UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period ended March 31, 2009

Commission file number: 000-51397

Federal Home Loan Bank of New York

(Exact name of registrant as specified in its charter)

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

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

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

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

Indicate by check mark 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.

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 Exchange Act). Yes o No þ

The number of shares outstanding of the issuer’s common stock as of April 30, 2009 was 53,243,486.

FEDERAL HOME LOAN BANK OF NEW YORK
FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2009
Table of Contents

	Page
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS (Unaudited):
Statements of Condition (Unaudited) as of March 31, 2009 and December 31, 2008		1
Statements of Income (Unaudited) for the Three Months ended March 31, 2009 and 2008		2
Statements of Capital (Unaudited) for the Three Months ended March 31, 2009 and 2008		3
Statements of Cash Flows (Unaudited) for the Three Months ended March 31, 2009 and 2008		4
Notes to Financial Statements (Unaudited)		6
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		67
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		153
Item 4T. CONTROLS AND PROCEDURES		158
Part II. OTHER INFORMATION		159
Item 1. LEGAL PROCEEDINGS		159
Item 1A. RISK FACTORS		159
Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS		159
Item 3. DEFAULTS UPON SENIOR SECURITIES		159
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS		159
Item 5. OTHER INFORMATION		159
Item 6. EXHIBITS		160
Exhibit 10.01
Exhibit 10.02
Exhibit 31.01
Exhibit 31.02
Exhibit 32.01
Exhibit 32.02

Federal Home Loan Bank of New York

Statements of Condition — Unaudited (in thousands, except per share data)

As of March 31, 2009 and December 31, 2008

	March 31, 2009			December 31, 2008
Assets
Cash and due from banks (Note 2)	$	32,136		$	18,899
Interest-bearing deposits (Note 3)		8,602,233			12,169,096
Federal funds sold		500,000			—
Available-for-sale securities, net of unrealized losses of $33,994 at March 31, 2009 and $64,420 at December 31, 2008 (Note 5)		2,641,996			2,861,869
Held-to-maturity securities (Note 4)
Long-term securities		9,935,079			10,130,543
Certificates of deposit		300,000			1,203,000
Advances (Note 6)		104,463,598			109,152,876
Mortgage loans held-for-portfolio, net of allowance for credit losses of $1,848 at March 31, 2009 and $1,406 at December 31, 2008 (Note 7)		1,430,899			1,457,885
Accrued interest receivable		411,500			492,856
Premises, software, and equipment		13,817			13,793
Derivative assets (Note 15)		11,463			20,236
Other assets		16,217			18,838
Total assets	$	128,358,938		$	137,539,891
Liabilities and capital
Liabilities
Deposits (Note 9)
Interest-bearing demand	$	2,306,887		$	1,333,750
Non-interest bearing demand		7,528			828
Term		58,000			117,400
Total deposits		2,372,415			1,451,978
Consolidated obligations, net (Note 8)
Bonds (Includes $25,377 at March 31, 2009 and $998,942 at December 31, 2008 at fair value under the fair value option)		69,582,076			82,256,705
Discount notes		48,721,626			46,329,906
Total consolidated obligations		118,303,702			128,586,611
Mandatorily redeemable capital stock (Note 11)		139,961			143,121
Accrued interest payable		385,121			426,144
Affordable Housing Program (Note 10)		128,368			122,449
Payable to REFCORP (Note 10)		41,815			4,780
Derivative liabilities (Note 15)		1,031,771			861,660
Other liabilities		132,658			75,753
Total liabilities		122,535,811			131,672,496
Commitments and Contingencies (Notes 8, 10, 15 and 17)
Capital (Note 11)
Capital stock ($100 par value), putable, issued and outstanding shares:
54,130 and 55,857 at March 31, 2009 and December 31, 2008		5,413,026			5,585,700
Unrestricted retained earnings		488,895			382,856
Accumulated other comprehensive income (loss) (Note 12)
Net unrealized loss on available-for-sale securities		(33,994	)		(64,420	)
Non-credit portion of OTTI on held-to-maturity securities		(9,938	)		—
Net unrealized loss on hedging activities		(28,312	)		(30,191	)
Employee supplemental retirement plans (Note 14)		(6,550	)		(6,550	)
Total capital		5,823,127			5,867,395
Total liabilities and capital	$	128,358,938		$	137,539,891

The accompanying notes are an integral part of the unaudited financial statements.

1

Federal Home Loan Bank of New York

Statements of Income — Unaudited (in thousands, except per share data)

For the three months ended March 31, 2009 and 2008

	March 31,
	2009			2008
Interest income
Advances (Note 6)	$	502,222		$	871,785
Interest-bearing deposits (Note 3)		8,918			8,999
Federal funds sold		68			29,418
Available-for-sale securities (Note 5)		8,519			9,483
Held-to-maturity securities (Note 4)
Long-term securities		126,820			134,348
Certificates of deposit		508			102,252
Mortgage loans held-for-portfolio (Note 7)		19,104			19,633
Loans to other FHLBanks and other		—			1
Total interest income		666,159			1,175,919
Interest expense
Consolidated obligations-bonds (Note 8)		343,707			731,261
Consolidated obligations-discount notes (Note 8)		89,378			271,283
Deposits (Note 9)		777			15,175
Mandatorily redeemable capital stock (Note 11)		878			4,278
Cash collateral held and other borrowings		37			471
Total interest expense		434,777			1,022,468
Net interest income before provision for credit losses		231,382			153,451
Provision for credit losses on mortgage loans		443			30
Net interest income after provision for credit losses		230,939			153,421
Other income (loss)
Service fees		985			691
Instruments held at fair value — Unrealized gain (Note 16)		8,313			—
Total OTTI losses		(15,203	)		—
Portion of loss recognized in other comprehensive income		9,938			—
Net impairment losses recognized in earnings		(5,265	)		—
Net realized and unrealized gain (loss) on derivatives and hedging activities (Note 15)		(13,666	)		866
Net realized gain from sale of available-for-sale securities (Note 5)		440			—
Other		46			(183	)
Total other income (loss)		(9,147	)		1,374
Other expenses
Operating		18,094			16,451
Finance Agency and Office of Finance		1,967			1,453
Total other expenses		20,061			17,904
Income before assessments		201,731			136,891
Affordable Housing Program (Note 10)		16,557			11,611
REFCORP (Note 10)		37,035			25,056
Total assessments		53,592			36,667
Net income	$	148,139		$	100,224
Basic earnings per share (Note 13)	$	2.72		$	2.30
Cash dividends paid per share	$	0.75		$	2.12

The accompanying notes are an integral part of the unaudited financial statements.

2

Federal Home Loan Bank of New York

Statements of Capital — Unaudited (in thousands, except per share data)

For the three months ended March 31, 2009 and 2008

										Accumulated
	Capital Stock1									Other						Total
	Class B						Retained			Comprehensive			Total			Comprehensive
	Shares			Par Value			Earnings			Income (Loss)			Capital			Income (Loss)
Balance, December 31, 2007		43,680		$	4,367,971		$	418,295		$	(35,675	)	$	4,750,591
Proceeds from sale of capital stock		9,287			928,754			—			—			928,754
Redemption of capital stock		(7,623	)		(762,253	)		—			—			(762,253	)
Shares reclassified to mandatorily redeemable capital stock		(583	)		(58,344	)		—			—			(58,344	)
Cash dividends ($2.12 per share) on capital stock		—			—			(89,270	)		—			(89,270	)
Net Income		—			—			100,224			—			100,224		$	100,224
Net change in Accumulated other comprehensive income:
Net unrealized loss on available-for-sale securities		—			—			—			(16,661	)		(16,661	)		(16,661	)
Hedging activities		—			—			—			(5,221	)		(5,221	)		(5,221	)
																$	78,342
Balance, March 31, 2008		44,761		$	4,476,128		$	429,249		$	(57,557	)	$	4,847,820
Balance, December 31, 2008		55,857		$	5,585,700		$	382,856		$	(101,161	)	$	5,867,395
Proceeds from sale of capital stock		10,418			1,041,817			—			—			1,041,817
Redemption of capital stock		(12,145	)		(1,214,491	)		—			—			(1,214,491	)
Shares reclassified to mandatorily redeemable capital stock		—			—			—			—			—
Cash dividends ($0.75 per share) on capital stock		—			—			(42,100	)		—			(42,100	)
Net Income		—			—			148,139			—			148,139		$	148,139
Net change in Accumulated other comprehensive income:
Non-credit portion of OTTI on held-to-maturity securities		—			—			—			(9,938	)		(9,938	)		(9,938	)
Net unrealized loss on available-for-sale securities		—			—			—			30,426			30,426			30,426
Hedging activities		—			—			—			1,879			1,879			1,879
																$	170,506
Balance, March 31, 2009		54,130		$	5,413,026		$	488,895		$	(78,794	)	$	5,823,127

¹ Putable stock

The accompanying notes are an integral part of the unaudited financial statements.

3

Federal Home Loan Bank of New York

Statements of Cash Flows — Unaudited (in thousands)

For the three months ended March 31, 2009 and 2008

	March 31,
	2009			2008
Operating activities
Net Income	$	148,139		$	100,224
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization:
Net premiums and discounts on consolidated obligations, investments, mortgage loans and other adjustments		(16,488	)		(117,965	)
Concessions on consolidated obligations		1,858			3,362
Premises, software, and equipment		1,323			1,159
Provision for credit losses on mortgage loans		443			30
Net realized (gains) from sale of available-for-sale securities		(440	)		—
Net impairment losses on held-to-maturity securities		5,265			—
Change in net fair value adjustments on derivatives and hedging activities		10,927			(1,010	)
Change in fair value adjustments on financial instruments held at fair value		(8,313	)		—
Net change in:
Accrued interest receivable		81,356			93,986
Derivative assets due to accrued interest		122,496			37,513
Derivative liabilities due to accrued interest		(184,242	)		(36,709	)
Other assets		2,353			1,473
Affordable Housing Program liability		5,919			5,280
Accrued interest payable		(48,275	)		19,615
REFCORP liability		37,035			1,058
Other liabilities		(2,619	)		(1,380	)
Total adjustments		8,598			6,412
Net cash provided by operating activities		156,737			106,636
Investing activities
Net change in:
Interest-bearing deposits		4,328,324			(1,335,400	)
Federal funds sold		(500,000	)		436,000
Deposits with other FHLBanks		(3	)		(24	)
Premises, software, and equipment		(1,348	)		(527	)
Held-to-maturity securities:
Long-term securities
Purchased		(395,221	)		—
Repayments		624,495			659,318
In-substance maturities		1,479			—
Net change in certificates of deposit		903,000			5,330,200
Available-for-sale securities:
Purchased		(346	)		(2,034,289	)
Proceeds		120,446			35,520
Proceeds from sales		131,780			—
Advances:
Principal collected		159,760,816			97,001,879
Made		(155,769,454	)		(99,324,959	)
Mortgage loans held-for-portfolio:
Principal collected		54,415			44,048
Purchased and originated		(28,208	)		(21,032	)
Loans to other FHLBanks
Principal collected		—			55,000
Net cash provided by investing activities		9,230,175			845,734

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

4

Federal Home Loan Bank of New York
Statements of Cash Flows — Unaudited (in thousands)
For the three months ended March 31, 2009 and 2008

	March 31,
	2009			2008
Financing activities
Net change in:
Deposits and other borrowings*	$	919,256		$	958,632
Short-term loans from other FHLBanks:
Proceeds from loans		—			985,000
Payments for loans		—			(985,000	)
Consolidated obligation bonds:
Proceeds from issuance		5,795,744			22,215,081
Payments for maturing and early retirement		(18,272,802	)		(15,711,852	)
Consolidated obligation discount notes:
Proceeds from issuance		190,143,891			179,164,083
Payments for maturing		(187,741,830	)		(187,514,958	)
Capital stock:
Proceeds from issuance		1,041,817			928,754
Payments for redemption / repurchase		(1,214,491	)		(762,253	)
Redemption of Mandatorily redeemable capital stock		(3,160	)		(115,116	)
Cash dividends paid 1		(42,100	)		(89,270	)
Net cash (used) by financing activities		(9,373,675	)		(926,899	)
Net increase in cash and cash equivalents		13,237			25,471
Cash and cash equivalents at beginning of the period		18,899			7,909
Cash and cash equivalents at end of the period	$	32,136		$	33,380
Supplemental disclosures:
Interest paid	$	583,725		$	767,340
Affordable Housing Program payments 2	$	10,638		$	6,331
REFCORP payments	$	—		$	23,998
Transfers of mortgage loans to real estate owned	$	108		$	116
Portion of non-credit losses on held-to-maturity securities	$	9,938		$	—

1	Does not include payments to holders of Mandatorily redeemable capital stock.
2	AHP payments = (beginning accrual - ending accrual) + AHP assessment for the period; payments represent funds released to the Affordable Housing Program.
*	Includes $41,605 of cash flows from derivatives in the first quarter of 2009 and none in the first quarter of 2008.

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

5

Notes to Financial Statements (Unaudited)

Background

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

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

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

All federally insured depository institutions, insured credit unions and insurance companies engaged in residential housing finance can apply for membership in the FHLBank in their district. All members are required to purchase capital stock in the FHLBNY as a condition of membership. A member of another FHLBank or a financial institution that is not a member of any FHLBank may also hold FHLBNY stock as a result of having acquired an FHLBNY member. Because the Bank operates as a cooperative, the FHLBNY conducts business with related parties in the normal course of business and considers all members and non-member stockholders as related parties in addition to the other FHLBanks. See Note 18 — Related party transactions — for more information.

The FHLBNY’s primary business is making collateralized advances to members which is the principal factor that impacts the financial condition of the FHLBNY.

As of July 30, 2008, the FHLBNY is supervised and regulated by the Federal Housing Finance Agency (“Finance Agency”), which is an independent agency in the executive branch of the U.S. government. With the passage of the “Housing and Economic Recovery Act of 2008” (“Housing Act”), the Finance Agency was established and became the new independent Federal regulator (the “Regulator”) of the FHLBanks, effective July 30, 2008. The Finance Board, the FHLBanks’ former regulator, was merged into the Finance Agency as of October 27, 2008. The Finance Board will be abolished one year after the date of enactment of the Housing Act. Finance Board regulations, orders, determinations and resolutions remain in effect until modified, terminated, set aside or superseded in accordance with the Housing Act by the FHFA Director, a court of competent jurisdiction or by operation of the law.

6

The Finance Agency 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 Agency establishes regulations governing the operations of the FHLBanks, each FHLBank functions as a separate entity with its own management, employees and board of directors.

Tax Status

The FHLBanks, including the FHLBNY, are exempt from ordinary federal, state, and local taxation except for local real estate 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 dependence on each other. The FHLBNY accrues its REFCORP assessment on a monthly basis.

The Resolution Funding Corporation has been designated as the calculation agent for the Affordable Housing Program and REFCORP assessments. Each FHLBank provides the amount of quarterly income before Affordable Housing Program and REFCORP and other information 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 Agency. The FHLBNY accrues the AHP expense monthly.

7

Basis of Presentation

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 reported amounts of income and expense during the reported periods. Although management believes these judgments, estimates, and assumptions to be appropriate, actual results may differ. The information contained in these financial statements is unaudited. In the opinion of management, normal recurring adjustments necessary for a fair presentation of the interim period results have been made. Certain amounts in the comparable 2007 and 2008 presentations have been conformed to the 2009 presentation and the impact on the changes was insignificant.

These unaudited financial statements should be read in conjunction with the FHLBNY’s audited financial statements for the year ended December 31, 2008, included in Form 10-K filed on March 27, 2009.

See Note 1 — Summary of Significant Accounting Policies in Notes to the Financial Statements of the Federal Home Loan Bank of New York filed on Form 10-K on March 27, 2009, which contains a summary of the Bank’s significant accounting policies.

Note 1. Recently Issued Accounting Standards and Interpretations, and Significant Accounting Policies and Estimates

Recently issued Accounting Standards and Interpretations

SFAS 161 — In March 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). Since SFAS 161 only requires additional disclosures concerning derivatives and hedging activities, adoption of SFAS 161 as of January 1, 2009 did not have an effect on our financial condition, results of operations or cash flows. The expanded disclosures related to SFAS 161 are included in Note 15 — Derivatives and hedging activities.

FSP No. FAS 133-1 and FIN 45-4. In September 2008, the FASB issued FSP No. FAS 133-1 and FIN 45-4, “Disclosures about Credit Derivatives and Certain Guarantees: An Amendment of FASB Statement No. 133 and FASB Interpretation No. 45; and Clarification of the Effective Date of FASB Statement No. 161.” FSP No. FAS 133-1 and FIN 45-4 require enhanced disclosures about credit derivatives and guarantees and amends FIN 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others” to exclude credit derivative instruments accounted for at fair value under SFAS No. 133. The FSP is effective for financial statements issued for reporting periods ending after November 15, 2008. Since FSP No. FAS 133-1 and FIN 45-4 only require additional disclosures concerning credit derivatives and guarantees, adoption of FSP No. FAS 133-1 and FIN 45-4 as of January 1, 2009 did not have an effect on our financial condition, results of operations or cash flows.

FSP FAS 157-4 — On April 9, 2009, the FASB issued FSP FAS 157-4, “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly” (FSP FAS 157-4). FSP FAS 157-4 is intended to provide application guidance addressing the determination of when a market for a financial asset or a financial liability is not active and when a transaction is not distressed for fair value measurements under SFAS 157. The FHLBNY early adopted FSP FAS 157-4 as of January 1, 2009, and adoption did not have a material impact on its financial condition, results of operations or cash flows. The enhanced disclosures related to FSP FAS 157-4 are included in Note 16 — Fair Values of Financial Instruments.

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FSP FAS 115-2 and FAS 124-2 — On April 9, 2009, the FASB issued FSP FAS 115-2, “Recognition and presentation of Other-Than-Temporary Impairment” (“FSP FAS 115-2 and FAS 124-2”) which is intended to provide greater clarity to investors about the credit and noncredit component of an OTTI event and to more effectively communicate when an OTTI event has occurred. The FSP applies to debt securities and requires that the total OTTI be presented in the statement of income with an offset for the amount of impairment that is recognized in other comprehensive income, which is the noncredit component. Noncredit component losses are to be recorded in other comprehensive income if an investor can assert that (a) it does not have the intent to sell or (b) it is not more likely than not that it will have to sell the security prior to its anticipated recovery, and (c) it expects to recover the amortized cost basis of the security. The FHLBNY early adopted the FSP at January 1, 2009, and has recorded OTTI on its securities under the new rules. No cumulative effect transition adjustment was made since the FHLBNY had no OTTI prior to 2009. The expanded disclosures related to FSP 115-2 are included in Note 4 — Held-to-maturity securities and Note 5 — Available-for-sale securities.

FSP FAS 107-1 and APB 28-1 — On April 9, 2009, the FASB issued FSP FAS 107-1 and APB 28-1, “Interim Disclosures about Fair Value of Financial Instruments” (FSP FAS 107-1 and APB 28-1). FSP FAS 107-1 and APB 28-1 amend the disclosure requirements in SFAS No. 107, “Disclosures about Fair Value of Financial Instruments” (SFAS 107), and APB Opinion No. 28, “Interim Financial Reporting”, to require disclosures about the fair value of financial instruments within the scope of SFAS 107, including disclosure of the methods and significant assumptions used to estimate the fair value of financial instruments in interim financial statements as well as in annual financial statements. Previously, these disclosures were required only in annual financial statements. The FHLBNY early adopted the FSP as of January 1, 2009. Since the FSP requires additional disclosures and the FHLBNY pre-existing disclosure practices already presented interim disclosures about fair values of financial instruments. Adoption of the FSP did not have an effect on the Bank’s financial condition, results of operations or cash flows.

Significant Accounting Policies and Estimates

The FHLBNY has identified certain accounting policies that it believes are significant because they require management to make subjective judgments about matters that are inherently uncertain and because of the likelihood that materially different amounts would be reported under different conditions or by using different assumptions. These policies include estimating the allowance for credit losses on the advance and mortgage loan portfolios, evaluating the impairment of the Bank’s securities portfolios, estimating the liabilities for employee benefit programs, and estimating fair values of certain assets and liabilities.

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SFAS 157 — Fair Value Measurements. SFAS 157, “Fair Value Measurements” (“SFAS 157”) as clarified by FSP FAS 157-3, defines fair value, expands disclosure requirements around fair values and establishes a framework for measuring fair value. SFAS 157 discusses how entities should measure fair value based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources or those that can be directly corroborated to market sources, while unobservable inputs reflect the FHLBNY’s market assumptions. SFAS 157 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction in the principal or most advantageous market for the asset or liability between market place participants at the measurement date. This definition is based on an exit price rather than transaction (entry) price.

In determining fair value, FHLBNY uses various valuation methods, including both the market and income approaches. SFAS 157 establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability, and would be based on market data obtained from sources independent of FHLBNY. Unobservable inputs are inputs that reflect FHLBNY’s assumptions about the parameters market participants would use in pricing the asset or liability, and would be based on the best information available in the circumstances.

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

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

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

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

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

At March 31, 2009 and December 31, 2008, the FHLBNY measured and recorded fair values under the guidelines established by SFAS 157 in the Statements of Condition for derivatives, available-for-sale securities, for certain consolidated obligation bonds that were designated and recorded at fair value under SFAS 159, “Fair Value Option for Financial Assets and Financial Liabilities” (“FVO”), and at March 31, 2009, for certain held-to-maturity securities measured at fair value on a non-recurring basis. At March 31, 2009 and December 31, 2008, the Bank had designated consolidated obligation debt of $25.0 million and $983.0 million under the FVO. A significant percentage of fixed-rate advances and consolidated obligation bonds are hedged to mitigate the risk of fair value changes from changes in the interest rate environment and are typically accounted under SFAS 133 as a qualifying fair value hedging relationship. When the FHLBNY deems that a hedge relationship under SFAS 133 is either not operationally practical or considers the hedge may not be highly effective, the FHLBNY may hedge certain advances and consolidated obligation bonds in economic hedges.

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Fair Values of Derivative positions — The FHLBNY is an end-user of over-the-counter (“OTC”) derivatives to hedge assets and liabilities under the provisions of SFAS 133, “Accounting for Derivative Instruments and Hedging Activities”, (“SFAS 133”) to mitigate fair value risks. In addition, the Bank records the fair value of an insignificant amount of mortgage-delivery commitments as derivatives, also under the provisions of SFAS 133. For additional information, see Note 15 — Derivatives and hedging activities.

Valuations of derivative assets and liabilities reflect the value of the instrument including the value associated with counterparty risk. Derivative values also takes into account the FHLBNY’s own credit standing. The valuation of the derivative instrument reflects the net credit differential between the FHLBNY and its counterparties to its derivative contracts. The computed fair values of the FHLBNY’s OTC derivatives take into consideration the effects of legally enforceable master netting agreements that allow the FHLBNY to settle positive and negative positions and offset cash collateral with the same counterparty on a net basis. On a contract-by-contract basis, the collateral and netting arrangements sufficiently mitigated the impact of the credit differential between the FHLBNY and its counterparties to an immaterial level such that an adjustment for nonperformance risk was not deemed necessary. Fair values of the derivatives were computed using quantitative models and employed multiple market inputs including interest rates, prices and indices to generate continuous yield or pricing curves and volatility factors. These multiple market inputs were predominantly actively quoted and verifiable through external sources, including brokers and market transactions. As a result, model selection and inputs did not involve significant judgments.

Fair Values of investments classified as available-for-sale securities — Changes in the values of available-for-sale securities are recorded in Accumulated other comprehensive income (loss), which is a component of members’ capital, with an offset to the recorded value of the investments in the Statements of Condition. The Bank’s entire portfolio of mortgage-backed securities classified as available-for-sale (“AFS”) are comprised of securities issued by GSE variable rate collateralized mortgage obligations which are marketable at recorded fair values. A small percentage of the AFS portfolio at March 31, 2009 and December 31, 2008 consisted of investments in equity and bond mutual funds held by grantor trusts owned by the FHLBNY. The unit prices, or the “Net asset values,” of the underlying mutual funds were available through publicly viewable web sites and the units were marketable at recorded fair values. In summary, the recorded fair values of available-for-sale securities in the Statements of Condition at March 31, 2009 and December 31, 2008 reflected the estimated price at which the positions could be sold.

All of the FHLBNY’s mortgage-backed securities classified as available-for-sale are marketable and the fair value of these investment securities is estimated by management using specialized pricing services that employ pricing models or quoted prices of securities with similar characteristics. Inputs into the pricing models are market based and observable. Examples of securities, which would generally be classified within Level 2 of the valuation hierarchy and valued using the “market approach” as defined under SFAS 157, include GSE issued collateralized mortgage obligations and money market funds.

See Note 16 — Fair Values of Financial Instruments — for additional disclosure with respect to the Levels associated with assets and liabilities recorded on the Bank’s Statements of Condition at March 31, 2009 and December 31, 2008. See Note 16 — Fair Values of Financial Instruments — for more information about fair value disclosures of financial instruments under the provisions of SFAS 107.

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Fair Value on a Nonrecurring Basis — Certain held-to-maturity investment securities are measured at fair value on a nonrecurring basis; that is, they are not measured at fair value on an ongoing basis but are subject to fair-value adjustments in certain circumstances (for example, when there is evidence of other-than-temporary impairment). The FHLBNY early adopted FSP FAS 115-2 and FAS 124-2, “Recognition and Presentation of Other-Than-Temporary Impairments” (“FSP115-2”). In accordance with FSP115-2, held-to-maturity mortgage-backed securities with an amortized cost basis of $37.0 million prior to write-down were written down to their fair value of $21.8 million, resulting in an impairment charge. The impairment was separated into a credit loss component of $5.3 million recorded as a charge to current year first quarter’s earnings. The non-credit component of $9.9 million was recorded in other comprehensive income (loss).

Financial Assets and Financial Liabilities recorded under the Fair Value Option — SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities — Including an Amendment of FASB Statement No. 115” (“SFAS 159” or “FVO”), created a fair value option allowing, but not requiring, an entity to irrevocably elect fair value as the initial and subsequent measurement attribute for certain financial assets and financial liabilities with changes in fair value recognized in earnings as they occur. In the third quarter of 2008, the FHLBNY elected the FVO designation for certain consolidated obligation bonds which were hedged by interest rate swaps in an economic hedge of the changes in the fair values of the designated bonds. See Note 16 — Fair Values of Financial Instruments for more information.

In addition, SFAS 157 measurement standards were adopted in the fair value measurement of financial assets and liabilities disclosed under the provisions of SFAS 107 “Disclosures About Fair Value of Financial Instruments” as amended by FSP FAS 107-1 “Interim Disclosures about Fair Value of Financial Instruments” (“SFAS 107”). See Estimated Fair values (SFAS 107) — Summary Tables for more information about fair values (Note 16 — Fair Values of Financial Instruments).

Investments

Early adoption by the FHLBNY of FSP FAS 115-2 at January 1, 2009 required the Bank to incorporate certain clarifications and definitions in its investment policies; FSP FAS 115-2 amends SFAS 115, and is primarily intended to provide greater clarity to investors about the credit and noncredit component of an OTTI event and to more effectively communicate when an OTTI event has occurred. The standards under the FSPs have been incorporated in the Bank’s investment policies as summarized below.

The FHLBNY classifies investments for which it has both the ability and intent to hold to maturity at amortized cost basis as held-to-maturity investments. Amortized cost basis includes adjustments made to the cost of an investment for accretion, amortization, collection of cash, previous OTTI recognized in earnings and fair value hedge accounting adjustments. The FHLBNY classifies investments that it may sell before maturity as available-for-sale and carries them at fair value.

Under 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. The Bank did not transfer or sell any held-to-maturity securities due to changes in circumstances thus far in 2009 as well as all of 2008 and 2007.

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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 over its term.

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 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 March 31, 2009 or December 31, 2008) 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 FHLBNY’s estimated life method requires a retrospective adjustment of the effective yield each time the FHLBNY changes the estimated life as if the new estimate had been known at the original acquisition date of the asset.

