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, 2007

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)

Federally chartered corporation (State or other jurisdiction of incorporation or organization)	13-6400946 (I.R.S. Employer Identification No.)
101 Park Avenue New York, New York (Address of principal executive offices)	10178 (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 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, 2007, the aggregate par value of the common stock held by members of the registrant was approximately $3,662,445,900. At February 29, 2008, 43,098,958 shares of common stock were outstanding.

Federal Home Loan Bank of New York
2007 Annual Report on Form 10-K
Table of Contents

PART I
ITEM 1. BUSINESS	2
ITEM 1A. RISK FACTORS	28
ITEM 1B. UNRESOLVED STAFF COMMENTS	32
ITEM 2. PROPERTIES	32
ITEM 3. LEGAL PROCEEDINGS	32
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS	32
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES	35
ITEM 6. SELECTED FINANCIAL DATA	36
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	38
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	148
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	154
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	219
ITEM 9A. CONTROLS AND PROCEDURES	219
ITEM 9B. OTHER INFORMATION	220
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE	220
ITEM 11. EXECUTIVE COMPENSATION	229
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS	258
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE	259
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES	262
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES	263
SIGNATURES	264
Exhibit 4.01
Exhibit 10.01
Exhibit 10.04
Exhibit 10.05
Exhibit 10.06
Exhibit 10.07
Exhibit 10.08
Exhibit 10.09
Exhibit 12.01
Exhibit 31.01
Exhibit 31.02
Exhibit 32.01
Exhibit 32.02
Exhibit 99.01
Exhibit 99.02

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 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, primarily through collateralized loans known as “advances”. 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.

Members of the cooperative must purchase FHLBNY stock according to regulatory requirements. The business of the cooperative is to provide liquidity for our members in the form of advances, and to provide a return on their investment in FHLBNY stock in the form of a dividend. Since the members are both stockholders and customers, 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. This means that the FHLBNY is managed to deliver balanced value to members, rather than to maximize either advance volume through low pricing or profitability.

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, as can all community financial institutions. For the year ending December 31, 2007, community financial institutions are defined as FDIC-insured depository institutions having average total assets of $599 million. Annually, 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. As a result of the membership requirements, 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 10, “Related party transactions” in notes to the audited financial statements. See also Item 13, “Certain Relationships and Related Transactions, and Director Independence in this Form 10-K”.

The FHLBNY’s primary business is making collateralized loans, known as advances, to members, and is the primary focus of the Bank’s operations 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.

The FHLBNY combines private capital and public sponsorship 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.

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The FHLBNY is supervised and regulated by the Finance Board, which is an independent agency in the executive branch of the U.S. government. The Finance Board ensures that the FHLBNY carries out its housing and community development mission, remains adequately capitalized and able to raise funds in the capital markets, and operates in a safe and sound manner. However, while the Finance Board 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 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 established by the Finance Board. 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 are accepted from member financial institutions and federal instrumentalities.

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 291 and 293 members at December 31, 2007 and 2006.

The most recent market analysis performed in 2007 indicated that in the Bank’s district, there are 41 banks, thrifts and credit unions eligible for membership but have not joined. Of these, the FHLBNY considers only a limited number as attractive candidates for membership. An attractive 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 that 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, 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 to attractive candidates through personal calling and promotional materials. The FHLBNY competes for business by explaining the competitively priced products and financial flexibility afforded by membership. Institutions join the FHLBNY primarily for access to a reliable source of liquidity. 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.

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

	Commercial		Thrift		Credit		Insurance
	Banks		Institutions		Unions		Companies		Total
December 31, 2007		139		116		35		1		291
December 31, 2006		141		120		31		1		293

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 22. “Segment Information” in notes to audited financial statements.

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 funds are no longer needed, 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 7.5 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 at a fee. The total of income derived from such services was about $3.0 million for the years ended December 31, 2007 and 2006, and about $5.0 million in 2005. 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. 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 $78.9 million and $76.1 million for the years ended December 31, 2007 and 2006. The revenues represented only 1.7% of total interest income for the years ended December 31, 2007 and 2006.

The FHLBNY’s short-term investments provide immediate liquidity to satisfy members’ needs for funds. Investments in held-to-maturity securities, specifically mortgage-backed securities, 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 such investments aggregated $1.2 billion, $1.0 billion and $876.8 million for the years ended December 31, 2007, 2006 and 2005 and represented 25.2%, 23.3% and 28.1% 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.

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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 products (including option-embedded and amortizing advances).

Advances to members, including former members, constituted 74.8% and 72.2% of the FHLBNY’s Total assets of $109.7 billion and $81.7 billion at December 31, 2007 and 2006. In terms of revenues, interest income derived from advances was $3.5, $3.3 and $2.2 billion, representing 73.2%, 75.0% and 69.7% of total interest income for the years ended December 31, 2007, 2006 and 2005. 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, managing 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 forgoing 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 were as follows (outstanding par amounts 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.

• Repurchase Agreement (“REPO”) Advances: REPO Advances are secured by eligible securities and can be structured to have fixed or variable interest rate, “bullet” or quarterly interest payments, or a put option, by which the FHLBNY purchases an option to terminate the advance and require repayment after a predetermined lockout period. Members may use U.S Treasuries, Agency-issued debentures, and mortgage-backed securities as collateral.

• 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. Principal is due at maturity and interest payments are due at every reset date, including the final payment.

• 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.

• Convertible Advances: Convertible Advances, also referred to as 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 to an advance product of their choice at the current market rates as established by the Bank.

Letters of Credit

The FHLBNY may issue letters of credit (“Standby 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.

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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 guarantee to the FHLBNY. This guarantee provides a double-A equivalent level of creditworthiness on the mortgages. The amount of this guarantee 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.

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 Board 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 Board’s initial resolutions were specifically extended by the Acquired Member Assets Regulations (12 CFR Part 955).

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.

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.

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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 years to 30 years or participations in such mortgage loans. MPF Loans that are Government loans, collectively referred to as “MPF Government Loans.”

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.

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 Board 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: Atlanta, Boston, Chicago, Dallas, Des Moines, New York, Pittsburgh, San Francisco 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.

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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.

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 conforming 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. Conforming loan size, which is established annually as required by Finance Board regulations, may not exceed the loan limits permitted to be set by the Office of Federal Housing Enterprise Oversight (“OFHEO”) each year. 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).

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• 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, from an MI company rated at least “AA” or “Aa” and acceptable to S&P.

• 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.

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The sum of MPF Loans delivered by the PFI under a specific Delivery Commitment cannot exceed the amount specified in the Delivery Commitment without the assessment of a price adjustment 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), which protect the MPF Bank against changes in market prices.

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.

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 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 any quality assurance reviews of MPF Government Loans. However, the FHLBNY may allow PFIs to repurchase delinquent MPF Government Loans so that they may comply with loss mitigation requirements of the applicable government agency in order to preserve the insurance or guaranty coverage. The repurchase price is equal to the current scheduled principal balance and accrued interest on the MPF Government Loan. In addition, 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 when PFIs were required to make repurchases under the terms of the MPF Guides.

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MPF Products

A variety of MPF Loan products have been developed to meet the differing needs of PFIs. There are currently five MPF products that PFIs may choose from: Original MPF, MPF 100, MPF 125, MPF Plus and MPF Government. 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 program.

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 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, 2007.
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 participant 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% to be retained by the Bank to 100% 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 or the Owner Bank exercised the right to require the MPF Provider to acquire 100% participation for delivery commitments for a particular day. 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% 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%. 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% of the first $50 million and 50% of the second $50 million of MPF Loans delivered under a Master Commitment, the MPF Bank would share in 37.5% 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% interest and the others in which it may own a 50% interest.

Effective May 2004, the FHLBNY retained 100% 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.

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 to 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 any 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 expected 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 expected 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 our 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.

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.

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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 0.07% (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 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 guaranty 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 guaranty 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.

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 is exposed to credit losses.

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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 Board 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, as closing cost and/or down payment assistance. Households are also required to attend counseling seminars that address personal budgeting and home ownership skills training.

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.

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These 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 income allocation 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, are accounted for on their contractual terms consistent with standard accounting practices and no separate benefits are recorded.

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. 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 maintaining a long-term investment portfolio. This portfolio may include securities issued by the U.S. government and U.S. government agencies as well as mortgage-backed and residential asset-backed securities issued by government-sponsored mortgage enterprises or those carrying the highest credit ratings from Moody’s Investors Service (“Moody’s”) or Standard & Poor’s (“S&P”). Investments in housing-related obligations of state and local governments and their housing finance agencies 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.

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.

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% of the Bank’s previous month-end 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.

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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. Moody’s has rated the consolidated obligations Aaa/P-1, and Standard & Poor’s has rated them AAA/A-1+ the highest ratings awarded.

At December 31, 2007 and 2006, the par amounts of consolidated obligations outstanding , bonds and discount notes, for all 12 FHLBanks aggregated $1,189.7 billion and $951.9 billion. In comparison, the par amounts of the FHLBNY’s consolidated obligations outstanding at December 31, 2007 and 2006 aggregated $101.0 billion and $74.5 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 Board, 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 Board, at its discretion, may require any FHLBank to make principal or interest payments due on any consolidated obligations.

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 Board determines that the non-complying FHLBank is unable to make the payment, then the Finance Board 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 Board.

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Finance Board 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 Board’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.

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.

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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 ranging from four to 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, an 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 the 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 Board 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 predictable dividend stream. 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 supplement dividends when current earnings are low or losses occur.

As of December 31, 2007 and 2006, management determined that the amount of retained earnings necessary to achieve the objectives based on the risk profile of the FHLBNY’s balance sheet was $159.2 and $186.3 million. Actual unrestricted retained earnings as of December 31, 2007 and 2006 were $418.3 million and $368.7 million. Management expects future dividend payout ratios to range from 90% to 100% of net income.

The Retained Earnings and Dividend Policy establishes a dividend payout after determining a retained earnings target amount, based on an assessment methodology approved by the Board of Directors, that reasonably identifies and quantifies all material risks faced by the FHLBNY. The final dividend payout is subject to Board of Directors’ approval and the applicable Finance Board regulations.

The following table summarizes the impact of dividends on the FHLBNY’s retained earnings for the years ended December 31, 2007, 2006, and 2005 (in thousands):

	2007			2006			2005
Retained earnings, beginning of year	$	368,688		$	291,413		$	223,434
Net Income for the year		323,105			285,195			230,158
		691,793			576,608			453,592
Dividend paid in the year*		(273,498	)		(207,920	)		(162,179	)
Retained earnings, end of year	$	418,295		$	368,688		$	291,413

* Dividends are not accrued at quarter end; they are declared and paid in the month following the end of the quarter.

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Competition

Demand for advances is affected by, among other things, the availability to members of other sources of liquidity, including retail deposits, and the cost of those other sources. Because members generally grow their balance sheets 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 and commercial banks. Certain members may have access to alternative wholesale funding sources such as through lines of credit, wholesale CD programs, and sales of securities under agreements to repurchase. Large members may also have independent access to the national and global credit markets. The availability of alternative funding sources can vary as a result of market conditions, member creditworthiness, and availability of collateral 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.

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

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.

Competition among the twelve member banks of the Federal Home Loan Bank system (“FHLBanks”) is limited. A member bank holding company with multiple banking charters may operate in multiple Federal Home Loan Bank districts. If the member has a centralized treasury function, it is possible that there could be competition for advances. A limited number of financial institutions who are members of the FHLBNY are part of a bank holding companies with multiple charters, and could therefore be affiliated with other FHLBanks. The FHLBNY does not believe that the amount of advances borrowed, or the amount of capital stock held, is material in the context of its competitive environment. Certain large 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. However, the FHLBNY’s current practice is not to permit members to borrow unsecured funds from the FHLBNY. Therefore the FHLBNY does not compete with other FHLBanks in the unsecured Federal funds market.

An indirect but growing source of competition is the acquisition of a FHLBNY member bank by a member of another FHLBank. Under Finance Board regulations, the acquired member 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 $3.3 billion and $1.8 billion at December 31, 2007 and 2006. Such non-members also held capital stock, which was reported as mandatorily redeemable capital stock and classified as a liability in the FHLBNY’s Statements of condition, of $238.6 million and $109.9 million at December 31, 2007 and 2006.

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Oversight, Audits, and Examinations

The FHLBNY is supervised and regulated by the Federal Housing Finance Board “Finance Board”, which is an independent agency in the executive branch of the U.S. government. The Finance Board ensures that the FHLBNY carries out its housing and community development mission, remains adequately capitalized and able to raise funds in the capital markets, and operates in a safe and sound manner.

The Board of Directors of the Finance Board has five members. Four are appointed by the President of the United States, with the advice and consent of the Senate, to serve seven-year terms. The fifth member is the Secretary of the Department of Housing and Urban Development or the Secretary’s designee. The Finance Board is supported by assessments from the twelve FHLBanks with no tax dollars or other appropriations supporting the operations of the Finance Board or the FHLBanks. To evaluate the safety and soundness of the FHLBNY, the Finance Board conducts annual and periodic on-site examinations of the Bank as well as periodic off-site reviews. Additionally, the Finance Board requires each FHLBank to submit monthly financial information on their condition and results of operations.

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 Board’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 Board, 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 Board 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, 2007 the FHLBNY had 238 full-time and 8 part-time employees. At December 31, 2006, there were 225 full-time and 7 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 FHLBanks are required to make payments to REFCORP until the total amount of payments actually made is equivalent to a $300 million annual annuity whose final maturity date is April 15, 2030. The REFCORP assessment is 20 percent of annual GAAP net income after payment of AHP assessments; see section immediately following this discussion for an explanation of the impact of AHP assessment and interest payments due on mandatorily redeemable capital stock.

The maturity date of the REFCORP obligation may be extended beyond April 15, 2030 if such extension is necessary to ensure that the value of the aggregate amounts paid by the FHLBanks exactly equals a $300 million annual annuity. Any payment beyond April 15, 2030 will be paid to the Department of Treasury.

The REFCORP has been designated as the calculation agent for AHP and REFCORP assessments. Each FHLBank provides their net income before AHP and REFCORP to the REFCORP, who then performs the calculations for each quarter end. The Finance Board, in consultation with the Secretary of the Treasury, selects the appropriate discounting factors to be used in this annuity calculation. The Finance Board will shorten or lengthen the period during which the FHLBanks must make payments to REFCORP depending on actual payments relative to the referenced annuity.

The REFCORP assessment of the FHLBanks was a cash payment of $209.0 million for the fourth quarter of 2007 and a cash payment of $703.0 million for the year 2007. The payments are 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. As specified in the Finance Board regulation that implements section 607 of the GLB Act, the amount by which the REFCORP payment for any quarter exceeds the $75 million benchmark payment is used to simulate the purchase of zero-coupon Treasury bonds to “defease” all or a portion of the most-distant remaining quarterly benchmark payment. The $134.0 million by which the fourth-quarter REFCORP payment exceeded the $75.0 million quarterly benchmark will fully defease the remaining $64.0 million portion of the benchmark payment due on April 15, 2014, the benchmark payment due on January 15, 2014, and defease $24.0 million of the $75.0 million benchmark payment due on October 15, 2013. The defeased benchmark payments, or portions thereof, can be reinstated if future actual REFCORP payments fall short of the $75.0 million benchmark in any quarter.

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As a result of the REFCORP payments of $703.0 million made by the FHLBanks in 2007, the overall period during which the FHLBanks must continue to make quarterly payments was shortened to October 15, 2013, effective at December 31, 2007. This date assumes that the FHLBanks will pay exactly $300.0 million annually after December 31, 2007 until the annuity is fully satisfied. This compares to the outside date of July 15, 2015, effective at December 31, 2006, based on REFCORP payments made through 2006.

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. The FHLBNY would be entitled to a refund of amounts paid for the full year that were in excess of its calculated annual obligation. If the Bank had net income in subsequent quarters, it would be required to contribute additional amounts to meet its calculated annual obligation. If the Bank experienced a net loss for a full year, the Bank would have no obligation to the REFCORP for the year.

Affordable Housing Program Assessments. Section 10(j) of the FHLBank Act requires each FHLBank to establish an Affordable Housing Program (“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 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 net income. Regulatory net income is defined as GAAP net income before interest expense related to mandatorily redeemable capital stock under Statement of Financial Accounting Standard No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity” (“SFAS 150”) and the assessment for AHP, but after the assessment for REFCORP. The exclusion of interest expense related to mandatorily redeemable capital stock is a regulatory interpretation of the Finance Board. The Affordable Housing Program and REFCORP assessments are calculated simultaneously because of their interdependence on each other. The FHLBNY accrues this expense monthly based on its regulatory income.

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 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 2007, 2006, or 2005.

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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 their 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.

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 Board, 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 Board could have a negative effect on the FHLBanks’ ability to conduct business or its costs 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 an FHLBNY’s capital stock or take advantage of an FHLBNY’s products and services.

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Changes in the regulation of GSEs or the FHLBanks’ status as GSEs may adversely affect the FHLBNY’s business activities, future advance balances, and the cost of debt issuance. Many GSEs, such as Fannie Mae, Freddie Mac, and the FHLBank System, have grown significantly in recent years. As a result of this growth, these GSEs have actively issued debt securities to fund their operations. In addition, negative accounting and other announcements by Fannie Mae and Freddie Mac have created pressure on debt pricing, as investors have perceived their debt instruments as bearing increased risk. Restatement of financial statements and related announcements by the FHLBanks may contribute to this pressure on FHLBank debt pricing.

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.

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 combined 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 combined 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.

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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, and 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.

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.

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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. Any failure or interruption could adversely affect its member relations, risk management, and profitability, which 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 worsen, 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 Board 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 Board 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.

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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 FHLBNY 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 FHLBNY that would significantly impact the Bank’s financial condition, results of operations or cash flows.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Under the FHLBank Act, the only matter that is submitted to shareholders for a vote is the annual election of the FHLBNY’s elected directors. The majority of the FHLBNY’s directors are elected by and from the membership. The FHLBank Act requires that the FHLBNY’s regulator, the Federal Housing Finance Board (“Finance Board”) appoint the remainder.

The Director Election Process in 2007

Voting rights of shareholders with regard to the election of directors are set forth in Finance Board regulations located at 12 C.F.R. Section 915. Specifically, holders of stock that were members of the FHLBNY as of the record date, December 31 of the year immediately preceding an election are entitled to participate in the election process. Eligible shareholders may nominate representatives from FHLBNY members in their states to serve three-year terms on the FHLBNY’s Board of Directors. After the slate of nominees is finalized, each shareholder is then eligible to vote for the number of open director seats in the state in which its principal place of business is located. Each shareholder is entitled to cast one vote for each share of stock that the shareholder was required to hold as of the record date; however, the number of votes that each shareholder may cast for each directorship can not exceed the average number of shares of stock that were required to be held by all members located in that state on the record date. The nomination and election of directors is conducted by mail; no in-person meetings of the members are held.

Elected directorships are allocated by state and such allocation is performed by the Finance Board each year in accordance with provisions of the Federal Home Loan Bank Act located at 12 U.S.C. 1427. The 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 2007, the Bank had seventeen director positions eleven elected by the members of the Bank and six appointed by the Finance Board. Of the eleven elected director positions, six were allocated to New York, four to New Jersey and one to Puerto Rico and the U.S. Virgin Islands.

However, as a result of calculations performed by the Finance Board in May of 2007, the number of elected director seats allocated to New York was reduced by one seat down to five as of January 1, 2008. This reduction meant that the seat occupied by director John Scarchilli, one of the directors representing New York, was lost as of December 31, 2007. However, Mr. Scarchilli was, as described below, elected by the Bank’s members to fill one of the two seats allocated to New York that was up for election during the 2007 director elections. Thus, as of the date of this current report on Form 10-K, the Bank’s Board has sixteen director positions, ten elected by the members of the Bank and six appointed by the Finance Board.

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The table below shows the total number of elective directorships designated by the Finance Board for each state in the Bank’s district for 2008 and the number of director positions that were required to be filled in the Bank’s 2007 election of directors:

	Total Elective		Directorships
	Directorships		Up For Election
State	for 2008		in 2007
New Jersey		4		2
New York		5		2
Puerto Rico & U.S. Virgin Islands		1		0
District Total		10		4

Consistent with the foregoing, the only matter submitted to a vote of shareholders in 2007 was the election of certain directors, which occurred in the last quarter of 2007. The FHLBNY conducted this election to fill all open elective directorships for 2008 designated by the Finance Board. The election was conducted in accordance with Finance Board regulations. Information about the results of the election is set forth below.

2007 Director Election Results

On November 1, 2007, the stockholders of the FHLBNY re-elected Messrs. Joseph R. Ficalora, Ronald E. Hermance, Kevin J. Lynch and John M. Scarchilli as directors of the FHLBNY to each serve for a three-year term commencing January 1, 2008. The following information summarizes the results of the election:

New York

In New York, two directorships were open. John M. Scarchilli received 2,622,397 votes and Joseph R. Ficalora received 2,402,328 votes, respectively, and were elected. There were no other nominees. 5,811,815 votes were not cast.

Ordinarily, with only two candidates running for two seats, there would have not been any need under Finance Board regulations for an election in New York. However, an election was required because one of the open seats was a “guaranteed” seat allocated to New York and the other was a “non-guaranteed seat”. The main difference between the two seats is that the “non-guaranteed” seat is subject to elimination by the Finance Board depending on the proportion of capital stock held by members in the states in the Bank’s district, whereas the “guaranteed” seat is not subject to such elimination. As Mr. Scarchilli received the higher amount of votes, he filled the “guaranteed” seat; Mr. Ficalora filled the other seat.

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New Jersey

In New Jersey, two directorships were open. Ronald E. Hermance received 1,589,289 votes and Kevin J. Lynch received 1,449,996 votes, respectively, and were elected. One other nominee received 781,206 votes. 1,781,059 votes were not cast.

Apart from the foregoing, each of the following elected directors served on the Board during 2007 and their terms continued into 2008: Carl A. Florio, James W. Fulmer, José Ramon Gonzalez, David W. Lindstrom, Katherine J. Liseno, Kevin J. Lynch and George Strayton. The term of elected director George Engelke, who served on the Board throughout 2007, ended on December 31, 2007; due to term limitations, Mr. Engelke was not eligible to run for another term. In addition, elected director Carl A. Florio, who served on the Board throughout 2007 and whose term would have continued throughout 2008, left the Board on January 22, 2008 because of the termination of his employment with Bank member First Niagara Bank. In accordance with FHFB regulations, to serve as an elected director, one must be a director or officer of a member institution.

Directors Appointed by the Federal Housing Finance Board

In addition to the aforementioned group of elected directors, the remainder of the FHLBNY’s directors are appointed by the regulator of the Federal Home Loan Banks, the Finance Board. There are six appointed director seats on the Bank’s Board. The term of each directorship is three years. Each year, the terms of two of the appointed director seats will expire.

As of 2007, Finance Board regulations require that the Boards of the Federal Home Loan Banks submit names of potential directors for the consideration of the Finance Board. The board of directors of the Home Loan Bank may consider any individual for inclusion on the list of names submitted to the Finance Board provided that the board of directors has determined that the individual is eligible to serve in accordance with the Finance Board’s regulations and well-qualified for an appointive directorship at the Bank. In this regard, the regulations also provide that any individual who seeks to be appointed to the board of a Federal Home Loan Bank may submit to the Home Loan Bank an executed appointive director application form. However, the ultimate determination of whether a person is eligible to serve as an appointed director and the selection of the appointed directors remains solely within the discretion of the Finance Board.

Anne Evans Estabrook and Richard S. Mroz served as appointed directors throughout 2007, and were reappointed by the Finance Board to serve as directors for three-year terms commencing on January 1, 2008. In addition, on April 12, 2007, the Finance Board appointed Michael M. Horn and Joseph J. Melone to fill certain existing vacancies on the Board and serve as appointed directors through December 31, 2009, and C. Cathleen Raffaeli and Edwin C. Reed to fill other existing vacancies on the Board and serve as appointed directors through December 31, 2008. For the year 2008, the directors on the FHLBNY’s Board appointed by the Federal Housing Finance Board are Ms. Estabrook, Mr. Horn, Mr. Melone, Mr. Mroz, Ms. Raffaeli and Mr. Reed.

The FHLBNY is exempt from filing of information and proxy statements 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.

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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. 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, 2007 the FHLBNY had 291 members. Total capital stock held by members was 43,679,710 and 2,385,960 held by former members. Capital stock held by former members is classified as a liability, and deemed mandatorily redeemable under the provisions SFAS 150, “Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity” (“SFAS 150”). At December 31, 2006 the FHLBNY had 293 members and 35,462,530 shares of stock held by members, and 1,099,496 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 Board. 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 in the month following the end of that calendar quarter.

The following amounts are in thousands:

	2007					2006					2005
Month Paid	Amount		Dividend Rate			Amount		Dividend Rate			Amount		Dividend Rate
January	$	67,203		7.00	%	$	46,369		5.11	%	$	28,715		3.05	%
April		67,280		7.50			47,137		5.25			42,573		4.70
July		68,840		7.50			53,913		5.75			45,970		5.00
October		78,810		8.05			62,020		6.25			48,639		5.25
	$	282,133				$	209,439				$	165,897

Dividends paid to non-members are classified as interest expense and are associated with mandatorily redeemable stock held by former members. In the table above, payments to former members are also included as dividends paid. Dividends paid to former members were $11.7 million, $3.1 million, and $2.7 million for the years ended December 31, 2007, 2006 and 2005.

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 exempted from disclosure of securities repurchases by the issuer that otherwise would have been required under Item 703 of Regulation S-K.

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ITEM 6. SELECTED FINANCIAL DATA

Statements of Condition	December 31,
(dollars in millions)	2007			2006			2005			2004			2003
Investments (1)	$	25,431		$	20,503		$	21,190		$	18,363		$	14,217
Advances		82,090			59,012			61,902			68,507			63,923
Mortgage loans		1,492			1,483			1,467			1,178			672
Total assets		109,683			81,703			85,014			88,439			79,230
Deposits and borrowings		1,647			2,390			2,658			2,297			2,100
Consolidated obligations		101,117			74,234			77,279			80,157			70,857
Mandatorily redeemable capital stock		239			110			18			127			—
AHP liability		119			102			91			82			93
REFCORP liability		24			17			14			10			—
Capital stock		4,368			3,546			3,590			3,655			3,639
Retained earnings		418			369			291			223			127
Equity to asset ratio (2)		4.33	%		4.79	%		4.57	%		4.38	%		4.75	%

Statements of Condition	Years ended December 31,
Averages (dollars in millions)	2007		2006		2005		2004		2003
Investments (1)	$	22,230	$	19,490	$	19,944	$	17,642	$	19,833
Advances		65,454		64,658		63,446		65,289		70,943
Mortgage loans		1,502		1,471		1,360		928		527
Total assets		89,961		86,319		85,254		84,344		92,747
Interest-bearing deposits and other borrowings		2,286		1,773		2,112		1,968		2,952
Consolidated obligations		82,233		79,314		77,629		76,105		81,818
Mandatorily redeemable capital stock		146		51		56		238		—
AHP liability		108		95		84		83		105
REFCORP liability		10		9		7		4		2
Capital stock		3,771		3,737		3,604		3,554		4,082
Retained earnings		362		314		251		159		193

Operating Results and other data
(dollars in millions,	Years ended December 31,
except earnings and dividends per share)	2007			2006				2005		2004			2003
Net interest income (3)	$	499		$	470		$	395		$	268		$	299
Net income		323			285			230			161			46
Dividends paid in cash		273			208			162			66			164
AHP expense		37			32			26			19			5
REFCORP expense		81			71			58			40			11
Return on average equity (4)		7.85	%		7.04	%		5.97	%		4.34	%		1.08	%
Return on average assets		0.36	%		0.33	%		0.27	%		0.19	%		0.05	%
Operating expenses	$	67		$	63		$	59		$	51		$	48
Operating expenses ratio (5)		0.07	%		0.07	%		0.07	%		0.06	%		0.05	%
Earnings per share	$	8.57		$	7.63		$	6.36		$	4.55		$	1.12
Dividend per share	$	7.51		$	5.59		$	4.50		$	1.83		$	3.97
Headcount (Full/part time)		246			232			221			210			206

(1)	Investments include held-to-maturity securities, available for-sale securities, interest-bearing deposits, Federal funds, and loans to other FHLBanks.
(2)	Equity to asset ratio is capital stock plus retained earnings and accumulated other comprehensive income (loss) as a percentage of total assets.
(3)	Net interest income is net interest income before the provision for credit losses on mortgage loans.
(4)	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).
(5)	Operating expenses as a percentage of average assets.

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Supplementary financial data for each quarter for the years ended December 31, 2007 and 2006 are presented below (in thousands):

	2007 (unaudited)
	4th Quarter		3rd Quarter		2nd Quarter		1st Quarter
Interest income	$	1,375,801	$	1,221,924	$	1,102,469	$	1,075,311
Interest expense		1,227,981		1,095,902		989,612		962,623
Net interest income		147,820		126,022		112,857		112,688
Provision for credit loss		40		—		—		—
Other income (loss)		2,040		8,006		1,460		1,994
Other expenses		53,830		48,813		43,690		43,409
		51,830		40,807		42,230		41,415
Net income	$	95,990	$	85,215	$	70,627	$	71,273

	2006 (unaudited)
	4th Quarter			3rd Quarter			2nd Quarter		1st Quarter
Interest income	$	1,174,997		$	1,212,398		$	1,069,478	$	947,374
Interest expense		1,045,761			1,089,978			954,255		844,135
Net interest income		129,236			122,420			115,223		103,239
Provision for credit loss		10			—			1		—
Other income (loss)		(14,705	)		(1,057	)		3,647		(1,124	)
Other expenses		44,256			44,538			43,451		39,428
		58,971			45,595			39,805		40,552
Net income	$	70,265		$	76,825		$	75,418	$	62,687

Interim period - Infrequently occurring items recognized.

2007- There were no infrequently occurring items that were material in any interim periods in 2007.

2006- In the second and third quarters, the Bank retired debt with reported losses of $6.8 million. In the fourth quarter, debt retirements resulted in losses of $19.5 million. Advance prepayments initiated by the Bank’s members were significant during the fourth quarter.

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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;

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• 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;

• 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.

39

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
2007 Highlights		42
2008 Business Outlook		44
Trends in the Financial Markets		45
Critical Accounting Policies and Estimates		46
Change in Accounting Principle		52
Recently Issued Accounting Standards and Interpretations		52
Legislative and Regulatory Developments		54
Financial Condition – Assets, Liabilities, Commitments and Capital		56
Advances		58
Investments		67
Mortgage Loans		75
Deposit Liabilities		77
Debt Financing Activity and Consolidated Obligations		78
Short-Term and Long-Term Rating Actions		88
Mandatorily Redeemable Capital Stock		88
Capital Resources		90
Retained Earnings and Dividends		91
Derivative Instruments		92
Liquidity		102
Results of Operations		107
Asset Quality and Concentration		128
Commitments and Contingencies		145
Quantitative and Qualitative Disclosures about Market Risk		148

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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 intermediate-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 member credit, 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 Board’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.

41

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.

2007 Highlights

The FHLBNY reported record 2007 net income of $323.1 million, or $8.57 per share compared with net income of $285.2 million or $7.63 per share, for 2006. The return on average equity, which is Net income divided by average Capital stock, Retained earnings, and Accumulated other comprehensive income, in 2007 was 7.85%, compared with 7.04% in 2006. The Bank’s record earnings in 2007 were positively impacted by the extraordinary increase in advances borrowed by its membership in the last two quarters of the year.

• Net interest income after the provision for credit losses, a key metric for the FHLBNY, was $499.4 million for 2007, up by $29.3 million, or 6.2% from the prior year. Net interest income represents the difference between income from interest-earning assets and interest expenses paid on interest-bearing liabilities. Net interest spread earned was 30 basis points in 2007, up slightly from 29.5 basis points in 2006. Net interest spread is the difference between yields on interest-earning assets and yields on interest-bearing liabilities. Return on average earning-assets increased to 56 basis points in 2007, up from 54.9 basis points from the prior year, and improved returns were directly attributable to the increase in net income in 2007 compared to 2006.

• Net realized and unrealized gain from hedging activities resulted in net gains of $18.4 million in 2007, compared to net gains of $9.7 million in 2006. The increase primarily represented net unrealized gains from fair value hedges designated as economic hedges in 2007.

• Operating Expenses were $66.6 million in 2007, up by $3.4 million, or 5.3% from the prior year. Increases were primarily from higher charges for the supplemental pension and postretirement health benefit plans, the cost of additions to staffing levels, and the inflationary cost of employment and related expenses.

• REFCORP assessments were $80.8 million in 2007, up by $9.5 million, from 2006. AHP assessments were $37.2 million, up by $5.2 million, from 2006. Assessments are calculated on net income before assessments and the increase was due to higher net income in 2007 compared to 2006.

• Cash dividends were paid to stockholders in each of the quarters in 2007. In 2007, they totaled $7.51 per share of capital stock (par value $100), up from $5.59 in 2006.

At December 31, 2007, the FHLBNY’s Total assets were a record $109.7 billion, an increase of $28.0 billion, or 34.2%, from December 31, 2006. The principal driver was the record growth in advances borrowed by members. The Bank also increased balance sheet liquidity by increasing investments in short-term money market instruments, increasing leverage and total assets.

• Advances grew by over 39.1% to $82.1 billion at December 31, 2007, compared with $59.0 billion at December 31, 2006. In the recent market turmoil in the third quarter of 2007, member borrowings grew from $61.2 billion at June 30, 2007 to $75.1 billion at September 30, 2007, an increase of over 21.0% in one quarter. Demand for advances continued through the fourth quarter of 2007. While this unprecedented increase in borrowing was concentrated among the large members, a broad base of the membership also increased their borrowings from the FHLBNY.

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• Events in the market place also caused a surge in demand by investors for shorter-term debt issued by the FHLBanks, including those issued by the FHLBNY. Issuances of discount notes, which have maturities from overnight to 365 days, rose to record levels at attractive sub-LIBOR spreads. Discount notes issued to investors and outstanding at December 31, 2007 were $34.8 billion, an increase of $22.6 billion, or 185.4%, from December 31, 2006. The ratio of discount notes to total assets at December 31, 2007 was 31.7%, a significant increase from 14.9% at December 31, 2006. Almost all of the increase occurred in the third quarter and fourth quarter of 2007.

• Held-to-maturity securities consisting of mortgage-backed securities and state and local housing agency bonds declined to $10.3 billion at December 31, 2007, compared to $11.3 billion at December 31, 2006, as paydowns outpaced new acquisitions. Acquisitions continued to be selective during 2007 and remained opportunistic. When market conditions met the Bank’s risk-reward preferences, acquisition was considered and pursued. All $1.1 billion in MBS acquired in 2007, were triple-A rated securities, with a heavy concentration in agency issued collateralized mortgage obligations (CMOs), which are supported by agency pass-through securities. In January 2008, three mortgage-backed securities, book value $86.8 million and market value of $85.7 million at December 31, 2007, were downgraded by Fitch Investor Services. These securities are insured by Ambac Assurance Corp. (“Ambac”). On February 25, 2008, S&P affirmed Ambac’s rating at triple-AAA with a negative watch. For more information about the downgrades and securities under negative watch, see Investment Quality in the section of this MD&A captioned “Asset Quality”.

• Shareholders’ equity, the sum of Capital stock, Retained earnings and Accumulated other comprehensive income (loss) was $4.8 billion at December 31, 2007, up by $846.2 million, from December 31, 2006. Capital stock at December 31, 2007 was $4.4 billion, up by $821.7 million, compared to December 31, 2006. The increase in capital stock was consistent with increases in advances borrowed by members since members are required to purchase stock at par value of $100 as a prerequisite to membership and to hold FHLBNY stock as a percentage of advances borrowed from the FHLBNY. Under present capital stock management practice, stock in excess of amount necessary to support advance activity is redeemed daily by the FHLBNY. As a result, the amount of capital stock outstanding varies in line with members’ outstanding advance borrowings.

Effective December 31, 2007, George L. Engelke, Jr., the FHLBNY’s Chairman of the Board retired and was succeeded by David W.Lindstrom, who had been the vice chair of the Board; Michael Horn was appointed vice chair of the Board.

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2008 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 results to differ materially from those set forth in such forward-looking statements.

The basic outlook for 2008 is predicated on the slowdown in the U.S. economy and particularly the slowdown in the housing market. Against that backdrop, management of the Bank believes it is probable that member demand for advances will decline.

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 changes and demand for liquidity. Demand 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 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 in the FHLBNY and the FHLBNY cannot offer renewal 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 advance lending.

The FHLBNY earns income from investing its members’ capital to fund interest-earning assets. In a lower interest rate environment, which is forecasted for 2008, deployed capital, which is capital stock, retained earnings, and net non-interest bearing liabilities, will provide lower income than in 2007.

In the second half of 2007, investor demand for FHLBank short-term bonds and discount notes drove down coupons and yields and such short-term debt was issued by the FHLBNY at very favorable pricing. Management believes a return to more traditional debt issuance pricing of its short term bonds and discount notes is likely in 2008, and may compress interest rate margins and impact 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 2007 and 2006 (rates in percent):

	Year-to-date December 31,
	2007		2006		2007		2006
	Average		Average		Ending Rate		Ending Rate
Federal Funds Rate		5.05		4.97		4.25		5.25
3-month LIBOR		5.30		5.20		4.70		5.36
2-year U.S.Treasury		4.36		4.82		3.05		4.81
5-year Treasury		4.42		4.75		3.44		4.69
10-year Treasury		4.63		4.79		4.03		4.70
15-year residential mortgage note rate		5.94		6.01		5.60		5.93
30-year residential mortgage note rate		6.27		6.36		6.05		6.22

Impact of general level of interest rates to 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, 2007 and 2006, investments, excluding mortgage-backed securities and state and local housing agency obligations, had stated maturities of less than one year. The FHLBNY had also used derivatives to effectively change the repricing characteristics of a significant proportion of its advances and debt , consolidated obligation bonds, to match shorter-term LIBOR rates that repriced at three-month intervals or less. 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 Government Sponsored Enterprises 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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Critical Accounting Policies and Estimates

The preparation of financial statements in accordance with generally accepted accounting principles in the U.S. requires management to make a number of judgments, estimates, and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities (if applicable), and the amounts of income and expenses during the report period. Although management believes these judgments, estimates, and assumptions to be reasonably accurate, actual results may differ.

The FHLBNY has identified certain accounting policies that it believes are critical 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 using different assumptions. These policies include estimating the allowance for credit losses on the advance and mortgage loan portfolios; and estimating fair values on certain assets and liabilities, including all derivatives and associated hedged items accounted for in accordance with SFAS 133, “Accounting for Derivative Instruments and Hedging Activities,” and the collateral that members pledge for advance borrowings. Policies, estimates, and assumptions are also described in Note 1 to the audited financial statements. Policies with respect to the valuation of derivatives and associated hedged items are also described in Notes 1, 19 and 20 to the audited financial statements.

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 results could differ from these estimates.

Advances - No provisions for credit losses were required. The analysis for credit losses on advances includes the following underlying assumptions that the FHLBNY uses for evaluating its exposure to credit loss: (i) management’s judgment on the creditworthiness of the members to which the FHLBNY lends funds, (ii) review and valuation of the collateral pledged by members, and (iii) evaluation of historical loss experience. The FHLBNY has policies and procedures in place to manage its credit risk effectively. These include:

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

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

• 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.

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The FHLBNY is required by Finance Board regulations to obtain sufficient collateral on advances to protect against losses, and to accept only certain 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, 2007, 2006, or 2005.

At December 31, 2007, 2006 and 2005, 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 provision for credit losses on mortgage loans includes the following assumptions used to evaluate the FHLBNY’s exposure to credit loss: (i) management’s judgment on the eligibility of members to participate in the program, (ii) evaluation of credit exposure on purchased loans, and (iii) assessment of loss exposure and historical loss experience.

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.

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 separated from the aggregate pool. If adversely classified, or on non-accrual status, reserves for 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.

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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 classified.

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 interest 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, and the outstanding balance of Community Mortgage Asset loans was $4.1 million at December 31, 2007, down from $4.9 million at December 31, 2006. 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.

Estimated Fair Values

As of December 31, 2007 and 2006, certain of the FHLBNY’s assets and liabilities (derivatives, assets and liabilities hedged under the provisions of SFAS 133, mortgage delivery commitments, available-for-sale securities, and mandatorily redeemable capital stock) are presented in the Statements of condition at their estimated fair values. Many of these financial instruments and substantially all of the collateral that members pledge for advance borrowings lack an active trading market as characterized by frequent transactions between a willing buyer and willing seller engaging in an exchange transaction. Therefore, significant assumptions and various valuation techniques have been used by the FHLBNY for the purpose of determining estimated fair values. Changes in these assumptions, calculations and techniques could significantly affect FHLBNY’s financial position and results of operations. Thus, the fair values may not represent the actual values of the financial instruments that could have been realized as of period-end or that will be realized in the future. Although the FHLBNY uses its judgment in estimating the fair value of these financial instruments, there are inherent limitations in any estimation technique or valuation methodology. The FHLBNY continually refines its assumptions, valuation techniques and methodologies to better reflect market indications.

Because valuation is a significant element of the FHLBNY’s financial results of operations, changes in the fair values of certain assets and liabilities could have a disproportionate effect on the financial condition of the FHLBNY. Accordingly, the FHLBNY places significant emphasis on the measurement process.

The Bank has concluded its evaluation of the two new fair value related standards, SFAS 157 “Fair Value Measurements,” and SFAS 159, “The Fair Value Option for Financial Assets and Financial Liabilities, including an amendment of FASB Statement No. 115”, issued by the FASB. The Bank chose not to early adopt these standards. The two standards address both the measurement, accounting, and disclosure aspects of fair value, and are discussed in the MD&A section “Recently Issued Accounting Standards and Interpretations”.

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For each major category of assets and liabilities measured at fair value at December 31, 2007 and 2006, the FHLBNY has segregated fair value amounts into four disclosure groups:

1. Fair value amounts determined using quoted prices for identical assets and liabilities in active markets.

• Approximately 5 percent of investments (Investments in “State or local housing agency obligations”, certain variable rate mortgage-backed securities, and certain mortgage-backed securities backed by manufactured homes) are valued using market pricing and a combination of dealer, market maker, or other external pricing source.

2. Fair value amounts determined using quoted prices for similar assets and liabilities in active markets, adjusted for differences between assets and liabilities being measured and other similar assets or liabilities.

• The fair values derived from such estimates are not material.

3. Fair value amounts determined by the use of multiple valuation techniques and other available market inputs.

• All of the FHLBNY’s investment securities are marketable and can be priced using open market quotes. However, they generally do not have enough liquidity and would require special quotes from market makers. The fair values of about 95% of mortgage-backed securities are priced using pricing services provided by specialist securities pricing services. The loans acquired and originated under the MPF and CMA programs are priced using market information (pricing and spreads) as input to standard option valuation models.

• The Bank’s derivatives consist primarily of over-the-counter contracts and a de minimis amount of commitments to purchase mortgage assets. Derivatives are valued using industry-standard models that utilize market inputs that can be corroborated from widely accepted third-party sources. Model selection and inputs do not involve significant judgments. The Bank’s interest rate swaps, caps and floors trade in deep and liquid markets, and the Bank is able to validate derivative pricing data on a large number of its derivatives at trade execution.

• With regard to the FHLBNY’s liabilities, the consolidated obligations do have a secondary market but there are limits to its liquidity and the FHLBNY’s ability to obtain timely quotes, particularly with regard to option-embedded issues that are seldom traded. Therefore, FHLBNY prices its bonds 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 standard option valuation models using market data: (1) consolidated obligation debt curve that is available to the public and published by the Office of Finance, and (2) LIBOR curve and volatilities.

• Variable rate advances are valued with market spreads, volatilities and using standard option valuation models.

4. Fair value amounts determined by the use of entity inputs that represent an entity’s own internal estimates and assumptions as a practical expedient, and are substantially in line with market observable inputs.

• Fixed-rate advances with or without put options are all valued with internal assumptions and using standard valuation models.

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Accounting for Derivatives

The Bank records and reports hedging activities in accordance with SFAS 133 “Accounting for Derivative Instruments and Hedging Activities,” as amended. In compliance with this standard, the Bank’s accounting for derivatives includes the following assumptions and estimates: (i) assessing whether the hedging relationship qualifies for hedge accounting under SFAS 133, (ii) assessing whether an embedded derivative should be bifurcated under SFAS 133, (iii) calculating the estimated 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 under SFAS 133

• 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 hedge under SFAS 133

All derivatives are recorded on the statements of condition at their fair value and designated as either fair value or cash flow hedges for SFAS 133-qualifying hedges or as non-SFAS 133-qualifying hedges (economic hedges, or customer intermediations). In an economic hedge, the Bank retains or executes derivative contracts, which are economically effective in reducing risk, either because a SFAS 133-qualifying hedge is not available or because the cost of a qualifying hedge is not economical.

Any changes in the fair value of a derivative are recorded in current period earnings or other comprehensive income, depending on the type of hedge designation.

In addition, the FHLBNY evaluates its products offered to its members and debt issued to investors to determine whether an embedded derivative exists based on the guidance of SFAS 133. 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 criteria under paragraph 68 of SFAS 133 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 or other statistical 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)”.

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). 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 for 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-members 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. All extensions of credit, including those associated with the purchase or sale of derivatives, to counterparties that are 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.

The FHLBNY considers hedges of committed advances and consolidated obligations bonds eligible for the short-cut accounting, under paragraph 68 of FAS 133, 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 paragraph 68 (b) of FAS 133 are met if the fair value of the swap is zero on the date the FHLBNY commits itself to issue the consolidated obligation bond.

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Change in Accounting Principle

Change in Accounting Principle for Amortization and Accretion of Premiums and Discounts on Mortgage Loans

Amortization and accretion on premiums and discounts on mortgage loans have been computed by the contractual method in accordance with Statement of Financial Accounting Standards No. 91, “Accounting for Nonrefundable Fees and Costs Associated with Originating or Acquiring Loans and Initial Direct Costs of Leases” (“FAS 91”), effective January 1, 2005. Previously, amortization and accretion of premiums and discounts was computed using the retrospective method with estimated life, which requires a retrospective adjustment each time the FHLBNY changes the estimated remaining life of the mortgage loans. The retrospective method is intended to adjust the carrying value for the effects of all past cash flows and estimated future cash flows. The FHLBNY believes that the contractual method is preferable because under the contractual method, the income effects of premiums and discounts are recognized in a manner that is reflective of the actual behavior of the mortgage loans during the period in which the behavior occurs without regard to changes in estimates based on assumptions about future borrower behavior. As a result of the change in accounting principle, income of $1.1 million, before assessments, was recorded on January 1, 2005 as a cumulative effect of change in accounting principle.

Recently Issued Accounting Standards and Interpretations

SFAS 157 – In September 2006, the FASB issued SFAS 157, “Fair Value Measurements” (“SFAS 157”). SFAS 157 defines fair value, establishes a framework for measuring fair value and enhances disclosure about fair value measurements required under other accounting pronouncements, but does not change existing guidance as to whether or not an instrument is carried at fair value. SFAS 157 nullifies the guidance in Emerging Issues Task Force Issue EITF 02-3, which precluded the recognition of a trading profit at the inception of a derivative contract, unless the fair value of such derivative is obtained from a quoted market price, or other valuation technique incorporating observable market data. SFAS 157 also precludes the use of a liquidity or block discount when measuring instruments traded in an active market at fair value. SFAS 157 requires that costs related to acquiring financial instruments carried at fair value should not be capitalized, but rather should be expensed as incurred. SFAS 157 also clarifies that an issuer’s credit standing should be considered when measuring liabilities at fair value.

SFAS 157 is effective for fiscal years beginning after November 15, 2007 (January 1, 2008 for the Bank), with earlier application encouraged. SFAS 157 must be applied prospectively as of the beginning of the fiscal year in which it is initially adopted, except that the provisions related to block discounts and the guidance in EITF 02-3 are to be applied as a one time cumulative effect adjustment to opening retained earnings in the first interim period for the fiscal year in which SFAS 157 is initially applied. The Bank will adopt SFAS 157 on January 1, 2008, and implementation will not have a material impact on its reported results of operations or financial condition.

SFAS 159 – In February 2007, the FASB issued SFAS 159, “The Fair Value Option for Financial Assets and Financial Liabilities, including an amendment of FASB Statement 115” (“SFAS 159”). SFAS 159 creates a fair value option allowing 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. SFAS 159 also requires an entity to report those financial assets and financial liabilities measured at fair value in a manner that separates those reported fair values from the carrying amounts of assets and liabilities measured using another measurement attribute on the face of the Statements of Condition. Lastly, SFAS 159 requires an entity to provide information that would allow users to understand the effect on earnings of changes in the fair value on those instruments selected for the fair value election. The Bank will adopt SFAS 159 on January 1, 2008. The Bank has not elected the fair value option for any asset or liability as of January 1, 2008.

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FSP FIN 39-1 – In April 2007, the FASB directed the FASB Staff to issue FSP No. FIN 39-1, “Amendment of FASB Interpretation No. 39.” (“FSP FIN 39-1”). FSP FIN 39-1 modifies FIN No. 39, “Offsetting of Amounts Related to Certain Contracts”, and permits companies to offset cash collateral receivables or payables with net derivative positions under certain circumstances. The Bank will adopt FSP FIN 39-1 on January 1, 2008, and implementation will not have a material impact on its reported results of operations or financial condition.

SFAS 158 – In September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans.” SFAS 158 requires recognition in the statements of condition of the over or underfunded status of postretirement plans, measured as the difference between the fair value of the plan assets and the benefit obligation. For pension plans, the benefit obligation is the projected benefit obligation; for other postretirement plans, the benefit obligation is the accumulated postretirement benefit obligation. For an employer without publicly traded equity securities, SFAS 158 is effective for fiscal year ending after June 15, 2007, with certain disclosure requirements effective for a fiscal year ending after December 15, 2006, but before June 16, 2007. The FHLBNY considers itself a non-publicly traded enterprise for the purposes of the standard and adopted SFAS 158 as of December 31, 2006. In compliance with the provisions of SFAS 158, the Bank recognized $6.1 million of previously unrecognized actuarial gains and losses and service costs within accumulated other comprehensive income (a component of capital). See Note 18 in notes to audited financial statements.

SFAS 161 – On March 19, 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133” (SFAS 161). SFAS 161 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. SFAS 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008 (January 1, 2009 for the FHLBNY), with early application allowed. The FHLBNY has not yet determined the effect that the adoption of SFAS 161 will have on its financial statement disclosures.

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Legislative and Regulatory Developments

Finance Board Issues Advisory Bulletin on Nontraditional and Subprime Residential Mortgage Loans.  On April 12, 2007, the Finance Board issued Advisory Bulletin 2007-AB-01 (the “Advisory Bulletin”) on nontraditional and subprime residential mortgage loans. The Advisory Bulletin provided that by June 30, 2007, each FHLBank’s board of directors should review its existing credit risk management policies and adopt any necessary additional policies related to nontraditional and subprime residential mortgage products. The Advisory Bulletin also states that the Finance Board may require periodic reporting of volumes, policies, procedures and risk management practices related to these types of residential mortgages. Additionally, each FHLBank should require periodic confirmation from each of its members that is subject to federal or state regulatory oversight that the member is complying with nontraditional residential mortgage and subprime mortgage lending guidance.

The Bank’s Board of Directors has completed its review of its existing policies and adopted certain necessary additional policies as required by the Advisory Bulletin. The FHLBNY has limited exposure to subprime and nontraditional loans in its investment and its Acquired Member Assets (i.e., mortgage loan) portfolios due to its conservative investment and asset management practices and policies. In addition, Bank management believes that the FHLBNY has limited exposure to subprime and nontraditional loans in its collateral portfolio due to its members’ business models, as well as the Bank’s conservative collateral practices and policies and its detailed collateral reporting requirements.

U.S. Department of the Treasury to Review GSE Debt Issuance Approval Process. The U.S. Department of the Treasury has announced that it will review its process for approving the GSEs’ debt issuance. As a result of this review, the approval process could change again, which could affect the amount, timing, structures, and interest costs of the FHLBank System’s CO issuances and which, in turn, could affect the FHLBanks’ ability to continue to achieve its mission and corporate objectives. At this time, the Bank cannot predict what effects, if any, will result from actions taken as a result of the Treasury’s review.

Finance Board and FHLBank Agreements and Orders. On October 10, 2007, the Federal Home Loan Bank of Chicago (the “Chicago Bank”) reported that the Federal Housing Finance Board had terminated a written agreement originally entered into on June 30, 2004 between the Finance Board and the Chicago Bank. This agreement had required the Chicago Bank to, among other things, adopt a revised business plan, maintain a specified regulatory capital level and, unless otherwise restricted by the Finance Board, restrict the annual growth of its Acquired Member Assets program to 10%. The agreement was subsequently amended three times to adjust the Chicago Bank’s minimum regulatory capital requirements.

The Chicago Bank also reported on October 10, 2007 that it had entered into a consensual cease and desist order with the Finance Board. Under the terms of this order, certain restrictions were placed on capital stock repurchases and redemptions, including redemptions upon membership withdrawal or other termination, and restrictions were also placed on dividend declarations. The order also required the Chicago Bank to submit a capital plan to the Finance Board consistent with the requirements of the Gramm-Leach-Bliley Act and Finance Board regulations. Further, the order required the Bank to review and revise various market risk management and hedging policies, procedures and practices. In addition, the order included specific minimum capital requirements for the Chicago Bank that were previously included in the aforementioned agreement.

Merger Discussions Among Federal Home Loan Banks. On August 8, 2007, the Chicago Bank and the Federal Home Loan Bank of Dallas jointly announced that they were engaged in discussions aimed at evaluating the benefits and feasibility of combining the business operations of the two institutions. More recently, the Chicago Bank, in their Form 10-K for the year 2007, indicated that “the [two] banks have not reached an agreement and it is possible that the banks will not finalize any agreement to combine the banks.” As of the date of the filing of this annual report on Form 10-K, no further public announcement had been made.

54

Proposed Changes to GSE Regulation.  Congress is considering proposed legislation that is designed to strengthen the regulation of Fannie Mae, Freddie Mac and the FHLBanks and to address other GSE reform issues. On May 22, 2007 the House of Representatives passed GSE regulatory reform bill (H.R. 1427), which would, among other things, establish a new regulator for the housing GSEs. The Senate Banking Committee has not held a hearing or passed GSE reform legislation as of the date of this annual report on Form 10-K. We are unable to predict whether any provisions relating to the Finance Board and the FHLBanks will be included in any such legislation and what such provisions may be. In addition, we are unable to predict whether the Senate will approve such legislation and whether any such change in regulatory structure will be signed into law. Finally, we are unable to predict when any such change would go into effect if it were to be enacted, and what effect the legislation would ultimately have on the Finance Board or the FHLBanks.

Finance Board Adopts Process for Appointing Directors.  On March 27, 2007, the Finance Board issued a final rule establishing procedures for the selection of appointive directors to the boards of the Federal Home Loan Banks. Under the rule, the FHLBanks are responsible for identifying potential directors, conducting a preliminary assessment of their eligibility and qualifications, and submitting up to two nominees for each vacant appointive directorship to the Finance Board for its consideration. The nominations must be accompanied by a completed eligibility form that demonstrates the qualifications of each nominee to serve on the board of an FHLBank. The Finance Board will review each nomination and decide whether to appoint directors from the submitted list of nominees. If the Finance Board declines to appoint any of the nominees, it may require the FHLBank to submit additional nominees for consideration. However, the selection of the appointive directors remains within the discretion of the Finance Board. The Bank has been complying with the provisions of this rule since enactment.

55

Financial Condition: Assets, Liabilities, Capital, Commitments and Contingencies

	December 31,
	2007		2006
Assets
Cash and due from banks	$	7,909	$	38,850
Interest-bearing deposits		10,696,687		5,591,077
Federal funds sold		4,381,000		3,661,000
Available-for-sale securities		13,187		—
Held-to-maturity securities		10,284,754		11,251,098
Advances		82,089,667		59,012,394
Mortgage loans held-for-portfolio		1,491,628		1,483,419
Loans to other FHLBanks		55,000		—
Accrued interest receivable		562,323		406,123
Premises, software, and equipment, net		13,154		11,107
Derivative assets		70,278		224,775
All other assets		17,004		23,144
Total assets	$	109,682,591	$	81,702,987
Liabilities
Deposits
Interest-bearing demand	$	1,627,339	$	2,307,733
Non-interest bearing demand		2,596		1,795
Term		16,900		80,000
Total deposits		1,646,835		2,389,528
Consolidated obligations
Bonds		66,325,817		62,042,675
Discount notes		34,791,570		12,191,553
Total consolidated obligations		101,117,387		74,234,228
Mandatorily redeemable capital stock		238,596		109,950
Accrued interest payable		655,870		735,215
Affordable Housing Program		119,052		101,898
Payable to REFCORP		23,998		17,475
Derivative liabilities		1,069,742		107,615
Other liabilities		60,520		102,685
Total liabilities		104,932,000		77,798,594
Capital		4,750,591		3,904,393
Total liabilities and capital	$	109,682,591	$	81,702,987

Balance sheet overview

At December 31, 2007, the FHLBNY’s Total assets were a record $109.7 billion, an increase of $28.0 billion, or 34.2%, from December 31, 2006. Beginning in August 2007, the Bank experienced unprecedented increase in member demand for advances, and par amount of advances grew from $61.4 billion at the end of the second quarter of 2007 to $66.5 billion at August 31, 2007, and to a $74.6 billion at the end of the third quarter of 2007. Member borrowings continued through the fourth quarter and advances rose to all time record high of $80.6 billion at December 31, 2007.

56

The Bank also increased its investment in short-term money market instruments – Interest-bearing deposits and Federal funds sold – with the goal of increasing balance sheet liquidity. Investments in both categories averaged higher in 2007 compared to 2006. Historically, the Bank has maintained a significant inventory of highly liquid Federal funds and short-term certificates deposits at highly-rated financial institutions to ensure liquidity for its members’ borrowing needs. In the second quarter of 2007, management perceived some volatility in the credit markets, and to ensure members’ liquidity needs would be met, the Bank began to increase its balance sheet liquidity by additional investments in money market instruments. As a result of management’s perception of increased member demand due to market volatility, investment in liquid assets was increased. At December 31, 2007, investments in interest earning deposits and Federal funds sold were $15.1 billion, up $5.8 billion, or 63.0% from December 31, 2006.

Increased liquidity at December 31, 2007 resulted in balance sheet leverage of 23.1 times shareholders’ capital, up from the leverage of 20.9 at December 31, 2006. Increases or decreases in investments has a direct impact on leverage, but generally growth in 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 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.

Investments classified as held-to-maturity, principally mortgage-backed securities, were $10.3 billion, a decline of $966.3 million, or 8.6% at December 31, 2007 compared to $11.3 billion at December 31, 2006. Acquisitions of mortgage-backed securities have remained very selective.

At December 31, 2007, the Bank’s total liabilities were $104.9 billion, an increase $27.1 billion, or 34.9% from December 31, 2006. Liabilities were higher to fund significant member demand for advances, and to finance additional investments in short-term liquid funds, such as certificates of deposits and Federal funds sold.

In 2007, 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. Increases in funding to accommodate the growth in assets and increased liquidity in the third and fourth quarters of 2007 were primarily from greater use of discount notes, which increased by $22.6 billion between December 31, 2006 and 2007. The Bank shifted to the issuance of discount notes to meet investor demand for notes and also benefited from very favorable coupons. In contrast to the explosive growth of discount notes, increase in consolidated obligation bonds issued and outstanding was relatively small, and grew $4.3 billion, or 6.9%, from December 31, 2006 to $66.3 billion at December 31, 2007.

Member deposits were $1.6 billion at December 31, 2007, compared to $2.4 billion at December 31, 2006. Changes in deposit balances reflect member preference for liquidity and availability of alternative investment vehicles. The FHLBNY does not rely on member deposits to meet its funding needs.

Shareholders’ equity was $4.8 billion at December 31, 2007, an increase of $846.2 million from the balance at December 31, 2006. Capital stock increased to $4.4 billion at December 31, 2007, up from $3.5 billion at December 31, 2006 as a result of stockholder purchases of additional capital stock of the FHLBNY to support advance borrowings. Retained earnings grew to $418.3 million at December 31, 2007, compared to $368.7 million at December 31, 2006. Dividend payout, the ratio of dividend paid to Net income was 84.6% in 2007, up from 72.9% in 2006.

57

Advances

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

Reported book value of advances was $82.1 billion at December 31, 2007, up dramatically from $59.0 billion at December 31, 2006. Par amount of advances outstanding was $80.6 billion at December 31, 2007, compared to $59.0 billion at December 31, 2006. Reported book values include fair value basis adjustments under the hedge accounting provisions of SFAS 133.

Membership demand for advances increased sharply in the third quarter in the midst of the liquidity problems in the capital markets, and the third quarter surge in advances was unprecedented. Reported total advance was $61.2 billion at June 30, 2007 and grew to $75.1 billion at September 30, 2007. Increase in demand continued through the fourth quarter of 2007, and advances were at their historical record for the Bank at $82.1 billion at December 31, 2007.

The very significant increase in the advance portfolio reflects in part to the FHLBNY’s willingness to be a reliable provider of well-priced funds to our members, and in part to the FHLBNY’s ability to raise funding in the market place through the issuance of consolidated obligation bonds and discount notes to local and global investors. In meeting member demand for liquidity, the Bank did not adjust pricing to either discourage members advance growth nor did the Bank take advantage of the dislocation in the marketplace in an environment of uncertainty.

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.

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Advances – Product Types

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

	December 31, 2007						December 31, 2006
				Percentage						Percentage
	Amounts			of total			Amounts			of total
Adjustable Rate Credit - ARCs	$	19,812,544			24.58	%	$	13,251,464			22.47	%
Fixed Rate Advances		37,313,594			46.30			29,873,543			50.64
Repurchase (Repo) Agreement		16,098,080			19.97			11,969,036			20.29
Short-Term Advances		4,590,805			5.70			1,824,705			3.09
Mortgage Matched Advances		690,058			0.86			757,050			1.28
Overnight Line of Credit (OLOC) Advances		1,767,080			2.19			1,187,685			2.02
All other categories		319,893			0.40			125,787			0.21
Total par value of advances		80,592,054			100.00	%		58,989,270			100.00	%
Discount on AHP Advances		(417	)					(519	)
Net premium on advances		—						489
SFAS 133 hedging adjustments		1,498,030						23,154
Total	$	82,089,667					$	59,012,394

Advance growth was across all the principal advance products offered to members, with the greatest increases in Adjustable Rate Credit advances (“ARCs”), Short-Term fixed-rate advances, Repurchase Agreement advances (“Repo”), and Fixed-Rate putable advances.

Member demand for advance products

ARC Advances - ARC Advances grew from $13.3 billion at December 31, 2006 to $19.8 billion at December 31, 2007. Growth in demand for the ARC product was concentrated in the third quarter of 2007. ARC Advances grew from $14.4 billion at June 30, 2007 to $19.1 billion at September 30, 2007, and was up slightly in the fourth quarter to $19.8 billion at December 31, 2007. Generally, the FHLBNY’s larger members have been the more significant borrowers of ARCs, and the growth in the third quarter was concentrated among the larger members.

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. Principal is due at maturity and interest payments are due at every reset date, including the final payment date. ARC Advances have continued to be a significant category of advances.

Fixed-rate Advances - Demand for Fixed-rate Advances has been steadily increasing throughout the year with increased demand in the fourth quarter of 2007. Fixed-rate Advances are primarily fixed-rate putable or convertible advances, and outstanding balances may decrease because of the put feature which allows the FHLBNY to exercise its right to “terminate” the advance at pre-determined dates or a series of dates.

In the first six months of 2007, fixed-rate advances grew marginally from $29.9 billion at December 31, 2006 to $31.5 billion at June 30, 2007. Demand increased in the third quarter, and fixed-rate advances grew to $33.7 billion. In the fourth quarter, member demand remained strong and fixed-rate advances increased to $37.3 billion at December 31, 2007.

59

Almost all of the growth was from increased borrowings of fixed-rate putable or convertible advances. Total putable advances, comprised of fixed-rate putable and Repo advance putable grew to $38.8 billion at December 31, 2007 from $28.9 billion at December 31, 2006. Fixed-rate putable advances make up a significant component of Fixed-rate advances, and par amounts grew to $29.0 billion at December 31, 2007, up from $21.9 billion at December 31, 2006. Demand for fixed-rate putable advances grew steadily throughout 2007. Total fixed-rate putable advances were $26.7 billion at the end of the third quarter, up from $24.3 billion at June 30, 2007. The competitively priced convertible fixed-rate advances continue to be in demand by members.

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. Fixed-rate advances were the largest category of advances at December 31, 2007 and 2006. Fixed-rate, putable advances are competitively priced where the FHLBNY purchases the option from the member to put the advance back to borrowers (members) at predetermined exercise dates. This feature lowers the member’s cost of the advance. These advances are known as “convertible” or “putable” advances. If on the put date, the Bank exercises its option, the existing advance is matured. The member may request an advance of any type or term within the available suite of advance products that is offered to all members on that day. In order to qualify for an advance, regardless of whether or not the advance is replacement funding, a member must meet the Bank’s credit and collateral criteria.

