefit described above only applies to the portion of your Protected Frozen Benefit that was earned up to June 30, 2008.

12

“Employees hired prior to July 1, 2008 who have not attained age 50 or have not
completed 5 years of vesting service as of July 1, 2008”

In Retirement:
(Applicable to your accrued benefits after June 30, 2008)

If you die before receiving benefits under the Plan and you are married at the time of your death, then your spouse will be entitled to the “minimum spouse’s death benefit.” The “minimum spouse’s death benefit” is equal to the amount that would have been paid to your spouse if you had begun receiving distributions under a joint and 50% survivor annuity. For example, suppose that if you were to retire, you would receive an annuity paying you $1,000 a month for your life and then upon your death, $500 each month to your spouse (this is a joint and 50% survivor annuity). In this example, the amount payable to your spouse is the “minimum spouse’s death benefit.”

If you wish to designate a beneficiary other than your spouse, then your spouse must irrevocably consent to waive any right to the death benefit. Your spouse’s consent must be in writing, be witnessed by a notary or a plan representative and acknowledge the specific non-spouse beneficiary. In addition, you may elect a beneficiary other than your spouse without your spouse’s consent if your spouse cannot be located.

If you are married and you change the designation of the beneficiary of the “minimum spouse’s death benefit,” then your spouse must again consent to the change subject to the rules above.

If you are not married, then you may designate the beneficiary on a form to be supplied to you by the Pentegra DB Plan.

In the event you are not survived by a Spouse, such a benefit will be paid in the following order of priority to:

(a) Designated beneficiary;

(b) Your estate.

13

“Employees hired prior to July 1, 2008 who have not attained age 50 or have not
completed 5 years of vesting service as of July 1, 2008”

OPTIONAL FORMS OF RETIREMENT BENEFIT

At any time before your retirement allowance begins, you may elect to convert your regular retirement allowance (an allowance payable for your lifetime) to an optional form of benefit. The amount of each Option in which you are interested will be determined and communicated to you at retirement.

These Options are:

1 –    A higher allowance payable for life and no further benefits upon death. This option is available only on your Protected Frozen Allowance accrued up to June 30, 2008.

2 –    An allowance payable for life. If you die before 144 monthly installments have been paid, the remaining value of such unpaid installments would be paid in a lump sum to your beneficiary. This option is available only on the portion of your benefit accrued after June 30, 2008.

3 –    An allowance payable for life. If you die before 120 monthly installments have been paid, the commuted value of such unpaid installments would be paid in a lump sum to your beneficiary.

4 –    A joint and survivor allowance which would continue at the rate of 100% to your contingent annuitant if he or she survives you. If both you and your contingent annuitant die before 120 monthly installments have been paid, the commuted value of such unpaid installments would be paid in a lump sum to your beneficiary.

5 –    A joint and survivor allowance which would continue at the rate of 50% to your contingent annuitant if he or she survives you.

6 –    A single lump sum settlement in lieu of any monthly allowance and death benefit. This Option may be elected if you retire after reaching age 59-1/2, or if you are an early retiree and defer commencement of your benefit until such age. The election of this Option requires the written consent of your spouse, if any.

7 –    A partial lump sum settlement equal to 25%, 50% or 75% of the total benefit and a monthly allowance for the remainder of the benefit which must commence at the time of the partial lump sum settlement. This Option may be elected if you retire after reaching age 59-1/2 or if you are an early retiree and defer commencement of your benefit until such age. The election of this Option requires written consent of your spouse, if any.

NOTE: The death benefit of a deceased retiree or Member who was eligible for early retirement, who (i) is survived by a spouse, and (ii) has not made any election with respect to his death benefit or retirement benefit, will be paid to the surviving spouse in an amount equal to a lifetime annuity of at least 50% of the retiree’s allowance as though he elected Option 5 above. This benefit may be paid in the form of a lump sum or in installments of equivalent value.

DIRECT ROLLOVERS

If you select payment option numbers 6 or 7 above, you may request that a direct rollover of all or a portion of the distribution be made to either an Individual Retirement Account (IRA) or another qualified plan, which is will to accept the transfer of assets and is permissible under the Pentegra DB Plan. A direct rollover will result in no tax being due until you withdraw the funds from the IRA or other qualified plan. Under certain circumstances, all or a portion of the amount to be distributed may not qualify for a direct rollover. For example, a distribution of less than $200 will not be eligible for a direct rollover. If you elect to receive the distribution, rather than request a direct rollover, then 20% of the distribution amount will be withheld for federal income tax purposes.

14

“Employees hired prior to July 1, 2008 who have not attained age 50 or have not
completed 5 years of vesting service as of July 1, 2008”

PAYING FOR YOUR BENEFITS

All contributions made to the Plan on your behalf are actuarially determined. Your employer has elected to pay the full cost of your benefits. You, as an employee, do not contribute while on the “non-contributory basis.”

Special Note to any Member who has “Accumulated Contributions” with the Pentegra DB Plan:

If you made personal contributions to the Pentegra DB Plan while your present or previous employer was on the contributory basis and if those contributions have not been refunded to you, you are fully vested in the value of such contributions plus interest (“accumulated contributions”). This means that if you terminate employment, you may request a refund of such accumulated contributions. If you terminate before becoming fully or partially vested in a retirement benefit, the refund will be in lieu of all other benefits. If you terminate after becoming fully or partially vested in an early or normal retirement benefit (refer to Page 3 describing Vesting), the refund will be in lieu of that portion of your retirement benefit which is attributable to your accumulated contributions. The remaining portion, attributable to your employer’s contributions, will be payable as a reduced retirement benefit.

Your accumulated contributions will be shown on your Personal Annual Statement (see below).

YOUR PERSONAL ANNUAL STATEMENT
(Keeping You Informed)

Every year the Pentegra DB Plan prepares a Personal Annual Statement for each Member. This statement shows as of each January 1 your periods of accrued vesting and benefit service and the status of your retirement and death benefits. These statements are sent to your employer for distribution in or about the following March.

15

“Employees hired prior to July 1, 2008 who have not attained age 50 or have not
completed 5 years of vesting service as of July 1, 2008”

REINSTATEMENT OF MEMBERSHIP AND SERVICE

If you leave employment before becoming vested (see Page 3), but become reemployed by the same or another employer participating in this Program, you will be reenrolled immediately.

If the period of your break in service (i.e., the period between your termination and reemployment) was not longer than 60 months, your previous Vesting Service will be reinstated upon your reemployment. If your break in service was not longer than 12 consecutive months, your previous Vesting Service will be reinstated upon your reemployment. In addition, you will also receive Vesting Service credit for the period of your break. If the period of your break in service exceeded 60 months but was not longer than the period of your Vesting Service before becoming vested, your previous Vesting Service will be reinstated upon your reemployment. If the period of your break in service was equal to or exceeded the greater of 60 consecutive months or your previous Vesting Service, upon reemployment you will be treated as a new employee upon reemployment. In other words, no prior Vesting Service will be credited to you.

The following chart should assist you in understanding your options:

Length of Break in Service for a	Vesting Service Prior to the
Non-Vested Member	Break in Service	Period of the Break in Service
Less than 60 consecutive months	Will be reinstated upon a Member’s reemployment.	Credit will not be given for the period of break in service.
Less than 12 consecutive months	Will be reinstated upon a Member’s reemployment.	Credit will be given for the period of the break in service.
More than 60 consecutive months, but not more than total Vesting Service up to the break in service	Will be reinstated upon a Member’s reemployment.	Credit will not be given for the period of the break in service.
More than the greater of:	Will NOT be reinstated upon a Member’s reemployment.	Credit will not be given for the period of break in service.
a) 60 consecutive months; or
b) Total Vesting Service prior to the break in service		Upon reemployment, the Member will be considered a new employee.

Upon reinstatement of your Vesting Service, your previous Benefit Service will also be reinstated if you repay within five years of your reemployment or the date you incurred a break in service of at least 60 months, any accumulated contributions which were refunded to you with interest to the date of such repayment.

For example, if you terminated service and had completed one year (i.e., 12 months) of Vesting Service, you would not be vested in a retirement benefit and would be entitled only to a refund of your own contributions, if any, plus interest. However, if you returned to service with any participating employer within 60 months, your previous Vesting Service would be reinstated and your previous Benefit Service would also be reinstated if you repaid with interest any contributions that had been refunded to you.

If you leave employment with a vested benefit, commence receiving benefits, and then are reemployed as an active Member by a participating employer, you will be reenrolled immediately and given the option, within six months following reemployment as an active Member, to make an irrevocable election to continue to receive the payment of your Retirement Allowance or to suspend the payment until subsequent termination of service. If no election is made, the payment of your Retirement Allowance will continue in the form of payment previously chosen. Upon your subsequent retirement, your retirement benefit will be based upon your Benefit Service before and after your prior retirement and your Salary during that service, but will be actuarially reduced for any such benefit already paid.

16

“Employees hired prior to July 1, 2008 who have not attained age 50 or have not
completed 5 years of vesting service as of July 1, 2008”

LEAVES OF ABSENCE

There are four types of approved leaves of absence which may be granted on a uniform basis by your employer while you are a Plan Member.

Type 1.	Non-military leave granted to a Plan Member for up to one year. Both vesting and benefit service continue to accrue during this leave.
Type 1-A.	Military leave granted to a Plan Member who is subject to qualified military service pursuant to an involuntary military call-up in the Reserves of the U.S. Armed Services. During this leave, contributions continue, if any, to be made. In addition, vesting and benefit service continue to accrue. To qualify for benefits under Type 1-A, in general, a Member must return to the service of his employer within 90 days of his discharge from military service.
Type 2.	Non-military granted to a Plan Member for up to one year during which all contributions are discontinued. During this leave, vesting service continues to accrue, but benefit service does not. The accrual of benefit service will resume when your leave terminates and your contributions resume.
Type 3.	Military leave to a Plan Member during which all contributions are discontinued. During this leave, vesting service continues to accrue, but benefit service generally does not. The accrual of benefit service will resume when your leave terminates and your contributions resume.

The following Table will assist you in understanding the Plan’s Leave of Absence provisions as described above.

			Vesting	Benefit
Type of Leave	Duration	Contributions	Service	Service
NON-MILITARY LEAVE:
1	Up to one year	Will continue to be made	Will continue to accrue	Will continue to accrue
2	Up to one year	Will be discontinued	Will continue to accrue	Will not continue to accrue
MILITARY LEAVE:
1-A	Can vary	Will continue to be made	Will continue to accrue	Will continue to accrue
3	Can vary	Will be discontinued	Will continue to accrue	Will not continue to accrue

17

“Employees hired prior to July 1, 2008 who have not attained age 50 or have not
completed 5 years of vesting service as of July 1, 2008”

LIMITATIONS ON BENEFITS

• No benefit is payable by the Pentegra DB Plan unless the required contributions and application forms have been received by the Plan.

• Internal Revenue Service (IRS) requirements impose certain limitations on the amount of benefits that may be paid under this and other qualified retirement plans. (See Article XI of the Pentegra DB Plan Regulations.) These limitations normally affect only the highest-paid employees and are subject to adjustment in accordance with IRS regulations. The dollar limit on annual benefits payable from a defined benefit plan is $195,000 in 2009 ($185,000 in 2008), actuarially reduced for benefits commencing before age 62 and increased for benefits commencing after age 65. If an employee has less than 10 years of vesting service or is under age 65 when he retires, or if his employer has two (2) plans in effect, his benefits are subject to further restrictions.

• The Pentegra DB Plan, by law, cannot recognize annual compensation in excess of a certain dollar limit. The limit for the 2009 limitation year is $245,000 ($230,000 for the 2008 limitation year). After 2009, the compensation dollar limit may be adjusted by the IRS.

• If an employer should withdraw from the Pentegra DB Plan (see Article XII of the Regulations), and establish a comparable defined benefit plan as a qualified successor plan, all liabilities of such employer under the Pentegra DB Plan must be transferred to the qualified successor plan. If an employer should withdraw from the Pentegra DB Plan without establishing a qualified successor Plan, all liabilities of the employer under the Pentegra DB Plan must be annuitized through an insurance company selected by the Pentegra DB Plan. Limits may be imposed upon the benefits of certain higher-paid employees if an employer withdraws from the Pentegra DB Plan within 10 years after the later of its commencement date or the effective date of any change which increases benefits. (See Article XI, Section 1(c) of the Regulations).

• Amounts payable by the Pentegra DB Plan may not be assigned, and if any person entitled to a payment attempts to assign it, his interest in the amount payable may be terminated and held for the benefit of that person or his dependents.

• Your employer’s continued participation is subject to IRS qualifications and other regulations it may impose.

• The limitations on benefits imposed by the IRS are subject to changes on an annual basis.

18

“Employees hired prior to July 1, 2008 who have not attained age 50 or have not
completed 5 years of vesting service as of July 1, 2008”

INSURANCE OF BENEFITS

Benefits under the Plan are insured by the Pension Benefit Guaranty Corporation (PBGC) if the Pentegra DB Plan terminates. Generally, the PBGC guarantees most vested normal retirement age benefits, early retirement benefits, and certain disability and survivor pensions. However, the PBGC does not guarantee all types of benefits under covered plans, and the amount of benefit protection is subject to certain limitations.

The PBGC guarantees vested benefits at the level in effect on the date of Plan termination. However, if prior to the termination of a plan, the employer has been participating for less than five (5) years, or if benefits have been increased within the past five years, the whole amount of the vested benefits or the vested increase may not be guaranteed. In addition, there is a ceiling on the amount of monthly benefit the PBGC guarantees, which is adjusted periodically. A withdrawal of your employer from participation in the Pentegra DB Plan is not a plan termination under this paragraph, and only those benefits provided under Article XII of the Pentegra DB Plan Regulations are payable in the event of such a withdrawal.

For more information on the PBGC insurance protection and its limitations, ask the Plan Administrator or the PBGC. Inquiries to the PBGC should be addressed to the PBGC=s Technical Assistance Division, 1200 K Street N.W., Suite 930, Washington, D.C. 20005 — 4026 or call 202-326-4000 (not a toll free number). TTY/TTD users may call the federal relay service toll free at 1-800-877-8339 and ask to be connected to 202-326-4000. Additional information about the PBGC’s pension insurance program is available through the PBGC’s website on the Internet at http://www.pbgc.gov.

DISPUTED CLAIMS PROCEDURE

If you disagree with the Pentegra DB Plan with respect to any benefit to which you feel you are entitled, you should make a written claim to the President of the Pentegra DB Plan, who holds discretionary authority to approve or deny the claim.. If your claim is denied, you will receive written notice from him explaining the reason for the denial within 90 days after the claim is filed, which sets forth, in an understandable manner, the following information:

• The specific reason(s) for the denial of the claim;

• Reference to the specific plan provision on which the denial is based;

• A description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why that material or information is necessary; and

• A description of the Plan’s review procedures and the time limits applicable to those procedures, including a statement of the claimant’s right to bring a civil action under ERISA Section 502(a) following a denial on review.

The President’s decision will be final unless you appeal such decision in writing to the Retirement Committee of the Board of Directors of the Pentegra DB Plan at 108 Corporate Park Drive, White Plains, New York 10604, within 60 days after receiving the notice of denial. The written appeal should contain all information you wish to be considered. The Retirement Committee will review the claim within 60 days after the appeal is made. Its decision will be in writing, and will include the reason for such decision. The Committee’s decision will be final. In the case of a decision on appeal upholding the President’s initial denial of the claim, the President’s notice of its decision on appeal shall set forth, in an understandable manner, the following information:

• The specific reason(s) for the decision on appeal;

• Reference to the specific Plan provision on which the decision on appeal is based;

• A statement that the claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant to the claim for benefits; and

• A statement describing any voluntary appeal procedures (including voluntary arbitration or any other form of dispute resolution) offered by the Plan and the claimant’s right to obtain information sufficient to enable you or your beneficiary to make an informed judgment about whether to submit a benefit dispute to the voluntary level of appeal, and a statement of the claimant’s right to bring an action under ERISA Section 502(a).

19

“Employees hired prior to July 1, 2008 who have not attained age 50 or have not
completed 5 years of vesting service as of July 1, 2008”

QUALIFIED DOMESTIC RELATIONS ORDERS (“QDROS”)

A QDRO is a judgment, decree or order which has been determined by the Pentegra DB Plan, in accordance with the procedures established under the Pentegra DB Plan’s Regulations, to constitute a QDRO under the Internal Revenue Code.

To obtain copies of the Pentegra DB Plan’s Model QDRO and QDRO Procedures free of charge, please contact the Plan Administrator. (Please refer to the “Other Plan Information” section of this Summary to obtain the Plan Administrator’s address and telephone number).

20

“Employees hired prior to July 1, 2008 who have not attained age 50 or have not
completed 5 years of vesting service as of July 1, 2008”

STATEMENT OF ERISA RIGHTS

As a Member in the Comprehensive Retirement Program, you are entitled to certain rights and protections under the Employee Retirement Income Security Act of 1974 (ERISA). ERISA provides that all Members will be entitled to:

Receive Information About Your Plan and Benefits

• Examine, without charge, at the Plan Administrator’s office or at other specified locations, all documents governing the Plan, and a copy of the latest annual report (Form 5500 Series) filed by the Plan Administrator with the U.S. Department of Labor and available at the Public Disclosure Room of the Employee Benefits Security Administration.

• Obtain, upon written request to the Plan Administrator, copies of documents governing the operation of the Plan and copies of the latest annual report (Form 5500 Series) and updated summary plan description. The Administrator may make a reasonable charge for the copies.

• Receive a summary of the Plan’s annual financial report. The Plan Administrator is required by law to furnish each Member with a copy of this summary annual report.

• Obtain, without charge, a statement telling you whether you have a vested right to receive a pension at normal retirement (age 65) and if so, what your benefits would be at that time if you stop working under the Plan now. If you do not have a vested right to a pension, the statement will tell you how many more years you have to work to get such a right. This type of statement is provided automatically to each Member once a year (see “Your Personal Annual Statement” as described earlier).

Prudent Actions by Plan Fiduciaries

In addition to creating rights for Plan Members, ERISA imposes duties upon the people who are responsible for the operation of the Plan. The people who operate your Plan, called “fiduciaries” of the Plan, have a duty to do so prudently and in the interest of you and other Plan Members and beneficiaries. No one, including your employer or any other person, may fire you or otherwise discriminate against you in any way to prevent you from obtaining a pension benefit or exercising your rights under ERISA.

Enforce Your Rights

If your claim for a pension benefit is denied in whole or in part, you have a right to know why this was done, to obtain copies of documents relating to the decision without charge, and to appeal any denial, all within certain time schedules.

Under ERISA, there are steps you can take to enforce the above rights. For instance, if you request a copy of plan documents or the latest annual report from the Plan Administrator and do not receive them within 30 days, you may file suit in a Federal court. In such a case, the court may require the Plan Administrator to provide the materials and pay you up to $110 a day until you receive them, unless such materials were not sent for reasons beyond the Plan Administrator’s control. If you have a claim for benefits which is denied or ignored, in whole or in part, you may file suit in a state or Federal court.

In addition, if you disagree with the Plan Administrator’s decision (or lack thereof) concerning the qualified status of a domestic relations order, after you have complied with the remedies prescribed in the Plan’s QDRO Procedures and Disputed Claims Procedure outlined in this summary plan description, you may file suit in Federal court.

If it should happen that Plan fiduciaries misuse the Plan’s money, or if you are discriminated against for asserting your rights, you may seek assistance from the U. S. Department of Labor or, after you have complied with the Plan’s “Disputed Claims Procedure” outlined in this summary plan description, you may file suit in a Federal court. The court will decide who should pay court costs and legal fees. If you are successful, the court may order the person you have sued to pay these costs and fees. If you lose, the court may order you to pay these costs and fees (for example, if it finds your claim is frivolous).

21

“Employees hired prior to July 1, 2008 who have not attained age 50 or have not
completed 5 years of vesting service as of July 1, 2008”

Assistance with Your Questions

If you have any questions about your Plan, you should contact the Plan Administrator. If you have any questions about this statement or your rights under ERISA, or if you need assistance in obtaining documents from the Plan Administrator, you should contact the nearest office of the Employee Benefits Security Administration, U.S. Department of Labor, listed in your telephone directory or the Division of Technical Assistance and Inquiries; Employee Benefits Security Administration, U.S. Department of Labor, 200 Constitution Avenue, N. W. Washington, D.C. 20210. You may also obtain certain publications about your rights and responsibilities under ERISA by calling the publications hotline of the Employee Benefits Security Administration.

This Statement of ERISA Rights is required by Federal law and regulations.

22

“Employees hired prior to July 1, 2008 who have not attained age 50 or have not
completed 5 years of vesting service as of July 1, 2008”

OTHER PLAN INFORMATION

Plan Name:

Pentegra Defined Benefit Plan for Financial Institutions as adopted by
Federal Home Loan Bank of New York

Employer:

Federal Home Loan Bank of New York
101 Park Avenue
New York, NY 10178-0599

Telephone Number – 212-681-6000

Plan Sponsor:

The Comprehensive Retirement Program is sponsored by the –

Pentegra Defined Benefit Plan for Financial Institutions
108 Corporate Park Drive
White Plains, New York 10604
Telephone Number 914-694-1300

Employer Identification Number – 13-5645888
Plan Number – 001
Plan Year End – June 30

Plan Administrator:

The Plan Administrator is the President of the Pentegra DB Plan, whose place of business is the office of the Pentegra Defined Benefit Plan for Financial Institutions. The President is also the person designated as agent for service of legal process. Service of legal process may also be made upon a Plan Trustee.

Board of Directors:

The composition of the Board changes from year to year, but you may refer to the most recent Annual Report (which is furnished to your employer) for a current listing of Directors and their places of business.

Participating Employers:

Upon receipt of a written request for information regarding whether a particular employer is a Member of this multiple employer arrangement, we will provide you with a statement as to whether such employer is a Member and, if so, the employer’s address.

23

Our difference is your advantage
  Pentegra Retirement Services
108 Corporate Park Drive
White Plains, NY 10604
(800) 872-3473
www.pentegra.com

EX-10.08

Exhibit 10.08

PENTEGRA RETIREMENT SERVICES

Summary Plan Description

Pentegra
Defined Contribution Plan
for Financial Institutions

as adopted by:
Federal Home Loan Bank of New York

SUMMARY PLAN DESCRIPTION

for

Federal Home Loan Bank of New

York New York, NY

September 1, 2008

Pentegra Defined Contribution Plan
for Financial Institutions
108 Corporate Park Drive
White Plains, NY 10604

Dear Member:

We are pleased to present your Summary Plan Description. This Summary is designed to help you understand and appreciate the savings plan provided by Federal Home Loan Bank of New York through the Pentegra Defined Contribution Plan for Financial Institutions (formerly known as the Financial Institutions Thrift Plan) (the “Plan”).

The Plan is a tax-exempt, trusteed savings plan which was created in 1970. It is administered by a professional staff under the direction of a Board of Directors (the “Board”) comprised of officers of the Federal Home Loan Banks and participating financial institutions as well as the Plan’s President.

The Plan provides an opportunity for you to save and invest on a regular, long-term basis. All contributions to the Plan (a defined contribution type plan) are paid to the Trustee to be invested for the benefit of all members. An individual account is maintained for each member. Under certain conditions, a member may make withdrawals or take loans from their account based on its market value.

The Plan offers federal income tax advantages. You do not pay taxes on employer contributions or investment income until they are withdrawn. An employer subject to income tax may deduct its contributions.

This Summary highlights the main features of the Plan. The Plan and Declaration of Trust contain the governing provisions and should be consulted as official text in all cases. If there is any conflict between this Summary and the Plan Document, the Plan Document will control.

Finally, please note that wherever the masculine pronoun is used in this Summary, it is intended to include the feminine pronoun.

Board of Directors,

Pentegra Defined Contribution Plan for
Financial Institutions

SUMMARY OF YOUR BENEFITS

ELIGIBILITY	You will be eligible for membership in the Plan on the first day of the month coinciding with or next following the date you complete three months of employment. Your employer will notify you of your right to become a member when you first become eligible and will furnish you with an enrollment application. However, certain groups of employees are not eligible for membership in the Plan. Please refer to the “Determining Your Eligibility” section of this Summary.
PLAN SALARY	Plan Salary is defined as your basic salary rate, reflecting changes that occur during the year. In addition, any pre-tax contributions that you make are included in Plan Salary. Please refer to the “Plan Salary” section of this Summary.
PLAN CONTRIBUTIONS	Employee — You may elect to make a pre-tax and/or after-tax contribution of 1% to 19% (in 1% increments) of Plan Salary. If you are at least age 50, you may elect to make catch-up contributions ($5,000 for 2008, indexed).
	Employer — Your employer will contribute an amount equal to the greater of (A) or (B)
	(A)   (i) 100% of your contributions through your 3rd year of employment;
	(ii) 150% of your contributions during your 4th and 5th years of Employment; and
	(iii) 200%of your contributions starting with your 6th year of employment.
	OR
	(B)   The lesser of $75 per month or 2% of your Plan Salary.
	This percentage rate applies to the first 3% of your Plan Salary (see the “Plan Salary” section of this Summary). In addition, your employer may, in its sole discretion, make a profit sharing contribution to the Plan. You will be eligible to receive a profit sharing contribution if you are employed on the last day of the plan year, retire, die or become totally and permanently disabled prior to December 31 of the year for which the profit sharing contributions are being made to the Plan by your employer.
VESTING	You will be 100% vested in any employer matching and/or profit sharing contributions immediately upon enrollment in the Plan. You are always 100% vested in any contributions you make to the Plan. In other words, you will not give up any units based on your own contributions when you terminate employment.
LOANS	You may take a loan from your account and pay your account back with interest. Please refer to the “Borrowing From Your Account” section of this Summary to determine how you may take a loan from your account.
WITHDRAWALS	While you are working, you may withdraw all or part of your vested account balance subject to certain limitations. You may also make withdrawals from your account after termination of employment.
DISABILITY	If you are disabled, you will be entitled to the same withdrawal rights as if you had terminated employment.
DEATH	If you die before the value of your account is paid to you, your beneficiary may receive the full value of your account or may defer payment within certain limits. If you are married, your spouse will be your beneficiary unless your spouse consents in writing to the designation of a different beneficiary.

TABLE OF CONTENTS

Determining Your Eligibility	1
• Employee Eligibility	1
• Reenrollment	1
Making Contributions to the Plan	2
• Plan Contributions	2
• Allocation of Contributions	3
• IRS Nondiscrimination Rules	3
• Rollovers	4
• Plan Salary	4
Investing Your Account	5
• Investment of Contributions	5
• Valuation of Accounts	5
• Reporting to Members	5
Vesting	6
Making Withdrawals from Your Account	7
• While Employed	7
• Upon Termination of Employment	8
• Upon Disability	8
• Upon Death	9
Borrowing from Your Account	10
• Loans	10
Plan Limitations	11
Other Information	12
• Top Heavy Information	12
• Disputed Claims Procedure	12
• Qualified Domestic Relations Orders (QDRO’s)	12
Members Rights	13
• Statement of ERISA Rights	13
Plan Information	14

DETERMINING YOUR ELIGIBILITY

Employee Eligibility	You will be eligible for membership in the Plan on the first day of the month coinciding with or next following the date you complete three months of employment. Your employer will notify you of your right to become a member when you first become eligible and will furnish you with an enrollment application.
	In order for you to complete three months of employment, you must complete at least 250 hours of employment in a three consecutive month period. The initial three consecutive month period is measured from your date of employment. If you do not complete at least 250 hours of employment in such period, subsequent three month periods are measured.
	In counting hours you will be credited with an hour of employment for every hour you have a right to be paid. This includes vacation, sick leave, jury duty, etc. and any hours for which back pay may be due. Notwithstanding the above, the following groups of employees are not eligible for membership in the Plan:
	•     Flex staff employees.
	Flex staff employees are those that are not regular full time or part time employees. Flex staff employees are not eligible to participate, regardless of the number of hours actually worked during the Plan Year. However, Flex staff employees that were hired prior to August 1, 2001 will continue to be eligible to participate in the Plan.
	After you meet the Plan’s eligibility requirements and your completed enrollment form is received by the Plan Board, you will be enrolled in the Plan. Your participation will continue until the earlier of (a) your termination of employment and payment to you of your entire account or (b) your death.
Reenrollment	If you terminate employment and are subsequently reemployed by the same employer, you will be eligible for immediate reenrollment.

-1-

MAKING CONTRIBUTIONS TO THE PLAN

Plan Contributions	Employee — You may elect to make a pre-tax and/or after-tax contribution of 1% to 19% (in 1% increments) of Plan Salary (see the “Plan Salary” section of this Summary). You may elect not to make any contributions, in which case your employer will make the 2% minimum contribution as described below.
	You may change the rate at which you are contributing one time in any reporting period as of the first day of any contribution reporting period. You may suspend your contributions at any time, but suspended contributions may not subsequently be made up.
	Employer — Your employer will contribute an amount equal to the greater of (A) or (B)
	(A)    (i) 100% of your contributions through your 3rd year of employment;
	(ii) 150% of your contributions during your 4th and 5th years of employment; and
	(iii) 200%of your contributions starting with your 6th year of employment.
	OR
	(B)    The lesser of $75 per month or 2% of your Plan Salary.
	This percentage rate applies to the first 3% of your Plan Salary (see the “Plan Salary” section of this Summary).

Illustration
Employer’s Matching Contribution
Your	100% During		150% During		200% Starting
Contribution	2nd & 3rd Yrs.		4th & 5th Yrs.		with 6th Yr. of
Rate	of Employment		of Employment		Employment
1%		1.00%		1.50%		2.00%
2%		2.00%		3.00%		4.00%
3-19%		3.00%		4.50%		6.00%

In addition, your employer may, in its sole discretion, make a profit sharing contribution to the Plan. You will be eligible to receive a profit sharing contribution if you are employed on the last day of the plan year, retire, die or become totally and permanently disabled prior to December 31 of the year for which the profit sharing contributions are being made to the Plan by your employer.

Please refer to the “Making Withdrawals From Your Account” section of this Summary to determine if there are any restrictions on employer contributions on account of a withdrawal.

Catch-up Contributions — All employees who are eligible to make contributions to this Plan and who will reach age 50 before the end of a calendar year will be eligible to make catch-up contributions in accordance with, and subject to the limitations of, Section 414(v) of the Internal Revenue Code.

The maximum catch-up contribution for 2008 is $5,000 (as indexed in the future). The amount, if any, of your elective deferrals which will be characterized as catch-up contributions will be determined at the end of the Plan Year based upon the statutory limits and plan limits in effect for the Plan Year.

-2-

MAKING CONTRIBUTIONS TO THE PLAN

CONTINUED

	There are several ways in which a contribution could be characterized as a catch-up contribution, as illustrated in the following examples. Assume that the member is over age 50 in each example:
	Example 1: Suppose your annual salary is $125,000 and you contribute 15% of your Plan Salary to the Plan (as permitted under the terms of the Plan) for each contribution reporting period in 2008. At the end of the Plan Year, you will have contributed $18,750 to the Plan. Because this amount exceeds the statutory limit on elective deferrals ($15,500 in 2008), the excess ($3,250) will be treated as a catch-up contribution.
	Example 2: Same facts as provided in Example 1, except that your annual Plan Salary is $75,000. In this example, you will have contributed $11,250 to the Plan in 2008 ($75,000 x 15%). Because your contributions do not exceed either the Plan’s maximum contribution percentage or the elective deferral limitation ($15,500 in 2008) and no other limitations are impacted, no portion of your contributions is treated as a catch-up contribution.
	Example 3: Suppose that your annual Plan Salary is $110,000 in 2008, you earned total compensation of $100,000 in 2007 (making you a Highly-Compensated Employee for 2008), and you contributed $15,500 to the Plan in 2008. Because your $15,500 contribution does not exceed either the Plan’s maximum contribution percentage or the elective deferral limit ($15,500 in 2008), there is no catch-up contribution based upon the application of those two limits. However, further assume that the Plan determines that you are required to receive a $6,000 Actual Deferral Percentage (“ADP”) refund for 2008. In this scenario, $5,000 of your ADP refund would automatically be recharacterized as a catch-up contribution.
Allocation of Contributions	Your employer has established a Regular Account, 401(k) Account and Profit Sharing Account for each member. All of your contributions and all employer contributions will be allocated to these accounts. The total value of these accounts, including the value of your Rollover Account (see below), represents your interest in the Plan.
	Employee — You may allocate all or part of your contributions to your 401(k) Account. Contributions not allocated to your 401(k) Account will be allocated to your Regular Account.
	Employer — If you allocate a contribution of at least 2% to your 401(k) Account, all employer contributions will be allocated to your Regular Account. If you do not allocate any of your contributions to your 401(k) Account, employer contributions of the lesser of $75 per month or 2% of your Plan Salary will be allocated to your 401(k) Account. The balance of employer contributions, if any, will be allocated to your Regular Account.
IRS Nondiscrimination Rules	If you are a Highly Compensated Employee, a portion of your contributions and/or employer contributions made on your behalf, if any, may have to be returned to you in order to comply with special Internal Revenue Service (IRS) nondiscrimination rules (see the “Plan Limitations” section of this Summary for other limitations). In general, a Highly Compensated Employee is an employee who:
	(a)    was a 5% owner at any time during 2008 or 2007, or
	(b)    received annual compensation in excess of $100,000 for 2007.

-3-

MAKING CONTRIBUTIONS TO THE PLAN

CONTINUED

Rollovers	You may make a rollover contribution of an eligible rollover distribution from any other Internal Revenue Service qualified retirement plan or an individual retirement arrangement (IRA). These funds will be maintained in a separate Rollover Account in which you will have a nonforfeitable vested interest. Please note that you may establish a Rollover Account within the Plan prior to satisfying the Plan’s eligibility requirements. However, the establishment of a Rollover Account prior to satisfying such eligibility requirements will not constitute active membership in the Plan.
Plan Salary	Plan Salary is defined as your basic salary rate, reflecting changes occurring during the year.
	In addition, any pre-tax contributions that you make as well as pre-tax contributions to a Section 125 cafeteria plan and, unless the employer elects otherwise, Qualified Transportation Fringe benefits as defined under Section 132(f) of the Internal Revenue Code, are included in Plan Salary.
	Your Plan Salary for any year may not exceed a specified dollar amount as determined by the Internal Revenue Service each year. This limit is $230,000 for 2008, and is subject to adjustment in accordance with IRS regulations.

-4-

INVESTING YOUR ACCOUNT

Investment of Contributions	All contributions are invested at your direction in one or more of the investment funds provided under your Plan in whole percentages. These funds are described in greater detail in your enrollment kit.
	Please note that different investment instructions can be provided to the Plan for amounts already accumulated in your account and for future contributions. Certain restrictions may apply. Changes in investment instructions may be made by submitting a properly completed form, by using Pentegra by Phone, the Pentegra Voice Response System or by accessing Pentegra Online at www.pentegra.com. You may access Pentegra by Phone by calling 1-800-433- 4422.
	Any changes which are received by Stock Market Closing (usually 4 p.m. Eastern Time) will be processed at the business day’s closing price. Transaction changes received after Stock Market Closing will be processed on the next business day. Your Plan allows for a change of investment allocation on a daily basis.
	Investment changes made by submitting a form is effective on the valuation date (see the “Valuation of Accounts” section of this Summary) on which your written notice is processed.
	No amounts invested in the Stable Value Fund may be transferred directly to the Money Market Fund. Stable Value Fund amounts transferred to and invested in any of the other funds provided under the Plan for a period of three months may subsequently be transferred to the Money Market Fund upon the submission of a separate Change of Investment form.
	If no investment direction is given, all contributions credited to a participant’s account will be invested in the target date retirement fund, the year of which coincides with or next follows the year in which the member reaches age 65.
Valuation of Accounts	The Plan uses a unit system for valuing each Investment Fund. Under this system each participant’s share in any Investment Fund is represented by units. The unit value is determined as of the close of business each regular business day (daily valuation). The total dollar value of a participant’s share in any Investment Fund as of any valuation date is determined by multiplying the number of units to the participant’s credit by the unit value of the Fund on that date. The sum of the values of the Funds you select represents the total value of your Plan account.
	NOTE: If for some reason (such as shut down of financial markets) the underlying portfolio of any Investment Fund cannot be valued, the valuation date for such Investment Fund will be the next day on which the underlying portfolios can be valued.
Reporting to Members	As soon as practicable after the end of each calendar quarter, the Plan will send you a Quarterly Statement. This Statement provides information about your account including its market value in each Investment Fund. Activity for the quarter is reported by Investment Fund and contribution type.

-5-

VESTING

Vesting	Vesting is the process under which you earn a non-forfeitable right to the units in your account. You are always 100% vested in any contributions you make to the Plan. In other words, you will not give up any units based on your own contributions when you terminate employment.
	Your employer has also provided that you are immediately 100% vested in any employer matching and/or profit sharing contributions credited to your account.

-6-

MAKING WITHDRAWALS FROM YOUR ACCOUNT

While Employed	You may make a total or partial withdrawal of the vested portion of your account by filing the appropriate form with the Plan. A withdrawal is based on the unit values on the valuation date on which a properly completed withdrawal form is received and processed by the Plan. (See the “Valuation of Accounts” section of this Summary).
	Under current law, an excise tax of 10% is generally imposed on the taxable portion of withdrawals occurring prior to your reaching age 591/2. There are certain exceptions to the 10% excise tax. For example, the 10% excise tax will not apply to withdrawals made on account of separation from service on or after the date you have reached age 55, death or disability.

A	From the Regular Account:
	Not more than one voluntary withdrawal may be made from your Regular Account in a calendar year unless it is limited to your own contributions, if any, made prior to January 1, 1987 (“pre 1987 contributions”) without earnings.
	No partial withdrawal of less than $1,000 will be permitted unless it is for either the full amount of (a) your own “pre-1987 contributions” without earnings, (b) your own contributions (pre-1987 plus post-1986) and earnings on them or (c) the total vested balance of your Regular Account.
B	From the 401(k) Account:
	Not more than one withdrawal may be made from your 401(k) Account in a calendar year.
	As required by Internal Revenue Service Regulations, a withdrawal from your 401(k) Account prior to age 591/2 or termination of employment can only be made on account of hardship. The existence of an immediate and heavy financial need, and the lack of any other available financial resources to meet this need, must be demonstrated for a hardship withdrawal. The following situations will be considered to constitute an immediate and heavy financial need:

1)	Medical Expenses — Medical expenses (other than amounts paid by insurance) incurred by the member as well as the member’s spouse or dependents (other than amounts paid by insurance).
2)	Home Purchase — Purchase of a principal residence of the member (mortgage payments are excluded).
3)	Educational Expenses — Tuition, including room and board, for the next 12 months of post-secondary education of the member as well as the member’s spouse, children, or dependents.
4)	Prevention of Eviction — Prevention of eviction from a member’s principal residence or foreclosure on the mortgage of a member’s principal residence.
5)	Funeral Expenses — Burial or funeral expenses for the member’s deceased parent, spouse, children, or dependents.
6)	Home Damage — Expenses for the repair of damages to the member’s principal residence that would qualify as a tax deductible casualty loss.

No partial withdrawal of less than $1,000 will be permitted unless it is for either (a) the amount necessary to satisfy your hardship or (b) the total vested balance of your 401(k) Account. Only one in-service withdrawal may be made in any Plan Year.

-7-

MAKING WITHDRAWALS FROM YOUR ACCOUNT

CONTINUED

	You will be required to receive a distribution of the remaining available vested balance, if any, of your Regular Account and your Rollover Account, if any, prior to making a hardship withdrawal from your 401(k) Account. In no event may the maximum amount of a hardship withdrawal from your 401(k) Account exceed the value of your 401(k) Account as of December 31, 1988 plus the amount of any 401(k) contributions which you make to the Plan on or after January 1, 1989 reduced by the amount of any hardship withdrawals which you make from your 401(k) Account on or after January 1, 1989.
C.	From the Rollover Account:
	Not more than one withdrawal may be made from your Rollover Account in a calendar year. No partial withdrawal of less than $1,000 will be permitted unless it is for the total balance of your Rollover Account.
D.	From the Profit Sharing Account:
	Not more than one withdrawal may be made from your Profit Sharing Account in a calendar year. No partial withdrawal of less than $1,000 will be permitted unless it is for the total balance of your Profit Sharing Account.
	NOTE: In general, employer contributions credited on your behalf will not be available for in-service withdrawal until such employer contributions have been invested in the Plan for at least 24 months (2 years) or you have been a participant in the Plan for at least 60 months (5 years) or have reached age 591/2.

Upon Termination of Employment	You may leave your account with the Plan and defer commencement of receipt of your vested balance until April 1 of the calendar year following the later of (i) the calendar year in which you reach age 701/2, or (ii) the calendar year in which you retire (unless you are a 5% owner during the year in which you reach age 701/2) except to the extent that your vested account balance as of the date of your termination is less than $500, in which case your interest in the Plan will be cashed out and payment sent to you.
	Please note that if you leave your account with the Plan and your vested balance is less than $20,000, your account will be assessed an annual administrative fee in the amount of $24.00. If your vested account balance is equal to or exceeds $20,000, no annual administrative fee will be assessed to your account. You may make withdrawals from your account(s) at any time after you terminate employment. You may continue to change the investment instructions with respect to your remaining account balance and make withdrawals as provided above. (See the “Investment of Contributions” section of this Summary).
	If your total vested account equals or exceeds $500, you may elect, in lieu of a lump sum payment, to be paid in annual installments with the right to take in a lump sum the vested balance of your account at any time during such payment period. If the actuarial determination of your life expectancy is less than the period you elect, the maximum period over which you can receive annual installments will be the next lower payment period.
Upon Disability	If you are disabled in accordance with the definition of disability under the Plan, you will be entitled to the same withdrawal rights as if you had terminated your employment.
	You are disabled under the Plan if you are eligible to receive (i) disability insurance benefits under Title II of the Federal Social Security Act or (ii) disability benefits under any other Internal Revenue Service qualified employee benefits plan or long-term disability plan of your employer.

-8-

MAKING WITHDRAWALS FROM YOUR ACCOUNT

CONTINUED

Upon Death	If you die while you are a member of the Plan, the value of your entire account will be payable to your beneficiary. This payment will be made in the form of a lump sum, unless the payment would exceed $500, in which event payments must commence by December 31 of the calendar year immediately following the calendar year in which you died or, if your spouse is your beneficiary, by December 31 of the calendar year in which you would have reached age 701/2, if later.
	The minimum amount that will be distributed for each calendar year after the year of your death is the quotient obtained by dividing your account balance by your remaining life expectancy calculated using your age in the year of death, reduced by one for each subsequent year. If there is no designated beneficiary your entire account balance must be distributed by December 31 of the calendar year following the fifth anniversary of your death.
	If you are married, your spouse will be your beneficiary unless your spouse consents in writing to the designation of a different beneficiary.

-9-

BORROWING FROM YOUR ACCOUNT

Loans	You may borrow from your 401(k) Account and Rollover Account as well as the vested portion of your Regular Account and Profit Sharing Account. You may borrow any amount between $1,000 and $50,000 (reduced by your highest outstanding loan balance(s) from the Plan during the preceding 12 months). In no event may you borrow more than 50% of the vested balance of your account.
	You may borrow only once in each calendar year from your Profit Sharing Account, Regular Account or 401(k) Account and once each calendar year from your Rollover Account. Each loan must be for at least $1,000. Your 401(k) Account will first be used for the loan unless you specifically request otherwise. In any event, whichever account you borrow from first, such account must be exhausted before you may borrow any amount from the other account. A loan from your Rollover Account, if you have one, will be considered a separate loan. The amount of your loan will first be deducted from the taxable portion of your account and then from the after-tax portion, if any.
	The amount of your loan will be deducted on the valuation date (see the “Valuation of Accounts” section of this Summary) on which the Plan office receives and processes your properly executed Loan Application, Promissory Note and Disclosure Statement and Truth-in-Lending Statement. On request, the Plan Administrator will provide you with the application form. The loan will not affect your right to continue making contributions or to receive employer contributions.
	Your loan will be deducted proportionately from the funds in which the account (from which you are taking the loan) is invested. Your loan repayments will be credited in accordance with your investment instructions in effect at the time of each repayment.
	The rate of interest for the term of the loan will be established as of the loan date, and shall be a reasonable rate of interest generally comparable to the rates of interest then in effect at a major banking institution (e.g., the Barron’s Prime Rate [base rate] plus 1%).
	Repayments are made through payroll deductions and will be transmitted along with the employer’s contribution reports. The repayment period is between one and 15 years for loans used exclusively for the purchase of a primary residence or between one and five years for all other loans, at your option. After three monthly payments have been made, you may repay the outstanding balance of the loan (subject to the terms of your loan document).
	As you repay the loan, the principal portion, together with the interest, will be credited to your account. In this way, you will be paying interest to yourself. A $50.00 origination fee and a $40.00 annual administrative fee will be subtracted from your account. The origination fee, plus the first year’s administrative fee, will be deducted proportionately from your account at the time of origination. Subsequent annual administrative fees will be deducted from your account.
	In the event that you leave employment or die before repaying the loan, the outstanding balance will be due and, if not paid by the end of the calendar quarter following the calendar quarter in which you terminate employment or die, will be deemed a distribution and subject to the applicable tax treatment. However, you may elect upon termination of employment to continue to repay the loan on a monthly basis directly to the Plan office.