The FHLBNY computes the amortization and accretion of premiums and discounts on investments other than mortgage-backed securities using the level-yield method to the contractual maturities of the investments. The FHLBNY computes gains and losses on sales of investment securities using the specific identification method and includes these gains and losses in Other income (loss). The FHLBNY treats securities purchased under agreements to resell as collateralized financings because the counterparty retains control of the securities.

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. A security is considered impaired if its fair value is less than its amortized cost basis. Amortized cost basis includes adjustments made to the cost of an investment for accretion, amortization, collection of cash, previous OTTI recognized in earnings and fair value hedge accounting adjustments. If management has made a decision to sell such a security, other-than-temporary impairment (“OTTI”) is considered to have occurred. If a decision to sell the investment has not been made, and management concludes that it is more likely than not that it will be required to sell such a security before recovery of the amortized cost basis of the security, an OTTI is considered to have occurred.

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

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If management determines that it intends to sell a security in an unrealized loss position, the entire OTTI is recorded as a charge to earnings in the period management reaches a decision to sell or can no longer assert that it will not be required to sell such as security before recovery of the amortized cost basis of the security.

However, if management determines that OTTI exists only because of a credit loss (even if it does not intend to sell or it will not be required to sell such as security before recovery of the amortized cost basis of the security), the amount of impairment related to credit loss will affect earnings and the amount of loss related to factors other than credit loss is recognized as a component of Accumulated other comprehensive income (loss).

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

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

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

In the current year first quarter, the Bank recognized an OTTI loss of $15.2 million, of which the credit component was $5.3 million and the non-credit component was $9.9 million. Two held-to-maturity private-label mortgage-backed securities were written down by $15.2 million to their fair value. The non-credit loss of $9.9 million was recorded in Accumulated other comprehensive income (loss). The credit component of the OTTI of $5.3 million was recorded as a charge to current year first quarter’s earnings. The Bank did not experience any OTTI during 2008 or 2007.

Other-than-temporary impairment analysis of mortgage-backed securities

Securities with a fair value below amortized cost basis are considered impaired. Determining whether a decline in fair value is OTTI requires significant judgment. The FHLBNY evaluates its individual held-to-maturity investment in private label issued mortgage- and asset- backed securities for OTTI on a quarterly basis. As part of this process, the FHLBNY assesses if it has an intention to sell the security or it is more likely than not that it will be required to sell the impaired investment before recovery of its amortized cost basis.

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To determine which individual securities are at risk of OTTI, the FHLBNY considers various characteristics of each security including, but not limited to, the following: the credit rating and related outlook or status; the creditworthiness of the issuers of the debt securities; the underlying type of collateral; the year of securitization or vintage, the duration and level of the unrealized loss; any credit enhancements or insurance for securities that were “wrapped” at inception; and certain other collateral-related characteristics such as FICO^® credit scores and delinquency rates. The relative importance of this information varies based on the facts and circumstances surrounding each security as well as the economic environment at the time of assessment and, if insured, the financial strength of the monoline insurers when the security relies on the insurer for support either currently or potentially in future periods. In determining monoline insurer support, the Bank considers the contractual terms of the insurance guarantee, and whether the credit protection under the terms of the agreement travels with the security, if the security is estimated to rely on insurance protection for cash flow deficiency either currently or in the future.

For securities screened to be at risk of OTTI, the FHLBNY performs analysis of each security on a quarterly basis to determine whether the credit enhancements within the structure of each security are sufficient to protect against losses of principal and interest on the underlying mortgage loans. The FHLBNY employs third-party models to project cash flows expected to be collected based on the underlying loan collateral. These models use expected borrower default rates, projected loss severities, and forecasted voluntary and involuntary prepayment speeds which are determined by management based on available information.

Each security screened to be at risk of OTTI is typically run under several scenarios, each with independent assumptions of constant prepayment rates or prepayment speeds (“CPR”), conditional default rates (“CDR”) and “Loss severity”. Each independent set of assumptions are typically based on (1) Assumptions derived from third-party vendor service specializing in risk modelling behavior of mortgage-pools and mortgage loan. When vendor service is not able to obtain loan-level data for a specific FHLBNY owned MBS, management uses “proxy” pool weighted average FICO^® and weighted average loan-to-value (“LTV”) characteristics in order to formulate vectors. (2) Assumptions obtained based on market “consensus” and derived from vintage or shelf-specific performance data collected by market participants, and (3) assumptions derived from latest actual performance statistics extracted from reports from trustees, loan servicer reports and others.

The FHLBNY then performs cash flow analysis based on expected behavior of the underlying loans under each independent scenario to generate expected cash flows to be collected, and a detailed understanding of each security’s credit-support structure and credit-enhancement sufficiency to enable management to perform a qualitative review.

Certain held-to-maturity private-label MBS are insured by third-party bond insurers (monoline insurers). The bond insurance on these investments guarantees the timely payments of principal and interest if these payments cannot be satisfied from the cash flows of the underlying mortgage pool. For securities that are screened and identified to be at risk of OTTI and protected by such third-party insurance, the analysis looks first to the performance of the underlying security, considering its embedded credit enhancements in the form of excess spread, overcollateralization, and credit subordination, to determine the collectability of all amounts due. If these protections are deemed insufficient to make timely payment of all amounts due, then the FHLBNY considers the capacity of the third-party bond insurer to cover any shortfalls.

The monoline insurers have been subject to adverse ratings, rating downgrade, and weakening financial performance measures. In estimating the insurers’ capacity to provide credit protection in the future to cover any decrease in cash flows expected to be collected for securities deemed to be OTTI, the FHLBNY has developed a methodology to assess the ability of monoline insurer to meet future insurance obligations. The methodology establishes boundaries that can be used on a consistent basis, and includes both quantitative and qualitative factors.

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This methodology calculates the length of time a monoline is expected to remain financially viable to pay claims for securities insured; it employs for the most part, publicly available information to identify cash flows used up by a monoline for insurance claims. Based on the monoline’s existing insurance reserves, the methodology attempts to predict the length of time over which the monoline’s claims-paying resource could sustain bond insurance losses. The methodology provides an indicator of a point in time in the future when the monoline’s claim-paying resource is estimated to be exhausted.

For the FHLBNY insured securities that are deemed to be credit impaired absent insurer protection, the methodology compares the timing and amount of the cash flow shortfall to the timing of the when a monoline’s claim-paying resource is deemed exhausted. The analysis quantifies both the timing and the amount of cash flow shortfall that the insurer is unlikely to be able to cover. However, estimation of an insurer’s financial strength to remain viable over a long time horizon requires significant judgment and assumptions. Predicting when the insurers may no longer have the ability to perform under their contractual agreements, then comparing the timing and amounts of cash flow shortfalls of securities that are credit impaired absent insurer protection to determine credit impairment requires significant judgment.

Because predicting outcomes over a distant time horizon is inherently subjective, the FHLBNY has established qualitative factors to assist its analysis when a quantitative measure results in a prediction that is so far in the future that its reliability may be subject to challenge. In circumstances that identify insignificant cash flow shortfalls far into future periods and at a time when insurance coverage is also deemed unavailable, the Bank would employ qualitative assessments. When any cash flow shortfalls are identified and the insurance coverage is deemed unavailable in the near- to medium-term, the decision to record OTTI is less judgmental. These boundaries are established to provide consistency in the assessment of OTTI under different fact patterns.

The FHLBNY believes that bond insurance is an inherent aspect of credit support within the structure of the security itself and it is appropriate to include insurance in its evaluation of expected cash flows and determination of OTTI. The FHLBNY has also established that the terms of insurance enable the insurance to travel with the security if the security is sold in the future. Currently, the monolines that provide insurance for the Bank’s securities are going concerns and are honoring claims with their existing capital resources. Within the boundaries set in the methodology outline above, the Bank believes it is appropriate to assert that insurer credit support can be relied upon. As with all assumptions, changes to these assumptions may result in materially different outcomes and the realization of additional other-than-temporary impairment charges in the future.

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 outstanding mortgage loans held-for-portfolio at March 31, 2009 and December 31, 2008. The FHLBNY manages the liquidity, interest rate and prepayment option risk of the MPF loans, while the PFIs retain servicing activities. The FHLBNY and the PFI share the credit risks of the uninsured MPF loans by structuring potential credit losses into layers. Collectability of the loans is first supported by liens on the real estate securing the loan. For conventional mortgage loans, additional loss protection is provided by private mortgage insurance required for MPF loans with a loan-to-value ratio of more

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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 $13.8 million at March 31, 2009 and at December 31, 2008. The aggregate amount of FLA is memorialized and tracked but is neither recorded nor reported as a loan loss reserve in the FHLBNY’s financial statements. If “second losses” beyond this layer are incurred, they are absorbed through a credit enhancement provided by the PFI. The credit enhancement held by PFIs ensures that the lender retains a credit stake in the loans it sells to the FHLBNY or originates as an agent for the FHLBNY (only relates to MPF 100 product). For assuming this risk, PFIs receive monthly “credit enhancement fees” from the FHLBNY.

The amount of the credit enhancement is computed with the use of a Standard & Poor’s model to determine the amount of credit enhancement necessary to bring a pool of uninsured loans to “AA” credit risk. The credit enhancement becomes an obligation of the PFI. For certain MPF products, the credit enhancement fee is accrued and paid each month. For other MPF products, the credit enhancement fee is accrued 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. Extension fees are received when a member requests to extend the period of the delivery commitment beyond the original stated maturity. Amounts were not significant for all periods reported.

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.

Allowance for credit losses on mortgage loans. 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 allowance for credit losses on mortgage loans was $1.8 million and $1.4 million as of March 31, 2009 and December 31, 2008.

The Bank identifies inherent losses through analysis of the conventional loans (FHA and VA are insured loans, and excluded from the analysis) that are not adversely classified or past due. Reserves are based on the estimated costs to recover any portions of the MPF loans that are not FHA and VA insured. When a loan is foreclosed, the Bank will charge to the loan loss reserve account for any excess of the carrying value of the loan over the net realizable value of the foreclosed loan.

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If adversely classified, or on non-accrual status, reserves for conventional mortgage loans, except FHA and VA insured loans, are analyzed under liquidation scenarios on a loan level basis, and identified losses are 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.

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 balance was $4.0 million at March 31, 2009 and December 31, 2008. If adversely classified, CMA loans will have additional reserves established based on the shortfall of the underlying estimated liquidation value of collateral to cover the remaining balance of the CMA loan. Reserve values are calculated by subtracting the estimated liquidation value of the collateral (after sale value) from the current remaining balance of the CMA loan.

Note 2. Cash and due from banks

Cash on hand, cash items in the process of collection, and amounts due from correspondent banks and the Federal Reserve Banks are included in cash and due from banks.

Compensating balances

The Bank maintained average required clearing balances with various Federal Reserve Banks of approximately $1.0 million for the periods ended March 31, 2009 and December 31, 2008. The Bank uses earnings credits on these balances to pay for services received from the Federal Reserve Banks.

Pass-through deposit reserves

The Bank acts as a pass-through correspondent for member institutions required to deposit reserves with the Federal Reserve Banks. Pass-through reserves deposited with Federal Reserve Banks were $40.5 million and $31.0 million as of March 31, 2009 and December 31, 2008. The Bank includes member reserve balances in other liabilities in the statements of condition.

Note 3. Interest-bearing deposits

In October 2008, the Board of Governors of the Federal Reserve System directed the Federal Reserve Banks to pay interest on balances in excess of certain required reserve and clearing balances. The formula for calculating interest earned is based on average excess balances over the calculation period; rates are generally tied to the federal funds rate. The balances at March 31, 2009 and December 31, 2008 represent the actual excess balance with the Federal Reserve Bank of New York.

Note 4. Held-to-maturity securities

Held-to-maturity securities consist of mortgage- and asset-backed securities (collectively mortgage-backed securities or “MBS”), state and local housing finance agency bonds, and short-term certificates of deposits issued by highly-rated banks and financial institutions.

At March 31, 2009 and December 31, 2008, the FHLBNY had pledged MBS with an amortized cost basis of $2.5 million and $2.7 million to the FDIC in connection with deposits maintained by the FDIC at the FHLBNY.

The FHLBNY records investments classified as held-to-maturity at amortized cost basis.

18

Mortgage-backed securities — The amortized cost basis of investments in mortgage-backed securities issued by Federal National Mortgage Association (“Fannie Mae”) and the Federal Home Loan Mortgage Corp. (“Freddie Mac”) (together, government sponsored enterprises or “GSE”) and a U.S. government agency at March 31, 2009 was $7.6 billion, or 83.1% of the amortized cost basis of total MBS classified as held-to-maturity. The comparable amortized cost basis of GSE issued MBS at December 31, 2008 was $7.6 billion, or 81.3% of total held-to-maturity securities. The amortized cost basis of privately issued mortgage- and asset-backed securities at March 31, 2009 and December 31, 2008 were $1.5 billion and $1.7 billion. Privately issued MBS primarily included commercial mortgage- and asset-backed securities, and mortgage pass-throughs and Real Estate Mortgage Investment Conduit bonds, and securities supported by manufactured housing loans.

In recent periods, investments in GSE issued securities, specifically those issued by Fannie Mae and Freddie Mac, were affected by investor concerns regarding those entities’ capital levels needed to offset expected credit losses that may result from declining home prices. The Housing Act (see the FHLBNY’s most recent Form 10-K for more details about the Housing Act) contains provisions allowing the U.S. Treasury to provide support to Fannie Mae and Freddie Mac. The U.S. Treasury and the Finance Agency have placed Fannie Mae and Freddie Mac into conservatorship with the Finance Agency named as conservator. The Finance Agency will manage Fannie Mae and Freddie Mac to stabilize their financial conditions and their ability to support the secondary mortgage market. As the securities are guaranteed and the Bank has the ability and intent to hold the securities to the recovery of their values, the Bank believes any unrealized losses will be recovered. The Bank believes that unrealized losses on GSE and government agency issued securities are primarily the result of the liquidity issues in the credit markets.

Certificates of deposits — Investments in certificates of deposits were also classified as held-to-maturity. All such investments mature within one year. The amortized cost basis was $300.0 million and $1.2 billion at March 31, 2009 and December 31, 2008.

State and local housing finance agency bonds — Investments in primary public and private placements of taxable obligations of state and local housing finance authorities (“HFA”) were classified as held-to-maturity and the amortized cost basis was $802.6 million and $804.1 million at March 31, 2009 and December 31, 2008.

Impairment analysis on held-to-maturity securities — Securities with a fair value below amortized cost basis are considered impaired. Determining whether a decline in fair value is other-than-temporarily impaired or OTTI requires significant judgment. The FHLBNY evaluates its individual held-to-maturity investment in private label issued mortgage- and asset-backed securities for OTTI on a quarterly basis. As part of this process, the FHLBNY assesses if it has an intention to sell the security or if it is more likely than not that it will be required to sell the impaired investment before recovery of its amortized cost basis.

To determine which individual securities are at risk of OTTI, the FHLBNY considers various characteristics of each security including, but not limited to, the following: the credit rating and related outlook or status; the creditworthiness of the issuers of the debt securities; the underlying type of collateral; the year of securitization or vintage, the duration and level of the unrealized loss; any credit enhancements or insurance for securities that were “wrapped” at inception; and certain other collateral-related characteristics such as FICO^® credit scores, and delinquency rates. The relative importance of this information varies based on the facts and circumstances surrounding each security, as well as the economic environment at the time of assessment, and, if insured, the financial strength of the monoline insurers when the security relies on the insurer for support either currently or potentially in future periods. In determining monoline insurer support, the Bank considers the contractual terms of the insurance guarantee, whether the credit protection under the terms of the agreement travels with the security, and if the security is estimated to rely on insurance protection for cash flow deficiency either currently or in the future.

19

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

Non-agency private-label mortgage- and asset-backed securities (“PLMBS”) — At March 31, 2009, the FHLBNY evaluated all 55 (55 at December 31, 2008) non-agency private label residential and asset-backed MBS in its investment portfolio by performing a security-level review. Commercial mortgage-backed securities were also reviewed at a security level. As a result of this security level review, the FHLBNY identified 19 securities at March 31, 2009 (21 at December 31, 2008) with performance measures indicating the possibility of other-than-temporary impairment based on the Bank’s screening and monitoring parameters, which included pricing, credit rating and credit enhancement coverage. These securities were evaluated further by analyzing the expected cash flows to be collected based on the structure of the security under certain assumptions, such as estimated default rates, loss severity and prepayment speeds. For more information, see Significant Accounting Policies and Estimates in Note 1.

The following summarizes key characteristics of the 19 securities at risk of OTTI at March 31, 2009. The amortized cost basis of these held-to-maturity securities are before impairment charge offs (dollars in thousands):

			AMBAC				MBIA				Uninsured
			Amortized		Fair		Amortized		Fair		Amortized		Fair		Gross
Ratings	Count		Cost Basis		Value		Cost Basis		Value		Cost Basis		Value		Losses
AAA		6	$	—	$	—	$	—	$	—	$	117,561	$	63,078	$	(54,483	)
AA		—		—		—		—		—		—		—		—
A		3		87,099		46,833		—		—		—		—		(40,266	)
BBB		8		108,065		63,380		—		—		—		—		(44,685	)
BB		1		—		—		13,752		8,273		—		—		(5,479	)
B		1		—		—		23,259		13,535		—		—		(9,724	)
Total		19	$	195,164	$	110,213	$	37,011	$	21,808	$	117,561	$	63,078	$	(154,637	)

20

Monoline support — The Bank’s analysis at March 31, 2009 projected under various cash flow scenarios indicated that 13 securities at March 31, 2009 (14 at December 31, 2008) that were considered to be at risk of OTTI at March 31, 2009 are insured by Ambac Assurance Corp (“Ambac”) and MBIA Insurance Corp (“MBIA”). Certain held-to-maturity private-label securities are insured by Financial Security Assurance, Inc (“FSA”) and these securities are not at risk of impairment even without credit support from FSA.

The monoline insurers have been subject to adverse ratings, rating downgrade, and weakening financial performance measures. Rating downgrade imply an increased risk that the insurer will fail to fulfill its obligations to reimburse the investor for claims under the insurance policies.

A number of insured securities have been identified as credit impaired absent credit protection from Ambac and MBIA to meet scheduled payments in the future. Cash flows on certain insured securities are currently experiencing cash flow shortfalls. Ambac and MBIA are currently paying claims in order to meet current cash flow deficiency within the structure of the securities.

The Bank has analyzed the going-concern basis of Ambac and MBIA, the two monoline insurers that are associated with the 13 insured securities potentially at risk of OTTI. The Bank has analyzed the financial strength of Ambac and MBIA to perform with respect to their contractual obligations for the securities owned by the FHLBNY; the monolines are currently performing under the terms of their contractual agreements with respect to the FHLBNY’s insured bonds. See Significant Accounting Policies and Estimates in Note 1 for more information about investment and impairment policies and estimates. However, estimation of an insurer’s financial strength to remain viable over a long time horizon requires significant judgment and assumptions. Predicting when the insurers may no longer have the ability to perform under their contractual agreements, then comparing the timing and amounts of cash flow shortfalls of securities that are credit impaired to when insurer protection may no be available, and determining credit impairment is judgmental. Estimation of the cash flow shortfall far into future periods itself requires significant judgment, the further out in the future a monoline is not expected to perform, such estimations involve significant assumptions and judgment.

Based on the Bank’s methodologies and analysis, OTTI was recognized for two securities owned by the FHLBNY and insured by MBIA. Management’s analysis determined that the two securities would require cash flow support from MBIA beyond the period the FHLBNY’s methodology considers MBIA’s claim paying ability to remain viable. Total credit loss of $5.3 million recognized on the two held-to-maturity private-label securities at March 31, 2009 is the estimated cash flow shortfall beyond this period.

The Bank will continue to closely monitor the viability of the monoline insurers on an on-going basis.

21

OTTI Conclusion — Based on the management’s determination of expected cash flow shortfall of two securities insured by MBIA concurrently with the determination that MBIA’s claim paying ability would not be sufficient in future periods, management concluded that two securities had become other-than-temporarily impaired at March 31, 2009. The Bank early adopted FSP FAS 115-2 and FAS 124-2 as of January 1, 2009, and has applied accounting provisions under the FSP FAS 115-2 to write down the two securities to their fair values at March 31, 2009. Recognition of impairment resulted in a charge of $5.3 million to current year first quarter earnings and the amount represented management’s best estimate of credit losses in the two securities for which the FHLBNY does not intend to sell the securities and it is more likely than not that the FHLBNY will not be required to sell the securities prior to recovery of their amortized cost basis. Factors other than credit losses were $9.9 million and were charged directly to Accumulated other comprehensive loss at March 31, 2009. The amortized cost basis of the two securities prior to the write down was $37.0 million. The new amortized cost basis is $21.8 million, which is the fair value of the two securities at March 31, 2009. Had the FHLBNY not adopted FSP FAS 115-2, the FHLBNY would have recognized additional OTTI charge of $9.9 million on a pre-assessment basis for the current year first quarter.

The table below summarizes the key characteristics of the two securities deemed as OTTI at March 31, 2009 (dollars in thousands):

			Insurer MBIA				OTTI						Gross Losses
			Amortized		Fair		Credit			Non-credit			Less than		More than
Ratings	Count		Cost Basis		Value		Loss			Loss			12 months		12 months
BB		1	$	13,752	$	8,273	$	(1,926	)	$	(3,553	)	$	—	$	(5,479	)
B		1		23,259		13,535		(3,339	)		(6,385	)		—		(9,724	)
Total		2	$	37,011	$	21,808	$	(5,265	)	$	(9,938	)	$	—	$	(15,203	)

With respect to the Bank’s remaining investments, the Bank believes no other-than-temporary impairment exists. The Bank’s conclusion is based upon multiple factors: bond issuers’ continued satisfaction of their obligations under the contractual terms of the securities; the estimated performance of the underlying collateral; the evaluation of the fundamentals of the issuers’ financial condition; and the estimated support from the monoline insurers under the contractual terms of insurance. Management has not made a decision to sell such securities at March 31, 2009. Management has also concluded that it is more likely than not that it will not be required to sell such as security before recovery of the amortized cost basis of the security. Based on factors outlined above, the FHLBNY believes that the remaining securities classified as held-to-maturity were not other-than-temporarily impaired as of March 31, 2009 and December 31, 2008.

However, without recovery in the near term such that liquidity returns to the mortgage-backed securities market and spreads return to levels that reflect underlying credit characteristics, or if the credit losses of the underlying collateral within the mortgage-backed securities perform worse than expected, or if the presumption of the ability of monoline insurers to support the insured securities identified at March 31, 2009 as dependent on insurance is negatively impacted by the insurers’ future financial performance, it would be likely that additional OTTI may be recognized in future periods.

22

The following table provides rollforward information of the credit component of OTTI recognized in earnings related to held-to-maturity securities for which a portion of the OTTI was recognized in other comprehensive income (loss) (in thousands):

	March 31,
	2009
Beginning balance, January 1, 2009	$	—
Additions to the credit component for OTTI loss not previously recognized		5,265
Credit component of OTTI reclassified to OCI		—
Ending balance, March 31, 2009	$	5,265

Major Security Types

The amortized cost basis, gross unrealized gains, losses, fair value of held-to-maturity securities, and OTTI recognized in other comprehensive income were as follows (in thousands):

	March 31, 2009
	Amortized		Gross		Gross					Total
	Cost		Unrealized		Unrealized			Fair		OTTI
	Basis		Holding Gains		Holding Losses			Value		in OCI
State and local housing agency bonds	$	802,637	$	3,504	$	(74,369	)	$	731,772	$	—
Mortgage-backed securities		9,132,442		251,107		(331,196	)		9,052,353		(9,938	)
Certificates of deposit		300,000		17		—			300,017		—
Total	$	10,235,079	$	254,628	$	(405,565	)	$	10,084,142	$	(9,938	)

	December 31, 2008
	Amortized		Gross		Gross
	Cost		Unrealized		Unrealized			Fair
	Basis		Holding Gains		Holding Losses			Value
State and local housing agency bonds	$	804,100	$	6,573	$	(47,512	)	$	763,161
Mortgage-backed securities		9,326,443		187,531		(342,662	)		9,171,312
Certificates of deposit		1,203,000		328		—			1,203,328
Total	$	11,333,543	$	194,432	$	(390,174	)	$	11,137,801

23

Unrealized Losses

The following tables summarize held-to-maturity securities with fair values below their amortized cost basis. The fair values and gross unrealized holding losses are aggregated by major security type and by the length of time individual securities have been in a continuous unrealized loss position. Gross unrealized holding losses at March 31, 2009 and December 31, 2008 were caused by interest rate changes, credit spread widening and reduced liquidity in the applicable markets. The FHLBNY has reviewed the investment security holdings and determined, based on creditworthiness of the securities and including any underlying collateral and/or insurance provisions of the security, that gross unrealized holding losses in the analysis below represent temporary impairment (in thousands).

	March 31, 2009
	Less than 12 months					12 months or more					Total
	Estimated Fair		Unrealized			Estimated Fair		Unrealized			Estimated Fair		Unrealized
	Value		Losses			Value		Losses			Value		Losses
Non-MBS Investment Securities
State and local housing agency obligations	$	440,114	$	(36,697	)	$	102,883	$	(37,672	)	$	542,997	$	(74,369	)
Total Non-MBS		440,114		(36,697	)		102,883		(37,672	)		542,997		(74,369	)
MBS Investment Securities
MBS — Other US Obligations
Ginnie Mae		2,717		(53	)		3,216		(76	)		5,933		(129	)
MBS-GSE
Fannie Mae		82,900		(510	)		3,145		(76	)		86,045		(586	)
Freddie Mac		1,064		(17	)		—		—			1,064		(17	)
Total MBS-GSE		83,964		(527	)		3,145		(76	)		87,109		(603	)
MBS-Private Label		317,407		(40,903	)		873,826		(289,561	)		1,191,233		(330,464	)
Total MBS		404,088		(41,483	)		880,187		(289,713	)		1,284,275		(331,196	)
Total Temporarily Impaired		844,202		(78,180	)		983,070		(327,385	)		1,827,272		(405,565	)
OTTI Securities		—		—			21,808		(9,938	)		21,808		(9,938	)
Total MBS in Gros Unrealized Loss Positions	$	844,202	$	(78,180	)	$	1,004,878	$	(337,323	)	$	1,849,080	$	(415,503	)

	December 31, 2008
	Less than 12 months					12 months or more					Total
	Estimated Fair		Unrealized			Estimated Fair		Unrealized			Estimated Fair		Unrealized
	Value		Losses			Value		Losses			Value		Losses
Non-MBS Investment Securities
State and local housing agency obligations	$	78,261	$	(16,065	)	$	84,108	$	(31,447	)	$	162,369	$	(47,512	)
Total Non-MBS		78,261		(16,065	)		84,108		(31,447	)		162,369		(47,512	)
MBS Investment Securities
MBS — Other US Obligations
Ginnie Mae		6,137		(187	)		—		—			6,137		(187	)
MBS-GSE
Fannie Mae		3,452		(125	)		—		—			3,452		(125	)
Freddie Mac		1,102		(30	)		32		—			1,134		(30	)
Total MBS-GSE		4,554		(155	)		32		—			4,586		(155	)
MBS-Private Label		509,273		(115,061	)		718,321		(227,259	)		1,227,594		(342,320	)
Total MBS		519,964		(115,403	)		718,353		(227,259	)		1,238,317		(342,662	)
Total Temporarily Impaired	$	598,225	$	(131,468	)	$	802,461	$	(258,706	)	$	1,400,686	$	(390,174	)

24

Note 5. Available-for-sale securities

Impairment analysis on Available-for-sale securities —The Bank’s entire portfolio of mortgage-backed securities classified as available-for-sale (“AFS”) are comprised of securities issued by GSEs as variable rate collateralized mortgage obligations which are “pass through” securities. The FHLBNY evaluates its individual securities issued by Fannie Mae and Freddie Mac or a government agency by considering the creditworthiness and performance of the debt securities and the strength of the government-sponsored enterprises’ guarantees of the securities. Based on the Bank’s analysis, GSE and agency issued securities are performing in accordance with their contractual agreements. The Housing Act contains provisions allowing the U.S. Treasury to provide support to Fannie Mae and Freddie Mac. The U.S. Treasury and the Finance Agency placed Fannie Mae and Freddie Mac into conservatorship in an attempt to stabilize their financial conditions and their ability to support the secondary mortgage market. The FHLBNY believes that it will recover its investments in GSE and agency issued securities given the current levels of collateral and credit enhancements and guarantees that exist to protect the investments. Management has not made a decision to sell such securities at March 31, 2009. Management also concluded that it is more likely than not that it will not be required to sell such securities before recovery of the amortized cost basis of the security. The FHLBNY believes that these securities were not other-than-temporarily impaired as of March 31, 2009. The Bank established certain grantor trusts to fund current and future payments under certain supplemental pension plans and these were classified as available-for-sale. The grantor trusts invest in money market and bond funds and such investments make up the remainder of the AFS portfolio. Investments in equity and fixed-income funds are redeemable at short notice, and realized gains and losses from investments in the funds were not significant. No security classified as available-for-sale had been pledged at March 31, 2009 and December 31, 2008.