REPO Advances - This product includes both putable or convertible REPO advances and non-putable REPO advances. Borrowed amounts remained largely unchanged until the third quarter of 2007. Earlier in 2007, demand was weak principally because of alternative funding sources available to members in the U.S. capital markets. Demand for REPO advances grew in the third quarter, and REPO Advances increased to $15.0 billion at September 30, 2007, up from $12.0 billion at June 30, 2007 and December 31, 2006. In the fourth quarter, demand was still higher and member borrowing resulted in a total outstanding of $16.1 billion at December 31, 2007. It appears that other sources of “repo” credit for members withdrew from the capital markets in third and fourth quarters of 2007. The increase in borrowings has been largely related to demand for non-putable REPO advances, and demand for convertible (putable) REPO advances has not been as strong as members’ interest in non-putable REPO advances.

REPO Advances are secured by eligible securities and can be structured to have a fixed or variable interest rate, “bullet” or quarterly interest payments, and a put option, by which the FHLBNY receives an option to require payment after a predetermined lockout period. Members may use U.S. Treasuries, Agency-issued debentures, and mortgage-backed securities as collateral.

Short-term Advances - Short-term fixed-rate advances are a smaller category of advances and member demand for the Bank’s fixed-rate products has been weak given alternative funding sources for members in the capital markets. Fixed-rate short-term advances were at their historical low-point in the first quarter of 2007 as member demand declined and outstanding amounts of short-term, fixed-rate advances declined by 58.9% to $750.7 million at March 31, 2007, down from $1.8 billion at December 31, 2006. Member appetite increased only slightly in the second quarter of 2007 and advances outstanding grew to $864.0 million at June 30, 2007. Weak demand in the first six months of 2007 was because of the relatively higher coupons in the short-end of the term structure of interest rates. Members reacted in that period by switching to alternative products and funding available in the overnight and term “repo markets.”

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That environment changed dramatically in the third quarter of 2007. Short-term interest rates declined, and the FHLBNY’s cost of funding short-term advances declined even more dramatically as the Bank was able to pass on the benefits by way of relatively lower coupons to its members. As with REPO Advances, alternative funding sources that had been available to members, in particular the “repo markets”, tightened due to market conditions in the second six months of 2007. These conditions resulted in heavy demand for short-term advances in September 2007, and outstanding balances grew by $3.9 billion, an extraordinary growth over a very short time, to reach $4.8 billion at September 30, 2007. Since then, demand has retreated somewhat and the balance outstanding at December 31, 2007 was $4.6 billion.

Overnight Line of Credit (“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.

Member demand for the Overnight Line of Credit Advances (OLOC Advances) reflected the immediate liquidity needs of members and variability during 2007 reflected seasonal needs of member banks for their short-term liquidity requirements. Some large members also used it to adjust their balance sheet in line with their own leverage targets.

At December 31, 2007, outstanding OLOC Advances stood at $1.8 billion compared to $1.2 billion at December 31, 2006.

Impact of mergers and prepayments

While merger activity was an important factor contributing to the uneven pattern in advance balances during 2006, its impact was not as relevant in 2007. Typically, merger activity results in the loss of new business as the FHLBank Act does not permit new advances to former members or advances to replace maturing advances. 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 mergers are followed by decision by the acquired member to prepay existing advances partially or in full depending on the liquidity structure and needs post merger. In 2006, several mergers were followed by former members’ decisions to prepay advances rather than to wait for advances to run-down at their contractual maturity dates. In 2007, the mergers did not result in any significant prepayments.

Six members became non-members in 2007 compared to four in 2006. Advances outstanding to non-members were $3.3 billion at December 31, 2007 compared to $1.8 billion at December 31, 2006. The increase in advances held by non-members is due to the acquisition of one large member of the FHLBNY by a member of the FHLBank of Boston.

Prepayments of advances initiated by members in 2007 aggregated $1.4 billion in par amounts, down from $5.3 billion in 2006. In a tight market for liquidity and for other economic reasons, it appears that members opted to maintain their existing borrowings.

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Advances – Maturities and coupons

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

	December 31,
	2007						2006
				Weighted 1						Weighted 1
	Amount			Average Yield			Amount			Average Yield
Overdrawn demand deposit accounts	$	—			0.00	%	$	498			6.05	%
Due in one year or less		24,140,285			4.72			12,273,636			4.91
Due after one year through two years		7,714,912			4.87			12,450,960			4.99
Due after two years through three years		8,730,643			5.13			4,108,983			5.05
Due after three years through four years		3,153,113			4.89			5,744,505			5.45
Due after four years through five years		5,988,142			4.76			2,591,828			4.86
Due after five years through six years		556,095			3.44			2,279,706			4.18
Thereafter		30,308,864			4.29			19,539,154			4.22
Total par value		80,592,054			4.62	%		58,989,270			4.73	%
Discount on AHP advances *		(417	)					(519	)
Net premium on advances *		—						489
SFAS 133 hedging basis adjustments *		1,498,030						23,154
Total	$	82,089,667					$	59,012,394

*

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 ($0.4) million, ($0.4) million, and ($0.5) million for the years ended December 31, 2007, 2006 and 2005. All other amortization charged to interest income aggregated ($0.5) million, ($0.6) million, and ($0.7) million for the years ended December 31, 2007, 2006 and 2005. Interest rates on AHP advances ranged from 1.25% to 6.04% in 2007 and 1.25% to 8.29% in 2006.

1

The weighted average yield is the weighted average coupon rates for advances, unadjusted for interest rate swaps.

Based on contractual maturities of advances, a par amount of $31.9 billion of advances, or 39.5% of the total $80.6 billion in par value of all advances, had a remaining maturity of two years or less. At December 31, 2006, a par amount $24.7 billion advances, or 41.9%, of the total $58.9 billion in par value of all advances at December 31, 2006 had a remaining maturity of two years or less. The change in this category year-over-year is not significant. Also, par amounts of advances at December 31, 2007 with contractual maturities greater than five years had a proportion to total advances at almost the same percentage as at December 31, 2006. Par amounts of advances with contractual maturities greater than five years were $30.9 billion and 38.3% of total par at December 31, 2007 compared to $21.8 billion or 37.0% at December 31, 2006.

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Impact of hedging

The Bank hedges certain advances under the provisions of SFAS 133 by the use of both callable and non-callable interest rate swaps as fair value hedges. Recorded fair value basis adjustments to advances in the Statements of condition were a result of hedging activities under the provisions of SFAS 133. 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 are recorded with interest income from advances. Fair value changes of qualifying hedged advances are recorded as a Net realized and unrealized gain (loss) on derivative and hedging activities, a component of Other income (loss), and 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. Par amounts of advances that were hedged at December 31, 2007 and 2006 totaled $47.0 billion and $35.6 billion.

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 market 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 advances 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 under SFAS 133. Amounts reported for advances in the Statements of condition include fair value hedge basis adjustments.

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. Also, when putable advances are hedged by callable 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.”

Hedge volume - The largest component of the $47.0 billion in hedged advances at December 31, 2007 was comprised of $38.8 billion in putable advances, up from $28.9 billion at December 31, 2006. 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. When the FHLBNY puts the fixed-rate advance, and if the member borrows to replace the fixed-rate advance, the FHLBNY effectively converts the advance from fixed-rate to floating-rate.

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At December 31, 2007 and 2006, almost all putable, fixed-rate advances were hedged by interest rate derivatives, principally interest rate swaps, in SFAS 133 qualifying hedge relationships, which effectively converted the fixed-rate exposure of the FHLBNY to a variable-rate exposure, generally indexed to 3-month LIBOR.

In addition, certain LIBOR-indexed advances have “capped” coupons. These caps are offset by purchased options (caps) with mirror-image terms. Fair value changes of caps due to changes in the benchmark rate and option volatilities are recorded as a Net realized and unrealized gain (loss) on derivative and hedging activities in Other income (loss). Purchased interest rate “caps” at December 31, 2007 and 2006 aggregated $1.2 billion, and were accounted for as economic hedges of “capped” variable-rate advances borrowed by members, and not qualifying for hedge accounting under the provisions of SFAS 133.

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 provisions of SFAS 133.

Reported book value at December 31, 2007 included net unrealized gains of $1.5 billion resulting from fair value hedge basis adjustments under SFAS 133 hedge accounting rules, compared to unrealized gains of $23.2 million at December 31, 2006. Fair value basis of previously recorded realized gains and losses from discontinued hedges, net of amortization, was not material. 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. Two factors explain the changes at December 31, 2007 from December 31, 2006. First, interest rates declined dramatically at December 31, 2007 compared to December 31, 2006, the two fair value measurement dates, and since hedged advances are typically fixed-rate, in a declining interest rate environment, fixed-rate advances exhibited increasing fair value basis adjustments. Second, hedge volume increased in line with the very significant growth of hedged fixed-rate advances, both putable and non-putable (“bullet”).

The benchmark LIBOR rate has been particularly volatile in 2007. Fair value changes are typically from changes in the term structure of medium- and short-term rates, from changes in volatilities of such rates, and from the growth or decline in hedge volume. As a result, fair value basis adjustments exhibited significant changes at each quarter end in 2007, and were consistent with the changes in the term structure of interest rates and changes in volatilities in 2007.

• At June 30, 2007, recorded fair basis adjustment was a net unrealized loss of $170.7 million, a change from a net gain position of $132.5 million at March 31, 2007. At June 30, 2007, the yield curve had steepened compared to March 31, 2007, with higher rates at the longer-end of the yield curve. Since hedged advances are typically fixed-rate and long in tenor, in a rising rate environment, fixed-rate advances exhibited declining fair value basis adjustments under the accounting provisions of SFAS 133, and was consistent with the net unrealized loss of $170.7 million at June 30, 2007.

• At September 30, 2007, fair value basis was a net gain of $521.4 million, a dramatic change from the amount at June 30, 2007. At December 31, 2007, fair value basis adjustment net gains increased to $1.5 billion. These changes are consistent with the changes in the declining term structure of interest rates during 2007. In a declining interest rate environment in the fourth quarter of 2007, the fair values of the Bank’s hedged advances, which were almost entirely fixed-rate, exhibited gains under the accounting provisions of SFAS 133. Hedge volume was up significantly in line with growing demand for advances. The Bank had hedged $47.0 billion of par amounts of advances at December 31, 2007, up significantly from $35.6 billion at December 31, 2006.

• The two factors, decline in the rate environment and significant increase in volumes of hedged fixed-rate advances at December 31, 2007 explain the changes at year-end 2007.

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Hedge ratio - Hedged amounts represented 58.3% and 60.3% of total par amounts of advances hedged at December 31, 2007 and 2006. The small decline in the percentage of hedged advances to total advances is ascribed to disproportionate growth at December 31, 2007 in ARC Advances and Short-Term advances which are typically not hedged.

Advances – Call Date

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 (in thousands).

	December 31,
	2007			2006
Overdrawn demand deposit accounts	$	—		$	498
Due or putable in one year or less		48,005,147			29,962,181
Due or putable after one year through two years		16,112,362			16,745,798
Due or putable after two years through three years		7,546,243			6,341,532
Due or putable after three years through four years		2,607,563			2,504,205
Due or putable after four years through five years		4,180,492			1,668,578
Due or putable after five years through six years		121,095			442,706
Thereafter		2,019,152			1,323,772
Total par value		80,592,054			58,989,270
Discount on AHP advances		(417	)		(519	)
Net premium on advances		—			489
SFAS 133 hedging basis adjustments		1,498,030			23,154
Total	$	82,089,667		$	59,012,394

Contrasting advances by contractual maturity dates with potential put dates, illustrates the impact of hedging on the effective durations of the Bank’s advances. 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, 2007, the amount of advances that were still putable (one or more exercise dates) was $38.8 billion at December 31, 2007 compared to $28.9 billion at December 31, 2006. Typically, almost all putable advances are hedged by callable interest rate swaps in which the derivative counterparty has the right to exercise and terminate the swap at par at agreed upon dates. When the swap counterparty exercises its right to call the swap, the Bank would typically also exercise its right to terminate the advance at par.

Under current 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.

On a contractual maturity basis (see advance maturities table), 39.5% or $31.9 billion of the par value of advances at December 31, 2007 were in the maturity band of two years or less. On a put option basis, the potential exercised maturity was significantly accelerated, and 79.6% or $64.1 billion were potentially exercisable within the maturity band of two years or less.

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At December 31, 2006, some 41.9%, or $24.7 billion of the par value of advances were in the maturity band of two years or less based on contractual maturity. On a put option basis, the potential exercised maturity was significantly accelerated 79.3% or $46.7 billion were potentially putable by the Bank.

The most significant impact of put options was in the maturity band of greater than five years. At December 31, 2007, the percentage of par advances maturing on a contractual basis was $30.9 billion, or 38.3% of total par advances. On an option exercise basis, the percentage greater than five years declined to only $2.1 billion, or 2.7%. At December 31, 2006, the percentage of par advances maturing on a contractual basis was $21.8 billion, or 37.0% compared to 3.1% on a putable basis.

Advances – Interest Rate Terms

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

	December 31,
	2007						2006
				Percentage						Percentage
	Amount			of total			Amount			of total
Fixed-rate	$	60,779,510			75.42	%	$	45,737,308			77.53	%
Variable-rate		18,654,850			23.15			12,014,268			20.37
Variable-rate capped		1,157,694			1.43			1,237,694			2.10
Total par value		80,592,054			100.00	%		58,989,270			100.00	%
Discount on AHP Advances		(417	)					(519	)
Net premium on advances		—						489
SFAS 133 hedging basis adjustments		1,498,030						23,154
Total	$	82,089,667					$	59,012,394

Fixed-rate borrowings remained popular with members, although the percentage declined and member demand for adjustable-rate LIBOR-based funding increased. A significant percentage of fixed-rate advances were swapped, effectively converting the fixed-rate advances into variable rate LIBOR-indexed advances. Variable-rate capped advances were also popular with some members who purchased cap options from the FHLBNY to limit their interest exposure in a rising rate environment. The FHLBNY had offsetting purchased cap options that mirrored the terms of the caps sold to members, eliminating the FHLBNY’s exposure. Variable-rate advances were mainly indexed to LIBOR.

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

	December 31,
	2007		2006
LIBOR indexed	$	19,487,194	$	12,736,114
Federal funds		325,000		515,000
Overdrawn demand deposit accounts		—		498
Prime		350		350
Total	$	19,812,544	$	13,251,962

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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 and private enterprises, and securities issued by state or local housing finance agencies. Mortgage- and asset-backed securities (“MBS”) 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 Board regulations prohibit the FHLBanks, including the FHLBNY, from investing in certain types of securities and limit the investment in mortgage- and asset-backed securities. These restrictions and limits are set out in more detail in the section captioned “Investments” under Item 1. Business of this MD&A.

Short-term investments - The FHLBNY maintains substantial investments in high-quality, short- and intermediate-term financial instruments. At December 31, 2007 and 2006, the FHLBNY’s short-term investments consisted of investment in interest-bearing deposits, certificates of deposits, and overnight and term Federal funds sold by highly-rated financial institutions. The Bank invests in certificates of deposits with maturities not exceeding one year issued by major financial institutions, recorded at amortized cost and reported as interest-bearing deposits in the statements of condition. Interest-bearing deposits were cash pledged to derivative counterparties to meet collateral requirements.

Long-term investments - At December 31, 2007 and 2006, long-term investments comprised of MBS, which also includes asset-backed securities, and investment in securities issued by state and local housing agencies. Both investment portfolios were classified as held-to-maturity securities as defined under SFAS 115, “Accounting for Certain Investments in Debt and Equity Securities.” Two grantor trusts were established in the third quarter of 2007 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 under the provisions of SFAS 115.

Mortgage-backed securities – Insurer risks and ratings and securities supported by loans with low FICO scores and high loan-to-value ratios. - For a detailed discussion and analysis of insured MBS securities, and securities supported by loans with low FICO scores and high loan-to-value (“LTVs”) ratios, see Investment Quality in the section captioned Asset Quality in this MD&A.

The following table summarizes changes in investments by categories (including held-to-maturity securities) between December 31, 2007 and 2006 (dollars in thousands):

	December 31,		December 31,		Dollar			Percentage
	2007		2006		Variance			Variance
State and local housing agency obligations	$	576,971	$	618,810	$	(41,839	)		(6.76)	%
Mortgage-backed securities		9,707,783		10,632,288		(924,505	)		(8.70	)
Total investment securities		10,284,754		11,251,098		(966,344	)		(8.59	)
Grantor trusts		13,187		—		13,187			n/a
Interest-bearing deposits *		10,696,600		5,591,000		5,105,600			91.32
Federal funds sold		4,381,000		3,661,000		720,000			19.67
Total investments	$	25,375,541	$	20,503,098	$	4,872,443			23.76	%

* Excludes bank deposits at another FHLBank.

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Held-to-maturity securities

Market value of held-to-maturity securities was as follows (in thousands):

	December 31, 2007
			Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
State and local housing agency obligations	$	576,971	$	9,780	$	(200	)	$	586,551
Mortgage-backed securities		9,707,783		82,670		(97,191	)		9,693,262
Total	$	10,284,754	$	92,450	$	(97,391	)	$	10,279,813

	December 31, 2006
			Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
State and local housing agency obligations	$	618,810	$	11,141	$	(283	)	$	629,668
Mortgage-backed securities		10,632,288		47,184		(139,371	)		10,540,101
Total	$	11,251,098	$	58,325	$	(139,654	)	$	11,169,769

Held-to-maturity securities were comprised of agency and privately issued mortgage, including commercial mortgage- and asset-backed securities, collectively referred to as “MBS” that were rated triple-A by both S&P and Moody’s, and mortgage-pass-throughs and Real Estate Mortgage Investment Conduit bonds issued by government sponsored mortgage agencies. Investment in mortgage-backed securities provides a reliable income stream. Limits for the size of the MBS portfolio are defined by Finance Board regulations, which limits holding of MBS to 300% of capital. At December 31, 2007 and 2006, the Bank was within these limits.

In addition, the FHLBNY had investments in primary public and private placements of taxable obligations of state and local housing finance authorities (“HFA”) also classified as held-to-maturity that were rated at least “Aa” by Moody’s or “AA” by S&P at December 31, 2007.

At December 31, 2007, held-to-maturity securities declined to $10.3 billion, compared to $11.3 billion at December 31, 2006.

Mortgage-backed securities - Fixed-rate MBS totaled $9.5 billion at December 31, 2007 down from $10.4 billion at December 31, 2006. Variable-rate MBS was $209.0 million at December 31, 2007 down from $274.5 million at December 31, 2006. The Bank’s conservative purchasing practice over the years is evidenced by its concentration in mortgage-backed securities issued by a Government Sponsored Enterprises (“GSE”). The amount of such securities outstanding was $6.9 billion at December 31, 2007 and 2006. They represented 70.4% and 65.1% of all MBS at December 31, 2007 and 2006. All MBS were rated triple-A at December 31, 2007 and 2006.

Housing finance agency bonds - Investment in HFA bonds was $577.0 million at December 31, 2007, down from $618.8 million at December 31, 2006. No acquisitions were made during 2007 or 2006. Investments in state and local housing finance bonds help to fund mortgages that finance low- and moderate-income housing. These obligations carried a rating of double-A or higher.

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Securities and insurer ratings downgrades – The following summarizes rating actions in January and February of 2008.

• In January 2008, three mortgage-backed securities, with amortized cost of $86.8 million and a market value $81.9 million at December 31, 2007, were downgraded by Fitch Investor Services to double-A. Both S&P and Moody’s continued to rate the securities as triple-A. The three securities are insured by Ambac Assurance Corp. (“Ambac”). On February 25, 2008, S&P reaffirmed Ambac’s rating as triple-A with negative watch. Additionally, 13 mortgage-backed securities, with amortized cost of $267.2 million and market value $260.0 million at December 31, 2007, were placed under negative watch by both S&P and Moody’s. These securities are insured by Ambac and MBIA Insurance Corp. (“MBIA”). On February 25, 2008, S&P also reaffirmed MBIA’s rating as triple-A with negative outlook. Between February 28, 2008 and March 14, 2008, all three rating agencies, S&P, Moody’s and Fitch, removed the 13 securities from negative watch. S&P and Moody’s reaffirmed their triple-A rating. Fitch reaffirmed its double-A rating.

• Investments in two bonds issued by state and local housing finance agencies were also placed under negative watch by S&P and Moody’s in February 2008. The two bonds are insured by MBIA. Amortized cost and market values of the two bonds was $110.6 million at December 31, 2007.

The Bank has analyzed these securities as well as all its investments in MBS in light of the prevailing market conditions and believes impairment, if any, is only temporary. The management of the FHLBNY has the positive intent to hold the securities to their ultimate recovery of value, and the Bank has the financial ability to hold all such securities to their ultimate recovery of value.

Fair values of held-to-maturity securities

The estimated fair values of held-to-maturity securities at December 31, 2007 were based on a reputable securities dealer’s pricing service. At December 31, 2006, the estimated fair values of a limited number of securities were derived from prices of similar securities in instances where a pricing service was not available. At December 31, 2007 and 2006, estimated fair values of fixed-rate securities were affected by changes in market interest rates and the FHLBNY generally views changes in fair value caused by changes in interest rates as temporary, which is consistent with the FHLBNY’s experience.

MBS securities - At December 31, 2007, the market value of all held-to-maturity mortgage-backed was below amortized cost by $14.5 million, representing net market value losses. Total market value losses were $97.2 million, partly offset by market value gains of $82.7 million at December 31, 2007. At December 31, 2006, the net market value loss was $92.2 million. In a declining rate environment at December 31, 2007, the Bank’s MBS portfolio, which is primarily fixed-rate, exhibited rate related gains.

Gross unrealized losses of MBS securities that were in an unrealized loss position of 12 months or more aggregated $55.7 million, or 57.4% of the total gross unrealized losses of $97.2 million at December 31, 2007. At December 31, 2006, gross unrealized losses of held-to-maturity MBS securities that were in an unrealized position of 12 months or more aggregated $132.2 million. The Bank has analyzed the securities in an unrealized loss position, and concluded that these securities were temporarily impaired as defined under FSP 115-1, “The Meaning of Other-Than-Temporary Impairment and its Application to Certain Investments” (“FSP 115-1”). See Note 5 to audited financial statements.

Housing finance agency bonds - HFA bonds were in a net unrealized gain position of $9.6 million, compared $10.9 million at December 31, 2006. Gross unrealized losses of HFA bonds that were in an unrealized loss position of 12 months or more aggregated $0.2 million and $0 at December 31, 2007 and 2006.

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The FHLBNY conducts a review and evaluation of the securities portfolio to determine, based on the creditworthiness of the securities and including any underlying collateral and/or insurance provisions of the security, if the decline, if any, in the fair value of a security below its carrying value is other than temporary. The FHLBNY generally views changes in fair value caused by changes in interest rates as temporary, which is consistent with the FHLBNY’s experience. Based on analysis of its investment securities, the Bank has concluded that there was no other-than-temporary impairment. Fair values below their carrying values represented temporary impairment at December 31, 2007 and 2006. The FHLBNY has both the intent and financial ability to hold the temporarily impaired securities until recovery of their value.

For more information about investments, also see “Investment Quality” under the caption Asset Quality in this MD&A.

Contractual maturities – Mortgage-backed securities

The amortized cost and estimated fair values of held-to-maturity securities by contractual maturity are shown below (in thousands). Expected maturities of certain securities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment fees.

	December 31, 2007				December 31, 2006
	Amortized		Estimated		Amortized		Estimated
	Cost		Fair Value		Cost		Fair Value
State and local housing bonds
Due in one year or less	$	—	$	—	$	—	$	—
Due after one year through five years		32,009		32,474		24,549		25,171
Due after five years through ten years		20,400		20,938		17,115		17,115
Due after ten years		524,562		533,139		577,146		587,382
State and local housing finance agency bonds		576,971		586,551		618,810		629,668
Mortgage-backed securities
Due in one year or less		243,309		242,471		98,897		99,338
Due after one year through five years		546,303		555,003		1,104,246		1,125,038
Due after five years through ten years		103,792		104,563		133,511		132,966
Due after ten years		8,814,379		8,791,225		9,295,634		9,182,759
Mortgage-backed securities		9,707,783		9,693,262		10,632,288		10,540,101
Total securities	$	10,284,754	$	10,279,813	$	11,251,098	$	11,169,769

Weighted average rates – Mortgage-backed securities

The following table summarizes weighted average rates by contractual maturities (dollars in thousands):

	December 31, 2007					December 31, 2006
	Amortized		Weighted			Amortized		Weighted
	Cost		Average rate			Cost		Average rate
Mortgage-backed securities
Due in one year or less	$	243,309		6.22	%	$	98,897		5.80	%
Due after one year through five years		546,303		7.15			1,104,246		6.75
Due after five years through ten years		103,792		5.43			133,511		5.43
Due after ten years		8,814,379		5.31			9,295,634		5.35
Total mortgage-backed securities	$	9,707,783		5.44	%	$	10,632,288		5.50	%

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Short-term investments

High quality short-term investments such as Federal funds and certificates of deposits were held at December 31, 2007 and 2006, and provided the liquidity necessary to meet members’ credit needs. Both short- and long-term investments are used by the FHLBNY to employ its capital and generate additional returns for its members’ investment in FHLBNY capital. Short-term investments were higher at December 31, 2007, compared to December 31, 2006, and provided a flexible means of implementing the asset-liability management decision to increase liquidity.

Federal funds sold - Inventory of Federal funds sold was $4.4 billion, up from $3.7 billion at December 31, 2006. The average inventory of Federal funds sold was $3.7 billion in 2007, up from $2.9 billion in 2006. 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.

Certificates of deposits - At December 31, 2007, certificates of deposits at highly-rated financial institutions, all maturing within 12 months or less, were $10.3 billion, up from $5.6 billion at December 31, 2006. Average investment in 2007 was $7.6 billion, compared to $5.9 billion in 2006. Starting in September 2007, the Bank took advantage of favorable execution funding levels of discounts notes and issued short-term discount notes and immediately invested in certificates of deposits for the same amount and maturity and locked in a favorable spread.

Cash collateral pledged - The FHLBNY generally executes derivatives with major banks and broker-dealers and typically enters into bilateral collateral agreements. When counterparties are exposed, the Bank’s derivatives are in a net unrealized loss position, and the Bank would be called upon to pledge cash collateral to mitigate the counterparties’ credit exposure. Collateral agreements in place include certain thresholds and pledge requirements that are generally triggered if exposures exceed the agreed upon thresholds. As of December 31, 2007, the Bank had pledged $396.4 million in interest-bearing deposits to derivative counterparties. Typically, such pledges earn interest at the overnight Federal funds rate. At December 31, 2006, no cash had been required to be pledged by the Bank.

Investments - Counterparty ratings, policies and practices

Mortgage-backed securities - At December 31, 2007 and 2006, all mortgage-backed securities held by the FHLBNY were rated triple-A by a Nationally Recognized Statistical Rating Organization (“NRSRO”). See prior discussions with respect to downgraded securities and securities under “negative watch”.

State and local housing finance agency bonds - At December 31, 2007 and 2006, the percentage of state and housing finance agency bonds that were rated triple-A was 47.0% and 47.6% at December 31, 2007 and 2006. The remaining securities were rated double-A. See prior discussions with respect to securities under “negative watch”.

Short-term instruments - At December 31, 2007, substantially all short-term investments were to financial institutions that were rated single A or better.

Derivative counterparties - The Bank had open derivatives positions with eighteen derivatives counterparties, of which fourteen were rated double-A; one rated triple-A, and another three were rated single-A. In addition to the practice of selecting top-rated counterparties for such transactions, the FHLBNY has collateral and netting agreements with its derivatives counterparties. These practices tend to mitigate credit exposure.

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Finance Board 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. Finance Board regulations further limit the mortgage-backed 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 held-to-maturity securities consisted of mortgage-backed and residential asset-backed securities, and housing finance agency bonds.

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. The FHLBNY’s practice is to not lend to members unsecured funds, including overnight Federal funds sold and certificates of deposits, to members. Unsecured lending to members is not prohibited by Finance Board 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 at December 31, 2007 or 2006.

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.

Mortgaged-backed securities – By issuer

Composition of FHLBNY’s mortgage-backed securities was as follows (in thousands):

	December 31,
	2007		2006
U.S. government sponsored enterprise residential mortgage-backed securities	$	6,829,668	$	6,851,964
U.S. agency residential mortgage-backed securities		7,482		9,061
Securities backed by home equity loans		792,617		1,043,110
Non-federal agency residential mortgage-backed securities		729,331		857,321
Non-federal agency commercial mortgage-backed securities		1,087,713		1,563,489
Securities backed by manufactured housing loans		260,972		307,343
Total mortgage-backed securities	$	9,707,783	$	10,632,288

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Investment Ratings

The following table sets forth the FHLBNY’s investments by rating category at December 31, 2007 (in thousands):

			NRSRO Ratings- December 31, 2007
Issued, guaranteed or insured by:	Amount		AAA		AA		A
Pools of Mortgages
Fannie Mae	$	1,588,563	$	1,588,563	$	—	$	—
Freddie Mac		488,237		488,237		—		—
Total pools of mortgages		2,076,800		2,076,800		—		—
Collateralized Mortgage Obligations/Real Estate Mortgage Investment Conduits
Fannie Mae		1,548,318		1,548,318		—		—
Freddie Mac		3,204,550		3,204,550		—		—
Ginnie Mae		7,482		7,482		—		—
Total CMOs/REMICs		4,760,350		4,760,350		—		—
Non-GSE MBS
CMOs/REMICs		729,331		729,331		—		—
Commercial mortgage-backed securities		1,087,713		1,087,713		—		—
Total non-federal-agency MBS		1,817,044		1,817,044		—		—
Asset-Backed Securities
Manufactured housing (insured)		260,972		260,972		—		—
Home equity loans (insured)		457,294		457,294		—		—
Home equity loans (uninsured)		335,323		335,323		—		—
Total asset-backed securities		1,053,589		1,053,589		—		—
Total mortgage-backed securities	$	9,707,783	$	9,707,783	$	—	$	—
Non-MBS Investment securities
State and local housing finance agency obligations	$	576,971	$	271,252	$	305,719	$	—
Short-term Investments*
Interest-bearing deposits	$	10,696,687
Federal funds sold		4,381,000
Total Short-term investments	$	15,077,687

* Short-term investments were placed with counterparties with ratings that were single-A or better at December 31, 2007.

In January, 2008, Fitch Investor Services (“Fitch”) downgraded Ambac Assurance Corp (“Ambac”) to double-A with negative watch. As a result, three mortgage-backed securities, insured by Ambac with amortized cost of $86.8 million and market value of $81.9 million at December 31, 2007, were downgraded by Fitch to double-A with negative watch. S&P does not rate one of the securities, and continues to rate the two remaining securities as triple-A. Moody’s continues to rate all three securities as triple-A. In addition, S&P and Moody’s placed Ambac and MBIA Insurance Corp., (“MBIA”) under negative watch in January, 2008 so that thirteen mortgage-backed securities, with amortized cost of $267.2 million and market value of $260.0 million at December 31, 2007 that are insured by Ambac and MBIA, were placed on negative watch. Between February 25, 2008 and March 12, 2008, S&P and Moody’s removed the 13 securities from negative watch, and reaffirmed these securities as triple-A. Fitch also reaffirmed its double-A rating to the three securities and removed the negative watch. S&P and Moody’s reaffirmed MBIA as triple-A with negative outlook on February 25 and February 26, 2008. Both S&P and Moody’s reaffirmed Ambac as triple-A with negative outlook on March 12, 2008.

Investments in two bonds issued by state and local housing finance agencies were also placed under negative watch by S&P and Moody’s in January 2008. The two bonds are insured by MBIA. Amortized cost and market values of the two bonds were $110.6 million at December 31, 2007.

The Bank has analyzed these securities as well as all its investments in MBS in light of the prevailing market conditions and believes impairment, if any, is only temporary. The management of the FHLBNY has the positive intent to hold the securities to their ultimate recovery of value, and the Bank has the financial ability to hold all such securities to their ultimate recovery of value.

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The following table sets forth the FHLBNY’s investments by rating category at December 31, 2006 (in thousands):

			NRSRO Ratings- December 31, 2006
Issued, guaranteed or insured by:	Amount		AAA		AA		A
Pools of Mortgages
Fannie Mae	$	2,060,642	$	2,060,642	$	—	$	—
Freddie Mac		1,138,687		1,138,687		—		—
Total pools of mortgages		3,199,329		3,199,329		—		—
Collateralized Mortgage Obligations/Real Estate Mortgage Investment Conduits
Fannie Mae		1,351,084		1,351,084		—		—
Freddie Mac		2,301,550		2,301,550		—		—
Ginnie Mae		9,061		9,061		—		—
Total CMOs/REMICs		3,661,695		3,661,695		—		—
Non-GSE MBS
CMOs/REMICs		857,321		857,321		—		—
Commercial mortgage-backed securities		1,563,489		1,563,489		—		—
Total non-federal-agency MBS		2,420,810		2,420,810		—		—
Asset-Backed Securities
Manufactured housing (insured)		307,344		307,344		—		—
Home equity loans (insured)		595,397		595,397		—		—
Home equity loans (uninsured)		447,713		447,713		—		—
Total asset-backed securities		1,350,454		1,350,454		—		—
Total mortgage-backed securities	$	10,632,288	$	10,632,288	$	—	$	—
Other
State and local housing finance agency obligations	$	618,810	$	294,322	$	324,488	$	—
Interest-bearing deposits		5,591,077		5,591,000		77		—
Federal funds sold		3,661,000		3,661,000		—		—
Total other	$	9,870,887	$	9,546,322	$	324,565	$	—

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Mortgage Loans

Mortgage loans held-for-portfolio

At December 31, 2007, 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 book value of investments in the MPF program was $1.5 billion at December 31, 2007, a net increase of $9.1 million from the amounts outstanding at December 31, 2006. During 2007, the Bank added $175.1 million in new MPF loans. In 2006, the FHLBNY acquired $184.9 million in new MPF loans. The FHLBNY does not expect the MPF loans to increase substantially, and the Bank provides this product to its members as another alternative for its members to sell their mortgage production. Included in the portfolio of MPF loans held-for-portfolio were $40.5 million and $45.7 million in loans at December 31, 2007 and 2006 that had been “table-funded” and therefore considered as originated by the Bank. In a table-funded loan 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 restricted originations (table funding) to only 3 PFIs in 2007 and 2006.

CMA Program - The book value of investment in the CMA program, which has not been active since 2001 and has been declining steadily over time, was $4.1 million at December 31, 2007, down by $0.8 million from December 31, 2006.

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Mortgage loans by loan type

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

	December 31,
	2007			Percentage			2006			Percentage
Real Estate:
Fixed medium-term single-family mortgages	$	529,839			35.61	%	$	575,114			38.90	%
Fixed long-term single-family mortgages		953,946			64.11			897,153			60.70
Multi-family mortgages		4,102			0.28			4,940			0.40
Total par value		1,487,887			100.00	%		1,477,207			100.00	%
Unamortized premiums		11,779						13,323
Unamortized discounts		(6,805	)					(6,288	)
Basis adjustment 1		(600	)					(230	)
Total mortgage loans held-for-portfolio		1,492,261						1,484,012
Allowance for credit losses		(633	)					(593	)
Total mortgage loans held-for-portfolio after allowance for credit losses	$	1,491,628					$	1,483,419

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

Mortgage loans – Conventional and insured loans.

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

	December 31,
	2007		2006
Federal Housing Administration and Veteran Administration insured loans	$	8,360	$	10,643
Conventional loans		1,475,425		1,461,624
Others		4,102		4,940
Total par value	$	1,487,887	$	1,477,207

Mortgage loans – credit losses

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

	Year ended December 31,
	2007		2006			2005
Beginning balance	$	593	$	582		$	507
Charge-offs		—		(18	)		—
Recoveries		—		18			—
Net charge-offs		—		—			—
Provision for credit losses		40		11			75
Ending balance	$	633	$	593		$	582

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Deposit Liabilities

Deposits liabilities comprised of member deposits and interest-bearing deposits pledged to the Bank as cash collateral by derivative counterparties 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. Total deposits at December 31, 2007, including demand and term, aggregated $1.6 billion down from $2.4 billion at December 31, 2006. Member deposits have fluctuated during the three quarters in 2007, averaging $1.8 billion in the first quarter, $2.7 billion in the second quarter, $2.6 billion in the third quarter, and $1.8 billion in the fourth quarter. Fluctuations in member deposits have little impact on the Bank and are not a significant source of liquidity for the Bank.

Cash collateral held and classified as interest-bearing liabilities - Cash collateral pledged to the FHLBNY by derivative counterparties at December 31, 2007 was $41.3 million compared to $124.0 million at December 31, 2006. These deposits are interest-bearing demand deposits that reprice daily based principally upon rates prevailing in the overnight Federal funds market. Derivative counterparties are required by agreement to pledge collateral to the FHLBNY to cover the FHLBNY’s credit exposure in the event of counterparty default. At December 31, 2007 and 2006, the FHLBNY’s exposure was represented by derivatives in an unrealized gain position, after giving effect to threshold triggers under collateral agreements with derivative counterparties.

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, 2007 and 2006. In the third quarter of 2007, the Bank borrowed $100.0 million for one day. In the first nine months of 2007, there were two overnight transactions of $20.0 million and $100.0 million. In the fourth quarter, there were four overnight transactions for one day of $147.0 million, $55.0 million, $40.0 million and $300.0 million. 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 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 Board. 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. 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 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 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.

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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 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- or fixed-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

In 2007 and 2006, the primary source of funds for the FHLBNY continued to be through issuance of consolidated obligation bonds and discount notes.

Reported amounts of consolidated obligations outstanding, comprising of bonds and discount notes, at December 31, 2007 and 2006 were $101.1 billion and $74.2 billion, and funded 92.2% and 90.8% 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 to rely on FHLBank debt for financing its activities.

Increase in funding requirements to finance the surge in member demand for advances in the third and fourth quarters of 2007 was principally through the issuance of discount notes and to a lesser extent through the issuance of bonds. To accommodate member demand for advances and to support higher balance sheet liquidity through increased investments in short-term investments, the issuance of FHLBank debt increased quite dramatically in 2007. Total debt was $74.8 billion at March 31, 2007, grew to $78.6 billion at June 30, 2007, before the recent market turmoil. At the end of the third quarter of 2007, debt outstanding was $93.1 billion, a dramatic increase over a single quarter. At year end 2007, debt outstanding grew to $101.1 billion.

Investor demand for FHLBank debt - Market demand for FHLBank consolidated obligation debt remained strong with local and global investors permitting the FHLBNY to issue debt at its targeted funding costs through the first two quarters of 2007, and for its shorter-term debt issuances, better than targeted funding costs in the third and fourth quarters of 2007. In the third and fourth quarters of 2007, execution of FHLBank long-term debt was also affected by the credit uncertainties and despite the triple-A quality ascribed to the FHLBank bonds, investor demand was stronger for shorter-term issuances and in particular for discount notes. Demand drove down yields on discount notes making them an attractive funding vehicle. Reacting to investor demand and attractive discount note pricing, the FHLBNY increased its issuance of discount notes. Issuance volume as measured by average principal amounts outstanding was $13.3 billion and $13.1 billion in the first and second quarters of 2007. In September 2007, the average for the month rose to $24.5 billion and the average for the fourth quarter was $32.8 billion.

Funding tactical changes - Several tactical changes were made in response to member demand for liquidity in the third quarter of 2007 and continuing demand through the fourth quarter of 2007. Tactical adjustments also factored in strong investor demand for shorter-term FHLBank debt and discount notes in the same periods. The two principal tactical funding strategy changes employed in executing issuances of debt were:

• First, in response to market demand for shorter-term debt, the Bank increased its issuance of discount notes which have maturities from overnight to 365 days. Issuance pattern of discount notes was uneven during the quarters in 2007, a reflection of the dramatic changes in the capital markets starting in the third quarter of 2007. Discount notes outstanding at December 31, 2006 were $12.2 billion, increased

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to $14.0 billion at March 31, 2007, but were down to $12.8 billion at June 30, 2007 when discount note issuances were at unattractive execution levels. In the third quarter, in response to investor demand for liquidity in general and specifically for short-term liquidity, the Bank increased its issuance of discount notes and outstanding balances grew to $30.1 billion at September 30, 2007. Investor demand for discount notes continued through the fourth quarter and remained at favorable execution levels for the FHLBNY. Discount notes issued by the FHLBNY and outstanding reached a record level at $34.8 billion at December 31, 2007.

•

Second, the Bank also increased its issuance of shorter-maturity bonds to replace maturing debt or debt that was being called by the Bank at pre-determined call exercise dates. Investor demand for shorter-term debt resulted in better execution pricing for issuing FHLBanks, and the FHLBNY increased its issuance of discount notes at very favorable spreads to LIBOR and improved the Bank’s cost of funding. In the same period of time, member demand for ARC Advances, which reprice at short intervals, and member demand for short-term advances also saw unprecedented growth, and the Bank was able to issue short-term debt and finance short-term advances and ARC advances efficiently.

Debt extinguishment - In 2007, the Bank extinguished $626.2 billion of par amounts of consolidated obligation bonds at a loss of $8.6 million. In 2006, the FHLBNY repurchased par amounts of $770.0 million of consolidated obligation bonds at a loss of $26.3 million. Bonds extinguished were primarily associated with the financing of advances and MBS that had been prepaid.

Consolidated obligation bonds

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

	December 31,
	2007			2006
Fixed-rate, non-callable	$	39,642,670		$	37,328,640
Fixed-rate, callable		11,420,300			17,039,000
Step Up, non-callable		—			50,000
Step Up, callable		843,000			3,688,000
Step Down, non-callable		—			—
Step Down, callable		15,000			—
Single-index floating rate		14,135,000			4,100,000
Total par value		66,055,970			62,205,640
Bond premiums		38,586			23,334
Bond discounts		(28,529	)		(33,300	)
SFAS 133 fair value basis adjustments		259,405			(151,222	)
Fair value basis adjustments on terminated hedges		385			(1,777	)
Total bonds	$	66,325,817		$	62,042,675

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Funding Mix

The Bank issues bonds and discount notes in a mix of issuances to achieve its asset/liability management goals.

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.

In prior years, the use of term discount notes generally 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 callable interest rate swaps. Hedge ratio, or the percentage of debt hedged versus debt not hedged, and the mix between the use of non-callable and callable interest rate swaps to hedge bonds reflects the Bank’s balance sheet management preferences and the attractiveness of the pricing of callable 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 the third quarter of 2007 and through the fourth quarter, the Bank increased its holdings of term discount notes mainly because of very favorable investor demand and pricing for the Bank. As discussed previously, the Bank was able to issue term discount notes at favorable spreads to LIBOR and invest in equivalent tenor certificates of deposits and lock in favorable margin. Still, consolidated obligation bonds remained the primary financing basis for the FHLBNY. The Bank executes interest rate swaps for a significant percentage of its fixed-rate debt and almost all its step- up and step-down debt, effectively converting the fixed-rate debt to LIBOR-indexed debt.

Fixed-rate non-callable bonds - Fixed-rate non-callable bonds, also referred to as “bullet bonds”, as a percentage of total par amount of debt outstanding at the quarter end dates in 2007 was almost unchanged, at 57.0% to 58.0% through most of 2007 and increased slightly to 60.0% at December 31, 2007, about the same ratio at December 31, 2006.

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.

Pricing of non-callable FHLBank bonds was uneven over all of the quarters in 2007. During the first six months of 2007, the Bank increased its issuance of fixed-rate non-callable bonds because of favorable execution levels and asset liability management goals. As a result, the par amount of non-callable debt outstanding grew to $38.3 billion at June 30, 2007, up from $37.3 billion at December 31, 2006. In the third quarter, long- and medium-term FHLBank bond execution prices were also affected by the credit uncertainty in the markets. Despite the triple-A quality ascribed to the consolidated obligation bonds, investor demand was relatively stronger for shorter-term debt and discount notes, and market turmoil drove investors into shorter duration investments and floating rate debt which reset periodically based on prevailing market rates, which made them an attractive choice for investors. The FHLBNY reacted by reducing issuances of long-term non-callable bonds, and the par amount of bullet bonds outstanding declined to $35.9 billion at September 30, 2007. In the third quarter of 2007, execution levels improved for bullet bonds and in some instances, the spread to 3-month LIBOR was either at or better than the pre-crises levels in the third quarter of 2007. In reaction to market conditions, but principally to satisfy the Bank’s balance sheet management goals, the issuance of bullet bonds increased in the fourth quarter and outstanding amount grew to $39.6 billion at December 31, 2007.

Fixed-rate callable bonds - 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. 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.

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Execution levels and spreads on a swapped out basis was favorable for the issuance of fixed-rate callable bonds during most of the first two quarters of 2007 and the Bank increased issuances of fixed-rate callable debt. As a result, the percentage of par amounts of fixed-rate callable debt outstanding compared to total debt outstanding grew to 29.0% s at the end of the first and second quarters of 2007, up from 27.4% at December 31, 2006. Since then, spreads to both U.S. Treasury securities and LIBOR widened further in the middle of the third quarter of 2007 and the unfavorable trend continued through the fourth quarter. Execution levels and spreads in the fourth quarter of 2007 were such that the issuance of callable debt was not as attractive as alternative funding strategies of either issuing discount notes or floating rate notes. In addition, declining rates have fueled callable bond redemptions in the fourth quarter of 2007 in association with the calls on the associated interest rate swaps. As a result, outstanding amounts of fixed-rate callable debt were allowed to decline as maturing or called bonds were not replaced by callable bonds. Total fixed-rate callable bonds outstanding, which had stood at $17.0 billion at December 31, 2006, and $18.3 billion at September 30, 2007, declined to $11.4 billion at December 31, 2007.

Callable debt and the associated interest rate swap that converts fixed-rate debt expense to LIBOR indexed funding, typically three-month LIBOR, provides funding for short-term assets. Call options on swapped bonds are typically exercised when the swap counterparty exercises its call option on the swap. Call options on unswapped bonds are generally exercised when the bond can be replaced at a lower economic cost. Thus, by issuing callable swaps with callable bonds, the Bank 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 Bank may also issue callable debt on an unswapped basis. Generally, the financing strategy is 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.

Floating-rate bonds - Floating-rate bonds have not been extensively used in prior years principally because of unfavorable pricing compared to the pricing of discount notes and callable-fixed-rate bonds with associated fixed-to-floating interest rate swaps. Issuance of floating-rate debt, indexed to LIBOR, increased in the third quarter of 2007 because of improved execution spreads and the desire to take advantage of forecasted decline in LIBOR rates. In the third quarter of 2007 and continuing through the fourth quarter, floating-rate bonds, which reset periodically with market rates, became an attractive choice for investors and dealers in the difficult market conditions. Increased investor appetite for floating-rate debt may also have been due to a “flight to quality” and an alternative investor choice in the recent market turmoil even from competing investments in highly-rated commercial paper.

Step-up bonds - The use of callable step-up bonds declined during the last two years as maturing and called step-up bonds were not replaced. Par amount of outstanding debt at December 31, 2007 was $0.8 billion, down from $3.7 billion at December 31, 2006. Redemption activity of callable step-up bonds increased in 2007 in association with the unwinding of hedges as the Bank honored calls by derivative counterparties on the associated interest rate swaps. Earlier in 2007, in a flat- to-inverted yield curve interest rate environment, step-up debt structure was relatively unattractive in the market place and market demand for step-up bonds was not strong. While the yield curve did steepen later in 2007, yields on step-up bonds remained unattractive to investors who continued to remain on the side-line for such structures. It is probable that the term structure of interest rates was still not steep enough to present attractive yields on callable, step-up bonds. 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.

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Consolidated obligation bonds – Maturity and coupons

The following is a summary of consolidated bonds outstanding by year of maturity (dollars in thousands):

	December 31,
	2007						2006
				Weighted						Weighted
				Average						Average
Maturity	Amount			Rate 1			Amount			Rate 1
One year or less	$	38,027,475			4.69	%	$	25,888,510			4.35	%
Over one year through two years		11,047,950			4.78			20,458,280			4.69
Over two years through three years		6,344,300			4.85			6,007,350			4.80
Over three years through four years		2,309,100			4.99			3,275,700			4.62
Over four years through five years		2,972,845			5.14			2,077,900			5.00
Over five years through six years		728,250			5.27			529,800			4.71
Thereafter		4,626,050			5.31			3,968,100			5.29
Total par value		66,055,970			4.80	%		62,205,640			4.60	%
Bond premiums		38,586						23,334
Bond discounts		(28,529	)					(33,300	)
SFAS 133 fair value basis adjustments		259,405						(151,222	)
Fair value basis adjustments on terminated hedges		385						(1,777	)
Total bonds	$	66,325,817					$	62,042,675

¹ Weighted average rate represents the weighted average coupons of bonds, unadjusted for swaps. The weighted average coupon of bonds outstanding at December 31, 2007 and 2006, represent contractual coupons payable to investors.

Bonds issued and outstanding at December 31, 2007 and 2006 were primarily medium-term. At December 31, 2007, 74.3% of par amounts of bonds had stated final maturities within two years, compared to 74.5% at December 31, 2006. Within three years, 83.9% of the par amounts of bonds would mature, compared to 84.2% at December 31, 2006. The virtually unchanged contractual maturity distribution of bonds outstanding at December 31, 2007 and 2006 is an indication of a stable funding strategy with respect to the issuance of consolidated obligation bonds.

The Bank hedges certain fixed-rate debt under the provisions of SFAS 133 by the use of both callable and non-callable interest rate swaps as fair value hedges. Under the Bank’s present practices, when a derivative counterparty exercises its right to call a swap at predetermined exercise date, the Bank terminates the bond by exercising its right to call the callable bond. Thus, when callable bonds are hedged by callable swaps, the possibility of exercise of the call shortened the expected maturity of the bond.

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Impact of hedging fixed-rate debt

The Bank hedges certain fixed-rate debt under the provisions of SFAS 133 by the use of both callable and non-callable interest rate swaps in a fair value hedge. The Bank also hedges anticipatory issuances of bonds under the provisions of “cash flow” hedging rules of SFAS 133.

Net interest accruals from SFAS 133 qualifying interest rate swaps are recorded together with interest expense of consolidated obligation bonds. Fair value changes of debt in a qualifying fair value hedge are recorded as a Net realized and unrealized gain (loss) on derivative and hedging activities in Other income (loss), and 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 SFAS 133 are recorded as a Net realized and unrealized gain (loss) on derivative and hedging activities in Other income (loss).

Derivative transactions are employed to hedge consolidated bonds in the following manner to achieve the following 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 match 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 with 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 hedge basis adjustments.

• Lowers 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 continued attractiveness of 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 elements that impacts balance sheet reporting of debt is the recording of fair value basis adjustments. Also, when callable bonds are hedged by callable 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 adjustments - The reported carrying values of hedged consolidated bonds are adjusted for changes in their fair value basis adjustments that are attributable to the risk being hedged in accordance with hedge accounting rules. The Bank hedges the risk of changes in the benchmark interest rate, which the Bank has designated as LIBOR.

Of the par amounts of $66.1 billion in bonds outstanding at December 31, 2007, the Bank had hedged $34.9 billion under SFAS 133 qualifying fair value hedges, and another $1.5 billion in economic hedges that were non-qualifying under the provisions of SFAS 133 but were an acceptable strategy under the Bank’s risk management guidelines. In addition, at December 31, 2007, the Bank had $127.5 million of notional amounts of interest-rate swaps to hedge the anticipated issuance of debt and to “lock in” a spread between the earning asset and cost of funding. Such hedges were accounted for as “cash flow” hedges under the provisions of SFAS 133.

In aggregate, the hedges represented a ratio of 55.2% of the total par amounts of bonds swapped at December 31, 2007. At December 31, 2006, the notional amount of swapped out debt that qualified for hedge accounting under SFAS 133 was $40.5 billion on total debt of $62.2 billion, representing 65.1% of total par amount of consolidated obligation bonds. Declining hedge ratio is explained by declining amounts of fixed-rate callable bonds, which typically constitute the largest percentage of hedged bonds. At December 31, 2007, the par amounts of fixed-rate callable bonds totaled $11.4 billion, down from $17.0 billion at December 31, 2006.

The reported carrying value of hedged consolidated bonds is adjusted for changes in their fair value basis adjustments that are attributable to the risk being hedged in accordance with hedge accounting rules. Amounts reported for consolidated obligation debt in the balance sheet included hedging fair value basis adjustments of $259.4 million, represented by net unrealized fair value basis losses at December 31, 2007. In contrast, at December 31, 2006 the fair value basis adjustments were unrealized gains of $151.2 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.

The yield curve at December 31, 2007 had shifted downward compared to December 31, 2006 for most tenors that were relevant to the Bank’s hedged debt portfolio. In a falling interest rate environment, fixed-rate debt exhibited fair value losses and the change was consistent with the observed down shift in the yield curve, especially in the short-end and the 2-3 year forward rates. The change in the fair value basis adjustment was due to significant changes in interest rates between those observed at December 31, 2007, and December 31, 2006.

Changes due to amortization of previously recorded realized gains and losses were not material. Unrealized gains associated with hedged debt were almost entirely offset by unrealized losses associated with the interest rate swaps that hedged the consolidated obligation bonds at December 31, 2007 and 2006.

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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 the Banks ‘s consolidated bonds outstanding by years to maturity or next call date (in thousands):

	December 31,
	2007			2006
Year of Maturity or next call date
Due or callable in one year or less	$	47,346,975		$	40,152,210
Due or callable after one year through two years		9,924,450			14,786,280
Due or callable after two years through three years		3,551,100			1,959,650
Due or callable after three years through four years		980,100			1,608,000
Due or callable after four years through five years		910,845			928,900
Due or callable after five years through six years		435,250			284,800
Thereafter		2,907,250			2,485,800
Total par value		66,055,970			62,205,640
Bond premiums		38,586			23,334
Bond discounts		(28,529	)		(33,300	)
SFAS 133 fair value adjustments		259,405			(151,222	)
Fair value basis adjustments on terminated hedges		385			(1,777	)
Total carrying value	$	66,325,817		$	62,042,675

Because of the possibility of exercise on pre-determined call dates, it is probable that some 86.7% of bonds outstanding at December 31, 2007 may get called within two years. The comparable ratio was 88.4% at December 31, 2006.

Call options are owned and exercisable by the Bank and are typically 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. Fixed-rate callable bonds constituted 17.3% of all bonds at December 31, 2007 and since almost all such bonds were hedged by callable interest rate swaps, the impact of the hedge under current practice was to considerably shorten the expected duration of the bonds outstanding at December 31, 2007.

At December 31, 2006, based on the possibility of the call options exercised, 64.6% of bonds outstanding were likely to be redeemed within one year, and 88.4% within two years.

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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.

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):

					Weighted
	Book		Par		Average
	Value		Value		Interest Rate
December 31, 2007	$	34,791,570	$	34,984,105		4.28	%
December 31, 2006	$	12,191,553	$	12,255,625		5.10	%

Issuances of discount notes were uneven in 2007 with issuances increasing rapidly beginning with the latter part of the third quarter of 2007.

The ratio of discount notes to Total assets at December 31, 2007 was 31.7%, a significant increase from 14.9% at December 31, 2006. All of the increase occurred in the third and fourth quarters of 2007.

The average balance of discount notes outstanding during the first six months of 2007 declined compared to prior year periods because of the Bank’s view that the issuance of discount notes was at unfavorable yields relative to LIBOR. In the first six months of 2007, as an alternative to discount notes, the Bank increased its use of structured bonds associated with interest rate swaps to replace declining issuances of discount notes. This was in response to investor demand for the longer-term consolidated obligation bonds, particularly fixed-rate, callable bonds.

Conditions changed dramatically in the third quarter of 2007 as the sub-prime mortgage market crises unfolded with the resulting decline in liquidity in the market place. Investor demand for FHLBank issued discount notes was almost unprecedented. Discount notes that had yielded 20 basis points below LIBOR very early in August 2007 were soon sought after by investors at yields that at times were 90 basis points below LIBOR early in September. Reacting to market conditions and very favorable discount note yields, the Bank doubled its outstanding amount of discount notes to $21.2 billion at August 31, 2007 from $10.1 billion at July 31, 2007, and to $30.1 billion at September 30, 2007. With credit market uncertainties still unresolved in the fourth quarter, investor demand for FHLBank discount notes remained strong, although the spread below LIBOR narrowed to around 50 basis points. The Bank continued to issue discount notes in these attractive market conditions and the total amount of discount notes rose to $34.8 billion at December 31, 2007.

Discount notes are mostly 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 a 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 best illustrated by measuring the annual cash flows generated by discount note issuance. For the twelve months ended December 31, 2007, the Bank issued $441.2 billion in discount notes. In the same period, cash flows from the issuance of consolidated obligation bonds were only $42.5 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.

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Rating actions with respect to the FHLBNY are outlined below:

Short-Term Ratings:

	Moody ’s Investors Service		S & P
Year	Outlook	Rating	Short-Term Outlook		Rating
2005	June 30, 2005 - Affirmed	P-1
2006			September 21, 2006	Short Term rating affirmed	A-1+
Long-Term Ratings:
	Moody’s Investors Service		S & P
Year	Outlook	Rating	Long-Term Outlook		Rating
2005	June 30, 2005 - Affirmed	Aaa/Stable
2006			September 21, 2006	Long Term rating upgraded	outlook stable 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. 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. Redeemable capital stock is generally accounted for under the provisions of SFAS 150, “Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity” (“SFAS 150”). Mandatorily redeemable capital stock at December 31, 2007 and 2006 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 repaid 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.

Voluntary withdrawal from membership - No member had notified the FHLBNY at December 31, 2007 or at December 31, 2006 of their intention to voluntarily withdraw from membership. No member’s or non-member’s redemption request remained pending at December 31, 2007 or 2006.

Members acquired by non-members - The Bank reclassifies stock of members to a liability on the day the member’s charter is dissolved.

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At December 31, 2007 the amount of mandatorily redeemable stock classified as a liability was $238.6 million, compared to $109.9 million at December 31, 2006. In the first six months of 2007, one member was acquired by a non-member and $6.9 million of capital was reclassified from capital to liability. In the second six months of 2007, four members were acquired by non-members and a fifth member relocated its headquarters to outside the Bank’s membership district, and $180.1 million of capital was reclassified from capital to liability. In compliance with Finance Board regulations, the Bank classified these six members as non-members.

Capital stock held by non-members will be repaid at maturity of the advances borrowed by non-members. In accordance with Finance Board regulations, non-members cannot renew their advance borrowings at maturity. Under the provisions of SFAS 150, such capital is considered mandatorily redeemable.

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 $58.3 million of mandatorily redeemable stock in 2007, compared to repurchases of $138.9 million in 2006. As non-member advances matured in their normal course, and were not replaced under Finance Board 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, 2007 was $238.6 million. If present practice of redeeming excess stock continues, the Bank expects $127.0 million to be redeemed in 2008 and another $94.6 million between 2009 and 2011 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. See Notes 1 and 14 to the Bank’s audited financial statements for additional discussions about redemption rights of members and non-members.

Interest expense associated with mandatorily redeemable capital stock was accrued at an estimated dividend rates payable to all capital stock holders in 2007. Accrued but unpaid interest associated with mandatorily redeemable capital stock at December 31, 2007 and 2006 were reported as a liability.

Total interest expense accrued and paid to non-member stockholders and recorded as interest expense was $11.7 million in 2007, compared to $3.1 million and $2.7 million in 2006 and 2005.

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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, 2007, total capital stock $100 par value, putable and issued and held by members aggregated 43,680,000 shares, up significantly from 35,463,000 shares at December 31, 2006. Members are required to purchase FHLBNY stock in proportion to the volume of advances borrowed. Increase in capital stock is in line with the very significant increase in advances borrowed by members.

Capital Structure

The Finance Board 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. Class A stock is conditionally redeemable on six months written notice from the member and Class B stock is conditionally redeemable on five years written notice from the member. 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.

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. The Class B capital stock issued or repurchased may be membership stock, activity-based stock, or both.

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. 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, effective December 1, 2005, the specified percentages is 4.5% for both advances and MPF loans, with the proviso 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.

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 Board. 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.

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The Finance Board has confirmed that the SFAS 150 accounting treatment for mandatorily redeemable shares of its capital stock will not affect the definition of total capital for purposes of determining the FHLBank’s compliance with Finance Board regulatory capital requirements, calculating its mortgage securities investment authority (300 percent of total capital), calculating its unsecured credit exposure to other Government Sponsored Enterprise (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 Board’s regulations. The capital requirements are described in greater detail below.

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 Board may decide are appropriate to include. Finance Board 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 Board regulations require that the FHLBNY maintain a minimum leverage ratio of 5.0%.

Retained Earnings and Dividend

Stockholders’ Capital - Stockholders’ Capital comprised of capital stock, retained earnings and accumulated other comprehensive income, and increased by $846.2 million to $4.8 billion at December 31, 2007, up from $3.9 billion at December 31, 2006.

Capital stock- Capital stock, par value $100, was $4.4 billion at December 31, 2007, up from $3.5 billion at December 31, 2006. The increase in capital stock was consistent with increases in advances borrowed by members which increased to an $80.6 billion par amount at December 31, 2007 up from $58.9 billion at December 31, 2006. Since members are required to purchase stock as a percentage of advances borrowed from the FHLBNY, growth in advances will typically result in growth in capital stock. Also, 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 - The FHLBNY has been building its retained earnings to further strengthen its financial condition. Retained earnings at the FHLBNY grew to $418.3 million at December 31, 2007, up from $368.7 million at December 31, 2006. Retained earnings were after dividend payments of $273.5 million in 2007, up from $207.9 million in 2006.

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Accumulated other comprehensive income - The amounts making up Accumulated other comprehensive income (loss) was a net loss of $35.7 million at December 31, 2007 and comprised of – (1)Net unrealized losses of $30.2 million from cash flow hedges, principally from hedges of anticipated issuance of debt, compared to unrealized losses of $4.8 million at December 31, 2006. Recorded unrealized losses will be offset by favorable changes in the coupon rates of anticipated debt issuance. (2) Liabilities of $5.1 million representing actuarially determined minimum additional liabilities due on the Bank’s supplemental pension plans. The comparable amount at December 31, 2006 was a liability of $5.8 million, primarily from the initial adoption of SFAS 158 “Employees’ Accounting for Defined Benefit Pension and other Postretirement Plans.” (3) Net unrealized losses of $0.4 million related to two grantor trusts classified as available-for-sale.

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 to 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 Board 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 Board 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 in the month following the end of the quarter. During the year ended December 31, 2007, four dividends were paid for a total of $7.51 per share, or 87.6% of net earnings per share, compared to $5.59 per share, or 73.3% of net earnings per share in 2006, and $4.50 per share, or 70.8% of net earnings per share in 2005.

A dividend at an annualized rate of 8.40% was paid on January 31, 2008 for the quarter ended December 31, 2007.

Derivative Instruments

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.

Section 956.6(a) of the Finance Board regulations prohibits 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.

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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 derivative asset or 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 value and designated as either fair value or cash flow hedges for SFAS 133-qualifying hedges, or as non-SFAS 133-qualifying hedges (economic hedges or customer intermediations). In an economic hedge, the Bank retains or executes derivative contracts, which are economically effective in reducing risk, either because: a SFAS 133 qualifying hedge was not available, the hedge was not able to demonstrate that it would be effective on an ongoing basis as a qualifying hedge, or the cost of a qualifying hedge was not economical. Interest income and interest expense from interest rate swaps used for hedging are reported together with interest on the instrument being hedged. Any changes in the fair value of a derivative are recorded in current period earnings or in Accumulated other comprehensive income (loss), depending on the hedge designation.

The FHLBNY uses derivatives in three ways: (1) as fair value or cash flow hedges 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 economic hedges, 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 and advances 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.

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The following table summarizes the principal derivatives hedging strategies as of December 31, 2007:

			Notional Amount
Derivatives Terms	Hedging Strategy	Accounting Designation	(in millions)
Pay fixed, receive floating interest rate swap	To convert fixed rate on a fixed rate advance to a LIBOR floating rate	Fair Value Hedge	$	46,953
Purchased interest rate cap	To offset the cap embedded in the variable rate advance	Fair Value Hedge	$	1,158
Receive fixed, pay floating interest rate swap (non- callable)	To convert the fixed rate consolidated obligation debt to a LIBOR floating rate	Fair Value Hedge	$	27,351
Pay fixed, receive LIBOR interest rate swap	To offset the variability of cash flows associated with interest payments on forecasted issuance of fixed rate consolidated obligation debt.	Cash flow hedge	$	128
Receive fixed, pay floating interest rate swap with an optional to call	To convert the fixed rate consolidated obligation debt to a LIBOR floating rate; swap is callable on the same day as the consolidated obligation debt.	Fair Value Hedge	$	9,000
Intermediary positions Interest rate swaps Interest rate caps	To offset interest rate swaps and caps executed with members by executing offsetting derivatives with counterparties.	Economic Hedge	$	70

The following table summarizes the principal derivatives hedging strategies as of December 31, 2006:

			Notional Amount
Derivatives Terms	Hedging Strategy	Accounting Designation	(in millions)
Pay fixed, receive floating interest rate swap	To convert fixed rate on a fixed rate advance to a LIBOR floating rate	Fair Value Hedge	$	35,615
Purchased interest rate cap	To offset the cap embedded in the variable rate advance	Fair Value Hedge	$	1,238
Receive fixed, pay floating interest rate swap (non- callable)	To convert the fixed rate consolidated obligation debt to a LIBOR floating rate	Fair Value Hedge	$	23,638
Pay fixed, receive LIBOR interest rate swap	To offset the variability of cash flows associated with interest payments on forecasted issuance of fixed rate consolidated obligation debt.	Cash flow hedge	—
Receive fixed, pay floating interest rate swap with an optional to call	To convert the fixed rate consolidated obligation debt to a LIBOR floating rate; swap is callable on the same day as the consolidated obligation debt.	Fair Value Hedge	$	17,047
Intermediary positions Interest rate swaps Interest rate caps	To offset interest rate swaps and caps executed with members by executing offsetting derivatives with counterparties.	Economic Hedge	$	50

The accounting designation “economic” hedges represented derivative transactions under hedge strategies that do not qualify for hedge accounting under the provisions of SFAS 133 but are an approved risk management hedge.