-10-

PLAN LIMITATIONS

Plan Limitations	Internal Revenue Service (“IRS”) requirements impose certain limitations on the amount of contributions that may be made to this and other qualified plans. In general, the annual “contributions” made to a defined contribution plan such as this Plan, in respect of any member, may not exceed the lesser of (a) 100% of the member’s total compensation or (b) a specific dollar amount, as determined by the Internal Revenue Service each year. The dollar limit is $46,000 for 2008 and is subject to adjustment in accordance with IRS regulations.
	For this purpose, “contributions” include employer contributions and member contributions. The combined annual member contributions allocated to a member’s 401(k) Account may not exceed a specific dollar amount, as determined by the Internal Revenue Service each year. This limit is $15,500 in 2008, and is subject to adjustment in accordance with IRS regulations. If your employer has another tax-qualified plan in effect, these limits are subject to additional restrictions.
	Each member and beneficiary assumes the risk in connection with any decrease in the market value of his account. The benefit to which you may be entitled when you take a distribution of your account cannot be determined in advance.
	As a defined contribution plan, the Plan is not covered by the plan termination insurance provisions of Title IV of the Employee Retirement Income Security Act of 1974 (“ERISA”). Therefore, your benefits are not insured by the Pension Benefit Guaranty Corporation in the event of a plan termination.
	The Trustee is empowered to charge against and pay out of the Trust Fund, to the extent not paid by the employers, all proper costs of operation and administration of the Plan, including the expenses and compensation of the Trustee, expenses of the Board and compensation for its agents.
	Except as may otherwise be required by applicable law or pursuant to the terms of a Qualified Domestic Relations Order, amounts payable by the Plan generally may not be assigned, and if any person entitled to a payment attempts to assign it, his interest in the amount payable may be terminated and held for the benefit of that person or his dependents.
	Membership in the Plan does not give you the right to continued employment with your employer or affect your employer’s right to terminate your employment.
	Your employer’s continued participation is subject to IRS approval and any requirements the IRS may impose.
	An employer may terminate its participation in the Plan at any time. In addition, the Board retains the right to terminate the Plan or an employer’s participation in the Plan in certain circumstances. If the Plan is terminated or if your employer’s participation in the Plan is terminated, there will be no further contributions to the Plan for your account.

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OTHER INFORMATION

Top Heavy Information	A “top heavy” plan is a plan under which more than 60% of the accrued benefits (account values) are for key employees. Key employees generally include officers and shareholders earning more than $150,000 per year (indexed for cost-of-living adjustments), 5% owners of the Employer, and 1% owners of the Employer earning more than $150,000 per year. If your employer’s plan is top heavy for a particular Plan Year, you may be entitled to a minimum employer contribution equal to the lesser of 3% of your Plan Salary or the greatest percentage contributed by the employer for any key employee. This minimum contribution would be offset by the regular contribution made by your employer (See the “Plan Contributions” section of this Summary).
	In order to receive the minimum contribution for any Plan Year, you must be employed on the last day of the Plan Year (December 31). If your employer also provides a defined benefit or another defined contribution plan, your minimum benefit may be provided under such plan.
Disputed Claims Procedure	If you disagree with respect to any benefit to which you feel you are entitled, you should make a written claim to the President of the Plan. If your claim is denied, you will receive written notice explaining the reason for the denial within 90 days after the claim is filed.
	The President’s decision will be final unless you appeal such decision in writing to the Board of Directors of the Plan, within 60 days after receiving the notice of denial. The written appeal should contain all information you wish to be considered. The Board will review the claim within 60 days after the appeal is made. Its decision will be in writing and will include the reason for such decision. The Board’s decision will be final.
Qualified Domestic Relations Orders (QDRO’s)	A QDRO is a judgment, decree or order which has been determined by the Plan, in accordance with the procedures established under the provisions of the Plan, to constitute a QDRO under the Internal Revenue Code.
	To obtain copies of the Plan’s Model QDRO and QDRO Procedures, free of charge, please contact the Plan Administrator. (Please refer to the “Plan Information” section of this Summary to obtain the Plan Administrator’s address and telephone number).

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MEMBERS RIGHTS

Statement of ERISA Rights	As a participant of the Plan, you are entitled to certain rights and protection under the Employee Retirement Income Security Act of 1974 (ERISA) which provides that all members shall be entitled to:
	•    Examine, without charge, at the Plan Administrator’s office or at other specified locations, all plan documents, and copies of all documents filed by the Plan Administrator with the U. S. Department of Labor such as detailed annual reports and plan descriptions.
	•    Obtain copies of all plan documents and other plan information upon written request to the Plan Administrator. The Administrator may make a reasonable charge for the copies.
	•    Receive a summary of the Plan’s annual financial report. The Plan Administrator is required by law to furnish each member with a copy of such summary.
	In addition to creating rights for Plan members, ERISA imposes duties upon the people who are responsible for the operation of the Plan. The people who operate your Plan, called “fiduciaries”, have a duty to do so prudently and in the interest of you and other plan participants and beneficiaries. No one may fire you or otherwise discriminate against you in any way to prevent you from obtaining a benefit or exercising your rights under ERISA. If your claim for a benefit is denied in whole or in part, you will receive a written explanation of the reason for the denial. As already explained, you also have the right to have your claim reconsidered.
	Under ERISA, there are steps you can take to enforce the above rights. For instance, if you request materials from the Plan Administrator and do not receive them within 30 days, you may file suit in a federal court. In such a case, the court may require the Plan Administrator to provide the materials and pay you up to $110 a day until you receive them, unless such materials were not sent for reasons beyond the Administrator’s control. If you have a claim for benefits which is denied or ignored, in whole or in part, you may file suit in a state or federal court.
	In addition, if you disagree with the Plan Administrator’s decision (or lack thereof) concerning the qualified status of a domestic relations order subsequent to the 18 month period described in Section 414(p) of the Code, after you complied with the remedies prescribed by the Plan’s QDRO procedures and the Disputed Claims Procedures outlined in the Summary Plan Description, you may file suit in federal court.
	If it should happen that Plan fiduciaries misuse the Plan’s money, or if you are discriminated against for asserting your rights, you may seek assistance from the U.S. Department of Labor or, after you have complied with the Disputed Claims Procedure outlined in this Summary Plan Description, you may file suit in a federal court. The court will decide who should pay court costs and legal fees. If you are successful, the court may order the person you have sued to pay these costs and fees. If you lose, the court may order you to pay such costs and fees (for example, if it finds your claim is frivolous).
	If you have any questions about your Plan, you should contact the Plan Administrator. If you have any questions about this statement or your rights under ERISA, you should contact the nearest office of the Employee Benefits Security Administration, U.S. Department of Labor, listed in your telephone directory or the Division of Technical Assistance and Inquiries; Employee Benefits Security Administration, U.S. Department of Labor, 200 Constitution Avenue, N.W., Washington D.C. 20210.
	This Statement of ERISA Rights is required by federal law and regulation.

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PLAN INFORMATION

Employer	Federal Home Loan Bank of New York
	101 Park Avenue
	New York, NY 10178-0599
	Telephone Number: (212) 681-6000
Plan Sponsor:	The Plan is sponsored by the —
	Pentegra Defined Contribution Plan for Financial Institutions
	108 Corporate Park Drive
	White Plains, NY 10604
	Telephone Number — (914) 694-1300
	Pentegra by Phone — (800) 433-4422
	Pentegra Online — www.pentegra.com
	Employer Identification Number — 13-6321489
	Plan Number — 002
	Plan Year End — December 31
Plan Administrator:	The Plan Administrator is the President of the Plan whose place of business is the office of the Pentegra Defined Contribution Plan for Financial Institutions. The President is also the person designated as agent for service of legal process. Service of legal process may also be made upon the Plan Trustee.
Board of Directors:	The composition up of the Board changes from year to year, but you may refer to the most recent Annual Report (which is sent to your employer) for a current listing of the Board members and their places of business.
Trustee:	The Bank of New York
	One Wall Street
	New York, NY 10286
Participating Employers:	Upon receipt of a written request for information regarding whether a particular employer is a member of this multiple employer arrangement, we will provide you with a statement as to whether such employer is a member and, if so, the employer’s address.

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Our difference is your advantage Pentegra Retirement Services
108 Corporate Park Drive
White Plains, NY 10604
(800) 872-3473
www.pentegra.com

PENTEGRA DEFINED CONTRIBUTION PLAN
FOR FINANCIAL INSTITUTIONS

16^th Revision, Amended and Restated, Effective January 1, 2008

108 Corporate Park Drive
White Plains, N.Y. 10604

A tax-exempt, trusteed savings plan
established July 1, 1970
in order that eligible employees
of financial institutions and other organizations serving them
may save and invest on a regular, long term basis.

TABLE OF CONTENTS

	Page
PURPOSE		i
ARTICLE I DEFINITIONS		1
ARTICLE II PARTICIPATION AND MEMBERSHIP		8
Section 1. Employer Participation		8
Section 2. Employee Membership		8
ARTICLE III CONTRIBUTIONS		12
Section 1. Contributions by Members		12
Section 2. Regular Contributions by Employer		12
Section 3. Supplemental Contributions by Employer		14
Section 4. 401(k) Features		15
Section 5. Remittance of Contributions		22
Section 6. Transfer of Funds and Rollover Contributions		22
Section 7. Limitations on Member Contributions and Matching Employer Contributions		27
Section 8. Profit Sharing Feature		30
Section 9. Catch-up Contributions		33
Section 10. Automatic Enrollment		33
ARTICLE IV INVESTMENT OF CONTRIBUTIONS		37
Section 1. General		37
Section 2. Qualified Default Investment Alternative		38
ARTICLE V MEMBERS’ ACCOUNTS, UNITS AND VALUATION		40
ARTICLE VI VESTING OF UNITS		41
Section 1. Vesting		41
Section 2. Forfeitures		44
ARTICLE VII WITHDRAWAL PAYMENTS		46
Section 1. General		46
Section 2. Account Withdrawal While Employed		47
Section 3. Account Withdrawal Upon Termination of Employment or Employer Participation		47
Section 4. Account Withdrawal Upon Member’s Disability		52
Section 5. Member’s Death		53
Section 6. Minimum Distribution Requirements		54

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	Page
ARTICLE VIII LOAN PROGRAM		60
Section 1. General		60
Section 2. Loan Application		60
Section 3. Permitted Loan Amount		61
Section 4. Source of Funds for Loan		61
Section 5. Conditions of Loan		61
Section 6. Crediting of Repayment		62
Section 7. Cessation of Payments on Loan		63
Section 8. Loans to Former Members and Beneficiaries		63
ARTICLE IX ADMINISTRATION OF PLAN		64
Section 1. Board of Directors		64
Section 2. Trust Agreement		66
ARTICLE X MISCELLANEOUS PROVISIONS		67
Section 1. General Limitations		67
Section 2. Top Heavy Provisions		68
Section 3. Information and Communications		72
Section 4. Small Account Balances		72
Section 5. Amounts Payable to Incompetents, Minors or Estates		72
Section 6. Non-alienation of Amounts Payable		72
Section 7. Unclaimed Amounts Payable		73
Section 8. Leaves of Absence		73
Section 9. Return of Contributions to Employer		74
Section 10. Controlling Law		74
ARTICLE XI TERMINATION OF EMPLOYER PARTICIPATION		75
Section 1. Termination by Employer		75
Section 2. Termination by Board		75
Section 3. Termination Distribution		75
ARTICLE XII AMENDMENT OR TERMINATION OF THE PLAN AND TRUST		76
TRUSTS ESTABLISHED UNDER THE PLAN		77

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PURPOSE

The purpose of the Pentegra Defined Contribution Plan for Financial Institutions (the “Plan” or “Pentegra DC Plan”) is to provide Members of participating Employers with a convenient way to save on a regular and long term basis and, in addition to, or in lieu of such benefit, a benefit under a Profit Sharing Feature, all as elected by the Employer, and as set forth herein and in the Trust Agreement adopted as a part of this Plan. This Plan, as hereby amended and restated, and the Trust established hereunder, are intended to qualify as a plan and trust which meet the requirements of Sections 401(a), 401(k), and 501(a), respectively, of the Internal Revenue Code of 1986, as now in effect or hereafter amended, or any other applicable provisions of law including, without limitation, the Employee Retirement Income Security Act of 1974, as amended. The Plan is applicable to Members who earn one Hour of Employment on or after the Plan’s Effective Date unless specifically provided otherwise herein or otherwise required by applicable law. If a Member has not earned onr Hour of Employment on or after the Plan’s Effective Date, the Member’s benefits shall be based on the Plan’s predecessor plan document. The Effective Date of this Plan, as herein amended and restated, is generally as of January 1, 2008, unless otherwise provided herein or under applicable law.

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ARTICLE I DEFINITIONS

	The following words and phrases as used in this Plan shall have the following meanings:
1.	“Account” means the Plan account established and maintained in respect of each Member pursuant to Article V, including the Member’s 401(k) Account, Roth 401(k) Account, Regular Account, Rollover Account (including Profit Sharing Rollover Amounts), Safe Harbor CODA Account, and Profit Sharing Account.
2.	“Actual Deferral Percentage Test Safe Harbor” means the method described in Section 4(J) of Article III for satisfying the actual deferral percentage test of Section 401(k) (3) of the Code.
3.	“Actual Deferral Percentage Test Safe Harbor Contributions” means Employer matching contributions and non-elective contributions described in Section 4(J) of Article III.
4.	“Basic Amounts” means, with respect to a Member, the contributions made on behalf of the Member by the Employer pursuant to Article III, Section 2(B) and earnings thereon.
5.	“Beneficiary” means the person or persons designated to receive any amount payable under the Plan upon the death of a Member. Such designation may be made or changed only by the Member on a form provided by, and filed with, the Board prior to his death. If the Member is not survived by a Spouse and if no Beneficiary is designated, or if the designated Beneficiary predeceases the Member, then any such amount payable shall be paid to such Member’s estate upon his death.
6.	“Board” means the Board of Directors provided for in Article IX, Section 1.
7.	“Break in Service” means a Plan Year during which an individual has not completed more than 500 Hours of Employment, as determined by the Board in accordance with the IRS Regulations. Solely for purposes of determining whether a Break in Service has occurred, an individual shall be credited with the Hours of Employment which such individual would have completed but for a maternity or paternity absence, as determined by the Board in accordance with this Article I, Paragraph (7), the Code and the applicable regulations issued by the DOL and the IRS; provided, however, that the total Hours of Employment so credited shall not exceed 501 and the individual timely provides the Board with such information as it may require. Hours of Employment credited for a maternity or paternity absence shall be credited entirely (i) in the Plan Year in which the absence began if such hours of Employment are necessary to prevent a Break in Service in such year, or (ii) in the following Plan Year. For purposes of this Article I, Paragraph (7), maternity or paternity absence shall mean an absence from work by reason of the individual’s pregnancy, the birth of the individual’s child or the placement of a child with the individual in connection with the adoption of the child by such individual, or for purposes of caring for a child for the period immediately following such birth or placement.
8.	“Code” means the Internal Revenue Code of 1986, as now in effect or as hereafter amended. All citations to sections of the Code are to such sections as they may from time to time be amended or renumbered.

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9.	“Commencement Date” means the date on which an Employer begins to participate in the Plan.
10.	“Contribution Determination Period” means the Plan Year, fiscal year, or calendar or fiscal quarter, as elected by an Employer, upon which eligibility for and the maximum permissible amount of any contribution to the Profit Sharing Feature, as defined in Article III, Section 8, is determined. Notwithstanding the foregoing, for purposes of Article VI, Section 2(B), Contribution Determination Period means the Plan Year.
11.	“Disability” means a Member’s disability as defined in Article VII, Section 4.
12.	“DOL” means the United States Department of Labor.
13.	“Employee” means any person in the Employment of, and who receives a salary from, an Employer, and any leased employee within the meaning of Section 414(n)(2) of the Code, unless the Employer elects to exclude leased employees from participation of the Plan under Article II, Section 2(H). Notwithstanding the foregoing, if such leased employees constitute less than twenty percent (20%) of the Employer’s Non-highly compensated workforce within the meaning of Section 414(n)(5)(C)(ii) of the Code, such leased employees are not Employees if they are covered by a plan meeting the requirements of Section 414(n)(5)(B) of the Code. A director of the Employer is not eligible to participate in the Plan unless he is also an Employee.
14.	“Employer” means any entity which has adopted the Plan in accordance with Article II, Section 1.
15.	“Employment” means all periods of service with an Employer commencing with the Employee’s first day of employment or reemployment and ending on the date a break in service begins. The first day of employment or reemployment is the first day the Employee performs an hour of service. An Employee will also receive credit for any period of severance of less than 12 consecutive months. Fractional periods of a year will be expressed in terms of days.
	Hour of service shall mean each hour for which an Employee is paid or entitled to payment for the performance of duties for an Employer.
	For purposes of this Section 15, break in service is a period of severance of at least 12 consecutive months.
	Period of severance is a continuous period of time during which the Employee is not employed by an Employer. Such period begins on the date the Employee retires, quits or is discharged or, if earlier, the 12 month anniversary of the date on which the Employee was otherwise first absent from service.
	If an Employer is a member of an affiliated service group (under Section 414(m) of the Code), a controlled group of corporations (under Section 414(b) of the Code), a group of trades or businesses (under Section 414(c) of the Code), or any other entity required to be aggregated with the Employer pursuant to section 414(o) of the Code, service will be credited for any employment for any period of time for any other member of such group. Service will also be credited for any individual required under section 414(n) or section 414(o) to be considered an employee of any Employer aggregated under section 414(b), (c), or (m).

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	In the case of an Employee who is absent from work for maternity or paternity reasons, the 12-consecutive month period beginning on the first anniversary of the first date of such absence shall not constitute a break in service. For purposes of this paragraph, an absence from work for maternity or paternity reasons means an absence (1) by reason of the pregnancy of the Employee, (2) by reason of the birth of a child of the Employee, (3) by reason of the placement of a child with the Employee in connection with the adoption of such child by such Employee, or (4) for purposes of caring for such child for a period beginning immediately following such birth or placement.
	Solely for purposes of determining vesting, “Employment” shall include service performed by an individual for an Employer or members of an affiliated service group (under Code Section 414(m)), a controlled group of corporations (under Code Section 414(b)), or a group of trades or businesses under common control (under Code Section 414(c)), of which the Employer is a member, during the period such individual is not a member of a class of Employees otherwise eligible to participate in the Plan.
16.	“Enrollment Date” means the date on which an Employee becomes a Member as provided under Article II, Section 2.
17.	“ERISA” means the Employee Retirement Income Security Act of 1974, as now in effect or as hereafter amended.
18.	“401(k) Account” means the Plan account established and maintained in respect of a Member pursuant to Article III, Section 4 and Article V, and shall include all amounts (and earnings thereon) credited thereto on behalf of the Member pursuant to the provisions of Article III. Unless specified otherwise, the term “401(k) Account” shall also include a Member’s Roth 401(k) Account.
19.	“401(k) Elective Deferral” means a Member’s pre-tax elective Salary deferrals pursuant to Article III, Section 4 and a Member’s Roth Elective Deferrals pursuant to Article III, Section 4(D).
20.	“Highly Compensated Employee” or “Highly Compensated Member” means an Employee or a Member (i) who is a 5 percent owner at any time during the look-back year or determination year, or (ii) (a) who is employed during the determination year and who during the look-back year received compensation from the Employer in excess of $105,000 (in 2008) (as adjusted pursuant to the Code and Regulations for changes in the cost of living), and (b) if elected by the Employer was in the top-paid group of Employees for such look-back year.
	For this purpose, the determination year shall be the Plan Year. The look-back year shall be the 12-month period immediately preceding the determination year.
	The top-paid group shall consist of the top 20 percent of the Employees when ranked on the basis of compensation paid by the Employer.
	The determination of who is a Highly Compensated Employee will be made in accordance with Section 414(q) of the Code and the IRS Regulations thereunder.

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21. “Hour of Employment” means

(A) Each hour for which an Employee is paid, or entitled to payment, for the performance of duties for an Employer. These hours will be credited to the Employee for the computation period in which the duties are performed; and

(B) Each hour for which an Employee is paid, or entitled to payment, by an Employer on account of a period of time during which no duties are performed (irrespective of whether the employment relationship has terminated) due to vacation, holiday, illness, incapacity (including disability), layoff, jury duty, military duty or leave of absence. No more than 501 Hours of Employment will be credited under this Subsection (B) for any single continuous period (whether or not such period occurs in a single computation period). Hours under this Subsection (B) will be calculated and credited pursuant to Section 2530.200b-2 of the DOL Regulations which is incorporated herein by this reference; and

(C) Each hour for which back pay, irrespective of mitigation of damages, is either awarded or agreed to by an Employer. The same Hours of Employment will not be credited both under Subsection (A) or (B), as the case may be, and under this Subsection (C). These hours will be credited to the Employee for the computation period or periods to which the award or agreement pertains rather than the computation period in which the award, agreement or payment is made.

Hours of Employment will be credited for employment with other members of an affiliated service group (under Code Section 414(m)), a controlled group of corporations (under Code Section 414(b)), or a group of trades or businesses under common control (under Code Section 414(c)), of which the Employer is a member, and any other entity required to be aggregated with such Employer pursuant to Code Section 414(o).

Hours of Employment will also be credited for any individual considered an Employee for purposes of the Plan under Code Section 414(n) or Section 414(o).

Solely for purposes of determining eligibility to participate, “Hour of Employment” shall include service performed by an individual for an Employer or members of an affiliated service group (under Code Section 414(m)), a controlled group of corporations (under Code Section 414(b)), or a group of trades or businesses under common control (under Code Section 414(c)), of which the Employer is a member, during the period such individual is not a member of a class of Employees otherwise eligible to participate in the Plan.

22.	“IRS” means the United States Internal Revenue Service.
23.	“Leave of Absence” means an absence authorized by an Employee’s Employer on a uniform basis, in accordance with Article X, Section 8.

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24.	“Matching Amounts” means, with respect to a Member, the contributions made on behalf of the Member by the Employer pursuant to Article III, Section 2(A) and earnings thereon.
25.	“Member” means an Employee enrolled in the membership of the Plan under Article II, Section 2. Notwithstanding the foregoing, Member shall include a former Member, except for purposes of Article III (other than Section 6 thereof) of the Plan.
26.	“Month” means any calendar month.
27.	“Non-highly Compensated Employee” means an Employee who is not a Highly Compensated Employee.
28.	“Normal Retirement Age” means the Member’s sixty-fifth (65th) birthday.
29.	“Plan” or “Pentegra DC Plan” means the Pentegra Defined Contribution Plan for Financial Institutions established herein and as from time to time amended.
30.	“Plan Year” means a 12 month period ending December 31.
31.	“Profit Sharing Account” means the Plan account established in respect of each Member pursuant to Article III, Section 8(B)(2) and Article V which shall be maintained separate from any other Account established in respect of such Member under the Plan. Except as otherwise indicated under the Plan, a Member’s Profit Sharing Account shall not include his Profit Sharing Rollover Amounts.
32.	“Profit Sharing Rollover Amounts” means, with respect to an Employee or Member whose Employer participates in the Plan solely under Article III, Section 8 (Profit Sharing Feature), any amounts (and earnings thereon) transferred or contributed on behalf of such Employee or Member pursuant to Article III, Section 6(C).
33.	“Qualified Default Investment Alternative” or “QDIA” means an investment alternative under Article IV, Section 2 that satisfies the requirements of Section 404(c)(5) of ERISA and U.S. Department of Labor Regulations Section 2550.404c-5(e), and any guidance issued thereunder, and which has been approved by the Board.
34.	“Regular Account” means the Plan account established and maintained in respect of a Member pursuant to Article III, Section 2(C) and Article V, and shall include all amounts (and earnings thereon) credited thereto on behalf of the Member pursuant to the provisions of Article III.
35.	“Regulations” means the applicable regulations issued under the Code, ERISA or other applicable law, by the IRS, the DOL or any other governmental authority and any proposed or temporary regulations or rules promulgated by such authorities pending the issuance of such regulations.
36.	“Rollover Account” means the Plan account established in respect of each Member pursuant to Article III, Section 6(C) and Article V which shall be maintained separate from any other Account established in respect of such Member under the Plan. For purposes of Article III, Section 4(H), Article VII, Sections 1 and 2, and Article VIII, a Member’s Rollover Account shall not include his Profit Sharing Rollover Amounts unless otherwise indicated therein.

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37.	“Roth Elective Deferral” means an elective deferral that is: (a) designated irrevocably by the Member at the time of the cash or deferred election as a Roth contribution that is being made in lieu of all or a portion of the pre-tax elective deferrals the Member is otherwise eligible to make under the Plan; and (b) treated by the Employer as includible in the Member’s income at the time the Member would have received that amount in cash if the Member had not made a cash or deferred election.
38.	“Roth 401(k) Account” means the Plan account established and maintained in respect of a Member pursuant to Article III, Section 4(D) and Article V, and shall include all amounts (and earnings thereon) credited thereto on behalf of the Member pursuant to the provisions of Article III, Section 4(D) and including Roth Elective Deferrals made pursuant to an Employer’s automatic enrollment program under Article III, Section 10, where such automatic 401(k) Elective Deferrals are Roth Elective Deferrals.
39.	“Safe Harbor CODA Account” means the Plan account established in respect of each Member pursuant to Article III, Section 4(J) and Article V which shall be maintained separate from any other Account established in respect of such Member under the Plan.
40.	“Salary” means regular basic monthly (or other periodic) salary or wages, exclusive of special payments such as overtime, bonuses, fees, deferred compensation (other than amounts deferred pursuant to a Member’s election under Article III, Section 4), severance payments, and contributions by the Employer under this or any other plan (other than before tax contributions made on behalf of a Member under a Code Section 125 cafeteria plan or contributions made under Code Section 132(f), unless the Employer specifically elects to exclude such contributions). Commissions shall be included at the Employer’s option within such limits, if any, as may be set by the Employer and applied uniformly to all its commission Employees. In addition, Salary may also include, at the Employer’s option, special payments such as (i) overtime or (ii) overtime plus bonuses. If an Employer elects to generally include bonuses in the definition of Salary, the Employer may nevertheless elect to exclude a particular type of bonus (e.g, long term incentive compensation payments), provided such exclusion is applied uniformly to all its Employees.
	If an Employer elects to include the special payments enumerated in (i) or (ii) above in the definition of Salary or, if the Employer elects to include commissions in the definition of Salary, such Salary shall be determined based on the amounts received by the Member during the relevant determination period. Otherwise, unless an Employer specifically requests to include Salary changes received by a Member during the relevant determination period and is granted permission by the Board, a Member’s monthly Salary rate is one twelfth of his annual Salary rate as of each January 1. If commissions are included in Salary, unless an Employer specifically requests to include commissions received by a Member during the relevant determination period and is granted permission by the Board, they shall be calculated on a uniform basis based on the commissions received by the Member during the 12 month period prior to the determination period. As an alternative to the foregoing definition, at the Employer’s option, Salary may be defined to include total taxable compensation reported on the Member’s IRS Form W-2, plus deferrals, if any, pursuant to Section 401(k) of the Code, Section 125 of the Code, and Section 132(f) of the Code (unless the Employer specifically elects to exclude such Section 125 and Section 132(f) deferrals), but excluding the payment of compensation deferred from previous years. In no event, may a Member’s Salary for any Plan Year exceed for purposes of the Plan $200,000 or, effective January 1, 1994, $150,000 (adjusted for cost of living to the extent permitted by the Code and the IRS Regulations).

6

	For Plan Years beginning after December 31, 1996, the family member aggregation rules of Code Section 414(q)(6) (as in effect prior to the Small Business Job Protection Act of 1996) are eliminated.
	The annual Salary of each Member taken into account in determining allocations, shall not exceed $230,000 (in 2008) as adjusted for cost-of-living increases in accordance with section 401(a)(17)(B) of the Code.
41.	“Spouse” or “Surviving Spouse” means the individual to whom a Member or former Member was married on the date such Member withdraws his Account, or if such Member has not withdrawn his Account, the individual to whom the Member or former Member was married on the date of his death.
42.	“Supplemental Amounts” means, with respect to a Member, the contributions made on behalf of the Member by the Employer pursuant to Article III, Section 3 and earnings thereon.
43.	“Trustee” means the Trustee or Trustees provided for in Article IX, Section 2.
44.	“Trust Fund” means the Trust Fund or Funds established by the Trust Agreement or Agreements provided for in Article IX, Section 2.
45.	“Unit” means the unit of measure described in Article V of a Member’s proportionate interest in the Plan’s Investment Funds.
46.	“Valuation Date” means any business day of any month for the Trustee, except that in the event the underlying portfolios of any Investment Fund cannot be valued on such date, the Valuation Date for such Investment Fund shall be the next subsequent date on which the underlying portfolio(s) can be valued. Valuations shall be made as of the close of business on such valuation date(s).
47.	“Year of Employment” means a 12-month period of Employment.
48.	“Year of Service” means any Plan Year during which an individual completed at least 1,000 Hours of Employment, or satisfied any alternative requirement, as determined by the Board in accordance with any applicable regulations issued by the DOL and the IRS.
49.	The masculine pronoun wherever used shall include the feminine pronoun.

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ARTICLE II PARTICIPATION AND MEMBERSHIP

Section 1. Employer Participation

Any financial institution, or other organization serving it, may apply to the Board for participation in the Plan if: (A) as of its Commencement Date and in accordance with Section 410(b) of the Code and the IRS Regulations (i) the percentage of Non-highly Compensated Employees who will benefit under the Plan is at least 70% of the percentage of Highly Compensated Employees who will benefit under the Plan (excluding such employees as are permitted to be excluded under IRS Regulations), or (ii) the average benefit percentage test (as defined in Section 410(b)(2) of the Code and the IRS Regulations) will be satisfied with respect to the Employer. The applicant shall submit the formal application and all required information, and the Board, in its discretion, shall decide upon admittance and determine the Commencement Date. The Board may, in its discretion and at such times as it may determine, require an affirmative showing by an Employer of its continued compliance with the requirements of Section 410(b) of the Code and IRS Regulations. Initial and continued participation shall be subject to the determination of the IRS that the Plan and the Trust Fund are tax qualified and tax exempt under Sections 401(a) and 501(a) of the Code, respectively. In addition, any Employee who participated in the Plan but who has been transferred to a governmental or quasi-governmental agency serving the financial industry shall, notwithstanding anything to the contrary in this Section, be permitted to continue to participate in the Plan; provided that, in such case, such Employee’s employing agency has adopted the Plan.

An Employer may, at its option, subject to the provisions of the Plan, adopt different Plan features and provisions (basis of participation) for different definable groups of employees, including for employees acquired pursuant to a merger or acquisition. The Employer will be required to demonstrate that this Section 1 and all other applicable Code and IRS Regulations continue to be satisfied following the adoption of different bases of participation for separate and definable groups of employees.

Section 2. Employee Membership

(A)

Employer contributions on behalf of any Member shall be conditioned upon the Member making contributions under Article III, Section 1, except in the case of the basic contribution feature described in Article III, Section 2; the supplemental contribution feature (Formula (2)) described in Article III, Section 3; the 401(k) Feature described in Article III, Section 4(B); the Safe Harbor CODA non-elective contribution feature described in Article III, Section 4(J); or the Profit Sharing Feature described in Article III, Section 8.

(B)

Every Employee (other than Employees who, at the election of the Employer, are excluded from participation under this Section 2) shall be eligible for membership in the Plan on the later of:

(1)

His Employer’s Commencement Date, or

(2)

The first day of the month, or, at the election of the Employer, the first day of the calendar quarter, coincident with or next following his satisfaction of one or more of the eligibility requirements described hereunder, as designated by his Employer: (i) the Employee’s first day of Employment; (ii) the completion of any number of months not to exceed 12 consecutive months or (iii) the completion of one Year of Service or two Years of Service, and/or (iv) if the Employer so elects, it may adopt a minimum age requirement from age 18 to age 21. An Employer, at its election and in a uniform and nondiscriminatory manner, may waive the eligibility requirement(s) for participation specified under this paragraph (B) for (1) all Employees, or (2) all those Employees employed on or up to 12 months after the Employer’s Commencement Date under the Plan.

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The eligibility requirement(s) designated by the Employer shall apply uniformly to all Plan Features elected by the Employer. Notwithstanding the foregoing, the Employer may elect to establish as an eligibility requirement (as a minimum service requirement, minimum age requirement, or both) for Employer matching contributions, Employer basic contributions, Employer supplemental contributions, Employer Safe Harbor CODA contributions, and/or Employer Profit Sharing contributions (i) the completion of any number of months not to exceed 12 consecutive months, or (ii) the completion of one 12-consecutive-month period, and/or (iii) if the Employer so elects, it may adopt a minimum age requirement from age 18 to age 21. If, pursuant to Section 410(b)(4)(B), the Employer applies Code Section 410(b) separately to the portion of the Plan (within the meaning of Code Section 414(l)) that benefits only Employees who satisfy the eligibility requirements of this Section 2 that are lower than age twenty-one (21) and completion of a Year of Service, the Plan is treated as two separate plans for purposes of Code Section 401(k). Accordingly, if the Employer elects to make a Safe Harbor CODA contribution, then such contribution shall not be made on behalf of Employees who have not attained age twenty-one (21) and completed a Year of Service. However, in such a case, Section 401(k) Elective Deferrals and the matching contribution made pursuant to Article III, Section 2(A) on behalf of those Employees must satisfy Article III, Sections 4(E), (F) and (G) and Article III, Section 7.

Subject to the requirements of the Code, where an Employee who participated as a Member under the Plan terminates employment with an Employer and thereafter is reemployed by the same (or a different) Employer, such Employee, subject to any applicable break in service rules, shall participate immediately upon returning to employment with respect to the Profit Sharing Feature and the Basic and Supplemental Employer Contribution and shall participate on the next applicable payroll date with respect to Member Contributions, Matching Employer Contributions, Safe Harbor Employer Contributions and the 401(k) Feature, as and to the extent any such contribution feature is then maintained by such Employee’s Employer and the Member has satisfied the eligibility requirements for receiving such Employer contributions. In the case of an Employer that adopts a 401(k) Feature under Article III, Section 4, the eligibility requirement(s) under such Feature, and any other Plan Feature adopted by the Employer in addition to the 401(k) Feature, shall not exceed the period described in clause (i) above, and, at the election of the Employer, attainment of an age as elected by the Employer from age 18 to age 21 as described in clause (iii) above. In the event a Member is no longer part of an eligible class of Employees and thus becomes ineligible to participate in the Plan, such Employee, subject to any applicable break in service rules, shall participate immediately upon returning to an eligible class of Employees with respect to the Profit Sharing Feature and the Basic and Supplemental Employer Contribution and shall participate on the next applicable payroll date with respect to Member Contributions, Matching Employer Contributions, Safe Harbor CODA contributions, and the 401(k) Feature, as and to the extent any such contribution feature is then maintained by such Employee’s Employer and the Member has satisfied the eligibility requirements for receiving such Employer contributions.

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(C) Where an Employer designates a one Year of Service or two Years of Service eligibility requirement, an Employee must complete at least 1,000 Hours of Employment during each 12-consecutive-month eligibility computation period (measured from his date of Employment and then from each January 1, thereafter). Where an Employer designates an eligibility waiting period of less than 12 months, an Employee must, for purposes of eligibility, complete a required number of hours (measured from his date of Employment and each anniversary thereafter) which is arrived at by multiplying the number of months of the eligibility waiting period requirement by 83¹/₃; provided, however, if the Employee completes at least 1,000 Hours of Employment during the 12-consecutive-month eligibility computation period (measured from his date of Employment and then from each January 1 thereafter) the Employee shall be deemed to satisfy the eligibility waiting period designated by the Employer.

(D)	(1)	The Employer shall notify each Employee of his membership in the Plan and shall furnish him with an enrollment application in order that he may elect to make or receive contributions on his behalf under Article III at the earliest possible date consonant with this Article.
	(2)	All Employees whose Employment commences after the expiration date of the Employer’s waiver of the eligibility requirement(s) shall be enrolled in the Plan in accordance with the eligibility requirement(s) designated in Paragraph (B) above.
	(3)	If it is determined that an Employee who is eligible to be enrolled has, for any reason, not been so notified, such Employee shall be furnished an application by his Employer and be retroactively enrolled, in accordance with the Plan and applicable law, as of the date he first became eligible, upon receipt by the Board of the application properly executed. In accordance with the Plan and applicable law, the Employer may be required to make certain contributions, and the Employee may, at his election, make any contributions he could have made, had the Employee been enrolled on such earlier date. The Account of an Employee who is retroactively enrolled shall, upon such enrollment, consist solely of the number of Units which, as of the Valuation Date coincident with or next following such enrollment, may be credited to him pursuant to Article V based upon the amount of contributions received by the Board.

(E) An Employee shall become a Member on his Enrollment Date which shall be the date on which he becomes eligible. However, no person shall under any circumstances become a Member unless and until his enrollment application is filed with, and accepted by, the Plan. If an Employee fails to complete the enrollment form furnished to him, the Employer shall do so on his behalf.

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(F)	At the option of the Employer, an Employee who is employed on or prior to his Employer’s Commencement Date may make a one time election to waive participation in the Plan on the Employer’s Commencement Date.
(G)	Membership under all provisions of the Plan shall terminate upon the earlier of (a) a Member’s termination of Employment and payment to him of his entire vested interest, or (b) his death.
(H)	The following Employees, at the Employer’s election, may be excluded from participation in the Plan:

(i)	Employees who are included in a unit of Employees covered by a collective bargaining agreement between the Employee representatives and one or more Employers if there is evidence that retirement benefits were the subject of good faith bargaining between such Employee representatives and such Employer(s). For this purpose, the term “Employee representative” does not include any organization where more than one-half of the membership is comprised of owners, officers and executives of the Employer;
(ii)	Employees who are non-resident aliens and who receive no earned income from the Employer which constitutes income from sources within the United States;
(iii)	Employees who are employed on an hourly basis. Notwithstanding, if the Employee is employed on an hourly basis following the adoption date of the Plan by the Employer, but prior to the adoption of an hourly exclusion by his Employer, such employee shall will continue to receive benefits on the same basis as a regular salaried Member, despite classification as an hourly employee unless the employee is otherwise excluded from participation in the Plan at the election of the Employer under this Section 2(H). In the event an individual who was not part of an eligible class of Employees becomes part of an eligible class, such individual will be eligible to participate in the Plan in accordance with the provisions of this Article II;
(iv)	Employees who are not regular full-time or part-time Employees (Flex Staff Employees);
(v)	Leased Employees within the meaning of Section 414(n)(2) of the Code; and
(vi)	Employees hired under a written agreement which precludes membership and provides for a specific period of employment not in excess of one year.

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ARTICLE III CONTRIBUTIONS

Section 1. Contributions by Members

A Member of an Employer may elect to make contributions under the Plan (in 1% increments) up to a maximum percentage specified by the Employer not to exceed 100% of his Salary. Each Employer shall elect whether: (A) its Members’ contributions must be based on a percentage of Salary (in 1% increments); (B) its Members’ contributions must be based on a flat dollar amount of Salary; or (C) to permit its Members to make contributions based on either a percentage or flat dollar amount of Salary. A Member may change his contribution rate or suspend his contributions at any time, but reduced or suspended contributions may not subsequently be made up.

Section 2. Regular Contributions by Employer

(A)	Matching Employer Contributions
	Under this Section, an Employer shall contribute to the Plan on behalf of each of its Members (subject to any possible suspension under Article VII) an amount equal to a percentage (as specified by the Employer) of the Member’s contributions (determined, if elected by the Employer, on the basis of the Plan Year) not in excess of a maximum of 50% (as specified by the Employer) of his Salary. Such contributions, unless otherwise elected by the Employer, shall be made on a payroll period basis. Notwithstanding, the Employer may elect to determine Employer matching contributions based upon the entire Plan Year. A Member’s Salary and any limitation on matching contributions shall be applied based upon the applicable payroll period, unless the Employer elects to determine matching contributions based upon the Plan Year. In such instance, a Member’s Salary and the applicable limits for the entire Plan Year shall be used to determine Employer matching contributions.
	The percentage chosen by the Employer shall be in accordance with the schedule of contribution formulas listed below. Such contribution formula must be uniformly applicable to all its Members on a payroll period basis (or on the basis of such other period as elected by the Employer), except where the Employer has elected to provide a separate basis of participation for different definable groups of employees under the Plan.

Formula 0	—		0% of the Member’s contributions.
Formula 25	—		25% of the Member’s contributions.
Formula 50	—		50% of the Member’s contributions.
Formula 75	—		75% of the Member’s contributions.
Formula 100	—		100% of the Member’s contributions.
Formula Step (1)	—	(i)	50% of the Member’s contributions through the third year of Employment.
		(ii)	75% of the Member’s contributions during the fourth and fifth years of Employment.
		(iii)	100% of the Member’s contributions upon completion of 5 or more years of Employment.

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Formula Step (2)	—	(i)	100% of the Member’s contributions through the third year of Employment.
		(ii)	150% of the Member’s contributions during the fourth and fifth years of Employment.
		(iii)	200% of the Member’s contributions upon completion of 5 or more years of Employment.
Formula Step (3)	—	A percentage of the Member’s contributions chosen by the Employer through the Member’s third year of Employment with an increased percentage of the Member’s contributions as elected by the Employer to apply during the fourth and fifth years of Employment and a further increased percentage of the Member’s contributions to apply upon completion of 5 or more years of Employment.
Formula 150	—	150% of the Member’s contributions.
Formula 200	—	200% of the Member’s contributions.

Notwithstanding the matching formulas provided above, an Employer may at its option, specify the percentage of the Member’s contributions which will be matched by the Employer.

(B)	Basic Employer Contributions
	An Employer may, at its option, make a basic contribution equal to a uniform percentage (as specified by the Employer) of each of its Members’ Salaries for each month or payroll period, as applicable, provided that in no event shall such percentage exceed 15%. The percentage so specified may be elected or changed by the Employer by filing a properly completed form with the Pentegra DC Plan Office. No more than one such change may be made by an Employer during any year. An employer may restrict the allocation of such basic contribution to those Members who were employed with the Employer on the last working day of the month or payroll period for which the basic contribution is made.
	At the election of the Employer, any basic contribution shall be credited to its Members’ 401(k) Accounts or Regular Accounts on a uniform basis.
(C)	Regular Accounts
	A Regular Account shall be established and maintained for each Member on whose behalf contributions are made to the Plan pursuant to Section 1 or 2 of this Article.

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Section 3. Supplemental Contributions by Employer

An Employer may, at its option, make a supplemental contribution under Formula (1) or (2) below:

Formula (1) — A uniform percentage (as specified by the Employer) of each Member’s contributions not in excess of a maximum percentage (if the Employer elects to impose such a maximum) of the Member’s Salary which were received by the Plan during the preceding Plan Year. Such supplemental contribution may be made on or before the last day of February in any year on behalf of all those Members who were in its employ on the last working day of the preceding Plan Year. For purposes of this Section, Members on a Type 1 non-military Leave of Absence (as defined under Article I, Paragraph (23) and Article X, Section 8(B)(1)), or a Type 4 military Leave of Absence (as defined under Article I, Paragraph (23) and Article X, Section 8(B)(4)), shall be deemed employed on the last working day of such preceding Plan Year.