The amortized cost basis, gross unrealized gains, losses, and the fair value of investments classified as available-for-sale were as follows (in thousands):

	March 31, 2009
	Amortized		Gross		Gross
	Cost		Unrealized		Unrealized			Fair
	Basis		Gains		Losses			Value
Cash equivalents	$	846	$	—	$	—		$	846
Equity funds		9,288		—		(4,114	)		5,174
Fixed income funds		3,795		48		(11	)		3,832
Mortgage-backed securities		2,662,061		2,603		(32,520	)		2,632,144
Total	$	2,675,990	$	2,651	$	(36,645	)	$	2,641,996

	December 31, 2008
	Amortized		Gross		Gross
	Cost		Unrealized		Unrealized			Fair
	Basis		Gains		Losses			Value
Cash equivalents	$	836	$	—	$	—		$	836
Equity funds		8,978		—		(3,516	)		5,462
Fixed income funds		3,833		66		(10	)		3,889
Mortgage-backed securities		2,912,642		364		(61,324	)		2,851,682
Total	$	2,926,289	$	430	$	(64,850	)	$	2,861,869

25

Unrealized Losses — Available-for-sale securities (in thousands):

	March 31, 2009
	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
MBS-GSE
Fannie Mae	$	270,453	$	(2,588	)	$	1,202,238	$	(20,688	)	$	1,472,691	$	(23,276	)
Freddie Mac		321,407		(3,465	)		463,798		(5,779	)		785,205		(9,244	)
Total MBS-GSE		591,860		(6,053	)		1,666,036		(26,467	)		2,257,896		(32,520	)
Total Temporarily Impaired	$	591,860	$	(6,053	)	$	1,666,036	$	(26,467	)	$	2,257,896	$	(32,520	)

	December 31, 2008
	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
MBS-GSE
Fannie Mae	$	1,662,928	$	(35,047	)	$	142,630	$	(3,539	)	$	1,805,558	$	(38,586	)
Freddie Mac		957,617		(21,744	)		39,077		(994	)		996,694		(22,738	)
Total MBS-GSE		2,620,545		(56,791	)		181,707		(4,533	)		2,802,252		(61,324	)
Total Temporarily Impaired	$	2,620,545	$	(56,791	)	$	181,707	$	(4,533	)	$	2,802,252	$	(61,324	)

Gross unrealized losses at March 31, 2009 and December 31, 2008 were caused by interest rate changes, credit spread widening and reduced liquidity in the applicable markets. The FHLBNY has reviewed the investment security holdings and determined, based on creditworthiness of the securities and including any underlying collateral and/or insurance provisions of the security, that unrealized losses in the analysis above represent temporary impairment.

26

Note 6 . Advances

Redemption terms

Contractual redemption terms and yields of advances were as follows (dollars in thousands):

	March 31, 2009									December 31, 2008
				Weighted 2									Weighted 2
				Average			Percentage						Average			Percentage
	Amount			Yield			of Total			Amount			Yield			of Total
Overdrawn demand deposit accounts	$	—			—	%		—	%	$	—			—	%		—	%
Due in one year or less		25,389,467			2.00			25.55			32,420,095			2.52			31.36
Due after one year through two years		17,132,974			3.15			17.24			16,150,121			3.71			15.62
Due after two years through three years		7,902,987			3.18			7.95			7,634,680			3.76			7.39
Due after three years through four years		7,377,085			3.39			7.42			6,852,514			3.74			6.63
Due after four years through five years		4,279,074			3.60			4.31			3,210,575			3.88			3.11
Due after five years through six years		1,305,230			3.39			1.31			836,689			3.74			0.81
Thereafter		36,001,548			3.83			36.22			36,275,053			3.96			35.08
Total par value		99,388,365			3.15	%		100.00	%		103,379,727			3.44	%		100.00	%
Discount on AHP advances 1		(310	)								(330	)
SFAS 133 hedging basis adjustments 1		5,075,543									5,773,479
Total	$	104,463,598								$	109,152,876

1	Discounts on AHP advances were amortized to interest income using the level-yield method and were not significant for all periods reported. Interest rates on AHP advances ranged from 1.25% to 4.00% at March 31, 2009 and 1.25% to 6.04% at December 31, 2008.
2	The weighed average yield is the weighted average coupon rates for advances, unadjusted for swaps. For floating-rate bonds, the weighted average rate is the rate outstanding at the reporting dates.

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

	March 31, 2009						December 31, 2008
				Percentage of						Percentage of
	Amount			total			Amount			total
Overdrawn demand deposit accounts	$	—			—	%	$	—			—	%
Due or putable in one year or less		58,699,279			59.06			63,251,007			61.18
Due or putable after one year through two years		18,552,824			18.67			18,975,821			18.36
Due or putable after two years through three years		9,704,537			9.76			10,867,530			10.51
Due or putable after three years through four years		6,028,185			6.07			5,293,364			5.12
Due or putable after four years through five years		3,673,324			3.70			2,728,075			2.64
Due or putable after five years through six years		678,480			0.68			230,189			0.22
Thereafter		2,051,736			2.06			2,033,741			1.97
Total par value		99,388,365			100.00	%		103,379,727			100.00	%
Discount on AHP advances		(310	)					(330	)
SFAS 133 hedging basis adjustments		5,075,543						5,773,479
Total	$	104,463,598					$	109,152,876

27

Note 7. Mortgage loans held-for-portfolio

Mortgage Partnership Finance program, or (“MPF”) constitutes the majority of the mortgage loans held-for-portfolio. The MPF program involves investment by the FHLBNY in mortgage loans that are purchased from or originated through its participating financial institutions (“PFIs”). The members retain servicing rights and may credit-enhance the portion of the loans participated to the FHLBNY. No intermediary trust is involved.

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

	March 31, 2009						December 31, 2008
				Percentage of						Percentage of
	Amount			Total			Amount			Total
Real Estate:
Fixed medium-term single-family mortgages	$	451,675			31.61	%	$	467,845			32.15	%
Fixed long-term single-family mortgages		973,362			68.11			983,493			67.58
Multi-family mortgages		3,984			0.28			4,009			0.27
Total par value		1,429,021			100.00	%		1,455,347			100.00	%
Unamortized premiums		10,272						10,662
Unamortized discounts		(6,092	)					(6,310	)
Basis adjustment 1		(454	)					(408	)
Total mortgage loans held-for-portfolio		1,432,747						1,459,291
Allowance for credit losses		(1,848	)					(1,406	)
Total mortgage loans held-for-portfolio after allowance for credit losses	$	1,430,899					$	1,457,885

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

The FHLBNY and its members share the credit risk of MPF loans by structuring potential credit losses into layers (See Significant Accounting Policies and Estimates in Note 1 in the Bank’s most recent Form 10-K filed on March 27, 2009). The first layer is typically 100 basis points but varies with the particular MPF program. The amount of the first layer, or First Loss Account or “FLA”, was estimated as $13.8 million at March 31, 2009 and December 31, 2008. 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 were not material for the first quarters of 2009 and 2008, and were reported as a reduction to mortgage loan interest income. The amount of charge-offs in each period reported was insignificant and it was not necessary for the FHLBNY to recoup any losses from the PFIs.

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The following provides rollforward analysis of the allowance for credit losses (in thousands):

	Three months ended March 31,
	2009		2008
Beginning balance	$	1,405	$	633
Charge-offs		—		—
Recoveries		—		—
Net charge-offs		—		—
Provision (Recovery) for credit losses on mortgage loans		443		30
Ending balance	$	1,848	$	663

The First Loss Account (“FLA”) memorializes the first tier of credit exposure and is neither an indication of inherent losses in the loan portfolio nor a loan loss reserve.

As of March 31, 2009 and December 31, 2008, the FHLBNY had $7.1 million and $4.8 million of non-accrual loans. The estimated fair value of the mortgage loans as of March 31, 2009 and December 31, 2008 is reported in Note 16 — Fair Values of Financial Instruments. 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.

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):

	March 31, 2009		December 31, 2008
Secured by 1-4 family	$	719	$	507

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Note 8. Consolidated obligations

Consolidated obligations are the joint and several obligations of the FHLBanks and consist of bonds and discount notes. The FHLBanks issue consolidated obligations through the Office of Finance as their fiscal agent. Consolidated bonds are issued primarily to raise intermediate- and long-term funds for the FHLBanks and are not subject to any statutory or regulatory limits on maturity. Consolidated discount notes are issued primarily to raise short-term funds. Discount notes sell at less than their face amount and are redeemed at par value when they mature.

The Finance Agency, at its discretion, may require any FHLBank to make principal or interest payments due on any consolidated obligations. Although it has never occurred, to the extent that an FHLBank would make a payment on a consolidated obligation on behalf of another FHLBank, the paying FHLBank would be entitled to reimbursement from the non-complying FHLBank. However, if the Finance Agency determines that the non-complying FHLBank is unable to satisfy its obligations, then the Finance Agency may allocate the outstanding liability among the remaining FHLBanks on a pro rata basis in proportion to each FHLBank’s participation in all consolidated obligations outstanding, or on any other basis the Finance Agency may determine.

Based on management’s review, the FHLBNY has no reason to record actual or contingent liabilities with respect to the occurrence of events or circumstances that would require the FHLBNY to assume an obligation on behalf of other FHLBanks. The par amounts of the FHLBanks’ outstanding consolidated obligations, including consolidated obligations held by other FHLBanks, were approximately $1.1 trillion and $1.3 trillion as of March 31, 2009 and December 31, 2008.

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

The FHLBNY met the qualifying unpledged asset requirements in each of the period ends in this report as follows:

	March 31, 2009			December 31, 2008
Percentage of unpledged qualifying assets to consolidated obligations		108	%		107	%

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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 the bonds at its option on predetermined exercise dates at par.

The following summarizes consolidated obligations issued by the FHLBNY and outstanding at March 31, 2009 and December 31, 2008 (in thousands):

	March 31, 2009		December 31, 2008
Consolidated obligation bonds-amortized cost	$	68,497,600	$	80,978,383
SFAS 133 fair value basis adjustments		1,077,217		1,254,523
Fair value basis on terminated hedges		6,882		7,857
SFAS 159 valuation adjustments and accrued interest		377		15,942
Total Consolidated obligation-bonds	$	69,582,076	$	82,256,705
Discount notes-amortized cost	$	48,721,469	$	46,329,545
Fair value basis adjustments		157		361
Total Consolidated obligation-discount notes	$	48,721,626	$	46,329,906

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Redemption Terms of consolidated obligation bonds

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

	March 31, 2009									December 31, 2008
				Weighted									Weighted
				Average			Percentage						Average			Percentage
Maturity	Amount			Rate 1			of total			Amount			Rate 1			of total
One year or less	$	41,894,850			1.51	%		61.18	%	$	49,568,550			1.93	%		61.23	%
Over one year through two years		12,760,050			3.05			18.63			16,192,550			3.20			20.00
Over two years through three years		4,414,800			3.76			6.45			5,299,700			3.73			6.55
Over three years through four years		2,604,575			4.01			3.80			2,469,575			4.75			3.05
Over four years through five years		3,047,850			4.01			4.45			3,352,450			3.99			4.14
Over five years through six years		1,015,000			5.18			1.48			989,300			5.06			1.22
Thereafter		2,743,050			5.29			4.01			3,082,050			5.35			3.81
Total par value		68,480,175			2.35	%		100.00	%		80,954,175			2.64	%		100.00	%
Bond premiums		55,406									63,737
Bond discounts		(37,981	)								(39,529	)
SFAS 133 fair value basis adjustments		1,077,217									1,254,523
Fair value basis adjustments on terminated hedges		6,882									7,857
SFAS 159 valuation adjustments and accrued interest		377									15,942
Total bonds	$	69,582,076								$	82,256,705

¹ Weighted average rate represents the weighted average coupons of bonds, unadjusted for swaps. The weighted average coupon of bonds outstanding at March 31, 2009 and December 31, 2008, represent contractual coupons payable to investors.

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

	March 31, 2009						December 31, 2008
				Percentage of						Percentage of
	Amount			total			Amount			total
Year of Maturity or next call date
Due or callable in one year or less	$	43,773,850			63.93	%	$	53,034,550			65.51	%
Due or callable after one year through two years		12,484,850			18.23			15,472,350			19.11
Due or callable after two years through three years		4,179,800			6.10			4,843,700			5.98
Due or callable after three years through four years		2,030,575			2.97			1,445,575			1.79
Due or callable after four years through five years		2,817,850			4.11			2,954,450			3.65
Due or callable after five years through six years		680,500			0.99			684,800			0.85
Thereafter		2,512,750			3.67			2,518,750			3.11
Total par value		68,480,175			100.00	%		80,954,175			100.00	%
Bond premiums		55,406						63,737
Bond discounts		(37,981	)					(39,529	)
SFAS 133 fair value adjustments		1,077,217						1,254,523
Fair value basis adjustments on terminated hedges		6,882						7,857
SFAS 159 valuation adjustments and accrued interest		377						15,942
Total carrying value	$	69,582,076					$	82,256,705

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Discount notes

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

	March 31, 2009			December 31, 2008
Par value	$	48,779,633		$	46,431,347
Amortized cost	$	48,721,469		$	46,329,545
Fair value basis adjustments		157			361
Total	$	48,721,626		$	46,329,906
Weighted average interest rate		0.58	%		1.00	%

Note 9. 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):

	March 31, 2009		December 31, 2008
Due in one year or less	$	58,000	$	117,400
Total term deposits	$	58,000	$	117,400

Note 10. Affordable Housing Program and REFCORP

The FHLBank Act requires each FHLBank to establish an AHP. Each FHLBank provides subsidies in the form of direct grants and below-market interest rate advances to members who use the funds to assist the purchase, construction, or rehabilitation of housing for very low-, low-, and moderate-income households. Annually, the FHLBanks must set aside for the AHP the greater of $100 million or 10% of regulatory income. The FHLBNY charges the amount set aside for AHP to income and recognizes it as a liability. The FHLBNY relieves the AHP liability as members use the subsidies. If the result of the aggregate 10% 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 during the current or prior period quarters.

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Regulatory income is income before assessments, and before interest expense related to mandatorily redeemable capital stock under SFAS 150, but after the assessment for REFCORP. The exclusion of interest expense related to mandatorily redeemable capital stock is a regulatory interpretation. The AHP and REFCORP assessments are calculated simultaneously because of their interdependence on each other. Each FHLBank accrues this expense monthly based on its income before assessments. An FHLBank reduces its AHP liability as members use subsidies.

The following provides rollforward information with respect to changes in Affordable Housing Program liabilities (in thousands):

	Three months ended March 31,
	2009			2008
Beginning balance	$	122,449		$	119,052
Additions from current period’s assessments		16,557			11,611
Net disbursements for grants and programs		(10,638	)		(6,331	)
Ending balance	$	128,368		$	124,332

Each FHLBank is required to pay to REFCORP 20 percent of income calculated in accordance with GAAP after the assessment for AHP, but before the assessment for REFCORP. REFCORP has been designated as the calculation agent for AHP and REFCORP assessments. Each FHLBank provides its net income before AHP and REFCORP to REFCORP, which then performs the calculations for each quarter end.

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Note 11. Capital, Capital Ratios, and Mandatorily Redeemable Capital Stock

The FHLBanks, including the FHLBNY, have a cooperative structure. To access FHLBNY’s products and services, a financial institution must be approved for membership and purchase capital stock in FHLBNY. The member’s stock requirement is generally based on its use of FHLBNY products, subject to a minimum membership requirement, as prescribed by the FHLBank Act and the FHLBNY Capital Plan. FHLBNY stock can be issued, exchanged, redeemed and repurchased only at its stated par value of $100 per share. It is not publicly traded. An option to redeem capital stock that is greater than a member’s minimum requirement is held by both the member and the FHLBNY.

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 and certain commitments outstanding with the FHLBNY. Class B1 and Class B2 shares have the same voting and dividend rights.

Any member that withdraws from membership must wait 5 years from the termination of the charter for all capital stock that is held as a condition of membership unless the institution has cancelled its notice of withdrawal prior to that date and before being readmitted to membership in any FHLBank. Commencing in 2008, the Bank at its discretion, may repay a non-member’s membership stock before expiration of the five-year waiting period¹.

The FHLBNY is subject to risk-based capital rules. Specifically, the FHLBNY is subject to three capital requirements. First, the FHLBNY must maintain at all times permanent capital in an amount at least equal to the sum of its credit, market, and operations risks capital requirements calculated in accordance with the FHLBNY policy and the rules and regulations of the Federal Housing Finance Agency (“Finance Agency”). Only permanent capital, defined as Class B stock and retained earnings, satisfies this risk-based capital requirement. The Finance Agency may require the FHLBNY to maintain a greater amount of permanent capital than is required as defined by the risk-based capital requirements. In addition, the FHLBNY is required to maintain at least a 4% 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 plus allowance for loan loss reserves and nonpermanent capital weighted 1.0 times plus allowance for loan loss reserves divided by total assets. The FHLBNY was in compliance with the aforementioned capital rules and requirements for all periods reported.

¹ On December 12, 2007 the Finance Board, the predecessor of the Finance Agency, approved amendments to the FHLBNY’s capital plan which allow the FHLBNY to recalculate the membership stock purchase requirement any time after 30 days subsequent to a merger. The amendments also permit the FHLBNY to use a zero mortgage asset base in performing the calculation, which recognizes the fact that the corporate entity that was once its member no longer exists. As a result of these amendments, the FHLBNY could determine that all of the membership stock formerly held by the member would become 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.

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Capital Ratios

The following table summarizes the Bank’s risk-based capital ratios (dollars in thousands):

	March 31, 2009						December 31, 2008
	Required 4			Actual			Required 4			Actual
Regulatory capital requirements:
Risk-based capital1	$	595,197		$	6,041,881		$	650,333		$	6,111,676
Total capital-to-asset ratio		4.00	%		4.71	%		4.00	%		4.44	%
Total capital2	$	5,134,358		$	6,043,730		$	5,501,596		$	6,113,082
Leverage ratio		5.00	%		7.06	%		5.00	%		6.67	%
Leverage capital3	$	6,417,947		$	9,064,670		$	6,876,995		$	9,168,920

1	Actual “Risk-based capital” is capital stock and retained earnings plus mandatorily redeemable capital stock. Section 932.2 of the Finance Agency’s regulations also refers to this amount as “Permanent Capital.”
2	Actual “Total capital” is “Risk-based capital” plus allowance for credit losses. Does not include reserves for the Lehman Brothers receivable which is a specific reserve.
3	Actual Leverage capital is “Risk-based capital” times 1.5 plus allowance for loan losses.
4	Required minimum.

Mandatorily Redeemable Capital Stock

Generally, the FHLBNY’s capital stock is redeemable at the option of either the member or the FHLBNY subject to certain conditions, and is subject to the provisions under SFAS 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity” (“SFAS 150”).

The FHLBNY is a cooperative whose member financial institutions own almost all of the FHLBNY’s capital stock. Member shares cannot be purchased or sold except between the Bank and its members at its $100 per share par value. Also, the FHLBNY does not have equity securities that trade in a public market. Future filings with the SEC will not be in anticipation of the sale of equity securities in a public market as the FHLBNY is prohibited by law from doing so, and the FHLBNY is not controlled by an entity that has equity securities traded or contemplated to be traded in a public market. Therefore, the FHLBNY is a nonpublic entity based on the definition in 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 accordance 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 and are reclassified to a liability at fair value. Dividends on member shares classified as a liability in the Statements of Condition and an offset in the Statements of Income as an interest expense. The repayment of these mandatorily redeemable financial instruments, once settled, will be reflected as financing cash outflows in the Statements of cash flows. In compliance with this provision, dividends on mandatorily redeemable capital stock in the amounts of $0.9 million and $4.3 million were recorded as interest expense for the current and prior year first quarters.

36

If a member cancels its notice of voluntary withdrawal, the FHLBNY will reclassify the mandatorily redeemable capital stock from a liability to equity. After the reclassification, dividends on the capital stock will no longer be classified as interest expense.

At March 31, 2009 and December 31, 2008, mandatorily redeemable capital stock of $140.0 million and $143.1 million were held by former members who had attained non-member status by virtue of being acquired by non-members. A small number of members also became non-members by relocating their charters to outside the FHLBNY’s membership district.

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

	March 31, 2009		December 31, 2008
Redemption less than one year	$	57,680	$	38,328
Redemption from one year to less than three years		74,287		83,159
Redemption from three years to less than five years		2,582		14,646
Redemption after five years or greater		5,412		6,988
Total	$	139,961	$	143,121

Anticipated redemptions assume the Bank will follow its current practice of daily redemption of capital in excess of the amount required to support advances. Commencing January 1, 2008, the Bank may also redeem, at its discretion, non-members’ membership stock.

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Note 12. Total comprehensive income

Changes in Accumulated other comprehensive income (loss) and total comprehensive income were as follows for the three months ended March 31, 2009 and 2008 (in thousands):

													Accumulated
	Available-			Non-credit			Cash			Supplemental			Other					Total
	for-sale			OTTI on HTM			flow			Retirement			Comprehensive			Net		Comprehensive
	securities			securities			hedges			Plans			Income (Loss)			Income		Income
December 31, 2007	$	(373	)	$	—		$	(30,215	)	$	(5,087	)	$	(35,675	)
Net change		(16,661	)		—			(5,221	)		—			(21,882	)	$	100,224	$	78,342
March 31, 2008	$	(17,034	)	$	—		$	(35,436	)	$	(5,087	)	$	(57,557	)
December 31, 2008	$	(64,420	)	$	—		$	(30,191	)	$	(6,550	)	$	(101,161	)
Net change		30,426			(9,938	)		1,879			—			22,367		$	148,139	$	170,506
March 31, 2009	$	(33,994	)	$	(9,938	)	$	(28,312	)	$	(6,550	)	$	(78,794	)

Note 13. Earnings per share of capital

The following table sets forth the computation of earnings per share (dollars in thousands except per share amounts):

	Three months ended March 31,
	2009			2008
Net income	$	148,139		$	100,224
Net income available to stockholders	$	148,139		$	100,224
Weighted average shares of capital		55,976			45,469
Less: Mandatorily redeemable capital stock		(1,430	)		(1,946	)
Average number of shares of capital used to calculate earnings per share		54,546			43,523
Net earnings per share of capital	$	2.72		$	2.30

Basic and diluted earnings per share of capital are the same. The FHLBNY has no dilutive potential common shares or other common stock equivalents.

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Note 14. 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. 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 FHLBNY maintains a Benefit Equalization Plan (“BEP”) that restores defined benefits and contribution benefits to those employees who have had their qualified defined benefit and defined contribution benefits limited by IRS regulations. The contribution component of the BEP plan is a supplemental defined contribution plan. The plan’s liability consists of the accumulated compensation deferrals and accrued interest on the deferrals. The BEP is an unfunded plan. The FHLBNY also offers a Retiree Medical Benefit Plan, which is a postretirement health benefit plan. There are no funded plan assets that have been designated to provide postretirement health benefits. The Bank has established several grantor trusts to meet future benefit obligations and current payments to beneficiaries in supplemental pension plans.

Effective January 1, 2009, the Bank offers a Nonqualified Deferred Compensation Plan to certain officer employees and to the members of the Board of Directors of the Bank. Participants in the plan may elect to defer all or a portion of their compensation earned. The deferment period is for a minimum period of five years. Amounts recorded as a liability were de minimis at March 31, 2009.

Retirement Plan Expenses — Summary

The following table presents employee retirement plan expenses for the periods ended (in thousands):

	Three months ended March 31,
	2009		2008
Defined Benefit Plan	$	1,441	$	1,495
Benefit Equalization Plan (defined benefit)		515		469
Defined Contribution Plan and BEP Thrift		242		186
Postretirement Health Benefit Plan		251		249
Total retirement plan expenses	$	2,449	$	2,399

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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.

Components of the net periodic pension cost for the defined benefit component of the BEP, an unfunded plan, were as follows (in thousands):

	Three months ended March 31,
	2009			2008
Service cost	$	153		$	153
Interest cost		263			236
Amortization of unrecognized prior service cost		(36	)		(36	)
Amortization of unrecognized net loss		135			116
Net periodic benefit cost	$	515		$	469

Key assumptions and other information for the actuarial calculations to determine benefit obligations for the FHLBNY’s BEP plan were as follows (dollars in thousands):

	March 31,			December 31,
	2009			2008
Discount rate *		6.14	%		6.14	%
Salary increases		5.50	%		5.50	%
Amortization period (years)		8			8
Benefits paid during the year	$	(544	)	$	(392	)

* The discount rate was based on the Citigroup Pension Liability Index at December 31, 2008 and adjusted for durations.

The total amounts of benefits paid and expected to be paid under this plan are not expected to be materially different from amount disclosed in the Bank’s Form 10-K filed on March 27, 2009.

Postretirement Health Benefit Plan

The FHLBNY has a postretirement health benefit plan for retirees. Employees over the age of 55 are eligible provided they have completed ten years of service after age 45.

Components of the net periodic benefit cost for the postretirement health benefit plan were (in thousands):

	Three months ended March 31,
	2009			2008
Service cost (benefits attributed to service during the period)	$	139		$	128
Interest cost on accumulated postretirement health benefit obligation		217			227
Amortization of loss		78			77
Amortization of prior service cost/(credit)		(183	)		(183	)
Net periodic postretirement health benefit cost	$	251		$	249

40

Key assumptions and other information to determine obligation for the FHLBNY’s postretirement health benefit plan were as follows:

	March 31,			December 31,
	2009			2008
Weighted average discount rate at the end of the year*		6.14	%		6.14	%
Health care cost trend rates:
Assumed for next year		7.00	%		7.00	%
Ultimate rate		5.00	%		5.00	%
Year that ultimate rate is reached		2011			2011
Alternative amortization methods used to amortize
Prior service cost	Straight - line			Straight - line
Unrecognized net (gain) or loss	Straight - line			Straight - line

* The discount rate was based on the Citigroup Pension Liability Index at December 31, 2008 and adjusted for durations.

The total amounts of benefits paid and expected to be paid under this plan are not expected to be materially different from amount disclosed in the Bank’s Form 10-K filed on March 27, 2009.

Note 15. Derivatives and hedging activities

General — The FHLBNY may enter into interest-rate swaps, swaptions, and interest-rate cap and floor agreements to manage its exposure to changes in interest rates. The FHLBNY may also use callable swaps to potentially adjust the effective maturity, repricing frequency, or option characteristics of financial instruments to achieve risk management objectives. The FHLBNY uses derivatives in three ways: by designating them as a fair value or cash flow hedge of an underlying financial instrument or a forecasted transaction; by acting as an intermediary; or by designating the derivative as an asset-liability management hedge (i.e., an “economic hedge”). For example, the FHLBNY uses derivatives in its overall interest-rate risk management to adjust the interest-rate sensitivity of consolidated obligations to approximate more closely the interest-rate sensitivity of assets (both advances and investments), and/or to adjust the interest-rate sensitivity of advances, investments or mortgage loans to approximate more closely the interest-rate sensitivity of liabilities. In addition to using derivatives to manage mismatches of interest rates between assets and liabilities, the FHLBNY also uses derivatives: to manage embedded options in assets and liabilities; to hedge the market value of existing assets and liabilities and anticipated transactions; to hedge the duration risk of prepayable instruments; and to reduce funding costs where possible.