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Derivatives by products and hedge types

The following tables provide summarized derivatives data by SFAS 133 classifications at December 31, 2007 and 2006 (in millions):

December 31, 2007

	Short-Cut 1					Long-Haul 1					Total
	Notional		Fair Values			Notional		Fair Values			Notional		Fair Values
Derivative Hedging by Product Type:
Advances	$	41,364	$	(1,314	)	$	5,589	$	(181	)	$	46,953	$	(1,495	)
Consolidated bonds-SFAS 133 qualifying		15,212		52			19,729		200			34,941		252
Consolidated bonds- Economic hedges							1,538		5			1,538		5
Mortgage commitments*		—		—			1		—			1		—
Caps and floors		—		—			1,158		—			1,158		—
Others — intermediation		—		—			70		—			70		—
Total	$	56,576	$	(1,262	)	$	28,085	$	24		$	84,661	$	(1,238	)
SFAS 133 Hedge Classification:
Fair value hedges	$	56,576	$	(1,262	)	$	25,190	$	19		$	81,766	$	(1,243	)
Cash flow hedges		—		—			128		—			128		—
Intermediation **		—		—			70		—			70		—
Economic hedges **		—		—			2,697		5			2,697	$	5
Total	$	56,576	$	(1,262	)	$	28,085	$	24		$	84,661	$	(1,238	)

December 31, 2006

	Short-Cut 1					Long-Haul 1					Total
	Notional		Fair Values			Notional		Fair Values			Notional		Fair Values
Derivative Hedging by Product Type:
Advances	$	30,703	$	(29	)	$	4,912	$	5		$	35,615	$	(24	)
Consolidated bonds-SFAS 133 qualifying		13,116		(65	)		27,394		(95	)		40,510		(160	)
Consolidated bonds-Economic hedges							175					175		—
Mortgage commitments*		—		—			9		—			9		—
Caps and floors		—		—			1,238		—			1,238		—
Others — intermediation		—		—			50		—			50		—
Total	$	43,819	$	(94	)	$	33,778	$	(90	)	$	77,597	$	(184	)
SFAS 133 Hedge Classification:
Fair value hedges	$	43,819	$	(94	)	$	32,306	$	(90	)	$	76,125	$	(184	)
Cash flow hedges		—		—			—		—			—		—
Intermediation **		—		—			50		—			50		—
Economic hedges **		—		—			1,422		—			1,422		—
Total	$	43,819	$	(94	)	$	33,778	$	(90	)	$	77,597	$	(184	)

* Fair values are not significant; mortgage commitments were no longer hedged commencing 4th quarter 2005.

Note ¹:

Short-cut - Highly effective hedging relationships that use interest rate swaps as the hedging instrument to hedge a recognized asset or liability and that meet criteria under paragraph 68 of SFAS 133 to qualify for an assumption of no ineffectiveness. The short-cut method allows the FHLBNY to assume that the change in fair value of the hedged item attributable to interest rates equals the change in fair value of the derivative during the life of the hedge.

Long-haul - For a hedging relationship that does not qualify for the short-cut method, the FHLBNY measures hedge 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.

** Intermediation and economic hedges represented derivative transactions that did not qualify for hedge accounting treatment under SFAS 133, and were included under the caption “Long-Haul” for display purposes only.

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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 under SFAS 133 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):

	December 31,
	2007					2006
			Total estimated					Total estimated
			fair value					fair value
			(excluding					(excluding
	Total notional		accrued			Total notional		accrued
	amount		interest)			amount		interest)
Advances-fair value hedges	$	46,953,298	$	(1,495,055	)	$	35,615,115	$	(23,889	)
Advances (Caps)-economic hedges		1,157,694		2			1,237,694		—
Consolidated obligations-fair value hedges		34,813,015		251,628			40,510,105		(159,919	)
Consolidated obligations-economic hedges		1,538,100		5,454			175,000		(253	)
MPF loan-commitments		1,351		5			9,497		(35	)
Cash Flow-anticipated transactions		127,500		(177	)		—		—
Intermediary positions-economic hedges		70,000		22			50,000		3
Total notional and fair value	$	84,660,958	$	(1,238,121	)	$	77,597,411	$	(184,093	)
Total derivatives, excluding accrued interest			$	(1,238,121	)			$	(184,093	)
Accrued interest				238,657					301,253
Net derivative balance			$	(999,464	)			$	117,160
Net derivative asset balance			$	70,278				$	224,775
Net derivative liability balance				(1,069,742	)				(107,615	)
Net derivative balance			$	(999,464	)			$	117,160

Derivative Gains and Losses Reclassified from Accumulated other comprehensive income (loss) to Earnings

The following table summarizes changes in derivative gains and losses and reclassifications to earnings for the periods reported and as recorded in accumulated other comprehensive income (loss) (in thousands):

	Years ended December 31,
	2007			2006			2005
Accumulated other comprehensive income/(loss) from cash flow hedges
Beginning of period	$	(4,763	)	$	5,352		$	898
Net hedging transactions		(26,114	)		(7,897	)		6,054
Reclassified into earnings		662			(2,218	)		(1,600	)
End of period	$	(30,215	)	$	(4,763	)	$	5,352

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Earnings Impact of Hedging Activities

The following table summarizes the impact of hedging activities on earnings for each of the three years ended December 31, 2007, 2006, and 2005 (in thousands):

	2007
							Consolidated			Consolidated
				MPF			Obligation			Obligation		Intermediary
Earnings Impact	Advances			Loans			Bonds			Discount Notes		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

	2006
						Consolidated			Consolidated
				MPF		Obligation			Obligation		Intermediary
Earnings Impact	Advances			Loans		Bonds			Discount Notes		Positions		Total
Amortization/accretion of hedging activities reported in net interest income	$	(2,489	)	$	142	$	8,380		$	—	$	—	$	6,033
Net realized and unrealized gains (losses) on derivatives and hedging activities	$	3,505		$	—	$	(355	)	$	—	$	—	$	3,150
Gains (losses)- Economic hedges		5,761			22		740			—		3		6,526
Reported in Other Income	$	9,266		$	22	$	385		$	—	$	3	$	9,676
Total	$	6,777		$	164	$	8,765		$	—	$	3	$	15,709

	2005
							Consolidated			Consolidated
				MPF			Obligation			Obligation		Intermediary
Earnings Impact	Advances			Loans			Bonds			Discount Notes		Positions			Total
Amortization/accretion of hedging activities reported in net interest income	$	(460	)	$	154		$	6,706		$	—	$	—		$	6,400
Net realized and unrealized gains (losses) on derivatives and hedging activities	$	(405	)	$	—		$	(260	)	$	—	$	—		$	(665	)
Gains (losses)- Economic hedges		(8,235	)		(582	)		19			—		(3	)		(8,801	)
Reported in Other Income	$	(8,640	)	$	(582	)	$	(241	)	$	—	$	(3	)	$	(9,466	)
Total	$	(9,100	)	$	(428	)	$	6,465		$	—	$	(3	)	$	(3,066	)

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Derivative Credit Risk Exposure

In addition to market risk, the FHLBNY is subject to credit risk in derivatives transactions because of the potential for non-performance by the counterparties, which could result in the FHLBNY having to acquire 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. Twenty-one counterparties (eighteen non-members and three members) represented 100% of the total notional amount of the FHLBNY’s outstanding derivative transactions at December 31, 2007, unchanged from December 31, 2006.

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. All derivative contracts with non-members are also subject to master netting agreements or other right of offset arrangements.

Exposure - At December 31, 2007, the FHLBNY’s maximum credit risk, as defined above, was approximately $70.3 million without recognition of collateral held by the FHLBNY, down from $224.8 million at December 31, 2006. In determining maximum credit risk, the FHLBNY considers accrued interest receivable and payable, and the legal right to offset assets and liabilities by counterparty. The FHLBNY mitigates its exposure by requiring derivative counterparties to pledge cash collateral, if the amount of exposure is above the collateral threshold agreements. Derivative counterparties had pledged $41.3 million in cash to the FHLBNY at December 31, 2007. At December 31, 2006, the comparable cash held by the FHLBNY was $124.0 million.

Derivative counterparty ratings - The Bank’s credit exposure at December 31, 2007, in a gain position, were to seventeen counterparties of which 14 were to counterparties with a double-A credit rating and 3 were with single-A rated counterparties as assigned by a Nationally Recognized Statistical Rating Organization. The exposure to the three single-A counterparties was insignificant at year-end. Three other counterparties were member institutions on whose behalf the FHLBNY had acted as an intermediary. The notional amount of derivatives that was sold to members and outstanding at December 31, 2007 and 2006 was $35.0 million and $25.0 million. Acting as an intermediary, the Bank had also purchased equivalent notional amounts of derivatives from unrelated derivative counterparties.

Risk mitigation - The FHLBNY mitigates 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 International Swaps and Derivatives Association (“ISDA”) agreements 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 a gain position. 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 each individual counterparty.

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The FHLBNY also manages 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 Board’s regulations.

As a result of these risk mitigation initiatives, the management of the FHLBNY does not anticipate any credit losses on its derivatives. The FHLBNY has never experienced a credit loss on a derivative transaction due to a credit default by counterparty.

Derivatives Counterparty Credit Ratings

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

	December 31, 2007
					Total Net
	Number of		Notional		Exposure at		Net Exposure
Credit Rating	Counterparties		Balance		Fair Value		after Collateral
AAA		1	$	2,301,444	$	—	$	—
AA		14		63,076,269		69,520		28,220
A		3		19,246,894		—		—
Members		3		35,000		753		—
Delivery Commitments		—		1,351		5		—
Total		21	$	84,660,958	$	70,278	$	28,220

	December 31, 2006
					Total Net
	Number of		Notional		Exposure at		Net Exposure
Credit Rating	Counterparties		Balance		Fair Value		after Collateral
AAA		1	$	2,874,229	$	—	$	—
AA		14		57,905,862		215,744		91,744
A		3		16,782,823		9,031		9,031
Members		3		25,000		—		—
Delivery Commitments		—		9,497		—		—
Total		21	$	77,597,411	$	224,775	$	100,775

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Accounting for Derivatives - Hedge Effectiveness

Under SFAS 133, 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, 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 relationships to be highly effective. This is a forward-looking relationship 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.

• 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 for 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 as a better methodology for measuring 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:

DV_h = a + bDV_H

where DV_h is the change in the net present value of the hedging item, DV_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. 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.

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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 Accumulated other comprehensive income (loss) 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). The basis and the amortization of such items were not significant for all periods since adoption of SFAS 133.

Embedded derivatives

Before a trade is executed, the FHLBNY’s procedures require the identification and evaluation of embedded derivatives, if any, as described under paragraph 12 of SFAS 133. 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, 2007, 2006 and 2005, 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.

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Aggregation of similar items

The FHLBNY does not aggregate similar items for “macro hedging.” All hedge 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, 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. In addition, the Secretary of the Treasury is authorized to purchase up to $4.0 billion of consolidated obligations from the FHLBanks. The FHLBNY’s liquidity position remains in compliance with all regulatory requirements and it does not foresee any changes to that position.

Finance Board Regulations - Liquidity

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

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Violations of the liquidity requirements would invoke non-compliance penalties under discretionary powers given to the Finance Board under applicable regulations, which would include 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 any 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 2007 and 2006 (in millions). The FHLBNY met its requirements at all times.

	Average Deposit		Average Actual
For the quarters ended	Reserve Required		Deposit Liquidity		Excess
December 31, 2007	$	1,776	$	48,254	$	46,478
September 30, 2007		2,686		38,277		35,591
June 30, 2007		2,726		35,853		33,127
March 31, 2007		1,796		37,559		35,763
December 31, 2006		1,944		42,386		40,442
September 30, 2006		1,745		48,347		46,602
June 30, 2006		1,976		45,797		43,821
March 31, 2006		1,378		45,001		43,623

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.

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Operational liquidity is measured daily. The FHLBNY met its requirements at all times. The following table summarizes excess operational liquidity by each quarter in 2007 and 2006 (in millions):

	Average Balance Sheet		Average Actual
For the quarters ended	Liquidity Requirement		Operational Liquidity		Excess
December 31, 2007	$	4,830	$	19,522	$	14,692
September 30, 2007		2,290		16,716		14,426
June 30, 2007		2,186		15,653		13,467
March 31, 2007		3,482		16,033		12,551
December 31, 2006		5,852		16,970		11,118
September 30, 2006		5,506		17,763		12,257
June 30, 2006		4,388		16,444		12,056
March 31, 2006		4,252		17,007		12,755

Contingency Liquidity. The FHLBNY is required by Finance Board 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.

Contingency liquidity is reported daily. The FHLBNY met its requirements at all times. The following table summarizes excess contingency liquidity by each quarter in 2007 and 2006 (in millions):

	Average Five Day		Average Actual
For the quarters ended	Requirement		Contingency Liquidity		Excess
December 31, 2007	$	2,966	$	17,914	$	14,948
September 30, 2007		1,530		15,643		14,113
June 30, 2007		1,115		14,460		13,345
March 31, 2007		1,476		14,509		13,033
December 31, 2006		2,130		14,852		12,722
September 30, 2006		3,934		15,755		11,821
June 30, 2006		2,490		14,428		11,938
March 31, 2006		3,114		14,797		11,683

The FHLBNY sets standards in its risk management policy that address its day-to-day operational liquidity 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 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 Board 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 Board, at its discretion, may require any FHLBank to make principal or interest payments due on any consolidated obligations.

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The par amount of the outstanding consolidated obligations of all 12 FHLBanks was $1,189.7 billion and $951.9 billion at December 31, 2007 and 2006. The FHLBNY does not believe that it will be called upon to pay the consolidated obligations of another FHLBank in the future.

Finance Board 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.

Leverage Limits and Unpledged Asset Requirements

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

	December 31,
	2007			2006
Consolidated Obligations:
Bonds	$	66,325,817		$	62,042,675
Discount Notes		34,791,570			12,191,553
Total consolidated obligations		101,117,387			74,234,228
Unpledged assets
Cash		7,909			38,850
Less: Member pass-through reserves at the FRB		(19,584	)		(43,265	)
Secured Advances		82,089,667			59,012,394
Investments		25,375,628			20,503,175
Mortgage Loans		1,491,628			1,483,419
Other loans*		—			112
Accrued interest receivable on advances and investments		562,323			406,123
Less: Pledged Assets		(396,400	)		—
		109,111,171			81,400,808
Excess unpledged assets	$	7,993,784		$	7,166,580

* Excludes $55 million overnight loan to another FHLBank.

Finance Board 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.

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

	December 31, 2007						December 31, 2006
	Actual			Limits			Actual			Limits
Mortgage securities investment authority 1		198	%		300	%		254	%		300	%

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

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Results of Operations

The following section provides a comparative discussion of the Federal Home Loan Bank’s results of operations for the three-year period ended December 31, 2007. For a discussion of the Critical accounting estimates used by the FHLBNY that affect the results of operations, see section captioned Critical Accounting Policies and Estimates in this MD&A.

Net Income

2007 compared with 2006

The FHLBNY manages its operations as a single business segment. Advances to members are the primary focus of the FHLBNY’s operations, and is 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 repurchase and associated losses, and earnings from shareholders’ capital.

The FHLBNY reported record 2007 net income of $323.1 million, or $8.57 per share, compared with net income of $285.2 million, or $7.63 per share, for 2006. Net income was after the deduction of AHP and REFCORP assessments, which are a fixed percentage of the FHLBNY’s pre-assessment income. The increase in net income was attributed to increase in net interest income.

The return on average equity, which is net income plus average retained earnings and Accumulated other comprehensive income (loss) divided by average capital stock was 7.85% in 2007, compared with 7.04% in 2006. The Bank’s record performance in 2007 was positively impacted by the extraordinary increase in advances borrowed by its membership and favorable execution spreads for the issuances of FHLBank shorter-term bonds and discount notes.

In 2007, four dividends were paid for a total of $7.51 per share (par value $100), or 87.6% of net earnings per share, compared to $5.59 per share, or 73.3% of net earnings per share in 2006.

2006 compared with 2005

Net Income in 2006 increased by $55.0 million to $285.2 million, up from $230.2 million in 2005. Net earnings per share of capital in 2006 was $7.63, up from $6.36 in 2005. Return on average stockholders’ equity, which is capital stock and retained earnings, increased to 7.04% in 2006, up from 5.97% in 2005. Return on average earning-assets increased to 54.9 basis points in 2006, up from 46.6 basis points in 2005. Improved returns were directly attributable to the increase in net income in 2006 compared to 2005.

In 2006, four dividends were paid for a total of $5.59 per share of capital stock (par value $100), up from $4.50 per share paid in 2005.

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The following table summarizes key changes in the components of net interest income for the three years ended December 31, 2007, 2006 and 2005 (dollar amounts in thousands):

	December 31,						Percentage			Percentage
	2007		2006		2005		Variance 2007			Variance 2006
Interest Income
Advances	$	3,495,312	$	3,302,174	$	2,174,948		5.85	%		51.83	%
Interest-bearing deposits		411,647		300,499		193,668		36.99			55.16
Federal funds sold		192,845		145,420		97,547		32.61			49.08
Available-for-sale securities		—		—		19,519		—			(100.00	)
Held-to-maturity securities		596,761		580,002		566,009		2.89			2.47
Mortgage loans held-for-portfolio		78,937		76,111		69,312		3.71			9.81
Loans to other FHLBanks		2		37		9		(94.60	)		311.11
Other		1		4		33		(75.00	)		(87.88	)
Total interest income		4,775,505		4,404,247		3,121,045		8.43			41.11
Interest Expense
Consolidated obligations-bonds		3,215,560		2,944,241		2,001,960		9.22			47.07
Consolidated obligations-discount notes		937,534		901,978		658,837		3.94			36.90
Deposits		106,777		81,442		62,237		31.11			30.86
Mandatorily redeemable capital stock		11,731		3,086		2,747		280.14			12.30
Cash collateral held and other borrowings		4,516		3,382		292		33.53			1,058.22
Total interest expense		4,276,118		3,934,129		2,726,073		8.69			44.31
Net interest income before provision for credit losses	$	499,387	$	470,118	$	394,972		6.23	%		19.03	%

Net interest income

Net interest income - 2007 compared with 2006

Net interest income after the provision for credit losses, was $499.4 million for 2007, up by $29.3 million, or 6.2% from the prior year. Net interest income represents the difference between income from interest-earning assets and interest expense paid on interest-bearing liabilities.

Net interest income is the principal source of revenue for the Bank. Net interest income is impacted by: 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 permits 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. Income earned from assets funded by member capital and retained earnings, referred to as “deployed capital”, which are non-interest bearing, is another important consideration 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 and 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.

Net interest spread - Net interest spread earned, was 30.0 basis points in 2007, almost unchanged from 29.5 basis points in 2006. Net interest spread is the difference between yields on interest-earning assets and stockholders’ equity and yields paid on interest-bearing liabilities. Net interest margin, annualized net interest income as a percentage of average earning assets, was 56.0 basis points in 2007, up from 54.9 basis points from the prior year.

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Earnings from member capital - The FHLBNY earns income from investing its members’ capital to fund interest-earning assets. In the higher interest rate environment prevalent through most of 2007 relative to 2006, deployed capital, which is capital stock, retained earnings, and net non-interest bearing liabilities, provided the FHLBNY with significant income.

Deployed capital made a stronger contribution to net interest income as a result of the higher rate environment in 2007 compared to 2006. As an illustration, an average $4.5 billion in deployed capital in 2007 earned a yield of 5.35%, the annualized yield on aggregate interest-earning assets in 2007. In contrast, the Bank’s average deployed capital in the prior year was also $4.5 billion, but earned a lower yield of 5.14%. As a result, the contribution from deployed capital in 2007 enhanced interest income by 21 basis points, even though average deployed capital was almost unchanged.

Net interest income - 2006 compared with 2005

Reported net interest income after provisions for credit losses was $470.1 million in 2006, up 19.0%, or $75.2 million, compared to $394.9 million in 2005. The full impact of changes in pricing implemented during 2005 was realized in 2006. The average coupon from advances rose by 168 basis points, the increase was a combination of the pricing changes and a generally higher interest rate environment in 2006 compared to 2005. Deployment of stockholders’ equity, defined as capital stock and retained earnings, which are considered as non-interest costing liabilities or “free capital,” provided a significant contribution to the net spread earned by the Bank in 2006 from a rate environment that was higher than in 2005.

Interest Income

Interest income - 2007 compared with 2006

Total interest income in 2007 was $4.8 billion, an increase of $371.3 million from the previous year. Changes in both rate and intermediation volume (average interest-yielding assets) explain the change in the current year from the prior year. The principal components of interest income are discussed below:

Interest income from advances - Interest income from advances is principally the coupon payments received from borrowing members and are recorded as interest income in the statements of operations together with the net cash flows associated with interest rate swaps when hedges qualify under the accounting provisions of SFAS 133. In the interest rate swap, the Bank pays fixed-rate to derivative counterparty which typically mirrors the fixed-rate coupon received from members. In exchange, the Bank receives variable-rate LIBOR-indexed cash flows from derivative counterparty. Typically, the Bank hedges its long-term, fixed-rate advances and almost all fixed-rate putable advances. The impact of hedging activities on interest expense is discussed separately under the section “Impact of hedging advances.”

Reported interest income from advances was $3.5 billion in 2007, up from $3.3 billion in 2006. Other than the positive contribution from accruals of cash flows associated with interest rate swaps, three principal factors contributed to the increase. The general increase in the interest rate environment in the first six months of 2007, as maturing advances were replaced at higher coupons in a higher interest rate environment in 2007. The unprecedented member demand for advances that began at the tail-end of the third quarter and continued through the fourth quarter. Finally, member demand increased for adjustable-rate products which were priced at relatively higher coupons in an inverted yield curve environment.

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Advance pricing remained unchanged in 2007 and the Bank continued to offer pricing to its membership that balances the Bank’s desire for healthier interest spreads and its mission to provide low-cost funds to its members.

The net advance prepayment fees recorded in interest income were $4.6 million in 2007, significantly lower than $19.2 million in 2006. This is a reflection of slow-down in member initiated prepayment activity in 2007, compared to 2006. The FHLBNY generally requires advances with a maturity or repricing period greater than nine months to carry a fee sufficient to make it financially indifferent to the borrower’s decision to prepay the advances.

Impact of hedging - Cash flows from interest rate swaps are a critical component of interest income earned from 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. The impact of swapping fixed- for a floating-interest rate in which the FHLBNY paid out fixed-rate and received LIBOR-indexed cash flows in an interest rate swap agreement made a positive contribution of $356.0 million to interest income in 2007, compared to a positive contribution of $236.8 million in 2006.

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

	Years ended December 31,
	2007		2006		2005
Advance Interest Income
Advance interest income before adjustment for interest rate swaps	$	3,139,311	$	3,065,361	$	2,546,995
Net interest adjustment for interest rate swaps		356,001		236,813		(372,047	)
Total Advance interest income reported	$	3,495,312	$	3,302,174	$	2,174,948

In a hedge of an advance, the Bank structures the interest rate swap whereby the Bank pays the swap counterparty a fixed coupon and receives variable cash flows, typically indexed to the 3-month LIBOR rate. This structure generates positive cash flows when the 3-month LIBOR rates are higher than the contractual pay-fixed leg of the interest rate exchange agreement. The positive cash flow contribution from the interest rate exchanges between the Bank and swap counterparties in 2007 was consistent with the level of the 3-month LIBOR indexed cash flows, which on average was higher than the fixed-rates that the FHLBNY was contractually obligated to pay to derivative counterparties.

If the interest rate swap is callable, it is typically associated with a putable advance and, until the derivative counterparty exercises the option to terminate the swap, the cash flows from the swaps will continue to impact earnings. Typically, in a rising rate environment, derivative counterparties will exercise the right to put the option and terminate the swap and, generally, the Bank would then put the advance and offer a new advance to the member at the then prevailing market terms.

Interest income from investments - The Bank derives interest income from investments principally from its long-term securities classified as held-to-maturity, mainly mortgage-backed securities, and a small inventory of state and local housing finance agency bonds. Mortgage-backed securities typically yield higher coupons compared to other investments allowed under the FHLBNY’s current investment policy.

The Bank also generates interest income from short-term investments comprised of certificates of deposits, Federal funds sold, and interest-yielding cash pledged as collateral to derivative counterparties.

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Long-term investments - Interest income from investments, principally MBS, grew marginally in 2007. Volume, as measured by daily average balance outstanding, was virtually unchanged in 2007. The average balance of long-term investments was $10.8 billion in 2007, only slightly higher than the average of $10.6 billion in 2006. The weighted average coupon or yield from long-term investments grew by only 7 basis points in 2007 from 2006. In contrast, the Bank’s overall yield from its interest-earning assets grew by 21 basis points in 2007 over the prior year. As a result, interest earned on investments in 2007 was $596.8 million, up slightly from $580.0 million in 2006. Fees from prepayment of commercial mortgage-backed securities, included in interest income from investments, were also lower and totaled $4.2 million in 2007 as compared to $5.5 million in 2006.

Short-term investments -Increased earnings from short-term, money market investments made a strong contribution to interest income in 2007, principally as a result of management’s decision to increase liquidity by increasing investments in short-term certificates of deposits at highly-rated financial institutions.

Investments in interest-earning deposits averaged $7.7 billion in 2007, up from $6.0 billion in 2006. Interest-bearing deposits were comprised of short-term certificates of deposits and interest-earning cash collateral pledged by the Bank to derivative counterparties. Interest income from interest-bearing deposit investments was $411.6 million in 2007, compared with $300.5 million in 2006. The general increase in the interest rate environment in 2007, relative to 2006, explains the increase in yields and coupons earned from short-term investments in 2007. As an illustration, the Bank earned an average yield from short-term deposits of 5.35% in 2007, up 35 basis points from 5.00% in 2006.

Interest income from investments in Federal funds sold grew to $192.8 million in 2007, up from $145.4 million in 2006 due to increased volume of investments. The average position in Federal funds was $3.7 billion in 2007, up from $2.9 billion in 2006. Yields improved marginally by 5 basis points to yield 5.15% in 2007.

Interest income - 2006 compared with 2005

Reported net interest income after provisions for credit losses was $470.1 million in 2006, up 19.0%, or $75.2 million, compared to $394.9 million in 2005. The contribution from advance pricing changes in 2005 was fully realized in 2006 and favorably impacted income in 2006. Coupons increased in 2007 also as a result of higher interest rate environment.

Interest income from advances - Reported interest income from advances, on a swapped-out basis, was $3.3 billion in 2006, up from $2.2 billion in 2005. Three principal factors contributed to the increases. The general increase in the interest rate environment as maturing advances were replaced at higher coupons in a higher interest rate environment in 2006. Change in the mix of demand towards more profitable products was another factor. Member demand increased for the higher-margin, short-term, fixed-rate advances, contributing to higher earnings in 2006 compared to 2005. Yet another factor was the full impact in 2006 from new pricing policy which went into effect in 2005 as maturing advances were replaced in 2006 with advances with coupons at a relatively higher spread to the Bank’s funding cost.

Advance volume, as measured by the daily average advances outstanding during the year, was not a major factor in the increase in interest income from advances in 2006. Advances outstanding in 2006 averaged $64.7 billion, up by only $1.2 billion from the average of $63.4 billion in 2005. As a result, contribution from volume related growth in income was only $41.5 million in 2006. Increased interest income from advances was mostly rate-related and contributed $1.1 billion in the growth of interest income in 2006.

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Reported net prepayment fees totaled $19.2 million in 2006, compared to $6.6 million in 2005. Prepayment fees were included in interest income from advances. The FHLBNY generally requires advances with a maturity or repricing period greater than nine months to carry a fee sufficient to make it financially indifferent to the borrower’s decision to prepay the advances.

Impact of hedging - The impact of swapping fixed- for floating-interest rate in which the FHLBNY paid out fixed-rate and received LIBOR-indexed cash flows in an interest rate swap agreement made a positive cash in-flow of $236.8 million in 2006, compared to negative cash out-flow of $372.0 million in 2005. In 2006, the term structure of interest rates had tended to be such that short-term rates were close to or in some instances higher than long-term rates. The Bank benefited from swapping out fixed rates in return for receiving 3-month LIBOR indexed cash in-flows.

In 2006, these positive factors together contributed to the improved yields from advances which grew by 168 basis points to yield 5.11% on a swapped-out basis, and exceeded the increase of 142 basis points on the Bank’s aggregate cost of issuing debt (consolidated obligation bonds and discount notes) in 2006.

Interest income from investments - In 2006, the Bank derived interest income from investments principally from its long-term securities classified as held-to-maturity, mainly mortgage-backed securities, and a small inventory of state and housing agency bonds. Mortgage-backed securities typically yield higher coupons compared to other investments allowed under the FHLBNY’s current investment policy.

The Bank also generated interest income from short-term investments, comprised of certificates of deposits, Federal funds sold, and interest-yielding cash pledged as collateral to derivative counterparties. In 2005, the Bank had also carried a portfolio of variable-rate mortgage-backed securities classified as available-for-sale securities, which was sold during 2005 at a small gain.

Long- term investments — Interest income from investments in held-to-maturity securities, principally MBS, grew marginally in 2006 from the prior year despite the general increase in the rate environment. This was due to declining volumes of investments in 2006 as the average balance of investments was $10.6 billion compared to $11.3 billion in 2005. Interest earned on investments was $580.0 million in 2006, almost unchanged from the prior year total of $585.5 million, even as interest rates trended upwards in 2006 compared to 2005. During most of 2006, the Bank did not believe that the risk-reward pricing in the market place for MBS met its investment objectives and, as a result, acquisitions were opportunistic.

Prepayment fees received, primarily from unscheduled prepayments of commercial real estate-backed MBS, aggregated $5.5 million in 2006 compared to $13.7 million in 2005. Prepayments fees were reported in interest income from investments.

Short-term investments — As an offset to declining investments in MBS, the Bank maintained its balance sheet leverage targets by increasing average investments in short-term certificates of deposits issued by highly-rated financial institutions.

Interest income from short-term certificates of deposit and interest-earning cash pledged with derivatives counterparties was $300.5 million in 2006, compared to $193.7 million in 2005. Increased income from such short-term liquid investments was principally from the general increase in short-term interest rates in 2006 compared to 2005. The average yield from short-term deposits was 5.00% in 2006, up from 3.42% in 2005, an increase of 158 basis points. This parallels observed increases in the interest rate environment as the average 3-month LIBOR rate increased by 163 basis points over the same period.

Interest income from Federal funds sold was $145.4 million in 2006 and $97.5 million in 2005. Lower volume of Federal funds activity was offset by higher short-term rates in 2006. Yields improved by 182 basis points to 5.10% in 2006.

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Interest Expense

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. Discount notes are issued to fund assets with shorter-interest rate reset characteristics.

Interest expense accruals are principally the coupon payments to investors holding the Bank’s debt. Recorded interest expense in the statements of operations are adjusted for the cash flows associated with interest rate swaps in which the Bank pays variable-rate LIBOR-indexed cash flows to derivative counterparties and, in exchange, the Bank receives from derivative counterparties fixed-rate cash flows which typically mirror the fixed-rate coupon payments to investors holding the debt. The Bank hedges its long-term fixed-rate bonds and almost all fixed-rate callable bonds. The impact of hedging activities on interest expense is discussed separately under the section “Impact of hedging debt.”

Interest expense - 2007 compared with 2006

Total interest expense in 2007 was $4.3 billion, an increase of $342.0 million from the previous year. Interest expense associated with the issuance of FHBNY bonds and discount notes was the primary source of interest expense in 2007 and 2006 and accounted for 97.1% and 97.8% of total interest expense in those years. Changes in both rate and intermediation volume (average interest-costing liabilities) explain the change in 2007 from the prior year.

The principal components of FHLBNY bond and discount note expenses are summarized below (in thousands).

	Years ended December 31,
	2007		2006		2005
Fixed-rate Bonds	$	2,710,748	$	2,538,401	$	1,905,853
Floating-rate Bonds		330,709		100,445		69,179
Discount Notes		937,535		901,978		658,655
		3,978,992		3,540,824		2,633,687
Net Impact of interest rate swaps and amortization of basis		174,102		305,395		27,110
Reported Interest Expense	$	4,153,094	$	3,846,219	$	2,660,797

Interest expense on consolidated obligation bonds - Consolidated obligation bond expense, net of the impact of interest rate swaps, was $3.2 billion in 2007, up by $271.3 million from the prior year.

Increase in volume contributed $113.3 million in higher interest expenses. Average volume of bonds outstanding, as measured by daily average of outstanding balances, was $63.3 billion in 2007 and funded 70.9% of the average interest-yielding assets in 2007. In 2006, the average volume of bonds was $60.9 billion and funded 71.2% of average interest-earning assets.

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Higher coupon cost, net of the impact of interest rate swaps, in 2007 contributed $158.0 million in higher interest expenses. On an after swap basis, consolidated obligation bonds averaged a yield of 5.08%, compared to 4.83% in the prior year. Yields are determined by investor demand for FHLBank bonds and the prevailing interest rate environment. Consolidated obligation bond yields, driven by investors’ investment preferences and market conditions, were uneven during 2007. During most of the first six months in 2007, the Bank increased the usage of fixed-rate non-callable bonds because of favorable execution spreads. Earlier in 2007, investor demand for short-term callable bonds drove pricing to favorable levels for the Bank and issuances of short-term bonds callable bonds with short-lockouts increased. Issuances of discount notes decreased in the first two quarters of 2007. Late in the second quarter of 2007, the yield curve steepened and the advantageous pricing for short lock-out callable bonds reverted to more normal levels.

In the third quarter of 2007, FHLBank’s bond execution was affected by the credit uncertainty in the markets and despite the triple-A quality ascribed to consolidated obligation bonds, investor demand weakened and the Bank shifted to the issuance of discount notes and floating-rate bonds, which were sought out by investors.

Interest expense on consolidated obligation discount notes - Interest expense on discount notes was $937.5 million in 2007, up $35.6 million from the prior year. Average volume of discount notes outstanding was $19.0 billion in 2007 and funded 21.3% of the average interest-yielding assets in 2007. In 2006, the average volume of bonds was $18.4 billion and funded 21.5% of average interest-earning assets.

The yield on discount notes was 4.95% in 2007 compared to 4.91% in the prior year, an increase of only 4 basis points in 2007. In 2007, the Federal funds rate averaged 5.05% and the 3-month LIBOR rate averaged 5.30%. Contrasting market rates for Federal funds with the yields on discount notes rates illustrates the advantage to the Bank from the issuances of discount notes.

Attractiveness of discount notes, as measured in terms of spread to LIBOR, was consistent throughout the four quarters in 2007. Through most of the first nine months of 2007, the Bank opted to reduce the issuance of discount notes because of more attractive alternative funding structures. Relative spread to 3-month LIBOR was tighter during most of the first two quarters of 2007 and the Bank was able to achieve better short-term funding executions through the issuance of alternative funding structures such as the issuance of fixed-rate callable debt with very short lock-out periods in conjunction with the execution of receive-fixed, pay-LIBOR indexed interest rate swaps with mirrored short lock-out call terms. In the rising-rate environment during the first half of 2007, derivative counterparties tended to exercise their right to terminate the swap at the earliest opportunity. In turn, the Bank exercised its right to call the bond, effectively converting a medium-term debt into a short-term debt at better overall spreads to LIBOR than the issuance of term discount notes. Discount notes outstanding averaged only $10.8 billion early in the third quarter when discount note pricing was unattractive to the Bank.

That all changed in August 2007 with the sub-prime crises and resulting decline in liquidity in the market place. Investor demand for FHLBank discount notes was unprecedented. Issuances increased and the outstanding amount of discount notes averaged $14.4 billion in August 2007 when spread was about 20 basis points below LIBOR; issuances increased in September and outstanding amounts of discount notes averaged $24.5 billion in September 2007 when at times the spread was 50-90 basis points below LIBOR. At September 30, 2007, the amount of discount notes outstanding was $30.1 billion, and the amount outstanding grew to $34.8 billion at December 31, 2007.

Impact of hedging debt - Cash flows from interest rate swaps are an important component of interest expense on debt. The FHLBNY issues both fixed-rate callable and non-callable debt. Typically, the Bank issues callable debt with the simultaneous execution of callable 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.

This hedging strategy benefits 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 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 convert the debt to an adjustable-rate instrument tied to an index, typically LIBOR.

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Impact of hedging debt - 2007 compared with 2006

In 2007 and 2006, the Bank’s obligation to pay swap counterparties variable cash flows, indexed to LIBOR, exceeded the swap counterparties’ obligations to pay the Bank fixed coupons and resulted in net out-flow of cash to derivative counterparties. The interest rate exchanges were primarily associated with SFAS 133 qualifying debt hedges and added $174.1 million to debt expense in 2007, compared to a larger out-flow of $305.4 million in 2006. In 2007 and 2006, the prevailing interest rate environment was such that the typical 3-month LIBOR indexed payments by the Bank to swap counterparties exceeded the fixed coupons received by the Bank in the interest rate hedging relationship. Relative to 2007, the 2006 yields on the short-end of the term structure of interest rates were higher, and the 3-month LIBOR-indexed payments by the Bank were accordingly larger in 2006 than in 2007.

In a hedge of debt, the Bank is obligated to pay LIBOR-indexed cash flows to swap counterparties and, in a rising interest rate environment, LIBOR resets almost immediately to the risings rates, while the Bank may receive lower fixed-rate coupons of bonds issued in prior years.

While the Bank holds the right to exercise a call and terminate the bond at predetermined exercise dates, the Bank’s practice is to call the bond only when the swap counterparty exercises its right to call the swap associated in the hedging relationship. Generally, a swap counterparty will only exercise its option to call the swap (with a callable swap), if it expects future LIBOR-indexed variable cash flows, it expects to receive from the Bank, to be less than the fixed-rate cash flows the swap counterparty is obligated to pay to the Bank.

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

	Years ended December 31,
	2007		2006		2005
Consolidated bonds-Interest expense
Gross interest expense before adjustment for interest rate swaps	$	3,041,458	$	2,638,846	$	1,974,850
Net interest adjustment for interest rate swaps		174,102		305,395		27,110
Total Consolidated bonds-interest expense reported	$	3,215,560	$	2,944,241	$	2,001,960

The term structure of interest rates in 2007 was such that it tended to narrow the spread differential between the Bank’s fixed-rate coupons on the fixed leg of the swap and the LIBOR-indexed coupons on the variable leg of the swap. As a result, the negative impact of interest rate exchanges associated with debt hedging activities was lower in 2007 compared to 2006 because of the narrowing gap between fixed coupons received by the Bank and the rising LIBOR-indexed variable coupons paid by the Bank to derivative counterparties in the interest rate exchange agreements. The cash flow pattern was not only consistent with the prevailing interest rate environment in 2007, but also was consistent with the Bank’s asset-liability management practices of converting fixed-rate debt largely to variable rate.

The Bank executes a similar hedge strategy with its fixed-rate advances converting fixed-cash flows to variable-rate cash flows.

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Interest expense - 2006 compared with 2005

Total interest expense on consolidated obligation bonds and discount notes was $3.8 billion in 2006 and $2.7 billion in 2005. The increase in the general interest rate environment as well as issuance of longer-term debt during the third quarter of 2006 were factors that contributed to the increase. The Bank also increased issuance of medium- and shorter-term securities in 2006 and, in a somewhat downward sloping yield curve, the short-end of the yield curve was relatively more expensive contributing to higher coupons.

Average debt yield was 4.85% in 2006, an increase of 142 basis points over the average yield in 2005. The average debt yield reported in 2006 did not fully reflected the benefits from debt repurchases in 2006. Some of this benefit was observed by the comparison of the weighted average bond coupons of 4.60% at December 31, 2006, which was lower than the 2006 average by 25 basis points.

Impact of hedging debt - 2006 compared with 2005

Cash flows from interest rate swaps was also a critical component of interest expense on debt in 2006 and 2005. The yield curve was mostly inverted in 2006, compared to a relatively flat yield curve in 2005. As a result, the differential between the pay-fixed coupons and the receive 3-month LIBOR indexed cash flows widened in 2006. Because of the higher yields on the short-end of the yield curve relative to longer-term yields, the net impact of accruals of receive-fixed interest-rate swaps and pay-LIBOR indexed cash flows associated with qualifying debt hedges increased debt expense by $305.4 million. In 2005, in a flat yield curve environment, the differential between the Bank’s obligation to pay LIBOR indexed cash flows and receive fixed rate cash flows was relatively smaller and the impact was only $27.1 million.

Net Interest Spread

Net interest income is typically measured in basis points and is referred by the Bank as net spread, which represents the difference in basis points between yields earned on interest yielding assets and yields paid on liabilities and shareholders’ equity, before the impact of assessments.

2007 compared with 2006

Net interest spread was 30 basis points in 2007, slightly up from 29.5 basis points in 2006. Net margin, which is a measure of efficient use of assets, was 56 basis points in 2007, up slightly from 55 basis points in the prior year. Net margin is net interest income divided by average earning assets.

In the third and fourth quarters of 2007, the Bank benefited from issuing attractively priced discount notes, relative to LIBOR, and simultaneously investing the proceeds from issuances in money market instruments, locking in favorable margins. The efficiency and attractiveness of this strategy also contributed to the Bank’s goal of increasing investments in money market instruments and ensuring liquidity for its members’ unexpected borrowing needs in an uncertain market.

Yields from earning assets increased by 21 basis points to yield 5.35% in 2007 compared to 5.14% in 2006. Yields paid on liabilities increased by 20 basis points to 5.05% in 2007, compared to 4.85% in 2006. Earnings from stockholders’ equity, which provides “interest-free” funding, also contributed to the net interest spread. Generally, short-term rates were higher in 2007 relative to 2006 and, in this environment, deployment of capital, defined as stock holders’ capital, retained earnings and net non-interest bearing liabilities, (“deployed capital”), provided the Bank with greater income in 2007 than in 2006. An average of $4.5 billion in deployed capital in 2007 earned an estimated yield of 5.35%, which was the overall yield earned by the Bank from its interest-earning assets in 2007. In contrast, in 2006, the Bank earned 5.14%, 21 basis points less than in 2007. Deployed capital was also $4.5 billion in 2006. As a result, deployed capital made a stronger contribution to net interest income in 2006 compared to 2005.

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2006 compared with 2005

Net interest spread was 29.53 basis points in 2006 compared to 26.64 basis points in 2005. Net interest margin was 54.9 basis points in 2006, up by 8.3 basis points compared to 2005.

Yields from earning assets increased by 146 basis points in 2006 to 5.14%. Yields paid on liabilities increased by 143 basis points. The incremental increase in yields earned on earning assets over yields paid on liabilities contributed a 3 basis point gain towards net margin earned in 2006. This was one factor contributing to spread improvement in 2006. Another factor was earnings from stockholders’ equity which provided “interest-free” funding. Interest rates were higher in 2006, relative to 2005, and in this environment, deployed capital provided the Bank with greater income in 2006 than in 2005. In 2006, an average $4.5 billion in deployed capital earned an estimated yield of 5.14%. In 2005, deployed capital earned only 3.68% on a higher average deployed capital of $4.9 billion.

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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.

	Years ended December 31,
	2007							2006							2005
			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	$	65,454,319	$	3,495,312		5.34	%	$	64,657,774	$	3,302,174		5.11	%	$	63,446,436	$	2,174,948		3.43	%
Interest-earning deposits		7,689,475		411,647		5.35			6,005,662		300,499		5.00			5,655,463		193,668		3.42
Federal funds sold		3,741,385		192,845		5.15			2,851,611		145,420		5.10			2,969,419		97,547		3.28
Investments		10,798,926		596,761		5.53			10,632,295		580,002		5.46			11,317,140		585,528		5.17
Mortgage and other loans		1,502,320		78,940		5.25			1,471,434		76,152		5.18			1,361,517		69,354		5.07
Total interest-earning assets	$	89,186,425	$	4,775,505		5.35	%	$	85,618,776	$	4,404,247		5.14	%	$	84,749,975	$	3,121,045		3.68	%
Funded By:
Consolidated obligations-bonds	$	63,276,726	$	3,215,560		5.08			60,932,425		2,944,241		4.83			56,975,120		2,001,960		3.51
Consolidated obligations-discount notes		18,956,390		937,534		4.95			18,381,469		901,978		4.91			20,654,321		658,837		3.19
Interest-bearing deposits and other borrowings		2,285,523		111,293		4.87			1,773,104		84,824		4.78			2,112,202		62,529		2.96
Mandatorily redeemable stock		146,286		11,731		8.02			50,948		3,086		6.06			55,512		2,747		4.95
Total interest-bearing liabilities		84,664,925		4,276,118		5.05	%		81,137,946		3,934,129		4.85	%		79,797,155		2,726,073		3.42	%
Capital and other non-interest- bearing funds		4,521,500		—					4,480,830		—					4,952,820		—
Total Funding	$	89,186,425	$	4,276,118				$	85,618,776	$	3,934,129				$	84,749,975	$	2,726,073
Net Interest Spread			$	499,387		0.30	%			$	470,118		0.29	%			$	394,972		0.26	%
Net Interest Margin (Net interest income/Earning Assets)						0.56	%						0.55	%						0.47	%

Note 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, typically resulting in funding at an advantageous price. 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.

118

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 table presents 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).

2007 compared to 2006

	For the years ended
	December 31, 2007 vs. December 31, 2006
	Increase (decrease)
	Volume		Rate		Total
Interest Income
Advances	$	40,681	$	152,457	$	193,138
Interest-earning deposits		84,251		26,897		111,148
Federal funds sold		45,375		2,050		47,425
Investments		9,090		7,669		16,759
Mortgage loans and other loans		1,598		1,190		2,788
Total interest income		180,995		190,263		371,258
Interest Expense
Consolidated obligations-bonds		113,276		158,043		271,319
Consolidated obligations-discount notes		28,211		7,345		35,556
Deposits and borrowings		24,515		1,954		26,469
Mandatorily redeemable stock		5,774		2,871		8,645
Total interest expense		171,776		170,213		341,989
Changes in Net Interest Income	$	9,219	$	20,050	$	29,269

Net Interest income increased by $29.3 million in 2007 compared to 2006. Rate related changes in yields from earning assets minus yields paid on interest costing liabilities contributed $20.1 million. Changes in volume and mix contributed $9.2 million.

Impact of yield and coupons - Increases in yields and coupons of interest-earning assets in a higher interest rate environment contributed $190.3 million towards the increase in reported interest income, principally due to higher yields from advances. Offsetting this was increases in liability expenses that caused interest expenses to rise by $170.2 million. The general increase in the interest rate environment through most of the first six months of 2007 was a factor.

Growth in interest income was mainly from higher rate related earnings from advances as maturing advances were replaced at higher coupons in a higher interest rate environment in 2007. Through most of the first six months of 2007, coupons of short-term and variable rate advances benefited the most from an inverted yield curve environment. Additionally, fixed-rate advances hedged by pay-fixed, receive variable-rate cash flows benefited from higher short-term LIBOR rates. Yields and coupons of short-term instruments also benefited from higher short-term rates in the latter part of 2007, contributing $26.9 million towards the increase in interest income in 2007. All of these factors contributed to $152.5 million in higher interest revenues in 2007 compared to 2006.

The year-over-year increase in interest expense from rate and yield related factors was $170.2 million in 2007. Of this amount, $158.0 million was due to higher coupons and yields on consolidated obligation bonds. As previously discussed, yields paid on bonds are predicated on investor demand for FHLBank debt and the prevailing interest rate environment.

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Impact of volume - Higher intermediation volume in 2007, as measured by average interest-yielding assets, resulted in an increase of $181.0 million in interest income, which was partly offset by corresponding volume driven increases in interest expense of $171.8 million, for an overall net increase in net interest income of $9.2 million in 2007, over 2006.

While the balance sheet grew from $81.7 billion at December 31, 2006 to $109.7 billion at December 31, 2007, average interest-earning assets increased substantially less. In 2007, total earning assets averaged $89.2 billion, an increase of only $3.6 billion over the average in 2006. This is explained by the fact that asset growth was largely the result of the surge in demand by members for advances in the third and fourth quarters of 2007, and the surge had a smaller impact on average volume, which is measured on the basis of a full year average.

For the same reason, advances averaged $65.5 billion in 2007, barely higher than $64.7 billion in 2006. In contrast the amount of advances outstanding at December 31, 2007 was $82.1 billion, significantly higher than $59.0 billion at the previous year end. Volume’s contribution towards increase in interest income was just $40.7 million.

On the other hand, volume’s contribution was significant from investments in Federal funds and short-term money market instruments. Together, they contributed $129.6 million in higher interest income in 2007. This positive contribution was directly due to the Bank’s decision to increase liquidity in the third and fourth quarters of 2007 and inventorying short-term highly liquid investments to meet members’ unprecedented demand for funds in the uncertain markets.

2006 compared to 2005

	For the years ended
	December 31, 2006 vs. December 31, 2005
	Increase (decrease)
	Volume			Rate		Total
Interest Income
Advances	$	41,525		$	1,085,701	$	1,127,226
Interest-earning deposits		11,992			94,839		106,831
Federal funds sold		(3,870	)		51,743		47,873
Investments		(35,433	)		29,907		(5,526	)
Mortgage loans and other loans		5,577			1,221		6,798
Total interest income		19,791			1,263,411		1,283,202
Interest Expense
Consolidated obligations-bonds		139,050			803,231		942,281
Consolidated obligations-discount notes		(72,500	)		315,641		243,141
Deposits and borrowings		(10,039	)		32,334		22,295
Mandatorily redeemable stock		(226	)		565		339
Total interest expense		56,285			1,151,771		1,208,056
Changes in Net Interest Income	$	(36,494	)	$	111,640	$	75,146

Net Interest income increased by $75.1 million in 2006 compared to 2005. Rate related changes in yields from earning assets minus yields paid on interest costing liabilities made a positive contribution of $111.6 million, primarily due to general increase in interest rates and increase in yields in 2006 over 2005. Changes in volume and mix resulted in a negative contribution of $36.5 million over the same periods. Volume related increases in advances were offset by a decline in interest income from investments because of lower investment volumes in 2006 compared to 2005.

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Allowance for Credit Losses

The FHLBNY’s allowances for loan losses were for mortgage loans held-for-portfolio. The Bank does not deem it necessary to provide a loan loss allowance against its advances to members.

Allowance for credit losses was $633.0 thousand and $593.0 thousand at December 31, 2007 and 2006. 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, 2007 and 2006.

Mortgage loans - The Bank recorded a provision of $40.0 thousand, $11.0 thousand and $75.0 thousand in 2007, 2006, and 2005, against its mortgage loans held-for-portfolio based on identification of inherent losses under a policy described more fully in the section Critical Accounting Policies and Estimates. The FHLBNY experienced no charge offs in 2007. In 2006, charge offs against the MPF portfolio amounted to $18.0 thousand, which were recovered through the credit enhancement provisions of MPF loans. There were no charge offs in 2005.

Advances - The FHLBNY’s credit risk from advances at December 31, 2007 and 2006 were concentrated in commercial banks and savings institutions. All advances were fully collateralized during their entire term. In addition, borrowing members pledged their stock of 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 has not early adopted SFAS 159, “The Fair Value Option for Financial Assets and Financial Liabilities, including an amendment of FASB Statement 115” (“SFAS 159”).

Changes in the fair value of a derivative that is designated and qualifies as a fair value hedge under the provisions of SFAS 133, together with the 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.

Net interest settlements on derivatives designated and SFAS 133 qualifying as fair value or cash flow hedges are recorded as adjustments to the interest income or interest expense of the hedged assets or liabilities. Net interest settlements on derivatives that do not qualify for hedge accounting under SFAS 133 are recorded in Other Income (loss) as a Net realized and unrealized gain (loss) on derivatives and hedging activities.

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To the extent of the effectiveness of a hedge, changes in the fair value of a derivative that is designated and qualifies as a “cash flow” hedge under the provisions of SFAS 133 are recorded in Accumulated other comprehensive income (loss).

For all hedge relationships, 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 hedging activities are typically determined 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. The net contractual interest accruals on interest rate swaps considered as not qualifying for hedge accounting under the provisions of SFAS 133 and interest received from in-the-money options are also recorded as a Net realized and unrealized gain (loss) on derivatives and hedging activities in Other income (loss).

Interest accruals associated with SFAS 133 qualifying derivatives are recorded in interest income and interest expense together with interest accruals associated with the hedged items.

Extinguishment of debt - The Bank retires debt principally to reduce future debt costs when the associated asset is either prepaid or terminated early. Typically, debt retirement is associated with the prepayments of advances and commercial mortgage-backed securities for which the Bank receives prepayment fees. When assets are prepaid in advance of their expected or contractual maturities, the Bank also attempts to extinguish debt in order to re-align asset and liability cash flow patterns. Debt extinguished was associated with prepayments of advances and commercial mortgage-backed securities. Debt retirement typically requires a payment of a premium resulting in a loss.

The following table sets forth the main components of Other income (loss) (in thousands):

	Years ended December 31,
	2007			2006			2005
Other income (loss):
Service fees	$	3,324		$	3,368		$	4,666
Net realized and unrealized gain (loss) on derivatives and hedging activities		18,356			9,676			(9,466	)
Net realized gain from sale of available-for-sale and held-to-maturity securities		—			—			1,895
Losses from extinguishment of debt and other		(8,180	)		(26,283	)		(14,952	)
Total other income (loss)	$	13,500		$	(13,239	)	$	(17,857	)

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Other income (loss) - 2007 compared with 2006

Other income (loss) in 2007 was a reported gain of $13.5 million in 2007 in contrast to a loss of $13.2 million in 2006.

Service fees - Service fees remained unchanged.

Hedging activities - In 2007, hedging activities resulted in a net gain of $18.4 million compared to a net gain of $9.7 million in 2006. The primary components of reported gains and losses from hedging activities were:

Debt hedging - Changes in the benchmark interest rate (LIBOR for the Bank) and implied volatilities of interest rates (i.e., market’s expectation of potential changes in future interest rates) of fair value hedges using receive-fixed, pay-variable swaps were:

• SFAS 133 qualifying fair value debt hedges of the Bank’s debt resulted in a net loss of $2.1 million in 2007 on total notional hedged amount of $34.9 billion at December 31, 2007. Net unrealized losses were $6.7 million, partly offset by realized gains of $4.7 million. In comparison, loss in the prior year from SFAS 133 qualifying debt hedges was $0.4 million on total notional of $40.5 billion. Realized gains in 2006 of $6.4 million were offset by unrealized losses of $6.8 million.

• SFAS 133 non-qualifying fair value debt hedges resulted in net unrealized gain of $9.7 million in 2007. The notional amount outstanding of non-qualifying debt hedges at December 31, 2007 was $1.5 billion. Net accruals of $1.9 million in 2007 from non-qualifying or economic hedges were recorded as realized gains. In the prior year, the impact of non-qualifying debt hedges was $0.6 million, primarily representing net interest accruals associated with non-qualifying debt hedges. Gains and losses from non-qualifying and economic hedges are classified as economic hedges, and also included in Other income (loss) as a Net realized and unrealized gain (loss) from derivatives and hedging activities. While such hedges do not meet the SFAS 133 hedge accounting criteria, the hedges were executed to mitigate business risk and met the Bank’s risk management objectives.

• SFAS 133 qualifying hedges of anticipatory issuances of debt (cash flow hedges) resulted in a de minimis impact due to ineffectiveness recorded through earnings in 2007 and 2006. The notional amount outstanding was $127.5 million at December 31, 2007. There were no cash flow hedges outstanding at December 31, 2006.

Advance Hedging - Changes in the benchmark interest rate (LIBOR for the Bank) and the implied volatilities of interest rates of fair value hedges using pay-fixed, receive-variable swaps associated with SFAS 133 qualifying hedges of the Bank’s advances were as follows:

• SFAS 133 qualifying fair value advance hedges in 2007 resulted in net gains of $8.0 million, including $1.0 million from the amortization of previously recorded basis adjustments. Total notional amount of hedges was $47.0 billion at December 31, 2007. In 2006, SFAS 133 qualifying hedges resulted in net gains of $3.5 million, including $2.1 million from the amortization of previously recorded basis adjustments.

• SFAS 133 non-qualifying advance hedges in 2007 and 2006 were de minimis.

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Option values of caps and floors - In 2007, changes in the fair value basis of caps and floors, collectively “options”, resulted in recorded loss of $2.6 million, principally from market-amortization of the time value of purchased options approaching expiration. Net interest income accruals from in-the-money option contracts associated with variable-rate advances contributed $3.6 million in realized gains. Certain purchased options, indexed to LIBOR, were in-the-money during 2007 as short-term interest rates rose past the contractual “strike-prices” of the option contracts and the Bank accrued to income the difference between the option strike price and prevailing LIBOR rates. Under hedge accounting rules, such periodic contractual interest income is also considered as cash flows from economic hedges and is reported as a Net realized and unrealized gain (loss) on derivatives and hedging activities in Other income (loss).

In 2006, the change in fair value basis of options resulted in a loss of $6.6 million, offset by $7.9 million of interest income accrued from in-the-money options.

Other income (loss) - 2006 compared with 2005

Other income (loss), in aggregate, was a charge against income of $13.2 million and $17.9 million for the years ended December 31, 2006 and 2005.

Service fees - Service fees declined due to declining demand for such services consistent with the trend over the previous years. The Bank does not consider income from such services as a significant element of its operations. Service fees were $3.4 million in 2006, down from $4.7 million in 2005.

Net realized and unrealized gain (loss) on derivatives and hedging activities - Changes in the fair value of the Bank’s derivatives, including a small amount of mortgage commitments, resulted in gains of $9.7 million in 2006, and a loss of $9.5 million in 2005. These gains and losses were included in Other income (loss) as a Net realized and unrealized gain (loss) on derivatives and hedging activities. In addition, the net contractual interest accruals on interest rate swaps considered as non-qualifying for hedge accounting and interest received from “in-the-money” options were also recorded as a Net realized and unrealized gain (loss) on derivatives and hedging activities.

Net realized and unrealized gains and losses from hedging activities were typically determined 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 change in the fair value of the hedged assets and liabilities attributable to changes in benchmark interest rates.

The primary components of reported gains and losses in 2006 from hedging activities were:

• Net realized and unrealized gains from qualifying fair value hedges using receive-fixed, pay-variable swaps, a strategy used mainly to hedge the Bank’s fixed-rate liabilities resulted in net recorded losses of $0.4 million in 2006.

• Net realized and unrealized gains from qualifying fair value hedges using pay-fixed, receive-variable swaps resulted in a reported ineffectiveness of $1.4 million in 2006. The average notional amount of such fair value interest rate swaps was $35.1 billion in 2006. In addition, amortization of basis adjustments from modified hedged resulted in a reported gain of $2.1 million in 2006 and $3.6 million in 2005.

• Termination of option contracts that had been associated with variable-rate advances prepaid by member in 2006 and designated as economic hedges resulted in a one-time gain of $4.5 million. This was offset by changes in the fair value basis of options resulting in reported losses of $6.6 million, principally from market-amortization of the time value of purchased options approaching expiration. Net interest income accruals from in-the-money option contracts associated with variable-rate advances contributed $7.9 million in realized gains in 2006. Purchased options, indexed to LIBOR, became “in-the-money” during 2006 as short-term interest rates rose past the contractual “strike prices” of option contracts, and the Bank accrued to income the difference between the option strike price and prevailing LIBOR rates. Under hedge accounting rules, such periodic contractual interest income is also considered as cash flows from economic hedges and was recorded as a Net realized and unrealized gain (loss) on derivatives and hedging activities. In 2005, interest accruals from in-the-money options were not material and market amortization and changes in fair value of purchased options resulted in reported losses of $10.5 million.

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• Net realized and unrealized gains from economic hedges totaled $0.8 million in 2006 and $2.0 million in 2005. In prior years and most of 2005, the Bank accounted for mortgage loan delivery commitments as “cash flow” hedges under the provisions of SFAS 133. In the fourth quarter of 2005, the Bank began to account for mortgage delivery commitments as economic hedges with an insignificant impact to earnings in 2005. In 2005, the FHLBNY corrected its estimation methodology for valuing hedged advances, which resulted in a cumulative charge of $3.5 million.

Debt extinguishment - Losses from extinguishment of debt consisted principally from retirement of consolidated obligation bonds. In 2006, the FHLBNY retired $770.0 million of consolidated obligation debt at a cost that exceeded book value by about $26.3 million. The amount of debt retired in 2005 was $359.5 million at a cost that exceeded book value by $14.8 million. Generally, the debt extinguished was fixed-rate and non-callable. The bonds retired were associated with advances and commercial mortgage-backed securities that had been prepaid.

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 Board, the regulator of the FHLBanks.

The following table sets forth the main components of Other expenses (in thousands):

	Years ended December 31,
	2007		2006		2005
Other expenses:
Operating	$	66,569	$	63,203	$	59,067
Finance Board and Office of Finance		5,193		5,140		5,506
Total other expenses	$	71,762	$	68,343	$	64,573

Operating expenses rose 5.3% in 2007 compared to 2006, and were mainly caused by increases in head- count and general inflationary increases in salary expenses. Expenses accrued towards the Bank’s unfunded liabilities for its supplemental pension and post retirement health benefit plan were higher in 2007.

In 2006, operating expenses rose by 7.0% compared to 2005. The cost of implementing controls and self-testing procedures under Section 404 of the Sarbanes-Oxley Act have been substantial. The legal, accounting and consulting costs with respect to the Bank’s SEC registration process were also significant.

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Operating Expenses

The following table sets forth the major categories of operating expenses (in thousands):

	Years ended December 31,
	2007		2006		2005
Salaries and employee benefits	$	44,740	$	41,292	$	39,253
Temporary workers		125		257		318
Occupancy		3,957		3,732		3,516
Depreciation and leasehold amortization		4,498		3,903		3,562
Computer service agreements and contractual services		5,202		4,519		3,641
Professional and legal fees		2,538		3,786		3,372
Other		5,509		5,714		5,405
Total operating expenses	$	66,569	$	63,203	$	59,067

Staff additions in financial reporting, risk management and the operation risk team explain the increases in salaries and employee benefits. General increases in salaries, payroll and medical costs were other contributing factors. Consulting services primarily associated with on-going risk and control enhancements were the primary cause of the increase in professional and other fees. Technology costs have increased primarily because of the Bank’s initiatives to enhance its information systems and to provide users of financial information within the Bank access to secure and tested data.

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 obligation expense in 2007 was $80.8 million up from $71.3 million in 2006 and $57.5 million in 2005. The Bank’s accrual to fund its Affordable Housing program was $37.2 million in 2007, up from $32.0 million in 2006 and $25.9 million in 2005. Assessments are calculated on income and the higher assessment expenses reflect the increases in 2007 pre-assessment income.

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 net income for the Affordable Housing Program. Regulatory net income is defined as reported net income before interest expense related to mandatorily redeemable capital stock under SFAS 150 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.

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The following table provides roll-forward information with respect to changes in Affordable Housing Program liabilities (in thousands):

	Years ended December 31,
	2007			2006			2005
Beginning balance	$	101,898		$	91,004		$	81,580
Additions from current period’s assessments		37,204			32,031			25,878
Net disbursements for grants and programs		(20,050	)		(21,137	)		(16,454	)
Ending balance	$	119,052		$	101,898		$	91,004

REFCORP - The following table provides roll-forward information with respect to changes in REFCORP liabilities (in thousands):

	Years ended December 31,
	2007			2006			2005
Beginning balance	$	17,475		$	14,062		$	9,966
Additions from current period’s assessments		80,776			71,299			57,540
Net disbursements to REFCORP		(74,253	)		(67,886	)		(53,444	)
Ending balance	$	23,998		$	17,475		$	14,062

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Asset Quality and Concentration- Advances, Investment securities, and Mortgage Loans

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 could have a negative impact upon the FHLBNY’s income and financial performance.

The following table sets forth five year history of the FHLBNY’s advances and mortgage loan portfolios as of December 31, (in thousands):

	2007		2006		2005		2004		2003
Advances	$	82,089,667	$	59,012,394	$	61,901,534	$	68,507,487	$	63,923,184
Mortgage loans before allowance for credit losses	$	1,492,261	$	1,484,012	$	1,467,525	$	1,178,590	$	672,151

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 credit extended to any member or counterparty 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.

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.

Within the collateral portfolio at December 31, 2007, 79.0% was concentrated in mortgage loans (60.0% in one-to-four- family mortgages, 10.0% in multi-family mortgages and 9.0% in commercial mortgages), and 21.0% was concentrated in Government, Agency and other mortgage-backed securities. The FHLBNY has the right to take such steps, as it deems necessary, to protect its secured position on outstanding loans, 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. As of December 31, 2007, the FHLBNY had a collateralization rate (total FHLBNY obligations of all members as a percent of total unpaid balance of collateral pledged) of 177.0% on its total portfolio of outstanding member obligations. The collateralization rate varies by individual member. In all cases, sufficient collateral had been pledged to cover each member’s outstanding obligations with the FHLBNY.