Formula (2) — A uniform dollar amount per Member or a uniform percentage limited to a specific dollar amount, if elected by the Employer, of each Member’s Salary (i) for the preceding Plan Year or fiscal year, regardless of whether the Member was eligible to participate in the Plan during the entire Plan Year (or fiscal year), or (ii) if an Employer so elects with respect to all of its Members, for the portion of the preceding Plan Year (or fiscal year) during which the Member was eligible to participate in the Plan. Such supplemental contribution may be made within the time prescribed by law, including extensions of time, for filing of the Employer’s federal income tax return on behalf of all those Members who were in its employ on the last working day of the preceding Plan Year (or, at the Employer’s option, the Employer’s fiscal year). Notwithstanding anything herein to the contrary, Employer contributions under Article III, Sections 2(A) and 2(B) and Formula 2 of this Article III, Section 3 shall not exceed, in the aggregate, 25% of the Member’s Salary for such Plan Year. The Employer may, at its option, elect to make a contribution under this paragraph to only those Members whose Salary is less than an amount to be specified by the Employer to the extent that such Salary limit is less than the dollar amount under Section 414(q) of the Code for such year.

For purposes of this Section, Members on a Type 1 non-military Leave of Absence (as defined under Article I, Paragraph (23) and Article X, Section 8(B)(1)), or a Type 4 military Leave of Absence (as defined under Article I, Paragraph (23) and Article X, Section 8(B)(4)), shall be deemed employed on the last working day of such preceding Plan Year (or fiscal year). The percentage contributed under this Formula (2) shall be limited in accordance with the Employer’s matching formula and basic contribution rate under Section 2 of this Article such that the sum of the Employer’s Formula (2) supplemental contribution plus the Employer basic contribution and the maximum Employer matching contribution under Section 2 of this Article shall not exceed 15% of Salary for such year.

At the election of the Employer, any supplemental contribution shall be credited either to its Members’ 401(k) Accounts (but not to the Member’s Roth 401(k) Account) or Regular Accounts on a uniform and nondiscriminatory basis.

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Section 4. 401(k) Features

(A)	An Employer may, at its option, adopt either the 401(k) Feature under Paragraph (B) of this Section or one of the 401(k) Features described in Paragraph (C) of this Section. In addition, an Employer may elect, in conjunction with electing a Paragraph (B) or Paragraph (C) 401(k) Feature, a Roth Elective Deferral feature under Paragraph (D). Under any 401(k) Feature, there shall be established for each of its Members a “401(k) Account.” A Member’s 401(k) Account shall be invested pursuant to his overall directions under Article IV but maintained separately from his Regular Account (consisting of the value of contributions made under Sections 1 and 2 of this Article). Based on the Employer’s election in accordance with Article III, Section 1, a Member contributing under this 401(k) feature shall be permitted to make deferrals based upon a uniform percentage (in whole percentages), or flat dollar amount of his Salary, as his Employer shall elect, so that the Member reaches the Code Section 402(g) limit by the end of the Plan Year. Should such Member not reach the 402(g) limit by the last contribution reporting period, the Member will be permitted to make a final 401(k) Elective Deferral which will enable a Member to precisely reach the limit under 402(g) of the Code. Such final contribution may be made based on a percentage of the Member’s compensation which is not a whole percentage. Notwithstanding anything in this Article III, Section 4 to the contrary, and in accordance with IRS Regulation Section 1.401(k)-1(a)(3)(iii), Member contributions may not be made prior to the Member’s performance of services with respect to which the Member contributions are made or, if earlier, when the compensation on which the Member contribution is based would be currently available.
(B)	Option 1 — Under the 401(k) Feature provided in this Paragraph (B), each Member may elect to defer 1% up to a maximum percentage specified by the Employer not to exceed 100% (in 1% increments) of his Salary or, subject to Article III, Section 3, a flat dollar amount of his Salary, or, if permitted by the Employer, either a percentage of his Salary or flat dollar amount, as the Member shall elect, and direct his Employer to contribute such amount to his 401(k) Account. Such deferral to the 401(k) Account shall reduce the Member’s contribution under Section 1 of this Article.
	The Employer shall contribute to each Member’s 401(k) Account an amount equal to 2% of his Salary not in excess of $3,750, subject to Article X, Section 1 of the Plan, unless the Member has deferred amounts of his Salary pursuant to the preceding paragraph, in which case the Employer’s 2% contribution will be allocated to the Member’s Regular Account. The amount which the Employer would otherwise be required to contribute with respect to each Member under Section 2 of this Article shall be reduced, but not below zero, by the amount which it contributes with respect to the Member under this Paragraph (B). Notwithstanding anything in this Paragraph to the contrary, should a Member’s deferrals to the 401(k) Account reach the maximum specified under the provisions of Paragraph (I) below in any Plan Year, the Employer’s 2% contribution will be allocated to the Member’s Regular Account for the remainder of such Plan Year.

The Employer, at its option, may adopt either of the two additional 401(k) Features described below:

(C) Option 2 — Under this Feature, each Member may elect to make deferrals to his 401(k) Account and/or contributions to his Regular Account in an amount of 1% of, or subject to Article III, Section 1, a flat amount of, Salary, or, if permitted by the Employer, either a percentage of his Salary or flat dollar amount, up to a maximum percentage specified by the Employer not to exceed 100% (in 1% increments) of his Salary, except that amounts deferred to the 401(k) Account shall reduce the Member’s contribution under Section 1 of this Article. Amounts contributed under this Option 2 may be allocated between the 401(k) Account and/or the Regular Account based on multiples of 1%. Notwithstanding anything herein to the contrary, a Member making a Roth 401(k) Elective Deferral may only make such deferral to his 401(k) Account.

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	If so adopted, Employer contributions under the Plan, which shall be made on behalf of each Member in an amount equal to a percentage of the Member’s 401(k) Elective Deferrals to his 401(k) Account and contributions to his Regular Account as specified by the Employer under Section 2 of Article III of his Salary, shall first be allocated to a Member’s 401(k) Account until total Member deferrals and Employer contributions allocated to the Member’s 401(k) Account equal a percentage specified by the Employer. Thereafter, the Employer contributions, with respect to both Member 401(k) Elective Deferrals and Regular contributions, shall be contributed to the Member’s Regular Account in an amount pursuant to the percentage elected in the preceding sentence.
	Notwithstanding the Employer election made under this Option 2, if the Member has deferred amounts of his Salary equal to the maximum specified under the provisions of Paragraph (I) below, the Employer shall contribute the remaining Employer contributions to the Member’s Regular Account.
	Option 3 — Under this Feature each Member may make deferrals to his 401(k) Account, but not contributions to his Regular Account. The Employer shall contribute under the Plan on behalf of each Member an amount equal to a percentage, specified by the Employer under Section 2 of Article III, of the Member’s 401(k) Elective Deferrals to his 401(k) Account. The Employer’s contributions under this Feature shall be made to the Member’s Regular Account.
(D)	Roth Elective Deferrals.

(1) General Application.

(a)	This subsection will apply to contributions beginning June 1, 2006.
(b)	As of June 1, 2006, if an Employer so elects, the Plan will accept Roth Elective Deferrals made on behalf of Members. A Member’s Roth Elective Deferrals will be allocated to a separate account maintained for such deferrals as described in Paragraph (D)(2).
(c)	Unless specifically stated otherwise or as provided under applicable law, Roth Elective Deferrals will be treated as elective deferrals for all purposes under the Plan.

(2) Separate Accounting.

(a) Contributions and withdrawals of Roth Elective Deferrals will be credited and debited, respectively, to the Roth 401(k) Account maintained for each Member.

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(b)	The Plan will maintain a record of the amount of Roth Elective Deferrals in each Member’s Roth 401(k) Account.
(c)	Gains, losses and other credits or charges must be separately allocated on a reasonable and consistent basis to each Member’s Roth 401(k) Account and the Member’s other Accounts under the Plan.
(d)	No contributions other than Roth Elective Deferrals and properly attributable earnings will be credited to Member’s Roth 401(k) Account.

(E) The actual deferral percentages for Highly Compensated Employees shall, in accordance with the Code and IRS Regulations, satisfy either (1) or (2) as follows:

(1)	Prior Year Testing:
	Notwithstanding any other provision of this Section 4, the actual deferral percentage for a Plan Year for Highly Compensated Employees for such Plan Year and the prior year’s actual deferral percentage for Members who were Non-highly Compensated Employees for the prior Plan Year must satisfy one of the following tests: (a) the actual deferral percentage for a Plan Year of those Employees who are Highly Compensated Employees for the Plan Year shall not exceed the prior year’s actual deferral percentage of those Members who are Non-highly Compensated Employees for the prior Plan Year multiplied by 1.25; or (b) the actual deferral percentage for a Plan Year for Members who are Highly Compensated Employees for the Plan Year shall not exceed the prior year’s actual deferral percentage for Members who were Non-highly Compensated Employees for the prior Plan Year multiplied by 2.0, provided that the actual deferral percentage for Members who are Highly Compensated Employees does not exceed the actual deferral percentage for Members who were Non-highly Compensated Employees in the prior Plan year by more than 2 percentage points.
	For the first Plan Year that the Plan permits any Member to make elective deferrals and this is not a successor plan, for purposes of the foregoing tests, the prior year’s Non-highly Compensated Employees’ actual deferral percentage shall be 3 percent unless the Employer has elected to use the current Plan Year’s actual deferral percentage for these Members. The Employer may elect to change from the Prior Year Testing method to the Current Year Testing method in accordance with the Code and IRS Regulations.
(2)	Current Year Testing:
	If elected by the Employer, the actual deferral percentage tests in (a) and (b) above, will be applied by comparing the current Plan Year’s actual deferral percentage for Members who are Highly Compensated Employees for such Plan Year with the current Plan Year’s actual deferral percentage for Members who are Non-highly Compensated Employees for such year. Once made, this election can only be changed and the Prior Year Testing method applied if the Plan meets the requirements for changing to Prior Year Testing set forth in applicable IRS regulations.

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	For purposes of this Section 4, the “actual deferral percentage” for a Plan Year means, for a specified group of Members for a Plan Year, the average of the ratios (calculated separately for each Member in such group) of (a) the amount of deferrals and/or contributions made to the Member’s 401(k) Account for the Plan Year, to (b) the amount of the Member’s compensation (as defined in Section 414(s) of the Code) which, at the Employer’s election, shall include the compensation required to be reported under Section 6041 or 6051 of the Code (i.e., “W-2 compensation”) for the Plan Year or, alternatively, where specifically elected by the Employer, for only that part of the Plan Year during which the Member was eligible to participate in the Plan. An Employee’s actual deferral percentage shall be zero if no 401(k) Elective Deferral or contribution is made by him or on his behalf for such applicable Plan Year. If the Plan and one or more other plans which include cash or deferred arrangements are considered as one plan for purposes of Sections 401(a)(4) and 410(b) of the Code, the cash or deferred arrangements included in such plans shall be treated as one arrangement for purposes of this Section 4.
	In accordance with IRS Regulations, the actual deferral percentage of a Member who is a Highly Compensated Employee and who is eligible to participate in two or more cash or deferred arrangements maintained by his Employer shall be determined by treating all such cash or deferred arrangements as a single arrangement.
(3)	Notwithstanding anything herein to the contrary, and in accordance with IRS Regulation Section 1.401(k)-2(a)(6)(iv) and 1.401(m)-2(a)(6)(v), no qualified nonelective contributions shall be taken into account in determining the actual deferral percentage for a Plan Year for a Non-highly Compensated Employee under the Plan to the extent such contributions exceed for such Non-highly Compensated Employee the greater of (a) 5% of the Non-highly Compensated Employee’s compensation (as defined in Code Section 414(s)) and (b) the product of (i) two times the “Plan’s representative contribution rate” (within the meaning, as applicable, of IRS Regulation Section 1.401(k)-2(a)(6)(iv) and Section 1.401(m)-2(a)(6)(v) and (ii) the Non-highly Compensated Employee’s compensation (as defined in Code Section 414(s)).

(F) The Pentegra DC Plan Office shall determine as of the end of the Plan Year whether one of the actual deferral percentage tests specified in Paragraph (E) above is satisfied for such Plan Year. This determination shall be made after first determining the treatment of excess deferrals within the meaning of Section 402(g) of the Code under Paragraph (I) below.

(1) In the event that neither of such actual deferral percentage tests is satisfied, the Pentegra DC Plan Office shall, to the extent permissible under the Code and the IRS Regulations, refund the excess contributions for the Plan Year in the following order of priority: by (i) refunding such amounts deferred by the Member and allocated to his 401(k) Account, or Roth 401(k) Account in accordance with Paragraph F(2) below which were not matched by his Employer (and any earnings and losses allocable thereto), and (ii) refunding amounts deferred for such Plan Year by the Member and allocated to his 401(k) Account, or Roth 401(k) Account in accordance with Paragraph (F)(2) below, (and any earnings and losses allocable thereto) and, in accordance with the Code and applicable IRS Regulations, forfeiting the amounts contributed for such Plan Year by the Employer with respect to the Member’s 401(k) Elective Deferrals that are returned pursuant to this Paragraph (and any earnings and losses allocable thereto).

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(2)

In the case of a distribution of excess contributions, the Plan will distribute pre-tax elective deferrals first.

(3)

The distribution of such excess contributions shall be made to Highly Compensated Members to the extent practicable before the 15th day of the third month immediately following the Plan Year for which such excess contributions were made, but in no event later than the end of the Plan Year following such Plan Year or, in the case of the termination of the Plan in accordance with Article XII or termination of Employer participation in the Plan in accordance with Article XI, no later than the end of the twelve-month period immediately following the date of such termination. For purposes of this Section 4, “excess contributions” means, with respect to any Plan Year, the excess of the aggregate amount of 401(k) Elective Deferrals and/or contributions (and any earnings and losses allocable thereto) made to the 401(k) Accounts of Highly Compensated Members for such Plan Year, over the maximum amount of such deferrals and/or contributions that could be made to the 401(k) Accounts of such Members without violating the requirements of Paragraph (E) above, determined by reducing 401(k) deferrals and/or contributions made by or on behalf of Highly Compensated Members in order of the actual deferral percentages beginning with the Highly Compensated Employee with the largest 401(k) Elective Deferral amount for the Plan Year until such amount is reduced to be equal to the Highly Compensated Employee with the next largest 401(k) Elective Deferral amount. The procedure described in the preceding sentence shall be repeated until all excess contributions have been eliminated and, as applicable, refunded. Notwithstanding anything herein to the contrary, and in accordance with IRS Regulation Section 1.401(k)-2(b)(2)(iv), the income allocable to the excess contributions to be refunded shall be equal to the allocable gain or loss for the Plan Year in question and, as applicable, for the “gap period” following the close of the Plan Year and ending on the date that is seven days preceding the distribution date. The Plan shall determine the allocable income in accordance with IRS Regulation Section 1.401(k)-2(b)(2)(iv)(C) or (D) or, in accordance with IRS Regulation Section 1.401(k)-2(b)(2)(iv)(B), any reasonable method for computing the income allocable to the excess contribution.

(G) Notwithstanding the provisions of Paragraphs (E) and (F) above, the amount of excess contributions to be distributed pursuant to Paragraph (F) above, with respect to a Member for a Plan Year, shall be reduced by any excess deferrals distributed to such Member for such Plan Year pursuant to Paragraph (I) below.

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(H)

A withdrawal from the vested portion of a Member’s 401(k) Account may be made only upon (a) attainment of age 591/2, (b) hardship (as determined by the Board in accordance with this Paragraph (H)), (c) termination of Employment, (d) death, (e) disability or (f) termination of an Employer’s participation in the Plan provided the Employer certifies in writing in such form as is satisfactory to counsel that no “alternative defined contribution plan” within the meaning of Code Section 401(k)(10) and IRS Regulations Section 1.401(k)-1(d)(4) will be established or maintained by the Employer at the time of termination of participation in the Plan or will be maintained through the period ending twelve months after distribution of all assets from the Plan attributable to the Employer’s participation in the Plan and amounts distributed upon such event shall be in the form of a “lump sum distribution” within the meaning of Section 402(e)(4)(D) of the Code (without regard to Code Sections 402(e)(4)(D)(i)(i)-(iv)). A withdrawal is on account of hardship only if the distribution is both made on account of an immediate and heavy financial need of the Member and is necessary to satisfy such financial need, and further provided that no earnings in the Member’s 401(k) Account credited on or after January 1, 1989 and/or Employer contributions made to the Member’s 401(k) Account on or after January 1, 1989 may be distributed in satisfying such need. For the purposes of this Paragraph (H), the term “immediate and heavy financial need” shall be limited to the need of funds for (i) the payment of medical expenses described in Section 213(d) of the Code previously incurred by the Member, the Member’s Spouse, or any of the Member’s dependents (as defined in Section 152 of the Code) or necessary for those persons to obtain such care, (ii) the payment of tuition and room and board for the next twelve months of post secondary education of the Member, the Member’s Spouse, the Member’s children, or any of the Member’s dependents (as defined in Section 152 of the Code and, for taxable years beginning on or after January 1, 2005, without regard to Section 152(b)(1),(b)(2) and (d)(1)(B)), (iii) the purchase (excluding mortgage payments) of a principal residence for the Member, (iv) the prevention of eviction of the Member from his principal residence or the prevention of foreclosure on the mortgage of the Member’s principal residence; (v) payments for burial or funeral expenses for the Member’s deceased parent, Spouse, children or dependents (as defined in Section 152 of the Code, without regard to Code Section 152(d)(1)(B)); or (vi) expenses for the repair of damage to the Member’s principal residence that would qualify for the casualty deduction under Code Section 165 (determined without regard to whether the loss exceeds 10% of adjusted gross income). For purposes of this Paragraph (H), a distribution generally may be treated as “necessary to satisfy a financial need” if the Employer reasonably relies upon the Member’s written representation that the need cannot be relieved (i) through reimbursement or compensation by insurance or otherwise, (ii) by reasonable liquidation of the Member’s assets, to the extent such liquidation would not itself cause an immediate and heavy financial need, (iii) by cessation of Member 401(k) Elective Deferrals pursuant to Article III, Section 4 of the Plan or Member Regular contributions pursuant to Article III, Section 1 of the Plan or (iv) by other distributions or nontaxable (at the time of the loan) loans from plans maintained by the Employer or by any other employer, or by borrowing from commercial sources on reasonable commercial terms. The amount of any withdrawal pursuant to this Paragraph (H) shall not exceed the amount required to meet the demonstrated financial hardship, including any amounts necessary to pay any federal income taxes and penalties reasonably anticipated to result from the distribution, as certified to the Plan by the Member.

No amounts may be withdrawn on account of hardship pursuant to this Paragraph prior to a Member’s withdrawal of the remaining vested balance of his Regular Account and Rollover Account, notwithstanding the withdrawal restrictions contained in Article VII, Section 2 or below.

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	Only one in-service withdrawal under this Paragraph may be made in any Plan Year, and any amounts paid under this Article may not be returned to the Plan. The amount of a withdrawal under this Paragraph (H) must be not less than the lesser of (i) $1,000, (ii) the full value of the vested portion of the 401(k) Account (reduced by the amount of post-December 31, 1988 earnings and Employer 401(k) contributions for those Members who have not attained age 591/2), if such value is less than $1,000, or (iii) the amount approved as a hardship withdrawal by the Board.
(I)	Notwithstanding any other provision of the Plan, no Member may defer to his 401(k) Account during any Plan Year an amount in excess of $15,500 (in 2008) or such other amount as may be provided in Section 402(g)(1) of the Code, and as adjusted for cost-of-living increases in accordance with Section 402(g)(4) of the Code. In the event that the 401(k) Elective Deferrals for a Member exceeds the limitation in the previous sentence, the amount of such excess, increased by any income and decreased by any losses attributable thereto, shall be refunded to such Member no later than the April 15 of the Plan Year following the Plan Year for which the elective deferrals were made.
	For purposes of Article III, Section 4 of the Plan, no Member shall be permitted to have elective deferrals made under this Plan, or any other qualified plan maintained by the Employer during the taxable year, in excess of the dollar limitation contained in section 402(g) of the Code in effect for such taxable year, except to the extent permitted under Section 9 of this Article and section 414(v) of the Code, if applicable.
(J)	Safe Harbor CODA
	If the Employer has elected the Safe Harbor CODA option, the provisions of this Section shall apply for the Plan Year and any provisions relating to the actual deferral percentage test described in Section 401(k)(3) of the Code or the actual contribution percentage test described in Section 401(m)(2) of the Code do not apply. Notwithstanding anything in the Plan to the contrary, if the Employer has elected the Safe Harbor CODA option, then such option shall comply and be administered in accordance with the applicable provisions of the safe harbor requirements under the IRS Regulation Sections 1.401(k)-3 and 1.401(m)-3. To the extent that any other provision of the Plan is inconsistent with the provisions of this section, the provisions of the section govern.

(i) Actual Deferral Percentage Test Safe Harbor

(1) Unless the Employer elects to make enhanced matching contributions (within the meaning of Section 401(k)(12)(B) of the Code and IRS Regulations Section 1.401(k)-3(c)(3)), the Employer will elect to contribute monthly or on another basis for the Plan Year: (a) a safe harbor matching contribution to the Plan on behalf of each eligible Employee equal to (I) 100 percent of the amount of the Employee’s 401(k) Elective Deferrals that do not exceed 3 percent of the Employee’s Salary for the Plan Year, plus (II) 50 percent of the amount of the Employee’s 401(k) Elective Deferrals that exceed 3 percent of the Employee’s Salary but that do not exceed 5 percent of the Employee’s Salary (“Basic Matching Contributions”); or (b) a safe harbor non-elective contribution to the Plan on behalf of each eligible Employee equal to at least 3 percent of the Employee’s Salary for the Plan Year.

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(2)	The Member’s benefit derived from the Actual Deferral Percentage Test Safe Harbor Contributions is nonforfeitable and may not be distributed earlier than separation from service, death, disability, an event described in Section 401(k)(10) of the Code, or the attainment of age 591/2. In addition, such contributions must satisfy the Actual Deferral Percentage Test Safe Harbor without regard to permitted disparity under Section 401(l) of the Code.
(3)	At least 30 days, but not more that 90 days, before the beginning of the Plan Year, the Employer will provide each Eligible Employee a comprehensive notice of the Employee’s rights and obligations under the Plan, written in a manner calculated to be understood by the average Eligible Employee. If an Employee becomes eligible after the 90th day before the beginning of the Plan Year and does not receive the notice for that reason, the notice must be provided no more than 90 days before the Employee becomes eligible but not later than the date the Employee becomes eligible.
(4)	In addition to any other election periods provided under the Plan, each Eligible Employee may make or modify a deferral election during the 30-day period immediately following receipt of the notice described above.

Section 5. Remittance of Contributions

The contributions of both Members and their Employer (including an administrative fee, as determined by the Board, to be paid by the Employer to defray expenses attributable to its participation in the Plan) shall be recorded by the Employer and remitted to the Board so that (i) in the case of Employer Contributions the Board shall be in receipt thereof by the 15th day of the month next following the month in respect of which such contributions are payable and (ii) in the case of Member after-tax contributions and 401(k) Elective Deferrals, the Trustee or custodian shall be in receipt thereof as soon as reasonably practicable, but in no event later than the 15th business day of the month following the month in which the Member contributions are received by the Employer or the 15th business day of the month following the month in which such amount would otherwise have been payable to the Member in cash. Such amounts shall be credited to the Member’s Account pursuant to Article V.

Section 6. Transfer of Funds and Rollover Contributions

(A) Upon such terms and conditions as the Board and the IRS shall approve, and provided that all benefits (including all optional forms of benefit) under the prior retirement plan are protected in accordance with Section 411(d)(6) of the Code, or any successor thereto, and the IRS Regulations thereunder, a transfer of funds may be made to the Plan from a prior retirement plan of an employer which was qualified under Section 401(a) of the Code so long as such funds (a) have been allocated to the individual members of such prior plan, (b) shall be allocated to the Accounts of the Members of the Plan to whom they were allocated under such prior plan, and (c) shall be applied so that each Member affected thereby would receive a benefit immediately after the transfer, if the Plan then terminated, at least equal to the benefit he would have received upon a termination of such prior plan immediately before such transfer. In addition to protecting those prior retirement plan benefits as required in the preceding sentence, the Pentegra DC Plan Office may, in its discretion, preserve any other prior retirement plan options which it determines to be economically and administratively feasible and which are not required to be protected under Section 411(d)(6) of the Code. Each Employee with respect to whom such a transfer is made shall, upon such transfer, be eligible for membership in the Plan.

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(B) If the funds so transferred are transferred from a retirement plan subject to Code Section 401(a)(11), then such funds shall be maintained in a separate account (including, as applicable, a separate account for any such transfers that represent after-tax contributions and related earnings) and any subsequent distribution of those funds, and earnings thereon, shall be subject to the following provisions:

(1)	The benefit to which a married Member is entitled shall, except as otherwise provided in this Paragraph (B), be payable by purchase from an insurance company of a single premium contract providing for a Qualified Joint and Survivor Annuity. The term, “Qualified Joint and Survivor Annuity,” means a benefit providing an annuity commencing immediately for the life of the Member, ending with the payment due on the last day of the month coincident with or preceding the date of his death, and, if the Member dies leaving a Surviving Spouse, a survivor annuity for the life of such Surviving Spouse equal to one half of the annuity payable for the life of the Member under his Qualified Joint and Survivor Annuity, commencing on the last day of the month following the date of the Member’s death and ending with the payment due on the first day of the month coincident with or preceding the date of such Surviving Spouse’s death.
(2)	In lieu of the form of benefit described immediately above, any benefit payable pursuant to this Paragraph (B) may be paid in one cash payment thereof, subject to the provisions of Subparagraph (5) below.
(3)	If a Member dies prior to the date payment of his benefit commences (i) without leaving a Surviving Spouse, or (ii) leaving a Surviving Spouse and having made a valid election to waive the Preretirement Survivor Annuity in accordance with Subparagraph (5) below, then the remaining value of the Member’s account subject to this Paragraph (B) shall become payable to his Beneficiary in a lump sum subject to Article III, Section 8(E)(2) and Article VII, Section 3(B).
(4)	A Preretirement Survivor Annuity shall be paid to the Surviving Spouse of a Member or former Member who dies before the commencement of payment of any benefit from an account subject to this Paragraph (B). The term “Preretirement Survivor Annuity” means a benefit providing for payment of 50% of the Member’s account balance as of the Valuation Date coincident with or preceding the date of his death, by the purchase of a single premium contract issued by an insurance company providing a survivor annuity to his Surviving Spouse, for the life of such Surviving Spouse. Payment of a Preretirement Survivor Annuity shall commence in the month following the month in which the Member dies or as soon as practicable thereafter; provided, however, that to the extent required by law, if the value of the amount used to purchase a Preretirement Survivor Annuity exceeds $500, then payment of the Preretirement Survivor Annuity shall not commence prior to the date the Member reached (or would have reached, had he lived) Normal Retirement Age without the written consent of the Member’s Surviving Spouse. Absence of any required consent will result in a deferral of payment of the Preretirement Survivor Annuity to the month following the month in which occurs the earlier of (i) the date the required consent is received by the Board or (ii) the date the Member would have reached Normal Retirement Age had he lived.

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(5)	(i) In the case of the Qualified Joint and Survivor Annuity, the Fund shall no less than 30 days and no more than 90 days prior to the annuity starting date provide each Member a written explanation of: (i) the terms and conditions of the Qualified Joint and Survivor Annuity; (ii) the Member’s right to make and the effect of an election to waive the Qualified Joint and Survivor Annuity form of benefit; (iii) the rights of a Member’s Spouse; and (iv) the right to make, and the effect of, a revocation of a previous election to waive the Qualified Joint and Survivor Annuity. In the case of the Preretirement Survivor Annuity, the Fund shall provide each Member within the applicable period for such Member a written explanation of the Preretirement Survivor Annuity in such terms and in such manner as would be comparable to the explanation provided for meeting the requirements applicable to the Qualified Joint and Survivor Annuity.
	The applicable period for a Member is whichever of the following periods ends last: (i) the period beginning with the first day of the Plan Year in which the Member attains age 32 and ending with the close of the Plan Year preceding the Plan Year in which the Member attains age 35; (ii) a reasonable period ending after the individual becomes a Member; or (iii) a reasonable period ending after this subparagraph (i) first applies to the Member. Notwithstanding the foregoing, notice must be provided within a reasonable period ending after separation from service in the case of a Member who separated from service before attaining age 35.
	For purposes of applying the preceding paragraph, a reasonable period ending after the enumerated events described in (ii) and (iii) is the end of the two-year period beginning one year prior to the date the applicable event occurs, and ending one year after that date. In the case of a Member who separates from service before the Plan Year in which age 35 is attained, notice shall be provided within the two-year period beginning one year prior to separation and ending one year after separation. If such a Member thereafter returns to employment with an Employer, the applicable period for such Member shall be redetermined.
	(ii) A Member may, with the written consent of his Spouse (unless the Board makes a written determination in accordance with the Code and the Regulations that no such consent is required), elect in writing (i) to receive his benefit in a single lump sum payment within the 90-day period ending on his annuity starting date (which is the first day of the first period for which an amount is paid as an annuity or any other form); and (ii) to waive the Preretirement Survivor Annuity within the period beginning on the first day of the Plan Year in which the Member attains age 35 and ending on the date of his death. Any election made pursuant to this Subparagraph (5) may be revoked by a Member, without spousal consent at any time within which such election could have been made. Such an election or revocation must be made in accordance with procedures developed by the Board and shall be notarized.

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	Any consent by a Spouse obtained under this provision (or establishment that the consent of a Spouse may not be obtained) shall be effective only with respect to such Spouse. A consent that permits designations by the Member without any requirement of further consent by such Spouse must acknowledge that the Spouse has the right to limit consent to a specific Beneficiary, and a specific form of benefit where applicable, and that the Spouse voluntarily elects to relinquish either or both of such rights. No consent obtained under this provision shall be valid unless the Member has received the notice described in subparagraph (i) above.
	Notwithstanding anything to the contrary, effective for Plan Years beginning after December 31, 1996, the 90-day period in which a Member may, with the written consent of his Spouse, elect in writing to receive his benefit in a single lump sum shall not end before the 30th day after the date on which explanations of the Qualified Joint and Survivor Annuity and Preretirement Survivor Annuity are provided. A Member may elect (with any applicable spousal consent) to waive any requirement that the written explanation be provided at least 30 days before the annuity starting date (or to waive the 30-day requirement under the preceding sentence) if the distribution commences more than seven days after such explanation is provided.
(6)	Notwithstanding the preceding provisions of this Paragraph (B), any benefit of $500, subject to the limits of Article X, Section 4, or less shall be paid in a lump cash sum in full settlement of the Plan’s liability therefor; provided, however, that in the case of a married Member, no such lump sum payment shall be made after benefits have commenced without the consent of the Member and his Spouse or, if the Member has died, the Member’s Surviving Spouse. Furthermore, if the value of the benefit payable to a Member or his Surviving Spouse is greater than $500 and the Member has or had not reached his Normal Retirement Age, then to the extent required by law, unless the Member (and, if the Member is married and his benefit is to be paid in a form other than a Qualified Joint and Survivor Annuity, his Spouse, or, if the Member was married, his Surviving Spouse) consents in writing to an immediate distribution of such benefit, his benefit shall continue to be held in the Trust until a date following the earlier of (i) the date of the Board’s receipt of all required consents or (ii) the date the Member reaches his earliest possible Normal Retirement Age under the Plan (or would have reached such date had he lived), and thereafter shall be paid in accordance with this Paragraph (B).

(C) Upon such terms and conditions as the Board shall approve, all Members (regardless of whether their Accounts are active) shall be permitted to make rollover contributions to the Plan of amounts held on their behalf in:

(1) a qualified plan described in section 401(a) or 403(a) of the Code, (including after-tax contributions for direct rollovers);

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(2)	an annuity contract described in section 403(b) of the Code, (excluding after-tax contributions);
(3)	an eligible plan under section 457(b) of the Code which is maintained by a state, political subdivision of a state, or an agency or instrumentality of a state or political subdivision of a state; and
(4)	an individual retirement account or annuity described in section 408(a) or 408(b) of the Code that is eligible to be rolled over and would otherwise be includible in gross income.
	An Employer may, at its option, permit its Employees to make rollover contributions prior to the date as of which the Employees become eligible for membership in the Plan. All such amounts which are accepted by the Pentegra DC Plan Office shall be certified in form and substance satisfactory to the Pentegra DC Plan Office by the Member as consisting of all or a portion of an “eligible rollover distribution” or a “rollover contribution” within the meaning of Section 402(c)(4) or Section 408(d)(3), respectively, of the Code. A Member shall have a nonforfeitable vested interest in all such amounts credited to his Rollover Account.
(5)	Notwithstanding anything in this paragraph (C) to the contrary, the Plan will accept a rollover contribution to a Roth 401(k) Account if it is a direct rollover from another Roth elective deferral account under an applicable retirement plan described in Section 402A(e)(1) of the Code, and only to the extent the rollover is permitted under the rules of Section 402(c) of the Code and the IRS Regulations issued thereunder. The Plan will accept a rollover contribution to a Roth 401(k) Account which is not a direct rollover only to the extent the rollover is permitted under applicable law.
(6)	Upon such terms and conditions as the Board and the IRS shall approve, a Member shall be permitted to transfer amounts deferred and/or contributed on behalf of such Member to a nonqualified Plan maintained by his Employer to the Plan. Such transfer to the Plan from the Employer’s nonqualified deferred compensation Plan shall be made by the 15th day of the third month immediately following the Plan Year for which compensation was deferred by the Member. The transferred amounts shall be treated as contributions under Article III for such Plan Year and shall be categorized as 401(k) Elective Deferrals under Article III, Section 4 or as Employer Matching Contributions under Article III, Section 2, as applicable.

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Section 7. Limitations on Member Contributions and Matching Employer Contributions

(A) Notwithstanding any other provision of this Section 7, the actual contribution percentage for a Plan Year for Highly Compensated Employees shall, in accordance with the Code and IRS Regulations, satisfy either (i) or (ii) as follows:

(1) Prior Year Testing:

(a) the actual contribution percentage for a Plan Year for Members who are Highly Compensated Employees for the Plan Year shall not exceed the prior Plan Year’s actual contribution percentage for Members who were Non-highly Compensated Employees for the prior Plan Year multiplied by 1.25; or (b) the actual contribution percentage for Members who are Highly Compensated Employees for the Plan Year shall not exceed the prior year’s actual contribution percentage for Members who were Non-highly Compensated Employees for the prior Plan Year multiplied by 2, provided that the actual contribution percentage for Members who are Highly Compensated Employees does not exceed the “actual contribution percentage” for Members who were Non-highly Compensated Employees in the prior Plan Year by more than 2 percentage points.

For the first Plan Year this Plan permits any Member to make contributions under Article III, Section 1 (after-tax), provides for Employer matching contributions or both, and this is not a successor plan, for purposes of the foregoing tests, the prior Plan Year’s Non-highly Compensated Employees’ actual contribution percentage shall be 3 percent unless the Employer has elected to use the current Plan Year’s actual contribution percentage for these Members.

(ii)	Current Year Testing:
	If elected by the Employer, the actual contribution percentage tests in (a) and (b), above, will be applied by comparing the current Plan Year’s actual contribution percentage for Members who are Highly Compensated Employees for such Plan Year with the current Plan Year’s actual contribution percentage for Members who are Non-highly Compensated Employees for such year. Once made, this election can only be changed and the Prior Year Testing method applied if the Plan meets the requirements for changing to Prior Year Testing set forth in applicable IRS regulations.
	For purposes of this Section 7, the “actual contribution percentage” for a Plan Year means, for a specified group of Employees, the average of the ratios (calculated separately for each Employee in such group) of (a) the sum of (i) Employer matching contributions credited to his Regular Account as described in Section 2 and Section 3, Formula (1) of this Article for the Plan Year, (ii) Member contributions credited to his Regular Account for the Plan Year, and (iii) in accordance with and to the extent permitted by the IRS Regulations, 401(k) Elective Deferrals credited to his 401(k) Account, to (b) the amount of the Member’s compensation (as defined in Section 414(s) of the Code) which, at the Employer’s election, shall include the compensation required to be reported under Section 6041 or 6051 of the Code (i.e., “W-2 compensation”) for the Plan Year or, alternatively, where specifically elected by the Employer, for only that part of the Plan Year during which the Member was eligible to participate in the Plan. The 401(k) Elective Deferrals referred to in (iii) above in this Paragraph (A) may be taken into account in determining the actual contribution percentage for a Plan Year if the actual deferral percentage test is satisfied prior to and following the exclusion of the 401(k) Elective Deferrals that are used to satisfy the actual contribution percentage test. An Employee’s actual contribution percentage shall be zero if no such contributions are made by him or on his behalf for such Plan Year. The actual contribution percentage taken into account under this Paragraph (A) for any Highly Compensated Employee who is eligible to make Member contributions or receive Employer matching contributions under two or more plans described in Section 401(a) of the Code or arrangements described in Section 401(k) of the Code that are maintained by the Employer shall be determined as if all such contributions were made under a single plan.

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(iii) Notwithstanding anything in this Section 7 to the contrary, and in accordance with IRS Regulation 1.401(m)-2(a)(5), no Employer matching contributions shall be taken into account in determining the actual contribution percentage for a Plan Year for a Non-highly Compensated Employee under the Plan to the extent such contributions exceed for such Non-highly Compensated Employee the greatest of (A) 5% of the Non-highly Compensated Employee’s compensation (as defined in Code Section 414(s)); (B) the Non-highly Compensated Employee’s 401(k) Elective Deferrals for the Plan Year; and (C) the product of (1) two times the Plan’s “representative matching rate” (within the meaning of IRS Regulation Section 1.401(m)-2(a)(5)(ii)) and (2) the Non-highly Compensated Employee’s 401(k) Elective Deferrals. The foregoing limitation on Employer matching contributions shall also apply to matching contributions with respect to a Non-highly Compensated Employee’s after-tax contributions or the total of a Non-highly Compensated Employee’s 401(k) Elective Deferrals and after-tax contributions.

(B) The Pentegra DC Plan Office shall determine as of the end of the Plan Year whether one of the actual contribution percentage tests specified in Paragraph (A) above is satisfied for such Plan Year. This determination shall be made after first determining the treatment of excess deferrals within the meaning of Section 402(g) of the Code under Article III, Section 4(I) and then determining the treatment of excess contributions under Article III, Section 4(F). In the event that neither of the actual contribution percentage tests is satisfied, the Pentegra DC Plan Office shall (i) refund the excess aggregate contributions to the extent attributable to Member after-tax contributions and vesting matching contributions for which the underlying Member after-tax contributions or 401(k) Elective Deferrals are not subject to correction under the actual deferral percentage or actual contribution percentage tests for such year (and any income related thereto) and (ii) forfeit the excess aggregate contributions to the extent attributable to non-vested Employer matching contributions and vested Employer matching contributions for which the underlying Member after-tax contributions or 401(k) Elective Deferrals are subject to correction under the actual deferral percentage or actual contribution percentage tests for such year (and any income related thereto) in the manner described in Paragraph (C) below. For purposes of this Section 7, “excess aggregate contributions” means, with respect to any Plan Year and with respect to any Member, the excess of the aggregate amount of contributions (and any earnings and losses allocable thereto) made as (a) Employer matching contributions to their Regular Accounts, (b) Member contributions to their Regular Accounts and (c) 401(k) Elective Deferrals by Members to their 401(k) Accounts (to the extent permitted by the IRS Regulations and if the Pentegra DC Plan Office elects to take into account such elective deferrals when calculating the actual contribution percentage) of Highly Compensated Members for such Plan Year, over the maximum amount of such contributions that could be made as Employer matching contributions to Regular Accounts, Member contributions to Regular Accounts and 401(k) Elective Deferrals by Members to 401(k) Accounts of such Members without violating the requirements of Paragraph (A) above.

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(C) To the extent excess aggregate contributions must be refunded or forfeited for a Plan Year, such excess amounts will be refunded (or, as applicable, forfeited) first to the Highly Compensated Employees with the largest Contribution Percentage Amounts (as defined below) taken into account in calculating the actual contribution percentage test for the year the excess arose and continuing in descending order until all the excess aggregate contributions are refunded (or, as applicable, forfeited). For purposes for the preceding sentence, the “largest amount” is determined after distribution of any excess aggregate contributions. For purposes of this paragraph, “Contribution Percentage Amounts” means the sum of Member after-tax contributions, Employer matching contributions, and Employer supplemental contributions under Formula (1) made under the Plan on behalf of the Member for the Plan Year. However, such Contribution Percentage Amounts shall not include Employer matching contributions that are forfeited either to correct excess aggregate contributions or because the contributions to which they relate are excess deferrals, excess contributions or excess aggregate contributions. The refund or forfeitures of such excess aggregate contributions shall be made with respect to such Highly Compensated Members to the extent practicable before the 15th day of the third month immediately following the Plan Year for which such excess aggregate contributions were made, but in no event later than the end of the Plan Year following such Plan Year or, in the case of the termination of the Plan in accordance with Article XII or termination of Employer participation in the Plan in accordance with Article XI, no later than the end of the twelve-month period immediately following the date of such termination.

(D)

Notwithstanding anything in this Article III, Section 7 to the contrary, and in accordance with IRS Regulation Section 1.401(m)-2(b)(2)(iv), the income allocable to the excess aggregate contributions shall be equal to the allocable gain or loss for the Plan Year in question and, as applicable, for the “gap period” following the close of the Plan Year and ending on the date that is seven days preceding the distribution date. The Plan shall determine the allocable income in accordance with IRS Regulation Section 1.401(m)-2(b)(2)(iv)(C) or (D) or, in accordance with IRS Regulation Section 1.401(m)-2(b)(2)(iv)(B), any reasonable method for computing the income allocable to the excess aggregate contributions.

(E)

Should an Employer’s matching formula fail to satisfy the applicable nondiscrimination requirements under the Code, the Employer shall be permitted to make additional matching contributions to the Regular account of Non-highly Compensated Employees (to be determined at the Employer’s discretion) and shall be contributed by the Employer by March 15th following the Plan Year in which matching contributions is discriminatory. Such matching contributions shall be added to the matching contributions for the immediately preceding Plan Year and shall be subject to this Section 7.

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Section 8. Profit Sharing Feature

(A) An Employer may, at its option, adopt a Profit Sharing Feature as described herein, subject to any other provisions of the Plan, where applicable. This Feature may be adopted either in lieu of, or in addition to, any other Plan Feature contained in this Article III, including the contributions described in Sections 1 through 4 of this Article. The Profit Sharing Feature is designed to provide the Employer a means by which to provide discretionary contributions on behalf of Employees eligible under the Plan.

Where investments provided for the contributions permitted under Article III, Sections 1 through 4 were subject to the Members’ investment directions among the Investment Funds, and the Profit Sharing Feature elected by the Employer requires that all account balances be invested in the Stable Value Fund or the Government Money Market Fund (subject to rules adopted by the Board), the accounts provided under Article III, Sections 1 through 4 will continue to be subject to the Members’ directions, pursuant to the provisions of Article IV.

(B)  (1)  Subject to the provisions of Article X, Section 1, an Employer may, but shall not be required to, contribute on behalf of each of its Members, on an annual (or at the election of the Employer, quarterly) basis for any Plan Year or fiscal year of the Employer (as the Employer shall elect), a discretionary amount not to exceed the maximum amount allowable as a deduction to the Employer under the provisions of Section 404 of the Code. Such Profit Sharing contribution must be received by the Pentegra DC Plan Office within the time prescribed by law, including extensions of time, for filing of the Employer’s federal income tax return following the close of the Contribution Determination Period on behalf of all those Members who were in its employ on the last working day of such Contribution Determination Period. For purposes of making the allocations described in this Subparagraph (B)(1), a Member who is on a Type 1 non-military Leave of Absence (as defined in Article I, Paragraph (23) and Article X, Section 8(B)(1)) or a Type 4 military Leave of Absence (as defined in Article I, Paragraph (23) and Article X, Section 8(B)(4)), shall, notwithstanding the provisions of this Paragraph, be treated as if he were a Member who was an Employee in Employment on the last day of such Contribution Determination Period.