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 SFAS 133; it is, however, an acceptable hedging strategy under the FHLBNY’s risk management program. These strategies also comply with the Finance Agency’s regulatory requirements prohibiting speculative use of derivatives. An economic hedge introduces the potential for earnings variability due to the changes in fair value recorded on the derivatives that are not offset by corresponding changes in the value of the economically hedged assets, liabilities, or firm commitments. The FHLBNY will execute an interest rate swap to match the terms of a asset or liability that is elected under the Fair Value Option under SFAS 159 and the swap is also considered as an economic hedge to mitigate the volatility of the FVO designated asset or liability due to change in the full fair value of the designated asset or liability. In the third quarter of 2008, the FHLBNY elected the FVO for certain consolidated obligation bonds and executed interest rate swaps to offset the fair value changes of the bonds. At March 31, 2009 and December 31, 2008, par amounts of debt designated under the FVO were $25.0 million and $983.0 million.

41

The FHLBNY, consistent with Finance Agency’s regulations, enters into derivatives to manage the market risk exposures inherent in otherwise unhedged assets and funding positions. The FHLBNY utilizes derivatives in the most cost efficient manner and may enter into derivatives as economic hedges that do not qualify for hedge accounting under 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.

Hedging activities

Consolidated Obligations — The FHLBNY manages the risk arising from changing market prices and volatility of a consolidated obligation by matching the cash inflows on the derivative with the cash outflow on the consolidated obligation. While consolidated obligations are the joint and several obligations of the FHLBanks, one or more FHLBanks may individually serve as counterparties to derivative agreements associated with specific debt issues. For instance, in a typical transaction, fixed-rate consolidated obligations are issued for one or more FHLBanks, and each of those FHLBanks could simultaneously enter into a matching derivative in which the counterparty pays to the FHLBank fixed cash flows designed to mirror in timing and amount the cash outflows the FHLBank pays on the consolidated obligations. Such transactions are treated as fair value hedges under SFAS 133. In the third quarter of 2008, the FHLBNY had elected the Fair Value Option under SFAS 159 for certain consolidated obligation bonds and these were measured under the provisions of SFAS 157 as of March 31, 2009 and December 31, 2008.

The FHLBNY has issued variable-rate consolidated obligations bonds indexed to 1 month-LIBOR, the U.S. Prime rate, or federal funds rate and has simultaneously executed interest-rate swaps to hedge the basis risk of the variable rate debt to 3-month LIBOR, the Bank’s preferred funding base. The interest rate swaps were accounted as economic hedges of the floating-rate bonds.

The issuance of the FHLB fixed-rate bonds to investors and the execution of interest rate swaps typically results in cash flow pattern in which the FHLBNY has effectively converted the bonds’ cash flows to variable cash flows that closely match the interest payments it receives on short-term or variable-rate advances. From time-to-time, this intermediation between the capital and swap markets has permitted the FHLBNY to raise funds at a lower cost than would otherwise be available through the issuance of simple fixed- or floating-rate consolidated obligations in the capital markets. The FHLBNY does not issue consolidated obligations denominated in currencies other than U.S. dollars.

42

Advances — With a putable advance (also referred to as convertible) borrowed by a member, the FHLBNY may purchase from the member a put option that enables the FHLBNY to effectively convert an advance from fixed rate to floating rate if interest rates increase, 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) that members may prepay without a prepayment fee, it usually finances such advances with callable debt. The Bank has not elected the FVO for any advances.

Mortgage Loans — The FHLBNY invests in mortgage assets. The prepayment options embedded in mortgage assets can result in extensions or reductions in the expected maturities of these investments, depending on changes in estimated prepayment speeds. Finance Agency regulations limit this source of interest-rate risk by restricting the types of mortgage assets the Bank may own to those with limited average life changes under certain interest-rate shock scenarios and by establishing limitations on duration of equity and changes in market value of equity. The FHLBNY may manage against prepayment and duration risk by funding some mortgage assets with consolidated obligations that have call features. In addition, the FHLBNY may use derivatives to manage the prepayment and duration variability of mortgage assets. Net income could be reduced if the FHLBNY replaces the mortgages with lower yielding assets and if the Bank’s higher funding costs are not reduced concomitantly.

The FHLBNY manages the interest rate and prepayment risks associated with mortgages through debt issuance. The FHLBNY issues both callable and non-callable debt to achieve cash flow patterns and liability durations similar to those expected on the mortgage loans. The FHLBNY analyzes the duration, convexity and earnings risk of the mortgage portfolio on a regular basis under various rate scenarios. The Bank has not elected the FVO for any mortgage loans.

Firm Commitment Strategies — Mortgage delivery commitments are considered derivatives under the provisions of SFAS 133, and the FHLBNY accounts for them as freestanding derivatives, and records the fair values of mortgage loan delivery commitments on the balance sheet with an offset to current period earnings. Fair values of the mortgage delivery commitments were de minimis for all periods reported.

The FHLBNY may also hedge a firm commitment for a forward starting advance through the use of an interest-rate swap. In this case, the swap will function as the hedging instrument for both the firm commitment and the subsequent advance. The basis movement associated with the firm commitment will be added to the basis of the advance at the time the commitment is terminated and the advance is issued. The basis adjustment will then be naturally amortized into interest income over the life of the advance.

Forward Settlements — There were no forward settled securities at March 31, 2009 or at December 31, 2008 that would settle outside the shortest period of time for the settlement of such securities. Forward settling MBS traded at March 31, 2009 with settlement within the shortest period of time for settlement of MBS was $50.0 million and was recorded as an investment with an offsetting liability at March 31, 2009.

43

Anticipated Debt Issuance — The FHLBNY enters into interest-rate swaps on the anticipated issuance of debt to “lock in” a spread between the earning asset and the cost of funding. The swap is terminated upon issuance of the debt instrument, and amounts reported in Accumulated other comprehensive income (loss) are reclassified to earnings in the periods in which earnings are affected by the variability of the cash flows of the debt that was issued.

Intermediation — To meet the hedging needs of its members, the FHLBNY acts as an intermediary between the members and the other counterparties. This intermediation allows smaller members access to the derivatives market. The derivatives used in intermediary activities do not qualify for 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. Collateral with respect to derivatives with member institutions includes collateral assigned to the FHLBNY as evidenced by a written security agreement and held by the member institution for the benefit of the FHLBNY.

Economic hedges — At March 31, 2009 and December 31, 2008, economic hedges were comprised primarily of: (1) short- and medium-term interest rate swaps that hedged the basis risk (Prime rate, Fed fund rate, and the 1-month LIBOR index) of variable-rate bonds issued by the FHLBNY. These swaps were considered freestanding and changes in the fair values of the swaps were recorded through income. The FHLBNY believes the operational cost of designating the basis hedges in a SFAS 133 qualifying hedge would outweigh the benefits of applying hedge accounting. (2) Interest rate caps to hedge balance sheet risk were considered freestanding derivatives with fair value changes recorded through Other income (loss) as a Net realized and unrealized gain or loss on derivatives and hedging activities. (3) Interest rate swaps hedging interest rate risk within the balance sheet. (4) Interest rate swaps that had been accounted under the provisions of SFAS 133 but had been de-designated from hedge accounting as they were assessed as being not highly effective hedges. (5) Interest rate swaps executed to offset the fair value changes of bonds designated under the provisions of SFAS 159. The FHLBNY is not a derivatives dealer and does not trade derivatives for short-term profit.

Cash Flow hedges

There were no material amounts for the first quarters in 2009 and 2008 that were reclassified into earnings as a result of the discontinuance of cash flow hedges because it became probable that the original forecasted transactions would not occur by the end of the originally specified time period or within a two-month period thereafter. The maximum length of time over which the Bank typically hedges its exposure to the variability in future cash flows for forecasted transactions is between three and six months. No cash flow hedges were outstanding at March 31, 2009 and December 31, 2008. The effective portion of the gain or loss on swaps designated and qualifying as a cash flow hedging instrument is reported as a component of Accumulated other comprehensive income and reclassified into earnings in the same period during which the hedged forecasted bond expenses affect earnings.

44

Derivative Instruments and Hedging activities

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

Finance Agency regulations prohibit the speculative use of derivatives. The FHLBNY does not take speculative positions with derivatives or any other financial instruments, or trade derivatives for short-term profits. The FHLBNY does not have any special purpose entities or any other types of off-balance sheet conduits. The FHLBNY established several small grantor trusts related to employee benefits programs.

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 interest-rate risk. Such derivatives were designated as economic hedges 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 SFAS 133 qualifying hedge was not economical. Changes in the fair value of a derivative are recorded in current period earnings for a fair value hedge, or in Accumulated other comprehensive income (loss) for the effective portion of fair value changes of a cash flow hedge.

Interest income and interest expense from interest rate swaps used for hedging are reported together with interest on the instrument being hedged if the swap qualifies for hedge accounting under the provisions of SFAS 133. If the swap is designated as an economic hedge, interest accruals are recorded in Other income (loss) as a Net realized and unrealized gain (loss) on derivatives and hedging activities.

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

45

The following tables present notional amounts and fair values of derivative instruments as of March 31, 2009 and December 31, 2008 (in thousands):

	March 31, 2009
	Notional Amount		Derivative			Derivative
	of Derivatives		Assets			Liabilities
Fair value of derivative instruments
Derivatives designated under SFAS 133
Interest rate swaps
Advances	$	65,880,831	$	1,064		$	(5,077,069	)
Consolidated obligation-bonds		21,815,280		1,063,957			(754	)
Total derivatives in SFAS 133 hedging relationships	$	87,696,111	$	1,065,021		$	(5,077,823	)
Derivatives not designated under SFAS 133
Interest rate swaps
Advances	$	392,200	$	—		$	(16,377	)
Consolidated obligation-bonds		22,625,000		3,948			(32,074	)
Consolidated obligation-discount notes		13,062,369		13,572			(200	)
Balance sheet		2,100,000		88,611			(94,282	)
Interest rate caps or floors
Balance sheet		1,892,000		9,814			—
Advances		465,000		7,941			(7,935	)
Mortgage delivery commitments		3,739		8			(6	)
Other		305,000		2,244			(1,898	)
Total derivatives not designated under SFAS 133	$	40,845,308	$	126,138		$	(152,772	)
Total derivatives before netting and collateral adjustments
Netting adjustments			$	(1,471,648	)	$	1,471,648
Accrued Interest				380,273			(343,944	)
Cash collateral and related accrued interest				(88,321	)		3,071,120
Total Collateral and Netting Adjustments			$	(1,179,696	)	$	4,198,824
Totals reported on the Statements of Condition			$	11,463		$	(1,031,771	)

46

	December 31, 2008
	Notional Amount		Derivative			Derivative
	of Derivatives		Assets			Liabilities
Fair values of derivative instruments
Derivatives designated under SFAS 133
Interest rate swaps
Advances	$	61,673,607	$	82		$	(5,758,736	)
Consolidated obligation-bonds		22,130,280		1,228,464			(843	)
Consolidated obligation-discount notes		778,909		129			(100	)
Total derivatives in SFAS 133 hedging relationships	$	84,582,796	$	1,228,675		$	(5,759,679	)
Derivatives not designated under SFAS 133
Interest rate swaps
Advances	$	617,700	$	34		$	(24,564	)
Consolidated obligation-bonds		29,465,000		12,123			(71,953	)
Consolidated obligation discount-notes		7,508,442		14,512			(566	)
Balance sheet		2,100,000		98,079			(104,077	)
Interest rate caps or floors
Balance sheet		1,892,000		8,164			—
Advances		465,000		8,090			(8,080	)
Mortgage delivery commitments		10,395		2			(110	)
Other		1,283,000		17,180			(8,997	)
Total derivatives not designated under SFAS 133	$	43,341,537	$	158,184		$	(218,347	)
Total derivatives before netting and collateral adjustments
Netting adjustments			$	(1,808,183	)	$	1,808,183
Accrued Interest				502,769			(528,187	)
Cash collateral and related accrued interest				(61,209	)		3,836,370
Total collateral and netting adjustments			$	(1,366,623	)	$	5,116,366
Totals reported on the Statements of Condition			$	20,236		$	(861,660	)

47

The following table presents the components of net gains (losses) on derivatives and hedging activities as presented in the Statements of Income for the three months ended March 2009 and 2008 (in thousands):

	March 31, 2009			March 31, 2008
	Gain (Loss)			Gain (Loss)
Derivatives and hedged items in SFAS 133 hedging
Interest rate swaps
Advances	$	(10,611	)	$	(637	)
Consolidated obligations-bonds		12,882			2,086
Net gain (loss) related to fair value hedge ineffectiveness	$	2,271		$	1,449
Net gain (loss) related to cash flow hedge ineffectiveness	$	—		$	447
Derivatives not designated under SFAS 133 hedging
Economic hedges
Interest rate swaps
Advances	$	4,340		$	(1,210	)
Consolidated obligations-bonds		31,482			1,025
Consolidated obligations-discount notes		(603	)		55
Member intermediation		(153	)		(1	)
Balance sheet		2,233			—
Accrued interest-swaps		(46,222	)		(486	)
Accrued interest-intermediation		25			2
Caps and floors
Advances		(429	)		(544	)
Balance sheet		1,650			—
Accrued interest-options		(692	)		126
Mortgage delivery committments		59			3
Swaps under fair value option		—			—
Consolidated obligations-bonds		(7,684	)		—
Accrued interest on FVO swaps		57			—
Net gain (loss) related to derivatives not designated as hedging instruments under SFAS 133	$	(15,937	)	$	(1,030	)
Net gain (loss) on derivatives and hedging activities	$	(13,666	)	$	866

48

The following tables present, by type of hedged item, the gains (losses) on derivatives and the related hedged items in fair value hedging relationships and the impact of those derivatives for the quarters ended March 31, 2009 and 2008 (in thousands):

	March 31, 2009
							Net Fair Value			Effect of			Effect of
	Gain (Loss) on			Gain (Loss) on			Hedge			Derivatives on Net			Amortization of
	Derivative			Hedged Item			Ineffectiveness			Interest Income			Basis Adjustment
FAS 133 hedged item type
Interest rate swaps
Advances	$	683,558		$	(694,169	)	$	(10,611	)	$	(331,166	)	$	(869	)
Consolidated obligations-bonds		(164,195	)		177,077			12,882			104,753			(674	)
Consolidated obligations-notes		—			—			—			239			204
Economic hedges
Interest rate swaps
Advances		4,340			—			4,340			—			—
Consolidated obligations-bonds		31,482			—			31,482			—			—
Consolidated obligations-notes		(603	)		—			(603	)		—			—
Member intermediation		(153	)		—			(153	)		—			—
Balance sheet		2,233			—			2,233			—			—
Accrued interest-swaps		(46,222	)		—			(46,222	)		—			—
Accrued interest-intermediation		25			—			25			—			—
Caps and floors
Advances		(429	)		—			(429	)		—			—
Balance sheet		1,650			—			1,650			—			—
Accrued interest-options		(692	)		—			(692	)		—			—
Mortgage delivery commitments		59			—			59			—			—
Total	$	511,053		$	(517,092	)	$	(6,039	)	$	(226,174	)	$	(1,339	)

49

	March 31, 2008
							Net Fair Value			Effect of			Effect of
	Gain (Loss) on			Gain (Loss) on			Hedge			Derivatives on Net			Amortization of
	Derivative			Hedged Item			Ineffectiveness			Interest Income			Basis Adjustment
FAS 133 hedged item type
Interest rate swaps
Advances	$	(1,544,847	)	$	1,544,210		$	(637	)	$	(2,602	)	$	(622	)
Consolidated obligations-bonds		307,405			(305,319	)		2,086			39,168			4,751
Cash flow hedges ineffectiveness		447			—			447			—			—
Economic hedges
Interest rate swaps
Advances		(1,210	)		—			(1,210	)		—			—
Consolidated obligations-bonds		1,025			—			1,025			—			—
Consolidated obligations-notes		55			—			55			—			—
Member intermediation		(1	)		—			(1	)		—			—
Accrued interest-swaps		(486	)		—			(486	)		—			—
Accrued interest-intermediation		2			—			2			—			—
Caps and floors
Advances		(544	)		—			(544	)		—			—
Accrued interest-options		126			—			126			—			—
Mortgage delivery commitments		3			—			3			—			—
Total	$	(1,238,025	)	$	1,238,891		$	866		$	36,566		$	4,129

50

The effect of cash flow hedge related derivative instruments for the quarters ended March 31, 2009 and 2008 were as follows (in thousands):

	March 31, 2009
	OCI
	Gains/(Losses)
			Location:	Amount		Ineffectiveness
	Recognized		Reclassified to	Reclassified to		Recognized in
	in OCI 1		Earnings 1	Earnings 1		Earnings
The effect of cash flow hedge related to
Interest rate swaps
Advances	$	—	Interest Income	$	—	$	—
Consolidated obligations-bonds		—	Interest Expense		1,879		—
Total	$	—		$	1,879	$	—

¹-Effective portion

	March 31, 2008
	OCI
	Gains/(Losses)
				Location:	Amount		Ineffectiveness
	Recognized			Reclassified to	Reclassified to		Recognized in
	in OCI 1			Earnings 1	Earnings 1		Earnings
The effect of cash flow hedge related to
Interest rate swaps
Advances	$	—		Interest Income	$	—	$	—
Consolidated obligations-bonds		(6,364	)	Interest Expense		1,134		9
Total	$	(6,364	)		$	1,134	$	9

¹-Effective portion

51

Note 16. Fair Values of Financial Instruments

Items Measured at Fair Value on a Recurring Basis

The following table presents for each SFAS 157 hierarchy level, the FHLBNY’s assets and liabilities that were measured at fair value on its Statements of Condition at March 31, 2009 and December 31, 2008 (in thousands):

	March 31, 2009
											Netting
	Total			Level 1		Level 2			Level 3		Adjustments
Assets
Available-for-sale securities	$	2,641,996		$	—	$	2,641,996		$	—	$	—
Derivative assets		11,463			—		1,191,159			—		(1,179,696	)
Total assets at fair value	$	2,653,459		$	—	$	3,833,155		$	—	$	(1,179,696	)
Liabilities
Consolidated obligations:
Discount notes	$	—		$	—	$	—		$	—	$	—
Bonds		(25,377	)		—		(25,377	)		—		—
Derivative liabilities		(1,031,771	)		—		(5,230,595	)		—		4,198,824
Total liabilities at fair value	$	(1,057,148	)	$	—	$	(5,255,972	)	$	—	$	4,198,824

	December 31, 2008
											Netting
	Total			Level 1		Level 2			Level 3		Adjustments
Assets
Available-for-sale securities	$	2,861,869		$	—	$	2,861,869		$	—	$	—
Derivative assets		20,236			—		1,386,859			—		(1,366,623	)
Total assets at fair value	$	2,882,105		$	—	$	4,248,728		$	—	$	(1,366,623	)
Liabilities
Consolidated obligations:
Discount notes	$	—		$	—	$	—		$	—	$	—
Bonds		(998,942	)		—		(998,942	)		—		—
Derivative liabilities		(861,660	)		—		(5,978,026	)		—		5,116,366
Total liabilities at fair value	$	(1,860,602	)	$	—	$	(6,976,968	)	$	—	$	5,116,366

Items Measured at Fair Value on a Nonrecurring Basis

Certain assets and liabilities would be measured at fair value on a nonrecurring basis. For the FHLBNY, such items may include mortgage loans in foreclosure, or mortgage loans and held-to-maturity securities written down to fair value. Two held-to-maturity private-label MBS were written down to fair value as a result of OTTI at March 31, 2009 (none at December 31, 2008). The amortized cost basis and fair values were $37.0 million and $21.8 million at March 31, 2009 prior to the write down.

52

Estimated fair values (SFAS 107) — Summary Tables

The Bank early adopted FSP FAS 107-1 and APB 28-1, “Interim Disclosures about Fair Value of Financial Instruments” as of January 1, 2009. The FHLBNY has consistently presented estimated fair value disclosures in interim financial statements in prior year periods, although it has not been required to under pre-existing GAAP disclosure requirements, as it believed fair values provided useful information to investors and its stockholders with respect to significant changes in the estimated fair values of the FHLBNY’s financial instruments.

The carrying value and estimated fair values of the FHLBNY’s financial instruments as of March 31, 2009 were as follows (in thousands):

	March 31, 2009
	Carrying		Net Unrealized			Estimated
Financial Instruments	Value		Gains/Losses			Fair Value
Assets
Cash and due from banks	$	32,136	$	—		$	32,136
Interest-bearing deposits		8,602,233		1,600			8,603,833
Federal funds sold		500,000		1			500,001
Available-for-sale securities		2,641,996		—			2,641,996
Held-to-maturity securities
Long-term securities		9,935,079		(150,954	)		9,784,125
Certificates of deposit		300,000		17			300,017
Advances		104,463,598		88,450			104,552,048
Mortgage loans, net		1,430,899		55,608			1,486,507
Accrued interest receivable		411,500		—			411,500
Derivative assets		11,463		—			11,463
Other financial assets		3,427		—			3,427
Liabilities
Deposits		2,372,415		270			2,372,685
Consolidated obligations:
Bonds		69,582,076		112,890			69,694,966
Discount notes		48,721,626		29,355			48,750,981
Mandatorily redeemable capital stock		139,961		—			139,961
Accrued interest payable		385,121		—			385,121
Derivative liabilities		1,031,771		—			1,031,771
Other financial liabilities		44,467		—			44,467

53

The carrying values and estimated fair values of the FHLBNY’s financial instruments as of December 31, 2008, were as follows (in thousands):

	December 31, 2008
	Carrying		Net Unrealized			Estimated
Financial Instruments	Value		Gains/Losses			Fair Value
Assets
Cash and due from banks	$	18,899	$	—		$	18,899
Interest-bearing deposits		12,169,096		1,585			12,170,681
Federal funds sold		—		—			—
Available-for-sale securities		2,861,869		—			2,861,869
Held-to-maturity securities
Long-term securities		10,130,543		(196,070	)		9,934,473
Certificates of deposit		1,203,000		328			1,203,328
Advances		109,152,876		268,482			109,421,358
Mortgage loans, net		1,457,885		38,444			1,496,329
Accrued interest receivable		492,856		—			492,856
Derivative assets		20,236		—			20,236
Other financial assets		2,713		—			2,713
Liabilities
Deposits		1,451,978		670			1,452,648
Consolidated obligations:
Bonds		82,256,705		276,343			82,533,048
Discount notes		46,329,906		79,001			46,408,907
Mandatorily redeemable capital stock		143,121		—			143,121
Accrued interest payable		426,144		—			426,144
Derivative liabilities		861,660		—			861,660
Other financial liabilities		38,594		—			38,594

The following table summarizes the activity related to consolidated obligation bonds for which the Bank elected the fair value option under SFAS 159 (in thousands):

	March 31, 2009			December 31, 2008
Balance, beginning of the period	$	998,942		$	—
New transaction elected for fair value option		—			1,014,000
Maturities and terminations		(958,000	)		(31,000	)
Change in fair value		(8,313	)		8,325
Change in accrued interest		(7,252	)		7,617
Balance, end of the period	$	25,377		$	998,942

The following table presents the change in fair value include in the Statements of Income for the consolidated obligation bonds designated under SFAS 159 (in thousands):

	Interest expense on					Total change in fair
	consolidated obligation			Net gain(loss) due to		value included in
	bonds			changes in fair value		current period earnings
Period ended March 31, 2009
Consolidated obligation-bonds	$	(1,074	)	$	8,313	$	7,239
Period ended March 31, 2008
Consolidated obligation-bonds	$	—		$	—	$	—

54

The following table compares the aggregate fair value and aggregate remaining contractual fair value and aggregate remaining contractual principal balance outstanding of consolidated obligation bonds for which the fair value option has been elected under SFAS 159 (in thousands):

	March 31, 2009
					Fair value
	Principal Balance		Fair value		over/(under)
Consolidated obligation-bonds	$	25,000	$	25,377	$	377

	December 31, 2008
					Fair value
	Principal Balance		Fair value		over/(under)
Consolidated obligation-bonds	$	983,000	$	998,942	$	15,942

Notes to Estimated Fair Values of financial instruments (SFAS 107)

The fair value of financial instruments is defined as the price FHLBNY would receive to sell an asset in an orderly transaction between market participants at the measurement date. A financial liability’s fair value is defined as the amount that would be paid to transfer the liability to a new obligor, not the amount that would be paid to settle the liability with the creditor. Where available, fair value is based on observable market prices or parameters, or derived from such prices or parameters. Where observable prices are not available, valuation models and inputs are utilized. These valuation techniques involve some level of management estimation and judgment, the degree of which is dependent on the price transparency for the instruments or markets and the instruments’ complexity.

The fair values of financial assets and liabilities reported in the tables above are discussed below. For additional information also see Significant Accounting Policies and Estimates in Note 1. The Fair Value Summary Tables above do not represent an estimate of the overall market value of the FHLBNY as a going concern, which would take into account future business opportunities and the net profitability of assets versus liabilities.

The estimated fair value amounts have been determined by the FHLBNY using procedures described below. Because an active secondary market does not exist for a portion of the FHLBNY’s financial instruments, in certain cases, fair values are not subject to precise quantification or verification and may change as economic and market factors and evaluation of those factors change.

Cash and due from banks

The estimated fair value approximates the recorded book balance.

Interest-bearing deposits and Federal funds sold

The FHLBNY determines estimated fair values of certain short-term investments by calculating the present value of expected future cash flows from the investments. The discount rates used in these calculations are the current coupons of investments with similar terms.

55

Investment securities

The fair value of mortgage-backed investment securities is estimated by management using information from specialized pricing services that use pricing models or quoted prices of securities with similar characteristics. Inputs into the pricing models employed by pricing services for most of the Bank’s investments are market based and observable and are considered as Level 2 securities. The valuation techniques used by pricing services employ cash flow generators and option-adjusted spread models. Pricing spreads used as inputs in the models are based on new issue and secondary market transactions if securities that are traded in sufficient volumes in the secondary market. The valuation of the Bank’s private-label securities that are all designated as held-to-maturity may require pricing services to use significant inputs that are subjective and may be considered to be Level 3 because the inputs may not be market based and observable. In accordance with the provisions of SFAS 115, as amended by the FASB issued FSP FAS 115-2, “Recognition and presentation of Other-Than-Temporary Impairment” (“FSP FAS 115-2 and FAS 124-2”), two held-to-maturity private-label mortgage-backed securities were written down to their fair value as a result of a recognition of OTTI. The amortized cost basis was $37.0 million prior to the write down. The new carrying value at March 31, 2009 is $21.8 million, which was the fair value of the two securities at March 31, 2009. The amount of write down was $15.2 million, deemed to be a non-recurring charge. The credit loss component of the write down was $5.3 million. The non-credit component of OTTI was $9.9 million. The credit loss was a charge to earnings in the Statement of Income for the current year first quarter. The two OTTI impaired securities are classified as Level 3 financial instruments within the SFAS 157 valuation hierarchy. This determination was made based on management’s view that the two private-label instruments may not have an active market because of the specific vintage of the two impaired securities as well as inherent conditions surrounding the trading of private-label mortgage-backed securities; fair values of the two securities were determined by management using third party specialized vendor pricing services that made appropriate adjustments to observed prices of comparable securities that were being transacted in orderly market.

The fair value of housing finance agency bonds is estimated by management using information primarily from specialized dealers.

For more information, see Significant Accounting Policies and Estimates in Note 1 for corroboration and other analytical procedures performed by the FHLBNY. Examples of securities priced under such a valuation technique, and which are classified within Level 2 of the valuation hierarchy and valued using the “market approach” as defined under SFAS 157, include GSE issued collateralized mortgage obligations and money market funds.