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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 and counterparties. 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 when 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.

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 adjusts liquidation values on a weekly basis.

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The FHLBNY makes on-site review of borrowers in connection with the evaluation of the borrower’s 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.

Collateral Coverage of Advances

All member obligations with the FHLBNY must be fully collateralized throughout their entire term. The liquidation value of collateral pledged was $143.8 billion to cover the $80.6 billion par value in outstanding advances as of December 31, 2007. Collateral comprised of $112.0 billion in market value of eligible mortgages and $31.8 billion in market value of eligible securities, including cash collateral. Of the $143.8 billion in pledged collateral securing all outstanding member obligations, $31.8 billion was in the FHLBNY’s physical possession or that of its safekeeping agent(s); $112.0 billion was specifically listed.

The level of over-collateralization is on an aggregate basis and may not necessarily be indicative of 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.

As of December 31, 2007, other outstanding member obligations totaling $454.1 million were collateralized by an additional $1.25 billion of pledged collateral. The pledged collateral comprised of $1.2 billion in mortgage loans and $49.0 million in securities and cash collateral. The outstanding member obligations consisted of $442.3 million of standby letters of credit, $0.9 million of collateralized value of outstanding derivatives, and $10.9 million representing the 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.

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 not uncommon 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.

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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 Board provides the potential for additional credit risk for the FHLBNY. It is the FHLBNY’s current policy to not 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, 2007 and 2006. 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 and savings institutions. At December 31, 2007, the Bank had advances of $38.9 billion outstanding to five member institutions, representing 48.3% of total advances outstanding, and sufficient collateral was held to cover the advances to these institutions.

Top Five Advance Holders

The following table summarizes the top five advance holders (in thousands):

Top five advance holders at December 31, 2007

	December 31, 2007
			Par		Percent of			Interest
	City	State	Advances		Total **			Income
Hudson City Savings Bank*	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 Lfe Insurance Company	New York	NY		4,555,000		5.7			81,724
Total			$	38,898,835		48.3	%	$	1,356,755

*	Officer of member bank also served on the Board of Directors of the FHLBNY.
**	Percentage calculated on par value of advances.

Top five advance holders at December 31, 2006

	December 31, 2006
			Par		Percent of			Interest
	City	State	Advances		Total **			Income
Hudson City Savings Bank*	Paramus	NJ	$	8,873,000		15.0	%	$	289,348
New York Community Bank*	Westbury	NY		7,878,877		13.4			315,626
HSBC Bank USA, National Association	New York	NY		5,009,503		8.5			260,749
Manufacturers and Traders Trust Company	Buffalo	NY		3,423,231		5.8			188,514
Astoria Federal Savings and Loan Assn.	Long Island City	NY		2,480,000		4.2			114,426
Total			$	27,664,611		46.9	%	$	1,168,663

*	Officer of member bank also served on the Board of Directors of the FHLBNY.
**	Percentage calculated on par value of advances.

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Top five advance holders at December 31, 2005

	December 31, 2005
			Par		Percent of			Interest
	City	State	Advances		Total **			Income
New York Community Bank*	Westbury	NY	$	6,476,364		10.5	%	$	263,161
HSBC Bank USA, National Association	New York	NY		5,008,817		8.1			167,798
Hudson City Savings Bank*	Paramus	NJ		4,300,000		7.0			139,769
North Fork Bank	Mattituck	NY		4,075,015		6.6			261,795
Manufacturers and Traders Trust Company	Buffalo	NY		3,653,730		5.9			138,552
Total			$	23,513,926		38.1	%	$	971,075

*	Officer of member bank also served on the Board of Directors of the FHLBNY.
**	Percentage calculated on par value of advances.

Advances outstanding to former members are summarized as below:

	Ultimate	Member of	Advances
Former Member	Acquiree Bank	FHLB	as of December 31, 2007
Citizens Bank, National Association	RBS Citizens, National Association	Boston	$	1,750,000
Independence Community Bank	Sovereign Bank	Pittsburgh		978,000
Summit Bank	Bank of America, NA	Boston		231,090
Susquehanna Patriot Bank	Susquehanna Bank DV	Pittsburgh		125,000
Dime Savings Bank	Washington Mutual Bank	San Francisco		103,298
Others	Various	Various		90,256
Total			$	3,277,644
	Ultimate	Member of	Advances
Former Member	Acquiree Bank	FHLB	as of December 31, 2006
Independence Community Bank	Sovereign Bank	Pittsburgh	$	1,378,000
Fleet National Bank	Bank of America, National Association	Boston		287,225
Dime Savings Bank	Washington Mutual Bank	San Francisco		103,488
Empire Corporate Federal Credit Union	Members United Corporate Federal Credit Union	Chicago		6,082
N/A	NJ Housing & Mortgage Finance Agency	N/A		2,802
Others	Various	Various		3,282
Total			$	1,780,879

Advances outstanding to former members — As a result of merger activities in 2007 and prior years, included in advances outstanding are advances to former members. As of December 31, 2007, the FHLBNY had advances of $1.75 billion to RBS Citizens, NA, who relocated to Rhode Island becoming a member of the FHLBank of Boston, representing 2.17% of total advances outstanding. The FHLBNY had advances of $978.0 million to Sovereign Bank, a member of the FHLBank of Pittsburgh, representing 1.21% of total advances outstanding. These advances were acquired by Sovereign Bank as a result of its acquisition of Independence Community Bank. The FHLBNY had advances of $231.0 million to Bank of America, NA, a member of the FHLBank of Boston, representing 0.29% of total advances outstanding. These advances were acquired by Bank of America, NA, as a result of its acquisition of Fleet Bank, also a member of the FHLBank of Boston, who had acquired Summit Bank, a former member of FHLBNY. The FHLBNY had advances of $125.0 million to Susquehanna Bank, DV, who relocated to Pennsylvania becoming a member of the FHLBank of Pittsburgh, representing 0.16% of total advances outstanding. These advances were issued while Susquehanna Bank DV was a member of FHLBNY. The FHLBNY had advances of $103.3 million to Washington Mutual Bank, FA, a member of the FHLBank of San Francisco, representing 0.13% of total advances outstanding. These advances were acquired by Washington Mutual Bank, FA as a result of its acquisition of The Dime Savings Bank of New York, FSB.

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The FHLBNY had advances of $80.0 million to Beneficial Savings Bank, a member of the FHLBank of Pittsburgh, representing 0.10% of total advances outstanding. These advances were acquired by Beneficial Savings Bank, as a result of its acquisition of Farmers and Mechanics Bank. The FHLBNY had advances of $5.1 million to Members United Corporate, FCU representing 0.01% of total advances outstanding. These advances were acquired by Members United Corporate, FCU, as a result of its acquisition of Empire Corporate Federal Credit Union. The FHLBNY had advances of $1.043 million to TD Banknorth, NA, a member of the FHLBank of Boston, representing 0.00129% of total advances outstanding. These advances were acquired by TD Banknorth, NA, as a result of its acquisition of Interchange Bank. The FHLBNY had advances of $1.011 million to Citibank, NA, a member of the FHLBank of San Francisco, representing 0.00126% of total advances outstanding. These advances were acquired by Citibank, NA, as a result of its acquisition of European American Bank.

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Investment quality

The following table summarizes the Bank’s investment by rating (in thousands):

			NRSRO Ratings- December 31, 2007
Issued, guaranteed or insured by:	Amount		AAA		AA		A
Pools of Mortgages
Fannie Mae	$	1,588,563	$	1,588,563	$	—	$	—
Freddie Mac		488,237		488,237		—		—
Total pools of mortgages		2,076,800		2,076,800		—		—
Collateralized Mortgage Obligations/Real Estate Mortgage Investment Conduits
Fannie Mae		1,548,318		1,548,318		—		—
Freddie Mac		3,204,550		3,204,550		—		—
Ginnie Mae		7,482		7,482		—		—
Total CMOs/REMICs		4,760,350		4,760,350		—		—
Non-GSE MBS
CMOs/REMICs		729,331		729,331		—		—
Commercial mortgage-backed securities		1,087,713		1,087,713		—		—
Total non-federal-agency MBS		1,817,044		1,817,044		—		—
Asset-Backed Securities
Manufactured housing (insured)		260,972		260,972		—		—
Home equity loans (insured)		457,294		457,294		—		—
Home equity loans (uninsured)		335,323		335,323		—		—
Total asset-backed securities		1,053,589		1,053,589		—		—
Total mortgage-backed securities	$	9,707,783	$	9,707,783	$	—	$	—
Non-MBS Investment securities
State and local housing finance agency obligations	$	576,971	$	271,252	$	305,719	$	—
Short-term Investments*
Interest-bearing deposits	$	10,696,687
Federal funds sold		4,381,000
Total Short-term investments	$	15,077,687

* Short-term investments were placed with counterparties with ratings that were single-A or better at December 31, 2007.

In January, 2008, Fitch Investor Services (“Fitch”) downgraded Ambac Assurance Corp (“Ambac”) to double-A with negative watch. As a result, three mortgage-backed securities, insured by Ambac with amortized cost of $86.8 million and market value of $81.9 million at December 31, 2007, were downgraded by Fitch to double-A with negative watch. S&P does not rate one of the securities, and continues to rate the two remaining securities as triple-A. Moody’s continues to rate all three securities as triple-A. In addition, S&P and Moody’s placed Ambac and MBIA Insurance Corp., (“MBIA”) under negative watch in January, 2008 so that thirteen mortgage-backed securities, with amortized cost of $267.2 million and market value of $260.0 million at December 31, 2007 that are insured by Ambac and MBIA, were placed on negative watch. Between February 25, 2008 and March 12, 2008, S&P and Moody’s removed the 13 securities from negative watch, and reaffirmed these securities as triple-A. Fitch also reaffirmed its double-A rating to the three securities and removed the negative watch. S&P and Moody’s reaffirmed MBIA as triple-A with negative outlook on February 25 and February 26, 2008. Both S&P and Moody’s reaffirmed Ambac as triple-A with negative outlook on March 12, 2008.

Investments in two bonds issued by state and local housing finance agencies were also placed under negative watch by S&P and Moody’s in January 2008. The two bonds are insured by MBIA. Amortized cost and market values of the two bonds were $110.6 million at December 31, 2007.

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The Bank has analyzed its investments in light of the prevailing market conditions and believes impairment, if any, is only temporary. The management of the FHLBNY has the positive intent to hold the securities to the ultimate recovery of their value, and the Bank has the financial ability to hold all such securities to their ultimate recovery of value.

Impairment of investments is evaluated considering numerous factors and their relative significance varies case-by-case. Factors considered include the length of time and extent to which the market value has been less than carrying value; the financial condition and near-term prospects of the issuer of the security; the Bank’s intent and ability to retain the security in order to allow for an anticipated recovery in fair value. If based upon an analysis of each of the above factors, it is determined that the impairment is other-than-temporary, the carrying value of the security is written down to fair value and a loss is recognized through earnings.

Based upon this analysis, it was determined that the Bank did not experience any other- than-temporary impairment in the value of its investments in 2007, 2006 or 2005.

Long-term investments

Long-term investments were principally comprised of held-to-maturity government sponsored enterprises and privately issued mortgage-backed, commercial mortgage-backed, and asset-backed securities, collectively referred to as “MBS” that were rated triple-A by Moody’s and S&P at December 31, 2007.

In addition, the FHLBNY had investments in primary public and private placements of taxable obligations of state and local housing finance authorities (“HFA”) that were rated at least “Aa” by Moody’s and “AA” by S&P.

Mortgage-backed securities (MBS)

Residential mortgage-backed securities supported by loans with low FICO scores and high Loan-to-value ratios - At December 31, 2007, the Bank’s investments in mortgage-backed securities aggregated $9.7 billion. The Bank identified certain residential mortgage-backed securities (“RMBS”), with amortized cost of $792.6 million that were supported by loans with low FICO scores or high loan-to-value ratios (“HLTVs”). The table below summarizes the securities. In January 2008, certain RMBS were downgraded and others were under downgrade watch, and such ratings actions are also summarized below.

Three held-to-maturity mortgage-backed securities were downgraded to double-A by Fitch Investors Service. Another 13 MBS and two housing finance agency bonds were put under negative watch by S&P and Moody’s in January 2008. These securities were either home-equity loans or non-conforming residential mortgage loans collateralized by loans with either low FICO scores or high loan-to-value ratios. Between February 25, 2008 and March 12, 2008, S&P and Moody’s removed the 13 securities from negative watch. S&P and Moody’s reaffirmed their triple-A rating. Fitch reaffirmed its double-A rating to the three securities that it had downgraded in January 2008 and removed the negative watch.

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The table below summarizes book and market values of MBS securities supported by loans with low FICO scores and high LTVs, and impacted by the rating agency actions. (in thousands):

	December 31, 2007
					Low FICO2				High HLTVs3
	Totals				RMBS				RMBS
	Book		Market Value		Book		Market Value		Book		Market Value
Securities downgraded1	$	86,790	$	81,913	$	50,787	$	48,092	$	36,003	$	33,821
Securities under downgrade watch		267,210		260,000		222,421		217,202		44,789		42,798
		354,000		341,913		273,208		265,294		80,792		76,619
Securities — Stable		438,616		415,361		438,616		415,361		—		—
	$	792,616	$	757,274	$	711,824	$	680,655	$	80,792	$	76,619

	January 31, 2008
					Low FICO2				High HLTVs3
	Totals				RMBS				RMBS
	Book		Market Value		Book		Market Value		Book		Market Value
Securities downgraded1	$	85,710	$	80,520	$	50,215	$	47,525	$	35,495	$	32,995
Securities under downgrade watch		262,816		251,096		218,733		208,918		44,083		42,178
		348,526		331,616		268,948		256,443		79,578		75,173
Securities — Stable		429,408		409,495		429,408		409,495		—		—
	$	777,934	$	741,111	$	698,356	$	665,938	$	79,578	$	75,173

¹ See discussions below.

Management’s discussions of the rating actions with respect to securities summarized in the table above follow:

MBS supported by collateral with low FICO scores ² - Held-to-maturity MBS at December 31, 2007 included with amortized cost of $711.8 million (market value $680.7 million) of seasoned MBS (acquired prior to 2003), and supported by non-conforming residential mortgage loans and home-equity loans collateralized at the time of issuance by loans with a weighted average FICO score of 660 or less. All securities were rated triple-A at the time of purchase and at December 31, 2007.

• At December 31, 2007, 16 mortgage-backed securities with an amortized cost of $354.0 million and market value of $341.9 million were insured either by MBIA Insurance Corp. (“MBIA”) or Ambac Assurance Corp. (“Ambac”), both of which were rated triple -A by S&P, Moody’s and Fitch at the time of purchase. During December 2007 and January 2008 S&P and Moody’s placed MBIA and Ambac on negative outlook and negative watch for a possible downgrade. On February 25, S&P affirmed MBIA at triple-A with a negative outlook; it also affirmed Ambac at triple-A with a negative watch.

• In January 2008, two mortgage-backed securities with low FICO scores were downgraded to double-A negative watch by Fitch. The two securities are insured by Ambac. Moody’s continues to rate the two securities as triple-A. S&P rates only one of the two securities which is rated triple-A. At December 31, 2007, the book value of the two securities was $50.8 million and market value was $48.1 million. At January 31, 2008, the book value of the two securities was $50.2 million and market value was $47.5 million. Between February and March 2008, Fitch reaffirmed its double-A rating to the two securities and removed the negative watch.

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• S&P and Moody’s also placed 12 mortgage-backed securities with low FICO scores under negative watch in February 2008. At December 31, 2007, book value of the 12 securities was $222.4 million and market value was $217.2 million. At January 31, 2008, the book value was $218.7 million and the market value was $208.9 million. Between February 25, 2008 and March 12, 2008, S&P and Moody’s removed the 12 securities from negative watch. S&P and Moody’s re-affirmed their triple-A rating.

Although principal and interest payments of these securities are current and the liquidity of MBIA and Ambac is sound, the market value of these securities may be affected by a rating downgrade of MBIA and/or Ambac.

MBS supported by collateral with high loan-to-value ratios ³ - At December 31, 2007, two seasoned mortgage-backed securities were supported by loans with high loan-to-value ratios (“HLTVs”). The securities were collateralized at the time of issuance by loans with a weighted average FICO score of 695 or greater. All securities were rated triple-A at the time of purchase and at December 31, 2007. Book value of the two securities supported by loans with high HLTVs was $80.8 million and market value was $76.6 million at December 31, 2007.

In January 2008, one security supported by loans with high loan-to-value ratios was downgraded by Fitch Investors Services to double-A negative watch. S&P and Moody’s continue to rate the two securities as triple-A. The December 31, 2007 book value of the security was $36.0 million and the market value was $33.8 million. The January 31, 2008 book value was $35.5 million and market value was $33.0 million.

In January 2008, the second security supported by loans with high loan-to-value ratios was put on downgrade watch by S&P and Moody’s. The December 31, 2007 book value of the security was $44.8 million and the market value was $42.8 million. The January 31, 2008 book value was $44.1 million and market value was $42.2 million. On March 12, 2008, S&P and Moody’s removed the security from negative watch and re-affirmed the security’s triple-A rating. Fitch re-affirmed its double-A rating.

State and local housing finance agency bonds

At December 31, 2007, the FHLBNY owned four state and local housing finance agency bonds with an amortized cost of $161.1 million ($161.6 million market value) that were insured either by MBIA or Ambac at the time of purchase.

In January 2008, S&P and Moody’s placed two bonds under negative watch. Book and market values of the 2 bonds was $110.6 million at December 31, 2007. At January 31, 2008, book and market values were $110.6 million and $110.3 million.

Monoline insurer risk - At December 31, 2007, the table below summarizes residential mortgage-backed securities supported by low FICO score and high loan-to-value ratios. The amortized cost of such securities aggregated $792.6 million at December 31, 2007. The Bank had insured $457.3 million of such securities with MBIA Insurance Corp., Ambac Assurance Corp. or Financial Security Assurance Inc. In addition, the Bank had also insured certain commercial mortgage-backed and MBS supported by manufactured housing loans.

In sum, at December 31, 2007, the Bank owned twenty-five mortgage-backed securities covered by insurance policies issued by MBIA Insurance Corp. (“MBIA”), Ambac Assurance Corp. (“Ambac”), and Financial Security Assurance Inc. (“FSA”).

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In January and February 2008, Ambac and MBIA had their external ratings downgraded by Fitch Investors Service. In February 2008, S&P rated MBIA at triple-A with a negative outlook, and rated Ambac at triple-A with negative watch. Ratings downgrade imply an increased risk that these insurers will fail to fulfill their obligations to reimburse the Bank for claims under the insurance policies.

The table below summarizes the Bank’s exposure to MBIA¹, Ambac¹, and FSA² at December 31, 2007 and January 31, 2008 (dollars in thousands):

	Mortgage-backed security insurance coverage
	December 31, 2007
	Number of securities		Security class	Amortized cost		Market value
Bank purchased insurance (WRAP)
MBIA		3	CMBS	$	177,450	$	176,780
FSA		2	RMBS		83,413		78,315
FSA		2	Manuctured Housing Bonds		260,972		260,522
		7			521,835		515,617
Insured at issuance
MBIA & AMBAC		16	RMBS		354,000		341,913
FSA		2	RMBS		19,881		19,795
		18			373,881		361,708
Total		25		$	895,716	$	877,325

	Mortgage-backed security insurance coverage
	January 31, 2008
	Number of securities		Security class	Amortized cost		Market value
Bank purchased insurance (WRAP)
MBIA		3	CMBS	$	165,129	$	164,523
FSA		2	RMBS		82,886		78,535
FSA		2	Manuctured Housing Bonds		258,147		261,528
		7			506,162		504,586
Insured at issuance
MBIA & AMBAC		16	RMBS		348,526		331,616
FSA		2	RMBS		19,724		19,622
		18			368,250		351,238
Total		25		$	874,412	$	855,824

1	Rated triple-A by S&P and Moody’s; double-A by Fitch
2	Rated triple-A by S&P, Moody’s and Fitch

Note: CMBS is commercial mortgage-backed security; RMBS is residential mortgage-backed security.
Manufactured Housing Bond is a mortgage backed security supported by manufactured housing loans.

Ten housing finance agency bonds, with amortized cost of $244.5 million and market value of $248.7 million at December 31, 2007 were covered by insurance policies underwritten by FSA, Ambac and MBIA.

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Short-term investments

The FHLBNY maintains substantial investments in high-quality, short- and intermediate-term financial instruments. At December 31, 2007 and 2006, the FHLBNY’s short-term investments consisted of interest-bearing deposits, certificates of deposits, and overnight and term Federal funds sold at highly-rated financial institutions. The Bank invests in certificates of deposits with maturities not exceeding one year issued by major financial institutions, recorded at amortized cost and reported as interest-bearing deposits in the statements of condition.

Mortgage Loans

The following table summarizes Mortgage Partnership Finance Loans (“MPF” or “Mortgage Partnership Finance program”) by loss layer structure product types (in thousands):

	December 31,
	2007		2006		2005
Original MPF	$	153,939	$	141,027	$	129,482
MPF 100		40,532		45,731		48,360
MPF 125		433,864		444,122		462,796
MPF 125 Plus		847,091		830,744		795,087
Other		8,359		10,643		14,302
Total MPF Loans *	$	1,483,785	$	1,472,267	$	1,450,027

* Par amount of total mortgage loan held-for-portfolio includes CMA, par amount at December 31, 2007 was $4,102.

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. 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. 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. 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.

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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.

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 Office of Federal Housing Enterprise Oversight.

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 and Mortgage Partnership Finance for FHA/VA products 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):

	December 31,
	2007		2006
Mortgage loans, net of provisions for credit losses	$	1,491,628	$	1,483,419
Non-performing mortgage loans held-for-portfolio	$	4,179	$	2,089
Mortgage loans past due 90 days or more and still accruing interest	$	384	$	850

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Mortgage loans - Non-performing

The FHLBNY’s interest contractually due and actually received for non-performing loans were as follows (in thousands):

	Years ended December 31,
	2007		2006
Interest contractually due	$	137	$	49
Interest actually received		112		43
Shortfall	$	25	$	6
Interest reported as income 1	$	—	$	—

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. Conventional loans in non-accrual status aggregated $4.2 million or 0.3% of the total MPF portfolio at December 31, 2007. At December 31, 2006 and 2005, conventional loans in non-accrual status were $2.1 million and $0.8 million, representing 0.1% of the MPF portfolio at those dates. FHA and VA insured loans aggregating $0.4 million, $0.9 million, and $1.4 million were past due 90 days or more at December 31, 2007, 2006 and 2005, respectively with interest still being accrued because of VA and FHA insurance. No loans were impaired at December 31, 2007, 2006 and 2005 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):

	Years ended December 31,
	2007		2006			2005
Beginning balance	$	593	$	582		$	507
Charge-offs		—		(18	)		—
Recoveries		—		18			—
Net charge-offs		—		—			—
Provision for credit losses		40		11			75
Ending balance	$	633	$	593		$	582

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 2007, no charge off was incurred and there were no foreclosures. In 2006, one conventional loan was foreclosed and the PFI took possession to and sold the property at a loss. The Bank incurred a loss of $18 thousand which represented the amount of residual loss for which the Bank was responsible under the “first loss layer.” Under the terms of the MPF Plus product type, the FHLBNY exercised its right to offset the loss from subsequent credit enhancement fees paid to the PFI.

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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.

For conventional MPF Loans in the years ended December 31, 2007, 2006 and 2005, the PFIs were required to repurchase 10, 3 and 11 loans for a total of $1.9 million, $0.3 million and $1.4 million in each of those years. The FHLBNY has not experienced any losses related to these conventional MPF Loan repurchases.

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 Board’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, 2007 and 2006 were $8.4 million and $10.6 million, representing 0.56% and 0.72%, of the remaining outstanding mortgage loans held-for-portfolio at December 31, 2007 and December 31, 2006.

The FHLBNY bases its provision for credit losses on its estimate of probable credit losses inherent in the Mortgage Partnership Finance portfolio as of the balance sheet date. The estimates are based on a variety of factors including performance history and analysis of industry standards for similar mortgage portfolios. Credit risks take into account the private mortgage insurance and other credit enhancement features that accompany the Mortgage Partnership Finance loans (but not the “First Loss Account”) to provide credit assurance to the FHLBNY.

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).

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The top five Participating Financial Institutions (PFI) and the outstanding MPF loan balances are listed below (dollar amounts in thousands):

	December 31, 2007
	Mortgage		Percent of Total
	Loans		Mortgage Loans
Manufacturers and Traders Trust Company	$	848,759		57.20	%
Astoria Federal Savings and Loan Association		257,609		17.36
Community Bank NA		109,059		7.35
Ocean First Bank		60,488		4.08
The Lyons National Bank		31,392		2.12
All Others		176,478		11.89
Total 1	$	1,483,785		100.00	%

	December 31, 2006
	Mortgage		Percent of Total
	Loans		Mortgage Loans
Manufacturers and Traders Trust Company	$	832,712		56.56	%
Astoria Federal Savings and Loan Association		257,486		17.49
Elmira Savings and Loan F.A.		101,438		6.89
Ocean First Bank		55,932		3.80
The Lyons National Bank		34,883		2.37
All Others		189,816		12.89
Total 1	$	1,472,267		100.00	%

¹ Totals do not include CMA loans.

Mortgage Loans - Potential Credit Losses

Par amount of conventional MPF loans outstanding were $1.5 billion, $1.4 billion, and $1.4 billion at December 31, 2007, 2006 and 2005. The par value of Federal Housing Administration and Veteran Administration insured loans outstanding were $8.4 million, $10.6 million, and $14.3 million at December 31, 2007, 2006 and 2005.

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. Collectibility 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 exposure were estimated to be $12.9 million, $12.2 million and $11.3 million at December 31, 2007, 2006 and 2005. The FHLBNY is entitled to recover any “first losses” incurred from the member up to the amount of credit enhancement fees paid by the FHLBNY to the member. The member is responsible for the second loss layer, estimated to be $10.9 million, $8.5 million, and $8.3 million at December 31, 2007, 2006 and 2005. The FHLBNY is again responsible for any residual losses.

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The following table provides roll-forward information with respect to the First Loss Account (in thousands):

	Years ended December 31,
	2007		2006		2005
Beginning balance	$	12,162	$	11,319	$	9,336
Additions		785		843		1,983
Charge-offs		—		—		—
Recoveries		—		—		—
Ending balance	$	12,947	$	12,162	$	11,319

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 $1.7 million in 2007 and 2006, and $1.5 million in 2005. The FHLBNY has not incurred any losses in any periods reported that were not fully recovered. Accordingly, no recoveries from credit enhancement fees paid were necessary other than inconsequential amounts in 2006.

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.

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, 2006 and 2005, the FHLBNY held Mortgage Partnership Finance loans collateralized by real estate in 49 states and 45 states. At December 31, 2007, there was a concentration of loans (71.8% by number of loans and 68.4% 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, 2006, there was a concentration of loans (69.7% by numbers of loans, and 72.1% by amounts outstanding) in New York State. At December 31, 2005, there was a concentration of loans (72.1% by numbers of loans, and 70.7% by amounts outstanding) in New York State. There is nothing in the New York State financial outlook that indicates that this concentration presents an undue risk.

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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 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 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 $4.1 million at December 31, 2007 from $4.9 million at December 31, 2006. 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.

Commitments and Contingencies

The FHLBNY is jointly and severally liable with the other FHLBanks for the payment of principal and interest on the consolidated obligations of all the FHLBanks. The FHLBNY is also a party to financial instruments with off-balance sheet risk in the normal course of its business in order to meet the financial needs of members and in connection with the Bank’s overall interest risk management strategy. These instruments involve, to varying degrees, elements of credit, interest rate and liquidity risk. In accordance with GAAP, these instruments are either not recorded in the financial statements or are recorded in amounts that differ from notional amounts. Such instruments primarily include lending commitments and derivative instruments.

Lending commitments include commitments to purchase and originate loans and commitments to fund unused lines of credit. Commitments to extend credits are conditional and have fixed expiration dates. Since some of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The FHLBNY evaluates creditworthiness on a case-by-case basis. Unused lines of credit to members totaled $19.5 billion at December 31, 2007.

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In connection with the Mortgage Partnership Finance program activities, the FHLBNY has commitments to purchase loans and to originate loans with the MPF 100 program. Commitments to purchase loans are considered derivative instruments and represent obligations on a mandatory delivery basis. Outstanding delivery commitments totaled $1.4 million and $9.5 million at December 31, 2007 and 2006; estimated fair values of the outstanding mandatory delivery commitment at December 31, 2007 and 2006 were de minimus.

In addition to the contractual obligations discussed above, the FHLBNY has contingent liabilities related to standby letters of credit. Standby letters of credit are conditional commitments issued by the FHLBNY to guarantee the performance of a member to a third party. The guarantees are for terms up to 15 years at December 31, 2007 and are fully collateralized. For each guarantee issued, if the member defaults on a payment to the third party, the FHLBNY would have to perform under the guarantee. Outstanding letters of credit totaled $442.3 million and $331.1 million at December 31, 2007 and 2006.

Off-balance sheet arrangements with respect to derivatives are discussed in detail in Note 19 to the FHLBNY’s audited financial statements.

The following table summarizes contractual obligations and other commitments as of December 31, 2007 (in thousands):

	Payments due or expiration terms by period 1
	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	$	38,027,475	$	17,392,250	$	5,281,945	$	5,354,300	$	66,055,970
Mandatorily redeemable capital stock 1		127,010		94,629		15,281		1,676		238,596
Premise and equipment (rental and lease obligations)		2,992		4,589		4,346		12,047		23,974
Total contractual obligations		38,157,477		17,491,468		5,301,572		5,368,023		66,318,540
Other commitments
Standby letters of credit		408,009		4,882		20,928		8,443		442,262
Unused lines of credit and other conditional commitments		19,512,009		—		—		—		19,512,009
Consolidated obligation bonds/discount notes traded not settled		956,937		—		—		—		956,937
Firm commitment-advances		5,350		—		—		—		5,350
Open delivery commitments (MPF)		1,351		—		—		—		1,351
Total other commitments		20,883,656		4,882		20,928		8,443		20,917,909
Total obligations and commitments	$	59,041,133	$	17,496,350	$	5,322,500	$	5,376,466	$	87,236,449

¹ 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 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.

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Consolidated obligations - Joint and several liability

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 Board 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 amount of the outstanding consolidated obligations of all 12 FHLBanks were $1,189.7 billion, $951.9 billion and $937.4 billion at December 31, 2007, 2006 and 2005.

The Finance Board, 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 Board determines that the non-complying FHLBank is unable to make the payment, then the Finance Board 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 Board. As discussed more fully in Note 21 to audited financial statements, the FHLBNY does not believe that it will be called upon to pay the consolidated obligations of another FHLBank in the future. Under FASB interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Other” (“FIN 45”), FIN 45 would have required FHLBNY 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 and meets the scope exceptions in FIN 45. Accordingly, the FHLBNY has not recognized a liability for its joint and several obligations related to other FHLBanks’ consolidated obligations at December 31, 2007 or December 31, 2006.

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.

147

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 potential significant falls 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 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 COs 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 options, 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 concerns, 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, 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 interest rates unchanged case and to a range of +/- six years in the +/-200bps shock cases.

• 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.

The FHLBNY’s portfolio, including its derivatives, is tracked by the FHLBNY and the overall mismatch between assets and liabilities are summarized by using a DOE measure. The FHLBNY’s quarterly 2007 DOE results are shown in years in the table below:

	Base Case DOE		-200bps DOE		+200bps DOE
December 31, 2006		1.10		-3.11		2.84
March 31, 2007		1.12		-2.91		2.93
June 30, 2007		1.86		-3.21		2.74
September 30, 2007		1.31		-4.18		2.35
December 31, 2007		-0.59		-4.77		1.48

148

As the table notes, the DOE has remained within its limits. Duration indicates any cumulative repricing/maturity imbalance in the FHLBNY’s financial assets and liabilities. A positive DOE indicates that, on average, the liabilities will reprice or mature sooner than the assets. A negative DOE indicates that, on average, the assets will reprice 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 rely solely 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 indicates that the FHLBNY has remained within its limit:

	One Year Re-
	pricing Gap
December 31, 2006	$2.801 Billion
March 31, 2007	$2.513 Billion
June 30, 2007	$3.419 Billion
September 30, 2007	$3.136 Billion
December 31, 2007	$3.671 Billion

The FHLBNY’s review of potential interest rate risk issues also includes the effect of changes in interest rates on expected net income. 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:

	Sensitivity in			Sensitivity in
	the - 200bps			the +200bps
	Shock			Shock
December 31, 2006		-2.23	%		-1.96	%
March 31, 2007		11.66	%		-9.92	%
June 30, 2007		-6.05	%		5.37	%
September 30, 2007		10.25	%		-9.07	%
December 31, 2007		-10.13	%		3.45	%

149

Aside from 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. The quarterly potential maximum decline in the market value of equity under these 200bps shocks is provided below:

	-200bps Change			+200bps Change
	in MVE			in MVE
December 31, 2006		-2.68	%		-4.54	%
March 31, 2007		-2.70	%		-4.68	%
June 30, 2007		-1.12	%		-4.95	%
September 30, 2007		-3.30	%		-4.22	%
December 31, 2007		-6.51	%		-1.77	%

As noted, the potential declines under these shocks are within the FHLBNY’s limits of a maximum ten percent.

150

The following table displays the FHLBNY’s maturity/repricing gaps¹ as of December 31, 2007 (in millions):

	Interest Rate Sensitivity
	December 31, 2007
			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	$	15,469	$	130		$	428		$	312		$	808
MBS Investments		1,446		1,332			3,109			1,814			2,007
Adjustable-rate loans and advances		19,813		—			—			—			—
Net unswapped		36,728		1,462			3,537			2,126			2,816
Fixed-rate loans and advances		11,364		3,476			10,188			6,767			28,985
Swaps hedging advances		45,017		(1,624	)		(8,196	)		(6,343	)		(28,855	)
Net fixed-rate loans and advances		56,382		1,852			1,992			424			130
Loans to other FHLBanks		55		—			—			—			—
Total interest-earning assets	$	93,165	$	3,314		$	5,529		$	2,550		$	2,946
Interest-bearing liabilities:
Deposits	$	1,644	$	—		$	—		$	—		$	—
Discount notes		34,234		557			—			—			—
Swapped discount notes		—		—			—			—			—
Net discount notes		34,234		557			—			—			—
Consolidated Obligation Bonds
FHLB bonds		26,215		17,407			13,242			5,022			4,180
Swaps hedging bonds		26,551		(13,801	)		(7,946	)		(2,760	)		(2,045	)
Net FHLB bonds		52,766		3,606			5,297			2,262			2,135
Total interest-bearing liabilities	$	88,645	$	4,163		$	5,297		$	2,262		$	2,135
Post hedge gaps:
Periodic gap	$	4,520	$	(849	)	$	232		$	287		$	811
Cumulative gaps	$	4,520	$	3,671		$	3,903		$	4,190		$	5,001

Note: Numbers may not add due to rounding.

¹ Repricings 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 expected call date under the current interest rate environment or the instrument’s contractual maturity.

151

The following table displays the FHLBNY’s maturity/repricing gaps¹ as of December 31, 2006 (in millions):

	Interest Rate Sensitivity
	December 31, 2006
			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	$	9,669	$	126		$	408		$	309		$	843
MBS Investments		1,150		994			4,153			1,907			2,428
Adjustable-rate loans and advances		13,251		—			—			—			—
Net unswapped		24,071		1,120			4,561			2,216			3,271
Fixed-rate loans and advances		5,678		2,744			9,799			7,073			20,444
Swaps hedging advances		34,745		(1,593	)		(6,415	)		(6,483	)		(20,254	)
Net fixed-rate loans and advances		40,423		1,151			3,384			590			189
Loans to other FHLBanks		—		—			—			—			—
Total interest-earning assets	$	64,494	$	2,271		$	7,946		$	2,806		$	3,460
Interest-bearing liabilities:
Deposits	$	2,389	$	—		$	—		$	—		$	—
Discount notes		12,171		21			—			—			—
Swapped discount notes		—		—			—			—			—
Net discount notes		12,171		21			—			—			—
Consolidated Obligation Bonds
FHLB bonds		18,339		11,747			23,070			5,560			3,481
Swaps hedging bonds		28,344		(9,045	)		(15,071	)		(2,313	)		(1,915	)
Net FHLB bonds		46,683		2,701			7,999			3,247			1,566
Total interest-bearing liabilities	$	61,243	$	2,722		$	7,999		$	3,247		$	1,566
Post hedge gaps:
Periodic gap	$	3,251	$	(451	)	$	(53	)	$	(441	)	$	1,894
Cumulative gaps	$	3,251	$	2,801		$	2,747		$	2,306		$	4,201

Note: Numbers may not add due to rounding.

¹ Repricings 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 expected call date under the current interest rate environment or the instrument’s contractual maturity.

152

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 continues to evolve. 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 standards 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 Committee.

153

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

	PAGE
Financial Statements
Management’s Assessment of Internal Control over Financial Reporting		155
Report of Independent Registered Public Accounting Firm		156
Statements of Condition as of December 31, 2007 and 2006		157
Statements of Income for the years ended December 31, 2007, 2006 and 2005		158
Statements of Capital for the years ended December 31, 2007, 2006 and 2005		159
Statements of Cash Flows for the years ended December 31, 2007, 2006 and 2005		160
Notes to Financial Statements		162
Supplementary Data		36

Supplementary financial data for each full quarter within the two years ended December 31, 2007, are included in Item 6. SELECTED FINANCIAL DATA.

154

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, 2007. 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, 2007, 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, 2007, appears on the following page.

155

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, capital, and 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, 2007 and 2006, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2007 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, 2007, 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 Assessment of 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 audits (which were integrated audits in 2007 and 2006). 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 2, the Bank changed its method of accounting and amortization and accretion of premiums and discounts on mortgage loans on January 1, 2005. Also, as discussed in Note 2, the Bank changed its method of accounting for defined benefit pensions and other postretirement benefits on December 31, 2006.

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, New York
March 27, 2008

156

Federal Home Loan Bank of New York

Statements of Condition (in thousands, except par value)
As of December 31, 2007 and 2006

	December 31,
	2007			2006
Assets
Cash and due from banks (Notes 1 and 3)	$	7,909		$	38,850
Interest-bearing deposits, includes $396,400 and $0 pledged at December 31, 2007 and 2006 (Note 4)		10,696,687			5,591,077
Federal funds sold		4,381,000			3,661,000
Available-for-sale securities, net of unrealized losses of $373 at December 31, 2007 (Note 6)		13,187			—
Held-to-maturity securities, includes $0 pledged at December 31, 2007 and 2006 (Note 5)		10,284,754			11,251,098
Advances (Note 7)		82,089,667			59,012,394
Mortgage loans held-for-portfolio, net of allowance for credit losses of $633 and $593 at December 31, 2007 and 2006 (Note 9)		1,491,628			1,483,419
Loans to other FHLBanks (Note 10)		55,000			—
Accrued interest receivable		562,323			406,123
Premises, software, and equipment, net		13,154			11,107
Derivative assets (Note 19)		70,278			224,775
Other assets		17,004			23,144
Total assets	$	109,682,591		$	81,702,987
Liabilities and capital
Liabilities
Deposits (Note 11)
Interest-bearing demand	$	1,627,339		$	2,307,733
Non-interest bearing demand		2,596			1,795
Term		16,900			80,000
Total deposits		1,646,835			2,389,528
Consolidated obligations, net (Note 13)
Bonds		66,325,817			62,042,675
Discount notes		34,791,570			12,191,553
Total consolidated obligations		101,117,387			74,234,228
Mandatorily redeemable capital stock (Notes 14 and 15)		238,596			109,950
Accrued interest payable		655,870			735,215
Affordable Housing Program (Notes 1 and 8)		119,052			101,898
Payable to REFCORP (Notes 1 and 8)		23,998			17,475
Derivative liabilities (Note 19)		1,069,742			107,615
Other liabilities		60,520			102,685
Total liabilities		104,932,000			77,798,594
Commitments and Contingencies (Notes 8, 13, 19 and 21)
Capital (Notes 1, 14, and 15)
Capital stock ($100 par value), putable, issued and outstanding shares: 43,680 and 35,463 at December 31, 2007 and 2006		4,367,971			3,546,253
Unrestricted retained earnings		418,295			368,688
Accumulated other comprehensive income (loss) (Note 16)
Net unrealized loss on available-for-sale securities		(373	)		—
Net unrealized loss on hedging activities		(30,215	)		(4,763	)
Employee supplemental retirement plans (Note 18)		(5,087	)		(5,785	)
Total capital		4,750,591			3,904,393
Total liabilities and capital	$	109,682,591		$	81,702,987

The accompanying notes are an integral part of these financial statements.

157

Federal Home Loan Bank of New York

Statements of Income (in thousands, except per share data)
Years Ended December 31, 2007, 2006, and 2005

	2007			2006			2005
Interest income
Advances (Note 7)	$	3,495,312		$	3,302,174		$	2,174,948
Interest-bearing deposits		411,647			300,499			193,668
Federal funds sold		192,845			145,420			97,547
Available-for-sale securities (Note 6)		—			—			19,519
Held-to-maturity securities (Note 5)		596,761			580,002			566,009
Mortgage loans held-for-portfolio (Note 9)		78,937			76,111			69,312
Loans to other FHLBanks (Note 10)		2			37			9
Other		1			4			33
Total interest income		4,775,505			4,404,247			3,121,045
Interest expense
Consolidated obligations-bonds (Note 13)		3,215,560			2,944,241			2,001,960
Consolidated obligations-discount notes (Note 13)		937,534			901,978			658,837
Deposits (Note 11)		106,777			81,442			62,237
Mandatorily redeemable capital stock (Note 14)		11,731			3,086			2,747
Cash collateral held and other borrowings		4,516			3,382			292
Total interest expense		4,276,118			3,934,129			2,726,073
Net interest income before provision for credit losses		499,387			470,118			394,972
Provision for credit losses on mortgage loans		40			11			75
Net interest income after provision for credit losses		499,347			470,107			394,897
Other income (loss)
Service fees		3,324			3,368			4,666
Net realized and unrealized gain (loss) on derivatives and hedging activities (Notes 1 and 19)		18,356			9,676			(9,466	)
Net realized gain from sale of available-for-sale and held-to-maturity securities (Note 6)		—			—			1,895
Losses from extinguishment of debt and other (Note 13)		(8,180	)		(26,283	)		(14,952	)
Total other income (loss)		13,500			(13,239	)		(17,857	)
Other expenses
Operating		66,569			63,203			59,067
Finance Board and Office of Finance		5,193			5,140			5,506
Total other expenses		71,762			68,343			64,573
Income before assessments		441,085			388,525			312,467
Affordable Housing Program (Notes 1 and 8)		37,204			32,031			25,878
REFCORP (Notes 1 and 8)		80,776			71,299			57,540
Total assessments		117,980			103,330			83,418
Income before cumulative effect of a change in accounting principle		323,105			285,195			229,049
Cumulative effect of a change in accounting principle (Note 2)		—			—			1,109
Net income	$	323,105		$	285,195		$	230,158
Basic earnings per share: (Note 17)
Earnings before cumulative effect of a change in accounting principle	$	8.57		$	7.63		$	6.33
Cumulative effect of a change in accounting principle		—			—			0.03
Net earnings per share	$	8.57		$	7.63		$	6.36
Cash dividends paid per share	$	7.51		$	5.59		$	4.50

The accompanying notes are an integral part of these financial statements.

158

Federal Home Loan Bank of New York

Statements of Capital (in thousands, except per share data)
Years Ended December 31, 2007, 2006, and 2005

																Accumulated
	Capital Stock*						Capital Stock*									Other						Total
	Pre-Exchange						Class B						Retained			Comprehensive			Total			Comprehensive
	Shares			Par Value			Shares			Par Value			Earnings			Income (Loss)			Capital			Income (Loss)
Balance, December 31, 2004		36,550		$	3,655,047			—		$	—		$	223,434		$	649		$	3,879,130
Proceeds from sale of capital stock-Pre-exchange		23,911			2,391,050			—			—			—			—			2,391,050
Redemption of capital stock- Pre-exchange		(22,987	)		(2,298,640	)		—			—			—			—			(2,298,640	)
Proceeds from sale of capital stock-Class B		—			—			2,763			276,296			—			—			276,296
Redemption of capital stock- Class B		—			—			(4,332	)		(433,299	)		—			—			(433,299	)
Capital exchange		(37,474	)		(3,747,457	)		37,474			3,747,457			—			—			—
Cash dividends ($4.50 per share) on capital stock		—			—			—			—			(162,179	)		—			(162,179	)
Net Income		—			—			—			—			230,158			—			230,158		$	230,158
Other comprehensive income (loss):
Changes in fair value during the year of available-for- sale securities		—			—			—			—			—			(490	)		(490	)		(490	)
Reclassification to earnings from sale of available-for- sale securities		—			—			—			—			—			(1,750	)		(1,750	)		(1,750	)
Net change in hedging activities		—			—			—			—			—			4,454			4,454			4,454
Additional minimum liability on Benefit Equalization Plan		—			—			—			—			—			650			650			650
																						$	233,022
Balance, December 31, 2005		—		$	—			35,905		$	3,590,454		$	291,413		$	3,513		$	3,885,380
Proceeds from sale of capital stock		—		$	—			34,695		$	3,469,533		$	—		$	—		$	3,469,533
Redemption of capital stock		—			—			(32,829	)		(3,282,884	)		—			—			(3,282,884	)
Shares reclassified to mandatorily redeemable capital stock		—			—			(2,308	)		(230,850	)		—			—			(230,850	)
Adjustments to initially apply FASB Statement No. 158		—			—			—			—			—			(6,141	)		(6,141	)
Cash dividends ($5.59 per share) on capital stock		—			—			—			—			(207,920	)		—			(207,920	)
Net Income		—			—			—			—			285,195			—			285,195		$	285,195
Other comprehensive income (loss):
Net change in hedging activities		—			—			—			—			—			(10,115	)		(10,115	)		(10,115	)
Additional minimum liability on Benefit Equalization Plan		—			—			—			—			—			2,195			2,195			2,195
																						$	277,275
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
Other comprehensive income (loss):
Net unrealized (loss) on available-for-sale securities		—			—			—			—			—			(373	)		(373	)		(373	)
Net change in hedging activities		—			—			—			—			—			(25,452	)		(25,452	)		(25,452	)
Additional minimum liability on pension plans		—			—			—			—			—			698			698			698
																						$	297,978
Balance, December 31, 2007		—		$	—			43,680		$	4,367,971		$	418,295		$	(35,675	)	$	4,750,591

* Putable stock

The accompanying notes are an integral part of these financial statements.

159

Federal Home Loan Bank of New York

Statements of Cash Flows – (in thousands)
Years Ended December 31, 2007, 2006, and 2005

	2007			2006			2005
Operating activities
Net Income	$	323,105		$	285,195		$	230,158
Cumulative effect of a change in accounting principle before assessments		—			—			(1,109	)
Income before cumulative effect of change in accounting principle	$	323,105		$	285,195		$	229,049
Adjustments to reconcile net income before cumulative effects of change in accounting principle to net cash provided by operating activities:
Depreciation and amortization:
Net premiums and discounts on consolidated obligations, investments, and mortgage loans		106,372			(53,162	)		16,211
Concessions on consolidated obligations		12,810			13,293			12,769
Premises, software, and equipment, net		4,498			3,903			3,562
Provision for credit losses on mortgage loans		40			11			75
Net realized gain on in-substance maturity of held-to-maturity securities		—			—			(145	)
Net realized gain on sale of available-for-sale securities		—			—			(1,750	)
Change in net fair value adjustments on derivatives and hedging activities		(6,387	)		6,962			7,717
Net change in:
Accrued interest receivable		(156,200	)		(28,870	)		(61,485	)
Derivative assets due to accrued interest		70,134			(311,266	)		(87,358	)
Derivative liabilities due to accrued interest		(7,538	)		131,530			10,883
Other assets		(18	)		(204	)		1,453
Affordable Housing Program liability		17,155			10,894			9,424
Accrued interest payable		(79,345	)		236,897			60,574
REFCORP liability		6,522			3,413			4,095
Other liabilities		(18,483	)		13,681			7,802
Total adjustments		(50,440	)		27,082			(16,173	)
Net cash provided by operating activities		272,665			312,277			212,876
Investing activities
Net change in:
Interest-bearing deposits		(5,105,600	)		3,107,807			(5,892,237	)
Federal funds sold		(720,000	)		(736,000	)		47,000
Deposits with other FHLBank’s mortgage programs		(10	)		223			—
Premises, software, and equipment, net		(6,545	)		(3,752	)		(1,789	)
Held-to-maturity securities:
Purchased		(1,080,245	)		(4,000,314	)		(707,559	)
Proceeds		2,044,987			2,310,782			3,006,033
Proceeds from sales		—			—			9,064
Available-for-sale securities:
Purchased		(13,704	)		—			(1,020,179	)
Proceeds		—			—			1,593,762
Proceeds from sales		144			—			141,460
Advances:
Principal collected		397,682,249			580,751,936			434,147,848
Made		(419,285,033	)		(578,047,900	)		(428,576,529	)
Mortgage loans held-for-portfolio:
Principal collected		165,262			167,003			161,069
Purchased and originated		(175,148	)		(184,901	)		(450,827	)
Principal collected on other loans made		113			208			191
Loans to other FHLBanks
Loans made		(55,000	)		(250,000	)		(100,000	)
Principal collected		—			250,000			100,000
Net cash (used in) provided by investing activities		(26,548,530	)		3,365,092			2,457,307

The accompanying notes are an integral part of these financial statements.

160

Federal Home Loan Bank of New York
Statements of Cash Flows – (in thousands)
Years Ended December 31, 2007, 2006, and 2005

	2007			2006			2005
Financing activities
Net change in:
Deposits and other borrowings	$	(766,373	)	$	(272,339	)	$	244,936
Short-term borrowings from other FHLBanks:
Proceeds from borrowings		662,000			435,000			765,000
Payments for borrowings		(662,000	)		(435,000	)		(765,000	)
Consolidated obligation bonds:
Proceeds from issuance		42,535,228			32,546,862			23,380,258
Payments for maturing and early retirement		(38,180,904	)		(26,695,917	)		(26,641,384	)
Payments for transfers to other FHLBanks		(490,884	)		(779,705	)		(229,611	)
Proceeds from transfers from other FHLBanks		—			—			5,936
Consolidated obligation discount notes:
Proceeds from issuance		441,178,795			592,280,096			671,632,148
Payments for maturing		(418,707,804	)		(600,579,371	)		(670,835,956	)
Capital stock:
Proceeds from issuance		3,253,548			3,469,533			2,667,345
Payments for redemption		(2,244,849	)		(3,282,884	)		(2,623,443	)
Redemption of Mandatorily redeemable capital stock		(58,335	)		(138,988	)		(108,495	)
Cash dividends paid *		(273,498	)		(207,920	)		(162,179	)
Net cash provided by (used in) financing activities		26,244,924			(3,660,633	)		(2,670,445	)
Net (decrease) increase in cash and cash equivalents		(30,941	)		16,736			(262	)
Cash and cash equivalents at beginning of the period		38,850			22,114			22,376
Cash and cash equivalents at end of the period	$	7,909		$	38,850		$	22,114
Supplemental disclosures:
Interest paid	$	3,419,404		$	2,642,907		$	1,944,489
Affordable Housing Program payments **	$	20,050		$	21,137		$	16,455
REFCORP payments	$	74,253		$	67,885		$	53,444

*	Does not include payments to holders of Mandatorily redeemable capital stock.
**	AHP payments = (beginning accrual - ending accrual) + AHP assessment for the year; payments represent funds released to the Affordable Housing Program.

The accompanying notes are an integral part of these financial statements.

161

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.

Members of the cooperative must purchase FHLBNY stock according to regulatory requirements (See Note 15. Capital for more information). The business of the cooperative is to provide liquidity for the members (primarily in the form of loans) 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, 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. As a result of the membership requirements, 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 10. Related party transactions for more information about related parties and related party transactions).

The FHLBNY’s primary business is making collateralized loans, known as “advances,” to members. This is the primary focus of the Bank’s operations and also the principal factor that impacts the financial condition of the FHLBNY.

The FHLBNY is supervised and regulated by the Federal Housing Finance Board (“Finance Board”), which is an independent agency in the executive branch of the U.S. government. The Finance Board ensures that the FHLBNY carries out its housing and community development mission, remains adequately capitalized and able to raise funds in the capital markets, and operates in a safe and sound manner. However, while the Finance Board 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 obtains its funds from several sources. A primary source is the sale 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 established by the Finance Board. 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.

162

Federal Home Loan Bank of New York
Notes to Financial Statements

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 an 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 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.

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 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 to the Resolution Funding Corporation, which then performs the calculations for each quarter end.

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 Affordable Housing Program the greater of $100 million or 10 percent of regulatory net income. Regulatory net income is defined as GAAP net income before interest expense related to mandatorily redeemable capital stock under Statement of Financial Accounting Standards No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity” (“SFAS 150”), 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 Board. The FHLBNY accrues the AHP expense monthly.

163

Federal Home Loan Bank of New York
Notes to Financial Statements

Note 1. Summary of Significant Accounting Policies

Use of Estimates

The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make assumptions and estimates. These assumptions and estimates affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities and the reported amounts of income and expense. Actual results could differ from these estimates.

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.

Interest-bearing Deposits

The Bank invests in certificates of deposits with maturities not exceeding one year issued by major financial institutions. Certificates of deposits are recorded at amortized cost and reported in Interest-bearing deposits. Cash collateral pledged to derivative counterparties are interest earning and are also included in Interest-bearing deposits.

Investments

The FHLBNY carries investments for which it has both the ability and intent to hold to maturity at cost, adjusted for the amortization of premiums and accretion of discounts using the level-yield method.

Under Statement of Financial Accounting Standards No. 115, “Accounting for Certain Investments in Debt and Equity Securities” (“SFAS 115”), changes in circumstances may cause the FHLBNY to change its intent to hold a certain security 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.

In addition, in accordance with SFAS 115, 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 due either to prepayments on the debt security or to scheduled payments on a debt security payable in equal installments (both principal and interest) over its term.

164

Federal Home Loan Bank of New York
Notes to Financial Statements

The FHLBNY classifies investments that it may sell before maturity as available-for-sale and carries them at fair value. The change in fair value of the available-for-sale securities not being hedged by derivative instruments is recorded in other comprehensive income as a net unrealized gain or loss on available-for-sale securities. If available-for-sale securities had been hedged (none at December 31, 2007 or 2006) under a SFAS 133 qualifying fair value hedge, the FHLBNY would record the portion of the change in 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 other comprehensive income as a Net unrealized gain (loss) on available-for-sale securities. If available-for-sale securities had been hedged under a SFAS 133 qualifying cash flow hedge, the FHLBNY would record the effective portion of the change in value of the derivative related to the risk being hedged in other comprehensive income as a Net unrealized gain (loss) on 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.

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 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 since 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.

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 the underlying collateral as well as a determination of the FHLBNY’s intent to hold such securities through to recovery of the unrealized losses. If there is an other-than-temporary impairment in value of an investment, the decline in value is recognized as a loss and presented in the statements of income as a loss on securities in Other income (loss). The FHLBNY did not experience any other-than-temporary impairment in value of investments during 2007, 2006 or 2005.

Advances

The FHLBNY reports advances, net of unearned commitment fees and discounts on advances for the Affordable Housing Program (“AHP”), at amortized cost. The FHLBNY credits interest on advances to income as earned using the level-yield method. 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 7 more fully describes, community financial institutions (FDIC-insured institutions with assets of $599 million or less during 2007) 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 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.

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 SFAS 133, “Accounting for Derivative Instruments and Hedging Activities”, 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 EITF Issue No. 01-7, “Creditor’s Accounting for a Modification or Exchange of Debt Instruments”, and SFAS No. 91 “Accounting for Nonrefundable Fees and Costs Associated with Originating or Acquiring Loans and Initial Direct Costs of Leases”(“SFAS 91”).

165

Federal Home Loan Bank of New York
Notes to Financial Statements

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 hedge accounting requirements of SFAS 133, 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 hedged 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 SFAS 133, basis adjustments continue to be made after the modification, and subsequent value changes attributable to hedged risks are recorded in Other income (loss). The amortization of the basis adjustment amounted to a net decrease to net interest income of $1.0 million, $2.1 million and $3.6 million for the years ended December 31, 2007, 2006 and 2005, and a corresponding increase to Net realized and unrealized gains and losses on derivatives and hedging activities in Other income (loss).

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.

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, herein after 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 remaining outstanding mortgage loans held-for-portfolio at December 31, 2007. 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. Collectibility 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% 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 $12.9 million and $12.2 million at December 31, 2007 and 2006. 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 managing this risk, PFIs receive monthly “credit enhancement fees” from the FHLBNY.

166

Federal Home Loan Bank of New York
Notes to Financial Statements

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 monthly and is 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 related amounts are not significant for all periods reported. Extension fees are received when a member requests to extend the period of the delivery commitment beyond the original stated maturity.

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. Mortgage loans are recorded at fair value on settlement date.

The FHLBNY defers and amortizes premiums, costs, and discounts as interest income using the level yield method to their 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.

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. The Bank performs periodic reviews of 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 FHLBNY had established an allowance for credit losses in the amount of $633 thousand and $593 thousand as of December 31, 2007 and 2006.

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 uninsured portion of the MPF loan. When a loan is foreclosed, 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.

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 greater than $1,000 are fully 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, 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.

167

Federal Home Loan Bank of New York
Notes to Financial Statements

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 outstanding balances were down to $4.1 million at December 31, 2007 compared to $4.9 million at December 31, 2006. 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.

Affordable Housing Program

The FHLBank Act requires each FHLBank to establish and fund an AHP (see Note 8. 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. It is then recorded as a discount on the AHP advance. The amount of such discounts recognized was 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 under the accounting provisions of SFAS 150 “Accounting 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 8.

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 outstanding at December 31, 2007, and purchased caps and floors if the counterparty defaults and the related collateral, if any, is of insufficient value to the FHLBNY.

168

Federal Home Loan Bank of New York
Notes to Financial Statements

Accounting for derivatives is addressed in Statement of Financial Accounting Standards (SFAS) No. 133, “Accounting for Derivative Instruments and Hedging Activities,” as amended by SFAS No. 137, “Accounting for Derivative Instruments and Hedging Activities—Deferral of Effective Date of FASB Statement No. 133,” SFAS No. 138, “Accounting for Certain Derivative Instruments and Certain Hedging Activities,” and SFAS No. 149, “Amendment of Statement 133 on Derivative Instruments and Hedging Activities” (collectively “SFAS 133”). All derivatives are recognized on the balance sheet at their estimated fair values. Each derivative is designated as one of the following:

(1) a hedge of the fair value of a recognized asset or liability or an unrecognized firm commitment (a “fair value” hedge);

(2) a 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 hedge of the foreign currency component of a hedged item in a fair value or cash flow hedge;

(4) a non-qualifying hedge of an asset or liability (“economic hedge”) for asset-liability management purposes; or

(5) a non-qualifying 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.

The FHLBNY had no foreign currency assets, liabilities or hedges in 2007, 2006 or 2005.

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 other comprehensive income, a component of capital, 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 adjustments to the hedged item’s 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 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”¹ provisions, under paragraph 68 of SFAS 133, as long as settlement of the committed asset or liability occurs within the market settlement conventions for that type of instrument. The FHLBNY also believes the conditions of paragraph 68(b) of SFAS 133 are met if the fair value of the swap is zero on the date the FHLBNY commits itself to issue the consolidated obligation bond.

¹ Highly effective hedging relationships that use an interest rate swap as the hedging instrument to hedge a recognized asset or liability and that meet the criteria under paragraph 68 of SFAS 133 to qualify for an assumption of no ineffectiveness.

169

Federal Home Loan Bank of New York
Notes to Financial Statements

For both fair value and cash flow hedges, 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 “Net realized and unrealized gain (loss) on derivatives and hedging activities.”

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 an asset or liability. Both the net interest on the derivative and the fair value adjustments are recorded in Other income (loss) as “Net realized and unrealized gain (loss) on derivatives and hedging activities.”

The differentials between accruals of interest receivables and payables on derivatives designated as fair value or cash flow hedges are recognized as adjustments to the interest income or expense of the designated underlying investment securities, advances, consolidated obligations or other financial instruments. The differentials between accruals of interest receivables and payables on intermediated derivatives for members and other economic hedges are recognized in Other income (loss) as “Net gain (loss) on derivatives and hedging activities.”

Changes in the fair value of derivatives in an economic (also referred to as a standalone derivative) or intermediary hedge are recorded in current period earnings with no fair value adjustment to an asset or liability. The differentials between accruals of interest receivables and payables on intermediated derivatives for members and other economic hedges are recognized as Other income (loss) as Net realized and unrealized gain (loss) on derivatives and hedging activities. Therefore, both the net interest on the standalone derivative and the fair value changes are recorded in Other income (loss) as Net gain (loss) on derivatives and hedging activities. In the Statements of Cash Flows, cash flows associated with stand-alone derivatives are reflected as cash flows from operating activities.

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, stand-alone instrument with the same terms would qualify as a derivative instrument, the embedded derivative would be separated from the host contract and carried at fair value. However, if the entire contract (the host contract and the embedded derivative) is to be measured at fair value, with changes in fair value reported in current earnings (such as an investment security classified as “trading” under SFAS 115, “Accounting for Certain Investments in Debt and Equity Securities” (“SFAS 115”) as well as hybrid financial instruments accounted for under SFAS 155, “Accounting for Certain Hybrid Financial Instruments”), 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.

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.

170

Federal Home Loan Bank of New York
Notes to Financial Statements

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 cumulative other comprehensive income adjustment 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 accumulated other comprehensive income 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 accumulated in other comprehensive income 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 continues 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 recognizes cash collateral received and paid associated with derivative contracts as assets and liabilities in the statements of condition. Cash collateral pledged by the Bank is reported as an asset and included in interest-bearing deposits. Cash collateral received from derivative counterparties is reported as a liability and included in interest-bearing deposit liabilities. Cash collateral is not offset against derivative fair values; no securities were either pledged or received as collateral at December 31, 2007 or 2006.

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 SFAS 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity” (“SFAS 150”). 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 stock at December 31, 2007 and December 31, 2006 represents stock held by former members who are 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 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 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.

171

Federal Home Loan Bank of New York
Notes to Financial Statements

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.

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 were no requests for voluntary withdrawal from membership during 2007 or 2006. 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 SFAS 150, 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 classified 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.

172

Federal Home Loan Bank of New York
Notes to Financial Statements

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 dividend was not material and was 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.

Premises, Sotware and Equipment

The book value of premises, software and equipment amounted to $13.2 million and $11.1 million as of December 31, 2007, and 2006. Depreciation and amortization expense was $4.5 million, $3.9 million, and $3.6 million for the years ended December 31, 2007, 2006 and 2005. 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 10 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). The net realized gains and losses on disposal of premises, software and equipment were not significant in 2007, 2006 and 2005.

Concessions on Consolidated Obligations

The FHLBNY defers and amortizes concessions over the contractual maturity of the bonds, using the level-yield method. Concessions are paid to dealers in connection with the sale of consolidated obligation bonds. 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. Unamortized concessions were $12.1 million and $17.9 million as of December 31, 2007, and 2006 and were included in Other assets. Amortization of such concessions, included in consolidated obligation interest expense, were $15.4 million, $15.0 million, and $15.0 million for the years ended December 31, 2007, 2006 and 2005. The FHLBNY charges to expense as incurred the concessions applicable to the sale of consolidated obligation discount notes because of their short maturities. These amounts are also recorded in consolidated obligations interest expense. For the years ended December 31, 2007, 2006 and 2005, concession expenses on discount notes were $2.6 million, $1.7 million, and $2.3 million.

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 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 Board, in consultation with the Secretary of the U.S. Treasury, selects the appropriate discounting factors to be used in this annuity calculation.

173

Federal Home Loan Bank of New York
Notes to Financial Statements

As a result of the REFCORP payments of $703 million made by the FHLBanks in 2007, the overall period during which the FHLBanks must continue to make quarterly payments was shortened to October 15, 2013, effective at December 31, 2007. This date assumes that the FHLBanks will pay exactly $300 million annually after December 31, 2007 until the annuity is fully satisfied. This compares to the outside date of July 15, 2015, effective at December 31, 2006, based on REFCORP payments made through 2006.

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 Board and Office of Finance Expenses

The FHLBNY is assessed for its proportionate share of the costs of operating the Finance Board and the Office of Finance. The Finance Board is authorized to impose assessments on the FHLBanks including FHLBNY, in amounts sufficient to pay the Finance Board’s annual operating expenses.

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.

Estimated Fair Values

Many of the Bank’s financial instruments lack an available trading market, characterized by transactions between a willing buyer and a willing seller engaging in an orderly transaction. Therefore, the Bank uses estimates and present-value calculations when estimating the fair value of hedged assets and liabilities and associated derivatives under the provisions of SFAS 133. Similar estimates and judgments are required in disclosing estimated fair values of the Bank’s financial instruments. See Note 20 “Estimated Fair Values” for more information. The Bank did not early-adopt SFAS 157, “Fair Value Measurements”.