(2) A Profit Sharing Account shall be established and maintained on behalf of each Member whose Employer has adopted the Profit Sharing Feature showing each Member’s interests in the Investment Funds or other investment vehicles attributable solely to such Profit Sharing contributions. The interest in each Investment Fund shall be represented by Units. These Units will be valued in accordance with Article V. Such account shall be known as the “Profit Sharing Account,” as defined under Article I, Paragraph (31) and shall be an account segregated from all other accounts maintained under the Plan with respect to such Member.

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(C)  (1) Contributions shall be allocated to each Member’s Profit Sharing Account for the Contribution Determination Period at the election of the Employer, in accordance with one of the options selected below: (i) in the same ratio as each Member’s Salary during such Contribution Determination Period bears to the total of such Salary of all Members, (ii) in the same ratio as each Member’s Salary for the portion of the Contribution Determination Period during which the Member satisfied the Employer’s eligibility requirement(s) bears to the total of such Salary of all Members or (iii) an Employer may integrate the Profit Sharing Feature with Social Security in accordance with the following provision.

(a) If the annual (or quarterly, if applicable) contribution for any Contribution Determination Period (which period shall include, for the purposes of the following maximum Social Security integration levels provided under Subparagraphs (C)(1) and (2) for those Employers who have elected quarterly allocations of contributions, the four quarters of a Plan Year or fiscal year) is allocated based on a uniform percentage, such contribution shall be allocated to each Member who is employed by the Employer on the last day of such Contribution Determination Period in a uniform percentage (i) of each Member’s Salary during the Contribution Determination Period (the “Base Contribution Percentage”), plus a uniform percentage of each Member’s Salary for the Contribution Determination Period in excess of the Social Security Taxable Wage Base for such Contribution Determination Period (the “Excess Contribution Percentage”), or (ii) of each Member’s Salary for the portion of the Contribution Determination Period during which the Member satisfied the Employer’s eligibility requirement(s), if any, up to the Base Contribution Percentage for such Contribution Determination Period, plus a uniform percentage of each Member’s Salary for the portion of the Contribution Determination Period during which the Member satisfied the Employer’s eligibility requirement(s), equal to the Excess Contribution Percentage.

(b) If the annual (or quarterly, if applicable) contribution for any Contribution Determination Period (which period shall include, for the purposes of the following maximum Social Security integration levels provided under Subparagraphs (C)(1) and (2) for those Employers who have elected quarterly allocations of contributions, the four quarters of a Plan Year or fiscal year) is allocated based on a specified dollar amount, such contribution shall be allocated to each Member who is employed by the Employer on the last day of such Contribution Determination Period as follows:

(i) If the Plan is top heavy with respect to the Employer, (A) contributions will be allocated to each Member’s Account in the ratio that each Member’s Salary bears to the total of all Members’ Salary, but not in excess of 3% of such Member’s Salary; (B) any remaining contributions after the application of (A) will be allocated to each Member’s Account in the ratio of each Member’s Salary for the Plan Year in excess of the Integration Level (as defined in the applicable Employer resolution) bears to the sum of all Members’ Salary in excess of the Integration Level, but not in excess of 3% of such Member’s excess Salary; (C) any remaining contributions after the application of clauses (A) and (B) will be allocated to each Member’s Account in the ratio that the sum of each Member’s total Salary and Salary in excess of the Integration Level bears to the sum of all Members’ total Salary and Salary in excess of the Integration Level, but not in excess of the profit sharing Maximum Disparity Rate (as defined below); and (D) any remaining contributions after the application of clauses (A), (B) and (C) will be allocated to each Member’s Account in the ratio that each Member’s Salary bears to the total of all Members’ Salary. If the Plan is not top-heavy with respect to the Employer, or if the minimum top heavy contribution or benefit is provided under another plan, clauses (A) and (B) may be disregarded.

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(ii) The profit sharing Maximum Disparity Rate is equal to the lesser of (A) or (B), reduced by the percentage of Salary allocated under Paragraph (C)(1)(b)(i)(A) above,: (A) 5.7%; or (B) the applicable percentage determined as follows: (1) if the Integration Level is more than twenty percent (20%), but less than eighty percent (80%), of the Social Security Taxable Wage Base, the applicable percentage is 4.3%; (2) if the Integration Level is eighty percent (80%) or more of the Social Security Taxable Wage Base, the applicable percentage is 5.4%.

(2)	The Excess Contribution Percentage described in Subparagraph (1) above may not exceed the lesser of (i) the Base Contribution Percentage, or (ii) the greater of (1) 5.7% or (2) the percentage equal to the portion of the Code Section 3111(a) tax imposed on employers under the Federal Insurance Contributions Act (as in effect as of the beginning of the Plan Year) which is attributable to old-age insurance. For purposes of this Subparagraph (2), “compensation” as defined in Section 414(s) of the Code shall be substituted for “Salary” in determining the Excess Contribution Percentage and the Base Contribution Percentage.
(3)	The Employer may not adopt the Social Security integration options provided above if any other integrated defined contribution or defined benefit plan is maintained by the Employer during any Contribution Determination Period.
(4)	No contributions by Members shall be made under the Profit Sharing Feature provided under this Section 8 of Article III.

(D)  (1) Contributions under the Profit Sharing Feature shall be invested in accordance with the provisions and procedures of Article IV, except as otherwise provided in this Paragraph (D). At the Employer’s election, contributions on behalf of Members may be invested (i) entirely in the Stable Value Fund or the Government Money Market Fund, subject to Board-adopted rules, (ii) pursuant to the Member’s directions among the Investment Funds and other investment vehicles or (iii) entirely in a QDIA. If the Employer does not so elect, or until an effective direction is made by Members, all contributions made pursuant to this Article III, Section 8, shall be invested in a QDIA.

(2) A Member’s investment directions, if any, with respect to contributions made under the Profit Sharing Feature, shall be submitted in writing and shall be separate from the directions submitted with respect to all other contributions under the Plan.

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(3) Where an Employer previously elected to invest contributions pursuant to Article IV and subsequently elects to have all future contributions invested entirely in accordance with Subparagraph (D)(1) above, Units previously accumulated in the Investment Funds or other investment vehicles prior to such election will continue to be subject to the Members’ investment directions in accordance with Article IV. All future Employer contribution allocations made following the Employer’s election shall be allocated in accordance with Subparagraph (D)(1).

(E)  (1) Except as otherwise provided under Article VII, Section 2, no amounts may be withdrawn from a Member’s Profit Sharing Account while still employed by the Employer, other than (i) amounts required to be distributed pursuant to the terms of a Qualified Domestic Relations Order, as defined in Article X, Section 6 of the Plan; or (ii) amounts withdrawn on account of mistake of fact, within one year after the payment of the contribution, as reviewed and approved by the Pentegra DC Plan Office.

(2) Subject to the provisions of Article VII of the Plan, upon receipt by the Plan of a notice of termination of Employment, a Member may request to withdraw any or all vested amounts in his Profit Sharing Account, including any amounts held in a Rollover Account for such Member, following the filing of a notice of withdrawal with the Pentegra DC Plan Office.

Section 9. Catch-up Contributions

All employees who are eligible to make elective deferrals under this Plan and who have attained age 50 before the close of the Plan Year shall be eligible to make catch-up contributions in accordance with, and subject to the limitations of, Section 414(v) of the Code. Such catch-up contributions shall not be taken into account for purposes of the provisions of the Plan implementing the required limitations of Sections 402(g) and 415 of the Code. The Plan shall not be treated as failing to satisfy the provisions of the Plan implementing the requirements of section 401(k)(3), 401(k)(11), 401(k)(12), 410(b), or 416 of the Code, as applicable, by reason of the making of such catch-up contributions. Catch-up contributions made pursuant to this Article III, Section 9 shall, at the Employer’s election, be eligible for matching contributions in accordance with Article III, Section 2.

Section 10. Automatic Enrollment

(A) An Employer may elect that 401(k) Elective Deferrals shall automatically be made to the Plan on behalf of a Member in lieu of Salary, unless a Member affirmatively elects: (1) that no such 401(k) Elective Deferrals shall be made to the Plan, or (2) in accordance with Article III, Section 1, the percentage of Salary, or specified dollar amount that shall be contributed to the Plan as a 401(k) Elective Deferrals.

(1) An Employer so electing shall also elect: (a) whether such 401(k) Elective Deferrals shall be pre-tax elective deferrals or Roth Elective Deferrals; and (b) the percentage of the Member’s Salary, or, as applicable, flat dollar amount, which shall be contributed to the Plan.

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(2)	Notwithstanding anything in Article III, Section 10(A) to the contrary, an Employer may elect to limit the automatic enrollment feature to Employees who commence Employment on or after the date the automatic enrollment feature becomes effective with respect to the Employer, or to those Employees who have not yet commenced participation in the Plan, provided that such Employer election shall not apply if the Employer has elected to meet the requirements of (C) or (D) of this Article III, Section 10.
(3)	The automatic contributions under this Section 10 shall cease to apply with respect to a Member if the Member affirmatively elects: (a) to have 401(k) Elective Deferrals made in a different amount or percentage of Salary, as applicable; or (b) not to have 401(k) Elective Deferrals made on his behalf.
(4)	Automatic 401(k) Elective Deferrals will be invested in a QDIA, until a Member affirmatively indicates how such amounts shall be invested.

(B)	An Employer who elects that 401(k) Elective Deferrals be automatically made under Article III, Section 10(A) may elect that such elective deferrals be made pursuant to either Paragraph (C) or (D) of this Article III, Section 10.
(C)	Eligible Automatic Contribution Arrangement. In accordance with Section 414(w) of the Code and the IRS Regulations issued thereunder, an “eligible automatic contribution arrangement” shall provide as follows:

(1)

The default level of a Member’s automatic 401(k) Elective Deferral shall be a uniform percentage of Salary elected by the Employer.

(2)

If an Employer elects, with respect to all of its Employees or a specified group of its Employees, to allow Members to receive a distribution of automatic 401(k) Elective Deferrals subject to the terms of the Plan and applicable law, a Member, on whose behalf automatic 401(k) Elective Deferrals have been made, may elect to receive a distribution equal to the amount of the automatic 401(k) Elective Deferrals (as adjusted for attributable earnings or losses), provided such election is made within 90 days of the first automatic 401(k) Elective Deferral. Such distribution may be reduced by any generally applicable fees.

(a) An Employer matching contribution contributed in connection with an automatic 401(k) Elective Deferral shall be forfeited in the event a Member elects to withdraw his 401(k) Elective Deferrals under this Paragraph (C)(2). Such forfeited matching contribution shall be subject to Article VI, Section 2.

(3) The Employer shall provide each Member to whom this Paragraph (C) applies a notice which includes the following information: the level of 401(k) Elective Deferrals which will automatically be made if a Member does not make an affirmative election, the Member’s right to elect not to have 401(k) Elective Deferrals made on his behalf (or to elect to have contributions made in a different amount or percentage of Salary) and how 401(k) Elective Deferrals under this Paragraph (C) will be invested.

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(D) Qualified Automatic Contribution Arrangement. In accordance with Section 401(k)(13) of the Code and the IRS Regulations issued thereunder, a “qualified automatic contribution arrangement” shall provide as follows:

(1) Amount of Automatic Deferral. The Employer shall elect a default 401(k) Elective Deferral level which shall be a uniform percentage of Salary. The percentage that first applies to a Member shall apply until the end of the last day of the Plan Year following the Plan Year in which the initial default 401(k) Elective Deferral was made. An Employer shall also elect default 401(k) Elective Deferral levels for the following Plan Years, and such default levels shall increase by at least 1% in each of the next 3 successive Plan Years, unless the default 401(k) Elective Deferral satisfies the minimum default levels in (D)(1)(a).

(a)	The minimum percentage an Employer may elect shall be 3% of Salary. Such minimum percentage shall increase by 1% in the each of the 3 successive Plan Years discussed above to a minimum percentage of no less than 6%.
(b)	Notwithstanding anything herein to the contrary, the default 401(k) Elective deferral level shall not exceed 10% of Salary.

(2) An Employer who has elected to have 401(k) Elective Deferrals automatically be made under this Paragraph (D) shall be required to make contributions on behalf of Non-highly Compensated Employees. An Employer shall elect whether such contributions shall be made in accordance with (a) or (b) below.

(a)	An Employer may elect to make a nonelective contribution equal to at least 3% of each eligible Non-highly Compensated Employee’s Salary.
(b)	An Employer may elect to make a matching contribution to eligible employees equal to: (i) 100% of the 401(k) Elective Deferrals made under this Paragraph (D) that do not exceed 1% of the applicable Member’s Salary; and (ii) at least 50% of the 401(k) Elective Deferrals made under this Paragraph (D) exceeding 1%, but not exceeding 6%, of the Member’s Salary.
(c)	Notwithstanding anything in Article VI to the contrary, all Employer contributions under this Paragraph (D) shall be fully vested after the Member completes two Years of Employment.
(d)	Employer contributions under this Paragraph (D) may not be distributed earlier than separation from service, death, disability, an event described in Section 401(k)(10) of the Code, or the attainment of age 591/2.

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(3) The Employer shall provide each Member to whom this Paragraph (D) applies a notice which includes the following information: the Member’s right to elect not to have 401(k) Elective Deferrals made on his behalf (or to elect to have contributions made in a different amount or percentage of Salary) and how 401(k) Elective Deferrals under this Paragraph (C) will be invested. Such notice shall also include such information as specified in Article III, Section 4(J)(3).

(E) Timing of Notices. The Employer shall provide the notices required by Paragraphs (C) and (D) in accordance with the following timeframes. An initial notice shall be provided to newly eligible Members no more than 90 days before the Member is first eligible to make 401(k) Elective Deferrals under the Plan, but no later than the date he first becomes eligible. An annual notice shall be provided to Members within a reasonable time before the beginning of each Plan Year. Such annual notice shall be provided at least 30 days, but no earlier than 90 days, in advance of each subsequent Plan Year, or such other period as may be permitted by law.

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ARTICLE IV INVESTMENT OF CONTRIBUTIONS

Section 1. General

All contributions to the Plan shall, upon receipt by the Board, be delivered to the Trustee to be held in the Trust Fund and invested and distributed by the Trustee in accordance with the provisions of the Plan and Trust Agreement. The Trust Fund shall consist of certain investment funds (each an “Investment Fund”) or other investment vehicles as described in the Trust Agreements and as designated by the Board.

To the extent made available under the Plan, an Employer may elect to allow Members to direct the investment of their Accounts, pursuant to, and in accordance with, such rules and procedures as may be prescribed by the Employer or the Board, to a self directed brokerage account. Should a self directed brokerage account be made available under the Plan, the Board may elect to provide, to all Members who have terminated employment with their Employer, the option to direct the investment of their Account to a self directed brokerage account. Where an Employer or the Board elects to provide a self directed brokerage account under the Plan, the Trustee may invest amounts held by it in a self directed brokerage account maintained by Charles Schwab & Co., Inc. (or any other such entity which provides a self directed brokerage account) on behalf of Plan Members who elect to utilize such investment vehicle.

A Trustee may in its discretion invest any amounts held by it in any Investment Fund in any commingled or group trust fund described in Section 401(a) of the Code and exempt under Section 501(a) of the Code or in any common trust fund exempt under Section 584 of the Code, provided that such trust fund satisfies the requirements of this Plan applicable to such investment fund and that the Trustees serve as Trustee of such commingled, group or common trust fund. To the extent that the Investment Funds are at any time invested in any commingled, group or common trust fund, the declaration of trust or other instrument pertaining to such fund and any amendments thereto are hereby adopted as part of this Agreement and deemed to form a part of the Plan.

Except as provided in Article III, Section 8(D)(1), each Member shall direct in writing that his contributions (including 401(k) Elective Deferrals and rollover contributions, if any) and the contributions made by his Employer (including Profit Sharing contributions) on his behalf shall be invested (a) entirely in any single Investment Fund or other investment vehicle (subject to additional restrictions imposed by the Board), or (b) in any combination of Investment Funds or investment vehicles offered under the Plan, in multiples of 1% (subject to additional restrictions imposed by the Board). Until an effective direction is made by the Member, all such contributions shall be invested in a QDIA.

Any such investment direction shall be followed until changed. Subject to the provisions of the following paragraphs of this Section, one time each business day (or, as elected by the Employer, once per month, or once per quarter) a Member may change his investment direction as to future contributions and also as to the value of his accumulated amounts in the Investment Funds or other investment vehicles. Such directed change will become effective upon the Valuation Date coinciding with or next following the date which his notice was received and processed by the Pentegra DC Plan Office subject to the same conditions with respect to the amount to be transferred under this Section which are specified in the Plan procedures for determining the amount of payments made under Article VII, Section 1(A) of the Plan.

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Except as otherwise provided below, a Member may not direct a transfer of his accumulated units in the Stable Value Fund to the Government Money Market Fund. A Member may direct a transfer from any other Investment Fund to the Government Money Market Fund provided that, except as otherwise provided below, amounts previously transferred from the Stable Value Fund, to such Investment Fund remain in such funds for a period of three months prior to being transferred to the Government Money Market Fund.

Notwithstanding anything in this Article IV to the contrary, if a Member participates in the automatic enrollment feature provided in Article III, Section 10 (other than an automatic enrollment feature provided in Section 10(C) of Article III which shall always be invested in a Qualified Default Investment Alternative), and fails to make an effective investment direction with respect to such deferral contributions, such amounts shall be invested in a Qualified Default Investment Alternative.

Section 2. Qualified Default Investment Alternative

(A)	The Accounts of a Member, who fails to provide affirmative instructions with respect to the investment of such Accounts, shall be invested in accordance with this Article IV, Section 2. For purposes of this Article IV, Section 2, the term “Member” shall include a Beneficiary.
(B)	The Employer shall furnish the following materials to the Member:

(1)	An initial notice shall be provided to the Member: (1) at least 30 days in advance of Membership eligibility, or least 30 days in advance of the date of any first investment in the QDIA on behalf of the Member, or (2) on or before the date of becoming a Member under Article II, Section 2, if the Member has an opportunity to make a withdrawal in accordance with Article III, Section 10(C).
(2)	An annual notice shall be provided to the Member within a reasonable period of time of at least 30 days, but no earlier than 90 days, in advance of each subsequent Plan Year, or such other period as may be permitted by law.
(3)	The notice provided under Paragraphs (B)(1) and (2) of this Article IV, Section 2 shall include : (a) a description of the circumstances under which assets in the Member’s Account may be invested on behalf of the Member in a QDIA; (b) an explanation of the Member’s right to direct the investments of his Accounts; (c) a description of the QDIA, including a description of the investment objectives, risk and return characteristics and fees and expenses attendant to the investment alternative; (d) a description of the right of the Members on whose behalf assets are invested in a QDIA to direct the investment of those assets to any other investment alternative under the Plan without financial penalty; and (e) an explanation of where Members can obtain investment information concerning the other investment alternatives available under the Plan. In addition, a notice required for a Member’s Account in connection with Article III, Section 10 shall also contain an explanation of the circumstances under which an elective deferral will be made for a Member, the percentage of such contribution and the right to elect not to have such contribution made on his or her behalf (or to elect to defer a different percentage).

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(4) Such information as relating to a Member’s investment in a QDIA as is required under U.S. Department of Labor Regulation Section 2550.404c-(5)(c)(4).

(C)

A Member may transfer the investment of his Account to another investment alternative available under the Plan with a frequency consistent with that afforded to a Member who affirmatively elected to invest his Accounts in the QDIA. Notwithstanding anything herein to the contrary, a Member whose Accounts are invested in a QDIA pursuant to this Article IV, Section 2 shall be able to transfer the investment of his Accounts to another investment alternative no less frequently than once within any three-month period.

(D)

Any fees or restrictions imposed in connection with a Member’s withdrawal of his investment from a QDIA shall satisfy the requirements of U.S. Department of Labor Regulation Section 2550.404c-(5)(c)(5).

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ARTICLE V MEMBERS’ ACCOUNTS, UNITS AND VALUATION

An Account shall be established and maintained for each Member showing his interests in the Investment Funds or other investment vehicles. The interest in each Investment Fund shall be represented by Units.

As of each Valuation Date, the value of a Unit in each Investment Fund shall be determined by dividing (a) the sum of the net assets at market value determined by the Trustee by (b) the total number of outstanding Units.

The number of additional Units to be credited to a Member’s interest in each Investment Fund, as of any Valuation Date, shall be determined by dividing (a) that portion of the aggregate contributions by and on behalf of the Member which was directed to be invested in such Investment Fund and received by the Board by (b) the Unit value of such Investment Fund.

The value of a Member’s Account may be determined as of any Valuation Date by multiplying the number of Units to his credit in each Investment Fund by the value of the Investment Fund Unit on such date and aggregating the results. If, and to the extent, a Member’s Account is invested pursuant to a self-directed brokerage account, the investments held in that account shall be valued by the brokerage firm maintaining such account in accordance with such procedures as may be determined by such brokerage firm.

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ARTICLE VI VESTING OF UNITS

Section 1. Vesting

(A)	All amounts credited to a Member’s Account shall immediately and fully vest in him, except amounts with respect to which the Employer has elected to adopt a vesting schedule as provided in this Article.
(B)	An Employer may adopt a different vesting schedule for its Members’ (i) Profit Sharing Accounts, (ii) Matching Amounts (including amounts contributed by the Employer under Article III, Section 3, Formula 1) and (iii) Basic Amounts and Supplemental Amounts (under Article III, Section 3, Formula 2).
(C)	If an Employer elects to adopt an automatic enrollment program, as provided in Article III, Section 10(D), Employer contributions shall vest as specified in such Article III, Section 10(D).
(D)	In accordance with Subsection (A) above, one or more of the following schedules may be elected by the Employer:

Schedule 1: Applicable Employer contributions (and related earnings) shall immediately and fully vest. If the eligibility requirement(s) selected by the Employer under Article II, Section 2(B), require(s) that an Employee complete a period of Employment which is longer than 12 consecutive months, this vesting Schedule 1 shall be automatically applicable.

Schedule 2: Applicable Employer contributions (and related earnings) shall become nonforfeitable and fully vested in accordance with the schedule set forth below:

Completed	Vested
Years of Employment	Percentage
Less than 2		0	%
2 but less than 3		20	%
3 but less than 4		40	%
4 but less than 5		60	%
5 but less than 6		80	%
6 or more		100	%

Schedule 3: Applicable Employer Contributions (and related earnings) shall become nonforfeitable and fully vested in accordance with the schedule set forth below:

Completed	Vested
Years of Employment	Percentage
Less than 5		0	%
5 or more		100	%

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Effective with respect to Employer contributions attributable to Employer basic, supplemental or profit sharing contributions made on or after January 1, 2007, this vesting schedule shall not be available for such contributions. Employer contributions, attributable to basic, supplemental or profit-sharing contributions, with respect to an Employer that had elected this Schedule 3 vesting schedule for such contributions, made on or after January 1, 2007, shall vest in accordance with Schedule 4.

Schedule 4: Applicable Employer Contributions (and related earnings) shall become nonforfeitable and fully vested in accordance with the schedule set forth below:

Completed	Vested
Years of Employment	Percentage
Less than 3		0	%
3 or more		100	%

Schedule 5: Applicable Employer Contributions (and related earnings) shall become nonforfeitable and fully vested in accordance with the schedule set forth below:

Completed	Vested
Years of Employment	Percentage
Less than 1		0	%
1 but less than 2		25	%
2 but less than 3		50	%
3 but less than 4		75	%
4 or more		100	%

Schedule 6: Applicable Employer Contributions (and related earnings) shall become nonforfeitable and fully vested in accordance with the schedule set forth by the Employer in accordance with applicable law.

Notwithstanding the vesting schedules above, a Member’s interest in his Account shall become 100% vested in the event that (i) the Member dies while in service with the Employer and the Plan has received notification of death, (ii) the Member has been approved for Disability, pursuant to the provisions of Article VII, Section 4, and the Plan has received notification of Disability, or (iii) the Member has attained Normal Retirement Age while in service with the Employer.

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(E) Vesting Election

(1) Except as otherwise provided in the next following paragraph, in the event that the Employer adopts the Plan as a successor plan to another defined contribution plan qualified under Section 401(a) and 501(a) of the Code, or in the event that the Employer changes or amends a vesting schedule adopted under this Article, any Member who was covered under such predecessor plan or the pre-amendment vesting schedule under the Plan, and who has completed at least 3 Years of Employment with such Employer, may elect to have the nonforfeitable percentage of the portion of his Account which is subject to such vesting schedule computed under such predecessor plan’s vesting provisions, or computed without regard to such change or amendment (a “Vesting Election”). Any Vesting Election shall be made by notifying the Pentegra DC Plan Office in writing within the election period hereinafter described. The election period shall begin on the date such amendment is adopted or the date such change is effective, or the date the Plan which serves as a successor plan is adopted or effective, as the case may be, and shall end no earlier than the latest of the following dates: (i) the date which is 60 days after the day such amendment is adopted; (ii) the date which is 60 days after the day such amendment or change becomes effective; (iii) the date which is 60 days after the day the Member is given written notice of such amendment or change by the Pentegra DC Plan Office; (iv) the date which is 60 days after the day the Plan is adopted by the Employer or becomes effective; or (v) the date which is 60 days after the day the Member is given written notice that the Plan has been designated as a successor plan. Any such election once made shall be irrevocable.

(2) To the extent permitted under the Code and Regulations, an Employer described in the foregoing paragraph may elect to treat all of its Members who are eligible to make a Vesting Election as having made such Vesting Election if the Vesting Schedule resulting from such an election is more favorable than the Vesting Schedule that would apply pursuant to the Plan amendment. Furthermore, subject to the requirements of the applicable Regulations, the Employer may elect to treat all its Members, who were employed by the Employer on or before the effective date of the change or amendment, as subject to the prior vesting schedule, provided such prior schedule is more favorable.

(F)

An Employer may, at its option, fully vest any Employer contributions (as elected by the Employer) and related earnings allocated to Members’ Accounts whose employment terminated pursuant to a sale of a line of business, subsidiary, or a division, except that the Employer’s election shall be ineffective if it is determined that such election is discriminatory.

(G)

Effective January 1, 2002, a Member’s accrued benefit derived from Employer matching contributions shall vest as provided by the Employer, except that the vesting schedule elected by the Employer for Employer matching contributions (and related earnings) credited to the Member’s Account on or after January 1, 2002 must be nonforfeitable and fully vested in accordance with the minimum vesting schedules under Section 411(a)(12) of the Code. If the Employer has elected a vesting schedule for Employer matching contributions which does not satisfy Section 411(a)(12) of the Code as of January 1, 2002, the Member’s vested interest in his Account attributable to Employer matching contributions made on or after January 1, 2002, shall not be less than the percentage determined in accordance with the following schedule:

Completed	Vested
Years of Employment	Percentage
Less than 2		0	%
2 but less than 3		20	%
3 but less than 4		40	%
4 but less than 5		60	%
5 but less than 6		80	%
6 or more		100	%

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Notwithstanding the schedule provided above, if, as of December 31, 2001, an Employer has elected a five (5) year cliff vesting schedule, under Schedule 3 above, for Employer matching contributions, the vested interest of each Member for Employer matching contributions (and related earnings) credited to the Member’s Account on or after January 1, 2002, shall not be less than the percentage determined in accordance with the following schedule:

Completed	Vested
Years of Employment	Percentage
Less than 3		0	%
3 or more		100	%

Section 2. Forfeitures

(A) If a Member who was partially vested in his Account on the date of his termination of Employment returns to Employment, his years of Employment prior to the Break in Service shall be included in determining future vesting and, if he returns before incurring 5 consecutive one-year Breaks in Service, any amounts forfeited from his Account shall be restored to his Account; provided, however, that if such a Member has received a distribution pursuant to Article VII, Section 3 or Article III, Section 8, his non-vested account Units shall not be restored unless he repays to the Plan the full amount distributed to him before the earlier of (i) 5 years after the first date on which the Member is subsequently reemployed by the Employer, or (ii) the close of the first period of 5 consecutive one-year Breaks in Service commencing after the withdrawal. The amounts restored to the Member’s Account will be valued on the Valuation Date coincident with or next following the later of (i) the date the Employee is rehired, or (ii) the date a new enrollment application is received by the Pentegra DC Plan Office and (iii) the date the Employee repays the full amount previously distributed to him that resulted in the forfeiture. If a Member terminates Employment without any vested interest in his Account, he shall (i) immediately be deemed to have received a total distribution of his Account and (ii) thereupon forfeit his entire Account; provided that if such Member returns to Employment before the number of consecutive one-year Breaks in Service equals or exceeds the greater of (i) 5, or (ii) the aggregate number of the Member’s Years of Service prior to such Break in Service, his Account shall be restored in the same manner as if such Member had been partially vested at the time of his termination of Employment and had his non-vested Account restored upon a return to employment, and his Years of Employment prior to incurring the first Break in Service shall be included in any subsequent determination of his vesting service. Notwithstanding anything herein to the contrary, in determining whether a Member has a vested interest in his Account derived from Employer contributions for purposes of Code Sections 410(a)(5)(D) and 411(a)(6)(D), the Member’s 401(k) Elective Deferrals shall be taken into account and treated as derived from Employer contributions.

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(B) Forfeited amounts, as described in the preceding Paragraph A, shall be made available to the Employer through a transfer from the Member’s Account to the Employer Hold Account, upon: (1) if the Member had a vested interest in his Account at his termination of Employment, the earlier of (i) the date as of which the Member receives a distribution of his entire vested interest in his Account or (ii) the date upon which the Member incurs 5 consecutive one-year Breaks in Service or (2) the date of the Member’s termination of Employment, if the Member then had no vested interest in his Account. Once so transferred, such amounts shall be used at the option of the Employer to (i) reduce administrative expenses (in accordance with Article IX, Section 2) for that Contribution Determination Period, (ii) offset any contribution to be made by such Employer for that Contribution Determination Period, or (iii) be allocated to all eligible Members at the end of such Contribution Determination Period in accordance with clause (ii) of the first sentence in Article III, Section 8(C)(1). The Employer Hold Account, referenced in this Paragraph (B), shall be maintained to receive, in addition to the forfeitures described above, (i) contributions in excess of the limitations contained in Section 415 of the Code, as described in Article X, Section 1(C),(ii) amounts, if any, forfeited pursuant to Sections 4 and 7 of Article III, and (iii) Employer contributions made in advance of the date allocable to Members.

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ARTICLE VII WITHDRAWAL PAYMENTS

Section 1. General

(A)

All payments in respect of a Member’s Account shall be made in cash from the Trust Fund and in accordance with the provisions of this Article or Articles XI or XII or Article III, Section 4. The amount of payment will be determined in accordance with the value of the Member’s Account on the Valuation Date coinciding with or next following the date proper notice is filed with the Board, unless following such Valuation Date a decrease in the value of the Member’s investment in any of the Investment Funds or other Account investment occurs prior to the date the Member’s Account is paid in which case that part of the payment which is based on such investments shall equal the value of such increments determined as of the date of payment which date shall occur as soon as administratively practicable on or following the Valuation Date such proper notice is filed with the Board. If Units are redeemed to make a payment of benefits, the redemption date Unit value with respect to a Member’s investment in any Investment Fund shall equal the value of a Unit in such Investment Fund, as determined in accordance with the valuation method applicable to Unit investments in such Fund on the date the Member’s investment is redeemed.

Payments provided under this Section will be made in a lump sum as soon as practicable after such Valuation Date or date of redemption, as may be applicable, subject to any applicable restriction on redemption imposed on amounts invested in any of the available Investment Funds.

(B)	At the election of the Employer, the Employer can suspend matching contributions to the Plan on behalf of a Member, during his uninterrupted period of Service with such Employer, who makes a withdrawal from his Regular Account for a period of 6 months after such withdrawal, except that (i) if the withdrawal does not exceed the amount of the Member’s contributions in his Regular Account plus earnings thereon, Employer contributions on his behalf may resume 3 months after such withdrawal, and (ii) if the withdrawal does not exceed the amount, if any, of the Member’s contributions in his Regular Account made prior to January 1, 1987 without earnings, then Employer contributions on his behalf shall not be affected by such withdrawal.
(C)	Any partial withdrawal from a Member’s Regular Account or Rollover Account shall be in an amount of at least $1,000 or shall be for the full amount of either (a) the Member’s contributions made prior to January 1, 1987 without earnings or (b) the Member’s contributions plus earnings thereon. Any partial withdrawal shall be deemed to come first from the Member’s contributions made prior to January 1, 1987 without earnings referred to in (ii) above, second proportionately from the Member contributions made after December 31, 1986 plus earnings thereon, and finally from the balance of his Regular Account or Rollover Account.
(D)	Any amounts paid under this Article may not be returned to the Plan.

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Section 2. Account Withdrawal While Employed

A Member may voluntarily withdraw his Account (other than his 401(k) Account, Safe Harbor CODA Account, Profit Sharing Account, or Profit Sharing Rollover Amounts, if any) while in Employment by filing a notice of withdrawal with the Pentegra DC Plan Office; provided, however, that in the event his Employer has elected to provide annuity options under Article VII, Section 3(B)(2) and a Member has elected an annuity form of payment, no withdrawals may be made from a married Member’s Account without the written consent of such Member’s Spouse (which consent shall be subject to the procedures set forth in Article III, Section 6(B)). Notwithstanding, the Employer may, at its option, provide that a Member be allowed to withdraw all or a portion of his Profit Sharing Account or Profit Sharing Rollover Amounts, if any. Only one in service withdrawal under this Section may be made in any Plan Year from each of the Member’s Regular Account and Rollover Account. This restriction shall not, however, apply to a withdrawal of a Member’s contributions made prior to January 1, 1987 without earnings, or a withdrawal under this Section in conjunction with a hardship withdrawal as defined under Article III, Section 4(H).

Notwithstanding the foregoing paragraph, a Member shall not withdraw any Matching, Basic, Profit Sharing, or Supplemental contributions made by his Employer under Article III, Section 2 or Section 3 and credited to his Regular Account unless (i) the Member has completed 60 months of participation in the Plan, (ii) the withdrawal occurs at least 24 months after such Matching, Basic, Profit Sharing, or Supplemental contributions were made by the Employer, (iii) the Member’s Employer terminates its participation in the Plan or (iv) the Member dies, is disabled, retires, terminates Employment or attains age 59¹/2. For purposes of the preceding requirements, if the Member’s Account includes amounts which have been transferred from a defined contribution plan established prior to the adoption of the Plan by the Member’s Employer, the period of time during which amounts were held on behalf of such Member and the periods of participation of such Member under such defined contribution plan shall be taken into account.

Section 3. Account Withdrawal Upon Termination of Employment or Employer Participation

(A) Except as provided in Article III, Sections 4 and 8, a Member who terminates Employment with a participating Employer, or whose Employer terminates its participation in the Plan under Article XI, may withdraw his Account at any time thereafter up to attainment of age 70¹/2 or, if elected by his Employer in accordance with the provisions of Article XI, Section 3, may transfer his Account, including all outstanding loan balances, to a qualified successor plan maintained by his Employer following the termination by the Employer of its participation under the Plan; provided, however, that the Member may not transfer outstanding loan balances unless such qualified successor plan provides participant loans. For purposes of this Section 3, a qualified successor plan is an employee benefit plan established or maintained by the Employer which (i) has received a favorable determination letter from the IRS stating that such plan satisfies the then current qualification and tax exemption requirements of the Code or with respect to which an opinion of counsel to the same effect, and in such form as may be satisfactory to the Pentegra DC Plan Office, (ii) has provided the Pentegra DC Plan Office with written certification by its appropriate fiduciaries that in the event of a transfer to such successor plan of the withdrawn assets, the successor plan shall be fully liable for the payment of all transferred benefits of the Members of such Employer (who consent to the transfer), and that the Plan shall not be liable for the payment of any part of such benefits, (iii) has provided each Member’s written consent to the transfer and his release of all claims against the Plan arising out of his membership therein, (iv) meets such other requirements of the IRS, other appropriate governmental authority or of the Board, which may apply, and (v) meets such other procedures as may be established by the Board from time to time.

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Any withdrawal under this Section requires that a notice of withdrawal be filed with the Pentegra DC Plan Office. If a Member does not file such notice, the value of his Account will be paid to him as soon as practicable after his attainment of age 70¹/2, but in no event shall payment commence later than April 1 of the calendar year following the calendar year in which the Member attains age 70 1/2, unless otherwise provided by Article VII, Section 3(C) or applicable law.

(B)  (1) In lieu of any lump sum payment of his total Account, a Member who has terminated his Employment may elect in his notice of withdrawal to be paid in installments (no less frequently than annually), provided that a Member shall not be permitted to elect an installment period in excess of his remaining life expectancy (or the joint life expectancy of the Member and his designated beneficiary) and if a Member attempts such an election, he shall be deemed to have elected the installment period with the next lowest multiple within the Member’s remaining life expectancy, subject to the provisions of Article X, Section 4. The amount of each installment will be equal to the value of the Member’s Account, multiplied by a fraction, the numerator of which is one and the denominator of which is the number of remaining installments including the one then being paid, so that at the end of the installment period so elected, the total Account will be liquidated. The value of the Units will be determined in accordance with the Unit values on the Valuation Date on or next following the Pentegra DC Plan Office’s receipt of his notice of withdrawal and on each anniversary thereafter. Payment will be made as soon as practicable after each such Valuation Date, but in no event shall payment commence later than April 1 of the calendar year following the calendar year in which the Member attains age 70¹/2 subject to Paragraph (C) below. The election of installments hereunder may not be subsequently changed by the Member, except that upon written notice to the Pentegra DC Plan Office, the Member may withdraw the balance of the Units in his Account in a lump sum at any time.

(2)	Annuity Option. An Employer may, at its option, elect to provide an annuity option in addition to the lump sum payment and installment payment options described in Section 1(A) and Subsection (B)(1) above. In the event an Employer elects to provide an annuity option, the following provisions shall apply:
	Unmarried Members: Any unmarried Member who has terminated his Employment may elect, in lieu of any lump sum or installment payment of his total Account(s) under Section 1(A) or Subsection (B) above, to receive a benefit payable by purchase from an insurance company of a single premium contract providing for (i) a single life annuity for the life of the Member or (ii) an annuity for the life of the Member and, if the Member dies leaving a designated Beneficiary, a 50% survivor annuity for the life of such designated Beneficiary.
	Married Members: Except as otherwise provided below, (i) any married Member who has terminated his Employment and who elected an annuity form of payment shall receive a benefit payable by purchase from an insurance company of a single premium contract providing for a Qualified Joint and Survivor Annuity, as defined under Section 6(B)(1) of Article III, unless the Member’s spouse executed a valid waiver of the Qualified Joint and Survivor Annuity and (ii) the Surviving Spouse of any married Member who dies prior to the date payment of his benefit commences and who elected to receive an annuity form of payment shall be entitled to a Preretirement Survivor Annuity, as defined under Section 6(B)(4) of Article III, unless the Member’s spouse executed a valid waiver of the Preretirement Survivor Annuity.

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(C)	Unless the Member elects otherwise, distribution of benefits will begin no later than the 60th day after the latest of the close of the Plan Year in which (i) the Member attains age 65; (ii) occurs the 10th anniversary of the year in which the Member commenced participation in the Plan; or (iii) the Member terminates Employment with an Employer. Notwithstanding the foregoing, the failure of a Member and Spouse to consent to a distribution while a benefit is immediately distributable shall be deemed to be an election to defer commencement of payment of any benefit.
	Effective as of January 1, 1997, and subject to Section 6 of this Article, payment of a Member’s Account shall not commence later than April 1 of the calendar year following the later of (i) the calendar year in which the Member attains age 701/2 or (ii) the calendar year in which the Member retires; provided however, if the Member is a 5 percent owner (as described in Section 416(i) of the Code), at any time during the Plan Year ending with or within the calendar year in which the Employee attains age 701/2, any benefit payable to such Member shall commence no later than April 1 of the calendar year following the calendar year in which the Member attains age 701/2. Such benefit shall be paid, in accordance with the Regulations, over a period not extending beyond the life expectancy of such Member (or the joint life expectancy of the Member and his designated Beneficiary). For purposes of this Section, life expectancy of a Member and/or a Member’s spouse may at the election of the Member be recalculated annually in accordance with the Regulations. The election, once made, shall be irrevocable. If the Member does not make an election prior to the time that distributions are required to commence, then life expectancies shall not be recalculated. If a Member dies after distribution of his interest has begun, the remaining portion of such interest will continue to be distributed at least as rapidly as under the method of distribution being used prior to the Member’s death. In addition, to the extent any payments from the Member’s Account would be made after the Member’s death, such payments shall be made in accordance with Section 401(a)(9) of the Code and the IRS Regulations thereunder (including the minimum distribution incidental benefit requirements).
	Except as provided in Article VII, Section 6, with respect to distributions under the Plan made on or after November 1, 2001, for calendar years beginning on or after January 1, 2001, the Plan will apply the minimum distribution requirements of section 401(a)(9) of the Internal Revenue Code in accordance with the regulations under section 401(a)(9) that were proposed on January 17, 2001 (the 2001 Proposed Regulations), notwithstanding any provision of the Plan to the contrary. If the total amount of the 2001 required minimum distributions made to a participant prior to November 1, 2001 are equal to or greater than the amount of required minimum distributions determined under the 2001 Proposed Regulations, then no additional distributions are required for such participant for 2001 on or after such date. If the total amount of required minimum distributions made to a participant prior to November 1, 2001 for 2001 are less than the amount determined under the 2001 Proposed Regulations, then the amount of required minimum distributions for 2001 on or after such date will be determined so that the total amount of required minimum distributions for 2001 is the amount determined under the 2001 proposed Regulations. This amendment shall continue in effect until the last calendar year beginning before the effective date of the final regulations under section 401(a)(9) or such other date as may be published by the Internal Revenue Service.

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(D) Solely to the extent required under applicable law and regulations, and notwithstanding any provision of the Plan to the contrary that would otherwise limit a Distributee’s election under this Subsection (D), a Distributee may elect, at the time and in the manner prescribed by the Board, to have any portion of an Eligible Rollover Distribution paid directly to an Eligible Retirement Plan specified by the Distributee in a Direct Rollover. Notwithstanding anything herein to the contrary, a Distributee who is a non-spousal Beneficiary shall only make an Eligible Rollover Distribution to an Eligible Retirement Pan if such Direct Rollover is accomplished through a direct trustee to trustee rollover.

For purposes of this Subsection (D), the following terms shall have the following meanings:

(1)	Eligible Rollover Distribution: Solely to the extent required under applicable law and regulations, an Eligible Rollover Distribution is any distribution of all or any portion of the balance to the credit of the Distributee, except that an Eligible Rollover Distribution does not include: any distribution that is one of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the Distributee or the joint lives (or joint life expectancies) of the Distributee and the Distributee’s designated beneficiary, or for a specified period of ten years or more; any distribution to the extent such distribution is required under Section 401(a)(9) of the Code; and the portion of any distribution that is not includible in gross income (determined without regard to the exclusion for net unrealized appreciation with respect to employer securities).
	A portion of a distribution shall not fail to be an Eligible Rollover Distribution merely because the portion consists of after-tax employee contributions which are not includible in gross income. However, such portion may be transferred only to an individual retirement account or annuity described in section 408(a) or (b) of the Code, or to a qualified defined contribution plan described in section 401(a) or 403(a) of the Code that agrees to separately account for amounts so transferred, including separately accounting for the portion of such distribution which is includible in gross income and the portion of such distribution which is not so includible.
(2)	Eligible Retirement Plan: An Eligible Retirement Plan is an individual retirement account described in Section 408(a) of the Code, an individual retirement annuity described in Section 408(b) of the Code, an annuity plan described in Section 403(a) of the Code, or a qualified trust described in Section 401(a) of the Code, that accepts the Distributee’s Eligible Rollover Distribution. However, in the case of an Eligible Rollover Distribution to a Surviving Spouse, an Eligible Retirement Plan is an individual retirement account or individual retirement annuity.