Advances

The fair values of advances are computed using standard option valuation models for purposes of SFAS 107. The most significant inputs to the valuation model are (1) consolidated obligation debt curve, published by the Office of Finance and available to the public, and (2) LIBOR swap curves and volatilities. The Bank considers both these inputs to be market based and observable as they can be directly corroborated by market participants.

Mortgage loans

The fair value of MPF loans and loans in the inactive CMA programs are priced for purposes of SFAS 107 using a valuation technique referred to as the “market approach” as defined in SFAS 157. Loans are aggregated into synthetic pass-through securities based on product type, loan origination year, gross coupon and loan term. Thereafter, these are compared against closing “TBA” prices extracted from independent sources. All significant inputs to the loan valuations are market based and observable.

Accrued interest receivable and payable

The estimated fair values approximate the recorded book value because of the relatively short period of time between their origination and expected realization.

56

Derivative assets and liabilities

The FHLBNY’s derivatives are traded in the over-the-counter market and are valued using discounted cash flow models that use as their basis, readily observable and market based inputs. Significant inputs include interest rates and volatilities. These derivative positions are classified within Level 2 of the valuation hierarchy, and include interest rate swaps, swaptions, interest rate caps and floors, and mortgage delivery commitments. SFAS No. 157 clarified that the valuation of derivative assets and liabilities must reflect the value of the instrument including the values associated with counterparty risk and must also take into account the company’s own credit standing and non-performance risk. The Bank has collateral agreements with all its derivative counterparties and enforces collateral exchanges at least weekly. The computed fair values of the FHLBNY’s derivatives took into consideration the effects of legally enforceable master netting agreements that allow the FHLBNY to settle positive and negative positions and offset cash collateral with the same counterparty on a net basis. The Bank and each derivative counterparty have bilateral collateral thresholds that take into account both the Bank’s and counterparty’s credit ratings. As a result of these practices and agreements and the FHLBNY’s assessment of any change in its own credit spread, the Bank has concluded that the impact of the credit differential between the Bank and its derivative counterparties was sufficiently mitigated to an immaterial level and no adjustments were deemed necessary to the recorded fair value of derivative assets and derivative liabilities in the Statements of Conditions at March 31, 2009 and December 31, 2008.

Deposits

The FHLBNY determines estimated fair values of deposits for purposes of SFAS 107 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 for purposes of SFAS 107 based on the cost of raising comparable term debt and prices its bonds and discount notes based on the current consolidated obligations market curve, which has a daily active market. The fair values of consolidated obligation debt (bonds and discount notes) are computed using a standard option valuation model using market based and observable inputs: (1) consolidated obligation debt curve that is available to the public and published by the Office of Finance, and (2) LIBOR curve and volatilities. Model adjustments that are not “market-observable” are not considered significant.

Mandatorily redeemable capital stock

The FHLBNY considers the fair value of capital subject to mandatory redemption, for purposes of SFAS 107, as the redemption value of the stock, which is generally par plus accrued estimated dividend. The FHLBNY has a cooperative structure. Stock can only be acquired by members at par value and redeemed at par value. Stock is not traded publicly and no market mechanism exists for the exchange of stock outside the cooperative structure.

57

Note 17. Commitments and contingencies

The FHLBanks have joint and several liability for all the consolidated obligations issued on their behalf. Accordingly, should one or more of the FHLBanks be unable to repay their participation in the consolidated obligations, each of the other FHLBanks could be called upon to repay all or part of such obligations, as determined or approved by the Finance Agency. Neither the FHLBNY nor any other FHLBank has ever had to assume or pay the consolidated obligations of another FHLBank. The FHLBNY does not believe that it will be called upon to pay the consolidated obligations of another FHLBank in the future. Under FASB interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees Including Indirect Guarantees of Indebtedness of Others” as amended by FSP No. FAS 133-1 and FIN 45-4. (“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 March 31, 2009 and December 31, 2008. The par amount of the twelve FHLBanks’ outstanding consolidated obligations, including the FHLBNY’s, were approximately $1.1 trillion and $1.3 trillion at March 31, 2009 and December 31, 2008.

Commitments for additional advances totaled approximately $20.0 billion and $19.0 billion as of March 31, 2009 and December 31, 2008. 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 $889.6 million and $908.6 million as of March 31, 2009 and December 31, 2008, 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 March 31, 2009 and December 31, 2008. Based on management’s credit analyses and collateral requirements, the FHLBNY does not deem it necessary to have any provision for credit losses on these commitments and letters of credit.

During the third quarter of 2008, each FHLBank, including the FHLBNY, entered into a Lending Agreement with the U.S. Treasury in connection with the U.S. Treasury’s establishment of the Government Sponsored Enterprise Credit Facility (GSECF), as authorized by the Housing Act. The GSECF is designed to serve as a contingent source of liquidity for the housing government-sponsored enterprises, including each of the 12 FHLBanks. Any borrowings by one or more of the FHLBanks under the GSECF are considered consolidated obligations with the same joint and several liability as all other consolidated obligations. The terms of any borrowings are agreed to at the time of issuance. Loans under the Lending Agreement are to be secured by collateral acceptable to the U.S. Treasury, which consists of FHLBank advances to members that have been collateralized in accordance with regulatory standards and mortgage-backed securities issued by Fannie Mae or Freddie Mac. Each FHLBank is required to submit to the Federal Reserve Bank of New York, acting as fiscal agent of the U.S. Treasury a list of eligible collateral updated on a weekly basis. As of March 31, 2009 and December 31, 2008, the FHLBNY had provided the U.S. Treasury listings of advance collateral amounting to $23.8 billion and $16.3 billion, which provides for maximum borrowings of $20.7 billion and $14.2 billion at March 31, 2009 and December 31, 2008. The amount of collateral can be increased or decreased (subject to the approval of the U.S. Treasury) at any time through the delivery of an updated listing of collateral. As of March 31, 2009, no FHLBank had drawn on this available source of liquidity. This temporary authorization expires December 31, 2009 and supplements the existing limit of $4 billion.

58

Under the MPF program, the Bank was unconditionally obligated to purchase $3.7 million and $10.4 million in mortgage loans at March 31, 2009 and December 31, 2008. 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 $370.4 million and $246.9 million as of March 31, 2009 and December 31, 2008.

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 pledged $3.1 billion and $3.8 billion in cash as collateral at March 31, 2009 and December 31, 2008, and these amounts were reported as a component of Derivative liabilities. At March 31, 2009 and December 31, 2008, the FHLBNY was also exposed to credit risk associated with outstanding derivative transactions measured by the replacement cost of derivatives in a gain position. The Bank’s reported credit exposure was reduced by cash collateral of $88.3 million and $61.2 million delivered by derivatives counterparties and held by the Bank at March 31, 2009 and December 31, 2008. The amounts were recorded as a component of Derivative assets at those dates.

Net rental expense and the cost of operating lease at the current or prior period quarters were not material. The lease agreements for FHLBNY premises 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.

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The following table summarizes contractual obligations and contingencies as of March 31, 2009 (in thousands):

	March 31, 2009
	Payments due or expiration terms by period
	Less than		One year		Greater than three		Greater than
	one year		to three years		years to five years		five years		Total
Contractual Obligations
Consolidated obligations-bonds at par 1	$	41,894,850	$	17,174,850	$	5,652,425	$	3,758,050	$	68,480,175
Mandatorily redeemable capital stock 1		57,680		74,287		2,582		5,412		139,961
Premises (lease obligations) 2		3,060		6,120		5,999		8,180		23,359
Total contractual obligations		41,955,590		17,255,257		5,661,006		3,771,642		68,643,495
Other commitments
Standby letters of credit		846,108		19,643		15,868		7,934		889,553
Unused lines of credit and other conditional commitments		19,996,890		—		—		—		19,996,890
Consolidated obligation-bonds/discount notes traded not settled		1,622,513		—		—		—		1,622,513
MBS purchase		50,000		—		—		—		50,000
Open delivery commitments (MPF)		3,739		—		—		—		3,739
Total other commitments		22,519,250		19,643		15,868		7,934		22,562,695
Total obligations and commitments	$	64,474,840	$	17,274,900	$	5,676,874	$	3,779,576	$	91,206,190

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. Callable bonds contain exercise date or a series of exercise dates that may result in a shorter redemption period.

2

Immaterial amount of commitments for equipment leases not included.

The FHLBNY does not anticipate any credit losses from its off-balance sheet commitments and accordingly no provision for losses is required.

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Note 18. Related party transactions

The FHLBNY is a cooperative and the members own almost all of the stock of the Bank. Stock that is not owned by members is held by former members. The majority of the members of the Board of Directors of the FHLBNY are elected by and from the membership. The FHLBNY conducts its advances business almost exclusively with members. The Bank considers its transactions with its members and non-member stockholders as related party transactions in addition to transactions with other FHLBanks, the Office of Finance, and the Finance Agency. All transactions with all members, including those whose officers may serve as directors of the FHLBNY, are at terms that are no more favorable than comparable transactions with other members.

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

Debt Transfers

During the current year and prior year first quarters, there was no transfer of consolidated obligation bonds to other FHLBanks. Generally, when debt is transferred in exchange for a cash price that represents the fair market values of the debt. Additionally, no debt were transferred to the FHLBNY from another FHLBank in the current or prior period quarters.

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

Advances sold or transferred

No advances were transferred/sold to the FHLBNY or from the FHLBNY to another FHLBank in the current year or prior year first quarters.

Loans to other Federal Home Loan Banks

In the current year first quarter or at December 31, 2008, the FHLBNY had not extended loans to another FHLBank. Generally loans made to other FHLBanks are uncollateralized.

Borrowings from other Federal Home Loan Banks

In the current year first quarter or at December 31, 2008, the FHLBNY had not borrowed funds from another FHLBank. The FHLBNY borrows from other FHLBanks, generally for a period of one day and are not collateralized.

61

The following tables summarize outstanding balances with related parties at March 31, 2009 and December 31, 2008, and transactions for each of the periods ended March 31, 2009 and 2008 (in thousands):

Related Party: Outstanding Assets, Liabilities and Capital

	March 31, 2009				December 31, 2008
	Related		Unrelated		Related		Unrelated
Assets
Cash and due from banks	$	—	$	32,136	$	—	$	18,899
Interest-bearing deposits		—		8,602,233		—		12,169,096
Federal funds sold		—		500,000		—		—
Available-for-sale securities		—		2,641,996		—		2,861,869
Held-to-maturity securities
Long-term securities		—		9,935,079		—		10,130,543
Certificates of deposit		—		300,000		—		1,203,000
Advances		104,463,598		—		109,152,876		—
Mortgage loans 1		—		1,430,899		—		1,457,885
Accrued interest receivable		356,566		54,934		433,755		59,101
Premises, software, and equipment		—		13,817		—		13,793
Derivative assets 2		—		11,463		—		20,236
Other assets 3		157		16,060		153		18,685
Total assets	$	104,820,321	$	23,538,617	$	109,586,784	$	27,953,107
Liabilities and capital
Deposits	$	2,372,415	$	—	$	1,451,978	$	—
Consolidated obligations		—		118,303,702		—		128,586,611
Mandatorily redeemable capital stock		139,961		—		143,121		—
Accrued interest payable		672		384,449		814		425,330
Affordable Housing Program 4		128,368		—		122,449		—
Payable to REFCORP		—		41,815		—		4,780
Derivative liabilities 2		—		1,031,771		—		861,660
Other liabilities 5		40,527		92,131		31,003		44,750
Total liabilities	$	2,681,943	$	119,853,868	$	1,749,365	$	129,923,131
Capital		5,823,127		—		5,867,395		—
Total liabilities and capital	$	8,505,070	$	119,853,868	$	7,616,760	$	129,923,131

1	Includes insignificant amounts of mortgage loans purchased from members of another FHLBank.
2	Derivative assets and liabilities include insignificant fair values due to intermediation activities on behalf of members.
3	Includes insignificant amounts of miscellaneous assets that are considered related party.
4	Represents funds not yet disbursed to eligible programs.
5	Related column includes member pass-through reserves at the Federal Reserve Bank.

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Related Party: Income and Expense transactions

	Three months ended
	March 31, 2009				March 31, 2008
	Related		Unrelated		Related		Unrelated
Interest income
Advances	$	502,222	$	—	$	871,785	$	—
Interest-bearing deposits 1		—		8,918		—		8,998
Federal funds sold		—		68		—		29,418
Available-for-sale securities		—		8,519		—		9,483
Held-to-maturity securities
Long-term securities		—		126,820		—		134,348
Certificates of deposit		—		508		—		102,253
Mortgage loans 2		—		19,104		—		19,633
Loans to other FHLBanks and other		—		—		1		—
Total interest income	$	502,222	$	163,937	$	871,786	$	304,133
Interest expense
Consolidated obligations	$	—		433,085		—	$	1,002,544
Deposits		777		—		15,175		—
Mandatorily redeemable capital stock		878		—		4,278		—
Cash collateral held and other borrowings		—		37		146		325
Total interest expense	$	1,655	$	433,122	$	19,599	$	1,002,869
Service fees	$	985	$	—	$	691	$	—

1	Includes de minimis amounts of interest income from MPF service provider.
2	Includes de minimis amounts of mortgage interest income from loans purchased from members of another FHLBank.

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Note 19. Segment information and concentration

The FHLBNY manages its operations as a single business segment. Management and the FHLBNY’s Board of Directors review enterprise-wide financial information in order to make operating decisions and assess performance. Advances to large members constitute a significant percentage of FHLBNY’s advance portfolio and its source of revenues.

The FHLBNY has a unique cooperative structure and is owned by member institutions located within a defined geographic district. The Bank’s market is the same as its membership district which includes New Jersey, New York, Puerto Rico, and the U.S. Virgin Islands. Institutions that are members of the FHLBNY must have their principal places of business within this market, but may also operate elsewhere.

The FHLBNY’s primary business is making low-cost, collateralized loans, known as “advances,” to its members. Members use advances as a source of funding to supplement their deposit-gathering activities. As a cooperative, the FHLBNY prices advances at minimal net spreads above the cost of its funding to deliver maximum value to members. Advances to large members constitute a significant percentage of FHLBNY’s advance portfolio and its source of revenues.

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.

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The top five advance holders at March 31, 2009, December 31, 2008 and March 31, 2008, and associated interest income for the first quarters of 2009 and 2008 are summarized as follows (dollars in thousands):

	March 31, 2009
					Percentage of
			Par		Total Par Value			Interest
	City	State	Advances		of Advances			Income
Hudson City Savings Bank 1	Paramus	NJ	$	17,575,000		17.7	%	$	176,070
Metropolitan Life Insurance Company	New York	NY		15,105,000		15.2			103,306
New York Community Bank 1	Westbury	NY		8,143,214		8.2			77,380
Manufacturers and Traders Trust Company	Buffalo	NY		7,479,282		7.5			36,499
Prudential Insurance Co. of America	Newark	NJ		4,500,000		4.5			24,618
Total			$	52,802,496		53.1	%	$	417,873

¹ Officer of member bank also serves on the Board of Directors of the FHLBNY.

	December 31, 2008
					Percentage of
			Par		Total Par Value			Interest
	City	State	Advances		of Advances			Income
Hudson City Savings Bank	Paramus	NJ	$	17,525,000		17.0	%	$	671,146
Metropolitan Life Insurance Company	New York	NY		15,105,000		14.6			260,420
Manufacturers and Traders Trust Company	Buffalo	NY		7,999,689		7.7			257,649
New York Community Bank	Westbury	NY		7,796,517		7.5			337,019
Astoria Federal Savings and Loan Assn.	Long Island City	NY		3,738,000		3.6			151,066
Total			$	52,164,206		50.4	%	$	1,677,300

	March 31, 2008
					Percentage of
			Par		Total Par Value			Interest
	City	State	Advances		of Advances			Income
Hudson City Savings Bank	Paramus	NJ	$	15,275,000		18.4	%	$	159,048
New York Community Bank	Westbury	NY		8,088,623		9.8			91,160
Manufacturers and Traders Trust Company	Buffalo	NY		6,430,522		7.8			68,568
Metropolitan Life Insurance Company	New York	NY		5,405,000		6.5			54,569
HSBC Bank USA, National Association	New York	NY		4,008,445		4.8			52,707
Total			$	39,207,590		47.3	%	$	426,052

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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 March 31, 2009 and December 31, 2008 (shares in thousands):

		Number		Percent
	March 31, 2009	of shares		of total
Name of beneficial owner	Principal Executive Office Address	owned		capital stock
Hudson City Savings Bank *	West 80 Century Road, Paramus, NJ 07652		8,678		15.63	%
Metropolitan Life Insurance Company	200 Park Ave., New York, NY 10166		8,302		14.95
Manufacturers and Traders Trust Company	One M & T Plaza, Buffalo, NY 14203		4,089		7.36
New York Community Bank *	615 Merrick Avenue, Westbury, NY 11590		4,084		7.35
			25,153		45.29	%

* Officer of member bank also serves on the Board of Directors of the FHLBNY.

		Number		Percent
	December 31, 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		8,656		15.11	%
Metropolitan Life Insurance Company	200 Park Ave., New York, NY 10166		8,302		14.49
Manufacturers and Traders Trust Company	One M & T Plaza, Buffalo, NY 14203		4,327		7.55
New York Community Bank	615 Merrick Avenue, Westbury, NY 11590		3,928		6.86
			25,213		44.01	%

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Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements

Statements contained in this report, 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.” All statements other than statements of historical fact are statements that could potentially 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. These statements may involve matters pertaining to, but not limited to: projections regarding revenue, income, earnings, capital expenditures, dividends, the capital structure and other financial items; statements of plans or objectives for future operations; expectations of future economic performance; and statements of assumptions underlying certain of the foregoing types of statements.

The Bank cautions that, by their nature, forward-looking statements involve risks or uncertainties, and actual results could differ materially from those expressed or implied in these forward-looking statements or could affect the extent to which a particular objective, projection, estimate, or prediction is realized. As a result, readers are cautioned not to place undue reliance on such statements, which are current only as of the date thereof. The Bank will not undertake to update any forward-looking statement herein or that may be made from time to time on behalf of the Bank.

These forward-looking statements may not be realized due to a variety of risks and uncertainties including, but not limited to risks and uncertainties relating to economic, competitive, governmental, technological and marketing factors, as well as other factors identified in the Bank’s filings with the Securities and Exchange Commission.

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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-Q. 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-Q should be read in its entirety, and in conjunction with the Bank’s most recent Form 10-K filed on March 27, 2009.

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 advances to members, mortgage loans and investments, offset in part by the FHLBNY’s operating expenses and assessments. FHLBNY’s board of directors and management determine the pricing of member credit and dividend policies based on the needs of its members and the cooperative.

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

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

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

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

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

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

First Quarter 2009 Highlights

The FHLBNY reported current year first quarter Net income of $148.1 million, or $2.72 per share, compared with $100.2 million, or $2.30 per share for the prior year first quarter. An other-than-temporary impairment (“OTTI”) of $5.3 million was recorded as a charge to Other income (loss) in the current year first quarter. Net income for the current year first quarter benefited from $38.7 million fair value gains from interest rate swaps designated in economic hedges that matured or were nearing maturity. When swaps are held to their contractual maturities, cumulative fair value changes sum to zero. Net income also benefited from $19.1 million in prepayment fees received from members who prepaid advances prior to their contractual maturities, compared to $8.2 million in the prior year first quarter.

The continued dislocation in the capital markets and factors outside the control of the FHLBanks are counteracting efforts by the FHLBanks to issue debt with maturities longer than one year. Yields demanded by investors remain unfavorable for longer-term FHLBank debt and spreads between 3-month LIBOR and FHLBank long-term debt yield have remained at a levels that make it expensive for the FHLBNY to issue term debt and offer longer-term advances to members even if there was sufficient investor demand for such debt.

The annualized return on average equity, which is Net income divided by average Capital stock, Retained earnings, and Accumulated other comprehensive income, in the current year quarter was 10.37%, compared with 8.59% for the prior year first quarter.

Current year first quarter Net interest income, after provision for credit losses on mortgage loans held for portfolio, increased to $230.9 million, or 50.5%, from $153.4 million in the prior year first quarter, in part by growth in advance volume in the current year quarter relative to prior year quarter and declining cost of debt, and in part by recording $46.9 million of net swap interest expense as a hedging expense in Other income and not as an interest expense in interest margin. The expense was associated with interest rate swaps designated as economic hedges and were recorded as a charge to Other income (loss) in accordance with hedge accounting provisions for economic hedges. The comparable expense was not material in the prior year first quarter because of the insignificant amounts of swaps designated as economic hedges in the prior year period.

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• Net interest income before the provision for credit losses, a key metric for the FHLBNY, was $231.4 million for the current year first quarter, up by $77.9 million, or 50.8% from the prior year first quarter. 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 60 basis points for the current year first quarter, up from 32 basis points in the prior year first quarter. Net interest spread is the difference between yields on interest-earning assets and yields on interest-bearing liabilities. Return on average earning-assets was 70 basis points for the current year first quarter, up from 57 from the prior year first quarter.

• Net interest income GAAP Vs Economic basis — These measurement metrics are based on “Generally Accepted Accounting Principles” or GAAP basis. Under GAAP, interest expense or income on interest rate swaps designated in an economic hedge is reported as hedging losses or gains in Other income (loss) as a Net realized and unrealized gain (loss) from derivatives and hedging activities as an expense in the Statements of Income. Other income (loss) is not a component of Net interest income. The effect of this was to reduce reported interest expense on debt by $46.9 million, which increased Net interest income on a GAAP basis by $46.9 million. The expense was recorded as a derivative hedging loss and increased losses from derivative hedging activities for the current year first quarter by $46.9 million. Net income remained unchanged. On an economic basis, Net interest income in the current year first quarter was $184.5 million. The comparable Net interest income for the prior year first quarter on an economic basis was $153.4 million, almost the same as on a GAAP basis because of the insignificant amounts of hedges in an economic basis in the prior year period.

• Net interest spread GAAP Vs. Economic basis — On a GAAP basis, Net interest spread earned was 60 basis points in current year first quarter. On an economic basis, the Bank estimates that had the Bank recorded swap interest expenses in Net interest income, it would have reduced Net interest spread by 16 basis points to 44 basis points in current year first quarter. Net interest spread is the difference between annualized yields on interest-earning assets and yields on interest-bearing liabilities. Return on average earning-assets, a measure of the efficiency of the use of interest-earning assets, was 70 basis points in the current year first quarter. On an economic basis, the return on average earnings assets for the current year first quarter would have been 56 basis points.

• Reported Net realized and unrealized gain (loss) from derivatives and hedging activities was a loss of $13.7 million in the current year first quarter, compared to a gain of $0.9 million in prior year first quarter. Two factors were the primary components of the reported loss in the current year first quarter. Changes in the fair values of interest rate swaps in economic hedges, often referred to as “one-sided marks” made a positive contribution of $38.7 million from hedging activities, which was primarily the reversal of previously recognized fair value unrealized losses. Interest expense associated with the interest rate swaps in economic hedges resulted in net expense of $46.9 million in the current year first quarter and was recorded as hedging expenses in Other income (loss).

• OTTI of $5.3 million was recorded as a charge to Other income (loss). In the current year first quarter, management determined that two held-to-maturity private-label MBS had become credit impaired. The impairment charge represented the credit loss component of OTTI. The non-credit component of OTTI was $9.9 million recorded as a loss in Accumulated other comprehensive income (loss). The total OTTI, which is the difference between the amortized cost basis and the fair value of the two securities was $15.2 million. The two securities are insured by MBIA Insurance Corp. (“MBIA”) and management’s analysis, and in part due to the recent reorganization of MBIA determined that future credit losses due to projected collateral shortfalls of the two securities would not be supported by MBIA. See Significant Accounting Policies and Estimates in Note 1 for more information about impairment methodology and bond insurer analysis.

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With respect to the Bank’s remaining investments, the Bank believes no OTTI exists. The Bank’s conclusion is based upon multiple factors: bond issuers’ continued satisfaction of their obligations under the contractual terms of the securities; the estimated performance of the underlying collateral; the evaluation of the fundamentals of the issuers’ financial condition; and the estimated support from the monoline insurers under the contractual terms of insurance. Management has not made a decision to sell such securities at March 31, 2009. Management has also concluded that it is more likely than not that it will not be required to sell such as securities before recovery of the amortized cost basis of the securities.

Based on factors outline above, the FHLBNY believes that the remaining investment securities were not other-than-temporarily impaired as of March 31, 2009 and December 31, 2008.

Operating Expenses were $18.1 million for the current year first quarter, up by $1.6 million, from $16.5 million in the prior year first quarter. REFCORP assessments were $37.0 million in current year first quarter, up by $12.0 million from the prior year first quarter. AHP assessments were $16.6 million, up by $4.9 million from the prior year first quarter. Assessments are calculated on Net income before assessments and the increases were due to higher Net income in current year first quarter compared to prior year first quarter.

Cash dividends of $0.75 per share of capital stock (3.0% annualized return on capital stock) was paid in the current year first quarter for the fourth quarter of 2008, compared to cash dividend of $2.12 per share of capital stock (8.40% annualized return on capital stock) paid in January 2008 for the fourth quarter of 2007.

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

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

• Credit dislocation in the marketplace has continued to drive bond investors to acquire shorter-term debt issued by the FHLBanks, including those issued on behalf of the FHLBNY. To accommodate members’ funding needs at reasonable spreads, the Bank increased its issuance of discount notes that have maturities from overnight to 365 days. At March 31, 2009, discount notes outstanding were $48.7 billion, and funded 38.0% of the Total assets at that date, compared to $46.3 billion at December 31, 2008, which funded 33.7% of Total assets.

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• Investments in mortgage-backed securities designated as held-to-maturity declined to $9.1 billion at March 31, 2009 from $9.3 billion at December 31, 2008. The Bank purchased GSE and agency issued securities of $445.2 million in the current year first quarter. State and local housing agency bonds declined slightly to $802.6 million at March 31, 2009, compared to $804.1 million at December 31, 2008. Investments in short-term certificates of deposits also designated as held-to-maturity were allowed to decline to $300.0 million at March 31, 2009 from $1.2 billion at December 31, 2008. Investments designated as held-to-maturity are recorded at an amortized cost basis. When a held-to-maturity security is impaired, its fair value becomes the new amortized cost basis. An other-than-temporary total impairment charge of $15.2 million was recorded at March 31, 2009, and the amortized cost basis of the two securities were written down to fair value. The credit component of the total OTTI of $15.2 million was $5.3 million.

• MBS designated as available-for-sale comprised entirely of variable-rate GSE and U.S. government agency issued securities. Amortized cost basis declined to $2.7 billion at March 31, 2009, from $2.9 billion at December 31, 2008 as paydowns and sales outpaced new acquisitions. No MBS was purchased in the current year first quarter for the available-for-sale portfolio. The Bank sold $131.7 million of GSE issued available-for-sale securities and realized a small gain. Available-for-sale securities are recorded in the Statements of Condition at fair values. Net unrealized losses at March 31, 2009 were $29.9 million compared to net unrealized losses of $61.0 million at December 31, 2008.

• Shareholders’ equity, the sum of Capital stock, Retained earnings, and Accumulated other comprehensive income (loss) was $5.8 billion at March 31, 2009, a decline of $44.3 million from December 31, 2008. Capital stock, a component of shareholders’ equity, at March 31, 2009 was $5.4 billion, a decline of $172.7 million as compared to December 31, 2008. The decrease in Capital stock was consistent with decrease in advances borrowed by members since members are required to purchase stock as a prerequisite to membership and to hold FHLBNY stock as a percentage of advances borrowed from the FHLBNY. The Bank’s current practice is to redeem stock in excess of the amount necessary to support advance activity on a daily basis. As a result, the amount of capital stock outstanding varies in line with members’ outstanding advance borrowings. Unrestricted retained earning was $488.9 million, up by $106.0 million from December 31, 2008. Two dividends paid out of retained earnings amounted to $42.1 million in the current year first quarter. Accumulated other comprehensive loss was $78.8 million at March 31, 2009 compared to a loss of $101.2 million at December 31, 2008, and comprised of net unrealized losses from cash flow hedging activities, additional liabilities on employee pension plans, net unrealized fair value losses on available-for-sale securities, and non-credit component of OTTI on held-to-maturity securities.