Earnings per Common Share

SFAS 128, “Earnings per Share,” addresses the presentation of basic and diluted earnings per share (“EPS”) in the income statement. 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 are not treated as cash equivalents for purposes of the statements of cash flows, but are instead treated as short-term investments and are reflected in the investing activities section of the statements of cash flows. Certificates of deposits and cash collateral pledged or received by the Bank are also not treated as cash equivalents and are reported as either investing or financing activities.

174

Federal Home Loan Bank of New York
Notes to Financial Statements

Cash flows from a derivative instrument that is accounted for as a fair value or cash flow hedge are generally classified in the same category as the cash flows from the items being hedged provided that the derivative instrument does not include an other-than-insignificant financing element at inception. Cash flows associated derivatives classified as standalone or as an economic hedge are reflected as cash flows from operating activities in the statements of cash flows.

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.

Note 2.  Change in Accounting Principle, and Recently Issued Accounting Standards & Interpretations

Change in Accounting Principle for Amortization and Accretion of Premiums and Discounts on Mortgage Loans

Amortization and accretion on premiums and discounts on mortgage loans have been computed by the contractual method in accordance with Statement of Financial Accounting Standards No. 91, “Accounting for Nonrefundable Fees and Costs Associated with Originating or Acquiring Loans and Initial Direct Costs of Leases” (“FAS 91”), effective January 1, 2005. Previously, amortization and accretion of premiums and discounts was computed using the retrospective method with estimated life, which requires a retrospective adjustment each time the FHLBNY changes the estimated remaining life of the mortgage loans. The retrospective method is intended to adjust the carrying value for the effects of all past cash flows and estimated future cash flows. The FHLBNY believes that the contractual method is preferable because under the contractual method, the income effects of premiums and discounts are recognized in a manner that is reflective of the actual behavior of the mortgage loans during the period in which the behavior occurs without regard to changes in estimates based on assumptions about future borrower behavior. As a result of the change in accounting principle, income of $1.1 million, before assessments, was recorded on January 1, 2005 as a cumulative effect of a change in accounting principle.

Recently Issued Accounting Standards and Interpretations

SFAS 157 – In September 2006, the FASB issued SFAS 157, “Fair Value Measurements” (“SFAS 157”). SFAS 157 defines fair value, establishes a framework for measuring fair value and enhances disclosure about fair value measurements required under other accounting pronouncements, but does not change existing guidance as to whether or not an instrument is carried at fair value. SFAS 157 nullifies the guidance in Emerging Issues Task Force Issue EITF 02-3, which precluded the recognition of a trading profit at the inception of a derivative contract, unless the fair value of such derivative is obtained from a quoted market price, or other valuation technique incorporating observable market data. SFAS 157 also precludes the use of a liquidity or block discount when measuring instruments traded in an active market at fair value. SFAS 157 requires that costs related to acquiring financial instruments carried at fair value should not be capitalized, but rather should be expensed as incurred. SFAS 157 also clarifies that an issuer’s credit standing should be considered when measuring liabilities at fair value.

SFAS 157 is effective for fiscal years beginning after November 15, 2007 (January 1, 2008 for the Bank), with earlier application encouraged. SFAS 157 must be applied prospectively as of the beginning of the fiscal year in which it is initially adopted, except that the provisions related to block discounts and the guidance in EITF 02-3 are to be applied as a one time cumulative effect adjustment to opening retained earnings in the first interim period for the fiscal year in which SFAS 157 is initially applied. The Bank will adopt SFAS 157 on January 1, 2008, and implementation will not have a material impact on its reported results of operations or financial condition.

175

Federal Home Loan Bank of New York
Notes to Financial Statements

SFAS 159 – In February 2007, the FASB issued SFAS 159, “The Fair Value Option for Financial Assets and Financial Liabilities, including an amendment of FASB Statement 115” (“SFAS 159”). SFAS 159 creates a fair value option allowing 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. SFAS 159 also requires an entity to report those financial assets and financial liabilities measured at fair value in a manner that separates those reported fair values from the carrying amounts of assets and liabilities measured using another measurement attribute on the face of the Statements of Condition. Lastly, SFAS 159 requires an entity to provide information that would allow users to understand the effect on earnings of changes in the fair value on those instruments selected for the fair value election. The Bank will adopt SFAS 159 on January 1, 2008. The Bank has not elected the fair value option for any asset or liability as of January 1, 2008.

FSP FIN 39-1 — In April 2007, the FASB directed the FASB Staff to issue FSP No. FIN 39-1, “Amendment of FASB Interpretation No. 39.” (“FSP FIN 39-1”). FSP FIN 39-1 modifies FIN No. 39, “Offsetting of Amounts Related to Certain Contracts”, and permits companies to offset cash collateral receivables or payables with net derivative positions under certain circumstances. The Bank will adopt FSP FIN 39-1 on January 1, 2008, and implementation will not have a material impact on its financial statements.

SFAS 158 – In September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans”. SFAS 158 requires recognition in the statements of financial condition of the over or underfunded status of postretirement plans, measured as the difference between the fair value of the plan assets and the benefit obligation. For pension plans, the benefit obligation is the projected benefit obligation; for other postretirement plans, the benefit obligation is the accumulated postretirement benefit obligation. For an employer without publicly traded equity securities, SFAS 158 is effective for fiscal year ending after June 15, 2007, with certain disclosure requirements effective for a fiscal year ending after December 15, 2006, but before June 16, 2007. The FHLBNY considers itself a non-publicly traded enterprise for the purposes of the standard and adopted SFAS 158 as of December 31, 2006. In compliance with the provisions of SFAS 158, the Bank recognized $6.1 million of previously unrecognized actuarial gains and losses and service costs within accumulated other comprehensive income (a component of capital). See Note 18.

SFAS 161 – On March 19, 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133” (SFAS 161). SFAS 161 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. SFAS 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008 (January 1, 2009 for the FHLBNY), with early application allowed. The FHLBNY has not yet determined the effect that the adoption of SFAS 161 will have on its financial statement disclosures.

Note 3. 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 various Federal Reserve Banks of approximately $1.0 million for the years ended December 31, 2007 and 2006. 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 $19.6 million and $43.3 million as of December 31, 2007 and 2006. The Bank includes member reserve balances in other liabilities in the statements of condition.

176

Federal Home Loan Bank of New York
Notes to Financial Statements

Note 4. Interest-bearing deposits

Interest-bearing deposits consist of interest earning cash pledged to derivative counteparties to meet collateral obligations and investments in certificates of deposit issued by highly-rated banks and other financial institutions. As of December 31, 2007 and 2006, cash pledged by the Bank as collateral was $396.4 million and $0 million to broker dealers and banks that have credit risk exposure related to derivative contracts. Investments in certificates of deposits, all maturing within one year were $10.3 billion and $5.6 billion at December 31, 2007 and 2006.

Note 5. Held-to-maturity securities

Held-to-maturity securities consist of mortgage- and asset-backed securities (collectively mortgage-backed securities or “MBS”), and state and local housing finance agency bonds.

During 2005, the FHLBNY sold two securities aggregating $9.0 million of held-to-maturity MBS for a gain of $145 thousand to “clean-up” the residual balances of the securities. The sales were considered “in-substance maturities” in accordance with the provisions of SFAS 115, “Accounting for Certain Investments in Debt and Equity Securities.”

Held-to-maturity securities included securities issued by the Federal National Mortgage Association (“Fannie Mae”) and the Federal Home Loan Mortgage Corp. (“Freddie Mac”). Neither Fannie Mae nor Freddie Mac are agencies of the U.S. Government nor are their securities guaranteed by the U.S. Government.

Major Security Types

The amortized cost, gross unrealized gains, losses, and the fair value of held-to-maturity securities, were as follows (in thousands):

	December 31, 2007
			Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
State and local housing agency obligations	$	576,971	$	9,780	$	(200	)	$	586,551
Mortgage-backed securities		9,707,783		82,670		(97,191	)		9,693,262
Total	$	10,284,754	$	92,450	$	(97,391	)	$	10,279,813

	December 31, 2006
			Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
State and local housing agency obligations	$	618,810	$	11,141	$	(283	)	$	629,668
Mortgage-backed securities		10,632,288		47,184		(139,371	)		10,540,101
Total	$	11,251,098	$	58,325	$	(139,654	)	$	11,169,769

177

Federal Home Loan Bank of New York
Notes to Financial Statements

Temporary Impairment

The following tables summarize held-to-maturity securities with fair values below their amortized cost, in an unrealized loss position. The fair values and unrealized losses are aggregated by major security type and rating, and by the length of time individual securities have been in a continuous unrealized loss position. Securities, to which different rating levels have been assigned by different rating agencies are assigned to the lower rating category.

The FHLBNY has both the intent and financial ability to hold the temporarily impaired securities to recovery of their value. 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 below represent temporary impairment.

Temporary impairment at December 31, 2007 (in thousands):

	December 31, 2007
	Less than 12 months				12 months or more				Total
	Estimated Fair		Unrealized		Estimated Fair		Unrealized		Estimated Fair		Unrealized
	Value		Losses		Value		Losses		Value		Losses
Mortgage-backed securities-fixed rate
AAA-rated	$	1,844,399	$	35,652	$	2,484,388	$	55,740	$	4,328,787	$	91,392
AA-rated		—		—		—		—		—		—
Below AA		—		—		—		—		—		—
Mortgage-backed securities-variable rate
AAA-rated		185,167		5,799		—		—		185,167		5,799
AA-rated		—		—		—		—		—		—
Below AA		—		—		—		—		—		—
		2,029,566		41,451		2,484,388		55,740		4,513,954		97,191
State and local housing finance agencies-fixed rate
AAA-rated		—		—		—		—		—		—
AA-rated		—		—		9,800		200		9,800		200
Below AA		—		—		—		—		—		—
State and local housing finance agencies-variable rate
AAA-rated		—		—		—		—		—		—
AA-rated		—		—		—		—		—		—
Below AA		—		—		—		—		—		—
		—		—		9,800		200		9,800		200
	$	2,029,566	$	41,451	$	2,494,188	$	55,940	$	4,523,754	$	97,391

In January, 2008, Fitch Investor Services (“Fitch”) downgraded Ambac Assurance Corp (“Ambac”) to double-A with negative watch. As a result, three mortgage-backed securities, insured by Ambac with amortized cost of $86.8 million and market value of $81.9 million at December 31, 2007, were downgraded by Fitch to double-A with negative watch. S&P does not rate one of the securities, and continues to rate the two remaining securities as triple-A. Moody’s continues to rate all three securities as triple-A. In addition, S&P and Moody’s placed Ambac and MBIA Insurance Corp., (“MBIA”) under negative watch in January, 2008 so that thirteen mortgage-backed securities, with amortized cost of $267.2 million and market value of $260.0 million at December 31, 2007 that are insured by Ambac and MBIA, were placed on negative watch. Between February 25, 2008 and March 12, 2008, S&P and Moody’s removed the 13 securities from negative watch, and reaffirmed these securities as triple-A. Fitch also reaffirmed its double-A rating to the three securities and removed the negative watch. S&P and Moody’s reaffirmed MBIA as triple-A with negative outlook on February 25 and February 26, 2008. Both S&P and Moody’s reaffirmed Ambac as triple-A with negative outlook on March 12, 2008.

Investments in two bonds issued by state and local housing finance agencies were also placed under negative watch by S&P and Moody’s in January 2008. The two bonds are insured by MBIA. Amortized cost and market values of the two bonds were $110.6 million at December 31, 2007.

The Bank has analyzed these securities as well as all its investments in MBS in light of the prevailing market conditions and believes impairment, if any, is only temporary. The management of the FHLBNY has the positive intent to hold the securities to their ultimate recovery of value, and the Bank has the financial ability to hold all such securities to their ultimate recovery of value.

178

Federal Home Loan Bank of New York
Notes to Financial Statements

Temporary impairment at December 31, 2006 (in thousands):

	December 31, 2006
	Less than 12 months				12 months or more				Total
	Estimated Fair		Unrealized		Estimated Fair		Unrealized		Estimated Fair		Unrealized
	Value		Losses		Value		Losses		Value		Losses
Mortgage-backed securities-fixed rate
AAA-rated	$	1,434,317	$	7,082	$	4,528,193	$	132,247	$	5,962,510	$	139,329
AA-rated		—		—		—		—		—		—
Below AA		—		—		—		—		—		—
Mortgage-backed securities-variable rate
AAA-rated		134,958		42		—		—		134,958		42
AA-rated		—		—		—		—		—		—
Below AA		—		—		—		—		—		—
		1,569,275		7,124		4,528,193		132,247		6,097,468		139,371
State and local housing finance agencies-fixed rate
AAA-rated		—		—		—		—		—		—
AA-rated		15,117		283		—		—		15,117		283
Below AA		—		—		—		—		—		—
State and local housing finance agencies-variable rate
AAA-rated		—		—		—		—		—		—
AA-rated		—		—		—		—		—		—
Below AA		—		—		—		—		—		—
		15,117		283		—		—		15,117		283
	$	1,584,392	$	7,407	$	4,528,193	$	132,247	$	6,112,585	$	139,654

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, 2007				December 31, 2006
	Amortized		Estimated		Amortized		Estimated
	Cost		Fair Value		Cost		Fair Value
State and local housing bonds
Due in one year or less	$	—	$	—	$	—	$	—
Due after one year through five years		32,009		32,474		24,549		25,171
Due after five years through ten years		20,400		20,938		17,115		17,115
Due after ten years		524,562		533,139		577,146		587,382
State and local housing finance agency bonds		576,971		586,551		618,810		629,668
Mortgage-backed securities
Due in one year or less		243,309		242,471		98,897		99,338
Due after one year through five years		546,303		555,003		1,104,246		1,125,038
Due after five years through ten years		103,792		104,563		133,511		132,966
Due after ten years		8,814,379		8,791,225		9,295,634		9,182,759
Mortgage-backed securities		9,707,783		9,693,262		10,632,288		10,540,101
Total securities	$	10,284,754	$	10,279,813	$	11,251,098	$	11,169,769

The amortized cost of mortgage-backed securities classified as held-to-maturity includes net premiums of $1.1 million and $5.2 million as of December 31, 2007 and 2006. Amortization expense, net of accretion charged to interest income was $1.9 million, $3.9 million, and $1.2 million for the years ended December 31, 2007, 2006 and 2005.

179

Federal Home Loan Bank of New York
Notes to Financial Statements

Interest rate payment terms

The following table summarizes interest rate payment terms for securities classified as held-to-maturity (in thousands):

	December 31,
	2007		2006
Amortized cost of held-to-maturity securities other than mortgage-backed securities
Fixed-rate	$	308,180	$	325,845
Variable-rate		268,791		292,965
		576,971		618,810
Amortized cost of held-to-maturity mortgage related securities
Pass-through securities
Fixed-rate		3,420,037		3,805,177
Variable-rate		188,369		249,892
Collateralized mortgage obligations
Fixed-rate		6,078,767		6,552,628
Variable-rate		20,610		24,591
		9,707,783		10,632,288
Total	$	10,284,754	$	11,251,098

Note 6. Available-for-sale securities

Available-for-sale securities - consisted principally of investments in equity and fixed-income mutual funds. The Bank established two grantor trusts in the third quarter of 2007 to fund current and future payments under two supplemental pension plans. The investments in the grantor trusts are classified as available-for-sale.

Investments in equity and fixed-income funds are redeemable at short notice. Realized gains and losses from investments in funds were not significant. Unrealized gains and losses, or “net asset values” (“NAV”) were as follows (in thousands):

	December 31, 2007
			Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
Cash equivalents	$	791	$	—	$	—		$	791
Equity funds		8,386		—		(570	)		7,816
Fixed income funds		4,383		197		—			4,580
Total	$	13,560	$	197	$	(570	)	$	13,187

There were no investments in securities classified as available-for-sale at December 31, 2006.

180

Federal Home Loan Bank of New York
Notes to Financial Statements

Note 7. Advances

Redemption terms

Contractual redemption terms and yields of advances outstanding at December 31, 2007 and 2006 were as follows (dollars in thousands):

	December 31,
	2007						2006
				Weighted 1						Weighted 1
	Amount			Average Yield			Amount			Average Yield
Overdrawn demand deposit accounts	$	—			0.00	%	$	498			6.05	%
Due in one year or less		24,140,285			4.72			12,273,636			4.91
Due after one year through two years		7,714,912			4.87			12,450,960			4.99
Due after two years through three years		8,730,643			5.13			4,108,983			5.05
Due after three years through four years		3,153,113			4.89			5,744,505			5.45
Due after four years through five years		5,988,142			4.76			2,591,828			4.86
Due after five years through six years		556,095			3.44			2,279,706			4.18
Thereafter		30,308,864			4.29			19,539,154			4.22
Total par value		80,592,054			4.62	%		58,989,270			4.73	%
Discount on AHP advances *		(417	)					(519	)
Net premium on advances *		—						489
SFAS 133 hedging basis adjustments *		1,498,030						23,154
Total	$	82,089,667					$	59,012,394

*

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 ($0.4) million, ($0.4) million, and ($0.5) million for the years ended December 31, 2007, 2006 and 2005. All other amortization charged to interest income aggregated ($0.5) million, ($0.6) million, and ($0.7) million for the years ended December 31, 2007, 2006 and 2005. Interest rates on AHP advances ranged from 1.25% to 6.04% in 2007 and 1.25% to 8.29% in 2006.

1

The weighted average yield is the weighted average coupon rates for advances, unadjusted for interest rate swaps.

Prepayment fees charged to members when members prepay certain advances before original maturity are included in interest income from advances. Net prepayment fees reported in interest income were $4.6 million, $19.2 million, and $6.6 million for the years ended December 31, 2007, 2006, and 2005. Amortization of basis on modified advances was a charge to interest income and aggregated $1.0 million, $2.1 million, and $3.6 million for the years ended December 31, 2007, 2006, and 2005.

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 on then prevailing market rates and terms. As of December 31, 2007 and 2006, the Bank had putable advances outstanding totaling $38.8 billion and $28.9 billion.

181

Federal Home Loan Bank of New York
Notes to Financial Statements

The following table summarizes advances by year of maturity or next put date (in thousands):

	December 31,
	2007			2006
Overdrawn demand deposit accounts	$	—		$	498
Due or putable in one year or less		48,005,147			29,962,181
Due or putable after one year through two years		16,112,362			16,745,798
Due or putable after two years through three years		7,546,243			6,341,532
Due or putable after three years through four years		2,607,563			2,504,205
Due or putable after four years through five years		4,180,492			1,668,578
Due or putable after five years through six years		121,095			442,706
Thereafter		2,019,152			1,323,772
Total par value		80,592,054			58,989,270
Discount on AHP advances		(417	)		(519	)
Net premium on advances		—			489
SFAS 133 hedging basis adjustments		1,498,030			23,154
Total	$	82,089,667		$	59,012,394

Security Terms

The FHLBNY lends to financial institutions involved in housing finance within its district. The FHLBank Act requires the FHLBNY to obtain sufficient collateral on advances to protect against losses and to accept as collateral on such advances only certain U.S. government or government agency securities, residential mortgage loans, cash or deposits in the FHLBNY and other eligible real estate-related assets. 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”). 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, 2007 and 2006, 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.

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% to 125% of outstanding advances, based on the collateral type. It is not uncommon 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., and 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.

182

Federal Home Loan Bank of New York
Notes to Financial Statements

As of December 31, 2007, members pledged a total of $143.8 billion in collateral to the Bank. At a minimum, each member pledged sufficient collateral to adequately secure their outstanding obligations with the Bank. In addition, most members maintain an excess amount of pledged collateral with the FHLBNY to secure future liquidity needs. Of the total collateral securing all outstanding member obligations, $31.8 billion was in the Bank’s physical possession or that of its safekeeping agent(s); $112.0 billion was specifically listed. Under this collateralization arrangement, the member holds 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, 2007 and 2006. 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 and savings institutions.

Concentration of advances outstanding - Advances to the FHLBNY’s top five borrowing member institutions aggregated $38.9 billion, representing 48.3% of total advances outstanding at December 31, 2007. The FHLBNY held sufficient collateral to cover the advances to all of these institutions, and it does not expect to incur any credit losses.

Interest Rate Payment Terms

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

	December 31,
	2007						2006
				Percentage						Percentage
	Amount			of total			Amount			of total
Fixed-rate	$	60,779,510			75.42	%	$	45,737,308			77.53	%
Variable-rate		18,654,850			23.15			12,014,268			20.37
Variable-rate capped		1,157,694			1.43			1,237,694			2.10
Total par value		80,592,054			100.00	%		58,989,270			100.00	%
Discount on AHP Advances		(417	)					(519	)
Net premium on advances		—						489
SFAS 133 hedging basis adjustments		1,498,030						23,154
Total	$	82,089,667					$	59,012,394

Variable-rate advances were mainly indexed to the London Interbank Offered Rate (LIBOR) or the Federal funds effective rate.

183

Federal Home Loan Bank of New York
Notes to Financial Statements

Note 8. Affordable Housing Program and REFCORP

Section 10(j) of 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% of the current year’s adjusted income after the assessment for REFCORP. 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% 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 2007, 2006 or 2005. The FHLBNY had outstanding principal in AHP-related advances of $5.6 million and $6.6 million as of December 31, 2007 and 2006.

The following provides roll-forward analysis of the Affordable Housing Program (dollars in thousands):

	December 31,
	2007			2006			2005
Beginning balance	$	101,898		$	91,004		$	81,580
Additions from current period’s assessments		37,204			32,031			25,878
Net disbursements for grants and programs		(20,050	)		(21,137	)		(16,454	)
Ending balance	$	119,052		$	101,898		$	91,004

184

Federal Home Loan Bank of New York
Notes to Financial Statements

Note 9. Mortgage loans held-for-portfolio

Mortgage Partnership Finance ^® program (“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”). Included in outstanding balances were $40.5 million and $45.7 million at December 31, 2007 and 2006 with respect to loans that are considered to be originated by the FHLBNY.

The members retain servicing rights and may credit-enhance the portion of the loans participated to the FHLBNY. No intermediary trust is involved.

Included in mortgage loans were 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 $4.1 million and $4.9 million at December 31, 2007 and 2006.

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

	December 31,
	2007			Percentage			2006			Percentage
Real Estate:
Fixed medium-term single-family mortgages	$	529,839			35.61	%	$	575,114			38.93	%
Fixed long-term single-family mortgages		953,946			64.11			897,153			60.73
Multi-family mortgages		4,102			0.28			4,940			0.34
Total par value		1,487,887			100.00	%		1,477,207			100.00	%
Unamortized premiums		11,779						13,323
Unamortized discounts		(6,805	)					(6,288	)
Basis adjustment 1		(600	)					(230	)
Total mortgage loans held-for-portfolio		1,492,261						1,484,012
Allowance for credit losses		(633	)					(593	)
Total mortgage loans held-for-portfolio after allowance for credit losses	$	1,491,628					$	1,483,419

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

Loans insured by the Federal Housing Administration and Veteran Administration were $8.4 million and $10.6 million at December 31, 2007 and 2006. Conventional mortgages and loans in the CMA program constituted the remaining balance of mortgage loans held-for-portfolio.

Amortization expense, net of accretion, that was reported as a charge to interest income was $1.3 million, $1.6 million, and $0.9 million for the years ended December 31, 2007, 2006 and 2005. Amortization of the basis adjustment was insignificant for all periods reported.

The FHLBNY and its members share the credit risk of MPF loans by structuring potential credit losses into layers (See Note 1, “Summary of 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 $12.9 million and $12.2 million at December 31, 2007 and 2006. The FLA is not recorded or reported as a reserve for loan losses as it serves as a memorandum 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 aggregated $1.7 million, $1.7 million, and $1.5 million for the years ended December 31, 2007, 2006 and 2005, and were reported as a reduction to mortgage loan interest income.

185

Federal Home Loan Bank of New York
Notes to Financial Statements

The following provides roll-forward analysis of the allowance for credit losses (in thousands):

	Years ended December 31,
	2007		2006			2005
Beginning balance	$	593	$	582		$	507
Charge-offs		—		(18	)		—
Recoveries		—		18			—
Net charge-offs		—		—			—
Provision for credit losses		40		11			75
Ending balance	$	633	$	593		$	582

As of December 31, 2007 and 2006, the FHLBNY had $4.2 million and $2.1 million of non-accrual loans. The estimated fair value of the mortgage loans as of December 31, 2007 and 2006 is reported in Note 20. 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, 2007 and 2006, 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,
	2007		2006
Secured by 1-4 family	$	384	$	850

186

Federal Home Loan Bank of New York
Notes to Financial Statements

Note 10. 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, and 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 Board. Therefore, in the normal course of business, the FHLBNY extends credit to members whose officers may serve as directors of the FHLBNY, and to non-members on market terms that are no more favorable to them than comparable transactions with other members. Capital stock ownership is a prerequisite to transacting any business with the FHLBNY.

The FHLBNY may from time to time borrow or sell overnight and term Federal funds at market rates to members.

Debt Transfers

During 2007, the Bank transferred $487.0 million of par amounts of consolidated obligation bonds to other FHLBanks in exchange for a cash price that represented the negotiated fair market values of the bonds. The transfers resulted in losses of $4.6 million. In 2006 and 2005, the Bank transferred par amounts of $755.0 million and $220.0 million, and recorded losses of $25.4 million and $7.2 million. No bonds were transferred to the FHLBNY from another FHLBank in 2007 and 2006. In 2005, consolidated obligation bonds of $6.0 million were transferred to the FHLBNY from other FHLBanks.

At trade date, the transferring bank notifies the Office of Finance of a change in primary obligor for the transferred debt.

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, 2007 was $1,137.0 million 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 $559.0 thousand, $515.0 thousand and $416.0 thousand for the years ended December 31, 2007, 2006 and 2005.

Mortgage-backed Securities

No mortgage-backed securities were acquired from other FHLBanks.

Intermediation

Notional amounts of $70.0 million and $50.0 million were outstanding at December 31, 2007 and 2006 in which the FHLBNY acted as an intermediary to sell derivatives to members. These were offset by identical transactions with unrelated derivatives counterparties. Fair values of these transactions at December 31, 2007 and 2006 were not material. The intermediated derivative transactions were fully collateralized.

Loans to other Federal Home Loan Banks

At December 31, 2007, the FHLBNY had extended $55.0 million as an overnight loan to another FHLBank. The loan was on an unsecured basis. There were no outstanding loans to another FHLBanks as of December 31, 2006. Loans made to other FHLBanks were uncollateralized and averaged $151.0 thousand, $685.0 thousand, and $274.0 thousand for the years ended December 31, 2007, 2006 and 2005. The maximum balance was $55.0 million and $200.0 million for the years ended December 31, 2007 and 2006. Interest income from such loans was $2.0 thousand, $37.0 thousand and $9.0 thousand for the years ended December 31, 2007, 2006 and 2005.

187

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 $3.0 million, $2.9 million and $2.1 million for the years ended December 31, 2007, 2006 and 2005. There were no borrowings outstanding as of December 31, 2007 and 2006. Interest expense for the years ended December 31, 2007, 2006 and 2005 was $146.0 thousand, $144.0 thousand, and $67.0 thousand.

The following tables summarize outstanding balances with related parties at December 31, 2007 and 2006, and transactions for each of the years ended December 31 2007, 2006 and 2005 (in thousands):

Related Party: Outstanding Assets, Liabilities and Capital

	December 31,
	2007				2006
	Related		Unrelated		Related		Unrelated
Assets
Cash and due from banks	$	—	$	7,909	$	—	$	38,850
Interest-bearing deposits		87		10,696,600		77		5,591,000
Federal funds sold		—		4,381,000		—		3,661,000
Available-for-sale securities		—		13,187		—		—
Held-to-maturity securities		—		10,284,754		—		11,251,098
Advances		82,089,667		—		59,012,394		—
Mortgage loans*		—		1,491,628		—		1,483,419
Loans to other FHLBanks		55,000		—		—		—
Accrued interest receivable		402,439		159,884		319,687		86,436
Premises, software, and equipment, net		—		13,154		—		11,107
Derivative assets**		—		70,278		—		224,775
Other assets**		—		17,004		—		23,144
Total assets	$	82,547,193	$	27,135,398	$	59,332,158	$	22,370,829
Liabilities and capital
Deposits	$	1,646,835	$	—	$	2,389,528	$	—
Consolidated obligations		—		101,117,387		—		74,234,228
Mandatorily redeemable capital stock		238,596		—		109,950		—
Accrued interest payable		60		655,810		—		735,215
Affordable Housing Program***		119,052		—		101,898		—
Payable to REFCORP		—		23,998		—		17,475
Derivative liabilities**		—		1,069,742		—		107,615
Other liabilities****		19,584		40,936		43,265		59,420
Total liabilities		2,024,127		102,907,873		2,644,641		75,153,953
Capital		4,750,591		—		3,904,393		—
Total liabilities and capital	$	6,774,718	$	102,907,873	$	6,549,034	$	75,153,953

*	Includes insignificant amounts of mortgage loans purchased from members of another FHLBank.
**	Includes insignificant amounts that are considered related party.
***	Represents funds not yet disbursed to eligible programs.
****	Related column includes member pass-through reserves at the Federal Reserve Bank.

188

Federal Home Loan Bank of New York
Notes to Financial Statements

Related Party: Income and Expense transactions

	Years ended December 31,
	2007				2006				2005
	Related		Unrelated		Related		Unrelated		Related		Unrelated
Interest income
Advances	$	3,495,312	$	—	$	3,302,174	$	—	$	2,174,948	$	—
Interest-bearing deposits *		—		411,647		—		300,499		—		193,668
Federal funds sold		—		192,845		—		145,420		—		97,547
Available-for-sales securities		—		—		—		—		—		19,519
Held-to-maturity securities		—		596,761		—		580,002		—		566,009
Mortgage loans **		—		78,937		—		76,111		—		69,312
Loans to other FHLBanks		2		—		37		—		9		—
Others		—		1		—		4		—		33
Total interest income	$	3,495,314	$	1,280,191	$	3,302,211	$	1,102,036	$	2,174,957	$	946,088
Interest expense
Consolidated obligations	$	—	$	4,153,094	$	—	$	3,846,219	$	—	$	2,660,797
Deposits		106,777		—		81,442		—		62,237		—
Mandatorily redeemable capital stock		11,731		—		3,086		—		2,747		—
Cash collateral held and other borrowings		146		4,370		144		3,238		67		225
Total interest expense	$	118,654	$	4,157,464	$	84,672	$	3,849,457	$	65,051	$	2,661,022
Service fees	$	3,324	$	—	$	3,368	$	—	$	4,666	$	—

*	Includes deminimis amounts of interest income from MPF service provider.
**	Includes deminimis amounts of mortgage interest income from loans purchased from members of another FHLBank.

Note 11. 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,
	2007		2006
Due in one year or less	$	16,900	$	80,000
Total term deposits	$	16,900	$	80,000

189

Federal Home Loan Bank of New York
Notes to Financial Statements

Note 12. Borrowings

Securities sold under agreements to repurchase

The FHLBNY did not have any securities sold under agreement to repurchase as of December 31, 2007 and 2006. Terms, amounts and outstanding balances of borrowings from other Federal Home Loan Banks are described under Note 10, Related party transactions.

Note 13. 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 Board, 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 Board determines that the non-complying FHLBank is unable to satisfy its obligations, then the Finance Board 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 Board 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 other FHLBanks, were approximately $1,189.7 billion and $951.9 billion as of December 31, 2007 and 2006.

Finance Board 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.

The FHLBNY met the qualifying unpledged asset requirements in each of the years reported as follows:

	December 31,
	2007			2006
Percentage of unpledged qualifying assets to consolidated obligations		108	%		110	%

190

Federal Home Loan Bank of New York
Notes to Financial Statements

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, 2007 and 2006, the combined FHLBanks’ capital stock was 4.32% and 4.53% of the par value of consolidated obligations outstanding, and the SAA balance was approximately $6 thousand at December 31, 2007 and $26 thousand at December 31, 2006. 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%.

The FHLBank Act authorizes the Secretary of the Treasury, at his or her discretion, to purchase consolidated obligations of the FHLBanks aggregating not more than $4.0 billion. The terms, conditions, and interest rates are determined by the Secretary of the Treasury. There were no such purchases by the U.S. Treasury during the years ended December 31, 2007 and 2006.

General Terms

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.

These 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.

The following summarizes consolidated obligations, bonds and discount notes issued by the FHLBNY and outstanding at December 31, 2007 and 2006 (in thousands):

	December 31, 2007		December 31, 2006
Consolidated obligation bonds-amortized cost	$	66,066,027	$	62,195,674
SFAS 133 fair value basis adjustments		259,405		(151,222	)
Fair value basis on terminated hedges		385		(1,777	)
Total Consolidated obligation-bonds	$	66,325,817	$	62,042,675
Discount notes - amortized cost	$	34,791,570	$	12,191,553
Total Consolidated obligation-discount notes	$	34,791,570	$	12,191,553

191

Federal Home Loan Bank of New York
Notes to Financial Statements

Redemption Terms

The following is a summary of consolidated bonds outstanding by year of maturity (dollars in thousands):

	December 31,
	2007						2006
				Weighted						Weighted
				Average						Average
Maturity	Amount			Rate 1			Amount			Rate 1
One year or less	$	38,027,475			4.69	%	$	25,888,510			4.35	%
Over one year through two years		11,047,950			4.78			20,458,280			4.69
Over two years through three years		6,344,300			4.85			6,007,350			4.80
Over three years through four years		2,309,100			4.99			3,275,700			4.62
Over four years through five years		2,972,845			5.14			2,077,900			5.00
Over five years through six years		728,250			5.27			529,800			4.71
Thereafter		4,626,050			5.31			3,968,100			5.29
Total par value		66,055,970			4.80	%		62,205,640			4.60	%
Bond premiums		38,586						23,334
Bond discounts		(28,529	)					(33,300	)
SFAS 133 fair value basis adjustments		259,405						(151,222	)
Fair value basis adjustments on terminated hedges		385						(1,777	)
Total carrying value	$	66,325,817					$	62,042,675

¹ Weighted average rate represents the weighted average coupons of bonds, unadjusted for swaps.

Amortization of bond premiums and discounts resulted in net reduction of interest expense of $1.8 million, $17.4 million, and $59.0 million for the years ended December 31, 2007, 2006 and 2005. Amortization of basis adjustments from terminated hedges was a net increase of $2.1 million, $0.05 million and $1.4 million for the years ended December 31, 2007, 2006 and 2005.

Debt extinguished

During the year ended December 31, 2007, the FHLBNY retired $626.2 million of consolidated bonds at a cost that exceeded book value by $8.6 million. The bonds retired were associated with the prepayment of advances or commercial mortgage-backed securities (“CMBS”) for which prepayment fees were received. During 2006, the FHLBNY retired $770.0 million of consolidated bonds at a cost that exceeded book value by $26.3 million.

Transfers of consolidated bonds to other FHLBanks

Included in total debt of $626.2 million in 2007, the Bank also transferred certain bonds at negotiated market rates to other FHLBanks in 2007 to meet the FHLBNY’s asset and liability management objectives. See Note 10, Related party transactions for more information.

192

Federal Home Loan Bank of New York
Notes to Financial Statements

The following summarizes bonds outstanding by year of maturity or next call date (in thousands):

	December 31,
	2007			2006
Year of Maturity or next call date
Due or callable in one year or less	$	47,346,975		$	40,152,210
Due or callable after one year through two years		9,924,450			14,786,280
Due or callable after two years through three years		3,551,100			1,959,650
Due or callable after three years through four years		980,100			1,608,000
Due or callable after four years through five years		910,845			928,900
Due or callable after five years through six years		435,250			284,800
Thereafter		2,907,250			2,485,800
Total par value		66,055,970			62,205,640
Bond premiums		38,586			23,334
Bond discounts		(28,529	)		(33,300	)
SFAS 133 fair value adjustments		259,405			(151,222	)
Fair value basis adjustments on terminated hedges		385			(1,777	)
Total carrying value	$	66,325,817		$	62,042,675

The FHLBNY uses fixed-rate callable debt to finance callable advances and mortgage-backed securities. Simultaneous with such a debt issue, the FHLBNY may also enter an 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 allows the Bank to provide members attractively priced, fixed-rate advances.

	December 31,
	2007		2006
Non-callable/non-putable	$	53,777,670	$	41,478,640
Callable		12,278,300		20,727,000
Total par value	$	66,055,970	$	62,205,640

Interest rate payment terms

The following table summarizes interest rate payment terms for bonds (in thousands).

	December 31,
	2007			2006
Fixed-rate, non-callable	$	39,642,670		$	37,328,640
Fixed-rate, callable		11,420,300			17,039,000
Step Up, non-callable		—			50,000
Step Up, callable		843,000			3,688,000
Step Down, non-callable		—			—
Step Down, callable		15,000			—
Single-index floating rate		14,135,000			4,100,000
Total par value		66,055,970			62,205,640
Bond premiums		38,586			23,334
Bond discounts		(28,529	)		(33,300	)
SFAS 133 fair value basis adjustments		259,405			(151,222	)
Fair value basis adjustments on terminated hedges		385			(1,777	)
Total carrying value	$	66,325,817		$	62,042,675

193

Federal Home Loan Bank of New York
Notes to Financial Statements

Discount notes

Consolidated discount notes are issued to raise short-term funds. Discount notes are consolidated obligations with original maturities up to 360 days. These notes are issued at less than their face amount and redeemed at par when they mature. The FHLBNY’s outstanding consolidated discount notes was as follows (dollars in thousands):

					Weighted
	Book		Par		Average
	Value		Value		Interest Rate
December 31, 2007	$	34,791,570	$	34,984,105		4.28	%
December 31, 2006	$	12,191,553	$	12,255,625		5.10	%

Note 14. 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 SFAS 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity.” (“SFAS 150”), and within the SFAS 150’s definition of a nonpublic entity, and the definition of an SEC registrant in FASB Staff Position No. SFAS 150-3 (FSP 150-3).

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 FHLBank 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 of SFAS 150. 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 SFAS 150 as a nonpublic SEC registrant.

In compliance with SFAS 150, 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. Member shares meeting this definition are reclassified to a liability at fair value. Dividends on member shares classified as a liability in accordance with SFAS 150 are accrued at the estimated dividend rate and recorded as interest expense in the statement of income. The repayment of these mandatorily redeemable financial instruments will be reflected as financing cash outflows in the statement of cash flows once settled.

If a member cancels notice of withdrawal, the FHLBNY will reclassify mandatorily redeemable capital stock from a liability to equity in compliance with SFAS 150. After the reclassification, dividends on the capital stock will no longer be classified as interest expense. In compliance with this provision, dividends on mandatorily redeemable capital stock in the amount of $11.7 million, $3.1 million and $2.7 million were recorded as interest expense for the years ended December 31, 2007, 2006 and 2005.

194

Federal Home Loan Bank of New York
Notes to Financial Statements

At December 31, 2007, mandatorily redeemable capital stock of $238.6 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 also became non-members by re-locating their charter to outside the FHLBNY’s membership districts.

Anticipated redemptions of mandatorily redeemable capital stock were as follows (in thousands):

	December 31,
	2007		2006
Redemption less than one year	$	127,010	$	43,184
Redemption from one year to less than three years		94,629		29,109
Redemption from three years to less than five years		15,281		30,679
Redemption after five years or greater		1,676		6,978
Total	$	238,596	$	109,950

Anticipated redemption assumes the Bank will follow its current practice of daily redemption of capital in excess of the amount required to support advances and of redeeming excess membership stock annually.

Voluntary withdrawal from membership - As of December 31, 2007, there were no members who had formally notified the Bank of their intent to withdraw from membership and voluntarily redeem their capital stock, and no members’ or non-members’ redemption requests for stock remained pending at December 31, 2007.

Members acquired by non-members - When a member is acquired by a non-member, the FHLBNY reclassifies stock of members 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 annually and repurchased.

Dividends related to capital stock classified as mandatorily redeemable were accrued at an estimated dividend rate and reported as interest expense in the statements of income. At December 31, 2007, the FHLBNY had estimated an 8.05% dividend payout due to holders of mandatorily redeemable capital stock averaging $242.5 million during the fourth quarter of 2007, and a liability of $4.9 million representing accrued dividend was recognized as an expense. The actual rate of dividend that was paid on January 31, 2008 was 8.40%.

195

Federal Home Loan Bank of New York
Notes to Financial Statements

The FHLBNY’s activity for mandatorily redeemable capital stock was as follows in 2007, 2006 and 2005 (in thousands):

	December 31,
	2007			2006			2005
Beginning balance	$	109,950		$	18,087		$	126,581
Capital stock subject to mandatory redemption reclassified from equity		186,981			230,851			—
Redemption of mandatorily redeemable capital stock*		(58,335	)		(138,988	)		(108,494	)
Ending balance	$	238,596		$	109,950		$	18,087
Accrued interest payable	$	4,921		$	1,825		$	258

*	Redemption includes repayment of excess stock.
	(The annualized rate accrual is at 8.05%, 6.25% and 5.25% for 2007, 2006 and 2005)

Note 15. 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 members’ 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.

The FHLBNY 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.

Historical Background

In November 1999, the FHLBank Act was significantly modified by the Federal Home Loan Bank System Modernization Act, which was enacted as Title VI of the Gramm-Leach-Bliley Act (“GLB Act”). The GLB Act established voluntary membership for all members. A member may withdraw from membership and have its capital stock redeemed after providing to the FHLBNY the required notice.

The GLB Act resulted in a number of changes in the capital structure of the FHLBanks. The GLB Act also removed the provision that required a non-thrift member to purchase additional stock to borrow from the FHLBank if the non-thrift member’s mortgage-related assets were less than 65 percent of total assets. A member may, at the FHLBank’s discretion, redeem at par value any capital stock greater than its statutory requirement or sell it at par value to another member of that FHLBank. The final Finance Board capital rule was published on January 30, 2001, and required each FHLBank to submit a capital structure plan (“Capital Plan”) to the Finance Board by October 29, 2001 in accordance with the provisions of the GLB Act and final capital rule. The Finance Board approved the FHLBNY’s Capital Plan on July 18, 2002. The FHLBNY implemented its new Capital Plan, under the provisions of the GLB Act and the Finance Board rules, on December 1, 2005.

196

Federal Home Loan Bank of New York
Notes to Financial Statements

Prior to the conversion to the new capital plan on December 1, 2005, the FHLBank Act required members to hold capital stock in the FHLBNY equal to the greater of:

• 5 % of the member’s total outstanding advances plus 5 percent of the FHLBNY’s interest in the aggregate unpaid principal balance of all loans sold by the members to the FHLBNY, or

• 1% of the member’s total unpaid principal balance of residential mortgage loans (usually as of the most recent year-end), or

• $500.

Under the GLB Act, each FHLBank may offer two classes of stock. Members can redeem Class A stock by giving six months’ notice, and redeem Class B stock by giving 5 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 percent minimum leverage ratio based on total capital and a 4 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 percent minimum leverage ratio.

Capital Plan under GLB Act

The FHLBNY implemented its new 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 5 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 ¹.

The FHLBNY is subject to risk-based capital rules. Specifically, the FHLBNY is subject to three capital requirements under the new capital structure 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 and rules and regulations of the Finance Board. Only permanent capital, defined as Class B stock and retained earnings, satisfies this risk-based capital requirement. The Finance Board 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% total capital-to-asset ratio and at least a 5% 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.

 ¹ On December 12, 2007 the Finance Board approved amendments to the FHLBNY’s ’s capital plan. The amendments allows 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.

197

Federal Home Loan Bank of New York
Notes to Financial Statements

The following table shows the risk-based capital ratios at December 31, 2007 and 2006 (dollars in thousands):

	December 31, 2007						December 31, 2006
	Required*			Actual			Required*			Actual
Regulatory capital requirements:
Risk-based capital1	$	578,653		$	5,024,861		$	611,861		$	4,024,891
Total capital-to-asset ratio		4.00	%		4.58	%		4.00	%		4.93	%
Total capital2	$	4,387,304		$	5,025,494		$	3,268,119		$	4,025,483
Leverage ratio		5.00	%		6.87	%		5.00	%		7.39	%
Leverage capital3	$	5,484,130		$	7,537,925		$	4,085,149		$	6,037,335

1.	Actual “Risk-based capital” is capital stock and retained earnings plus mandatorily redeemable capital stock. Section 932.2 of the Finance Board’s regulations also refers to this amount as “Permanent Capital.”
2.	Actual “Total capital” is “Risk-based capital” plus allowance for credit losses.
3.	Actual Leverage capital is “Risk-based capital” times 1.5 plus allowance for loan losses.
*	Required minimum.

The Finance Board has indicated that the SFAS 150 accounting treatment for certain shares of the Bank’s capital stock will not affect 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).

The FHLBNY’s board of directors may declare and pay dividends in either cash or capital stock only from retained and current earnings.

198

Federal Home Loan Bank of New York
Notes to Financial Statements

Note 16. Total comprehensive income

Total comprehensive income is comprised of net income and Accumulated other comprehensive income (loss), which includes unrealized gains and losses on available-for-sale securities, cash flow hedging activities and the additional minimum liability on employee supplemental retirement plans. Adjustments to adopt SFAS 158 in 2006, were included at December 31, 2006 as components of accumulated other comprehensive income only. Changes in accumulated other comprehensive income (loss) and total comprehensive income were as follows for each of the three years ended December 31, 2007 (in thousands):

										Accumulated
	Available-			Cash			Supplemental			Other					Total
	for-sale			flow			Retirement			Comprehensive			Net		Comprehensive
	securities			hedges			Plans			Income (Loss)			Income		Income
Balance, December 31, 2004	$	2,240		$	898			(2,489	)	$	649
Net change		(2,240	)		4,454			650			2,864		$	230,158	$	233,022
Balance, December 31, 2005		—			5,352			(1,839	)		3,513
Net change		—			(10,115	)		2,195			(7,920	)	$	285,195	$	277,275
Incremental impact of adopting SFAS 158		—			—			(6,141	)		(6,141	)
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	)

Note 17. Earnings per share of capital

The following table sets forth the computation of earnings per share¹ (dollars in thousands except per share data):

	December 31,
	2007			2006			2005
Net income before cumulative effect of change in accounting principal	$	323,105		$	285,195		$	229,049
Cumulative effect of change in accounting principle		—			—			1,109
Net income available to stockholders	$	323,105		$	285,195		$	230,158
Weighted average shares of capital		39,178			37,879			36,591
Less: Mandatorily redeemable capital stock		(1,463	)		(509	)		(427	)
Average number of shares of capital used to calculate earnings per share		37,715			37,370			36,164
Earnings per share of capital before cumulative effect of change in accounting principle	$	8.57		$	7.63		$	6.33
Cumulative effect of change in accounting principle		—			—			0.03
Net earnings per share of capital	$	8.57		$	7.63		$	6.36

¹ Basic and diluted earnings per share of capital are the same. The FHLBNY has no dilutive potential common shares or other common stock equivalents.

199

Federal Home Loan Bank of New York
Notes to Financial Statements

Note 18. 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 substantially 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. As a result, disclosure of the accumulated benefit obligations, projected benefit obligations, plan assets, and the components of annual pension expense attributable to the Bank are not made.

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” or “BEP plan”) 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 thrift component of the BEP plan is a supplemental defined contribution plan, which consists of the accumulated compensation deferrals and accrued interest on the deferrals. The BEP is an unfunded plan.

The FHLBNY offers a Postretirement Health Benefit Plan for retirees. The Postretirement Health Benefit Plan is an unfunded plan.

The Bank adopted the provisions of SFAS 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans” as of December 31, 2006. The incremental impact in 2006 of the adoption was an increase of $6.1 million to pension liabilities and an offsetting decrease in accumulated other comprehensive income.

Retirement Plan Expenses — Summary

The following table presents employee retirement plan expenses for the years ended (in thousands):

	December 31,
	2007		2006		2005
Defined Benefit Plan	$	6,006	$	5,536	$	6,593
Benefit Equalization Plan (Defined Benefits)		1,908		1,260		1,975
Defined Contribution Plan and BEP Thrift		1,346		1,141		1,072
Postretirement Health Benefit Plan		2,377		1,830		1,625
Total retirement plan expenses	$	11,637	$	9,767	$	11,265

200

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,
	2007			2006
Accumulated benefit obligation	$	11,005		$	9,259
Effect of future salary increase		4,026			2,321
Projected benefit obligation		15,031			11,580
Unrecognized prior service cost		666			282
Unrecognized net (loss)		(5,396	)		(3,123	)
Accrued pension cost	$	10,301		$	8,739

Components of the projected benefit obligation for the Bank’s BEP plan were as follows (in thousands):

	December 31,
	2007			2006
Projected benefit obligation at the beginning of the year	$	11,580		$	13,386
Service		626			388
Interest		880			604
Benefits paid		(346	)		(346	)
Actuarial loss/(gain)		2,786			(2,234	)
Plan amendments		(495	)		—
Change in discount rate		—			(218	)
Projected benefit obligation at the end of the year	$	15,031		$	11,580

The measurement date used to determine current period projected benefit obligation for the BEP plan was December 31, 2007.

Amounts recognized in the Statements of condition for the Bank’s BEP plan were as follows (in thousands):

	December 31,
	2007			2006
Unrecognized (gain)/loss	$	5,396		$	3,123
Prior services cost		(666	)		(282	)
Change in estimate		—			(876	)
Accumulated other comprehensive loss	$	4,730		$	1,965

201

Federal Home Loan Bank of New York
Notes to Financial Statements

Changes in the BEP plan assets were as follows (in thousands):

	December 31,
	2007			2006
Fair value of the plan assets at the beginning of the year	$	—		$	—
Employer contributions		346			346
Benefits paid		(346	)		(346	)
Fair value of the plan assets at the end of the year	$	—		$	—

Components of the net periodic pension cost for the defined benefit component of the BEP, an unfunded plan, were as follows (in thousands):

	Years ended December 31,
	2007			2006			2005
Service cost	$	626		$	388		$	526
Interest cost		880			604			676
Amortization of unrecognized prior service cost		(112	)		(50	)		(50	)
Amortization of unrecognized net loss		514			318			823
Net periodic benefit cost	$	1,908		$	1,260		$	1,975

Other changes in benefit obligations recognized in Accumulated other comprehensive income were as follows (in thousands):

	December 31, 2007
Net loss (gain)	$	2,786
Prior service cost (benefit)		381
Amortization of net loss (gain)		(514	)
Amortization of prior service cost (benefit)		112
Amortization of net obligation		—
Total recognized in other comprehensive income		2,765
Total recognized in net periodic benefit cost and other comprehensive income	$	4,673

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 Accumulated other comprehensive income into net periodic benefit cost over the next fiscal year are shown in the table below (in thousands):

	December 31, 2007
Expected amortization of net (gain)/loss	$	463
Expected amortization of prior service cost/(credit)	$	(143	)
Expected amortization of transition obligation/(asset)	$	—

202

Federal Home Loan Bank of New York
Notes to Financial Statements

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):

	2007			2006			2005
Discount rate *		6.37	%		5.65	%		5.50	%
Salary increases		5.50	%		5.50	%		5.50	%
Amortization period (years)		8			8			7
Benefits paid during the year	$	(346	)	$	(346	)	$	(341	)

* The discount rate was based on the Citigroup Pension Liability Index at November 30, 2007, and adjusted by the change in Moody’s Aa corporate bond rate from November 30, 2007 to December 31, 2007.

Future BEP plan benefits to be paid were estimated to be as follows (in thousands):

Years	Payments
2008	$	416
2009		480
2010		569
2011		772
2012		829
2013-2017		5,490
Total	$	8,556

The net periodic benefit cost for 2008 is expected to be $1.9 million.

203

Federal Home Loan Bank of New York
Notes to Financial Statements

Postretirement Health Benefit Plan

The FHLBNY has a postretirement health benefit plan for retirees. Assumptions used in determining the accumulated postretirement benefit obligation (“APBO”) included a discount rate of 6.37%. The effect of a percentage point increase in the assumed healthcare trend rates would be an increase in postretirement benefit expense of $150.1 thousand and in APBO of $1.3 million. The effect of a percentage point decrease in the assumed healthcare trend rates would be a decrease in postretirement benefit expense of $238.3 thousand and in APBO of $2.3 million. 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, 2007 and 2006 were (in thousands):

	December 31,
	2007			2006
Accumulated postretirement benefit obligation at the beginning of the year	$	14,577		$	10,368
Service cost		727			814
Interest cost		903			748
Actuarial loss		2,574			773
Benefits paid, net of participants’ contributions		(381	)		(292	)
Change in plan assumptions		(812	)		2,166
Change in plan provisions		(4,479	)		—
Accumulated postretirement benefit obligation at the end of the year		13,109			14,577
Unrecognized net gain		—			—
Accrued postretirement benefit cost	$	13,109		$	14,577

Changes in postretirement health benefit plan assets were (in thousands):

	December 31,
	2007			2006
Fair value of plan assets at the beginning of the year	$	—		$	—
Employer contributions		381			292
Benefits paid, net of participants’ contributions and subsidy received		(381	)		(292	)
Fair value of plan assets at the end of the year	$	—		$	—

Amounts recognized in Accumulated comprehensive income for the Bank’s postretirement benefit obligation were (in thousands):

	December 31,
	2007			2006
Prior service cost/(credit)	$	(4,297	)	$	—
Net loss/(gain)		4,654			3,820
Accrued pension cost	$	357		$	3,820

204

Federal Home Loan Bank of New York
Notes to Financial Statements

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 Accumulated other comprehensive income into net periodic benefit cost over the next fiscal year are shown in the table below (in thousands);

	December 31, 2007
Expected amortization of net (gain)/loss	$	265
Expected amortization of prior service cost/(credit)	$	(731	)
Expected amortization of transition obligation/(asset)	$	—

Components of the net periodic benefit cost for the postretirement health benefit plan were (in thousands):

	Years ended December 31,
	2007			2006		2005
Service cost (benefits attributed to service during the period)	$	727		$	814	$	505
Interest cost on accumulated postretirement health benefit obligation		903			748		546
Amortization of loss		319			268		574
Additional gain on recognition of plan amendment		611			—		—
Amortization of prior service cost/(credit)		(183	)		—		—
Net periodic postretirement health benefit cost	$	2,377		$	1,830	$	1,625

Other changes in benefit obligations recognized in Accumulated other comprehensive income were as follows (in thousands):

	December 31, 2007
Net loss (gain)	$	1,763
Prior service cost (benefit)		(4,479	)
Amortization of net loss (gain)		(319	)
Amortization of prior service cost (benefit)		(428	)
Amortization of net obligation		—
Total recognized in other comprehensive income		(3,463	)
Total recognized in net periodic benefit cost and other comprehensive income	$	(1,086	)

The measurement date used to determine current year’s benefit obligation was December 31, 2007.

Key assumptions and other information to determine current year’s obligation for the FHLBNY’s postretirement health benefit plan were as follows:

	2007		2006		2005
Weighted average discount rate at the end of the year		6.37%		5.65%		5.50%
Health care cost trend rates:
Assumed for next year		7.00%		7.00%		8.00%
Ultimate rate		4.50%		4.50%		4.50%
Year that ultimate rate is reached		2016		2016		2010
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

205

Federal Home Loan Bank of New York
Notes to Financial Statements

The discount rate was based on the Citigroup Pension Liability Index at November 30, 2007, and adjusted by the change in Moody’s Aa corporate bond rate from November 30, 2007 to December 31, 2007.

Future postretirement benefit plan expenses to be paid were estimated to be as follows (in thousands):

Years	Payments
2008	$	419
2009		505
2010		598
2011		663
2012		739
2013-2017		4,765
Total	$	7,689

The Bank’s postretirement health benefit plan accrual for 2008 is expected to be $998.0 thousand.

Note 19. Derivatives

General – The FHLBNY may enter into interest-rate swaps, swaptions, and interest-rate cap and floor agreements (collectively, derivatives) to manage its exposure to changes in interest rates. The FHLBNY may 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; by acting as an intermediary; or by designating the derivative as a 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.

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 rules of SFAS 133; it is, however, an acceptable hedging strategy under the FHLBNY’s risk management program. These strategies also comply with Finance Board’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, consistent with Finance Board’s regulations, enters into derivatives only to reduce 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 necessarily qualify for hedge accounting under SFAS 133 accounting rules. 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.

206

Federal Home Loan Bank of New York
Notes to Financial Statements

Hedging activities

Consolidated Obligations – The FHLBNY manages the risk arising from changing market prices and volatility of a consolidated obligation by matching the cash inflow 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 simultaneously enters 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 SFAS 133. In this typical transaction, the FHLBank pays a variable cash flow that closely matches the interest payments it receives on short-term or variable- rate advances. This intermediation between the capital and swap markets permits 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.

Advances – With the issuance of a putable advance (also referred to as convertible advance), 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, or to terminate the advance and extend additional credit on new terms. The FHLBNY may hedge a convertible advance by entering into a cancelable derivative where the FHLBNY pays fixed and receives variable. This type of hedge is treated as a fair value hedge under SFAS 133. The swap counterparty can cancel the derivative on the put date, which would normally occur in a rising rate environment, and the FHLBNY can terminate the advance and extend additional credit 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 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 advances) that members may prepay without a prepayment fee, it usually finances such advances with callable debt.

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 Board 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.

207

Federal Home Loan Bank of New York
Notes to Financial Statements

Firm Commitment Strategies – Prior to the fourth quarter of 2005, the FHLBNY designated the mortgage loan delivery commitment as a hedge of the firm commitment. Beginning with that quarter, the FHLBNY no longer applied hedge accounting to these delivery commitments. Instead, the FHLBNY records the fair value of the mortgage loan delivery commitment on the balance sheet with an offset to current period earnings.

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.

Investments – The FHLBNY invests in mortgage and residential asset-backed securities, mortgage-backed securities and mortgage loans held-for-portfolio, U.S. agency securities and the taxable portion of state or local housing finance agency securities. The interest rate and prepayment risks associated with these investment securities are managed through debt issuance.

Forward Settlements – There were no forward settled securities at December 31, 2007 or at December 31, 2006.

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 swap market. The derivatives used in intermediary activities do not qualify for SFAS 133 hedge accounting treatment 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 $70.0 million and $50.0 million as of December 31, 2007 and 2006. Fair values of derivatives which the Bank acted as an intermediary were not material at December 31, 2007 and 2006. 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 — The notional principal of derivatives designated as economic hedges was $1.5 billion and $175.0 million at December 31, 2007 and 2006. Fair values of derivatives designated as economic hedges was $5.5 million in unrealized gain at December 31, 2007, and de minimis at December 31, 2006.

The FHLBNY is not a derivatives dealer and does not trade derivatives for short-term profit.

208

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 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.

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 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, 2007 and 2006, the Bank’s maximum credit risk, as defined above, was approximately $70.3 million and $224.8 million without recognition of collateral held by the FHLBNY. These totals included $53.0 million and $242.8 million of net accrued interest receivable. In determining maximum credit risk, the FHLBNY considers accrued interest receivables and payables, and the legal right to offset assets and liabilities by counterparty. Exposure to counterparties with a double-A rating was $69.5 million, or 98.9% of aggregate exposure. The remaining exposure was to members. The Bank held $41.3 million and $124.0 million in cash as collateral as of December 31, 2007 and 2006. Based on credit analyses and collateral requirements, the management of the FHLBNY does not anticipate any credit losses on its derivative agreements.

209

Federal Home Loan Bank of New York
Notes to Financial Statements

The following table represented outstanding notional balances and estimated fair values of the derivatives outstanding at December 31, 2007 and 2006 (in thousands):

	December 31,
	2007					2006
			Estimated					Estimated
	Notional		Fair Value			Notional		Fair Value
Interest rate swaps
Fair value	$	81,766,313	$	(1,243,427	)	$	76,125,220	$	(183,808	)
Cash flow		127,500		(177	)		—		—
Economic		1,538,100		5,454			175,000		(253	)
Interest rate caps/floors
Economic-fair value changes		1,157,694		2			1,237,694		—
Mortgage delivery commitments (MPF)
Economic-fair value changes		1,351		5			9,497		(35	)
Other
Intermediation *		70,000		22			50,000		3
Total	$	84,660,958	$	(1,238,121	)	$	77,597,411	$	(184,093	)
Total derivatives, excluding accrued interest			$	(1,238,121	)			$	(184,093	)
Accrued interest				238,657					301,253
Net derivative balance			$	(999,464	)			$	117,160
Net derivative asset balance			$	70,278				$	224,775
Net derivative liability balance				(1,069,742	)				(107,615	)
Net derivative balance			$	(999,464	)			$	117,160

* Classified as economic.

Net realized and unrealized gains and losses on derivatives and hedging activities

In accordance with SFAS 133, the FHLBNY recorded the following net realized and unrealized gains and losses on derivatives and hedging activities (in thousands):

	Years ended December 31,
	2007			2006			2005
Earnings impact of derivatives and hedging activities gain (loss):
Fair value changes-interest rate swaps	$	5,919		$	3,150		$	(665	)
Fair value changes-options		(2,611	)		(2,101	)		(10,481	)
Net interest accruals-options		3,630			7,862			269
Fair value changes MPF delivery commitments-economic hedges		(171	)		22			(582	)
Fair value changes-economic hedges*		9,695			163			1,509
Net interest accruals-economic hedges*		1,894			580			484
Net impact on derivatives and hedging activities	$	18,356		$	9,676		$	(9,466	)

* Economic hedges include intermediation and swaps not qualifying for hedge accounting under SFAS 133.

Prior period interest accruals associated with hedges are allocated by category in the table above to conform to current period classification to more precisely match gains and losses from hedging activities. This reclassification has no impact on the recorded Net realized and unrealized gain (loss) on derivatives and hedging activities.

210

Federal Home Loan Bank of New York
Notes to Financial Statements

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). Ineffectiveness from hedges designated as cash flow hedges was inconsequential for all periods reported.

Amortization of basis resulting from modified advance hedges amounted to gains of $1.0 million, $2.1 million, and $3.6 million for the years ended December 31, 2007, 2006 and 2005.

Cash Flow hedges

There were no material amounts for the years ended December 31, 2007, 2006 and 2005 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 balances in accumulated other comprehensive income from cash flow hedges represented net unrealized losses of $30.2 million and $4.8 million at December 31, 2007 and 2006. Over the next 12 months, it is expected that about $4.3 million in net losses recorded in accumulated other comprehensive income at December 31, 2007 will be recognized in earnings. The remaining amount, representing unrealized losses of $25.9 million, are expected to be recognized as losses over the next 10 years. At December 31, 2007, the notional amount outstanding as cash flow hedges was $127.5 million. The maximum length of time over which the Bank’s hedged its exposure at December 31, 2007 to the variability in future cash flows for forecasted transactions was three months.

Note 20. Estimated fair values

The following estimated fair value amounts have been determined by the FHLBNY using available market information and the FHLBNY’s judgment of appropriate valuation methods. These estimates were based on pertinent information available to the FHLBNY as of December 31, 2007 and 2006. Although the FHLBNY uses its judgment in estimating the fair values of these financial instruments, there are inherent limitations in any estimation technique or valuation methodology. For example, 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. Therefore, these estimated fair values are not necessarily indicative of the amounts that would be realized in current market transactions. The Fair Value Summary Tables 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.

The Bank has not early adopted SFAS 157, “Fair Value Measurements.”

Cash and due from banks

The estimated fair value approximates the recorded book balance.

Interest-bearing deposits and Federal funds sold

To estimate the fair values, the cash flows are discounted using the appropriate market rates for the applicable maturity.

211

Federal Home Loan Bank of New York
Notes to Financial Statements

Investment securities

The estimated fair value is derived from an external pricing service, excluding accrued interest, as of the last business day of the period.

Advances and other loans

The FHLBNY determines the estimated fair value of advances with fixed rates and advances with complex floating rates by calculating the present value of expected future cash flows from the advances and excluding amounts for accrued interest receivable. The discount rates used in these calculations are the replacement advance rates for advances with similar terms. Following the Finance Board’s advances regulations, advances with a maturity and repricing period greater than six months require a prepayment fee sufficient to make the FHLBNY financially indifferent to the borrower’s decision to prepay the advances. Therefore, the estimated fair value of advances does not assume prepayment risk.

Mortgage loans

The estimated fair values for mortgage loans are determined based on quoted market prices of similar mortgage loans. These prices, however, can change rapidly based upon market conditions and are highly dependent upon the underlying prepayment assumptions.

Accrued interest receivable and payable

The estimated fair value approximates the recorded book value.

Derivative assets and liabilities

The FHLBNY estimated fair values of derivatives based on the present value of expected cash flows. The fair values are netted by counterparty where the legal right of offset exists. If these netted amounts are positive, they are classified as an asset and if negative, a liability.

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 off of the current consolidated obligations market curve. Their fair values are computed using standard option valuation models using the market data. The estimated cost of issuing debt includes non-interest selling costs.

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 FHLBank have 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.