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	An Eligible Rollover Distribution excludes hardship withdrawals as defined in Section 401(k)(2)(B)(i)(IV) of the Code which are attributable to Member’s 401(k) deferrals under Treasury Regulation Section 1.401(k)-1(d)(2)(ii).
	An Eligible Retirement Plan shall also mean an annuity contract described in section 403(b) of the Code and an eligible plan under section 457(b) of the Code which is maintained by a state, political subdivision of a state, or any agency or instrumentality of a state or political subdivision of a state and which agrees to separately account for amounts transferred into such plan from this plan.
	Notwithstanding anything herein to the contrary with respect to Distributees who are non-spousal Beneficiaries, only an individual retirement plan under Sections 408(a) or (b) of the Code shall constitute an Eligible Retirement Plan.
(3)	Distributee: A Distributee includes an employee or former employee and effective January 1, 2002, Distributee shall also include the Member’s Surviving Spouse. In addition, the employee’s or former employee’s Surviving Spouse and the employee’s or former employee’s spouse or former spouse who is the alternate payee under a qualified domestic relations order, as defined in Section 414(p) of the Code, are Distributees with regard to the interest of the spouse or former spouse.
	A Distributee shall also include a non-spousal Beneficiary.
(4)	Direct Rollover: A Direct Rollover is a payment by the Plan to the Eligible Retirement Plan specified by the Distributee.
(5)	Roth Elective Deferral Direct Rollover: Notwithstanding anything in this Paragraph (D) to the contrary, a Direct Rollover of a distribution from a Roth 401(k) Account under the Plan will only be made to another Roth elective deferral account under an applicable retirement plan described in Section 402A(e)(1) or to a Roth IRA described in Section 408A of the Code, and only to the extent the rollover is permitted under the rules of Section 402(c) of the Code.

(a) The Plan will not provide for a Direct Rollover (including an automatic rollover) for distributions from a Member’s Roth 401(k) Account if the amount of the distributions that are Eligible Rollover Distributions are reasonably expected to total less than $200 during a year. In addition, any distribution from a Member’s Roth 401(k) Account is not taken into account in determining whether distributions from a Member’s other Accounts are reasonably expected to total less than $200 during a year. However, Eligible Rollover Distributions from a Member’s Roth 401(k) Account are taken into account in determining whether the total amount of the Member’s account balances under the Plan exceeds $500 for purposes of mandatory distributions from the Plan.

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(b) The provisions of the Plan that allow a Member to elect a Direct Rollover of only a portion of an Eligible Rollover Distribution, but only if the amount rolled over is at least $500, is applied by treating any amount distributed from the Member’s Roth 401(k) Account as a separate distribution from any amount distributed from the Member’s other accounts in the Plan, even if the amounts are distributed at the same time.

(E) Effective for distributions after December 31, 2001, a Member’s elective deferrals and earnings attributable to these contributions may be distributed on account of severance from employment. However, such a distribution shall be subject to the other provisions of the Plan regarding distributions, other than provisions that require a separation from service before such amounts may be distributed.

Section 4. Account Withdrawal Upon Member’s Disability

(A)	A Member who is separated from Employment by reason of a disability which is expected to last in excess of 12 consecutive months and who is either (i) eligible for, or is receiving, disability insurance benefits under the Federal Social Security Act, (ii) approved for disability under the provisions of the Pentegra Defined Benefit Plan for Financial Institutions, formerly known as the Financial Institutions Retirement Fund (a defined benefit pension plan through which federally insured financial institutions and organizations serving them may cooperate in providing for the retirement of their employees), or (iii) approved for disability under the provisions of any other benefit program or policy maintained by his Employer, which policy or program is applied on a uniform and nondiscriminatory basis to all Employees of such Employer, shall be deemed to be disabled for all purposes under the Plan.
(B)	The Pentegra DC Plan Office shall determine whether a Member is disabled in accordance with the terms of Paragraph (A) above; provided, however, approval of Disability is conditioned upon notice to the Pentegra DC Plan Office of such Member’s Disability by the Employer within 13 months of the Member’s separation from Employment. The notice of Disability shall include a certification that the Member meets one or more of the criteria listed in Paragraph (A) above.
(C)	Upon an Employer’s filing a written notice of Disability, a Member may withdraw his total Account balance under the Plan (including his Rollover Account and/or total Profit Sharing Account balance, if any) and have such amounts paid to him in accordance with Article VII, Section 3. In lieu of such lump sum payment, the Member may elect in his notice of withdrawal to (i) defer receipt of some or all of his vested Account until April 1 of the calendar year following the calendar year in which the Member attains 701/2, (ii) elect installment payments, as described in Section 3(B) of this Article and Article III, Section 8(E)(2), or (iii) make periodic withdrawals not more frequently than once per year pursuant to the provisions of Article VII, Section 1; provided, however, if a disabled Member becomes reemployed subsequent to withdrawal of some or all of his Account balance, such Member may not repay to the Plan any such withdrawn amounts.

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Section 5. Member’s Death

(A)

Subject to Section 3(B)(2) above, if a married Member dies, his Spouse, as Beneficiary, will receive a death benefit equal to the value of the Member’s Account determined on the Valuation Date on or next following the Board’s receipt of notice that such Member died; provided, however, that if such Member’s Spouse had consented in writing to the designation of a different Beneficiary, the Member’s Account will be paid to such designated Beneficiary. Such nonspousal designation may be revoked by the Member without spousal consent at any time prior to the Member’s death. If a Member is not married at the time of his death, his Account will be paid to his designated Beneficiary.

(B)

Subject to Section 3(B)(2) above, a Member may elect that upon his death, his Beneficiary, pursuant to Paragraph (A) above, may receive, in lieu of any lump sum payment, payment in 5 annual installments (10 if the Spouse is the Beneficiary, provided that the Spouse’s remaining life expectancy is at least 10 years) whereby the value of 1/5th of such Member’s Units (or 1/10th in the case of a spousal Beneficiary, provided that the Spouse’s remaining life expectancy is at least 10 years) in each Investment Fund will be determined in accordance with the Unit values on the Valuation Date on or next following the Board’s receipt of notice of the Member’s death and on each anniversary of such Valuation Date. Payment will be made as soon as practicable after each Valuation Date until the Member’s Account is exhausted. Such election may be filed at any time with the Board prior to the Member’s death and may not be changed or revoked after such Member’s death. If such an election is not in effect at the time of the Member’s death, his Beneficiary (including any spousal Beneficiary) may elect to make withdrawals in accordance with this Article, provided that any balance remaining in the deceased Member’s Account be withdrawn (i) on or before the December 31 of the calendar year which contains the 5th anniversary, or (ii) in periodic payments over such longer life-expectancy period as shall be allowed by Section 401(a)(9) of the Code and the IRS regulations issued thereunder. Notwithstanding the foregoing provisions of this Paragraph (B), payment of a Member’s Account shall commence not later than the December 31 of the calendar year immediately following the calendar year in which the Member died or, in the event such Beneficiary is the Member’s Surviving Spouse, on or before the December 31 of the calendar year in which such Member would have attained age 701/2, if later (or, in either case, on any later date prescribed by the IRS Regulations). If, upon the Spouse’s or Beneficiary’s death, there is still a balance in the Account, the value of the remaining Units will be paid in a lump sum to such Spouse’s or Beneficiary’s estate. Notwithstanding anything in this Subsection (B) to the contrary, if a Member dies after distribution of his or her interest has begun, the remaining portion of such interest will continue to be distributed at least as rapidly as under the method of distribution being used prior to the Member’s death. In addition, to the extent any payments from a Member’s Account would be made after a Member’s death, such payments shall be made in accordance with Section 401(a)(9) of the Code and the IRS Regulations thereunder (including the minimum distribution incidental benefit requirements).

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Section 6. Minimum Distribution Requirements

(A) General Rules.

(1)	Effective Date. The provisions of this Section 6 will apply for purposes of determining required minimum distributions commencing as of November 1, 2002 and thereafter.
(2)	Precedence. The requirements of this Section 6 will take precedence over any inconsistent provisions of the Plan.
(3)	Requirements of Treasury Regulations Incorporated. All distributions required under this Plan will be determined in accordance with Treasury Regulations under Section 401(a)(9) of the Code, and the minimum distribution incidental death benefit requirement of Section 401(a)(9)(G) of the Code.
(4)	Limits on Distributions Periods. As of the fist distribution calendar year, distributions to a Member, if not made in a single sum, may only be made over the following periods:

(a) the life of the Member,

(b) the joint lives of the Member and a designated Beneficiary,

(c) a period certain not extending beyond the life expectancy of the Member, or

(d) a period certain not extending beyond the joint life and last survivor expectancy of the Member and a designated Beneficiary.

(B) Time and Manner of Distribution.

(1) Required Beginning Date. The Member’s entire interest will be distributed, or begin to be distributed, to the member no later than the Member’s Required Beginning Date (as defined below).

(2) Death of Participant Before Distributions Begin. If the Member dies before distributions begin, the Member’s entire interest will be distributed, or begin to be distributed, no later than as follows:

(a) If the Member’s Surviving Spouse is the Member’s sole designated Beneficiary, then, except as provided in the adoption agreement, distributions to the Surviving Spouse will begin by December 31 of the calendar year immediately following the calendar year in which the Member died, or by December 31 of the calendar year in which the member would have attained age 70 1/2, if later.

(b) If the Member’s Surviving Spouse is not the Member’s sole designated Beneficiary, then, except as provided in the adoption agreement, distributions to the designated Beneficiary will begin by December 31 of the calendar year immediately following the calendar year in which the Member died.

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(c) If there is no designated Beneficiary as of September 30 of the year following the year of the member’s death, the Member’s entire interest will be distributed by December 31 of the calendar year containing the fifth anniversary of the Member’s death.

(d) If the Member’s Surviving Spouse is the Member’s sole designated Beneficiary and the surviving spouse dies after the Member but before distributions to the Surviving Spouse begin, this Section 6(B)(2), other than Section 6(B)(2)(a), will apply as if the Surviving Spouse were the Member.

For purposes of this Section 6(B)(2) and Section 6(D), unless Section 6(B)(2)(d) applies, distributions are considered to begin on the Member’s Required Beginning Date. If Section 6(B)(2)(d) applies, distributions are considered to begin on the date distributions are required to begin to the surviving spouse under Section 6(B)(2)(a). If distributions under an annuity purchased from an insurance company irrevocably commence to the Member before the member’s Required Beginning Date (or to the Member’s Surviving Spouse before the date distributions are required to begin to the surviving spouse under Section 6(B)(2)(a)), the date distributions are considered to begin is the date distributions actually commence.

(3) Forms of Distribution. Unless the Member’s interest is distributed in the form of an annuity purchased from an insurance company or in a single sum on or before the Required Beginning Date, as of the first distribution calendar year distributions will be made in accordance with Sections 6.3 and 6.4 of this Article. If the Member’s interest is distributed in the form of an annuity purchased from an insurance company, distributions thereunder will be made in accordance with the requirements of Section 401(a)(9) of the Code and the Treasury Regulations.

(C) Required Minimum Distributions During Participant’s Lifetime.

(1) Amount of Required Minimum Distribution For Each Distribution Calendar Year. During the Member’s lifetime, the minimum amount that will be distributed for each distribution calendar year is the lesser of:

(a) the quotient obtained by dividing the Member’s account balance by the distribution period in the Uniform Lifetime Table set forth in Section 1.401(a)(9)-9, Q&A-2, of the Treasury Regulations, using the Member’s age as of the Member’s birthday in the distribution calendar year; or

(b) if the Member’s sole designated Beneficiary for the distribution calendar year is the Member’s Spouse, the quotient obtained by dividing the Member’s account balance by the number in the Joint and Last Survivor Table set forth in Section 1.401(a)(9)-9, Q&A-3 of the Treasury Regulations, using the Member’s and Spouse’s attained ages as of the Member’s and Spouse’s birthdays in the distribution calendar year.

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(2) Lifetime Required Minimum Distributions Continue Through Year of Participant’s Death. Required minimum distributions will be determined under this section 6(C) of Article VII beginning with the first distribution calendar year and up to and including the distribution calendar year that includes the Member’s date of death.

(D) Required Minimum Distributions After Member’s Death.

(1) Death On or After Date Distributions Begin.

(a) Member Survived by Designated Beneficiary. If the Member dies on or after the date distributions begin and there is a designated Beneficiary, the minimum amount that will be distributed for each distribution calendar year after the year of the Member’s death is the quotient obtained by dividing the Member’s account balance by the longer of the remaining life expectancy of the Member or the remaining life expectancy of the Member’s designated Beneficiary, determined as follows:

(i) The Member’s remaining life expectancy is calculated using the age of the Member in the year of death, reduced by one for each subsequent year.

(ii) If the Member’s Surviving Spouse is the Member’s sole designated Beneficiary, the remaining life expectancy of the Surviving Spouse is calculated for each distribution calendar year after the year of the Member’s death using the Surviving Spouse’s age as of the Spouse’s birthday in that year. For distribution calendar years after the year of the Surviving Spouse’s death, the remaining life expectancy of the Surviving Spouse is calculated using the age of the Surviving Spouse as of the Spouse’s birthday in the calendar year of the Spouse’s death, reduced by one for each subsequent calendar year.

(iii) If the Member’s Surviving Spouse is not the Member’s sole designated Beneficiary, the designated Beneficiary’s remaining life expectancy is calculated using the age of the Beneficiary in the year following the year of the Member’s death, reduced by one for each subsequent year.

(b) No Designated Beneficiary. If the Member dies on or after the date distributions begin and there is no designated Beneficiary as of September 30 of the year after the year of the Member’s death, the minimum amount that will be distributed for each distribution calendar year after the year of the Member’s death is the quotient obtained by dividing the Member’s account balance by the Member’s remaining life expectancy calculated using the age of the Member in the year of death, reduced by one for each subsequent year.

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(2) Death Before Date Distributions Begin.

(a) Participant Survived by Designated Beneficiary. Except as provided in the adoption agreement, if the Member dies before the date distributions begin and there is a designated Beneficiary, the minimum amount that will be distributed for each distribution calendar year after the year of the Member’s death is the quotient obtained by dividing the Member’s account balance by the remaining life expectancy of the Member’s designated Beneficiary, determined as provided in section 6(D)(1) of Article VII.

(b) No Designated Beneficiary. If the Member dies before the date distributions begin and there is no designated Beneficiary as of September 30 of the year following the year of the Member’s death, distribution of the Member’s entire interest will be completed by December 31 of the calendar year containing the fifth anniversary of the Member’s death.

(c) Death of Surviving Spouse Before Distributions to Surviving Spouse Are Required to Begin. If the Member dies before the date distributions begin, the Member’s surviving spouse is the Member’s sole designated Beneficiary, and the Surviving Spouse dies before distributions are required to begin to the Surviving Spouse under section 6(B)(2)(a) of Article VII, this section 6(D)(2) of Article VII will apply as if the Surviving Spouse were the Member.

(E) Definitions.

(1) Designated Beneficiary. The individual who is designated by the Member (or the Member’s Surviving Spouse) as the Beneficiary of the Member’s interest under the Plan and who is the designated Beneficiary under Section 401(a)(9) of Code and Section 1.401(a)(9)-4 of the Treasury Regulations.

(2) Distribution Calendar Year. A calendar year for which a minimum distribution is required. For distributions beginning before the Member’s death, the first distribution calendar year is the calendar year immediately preceding the calendar year which contains the Member’s Required Beginning Date. For distributions beginning after the Member’s death, the first distribution calendar year is the calendar year in which distributions are required to begin under section 6(B)(2) of Article VII. The required minimum distribution for the Member’s first distribution calendar year will be made on or before the Member’s Required Beginning Date. The required minimum distribution for other distribution calendar years, including the required minimum distribution for the distribution calendar year in which the Member’s Required Beginning Date occurs, will be made on or before December 31 of that distribution calendar year.

(3) Life Expectancy. Life expectancy as computed by use of the Single Life Table in Section 1.401(a)(9)-9, Q&A-1 of the Treasury Regulations.

(4) Member’s Account Balance. The account balance as of the last valuation date in the calendar year immediately preceding the distribution calendar year (valuation calendar year) increased by the amount of any contributions made and allocated or forfeitures allocated to the account balance as of dates in the valuation calendar year after the valuation date and decreased by distributions made in the valuation calendar year after the valuation date. The account balance for the valuation calendar year includes any amounts rolled over or transferred to the Plan either in the valuation calendar year or in the distribution calendar year if distributed or transferred in the valuation calendar year.

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(5) Required Beginning Date. The required beginning date of a Member is April 1 of the calendar year following the later of the calendar year in which the Member attains age 70¹/2 or the calendar year in which the participant retires, except that the benefit distributions to a 5% owner must commence by April 1 of the calendar year following the calendar year in which the Member attains age 70¹/2.

(6) 5% owner. A Member is treated as a 5% owner for purposes of this Section 5 if such Member is a 5% owner as defined in Section 416 of the Code at any time during the Plan Year ending with or within the calendar year in which such owner attains age 70 ¹/2. Once distributions have begun to a 5% owner under this Section 5 they must continue to be distributed, even if the Member ceases to be a 5% owner in a subsequent year.

(F) TEFRA Section 242(b)(2) Elections.

(1) Notwithstanding the other requirements of this Section 6 of Article VII, distribution on behalf of any Employee, including a 5% owner who has made a designation under section 242(b)(2) of the Tax Equity and Fiscal Responsibility Act (a “section 242(b)(2) election”) may be made in accordance with all of the following requirements (regardless of when such distribution commences):

(a) The distribution by the Plan is one which would not have disqualified such Plan under section 401(a)(9) of the Code as in effect prior to amendment by the Deficit Reduction Act of 1984.

(b) The distribution is in accordance with a method of distribution designated by the Member whose interest in the Plan is being distributed or, if the Member is deceased, by a Beneficiary of such Member.

(c) Such designation was in writing, was signed by the Member or the Beneficiary, and was made before January 1, 1984.

(d) The Member had accrued a benefit under the Plan as of December 31, 1983.

(e) The method of distribution designated by the Member or the Beneficiary specifies the time at which distributions will commence, the period over which distributions will be made, and in the case of any distribution upon the Member’s death, the Beneficiaries of the Member listed in order of priority.

(2) A distribution upon death will not be covered by this transitional rule unless the information in the designation contains the required information described above with respect to the distributions to be made upon the death of the Member.

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(3) For any distribution which commences before January 1, 1984, but continues after December 31, 1983, the Member, or the Beneficiary, to whom such distribution is being made, will be presumed to have designated the method of distribution under which the distribution is being made if the method of distribution was specified in writing and the distribution satisfies the requirements in Sections 6(F)(1)(a) and 6(F)(1)(e) of Article VII.

(4) If a designation is revoked, any subsequent distribution must satisfy the requirements of Section 401(a)(9) of the Code and the Treasury Regulations thereunder. If a designation is revoked subsequent to the date distributions are required to begin, the Plan must distribute by the end of the calendar year following the calendar year in which the revocation occurs the total amount not yet distributed which would have been required to have been distributed to satisfy Section 401(a)(9) of the Code and the Treasury Regulations thereunder, but for the section 242(b)(2) election. For calendar years beginning after December 31, 1988, such distributions must meet the minimum distribution incidental benefit requirements. Any changes in the designation will be considered to be a revocation of the designation. However, the mere substitution or addition of another Beneficiary (one not named in the designation) under the designation will not be considered to be a revocation of the designation, so long as such substitution or addition does not alter the period over which distributions are to be made under the designation, directly or indirectly (for example, by altering the relevant measuring life).

(5) In the case in which an amount is transferred or rolled over from one plan to another plan, the rules in Treasury Regulations Section 1.401(a)(9)-8, Q&A-14 and Q&A-15, shall apply.

(G) Transition Rules.

(1) Required minimum distributions before November 1, 2002 were made pursuant to Article VII, Sections 3(C) and 6(G)(2) through 6(G)(3) below, as applicable.

(2) 2000 and Before. Required minimum distributions for calendar years after 1984 and before 2001 were made in accordance with Section 401(a)(9) and the proposed Treasury Regulations thereunder published in the Federal Register on July 27, 1987 (the “1987 Proposed Regulations”).

(3) 2001 and 2002. Required minimum distributions for calendar years 2001 and 2002 (made on or after November 1, 2001 and on or before October 31, 2002) were made in accordance with Section 401(a)(9) and the Treasury Regulations thereunder that were proposed on January 17, 2001.

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ARTICLE VIII LOAN PROGRAM

Section 1. General

An Employer may, at its option, make available this loan program for any Member (and, if applicable under Section 8 of this Article, any Beneficiary), subject to applicable law. In the event amounts are transferred to the Plan from a retirement plan subject to Section 401(a)(11) of the Code, no loans may be made from a married Member’s Account without the written consent of such Member’s Spouse which shall be obtained no earlier than the beginning of the 90-day period that ends on the date on which the loan is to be secured by any portion of such Member’s Account. The consent must be in writing, must acknowledge the effect of the loan, and must be notarized. Such consent shall thereafter be binding with respect to the consenting Spouse or any subsequent Spouse with respect to that loan. In the event an Employer elects the loan program under this Article VIII, loans shall be available from the Rollover Accounts of any Employees of the Employer who have not yet become Members.

Section 2. Loan Application

(A) Subject to the restrictions described in Paragraph (B) of this Section, a Member in Employment may borrow from his Account by filing an application with the Pentegra DC Plan Office. Such application (hereinafter referred to as a “completed application”) shall (i) specify the terms pursuant to which the loan is requested to be made and (ii) provide such information and documentation as the Board shall require, including a note, duly executed by the Member, granting a security interest of an amount not greater than 50% of his vested Account, to secure the loan. With respect to such Member, the completed application shall authorize the repayment of the loan through payroll deductions. Such loan will become effective upon the Valuation Date coinciding with or next following the date on which his completed application and other required documents were received by the Pentegra DC Plan Office, subject to the same conditions with respect to the amount to be transferred under this Section which are specified in the Plan procedures for determining the amount of payments made under Article VII, Section 1(A) of the Plan.

(B) The Board shall establish standards in accordance with the Code and ERISA which shall be uniformly applicable to all Members eligible to borrow from their interests in the Trust Fund similarly situated and shall govern the approval or disapproval of completed applications. The terms for each loan shall be set solely in accordance with such standards.

(C) In accordance with the Board’s established standards, each completed application shall be reviewed and approved or disapproved as soon as practicable after the receipt thereof, and the applying Member shall be promptly notified of such approval or disapproval. Notwithstanding the foregoing, the review of a completed application, or payment of the proceeds of an approved loan, may be deferred if the proceeds of the loan would otherwise be paid during the period commencing on December 1 and ending on the following January 31.

(D) Subject to Paragraph (C) of this Section and Paragraph (C) of Section 6 of this Article VIII, upon approval of a completed application, payment of the loan to the Member shall be made from the Investment Fund(s) in the same proportion that the designated portion of the Member’s Account is invested at the time of the loan, and the relevant portion of the Member’s interest in such Investment Fund(s) shall be cancelled and shall be transferred in cash to the Member. The Pentegra DC Plan Office shall maintain sufficient records regarding such amounts to permit an accurate crediting of repayments of the loan.

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Section 3. Permitted Loan Amount

The amount of each loan may not be less than $1,000 nor more than the maximum amount as described below. The maximum amount available for loan under the Plan (when added to the outstanding balance of all other loans from the Plan to the borrowing Member) shall not exceed the lesser of: (a) $50,000 reduced by the excess (if any) of (i) the highest outstanding loan balance attributable to the Account of the Member requesting the loan from the Plan during the one year period ending on the day preceding the date of the loan, over (ii) the outstanding balance of all other loans from the Plan to the Member on the date of the loan, or (b) 50 percent of the value of the Member’s vested Account based on the latest available information on the date on which the Pentegra DC Plan Office receives the completed application for the loan and other required documents. In determining the maximum amount that a Member may borrow, all vested assets of his Account, will be taken into consideration, provided that, where the Employer has not elected to make a Member’s entire Account available for loans or where a Member’s Account contains investments in a brokerage account which shall not be available for loans, in no event shall the amount of the loan exceed the value of such vested portion of the Member’s Account from which loans are permissible.

Section 4. Source of Funds for Loan

The amount of the loan will be deducted from the Member’s Account in the Investment Funds in accordance with Section 2(D) of this Article and the Plan procedures for determining the amount of payments made under Article VII, Section 1(A). An Employer may elect to not make loans available to Members from a Member’s Regular Account, 401(k) Account, Safe Harbor CODA Account, Profit Sharing Account (including Profit Sharing Rollover amounts), and/or Rollover Account from which the loan shall be allocable based upon the Member’s designation. Any portion of a Member’s Account which is invested in a brokerage account shall not be available for loans. The account from which the Member first chooses to borrow must be exhausted before the Member can borrow any amount from the other account. A loan will first be allocable (to the extent the Employer permits Members to take loans from one or more of the Members’ Accounts) out of the amounts which are the least accessible to the Member unless elected otherwise.

Section 5. Conditions of Loan

(A) Each loan to a Member under the Plan shall be repaid in level amounts through regular payroll deductions after the effective date of the loan, and continuing thereafter with each payroll. Notwithstanding the foregoing sentence, at the election of the Employer, a loan may be repaid in level monthly payments or on a payroll period basis, provided that the Employer applies such election uniformly to all Members. Except as otherwise required by the Code and the IRS Regulations, each loan shall have a repayment period of not less than 12 months and not in excess of 60 months except that, if the purpose of the loan is the purchase of a primary residence, not more than 180 months. After the first 3 monthly payments of the loan have been satisfied, the Member may pay the outstanding loan balance (including accrued interest from the due date).

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(B) The rate of interest for the term of the loan will be established as of the loan date, and will be the Barron’s Prime Rate (base rate) plus 1% as published on the last Saturday of the preceding month, or such other rate as may be required by applicable law and determined by reference to the prevailing interest rate charged by commercial lenders under similar circumstances. The applicable rate would then be in effect through the last business day of the month.

(C) Repayment of all loans under the Plan shall be secured by 50% of the Member’s vested interest in his Account determined as of the origination of such loan.

(D) Only one loan may be made to a Member in the Plan Year from his Account (excluding the Member’s Rollover Account), except that a second loan may be made from the Member’s Rollover Account, if any, in such Plan Year, unless the Employer does not permit loans to be made from the Member’s Rollover Account.

(E) There shall be a reasonable origination fee and/or an annual administration fee assessed to the Member’s Account for each loan made to a Member or Beneficiary.

Section 6. Crediting of Repayment.

(A) Upon lending any amount to a Member, the Board shall establish and maintain a loan receivable account with respect to, and for the term of, the loan. The allocations described in this Section shall be made from the loan receivable account.

(B) Upon receipt of each monthly or payroll period installment payment and the crediting thereof to the Member’s loan receivable account, there shall be allocated to the Member’s Account in the Investment Funds in accordance with his most recent investment instruction the principal portion of the installment payment plus that portion of the interest equal to the rate determined in Section 5(B) of this Article.

(C) The unpaid balance owed by a Member on a loan under the Plan shall not reduce the amount credited to his Account. However, from the time of payment of the proceeds of the loan to the Member, such Account shall be deemed invested, to the extent of such unpaid balance, in such loan until the complete repayment thereof or distribution from such Account. Any loan repayment shall first be deemed allocable to a Member’s Regular Account contributions, then earnings on such Member’s Regular Account contributions and finally Employer contributions plus earnings. Notwithstanding the preceding sentence, any loan repayment of amounts derived from a Member’s 401(k) Account, Regular Account and Rollover Account shall be applied to such accounts on a proportionate basis that reflects the allocable portion of those Member accounts deemed invested in the loan.

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Section 7. Cessation of Payments on Loan

(A) If a Member, while employed, fails to make a monthly or payroll period installment payment when due, as specified in the completed application, subject to applicable law, he will be deemed to have received a distribution of the outstanding balance of the loan. If such default occurs after the first 3 monthly payments of the loan have been satisfied, the Member may pay the outstanding balance, including accrued interest from the due date, by the last day of the calendar quarter following the calendar quarter which contains the due date of the last monthly installment payment, in which case no such distribution will be deemed to have occurred. Subject to applicable law, notwithstanding the foregoing, a Member that borrows amounts from his 401(k) Account may not cease to make monthly installment payments while employed and receiving a Salary from the Employer.

(B) Except as otherwise provided under Section 8 below, upon a Member’s termination of Employment, death or Disability, or the termination of his Employer’s participation in the Plan, no further monthly installment payments may be made. Unless the outstanding balance, including accrued interest from the due date, is paid by the last day of the calendar quarter following the calendar quarter of the date of such occurrence, the Member will be deemed to have received a distribution of the outstanding balance of the loan including accrued interest from the due date. This Subsection (B) shall also apply to a Member (i) whose Employer terminates its participation in the Plan without establishing or maintaining a qualified successor plan (as defined in Article VII, Section 3) to which the Member’s Account could be transferred, (ii) who elects not to transfer the total accumulated balance of his Account to such qualified successor plan, as provided under Article VII, Section 3(A), where the Employer has satisfied all conditions and requirements to permit such transfer, or (iii) who fails to transfer outstanding loan balances as provided under Article VII, Section 3(A)(2).

Section 8. Loans to Former Members and Beneficiaries

Notwithstanding any other provisions of this Article VIII, a Member who terminates Employment for any reason or whose Employer terminates participation in the Plan (a “Terminated Member”) shall be permitted to continue making scheduled repayments with respect to any loan balance outstanding at the time he becomes a Terminated Member and any Terminated Member (or Beneficiary) shall be permitted to borrow from his Account if his Employer (or the Employer of the Member with respect to whom he is a Beneficiary) permitted loans under the Plan at the time he became a Terminated Member (or became entitled to benefits as a Beneficiary). If any individual who continues to make repayments or who borrows from his Account pursuant to this Section 8 fails to make a monthly installment payment by the end of the calendar quarter following the calendar quarter of the scheduled payment date, he will be deemed to have received a distribution of the outstanding balance of the loan.

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ARTICLE IX ADMINISTRATION OF PLAN

Section 1. Board of Directors

(A) The general administration of the Plan and the general responsibility for carrying out the provisions of the Plan shall be placed in a Board of Directors who must be Members of the Plan. The President of the Plan shall be the chief administrative officer of the Plan, a member ex officio of the Board and, for purposes of ERISA, the “plan administrator.” The Board shall constitute the “named fiduciary” for purposes of ERISA. The Board may adopt, and amend from time to time, by-laws not inconsistent with the Trust and the Plan and shall have such duties and exercise such powers as are provided in the Plan, Trust Agreement and by-laws. The number of Directors, their method of election and their terms of office shall be governed by such by-laws. The Board shall hold an annual meeting each year and may hold additional meetings from time to time.

(B) The Board members shall serve without compensation, but shall be reimbursed for any reasonable expenses incurred in their capacities as Board members. Neither the Plan Administrator, nor any Board member, officer or employee of the Plan shall be personally liable by virtue of any contract or other instrument executed by him or on his behalf in such capacity nor for any mistake of judgment made in good faith. Each Employer, by its participation in the Plan, agrees that each member of the Board and officer and employee of the Plan shall be indemnified by the Employer for any liability, in excess of that which is covered by insurance, arising out of any act or omission to act in connection with the Plan, except for fraud or willful misconduct. The obligation to pay any such expense shall be allocated among the Employers by the Board in such manner as the Board deems equitable.

(C) The Board shall elect from its membership a chairman and a vice chairman of the Board, and shall elect such other officers of the Plan as the Board deems desirable. The Board may appoint committees and shall arrange for such legal, accounting, investment advisory or management, administrative and other services as it deems appropriate to carry out the Plan, and may act in reliance upon the advice and actions of the persons or firms providing such services. The Board may delegate to any committee, officer, employee or agent the authority to perform any act pertaining to the Plan or the administration thereof. No Employer shall under any circumstances or for any purpose be deemed an agent of the Board. The Board shall cause to be maintained proper accounts and accounting procedures and shall submit an Annual Report on the operations of the Plan to each Employer for the information of its members. The Board may adopt by-laws governing the conduct of its affairs and may amend such by-laws from time to time.

(D) The Board shall have the exclusive right to interpret the Plan and to determine any question arising under or in connection with the administration of the Plan. Its decision or action in respect thereof shall be conclusive and binding upon all persons having an interest in the Trust or under the Plan. The Board shall have no duty to see that contributions received by the Trustee under the Plan comply with the provisions of the Plan, nor any duty to enforce payment of any contributions under the Plan.

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(E)  (1) All claims for benefits under the Plan shall be submitted in writing to, and within a reasonable period of time decided by, the President of the Plan. If the claim is wholly or partially denied, written notice of the denial shall be furnished within 90 days after receipt of the claim; provided that, if special circumstances require an extension of time for processing the claim, an additional 90 days from the end of the initial period shall be allowed for processing the claim, in which event the claimant shall be furnished with a written notice of the extension prior to the termination of the initial 90-day period indicating the special circumstances requiring an extension. The written notice denying the claim shall set forth the reasons for the denial, including specific reference to pertinent provisions of the Plan on which the denial is based, a description of any additional information necessary to perfect the claim and information regarding review of the claim and its denial.

(2) A claimant may review all pertinent documents and may request a review by the Board of a decision denying the claim. Such a request shall be made in writing and filed with the Board within 60 days after delivery to the claimant of written notice of the decision. Such written request for review shall contain all additional information which the claimant wishes the Board to consider. The Board may hold a hearing or conduct an independent investigation, and the decision on review shall be made as soon as possible after the Board’s receipt of the request for review. Written notice of the decision on review shall be furnished to the claimant within 60 days after receipt by the Board of a request for review, unless special circumstances require an extension of time for processing, in which event an additional 60 days shall be allowed for review and the claimant shall be so notified in writing. Written notice of the decision on review shall include specific reasons for the decision. For all purposes under the Plan, such decision on claims (where no review is requested) and decision on review (where review is requested) shall be final, binding and conclusive on all interested persons as to participation and benefits eligibility, the amount of benefits and as to any other matter of fact or interpretation relating to the Plan.

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Section 2. Trust Agreement

(A) The Board shall enter into one or more Trust Agreements with a Trustee or Trustees selected by the Board. The Trust established under any such agreement shall be a part of the Plan and shall provide that all funds received by the Trustee as contributions under the Plan and the income therefrom (other than such part as is necessary to pay the expenses and charges referred to in Paragraph (B) of this Section) shall be held in the Trust Fund for the exclusive benefit of the Members or their Beneficiaries, and managed, invested and reinvested and distributed by the Trustee in accordance with the Plan. Sums received for investment may be invested (i) wholly or partly through the medium of any common, collective or commingled trust fund maintained by a bank or other financial institution and which is qualified under Sections 401(a) and 501(a) of the Code and constitutes a part of the Plan, or (ii) wholly or partly through the medium of a group annuity or other type of contract issued by an insurance company and constituting a part of the Plan, and utilizing, under any such contract, general, commingled or individual investment accounts. Subject to the provisions of Article XII, the Board may from time to time and without the consent of any Employer, Member or Beneficiary (a) amend the Trust Agreement or any such insurance contract in such manner as the Board may deem necessary or desirable to carry out the Plan, (b) remove the Trustee and designate a successor Trustee upon such removal or upon the resignation of the Trustee, and (c) provide for an alternate funding agency under the Plan. The Trustee shall make payments under the Plan only to the extent, in the amounts, in the manner, at the time, and to the persons as shall from time to time be set forth and designated in written authorizations from the Board.

(B) The Trustee shall from time to time charge against and pay out of the Trust Fund taxes of any and all kinds whatsoever which are levied or assessed upon or become payable in respect of such Fund, the income or any property forming a part thereof, or any security transaction pertaining thereto. To the extent not paid by the Employers, the Trustee shall also charge against and pay out of the Trust Fund other expenses incurred by the Trustee in the performance of its duties under the Trust, the expenses incurred by the Board in the performance of its duties under the Plan (including reasonable compensation for agents and cost of services rendered in respect of the Plan), such compensation of the Trustee as may be agreed upon from time to time between the Board and the Trustee, and all other proper charges and disbursements of the Trustee or the Board.

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ARTICLE X MISCELLANEOUS PROVISIONS

Section 1. General Limitations

(A)	In order that the Plan be maintained as a qualified plan and trust under the Code, contributions in respect of a Member shall be subject to the limitations set forth in this Section, notwithstanding any other provision of the Plan. The contributions in respect of a Member to which this Section is applicable are his own contributions and his Employer’s contributions.
	For purposes of this Section 1, a Member’s contributions shall be determined without regard to any rollover contributions (as defined by Section 401(a)(5) of the Code). For purposes of this Section 1, a Member’s compensation shall be a Member’s Form W-2 compensation (within the meaning of IRS Regulation Section 1.415(c)-2(d)(4)).

(B) Annual additions to a Member’s Account (including his 401(k) Account, Regular Accounts and his Profit Sharing Account) and to any other defined contribution plan maintained by the Member’s Employer in respect of any Plan Year may not exceed the limitations set forth in Section 415 of the Code, which are incorporated by reference. For these purposes, “annual additions” shall have the meaning set forth in Section 415(c)(2) of the Code, as modified elsewhere in the Code and the Regulations, and the limitation year shall mean the Plan Year unless any other twelve consecutive month period is designated pursuant to a written resolution adopted by the Employer and approved by the Board.

Effective for limitation years beginning after December 31, 2001, except to the extent permitted under Article III, Section 9 of the Plan and Section 414(v) of the Code, if applicable, the annual additions that may be contributed or allocated to a Member’s Account under the Plan for any limitation year shall not exceed the lesser of:

(i) $40,000, as adjusted for increases in the cost-of-living under section 415(d) of the Code, or

(ii) 100 percent of the Member’s compensation, within the meaning of section 415(c)(3) of the Code, for the limitation year.

(C) In the event that, due to forfeitures, reasonable error in estimating a Member’s compensation, or other limited facts and circumstances, total contributions to a Member’s Account are found to exceed the limitations of this Section, the Board shall cause contributions made under Article III, Section 1 in excess of such limitations to be refunded to the affected Member, with earnings thereon, and shall take appropriate steps to reduce, if necessary, the Employer contributions made with respect to those returned contributions. Such refunds shall not be deemed to be withdrawals, loans, or distributions from the Plan. If a Member’s annual contributions exceed the limitations contained in Paragraph (B) of this Section after the Member’s Article III, Section 1 contributions, with earnings thereon, if any, have been refunded to such Member, the Profit Sharing contribution to be allocated to any Member in respect of any Contribution Determination Period (including allocations as provided in this Paragraph) shall instead be allocated to or for the benefit of all other Members who are

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Employees in Employment as of the last day of the Contribution Determination Period as determined under Article III, Section 8(c) and allocated in the same proportion that each such Member’s Salary for such Contribution Determination Period bears to the total Salary for such Contribution Determination Period of all such Members or, the Board may, at the election of the Employer, utilize such excess to reduce the contributions which would otherwise be made for the succeeding Contribution Determination Period by the Employer. If, with respect to any Contribution Determination Period, there is an excess Profit Sharing contribution, and such excess cannot be fully allocated in accordance with the preceding sentence because of the limitations prescribed in Paragraph (B) of this Section, the amount of such excess which cannot be so allocated shall be allocated to the Employer Hold Account and made available to the Employer pursuant to the terms of Article VI, Section 2(B)(2) except that any such excess contribution may not be applied to reduce administrative expenses (in accordance with Article IX, Section 2). The Board, in accordance with Paragraph (D) of this Section, shall take whatever additional action may be necessary to assure that contributions to Members’ Accounts meet the requirements of this Section.

(D) In addition to the steps set forth in Paragraph (C) above, the Board may from time to time adjust or modify the maximum limitations applicable to contributions made in respect of a Member under this Section 1 as may be required or permitted by the Code or ERISA prior to or following the date that allocation of any such contributions commence and shall take appropriate action to real locate the annual contributions which would otherwise have been made but for the application of this Section.

(E) Membership in the Plan shall not give any Employee the right to be retained in the Employment of his Employer and shall not affect the right of the Employer to discharge any Employee.

(F) Each Member, Spouse and Beneficiary assumes all risk in connection with any decrease in the market value of the assets of the Trust Fund. Neither the Board nor the Trustee guarantees that upon withdrawal the value of a Member’s Account, his Profit Sharing Account, and/or his Rollover Account will be equal to or greater than the amount of the Member’s own deferrals or contributions, or those credited on his behalf in which the Member has a vested interest, under the Plan.

(G) The establishment, maintenance or crediting of a Member’s Account pursuant to the Plan shall not vest in such Member any right, title or interest in the Trust Fund except at the times and upon the terms and conditions and to the extent expressly set forth in the Plan and the Trust Agreement.

(H) The Trust Fund shall be the sole source of payments under the Plan and the Employer and the Board assume no liability or responsibility for such payments, and each Member, Spouse or Beneficiary who shall claim the right to any payment under the Plan shall be entitled to look only to the Trust Fund for such payment. All contributions to the Trust Fund shall be deemed to have been made in the State of New York.

Section 2. Top Heavy Provisions

In respect of any Employer, the Plan will be considered a Top Heavy Plan for any Plan Year if it is determined to be a Top Heavy Plan as of the last day of the preceding Plan Year.

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The provisions of this Section 2 shall apply and supersede all other provisions in the Plan during each Plan Year with respect to which the Plan, with regard to such Employer, is determined to be a Top Heavy Plan.

(A) For purposes of this Section 2, the following terms shall have the meanings set forth below:

(1) “Affiliate” shall mean any entity affiliated with any Employer within the meaning of Section 414(b), 414(c) or 414(m) of the Code, or pursuant to the IRS Regulations under Section 414(o) of the Code, except that for purposes of applying the provisions hereof with respect to the limitation on contributions, Section 415(h) of the Code shall apply.

(2) “Aggregation Group” shall mean the group composed of each qualified retirement plan of the Employer or an Affiliate in which a Key Employee is a member and each other qualified retirement plan of the Employer or an Affiliate which enables a plan of the Employer or an Affiliate in which a Key Employee is a member to satisfy Sections 401(a)(4) or 410 of the Code. In addition, the Board may choose to treat any other qualified retirement plan as a member of the Aggregation Group if such Aggregation Group will continue to satisfy Sections 401(a)(4) and 410 of the Code with such plan being taken into account.

(3) “Key Employee” shall mean a “Key Employee” as defined in Sections 416(i)(1) and (5) of the Code and the IRS Regulations. For purposes of Section 416 of the Code and for purposes of determining who is a Key Employee, an Employer which is not a corporation may have “officers” only for Plan Years beginning after December 31, 1985. For purposes of determining who is a Key Employee pursuant to this Subparagraph (3), compensation shall have the meaning prescribed in Section 414(s) of the Code or, to the extent required by the Code or the IRS Regulations, Section 1.415-2(d) of the IRS Regulations.

(4) “Non Key Employee” shall mean a “Non Key Employee” as defined in Section 416(i)(2) of the Code and the IRS Regulations thereunder.

(5) “Top Heavy Plan” shall mean a “Top Heavy Plan” as defined in Section 416(g) of the Code and the IRS Regulations thereunder.

(6) “Determination Date” shall mean the last day of the preceding Plan Year or, in the case of the first Plan Year, the last day of such Plan Year.

(7) “Top Heavy Ratio” is a fraction, the numerator of which is the sum of the account balances of all Key Employees as of the applicable Determination Date (including any part of any account balance distributed in the five-year period ending on the Determination Date), and the denominator of which is the sum of all account balances (including any part of any account balance distributed in the five-year period ending on the Determination Date), both computed in accordance with Section 416 of the Code and the IRS Regulations thereunder.