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2009 Business Outlook

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

The financial crises in the U.S. markets and economy, which intensified in the third quarter of 2008; and the global economic slowdown is expected to continue through 2009 and 2010. The resulting loss of confidence across global and local markets has created liquidity crises in the financial markets. In response to these circumstances, the U.S. Treasury, the Federal Reserve System and the FDIC have taken a variety of extraordinary measures designed to restore confidence in the financial markets and to strengthen financial institutions, including capital injections, guarantees of bank liabilities and the acquisition of illiquid assets from banks. These U.S. government initiatives through guarantees in the capital markets may have resulted in structural changes in the debt market, which in turn may have far-reaching impact on the ability of the FHLBanks to compete for funds in the financial markets. We are unable at this time to predict the final outcome of these changes.

The outlook for the remainder of 2009 is also predicated on the expected slowdown in the U.S. economy, particularly the slowdown in the housing market, as well as an expectation of continued uncertainties in the financial markets. Against that backdrop, management of the Bank believes it is also difficult to predict member demand for advances, which are the primary focus of the FHLBNY’s operations and the principal factor that impacts its operating results. Earnings in 2008 were adversely impacted by the provision for credit losses resulting from the bankruptcy filing of Lehman Brothers Holdings Inc. and its subsidiary Lehman Brothers Special Financing Inc. Earnings in 2009 are expected to be adversely impacted by the conditions in the debt market for FHLBank issued debt particularly as they pertain to the pricing of longer-term issuances and may tend to adversely impact Net income. Bankruptcy proceedings are ongoing.

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

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

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In the FHLBNY’s membership district, the housing markets in New York and New Jersey appear to have fared relatively better than the housing market in general so far; some forecasts are concerned that the New York and New Jersey housing markets may yet experience further downturn. The Puerto Rican economy has been in recession for several years and forecasts are that it will continue.

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

The FHLBNY’s primary source of funds is the sale of consolidated obligations in the capital markets, and its ability to obtain funds through the sale of consolidated obligations depends in part on prevailing conditions in the capital markets, which are beyond the FHLBNY’s control. The FHLBNY may not be able to obtain funding on acceptable terms, if at all given the extraordinary market conditions and structural changes in the debt market. If the FHLBNY cannot access funding when needed on acceptable terms, its ability to support and continue operations could be adversely affected, which could negatively affect its financial condition and results of operations. Following the conservatorship of Fannie Mae and Freddie Mac, market pricing of FHLBank issued debt indicates that market participants believe that obligations of the two GSEs offer lower credit risk than FHLBank debt obligations, which are generally grouped into the same GSE asset class as Fannie Mae and Freddie Mac. As a result, investors are more likely to require a premium to acquire FHLBank debt relative to debt issued by Fannie Mae and Freddie Mac. The cost of the FHLBanks’ longer-term debt has also increased sharply relative to LIBOR as investors were only willing to purchase debt with very short-term maturities. To the extent the FHLBanks receive sub-optimal funding, the Bank’s member institutions may, in turn, experience higher costs for advance borrowings. To the extent the FHLBanks may not be able to issue long-term debt at economical spreads relative to the 3-month LIBOR rate; the Bank’s member institutions’ borrowing choices may also be limited.

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

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Selected financial data are presented below (Unaudited)

Statements of Condition	March 31,			December 31,
(dollars in millions)	2009			2008			2007			2006			2005			2004
Investments (1)	$	13,377		$	14,195		$	25,034		$	20,503		$	20,945		$	17,271
Interest bearing balance at FRB		8,602			12,169			—			—			—			—
Advances		104,464			109,153			82,090			59,012			61,902			68,507
Mortgage loans		1,431			1,458			1,492			1,483			1,467			1,178
Total assets		128,359			137,540			109,245			81,579			84,761			87,347
Deposits and borrowings		2,372			1,452			1,606			2,266			2,650			2,297
Consolidated obligations		118,304			128,587			101,117			74,234			77,279			80,157
Mandatorily redeemable capital stock		140			143			239			110			18			127
AHP liability		128			122			119			102			91			82
REFCORP liability		42			5			24			17			14			10
Capital stock		5,413			5,586			4,368			3,546			3,590			3,655
Retained earnings		489			383			418			369			291			223
Equity to asset ratio (2)		4.54	%		4.27	%		4.35	%		4.79	%		4.58	%		4.44	%

Statements of Condition	Three months ended
Averages	March 31,				Years ended December 31,
(dollars in millions)	2009		2008		2008		2007		2006		2005		2004
Investments (1)	$	12,963	$	23,863	$	22,253	$	22,155	$	19,431	$	19,347	$	16,292
Interest bearing balance at FRB **		11,538		—		1,322		—		—		—		—
Advances		105,344		82,615		92,617		65,454		64,658		63,446		65,289
Mortgage loans		1,450		1,479		1,465		1,502		1,471		1,360		928
Total assets		134,915		108,702		119,710		89,961		86,319		85,254		84,344
Interest-bearing deposits and other borrowings		1,749		2,105		2,003		2,202		1,709		2,100		1,971
Consolidated obligations		122,698		99,034		109,691		82,233		79,314		77,629		76,105
Mandatorily redeemable capital stock		143		195		166		146		51		56		238
AHP liability		125		121		122		108		95		84		83
REFCORP liability		22		12		6		10		9		7		4
Capital stock		5,455		4,352		4,923		3,771		3,737		3,604		3,554
Retained earnings		429		391		381		362		314		251		159

Operating Results and other data	Three months ended
(dollars in millions)	March 31,						Years ended December 31,
(except earnings and dividends per share)	2009			2008			2008			2007			2006			2005			2004
Net interest income (3)	$	231		$	153		$	694		$	499		$	470		$	395		$	268
Net income		148			100			259			323			285			230			161
Dividends paid in cash (6)		42			89			294			273			208			162			66
AHP expense		17			12			30			37			32			26			19
REFCORP expense		37			25			65			81			71			58			40
Return on average equity* (4)		10.37	%		8.59	%		4.95	%		7.85	%		7.04	%		5.97	%		4.34	%
Return on average assets*		0.45	%		0.37	%		0.22	%		0.36	%		0.33	%		0.27	%		0.19	%
Operating expenses	$	18		$	16		$	66		$	67		$	63		$	59		$	51
Operating expenses ratio* (5)		0.05	%		0.06	%		0.06	%		0.07	%		0.07	%		0.07	%		0.06	%
Earnings per share	$	2.72		$	2.30		$	5.26		$	8.57		$	7.63		$	6.36		$	4.55
Dividend per share	$	0.75		$	2.12		$	6.55		$	7.51		$	5.59		$	4.50		$	1.83
Headcount (Full/part time)		256			241			251			246			232			221			210

(1)	Investments include held-to-maturity securities, available for-sale securities, 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 total average assets.
(6)	Excludes dividends paid to non members classified as interest expense under FASB 150.
*	Annualized.
**	FRB program commenced in October 2008. The average balance is annualized YTD.

75

Results of Operations

The following section provides a comparative discussion of the Federal Home Loan Bank’s results of operations for the first quarters of 2009 and 2008. For a discussion of the significant accounting estimates used by the FHLBNY that affect the results of operations, see Significant Accounting Policies and Estimates in Note 1 to this Form 10-Q and in the Bank’s most recently filed Form 10-K on March 27, 2009.

Net Income

The FHLBNY manages its operations as a single business segment. Advances to members are the primary focus of the FHLBNY’s operations, and 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.

Net income — First quarter 2009 compared with first quarter 2008

The FHLBNY reported current year first quarter Net income of $148.1 million, or $2.72 per share, compared with Net income of $100.2 million, or $2.30 per share in the prior year first quarter. A credit OTTI of $5.3 million was recorded as a charge to earnings in the current year first quarter. The charge represented the credit loss component on two held-to-maturity private label MBS, because it was deemed unlikely that MBIA, a monoline insurer, would be able to perform under its contractual obligation to support projected shortfall in expected cash flows to be collected. Reported Net realized and unrealized loss from hedging activities was a loss of $13.7 million for the current year first quarter compared to a gain of $0.9 million for the prior year first quarter. The reported hedging loss mainly consisted of interest rate swaps designated as economic hedges. In order to manage the FHLBNY’s interest rate risk profile, management of the FHLBNY routinely uses derivatives to manage the interest rate risk inherent in the Bank’s assets and liabilities. Operating Expenses were $18.1 million for the current year first quarter, up by $1.6 million, from $16.5 million for the prior year first quarter. REFCORP assessments were $37.0 million for the current year first quarter, up by $12.0 million, from the prior year first quarter. AHP assessments were $16.6 million for the current year first quarter, up by $4.9 million, from the prior year first quarter. Assessments are calculated on Net income before assessments and the increase was due to higher Net income in the current year first quarter compared to the prior year first quarter.

The annualized return on average equity, which is Net income divided by average Capital stock, Retained earnings, and Accumulated other comprehensive income, in the current year first quarter was 10.37% compared with 8.59% for the prior year first quarter. In the current year first quarter, cash dividends paid for the quarter were $0.75 per share (par value $100), or 27.6% of Net earnings per share, compared to $2.12 per share, or 92.2% of Net earnings per share for the prior year first quarter.

Continued demand by members for advances and issuances of short-term debt to investors at attractive sub-LIBOR spreads were contributing factors.

76

Interest Income

Interest income from advances is the principal source of income for the FHLBNY. Changes in both rate and intermediation volume (average interest-yielding assets) explain the change in the current year from the prior year.

The principal components of interest income are discussed below (dollars in thousands):

	Three months ended March 31,
					Percentage
	2009		2008		Variance
Interest Income
Advances	$	502,222	$	871,785		(42.39	)%
Interest-bearing deposits		8,918		8,999		(0.90	)
Federal funds sold		68		29,418		(99.77	)
Available-for-sale securities		8,519		9,483		(10.17	)
Held-to-maturity securities
Long-term securities		126,820		134,348		(5.60	)
Certificates of deposit		508		102,252		(99.50	)
Mortgage loans held-for-portfolio		19,104		19,633		(2.69	)
Loans to other FHLBanks and other		—		1		(100.00	)
Total interest income	$	666,159	$	1,175,919		(43.35	)%

Impact of hedging advances — 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. These cash flow patterns were in line with the Bank’s interest rate risk management practices and effectively converted fixed-rate cash flows of hedged advances to LIBOR indexed cash flows. Derivative strategies are used to manage the interest rate risk inherent in fixed-rate advances and are designed to protect future interest income.

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

	Three months ended March 31,
	2009			2008
Advance Interest Income
Advance interest income before adjustment for interest rate swaps	$	833,388		$	874,387
Net interest adjustment from interest rate swaps		(331,166	)		(2,602	)
Total Advance interest income reported	$	502,222		$	871,785

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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 and advances. Discount notes are issued to fund advances and investments with shorter-interest rate reset characteristics.

The principal categories of Interest Expense are summarized below (dollars in thousands):

	Three months ended March 31,
					Percentage
	2009		2008		Variance
Interest Expense
Consolidated obligations-bonds	$	343,707	$	731,261		(53.00	)%
Consolidated obligations-discount notes		89,378		271,283		(67.05	)
Deposits		777		15,175		(94.88	)
Mandatorily redeemable capital stock		878		4,278		(79.48	)
Cash collateral held and other borrowings		37		471		(92.14	)
Total interest expense	$	434,777	$	1,022,468		(57.48	)%

Interest expense is principally the coupon payments to investors holding the Bank’s consolidated obligation debt. Recorded interest expense in the Statements of Income is adjusted for the cash flows associated with interest rate swaps in which the Bank generally pays variable-rate LIBOR-indexed cash flows to derivative counterparties and, in exchange, the Bank receives fixed-rate cash flows which typically mirror the fixed-rate coupon payments to investors holding the debt. The Bank hedges its long-term fixed-rate bonds and almost all fixed-rate callable bonds.

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.

These hedging strategies benefit the Bank in two principal ways: (1) fixed-rate callable bond in conjunction with interest rate swap containing a call feature that mirrors the option embedded in the callable bond enables the FHLBNY 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. Derivative strategies are used to manage the interest rate risk inherent in fixed-rate debt and certain floating-rate debt that are not indexed to 3-month LIBOR rates. The strategies are designed to protect future interest income.

78

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

	Three months ended March 31,
	2009			2008
Consolidated bonds and discount notes-Interest expense
Bonds-Interest expense before adjustment for swaps	$	447,786		$	775,180
Discount notes-Interest expense before adjustments for swaps		89,822			271,283
Net interest adjustment for interest rate swaps		(104,523	)		(43,919	)
Total Consolidated bonds and discount notes-interest expense reported	$	433,085		$	1,002,544

Net interest income

Net interest income is the principal source of revenue for the Bank, and represents the difference between income from interest-earning assets and interest expense paid on interest-bearing liabilities. Net interest income is impacted by a variety of factors — member demand for advances and investment activity, the yields from advances and investments, and the cost of consolidated obligation debt that is issued by the Bank to fund advances and investments. The execution of interest rate swaps in the derivative market at a constant spread to LIBOR, in effect converting fixed-rate advances and fixed-rate debt to conventional adjustable-rate instruments indexed to LIBOR, results in an important intermediation for the Bank between the capital markets and the swap market. The intermediation has typically permitted the Bank to raise funds at lower costs than would otherwise be available through the issuance of simple fixed- or floating-rate debt in the capital markets. The FHLBNY’s deploys the hedging strategies to protect future net interest income, but may reduce income in the short-run, although the FHLBNY expects them to benefit future periods. Income earned from assets funded by member capital and retained earnings, referred to as “deployed capital”, which are non-interest bearing, is another important 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 income before provision for credit losses on mortgage loans was $231.4 million for the current year first quarter, up 50.8% or $77.9 million from the prior year first quarter. Net interest income is the principal source of revenue for the Bank. It represents the difference between income from interest-earning assets and interest expense paid on interest-bearing liabilities. Volume, as measured by average earning assets minus costing liabilities, increased very significantly and contributed $41.9 million to the increase. Rate related changes in yields from earning assets minus yields paid on interest costing liabilities also made a positive contribution of $36.0 million.

The Bank deploys hedging strategies to protect future net interest income. On a GAAP basis, the impact of derivatives was to reduce Net interest income by $226.6 million for the current year first quarter, compared to a contribution to income of $41.3 million for the prior year first quarter. With an interest rate swap strategy, the Bank attempts to convert its fixed-rate interest income and expense to 3-month LIBOR (floating-rate cash flows), and certain floating-rate debt not linked to 3-month LIBOR. The Bank is generally indifferent to net swap interest expense or contributions since the interest-rate exchange between the Bank and swap counterparties are designed to achieve the Bank’s Net interest rate spread objectives. In 2008 and the current year first quarter, a significant amount of swaps were designated as economic in a hedge strategy that converted debt not linked to 3-month LIBOR to 3-month LIBOR indexed cash flows. Under existing accounting hedge accounting rules, the interest income or expense generated from the derivatives are not reported in Net interest income although they have an economic impact on Net interest income. Under GAAP, interest income or expense from such derivatives are recorded as derivative gains and losses in Other income (loss). In the current year first quarter, on an economic basis, the impact of derivatives would have been to reduce Net interest income by $46.9 million. In the prior year first quarter, the impact was not material. In the current year first quarter, on an economic basis, Net interest income before provision for credit losses on mortgage loans was $184.5 million, compared to $231.4 million on a reported GAAP basis. In the prior year first quarter, GAAP Net interest income of $153.5 million was not significantly different from economic Net interest income because of the insignificant amounts of economic hedges in the prior year first quarter.

79

The following tables summarize key changes in the components of Net interest income (dollars in thousands):

	Three months ended March 31,
					Percentage
	2009		2008		Variance
Interest Income
Advances	$	502,222	$	871,785		(42.39	)%
Interest-bearing deposits		8,918		8,999		(0.90	)
Federal funds sold		68		29,418		(99.77	)
Available-for-sale securities		8,519		9,483		(10.17	)
Held-to-maturity securities
Long-term securities		126,820		134,348		(5.60	)
Certificates of deposit		508		102,252		(99.50	)
Mortgage loans held-for-portfolio		19,104		19,633		(2.69	)
Loans to other FHLBanks and other		—		1		(100.00	)
Total interest income		666,159		1,175,919		(43.35	)
Interest Expense
Consolidated obligations-bonds		343,707		731,261		(53.00	)
Consolidated obligations-discount notes		89,378		271,283		(67.05	)
Deposits		777		15,175		(94.88	)
Mandatorily redeemable capital stock		878		4,278		(79.48	)
Cash collateral held and other borrowings		37		471		(92.14	)
Total interest expense		434,777		1,022,468		(57.48	)
Net interest income before provision for credit losses	$	231,382	$	153,451		50.79	%

Net interest spread — Net interest spread earned was 60 basis points for the current year first quarter, up from 32 basis points in the prior year first quarter. 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, which is annualized net interest income as a percentage of average earning assets, was 70 basis points in the current year first quarter, up from 57 basis points from the prior year first quarter. On an economic basis, the Bank estimates that had the Bank recorded swap interest expenses of $46.9 million on economic swaps in Net interest income, it would have reduced Net interest spread by 16 basis points to 44 basis points for the current year first quarter. Annualized return on average earning-assets, a measure of the efficiency of the use of interest-earning assets, was 70 basis points for the current year first quarter, up from 57 basis points for the prior year first quarter. On an economic basis, the return on average earnings assets for the current year first quarter would have been 56 basis points.

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Earnings from member capital — The FHLBNY earns income from investing its members’ capital to fund interest-earning assets. Member capital increased in the current year first quarter relative to prior year first quarter when the surge in advances borrowed by members occurred in the latter part of 2008. As a result, deployed capital, which is capital stock, retained earnings and net non-interest bearing liabilities grew and provided the FHLBNY with a significant source of income even in a lower interest rate environment in the current year first quarter. An average $9.6 billion in deployed capital in current year first quarter earned a yield of 2.01%, the annualized yield on aggregate interest-earning assets in the first quarter. In contrast, in the prior year first quarter, the Bank’s average deployed capital was $6.6 billion, significantly lower than the average in the current year, but earned a higher yield of 4.38%. Based on an assumption that deployed capital was invested to earn 2.01%, the annualized yield on aggregate earning assets in current year first quarter, and 4.38% in the prior year first quarter, the Bank would have earned $48.4 million from deployed capital in current year first quarter, down from $71.8 million in prior year first quarter. Typically, the Bank earns relatively greater income in a higher interest rate environment on a given amount of average deployed capital.

Spread/Yield Analysis:

The following tables summarize the Bank’s net interest income and net interest yield and provide an attribution of changes in rates and volumes of the FHLBNY’s interest-earning assets and interest bearing liabilities. Spread and yield analysis for the first quarters of 2009 and 2008:

	March 31, 2009							March 31, 2008
			Interest							Interest
	Average		Income/					Average		Income/
(dollars in thousands)	Balance		Expense		Rate 1			Balance		Expense		Rate 1
Earning Assets:
Advances	$	105,343,748	$	502,222		1.93	%	$	82,614,991	$	871,785		4.24	%
Certificates of deposit and others		3,193,686		2,062		0.26			9,804,462		111,251		4.56
Federal funds sold and other overnight funds		11,584,490		7,432		0.26			3,146,439		29,418		3.76
Investments		12,721,259		135,339		4.31			10,920,895		143,831		5.30
Mortgage and other loans		1,449,902		19,104		5.34			1,480,027		19,634		5.34
Total interest-earning assets	$	134,293,085	$	666,159		2.01	%	$	107,966,814	$	1,175,919		4.38	%
Funded By:
Consolidated obligations-bonds	$	76,543,358	$	343,707		1.82		$	70,028,817	$	731,261		4.20
Consolidated obligations-discount notes		46,154,843		89,378		0.79			29,004,748		271,283		3.76
Interest-bearing deposits and other borrowings		1,823,898		814		0.18			2,181,061		15,646		2.89
Mandatorily redeemable capital stock		142,971		878		2.49			194,586		4,278		8.84
Total interest-bearing liabilities		124,665,070		434,777		1.41	%		101,409,212		1,022,468		4.06	%
Capital and other non-interest- bearing funds		9,628,015		—					6,557,602		—
Total Funding	$	134,293,085	$	434,777				$	107,966,814	$	1,022,468
Net Interest Income/Spread			$	231,382		0.60	%			$	153,451		0.32	%
Net Interest Margin
(Net interest income/Earning Assets)						0.70	%						0.57	%

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

81

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):

	Three months ended
	March 31, 2009 vs. March 31, 2008
	Increase (decrease)
	Volume			Rate			Total
Interest Income
Advances	$	237,857		$	(607,420	)	$	(369,563	)
Certificates of deposit and others		(74,391	)		(27,434	)		(101,825	)
Federal funds sold and other overnight funds		78,239			(107,589	)		(29,350	)
Investments		23,515			(32,007	)		(8,492	)
Mortgage loans and other loans		(397	)		(133	)		(530	)
Total interest income		264,823			(774,583	)		(509,760	)
Interest Expense
Consolidated obligations-bonds		67,463			(455,017	)		(387,554	)
Consolidated obligations-discount notes		159,077			(340,982	)		(181,905	)
Deposits and borrowings		(2,541	)		(12,291	)		(14,832	)
Mandatorily redeemable capital stock		(1,125	)		(2,275	)		(3,400	)
Total interest expense		222,874			(810,565	)		(587,691	)
Changes in Net Interest Income	$	41,949		$	35,982		$	77,931

Non-Interest Income (Loss)

The principal components of Non-Interest income are described below:

Service fees — Service fees are derived primarily from providing correspondent banking services to members and fees earned on standby letters of credit. Service fees have declined over the years due to declining demand for such services. The Bank does not consider income from such services as a significant element of its operations.

Net realized and unrealized gain (loss) on derivatives and hedging activities — The Bank may designate a derivative as either a hedge of the fair value of a recognized fixed-rate asset or liability or an unrecognized firm commitment (fair value hedge), a forecasted transaction, or the variability of future cash flows of a floating-rate asset or liability (cash flow hedge). The Bank may also designate a derivative in an economic hedge, which does not qualify for hedge accounting under SFAS 133.

Changes in the fair value of a derivative that qualifies as a fair value hedge under the provisions of SFAS 133 and the offsetting gain or loss on the hedged asset or liability that is attributable to the hedged risk are recorded in Other income (loss) as a Net realized and unrealized gain (loss) on derivatives and hedging activities. To the extent changes in the fair value of the derivative is not entirely offset by changes in the fair value of the hedged asset or liability, the net impact from hedging activities is recorded as hedge ineffectiveness.

82

Net interest accruals of derivatives designated in a SFAS 133 qualifying 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 accruals of derivatives that do not qualify for hedge accounting under SFAS 133 and interest received from in-the-money options are recorded in Other income (loss) as a Net realized and unrealized gain (loss) on derivatives and hedging activities.

The effective portion of 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 SFAS 133 qualifying hedge relationships, hedge ineffectiveness resulting from differences between changes in fair values or cash flows of the hedged item and changes in fair value of the derivatives are recognized in Other income (loss) as a Net realized and unrealized gain (loss) on derivatives and hedging activities.

Net realized and unrealized gains and losses from SFAS 133 qualifying 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.

Redemption of 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 may receive prepayment fees. When assets are prepaid ahead of their expected or contractual maturities, the Bank also attempts to extinguish debt (consolidated obligation bonds) in order to realign asset and liability cash flow patterns. Bond retirement typically requires a payment of a premium resulting in a loss.

Non-Interest Income

The following table summarizes non-interest income (loss) (in thousands):

	Three months ended March 31,
	2009			2008
Other income (loss):
Service fees	$	985		$	691
Instruments held at fair value — Unrealized gain		8,313			—
Total OTTI losses		(15,203	)		—
Portion of loss recognized in other comprehensive income		9,938			—
Net impairment losses recognized in earnings		(5,265	)		—
Net realized and unrealized gain (loss) on derivatives and hedging activities		(13,666	)		866
Net realized gain from sale of available-for-sale securities		440			—
Other		46			(183	)
Total other income (loss)	$	(9,147	)	$	1,374

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Net impairment losses recognized in earnings on held-to-maturity securities — Other-than-temporary impairment

Based on the management’s determination of a decrease in cash flows expected to be collected (cash flow shortfall) on two securities insured by MBIA concurrently with the determination that MBIA’s claim paying ability would not be sufficient in future periods to cover the short falls, management concluded that the two securities had become other-than-temporarily impaired at March 31, 2009. The Bank early adopted FSP FAS 115-2 and FAS 124-2, and has applied accounting provisions to write down the two securities to their fair values at March 31, 2009. Recognition of OTTI resulted in a charge of $5.3 million to current year first quarter earnings representing the credit component of total OTTI. The difference between the amortized cost basis of the two securities and their fair values at March 31, 2009 was $15.2 million, the total OTTI. The non-credit component was $9.9 million, which was recorded as a loss to Accumulated other comprehensive income (loss) at March 31, 2009.

The table below summarizes the key characteristics of the other-than-temporarily impaired securities at March 31, 2009 (dollars in thousands):

			Insurer MBIA				OTTI						Gross Losses
			Amortized		Fair		Credit			Non-credit			Less than		More than
Ratings	Count		Cost Basis		Value		Loss			Loss			12 months		12 months
BB		1	$	13,752	$	8,273	$	(1,926	)	$	(3,553	)	$	—	$	(5,479	)
B		1		23,259		13,535		(3,339	)		(6,385	)		—		(9,724	)
Total		2	$	37,011	$	21,808	$	(5,265	)	$	(9,938	)	$	—	$	(15,203	)

Instruments held at fair value

Under SFAS 159, the FHLBNY elected to carry certain consolidated obligation bonds at fair value. The Bank records the unrealized gains and losses on these liabilities in Instruments held at fair value. In general, transactions elected for the fair value option in accordance with SFAS 159 are in economic hedge relationships. The fair value adjustments on consolidated obligation bonds carried at fair value in accordance with SFAS 159 resulted in net fair value gains of $8.3 million for the current year first quarter primarily because of matured bonds or bonds nearing maturity. These bonds were in a fair value gain position at March 31, 2009, but had been in net unrealized loss positions at the beginning of the current year first quarter. When instruments recorded at fair value are held to maturity, their cumulative fair value changes sum to zero at maturity. These losses were partially offset by gains on derivatives that economically hedged to the debt.

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Earnings impact of derivatives and hedging activities

Net realized and unrealized gain (loss) from derivatives and hedging activities

The FHLBNY reported the following net gains (losses) from derivatives and hedging activities (in thousands):

	Three months ended March 31,
	2009			2008 2
Earnings impact of derivatives and hedging activities gain (loss):
SFAS 133 Hedging
Cash flow hedge-ineffectiveness	$	—		$	447
Fair value hedges-ineffectiveness		2,271			1,449
Economic Hedging
Economic hedges-fair value changes-options		1,221			(544	)
Net interest income-options		(692	)		126
Economic hedges-fair value changes-MPF delivery commitments		59			3
Fair value changes-economic hedges 1		35,065			(131	)
Net interest expense-economic hedges 1		(46,196	)		(484	)
Macro hedge-swaps		2,233			—
Fair value matched to hedge liabilities designated under SFAS 159
Fair value changes-interest rate swaps		(7,627	)		—
Net impact on derivatives and hedging activities	$	(13,666	)	$	866

¹ Includes de minimis amount of net gains on member intermediated swaps.

Key components of hedging activities recorded in the Statements of Income for the current and prior year first quarters as Net realized and unrealized gain (loss) from hedging activities were as follows:

Reported Net realized and unrealized gain (loss) from derivatives and hedging activities was a loss of $13.7 million in the current year first quarter, compared to a gain of $0.9 million in prior year first quarter.