212

Federal Home Loan Bank of New York
Notes to Financial Statements

The carrying values and estimated fair values of the FHLBNY’s financial instruments as of December 31, 2007, were as follows (in thousands):

	December 31, 2007
	Carrying		Net Unrealized			Estimated
Financial Instruments	Value		Gains/Losses			Fair Value
Assets
Cash and due from banks	$	7,909	$	—		$	7,909
Interest-bearing deposits		10,696,687		7,091			10,703,778
Federal funds sold		4,381,000		720			4,381,720
Available-for-sale securities		13,187		—			13,187
Held-to-maturity securities		10,284,754		(4,941	)		10,279,813
Advances		82,089,667		146,865			82,236,532
Loan to other FHLBanks		55,000		—			55,000
Mortgage loans, net		1,491,628		(5,620	)		1,486,008
Accrued interest receivable		562,323		—			562,323
Derivative assets		70,278		—			70,278
Other financial assets		1,624		—			1,624
Liabilities
Deposits		1,646,835		3			1,646,838
Consolidated obligations:
Bonds		66,325,817		197,907			66,523,724
Discount notes		34,791,570		6,914			34,798,484
Mandatorily redeemable capital stock		238,596		—			238,596
Accrued interest payable		655,870		—			655,870
Derivative liabilities		1,069,742		—			1,069,742
Other financial liabilities		28,941		—			28,941

The carrying values and estimated fair values of the FHLBNY’s financial instruments as of December 31, 2006, were as follows (in thousands):

	December 31, 2006
	Carrying		Net Unrealized			Estimated
Financial Instruments	Value		Gains/Losses			Fair Value
Assets
Cash and due from banks	$	38,850	$	—		$	38,850
Interest-bearing deposits		5,591,077		62			5,591,139
Federal funds sold		3,661,000		17			3,661,017
Held-to-maturity securities		11,251,098		(81,329	)		11,169,769
Advances		59,012,394		(55,450	)		58,956,944
Mortgage loans, net		1,483,419		(24,284	)		1,459,135
Accrued interest receivable		406,123		—			406,123
Derivative assets		224,775		—			224,775
Other financial assets		2,105		6			2,111
Liabilities
Deposits		2,389,528		1			2,389,529
Consolidated obligations:
Bonds		62,042,675		(184,723	)		61,857,952
Discount notes		12,191,553		(1,229	)		12,190,324
Mandatorily redeemable capital stock		109,950		—			109,950
Accrued interest payable		735,215		—			735,215
Derivative liabilities		107,615		—			107,615
Other financial liabilities		52,506		—			52,506

213

Federal Home Loan Bank of New York
Notes to Financial Statements

Note 21. Commitments and contingencies

As described in Note 13, 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 Board. Neither the FHLBNY nor any other FHLBank has ever had to assume or pay the consolidated obligation 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 FASB interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees Including Indirect Guarantees of Indebtedness of Others” (“FIN 45”), 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 in FIN 45. 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, 2007 and 2006.

Commitments for additional advances totaled approximately $19.5 billion and $21.2 billion as of December 31, 2007 and 2006. Commitments are conditional and were for periods of up to twelve months. Extension of credit under these commitments is subject to certain collateral requirements and other financial criteria at the time the commitment is drawn upon. 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 $442.3 million and $331.1 million as of December 31, 2007 and 2006, respectively and had original terms of up to fifteen years, with a final expiration in 2019. Standby letters of credit are fully collateralized at the time of issuance. Unearned fees on standby letters of credit are recorded in other liabilities and were not significant as of December 31, 2007 and 2006. 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.

Under the MPF program, the Bank was unconditionally obligated to purchase $1.4 million and $9.5 million in mortgage loans at December 31, 2007 and 2006. Commitments are generally for periods not to exceed 45 days. Under the provision of SFAS 149, “Amendment of Statement 133 on Derivatives Instruments and Hedging Activities,” such commitments entered into after June 30, 2003 were recorded as derivatives at their fair value. 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 $268.6 million and $223.9 million as of December 31, 2007 and 2006.

The FHLBNY generally executes derivatives with major banks and broker-dealers and generally 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 was required to pledge cash $396.4 million and $0 million to derivative counterparties at December 31, 2007 and 2006, and these amounts were reported in assets and included in interest-bearing deposits. At December 31, 2007 and 2006, 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 was mitigated by cash collateral of $41.3 million and $124.0 million delivered by derivatives counterparties and held by the Bank as interest-bearing deposit liabilities at December 31, 2007 and 2006.

214

Federal Home Loan Bank of New York
Notes to Financial Statements

The FHLBNY charged to operating expenses net rental costs of approximately $3.1 million, $3.1 million, and $3.0 million for years ended December 31, 2007, 2006 and 2005. 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 other commitments as of December 31, 2007 (in thousands):

	Payments due or expiration terms by period 1
	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	$	38,027,475	$	17,392,250	$	5,281,945	$	5,354,300	$	66,055,970
Mandatorily redeemable capital stock 1		127,010		94,629		15,281		1,676		238,596
Premise and equipment (rental and lease obligations)		2,992		4,589		4,346		12,047		23,974
Total contractual obligations		38,157,477		17,491,468		5,301,572		5,368,023		66,318,540
Other commitments
Standby letters of credit		408,009		4,882		20,928		8,443		442,262
Unused lines of credit and other conditional commitments		19,512,009		—		—		—		19,512,009
Consolidated obligation bonds/discount notes traded not settled		956,937		—		—		—		956,937
Firm commitment-advances		5,350		—		—		—		5,350
Open delivery commitments (MPF)		1,351		—		—		—		1,351
Total other commitments		20,883,656		4,882		20,928		8,443		20,917,909
Total obligations and commitments	$	59,041,133	$	17,496,350	$	5,322,500	$	5,376,466	$	87,236,449

¹ 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.

The FHLBNY does not anticipate any credit losses from its off-balance sheet commitments and accordingly no provision for losses is required.

215

Federal Home Loan Bank of New York
Notes to Financial Statements

Note 22. 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.

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.

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.

216

Federal Home Loan Bank of New York
Notes to Financial Statements

The top five advance holders at December 31, 2007 and 2006, and associated interest income for the years then ended are summarized as follows (in thousands):

	December 31, 2007
			Par		Percent of			Interest
	City	State	Advances		Total **			Income
Hudson City Savings Bank*	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 Lfe Insurance Company	New York	NY		4,555,000		5.7			81,724
Total			$	38,898,835		48.3	%	$	1,356,755

*	Officer of member bank also served on the Board of Directors of the FHLBNY.
**	Percentage calculated on par value of advances.

	December 31, 2006
			Par		Percent of			Interest
	City	State	Advances		Total **			Income
Hudson City Savings Bank*	Paramus	NJ	$	8,873,000		15.0	%	$	289,348
New York Community Bank*	Westbury	NY		7,878,877		13.4			315,626
HSBC Bank USA, National Association	New York	NY		5,009,503		8.5			260,749
Manufacturers and Traders Trust Company	Buffalo	NY		3,423,231		5.8			188,514
Astoria Federal Savings and Loan Assn.	Long Island City	NY		2,480,000		4.2			114,426
Total			$	27,664,611		46.9	%	$	1,168,663

*	Officer of member bank also served on the Board of Directors of the FHLBNY.
**	Percentage calculated on par value of advances.

The following table summarizes advance interest income from the top five members and non-members for the year ended December 31, 2005 (in thousands):

	December 31, 2005
			Par		Percent of			Interest
	City	State	Advances		Total **			Income
New York Community Bank*	Westbury	NY	$	6,476,364		10.5	%	$	263,161
HSBC Bank USA, National Association	New York	NY		5,008,817		8.1			167,798
Hudson City Savings Bank*	Paramus	NJ		4,300,000		7.0			139,769
North Fork Bank	Mattituck	NY		4,075,015		6.6			261,795
Manufacturers and Traders Trust Company	Buffalo	NY		3,653,730		5.9			138,552
Total			$	23,513,926		38.1	%	$	971,075

*	Officer of member bank also served on the Board of Directors of the FHLBNY.
**	Percentage calculated on par value of advances.

217

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% of the FHLBNY’s outstanding capital stock as of December 31, 2007 (shares in thousands):

		Number of		Percent of
Name of beneficial owner	Principal Executive Office Address	shares owned		Total Capital Stock
Hudson City Savings Bank *	West 80 Century Road, Paramus, NJ 07652		6,954		15.09	%
New York Community Bank *	615 Merrick Avenue, Westbury, NY 11590		4,115		8.93
HSBC Bank USA, National Association	452 Fifth Avenue, New York, NY 10018		3,735		8.11
Manufacturers and Traders Trust Company	One M & T Plaza, Buffalo, NY 14203		3,653		7.93
Metropolitan Life Insurance Company	200 Park Ave., New York, NY 10166		3,390		7.36
			21,847		47.42	%

218

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, 2007. Based on this evaluation, they concluded that as of December 31, 2007, 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.

219

ITEM 9B. OTHER INFORMATION

None.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

2007/2008 Board of Directors

The Bank’s Board of Directors (“Board”) is composed of (i) directors appointed by the Federal Housing Finance Board (“Finance Board”), and (ii) directors elected by the members (or selected by the Board to fill mid-term vacancies). Each director must be a citizen of the United States. Each appointed director must be a bona fide resident of the Bank’s district and each elected director must be an officer or director of a member of the Bank. Eligibility for appointment or election to the Board and continuing service on the Board is determined by Finance Board regulations. The term for each directorship is three years. Additionally, elected directors are subject to a limit on the number of consecutive terms they may serve. An elected director elected to three consecutive full terms on the Board is not eligible for election to a term that begins earlier than two years after the expiration of the third consecutive term.

The Board currently has six appointed director positions. An appointed director may not serve as an officer of any Federal Home Loan Bank or as a director or officer of any member of the Bank. In addition, appointed directors may not hold any financial interest in a member of the Bank. Beginning in 2007, Finance Board regulations require that the Boards of the Home Loan Banks submit names of potential appointive directors for the consideration of the Finance Board. The board of directors of the Home Loan Bank may consider any individual for inclusion on the list of names submitted to the Finance Board, provided that the board of directors has determined that the individual is eligible and well-qualified for an appointive directorship at the Bank. In this regard, the regulations also provide that any individual who seeks to be appointed to the board of a Home Loan Bank may submit to the Home Loan Bank an executed appointive director application form. However, the selection of the appointed directors remains solely within the discretion of the Finance Board.

As of January 1, 2008, the Board had ten elected director positions. Each year, the Finance Board designates the total number of elected directorships for the Bank and the number of directorships to be allocated to each of the states in the Bank’s district. The allocation is based primarily on the number of shares of capital stock required to be held by the members in each of the states in the Bank’s district as of December 31 of the preceding calendar year (the record date). Of the ten elected director positions, five are currently allocated to New York, four are allocated to New Jersey, and one is allocated to Puerto Rico and the U.S. Virgin Islands. (In 2007, the Finance Board, based on the relative number of shares of capital stock required to be held by the Bank’s members in 2006, reduced the amount of seats allocated to New York from six down to five effective January 1, 2008.)

The Bank holds elections each year for the elected director positions becoming vacant at the end of the year, with new terms beginning the following January 1. Institutions holding stock as of the record date which are located in the state electing a director are eligible to participate in the election process. For each elected director position to be filled, an eligible institution may cast one vote for each share of capital stock it was required to hold as of the record date (according to the requirements of the Bank’s capital plan), except that an eligible institution’s votes for each director position to be filled may not exceed the average number of shares of capital stock required to be held by all of the members in that state as of the record date. Interim vacancies in elected director positions are filled by the Board.

220

The following table sets forth information regarding each of the directors of the FHLBNY who served on the Board from January 1, 2007 through the date of this annual report on Form 10-K. Footnotes are used to identify those directors who: (i) were appointed to the Board by the Finance Board after January 1, 2007; or (ii) served on the Board throughout 2007 but not in 2008; or (iii) served on the Board throughout 2007 but only for a portion of 2008. The footnotes also identify those directors who served on the Board throughout 2007 and who were also either reelected by Bank members or reappointed by the Finance Board for a new term on the Board commencing January 1, 2008. After the table is biographical information for each director.

			Expiration	Elected to	Appointed
		Director	of Term	Represent	by
Name	Age	Since	December 31,	Members in	FHFB
George L. Engelke, Jr. (Past Chair - 2007) a	69	1999	2007	NY
David W. Lindstrom (Chair - 2008; Past Vice Chair - 2007)	68	2003	2008	NJ
Michael M. Horn (Vice Chair - 2008) b	68	2007	2009		x
Anne Evans Estabrook c	63	2004	2010		x
Joseph R. Ficalora d	61	2005	2010	NY
Carl A. Florio e	59	2006	2008	NY
James W. Fulmer	56	2007	2009	NY
José Ramon Gonzalez	53	2004	2009	PR & USVI
Ronald E. Hermance, Jr. d	60	2005	2010	NJ
Katherine J. Liseno	62	2004	2009	NJ
Kevin J. Lynch d	61	2005	2010	NJ
Joseph J. Melone b	76	2007	2009		x
Richard S. Mroz c	46	2002	2010		x
C. Cathleen Raffaeli b	51	2007	2008		x
Edwin C. Reed b	54	2007	2008		x
John M. Scarchilli d	56	2006	2010	NY
George Strayton	64	2006	2008	NY

a	Final term ended on December 31, 2007.
b	Appointed by the Federal Housing Finance Board to serve on the Board commencing April 12, 2007.
c	Reappointed by the Federal Housing Finance Board for a new term commencing January 1, 2008.
d	Reelected by the Bank’s membership for a new term commencing January 1, 2008.
e	Left office on January 22, 2008 upon termination of employment with Bank member First Niagara Bank; under Finance Board regulations, one must be an officer or director of a member in order to serve as an elected director on the Bank’s Board.

Mr. Engelke (Past Chair - 2007) has been Chairman of Astoria Financial Corporation and its subsidiary, Astoria Federal Savings and Loan Association, since 1997. He has also served as CEO of these entities since 1989. He served as President of these entities from 1989 through August, 2007. He is a member of the Board of Trustees of Long Island University, past chair and current member of the Board of Directors of the Community Preservation Corporation, and a member of the Advisory Board of Directors of Neighborhood Housing Services of New York City, Inc. Mr. Engelke is a member of the Board of Directors of the New York Bankers Association. In addition to holding member positions on various committees of America’s Community Bankers, now the American Bankers Association. Mr. Engelke previously served as a member of the Financial Accounting Standards Advisory Council.

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Mr. Lindstrom (Chair – 2008; Past Vice Chair – 2007) has been President, Chief Executive Officer, and Director of Franklin Bank of Woodstown, New Jersey since 1985. He has served on the New Jersey League of Community Banker’s (“New Jersey League”) Board of Governors and as its chair. He is currently a member of the New Jersey League’s Legislative and Regulatory Affairs Committee, and is a director of the League’s subsidiary Banker’s Cooperative Group, Inc. Mr. Lindstrom has served as a member of the Board of Directors of the Pentegra Defined Benefit Plan For Financial Institutions since 2005. He has also served on the Board of Directors of Pentegra Services, Inc. since 2005 and was the Chair of that Board from 2005 through 2007. He also served on the Board of the Pentegra Defined Contribution Plan For Financial Institutions from 1991 through 2004; he was the Chair of that Board from 1997 to 1998 and again from 2001 to 2004. In addition, he has served as a director and chairman of the Philadelphia Federal Reserve Thrift Council. Mr. Lindstrom is a member of the American Bankers Association (“ABA”) Government Relations Summit and also serves as chair of the ABA’s Directors Publication Advisory Group.

Mr. Horn (Vice Chair - 2008) has been a partner in the law firm of McCarter & English, LLP since 1990. He was a member of the New Jersey State Assembly, a member of the Assembly Banking Committee, Commissioner of Banking, New Jersey State Treasurer, on the Executive Commission on Ethical Standards both as its vice chair and chairman, appointed as a State Advisory Member of the Federal Financial Institutions Examination Council, and a member of the Municipal Securities Rulemaking Board. Mr. Horn is counsel to the New Jersey League of Community Bankers, Inc., chairman of the Bank Regulatory Committee of the Banking Law Section of the New Jersey State Bar Association, a member of the Board of Directors of the Community Foundation of New Jersey, and a Fellow of the American Bar Foundation.

Ms. Estabrook has been the owner of Elberon Development Co. in Cranford, NJ since 1984. It, together with its affiliated companies, own approximately two million square feet of rental property, primarily industrial. 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 boards of Summit Bank, United Jersey Bank, Constellation Bancorp, and the National State Bank of Elizabeth. 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. Ms. Estabrook currently is a member of the Board of Trustees of Catholic Charities, serves on its Executive Committee, and Chairs its Nominating Committee and Building and Facilities Committees. She is on the Board of Overseers of the Weill Cornell Medical School, is also on the Board of Trustees of Monmouth Medical Center, 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, she is on the Council of the New Jersey Performing Arts Center (NJPAC), and is a the Trustee for New Jersey Network (NJN).

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, New York Community Bank (“New York Community”) and 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.

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In addition to 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 and 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 RSI Retirement Trust and also of Peter B. Cannell. Mr. Ficalora has previously served as a member of the board 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 Queens College Foundation, the Queensborough Community College Fund, the New York Hall of Science, Flushing Cemetery, and Forest Park Trust and on the Advisory Council of the Queens Museum of Art.

Mr. Florio was, from July 2007 until January 2008, Senior Vice President of First Niagara Bank (“First Niagara”). Prior to that, from August 2006 until July 2007, he was Counsel to the President and CEO of First Niagara. Before that, from January 2005 until August 2006, Mr. Florio was Eastern New York Regional President of First Niagara. Before joining First Niagara, Mr. Florio was (from 1993 to 1996) the Chief Financial Officer and then (from 1996 through January 2005) the President and Chief Executive Officer of Hudson River Bank & Trust Co. Mr. Florio’s earlier work experience included several years as a partner in the accounting firm of Pattison, Koskey, Rath & Florio, where he specialized in auditing commercial banks and savings institutions throughout the Hudson Valley. Mr. Florio has also been active in many professional and community service organizations. He is currently a board member of Hudson River Bank & Trust Company Foundation, State University of New York at Albany Foundation, Fuller Road Management, Columbia-Greene Community College Foundation, Columbia Children’s Center, AAA Hudson Valley and ABMC. Mr. Florio is a Certified Public Accountant and holds a Bachelor of Science degree from the State University of New York at Albany.

Mr. Fulmer has been a director of The Bank of Castile since 1988, the Chairman and Chief Executive Officer of the institution since 1992, and Chairman, President and Chief Executive Officer since 2002. Mr. Fulmer has also been Vice Chairman of Tompkins Financial Corporation, the parent company of The Bank of Castile, since 2006. He is Chairman of the Board of Directors for Tompkins Insurance Agencies, Inc. and AM&M Financial Services, Inc., both subsidiaries of Tompkins Financial Corporation. In addition, Mr. Fulmer is a director of Mahopac National Bank, which is also a subsidiary of Tompkins Financial Corporation. 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, and the Genesee County Economic Development Center.   Mr. Fulmer currently serves on the Government Relations Committee of the American Bankers Association.  He is a former director of the Monroe Title Corporation and the Catholic Heath System of Western New York.  Mr. Fulmer 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. González has been President and Chief Executive Officer of Santander BanCorp and Banco Santander Puerto Rico since October of 2002. He 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, he 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 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.

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Mr. Hermance, Chairman, President and Chief Executive Officer of Hudson City Savings Bank, Paramus, New Jersey, has 18 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. Mr. Hermance also serves on the Board of the New Jersey League of Community Bankers.

Ms. Liseno has been President and Chief Executive Officer of Metuchen Savings Bank since 1979, having begun her career with the bank in 1962.  She is a member of the New Jersey League of Community Banker’s (“New Jersey League”) Legislative and Regulatory Affairs Committee and currently serves on the Board of the Thrift Institutions Community Investment Corp. (TICIC), a subsidiary of the New Jersey League.  She is also a trustee of the Savings Association Political Election Committee of the New Jersey League (SAPEC-NJ). She previously served on the New Jersey League’s Executive Committee and the Board of Bankers Cooperative Group, Inc., another subsidiary of the New Jersey League. In addition, she previously served as the past Chairman of the Board of Governors of the New Jersey League. She is also past president of the Central Jersey Savings League.

Mr. Lynch has been President and Chief Executive Officer of Oritani Savings 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 Savings 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 America’s Community Bankers. 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 Savings Bank in 1993, Mr. Lynch was Vice President and General Counsel of a leasing company and served as a director of Oritani Savings 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 April 1998 and, from 1990 until 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”). Until August of 2007, he served on the board of directors of BISYS. Previously, Mr. Melone served as a director of both The Equitable Companies and Equitable Life as well as subsidiaries Donaldson, Lufkin & Jenerette, Inc. and Alliance Capital Management Corporation. 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 Chairman of the Board of Horace Mann Educators, Inc. and has held 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.

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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 in New Jersey. 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 Atlantic City Hotel and Lodging Association and the New Jersey Conference of Mayors, and was former counsel to the Delaware River Bay Authority. He is also the solicitor for the Waterford Township, N.J., planning board. He is also a frequent commentator on Philadelphia radio and TV regarding election and political issues.

Ms. Raffaeli has been the President and Managing Director of the Hamilton White Group, LLC since 2002. The Hamilton White Group is an advisory firm dedicated to assisting companies grow their businesses and pursue new markets. 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.

Rev. Reed has served as CEO of the Greater Allen Development Corporation (“Allen Corporation”) since July 2007. The Allen Corporation, with funding of more than $31 million, annually rehabilitates communities by sponsoring affordable housing, developing and managing 14 commercial stores, operating a community service center and providing quality education for over 500 students. Rev. Reed was previously 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 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: Commission Member, New York City Traffic Mitigation Congestion Commission; Vice Chairman of Board of Trustees, Hofstra University; Chairman, Jamaica Business Resource Center; Treasurer, Outreach Project; Board Member, JP Morgan Chase Bank National Community Advisory Board; Board Member, Wheelchair Charities; Board Member, Allen Transportation; Board Member, Allen Women’s Resource Center; and Board Member, Allen Housing Development Corporation.

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Mr. Scarchilli has been President and Chief Executive Officer of Pioneer 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, a wholly owned subsidiary of Pioneer Savings Bank. He is also a Director of the New York Bankers Association as well as Chairman of that Association in 2008. He is a Director of the American Bankers Association, a national banking trade organization, and a member of their Professional Development/Education Committee. Mr. Scarchilli is also a member of the Banking Board 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. Mr. Scarchilli also serves on numerous not-for-profit boards in the local community. He is a Director of the Center for Economic Growth (CEG) and the Albany-Colonie Regional Chamber of Commerce. He is Co-Chair of Troy 20/20 and the annual Chairman of the Hudson Valley Community College President’s Circle. Additionally, he serves as a member of the Audit and Compliance Committee of Ordway Research Institute.

Mr. Strayton has been President and Chief Executive Officer of Provident Bank, an independent full service community bank with $2.8 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. Mr. Strayton joined Provident Bank in 1982 after 18 years with Bankers Trust Company. 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 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.

Executive Officers

The following sets forth the executive officers of the FHLBNY at December 31, 2007 and as of the date of this annual report on Form 10-K:

				Employee of
Executive officer	Position held	Age		Bank since
Alfred A. DelliBovi	President & Chief Executive Officer		61		11/30/92
James A. Gilmore	Senior Vice President & Head of Marketing & Sales		60		02/14/84
Robert R. Hans	Senior Vice President & Head of Technology & Support Services		58		01/03/72	*
Paul B. Héroux	Senior Vice President & Head of Member Services		49		02/27/84
Peter S. Leung	Senior Vice President & Chief Risk Officer		52		01/20/04
Patrick A. Morgan	Senior Vice President & Chief Financial Officer		67		02/16/99
Kevin M. Neylan	Senior Vice President of Strategic & Organizational Performance		50		04/30/01
Craig E. Reynolds	Senior Vice President & Head of Asset Liability Management		58		06/27/94

* Terminated 1/15/75; rehired 9/16/75

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 291 neighborhood-based 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. He also served on the Board of Directors of the Pentegra Defined Benefit Plan for Financial Institutions from 2001 through 2003. 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.

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James A. Gilmore was appointed Head of Marketing and Sales in April 2004. He joined the Bank in 1984 after almost ten years with the Federal Reserve Bank of New York. During his 23 years at the FHLBNY, Mr. Gilmore has served in several positions, most recently as Head of Marketing and Sales and the senior officer in charge of correspondent banking and Business Risk Team. Mr. Gilmore retired from the Bank in March 2008.

Robert R. Hans was named Head of Technology and Support Services in April of 2004; in this role, he is responsible for Information Technology and Corporate Services. Mr. Hans has been with the FHLBNY for more than 30 years, primarily in management positions in bank operations and technology.

Peter S. Leung joined the Bank as Chief Risk Officer in January 2004. Mr. Leung has more than nineteen 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 since 2001. Prior to that, Mr. Leung was the Deputy Director of the Office of Supervision with the Federal Housing Finance Board for 11 years and an examiner with the Federal Home Loan Bank of Seattle and the Office of Thrift Supervision for 4 years in the 1980’s. Mr. Leung is a CPA and has an MBA from City University, Seattle, Washington.

Patrick A. Morgan was appointed the Chief Financial Officer in April 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 US. 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.

Paul B. Héroux was appointed Head of Member Services in April 2004 and oversees several functions 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 is a graduate of St. Bonaventure University and a recent graduate of the Columbia Senior Executive Program. Prior to joining the Bank, Mr. Héroux held positions at Merrill Lynch & Co. and EF Hutton & Co.

Kevin M. Neylan was named Head of Strategy and Organizational Performance in April 2004. Mr. Neylan joined the FHLBNY in April 2001 and is responsible for developing and overseeing execution of the Bank’s business strategy. He is also responsible for leading the Bank’s human resources and legal functions. Mr. Neylan had approximately twenty years experience in the financial services industry prior to joining the Bank. He was a partner in the financial service consulting group of one of the Big Four accounting firms and also holds an M.S. in corporate strategy from the MIT Sloan School of Management.

Craig E. Reynolds was appointed the Head of Asset and Liability Management in April 2004. Prior to this position, he was 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 as the treasurer of a Saudi Arabian bank for over five years. He is a graduate of Manhattan College in the Bronx, New York.

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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, 2007 through the date of the filing of this annual report on Form 10-K, the members of the Audit Committee included, at various times: George L. Engelke, Jr., Carl A. Florio, Anne Evans Estabrook, Joseph R. Ficalora, José R. González, Michael M. Horn, Katherine J. Liseno, 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: Michael M. Horn (Acting Chair), Anne Evans Estabrook, Joseph R. Ficalora, José R. González, Katherine J. Liseno, 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, 2007 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 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

Introduction

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 our community-based member-lenders to serve their markets.

The Bank meets its mission by providing our members with access to economical wholesale credit and technical assistance through our credit products, mortgage finance programs, housing and community development programs and correspondent services intended to increase the availability of home finance to families of all incomes.

To achieve the foregoing, the Bank seeks to recruit and retain only competent and talented individuals to achieve the Bank’s mission, and to keep its work force at a level that will allow the Bank to effectively conduct its business. In this regard, as of December 31, 2007, the Bank was staffed by 246 employees, a relatively small workforce for a New York City-based financial institution that had, as of that date, $109.7 billion in assets. Therefore, all employees, and particularly senior and middle management, are frequently required to perform multiple tasks requiring multiple skills.

In addition, 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.

Compensation is a key element to attract, motivate and retain talent. It is the role of the Compensation and Human Resource Committee (“Committee” or “C&HR Committee”) of the Bank’s Board of Directors (“Board”) to:

(a) advise the Board on compensation, benefits, and human resources matters affecting Bank employees;

(b) 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

(c) 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 Committee-recommended and Board-approved Compensation Policy acknowledges the Bank’s business environment and the additional factors the Bank takes into account to remain competitive in its labor market. Those additional factors include but are not limited to:

Geographical area — 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;

Availability/demand for talent — e.g., Recruiting critical positions with high market demand typically requires a recruiting premium to entice an individual to change firms.

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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 a “variable” or “at risk” short-term incentive compensation plan); (b) retirement-related benefits (i.e., defined benefit, defined contribution, benefit equalization, and, as of July 1, 2008, nonqualified profit sharing plans); and (c) health and welfare programs and other benefits which are listed and explained in Section IV C below, comprehensively termed “Other Benefits”. These components make up the Bank’s compensation and benefits program. It is the role of the Committee to formulate the structure of the Bank’s compensation and benefits program and it is the role of management to administer that formulation. As changes are made to one element of the program mix, the Committee considers the impact on the other elements of the program.

This CD&A provides information related to the Bank’s compensation and benefits program provided to its named executive officers (or “NEOs”) for 2007 — 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 compensation and benefits program and the elements of compensation the Bank provides to its NEOs (and other employees).

I. Objectives of the Bank’s compensation and benefits program

The Bank’s compensation and benefits program consists of the following components: (a) cash compensation (i.e., base salary and a “variable” or “at risk” short-term incentive compensation plan); (b) retirement-related benefits (i.e., defined benefit, defined contribution, benefit equalization and, as of July 1, 2008, nonqualified profit sharing plans); and (c) health and welfare programs and other benefits.

On June 29, 2006, the Committee engaged a compensation and benefits consultant, Aon Consulting, Inc. (“Aon”). McLagan Partners, Inc. (“McLagan”), a subsidiary of Aon which focuses on executive compensation, was also involved in this engagement. (Aon had, previous to the above engagement, been retained by the Bank with regard to matters pertaining to retiree medical benefits reporting as well as a review of actuarial assumptions and valuations used by the administrator of the Bank’s Defined Benefit and Benefit Equalizations Plans. McLagan had also been previously engaged by the Bank for compensation consulting.) To assist the Committee’s review of the process and conclusions of Aon’s benefit and compensation study, the Committee engaged another compensation and benefits consultant, Pearl Meyers and Partners. Pearl Meyers was of the view that the compensation review process was very thorough, and that the Committee exercised its fiduciary duties throughout the process.

The purpose of the June 29, 2006 engagement was to retain an outside expert who would perform a broad and comprehensive review of all the Bank’s compensation and benefits programs. Specifically, the consultant was instructed to: (i) determine how the Bank’s programs and level of rewards were 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 ways to provide benefits. The consultant was instructed to keep in mind the Bank’s desire to attract, motivate and retain talented employees.

During the review process, Aon recommended regional and commercial banks as 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 this particular 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 these institutions. Aon also proposed that Bank Officer positions be matched one position level down versus commercial/regional banks.

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While “Wall Street” firms were considered, Aon recommended they not be used as benchmark peers because 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, while the Bank operates using a low risk/return business model. The Committee and the Board agreed with these recommendations.

A representative list of the commercial bank peer group is set forth in the table below.

Australia & New Zealand Banking Group
ABN AMRO
Allied Irish Bank
The Bank of Nova Scotia
Banco Santander
Bank of New York/Mellon
Bank of Tokyo — Mitsubishi UFJ
Bank of America
BMO Financial Group
BNP Paribas
Brown Brothers Harriman
The CIT Group
Cargill
CIBC World Markets
Citigroup
Citizens Bank
Commerzbank
Commonwealth Bank
of Australia
DVB Bank
DZ Bank
Deutsche Bank
Dresdner Kleinwort Wasserstein
Fifth Third Bank
Fortis Financial Services LLC
GE Commercial Finance
GMAC
HSBC Bank
HSBC Corporate, Investment Banking & Markets
Hypo Vereinsbank
ING Bank
JP Morgan Chase
KeyCorp
Lloyds TSB
M&T Bank Corporation
Mizuho Corporate Bank, Ltd.
National Australia Bank
Rabobank Nederland
Royal Bank of Canada
Royal Bank of Scotland/Greenwich Capital
Societe Generale
Standard Chartered Bank
Sumitomo Mitsui Banking Corporation
SunTrust Banks
TD Securities
Wachovia Corporation
Wells Fargo Bank
WestLB
Westpac Banking Corporation

Note: Benchmarking data from international banks only contained results from their New York operations.

Aon’s review was completed and presented to the Board on August 3, 2007.

The results of the study completed by Aon indicated that the value of the Bank’s compensation and benefits program was slightly above that of the regional/commercial banks. The results also showed that the Bank had a shortfall in current compensation as compared to regional/commercial banks but that the Bank’s higher retirement benefit value compensated for the shortfall.

Aon’s recommendations to the Board were based on the Committee’s direction that:

• 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.

As a result of the study and Aon’s recommendations, the Board directed that changes in the Bank’s retirement plan for certain active employees be made effective as of July 1, 2008 and changes be made to health and welfare plans effective as of January 1, 2008 for all active employees and certain employees who retire on or after January 1, 2008. In addition, in December of 2007, the Board approved a new nonqualified profit sharing plan for certain Bank employees effective July 1, 2008 which was also recommended by Aon. The changes to these plans as well as the addition of the new nonqualified profit sharing plan will be discussed below. (While Aon interviewed members of management and conducted focus sessions with various employees at all levels for information gathering purposes during the course of the study, the Committee and the Board acted on Aon’s recommendations independent of the Bank’s management and employees.)

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The objectives of the Bank’s compensation and benefits program are to help motivate employees to achieve superior results 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. The Bank’s program is, for the most part, applicable to all Bank employees, including NEOs. However, two major program elements are available to certain employees, including all eligible NEOs, as follows: i) participation in the short-term incentive compensation plan is offered to all exempt (non-hourly) employees (exempt employees constituted 81% of all Bank employees as of year-end 2007); and ii) non-qualified defined contribution and defined benefit plans are 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 Benefit Equalization Plan Committee (“BEP Committee”). In addition, on July 1, 2008, a new nonqualified profit sharing plan will become available for certain employees.

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 Committee. No member of Bank management serves on the Board or any Board committee. In turn, the Committee makes decisions, or provides recommendations for the Board to consider. Among the Committee’s main responsibilities are 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; and
4.	review and approve annually the Bank’s Incentive Compensation Plan (“Plan”), year-end Plan results and Plan award payouts.

The Board has delegated to the 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 Committee is available on the Bank’s web site at www.fhlbny.com.

The Bank’s Benefit Equalization Plan (“BEP”) was approved by the Board. A separate committee, called the BEP Committee (a management committee which must include at least one member of the Board and which presently included two members of the Board at year-end), administers various operational/ministerial matters pertaining to the BEP and a nonqualified profit sharing plan including, but not limited to, approving employees as participants of the BEP and approving the payment method of benefits. The BEP Committee is chaired by the Chair of the C&HR Committee; other members include another Board member who sits on the C&HR Committee, the Bank’s Chief Financial Officer, the Bank’s Director of Human Resources, and the Bank’s Executive Compensation and Benefits Officer. The BEP Committee reports its actions to the C&HR Committee by submitting its meeting minutes to the C&HR Committee on a regular basis for review.

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II. The Bank’s benefits and compensation program is designed to reward for performance and employee longevity and to compete with compensation programs offered by the Bank’s competitors

The Bank’s compensation and benefits program is designed to reward employees based on Bank and individual performance, and to attract, retain and motivate employees. The Bank also strives to ensure that its employees are compensated fairly and consistent with employees at the Bank’s peer group.

All exempt employees are eligible to receive annual incentive awards through participation in the short-term incentive compensation 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’s defined benefit and defined contribution plans are designed to reward employees for continued strong performance over their careers — the longer an employee works at the Bank, the greater the benefit the employee is likely to accumulate.

The Bank’s new nonqualified profit sharing plan, effective July 1, 2008, is designed to address a shortfall in compensation to certain highly compensated employees (including one NEO) who were not grandfathered in the current defined benefit plan formula and who would be compensated less than the median of the market.

The Bank is prohibited by law from offering equity-based compensation, and the Bank does not offer long-term incentives. However, many of the firms in the Bank’s peer group do offer these programs. The compensation and benefits program takes into account these other types of compensation by offering a defined benefit and defined contribution plan to help the Bank effectively compete for talent.

III. The elements of compensation

The Bank’s compensation and benefits program consists of the following components: (a) cash compensation (i.e., base salary and a “variable” or “at risk” short-term incentive compensation plan); (b) retirement benefits (i.e., defined benefit, defined contribution, benefit equalization and, as of July 1, 2008, nonqualified profit sharing plans); and (c) health and welfare programs and other benefits. The Summary Compensation Table included below provides information regarding reportable compensation for each of the Bank’s NEOs.

IV. Explanation of why the Bank chooses to pay each element of compensation

The Board approved a revised Compensation Policy in November 2007 which is 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 Compensation Policy include the following:

A focus on regional/commercial banks (refer to above list) as the primary peer group for benchmarking at the 50^th percentile of the market total compensation (base pay + incentive compensation) and discounted to account for the incremental value provided by the Bank’s benefit programs for establishing competitive pay levels.

Target pay at the middle of the regional/commercial bank (median) and the top quartile of the other FHLBanks (75th percentile) where regional/commercial bank data is not available.

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Retain an overall greater emphasis on base salary and benefits (versus annual and long-term incentives) than would be typical of regional/commercial banks.

Conduct detailed benchmarking for approximately one-third of the Bank’s Officer positions each year. (The Bank collects information regarding benchmarking from McLagan as well as a variety of other reputable sources.)

Bank Officer positions will be matched one position level down versus commercial/regional banks. For example, the Bank’s Chief Financial Officer position will be benchmarked against a divisional Chief Financial Officer position at commercial/regional banks.

Evaluate the value of total compensation delivered to employees including base salary, incentive compensation, retirement and health & welfare benefits in determining market competitiveness every third year. The next evaluation will begin three years after the Bank completes final implementation of Board — approved plan design changes.

Additional factors that the Bank will take into account 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/demand for talent — Recruiting critical positions with high market demand typically requires a recruiting premium to entice an individual to change firms.

The following is an explanation of why the Bank chooses to pay each element of compensation.

A. Cash Compensation

1. Base Salary

The goal of offering a competitive base salary is to make the Bank successful in attracting, motivating and retaining the talent needed to execute the Bank’s business strategies.

The Committee does not look at one element in the compensation and benefits program mix without considering the impact on the other elements.

In 2006, the Committee engaged Aon to review the Bank’s compensation and benefits program against the market. The purpose of the review was to: (i) determine how the Bank’s compensation and benefits programs and level of rewards were aligned with the market; (ii) ascertain the current and projected costs of each Bank benefit and identify ways to control costs; (iii) determine the optimal mix of compensation and benefits for the Bank; and (iv) determine if there were alternative ways to provide benefits.

During the review process, Aon identified regional and commercial banks as the Bank’s peer group for “benchmarking” purposes (that is, for purposes of comparing levels of benefits and compensation) in part because the Bank tended to hire employees from and lose employees to these institutions. While Wall Street firms were considered, Aon recommended they be rejected as benchmark peers because 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, while the Bank operates in a low risk/return environment. The Committee and the Board agreed with these recommendations.

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The Board adopted Aon’s recommendation to evaluate the value of total income delivered to employees including compensation, retirement and health & welfare benefits in determining market competitiveness every third year. The next evaluation will begin three years after the Bank completes final implementation of Board approved plan design changes.

In addition, a performance-based merit increase program exists for all employees that has an impact on base salary. 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 that year. For the year 2007, merit-related officer salary increases ranged from 3.5% to 5.5%, depending on the employee’s performance rating. These increases went into effect on January 1, 2008.

2. Short-Term Incentive 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 its mission. Aon reported in the course of its compensation and benefits study 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 as well as pose a challenge with respect to the retention of key employees.

Incentive Plan participants have two types of performance measures that impact their Incentive Plan award: i) Bankwide performance goals, and ii) individual performance goals (which can include work performed as part of a group) as established and measured through the annual performance evaluation process.

The Bank’s Incentive Plan Bankwide goals for 2007 were: i) Dividend Capacity; ii) Enterprise Risk Management; and iii) Housing and Community Development. The first and second goals were approved by the Board’s Executive Committee and the third goal was approved by the Board’s Housing Committee; all of the goals were reported to the Board. A description of these goals is set forth below:

i) Dividend Capacity: This measure is generally defined as net income divided by capital stock. The weight of this goal, in proportion to all of the Bankwide goals, is 45%.

ii) Enterprise Risk Management: Risk is measured and quantified in the following four areas: i) market risk, ii) credit risk, iii) derivatives risk, and iv) operations risk. The weight of this goal, in proportion to all of the Bankwide goals, is 45%. (The rationale for having the Dividend Capacity and Enterprise Risk Management goals weighted equally is to motivate management to take a balanced approach to managing risks and returns).

iii) Housing and Community Development: This goal has the purpose of ensuring the Bank’s achievement of mission-related activities having to do with community development. The weight of this goal, in proportion to all of the Bankwide goals, is 10%.

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.

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The Incentive Plan is administered by the Chief Executive Officer subject to any requirements for review and approval by the Committee that the Committee may establish. In all areas not specifically reserved by the Committee for its review and approval, decisions of the Chief Executive Officer or his designee concerning the Plan shall be binding on the Bank and on all Participants.

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. 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.

B. Retirement Benefits

The Bank’s qualified and non-qualified defined benefit and defined contribution plans are elements of the compensation and benefits program and are intended to help encourage the accumulation of wealth by employees over a long period of time. These benefits are also 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 will be amended for eligible Bank employees as of July 1, 2008 and, as a consequence, the terms of the non-qualified defined benefit plan for certain Bank employees will also change as of that date as the non-qualified defined benefit plan is dependent on the qualified plan.

i) Qualified Defined Benefit Plan

The Pentegra 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.

The DB Plan provides 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 IRC limit.

As of July 1, 2008, the DB Plan will continue to provide that same benefit to Bank participants who on that date have five years of DB Plan service and are age 50 years or older. These participants are identified herein as “Grandfathered”. For all other participants (identified herein as “Non-Grandfathered”), the DB Plan will provide a benefit of 2.0% (as opposed to 2.5% as previously provided) of a participant’s highest consecutive 5-year average earnings (as opposed to consecutive 3-year average earnings as previously provided), multiplied by the participant’s years of benefit service, not to exceed 30 years. The Normal Form of Payment will be 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. Also, cost of living adjustments (“COLAs”) will no longer be provided on future accruals (as opposed to a 1% simple interest COLA beginning at age 66 as previously provided).

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The table below summarizes the DB Plan changes that will affect the Non-Grandfathered employees commencing on July 1, 2008. For purposes of the following table, please note the following definitions:

A “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.

Current Plan - The Bank’s current DB Plan that will be amended as of July 1, 2008.

Grandfathered Employees - Employees age 50 or more with at least five years of service as of July 1, 2008.

Non-Grandfathered Employees - Employees who are not age 50 or more with at least five years of service as of July 1, 2008. (This term also includes employees who commence employment on or after July 1, 2008.)

Benefit Multiplier - The annuity paid from the Bank’s current 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 will change to 2.0.

Final Average Pay Period - Is that period of time that an employee’s salary is used in the calculation of that employee’s benefit. Until July 1, 2008, in the instant situation under the Current Plan, 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 determination. Beginning July 1, 2008, the Benefit Multiplier will be changed to 2.5% multiplied by the employee’s years of service up to July 1, 2008 and 2% multiplied by the employee’s years of service after July 1, 2008 (total service not to exceed thirty years). The result will be multiplied by the average of the employee’s five highest consecutive years of salary multiplied by that employee’s years of service.

Normal Form of Payment - The DB Plan must state the form of the annuity to be paid to the retiring employee. For unmarried retirees, the Current Plan provides 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 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 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 will provide 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”) - The Current Plan provides that, once a 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 will no longer be offered to Non-Grandfathered Employees on benefits accruing after that date.

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Early Retirement Subsidy - The Current Plan provides a subsidy or benefit enhancement for retirees that 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. Effective as of July 1, 2008, with respect to Non-Grandfathered Employees, if such 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 - The Current Plan provides that 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 enter 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.

		PLAN CHANGES AS OF
		07/01/2008 AFFECTING
	CURRENT PLAN AND	ONLY NON-
DEFINED BENEFIT PLAN	GRANDFATHERED	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 Current Plan Vesting or New Plan Vesting applied to employees participating in the DB Plan prior to July 1, 2008.

Earnings 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 2007 was $225,000.

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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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 BEP 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, as well as the nonqualified defined contribution portion of the BEP described below, are unfunded arrangements. However, the Bank has recently established grantor trusts to assist in financing the payment of benefits under these plans. The trusts were approved by the Committee in March of 2006 and established in June of 2007.

iii) Qualified Defined Contribution Plan

Bank employees who have met the eligibility requirements contained in the Pentegra 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 2007 was $15,500 for employees under the age of 50. An additional “catch up” contribution of $5,000 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

Employees 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 BEP Committee are eligible to participate in a supplemental non-qualified defined contribution plan (which is a separate portion of the aforementioned BEP). The defined contribution portion of the BEP ensures, among other things, that participants whose benefits under the DC Plan would otherwise be restricted under certain provisions of the IRC are 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. In 2007, the BEP Committee established a grantor trust to finance the BEP.

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v) Nonqualified Profit Sharing Plan

The Bank’s new nonqualified profit sharing plan, effective July 1, 2008, is designed to address a shortfall in compensation to certain highly compensated employees (including one NEO) who were not grandfathered in the current defined benefit plan formula and who would be compensated less than the median of the market.

To address this shortfall to certain highly compensated employees, Aon proposed, and the Board approved, the establishment of a nonqualified profit sharing plan. The nonqualified profit sharing plan will be effective July 1, 2008, which is the date that the current DB Plan formula will change.

All Non-Grandfathered employees who have five years of Bank service and are members of the BEP will be entitled to participate in the Bank’s Nonqualified Profit Sharing Plan (“Profit Sharing Plan”). The Profit Sharing Plan will credit participants with 8% of salary (base pay plus Incentive Plan award) conditioned on the Bank achieving its threshold targets for certain Bank-wide performance goals used in the Bank’s Incentive Plan which is to be held in a deferred account for participants and paid in a lump sum six months after termination of a participant’s employment.

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 includes the following significant benefits:

Medical and Dental

Employees can choose preferred provider or managed care medical and dental plan coverage. Both types of medical coverage include a prescription benefit. Employees contribute to cover a portion of the costs for this benefit.

As of January 1, 2008, employees can still choose between preferred provider or managed care coverage; however, employees can now choose to receive medical and dental coverage; or medical-only coverage; or dental-only coverage.

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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 Plan (the “Plan”) if they are at least 55 years old with 10 years of service at the Bank after age 45 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 Paid
Service	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 a compensation and benefits study conducted by Aon and the recommendations that resulted from such study, the Board directed that certain changes in the Plan be made, effective January 1, 2008, for certain active employees, to change the premium-payment requirements beginning at age 62 to a “Defined Dollar” basis, as defined below.

Employees who, on December 31, 2007, have 5 years of service and are age 60 or older are 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 have been 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 are 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%.

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The table below summarizes the Retiree Medical Benefits Plan changes that will affect Non-Grandfathered employees who retire on or after January 1, 2008. For purposes of the following table and the preceding discussion, 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.

	Current Provisions	New Provisions for Non-Grandfathered Retirees
Plan Type	Defined Benefit	Defined Dollar Plan
Underlying Medical Plan Formula	Current Active Plan for Pre-Age 65 Coverage	$45/month x Service > Age 45 for Pre-Age 65 Benefits per covered individual (3% COLA)
	Supplement Medicare for Post-Age 65 Coverage	$25/month x Service > Age 45 for Post- Age 65 Benefits per covered individual (3% COLA)
Employer		$0 for Pre-62
Cost Share Examples	0% for Pre-62	Pre-65/Post-65
10 Yrs>45	50% for Post-62	$5400/$3000
15 Yrs>45	62.5% for Post-62	$8100/$4500
20 Yrs>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.

Business Travel Accident Insurance

Business Travel & Accident insurance providing 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.

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Flexible Spending Accounts

Flexible spending accounts in accordance with IRC rules are provided to employees to allow tax benefits for medical, dependent, transit and parking expenses. 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, which provides tuition reimbursement, subject to the satisfaction of certain conditions, is available to all eligible employees.

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 Center Reimbursement

Fitness center reimbursement, up to $250 per year, is available to all employees.

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 2007 per NEO for all such expenditures.

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.

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The Bank’s compensation and benefits program consists of the following components: i) cash compensation (i.e., base salary and a “variable” or “at risk” short-term incentive compensation plan); ii) retirement benefits (i.e., defined benefit, defined contribution, benefit equalization, and as of July 1, 2008, nonqualified profit sharing plans); and iii) health and welfare programs and other benefits.

The Bank’s overall objective of the Bank’s compensation and benefits program is to motivate employees to achieve superior results 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 Committee considers the impact on the other elements of the mix. The Committee strives to maintain programs that keep the Bank within 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 2007.

THE COMPENSATION AND HUMAN RESOURCES COMMITTEE

José R. González,
Chairman
David W. Lindstrom
Katherine J. Liseno
Kevin J. Lynch
Richard S. Mroz
C. Cathleen Raffaeli

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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, 2007 and December 31, 2006 (in whole dollars):

Summary Compensation Table for Fiscal Years 2007 and 2006

													Change in
													Pension Value
											Non-Equity		and Nonqualified		All Other
											Incentive		Deferred		Compensation
Name and Principal							Stock		Option		Plan		Compensation		(3,4,5,6,7)
Position	Year		Salary		Bonus		Awards		Awards		Compensation		(1,2) (a,b)		(c,d,e,f,g,h,i)		Total
Alfred A. DelliBovi		2007	$	583,539		—		—		—	$	421,964	$	479,000	$	75,855	$	1,560,358
President & Chief Executive Officer (PEO)		2006	$	560,018		—		—		—	$	349,364	$	294,000	$	73,047	$	1,276,429
Peter S. Leung		2007	$	387,623		—		—		—	$	204,407	$	499,000	$	46,917	$	1,137,947
Senior Vice President,		2006	$	371,999		—		—		—	$	176,842	$	47,000	$	34,332	$	630,173
Chief Risk Officer
Paul B. Héroux		2007	$	275,616		—		—		—	$	145,342	$	171,000	$	43,425	$	635,383
Senior Vice President,		2006	$	264,507		—		—		—	$	125,742	$	98,000	$	37,880	$	526,129
Head of Member Services
Patrick A. Morgan		2007	$	292,259		—		—		—	$	154,118	$	279,000	$	31,184	$	756,561
Senior Vice President,		2006	$	280,479		—		—		—	$	133,335	$	211,000	$	28,793	$	653,607
Chief Financial Officer (PFO)
Craig E. Reynolds		2007	$	270,443		—		—		—	$	142,614	$	183,000	$	42,877	$	638,934
Senior Vice President,		2006	$	259,542		—		—		—	$	123,382	$	100,000	$	42,433	$	525,357
Head of Asset Liability

Footnotes for Summary Compensation Table for the Year Ending December 31, 2007

a	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. Reynolds — $93,000
b	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 C. Reynolds — $90,000
c	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.
d	For A. DelliBovi, P. Leung, P. Héroux, and C. Reynolds, 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, for P. Héroux $4,732, and for C. Reynolds $8,981).
e	For A. DelliBovi, P. Leung, P. Morgan, and C. Reynolds, includes this item paid by the Bank for all participating employees: payment of vision insurance premium.
f	For A. DelliBovi, includes value of leased automobile ($11,856).

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g	For P. Héroux, includes payment of this item paid by the Bank for all eligible officers: officer physical examination.
h	For A. DelliBovi, P. Héroux and C. Reynolds, includes this item paid by the Bank for all eligible officers: payment of term life insurance premium.
i	For P. Héroux, includes payment of this item paid by the Bank for all eligible employees: fitness center membership reimbursement.

Footnotes for Summary Compensation Table for the Year Ending December 31, 2006

1	Change in Pension Value for the Pentegra Defined Benefit Plan for Financial Institutions: A. DelliBovi — $109,000 P. Morgan — $78,000 P. Leung — $47,000 P. Héroux — $59,000 C. Reynolds — $82,000
2	Change in Pension Value for the Nonqualified Defined Benefit Portion of the Benefit Equalization Plan: A. DelliBovi — $185,000 P. Morgan — $133,000 P. Leung — not eligible to participate in the Nonqualified Benefit Portion of the Benefit Equalization Plan as of 12/31/06. P. Héroux — $39,000 C. Reynolds — $18,000
3	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.
4	For A. DelliBovi, P. Héroux and C. Reynolds, 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 $19,600, for P. Héroux $3,894 and for C. Reynolds $8,637), and payment of term life insurance premium.
5	For A. DelliBovi, P. Leung, P. Morgan and C. Reynolds, includes this item paid by the Bank for all participating employees: payment of vision insurance premium.
6	For A. DelliBovi, includes value of leased automobile ($12,432).
7	For C. Reynolds, includes payment of this item paid by the Bank for all eligible officers: officer physical examination.

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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 2007 (in whole dollars):

Grants of Plan-Based Awards for Fiscal Year 2007
															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)						Plan Awards						Stock		Underlying		Awards		Awards
Name	Date (1) (a)		Threshold		Target		Maximum		Threshold		Target		Maximum		or Units		Options		($/Sh)		($/Sh)
Alfred A. DelliBovi		01/18/07	$	128,379	$	233,416	$	443,490		—		—		—		—		—		—		—
Peter S. Leung		01/18/07	$	63,958	$	116,287	$	220,945		—		—		—		—		—		—		—
Paul B. Héroux		01/18/07	$	45,476	$	82,684	$	157,101		—		—		—		—		—		—		—
Patrick A. Morgan		01/18/07	$	48,223	$	87,678	$	166,588		—		—		—		—		—		—		—
Craig E. Reynolds		01/18/07	$	44,623	$	81,133	$	154,152		—		—		—		—		—		—		—

1	On this date, the Board of Directors’ Compensation and Human Resources Committee approved the 2007 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.

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, the ability to participate in a “variable” or “at-risk” short-term incentive compensation plan), (b) retirement related benefits (i.e., defined benefit and defined contribution plans) and (c) other benefits. 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 center reimbursement and a severance pay plan. An additional benefit offered to all officers, age 40 or greater, or who are at Vice President level or above, is a physical examination every 18 months. (Participation in non-qualified defined contribution and defined benefit plans are offered to employees at the rank of Vice President and above who exceed income limitations established by the Internal Revenue code for three out of five consecutive years and who are also approved for membership by the Bank’s Benefit Equalization Plan Committee.)

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The annual base salaries for the Named Executive Officers are as follows (whole dollars):

	2007		2008
Alfred A. DelliBovi	$	583,539	$	615,634
Patrick A. Morgan		292,259		305,411
Peter S. Leung		387,623		405,066
Paul B. Héroux		275,616		288,019
Craig E. Reynolds		270,443		282,613

See the “Grant of Plan-Based Awards” table for 2007 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 its mission. Aon reported in the course of its compensation and benefits study 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 as well as pose a challenge with respect to the retention of key employees.

Incentive Plan participants have two types of performance measures that impact on their Incentive Plan award: i) Bankwide performance goals, and ii) individual performance goals (which can include work performed as part of a group) as established and measured through the annual performance evaluation process.

The Bank’s Incentive Plan Bankwide goals for 2007 were: i) Dividend Capacity; ii) Enterprise Risk Management; and iii) Housing and Community Development. The first and second goals were approved by the Board’s Executive Committee and the third goal was approved by the Board’s Housing Committee; all of the goals were reported to the Board. A description of these goals is set forth below:

i) Dividend Capacity: This measure is generally defined as net income divided by capital stock. The weight of this goal, in proportion to all of the Bankwide goals, is 45%.

ii) Enterprise Risk Management: Risk is measured and quantified in the following four areas: i) market risk, ii) credit risk, iii) derivatives risk, and iv) operations risk. The weight of this goal, in proportion to all of the Bankwide goals, is 45%. (The rationale for having the Dividend Capacity and Enterprise Risk Management goals weighted equally is to motivate management to take a balanced approach to managing risks and returns).

iii) Housing and Community Development: This goal has the purpose of ensuring the Bank’s achievement of mission-related activities having to do with community development. The weight of this goal, in proportion to all of the Bankwide goals, is 10%.

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.

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The Incentive Plan is administered by the Chief Executive Officer subject to any requirements for review and approval by the Committee that the Committee may establish. In all areas not specifically reserved by the Committee for its review and approval, decisions of the Chief Executive Officer or his designee concerning the Plan shall be binding on the Bank and on all Participants.

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. 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.

Qualified Defined Contribution Plan

Bank employees who have met the eligibility requirements contained in the Pentegra 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 2007 was $15,500 for employees under the age of 50. An additional “catch up” contribution of $5,000 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 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 2007
		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		14.75	$	781,000			—
	Nonqualified Defined Benefit Portion of the Benefit Equalization Plan		14.75	$	2,307,000			—
Peter S. Leung	Pentegra Defined Benefit Plan for Financial Institutions Qualified Plan		10.50	$	312,000			—
	Nonqualified Defined Benefit Portion of the Benefit Equalization Plan (3)		10.50	$	448,000	(4)		—
Paul B. Héroux	Pentegra Defined Benefit Plan for Financial Institutions Qualified Plan		23.50	$	484,000			—
	Nonqualified Defined Benefit Portion of the Benefit Equalization Plan		23.50	$	395,000			—
Patrick A. Morgan	Pentegra Defined Benefit Plan for Financial Institutions Qualified Plan		8.50	$	556,000			—
	Nonqualified Defined Benefit Portion of the Benefit Equalization Plan		8.50	$	418,000			—
Craig E. Reynolds	Pentegra Defined Benefit Plan for Financial Institutions Qualified Plan		13.17	$	557,000			—
	Nonqualified Defined Benefit Portion of the Benefit Equalization Plan		13.17	$	391,000			—

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Pension benefit footnotes

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 12/31/2007.
3	Mr. Leung’s 10.5 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 3.9 years of credited service working for the Federal Home Loan Bank of New York.
4	Mr. Leung was not eligible to participate in 2006, however, once he became eligible to participate all of his previous years of service with Office of Thrift Supervision, Federal Home Loan Bank of Dallas and Federal Home Loan Bank of New York are included in the benefit calculation.

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 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.

The DB Plan provides 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 an annual IRS limit.

The IRC limit on earnings for 2007 was $225,000. Annual benefits provided under the DB Plan also are subject to IRC limits, which vary by age and benefit payment option selected. 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. Employees are vested at 20% per year beginning with the second full year of service and become fully vested at the completion of the sixth year of service.

Early retirement is provided for at age 45 and after with an actuarial reduction in benefits. Any participant that 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 (commonly referred to as the “rule of 70”), will realize a reduction of 1.5% to his/her early retirement benefit for each year under age 65. Without the “rule of 70” in place, a participant that retires early and elects to draw pension benefits prior to age 65 would have a 3% reduction in benefit for each year under age 65.

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 BEP 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 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.

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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 2007
	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	$	37,809	$	22,839	$	50,158			—	$	1,164,139
Patrick A. Morgan [3]		—		—		—			—		—
Paul B. Héroux	$	6,532	$	4,732	$	(964	)		—	$	156,114
Peter S. Leung	$	53,091	$	15,994	$	(2,098	)		—	$	66,987
Craig E. Reynolds	$	30,844	$	8,981	$	19,014			—	$	425,227

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 deferred compensation Benefit Equalization Plan (BEP).
2	These totals are also included in the “All Other Compensation” column of the Summary Compensation Table.
3	Patrick Morgan had not met the eligibility requirements to participate in this benefit as of 12/31/07.

Nonqualified Defined Contribution portion of the Benefit Equalization Plan

The nonqualified defined contribution portion of the Benefit Equalization Plan (“BEP”) ensures that participants whose benefits under the qualified defined contribution plan that would have been granted to them but for IRC limitations are made whole. BEP plan participants are able to make elective pre-tax deferrals that would have been made to the qualified plan but for the IRC limitation. As in the qualified defined contribution plan, the Bank matches 100% of up to the first 3% of the employee’s contribution through the third year of employment; 150% of up to the first 3% of contribution during the fourth and fifth years of employment; and 200% of up to the first 3% of contribution starting with the sixth year of employment. Investment earnings and losses on employee contributions, as well as Bank matching contributions that would have been received under the qualified defined contribution plan, but for IRC limitations, are provided under the BEP in the same manner as would have been provided under the qualified defined contribution plan, which is based on participants’ individual elections. Participant investment elections may be changed daily. Withdrawals prior to termination of employment are not allowed. Upon termination of employment, the total balance will be paid to participant in a lump sum.

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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.

253

The following table describes estimated severance payout information for each NEO assuming that severance would have occurred on December 31, 2007:

	Number of Weeks Used to		2007 Annual
	Calculate Severance Amount		Base Salary		Severance Amount
Alfred A. DelliBovi		36	$	583,539	$	403,989
Peter S. Leung		14	$	387,623	$	104,360
Patrick A. Morgan		34	$	292,259	$	191,092
Paul B. Heroux		36	$	275,616	$	190,811
Craig E. Reynolds		36	$	270,443	$	187,230

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, employees receiving severance benefits also receive, if applicable, life insurance for the severance period and a reimbursement covering the difference between their Consolidated Omnibus Budget Reconciliation Act (“COBRA”) cost and what they would have paid for health insurance as employees.

Life insurance premiums paid on behalf of employees on severance are paid monthly by the Bank, coinciding with the monthly invoice processing. Employees on severance who are covered under the Bank’s health insurance plan are reimbursed for health insurance expenses (COBRA), minus the cost of health insurance that they would have paid as an active employee. Reimbursements are made monthly coinciding with the monthly invoice processing and upon receipt of payment by the employee receiving severance.

Other Potential Post-Employment Payments

The Bank maintains no arrangements which contain “change in control” provisions.

254

The Bank has established a formal Director Compensation Policy governing compensation for Board meeting attendance. This policy, which is reviewed on an annual basis, has been established in accordance with the provisions of the Federal Home Loan Bank Act and related Federal Housing Finance Board regulations. The Bank Act and Finance Board regulations provide for strict annual limits (subject to adjustment by the Finance Board on an annual basis) on the total amount of compensation that can be paid to directors. Under the Bank’s Director Compensation Policy, fees can only be paid for attendance at Board meetings, and can not exceed the established annual compensation limits.

Below are tables summarizing the meeting fees established by the Bank and the annual compensation limits that were established by the Finance Board for 2007. Following these tables are tables summarizing the meeting fees established by the Bank and the annual compensation limits established by the Finance Board for 2008.

Director Meeting Fees — 2007 (In whole dollars)

Type of Meeting	Position	Meeting Fees
Board	Chairman	$3,800
Board	Vice Chairman	$3,000
Board	Director	$2,300

Director Annual Compensation Limits — 2007 (In Whole Dollars)

Position	Annual Limit
Chairman	$29,944
Vice Chairman	$23,955
Director	$17,967

Director Meeting Fees — 2008 (In Whole Dollars)

Type of Meeting	Position	Meeting Fees
Board	Chairman	$3,904
Board	Vice Chairman	$3,124
Board	Director	$2,343

Director Annual Compensation Limits — 2008 (In Whole Dollars)

Position	Annual Limit
Chairman	$31,232
Vice Chairman	$24,986
Director	$18,739

255

DIRECTOR COMPENSATION

The following table summarizes the compensation paid by the Bank to its Directors for the year ended December 31, 2007 (whole dollars):

									Change in Pension
									Value and
	Fees						Non-Equity		Nonqualified		All
	Earned or		Stock		Option		Incentive Plan		Deferred Compensation		Other
Name	Paid in Cash		Awards		Awards		Compensation		Earnings		Compensation		Total
George L. Engelke, Jr.	$	29,944		—		—		—		—		—	$	29,944
David W. Lindstrom		23,955		—		—		—		—		—		23,955
Anne E. Estabrook		17,967		—		—		—		—		—		17,967
Joseph R. Ficalora		17,967		—		—		—		—		—		17,967
Carl A. Florio		17,967		—		—		—		—		—		17,967
James W. Fulmer		17,967		—		—		—		—		—		17,967
José R. González		17,967		—		—		—		—		—		17,967
Ronald E. Hermance, Jr.		17,967		—		—		—		—		—		17,967
Michael M. Horn		17,967		—		—		—		—		—		17,967
Katherine J. Liseno		17,967		—		—		—		—		—		17,967
Kevin J. Lynch		17,967		—		—		—		—		—		17,967
Joseph J. Melone		16,100		—		—		—		—		—		16,100
Richard S. Mroz		17,967		—		—		—		—		—		17,967
C. Cathleen Raffaeli		17,967		—		—		—		—		—		17,967
Edwin C. Reed		17,967		—		—		—		—		—		17,967
John M. Scarchilli		17,967		—		—		—		—		—		17,967
George Strayton		17,967		—		—		—		—		—		17,967
	$	321,537											$	321,537

The annual compensation limits for members of the Board of Directors of each Federal Home Loan Bank were as follows in 2007: for the Chair — $29,944; for the Vice-Chair — $23,955; and for any other member of the Board — $17,967.

In addition, the Director Compensation Policy 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 Board

• 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

256

The following table, which is included here pursuant to FHFB regulations, includes information about reimbursed expenses for 2007 (whole dollars):

	Directors’ Expenses
	Reimbursed
Name	(Paid in Cash)
George L. Engelke, Jr.	$	8,126
David W. Lindstrom		8,624
Anne E. Estabrook		2,180
Joseph R. Ficalora		—
Carl A. Florio		3,614
James W. Fulmer		4,147
José R. González		14,989
Ronald E. Hermance, Jr.		—
Michael M. Horn		1,826
Katherine J. Liseno		1,372
Kevin J. Lynch		2,267
Joseph J. Melone		640
Richard S. Mroz		5,019
C. Cathleen Raffaeli		—
Edwin C. Reed		2,210
John M. Scarchilli		1,909
George Strayton		1,041
	$	57,964

Total expenses incurred by the FHLBNY for board expenses, including amounts reimbursed in cash to directors, totaled $183,000, $137,000, and $97,000 in 2007, 2006 and 2005.

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, 2007 through the date of this annual report on Form 10-K: David W. Lindstrom, Carl A. Florio, José R. González, Katherine J. Liseno, Kevin J. Lynch, Richard Mroz, 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 exist 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.