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(B) Subject to the provisions of Paragraph (D) below, for each Plan Year that the Plan is a Top Heavy Plan, the Employer’s contribution allocable to each Employee (other than a Key Employee) who has satisfied the eligibility requirement(s) of Article II, Section 2, and who is in service at the end of the Plan Year shall not be less than the lesser of (i) 3% of such eligible Employee’s compensation (as defined in Section 414(s) of the Code or, to the extent required by the Code or the IRS Regulations, Section 1.415-2(d) of the Regulations), provided that for any Plan Year beginning on or after January 1, 1994 no more than $150,000 (adjusted for cost of living to the extent permitted by the Code and the IRS Regulations) shall be taken into account), or (ii) the percentage at which Employer contributions for such Plan Year are made and allocated on behalf of the Key Employee for whom such percentage is the highest. For the purpose of determining the appropriate percentage under clause (ii), all defined contribution plans required to be included in an Aggregation Group shall be treated as one plan. Clause (ii) shall not apply if the Plan is required to be included in an Aggregation Group which enables a defined benefit plan also required to be included in said Aggregation Group to satisfy Sections 401(a)(4) or 410 of the Code. Contributions attributable to salary reduction that are made to a Key Employee’s 401(k) Account and Roth 401(k) Account shall be taken into account in determining the minimum required contribution under this Subsection (B).

(C) If the Plan is a Top Heavy Plan for any Plan Year, and (i) the Employer has elected a vesting schedule under Article VI for an employer contribution type which does not satisfy the minimum Top Heavy vesting requirements or (ii) if the Employer has not elected a vesting schedule for an employer contribution type, the vested interest of each Member, who is credited with at least one Hour of Employment on or after the Plan becomes a Top Heavy Plan, for each employer contribution type in his Account described in clause (i) or (ii) above, shall not be less than the percentage determined in accordance with the following schedule:

Completed	Vested
Years of Employment	Percentage
Less than 2		0	%
2 but less than 3		20	%
3 but less than 4		40	%
4 but less than 5		60	%
5 but less than 6		80	%
6 or more		100	%

Notwithstanding the schedule provided above, if the Plan is a Top Heavy Plan for any Plan Year and if an Employer has elected a cliff vesting schedule for an employer contribution type described in clause (i) or (ii) above, the vested interest of each Member, who is credited with at least one Hour of Employment on or after the Plan becomes a Top Heavy Plan, for such employer contribution type in his Account, shall not be less than the percentage determined in accordance with the following schedule:

Completed	Vested
Years of Employment	Percentage
Less than 3		0	%
3 or more		100	%

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(D) The Board shall, to the maximum extent permitted by the Code and in accordance with the IRS Regulations, apply the provisions of this Section 2 by taking into account the benefits payable and the contributions made under the Pentegra Defined Benefit Plan for Financial Institutions or any other qualified plan maintained by an Employer, to prevent inappropriate omissions or required duplication of minimum contributions.

(E) Effective for Plan Years beginning after December 31, 2001, for purposes of determining whether the Plan is a top-heavy plan under Section 416(g) of the Code, and whether the Plan satisfies the minimum benefits requirements of Section 416(c) of the Code for such years, the following provisions shall apply:

(1) “Key Employee” shall mean any Employee or former Employee (including any deceased employee) who at any time during the Plan Year that includes the determination date was an officer of the Employer having annual compensation greater than $130,000 (as adjusted under section 416(i)(1) of the Code for plan years beginning after December 31, 2002), a 5-percent owner of the employer, or a 1-percent owner of the employer having annual compensation of more than $150,000. For this purpose, annual compensation means compensation within the meaning of section 415(c)(3) of the Code. The determination of who is a Key Employee will be made in accordance with section 416(i)(1) of the Code and the applicable regulations and other guidance of general applicability issued thereunder.

(2)

The present value of accrued benefits and the amounts of account balances of an Employee as of the determination date shall be increased by the distributions made with respect to the Employee under the Plan and any plan aggregated with the Plan under section 416(g)(2) of the Code during the 1-year period ending on the determination date. The preceding sentence shall also apply to distributions under a terminated plan which, had it not been terminated, would have been aggregated with the Plan under section 416(g)(2)(A)(i) of the Code. In the case of a distribution made for a reason other than separation from service, death, or disability, this provision shall be applied by substituting “5-year period” for “1-year period.”

The accrued benefits accounts of any individual who has not performed services for the employer during the 1-year period ending on the determination date shall not be taken into account.

(3) Employer matching contributions shall be taken into account for purposes of satisfying the minimum contribution requirements of section 416(c)(2) of the Code and the Plan. The preceding sentence shall apply with respect to matching contributions under the Plan, or any other plan maintained by the Employer, to the maximum extent permitted by the Code and in accordance with the IRS Regulations. Employer matching contributions that are used to satisfy the minimum contribution requirements shall be treated as matching contributions for purposes of the actual contribution percentage test and other requirements of section 401(m) of the Code.

The employer may elect to provide that the minimum benefit requirement shall be met in another plan (including another plan that consists solely of a cash or deferred arrangement which meets the requirements of section 401(k)(12) of the Code and matching contributions with respect to which the requirements of section 401(m)(11) of the Code are met).

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Section 3. Information and Communications

Each Employer, Member, Spouse and Beneficiary shall be required to furnish the Board with such information and data as may be considered necessary by the Board. All notices, instructions and other communications with respect to the Plan shall be in such form as is prescribed from time to time by the Board, shall be mailed by first class mail or delivered personally, and shall be deemed to have been duly given and delivered only upon actual receipt thereof by the Board. All information and data submitted by an Employer or a Member, including a Member’s birth date, marital status, salary and circumstances of his employment and termination thereof, may be accepted and relied upon by the Board. All communications from the Board or the Trustee to an Employer, Member, Spouse or Beneficiary shall be deemed to have been duly given if mailed by first class mail to the address of such person as last shown on the records of the Plan.

Section 4. Small Account Balances

Notwithstanding the foregoing provisions of the Plan, and except as provided in Article III, Section 6(B)(6), if the value of all of a Member’s Account under the Plan (including a Profit Sharing Account and a Rollover Account, if any), when aggregated is equal to or exceeds $500, then no Account will be distributed without the consent of the Member prior to age 65 (at the earliest).

Section 5. Amounts Payable to Incompetents, Minors or Estates

If the Board shall find that any person to whom any amount is payable under the Plan is unable to care for his affairs because of illness or accident, or is a minor, or has died, then any payment due him or his estate (unless a prior claim therefor has been made by a duly appointed legal representative) may be paid to his Spouse, relative or any other person deemed by the Board to be a proper recipient on behalf of such person otherwise entitled to payment. Any such payment shall be a complete discharge of the liability of the Trust Fund therefor.

Section 6. Non-alienation of Amounts Payable

Except insofar as may otherwise be required by applicable law, or Article VIII, or pursuant to the terms of a Qualified Domestic Relations Order, no amount payable under the Plan shall be subject in any manner to alienation by anticipation, sale, transfer, assignment, bankruptcy, pledge, attachment, charge or encumbrance of any kind, and any attempt to so alienate shall be void; nor shall the Trust Fund in any manner be liable for or subject to the debts or liabilities of any person entitled to any such amount payable; and further, if for any reason any amount payable under the Plan would not devolve upon such person entitled thereto, then the Board, in its discretion, may terminate his interest and hold or apply such amount for the benefit of such person or his dependents as it may deem proper. For the purposes of the Plan, a “Qualified Domestic Relations Order” means any judgment, decree or order (including approval of a property settlement agreement) which has been determined by the Board in accordance with procedures established under the Plan, to constitute a Qualified Domestic Relations Order within the meaning of Section 414(p)(1) of the Code. No amounts may be withdrawn under Article VII and Article III, Section 8, and no loans granted under Article VIII, if the Pentegra DC Plan Office has received a document which may be determined following its receipt to be a Qualified Domestic Relations Order prior to completion of review of such order by the Office within the time period prescribed for such review by the IRS Regulations.

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Section 7. Unclaimed Amounts Payable

If the Board cannot ascertain the whereabouts of any person to whom an amount is payable under the Plan, and if, after 5 years from the date such payment is due, a notice of such payment due is mailed to the address of such person, as last shown on the records of the Plan, and within 3 months after such mailing such person has not filed with the Board written claim therefor, the Board may direct in accordance with ERISA that the payment (including the amount allocable to the Member’s contributions) be cancelled, and used in abatement of the Plan’s administrative expenses, provided that appropriate provision is made for recrediting the payment if such person subsequently makes a claim therefor.

Section 8. Leaves of Absence

(A) Contribution allocations and vesting service continue to the extent provided in Paragraphs (B)(1), (2), (3) or (4), below, during any approved Leave of Absence, provided that the Employer notifies the Plan of its intention to grant to a specific Employee or Member, pursuant to the Employer’s policy which is uniformly applicable to all its Employees under similar circumstances, one of the Leaves of Absence described in Paragraph (B) below, and agrees to notify the Plan at the conclusion of such leave.

(B) For purposes of the Plan there are only four types of approved Leaves of Absence:

(1) Non-military leave granted to a Member for a period not in excess of one year during which service is recognized for vesting purposes and the Member is entitled to share in any supplemental contributions under Article III, Section 3 or forfeitures under Article VI, Section 2, if any, on a pro rata basis, determined by the Salary earned during the Plan Year or Contribution Determination Period; or

(2) Non-military leave or layoff granted to a Member for a period not in excess of one year during which service is recognized for vesting purposes, but the Member is not entitled to share in any contributions or forfeitures as defined under (1) above, if any, during the period of the leave; or

(3) To the extent not otherwise required by applicable law, military or other governmental service leave granted to a Member from which he returns directly to the service of the Employer. Under this leave, a Member may not share in any contributions or forfeitures as defined under (1) above, if any, during the period of the leave, but vesting service will continue to accrue; or

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(4) To the extent not otherwise required by applicable law, a military leave granted at the option of the Employer to a Member who is subject to military service pursuant to an involuntary call-up in the Reserves of the U.S. Armed Services from which he returns to the service of the Employer within 90 days of his discharge from such military service. Under this leave, a Member is entitled to share in any contributions or forfeitures as defined under (1) above, if any, and vesting service will continue to accrue. Notwithstanding any provision of the Plan to the contrary, if a Member has one or more loans outstanding at the time of this leave, repayments on such loan(s) may be suspended, if the Member so elects, until such time as the Member returns to the service of the Employer or the end of the leave, if earlier.

The determination of who is a Highly Compensated Employee will be made in accordance with Section 414(q) of the Code and the IRS Regulations thereunder.

(C) Notwithstanding any provision of this Plan to the contrary, effective December 12, 1994, contribution allocations and vesting service with respect to qualified military service will be provided in accordance with Section 414(u) of the Code. Loan repayments will be suspended under this Plan as permitted under Section 414(u)(4) of the Code during such period of qualified military service.

Section 9. Return of Contributions to Employer

(A) In the case of a contribution that is made by an Employer by reason of a mistake of fact, such Employer may request the return to it of such contribution within one year after the payment of the contribution, provided such refund is made within one year after the payment of the contribution.

(B) In the case of a contribution made by an Employer or a contribution otherwise deemed to be an Employer contribution under the Code, such contribution shall be conditioned upon the deductibility of the contribution by the Employer under Section 404 of the Code. To the extent the deduction for such contribution is disallowed, in accordance with IRS Regulations, the Employer may request the return to it of such contribution within one year after the disallowance of the deduction.

Section 10. Controlling Law

The Plan and all rights thereunder shall be governed by and construed in accordance with the laws of the State of New York (without regard to the principles of the conflicts of laws thereof) and ERISA.

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ARTICLE XI TERMINATION OF EMPLOYER PARTICIPATION

Section 1. Termination by Employer

Any Employer may terminate its participation in the Plan by giving the Board written notice specifying a termination date which shall be a Valuation Date at least 60 days subsequent to the date such notice is received by the Board.

Section 2. Termination by Board

The Board may terminate any Employer’s participation, as of a termination date specified by the Board, if the Board determines that the Employer has failed to make proper contributions or to comply with any other provision of the Plan or any applicable rulings or Regulations under the Code, within 15 days after notice and demand by the Board. Except as provided under Article III, Section 3, upon complete discontinuance of an Employer’s contributions, its participation shall automatically terminate, and its termination date shall be a Valuation Date specified by the Board which is within 3 months subsequent to the last day through which the Employer’s contributions to the Trust Fund were paid.

Section 3. Termination Distribution

If an Employer’s participation is terminated, the Board shall promptly notify the IRS and such other appropriate governmental authority as applicable law may require. Neither the Employer not its Employees shall make any further contributions under the Plan after the termination date, except that the Employer shall remit to the Board an amount equal to the product of (i) $60 multiplied by (ii) the number of the Employer’s Members and Employees with a balance in their Accounts as of the termination date, to defray the cost of implementing its termination. If the Employer elects to permit transfers to a qualified successor plan in accordance with Article VII, Section 3, for which Pentegra Services, Inc., will provide services, the Board may waive the withdrawal fees provided for in this Section 3. Except as Article III, Section 4 may provide, each Employee may thereafter withdraw the current value of his Accounts in accordance with Article VII. Subject to the provisions of Article XII, Paragraph (D), an Employer whose participation has been terminated pursuant to this Article may transfer assets under its prior Plan to a qualified successor plan, provided such plan satisfies the requirements contained in Article VII, Section 3 and the transfer is otherwise in accordance with the procedures of such Section.

Upon the termination of participation under the Plan of an Employee’s or Member’s Employer, any rights of the Employee or Member to make contributions, rollovers or transfers to the Plan shall cease.

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ARTICLE XII AMENDMENT OR TERMINATION OF THE PLAN AND TRUST

(A) The Board shall have the right to amend or terminate the Plan or Trust Agreement at any time in whole or in part, for any reason, and without the consent of any Employer, Member or Beneficiary, and each Employer by its adoption of the Plan and Trust shall be deemed to have delegated this authority to the Board. No amendment, however, shall impair such rights of payment as the Member or his Beneficiary would have had, if such amendment had not been made, with respect to contributions made by him or on his behalf prior to such amendment, except to the extent that such amendment is, in the opinion of the Board, necessary or desirable to qualify or maintain the Plan and the Trust as a plan and trust meeting the requirements of Sections 401(a) and 501(a) of the Code as now in effect or hereafter amended, or any other applicable section of the Code now or hereafter in force from time to time; and no amendment shall make it possible for any part of the Trust Fund (other than such part as may be necessary to pay the expenses and charges referred to in Article IX) to be used for purposes other than for the exclusive benefit of Members or their Beneficiaries.

(B) In the event of termination of the Plan by the Board or upon a complete discontinuance of contributions under the Plan, the Units credited to each Member’s Account as of the date of such termination or complete discontinuance of contributions shall be fully vested in the Member, and the Trustee shall upon direction of the Board liquidate the assets of the Trust Fund with such promptness as the Trustee deems prudent. When such liquidation has been completed and after provision for all expenses and charges referred to in Article IX, and proportionate adjustment of all Plan Accounts to reflect such expenses, the Trustee shall pay to each person who was a Member on such termination date (or in the event of his death on or after such date, to his Spouse or Beneficiary) a lump sum equal to the amount, if any, then credited to his Account after such liquidation and provision for expenses and charges.

(C) Notwithstanding any termination of the Plan by the Board, the Board shall remain in existence and all the provisions of the Plan shall remain in force which are necessary for the execution of the Plan and the distribution of the Trust Fund assets in accordance with this Article.

(D) No assets of the Plan shall in any event be merged, consolidated with, or transferred to any other plan unless each Member affected thereby would, if such plan then terminated immediately after such event, receive thereunder a benefit which is equal to or greater than the benefit to which he would have been entitled if the Plan had terminated immediately before such event.

(E) In the event that any governmental authority or the Board determines that a partial termination (within the meaning of ERISA) of the Plan has occurred as to any Employer, then the Units credited to the Account of each Member who is affected thereby shall be fully vested in such Member and the provisions of Article XI and this Article XII, which in the opinion of the Board are necessary for the execution of the Plan and the allocation and distribution of assets of the Plan, shall apply.

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TRUSTS ESTABLISHED UNDER THE PLAN

Assets of the Plan are held in trust under Trust Agreements with Bank of New York, pursuant to Article IX, Section 2 of the Plan. Any Employer or Member may obtain a copy of these Trust Agreements from the office of the Plan.

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SUMMARY OF MATERIAL MODIFICATIONS

PLAN NAME: FEDERAL HOME LOAN BANK OF NEW YORK
PENTEGRA DC PLAN

In accordance with the requirements of the Employee Retirement Income Security Act of 1974 (“ERISA”) and regulations thereunder, this is a Summary of Material Modifications (“SMM”) regarding certain changes to the Federal Home Loan Bank of New York Pentegra DC Plan (“Plan”).

This SMM supplements the Summary Plan Description (“SPD”) previously provided to you and is intended to inform you of these Plan changes. You should retain this document with your copy of the SPD.

Employer Information. The legal name, address, and Federal employer identification number of the Employer are as follows:

Employer/Plan Sponsor: Federal Home Loan Bank of New York/Pentegra DC Plan

Address: 101 Park Avenue, New York, NY 10178

EIN: 13-6321489

Description of Plan Change(s). The Employer has amended the Plan in the following respects, effective as of the date or dates specified hereunder:

1. Effective as of July 1, 2009, in addition to making pre-tax elective deferrals, you may also elect all or a portion of your employee contributions to be designated as Roth elective deferrals. Unless stated otherwise, Roth elective deferrals will be treated as elective deferrals for all purposes under the Plan.

For purposes of making distributions, if you designate all or a portion of your elective deferrals to be Roth elective deferrals, then such deferrals may be withdrawn from your Roth Elective Deferral Account. The same rules and restrictions that apply to withdrawals from your 401(k) Account will apply to withdrawals from your Roth Elective Deferral Account. Earnings associated with designated Roth contributions will become taxable upon distribution, if such distribution is made within the 5-tax-year period beginning with the first tax year for which you made a designated Roth contribution to the Plan.

EX-10.09

Exhibit 10.09

THE FEDERAL HOME LOAN BANK
OF NEW YORK

BENEFIT EQUALIZATION PLAN

Effective as of
January 1, 1988

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BENEFIT EQUALIZATION PLAN
INTRODUCTION

The adoption of this Benefit Equalization Plan has been authorized by the Board of Directors of The Federal Home Loan Bank of New York (the “Bank”) solely for the purpose of providing benefits to certain employees of the Bank which would have been payable under the Regulations governing the Comprehensive Retirement Program of the Financial Institutions Retirement Fund, as they may be from time to time amended and as adopted by the Bank, but for the limitations placed on benefits for such employees by Sections 401(a)(17) and 415 of the Internal Revenue Code of 1954, as amended from time to time, or any successor thereto (“IRC”).

This Plan is intended to constitute an unfunded “excess benefit plan” as defined in Section 3(36) of the Employee Retirement Income Security Act of 1974 and to provide certain other supplemental benefits for employees whose compensation exceeds the limit contained in IRC Section 401(a)(17). All benefits payable under this Plan shall be paid solely out of the general assets of the Bank. No benefits under this Plan shall be payable by the Financial Institutions Retirement Fund or from its assets.

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Article 1. Definitions

When used in the Plan, the following terms shall have the following meanings:

1.01 “Actuary” means the independent consulting actuary retained by the Bank to assist the Committee in its administration of the Plan.

1.02 “Bank” means The Federal Home Loan Bank of New York and each subsidiary or affiliated company thereof which participates in the Plan.

1.03 “Beneficiary” means the beneficiary or beneficiaries designated in accordance with Article 5 of the Plan to receive the benefit, if any, payable upon the death of a member of the Plan.

1.04 “Board of Directors” means the Board of Directors of the Bank.

1.05 “Committee” means the Administrative Committee appointed by the Board of Directors to administer the Plan.

1.06 “Effective Date” means January 1, 1988.

1.07 “Fund” means the Financial Institutions Retirement Fund, a qualified and tax-exempt pension plan and trust under Sections 401(a) and 501(a) of the IRC.

1.08 “IRC” means the Internal Revenue Code of 1954, as amended from time to time, or any successor thereto.

1.09 “Member” means any person included in the membership of the Plan as provided in Article 2.

1.10 “Plan” means The Federal Home Loan Bank of New York Benefit Equalization Plan, as set forth herein and as amended from time to time.

1.11 “Regulations” means the Regulations governing the Comprehensive Retirement Program of the Fund as from time to time amended, and as adopted by the Bank.

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Article 2. Membership

2.01 Each employee of the Bank who is included in the membership of the Fund shall become a member of the Plan on the earliest date on which he, or his beneficiary, would have been entitled to receive a benefit under Section 3.01 of the Plan had he become a retirant of the Fund, or died in active service, on such date.

2.02 If, on the date that payment of a member’s benefit from the Fund commences, the member is not entitled under Section 3.01 below to receive a benefit under the Plan, his membership in the Plan shall terminate on such date.

2.03 A benefit shall be payable under the Plan to or on account of a member only upon the member’s retirement, death or other termination of employment with the Bank.

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Article 3. Amount and Payment of Benefits

3.01 The amount, if any, of the annual benefit payable to or on account of a member pursuant to the Plan shall equal the excess of (i) over (ii), as determined by the Committee, where:

(i) is the annual benefit (as calculated by the Fund on the basis of the form of payment elected under the Regulations by the member) that would otherwise be payable to or on account of the member by the Fund under the Regulations if the provisions of the Regulations were administered without regard to the limitations imposed by Sections 401(a)(17) and 415 of the IRC; and

(ii) is the annual benefit (as calculated by the Fund on the basis of the form of payment elected under the Regulations by the member) that is payable to or on account of the member by the Fund under the Regulations after giving effect to any reduction of such benefit required by regulation limitations imposed by Sections 401(a)(17) and 415 of the IRC.

For purposes of this Section 3.01, “annual benefit” includes any “Active Service Death Benefit,” “Retirement Adjustment Payment,” “Annual Increment” and “Single Purchase Fixed Percentage Adjustment” which the Bank elected to provide its employees under the Regulations.

3.02 Unless the member elects an optional form of payment under the Plan pursuant to Section 3.03 below, the annual benefit, if any, payable to or on account of a member under Section 3.01 above, shall be converted by the Actuary and shall be payable to or on account of the member in the “Regular Form” of payment, utilizing for that purpose the same actuarial factors and assumptions then used by the Fund to determine actuarial equivalence under the Regulations. For purposes of the Plan the “Regular Form” of payment means an annual benefit payable for the member’s lifetime and the death benefit described in Section 3.04 below.

3.03(a) A member may, with the consent of the Committee, elect in writing to have the annual benefit, if any, payable to or on account of a member under Section 3.02 above, converted by the Actuary to any optional form of payment then permitted under the Regulations except that no benefit under the Plan may be paid in the form of a lump sum settlement. The Actuary shall utilize for the purpose of that conversion the same actuarial factors and assumptions then used by the Fund to determine actuarial equivalence under the Regulations.

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(b) If a member who had elected an optional form of payment under this Section 3.03 dies after the date his benefit payments under the Plan had commenced, the only death benefit, if any, payable under the Plan in respect of said member shall be the amount, if any, payable under the optional form of payment which the member had elected under the Plan. If a member who had elected an optional form of payment under this Section 3.03 dies before the date his benefit payments under the Plan commence, his election of an optional form of benefit shall be inoperative.

(c) An election of an optional form of payment under this Section 3.03 may be made only on a form prescribed by the Committee and filed by the member with the Committee prior to the commencement of payment of his benefit under Section 4.02 below.

3.04 Upon the death of a member who had not elected an optional form of payment under Section 3.03 above, a death benefit shall be paid to the member’s beneficiary in a lump sum equal to the excess, if any, of (i) over (ii), where

(i)	is an amount equal to 12 times the annual benefit, if any, payable under Section 3.02 above, and
(ii)	is the sum of the benefit payments, if any, which the member had received under the Plan.

3.05 If a member to whom an annual benefit is payable under the Plan dies before commencement of the payment of his benefit, the death benefit payable under Section 3.02 shall be payable to the member’s beneficiary as if the payment of the member’s benefit had commenced on the first day of the month in which his death occurred.

3.06 If a member is restored to employment with the Bank after payment of his benefit under the Plan has commenced, all payments under the Plan shall thereupon be discontinued. Upon the member’s subsequent retirement or termination of employment with the Bank, his benefit under the Plan shall be recomputed in accordance with Sections 3.01 and 3.02, but shall be reduced by the equivalent value of the amount of any benefit paid by the Plan in respect of his previous retirement or termination of employment, and such reduced benefit shall be paid to such member in accordance with the provisions of the Plan. For purposes of this Section 3.06, the equivalent value of the benefit paid in respect of a member’s previous retirement or termination of employment shall be determined by the Actuary utilizing for that purpose the same actuarial factors and assumptions then used by the Fund to determine actuarial equivalence under the Regulations.

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Article 4. Source and Method of Payments

4.01 All payments of benefits under the Plan shall be paid from, and shall only be a general claim upon, the general assets of the Bank, notwithstanding that the Bank, in its discretion, may establish a bookkeeping reserve or a grantor trust (as such term is used in Sections 671 through 677 of the IRC) to reflect or to aid it in meeting its obligations under the Plan with respect to any member or prospective member or beneficiary. No benefit whatever provided by the Plan shall be payable from the assets of the Fund. No member shall have any right, title or interest whatever in or to any investments which the Bank may make or any specific assets which the Bank may reserve to aid it in meeting its obligations under the Plan.

4.02 All annual benefits under the Plan shall be paid in monthly installments commencing on the first day of the month next following the member’s retirement date under the Regulations, except that no benefit shall be paid prior to the date benefits under the Plan can be definitely determined by the Committee.

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Article 5. Designation of Beneficiaries

5.01 Each member of the Plan may file with the Committee a written designation of one or more persons as the beneficiary who shall be entitled to receive the amount, if any, payable under the Plan upon his death. A member may, from time to time, revoke or change his beneficiary designation without the consent of any prior beneficiary by filing a new designation with the Committee. The last such designation received by the Committee shall be controlling; provided, however, that no designation, or change or revocation thereof, shall be effective unless received by the Committee prior to the member’s death, and in no event shall it be effective as of a date prior to such receipt.

5.02 If no such beneficiary designation is in effect at the time of a member’s death, or if no designated beneficiary survives the member, or if, in the opinion of the Committee, such designation conflicts with applicable law, the member’s estate shall be deemed to have been designated his beneficiary and shall be paid the amount, if any, payable under the Plan upon the member’s death. If the Committee is in doubt as to the right of any person to receive such amount, the Committee may retain such amount, without liability for any interest thereon, until the rights thereto are determined, or the Committee may pay such amount into any court of appropriate jurisdiction and such payment shall be a complete discharge of the liability of the Plan and the Bank therefor.

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Article 6. Administration of the Plan

6.01 The Board of Directors has delegated to the Benefits Equalization Plan Committee, subject to those powers which the Board has reserved as described in Article 7 below, general authority over and responsibility for the administration and interpretation of the Plan. The Committee shall have full power and authority to interpret and construe the Plan, to make all determinations considered necessary or advisable for the administration of the Plan and any trust referred to in Article 4 above, and the calculation of the amount of benefits payable thereunder, and to review claims for benefits under the Plan. The Committee’s interpretations and constructions of the Plan and its decisions or actions thereunder shall be binding and conclusive on all persons for all purposes.

6.02 If the Committee deems it advisable, it shall arrange for the engagement of the Actuary, and legal counsel and certified public accountants (who may be counsel or accountants for the Bank), and other consultants, and make use of agents and clerical or other personnel, for purposes of the Plan. The Committee may rely upon the written opinions of such Actuary, counsel, accountants and consultants, and upon any information supplied by the Fund for purposes of Section 3.01 of the Plan, and delegate to any agent or to any subcommittee or Committee member its authority to perform any act hereunder, including without limitations those matters involving the exercise of discretion; provided, however, that such delegation shall be subject to revocation at any time at the discretion of the Committee. The Committee shall report to the Board of Directors, or to a committee designated by the Board, at such intervals as shall be specified by the Board or such designated committee, with regard to the matters for which it is responsible under the Plan.

6.03 The Committee shall consist of at least three individuals, each of whom shall be appointed by, shall remain in office at the will of, and may be removed, with or without cause, by the Board of Directors. Any Committee member may resign at any time. No Committee member shall be entitled to act on or decide any matters relating solely to such member or any of his rights or benefits under the Plan. The Committee member shall not receive any special compensation for serving in such capacity but shall be reimbursed for any reasonable expenses incurred in connection therewith. No bond or other security need be required of the Committee or any member thereof in any jurisdiction.

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6.04 The Committee shall elect or designate its own Chairman, establish its own procedures and the time and place for its meetings and provide for the keeping of minutes of all meetings. Any action of the Committee may be taken upon the affirmative vote of a majority of the members at a meeting or, at the direction of its Chairman, without a meeting by mail or telephone, provided that all of the Committee members are informed in writing of the vote.

6.05 All claims for benefits under the Plan shall be submitted in writing to the Chairman of the Committee. Written notice of the decision on each such claim shall be furnished with reasonable promptness to the member or his beneficiary (the “claimant”). The claimant may request a review by the Committee of any decision denying the claim in whole or in part. Such request shall be made in writing and filed with the Committee within 30 days of such denial. A request for review shall contain all additional information which the claimant wishes the Committee to consider. The Committee may hold any hearing or conduct any independent investigation which it deems desirable to render its decision and the decision on review shall be made as soon as feasible after the Committee’s receipt of the request for review. Written notice of the decision on review shall be furnished to the claimant. For all purposes under the Plan, such decisions on claims (where no review is requested) and decisions on review (where review is requested) shall be final, binding and conclusive on all interested persons as to all matters relating to the Plan.

6.06 All expenses incurred by the Committee in its administration of the Plan shall be paid by the Bank.

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Article 7. Amendment and Termination

The Board of Directors may amend, suspend or terminate, in whole or in part, the Plan without the consent of the Committee, any member, beneficiary or other person, except that no amendment, suspension or termination shall retroactively impair or otherwise adversely affect the rights of any member, beneficiary or other person to benefits under the Plan which have accrued prior to the date of such action, as determined by the Committee in its sole discretion. The Committee may adopt any amendment or take any other action which may be necessary or appropriate to facilitate the administration, management and interpretation of the Plan or to conform the Plan thereto, provided any such amendment or action does not have a material effect on the then currently estimated cost to the Bank of maintaining the Plan.

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Article 8. General Provisions

8.01 The Plan shall be binding upon and inure to the benefit of the Bank and its successors and assigns and the members, and the successors, assigns, designees and estates of the members. The Plan shall also be binding upon and inure to the benefit of any successor organization succeeding to substantially all of the assets and business of the Bank, but nothing in the Plan shall preclude the Bank from merging or consolidating into or with, or transferring all or substantially all of its assets to, another organization which assumes the Plan and all obligations of the Bank hereunder. The Bank agrees that it will make appropriate provision for the preservation of members’ rights under the Plan in any agreement or plan which it may enter into to effect any merger, consolidation, reorganization or transfer of assets. Upon such a merger, consolidation, reorganization, or transfer of assets and assumption of Plan obligations of the Bank, the term “Bank” shall refer to such other organization and the Plan shall continue in full force and effect.

8.02 Neither the Plan nor any action taken thereunder shall be construed as giving to a member the right to be retained in the employ of the Bank or as affecting the right of the Bank to dismiss any member from its employ.

8.03 The Bank shall withhold or cause to be withheld from all benefits payable under the Plan all federal, state, local or other taxes required by applicable law to be withheld with respect to such payments.

8.04 No right or interest of a member under the Plan may be assigned, sold, encumbered, transferred or otherwise disposed of and any attempted disposition of such right or interest shall be null and void.

8.05 If the Committee shall find that any person to whom any amount is or was payable under the Plan is unable to care for his affairs because of illness or accident, or is a minor, or has died, then any payment, or any part thereof, due to such person or his estate (unless a prior claim therefor has been made by a duly appointed legal representative), may, if the Committee is so inclined, be paid to such person’s spouse, child or other relative, an institution maintaining or having custody of such person, or any other person deemed by the Committee to be a proper recipient on behalf of such person otherwise entitled to payment. Any such payment shall be in complete discharge of the liability of the Plan and the Bank therefor.

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8.06 To the extent that any person acquires a right to receive payments from the Bank under the Plan, such right shall be no greater than the right of an unsecured general creditor of the Bank.

8.07 All elections, designations, requests, notices, instructions, and other communications from a member, beneficiary or other person to the Committee required or permitted under the Plan shall be in such form as is prescribed from time to time by the Committee and shall be mailed by first- class mail or delivered to such location as shall be specified by the Committee and shall be deemed to have been given and delivered only upon actual receipt thereof at such location.

8.08 The benefits payable under the Plan shall be in addition to all other benefits provided for employees of the Bank and shall not be deemed salary or other compensation by the Bank for the purpose of computing benefits to which he may be entitled under any other plan or arrangement of the Bank.

8.09 No Committee member shall be personally liable by reason of any instrument executed by him or on his behalf, or action taken by him, in his capacity as a Committee member nor for any mistake of judgment made in good faith. The Bank shall indemnify and hold harmless the Fund and each Committee member and each employee, officer or director of the Bank or the Fund, to whom any duty, power, function or action in respect of the Plan may be delegated or assigned, or from whom any information is requested for Plan purposes, against any cost or expense (including fees of legal counsel) and liability (including any sum paid in settlement of a claim or legal action with the approval of the Bank) arising out of anything done or omitted to be done in connection with the Plan, unless arising out of such person’s fraud or bad faith.

8.10 As used in the Plan, the masculine gender shall be deemed to refer to the feminine, and the singular person shall be deemed to refer to the plural, wherever appropriate.

8.11 The captions preceding the sections of the Plan have been inserted solely as a matter of convenience and shall not in any manner define or limit the scope or intent of any provisions of the Plan.

8.12 The Plan shall be construed according to the laws of the State of New York in effect from time to time.

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This Benefit Equalization Plan has been duly adopted this 18th, day of June, 1987, to be effective as of 1st day of January, 1988.

The Federal Home Loan Bank of New York
By:	/s/ Brian Dittenhafer
	President

Attest:

/s/ Leslie Bogen Secretary

(Seal)

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AMENDMENT NO. 1
TO THE FEDERAL HOME LOAN BANK OF NEW YORK
BENEFIT EQUALIZATION PLAN

The Federal Home Loan Bank of New York Benefit Equalization Plan (the “Plan”), as adopted by the Federal Home Loan Bank of New York (the “Bank”) as of June 18, 1987, to be effective as of January 1, 1988, is hereby amended effective January 1, 1995 in the following respects:

1. The section titled “Introduction” that immediately precedes Article 1 of the Plan is amended and restated to read in its entirety as follows:

INTRODUCTION

The purpose of this Benefit Equalization Plan is to provide to certain employees of the Bank the benefits which would have been payable under the Comprehensive Retirement Program of the Financial Institutions Retirement Fund, and benefits equivalent to the matching contributions, regular account contributions (after-tax) and 401(k) account contributions (pre-tax) which would have been available under the Financial Institutions Thrift Plan, but for the limitations placed on benefits and contributions for such employees by Sections 401(a)(17), 401(k)(3)(A)(ii), 401(m), 402(g) and 415 of the Internal Revenue Code of 1986.

The Plan is unfunded and all benefits payable under this Plan shall be paid solely out of the general assets of the Bank. No benefits under this Plan shall be payable by the Financial Institutions Retirement Fund or its assets or by the Financial Institutions Thrift Plan or its assets.

2. Section 1.07 is deleted, and all references in the Plan to the term “Fund” are changed to “Retirement Fund.”

3. Section 1.08 is redesignated as Section 1.07, and the reference therein to “1954” is changed to “1986.”

4. A new Section 1.08 is added which reads in its entirety as follows:

1.08 “IRC Limitations” mean the cap on compensation taken into account by a plan under IRC Section 401(a)(17), the limitations on 401(k) contributions necessary to meet the average deferral percentage (“ADP”) test under IRC Section 401(k)(3)(A)(ii), the limitations on employee and matching contributions necessary to meet the average contribution percentage (“ACP”) test under IRC Section 401(m), the dollar limitations on elective deferrals under IRC Section 402(g), and the overall limitations on contributions and benefits imposed on qualified plans by IRC Section 415, as such provisions may be amended from time to time, and any similar successor provisions of federal tax law.

5. Section 1.11 is deleted, and all references in the Plan to the term “Regulations” are changed to “Retirement Fund.”

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6. New Sections 1.11 and 1.12 are added which read in their entirety as follows:

1.11 “Retirement Fund” means the Comprehensive Retirement Program of the Financial Institutions Retirement Fund, a qualified and tax-exempt defined benefit pension plan and trust under Sections 401(a) and 501(a) of the IRC, and the governing Regulations thereof, as adopted by the Bank.

1.12 “Thrift Plan” means the Financial Institutions Thrift Plan, a qualified and tax-exempt defined contribution plan and trust under Sections 401(a) and 501(a) of the IRC, as adopted by the Bank.

7. Section 2.03 is redesignated as Section 2.04, and a new Section 2.03 is added which reads in its entirety as follows:

2.03 Each employee of the Bank who is included in the membership of the Thrift Plan shall become a member of the Plan on the earliest date on or after January 1, 1995 on which he is credited with an elective contribution addition or makeup contribution addition under Section 4.01 or 4.02 of the Plan.

8. A new Section 2.05 is added which reads in its entirety as follows:

2.05 Notwithstanding any other provision of this Plan to the contrary, the Committee, in its sole and absolute discretion, shall exclude from Plan participation any employee who is not one of a select group of management and highly compensated employees (within the meaning of Section 201(2) of the Employee Retirement Income Security Act of 1974, as amended).

9. The title of Article 3 is changed to “Amount and Payment of Pension Benefits.”

10. Clauses (i) and (ii) of Section 3.01 are amended and restated to read in their entirety as follows:

(i) is the annual pension benefit (as calculated by the Retirement Fund on the basis of the form of payment elected under it by the member) that would otherwise be payable to or on account of the member by the Retirement Fund if its provisions were administered without regard to the IRC Limitations and on the basis of salary unreduced by the amount of any elective contributions under Article IV of this Plan; and

(ii) is the annual pension benefit (as calculated by the Retirement Fund on the basis of the form of payment elected under it by the member) that is payable to or on account of the member by the Retirement Fund after giving effect to any reduction of such benefit required by the IRC Limitations and on the basis of salary reduced by the amount of any elective contributions under Article IV of this Plan.

11. A new Section 3.07 is added which reads in its entirety as follows:

3.07 Notwithstanding any other provision of this Plan, if on the date payment under the Plan would otherwise commence the lump sum settlement value of a member’s benefit determined by the Actuary does not exceed $3,500, then that member’s benefit shall automatically be paid in the form of a lump sum settlement.

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2

12. Articles 4, 5, 6, 7 and 8 are redesignated as Articles 5, 6, 7, 8 and 9, respectively, the Section numbers within each such redesignated Article are correspondingly changed (e.g., Section 4.01 becomes Section 5.01), any and all cross-references in the Plan to such revised Article and Section numbers are changed, as appropriate, and a new Article 4 is added which reads in its entirety as follows:

ARTICLE IV. AMOUNT AND PAYMENT OF THRIFT BENEFITS

4.01 For each calendar year after 1994, if the employee’s 401(k) account contributions and/or regular account contributions under the Thrift Plan for such year have reached the maximum permitted by the IRC Limitations as determined by the Committee, and if the employee’s compensation for that calendar year is expected to exceed the dollar limitation set forth in IRC Section 401(a)(17) (as indexed), and if the employee elects to reduce his compensation for the current calendar year by delivering a written election to the Committee, prior to the commencement of such calendar year, on such form as the Committee may designate, then such employee shall be credited with an elective contribution addition under this Plan equal to the renuation in his compensation made in accordance with such election; provided, however, that the sum of all such elective contribution additions for an employee with respect to any single calendar year shall not be greater than the excess of (i) over (ii), where

(i) is an amount equal to 15% of his compensation (as defined by the Thrift Plan if its provisions were administered without regard to the IRC Limitations); and

(ii) is an amount equal to his regular account and 401(k) account contributions actually made under the Thrift Plan for the calendar year after giving effect to any limitation or reduction on elective contributions required by the IRC Limitations.

If the reduction in an employee’s compensation under such election is determined to exceed the maximum allowable elective contribution additions for such year, the excess and any related earnings credited under Section 4.03 shall be paid to such employee within the first two and one-half months of the succeeding calendar year.

4.02 For each calendar year after 1994, if a portion of an employee’s regular account contribution or 401(k) account contribution to the Thrift Plan for the preceding year is returned to an employee after the end of such preceding year on account of the IRC Limitations, and if the employee’s compensation for that calendar year is expected to exceed the dollar limitation set forth in IRC Section 401(a)(17) (as indexed), and if the employee elects to reduce his compensation for the current year by an amount up to the sum of Thrift Plan contributions and related earnings returned to him for the preceding year by delivering a written election to the Committee prior to the commencement of such calendar year on such form as the Committee may designate, then such employee shall be credited with a makeup contribution addition under this Plan equal to the reduction in his compensation made in accordance with such election.

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3

4.03 For each elective contribution addition credited to an employee under Section 4.01, such employee shall also be credited with a matching contribution addition under this Plan equal to the matching contribution, if any, that would be credited under the Thrift Plan with respect to such amount if contributed to the Thrift Plan, determined as if the provisions of the Thrift Plan were administered without regard to the IRC Limitations and determined after taking into account the employee’s actual regular and 401(k) contributions to and actual matching contributions under the Thrift Plan. For each makeup contribution addition credited to an employee under Section 4.02, such employee shall also be credited with a matching contribution addition under this Plan equal to the matching contribution, if any, that was lost under the Thrift Plan with respect to the contributions returned for the preceding calendar year.

4.04 The Committee shall maintain a thrift benefit account on the books and records of the Bank for each employee who is a member by reason of amounts credited under Section 4.01 or 4.02. The elective contribution additions, makeup contribution additions and matching contribution additions of a member under Sections 4.01, 4.02 and 4.03 shall be credited to the member’s thrift benefit account as soon as practical after the date that the compensation reduced under Section 4.01 and/or 4.02 would otherwise have been paid to such member. In addition, the thrift benefit account of a member shall be credited from time to time with interest at a rate substantially equivalent to the net rate of return earned on the member’s account in the Thrift Plan, or at such other rate or rates or in such amount as may be determined by the Committee in its discretion.

4.05 The balance credited to a member’s thrift benefit account shall be paid to him in a lump sum payment as soon as reasonably practicable after his retirement or other termination of employment with the Bank.

4.06 If a member dies prior to receiving the balance credited to his thrift benefit account under Section 4.05 above, the balance in his thrift benefit account shall be paid to his Beneficiary in a lump sum payment as soon as reasonably practicable after his death.

13. Except as revised as specifically stated above, the terms and provisions of the Plan are hereby ratified and affirmed.

This Amendment No. 1 to the Plan has been duly adopted by the Bank this 22nd day of December, 1994, to be effective as of January 1, 1995.

FEDERAL HOME LOAN BANK OF NEW YORK
By:	/s/ Alfred A. DelliBovi
	President

Attest:

/s/ Barbara Sperrazza Secretary

(Seal)

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4

AMENDMENT NO. 2 TO THE
FEDERAL HOME LOAN BANK
OF NEW YORK
BENEFIT EQUALIZATION PLAN

The Federal Home Loan Bank of New York Benefit Equalization Plan (the “Plan”), as adopted by the Federal Home Loan Bank of New York (the “Bank”) as of June 18, 1987, to be effective as of January 1, 1988, and as previously amended effective January 1, 1995 by Amendment No. 1 thereto, is hereby further amended effective January 1, 1996 in the following respects:

1. Section 3.01 is amended and restated in its entirety to read as follows:

3.01 The amount, if any, of the annual benefit payable to or on account of a member pursuant to the Plan shall equal (i) minus (ii) minus (iii), but not less than zero, as determined by the Committee, where:

(i) is the annual benefit (as calculated by the Fund on the basis of the form of payment elected under the Regulations by the member) that would otherwise be payable to or on account of the member by the Fund under the Regulations if the provisions of the Regulations were administered without regard to the limitations imposed by Section 401(a)(17) and 415 of the IRC; and

(ii) is the annual benefit (as calculated by the Fund on the basis of the form of payment elected under the Regulations by the member) that is payable to or on account of the member by the Fund under the Regulations after giving effect to any reduction of such benefit required by the limitations imposed by Sections 401(a)(17) and 415 of the IRC; and

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(iii) is the value of any applicable life insurance policy as described in Section 3.08.