The reported loss was primarily due to (1) The accounting of interest expense on swaps designated as economic hedges and reported as hedging losses. (2) Fair value changes of swaps and derivatives in economic hedges of debt and advances that were not offset by fair value changes of the hedged bonds and advances because the hedges were not executed under hedge accounting provisions. An economic hedge represents derivative transactions that are an approved risk management hedge but may not qualify for hedge accounting treatment under the provisions of SFAS 133. When derivatives are designated as economic hedges, the fair value changes due to changes in the interest rate and volatility of rates are recorded through the Statements of Income without the offsetting change in the fair values of the hedged advances and debt as would be afforded under SFAS 133 hedge accounting rules. In addition, and as described in the previous paragraph, net swap interest expense and income associated with swaps in economic hedges of assets and liabilities are reported as hedging losses and gains in Other income (loss) in the Statements of Income. Fair value losses and gains are typically unrealized unless the Bank terminates the derivative. When the derivatives and the associated hedged advances and debt are held to their contractual maturity or to predetermined call dates, the cumulative fair value gains and losses sum to zero over the life of the hedge. However, interest income and expense have economic consequences since they result in exchanges of cash payments or receipts.

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Economic hedges

• Interest rate swaps — In the current year first quarter, the primary economic hedges were : (1) Interest rate “Basis swaps” that synthetically converted floating-rate funding based on Prime rate, Federal funds rate, and the 1-month LIBOR rate to 3-month LIBOR rate. (2) Interest rate swaps hedging balance sheet risk. (3) Interest rate swaps hedging discount notes. Changes in the fair values of interest rate swaps in economic hedges, often referred to as “one-sided marks” made a positive contribution of $38.7 million from hedging activities. Interest expense associated with the interest rate swaps in economic hedges resulted in net expense of $46.9 million in the current year first quarter and was recorded as hedging expenses in Other income (loss) as Net realized and unrealized gain (loss) from derivatives and hedging activities.

• Changes in fair values of swaps in an economic hedge of consolidated obligation bonds accounted under SFAS 159, “Fair Value Option”, resulted in a loss of $7.6 million in 2008. The accounting under SFAS 159 was introduced for the first time in the third quarter of 2008.

• Interest rate caps — were also designated as economic hedges, and fair value changes of purchased caps resulted in a gain of $1.2 million in current year first quarter. The Bank had acquired $1.9 billion in notional amounts of interest rate caps in the second quarter of 2008 at a cost of $46.9 million to help mitigate certain balance sheet risk metrics. The fair value of the caps is recorded as derivative assets in the Statements of Condition. In a rising interest rate environment at March 31, 2009, relative to December 31, 2008, the fair values of interest rate caps increased at March 31, 2009, contributing to a gain from hedging activities.

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SFAS 133 qualifying hedges

Net fair value changes from SFAS 133 qualifying hedges resulted in recorded net gain of $2.3 million in current year first quarter, compared to a net gain of $1.4 million in prior year first quarter. Typically, gains and losses in a SFAS 133 qualifying hedge represent hedge ineffectiveness due to changes in fair values of hedged advances and debt from changes in the benchmark rate (LIBOR for the Bank) that are not entirely offset by changes in the fair values of the swaps.

Derivative gains and losses reclassified from Accumulated other comprehensive income (loss) to current period income — The following table summarizes changes in derivative gains and (losses) and reclassifications into earnings from Accumulated other comprehensive income (loss) in the Statements of Condition (in thousands):

	March 31, 2009			December 31, 2008
Accumulated other comprehensive income/(loss) from cash flow hedges
Beginning of period	$	(30,191	)	$	(30,215	)
Net hedging transactions		—			(6,100	)
Reclassified into earnings		1,879			6,124
End of period	$	(28,312	)	$	(30,191	)

Cash Flow Hedges

There were no material amounts for the current or prior year first quarters that were reclassified from Accumulated other comprehensive income (loss) into earnings as a result of the discontinuance of cash flow hedges because it became probable that the original forecasted transactions would not occur by the end of the originally specified time period or within a two-month period thereafter. Ineffectiveness from hedges designated as cash flow hedges was not material in any periods reported in this Form 10-Q.

Over the next twelve months, it is expected that $7.4 million of net losses recorded in Accumulated other comprehensive income (loss) will be recognized as a charge to earnings.

Debt Extinguishment

No debt was retired or transferred in the current year or prior year first quarters.

Other Expenses (Non-Interest Expense)

The primary components of Other expenses are Operating expenses and Assessments. Operating expenses included the administrative and overhead costs of operating the Bank and the operating costs of providing advances and managing collateral associated with the advances, managing the investment portfolios, and providing correspondent banking services to members.

The FHLBanks, including the FHLBNY, fund the cost of the Office of Finance, a joint office of the FHLBanks that facilitates issuing and servicing the consolidated obligations of the FHLBanks, preparation of the combined quarterly and annual financial reports, and certain other functions. The FHLBanks are also assessed the operating expenses of the Finance Agency, the regulator of the FHLBanks.

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

	Three months ended March 31,
	2009		2008
Other expenses:
Operating	$	18,094	$	16,451
Finance Agency and Office of Finance		1,967		1,453
Total other expenses	$	20,061	$	17,904

Operating Expenses

The following table summarizes the major categories of operating expenses (dollars in thousands):

	Three months ended March 31,
			Percentage of					Percentage of
	2009		total			2008		total
Salaries and employee benefits	$	12,088		66.81	%	$	11,352		69.00	%
Temporary workers		103		0.57			14		0.09
Occupancy		1,056		5.83			981		5.96
Depreciation and leasehold amortization		1,324		7.32			1,159		7.05
Computer service agreements and contractual services		1,462		8.08			1,243		7.56
Professional and legal fees		449		2.48			336		2.04
Other		1,612		8.91			1,366		8.30
Total operating expenses	$	18,094		100.00	%	$	16,451		100.00	%

Increase in head count and general increases in salary expenses were the primary factors that caused operating expenses to increase.

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”). AHP assessments are set aside from Net income for future grants and contributions towards the program. REFCORP expenses are paid to the United States Treasury.

Both the REFCORP and AHP assessments are based on income and the increases reflect the change in pre-assessment income for the current year first quarter compared to the prior year first quarter.

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

					Net change in			Net change in
(Dollars in thousands)	March 31, 2009		December 31, 2008		dollar amount			percentage
Assets
Cash and due from banks	$	32,136	$	18,899	$	13,237			70.04	%
Interest-bearing deposits		8,602,233		12,169,096		(3,566,863	)		(29.31	)
Federal funds sold		500,000		—		500,000		NM
Available-for-sale securities		2,641,996		2,861,869		(219,873	)		(7.68	)
Held-to-maturity securities
Long-term securities		9,935,079		10,130,543		(195,464	)		(1.93	)
Certificates of deposit		300,000		1,203,000		(903,000	)		(75.06	)
Advances		104,463,598		109,152,876		(4,689,278	)		(4.30	)
Mortgage loans held-for-portfolio		1,430,899		1,457,885		(26,986	)		(1.85	)
Accrued interest receivable		411,500		492,856		(81,356	)		(16.51	)
Premises, software, and equipment		13,817		13,793		24			0.17
Derivative assets		11,463		20,236		(8,773	)		(43.35	)
Other assets		16,217		18,838		(2,621	)		(13.91	)
Total assets	$	128,358,938	$	137,539,891	$	(9,180,953	)		(6.68	)%
Liabilities
Deposits
Interest-bearing demand	$	2,306,887	$	1,333,750	$	973,137			72.96	%
Non-interest bearing demand		7,528		828		6,700		NM
Term		58,000		117,400		(59,400	)		(50.60	)
Total deposits		2,372,415		1,451,978		920,437			63.39
Consolidated obligations
Bonds		69,582,076		82,256,705		(12,674,629	)		(15.41	)
Discount notes		48,721,626		46,329,906		2,391,720			5.16
Total consolidated obligations		118,303,702		128,586,611		(10,282,909	)		(8.00	)
Mandatorily redeemable capital stock		139,961		143,121		(3,160	)		(2.21	)
Accrued interest payable		385,121		426,144		(41,023	)		(9.63	)
Affordable Housing Program		128,368		122,449		5,919			4.83
Payable to REFCORP		41,815		4,780		37,035		NM
Derivative liabilities		1,031,771		861,660		170,111			19.74
Other liabilities		132,658		75,753		56,905			75.12
Total liabilities		122,535,811		131,672,496		(9,136,685	)		(6.94	)
Capital		5,823,127		5,867,395		(44,268	)		(0.75	)
Total liabilities and capital	$	128,358,938	$	137,539,891	$	(9,180,953	)		(6.68	)%

Balance sheet overview

At March 31, 2009, the FHLBNY’s Total assets were $128.4 billion, a decrease of $9.2 billion, or 6.7%, from December 31, 2008. Advances borrowed by members declined by $4.7 billion. Both short-term and long-term investments were lower at March 31, 2009 relative to outstanding amounts at December 31, 2008. The Bank’s balance sheet management strategy has been to keep balance sheet growth in line with the growth in member demand for advances.

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The Bank invested $8.6 billion ($12.2 billion at December 31, 2008) in interest-earning demand balances at the FRB, which were reported as Interest-bearing deposits in the Statements of Condition. The liquid investment at the FRB is consistent with the Bank’s goals of maintaining liquidity for its members, as 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, especially in the existing volatile credit markets.

At March 31, 2009, balance sheet leverage of 22.0 times shareholders’ capital was slightly down from 23.4 times capital at December 31, 2008. Increases or decreases in investments have 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, or its cash position at the FRB.

Advances

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

Reported book value of advances was $104.5 billion at March 31, 2009, down from $109.2 billion at December 31, 2008. Par amount of advances outstanding was $99.4 billion at March 31, 2009, compared to $103.4 billion at December 31, 2008. Advance book values include fair value basis adjustments of $5.1 billion and $5.8 billion at March 31, 2009 and December 31, 2008 recorded under the hedge accounting provisions of SFAS 133. Short-term fixed-rate advances, adjustable-rate advances, and overnight borrowings declined at March 31, 2009 compared to outstanding balances at December 31, 2008.

The FHLBNY’s willingness to be a reliable provider of well-priced funds to our members reflect the FHLBNY’s ability to raise funding in the marketplace 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):

	March 31, 2009						December 31, 2008
				Percentage						Percentage
	Amounts			of total			Amounts			of total
Adjustable Rate Credit — ARCs	$	18,530,850			18.65	%	$	20,205,850			19.55	%
Fixed Rate Advances		73,958,276			74.41			71,860,685			69.51
Short-Term Advances		4,554,950			4.58			7,793,500			7.54
Mortgage Matched Advances		653,908			0.66			693,559			0.67
Overnight Line of Credit (OLOC) Advances		853,244			0.86			2,039,423			1.97
All other categories		837,137			0.84			786,710			0.76
Total par value		99,388,365			100.00	%		103,379,727			100.00	%
Discount on AHP Advances		(310	)					(330	)
SFAS 133 hedging adjustments		5,075,543						5,773,479
Total	$	104,463,598					$	109,152,876

Comparing member borrowings at March 31, 2009 to last year-end, overall Advance borrowings declined. Member demand for variable-rate advances, Adjustable Rate Credit advances (“ARCs”) and OLOC Advances declined at March 31, 2009 from balances outstanding at December 31, 2008. These product categories had also not kept pace at December 31, 2008 with the overall surge in member borrowings in 2008.

In the current year first quarter, fixed-rate advances specially those collateralized by member securities grew and partially offset the declining demand of adjustable-rate products.

Member demand for advance products

Adjustable Rate Advances (ARC Advances) — Demand for ARC advances in the current year first quarter declined and outstanding balances fell to $18.5 billion from $20.2 billion at December 31, 2008. Generally, the FHLBNY’s larger members have been the more significant borrowers of ARCs.

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

Fixed-rate Advances — Demand for long-term fixed-rate advances was strong in the current year first quarter. Primary demand was for fixed-rate advances collateralized by pledged securities. A significant component of Fixed-rate advances is putable advances, also referred to as “Convertible Advances”. Outstanding amounts of putable advances were $43.2 billion at March 31, 2009 almost unchanged from December 31, 2008. Historically, Fixed-rate, putable advances have been competitively priced relative to fixed-rate “bullet” advances because of the “put” feature that the Bank purchases from the member, driving down the coupon on the advance. In the present interest rate environment the price advantage is not significant because of constraints in offering longer-term-advances that has also narrowed the price advantage of putable advances.

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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, comprising putable and non-putable advances were the largest category of advances at March 31, 2009 and December 31, 2008.

Short-term Advances — Demand for Short-term fixed-rate advances in the first quarter of 2009, was soft and outstanding balances declined at March 31, 2009 from December 31, 2008.

Overnight Line of Credit (“OLOC Advances”) — Overnight borrowings were weak during the current year first quarter and outstanding amounts declined.

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

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

Merger Activity

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

No members were acquired by non-members in the current year first quarter compared to three in the prior year first quarter.

Early Prepayment of Advances

Early prepayment initiated by members and former members is another important factor that impacts advances to members. The FHLBNY charges a member a prepayment fee when the member prepays certain advances before the original maturity. Member initiated prepayments totaled $3.0 billion in par amount of advances in the current year first quarter, compared to $2.1 billion in the prior year first quarter. The Bank recorded net prepayment fees of $19.1 million in the current year first quarter as income compared to $8.2 million the prior year first quarter. For advances that are prepaid and hedged under the provisions of SFAS 133, the FHLBNY terminates the hedging relationship upon prepayment and adjusts the prepayments fees received for the associated fair value basis of the hedged prepaid advance.

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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 SFAS 133 qualifying hedges are recorded with interest income from advances. Fair value changes of SFAS 133 qualifying hedged advances are recorded as a Net realized and unrealized gain (loss) on derivative and hedging activities, a component of Other income (loss); an offset is recorded as fair value basis adjustment to the carrying amount of the advances in the Statements of Condition.

The Bank primarily hedges putable or convertible advances and certain “bullet” fixed-rate advances. A significant percentage of advances were hedged by the use of interest rate swaps in economic hedges as well as hedges qualifying under the hedging provisions of SFAS 133.

At March 31, 2009, $65.9 billion in interest rate swaps hedged advances, compared to $62.3 billion at December 31, 2008.

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”. Fair value basis adjustments as measured under the hedging rules are impacted by both hedge volume and the interest rate environment and the volatility of the rate environment.

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Hedge volume — At March 31, 2009 and December 31, 2008, almost all putable fixed-rate advances were hedged by interest rate swaps in SFAS 133 qualifying hedge relationships, which effectively converted the fixed-rate exposure of the advances to a variable-rate exposure, generally indexed to 3-month LIBOR. The Bank’s putable 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. The Bank also hedges certain long-term, single maturity (bullet) advances to hedge fair value risk from changes in the benchmark rate.

Hedge volume as measured by the amount of notional amounts of interest rate swaps outstanding that hedged advances, both economically and under SFAS 133 hedging provisions, increased to $66.3 billion at March 31, 2009, compared to $62.3 billion at December 31, 2008.

The notional amounts of swaps included $0.4 billion and $0.6 billion at March 31, 2009 and December 31, 2008 that were in an economic hedge of advances.

The largest component of interest rate swaps hedging advances at March 31, 2009 was comprised of $41.7 billion in putable advances, slightly below $43.4 billion at December 31, 2008. Generally, the Bank hedges almost all putable advances with a callable interest rate swap. 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.

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

Fair value basis adjustments — The Bank uses interest rate derivatives to hedge the risk of changes in the benchmark rate, which the FHLBNY has adopted as LIBOR, and is also the discounting basis for computing changes in fair values of hedged advances. Recorded fair value basis adjustments in the Statements of Condition were associated with hedging activities under the provisions of SFAS 133.

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Reported book value of advances at March 31, 2009 included net unrealized basis gains of $5.1 billion compared to $5.8 billion at December 31, 2008 and represented fair value basis adjustments under SFAS 133 hedge accounting rules. The notional amounts of swaps that were associated in hedging relationships under SFAS 133 aggregated $65.9 billion at December 31, 2008, up from $61.7 billion at December 31, 2008. Advances designated at inception as economic hedges do not generate basis adjustments.

Unrealized basis gains were consistent with the forward yield curves at March 31, 2009 and December 31, 2008 that were projecting forward rates below the fixed-rate coupons of advances that had been issued in prior periods at the then prevailing higher interest-rate environment. Since hedged advances are typically fixed-rate, in a declining interest rate environment, fixed-rate advances exhibited unrealized fair value basis gains. Unrealized gains from fair value basis adjustments to advances were almost entirely offset by net fair value unrealized losses of the derivatives associated with the fair value hedges of advances, thereby achieving the Bank’s hedging objectives of mitigating fair value basis risk. Hedge volume as represented by the notional amounts of advances hedged in a SFAS 133 qualifying hedge increased at March 31, 2009 in line with the increase in hedged long-term fixed-rate advances at March 31, 2009 compared to December 31, 2008. The amount of basis adjustments of hedged advances in an unrealized gain position declined to $5.1 billion at March 31, 2009 from $5.8 billion at December 31, 2008 primarily as a result of the steepening of the yield curve at March 31, 2009 relative to December 31, 2008.

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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 a smaller portfolio of MBS issued by private enterprises, and securities issued by state or local housing finance agencies.

Mortgage- and asset-backed securities acquired must carry the highest ratings from Moody’s Investors Service (“Moody’s”) or Standard & Poor’s Rating Services (“S&P”) at the time of purchase. Finance Agency regulations prohibit the FHLBanks, including the FHLBNY, from investing in certain types of securities and limit the investment in mortgage- and asset-backed securities.

Limits on the size of the MBS portfolio are defined by Finance Agency regulations, which limits holding of MBS to 300% of capital. At March 31, 2009 and December 31, 2008, the Bank was within these limits.

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

Based on the management’s determination of a decrease in cash flows expected to be collected (cash flow shortfall) on two held-to-maturity private-label mortgage-backed securities insured by MBIA and the determination that MBIA’s claim paying ability would not be sufficient in future periods to cover the estimated short falls, management concluded that the two securities had become other-than-temporarily impaired at March 31, 2009. Total OTTI was $15.2 million, representing the difference between the amortized cost basis of $37.0 million prior to the write down and $21.8 million, the fair value basis of the two securities, which is the new amortized cost basis of the two securities. The credit component of OTTI was $5.3 million and was a charge to current year first quarter earnings. The non-credit component of total OTTI was $9.9 million, which was a loss to Accumulated other comprehensive income (loss), a component of shareholders’ equity.

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The following table summarizes changes in investments by categories (including held-to-maturity securities, available-for-sale securities, and money market investments) between March 31, 2009 and December 31, 2008. Amounts are after writing down the amortized cost basis of impaired securities to fair values (dollars in thousands):

	March 31,		December 31,		Dollar			Percentage
	2009		2008		Variance			Variance
State and local housing agency obligations 1	$	802,637	$	804,100	$	(1,463	)		(0.18	)%
Mortgage-backed securities
Available-for-sale securities, at fair value		2,632,144		2,851,682		(219,538	)		(7.70	)
Held-to-maturity securities, at amortized cost		9,132,442		9,326,443		(194,001	)		(2.08	)
Total long-term securities		12,567,223		12,982,225		(415,002	)		(3.20	)
Grantor trusts 2		9,852		10,187		(335	)		(3.29	)
Certificates of deposit 1		300,000		1,203,000		(903,000	)		(75.06	)
Federal funds sold		500,000		—		500,000		NA
Total investments	$	13,377,075	$	14,195,412	$	(818,337	)		(5.76	)%

1	Classified as held-to-maturity securities, at amortized cost.
2	Classified as available-for-sale securities, at fair value represent investments in registered mutual funds and other fixed-income securities maintained under the grantor trusts.
Note:	Excludes $8.6 billion in interest-earning balance at Federal Reserve Bank of New York at March 31, 2009 ($12.2 billion at December 31, 2008).

Long-term investments

At March 31 2009 and December 31, 2008, investments with original contractual maturities that were long-term comprised of mortgage- and asset-backed securities, and investment in securities issued by state and local housing agencies. These investments were classified as either held-to-maturity or available-for-sale securities under the meaning of SFAS 115, “Accounting for Certain Investments in Debt and Equity Securities” as amended by FSP FAS 115-2. Several grantor trusts have been established and owned by the FHLBNY to fund current and potential future payments to retirees for supplemental pension plan obligations. The trust funds are invested in fixed-income and equity funds, which were classified as available-for-sale.

97

Mortgage-backed securities — By issuer

Composition of FHLBNY’s held-to-maturity mortgage-backed securities was as follows (amortized cost basis; dollars in thousands):

	March 31,		Percentage			December 31,		Percentage
	2009		of total			2008		of total
U.S. government sponsored enterprise residential mortgage-backed securities	$	7,532,841		82.48	%	$	7,577,036		81.24	%
U.S. agency residential mortgage-backed securities		6,063		0.07			6,325		0.07
U.S. agency commercial mortgage-backed securities		50,000		0.55			—		—
Private-label issued securities backed by home equity loans		599,733		6.57			636,466		6.83
Private-label issued residential mortgage-backed securities		576,729		6.31			609,908		6.54
Private-label issued commercial mortgage-backed securities		143,631		1.57			266,994		2.86
Private-label issued securities backed by manufactured housing loans		223,445		2.45			229,714		2.46
Total Held-to-maturity securities — MBS	$	9,132,442		100.00	%	$	9,326,443		100.00	%

Held-to-maturity mortgage- and asset-backed securities (“MBS”) — Government sponsored enterprise (“GSE”) and U.S. government agency issued MBS aggregated $7.6 billion at March 31, 2009 and December 31, 2008. They represented 83.1% and 81.3% of total MBS classified as held-to-maturity at those dates. Privately issued mortgage-backed securities made up 16.9% and 18.7% at March 31, 2009 and December 31, 2008 and included commercial mortgage- and asset-backed securities, and mortgage-pass-throughs and Real Estate Mortgage Investment Conduit bonds.

Investment in mortgage-backed securities provides a reliable income stream and enhance interest income.

In the current year first quarter, the Bank acquired $445.2 million of GSE and U.S. government agency issued MBS and designated the purchases as held-to-maturity. Securities acquired were triple-A rated. New acquisitions were slightly below paydowns in the current year first quarter and as a result, outstanding balances at March 31, 2009 declined from December 31, 2008. The Bank’s conservative purchasing practice over the years is evidenced by its concentration in mortgage-backed securities issued by a GSE.

Local and housing finance agency bonds — The FHLBNY had investments in primary public and private placements of taxable obligations of state and local housing finance authorities (“HFA”) classified as held-to-maturity. Investments in state and local housing finance bonds help to fund mortgages that finance low- and moderate-income housing. In the current year first quarter, the Bank made no acquisitions.

98

Held-to-maturity securities

Market values of held-to-maturity securities were as follows (in thousands):

	March 31, 2009
	Amortized		Gross		Gross					Total
	Cost		Unrealized		Unrealized			Fair		OTTI
	Basis		Holding Gains		Holding Losses			Value		in OCI
State and local housing agency bonds	$	802,637	$	3,504	$	(74,369	)	$	731,772	$	—
Mortgage-backed securities		9,132,442		251,107		(331,196	)		9,052,353		(9,938	)
Certificates of deposit		300,000		17		—			300,017		—
Total	$	10,235,079	$	254,628	$	(405,565	)	$	10,084,142	$	(9,938	)

	December 31, 2008
	Amortized		Gross		Gross
	Cost		Unrealized		Unrealized			Fair
	Basis		Holding Gains		Holding Losses			Value
State and local housing agency bonds	$	804,100	$	6,573	$	(47,512	)	$	763,161
Mortgage-backed securities		9,326,443		187,531		(342,662	)		9,171,312
Certificates of deposit		1,203,000		328		—			1,203,328
Total	$	11,333,543	$	194,432	$	(390,174	)	$	11,137,801

99

External rating information of the held-to-maturity portfolio was as follows; two securities were rated below investment grade (single-B and double-B; these securities were credit impaired). (amortized cost basis in thousands):

	March 31, 2009
									Below
									Investment
	AAA-rated		AA-rated		A-rated		BBB-rated		Grade		Total
Long-term securities
Mortgage-backed securities	$	8,478,436	$	299,766	$	179,617	$	152,815	$	21,808	$	9,132,442
State and local housing bonds		74,637		671,780		—		56,220		—		802,637
Total Long-term securities		8,553,073		971,546		179,617		209,035		21,808		9,935,079
Short-term securities
Certificates of deposit		—		—		300,000		—		—		300,000
Total	$	8,553,073	$	971,546	$	479,617	$	209,035	$	21,808	$	10,235,079

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

Rating information of the available-for-sale portfolios was as follows. (fair values in thousands):

	March 31, 2009
	AAA-rated		AA-rated		A-rated		BBB-rated		Unrated		Total
Available-for-sale securities
Mortgage-backed securities	$	2,632,144	$	—	$	—	$	—	$	—	$	2,632,144
Other — Grantor trusts		—		—		—		—		9,852		9,852
Total	$	2,632,144	$	—	$	—	$	—	$	9,852	$	2,641,996

	December 31, 2008
	AAA-rated		AA-rated		A-rated		BBB-rated		Unrated		Total
Available-for-sale securities
Mortgage-backed securities	$	2,851,682	$	—	$	—	$	—	$	—	$	2,851,682
Other — Grantor trusts		—		—		—		—		10,187		10,187
Total	$	2,851,682	$	—	$	—	$	—	$	10,187	$	2,861,869

100

Fair values of investment securities

The fair value of investment securities is estimated by management using information from specialized pricing services that use pricing models or quoted prices of securities with similar characteristics. Inputs into the pricing models employed by pricing services are market based and observable for Level 1 and Level 2 securities. The valuation techniques used by pricing services employ cash flow generators and option-adjusted spread models. Pricing spreads used as inputs in the models are based on new issue and secondary market transactions if securities that are traded in sufficient volumes in the secondary market. The valuation of the Bank’s private-label securities that are all designated as held-to-maturity may require pricing services to use significant inputs that are subjective and may be considered to be Level 3 inputs because the inputs may not be market based and observable. In accordance with the provisions of SFAS 115, as amended by the FASB issued FSP FAS 115-2, “Recognition and presentation of Other-Than-Temporary Impairment” (“FSP FAS 115-2 and FAS 124-2”), two held-to-maturity private label mortgage-backed securities were written down to their fair value as a result of a recognition of other-than-temporary impairment. The amortized cost basis was $37.0 million prior to the write down. The new amortized cost basis at March 31, 2009 was $21.8 million, which was the fair value of the two securities at March 31, 2009. The amount of write down was $15.2 million, deemed to be a non-recurring charge. The credit loss component of the write down was $5.3 million. The non-credit component of OTTI was $9.9 million. The credit loss was a charge to earnings in the Statement of Income for the current year first quarter. The two impaired securities are classified as Level 3 financial instruments within the SFAS 157 valuation hierarchy. This determination was made based on management’s view that the two private-label securities may not have an active market because of the specific vintage of the two impaired securities as well as inherent conditions surrounding the trading of private-label mortgage-backed securities; fair values of the two securities were determined by management using third party specialized vendor pricing services that made appropriate adjustments to observed prices of comparable securities that were being transacted in orderly market.

For corroboration and other analytical procedures performed by the FHLBNY, see Significant Accounting Policies and Significant Estimates in Note 1, and Note 16 Fair Values of Financial Instruments. Examples of securities priced under such a valuation technique, and which are classified within Level 2 of the valuation hierarchy and valued using the “market approach” as defined under SFAS 157, include GSE issued collateralized mortgage obligations and money market funds.

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. Based on detailed credit analysis on a security level, the Bank has concluded that other than the two securities determined to be impaired, gross unrealized losses for the remainder of securities were primarily caused by interest rate changes, credit spread widening and reduced liquidity and the securities were temporarily impaired as defined under FSP FAS 115-2 and FSP FAS 124-2. For information about the Bank’s Impairment Analysis and conclusions, investment ratings, and investment quality see Asset Quality and Concentration — Advances, Investment securities, Mortgage loans, and Counterparty risks in this MD&A. Also, see Note 4 — Held-to-maturity securities and Note 5 — Available-for-sale securities.

101

Contractual maturities — Mortgage-backed securities

The amortized cost basis 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.