257

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, 2008	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		7,354		16.36	%
New York Community Bank *	615 Merrick Avenue, Westbury, NY 11590		4,092		9.11
Metropolitan Life Insurance Company	200 Park Ave., New York, NY 10166		3,548		7.89
Manufacturers and Traders Trust Company	One M & T Plaza, Buffalo, NY 14203		3,429		7.63
HSBC Bank USA, National Association	452 Fifth Avenue, New York, NY 10018		3,060		6.81
			21,483		47.80	%

		Number		Percent
	December 31, 2007	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		6,954		15.09	%
New York Community Bank *	615 Merrick Avenue, Westbury, NY 11590		4,115		8.93
HSBC Bank USA, National Association	452 Fifth Avenue, New York, NY 10018		3,735		8.11
Manufacturers and Traders Trust Company	One M & T Plaza, Buffalo, NY 14203		3,653		7.93
Metropolitan Life Insurance Company	200 Park Ave., New York, NY 10166		3,390		7.36
			21,847		47.42	%

*   An officer of this member bank also serves on the Board of Directors of the FHLBNY

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, 2007, 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		6,954		15.09	%
New York Community Bank	Joseph R. Ficalora	Westbury	New York		4,115		8.93
Astoria Federal Savings and Loan Assn.	George L. Engelke, Jr.	Lake Success	New York		2,015		4.37
Banco Santander Puerto Rico	José R. González	San Juan	Puerto Rico		646		1.40
First Niagara Bank	Carl A. Florio	Lockport	New York		522		1.13
Provident Bank	George Strayton	Montebello	New York		339		0.74
Oritani Savings Bank	Kevin J. Lynch	Washington	New Jersey		155		0.34
The Bank of Castile	James W. Fulmer	Castile	New York		31		0.07
Metuchen Savings Bank	Katherine J. Liseno	Metuchen	New Jersey		26		0.06
Franklin Bank	David W. Lindstrom	Woodstown	New Jersey		18		0.04
Pioneer Savings Bank	John M. Scarchilli	Troy	New York		15		0.03
					14,836		32.20	%

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.

258

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Transactions with Related Persons

The FHLBNY is a cooperative and the members own all of the stock of the FHLBNY. 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 elected by and from the membership. The remaining Directors are appointed by the Finance Board. 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 on 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. All loans extended by the FHLBNY to these members are on market terms that are no more favorable to them than the terms of comparable transactions with other members. 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 Footnote 10, “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 disclosure 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.

259

Director Independence

In General

During the period from January 1, 2007 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, 11 of whom were elected by the Bank’s member institutions and six of whom were appointed by the Federal Housing Finance Board (“Finance Board”). All of these 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, Finance Board 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 Board Regulations Regarding Independence

The Finance Board 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 Board 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 Board’s independence standards, regardless of whether they serve on the Audit Committee. From January 1, 2007 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 (the “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 appointed directors who served at any time during the period from January 1, 2007 through and including the date of this annual report on Form 10-K (Anne Evans Estabrook, Michael H. Horn, Joseph J. Melone, Richard S. Mroz, C. Cathleen Raffaeli and Edwin C. Reed) were independent.

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 elected directors, and has therefore concluded that none of the Bank’s elected directors who served at any time during the aforementioned period 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 elected 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.

260

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 elected director’s institution. It is possible that an elected director could satisfy this test on a particular day. However, because the amount of business conducted by an elected 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 elected 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 elected directors who served at any time as members of the Bank’s Audit Committee during the period from January 1, 2007 through and including the date of this annual report on Form 10-K (George L. Engelke, Jr., Joseph R. Ficalora, Carl A. Florio, 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 appointed directors who served at any time as members of the Bank’s Audit Committee during the period from January 1, 2007 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.

261

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, 2007, 2006 and 2005 (in thousands):

	2007		2006		2005
Audit Fees	$	1,163	$	1,342	$	1,057
Audit-related Fees		33		60		174
Tax Fees		—		—		29
All Other Fees		18		4		9
	$	1,214	$	1,406	$	1,269

Audit Fees

Audit fees relate to professional services rendered in connection with the audit of the FHLBNY’s annual financial statements, review of interim financial statements included in quarterly reports on Form 10-Q, and consultation services provided in connection with the FHLBNY’s registration with the Securities and Exchange Commission and other regulatory filings.

Audit-Related Fees

Audit-related fees primarily relate to consultation services provided in connection with the implementation of the requirements under Section 404 of the Sarbanes-Oxley Act, and consultation with respect to certain accounting and reporting standards.

Tax Fees

Consulting services relate to services provided with respect to the FHLBNY’s payroll tax withholding process.

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.

262

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 Statement and Supplementary Data.”
	3.	Exhibits

			Filed with
No.		Exhibit 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		1/29/2007
	4.01	Amended and Restated Capital Plan of the Bank		X
	10.01	Bank 2006 Incentive Compensation Plan* a				10-Q		000-51397		5/15/2006
	10.02	Bank 2007 Incentive Compensation Plan* a				10-Q		000-51397		5/11/2007
	10.03	2006 Director Compensation Policy a				10-Q		000-51397		5/15/2006
	10.04	2007 Director Compensation Policy a		X
	10.05	The Comprehensive Retirement Program a		X
	10.06	Bank Benefit Equalization Plan a		X
	10.07	Nonqualified Profit Sharing Plan a		X
	10.08	Bank Severance Pay Plan a		X
	10.09	Compensatory Arrangements for Named Executive Officers a		X
	10.10	Federal Home Loan Banks P&I Funding and Contingency Plan Agreement				8-K		000-51397		6/27/2006
	12.01	Computation of Ratio of Earnings to Fixed Charges		X
	31.01	Certification of the Registrant’s Chief Executive Officer, as required by Section 302 of the Sarbanes-Oxley Act of 2002		X
	31.02	Certification of the Registrant’s Chief Financial Officer, as required by Section 302 of the Sarbanes-Oxley Act of 2002		X
	32.01	Certification of Registrant’s Chief Executive Officer, as required by Section 906 of the Sarbanes-Oxley Act of 2002		X
	32.02	Certification of Registrant’s Chief Financial Officer, as required by 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 requested with respect to portions of this exhibit.
a	This exhibit includes a management contract, compensatory plan or arrangement required to be noted herein.

263

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 28, 2008

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	President and Chief Executive Officer	March 28, 2008
Alfred A. DelliBovi
(Principal Executive Officer)
/s/ Patrick A. Morgan	Senior Vice President and Chief	March 28, 2008
Patrick A. Morgan	Financial Officer
(Principal Financial Officer)
/s/ Backer Ali	Vice President and Controller	March 28, 2008
Backer Ali
(Principal Accounting Officer)
/s/ David W. Lindstrom	Chairman of the Board of Directors	March 28, 2008
David W. Lindstrom
/s/ Michael M. Horn	Vice Chairman of the Board of Directors	March 28, 2008
Michael M. Horn
/s/ Anne Evans Estabrook	Director	March 28, 2008
Anne Evans Estabrook
/s/ Joseph R. Ficalora	Director	March 28, 2008
Joseph R. Ficalora
/s/ James W. Fulmer	Director	March 28, 2008
James W. Fulmer

264

Signature	Title	Date
/s/ José Ramon González	Director	March 28, 2008
José Ramon González
/s/ Ronald E. Hermance, Jr.	Director	March 28, 2008
Ronald E. Hermance, Jr.
/s/ Katherine J. Liseno	Director	March 28, 2008
Katherine J. Liseno
/s/ Kevin J. Lynch	Director	March 28, 2008
Kevin J. Lynch
/s/ Joseph J. Melone	Director	March 28, 2008
Joseph J. Melone
/s/ Richard S. Mroz	Director	March 28, 2008
Richard S. Mroz
/s/ C. Cathleen Raffaeli	Director	March 28, 2008
C. Cathleen Raffaeli
/s/ Edwin C. Reed	Director	March 28, 2008
Edwin C. Reed
/s/ John M. Scarchilli	Director	March 28, 2008
John M. Scarchilli
/s/ George Strayton	Director	March 28, 2008
George Strayton

265

EXHIBIT INDEX

			Filed with
No.		Exhibit 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		1/29/2007
	4.01	Amended and Restated Capital Plan of the Bank		X
	10.01	Bank 2006 Incentive Compensation Plan* a				10-Q		000-51397		5/15/2006
	10.02	Bank 2007 Incentive Compensation Plan* a				10-Q		000-51397		5/11/2007
	10.03	2006 Director Compensation Policy a				10-Q		000-51397		5/15/2006
	10.04	2007 Director Compensation Policy a		X
	10.05	The Comprehensive Retirement Program a		X
	10.06	Bank Benefit Equalization Plan a		X
	10.07	Nonqualified Profit Sharing Plan a		X
	10.08	Bank Severance Pay Plan a		X
	10.09	Compensatory Arrangements for Named Executive Officers a		X
	10.10	Federal Home Loan Banks P&I Funding and Contingency Plan Agreement				8-K		000-51397		6/27/2006
	12.01	Computation of Ratio of Earnings to Fixed Charges		X
	31.01	Certification of the Registrant’s Chief Executive Officer, as required by Section 302 of the Sarbanes-Oxley Act of 2002		X
	31.02	Certification of the Registrant’s Chief Financial Officer, as required by Section 302 of the Sarbanes-Oxley Act of 2002		X
	32.01	Certification of Registrant’s Chief Executive Officer, as required by Section 906 of the Sarbanes-Oxley Act of 2002		X
	32.02	Certification of Registrant’s Chief Financial Officer, as required by 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 requested with respect to portions of this exhibit.
a	This exhibit includes a management contract, compensatory plan or arrangement required to be noted herein.

EX-4.01

Exhibit 4.01

As of January 22, 2008

AMENDED AND RESTATED

CAPITAL PLAN

of the

Federal Home Loan Bank of New York

FHLBNY Capital Plan 1-22-08

Table of Contents

Definitions				iii
1.	Overview				1
2.	The Capital Structure				2
	2.1	Authorized Stock			2
		2.1.1	Par Value		2
		2.1.2	Ownership of Retained Earnings		2
	2.2	Purchase, Redemption and Repurchase of Stock			2
		2.2.1	Purchase of Capital Stock		2
		2.2.2	Redemption of Capital Stock by Members		3
		2.2.3	Repurchase of Excess Stock by the FHLBNY		4
		2.2.4	Limitations on Redemptions and Repurchases		5
		2.2.5	Retirement of Redeemed and Repurchased Stock		6
		2.2.6	Transfer of Capital Stock		6
		2.2.7	Limitation on Converting or Exchanging Excess Stock as Between Subclasses		6
	2.3	Dividends			7
	2.4	Rights Upon Liquidation, Merger or Consolidation of the FHLBNY			7
		2.4.1	Liquidation of the FHLBNY		7
		2.4.2	FHLBNY Acquired by another Federal Home Loan Bank		7
		2.4.3	FHLBNY Acquires Other Federal Home Loan Bank		7
3.	Responsibilities of Directors and Management and Voting of Stock				8
	3.1	Responsibilities of Directors and Management			8
	3.2	Voting Rights			9
4.	Member Stock Purchase Requirements				10
	4.1	Membership Stock Purchase Requirement			10
	4.2	Activity-Based Stock Purchase Requirement			10
	4.3	Periodic Review of Capital Stock Purchase Requirements			11
	4.4	Member Compliance with Adjusted Requirements			12
5.	Capital Requirements of the FHLBNY				13
	5.1	Statutory Capital Requirements			13
		5.1.1	Total Capital Requirement		13
		5.1.2	Leverage Capital Requirement		13
		5.1.3	Permanent Capital Requirement		13
		5.1.4	FHFB Authority to Require More Capital		13
	5.2	Risk-Based Capital Requirement			13
		5.2.1	Credit Risk Capital Requirement		14
		5.2.2	Market Risk Capital Requirement		14
		5.2.3	Operations Risk Capital Requirement		15
6.	Reporting Requirements to the Finance Board				16
	6.1.	Changes in Membership			16

FHLBNY Capital Plan i 1-22-08

	6.2	Leverage and Risk Based Capital		16
	6.3	Voting Shares		16
7.	Termination of Membership in the FHLBNY			17
	7.1	Voluntary Withdrawal from Membership		17
		7.1.1	Written Notification	17
		7.1.2	Access to Benefits of Membership	17
		7.1.3	Finance Board Notification	17
		7.1.4	Finance Board Certification	17
		7.1.5	Disposition of Claims	17
		7.1.6	Effective Date of Withdrawal	18
	7.2	Involuntary Termination of Membership		18
		7.2.1	Written Notification	18
		7.2.2	Access to Benefits of Membership	18
		7.2.3	Disposition of Claims	18
	7.3	Merger or Consolidation of Members		19
		7.3.1	Termination of Charter and Stock Redemption Period	19
		7.3.2	Capital Stock Requirement of Surviving Member	19
	7.4	Merger or Consolidation of Member into a Member of another Federal Home Loan Bank or into a Nonmember		20
		7.4.1	General	20
		7.4.2	Disposition of Claims	20
		7.4.3	Acquiring Institution Applies for FHLBNY Membership	21
	7.5	Relocation of Principal Place of Business		21
		7.5.1	General	21
		7.5.2	Disposition of Claims	22
8.	The Transition Plan			23
	8.1	Transition Process		23
		8.1.1	Member Election	23
		8.1.2	Plan of Reorganization	26
		8.1.3	Post-Transition Stock Purchases	27
9.	Reviews of the FHLBNY’s Capital Plan			28
	9.1	Independent CPA Review		28
	9.2	NRSRO Review		28
	9.3	Internal Market Risk Model Review		28
	9.4	Internal Market Risk Model & Risk Management Procedure Approval by FHFB		28
	9.5	FHLBNY Determination regarding the Capital Plan		28
10.	Amendments to the Capital Plan and Notices			29
	10.1	Amendments to the Capital Plan		29
	10.2	Notices Relating to the Capital Plan		29
		10.2.1	Notices by the FHLBNY	29
		10.2.2	Notices to the FHLBNY	29
Appendix I — Member Stock Purchase Requirements				30
A.	Membership Stock Purchase Requirement			30
B.	Activity-Based Stock Purchase Requirement			31

FHLBNY Capital Plan ii 1-22-08

Definitions

For purposes of the Capital Plan, all capitalized terms used but not defined elsewhere have the meanings set forth below. In the Capital Plan unless the context otherwise requires, words describing the singular number include the plural and vice versa.

Activity-Based Stock means Capital Stock that is purchased and held by a Member to meet the Member’s Activity-Based Stock Purchase Requirement.

Activity-Based Stock Purchase Requirement means the requirement under which a Member must acquire and maintain a specific amount of Activity-Based Stock based on the specified value of certain transactions of the Member with the FHLBNY as described in Section 4.2 of the Capital Plan.

Acquired Member Assets or AMA means assets acquired by the FHLBNY from a Member through either a purchase or funding transaction under Part 955 of the Regulations, and includes assets acquired through transactions undertaken through the FHLBNY’s “Community Mortgage Asset” program.

Advances Agreement means the Bank’s Advances, Collateral Pledge and Security Agreement, as may be amended from time to time. For avoidance of doubt, the term “advances” for purposes of the Capital Plan shall include funding agreements between the FHLBNY and life insurance company Members.

Bank Act means the Federal Home Loan Bank Act, as amended.

Bank Stock means the capital stock of the FHLBNY outstanding prior to the Effective Date.

Board of Directors means the Board of Directors of the FHLBNY.

Calculation Date means the business day immediately prior to the Effective Date.

Capital Plan means the capital plan of the FHLBNY as adopted by the Board of Directors and approved by the Finance Board, as amended from time to time.

Capital Stock means all shares of Class B Stock issued by the FHLBNY, including subclasses, in accordance with the Bank Act, the Regulations and the Capital Plan.

Class B Stock means the capital stock that has the characteristics of Class B stock as described in the Bank Act and the Regulations, and as specified in Section 2.1 of the Capital Plan.

Credit Risk Capital Requirement means the amount of Permanent Capital that is required to support the FHLBNY’s credit risk, as defined by Section 932.4 of the Regulations.

DDA Account means a Member’s Demand Deposit Account established at the FHLBNY.

FHLBNY Capital Plan iii 1-22-08

Derivative Contract means a financial contract the value of which is derived from the values of one or more underlying assets, reference rates, or indices of asset values, or credit-related events.

Effective Date means the date selected by the Board of Directors that shall be within eighteen months of the Finance Board’s written approval of this Capital Plan, upon which outstanding shares of Bank Stock are exchanged for shares of Capital Stock in accordance with the Capital Plan.

Excess Stock means the shares of each subclass of Capital Stock held by a Member, or Other Institution, that exceeds the Member’s, or Other Institution’s, Membership Stock Purchase Requirement or Activity-Based Stock Purchase Requirement related to the respective subclass.

FHFB or Finance Board means the Federal Housing Finance Board, the regulatory and supervisory agency for the Federal Home Loan Banks.

FHLBNY means the Federal Home Loan Bank of New York.

GAAP means Generally Accepted Accounting Principles in the United States of America.

General Allowance for Losses means an allowance established by the FHLBNY in accordance with GAAP for expected losses, but does not include any amounts held against specific assets of the FHLBNY.

Market Risk Capital Requirement means the amount of Permanent Capital to support the FHLBNY’s market risk, as required by Section 932.5 of the Regulations.

Member means an institution that: (i) has been approved for membership by the FHLBNY in accordance with Part 925 of the Regulations and which has purchased the required amount of Bank Stock, or (ii) has purchased the required amount of Bank Stock, or (iii) has satisfied the Membership Stock Purchase Requirement, as applicable.

Membership means all the rights, privileges and obligations associated with being a Member.

Membership Stock means Capital Stock that is purchased and held by each Member to meet the Membership Stock Purchase Requirement.

Membership Stock Purchase Requirement means the level of Membership Stock that must be purchased and maintained by a Member as a condition of Membership as described in Section 4.1 of the Capital Plan.

Member Stock Purchase Requirements means, respectively, the Activity-Based Stock Purchase Requirement and the Membership Stock Purchase Requirement.

Minimum Regulatory Capital Requirement means a minimum regulatory capital requirement for the FHLBNY established by the Regulations, as referred to in Sections 5.1.1, 5.1.2, 5.1.3 and 5.2 of the Capital Plan, or on a basis specifically applicable to the FHLBNY by the Finance Board, as referred to in Section 5.1.4 of the Capital Plan.

FHLBNY Capital Plan iv 1-22-08

Minimum Stock Investment Requirement means the Capital Stock that a Member or Other Institution is required, as applicable, to hold to meet its Membership Stock Purchase Requirement and the Capital Stock that a Member or Other Institution is required, as applicable, to hold to meet its Activity-Based Stock Purchase Requirement. For avoidance of doubt, in order for a Member or Other Institution to be deemed to satisfy its Minimum Stock Investment Requirement it must at the relevant point in time hold both the number of shares of Membership Stock required to meet, to the extent applicable, the Member’s or Other Institution’s Membership Stock Purchase Requirement and the number of shares of Activity-Based Stock required to meet, to the extent applicable, the Member’s or Other Institution’s Activity-Based Stock Purchase Requirement.

Mortgage-related Assets means loans and participations in loans secured by residential real property and mortgage-backed securities, all as defined in Section 950.1 of the Regulations; loans secured by manufactured housing; certain other mortgage-related securities; and certain loans secured by nonresidential nonfarm real property, as listed and described in Appendix I.

Opt-Out Date means the date that is ten days prior to the Effective Date.

Operations Risk Capital Requirement means the amount of Permanent Capital that is required to support the FHLBNY’s operations risk, as required by Section 932.6 of the Regulations.

Other Institution means a financial institution that is not a Member and that acquires, receives or retains Capital Stock under the Capital Plan.

Par Value means $100 per share of Capital Stock.

Permanent Capital means the retained earnings of the FHLBNY, determined in accordance with GAAP, plus the amount paid-in for the FHLBNY’s Class B stock (whether required or excess).

Record Date means December 31^st of the calendar year preceding the election of directors.

Redemption Cancellation Fee means as applicable (i) a fee of $500, which may be imposed in the event that a Member cancels a Redemption Notice, or a Member’s Redemption Notice is subject to automatic cancellation, or (ii) a fee of $500 that may be imposed in the event that a Member cancels its notification of intent to withdraw from Membership.

Redemption Notice means a written notice provided by a Member to the FHLBNY in accordance with Section 2.2.2 of the Capital Plan requesting redemption of a specified number of shares of Capital Stock, subject to the time limits prescribed in the Bank Act, for Class B Stock and the other restrictions set forth in the Act, the Regulations and the Capital Plan.

Risk-based Capital Requirement means the amount of Permanent Capital that the FHLBNY must maintain in accordance with Section 932.3 of the Regulations.

FHLBNY Capital Plan v 1-22-08

Regulations means the regulations promulgated by the Finance Board, as amended from time to time.

Stock Redemption Period means the five-year period, as applicable, following: (i) the FHLBNY’s receipt of a Member’s Redemption Notice, (ii) the FHLBNY’s (or as applicable, the Finance Board’s) receipt of a Member’s written notice to the FHLBNY (or as applicable, the Finance Board) of intent to withdraw from Membership, or the date of acquisition or receipt of any additional shares of Capital Stock after the FHLBNY’s (or as applicable, the Finance Board’s) receipt of such notice, (iii) a Member’s termination from Membership as a result of merger or consolidation into a member of another Federal Home Loan Bank or a nonmember, or the date of acquisition or receipt of any additional shares of Capital Stock after such termination from Membership, (iv) a Member’s termination from Membership as a result of the relocation of its principal place of business, or the date of acquisition or receipt of any additional shares of Capital Stock after such termination of Membership, or (v) a Member’s involuntary termination from Membership, or the date of acquisition or receipt of any additional shares of Capital Stock after such termination of Membership.

Total Assets means the total assets of the FHLBNY, as determined in accordance with GAAP.

Total Capital of the FHLBNY means the sum of Permanent Capital, the amount of any General Allowance for Losses, and the amount of other instruments identified in the Capital Plan that the FHFB has determined to be available to absorb losses incurred by the FHLBNY.

FHLBNY Capital Plan vi 1-22-08

1.	Overview
	Pursuant to the Bank Act and the Regulations, the Board hereby establishes this Capital Plan to:

• provide a new statutory capital structure for the FHLBNY that can be implemented as described herein; and

• ensure that the FHLBNY is able to comply with each of its Minimum Regulatory Capital Requirements at all times after implementation.

In developing this Capital Plan, the Board of Directors has kept in mind the cooperative nature of the FHLBNY. The Board of Directors hereby reaffirms the FHLBNY’s continuing use of the cooperative business model.

This document takes into account the Bank Act and the Regulations, and is not intended to contradict the same. Under Section 26 of the Bank Act, the Finance Board has the authority to liquidate or reorganize a Federal Home Loan Bank and the provisions of this Capital Plan are subject to that authority. In addition, certain discretionary decisions of the Board of Directors under this plan may be subject to Finance Board review and/or approval. Nothing in this plan may be construed as abrogating, nullifying or otherwise interfering with such Finance Board authorities.

All references to the Regulations hereunder shall be deemed to include any successor regulations.

FHLBNY Capital Plan 1 1-22-08

2.	The Capital Structure
2.1	Authorized Stock
	The Board of Directors hereby authorizes one class of Capital Stock, Class B Stock. Shares of Class B Stock shall be redeemable in cash at Par Value five years following the FHLBNY’s receipt of a Member’s Redemption Notice, or in accordance with a termination of Membership as provided in Section 7 of the Capital Plan, or in accordance with Sections 8.1.1.2, 8.1.1.4 and 8.1.1.5 of the Capital Plan. Class B Stock will have two distinct subclasses:

• Membership Stock will be purchased and held by each Member to meet the Membership Stock Purchase Requirement established by the FHLBNY as a condition of membership.

• Activity-Based Stock will be purchased and held by a Member to meet the Activity-Based Stock Purchase Requirement established by the FHLBNY for certain transactions with Members.

The Board of Directors may determine in the future that it wishes to authorize the issuance of additional subclasses of Class B Stock or to authorize the issuance of Class A stock, including one or more subclasses of Class A stock. In such cases, an amendment to this Capital Plan will be submitted to the FHFB for approval in accordance with Section 10.1 of the Capital Plan.

2.1.1 Par Value

All Capital Stock will be issued, redeemed, repurchased or transferred pursuant to Section 2.2.6 of the Capital Plan at Par Value.

2.1.2 Ownership of Retained Earnings

The retained earnings, surplus, undivided profits and equity reserves, if any, of the FHLBNY shall be owned by the holders of Class B Stock in an amount proportional to each holder’s share of the total shares of Class B Stock; however, the holders shall have no right to receive any portion of those items, except through the declaration of a dividend or capital distribution approved by the Board of Directors or through the liquidation of the FHLBNY.

2.2 Purchase, Redemption and Repurchase of Stock

All Members are required to purchase and redeem Capital Stock in accordance with the requirements of the Bank Act, the Regulations and this Capital Plan.

2.2.1 Purchase of Capital Stock

Each Member of the FHLBNY will be required to maintain a minimum investment in Membership Stock as a condition of membership in accordance with the requirements of Section 4 of this Capital Plan and Appendix I hereto; in addition, each Member engaged in certain transactions with the FHLBNY will also be required to maintain a minimum investment in Activity-Based Stock in accordance with the requirements of Section 4 of this Capital Plan and Appendix I hereto.

FHLBNY Capital Plan 2 1-22-08

The FHLBNY will not issue stock other than in accordance with 12 C.F.R. §931.2 and the Capital Plan. Capital Stock shall be issued to and owned only by Members, with the exception of Other Institutions. Capital Stock may be traded only between the FHLBNY and its Members. All Capital Stock will be issued in book entry form only. The FHLBNY will act as its own transfer agent.

2.2.2 Redemption of Capital Stock by Members

A Member may redeem shares of its Capital Stock by providing a Redemption Notice to the FHLBNY. A redemption of Capital Stock may also occur in accordance with Sections 7, 8.1.1.2 and 8.1.1.5 of the Capital Plan. The FHLBNY shall (subject to the restrictions contained in Section 2.2.4 below) redeem Capital Stock in accordance with the two preceding sentences upon the expiration of the applicable Stock Redemption Period, provided that the FHLBNY shall not be obligated to redeem Capital Stock unless all applicable conditions contained in the Bank Act, the Regulations and the Capital Plan are met.

•	Redemption Notice
	A Member that provides a Redemption Notice to the FHLBNY shall identify in that Redemption Notice the particular shares that are the subject of the Redemption Notice by reference to the subclass, the date acquired and the manner in which the shares were acquired. If a Member fails to identify the particular shares within a subclass to be redeemed, the shares subject to redemption shall be determined using a last acquired, first redeemed method of identification within the subclass specified by the Member. Capital Stock will be redeemed upon the expiration of the applicable Stock Redemption Period subject to the conditions and limitations set forth in Sections 2.2.4 and 2.2.5 of the Capital Plan. A Member may not have more than one Redemption Notice outstanding at any time with respect to the same shares of Capital Stock.
•	Cancellation of Redemption Notice
	A Member may cancel its Redemption Notice by providing written notice of such cancellation to the FHLBNY at any time prior to the expiration of the applicable Stock Redemption Period. The FHLBNY will assess a Redemption Cancellation Fee unless the Board of Directors determines that it has a bona fide business purpose for waiving the Redemption Cancellation Fee, and the waiver is consistent with Section 7(j) of the Bank Act.
•	Repurchase of Shares Subject to a Redemption Notice
	To the extent that the FHLBNY repurchases pursuant to Section 2.2.3 of the Capital Plan shares of Capital Stock that are subject to a Redemption Notice or Notices, the respective repurchased shares of Capital Stock shall be deducted from the outstanding Redemption Notice or Notices.
•	Automatic Cancellation of a Redemption Notice
	A Redemption Notice will be automatically cancelled if the FHLBNY is prevented from redeeming the Capital Stock within five business days of the expiration of the applicable Stock Redemption Period because the Member would not be in compliance with its Minimum Stock Investment Requirement. In the event of an automatic cancellation of a Member’s Redemption Notice as provided in the preceding sentence, the FHLBNY will assess a Redemption Cancellation Fee unless the Board of Directors determines it has a bona fide business purpose for waiving the Redemption Cancellation Fee, and the waiver is consistent with Section 7(j) of the Bank Act.

FHLBNY Capital Plan 3 1-22-08

2.2.3	Repurchase of Excess Stock by the FHLBNY
•	Repurchase of Activity-Based Stock
	The FHLBNY will, after the close of business on the Effective Date, and thereafter from time to time but not less than monthly, calculate with respect to each Member, or Other Institution, the amount, if any, of outstanding Activity-Based Stock that is Excess Stock. The FHLBNY will then automatically repurchase for cash all such Excess Stock at its Par Value on the same day as the calculation, subject to the provisions of Section 2.2.4 of the Capital Plan. Subsequent to the initial repurchase made after the close of business on the Effective Date under this provision, the FHLBNY will notify members of all other repurchases no less than fifteen business days prior to such repurchase.
•	Repurchase of Membership Stock
	Upon written application by a Member, or Other Institution, to the FHLBNY or on its own initiative, the FHLBNY may in its discretion repurchase for cash at Par Value some or all of the outstanding shares of Membership Stock that are determined by the FHLBNY to be in excess of the Member’s, or Other Institution’s, Membership Stock Purchase Requirement, subject to Section 2.2.4 of the Capital Plan. If the FHLBNY determines that it will not repurchase any or all shares of Membership Stock requested to be repurchased under a written application by a Member, or Other Institution, the FHLBNY will promptly notify the Member, or Other Institution, that such Membership Stock will not be repurchased. No prior notice of repurchase of shares of Membership Stock under a written application by a Member, or Other Institution will be given. The FHLBNY shall transmit, send or give written notice to the Member, or Other Institution, of repurchases of shares of Membership Stock undertaken on its own initiative at least 10 business days prior to the date of the repurchase.
•	Identification of Repurchased Shares
	If a Member, or Other Institution, has one or more Redemption Notices outstanding as of the date that the FHLBNY is to repurchase shares of Capital Stock pursuant to this Section 2.2.3 of the Capital Plan, the FHLBNY shall repurchase shares of Capital Stock by first repurchasing shares of a Member, or Other Institution, that are subject to a Redemption Notice applicable to the subclass that is to be repurchased that has been outstanding for the longest period of time and then, to the extent necessary, by repurchasing shares that are subject to a Redemption Notice applicable to the subclass to be repurchased that was outstanding for the next longest period of time and continuing in that order, to the extent necessary, until there are no remaining outstanding Redemption Notices with respect to the subclass to be repurchased in which instance the shares to be repurchased shall be determined by the FHLBNY using a last acquired, first repurchased method of identification. If a Member, or Other Institution, does not have any Redemption Notices applicable to the subclass to be repurchased outstanding as of the date that the FHLBNY is to repurchase shares of Capital Stock the shares to be repurchased shall be determined by the FHLBNY using a last acquired, first repurchased method of identification.

FHLBNY Capital Plan 4 1-22-08

2.2.4	Limitations on Redemptions and Repurchases
•	Prohibitions on Redemptions and Repurchases
	The FHLBNY will not redeem or repurchase any shares of Capital Stock, if following the redemption or repurchase the FHLBNY would not be in compliance with each of its Minimum Regulatory Capital Requirements.
	The FHLBNY will not redeem or repurchase any shares of Capital Stock if, following such redemption or repurchase, the Member, or Other Institution, would not be in compliance with the Member’s, or Other Institution’s, Minimum Stock Investment Requirement.
	The FHLBNY will not redeem or repurchase any shares of Capital Stock without the prior written approval of the FHFB if the FHFB or the Board of Directors has determined that the FHLBNY has incurred or is likely to incur losses that result in or are likely to result in “charges against the capital of the Bank,” as that phrase is defined in the Regulations. This prohibition shall apply even if the FHLBNY is in compliance with its Minimum Regulatory Capital Requirements, and shall remain in effect for however long the FHLBNY continues to incur such charges, or until the FHFB determines that such charges are not expected to continue.
•	FHLBNY’s Discretion to Suspend Redemptions of Capital Stock
	The Board of Directors may suspend the redemption of Capital Stock, if the FHLBNY reasonably believes that continued redemption of Capital Stock would cause the FHLBNY to fail to meet its Minimum Regulatory Capital Requirements, would prevent the FHLBNY from maintaining adequate capital against a potential risk that may not be adequately reflected in its Minimum Regulatory Capital Requirements, or would otherwise prevent the FHLBNY from operating in a safe and sound manner. If a decision is made to suspend redemption of Capital Stock, the FHLBNY shall notify the Finance Board in writing within two business days of the decision, informing the Finance Board of the reasons for the suspension and of the FHLBNY’s strategies and time frames for addressing the conditions that led to the suspension, as indicated in Section 931.8(b) of the Regulations. The Finance Board may require the FHLBNY to re-institute the redemption of Capital Stock. The FHLBNY may not repurchase any Capital Stock without the written permission of the Finance Board during any period in which the FHLBNY has suspended the redemption of Capital Stock as provided for in this section of the Capital Plan.
•	Retention of Redemption or Repurchase Proceeds as Collateral
	If the FHLBNY reasonably determines that there is an existing or anticipated collateral deficiency related to any obligations owed by the Member, or Other Institution, to the FHLBNY and the Member, or Other Institution, has failed to deliver additional collateral to resolve the existing or anticipated collateral deficiency to the FHLBNY’s satisfaction the FHLBNY may retain the proceeds of redemption or repurchase of Capital Stock as additional collateral until all such obligations have been satisfied or the existing or anticipated deficiency is resolved to the FHLBNY’s satisfaction.

FHLBNY Capital Plan 5 1-22-08

•	Limitations on Redemptions and Repurchases Related to Terminations of Membership
	The restrictions on redemptions and repurchases set forth in the preceding provisions of this Section 2.2.4 of the Capital Plan apply with respect to redemptions pursuant to a Redemption Notice as well as to redemptions in connection with a termination of Membership in accordance with Section 7 of the Capital Plan and to redemptions in accordance with Sections 8.1.1.2, 8.1.1.4 and 8.1.1.5 of the Capital Plan and to all repurchases of Capital Stock held by Members and by Other Institutions.
	If a Member whose Membership is terminated pursuant to Sections 7.1, 7.2, 7.4 or 7.5 of the Capital Plan has one or more Redemption Notices outstanding as of the effective date of its termination from Membership such Redemption Notice or Notices shall not be subject to automatic cancellation in accordance with Section 2.2.2 of the Capital Plan. Such Redemption Notices shall remain pending until they can be satisfied in accordance with this Section 2.2.4 of the Capital Plan.
•	Pro Rata Allocation of Redemptions
	If at any time more than one Member or Other Institution has outstanding a Redemption Notice in accordance with Section 2.2.2 of the Capital Plan or redemption of Capital Stock in connection with a termination of Membership in accordance with Sections 7.1, 7.2, 7.4 and 7.5 of the Capital Plan or redemption of Capital Stock in accordance with Sections 8.1.1.2, 8.1.1.4 and 8.1.1.5 of the Capital Plan as to which the applicable Stock Redemption Period has expired, and if the redemption by the FHLBNY of all of the shares of Capital Stock subject to such Redemption Notice or termination of Membership would cause the FHLBNY to fail to be in compliance with any of its Minimum Regulatory Capital Requirements, then the FHLBNY shall fulfill such redemptions as the FHLBNY is able to do so from time to time, beginning with such redemptions as to which the Stock Redemption Period expired on the earliest date and fulfilling such redemptions relating to that date on a pro rata basis from time to time until fully satisfied, and then fulfilling such redemptions as to which the Stock Redemption Period expired on the next earliest date in the same manner, and continuing in that order until all such redemptions as to which the Stock Redemption Period has expired have been fulfilled.

2.2.5 Retirement of Redeemed and Repurchased Stock

All shares of Capital Stock that are acquired by the FHLBNY pursuant to redemption or repurchase shall be retired.

2.2.6 Transfer of Capital Stock

A Member, or Other Institution, may not transfer any Capital Stock to any other person or entity, including another Member, except for transfers of Capital Stock occurring pursuant to Sections 7.3 and 7.4 of the Capital Plan. Such transfers shall be deemed to be approved by the FHLBNY as of the cancellation of the disappearing Member’s charter.

2.2.7 Limitation on Converting or Exchanging Excess Stock as Between Subclasses

A member shall not convert or exchange (i) shares of Membership Stock that are in excess of its Membership Stock Purchase Requirement into shares of Activity-Based Stock or (ii) shares of Activity-Based Stock that are in excess of its Activity-Based Stock Purchase Requirement into shares of Membership Stock.

FHLBNY Capital Plan 6 1-22-08

2.3	Dividends
	The Board of Directors, in its discretion, subject to the provisions of this Section 2.3 of the Capital Plan, may declare dividends to be paid on the Capital Stock on a quarterly basis or as otherwise determined by the Board of Directors. Each Member, or Other Institution, that continues to hold Capital Stock is entitled to receive dividends that are declared on all Capital Stock held during the applicable period for the period of time the Member, or Other Institution, owns the Capital Stock. Dividends are non-cumulative with respect to payment obligations.
	Dividends may be paid only in accordance with the Bank’s Retained Earnings and Dividend Policy, as such may be amended by the Bank’s Board of Directors from time to time. Dividend payments may be in the form of cash, additional shares of Capital Stock, or a combination thereof as determined by the Board of Directors. The Board of Directors may not declare or pay a dividend if the FHLBNY is not at the time in compliance with each of its Minimum Regulatory Capital Requirements or if following such declaration or payment of such a dividend the FHLBNY would not be in compliance with each of its Minimum Regulatory Capital Requirements.
2.4	Rights Upon Liquidation, Merger or Consolidation of the FHLBNY

2.4.1 Liquidation of the FHLBNY

Upon the liquidation of the FHLBNY, following the retirement of all outstanding liabilities of the FHLBNY to its creditors, all shares of Capital Stock are to be redeemed at Par Value, provided that if sufficient funds are not available to accomplish the redemption in full of the Capital Stock, then such redemption shall occur on a pro rata basis among all holders of Capital Stock. Following the redemption in full of all Capital Stock any remaining assets will be distributed on a pro rata basis to holders of Capital Stock immediately prior to such liquidation. This provision does not limit the authority granted the Finance Board under 12 U.S.C. § 1446 to prescribe rules, regulations or orders governing the liquidation of a Federal Home Loan Bank that modify, restrict or eliminate any of the rights set forth above.

2.4.2 FHLBNY Acquired by another Federal Home Loan Bank

In the event that the FHLBNY is merged or consolidated into another Federal Home Loan Bank, the holders of the outstanding Capital Stock of the FHLBNY will be entitled to the rights and benefits set forth in any applicable plan of merger and/or terms established or approved by the Finance Board.

2.4.3 FHLBNY Acquires Other Federal Home Loan Bank

In the event that another Federal Home Loan Bank is merged or consolidated into the FHLBNY, the holders of the outstanding stock of the other Federal Home Loan Bank will be entitled to the rights and benefits set forth in any applicable plan of merger and/or terms established or approved by the Finance Board.

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3.	Responsibilities of Directors and Management and Voting of Stock
3.1	Responsibilities of Directors and Management
	The Board of Directors
	The duties and responsibilities of the FHLBNY’s Board of Directors under the Capital Plan include:

• approval of:

• the initial Capital Plan;

• authorization to issue Capital Stock;

• “operating ratios” for leverage and risk based capital to be specified in the FHLBNY’s risk management policy in accordance with 12 C.F.R. § 917.3;

• initial minimum Member Stock Purchase Requirements;

• policy limits for market and credit risk;

• involuntary terminations of membership; and

• dividend distributions.

• periodic review and approval of:

• amendments to the Capital Plan to be submitted for Finance Board approval;

• adjustments to the minimum Member Stock Purchase Requirements; and

• independent annual validations of the FHLBNY’s internal risk measurement model.

• monitoring of compliance with the terms and conditions of the Capital Plan, including a continuing obligation to review and adjust the Member Stock Purchase Requirements, as necessary to ensure that the FHLBNY remains in compliance with its Minimum Regulatory Capital Requirements.

FHLBNY Management

Upon approval of this Capital Plan by the FHFB, the Board of Directors will approve specific delegations to the management of the FHLBNY to implement the Capital Plan. Such delegations will provide authority to manage:

(1) the transition from the current capital structure to the new capital structure, which will involve:

• transition from existing stock ownership to the Member Stock Purchase Requirements described in the Capital Plan;

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• establishment of the internal risk measurement model in accordance with the Regulations;

• development of procedures and systems to support the purchase and redemption of stock under the new capital structure; and

• development of new reporting systems and procedures for Member Stock Purchase Requirements and stock ownership.

(1) the development of an effective internal control system to provide:

• Member compliance with Member Stock Purchase Requirements;

• the FHLBNY’s compliance with its Minimum Regulatory Capital Requirements at all times; and

• timely reporting to the Finance Board and the Board of Directors.

3.2

Voting Rights

Holders of Capital Stock that are Members as of the Record Date shall be entitled to vote for the election of directors to the Board of Directors in accordance with Part 915 of the Regulations. For purposes of applying Part 915 of the Regulations, the Capital Stock that a Member is “required to hold” shall be the Member’s Minimum Stock Investment Requirement as of the Record Date, provided that if the Capital Plan was not in effect as of the Record Date, the number of shares of Bank Stock that the Member was required to hold as of the Record Date shall be as determined in accordance with Sections 925.20 and 925.22 of the Regulations. The number of shares of Capital Stock that a particular Member, or Other Institution (to the extent such institution is permitted to vote under Part 915 of the Regulations), may vote in connection with an election of directors shall be subject to the limitations set forth in the Bank Act and Part 915 of the Regulations.

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4.	Member Stock Purchase Requirements
	The FHLBNY requires all Members to purchase Capital Stock of the FHLBNY. The FHLBNY’s Member Stock Purchase Requirements are based on the potential and actual volume of, and risks inherent in, the financial products and services provided by the FHLBNY to its Members. Therefore:

• a Member will be required to maintain a minimum Capital Stock investment of Membership Stock for as long as the institution remains a Member of the FHLBNY, irrespective of the volume of activity with the FHLBNY; and

• a Member will also be required to purchase Activity-Based Stock in proportion to that Member’s transactions with the FHLBNY.

4.1	Membership Stock Purchase Requirement
	As a condition of Membership, each Member is required to purchase and maintain a minimum investment in Membership Stock. The Membership Stock Purchase Requirement will be equal to a specified percentage of the Mortgage-related Assets held by the Member, in all events rounded up to the next even $100 increment. The FHLBNY will perform calculations of the Membership Stock Purchase Requirement for each Member on at least an annual basis and may recalculate such Requirement for any one or more Members more frequently as the Board of Directors may determine from time to time. The Board of Directors may increase or decrease the Membership Stock Purchase Requirement from time to time. Except as provided in Section 7.4.2 of this Capital Plan, in no event will the requirement be less than the greater of (i) $1,000 or (ii) an amount to be determined by the Board of Directors that will be no less than 0.10% or more than 0.25% of the Mortgage-related Assets held by the Member.
	The currently approved Membership Stock Purchase Requirement is specified in Appendix I attached hereto. Notice of changes to the Membership Stock Purchase Requirement will be transmitted, sent or given to Members and Other Institutions at least 10 days prior to the effective date of such changes.

4.2	Activity-Based Stock Purchase Requirement
	From time to time, the FHLBNY will adopt one or more percentages or amounts for the calculation of the Activity-Based Stock Purchase Requirement, which will require a Member or Other Institution to purchase and maintain Activity-Based Stock in an amount equal to:

• a specified percentage (but in no event less than 4.0% or more than 5.0%) of the outstanding principal balance of advances under the Advances Agreement between the FHLBNY and the Member; and

• a specified percentage (but in no event less than 4.0% or more than 5.0%) of the outstanding principal balance of Acquired Member Assets originated for or sold to the FHLBNY by a Member that remain on the FHLBNY’s balance sheet plus the principal amount of delivery commitments issued to the Member by FHLBNY for Acquired Member Assets to be held on the FHLBNY’s balance sheet, provided that the outstanding principal balance of Acquired Member Assets originated for or sold to the FHLBNY by a Member that are on the FHLBNY’s balance sheet as of the Calculation Date will not be subject to this requirement; and

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• a specified dollar amount ranging between (a) zero and (b) the FHLBNY’s Credit Risk Capital Requirement for any off-balance sheet items (excluding the principal amount of delivery commitments issued to the Member by the FHLBNY for Acquired Member Assets) listed in Section 932.4(f), Table 2, of the Regulations which the FHLBNY has transacted on a Member’s behalf and which are continuing, with such Credit Risk Capital Requirement being calculated in accordance with Section 932.4(c) of the Regulations; and

• a specified percentage (but in no event less than 0% or more than 5.0%) of the carrying value on the Bank’s balance sheet of Derivative Contracts between the Member and the FHLBNY, as determined by the FHLBNY under GAAP,

in all events rounded up to the next even $100 increment.

The Board of Directors may increase or decrease one or more of the percentages or amounts for the calculation of the Activity-Based Stock Purchase Requirement from time to time within the foregoing ranges.

The currently approved percentages and amounts for the calculation of the Activity-Based Stock Purchase Requirement are specified in Appendix I attached hereto. Notice of changes to any of the components of the Activity-Based Stock Purchase Requirement will be transmitted, sent or given to Members and Other Institutions at least 10 days prior to the effective date of such changes.

4.3	Periodic Review of Capital Stock Purchase Requirements
	The Board of Directors will review the FHLBNY’s Capital Plan on a continuing basis to ascertain whether changes to the Member Stock Purchase Requirements are required in order to ensure that the FHLBNY is in compliance with its Minimum Regulatory Capital Requirements, and shall make adjustments as necessary.
	The Board of Directors may at any time modify:

• the Membership Stock Purchase Requirement within the limits defined in Section 4.1 above; and/or

• the applicable percentage or amount for any of the components of the Activity-Based Stock Purchase Requirement, so long as such requirement is within the limits defined in Section 4.2 above.

With regard to any changes made to the Membership Stock Purchase Requirement, such changes shall be applied to all Members without preference.

With regard to any changes made to any components of the Activity-Based Stock Purchase Requirement, such changes shall be applied to all outstanding activity at the time that such changes become effective, provided that such changes shall not apply to the outstanding principal balance of Acquired Member Assets originated for or sold to the FHLBNY by a Member that are on the FHLBNY’s balance sheet as of the Calculation Date.

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4.4	Member Compliance with Adjusted Requirements
	Each Member must comply promptly with any adjusted Membership Stock Purchase Requirement or Activity-Based Stock Purchase Requirement established by the Board of Directors as described above; however, Members will be allowed a reasonable time (as determined by the Board of Directors from time to time, but in no event longer than three months), which period of time shall be specified in any notice provided in accordance with Sections 4.1 or 4.2 of the Capital Plan, to come into compliance. Each Other Institution must comply promptly with any adjusted Activity-Based Stock Purchase Requirement established by the Board of Directors as described above; however, Other Institutions will be allowed a reasonable time (as determined by the Board of Directors from time to time, but in no event longer than three months) which period of time shall be specified in any notice provided in accordance with Section 4.2 of the Capital Plan to come into compliance. Members and Other Institutions may reduce their outstanding activity with the FHLBNY as an alternative to purchasing additional Activity-Based Stock.
	In the event that a Member or Other Institution does not comply with any adjusted Activity-Based Stock Purchase Requirement by the expiration of the time period specified in a notice provided in accordance with Section 4.2 of the Capital Plan, the FHLBNY is hereby authorized, in its discretion, to issue a notice of noncompliance to the Member or Other Institution and, ten business days after transmitting, sending or giving such notice of noncompliance to the Member or Other Institution, to accelerate the maturity of an amount of advances sufficient to reduce the Member’s or Other Institution’s Activity-Based Stock Purchase Requirement to an amount not more than the Activity-Based Stock then held by the Member or Other Institution. Without regard to the discretion conferred on the Board of Directors under the foregoing sentence, and without in any respect limiting the Board of Directors’ authority under Section 7.2.1 of the Capital Plan, the Board of Directors in its discretion may determine that a Member’s failure to comply with any adjusted Membership Stock Purchase Requirement or Activity-Based Stock Purchase Requirement by the expiration of the period of time specified in any notice provided in accordance with Sections 4.1 or 4.2 of the Capital Plan constitutes the basis for a determination to terminate the Membership of a Member for a failure to comply with a requirement of the Capital Plan.

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5.	Capital Requirements of the FHLBNY
	The FHLBNY is required to maintain Permanent Capital and Total Capital to:

• provide for the safe and sound operation of the FHLBNY;

• protect the FHLBNY’s creditors against potential loss;

• generate earnings sufficient to meet the FHLBNY’s community support and public purpose obligations; and

• comply with regulatory requirements as established by the Finance Board.

5.1 Statutory Capital Requirements

5.1.1 Total Capital Requirement

Total Capital must be equal to at least 4.0% of the FHLBNY’s Total Assets.

5.1.2 Leverage Capital Requirement

The FHLBNY must maintain a leverage ratio of Total Capital to Total Assets of at least 5.0% of the FHLBNY’s Total Assets. For purposes of determining the leverage ratio, Total Capital shall be computed by multiplying by 1.5 the FHLBNY’s Permanent Capital, and adding to the product all other components of Total Capital.

5.1.3 Permanent Capital Requirement

Permanent Capital must at all times be equal to or exceed the value of the FHLBNY’s Risk-based Capital Requirement, calculated in accordance with Section 5.2 below.

5.1.4 FHFB Authority to Require More Capital

The FHFB may, in its discretion, require the FHLBNY to hold more Total Capital or Permanent Capital than is indicated in Sections 5.1.1 or 5.1.3 of the Capital Plan.

5.2	Risk-Based Capital Requirement
	The FHLBNY’s Risk-based Capital Requirement shall be equal to the sum of:

• the FHLBNY’s Credit Risk Capital Requirement,

• the FHLBNY’s Market Risk Capital Requirement, and

• the FHLBNY’s Operations Risk Capital Requirement as defined by the FHFB.

Unless otherwise directed by the FHFB, the FHLBNY will measure its Credit, Market and Operations Risk Capital Requirements as of the close of business of the last business day of the month for which the credit risk capital charge is being calculated.

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5.2.1 Credit Risk Capital Requirement

The Credit Risk Capital Requirement shall be equal to the sum of the credit risk capital charges for all assets, off-balance sheet items and derivative contracts. Credit risk percentage requirements are established by the FHFB from time to time.

Assets

The credit risk capital charge for an asset on the FHLBNY’s balance sheet is equal to the book value of the asset multiplied by the credit risk percentage requirement assigned to that asset class in the Regulations.

Off-balance sheet items

The credit risk capital charge for an off-balance sheet item is equal to the credit equivalent amount of the item (based on conversion factors provided by the FHFB) multiplied by the credit risk percentage requirement assigned to that item in the Regulations.

Off balance sheet items include:

• Asset sales with recourse where the credit risk remains with the FHLBNY

• Commitments to make advances

• Commitments to make or purchase other loans

• Standby letters of credit

• Other commitments with original maturity of over 1 year

• Other commitments with original maturity of 1 year or less

Derivative Contracts

The credit risk capital charge for Derivative Contracts is equal to:

• the current credit exposure for the Derivative Contract multiplied by the credit risk percentage requirement assigned to that derivative contract, as determined in accordance with Section 932.4 of the Regulations, plus

• the potential future credit exposure for the Derivative Contract multiplied by the credit risk percentage requirement assigned to that Derivative Contract, as determined in accordance with Section 932.4 of the Regulations.

Guidelines for calculating capital charges on Derivative Contracts are defined by the FHFB from time to time.

5.2.2 Market Risk Capital Requirement

The Market Risk Capital Requirement shall equal the sum of:

• the market value of the FHLBNY’s portfolio at risk from movements in market rates and prices that could occur during periods of market stress. The market value of the FHLBNY’s portfolio at risk is determined using an internal market risk model (VaR model) that that has been approved by the FHFB; and

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• the amount, if any, by which the FHLBNY’s current market value of Total Capital is less than 85% of the FHLBNY’s book value of Total Capital, where:

• the current market value of the FHLBNY’s Total Capital is calculated using the internal market risk model approved by the FHFB; and

• the book value of Total Capital is the same as the amount of Total Capital reported by the FHLBNY to the FHFB on a monthly basis.

The internal market risk model will:

• estimate the market value of the FHLBNY’s assets and liabilities, off-balance sheet items, and Derivative Contracts, including any related options, and

• measure the market value of the FHLBNY’s portfolio at risk, including all assets, liabilities, off-balance sheet items, and Derivative Contracts that represent a source of material market risk.

5.2.3 Operations Risk Capital Requirement

The FHLBNY is required to meet its Operations Risk Capital Requirement to cover unexpected losses associated with:

• human error

• fraud

• unenforceability of legal contracts

• deficiencies in internal controls

• deficiencies in information controls

The FHLBNY will meet its Operations Risk Capital Requirement through maintenance of an amount of Permanent Capital equal to 30% of the sum of its Credit Risk and Market Risk Capital Requirements subject to modification as set forth below.

With FHFB approval, the FHLBNY may have an Operations Risk Capital Requirement equal to less than 30% but no less than 10% of the sum of the FHLBNY’s Credit Risk and Market Risk Capital Requirements if (i) the FHLBNY provides an alternative methodology for assessing and quantifying an Operations Risk Capital Requirement or (ii) if the FHLBNY obtains insurance to cover operations risk from an insurer rated at least the second highest investment grade credit rating by an NRSRO.

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6.	Reporting Requirements to the Finance Board
	The following are the FHLBNY’s specific reporting requirements to the Finance Board pertaining to the Capital Plan.
6.1	Changes in Membership
	The FHLBNY shall notify the FHFB within 10 calendar days of receipt of any notice of withdrawal or notice of cancellation of withdrawal from Membership.
6.2	Leverage and Risk Based Capital
	The FHLBNY shall report to the FHFB by the 15th business day of each month:

• Risk-based Capital Requirement by component amounts, and

• actual Total Capital and Permanent Capital outstanding.

	Both measures are calculated as of the close of business on the last business day of the preceding month, or more frequently, as may be required by the FHFB.
6.3	Voting Shares
	On or before April 10 of each year, the FHLBNY shall submit to the FHFB a Capital Stock report that indicates, as of the Record Date:

• the number of Members located in each voting state in the FHLBNY’s district,

• the number of shares of Capital Stock that each Member (identified by its docket number) was required to hold, and

• the number of shares of Capital Stock that all Members located in each voting state were required to hold. Excess Stock will not be included in the calculation of outstanding Capital Stock for purposes of voting.

The FHLBNY shall certify to the FHFB that, to the best of its knowledge, the information provided in the Capital Stock report is accurate and complete, and that it has notified each Member of its minimum Capital Stock holdings pursuant to this Capital Plan.

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7.	Termination of Membership in the FHLBNY
7.1	Voluntary Withdrawal from Membership

7.1.1 Written Notification

A Member may withdraw from Membership at any time by providing written notice of its intent to withdraw from Membership to the FHLBNY. A Member may cancel a notice of withdrawal prior to its effective date by providing the FHLBNY with written notice of such cancellation. Any such cancellation will result in a Redemption Cancellation Fee with respect to the Member’s Capital Stock unless the Board of Directors determines it has a bona fide business purpose for waiving the imposition of the fee, and the waiver is consistent with Section 7(j) of the Bank Act.

7.1.2 Access to Benefits of Membership

Until the effective date of a Member’s withdrawal from the FHLBNY, such Member will continue to have access to the benefits of Membership. On and after the effective date of the Member’s withdrawal, regardless of whether the Other Institution is required to maintain an investment in the Capital Stock, the Other Institution will no longer have the benefits of Membership including access to the FHLBNY’s products and services and will no longer have any voting rights other than as provided in the Regulations, but the Other Institution will still be entitled to any and all dividends declared on its Capital Stock until the Capital Stock is redeemed or repurchased by the FHLBNY.

7.1.3 Finance Board Notification

The FHLBNY shall notify the Finance Board within ten calendar days of the receipt of any notice of intent to withdraw from Membership or cancellation of a notice of withdrawal from Membership.

7.1.4 Finance Board Certification

No Member may withdraw from Membership unless, on the date that the Membership is to terminate, there is in effect a certification from the Finance Board that the withdrawal of the Member will not cause the Bank System to fail to satisfy its requirements under 12 U.S.C. §1441b(f)(2)(c) to contribute toward the interest payments owed on obligations issued by the Resolution Funding Corporation.

7.1.5 Disposition of Claims

The FHLBNY shall determine an orderly manner for the disposition of transactions outstanding with a Member that withdraws from Membership. The Stock Redemption Period for the Capital Stock held by a Member as of the date of the FHLBNY’s receipt of the written notification of the Member’s intent to withdraw from Membership and not already subject to a Redemption Notice shall commence as of that date. The Stock Redemption Period for shares of Capital Stock acquired or received by such a withdrawing Member after the date that its notice of intent to withdraw is received by the FHLBNY will commence on the date such shares are acquired or received. If transactions remain outstanding beyond the effective date of the termination of Membership, the FHLBNY will not redeem any Activity-Based Stock that the Other Institution is required to hold to comply with the Activity-Based Stock Purchase Requirement corresponding to such outstanding transactions.

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Upon the effective date of a Member’s withdrawal from Membership, it shall become an Other Institution under this Capital Plan. Such Other Institution shall not be deemed to be subject to the Membership Stock Purchase Requirement and the FHLBNY may repurchase Membership Stock held by the Other Institution, that has not otherwise been redeemed by the FHLBNY upon the expiration of an applicable Stock Redemption Period. The FHLBNY may repurchase the Other Institution’s Activity-Based Stock, that has not otherwise been redeemed by the FHLBNY upon the expiration of an applicable Stock Redemption Period, if the stock is not needed to comply with the Activity-Based Stock Purchase Requirement corresponding to such outstanding transactions, and not subject to any of the limitations on redemption or repurchase in Section 2.2.4.

7.1.6 Effective Date of Withdrawal

The Membership of a Member that has submitted a notice of intent to withdraw, and that has not cancelled such notice, shall terminate as of the date on which the last applicable Stock Redemption Period ends for Capital Stock that the Member is required to hold under the Membership Stock Purchase Requirement as of the date that the Member’s written notification of its intent to withdraw from Membership was received by the FHLBNY.

7.2 Involuntary Termination of Membership

7.2.1 Written Notification

The Board of Directors may terminate the Membership of any Member that: (i) fails to comply with any requirement of the Bank Act, any Regulation, or any requirement of the Capital Plan, (ii) becomes insolvent or otherwise subject to the appointment of a conservator, receiver, or other legal custodian under federal or state law, or (iii) would jeopardize the safety and soundness of the FHLBNY if it were to remain a Member.

7.2.2 Access to Benefits of Membership

A Member whose Membership is terminated involuntarily shall cease being a Member of the FHLBNY as of the date on which the Board of Directors acts to terminate the Membership. After that date, such terminated Member shall become an Other Institution under this Capital Plan. Such Other Institution shall have no right to obtain any of the benefits of Membership including access to the FHLBNY’s products and services and will no longer have any voting rights, other than as provided in the Regulations, but shall be entitled to receive any dividends declared on its Capital Stock until the Capital Stock is redeemed or repurchased by the FHLBNY.

7.2.3 Disposition of Claims

The FHLBNY shall determine an orderly manner for the disposition of transactions outstanding with the Other Institution. The Stock Redemption Period for the Capital Stock owned by a Member as of the date of its termination and not already subject to a Redemption Notice shall commence on the date that the Member’s Membership is terminated. The Stock Redemption Period for Capital Stock acquired or received by the Other Institution after the date of the termination of its Membership shall commence on the date of such acquisition or receipt. If transactions remain outstanding beyond the effective date of the termination of Membership, the FHLBNY will not redeem any Activity-Based Stock to the extent that the Other Institution is required to hold such stock to comply with the Activity-Based Stock Purchase Requirement corresponding to such outstanding transactions.

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Capital Stock held by the Member as of the effective date of its termination shall not be deemed automatically to be Excess Stock solely by virtue of the termination of the Member’s Membership; provided however, that on and after the effective date of termination, any Membership Stock that is not required to meet the Other Institution’s Membership Stock Purchase Requirement on the date on which the Member’s Membership was terminated that has not otherwise been redeemed by the FHLBNY upon the expiration of an applicable Stock Redemption Period, or any Activity-Based Stock not required to meet the Other Institution’s Activity-Based Stock Purchase Requirement that has not otherwise been redeemed by the FHLBNY upon the expiration of an applicable Stock Redemption Period, shall be Excess Stock that shall be subject to repurchase by the FHLBNY; and provided further that effective upon the expiration of the Stock Redemption Period that commences on the date that the Member’s Membership is terminated, the terminated Member’s Membership Stock Purchase Requirement shall be deemed to be zero. Notwithstanding the foregoing, any repurchases and redemptions of stock permitted hereunder shall remain subject to the limitations in Section 2.2.4 of the Capital Plan.

7.3 Merger or Consolidation of Members

7.3.1 Termination of Charter and Stock Redemption Period

If a Member’s Membership is terminated as a result of a Member’s merger or other consolidation into another Member, the Membership shall terminate upon cancellation of the disappearing Member’s charter. On that date, the Capital Stock held by the disappearing Member will be transferred on the books of the FHLBNY into the name of the surviving Member. The Stock Redemption Period for the Capital Stock previously held by the disappearing Member shall not be deemed to commence on the date on which the disappearing Member’s charter is cancelled, but shall commence only upon: (i) the FHLBNY’s receipt of a Redemption Notice from the surviving Member, (ii) the FHLBNY’s receipt of the surviving Member’s written notice of its intent to withdraw from Membership, (iii) the surviving Member’s termination of Membership as a result of merger or consolidation into a member of another Federal Home Loan Bank or into a nonmember, (iv) the surviving Member’s termination of Membership as a result of the relocation of its principal place of business, or (v) the involuntary termination of the surviving Member’s Membership. Stock Redemption Periods applicable to a Redemption Notice or Notices received by the FHLBNY from the disappearing Member prior to the effective date of the cancellation of the disappearing Member’s charter shall continue to run with respect to the surviving Member from the date such Redemption Notice was received by the FHLBNY, subject to the provisions of Section 2.2.2 of the Capital Plan.

7.3.2 Capital Stock Requirement of Surviving Member

As of the effective date of the cancellation of the disappearing Member’s charter, the surviving Member’s Membership Stock Purchase Requirement shall be immediately increased by the amount of the disappearing Member’s Membership Stock Purchase Requirement immediately prior to the cancellation of its charter. Future calculations of the surviving Member’s Membership Stock Purchase Requirement shall be as determined in accordance with Section 4.1 of the Capital Plan, provided that if the mostly recently available data from the regulatory reports for the surviving Member does not include the assets of the disappearing Member, then, in that event, the Membership Stock Purchase Requirement for the surviving Member will be calculated by adding together the most recently available regulatory report data for the disappearing Member and for the surviving Member. As of the effective date of the cancellation of the disappearing Member’s charter, the surviving Member’s Activity-Based Stock Purchase Requirement will be calculated based on its current outstanding transactions with the FHLBNY including those acquired from the disappearing Member.

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7.4 Merger or Consolidation of Member into a Member of another Federal Home Loan Bank or into a Nonmember

7.4.1 General

If a Member’s Membership is terminated as a result of the Member’s merger or consolidation into a member of another Federal Home Loan Bank or a nonmember, the Membership shall terminate as of the date on which the Member’s charter is cancelled. On that date, the Capital Stock held by the disappearing Member will be transferred on the books of the FHLBNY into the name of the surviving institution. After that date the Other Institution shall have no right to obtain any of the benefits of Membership including access to the FHLBNY’s products and services and will no longer have any voting rights other than as provided in the Regulations, but shall be entitled to receive any dividends declared on its Capital Stock until the Capital Stock is redeemed or repurchased by the FHLBNY.

7.4.2 Disposition of Claims

The FHLBNY shall determine an orderly manner for the disposition of transactions outstanding with the Other Institution. The Stock Redemption Period for the Capital Stock then held by the Other Institution and not already subject to a Redemption Notice shall be deemed to commence on the date on which the Member’s charter is cancelled. The Stock Redemption Period for any Capital Stock acquired or received by the Other Institution after the date of the termination of the Member’s Membership shall commence on the date of acquisition or receipt. If transactions remain outstanding beyond the effective date of the termination of Membership, the FHLBNY will not redeem any Activity-Based Stock that the Other Institution is required to hold to comply with the Activity-Based Stock Purchase Requirement corresponding to such outstanding transactions.

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Capital Stock held by the Member as of the effective date of its termination shall not be deemed automatically to be Excess Stock solely by virtue of the termination of the Member’s Membership; provided however, that on and after the effective date of termination any Membership Stock that is not required to meet the Other Institution’s Membership Stock Purchase Requirement on the date on which the Other Institution’s Membership was terminated that has not otherwise been redeemed by the FHLBNY upon the expiration of an applicable Stock Redemption Period, or any Activity-Based Stock not required to meet the Other Institution’s Activity-Based Stock Purchase Requirement that has not otherwise been redeemed by the FHLBNY upon the expiration of an applicable Stock Redemption Period, shall be Excess Stock that shall be subject to repurchase by the FHLBNY. In lieu of the formula specified in Section 4.1 and section A of Appendix I of this Capital Plan, if the corporate existence of a Member is terminated as a result of its merger into a nonmember, the FHLBNY in its discretion may, at any time after thirty days subsequent to the merger, recalculate the Membership Stock Purchase Requirement based solely on Mortgage-related Assets, and in doing so may use zero dollars ($0.00) as the amount of the Mortgage-related Assets held by the former Member, and may thereafter repurchase any resulting Excess Stock. Notwithstanding the foregoing, any repurchases and redemptions of stock permitted hereunder shall remain subject to the limitations in Section 2.2.4 of the Capital Plan and the provisions, if applicable, of Section 7.4.3 of this Capital Plan.