For purposes of this Section 3.01, “annual benefit” includes any “Active service Death Benefit,” “Retirement Adjustment Payment,” “Annual Increment” and “Single Purchase Fixed Percentage Adjustment” which the Bank elected to provide its employees under the Regulations.

2. Section 3.03(a) is amended and restated in its entirety to read as follows:

3.03(a) A member may, with the consent of the Committee, elect in writing to have the annual benefit, if any, payable to or on account of a member under Section 3.02 above, converted by the Actuary to any optional form of payment then permitted under the Regulations, except that no benefits under the Plan may be paid in the form of a lump sum settlement unless the member irrevocably elects the lump sum option in writing no later than December 31 of the calendar year immediately preceding the calendar year in which the member’s benefit becomes distributable. The Actuary shall utilize for the purpose of that conversion the same actuarial factors and assumptions then used by the Fund to determine actuarial equivalence under the Regulations.

3. A new Section 3.08 is added which reads in its entirety as follows:

3.08 The amount referred to in clause (iii) of Section 3.01 is the annual benefit that is the actuarial equivalent of the annuity that would be purchasable by the cash surrender value of the policy in excess of the cumulative net premiums (total premiums less (a) term insurance costs charged to the member and (b) key person term insurance costs) paid by the Bank. All determinations under this Section 3.08 shall be made by the Actuary as of the date benefits are to be paid or commenced utilizing the same actuarial factors and assumptions then used by the Fund to determine actuarial equivalence under the Regulations.

4. Except as revised as specifically stated above, the terms and provisions of the Plan are hereby ratified and affirmed.

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- 2 -

This Amendment No. 2 to the Plan has been duly adopted by the Bank this 21^st day of December, 1995, to be effective as of January 1, 1996.

THE FEDERAL HOME LOAN BANK OF NEW YORK
By:	/s/ Alfred A. DelliBovi
	President

Attest:

/s/ Barbara Sperrazza Secretary

(Seal)

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- 3 -

AMENDMENT NO. 3 TO THE
FEDERAL HOME LOAN BANK
OF NEW YORK
BENEFIT EQUALIZATION PLAN

The Federal Home Loan Bank of New York Benefit Equalization Plan (the “Plan”), as adopted by the Federal Home Loan Bank of New York (the “Bank”) as of June 18, 1987, to be effective as of January 1, 1988, and as previously amended effective January 1, 1995 by Amendment No. 1 thereto, and effective January 1, 1996 by Amendment No. 2 thereto in the following respects:

1. Section 3.08 is amended to read in its entirety as follows:

3.08 The life insurance policies referred to in clause (iii) of Section 3.01 are any policies subject to a Split Dollar Agreement between the Bank and the member. The amount referred to in clause (iii) of Section 3.01 is the annual benefit that is the actuarial equivalent of the annuity that would be purchasable by the portion of the cash value of any such policy allocable to the member under the applicable Split Dollar Agreement. All determinations under this Section 3.08 shall be made by the Actuary as of the date benefits are to be paid or commenced utilizing the same actuarial factors and assumptions then used by the Fund to determine actuarial equivalence under the Regulations.

2. Section 3.05 is amended by adding the following at the end thereof:

; provided, however, that in calculating such death benefit, the offset described in clause (iii) of Section 3.01 shall be disregarded and instead such lump sum death benefit shall instead be offset by the death benefits payable in respect of such member under all such applicable life insurance policies.

3. Except as revised as specifically stated above, the terms and provisions of the Plan are hereby ratified and affirmed.

This Amendment No. 3 to the Plan has been duly adopted by the Bank this 17th day of November, 1998, to be effective as of December 21, 1995.

FEDERAL HOME LOAN BANK OF NEW YORK
By:	/s/ Alfred A. DelliBovi
	President

Attest:

/s/ Barbara Sperrazza Secretary

(Seal)

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AMENDMENT NO. 4 TO THE
FEDERAL HOME LOAN BANK
OF NEW YORK
BENEFIT EQUALIZATION PLAN

The Federal Home Loan Bank of New York Benefit Equalization Plan (the “Plan”), as adopted by the Federal Home Loan Bank of New York (the “Bank”) as of June 18, 1987, to be effective as of January 1, 1988, and as previously amended by Amendment No. 1, Amendment No. 2 and Amendment No. 3 thereto, is hereby amended effective October 19, 2000 in the following respects:

1. Section 4.01 is amended by deleting the reference in clause (i) thereof to “15%” and substituting in lieu thereof a reference to “19%.”

2. Except as revised as specifically stated above, the terms and provisions of the Plan are hereby ratified and affirmed.

This Amendment No. 4 to the Plan has been duly adopted by the Bank this 19th day of October, 2000, to be effective as of [October 19, 2000].

FEDERAL HOME LOAN BANK OF NEW YORK
By:	/s/ Alfred A. DelliBovi
	President

Attest:

/s/ Barbara Sperrazza Corporate Secretary

(Seal)

Thursday, June 19, 2003.max

AMENDMENT NO. 5 TO THE
FEDERAL HOME LOAN BANK
OF NEW YORK
BENEFIT EQUALIZATION PLAN

The Federal Home Loan Bank of New York Benefit Equalization Plan (the “Plan”), as adopted by the Federal Home Loan Bank of New York (the “Bank”) as of June 18, 1987, to be effective as of January 1, 1988, and as previously amended by Amendment No. 1, Amendment No. 2, Amendment No. 3 and Amendment No. 4 thereto, is hereby amended effective January 1, 2002 in the following respect:

1. Subparagraph (ii) of the first paragraph of Section 4.01 is amended to read as follows:

(ii) is an amount equal to his regular account, 401(k) account and additional elective deferral (as defined in IRC Section 414(v)) contributions actually made under the Thrift Plan for the calendar year after giving effect to any limitation or reduction on elective contributions required by the IRC Limitations.

2. Except as revised as specifically stated above, the terms and provisions of the Plan are hereby ratified and confirmed.

This Amendment No. 5 to the Plan has been duly adopted by the Bank this 21st day of March 2002, to be effective as of January 1, 2002.

FEDERAL HOME LOAN BANK OF NEW YORK
By:	/s/ Alfred A. DelliBovi
	President

Attest:

/s/ Barbara Sperrazza Corporate Secretary

Thursday, June 19, 2003.max

AMENDMENT NO. 6 TO THE
FEDERAL HOME LOAN BANK
OF NEW YORK
BENEFIT EQUALIZATION PLAN

The Federal Home Loan Bank of New York Benefit Equalization Plan (the “Plan”), as adopted by the Federal Home Loan Bank of New York (the “Bank”) as of June 18, 1987, to be effective as of January 1, 1988, and as previously amended by Amendment No. 1, Amendment No. 2, Amendment No. 3, Amendment No. 4 and Amendment No. 5 thereto, is hereby amended effective January 1, 2003 in the following respect:

1. Section 3.01 is amended to read as follows:

3.01 The amount, if any, of the annual benefit payable to or on account of a Member pursuant to the Plan shall equal (i) minus (ii), but not less than zero, as determined by the Committee, where:

(i) is the annual benefit (as calculated by the Retirement Fund on the basis of the form of payment elected under the Retirement Fund by the Member) that would otherwise be payable to or on account of the Member by the Retirement Fund under the Retirement Fund if the provisions of the Retirement Fund were administered without regard to the limitations imposed by Section 401(a)(17) and 415 of the IRC; and

(ii) is the annual benefit (as calculated by the Retirement Fund on the basis of the form of payment elected under the Retirement Fund by the Member) that is payable to or on account of the Member by the Retirement Fund under the Retirement Fund after giving effect to any reduction of such benefit required by the limitations imposed by Sections 401(a)(17) and 415 of the IRC;

For purposes of this Section 3.01, “annual benefit” includes any “Active Service Death Benefit,” “Retirement Adjustment Payment,” “Annual Increment” and “Single Purchase Fixed Percentage Adjustment” which the Bank elected to provide its employees under the Retirement Fund.

2. Section 3.05 is amended to read as follows:

3.05 If a Member to whom an annual benefit is payable under the Plan dies before commencement of the payment of his or her benefit, the death benefit payable under Section 3.02 shall be payable to the Member’s beneficiary as if the payment of the Member’s benefit had commenced on the first day of the month in which his or her death occurred; provided, however, that in calculating such death benefit, such lump sum death benefit shall be offset by the death benefits payable in respect of such Member under any and all life insurance policies maintained by the Bank at its sole cost and expense on behalf of the Member.

3. Section 3.08 is deleted in its entirety.

4. Except as revised as specifically stated above, the terms and provisions of the Plan are hereby ratified and confirmed.

Monday, August 04, 2003.max

This Amendment No. 6 to the Plan has been duly adopted by the Bank this       day of December, 2002, to be effective as of January 1, 2003.

FEDERAL HOME LOAN BANK OF NEW YORK
By:	/s/ Alfred A. DelliBovi
	President

Attest:

/s/ Barbara Sperrazza Corporate Secretary

Monday, August 04, 2003.max

AMENDMENT NO. 7 TO THE
FEDERAL HOME LOAN BANK
OF NEW YORK
BENEFIT EQUALIZATION PLAN

The Federal Home Loan Bank of New York Benefit Equalization Plan (the “Plan”), as adopted by the Federal Home Loan Bank of New York (the “Bank”) as of June 18, 1987, to be effective as of January 1, 1988, and as previously amended by Amendment No. 1, Amendment No. 2, Amendment No. 3, Amendment No. 4, Amendment No. 5 and Amendment No. 6 thereto, is hereby amended, effective October 16, 2003, in the following respects:

1. Section 1.02 is amended to read as follows:

1.02 “Bank” means the Federal Home Loan Bank of New York and each subsidiary or affiliated company thereof which participates in the Plan.

2. Section 2.05 is amended to read as follows:

2.05 Notwithstanding any other provision of this Plan to the contrary, the Committee, in its sole and absolute discretion, shall exclude from Plan participation any employee who is not one of a select group of management and highly compensated employees (within the meaning of those terms as used in Section 201(2) of the Employee Retirement Income Security Act of 1974, as amended).

3. Articles 1 through 6, inclusive, Section 7.05, Article 8 and Sections 9.01, 9.02, 9.04 and 9.07 are amended by changing the words “member,” “member’s” and “members” to “Member,” “Member’s” and “Members,” respectively, wherever the same appear therein.

4. Article IV is redesignated Article 4, and Article 4, as so redesignated, is amended by changing “employee,” “employee’s” and “an employee” to “Member,” “Member’s” and “a Member,” respectively, wherever the same appear therein.

5. Except as revised as specifically stated above, the terms and provisions of the Plan are hereby ratified and confirmed.

This Amendment No. 7 to the Plan has been duly adopted by the Bank this 16^th day of October, 2003, to be effective as of October 16, 2003.

FEDERAL HOME LOAN BANK OF NEW YORK
By:	/s/ Alfred A. DelliBovi
	President

Attest:

/s/ Barbara Sperrazza Corporate Secretary

AMENDMENT NO. 8 TO THE
FEDERAL HOME LOAN BANK
OF NEW YORK
BENEFIT EQUALIZATION PLAN

The Federal Home Loan Bank of New York Benefit Equalization Plan (the “Plan”), as adopted by the Federal Home Loan Bank of New York (the “Bank”) as of June 18, 1987, to be effective as of January 1, 1988, and as previously amended by Amendment No. 1, Amendment No. 2, Amendment No. 3, Amendment No. 4, Amendment No. 5, Amendment No. 6 and Amendment No. 7 thereto, is hereby amended, effective on and as of the date of adoption hereof, in the following respect:

Article 4 of the Plan is amended by inserting the following as Section 4.07 thereof:

Section 4.07 A Member who shall have been credited with an elective contribution addition under Section 4.01 of the Plan shall be entitled to elect to have the balance credited to the Member’s Thrift Benefit Account paid to him in such other form, or at such date or dates, other than a lump sum payment payable as soon as reasonably practicable after his retirement or other termination of employment with the Bank as provided in Section 4.05 of the Plan; provided, that such election shall be made in writing delivered to the Bank on or before December 31, 2007, and shall be effective only with respect to amounts payable under the provisions of Section 4.05 of the Plan on or after January 1, 2008, and not prior thereto.

This Amendment No. 8 to the Plan has been duly adopted by the Bank this 18^th day of October, 2007, to be effective on and as of the date of adoption hereof.

FEDERAL HOME LOAN BANK OF NEW YORK
By:	/s/ Alfred A. DelliBovi
	President

Attest:

/s/ Barbara Sperrazza Corporate Secretary

AMENDMENT NO. 9 TO THE
FEDERAL HOME LOAN BANK
OF NEW YORK
BENEFIT EQUALIZATION PLAN

The Federal Home Loan Bank of New York Benefit Equalization Plan (the “Plan”), as adopted by the Federal Home Loan Bank of New York (the “Bank”) as of June 18, 1987, to be effective as of January 1, 1988, and as previously amended by Amendment No. 1, Amendment No. 2, Amendment No. 3, Amendment No. 4, Amendment No. 5, Amendment No. 6, Amendment No. 7 and Amendment No. 8 thereto, is hereby amended, effective January 1, 2008, in the following respects:

1. Section 1.05 is amended to read as follows:

1.05 “Committee” means the Benefit Equalization Plan Committee appointed by the Board of Directors pursuant to Section 7.01 to administer the Plan.

2. Section 1.06 is deleted, and Sections 1.07, 1.08, 1.09 and 1.10 are hereby redesignated as Sections 1.06, 1.07, 1.08 and 1.09, respectively.

3. Section 1.10 is adopted as follows:

1.10 “Retirement” means and refers to the Separation from Service of a Member under circumstances entitling the Member to a benefit from and under the terms of the Retirement Fund.

4. Sections 1.11 and 1.12 are amended to read as follows:

1.11 “Retirement Fund” means the Pentegra Defined Benefit Plan for Financial Institutions, a qualified and tax-exempt defined benefit pension plan and trust under IRC Sections 401(a) and 501(a), and the governing Retirement Fund thereof, as adopted by the Bank.

1.12 “Retirement Plan Component” means and refers to the provisions of Article 3, which is and shall be deemed to be a separate plan within the Federal Home Loan Bank of New York Benefit Equalization Plan.

5. Sections 1.13, 1.14 and 1.15 are adopted as follows:

1.13 “Separation from Service “ has the meaning set forth in Section 1.409A-1(h) of the Regulations promulgated under IRC Section 409A.

1.14 “Thrift Plan Component” means and refers to the provisions of Article 4, which is and shall be deemed to be a separate plan within the Federal Home Loan Bank of New York Benefit Equalization Plan.

1.15 “Thrift Plan” means the Pentegra Defined Contribution Plan for Financial Institutions, a qualified and tax exempt defined contribution plan and trust under IRC Sections 401 (a) and 501 (a), as adopted by the Bank.

6. Article 2 is amended to read as follows:

Article 2. Membership

2.01 Each employee of the Bank who is included in the membership of the Retirement Fund shall become a Member of the Plan and of the Retirement Plan Component of the Plan on the later of (i) the date on which the Committee shall determine, in its sole and absolute discretion, that he or she is entitled to membership in the Plan and (ii) the earliest date on which a benefit under the Retirement Fund is limited by IRC Section 401(a)(17) or 415. If, on the date that payment of a Member’s benefit from the Retirement Fund commences, the Member is not entitled to receive a benefit under Article 3.01 of the Plan, his membership in the Retirement Component of the Plan shall terminate on such date.

2.02 Each employee of the Bank who is included in the membership of the Thrift Plan shall become a Member of the Plan and of the Thrift Plan Component of the Plan on the later of (i) the date on which the Committee shall determine, in its sole and absolute discretion, that he or she is entitled to membership in the Plan and (ii) the earliest date on which he or she is credited with an elective contribution addition or makeup contribution addition under Section 4.01 or 4.02 of the Plan.

2.03 Notwithstanding any other provision of this Plan to the contrary, the Committee, in its sole and absolute discretion, shall exclude from membership and participation in the Plan any employee who is not one of a select group of management and highly compensated employees, or who does not meet such criteria and requirements for membership in the Plan as the Committee shall fix and determine.

7. Article 3 is amended to read as follows:

Article 3. Amount and Payment of Pension Benefits

3.01 The amount, if any, of the annual benefit payable to or on account of a Member pursuant to the Retirement Plan Component of the Plan shall equal (i) minus (ii), but not less than zero, as determined by the Committee, where:

(i) is the annual benefit (as calculated by the Retirement Fund on the basis of the form of payment elected under the Retirement Fund by the Member) that would otherwise be payable to or on account of the Member by the Retirement Fund under the Retirement Fund if the provisions of the Retirement Fund were administered without regard to the limitations imposed by Sections 401 (a)(17) and 415 of the IRC; and

2

(ii) is the annual benefit (as calculated by the Retirement Fund on the basis of the form of payment elected under the Retirement Fund by the Member) that is payable to or on account of the Member by the Retirement Fund under the Retirement Fund after giving effect to any reduction of such benefit required by the limitations imposed by Sections 401 (a)( 17) and 415 of the IRC.

For purposes of this Section 3.01, “annual benefit” includes any “Active Service Death Benefit,” “Retirement Adjustment Payment,” “Annual Increment” and “Single Purchase Fixed Percentage Adjustment” which the Bank has elected to provide its employees under the Retirement Fund and shall be in the form of a life annuity within the meaning of Section 1.409A-2(b)(2)(ii) of the Regulations promulgated under IRC Section 409A.

3.02 Unless the Member elects an optional form of payment under this Article 3 pursuant to Section 3.03 of the Plan, the annual benefit, if any, payable to or on account of a Member under Section 3.01 of the Plan shall be converted by the Actuary and shall be payable to or on account of the Member in the “Regular Form” of payment, utilizing for that purpose the same actuarial factors and assumptions then used by the Retirement Fund to determine actuarial equivalence under the Retirement Fund. For purposes of the Plan, the “Regular Form” of payment means an annual benefit payable for the Member’s lifetime and the death benefit described in Section 3.04 of the Plan.

3.03 (a) A Member may, with the prior written consent of the Committee, elect in writing to have the annual benefit, if any, payable to or on account of a Member under Section 3.02 of the Plan converted by the Actuary to any optional form of payment then permitted under the Retirement Fund that is a life annuity within the meaning of Section 1.409A-2(b)(2)(ii) of the Regulations promulgated under IRC Section 409A other than the “Regular Form” of payment. The Actuary shall utilize for the purpose of that conversion the same actuarial factors and assumptions then used by the Retirement Fund to determine actuarial equivalence under the Retirement Fund.

(b) If a Member who had elected an optional form of payment under this Section 3.03 dies after the date his benefit payments under the Plan had commenced, the only death benefit, if any, payable under the Plan in respect of said Member shall be the amount, if any, payable under the optional form of payment which the Member had elected under the Plan. If a Member who had elected an optional form of payment under this Section 3.03 dies before the date his benefit payments under the Plan commence, his election of an optional form of benefit shall be inoperative.

(c) An election of an optional form of payment under this Section 3.03 may be made only on a form prescribed by the Committee and filed by the Member with the Committee prior to the commencement of payment of his benefit under Section 5.02 of the Plan.

3

3.04 Upon the death of a Member who had not elected an optional form of payment under Section 3.03 of the Plan, a death benefit shall be paid to the Member’s beneficiary in a lump sum equal to the excess, if any, of (i) over (ii), where:

(i) is an amount equal to twelve (12) times the annual benefit, if any, payable under Section 3.02 of the Plan; and

(ii) is the sum of the benefit payments, if any, which the Member had received under this Article 3.

3.05 If a Member to whom an annual benefit is payable under this Article 3 dies before commencement of the payment of his benefit, the death benefit payable under Section 3.02 of the Plan shall be payable to the Member’s beneficiary as if the payment of the Member’s benefit had commenced on the first day of the month in which his death occurred.

3.06 If a Member is restored to employment with the Bank after payment of his benefit under this Article 3 has commenced, all payments under the Plan shall thereupon be discontinued. Upon the Member’s subsequent Separation from Service with the Bank, his benefit under the Plan shall be recomputed in accordance with Sections 3.01 and 3.02 of the Plan, but shall be reduced by the equivalent value of the amount of any benefit paid by the Plan in respect of his previous Separation from Service, and such reduced benefit shall be paid to such Member in accordance with the provisions of the Plan. For purposes of this Section 3.06, the equivalent value of the benefit paid in respect of a Member’s previous retirement or termination of employment shall be determined by the Actuary utilizing for that purpose the same actuarial factors and assumptions then used by the Retirement Fund to determine actuarial equivalence under the Retirement Fund.

3.07 The annual benefit, if any, payable to or on account of a Member under this Article 3 shall commence to be paid no earlier than (i) the Member’s Separation from Service, (ii) the date the Member becomes disabled, within the meaning of IRC Section 409A(a)(2)(c), or (iii) the Member’s death, and the time or schedule of payments shall not be accelerated except as provided in Regulations promulgated pursuant to IRC Section 409A, nor shall any payment of benefits be deferred to a date other than the date fixed for such payment. Such annual benefit shall be paid in monthly installments commencing on the first day of the month next following the Member’s Separation from Service constituting the Member’s Retirement under the Retirement Fund, except that no benefits shall be paid prior to the date such annual benefit can be definitely determined by the Committee.

4

8. Article 4 is amended to read as follows:

Article 4. Amount and Payment of Thrift Benefits

4.01 For each calendar year after 2007, if the Member’s 401(k) account contributions and/or regular account contributions under the Thrift Plan for such year have reached the maximum permitted by the IRC Limitations as determined by the Committee, and if the Member’s compensation for that calendar year is expected to exceed the dollar limitation set forth in IRC Section 401(a)(17) (as indexed), and if the Member elects to reduce his compensation for such calendar year by delivering to the Committee, prior to the commencement of such calendar year, a written election on such form as the Committee may designate, which election shall become irrevocable on the last day of the calendar year preceding such calendar year, then such Member shall be credited with an elective contribution addition under this Plan equal to the reduction in his compensation made in accordance with such election; provided, however, that the sum of all such elective contribution additions for a Member with respect to any single calendar year shall not be greater than the excess of (i) over (ii), where

(i) is an amount equal to 19% of his compensation (as defined by the Thrift Plan if its provisions were administered without regard to the IRC Limitations); and

(ii) is an amount equal to his regular account, 401(k) account and additional elective deferral (as defined in IRC Section 414(v)) contributions actually made under the Thrift Plan for the calendar year after giving effect to any limitation or reduction on elective contributions required by the IRC Limitations.

If the reduction in a Member’s compensation under such election is determined to exceed the maximum allowable elective contribution additions for such calendar year, such excess and any related earnings credited under Section 4.03 of the Plan shall be paid to such Member within the first two and one half months of the succeeding calendar year.

4.02 For each calendar year after 2007, if a portion of an Member’s regular account contribution or 401(k) account contribution to the Thrift Plan for the preceding calendar year is returned to a Member after the end of such preceding calendar year on account of the IRC Limitations, and if the Member’s compensation for such calendar year is expected to exceed the dollar limitation set forth in IRC Section 401(a)(17) (as indexed), and if the Member elects to reduce his compensation for such calendar year by an amount up to the sum of Thrift Plan contributions and related earnings returned to him for the preceding year by delivering a written election to the Committee prior to the commencement of such calendar year on such form as the Committee may designate, then such Member shall be credited with a makeup contribution addition under this Article 4 equal to the reduction in his compensation made in accordance with such election.

4.03 For each elective contribution addition credited to a Member under Section 4.01 of the Plan, such Member shall also be credited with a matching contribution addition under this Article 4 equal to the matching contribution, if any, that would be credited under the Thrift Plan with respect to such amount if contributed to the Thrift Plan, determined as if the provisions of the Thrift Plan were administered without regard to the IRC Limitations and determined after taking into account the Member’s actual regular and 401(k) contributions to and actual matching contributions under the Thrift Plan. For each makeup contribution addition credited to a Member under Section 4.02, of the Plan such Member shall also be credited with a matching contribution addition under this Article 4 equal to the matching contribution, if any, that was lost under the Thrift Plan with respect to the contributions returned for the preceding calendar year.

5

4.04 The Committee shall maintain a thrift benefit account on the books and records of the Bank for each Member who is a Member by reason of amounts credited under Section 4.01 or 4.02 of the Plan. The elective contribution additions, makeup contribution additions and matching contribution additions of a Member under Sections 4.01, 4.02 and 4.03 of the Plan shall be credited to the Member’s thrift benefit account as soon as practicable after the date that the compensation reduced under Section 4.01 and/or 4.02 of the Plan would otherwise have been paid to such Member. In addition, the thrift benefit account of a Member shall be credited from time to time with interest at a rate substantially equivalent to the net rate of return earned on the Member’s account in the Thrift Plan, or at such other rate or rates or in such amount as may be determined by the Committee in its sole and absolute discretion.

4.05 The balance credited to a Member’s thrift benefit account shall be paid to him in a lump sum payment as soon as reasonably practicable after his Separation from Service with the Bank, or at such other date or dates and in such other form as the Member shall have elected in writing to the Bank on or before December 31, 2007, or, in the case of a Member who shall first elect to reduce his compensation pursuant to Section 4.01 of the Plan subsequent to December 31, 2007, at the time the Member first so elects to reduce his compensation, subject to the provisions of Section 4.07 of the Plan.

4.06 If a Member dies prior to receiving the balance credited to his thrift benefit account under Section 4.05 of the Plan, the balance in his thrift benefit account at the time of the Member’s death shall be paid to his Beneficiary in a lump sum payment as soon as reasonably practicable after his death.

4.07 A Member (or the beneficiary of a Member) who shall have been credited with an elective contribution addition under Section 4.01 of the Plan shall be deemed entitled to a benefit under this Article 4 at such time as the Member (or his beneficiary) shall be determined to be due to a benefit payable by the Thrift Plan; provided, that the benefit under this Article 4 shall be paid at the time or times and in the form in which such benefit is payable pursuant to Section 4.05 of the Plan and shall commence to be paid no earlier than (i) the Member’s Separation from Service, (ii) the date the Member becomes disabled, within the meaning of IRC Section 409A(a)(2)(c), or (iii) the Member’s death, and the time or schedule of payments provided in Section 4.05 of the Plan shall not be accelerated except as provided in Regulations promulgated pursuant to IRC Section 409A, nor shall any payment of benefits be deferred to a date other than the date fixed for such payment.

6

9. Article 5 is amended to read as follows:

Article 5. Source and Method of Payments

All payments of benefits under the Plan, whether arising under Article 3 with respect to the Retirement Plan Component of the Plan or under Article 4 with respect to the Thrift Plan Component of the Plan, shall be paid from, and shall only be a general claim upon, the general assets of the Bank, notwithstanding that the Bank, in its discretion, may establish a bookkeeping reserve or a grantor trust (as such term is used in IRC Sections 611 through 677) to reflect or to aid it in meeting its obligations under the Plan with respect to any Member or prospective Member or beneficiary. No benefit whatever provided by the Plan shall be payable from the assets of the Retirement Fund or the Thrift Plan. No Member shall have any right, title or interest whatever in or to any investments which the Bank may make or any specific assets which the Bank may reserve to aid it in meeting its obligations under the Plan.

10. Section 7.01 is amended to read as follows:

7.01 The Board of Directors has delegated to the Benefit Equalization Plan Committee, subject to those powers which the Board has reserved as described in Article 8 of the Plan, general authority over and responsibility for the administration and interpretation of the Plan. The Committee shall have full power and authority to interpret and construe the Plan, and to make all determinations considered necessary or advisable for the administration of the Plan and any trust referred to in Article 5 of the Plan, and the calculation of the amount of benefits payable thereunder, and to review claims for benefits under the Plan. The Committee’s interpretations and constructions of the Plan and its decisions or actions thereunder shall be binding and conclusive on all persons for all purposes.

11. Section 7.02 is amended by inserting “to” preceding the words “all accountants,” by changing “Section 3.01” to “Article 3” and by changing “limitations” to “limitation.”

This Amendment No. 9 to the Plan has been adopted by the Bank this 18^th day of October, 2007, to be effective as of January 1, 2008.

FEDERAL HOME LOAN BANK OF NEW YORK
By:	/s/ Alfred A. DelliBovi
	President

Attest:

/s/ Barbara Sperrazza Corporate Secretary

7

AMENDMENT NO. 10 TO THE
FEDERAL HOME LOAN BANK
OF NEW YORK
BENEFIT EQUALIZATION PLAN

The Federal Home Loan Bank of New York Benefit Equalization Plan (the “Plan”), as adopted by the Federal Home Loan Bank of New York (the “Bank”) as of June 18, 1987, to be effective as of January 1, 1988, and as previously amended by Amendment No. 1, Amendment No. 2, Amendment No. 3, Amendment No. 4, Amendment No. 5, Amendment No. 6, Amendment No. 7, Amendment No. 8, and Amendment No. 9 thereto, is hereby amended, effective October 16, 2008, in the following respect:

Article 4 of the Plan is amended by inserting the following as Section 4.08 thereof:

4.08 A Member who shall have been credited with an elective contribution addition under Section 4.01 of the Plan shall be entitled to elect to have the balance credited to the Member’s Thrift Benefit Account paid to him in such other form, or at such date or dates, other than a lump sum payment payable as soon as reasonably practicable after his retirement or other termination of employment with the Bank as provided in Section 4.05 of the Plan; provided, that such election shall be made in writing delivered to the Bank or before December 31, 2008, and shall be effective only with respect to amounts payable under the provisions of Section 4.05 of the Plan on or after January 1, 2009, and not prior thereto.

This Amendment No. 10 to the Plan has been duly adopted by the Bank this 16^th day of October, 2008, to be effective on and as of the date of adoption hereof.

FEDERAL HOME LOAN BANK OF NEW YORK
By:	/s/ Alfred A. DelliBovi
	President

Attest:

/s/ Barbara Sperrazza Corporate Secretary

AMENDMENT NO. 11 TO THE
FEDERAL HOME LOAN BANK
OF NEW YORK
BENEFIT EQUALIZATION PLAN

The Federal Home Loan Bank of New York Benefit Equalization Plan (the “Plan”), as adopted by the Federal Home Loan Bank of New York (the “Bank”) as of June 18, 1987, to be effective as of January 1, 1988, and as previously amended by Amendment No. 1, Amendment No. 2, Amendment No. 3, Amendment No. 4, Amendment No. 5, Amendment No. 6, Amendment No. 7, Amendment No. 8, Amendment No. 9, and Amendment No. 10 thereto, is hereby amended, effective January 1, 2009, in the following respects:

1. Section 3.03(a) is amended by inserting following the words “the Regular Form of payment” the words “and that is actuarially equivalent to the “Regular Form” of payment.”

2.	The first sentence of Section 3.06 is amended to read as follows: “If a Member is restored to employment by the Bank after payment of his benefit under this Article 3 has commenced, all payments under this Article 3 shall, to the extent permitted by law, thereupon be discontinued.”
3.	Clause (ii) of Section 4.01 is amended to read as follows:
	“(ii) is an amount equal to the maximum amount of regular account, 401(k) account and additional elective deferral (as defined in IRC Section 414(v)) contributions the Member could make under the Thrift Plan for the calendar year after giving effect to any limitation or reduction on elective contributions required by the IRC Limitations”.

4.	Section 4.05 is amended by changing “December 31, 2007,” wherever the same shall appear therein, to “December 31, 2008.”
5.	Section 4.08 is deleted.

6. Article 5 is amended by inserting following the word “beneficiary” in the first sentence thereof a semicolon, followed by the words “provided, that no contributions to such a grantor trust shall be made by the Bank during any “restricted period,” as such term is defined in IRC Section 409A(b)(3)(B).”

This Amendment No. 11 to the Plan has been duly adopted by the Bank this 16^th day of October, 2008, to be effective as of January 1, 2009.

FEDERAL HOME LOAN BANK OF NEW YORK
By:	/s/ Alfred A. DelliBovi
	President

Attest:

/s/ Barbara Sperrazza Corporate Secretary

AMENDMENT NO. 12
TO THE
FEDERAL HOME LOAN BANK OF NEW YORK
BENEFIT EQUALIZATION PLAN

The Federal Home Loan Bank of New York Benefit Equalization Plan (the “Plan”), as adopted by the Federal Home Loan Bank of New York (the “Bank”) as of June 18, 1987, to be effective as of January 1, 1988, and as previously amended by Amendment No. 1 through No. 11 thereto, is hereby amended, effective November 10, 2009, in the following respect:

Article 8 of the Plan is amended by adding the following sentence to the end thereof:

Notwithstanding Section 4.05 of the Plan or anything else to the contrary contained herein, upon termination of the Thrift Plan Component of the Plan, the account balances under the Thrift Plan Component of the Plan shall be paid to each member, beneficiary or other person entitled to benefits in a lump sum on a date that is at least twelve months and one day from the date of such termination. The Thrift Plan Component of the Plan is terminated November 10, 2009 and all account balances under the Thrift Plan Component of the Plan shall be distributed in a lump sum payment on November 12, 2010 (a date that is at least one day after 12 months from November 10, 2009) in accordance with this amended Article 8 of the Plan and Section 409A of the Code.

This Amendment No. 12 to the Plan has been duly adopted by the Bank this 10th day of November, 2009.

Federal Home Loan Bank of New York
By:	/s/ Alfred A. DelliBovi
	President

Attest:

/s/ Barbara Sperrazza

Corporate Secretary

AMENDMENT NO. 13
TO THE
FEDERAL HOME LOAN BANK OF NEW YORK
BENEFIT EQUALIZATION PLAN

The Federal Home Loan Bank of New York Benefit Equalization Plan (the Plan), as adopted by the Federal Home Loan Bank of New York (the Bank) as of June 18, 1987, to be effective as of January 1, 1988, and as previously amended by Amendment No. 1, Amendment No. 2, Amendment No. 3, Amendment No. 4, Amendment No. 5, Amendment No. 6, Amendment No. 7, Amendment No. 8, Amendment No. 9, Amendment No. 10, Amendment No. 11 and Amendment No. 12 thereto, is hereby amended in the following respects:

1. Section 3.03(a) is amended by inserting, following the words “elect in writing,” the words “prior to the making of any annuity payment under this Article 3.”

2. Section 3.06 is deleted.

3. Section 3.07 is amended by inserting the following at the end thereof: “Nothing in this Plan shall be deemed to make the payment of benefits to a Member under this Article 3 dependent upon the commencement of the payment of benefits to the Member under the Retirement Fund.”

4. The fifth sentence of Section 7.05 is amended to read as follows: “Written notice of the decision on review shall be furnished to the claimant not later than 90 days following the Committee’s receipt of the request for review.”

This Amendment No. 13 to the Plan has been adopted by the Bank this 19^th day of November, 2009.

FEDERAL HOME LOAN BANK OF NEW YORK
By:	/s/ Alfred A. DelliBovi
	President

Attest:

/s/ Barbara Sperrazza

Corporate Secretary

EX-10.10

Exhibit 10.10

THE FEDERAL HOME LOAN BANK

OF NEW YORK

NONQUALIFIED PROFIT SHARING PLAN

TABLE OF CONTENTS

ARTICLE	PAGE
I. DEFINITIONS		2
II. MEMBERSHIP		4
III. AMOUNT AND PAYMENT OF BENEFITS		5
IV. AMOUNT AND METHOD OF PAYMENT		8
V. DESIGNATION OF BENEFICIARIES		9
VI. ADMINISTRATION OF PLAN		10
VII. AMENDMENT AND TERMINATION		12
VIII. GENERAL PROVISIONS		13

THE FEDERAL HOME LOAN BANK OF NEW YORK
NONQUALIFIED PROFIT SHARING PLAN

This Plan is adopted by the Federal Home Loan Bank of New York (the “Bank”) in order to provide additional benefits to certain employees of the Bank who are ineligible for certain benefits under the Pentegra Defined Benefit Plan for Financial Institutions, a qualified defined benefit pension plan, as adopted by the Bank. This Plan is unfunded, and all benefits payable under the Plan shall be paid solely out of the general assets of the Bank.

1

Article I. Definitions

When used in the Plan, the following terms shall have the following meanings:

1.01 “Bank” means the Federal Home Loan Bank of New York and each subsidiary or affiliated company thereof which participate in the Plan.

1.02 “Bank Service” has the same meaning as is given to “Service” under the Retirement Plan, except that such term shall include only the Member’s “Service” (as defined by the Retirement Plan) as an employee of the Bank and shall exclude any and all “Service” with any other employer that may be credited to the Member under the Retirement Plan.

1.03 “Benefit Equalization Plan” means the Federal Home Loan Bank of New York Benefit Equalization Plan as adopted by the Bank as of June 18, 1987, to be effective as of January 1, 1988, as the same has heretofore been and may hereafter be amended.

1.04 “Nonqualified Plan Committee” means the Benefit Equalization Plan Committee appointed by the Board of Directors pursuant to Section 6.01 to administer the Plan.

1.05 “Board of Directors” or “Board” means the Board of Directors of the Bank.

1.06 “Compensation Committee” means the Compensation and Human Resources Committee of the Board of Directors.

1.07 “Effective Date” means July 1, 2008.

1.08 “IRC” means the Internal Revenue Code of 1986, as amended from time to time, or any successor thereto.

1.09 “Member” means any person included in the membership of the Plan as provided in Article 2.

1.10 “Plan” means the Federal Home Loan Bank of New York Nonqualified Profit Sharing Plan, as set forth herein and as amended from time to time.

1.11 “Profit Sharing Benefit” means and refers to the benefit determined pursuant to Article III.

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1.12 “Profit Sharing Benefit Account” means and refers to the account maintained for each Member pursuant to Section 3.02.

1.13 “Retirement Plan” means the Pentegra Defined Benefit Plan for Financial Institutions, a qualified and tax-exempt defined benefit pension plan and trust under IRC Sections 401(a) and 501(a), as adopted by the Bank.

1.14 “Separation from Service” has the meaning set forth in Section 1.408A-1(h) of the Regulations promulgated under IRC Section 409A.

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Article II. Membership

2.01 Each employee of the Bank who is included in the membership of the Retirement Plan and derives his benefit thereunder in whole or in part under the amended terms and conditions of the Retirement Plan, as amended effective July 1, 2008, shall become a Member of the Plan on the latest of (i) the date on which he shall have attained five (5) years of Bank Service, (ii) the date on which he shall have become a Member of the Retirement Plan Component of the Benefit Equalization Plan, and (iii) the Effective Date.

2.02 Notwithstanding any other provision of this Plan to the contrary, the Nonqualified Plan Committee, in its sole and absolute discretion, shall exclude from membership and participation in the Plan any employee who is not one of a select group of management and highly compensated employees, or who does not meet such criteria and requirements for membership in the Plan as the Nonqualified Plan Committee shall fix and determine.

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Article III. Amount and Payment of Benefits

3.01 For the calendar year 2008 and for each calendar year thereafter, the Members of the Plan during such calendar year shall be credited with a Profit Sharing Benefit under the Plan in such aggregate amount, if any, as the Compensation Committee shall determine in accordance with Section 3.02, based upon the evaluation by the Compensation Committee of the Bank’s performance of certain Bank-wide performance goals used in the Bank’s Incentive Compensation Plan for such calendar year established by the Board of Directors, or by such Committee as the Board of Directors shall designate for that purpose, or such other performance criteria as may be established by the Board of Directors or such Committee as the Board of Directors shall designate for that purpose, for such calendar year, which determination shall be made by the Compensation Committee as soon as practicable after the end of such calendar year.

3.02 The amount of the Profit Sharing Benefit with which a Member is credited for any calendar year in accordance with Section 3.01 shall be determined as follows:

(a) If the Board of Directors, or such Committee as the Board of Directors shall designate, in its sole and absolute discretion, determines that the Bank has achieved the threshold limits of performance of the criteria established for such calendar year pursuant to Section 3.01, the amount of the Profit Sharing Benefit with which each Member of the Plan who is such a Member at the commencement of such calendar year shall be credited for such calendar year shall be equal to eight percent (8%) of the Member’s Salary for such calendar year.

(b) If the Board of Directors, or such Committee as the Board of Directors shall designate, in its sole and absolute discretion, determines that the Bank has not achieved the threshold level of performance of such criteria established for such calendar year, no Member shall be credited with any Profit Sharing Benefit for such calendar year.

(c) Notwithstanding any provision of paragraph (a) or (b) of this Section 3.02 above, the Compensation Committee may credit such higher or lower amount of Profit Sharing Benefit for any calendar year as it may determine, in its sole and absolute discretion, is appropriate in light of all relevant facts and circumstances.

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3.03 The Bank shall maintain a Profit Sharing Benefit Account on the books and records of the Bank for each Member and shall credit to such Profit Sharing Benefit Account all Profit Sharing Benefits with which such Member shall be credited, pursuant to Section 3.02, as soon as practicable following the determination of the amount of such Profit Sharing Benefits by the Compensation Committee in accordance with the provisions of Sections 3.01 and 3.02.

3.04 A Member shall not be entitled to a Profit Sharing Benefit under this Article III for any calendar year unless, on the date the determination referred to in Section 3.02(a) is made by the Compensation Committee, (i) he is an employee of the Bank and (ii) he is eligible to be a Member under the provisions of Section 2.01; provided, that a Member whose employment during any calendar year shall have ceased prior to the last day of such calendar year by reason of his death during such calendar year shall be entitled to have credited to his Profit Sharing Benefit Account the Profit Sharing Benefit that would have been credited to his Profit Sharing Benefit Account for such calendar year but for his death.

3.05 There shall be credited to the Profit Sharing Benefit Account of each Member from time to time notional interest at such rate or rates or in such amount or amounts as may be determined by the Nonqualified Plan Committee in its sole and absolute discretion.

3.06 The right of any Member to receive all or any part of the amount credited to his Profit Sharing Benefit Account shall be subject to the following vesting rules:

(a) Each Member shall have a vested and nonforfeitable right to the balance in his Profit Sharing Benefit Account upon the earliest to occur of (i) his completion of five (5) years of Bank Service, (ii) his attainment of his Normal Retirement Date, (iii) his attainment of his Disability Retirement Date, or (iv) his death, in each case while he is an employee of the Bank. If a Member has any Separation from Service with the Bank prior to the earliest to occur of such dates, neither he nor any other person claiming in his right shall be entitled to any benefits under the Plan.

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(b) As used in the Plan, (i) “Salary” means the Member’s base salary for such calendar year including any elective contribution the Member may make under Article 4 of the Benefit Equalization Plan with respect to such calendar year and any award of benefits under the Bank’s Incentive Compensation Plan made with respect to such calendar year; provided, that a Member’s Salary for the calendar year 2008 shall be deemed to be equal to fifty percent (50%) of his Salary for such calendar year as determined without regard to this clause (b), and (ii) the terms “Normal Retirement Date” and “Disability Retirement Date” shall have the same meanings as are given to them, respectively, under the Retirement Plan.

3.07 The balance credited to the Profit Sharing Benefit Account of a Member who has met the vesting rules in Section 3.06 shall be paid to him in a lump sum payment as soon as reasonably practicable following his Separation from Service with the Bank, or at such other date or dates or in such other form as the Member shall have elected in writing on a form prescribed by the Nonqualified Plan Committee which is filed by the Member with the Nonqualified Plan Committee within thirty (30) days following (i) the Effective Date, in the case of a Member who is such on the Effective Date, or (ii) in the case of a Member who becomes such after the Effective Date, the date on which he becomes a Member; provided, that such balance credited to the Profit Sharing Benefits Account of a Member shall in no event be payable earlier than the earliest of (i) the Member’s Separation from Service with the Bank, (ii) the date of the Member’s death or (iii) the date the Member becomes disabled, within the meaning of IRC Section 409A(a)(2)(c), and that the time or schedule of payments of the balance credited to the Profit Sharing Benefit Account of a Member shall not be accelerated, except as provided in Regulations promulgated pursuant to IRC Section 409A, nor shall any payment of benefits under the Plan be deferred to a date other than the date fixed for such payment in this Article III; provided, that a Member may, by a subsequent election, as defined in § 1.409A-2(b)(1) of the Regulations promulgated pursuant to IRC Section 409A, delay the time or change the form of a payment of all or any part of the balance credited to the Member’s Profit Sharing Benefit Account if, and only if, such subsequent election meets all of the following requirements: (i) such election shall not be made less than twelve (12) months prior to the date of the first scheduled payment of the balance credited to the Member’s Profit Sharing Benefit Account; (ii) such election shall not take effect until at least twelve (12) months after the date on which the election is made; (iii) the payment with respect to which such election is made shall be deferred for a period of not less than five (5) years from the date such payment would otherwise have been made; and (iv) such election shall comply with any and all other requirements of such Regulations applicable thereto. If a Member dies while an employee of the Bank prior to receiving the balance credited to his Profit Sharing Benefit Account, the balance in his Profit Sharing Benefit Account at the date of the Member’s death shall be paid in a lump sum payment as soon as reasonably practicable following the Member’s death in accordance with the provisions of Article V.

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Article IV. Source and Method of Payments

All payments of benefits under the Plan, shall be paid from, and shall only be a general claim upon, the general assets of the Bank, notwithstanding that the Bank, in its discretion, may establish a bookkeeping reserve or a grantor trust (as such term is used in IRC Sections 611 through 677) to reflect or to aid it in meeting its obligations under the Plan with respect to any Member or prospective Member or beneficiary. No benefit whatever provided by the Plan shall be payable from the assets of the Retirement Fund or the Thrift Plan. No Member shall have any right, title or interest whatever in or to any investments which the Bank may make or any specific assets which the Bank may reserve to aid it in meeting its obligations under the Plan.

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Article V. Designation of Beneficiaries

5.01 Each Member of the Plan may file with the Nonqualified Plan Committee a written designation of one or more person as the beneficiary who shall be entitled to receive the amount, if any, payable under the Plan upon his death. A Member may, from time to time, revoke or change his beneficiary designation without the consent of any prior beneficiary by filing a new designation with the Nonqualified Plan Committee. The last such written designation received by the Nonqualified Plan Committee shall be controlling; provided, however, that no designation, or change or revocation thereof, shall be effective unless received by the Nonqualified Plan Committee prior to the Member’s death, and in no even shall it be effective as of a date prior to such receipt.

5.02 If no such beneficiary designation is in effect at the time of the Member’s death, or if no designated beneficiary survives the Member, or if, in the opinion of the Nonqualified Plan Committee, such designation conflicts with applicable law, the Member’s estate shall be deemed to have been designated as his beneficiary and shall be paid the amount, if any, payable under the Plan upon the Member’s death. If the Nonqualified Plan Committee is in doubt as to the right of any person to receive such amount, the Committee may retain such amount, without liability for any interest thereon, until the rights thereto are determined, or the Nonqualified Plan Committee may pay such amount into any court of appropriate jurisdiction and such payment shall be a complete discharge of the liability of the Plan and the Bank therefor.

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Article VI. Administration of Plan

6.01 The Board of Directors has delegated to the Nonqualified Plan Committee, subject to those powers which the Board has reserved to itself or to the Compensation Committee as described in Article III of the Plan, general authority over and responsibility for the administration and interpretation of the Plan. The Nonqualified Plan Committee shall have full power and authority to interpret and construe the Plan, to make all determinations considered necessary or advisable for the administration of the Plan and any trust referred to in Article V of the Plan and the calculation of the amount of benefits payable under the Plan, and to review claims for benefits under the Plan. The Nonqualified Plan Committee’s interpretations and constructions of the Plan and its decisions or actions thereunder shall be binding and conclusive on all persons for all purposes, except to the extent of the powers which the Board has reserved to itself or to the Compensation Committee referred to in the first sentence of this Section 6.01.

6.02 If the Nonqualified Plan Committee deems it advisable, it shall arrange for the engagement of legal counsel and certified public accountants (who may be counsel to or accountants for the Bank) and other consultants, and make use of agents and clerical or other personnel, for purposes of the Plan. The Nonqualified Plan Committee may rely upon the written opinions of such counsel, accountants, and consultants, and upon any information supplied by the Retirement Plan for purposes of Article III of the Plan, and delegate to any agent or to any subcommittee or Nonqualified Plan Committee member its authority to perform any act hereunder, including, without limitation, those matters involving the exercise of discretion; provided, however, that such delegation shall be subject to revocation at any time at the discretion of the Nonqualified Plan Committee. The Nonqualified Plan Committee shall report to the Compensation Committee, or to a committee designated by the Board, at such intervals as shall be specified by the Compensation Committee or such designated committee, with regard to the matters for which it is responsible under the Plan.

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6.03 All claims for benefits under the Plan shall be submitted in writing to the Nonqualified Plan Committee. Written notice of the decision on each such claim shall be furnished with reasonable promptness to the Member or his beneficiary (the “claimant”). The claimant may request a review by the Nonqualified Plan Committee of any decision denying the claim in whole or in part. Such request shall be made in writing and filed with the Nonqualified Plan Committee within 30 days of such denial. A request for review shall contain all additional information which the claimant wishes the Nonqualified Plan Committee to consider. The Nonqualified Plan Committee may hold any hearing or conduct any independent investigation which it deems desirable to render its decision and the decision on review shall be made as soon as feasible after the Nonqualified Plan Committee’s receipt of the request for review. Written notice of the decision shall be furnished to the claimant. For all purposes under the Plan, such decisions on claims (where no review is requested) and decisions on review (where review is requested) shall be final, binding, and conclusive on all interested persons as to all matters relating to the Plan.

6.04 All expenses incurred by the Nonqualified Plan Committee in its administration of the Plan shall be paid by the Bank.

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Article VII. Amendment and Termination

The Board of Directors may amend, suspend, or terminate, in whole or in part, the Plan without the consent of the Nonqualified Plan Committee or any Member, beneficiary or other person, except that no amendment, suspension or termination shall retroactively impair or otherwise adversely affect the rights of any Member, beneficiary or other person to benefits under the Plan which have vested prior to the date of such action, as determined by the Nonqualified Plan Committee in its sole discretion. The Nonqualified Plan Committee may adopt any amendment or take any other action which may be necessary or appropriate to facilitate the administration, management and interpretation of the Plan or to conform the Plan thereto, provided any such amendment or action does not have a material effect on the then currently estimated cost to the Bank of maintaining the Plan.

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Article VIII. General Provisions

8.01 The Plan shall be binding upon and inure to the benefit of the Bank, and its successors and assigns, and the Members, and their successors, assigns, designees and estates. The Plan shall also be binding upon and inure to the benefit of any successor organization succeeding to substantially all of the assets and business of the Bank, but nothing in the Plan shall preclude the Bank from merging or consolidating into or with, or transferring all or substantially all of its assets to, another organization which assumes the Plan and all obligations of the Bank hereunder. The Bank agrees that it will make appropriate provision for the preservation of Members’ rights under the Plan in any agreement or plan which it may enter into effect any merger, reorganization or transfer of assets and assumption of Plan obligations of the Bank, the term “Bank” shall refer to such other organization and the Plan shall continue in full force and effect.

8.02 Neither the Plan nor any action taken thereunder shall be construed as giving to a Member the right to be retained in the employ of the Bank or as affecting the right of the Bank to dismiss any Member from its employ.

8.03 The Bank shall withhold or cause to be withheld from all benefits payable under the Plan in all federal, state, local and other taxes required by applicable law be withheld with respect to such payments.

8.04 No right or interest of a Member under the Plan may be assigned, sold, encumbered, transferred or otherwise disposed of and any attempted disposition of such right or interest shall be null and void.

8.05 If the Nonqualified Plan Committee shall find that any person to whom any amount is or was payable under the Plan is unable to care for his affairs because of illness or accident, or is a minor, or has died, then any payment, or any part thereof, due to such person or his estate (unless a prior claim therefor has been made by a duly appointed legal representative), may, if the Nonqualified Plan Committee is so inclined, be paid to such person’s spouse, child or other relative, an institution maintaining or having custody of such person, or any other person deemed by the Nonqualified Plan Committee to be a proper recipient on behalf of such person otherwise entitled to payment. Any such payment shall be in complete discharge of the liability of the Plan and the Bank therefor.

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8.06 To the extent that any person acquires a right to receive payments from the Bank under the Plan, such right shall be no greater than the right of an unsecured general creditor of the Bank.

8.07 All elections, designations, requests, notices, instructions and other communications from a Member, beneficiary or other person to the Committee required or permitted under the Plan shall be in such form as is prescribed from time to time by the Nonqualified Plan Committee and shall be mailed by first-class mail or delivered to such location as shall be specified by the Nonqualified Plan Committee and shall be deemed to have been given and delivered only upon actual receipt thereof at such location.

8.08 The benefits payable under the Plan shall be in addition to all other benefits provided for employees of the Bank and shall not be deemed salary or other compensation by the Bank for the purpose of computing benefits to which he may be entitled under any other plan or arrangement of the Bank.

8.09 No Nonqualified Plan Committee member shall be personally liable by reason of, any instrument executed by him or on his behalf, or action taken by him, in his capacity as a Nonqualified Plan Committee member nor for any mistake of judgment made in good faith. The Bank shall indemnify and hold harmless the Retirement Plan and each Nonqualified Plan Committee member and each employee, officer or director of the Bank or the Retirement Plan, to whom any duty, power, function or action in respect of the Plan may be delegated or assigned, or from whom any information is requested for Plan purposes, against any cost or expense (including fees of legal counsel) and liability (including any sum paid in settlement of a claim or legal action with the approval of the Bank) arising out of anything done or omitted to be done in connection with the Plan, unless arising out of such person’s fraud or bad faith.

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8.10 As used in the Plan, the masculine gender shall be deemed to refer to the feminine, and the singular person shall be deemed to refer to the plural, wherever appropriate.

8.11 The captions preceding the sections of the Plan have been inserted solely as a matter of convenience and shall not in any manner define or limit the scope or intent of any provisions of the Plan.

8.12 The Plan shall be construed according to the laws of the State of New York in effect from time to time.

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EX-10.11

Exhibit 10.11

THE FEDERAL HOME LOAN BANK

OF NEW YORK

NONQUALIFIED DEFERRED COMPENSATION PLAN

TABLE OF CONTENTS

ARTICLE	PAGE
I. DEFINITIONS		2
II. MEMBERSHIP		3
III. ELECTION TO DEFER PAYMENT OF COMPENSATION AND PAYMENT OF DEFERRED COMPENSATION		4
IV. SOURCE AND METHOD OF PAYMENT		6
V. DESIGNATION OF BENEFICIARIES		7
VI. ADMINISTRATION OF PLAN		8
VII. AMENDMENT AND TERMINATION		10
VIII. GENERAL PROVISIONS		11

THE FEDERAL HOME LOAN BANK OF NEW YORK

NONQUALIFIED DEFERRED COMPENSATION PLAN

This Plan is adopted by the Federal Home Loan Bank of New York (the “Bank”) in order to provide benefits to directors and certain management or highly compensated employees of the Bank through the ability to defer the receipt of compensation from the Bank. This Plan is unfunded, and all benefits payable under the Plan shall be paid solely out of the general assets of the Bank.

1

Article I. Definitions

When used in the Plan, the following terms shall have the following meanings:

1.01 “Bank” means the Federal Home Loan Bank of New York and each subsidiary or affiliated company thereof which participate in the Plan.

1.02 “Board of Directors” or “Board” means the Board of Directors of the Bank.

1.03 “Business Day” means and refers to a day on which commercial banks are open for business in the State of New York.

1.04 “Compensation” means and includes any salary or other compensation payable by the Bank to a Member other than Nonqualified Deferred Compensation.

1.05 “Compensation Deferral Account” means and refers to the account maintained for each Member pursuant to Section 3.02.

1.06 “Compensation Deferral Election Date” means the last Business Day in the calendar year 2008 and any calendar year thereafter during which the Plan is in effect.

1.07 “Effective Date” means January 1, 2009.

1.08 “Director” means and includes any person who has been elected or appointed and is serving on the Board of Directors as a Director of the Bank.

1.09 “IRC” means the Internal Revenue Code of 1986, as amended from time to time, or any successor thereto.

1.10 “Member” means any person included in the membership of the Plan as provided in Article 2.

1.11 “Nonqualified Deferred Compensation” shall have the same meaning as it has in IRC Section 409A and the Regulations promulgated thereunder.

1.12 “Officer” means and includes any employee of the Bank elected or appointed by the Board of Directors to hold an office of the rank of Assistant Vice President or above and is serving in such office.

1.13 “Plan” means the Federal Home Loan Bank of New York Nonqualified Deferred Compensation Plan, as set forth herein and as amended from time to time.

1.14 “Plan Administrator” means the Director of Human Resources of the Bank.

1.15 “Separation from Service” has the meaning set forth in Section 1.409A-1(h) of the Regulations promulgated under IRC Section 409A.

2

Article II. Membership

2.01 Each Director of the Bank shall be eligible to become a Member of the Plan on the later of (i) the date on which he shall have been elected or appointed as a Director of the Bank and (ii) the Effective Date.

2.02 Each employee of the Bank who is an Officer of the Bank shall be eligible to become a Member of the Plan on the later of (i) the date on which he shall have been elected or appointed by the Board of Directors as an Officer of the Bank and (ii) the Effective Date.

2.03 The membership of any Director or Officer shall terminate on the later of (i) the date on which he shall cease to be serving as a Director or Officer of the Bank and (ii) the termination of the Plan. The termination of membership in the Plan shall not, by itself, affect the rights of the Member by reason of any election made by the Member as provided in Section 3.01 prior to the termination of membership of such Member.

3

Article III. Election to Defer Payment of Compensation and
Payment of Deferred Compensation

3.01 On or before the Compensation Deferral Election Date in the calendar year next preceding the calendar year 2009 and each calendar year thereafter, each Member of the Plan shall be entitled to elect to defer the payment by the Bank and receipt by such Member of Compensation which otherwise would be payable to such Member for services performed by such Member for the Bank during the calendar year next following the calendar year in which such Compensation Deferral Election Date occurs to such date or dates and in such form of payment as such Member shall designate and elect on a form provided by the Plan Administrator. Such election shall be deemed to have been timely made and shall be effective when such election form shall have been signed by the Member and shall have been received by the Plan Administrator or such person as shall be designated by the Plan Administrator for such purpose, provided such receipt shall occur on or before the close of business of the Bank on the last Business Day of the calendar year next preceding the calendar year in which such services are to be performed by the Member and to which such election relates.

3.02 Compensation deferred by a Member of the Plan for any calendar year pursuant to a timely election made as provided in Section 3.01 shall be credited on the books and records of the Bank to a Compensation Deferral Account for such Member as soon as practicable following the date on which such Compensation would have been paid to such Member but for the election made by such Member pursuant to Section 3.01 to defer the payment and receipt of such Compensation. If such Member shall have elected, with respect to one or more calendar years for which the payment and receipt of Compensation is deferred, a date or dates or form of payment different from the date or dates or form of payment elected by the Member with respect to Compensation deferred with respect to other calendar years, separate subaccounts of the Compensation Deferral Account shall be maintained for such Member with respect to Compensation deferred from calendar years for which different dates or forms of payment have been elected by such Member.

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3.03 The balance credited to the Compensation Deferral Account of a Member shall be paid to such Member at such date or dates or in such form as the Member shall have made a timely election in writing pursuant to Section 3.01; provided, that no part of such balance credited to the Compensation Deferral Account of a Member shall be payable earlier than the earliest of (i) the Member’s Separation from Service with the Bank, (ii) the date of the Member’s death, or (iii) the date the Member becomes disabled within the meaning of IRC Section 409A(a)(2)(c), and that the time or schedule of payments of the balance credited to the Compensation Deferral Account of a Member shall not be accelerated, except as provided in Regulations promulgated pursuant to IRC Section 409A, nor shall any payment of benefits under the Plan be deferred to a date other than the date fixed for such payment in such timely election; provided, that a Member may, by a subsequent election, as defined in Section 1.409A-2(b)(1) of the Regulations promulgated pursuant to IRC Section 409A, delay the time or change the form of a payment of all or any part of the balance credited to the Member’s thrift benefit account if, and only if, such subsequent election meets all of the following requirements: (i) such election shall not be made less than twelve (12) months prior to the date of the first scheduled payment of the balance credited to the Member’s thrift benefit account; (ii) such election shall not take effect until at least twelve (12) months after the date on which the election is made; (iii) the payment with respect to which such election is made shall be deferred for a period of not less than five (5) years from the date such payment would otherwise have been made; and (iv) such election shall comply with any and all other requirements of such Regulations applicable thereto.

3.04 The balance credited to the Compensation Deferral Account of each Member from time to time (and each subaccount, if any, thereof) shall be determined by the Plan Administrator by taking into account interest, gains, and losses realized or incurred by such Compensation Deferral Account (or subaccount thereof) to the date of determination and payment thereof based upon the investment of such balance in such investments as such Member shall designate, from time to time, in such manner as the Plan Administrator shall direct, from among investment alternatives provided by the Plan Administrator.

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Article IV. Source and Method of Payment

All payments of benefits under the Plan shall be paid from, and shall only be a general claim upon, the general assets of the Bank, notwithstanding that the Bank, in its discretion, may establish a bookkeeping reserve or a grantor trust (as such term is used in IRC Sections 611 through 677) to reflect or to aid it in meeting its obligations under the Plan with respect to any Member or the beneficiary of a Member. No Member shall have any right, title, or interest whatever in or to any investments which the Bank may make or any specific assets which the Bank may reserve to aid it in meeting its obligations under the Plan.

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Article V. Designation of Beneficiaries

5.01 Each Member of the Plan may file with the Plan Administrator a written designation of one or more persons as the beneficiary or beneficiaries of such Member who shall be entitled to receive the amount, if any, payable under the Plan to such Member following his death. A Member may, from time to time, without the consent of any prior beneficiary, revoke or change the beneficiary designation made by such Member by filing a new designation of beneficiary with the Plan Administrator. The last such written designation received by the Plan Administrator shall be controlling; provided, however, that no designation, or change or revocation thereof, shall be effective unless received by the Plan Administrator prior to the Member’s death, and in no event shall it be effective as of a date prior to such receipt.

5.02 If no such beneficiary designation is in effect at the time of the Member’s death, or if no designated beneficiary survives the Member, or if, in the opinion of the Plan Administrator, such designation conflicts with applicable law, the Member’s estate shall be deemed to have been designated as his beneficiary and shall be paid the amount, if any, payable under the Plan upon the Member’s death. If the Plan Administrator is in doubt as to the right of any person to receive such amount, the Committee may retain such amount, without liability for any interest thereon, until the rights thereto are determined, or the Plan Administrator may pay such amount into any court of appropriate jurisdiction and such payment shall be a complete discharge of the liability of the Plan and the Bank therefor.

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Article VI. Administration of Plan

6.01 The Board of Directors has delegated to the Plan Administrator, subject to those powers, if any, which the Board has reserved to itself, general authority over and responsibility for the administration and interpretation of the Plan. The Plan Administrator shall have full power and authority to interpret and construe the Plan, to make all determinations considered necessary or advisable for the administration of the Plan and any trust referred to in Article V of the Plan and the calculation of the amount of Deferred Compensation and interest payable under the Plan, and to review claims for benefits under the Plan. The interpretations and constructions of the Plan by the Plan Administrator and his decisions or actions thereunder shall be binding and conclusive on all persons for all purposes, except to the extent of the powers, if any, which the Board has reserved to itself.

6.02 If the Plan Administrator deems it advisable, it shall arrange for the engagement of legal counsel and certified public accountants (who may be counsel to or accountants for the Bank) and other consultants, and make use of agents and clerical or other personnel, for purposes of the Plan. The Plan Administrator may rely upon the written opinions of such counsel, accountants, and consultants, and upon any information supplied by the Retirement Plan for purposes of Article III of the Plan, and delegate to any agent or to any subcommittee or Plan Administrator member its authority to perform any act hereunder, including, without limitation, those matters involving the exercise of discretion; provided, however, that such delegation shall be subject to revocation at any time at the discretion of the Plan Administrator. The Plan Administrator shall report to the Board, or to a committee designated by the Board, at such intervals as shall be specified by the Board or such designated committee, with regard to the matters for which he is responsible under the Plan.

8

6.03 All claims for payments under the Plan shall be submitted in writing to the Plan Administrator. Written notice of the decision on each such claim shall be furnished with reasonable promptness to the Member or the Member’s beneficiary (the “claimant”). The claimant may request a review by the Plan Administrator of any decision denying the claim in whole or in part. Such request shall be made in writing and filed with the Plan Administrator within thirty (30) days following such denial. A request for review shall contain all additional information which the claimant wishes the Plan Administrator to consider. The Plan Administrator may hold any hearing or conduct any independent investigation which he deems desirable to render its decision, and the decision on review shall be made as soon as practicable after the Plan Administrator’s receipt of the request for review. Written notice of the decision shall be furnished to the claimant. For all purposes under the Plan, such decisions on claims (where no review is requested) and decisions on review (where review is requested) shall be final, binding, and conclusive on all interested persons as to all matters relating to the Plan.

6.04 All expenses incurred by the Plan Administrator in its administration of the Plan shall be paid by the Bank.

9

Article VII. Amendment and Termination

The Board of Directors may amend, suspend, or terminate the Plan, in whole or in part, without the consent of the Plan Administrator or any Member, beneficiary, or other person, except that no amendment, suspension, or termination shall retroactively impair or otherwise adversely affect the rights of any Member, beneficiary, or other person under the Plan which shall have accrued prior to the date of such action, as determined by the Plan Administrator in his sole discretion. The Plan Administrator may adopt any amendment or take any other action which the Plan Administrator may deem necessary or appropriate to facilitate the administration, management, and interpretation of the Plan or to conform the Plan thereto, provided any such amendment or action does not have a material effect on the then-currently estimated cost to the Bank of maintaining the Plan.

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Article VIII. General Provisions

8.01 The Plan shall be binding upon and inure to the benefit of the Bank, and its successors and assigns, and the Members, and their successors, assigns, designees, and estates. The Plan shall also be binding upon and inure to the benefit of any successor organization succeeding to substantially all of the assets and business of the Bank, but nothing in the Plan shall preclude the Bank from merging or consolidating into or with, or transferring all or substantially all of its assets to, another organization which assumes the Plan and all obligations of the Bank hereunder. The Bank agrees that it will make appropriate provision for the preservation of Members’ rights under the Plan in any agreement or plan which it may enter into effect any merger, reorganization or transfer of assets and assumption of Plan obligations of the Bank, that the term “Bank” shall refer to such other organization, and that the Plan shall continue in full force and effect until terminated pursuant to Article VII.

8.02 Neither the Plan nor any action taken thereunder shall be construed as giving to any Member the right to be retained in the employ of the Bank or as affecting the right of the Bank to dismiss any Member from its employ.

8.03 The Bank shall withhold or cause to be withheld from all amounts payable under the Plan any and all federal, state, local, and other taxes required by applicable law to be withheld with respect to such payments.

8.04 No right or interest of a Member under the Plan may be assigned, sold, encumbered, transferred, or otherwise disposed of, and any attempted disposition of such right or interest shall be null and void.

8.05 If the Plan Administrator shall find that any person to whom any amount is or was payable under the Plan is unable to care for his affairs because of illness or accident, or is a minor, or has died, then any payment, or any part thereof, due to such person or his estate (unless a prior claim therefor has been made by a duly appointed legal representative), may, if the Plan Administrator is so inclined, be paid to such person’s spouse, child, or other relative, an institution maintaining or having custody of such person, or any other person deemed by the Plan Administrator to be a proper recipient on behalf of such person otherwise entitled to payment. Any such payment shall be in complete discharge of the liability of the Plan and the Bank therefor.

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8.06 To the extent that any person acquires a right to receive payments from the Bank under the Plan, such right shall be no greater than the right of an unsecured general creditor of the Bank.

8.07 All elections, designations, requests, notices, instructions, and other communications from a Member, beneficiary, or other person to the Plan Administrator required or permitted under the Plan shall be in such form as is prescribed from time to time by the Plan Administrator and shall be mailed by first-class mail (except in the case of elections made pursuant to Section 3.01) or delivered to such location as shall be specified by the Plan Administrator and shall be deemed to have been given and delivered only upon actual receipt thereof at such location.

8.08 The Plan Administrator shall not be personally liable by reason of any instrument executed by him or on his behalf, or action taken by him, in his capacity as Plan Administrator, nor for any mistake of judgment made in good faith. The Bank shall indemnify and hold harmless each Plan Administrator and each employee, officer, or director of the Bank to whom any duty, power, function, or action in respect of the Plan may be delegated or assigned, or from whom any information is requested for Plan purposes, against any cost or expense (including fees of legal counsel) and liability (including any sum paid in settlement of a claim or legal action with the approval of the Bank) arising out of anything done or omitted to be done in connection with the Plan, unless arising out of such person’s fraud or bad faith.

8.09 As used in the Plan, the masculine gender shall be deemed to refer to the feminine, and the singular person shall be deemed to refer to the plural, wherever appropriate.

8.10 The captions preceding the sections of the Plan have been inserted solely as a matter of convenience and shall not in any manner define or limit the scope or intent of any provisions of the Plan.

8.11 The Plan shall be construed according to the laws of the State of New York in effect from time to time.

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EX-10.12

Exhibit 10.12

Compensatory Arrangements for Named Executive Officers

The Bank is an “at will” employer and does not provide written employment agreements to any of its employees. However, employees, including Named Executive Officers (or “NEOs”), receive (a) cash compensation (i.e., base salary, and, for exempt employees, “variable” or “at risk” short-term incentive compensation); (b) retirement-related benefits (i.e., Qualified Defined Benefit Plan; Qualified Defined Contribution Plan; and Nonqualified Defined Benefit Portion of the Benefit Equalization Plan; and (c) health and welfare programs and other benefits. In addition, in the category of retirement-related benefits, the Bank offered the Nonqualified Defined Contribution Portion of the Benefits Equalization Plan, a Nonqualified Deferred Compensation Plan and a Nonqualified Profit Sharing Plan through and until November 10, 2009. Other benefits, which are available to all regular employees, include medical, dental, vision care, life, business travel accident, and short and long term disability insurance, flexible spending accounts, an employee assistance program, educational development assistance, voluntary life insurance, long term care insurance, fitness club reimbursement and severance pay. An additional benefit offered to all officers, age 40 or greater, or who are at Vice President rank or above, is a physical examination every 18 months.

The annual base salaries for the Named Executive Officers are as follows (whole dollars):

	2009 (1)		2010 (2)
Alfred A. DelliBovi	$	649,494	$	678,721
Patrick A. Morgan		319,154		330,324
Peter S. Leung		423,294		438,109
Paul B. Héroux		300,980		311,514
Kevin M. Neylan		310,415		321,280

More information about compensation arrangements can be found in Item 11 of the Annual Report on Form 10-K.

¹ Figures represent salaries approved by the Bank’s Board of Directors for the year 2009.
² Figures represent salaries approved by the Bank’s Board of Directors for the year 2010.

EX-12.01

Exhibit 12.01 Computation of Ratio of Earnings to Fixed Charges

Earnings to Fixed Charges

	Years ended December 31,
(Dollars in thousands)	2009		2008		2007		2006		2005
Earnings:
Income before assessments	$	777,695	$	353,608	$	441,085	$	388,525	$	312,467
Fixed Charges		1,158,079		3,365,381		4,277,118		3,935,129		2,727,073
Total Earnings	$	1,935,774	$	3,718,989	$	4,718,203	$	4,323,654	$	3,039,540
Fixed Charges:
Interest Expense	$	1,157,079	$	3,364,381	$	4,276,118	$	3,934,129	$	2,726,073
Estimated interest component of other expenses		1,000		1,000		1,000		1,000		1,000
Total Fixed Charges	$	1,158,079	$	3,365,381	$	4,277,118	$	3,935,129	$	2,727,073
Ratio of Earnings to Fixed Charges		1.67		1.11		1.10		1.10		1.11

EX-31.01

Exhibit 31.01

Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
for the President and Chief Executive Officer

I, Alfred A. DelliBovi, certify that:

1. I have reviewed this Annual Report on Form 10-K of Federal Home Loan Bank of New York

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 25, 2010

/s/ Alfred A. DelliBovi Alfred A. DelliBovi

President and Chief Executive Officer
(Principal Executive Officer)

Federal Home Loan Bank of New York

EX-31.02

Exhibit 31.02

Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
for the Senior Vice President and Chief Financial Officer

I, Patrick A. Morgan, certify that:

1. I have reviewed this Annual Report on Form 10-K of Federal Home Loan Bank of New York

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 25, 2010

/s/ Patrick A. Morgan Patrick A. Morgan

Senior Vice President and Chief Financial Officer
(Principal Financial Officer)

Federal Home Loan Bank of New York

EX-32.01

Exhibit 32.01

Certification by the President and Chief Executive Officer
Pursuant to 18 U.S.C. Section 1350,
as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the annual report of FEDERAL HOME LOAN BANK OF NEW YORK (the “Company”) on Form 10-K for the year ended December 31, 2009, as filed with the Securities and Exchange Commission (the “Report”), I, Alfred A. DelliBovi, President and Chief Executive Officer of the Company, hereby certify as of the date hereof, solely for purposes of Title 18, Chapter 63, Section 1350 of the United States Code, that to the best of my knowledge:

(1) the Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the dates and for the periods indicated.

Date: March 25, 2010

/s/ Alfred A. DelliBovi  

Alfred A. DelliBovi 

President and Chief Executive Officer
(Principal Executive Officer) 

EX-32.02

Exhibit 32.02

Certification by the Senior Vice President and Chief Financial Officer
Pursuant to 18 U.S.C. Section 1350,
as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the annual report of FEDERAL HOME LOAN BANK OF NEW YORK (the “Company”) on Form 10-K for the year ended December 31, 2009, as filed with the Securities and Exchange Commission (the “Report”), I, Patrick A. Morgan, Senior Vice President and Chief Financial Officer of the Company, hereby certify as of the date hereof, solely for purposes of Title 18, Chapter 63, Section 1350 of the United States Code, that to the best of my knowledge:

(1) the Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, and

(2) the information contained in the Report fairly presents, in all materials respects, the financial condition and results of operations of the Company at the dates and for the periods indicated.

Date: March 25, 2010

/s/ Patrick A. Morgan  

Patrick A. Morgan 

Senior Vice President and Chief Financial Officer
(Principal Financial Officer) 

EX-99.01

Exhibit 99.01

Audit Committee Report

In accordance with its written charter adopted by the Board of Directors, the Audit Committee assists the Board in fulfilling its responsibility for oversight of the quality and integrity of the accounting, auditing, and financial reporting practices of the Bank.

The Audit Committee of the Federal Home Loan Bank of New York (“FHLBNY”) for 2009 is currently composed of eight Directors, one of whom was appointed to the Board by the Federal Housing Finance Board and seven of whom were elected to the Board by the members of the FHLBNY. The Audit Committee had eight meetings during 2009 and during these meetings the Audit Committee met separately with the Chief Audit Officer and the independent registered public accounting firm.

Management has the primary responsibility for the preparation and integrity of the FHLBNY’s financial statements, accounting and financial reporting principles and internal controls and procedures designed to assure compliance with accounting standards and applicable laws and regulations. FHLBNY’s independent registered public accounting firm, PricewaterhouseCoopers LLP, is responsible for performing an independent audit of the financial statements and expressing an opinion on the conformity of those financial statements with generally accepted accounting principles.

The Audit Committee oversees the FHLBNY’s financial reporting process; reviews the programs and policies of the FHLBNY designed to ensure compliance with applicable laws, regulations and policies and monitors the results of these compliance efforts; and advises and assists the Board of Directors in fulfilling its oversight responsibilities relating to risk management, internal controls, the accounting policies and financial reporting and disclosure practices of the FHLBNY, and the independent registered public accounting firm of the FHLBNY.

The Audit Committee has reviewed and discussed the 2009 audited financial statements with management and the independent registered public accounting firm. The Audit Committee has reviewed and discussed with the independent registered public accounting firm all communications required by generally accepted auditing standards, including those described in Statement on Auditing Standards (“SAS”) No. 61, as amended, “Communication with Audit Committees” and SAS No. 90, “Audit Committee Communications” and with and without management present, discussed and reviewed the results of the independent registered public accounting firm’s audit of the financial statements. The Audit Committee has also received the written disclosures and the letter from the independent registered public accounting firm required by Independence Standards Board Standard No. 1, Independence Discussions with Audit Committees, and has discussed the independent public registered accounting firm’s independence with them.

Based on the review and discussions referred to above, the Audit Committee recommended to the Board of Directors that the FHLBNY’s audited financial statements be included in the FHLBNY’s Annual Report on Form 10-K for the fiscal year ended December 31, 2009, for filing with the SEC.

FHLBNY AUDIT COMMITTEE MEMBERS

2009	2010
Anne E. Estabrook, Chairman	Anne E. Estabrook, Chairman
Katherine J. Liseno, Vice Chairman	Katherine J. Liseno, Vice Chairman
Joseph R. Ficalora	Joseph R. Ficalora
Jay M. Ford	Jay M. Ford
José R. González	José R. González
Michael M. Horn	Michael M. Horn
Joseph J. Melone	Joseph J. Melone
John M. Scarchilli	John M. Scarchilli

EX-99.02

Exhibit 99.02

FEDERAL HOME LOAN BANK OF NEW YORK
AUDIT COMMITTEE CHARTER

Approved by the Board of Directors on June 18, 2009
Effective as of June 18, 2009

I. INTRODUCTION

The charter of the Federal Home Loan Bank of New York’s (“Bank”) Audit Committee (“Committee”) has been adopted and approved by the Bank’s Board of Directors (“Board”) and is intended to comply with applicable laws, rules and regulations of the Federal Housing Finance Agency (“FHFA”) and the Securities and Exchange Commission (“SEC”). The Committee has committed to adopt to the extent possible those best practices that pertain to audit committees of public companies and which are relevant to the Bank, taking into account the cooperative structure of the Bank and the congressionally-mandated and regulatory requirements applicable to the Bank.

II. PURPOSE OF THE AUDIT COMMITTEE

The purpose of the Committee shall be to assist the Board in fulfilling its oversight responsibility relating to:

• The integrity of the Bank’s financial statements and financial reporting process and systems of internal accounting and financial controls;

• The Bank’s compliance with applicable laws and regulations;

• The establishment, maintenance, and performance of the Internal Audit function;

• The annual independent audit of the Bank’s financial statements; and

• The independence, qualifications, and performance of the Bank’s Independent Registered Public Accounting Firm.

It is not the duty of the Committee to plan or conduct audits of the financial statements as these are the responsibilities of the Independent Registered Public Accounting Firm. It is also not the duty of the Committee to determine that the Bank’s financial statements and disclosures are complete and accurate and in accordance with generally accepted accounting principles (“GAAP”) as these are the responsibilities of management.

III. AUTHORITY

The responsibility of the Committee is limited to matters upon which the Board of Directors has the authority to make a final determination. The Committee shall have the authority to establish other rules and operating procedures in order to fulfill its obligations under this charter.

The Committee shall utilize resources to conduct or authorize investigations into any matters within their duties and responsibilities. This includes retaining, and obtaining advice from, independent counsel, accountants, and other advisers, as it determines necessary to carry out its duties.

The Bank shall provide for appropriate funding, as determined by the Committee, for payment of compensation to the Independent Registered Public Accounting Firm and any counsel, accountants or other advisers retained by the Committee.

At its discretion, the Committee shall have direct access to the Independent Registered Public Accounting Firm, Chief Financial Officer, Chief Audit Officer (“CAO”) and upon request, any other officer or employee of the Bank. The Committee shall maintain an open and unrestricted communication channel with all Bank personnel, including internal and external auditors.

IV. DUTIES AND RESPONSIBILITIES OF THE AUDIT COMMITTEE

The Committee’s responsibilities will be discharged through reviews of audit reports, activities and discussions with internal and external auditors and Bank management.

To fulfill its duties and responsibilities the Committee shall:

A. Oversight of Financial Reporting

• Timely obtain and review reports delivered from the Independent Registered Public Accounting Firm;

• Review the Bank’s financial statements and the Independent Registered Public Accounting Firm’s opinion rendered with respect to the financial statements including the nature and extent of any significant changes in accounting principles or the application therein;

• Review and discuss the annual audited financial statements with management, the internal auditors and the Independent Registered Public Accounting Firm, including the Bank’s disclosures under “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” prior to announcement, publication or filing, and obtain explanations from management for any significant variances from the prior periods. Recommend to the Board that the audited financial statements be included in the Bank’s SEC Form 10-K;

• Discuss with the Independent Registered Public Accounting Firm the requirements of Statement of Auditing Standards (“SAS”) 114, which supersedes SAS 61, regarding communications with audit committees and SAS 89 and SAS 90 pertaining to uncorrected misstatements and the quality of the Bank’s accounting principles and underlying estimates in the financial statements;

• Review and discuss, with the Independent Registered Public Accounting Firm and management representatives, Bank quarterly financial information provided for the Federal Home Loan Bank System’s combined financial reports, and the Bank’s SEC Form 10-Q. The review will include a discussion of any significant changes to the Bank’s accounting principles and standards, significant changes to laws and regulations, and any concerns the Independent Registered Public Accounting Firm may have with management’s accounting methods, estimates and/or financial statement disclosure; and

• Meet periodically with the Bank’s management, Internal Audit staff, and the Independent Registered Public Accounting Firm in respect of any audit report by the Independent Registered Public Accounting Firm to discuss significant accounting and reporting principles, practices and procedures applied by the Bank in preparing its financial statements. This includes alternative treatments of financial information within GAAP and developments and issues with respect to reserves.

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B. With Regard to Internal Audit

• Select, evaluate the performance, determine the compensation and, where appropriate, approve the removal of the CAO. Approve the Incentive Compensation Plan and award for the Internal Audit employees;

• Provide that the CAO report directly to the Committee on substantive matters and be ultimately accountable to the Committee and the Bank’s Board;

• Provide that the CAO have unrestricted access to the Committee without the need for any prior management knowledge and approval;

• Review significant issues arising from Internal Audit that are reported to the Committee by the CAO;

• Provide an independent, direct channel of communication between the Bank’s Board and the CAO;

• Discuss with management, Internal Audit staff, and the Independent Registered Public Accounting Firm the Internal Audit function activities, the adequacy, and scope of the Internal Audit plan, budget and staffing and any recommended changes in the planned scope of the Internal Audit function;

• Review and approve the Internal Audit annual budget;

• Review and approve the Internal Audit charter on an annual basis; and

• Review and approve the Internal Audit annual plan.

C. With Regard to Independent Registered Public Accounting Firm

• Review with the Independent Registered Public Accounting Firm and approve, prior to the beginning of the audit, the scope of the audit plan and, all engagement fees, and terms;

• Make recommendations to the Bank’s Board of Directors regarding the appointment, compensation, renewal or termination of the Independent Registered Public Accounting Firm. The Independent Registered Public Accounting Firm shall report directly to the Committee;

• Pre-approve all audit and non-audit services performed by the Bank’s Independent Registered Public Accounting Firm and not engage the Independent Registered Public Accounting Firm to perform the specific non-audit services proscribed by law or regulation. The Committee may delegate pre-approval authority to a member of the Committee; however, any decisions made by the designated member must be presented to the full Committee at the next scheduled Committee meeting;

• Require the Independent Registered Public Accounting Firm to rotate the lead audit partner, and the partner responsible for reviewing the audit at least every five years;

• Resolve any disagreements between management and the Independent Registered Public Accounting Firm regarding financial reporting;

• Review the performance of the Independent Registered Public Accounting Firm;

• Provide that the Independent Registered Public Accounting Firm have unrestricted access to the Committee without the need for any prior management knowledge and approval;

• Provide an independent, direct channel of communication between the Board and the Independent Registered Public Accounting Firm;

• Establish policies for the hiring of employees or former employees of the Independent Registered Public Accounting Firm;

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• Obtain annually a formal written statement from the Independent Registered Public Accounting Firm regarding their independence for consistency with Independence Standards Board Standard 1; and

• Obtain and review annually a report by the Independent Registered Public Accounting Firm, describing i) the auditors’ internal quality control procedures, ii) any material issues raised by the auditors’ most recent internal quality control review or by its most recent peer review or raised within the preceding five years by any investigation or inquiry by governmental or professional authorities of an independent audit carried out by the firm and any steps taken to deal with such issues, and (iii) in order to assess the auditor’s independence, all relationships between the Independent Registered Public Accounting Firm and the Bank.

D. With Regard to Senior Management

• Direct senior management to maintain the reliability and integrity of the accounting policies and financial reporting and disclosure practices of the Bank; and

• Ensure that senior management has established and is maintaining an adequate internal control system in the Bank.

E. With Regard to Audit Committee Processes

a) Committee Charter

• Adopt a formal written Committee Charter. Annually assess the adequacy of the Committee Charter, and, where appropriate, recommend to the Board amendments to the Committee Charter.

b) Financial Reporting and Governance

• Ensure policies are in place that are reasonably designed to achieve disclosure and transparency regarding the Bank’s true financial performance and governance practices.

c) Internal Control

• Review on an annual basis the adequacy of internal controls, resolution of identified material weaknesses and reportable conditions including the prevention or detection of management override or compromise of the internal control system and ensure that appropriate corrective actions are instituted;

• Review the policies and procedures established by senior management designed to ensure compliance with applicable laws and regulations and monitor the results of these compliance efforts; and

• Establish procedures for the receipt, retention, and treatment of complaints received by the Bank regarding accounting, internal accounting controls, or auditing matters, and the confidential, anonymous submission by employees of concerns regarding questionable accounting or auditing matters.

d) Committee Report

• Prepare a written Committee report as required by the applicable rules of the FHFA and SEC to be included in the Bank’s SEC Form 10-K.

e) Risk Management

• Review and discuss with management the Bank’s major financial risk exposures and the steps taken by management to monitor and control such exposures.

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f) Performance Evaluation

• Conduct a self-evaluation of the Committee’s performance of its responsibilities and provide a report to the Board.

g) Code of Business Conduct and Ethics

• Review, on an annual basis, the Bank’s Code of Business Conduct and Ethics (“Code”) and provide input regarding the Code to the Compensation and Human Resources Committee.

V. AUDIT COMMITTEE STRUCTURE

The Committee shall consist of at least five directors of the Board. The Committee shall include a balance of representatives from Community Financial Institutions and other members and will also include a balance of independent and member directors. In order to provide continuity and experience, Committee members shall serve staggered terms.

VI. MEMBERSHIP REQUIREMENTS

All members of the Committee shall be independent¹ as determined in accordance with applicable rules. Each member shall be financially literate as this qualification is interpreted by the Board in its business judgment, or shall become financially literate within a reasonable period of time after appointment to the Committee. At least one member must have extensive accounting or related financial management experience. The Committee will comply with the Sarbanes Oxley Act of 2002 under Section 407 regarding rules for “Disclosure of Audit Committee Financial Expert” for filing periodic reports with the SEC.

Subject to the foregoing, the members of the Committee shall be appointed and replaced by the Board. One Committee member shall be designated as the Chairman and one Committee member shall be designated as the Vice Chairman.

The only compensation a Committee member may receive from the Bank shall be compensation determined by the Board in compliance with applicable rules.

VII. AUDIT COMMITTEE MEETINGS

The Committee shall keep written minutes and other relevant records of each Committee meeting. The minutes shall be approved by the Committee and then reviewed and approved by the Board. The CAO will compile this documentation and shall act as Secretary to the Committee. Following each of its meetings, the Chairman of the Committee shall report to the Board regarding the activities of the Committee.

The Committee shall meet at least four times annually.

The Committee shall meet separately, from time to time, by itself, with management, the Independent Registered Public Accounting Firm, and/or the CAO.

¹ To be considered independent, a director must not have a disqualifying relationship with the Bank or its management that would interfere with the exercise of that director’s independent judgment. This includes being employed by the Bank in the current year or any of the past five years, receiving any compensation (other than for service as a Board director), or serving as a consultant, advisor, promoter, underwriter, or legal counsel of, or to, the Bank in the past five years. An immediate family member who is, or has been in any of the past five years, employed by the Bank as an executive officer also disqualifies a Committee member from being independent.

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