7.4.3 Acquiring Institution Applies for FHLBNY Membership

If the institution into which the Member merges or is consolidated is eligible for Membership and intends to become a Member of the FHLBNY, it must provide written notification to the FHLBNY of its intention to apply for Membership within sixty calendar days of the cancellation of the charter of the former Member.

Following the submission of this notification, the application for Membership must be submitted within sixty calendar days. If the institution is approved for Membership, then it must purchase the appropriate amounts, if any, of Capital Stock to comply with its Minimum Stock Investment Requirement. Such purchase of Membership Stock must be made within sixty days of approval for Membership and with respect to any Activity-Based Stock Purchase Requirement, prior to engage in such transactions.

If the institution does not provide required notification and application for Membership within the respective required time periods, or is disapproved for Membership, the provisions of Section 7.4.2 of the Capital Plan will apply with respect to the disposition of outstanding transactions and redemption and repurchase of Capital Stock.

7.5 Relocation of Principal Place of Business

7.5.1 General

If a Member’s Membership is terminated as a result of the relocation of the Member’s principal place of business, as defined in the Regulations, the Membership shall terminate on the date on which the transfer of Membership under such Regulations becomes effective. After that date the Other Institution shall have no right to obtain any of the benefits of Membership including access to the FHLBNY’s products and services and will no longer have any voting rights other than as provided in the Regulations, but shall be entitled to receive any dividends declared on its Capital Stock until the Capital Stock is redeemed or repurchased by the FHLBNY.

FHLBNY Capital Plan 21 1-22-08

7.5.2 Disposition of Claims

The FHLBNY shall determine an orderly manner for the disposition of transactions outstanding with the Other Institution. The Stock Redemption Period for the Capital Stock then held by the Other Institution and not already subject to a Redemption Notice shall be deemed to commence on the date on which the Member’s Membership terminates. The Stock Redemption Period for any Capital Stock acquired or received by the Other Institution after the date of the termination of its Membership shall commence on the date of acquisition or receipt. If transactions remain outstanding beyond the effective date of the termination of Membership, the FHLBNY will not redeem any Activity-Based Stock that the Other Institution is required to hold to comply with the Activity-Based Stock Purchase Requirement corresponding to such outstanding transactions.

Capital Stock held by the Member as of the effective date of its termination shall not be deemed automatically to be Excess Stock solely by virtue of the termination of the Member’s Membership; provided however, that on and after the effective date of termination, any Membership Stock that is not required to meet the Other Institution’s Membership Stock Purchase Requirement on the date on which the Member’s Membership was terminated that has not otherwise been redeemed by the FHLBNY upon the expiration of an applicable Stock Redemption Period, or any Activity-Based Stock not required to meet the Other Institution’s Activity-Based Stock Purchase Requirement that has not otherwise been redeemed by the FHLBNY upon the expiration of an applicable Stock Redemption Period, shall be Excess Stock that shall be subject to repurchase by the FHLBNY; and provided further that effective upon the expiration of the Stock Redemption Period that commences on the date that the Member’s Membership is terminated, the Other Institution’s Membership Stock Purchase Requirement shall be deemed to be zero. Notwithstanding the foregoing, any repurchases and redemptions of stock hereunder shall remain subject to the limitations in Section 2.2.4 of the Capital Plan.

FHLBNY Capital Plan 22 1-22-08

8. The Transition Plan

The FHLBNY intends to transition to the new capital structure on the Effective Date which shall be a date determined by the Board of Directors. As a general rule, each Member and Other Institution must comply with its Minimum Stock Investment Requirement on the Effective Date except as allowed below in Section 8.1.1.1 of the Capital Plan.

8.1	Transition Process
	The following steps will be taken to implement the FHLBNY’s Capital Plan:

8.1.1	Member Election
8.1.1.1	Notification to Members

The Board of Directors has established the date that is ten days prior to the Effective Date as the Opt-Out Date. Not less than forty-five days nor more than sixty days prior to the Opt-Out Date, a copy of the Capital Plan as approved by the Finance Board and the disclosures required by Section 933.5 of the Regulations, including a description of a Member’s option to withdraw from Membership prior to the implementation of the Capital Plan will be transmitted, sent or given to each Member. Included with these materials each Member will also receive a preliminary calculation of the Member’s Membership Stock Purchase Requirement and Activity-Based Stock Purchase Requirement. These preliminary requirements will be calculated as follows:

• The data used for the preliminary calculations of the Membership Stock Purchase Requirement will be data from the immediately preceding December 31st.

• The data used for the preliminary calculations of the Activity-Based Stock Purchase Requirement will be data from the immediately preceding month-end.

Any Member that became a Member on or prior to November 12, 1999 will be advised of its option to meet its additional Minimum Stock Investment Requirement, if any, in two equal installments over a period of six months following the Effective Date, with the first installment to be paid three months following the Effective Date and the second installment to be paid six months following the Effective Date. Members will be required to advise the FHLBNY in writing as to whether this option will be exercised by a date to be specified in the notice to Members. Members that elect this option will nevertheless be required to purchase any Activity-Based Stock or AMA-Based Stock required to support new transactions that a Member enters into with the FHLBNY beginning on the Effective Date. Any institution that became a Member after November 12, 1999 but prior to the Effective Date must comply with the Minimum Stock Investment Requirement specified in this Capital Plan as of the Effective Date, and as such cannot exercise this option.

8.1.1.2 Member Notification of Intent to Withdraw

Members will be informed that written notice of the Member’s intent to withdraw from Membership must be received by the Finance Board and the FHLBNY no later than the Opt-Out Date. The Membership of a Member whose written notice of intent to withdraw from Membership is received by the Finance Board and the FHLBNY on or before the Opt-Out Date shall terminate at the earlier of (i) the Effective Date or (ii) six months after the Member’s written notice of intent to withdraw was received by the Finance Board and the FHLBNY, and such Member’s Bank Stock shall be redeemed and retired and shall not be exchanged for Capital Stock.

FHLBNY Capital Plan 23 1-22-08

Notwithstanding the preceding sentence, if an institution described in the preceding sentence continues to have transactions outstanding with the FHLBNY on the Effective Date that are subject to an Activity-Based Stock Purchase Requirement, all shares of such institution’s Bank Stock shall be exchanged for shares of Activity-Based Stock in accordance with the applicable provisions of Section 8.1.2 of the Capital Plan. Any such institution shall be deemed to have consented to the provisions of the Capital Plan, including, but not limited to, the exchange described in the preceding sentence. The Stock Redemption Period for the Activity-Based Stock issued to such an institution in exchange for shares of Bank Stock that the Member held as of the date that its notice of intent to withdraw is received will be deemed to commence on the date that the notice to withdraw is received by the Finance Board and the FHLBNY. If such an institution acquires or receives any additional shares of Bank Stock after the date its notice of withdrawal is received by the Finance Board and the FHLBNY and before the Effective Date, the Stock Redemption Period for the Activity-Based Stock issued to such institution in exchange for such Bank Stock will be deemed to commence on the date such shares of Bank Stock were acquired or received. If such an institution acquires or receives any shares of Capital Stock on or after the Effective Date, the Stock Redemption Period for such shares shall commence on the date such shares of Capital Stock were acquired or received.

On and after the Effective Date such institution shall not be subject to a Membership Stock Purchase Requirement. To the extent that the Activity-Based Stock held by such an institution upon the Effective Date is not sufficient to satisfy the Activity-Based Stock Purchase Requirement applicable to such institution’s outstanding transactions with the FHLBNY such institution shall be required to purchase additional shares of Activity-Based Stock in order to satisfy the Activity-Based Stock Purchase Requirement and such institution shall be required to purchase additional shares of Activity-Based Stock necessary to comply with any adjustments in the Activity-Based Stock Purchase Requirement that occur while transactions remain outstanding. To the extent such an institution would not be subject to an Activity-Based Stock Purchase Requirement on the Effective Date, in the event that the FHLBNY reasonably determines that there is an existing or anticipated collateral deficiency related to any obligations owed by such an institution to the FHLBNY and the institution has failed to deliver additional collateral to resolve the existing or anticipated collateral deficiency to the FHLBNY’s satisfaction, upon redeeming the institution’s Bank Stock the FHLBNY shall remit the proceeds to a deposit account as collateral security for such obligations until all such obligations have been satisfied or the existing or anticipated deficiency is resolved to the FHLBNY’s satisfaction.

8.1.1.3 Affirmative Election to Exchange Shares

Any Member whose written notice of intent to withdraw from Membership is not received by the Finance Board and the FHLBNY on or prior to the Opt-Out Date shall be deemed to have affirmatively elected to exchange its existing Bank Stock to Capital Stock on the Effective Date pursuant to the Capital Plan.

FHLBNY Capital Plan 24 1-22-08

8.1.1.4 Notice of Intent to Withdraw after Opt-Out Date

In the event a Member that is deemed to have affirmatively elected to exchange its existing Bank Stock to Capital Stock files written notice of its intent to withdraw from Membership that is received by the Finance Board and the FHLBNY after the Opt-Out Date, the Stock Redemption Period for the Capital Stock issued to the Member in exchange for shares of Bank Stock that the Member held as of the date its notice of intent to withdraw is received will be deemed to commence on the date that the notice of intent to withdraw is received by the Finance Board and the FHLBNY. If a Member described in the preceding sentence acquires or receives any additional shares of the Bank Stock after the date its notice of withdrawal is received by the Finance Board and the FHLBNY and before the Effective Date, the Stock Redemption Period for the Capital Stock issued to the Member in exchange for such Bank Stock will be deemed to commence on the date that such shares of Bank Stock were acquired or received. If a Member described in the second preceding sentence acquires or receives any shares of Capital Stock on or after the Effective Date other than through the exchange occurring on the Effective Date, the Stock Redemption Period for such shares shall commence on the date such shares of Capital Stock were acquired or received.

8.1.1.5 Treatment of Former Members

With respect to any institution the Membership of which has terminated on or prior to the Effective Date other than by virtue of Section 8.1.1.2 of the Capital Plan that continues to hold Bank Stock, such Bank Stock shall be redeemed for cash and retired on or before the Effective Date and shall not be exchanged for Capital Stock.

Notwithstanding the preceding sentence, if an institution described in the preceding sentence continues to have transactions outstanding with the FHLBNY on the Effective Date that are subject to an Activity-Based Stock Purchase Requirement, all shares of such institution’s Bank Stock shall be exchanged for shares of Activity-Based Stock in accordance with the applicable provisions of Section 8.1.2 of the Capital Plan. Any such institution shall be deemed to have consented to the provisions of the Capital Plan, including, but not limited to, the exchange described in the preceding sentence. The Stock Redemption Period for the Activity-Based Stock issued to such an institution in exchange for shares of Bank Stock that the Member held as of the date of its termination from Membership will be deemed to commence on such date of termination. If such an institution acquires or receives any additional shares of Bank Stock after the date of its termination from Membership and before the Effective Date, the Stock Redemption Period for the Activity-Based Stock issued to such institution in exchange for such Bank Stock will be deemed to commence on the date such shares of Bank Stock were acquired or received. If such an institution acquires or receives any shares of Capital Stock on or after the Effective Date, the Stock Redemption Period for such shares shall commence on the date such shares of Capital Stock were acquired or received.

On and after the Effective Date such institution shall not be subject to a Membership Stock Purchase Requirement. To the extent that the Activity-Based Stock held by such an institution upon the Effective Date is not sufficient to satisfy the Activity-Based Stock Purchase Requirement applicable to such institution’s outstanding transactions with the FHLBNY such institution shall be required to purchase additional shares of Activity-Based Stock in order to satisfy the Activity-Based Stock Purchase Requirement and such institution shall be required to purchase additional shares of Activity-Based Stock necessary to comply with any adjustments in the Activity-Based Stock Purchase Requirement that occur while transactions remain outstanding. To the extent such an institution would not be subject to an Activity-Based Stock Purchase Requirement on the Effective Date, in the event that the FHLBNY reasonably determines that there is an existing or anticipated collateral deficiency related to any obligations owed by such an institution to the FHLBNY and the institution has failed to deliver additional collateral to resolve the existing or anticipated collateral deficiency to the FHLBNY’s satisfaction, upon redeeming the institution’s Bank Stock the FHLBNY shall remit the proceeds to a deposit account as collateral security for such obligations until all such obligations have been satisfied or the existing or anticipated deficiency is resolved to the FHLBNY’s satisfaction.

FHLBNY Capital Plan 25 1-22-08

8.1.2 Plan of Reorganization

The following actions, which constitute the FHLBNY’s Plan of Reorganization within the meaning of Section 368 of the Internal Revenue Code of 1986, as amended, and the regulations thereunder, are to be taken in order to implement the Capital Plan.

8.1.2.1 Final Calculation of Initial Minimum Stock Investment Requirement

Each Member’s initial Minimum Stock Investment Requirement on the Effective Date will be calculated as follows:

• The data used for the calculations of the Membership Stock Purchase Requirement calculations will be data from the immediately preceding December 31^st, subject to the following exceptions: (1) If a Member has merged or consolidated with another Member between the immediately preceding December 31^st and the Effective Date, then the Membership Stock Purchase Requirement of the surviving Member will be calculated as of the date when the two entities were combined, provided, however, that if the most recently available regulatory report of the surviving Member does not reflect the combination of the two entities, then the Membership Stock Purchase Requirement for the surviving Member will be calculated by adding together the most recently available regulatory report data for the disappearing Member and for the surviving Member. (2) If an entity becomes a Member between the immediately preceding December 31^st and the Effective Date, then the Membership Stock Purchase Requirement for such new Member shall be calculated using data from the immediately preceding December 31^st or the most recent call report data submitted by the entity as part of its Membership application, whichever is later.

• The data used for the calculations of the Activity-Based Stock Purchase Requirement will be data from the close of business on the Calculation Date.

8.1.2.2 Exchange of Bank Stock for Capital Stock and Purchase of Additional Stock

On the Effective Date, prior to the opening of FHLBNY business, each Member’s existing Bank Stock, in an amount equal to the Member’s Membership Stock Purchase Requirement, shall automatically be exchanged on the FHLBNY’s books for shares of an equal amount of Membership Stock without any action on the part of the Member and such exchanged shares of Bank Stock shall be retired.

A Member whose investment in Bank Stock on the Effective Date is less than the Membership Stock Purchase Requirement for the Member on the Effective Date will, if the Member has not by prior notice exercised its option to meet its additional Membership Stock Purchase Requirement via the installment plan described in Section 8.1.1.1 of the Capital Plan, have its DDA Account debited in a dollar amount sufficient to purchase any additional Membership Stock required. The Par Value of any purchases of Membership Stock made as a result will be credited to the FHLBNY’s capital accounts in the Member’s name.

FHLBNY Capital Plan 26 1-22-08

If the Member’s existing balance of Bank Stock exceeds the Member’s Membership Stock Purchase Requirement, the remaining balance of Bank Stock shall automatically be exchanged on the FHLBNY’s books for shares of an equal amount of Par Value of Activity-Based Stock without any action on the part of the Member and such exchanged shares of Bank Stock shall be retired. A Member whose investment in Activity-Based Stock after taking into account the exchange, if any, described in the preceding sentence is less than the Activity-Based Stock Purchase Requirement for the Member on the Effective Date will, if the Member has not by prior notice exercised its option to fully cover its Activity-Based Stock Purchase Requirement via the installment plan described in Section 8.1.1.1 of the Capital Plan, have its DDA Account debited in a dollar amount sufficient to purchase any additional Activity-Based Stock required. The Par Value of any purchases of Activity-Based Stock made as a result will be credited to the FHLBNY’s capital accounts in the Member’s name. To the extent that a Member following any exchange that occurs pursuant to this paragraph holds shares of Activity-Based Stock that are Excess Stock such shares shall be subject to repurchase by the FHLBNY in accordance with Section 2.2.3 of the Capital Plan.

8.1.3 Post-Transition Stock Purchases

After the Effective Date, any institution approved for Membership must comply with the Minimum Stock Investment Requirement in order to become a Member.

Any Member that initiates a business activity with the FHLBNY on or after the Effective Date for which Activity-Based Stock is required must comply with the Activity-Based Stock Purchase Requirement at the time the transaction occurs.

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9. Reviews of the FHLBNY’s Capital Plan

The FHLBNY shall obtain the following reviews prior to the implementation of the Capital Plan:

9.1	Independent CPA Review
	Prior to submitting its Capital Plan, the FHLBNY shall engage an independent certified public accountant to conduct a review of the Capital Plan to ensure, to the extent possible, that the implementation of the Capital Plan will not result in any write-down of the redeemable stock owned by its Members. A copy of the CPA’s report shall be provided to the FHFB along with the Capital Plan.
9.2	NRSRO Review
	Prior to submitting its Capital Plan, the FHLBNY shall engage at least one NRSRO to conduct a review of the plan in order to determine, to the extent possible, that implementation of the Capital Plan will not have a material effect on the credit rating of the FHLBNY. A copy of the NRSRO’s report shall be provided to the FHFB along with the Capital Plan.
9.3	Internal Market Risk Model Review
	The FHLBNY will obtain an independent validation of its internal market risk model or internal cash flow model from an independent third party.
	The internal market risk model or internal cash flow model will be validated on an annual basis (or more frequently if required by the FHFB) by an independent third party.
	Results of these validations shall be reviewed by the Board of Directors and provided promptly to the FHFB.
9.4	Internal Market Risk Model & Risk Management Procedure Approval by FHFB
	The FHLBNY shall obtain FHFB approval of the internal market risk model or internal cash flow model used to calculate the market risk component of its risk-based capital requirement, including subsequent material adjustments to the model made by the FHLBNY, prior to the use of any such model. The FHLBNY shall make such adjustments to its model as may be directed by the FHFB. The FHLBNY shall also obtain FHFB approval for the risk assessment procedures and controls to be used to manage its credit, market and operations risks.
9.5	FHLBNY Determination regarding the Capital Plan
	Management of the FHLBNY has made a good faith determination that the FHLBNY will be able to implement the Capital Plan and that the FHLBNY will be in compliance with its Minimum Regulatory Capital Requirements on the Effective Date. An analysis of the FHLBNY’s projected capital position after implementation of the Capital Plan has been provided to the Finance Board.

FHLBNY Capital Plan 28 1-22-08

10.	Amendments to the Capital Plan and Notices
10.1	Amendments to the Capital Plan
	Any amendment to the Capital Plan must be approved by the Board of Directors and submitted to the Finance Board. The effective date for any proposed amendment shall be contained in any request for approval that is submitted to the Finance Board. In order to become effective, any amendment to the Capital Plan must be approved by the Finance Board. The FHLNBY will transmit, send or give its Members notice in writing at least thirty days prior to the effective date of any amendment to the Capital Plan.
10.2	Notices Relating to the Capital Plan

10.2.1 Notices by the FHLBNY

Written notices transmitted, sent or given by the FHLBNY under this Capital Plan shall be addressed to the chief executive officer of the Member, or Other Institution, or such other person, designated by the Member, or Other Institution. Such written notices shall be directed to the postal address, physical address or fax number appearing in the FHLBNY’s records from time to time.

10.2.2 Notices to the FHLBNY

Written notices given to the FHLBNY in accordance with the provisions of the Capital Plan shall be addressed to the President of the FHLBNY and delivered to 101 Park Avenue, New York, NY, 10178 or sent via fax to a fax number to be provided on the FHLBNY’s web site, and shall be deemed to have been received by the FHLBNY in each case upon actual receipt by the FHLBNY. The FHLBNY may from time to time change the address or fax number at which it will receive such written notices by transmitting, sending or giving written notice to the Member, or Other Institution.

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Appendix I — Member Stock Purchase Requirements

(Note: This Appendix I to the Capital Plan is effective as of April 21, 2005. Call report locations set forth below are correct as of the above date, but are subject to change by the regulatory agencies.)

A. Membership Stock Purchase Requirement

Each Member is required to purchase Membership Stock equal to the greater of (i) $1,000 or (ii) 0.20% of the Mortgage-related Assets held by the Member, as listed and described below:

Asset Description	FDIC Call Report Location
Home Equity Loans	RC-C 1.c.(1)
1 to 4 family Closed-end First Liens	RC-C 1.c.(2)(a)
1 to 4 family Closed-end Junior Liens	RC-C 1.c.(2)(b)
Multifamily (5+) Residential Loans	RC-C 1.d.
Nonfarm & Nonresidential Real Estate Loans	RC-C 1.e.
MBS Pass-Throughs:
GNMA Guaranteed	RC-B 4.a.(1) Column A + Column C
Issued by FNMA or FHLMC	RC-B 4.a.(2) Column A + Column C
Other Pass-Throughs	RC-B 4.a.(3) Column A + Column C
Other MBS
GSE-Issued or Guaranteed	RC-B 4.b.(1) Column A + Column C
Collateralized by GSE-Issued or Guaranteed	RC-B 4.b.(2) Column A + Column C
All Other	RC-B 4.b.(3) Column A + Column C

Asset Description	OTS Thrift Financial Report Location
Mortgage Loans:
1 to 4 family Closed-End 1st Liens	SC254
1 to 4 Family Closed-End Junior Liens	SC255
1 to 4 family Revolving, Open-End	SC251
Multifamily (5 or More Units)	SC256
Nonresidential Property, Excluding Land	SC260
MBS Pass-Throughs:
GSE-Insured or Guaranteed	SC210
Other	SC215
Other MBS:
GSE Issued or Guaranteed	SC217
Collateralized by GSE Issued or Guaranteed	SC219
Other	SC222

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Asset Description	NCUA Call Report Location
First Mortgage Real Estate Loans	Assets: line 18	Acct Code: 703
Other Real Estate Loans/Lines of Credit	Assets: line 19	Acct Code: 386
Mortgage Pass-through Securities	Schedule C: line 13	Acct Code: 732
CMOs/REMICs	Schedule C: line 14	Acct Code: 733

Other Types of Institutions

Members not filing an FDIC or NCUA Call Report or an OTS Thrift Financial Report will be required to file with the Bank an annual, year-end information statement regarding holdings of Mortgage-related Assets using the FDIC Call Report definitions.

B. Activity-Based Stock Purchase Requirement

Each Member is required to purchase Activity-Based Stock in the following amounts:

1.	Advances
	Members are required to purchase Activity-Based Stock equal to 4.50% of the dollar amount of any outstanding advances under the Advances Agreement.
2.	Acquired Member Assets
	Members are required to purchase Activity-Based Stock equal to 4.50% of the outstanding principal balance of the Acquired Member Assets originated for or sold to the FHLBNY by a Member that remain on the FHLBNY’s balance sheet plus the principal amount of delivery commitments issued to the Member by FHLBNY for Acquired Member Assets to be held on the FHLBNY’s balance sheet, provided that the outstanding principal balance of Acquired Member Assets originated for or sold to the FHLBNY by a Member that are on the FHLBNY’s balance sheet as of the Calculation Date will not be subject to this requirement.
3.	Off-Balance Sheet Items
	Members are required to purchase Activity-Based Stock equal to the credit equivalent amount of any off-balance sheet items listed in Section 932.4(f), Table 2 of the Regulations which the FHLBNY has transacted on a Member’s behalf and which are continuing, excluding the principal amount of delivery commitments issued to the Member by FHLBNY for Acquired Member Assets, multiplied by zero.
4.	Derivative Contracts
	Members are required to purchase Activity-Based Stock equal to 0% of the carrying value on the FHLBNY’s balance sheet of Derivative Contracts between the Member and FHLBNY, as determined by FHLBNY under GAAP.

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EX-10.01

Exhibit 10.01

FEDERAL HOME LOAN BANK OF NEW YORK 2006 INCENTIVE COMPENSATION PLAN

I.	OBJECTIVE
	The objective of the Federal Home Loan Bank of New York’s (“Bank”) 2006 Incentive Compensation Plan (“Plan”) is to motivate employees to take actions that support the Bank’s strategies and lead to the attainment of the Bank’s business plan and fulfillment of its mission.
	The Plan is intended to accomplish this objective by:

• Linking annual cash pay-out award opportunities to Bank performance measured by the Bank’s “Dividend Capacity From Income”, “Enterprise Risk Management “ and “Targeted Housing and Community Development” goals as well as utilizing individual, department and group performance measures for certain employees where appropriate and applicable;

• Establishing the goal setting process as an effective reward system so that employee monetary interests are related to and dependent upon Bank performance; and

• Retaining top performing employees by affording them the opportunity to share in the Bank’s enhanced performance.

II. DEFINITIONS

A.	Bank: The Federal Home Loan Bank of New York, its successors and assigns.
B.	Board: The Board of Directors of the Federal Home Loan Bank of New York.
C.	Committee: The Compensation and Human Resources Committee of the Board.
D.	Fiscal Year: The 12-month period used as the annual accounting period by the Bank.
E.	Manager: The person to whom the Participant reports directly.
F.	Participant: An employee of the Bank as defined by the terms of the Financial Institutions Retirement Fund who is exempt from the application of the overtime provisions of the Fair Labor Standards Act and who is also selected by the President to participate in the Plan.
G.	Plan: This Incentive Compensation Plan, as may be amended or supplemented from time to time.
H.	Plan Year: 2006
I.	President: The Chief Executive Officer of the Bank, regardless of title, or his designee.

III. ADMINISTRATION

A.	The Plan, as adopted by the Committee on March 16, 2006, is effective for the Plan Year beginning January 1, 2006.
B.	The Plan shall be administered by the President, subject to any requirements for review and approval by the Committee that the Committee may establish. The Committee shall keep the Board apprised of any amendments to the Plan. The Director of Human Resources shall be the President’s designee until there is a written communication by the President naming other(s) to fulfill that duty. In all areas not specifically reserved by the Committee for its review and approval, decisions of the President or his designee concerning the Plan shall be binding on the Bank and on all Participants.
C.	While the President has the full power and authority to interpret and administer the Plan, he will also have the following specific rights and duties:

1.	To adopt, amend and rescind administrative guidelines, rules and regulations pertaining to the Plan.
2.	To accept, modify or reject recommendations of the Managers to set final awards.
3.	To interpret and rule on any questions pertaining to any provisions of the Plan.
4.	To retain all such other powers as may be necessary to discharge the duties and responsibilities herein.

	Notwithstanding the foregoing, matters specifically affecting the President shall be handled by the Committee.
D.	The President will be responsible for ensuring effective communication of Plan provisions each year. Each Participant will be given a copy of the Plan document and of any schedule deemed necessary by the President. Modifications or changes to the Plan will be documented and distributed to Participants as soon as practicable.
E.	Nothing contained in this Plan shall be construed as a contract of employment between the Bank and a Participant, or as a right of a Participant to be continued in the employment of the Bank, or as a limitation of the right of the Bank to discharge a Participant with or without cause. In addition, no Participant shall have a vested right to any monies due under this Plan until payment is actually received by Participant.

IV. ELIGIBILITY

A.	Employees in positions determined to have a measurable impact on company results and for whom incentive participation is consistent with competitive practice may be eligible for participation in the Plan.
B.	The President will select annually, for approval by the Committee, those positions which will be eligible for awards granted under the terms of the Plan. Eligibility may vary from year to year.
C.	Eligible positions are listed in Schedule A, incorporated by reference, which may be updated annually or more frequently, as appropriate. Incumbents in these positions are Participants in the Plan unless otherwise noted in Schedule A.
D.	New employees deemed eligible for Plan participation will be considered eligible immediately upon date of hire.

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V. INDIVIDUAL AWARD OPPORTUNITIES

A.	The President shall recommend to the Committee for its approval the award levels which shall be used to calculate awards earned by Plan Participants.
B.	Award levels shall be expressed as a percent of the base salary of each Participant for that Plan Year.
C.	Each position shall have an assigned threshold, target and maximum award opportunity level. The range of award opportunities for each Plan Participant is included in Schedule B, which is incorporated by reference. This Schedule B may be amended or otherwise modified from year to year by the Committee.

VI.

OBJECTIVE SETTING

The President shall from time to time recommend to the Committee Bankwide performance goals that incentive payments to Participants shall be based upon, either in their entirety or selectively. Individual and/or group performance measures and goals may be developed by Participants in collaboration with their Managers. The Bankwide performance goals will specify target performance levels as well as the achievement levels required to receive threshold and maximum incentive award amounts. Target performance goal(s) shall be designed to be attainable, but not without significant effort. Maximum performance goal(s) shall be established as goal(s) representing a “reach” for the Bank and/or the group or individual as applicable. The Committee shall review and have final approval over the Bankwide performance measures and goals for all Participants, including the President. Individual and/or group performance measures and goals for Participants other than the President will be reviewed and approved by the participant’s and/or group’s manager. Changing the measures of Bankwide performance or changing the achievement levels of Bankwide performance will require approval of the Committee.

VII.	OBJECTIVE WEIGHTING
	Actual incentive awards under the Plan will be based on (i) Bankwide performance results, and (ii) individual and/or group performance results, if applicable or appropriate. The relative weighting of Bank performance may vary.

VIII. PERFORMANCE MEASUREMENT

A.	Performance against goals will be measured as soon as practicable following the close of the Plan Year.
B.	Group and/or individual performance, where applicable, will be measured by each Participant’s Manager.

IX. AWARD DETERMINATION

A. Aggregate performance of Bankwide goals, individual and/or group goals, where applicable, will be used to determine the Participants’ awards. There will be no payout to Participants for Bankwide goals if results on all Bankwide goals fall below the threshold level. Should the Bank not meet all of its Bankwide goals, participants who have attained at least an overall performance rating of 3.0 will be paid an incentive award based on their individual performance component.

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B.	A Participant’s overall performance as rated in his/her last performance evaluation must be at least a 3.0 in order to receive an incentive payment. However, regardless of his or her overall rating, a Participant with a written performance warning in his or her employment file who does not also have corresponding documentation from his or her manager in his/her employment file evidencing acceptable improvement in the participant’s performance prior to the payment of the award shall not receive any incentive payment. Participants who have not had a regularly scheduled performance appraisal due to leave of absence shall be eligible to receive incentive payments.
C.	Participants that have attained an “Exceeds Requirements” or “Outstanding” rating in their performance evaluation will receive an additional 3% or 6%, respectively, of their base salary added to their Plan award.
D.	Recommendations will be made to the Committee regarding the actual Bankwide performance and the associated level of payments as soon as practicable following the conclusion of the Plan Year. Such recommendations shall be based on achieved levels of performance, measured against the performance objectives adopted for each portion of the award.
E.	Plan Participants, including the President, will receive a cash payment of the award as soon as practicable after final approval by the Committee.
F.	Awards earned may vary from the target award defined for each Plan Participant according to performance achieved by the Bank, and where applicable by the group or individual.
G.	Payments may vary from the assigned threshold, target and maximum award opportunity level as indicated in Schedule B if the Committee determines at the end of the Plan year that an adjustment to the schedule would better serve the purposes of the Plan.
H.	Individuals that are hired during the Plan Year, but in no event after October 31 of that year, to fill eligible positions will receive prorated incentive payments based on length of time worked. The final incentive payment will be calculated on a calendar day basis.
I.	If a Participant’s rank or assignment from one tier to another as indicated in Schedule B is changed, the incentive payment may be determined on a pro rata basis according to that portion of the Plan Year worked in each eligible position.
J.	Incentive payments for participants who are non-officers shall be calculated using the base salary as of the end of the Plan year without regard to prorating.
K.	If a Participant other than the President dies, the payment may be awarded based upon the judgment of the President. The final payment may be made after approval by the Committee following the conclusion of the Plan Year. If the President dies, the payment may be awarded based upon the judgment of the Board. The final payment may be made after approval by the Board following the conclusion of the Plan Year.

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L. If, prior to the payment of an award, (i) the employment of a Participant is terminated by the Bank or (ii) the Participant leaves the Bank voluntarily, no incentive award will be made or payable under this Plan, except in the discretion of the Committee (or in the case of the President, the Board).

X.	AMENDMENTS
	The Committee reserves the right to amend, modify or terminate the Plan at any time and for any reason. All amendments to the Plan shall be made in writing and shall be effective when approved by the Committee. Notwithstanding the foregoing, amendments affecting the President shall be approved by the Board.
XI.	OTHER PROVISIONS
	The provisions of the Plan shall be governed by the laws of the State of New York.

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EX-10.04

Exhibit 10.4

2007 DIRECTOR COMPENSATION POLICY

Effective as of January 1, 2007

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 the fee caps contained in Section 7 of the Federal Home Loan Bank Act (“Bank Act”) and the regulations of the Federal Housing Finance Board (“FHFB”) located at 12 C.F.R. 918 regarding Director compensation and expenses.

I. MEETING FEES

A.	Chairman
	The fee for the Chairman of the Board is $3,800 per Board meeting attended (subject to Section I.D. below).
B.	Vice Chairman
	The fee for the Vice Chairman of the Board is $3,000 per Board meeting attended (subject to Section I.D. below).
C.	Appointed and Elected Directors
	The fee for a Director, other than the Chairman or the Vice Chairman, is $2,300 per Board meeting attended (subject to Section I.D. below).
D.	Fee Caps
	In no event shall fees paid to any Director in a calendar year exceed any limitations imposed by Section 7 of the Bank Act and/or the regulations of the FHFB located at 12 C.F.R. 918.3.

II. EXPENSES

A. In General

1. Directors may be paid for reasonable travel, subsistence or 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 both appointed and elected Directors for attendance at Board and Committee meetings as established herein.

C. Annual Regional Stockholders’ Meetings

1. Reimbursement of reasonable expenses incurred by appointed and elected Directors attending the FHLBNY’s regional stockholders’ meetings is permitted.

D. Industry Meetings

1.

Reimbursement of appointed 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. Appointed directors attending industry events on behalf of the FHLBNY should register and identify themselves as directors of the FHLBNY.

2.

Reimbursement of elected 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 Board

1. Reimbursement of reasonable expenses may be paid to all Directors participating in meetings called by the Federal Housing Finance Board.

F. 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 lI B, C, D or E above) is permitted.

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. FHFB Regulation 12 C.F.R. 918.8 prohibits 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.

2

EX-10.05

Exhibit 10.05

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	84
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

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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	106
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

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(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.

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(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.

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(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.

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(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.

8

	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.

9

(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.

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(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.
(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.

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(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.
	(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).

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(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:

TABLE I

	Vesting
Completed Years of Vesting Service	Percentage
Less than 5		0	%
5 or more		100	%

TABLE II

	Vesting
Completed Years of Vesting Service	Percentage
Less than 2		0	%
2		20	%
3		40	%
4		60	%
5		80	%
6 or more		100	%

TABLE III

	Vesting
Completed Years of Vesting Service	Percentage
Less than 2		0	%
2		20	%
3		40	%
4		60	%
5 or more		100	%

TABLE IV

	Vesting
Completed Years of Vesting Service	Percentage
Less than 3		0	%
3 or more		100	%

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TABLE V

	Vesting
Completed Years of 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 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.

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(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 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.

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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.

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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.

(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;
(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);

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(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).

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(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.

(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.

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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.

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.
(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.

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(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.
(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.

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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;
(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;

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(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;

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(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;

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(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.

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(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		0.965		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		0.860		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		0.650		0.850		0.925		0.925		0.928		0.935		0.952		0.959		60
59		0,820		0.820		0.820		0.020		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		0.758		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		0.938		0.939		0.961		0.963		54
53						0.666		0.868		0.688		0.691						0.935		0.939		0.958		0.961		53
52						0.641		0.843		0.662		0.665						0.933		0.936		0.955		0.957		52
51						0.615		0.617		0.633		0.638						0.930		0.933		0.949		0.951		51
50						0.608		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		0.928		48
47						0.496		0.498		0.511		0.511						0.901		0.802		0.916		0.918		47
46						0.483		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						0.389		0.369		0.360		0.380		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		0.316		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		0.260		34
33										0.269		0.268										0.268		0.268		33
32										0.257		0.257										0.257		0.257		32
31										0,248		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		0.168		26
25										0,176		0.176										0.176		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										0.136		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 at 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		0.936		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		0.618		0.617						0.884		0.865		0.896		0.896		51
50						0.574		0.578		0.586		0.588						0.875		0.876		0.886		0.867		50
49						0.545		0.546		0.556		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		0.359		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		0.267										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		0.064										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 68				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		0.983		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		0.409		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 68				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		0.650		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		58
55		0.700		0.700		0.704		0.707		0.717		0.719		0.878		0.881		0.892		0.694			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			0.898		0.899		54
53						0.653		0.654		0.664		0.665						0.878		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		4
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		0.281		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											0.165		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		0.883		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						0.766		0.766		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		0.860		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		0.936		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		0.916		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		0.865		0.867		0.876		0.877		0.885		0.886		54
53						0.650		0.851		0.659		0.660						0.866		0.868		0.875		0.677		53
52						0.622		0.623		0.631		0.632						0.856		0.657		0.865		0.866		52
51						0.594		0.595		0.601		0.602						0.846		0.847		0.854		0.855		51
50						0.565		0.566		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						0.796		0.799		0.804		0.805		47
46						0.443		0.443		0.449		0.449						0.785		0.785		0.790		0.791		45
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		0.356		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						0.262		0.282		0.285		0.286						0.282		0.282		0.285		0.286		37
36										0.276		0.276										0.276		0.276		36
35										0.266		0.266										0.266		0.266		35
34										0.256		0.256										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 A50% 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		0.008		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
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
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

	Table IV
Appendix E
1/15 1/30 EARLY RETIREMENT FACTORS

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		0.160
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		0.861
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		0361		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

EX-10.06

Exhibit 10.06

THE FEDERAL HOME LOAN BANK
OF NEW YORK

BENEFIT EQUALIZATION PLAN

Effective as of
January 1, 1988

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.

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.

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.

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 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 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.

(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 on 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.

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.

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.

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.

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.

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.

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.

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.

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)

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.”

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 or 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.

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 reduction 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.

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.

3

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)

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 l, 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

(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 benefit 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.

- 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)

- 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 purchaseable 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:

By:	/s/ Barbara Sperrazza
	Secretary
(Seal)

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)

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

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 Dank 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)(l 7) 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.

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

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-l(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)(l7) and 415 of the IRC; and

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(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 1.409 A-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.

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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.

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

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(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.

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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.

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.

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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

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EX-10.07

Exhibit 10.07

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.

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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” means service as an employee of the Bank from the commencement date of employment by the Bank.

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 “BEP 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.

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1.11 “Profit Sharing Benefit” means and refers to the benefit determined pursuant to Article III.

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 BEP 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 BEP 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 BEP 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 and 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 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 in such other form as the Member shall have elected in writing on a form prescribed by the BEP Committee which is filed by the Member with the BEP 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. 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 BEP 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 BEP Committee. The last such written designation received by the BEP Committee shall be controlling; provided, however, that no designation, or change or revocation thereof, shall be effective unless received by the BEP 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 BEP 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 BEP 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 BEP 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 the Plan

6.01 The Board of Directors has delegated to the BEP 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 BEP 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 the calculation of the amount of benefits payable under the Plan, and to review claims for benefits under the Plan. The BEP 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 BEP 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 BEP 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 BEP 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 BEP Committee. The BEP 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 BEP 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 BEP Committee of any decision denying the claim in whole or in part. Such request shall be made in writing and filed with the BEP Committee within 30 days of such denial. A request for review shall contain all additional information which the claimant wishes the BEP Committee to consider. The BEP 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 BEP 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 BEP 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 BEP 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 BEP Committee in its sole discretion. The BEP 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 confirm 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 BEP 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 therefore has been made by a duly appointed legal representative), may, if the BEP 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 BEP 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 therefore.

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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 BEP Committee and shall be mailed by first-class mail or delivered to such location as shall be specified by the BEP 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 BEP 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 BEP Committee member nor for any mistake of judgment made in good faith. The Bank shall indemnify and hold harmless the Retirement Plan and each BEP 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.

15

EX-10.08

Exhibit 10.08

FEDERAL HOME LOAN BANK OF NEW YORK

SEVERANCE PAY PLAN

AS AMENDED EFFECTIVE JANUARY 1, 2008

TABLE OF CONTENTS

	ARTICLE	PAGE
I	DEFINITIONS		1
II	ESTABLISHMENT OF THE PLAN		3
III	PROVISIONS RELATING TO SEVERANCE BENEFITS		4
IV	GENERAL PROVISIONS		9
V	MISCELLANEOUS		11
VI	AMENDMENTS AND PLAN TERMINATION		12

 i

ARTICLE I

DEFINITIONS

1.01 “Bank” means the Federal Home Loan Bank of New York.

1.02 “Code” means and refers to the Internal Revenue Code of 1986, as amended.

1.03 “Date of Employment” means and refers to the date on which an individual was first employed by the Bank as an Employee.

1.04 “Effective Date” means January 1, 2008.

1.05 “Employee” means and refers to any individual who is a regular employee of the Bank who works twenty (20) hours a week or more and excludes interns and other individuals employed by the Bank whose employment is intended not to exceed one thousand (1,000) hours in any twelve (12) month period.

1.06 “Employment” means and refers to the legal relationship of employment between an Employee and the Bank.

1.07 “Exempt Employee” means and refers to an Employee who is exempt from the overtime pay provisions of the Fair Labor Standards Act of 1938, as amended.

1.08 “Non-Exempt Employee” means and refers to an Employee who is subject to the overtime pay provisions of the Fair Labor Standards Act of 1938, as amended.

1.09 “Officer” means and refers to an officer of the Bank who has been designated as such by the Board of Directors of the Bank.

1.10 “Outplacement Services” means and refers to internal and/or external professional assistance provided to Employees following their Termination of Employment with the Bank with respect to their search for new employment.

1.11 “Periods of Service” means and refers to the number of six (6) month periods, in the aggregate, for which an Employee is employed by the Bank, commencing with the Date of Employment of the Employee and ending with the date of Termination of the Employee’s Employment with the Bank, both dates inclusive, excluding any period of Employment which Terminated under circumstances under which the Employee was not eligible for Severance Benefits under this Plan.

1.12 “Plan” means this Federal Home Loan Bank of New York Severance Pay Plan, as amended from time to time hereafter.

1.13 “Plan Administrator” means and refers to the Director of Human Resources of the Bank.

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1.14 “Reduction in Force” or “RIF” means and refers to a systematic series of Terminations of Employment of Employees by the Bank intended to lead to a permanent reduction in staffing.

1.15 “Release” means and refers to the elimination of a position with the Bank as part of a RIF, reorganization, or other management action, where no other Employment with the Bank is offered to an Employee and the Employment of the affected Employee is involuntarily Terminated.

1.16 “Resignation,” “Resign,” and “Resigned” mean and refer to a Termination of Employment with the Bank initiated by an Employee, other than a resignation requested by the Bank.

1.17 “Severance Benefits” means and refers to the amount payable under this Plan to an Employee qualifying for Severance Benefits, determined pursuant to the provisions of Section 3.04 and computed with respect to and based upon the base weekly salary of the Employee immediately preceding the date on which such Severance Benefits commence pursuant to Article III of this Plan.

1.18 “Termination of Employment” and “Terminated,” when used with reference to and in conjunction with Employment, have the meaning set forth in Section 3.11.

1.19 “Termination for Cause” means and refers to the Termination by the Bank of the employment of an Employee for (i) the commission of an illegal or unethical act, (ii) a violation of established Bank policy or practice, or (iii) the failure of the Employee to perform the duties of his or her position in a satisfactory manner, in each case as determined by the Plan Administrator in his sole and exclusive discretion.

1.20 “Year” means and refers to the taxable year of an Employee as such term is used in and for purposes of the Code.

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ARTICLE II

ESTABLISHMENT OF THE PLAN

2.01 Establishment of the Plan. The Bank hereby amends the Federal Home Loan Bank of New York Severance Pay Plan, to set forth the terms and provisions under which Severance Benefits will be granted to Employees whose Employment with the Bank is Terminated under certain specified circumstances, effective January 1, 2008.

2.02 Replacement of Prior Policies. This Plan supersedes and replaces any Bank policies relating to the subject matter of this Plan that may have been in effect prior to the Effective Date.

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ARTICLE III

PROVISIONS RELATING TO SEVERANCE BENEFITS

3.01 Participation. Participation in this Plan shall be extended to all Employees of the Bank.

3.02 Eligibility for Severance Benefits. An Employee who shall have completed at least two (2) Periods of Service shall be eligible for Severance Benefits under this Plan upon the Termination of the Employee’s Employment with the Bank under any of the following circumstances:

(a) The Employee’s position has been eliminated; or

(b) The employment of the Employee has been terminated as part of a RIF;

(c) The Employee has been determined by the Plan Administrator, in the sole and exclusive discretion of the Plan Administrator, to be unable to perform in a satisfactory manner the duties of the position in which the Employee is then employed, where such inability to perform has been determined by the Plan Administrator, in his sole and exclusive discretion, to not warrant a Termination for Cause, as defined in Section 1.19; or

(d) The Employee has Resigned from his or her Employment with the Bank either (i) following a reduction in salary grade, level, or rank, or a significant reduction of duties and responsibilities, as determined by the Plan Administrator in his sole and exclusive discretion, except when such reduction occurs as a result of disciplinary action by the Bank, or (ii) following a refusal to accept a transfer to a location outside a fifty (50) mile radius of the location at which the Employee is presently employed;, provided, in either case, that the Employee shall have provided to the Plan Administrator within not more than thirty (30) days following the occurrence of such condition, at least ten (10) days’ notice in writing of the condition referred to in clause (i) or (ii), as applicable, and his or her intention to Resign based thereon and that the Bank shall not have remedied the condition for such Resignation within thirty (30) days following the giving of such notice by the Employee.

3.03 Disqualification for Severance Benefits. Anything contained in this Plan to the contrary notwithstanding, an Employee shall not be eligible for Severance Benefits under this Plan upon his or her termination of employment with the Bank where such termination is due to any of the following circumstances:

(a) A Resignation by the Employee, other than one described in paragraph (d) of Section 3.02, or a Resignation by the Employee without giving the ten (10) days’ notice in writing to the Plan Administrator required by said paragraph (d) or prior to the expiration of said period, or if the condition on which such Resignation was based shall have been remedied by the Bank within the thirty (30) day period referred to in said paragraph (d);

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(b) The Resignation of the Employee prior to the effective date of the termination of the Employee’s employment as a result of a Release; or

(c) The Employee’s Termination for Cause;

in each case, as determined by the Plan Administrator in his sole and absolute discretion.

3.04 Computation of Severance Benefits. The amount of Severance Benefits payable under this Plan to an Employee qualifying for Severance Benefits under this Plan shall be determined based (i) upon the level of the Employee’s position with the Bank at the date of the termination of the Employee’s employment with the Bank and (ii) the Employee’s Periods of Service with the Bank:

(a) Officers of the Bank shall be eligible for two (2) weeks of Severance Benefits for each Period of Service with the Bank, but not less than six (6) weeks of Severance Benefits;

(b) Exempt Employees of the Bank shall be eligible for one (1) week of Severance Benefits for each Period of Service with the Bank, but not less than four (4) weeks of Severance Benefits; and

(c) Non-Exempt Employees of the Bank shall be eligible for one (1) week of Severance Benefits for each Period of Service with the Bank, but not less than two (2) weeks of Severance Benefits;

in each case, subject to the provisions of Section 3.05.

3.05 Maximum Amount of Severance Benefits. Anything in this Plan to the contrary notwithstanding, in no event shall an Employee be eligible to receive Severance Benefits, in the aggregate for all Periods of Service, whether or not continuous, totaling more than the lesser of (i) thirty-six (36) weeks in the case of an Officer of the Bank, twenty-four (24) weeks in the case of an Exempt Employee of the Bank, and twelve (12) weeks in the case of a Non-Exempt Employee of the Bank, or (ii) two (2) times the lesser of (a) the sum of the Employee’s annualized compensation based upon his 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 Code for the Year in which the Employment of the Employee Terminated.

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3.06 Method of Payment of Severance Benefits. The Severance Benefits payable under the provisions of Section 3.04 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 the agreement referred to in Section 3.10 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 provided, that, anything in this Plan to the contrary notwithstanding, in no event shall any Severance Benefits be paid or payable to any Employee later than the last day of the second Year following the Year in which the Termination of Employment of the Employee occurred.

3.07 Termination of Severance Benefits. Anything in this Plan to the contrary notwithstanding, the Severance Benefits for which an Employee is eligible under this Plan shall cease and terminate no later than upon the Employee’s reemployment by the Bank or by an employer other than the Bank. The Employee shall be responsible for notifying the Plan Administrator of his or her reemployment. If the Employee is reemployed and fails to give notice to the Plan Administrator of his or her reemployment, the Employee shall be liable for repayment to the Bank of any Severance Benefits received under this Plan following the date of reemployment.

3.08 Continuation of Employee Benefits. (i) An Employee who is eligible to receive Severance Benefits under this Plan who was, at the date of Termination of his or her Employment, a participant in the Federal Home Loan Bank of New York Life Insurance Plan shall, while receiving Severance Benefits under this Plan, be eligible to continue such participation in such plan, (ii) and an Employee who is eligible to receive Severance Benefits under this Plan who was, at the date of Termination of his or her Employment, a Participant in the Federal Home Loan Bank of New York Medical Benefits Plan, and any Medical Benefits Plan to which such plan relates, and who shall duly and timely elect to continue such participation under the provisions of the Consolidated Omnibus Budget Reconciliation Act of 1986, shall, while such continuation coverage election remains in effect, be eligible to continue such participation, with the cost of such coverage to be borne by the Bank, but such Employee shall not be eligible, following the Termination of his or her Employment, to participate in the Federal Home Loan Bank of New York Flexible Benefits Plan. The continued participation of such Employee in any of such plans under the provisions of this Section 3.08 shall continue only for so long as the Employee shall continue to be eligible for receive and shall be receiving Severance Benefits under this Plan, which participation shall cease upon the Employee’s reemployment or other termination of Severance Benefits. Any previously accrued vacation pay to which the Employee is entitled will be paid to the Employee in a lump sum as soon as practicable following the Termination of the Employee’s Employment. Any cash advances which were made to the Employee prior to the Termination of the Employee’s Employment will be subtracted from any accrued vacation pay due to the Employee, and if no such accrued vacation pay is due to the Employee, any such cash advances shall be required to be repaid by the Employee upon the termination of the Employee’s employment as a condition of receiving the Severance Benefits provided for under the provisions of Section 3.02.

6

3.09 Outplacement Services. The Bank may, on a case by case basis, but shall not be required to, provide Outplacement Services to Terminated Employees eligible for Severance Benefits under this Plan, the determination as to whether to provide Outplacement Services to any Employee being within the sole and exclusive discretion of the Plan Administrator; provided, that such Outplacement Services shall not be provided to a Terminated Employee beyond the last day of the second Year following the Year in which the Termination of Employment of the Employee occurred. Generally, individual counseling may be provided only to Officers and group counseling may be provided to other Exempt Employees and to Non-Exempt Employees.

3.10 Severance Agreement. An Employee whose Employment with the Bank is Terminated under conditions making the Employee eligible for Severance Benefits under this Plan shall, as a condition of receiving such Severance Benefits, be required to sign an agreement, in the form prescribed by the Bank, setting forth the terms on which Severance Benefits are to be paid or provided to the Employee and the acceptance thereof by the Employee. Such agreement shall include a release of any claims the Employee may have, at the date of the agreement or thereafter, against the Bank and any present and former directors, officers, and employees of the Bank.

3.11 Termination of Employment. For all purposes of this Plan, the Employment of an Employee shall be deemed to have been Terminated, and a Termination of Employment of an Employee shall be deemed to have occurred, upon the earliest to occur of the following events:

(i) On the effective date of a RIF applicable to the Employee;

(ii) On the effective date of the Employee’s Resignation from Employment;

(iii) On the effective date of the elimination by the Bank of the Employee’s position; and

(iv) On the date on which it is anticipated by the Bank and the Employee that no further services will be performed by the Employee after such date (whether as an Employee or as an independent contractor) or that the level of bona fide services the Employee will perform after such date will permanently decrease to no more than twenty percent (20%) of the average level of bona fide services performed (whether as an Employee or an independent contractor) over the preceding thirty-six (36) month period; provided, that the Employment relationship shall be treated as continuing while the Employee is on military leave, sick leave, or other bona fide leave of absence (which shall be deemed to exist only if there is a reasonable expectation that the Employee will return to perform services for the Bank) if the period of such leave does not exceed six (6) months, or, if longer, so long as the Employee retains a right to reemployment with the Bank under an applicable statute or by contract, unless the leave of absence is due to any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than six (6) months, where such impairment causes the Employee to be unable to perform the duties of his position of Employment or any substantially similar position of Employment, in which case a twenty-nine (29) month period of absence may be substituted for such six (6) month period; and provided, further, that if the period of leave described in the preceding provision shall exceed six (6) months (or twenty-nine (29) months, if applicable) and the Employee does not retain a right to reemployment, the Employment of the Employee shall be deemed to have Terminated on the first date following the end of such period.

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3.12 Determinations by the Plan Administrator to be Final. All determinations of the Plan Administrator in the administration and application of the terms and provisions of this Plan shall be final and binding upon all Employees without any right of appeal.

3.13 Exceptional Cases. The Bank reserves the right, in its sole and absolute discretion, to modify the application of the terms and provisions of this Plan in the case of any Employee whose Employment with the Bank shall Terminate, subject to the approval of the President of the Bank; provided, that nothing in this Section 3.13 shall be deemed to authorize or permit the payment of Severance Benefits or the continuation of benefits described in Section 3.08 or 3.09 to an Employee for a period that extends beyond the end of the second Year following the Year in which the Termination of Employment of the Employee occurred; provided, that nothing herein shall preclude the Bank from reimbursing an Employee for benefits incurred by the Employee during the period described in the foregoing provision as long as such reimbursement is paid no later than the third Year following the Year in which the Termination of Employment occurred or from reimbursing an Employee for payments of medical expenses incurred and paid by the Employee and not reimbursed by a person other than the Employee and allowable as a deduction under Section 213 of the Code (disregarding the requirement of subsection (a) thereof that the deduction is available only to the extent that such expenses exceed seven and one-half percent (7.5%) of adjusted gross income) during a period for which the Employee is or would be entitled to continuation coverage under a group health plan of the Bank under the Consolidated Omnibus Budget Reconciliation Act of 1986 if the Employee elected such coverage and paid the applicable premiums. Anything in this Plan to the contrary notwithstanding, the time or schedule of payments of any benefits provided under this Plan shall not be accelerated, nor shall any payment of any benefits be deferred to a date other than the date fixed for such payment; provided that the Bank reserves the right, in its sole and absolute discretion, to pay in a lump sum upon the Termination of Employment any Severance Benefits that may become payable to any Employee under the terms and provisions of this Plan to whom the Bank shall, in its sole and absolute discretion, provide no contribution of employee benefits or reimbursements pursuant to Section 3.08 or 3.09.

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ARTICLE IV

GENERAL PROVISIONS

4.01 Allocation of Responsibility for Administration. The designated representatives of the Bank shall have only those specific powers, duties, responsibilities, and obligations as are specifically given them under this Plan. The Plan Administrator shall have the sole responsibility for the administration of this Plan, which responsibility is specifically described in this Plan. Any direction given, information furnished, or action taken, by the Plan Administrator shall be in accordance with the provisions of the Plan authorizing or providing for such direction, information, or action. The Plan Administrator may rely upon any such direction, information, or action of another employee of the Bank as being proper under this Plan and is not required to inquire into the propriety of any such direction, information, or action. It is intended under this Plan that the Plan Administrator shall be responsible for the proper exercise of his own powers, duties, responsibilities, and obligations under this Plan and shall not be responsible for any act or failure to act of another employee of the Bank. Neither the Plan Administrator nor the Bank makes any guarantee to any Employee in any manner for any loss or other event because of the Employee’s participation in this Plan.

4.02 Appointment of Plan Administrator. The Plan shall be administered by the Plan Administrator or his duly designated representative pursuant to Section 4.01.

4.03 Records and Reports. The Plan Administrator shall exercise such authority and responsibility as he deems appropriate in order to comply with the terms of the Plan relating to the records of the Participants. The Plan Administrator shall be responsible for complying with any and all reporting, filing, and disclosure requirements and other applicable laws and regulations with respect to the Plan.

4.04 Other Powers and Duties of the Plan Administrator. The Plan Administrator shall have such duties and powers as may be necessary to discharge his duties under this Plan, including, but not limited to, the following:

(a)	to prepare and distribute, in such manner as the Plan Administrator determines to be appropriate, information explaining the Plan;
(b)	to receive from the Bank and from Participants such information as shall be necessary for the proper administration of the Plan;
(c)	to furnish to the Bank, upon request, such annual reports with respect to the administration of the Plan as are reasonable and appropriate; and
(d)	to appoint individuals to assist in the administration of the Plan and any other agents he deems advisable, including, but not limited to, legal and actuarial counsel.

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The Plan Administrator shall have the exclusive discretionary authority and power to determine eligibility for Severance Benefits and to construe the terms and provisions of the Plan, determine questions of fact and law arising under the Plan, direct disbursements pursuant to the Plan, and exercise all other powers specified herein or which may be implied from the provisions hereof, and the Plan Administrator may adopt such standards and procedures and such rules for the conduct of the administration of the Plan as he may deem appropriate. When making a determination or calculations, the Plan Administrator may rely upon information furnished by an Employee, the Bank, or the legal counsel of the Bank.

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ARTICLE V

MISCELLANEOUS

5.01 Non-guarantee of Employment. Nothing contained in this Plan shall be construed as a contract of employment between the Bank and any Employee, or as a right of any Employee to be continued in the employ of the Bank, or as a limitation of the right of the Bank to discharge any of its Employees, with or without cause.

5.02 Rights to Bank’s Assets. No Employee or other person shall have any right to, or interest in, any assets of the Bank, whether upon Termination of Employment or otherwise.

5.03 Nonalienation of Severance Benefits. Severance Benefits payable or other rights or benefits provided under this Plan shall not be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, charge, garnishment, execution, or levy of any kind, either voluntary or involuntary, including any such liability which is for alimony or other payments for the support of a spouse or former spouse, or for any other relative of the Employee, prior to actually being received by the person eligible for the benefit under the terms of the Plan; and any attempt to anticipate, alienate, sell, transfer, assign, pledge, encumber, charge, or otherwise dispose of any right to Severance Benefits payable or other rights or benefits provided under this Plan shall be void. The Bank shall not in any manner be liable for, or subject to, the debts, contracts, liabilities, engagements, or torts of any person eligible for Severance Benefits or other rights or benefits provided under this Plan.

5.04 Divestment of Severance Benefits. Subject only to the specific provisions of this Plan, nothing shall be deemed to divest an Employee of a right to the Severance Benefits or other rights or benefits provided for which the Employee may be or become eligible in accordance with the provisions of this Plan.

5.05 Discontinuance of Severance Benefits. In the event of a permanent discontinuance of the Plan, or of any Severance Benefits thereunder, all Employees shall receive any and all Severance Benefits for which they were eligible as of the effective date of such discontinuance.

5.06 Construction. Except where otherwise indicated or unless the context of this Plan clearly requires otherwise, references to the plural include the singular, references to the singular include the plural, and references to any of the masculine, feminine, or neuter include each of the similar masculine, feminine, or neuter, and the terms “hereof,” “herein,” “hereby,” “hereunder,” and all similar terms refer to this Plan as a whole and not to any particular provision of this Plan.

5.07 Governing Law. This Plan shall be construed, administered, and enforced according to the laws of the State of New York.

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ARTICLE VI

AMENDMENTS AND PLAN TERMINATION

6.01 Termination, Modification, and Amendment of the Plan. Notwithstanding anything to the contrary stated in this Plan, the Bank expressly reserves the right, at any time, for any reason, and without limitation, to terminate, modify, or otherwise amend this Plan and any or all of the Severance Benefits provided hereunder, either in whole or in part, whether as to all persons covered hereby or as to one or more groups thereof. Those rights include specifically, but are not limited to, (i) the right to terminate Severance Benefits under this Plan with respect to all, or any individual or group of, Employees, (ii) the right to modify Severance Benefits under this Plan to all, or any individual or group of, Employees, or (iii) the right to amend this Plan, or any term or condition hereof; in each case, whether or not such rights are exercised with respect to any other Employees; provided, that no modification or amendment shall be adopted by the Bank which shall adversely affect the treatment for federal income tax purposes of benefits provided under this Plan to Employees whose Employment is Terminated under conditions entitling them to such benefits.

6.02 Action by the Bank. The termination, modification, or other amendment of this Plan shall be effected by resolution of the Board of Directors of the Bank.

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EX-10.09

Exhibit 10.09

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, the ability to participate in a “variable” or “at-risk” short-term incentive compensation plan), (b) retirement related benefits (i.e., defined benefit and defined contribution plans) and (c) other benefits. 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 and fitness center reimbursement. An additional benefit offered to all officers, age 40 or greater, or who are at VP level or above), is a physical examination every 18 months. (Participation in non-qualified defined contribution and defined benefit plans are offered to employees at the rank of Vice President and above who exceed income limitations established by the Internal Revenue Service for three out of five consecutive years and who are also approved for inclusion by the Bank’s Benefit Equalization Plan Committee.)

The annual base salaries for the Named Executive Officers are as follows (whole dollars):

	2007		2008
Alfred A. DelliBovi	$	583,539	$	615,634
Patrick A. Morgan		292,259		305,411
Peter S. Leung		387,623		405,066
Paul B. Héroux		275,616		288,019
Craig E. Reynolds		270,443		282,613

More information about compensation arrangements can be found in Item 11 of the Annual Report on Form 10-K.

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)	2007		2006		2005		2004
Earnings:
Income before assessments	$	441,085	$	388,525	$	312,467	$	221,543
Fixed Charges		4,276,118		3,934,129		2,726,073		1,658,480
Total Earnings	$	4,717,203	$	4,322,654	$	3,038,540	$	1,880,023
Fixed Charges:
Interest Expense	$	4,276,118	$	3,934,129	$	2,726,073	$	1,658,480
Estimated interest component of other expenses		1,000		1,000		1,000		1,000
Total Fixed Charges	$	4,277,118	$	3,935,129	$	2,727,073	$	1,659,480
Ratio of Earnings to Fixed Charges		1.10		1.10		1.11		1.13

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 28, 2008

/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 28, 2008

/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, 2007, as filed with the Securities and Exchange Commission (the “Report”), I, Alfred 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 28, 2008

/s/ Alfred A. DelliBovi  

Alfred A. DelliBovi 

President and Chief Executive Officer
(Principal Executive Officer) 

EX-32.02

Exhibit 32.02

Certification by the 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, 2007, 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 28, 2008

/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 2008 is currently composed of eight Directors, three of whom were appointed to the Board by the Federal Housing Finance Board and five of whom were elected to the Board by the members of the FHLBNY. The Audit Committee had seven meetings during 2007 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 2007 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 firms 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, 2007, for filing with the SEC.

FHLBNY AUDIT COMMITTEE MEMBERS

2007	2008
Carl A. Florio, Chairman	Carl A. Florio, (Former Chair, left Board on February 22, 2008)
George L. Engelke, Jr.	Anne Evans Estabrook
Anne Evans Estabrook	José Ramon González
José Ramon González	Joseph R. Ficalora
Joseph R. Ficalora	Michael M. Horn
Michael M. Horn (Acting Chair)	Katherine J. Liseno
Katherine J. Liseno	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

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 Board (“FHFB”) 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 all applicable laws, regulations and Bank policies.

• The establishment, maintenance and performance of the internal audit function.

• The annual independent audit of the Bank’s financial statements.

• 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 or to determine that the Bank’s financial statements and disclosures are complete and accurate and in accordance with generally accepted accounting principles (“GAAP”). These are the responsibilities of management and the Independent Registered Public Accounting Firm.

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. With Regard to Documents/Reports Review

• Adopt a formal written Committee Charter. Review actions of bodies promulgating laws, rules and regulations and, in light of such reviews, assess the adequacy of and amend, where appropriate, the Committee Charter as required, but no less frequently than on an annual basis. Re-adopt the Committee Charter no less often than every three years. Recommend the Board approve the Committee Charter and any amendments, as appropriate.

• Review and approve the Internal Audit Charter on an annual basis.

• Review and approve the internal audit annual plan.

• Timely obtain and review reports delivered from the Independent Registered Public Accounting Firm.

• Review the basis for 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.

• Obtain annually a formal written statement from the Independent Registered Public Accounting Firm regarding their independence for consistency with Independence Standards Board Standard 1.

• Discuss with the Independent Registered Public Accounting Firm the requirements of Statement of Auditing Standards 61 regarding communications with audit committees and 89 and 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.

• Meet with the Bank’s Independent Registered Public Accounting Firm in respect of any audit report by the Independent Registered Public Accounting Firm, and periodically meet separately with the Bank’s management, with internal audit staff, and with 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.

• Prepare a written Committee report as required by the applicable rules of the FHFB and SEC to be included in the Bank’s Annual proxy statement.

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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.

• 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.

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.

• The Committee shall 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 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 auditor’s 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.

• 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) 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.

b) 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, regulations and policies and monitor the results of these compliance efforts.

• 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.

c) Strategic Business Plans

• Review the policies and procedures established by senior management to assess and monitor implementation of the Bank’s strategic business plan and the operating goals and objectives contained therein.

d) 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.

e) Performance Evaluation

• Conduct a self-evaluation of the Committee’s performance of its responsibilities and provide a report to the Board.

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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 appointive and elective 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, and one Committee member shall be designated as the 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.

Date: August 2, 2007

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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