	March 31, 2009				December 31, 2008
	Amortized		Fair		Amortized		Fair
	Cost Basis		Value		Cost Basis		Value
State and local housing agency obligations
Due in one year or less	$	—	$	—	$	—	$	—
Due after one year through five years		17,665		17,808		17,665		18,209
Due after five years through ten years		60,400		54,210		60,400		55,060
Due after ten years		724,572		659,754		726,035		689,892
State and local housing agency obligations		802,637		731,772		804,100		763,161
Mortgage-backed securities
Due in one year or less		139,451		139,111		257,999		258,120
Due after one year through five years		3,504		3,244		—		—
Due after five years through ten years		1,149,921		1,173,405		1,142,000		1,149,541
Due after ten years		7,839,566		7,736,593		7,926,444		7,763,651
Mortgage-backed securities		9,132,442		9,052,353		9,326,443		9,171,312
Certificates of deposit
Due in one year or less		300,000		300,017		1,203,000		1,203,328
Due after one year through five years		—		—		—		—
Due after five years through ten years		—		—		—		—
Due after ten years		—		—		—		—
Certificates of deposit		300,000		300,017		1,203,000		1,203,328
Total held-to-maturity securities	$	10,235,079	$	10,084,142	$	11,333,543	$	11,137,801

Weighted average rates — Mortgage-backed securities

The following table summarizes weighted average rates by contractual maturities. Certain securities have floating-rate coupons. (dollars in thousands):

	March 31, 2009					December 31, 2008
	Amortized		Weighted			Amortized		Weighted
	Cost Basis		Average rate			Cost Basis		Average rate
Mortgage-backed securities
Due in one year or less	$	139,451		7.42	%	$	257,999		7.39	%
Due after one year through five years		3,504		6.25			—		—
Due after five years through ten years		1,149,921		4.74			1,142,000		4.76
Due after ten years		10,501,627		3.28			10,839,086		4.24
Total mortgage-backed securities	$	11,794,503		4.08	%	$	12,239,085		4.36	%

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Short-term investments

The FHLBNY typically maintains substantial investments in high-quality, short- and intermediate-term financial instruments, such as interest-earning balances at the Federal Reserve Banks, certificates of deposits and overnight and term Federal funds sold to highly-rated financial institutions. These investments provide the liquidity necessary to meet members’ credit needs. Short-term investments also provide a flexible means of implementing the asset/liability management decisions to increase liquidity. The Bank invests in certificates of deposits with maturities not exceeding one year and issued by major financial institutions; certificates of deposits are recorded at amortized cost basis as held-to maturity investment. Cash pledged to derivative counterparties to meet collateral requirements are interest-bearing and are reported as a netting adjustment to Derivative liabilities in the Statements of Condition.

Investments — Policies and practices

Finance Agency regulations limit investment in housing-related obligations of state and local governments and their housing finance agencies to obligations that carry ratings of double-A or higher. Finance Agency 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. Unsecured lending to members is not prohibited by Finance Agency regulations or Board of Directors’ policy. The FHLBNY is prohibited from purchasing a consolidated obligation issued directly by another FHLBank, but may acquire consolidated obligations for investment in the secondary market after the bond settles. There were no investments in consolidated obligations at March 31, 2009 and at December 31, 2008.

The FHLBNY’s investment in mortgage-backed securities during all periods reported complied with FHLBNY’s Board-approved policy of acquiring mortgage-backed securities issued or guaranteed by the government-sponsored housing enterprises, or prime residential mortgages rated triple-A by both Moody’s and Standard & Poor’s rating services at acquisition.

103

Mortgage Loans Held-for-Portfolio

At March 31, 2009, 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 the Bank’s most recently filed Form 10-K on March 27, 2009. 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.

Paydowns slightly outpaced acquisitions in the current year first quarter and as a result the portfolio declined relative to December 31, 2008. 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.

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

	March 31, 2009						December 31, 2008
				Percentage of						Percentage of
	Amount			total			Amount			total
Real Estate:
Fixed medium-term single-family mortgages	$	451,675			31.61	%	$	467,845			32.15	%
Fixed long-term single-family mortgages		973,362			68.11			983,493			67.58
Multi-family mortgages		3,984			0.28			4,009			0.27
Total par value		1,429,021			100.00	%		1,455,347			100.00	%
Unamortized premiums		10,272						10,662
Unamortized discounts		(6,092	)					(6,310	)
Basis adjustment 1		(454	)					(408	)
Total mortgage loans held-for-portfolio		1,432,747						1,459,291
Allowance for credit losses		(1,848	)					(1,406	)
Total mortgage loans held-for-portfolio after allowance for credit losses	$	1,430,899					$	1,457,885

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

104

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

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

105

In the third quarter of 2008, each FHLBank (including the FHLBNY) entered into a Lending Agreement with the U.S. Treasury in connection with the U.S. Treasury’s establishment of the Government Sponsored Enterprise Credit Facility (GSECF), as authorized by the Housing Act. The GSECF is designed to serve as a contingent source of liquidity for the housing government-sponsored enterprises, including each of the 12 FHLBanks. Any borrowings by one or more of the FHLBanks under the GSECF are considered consolidated obligations with the same joint and several liability as all other consolidated obligations. The terms of any borrowings are agreed to at the time of issuance. Loans under the Lending Agreement are to be secured by collateral acceptable to the U.S. Treasury, which consists of FHLBank advances to members that have been collateralized in accordance with regulatory standards and mortgage-backed securities issued by the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation. Each FHLBank is required to submit to the Federal Reserve Bank of New York, acting as fiscal agent of the U.S. Treasury, a list of eligible collateral, updated on a weekly basis. As of March 31, 2009 and December 31, 2008, the FHLBNY had provided the U.S. Treasury with listings of advance collateral amounting to $23.8 billion and $16.3 billion. The amount of collateral can be increased or decreased (subject to the approval of the U.S. Treasury) at any time through the delivery of an updated listing of collateral. As of December 31, 2008 and at the date of this Form 10-Q report, no FHLBank has drawn on this available source of liquidity.

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

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

Highlights — Debt issuance and funding management

The primary source of funds for the FHLBNY continued to be through issuance of consolidated obligation bonds and discount notes. Reported amounts of consolidated obligations outstanding, comprising of bonds and discount notes, at March 31, 2009 and December 31, 2008 were $118.3 billion and $128.6 billion, and funded 92.2% and 93.5% of Total assets at those dates. These financing ratios have remained substantially unchanged over the years at around 90%, indicative of the stable funding strategy pursued by the FHLBNY to rely on FHLBank debt for financing its activities.

106

Investor demand for FHLBank debt — The cost of term debt issuance has continued to be under pressure in the current year first quarter. Key investors from Asia have continued to reduce acquisitions of FHLBank debt or have been absent in recent debt issuances. Following the conservatorship of Fannie Mae and Freddie Mac, market pricing of FHLBank issued debt indicates that market participants believe that obligations of the two GSEs offer lower credit risk than FHLBank debt obligations, which are generally grouped into the same GSE asset class as Fannie Mae and Freddie Mac. As a result, investors are more likely to require a premium to acquire FHLBank debt relative to debt issued by Fannie Mae and Freddie Mac. GSE debt pricing itself has been under competitive pressure with the FDIC announcing guarantees to debt offered by commercial banks and other financial institutions. Issuance of Treasury bills has increased, offering an alternative source of investments, adding to the yield pressure on FHLBank debt.

Money market funds and other domestic fund managers have stepped up to become key investors of FHLBank short-term debt. While this has positive implications for demand for FHLBank debt, it has put further pressure on demand for even shorter bond maturities. Money funds appear to be maintaining average investment maturities of 50 days with a ceiling of 90 days as mandated under certain regulatory provisions.

All of these factors and the general dislocation in the capital markets are counteracting efforts by the FHLBanks to issue debt with maturities longer than one year. Unfavorable spreads between 3-month LIBOR and yields on FHLBank long-term debt have persisted, making it expensive for the FHLBNY to issue term debt and offer advances to members even if there were sufficient investor demand.

Unless investors recommit to the term funding market in sufficient volume, the FHLBanks will continue to meet funding needs in the very short end of the funding market. Investor demand has been for ultra-short-term bullet and callable bonds, short-term floating-rate bonds, discount notes.

Funding tactical changes — To accommodate members’ funding needs at reasonable spreads, the FHLBNY heightened its responsiveness to investor maturity preferences, and tactical adjustments to the FHLBNY funding strategies have factored in strong investor demand for shorter-term FHLBank bonds and discount notes. As market conditions changed, the Bank has also reacted promptly. The principal tactical funding strategy changes employed in executing issuances of debt were:

• 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. At March 31, 2009, discount notes outstanding were $48.7 billion, and funded 38.0% of the total assets at that date, compared to $46.3 billion at December 31, 2008, which funded 33.7% of Total assets. Discount notes outstanding in the current year first quarter averaged $46.1 billion, compared to an average of $29.0 billion in the prior year first quarter and an average of $28.3 billion in the 12 months ended December 31, 2008. In the current year first quarter, the FHLBNY issued $190.1 billion of discount notes up from $179.2 billion in the prior year first quarter.

• Floating-rate bonds outstanding at March 31, 2009 declined from the balances at December 31, 2008. Maturing bonds were not replaced because of unfavorable spreads compared to other GSE issued LIBOR indexed floaters. In 2008, the FHLBNY had issued short-term floating-rate bonds, indexed to rates other than 3-month LIBOR and swapping the coupons back to 3-month LIBOR. A significant percentage will mature in 2009.

• Reacting to investor preference for shorter and medium-term debt, the FHLBNY increased the issuance of medium-term non-callable bonds. Investors have been receptive to FHLBanks’ non-callable bonds compared to alternative debt available in the capital markets and execution pricing has been relatively more favorable for the FHLBank bonds. FHLBank callable-bonds, which have been traditionally considered by investors to be competitively priced, were under price pressure in 2008 and in the current year first quarter, and the Bank’s use of funding with callable debt has declined because of the erosion of their price advantage. Maturing callable bonds were replaced with non-callable shorter-term bonds and floating-rate bonds. As a result, Bonds that were callable declined to $2.5 billion at March 31, 2009, down from $4.8 billion at December 31, 2008.

107

Debt extinguishment — No debt was retired or transferred to another FHLBank in the current year or prior year first quarters.

Consolidated obligation bonds

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

	March 31, 2009						December 31, 2008
				Percentage of						Percentage of
	Amount			total			Amount			total
Fixed-rate, non-callable	$	35,423,875			51.73	%	$	36,367,875			44.92	%
Fixed-rate, callable		2,538,300			3.71			4,828,300			5.96
Step Up, callable		73,000			0.11			73,000			0.09
Step Down, callable		—			—			15,000			0.02
Single-index floating rate		30,445,000			44.45			39,670,000			49.01
Total par value		68,480,175			100.00	%		80,954,175			100.00	%
Bond premiums		55,406						63,737
Bond discounts		(37,981	)					(39,529	)
SFAS 133 fair value basis adjustments		1,077,217						1,254,523
Fair value basis adjustments on terminated hedges		6,882						7,857
SFAS 159 valuation adjustments and accrued interest		377						15,942
Total bonds	$	69,582,076					$	82,256,705

Funding Mix

The FHLBNY has consistently demonstrated the ability to seek out the most attractively priced funding the capital market has to offer by being flexible in the debt structure the Bank is willing to offer to meet the borrowing needs of its members and to achieve management’s asset/liability goals. As investor demand shifts from bullets to callable to floaters, the FHLBNY has also been opportunistic in pursuing the debt structure most in demand at a reasonable price consistent with the Bank’s asset/liability match.

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

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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 current year first quarter the Bank increased its holdings of term discount notes mainly because of favorable investor demand and pricing relative to term funding. Still, consolidated obligation bonds remained the primary financing basis for the FHLBNY.

Fixed-rate non-callable bonds — With the decline in balance sheet assets at March 31, 2009, relative to December 31, 2008, the Bank reduced its outstanding debt. Fixed-rate non-callable bonds, also referred to as “bullet bonds”, declined but at a smaller percentage basis compared to other types of fixed-rate bonds. Issuances of non-callable debt are predicated partly on pricing of such debt and investor demand, and partly on the need to achieve asset/liability management goals. The Bank has made a strong effort to issue fixed-rate longer-term debt and lock-in the relative low rates in the current interest-rate environment. This has been a challenge as investor appetite for term debt has continued to be lukewarm, and pricing of short-term single maturity bullet bonds has generally been unattractive given investor preference for discount notes.

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. The Bank may also issue callable debt on an unswapped basis in a financing strategy to match the estimated prepayment characteristics of mortgage-backed securities and mortgage loans held-for-portfolio. As estimated lives and prepayment speeds of MBS and mortgage loans change with changes in the interest rate environment, those same factors are also likely to impact the call exercise feature of callable debt. These factors tend to shorten or lengthen the effective lives of the debt with changes in the interest rate environment, thereby achieving an offset to the prepayment options of MBS and mortgage loans.

The use of callable debt has declined over the years as investor demand for term debt has been very soft and the pricing advantage offered to investors for selling the call option tends to narrow as the term of the bond shortens. Spreads to both U.S. Treasury securities and LIBOR have widened and the unfavorable trend continued through the current year first quarter. The Bank’s acquisition of fixed-rate mortgage-backed securities has been very selective and acquisitions limited, another factor that limited the issuance of callable bonds. Still another factor was the declining interest rates have fueled callable bond redemptions 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.

Floating-rate bonds — Generally, maturing floating-rate bonds were not replaced in the current year first quarter and outstanding debt declined at March 31, 2009 relative to December 31, 2008. Floating-rate bonds were extensively used in 2008. The Bank had also issued floating-rate debt, indexed to 1-month LIBOR, Prime, and Fed effective rates was an innovative shift in funding tactics to take advantage of the historical wide spread between 3-month LIBOR and other indices. By executing interest rate swaps concurrently with the issuances of the floating-rate bonds and swapping the non-3 month LIBOR indices for 3-month LIBOR, the Bank effectively created variable funding that was indexed to 3-month LIBOR. Unfavorable pricing was one factor. The complexity of hedging to 3 month LIBOR was another factor.

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Impact of hedging fixed-rate 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 in a fair value hedge. The Bank may also hedge the anticipatory issuance of bonds under the provisions of “cash flow” hedging rules of SFAS 133 (None outstanding at December 31, 2008 or March 31, 2009).

Net interest accruals from SFAS 133 qualifying interest rate swaps are recorded together with interest expense of consolidated obligation bonds in interest expense. Fair value changes of debt in a qualifying fair value hedge are recorded in Other income (loss) as a Net realized and unrealized gain (loss) on derivative and hedging activities; an offset is recorded as a fair value basis adjustment to the carrying amount of the debt in the balance sheet. Net interest accruals associated with derivatives not qualifying under SFAS 133 are recorded in Other income (loss) as a Net realized and unrealized gain (loss) on derivatives and hedging activities.

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

The FHLBNY:

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

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

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

The most significant element that impacts balance sheet reporting of debt is the recording of fair value basis and valuation adjustments. 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 3 Quantitative and Qualitative Disclosures about Market Risk.

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Fair value basis and valuation adjustments — The Bank uses interest rate derivatives to hedge the risk of changes in the benchmark rate, which the FHLBNY has adopted as LIBOR, and is also the discounting basis for computing changes in fair values of hedged advances. Recorded fair value basis adjustments in the Statements of Condition were associated with hedging activities under the provisions of SFAS 133, and were a unrealized loss of $1.1 billion compared to $1.3 billion at December 31, 2008.

The reported carrying value of consolidated obligation bonds is adjusted for changes in their fair value basis attributable to the risk being hedged in accordance with the provisions of SFAS 133 when hedge accounting rules are applied. Reported carrying values of bonds designated under SFAS 159, the Fair Value Option, were also adjusted for valuation adjustments to recognize changes in the full fair value of the bonds elected under the Fair Value Option and measured under SFAS 157. Amount reported for consolidated obligations in the balance sheet for valuation adjustments under SFAS 159 included $0.4 million of accrued interest at March 31, 2009.

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

Hedge volume — As of March 31, 2009 and December 31, 2008, the Bank had hedged $20.0 billion of fixed-rate, non-callable bonds to hedge fair value risk from changes in the benchmark rate. Generally, all callable bonds were hedged by cancellable swaps at March 31, 2009 and December 31, 2008. These hedges were in SFAS 133 qualifying hedge relationships, which effectively converted the fixed-rate exposure of the bonds to a variable-rate exposure, generally indexed to 3-month LIBOR. The Bank’s callable bonds contain a call option purchased by the Bank from the investor. Under the terms of the call option, the Bank has the right to terminate the bond at agreed upon dates.

At March 31, 2009, outstanding par value of consolidated obligation bonds elected under the Fair Value Option declined to $25.0 million as maturing and called debt so designated at December 31, 2008 were not replaced by debt under the FVO designation. The remaining debt at March 31, 2009 was economically hedged by interest-rate swaps with matching terms.

As of March 31, 2009 and December 31, 2008, the FHLBNY had economic hedges of $3.4 billion and $4.5 billion of non-callable fixed-rate bonds that had previously been accounted under the SFAS 133 hedge accounting provisions. Changes due to amortization of basis adjustments of bonds de-designated from the previous hedging relationships were not material.

As of March 31, 2009 and December 31, 2008, the FHLBNY also had economic hedges of $19.2 billion and $25.0 billion of floating-rate bonds that were indexed to interest rates other than 3-month LIBOR by entering into swap agreements with derivative counterparties that synthetically converted the floating rate debt cash flows to 3-month LIBOR. Hedges designated at inception as economic do not generate basis adjustments on the hedged instruments.

111

Impact of changes in interest rate — The carrying amounts of consolidated obligations bonds included fair value basis losses of $1.1 billion at March 31, 2009, compared to fair value basis losses of $1.3 billion at December 31, 2008. Changes in fair value basis reflect changes in the term structure of interest rates, the shape of the yield curve at the measurement dates, and the value and implied volatility of call options of callable bonds.

Fair value basis losses at March 31, 2009 and December 31, 2008 were consistent with the forward yield curves at those dates that were projecting forward rates below the fixed-rate coupons of bonds hedged under the provisions of SFAS 133 and bonds designated under the FVO. Most of the hedged bonds had been issued in prior periods at the then prevailing higher interest-rate environment. Since such bonds are typically fixed-rate, in a declining interest rate environment, fixed-rate bonds exhibit unrealized fair value basis losses recorded under SFAS 133. Unrealized losses from fair value basis adjustments on hedged bonds were almost entirely offset by net fair value unrealized gains from derivatives associated with the hedged bonds, thereby achieving the Bank’s hedging objectives of mitigating fair value basis risk.

Discount Notes

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

Through a sixteen-member selling group, the Office of Finance, acting on behalf of the twelve Federal Home Loan Banks, offers discount notes. In addition, the Office of Finance offers discount notes in four standard maturities in two auctions each week. The FHLBNY used discount notes to fund short-term advances, longer-term advances with short repricing intervals, convertible advances and money market investments.

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

	March 31, 2009			December 31, 2008
Par value	$	48,779,633		$	46,431,347
Amortized cost	$	48,721,469		$	46,329,545
Fair value basis adjustments		157			361
Total	$	48,721,626		$	46,329,906
Weighted average interest rate		0.58	%		1.00	%

In the current year first quarter, the Bank increased its holdings of term discount notes mainly because of favorable investor demand and pricing relative to term funding.

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.

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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 another factor in its use as a popular funding vehicle as discount notes can be issued any time and in a variety of amounts and maturities in contrast to other short-term funding sources, such as the issuance of callable debt with an associated interest rate derivative with matching terms. The importance of the instrument in day-to-day funding operations is illustrated by the very significant volume of the cash flows generated by discount note issuance. For the current year first quarter, the Bank issued $190.1 billion in discount notes. In the same period, cash flows from the issuance of consolidated obligation bonds were $5.8 billion. Contrasting transaction volumes between bonds and discount notes provides an indication that discount notes continued to be an important source of short-term funding.

As of March 31, 2009 there was no discount note hedges under the provisions of SFAS 133; at December 31, 2008, the Bank had hedged $779.0 million of discount notes to hedge fair value risk from changes in the benchmark rate in SFAS 133 qualifying hedge relationships. Fair value basis adjustments at March 31, 2009 were the result of hedges that were de-designated as economic hedges. The Bank generally hedges discount notes in economic hedges to convert the fixed-rate exposure of the discount notes to a variable-rate exposure, generally indexed to 3-month LIBOR. At March 31, 2009 and December 31, 2008, the Bank had hedged $13.1 billion and $7.5 billion of discount notes to mitigate fair value risk and these were considered as economic hedges. Hedges designated at inception as economic do not generate basis adjustments.

Deposit Liabilities

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

Member deposits — The FHLBNY operates deposit programs for the benefit of its members. Deposits are primarily short-term in nature with the majority maintained in demand accounts that reprice daily based upon rates prevailing in the overnight Federal funds market. Members’ liquidity preferences are the primary determinant of the level of deposits. Total deposits at March 31, 2009 were $2.4 billion including demand and term, up from $1.5 billion at December 31, 2008. Fluctuations in member deposits have little impact on the Bank and are not a significant source of liquidity for the Bank.

Borrowings from other FHLBanks — The Bank borrows from other FHLBanks, generally for a period of one day. There were no borrowings outstanding at March 31, 2009 or December 31, 2008.

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Stockholders’ Capital, Capital Ratios, and Mandatorily Redeemable Capital Stock

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.

Stockholders’ Capital — Stockholders’ Capital comprised of capital stock, retained earnings and Accumulated other comprehensive income (loss), and decreased by $44.3 million to $5.8 billion at March 31, 2009 from December 31, 2008.

Capital stock — Capital stock, par value $100, was $5.4 billion at March 31, 2009, down from $5.6 billion at December 31, 2008. The 3.1 % decrease in capital stock was consistent with decreases in advances borrowed by members which decreased by $4.0 billion, or 3.9%, to $99.4 billion par amounts at March 31, 2009, from $103.4 billon at December 31, 2008. 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 — Unrestricted retained earnings was $488.9 million at March 31, 2009 compared to $382.9 million at December 31, 2008. Net income for the current year first quarter was $148.1 million and dividend payments of $42.1 million were paid to members. Net income in the prior year first quarter was $100.2 million, and dividend payments were $89.3 million. For more information about the Bank’s retained earning’s policy, refer to the section Retained Earnings and Dividend Policy in this Form 10-Q.

Accumulated other comprehensive income — Accumulated other comprehensive income (loss) was a net loss of $78.8 million at March 31, 2009 compared to a loss of $101.2 million at December 31, 2008. These amounts comprised of: (1) Net unrealized losses of $34.0 million ($64.4 million at December 31, 2008) representing net unrealized fair values losses on available-for-sale securities. (2) Net unrealized losses of $28.3 million ($30.2 million at December 31, 2008) from cash flow hedging activities, principally from hedges of anticipated issuances of debt. These unrealized losses will be recorded as an expense over the terms of the hedged bonds as a yield adjustment to the fixed coupons of the bonds. (3) Liabilities of $6.6 million at March 31, 2009 and December 31, 2008 representing actuarially determined minimum additional liabilities due on the Bank’s supplemental pension plans, (4) Non-credit component of OTTI loss of $9.9 million at March 31, 2009 ($0 at December 31, 2008) on held-to-maturity securities.

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 March 31, 2009 and December 31, 2008 represented stock held primarily by former members who were no longer members by virtue of being acquired by members of other FHLBanks. Under existing practice, such stock will be repaid when the stock is no longer required to support outstanding transactions with the FHLBNY.

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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 March 31, 2009 or at December 31, 2008 of their intention to voluntarily withdraw from membership. No member’s or non-member’s redemption request remained pending at March 31, 2009 or December 31, 2008.

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

The following table provides roll-forward information with respect to changes in mandatorily redeemable capital stock liabilities (in thousands):

	Three months ended March 31,
	2009			2008
Beginning balance	$	143,121		$	238,596
Capital stock subject to mandatory redemption reclassified from equity		—			58,344
Redemption of mandatorily redeemable capital stock 1		(3,160	)		(115,116	)
Ending balance	$	139,961		$	181,824
Accrued interest payable	$	1,058		$	4,064

¹ Redemption includes repayment of excess stock.
(The annualized rate accrual is at 3.00% for March 31, 2009 and 8.40% for March 31, 2008)

In the current year first quarter no amount of mandatorily redeemable stock were classified as a liability as no member was acquired by a non-member. In the prior year first quarter three members were acquired by non-members and $58.3 million of capital was reclassified from a capital to liability.

Capital stock held by non-members will be repaid at maturity of the advances borrowed by non-members. In accordance with Finance Agency 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.

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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.

Finance Agency 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. The FHLBNY established several small grantor trusts related to employee benefits programs.

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 highly 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.

For additional information see Note 15 — Derivatives and Hedging activities.

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The following table summarizes the principal derivatives hedging strategies as of March 31, 2009:

			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	Economic Hedge of fair value risk	$	392
	advance to a LIBOR floating rate
Pay fixed, receive floating interest rate swap cancelable	To convert fixed rate on a fixed rate advance	Fair Value Hedge	$	41,740
by counterparty	to a LIBOR floating rate putable advance
Pay fixed, receive floating interest rate swap no longer	To convert fixed rate on a fixed rate advance	Fair Value Hedge	$	1,429
cancelable by counterparty	to a LIBOR floating rate no-longer putable
Pay fixed, receive floating interest rate swap	To convert fixed rate on a fixed rate advance	Fair Value Hedge	$	22,712
non-cancelable	to a LIBOR floating rate non-putable
Purchased interest rate cap	To offset the cap embedded in the	Economic Hedge of fair value risk	$	465
	variable rate advance
Receive fixed, pay floating interest rate swap	To convert fixed rate consolidated	Economic Hedge of fair value risk	$	3,400
	obligation bond debt to a LIBOR floating rate
Receive fixed, pay floating interest rate swap	To convert fixed rate consolidated obligation	Fair Value Hedge	$	1,507
cancelable by counterparty	bond debt to a LIBOR floating rate callable bond
Receive fixed, pay floating interest rate swap no	To convert fixed rate consolidated obligation	Fair Value Hedge	$	278
longer cancelable	bond debt to a LIBOR floating rate no-longer callable
Receive fixed, pay floating interest rate swap	To convert fixed rate consolidated obligation	Fair Value Hedge	$	20,030
non-cancelable	bond debt to a LIBOR floating rate non-callable
Receive fixed, pay floating interest rate swap	To convert the fixed rate consolidated	Economic Hedge of fair value risk	$	13,063
(non-callable)	obligation discount note debt to a LIBOR floating rate.
Basis swap	To convert non-LIBOR index to LIBOR	Economic Hedge of cash flows	$	8,635
	to reduce interest rate sensitivity and
	repricing gaps.
Basis swap	To convert 1M LIBOR index to 3M LIBOR	Economic Hedge of cash flows	$	10,590
	to reduce interest rate sensitivity and
	repricing gaps.
Receive fixed, pay floating interest rate swap with	Fixed rate callable bond converted	SFAS 159	$	25
an option to call at the swap counterparty’s option	to a LIBOR floating rate; matched to
	callable bond accounted for under
	the fair value option of SFAS 159.
Pay fixed, receive floating interest rate swap	Economic hedge on the Balance Sheet	Economic Hedge	$	1,050
Receive fixed, pay floating interest rate swap	Economic hedge on the Balance Sheet	Economic Hedge	$	1,050
Purchased interest rate cap	Economic hedge on the Balance Sheet	Economic Hedge	$	1,892
Intermediary positions	To offset interest rate swaps and caps	Economic Hedge of fair value risk	$	280
Interest rate swaps	executed with members by executing
Interest rate caps	offsetting derivatives with counterparties.

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

			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	Economic Hedge of fair value risk	$	618
	advance to a LIBOR floating rate	Fair Value Hedge	$	61,673
Purchased interest rate cap	To offset the cap embedded in the	Economic Hedge of fair value risk	$	465
	variable rate advance
Receive fixed, pay floating interest rate swap	To convert the fixed rate consolidated	Economic Hedge of fair value risk	$	4,500
(non-callable)	obligation bond debt to a LIBOR floating rate	Fair Value Hedge	$	19,982
Receive fixed, pay floating interest rate swap	To convert the fixed rate consolidated	Economic Hedge of fair value risk	$	15
with an option to call held by the counterparty	obligation bond debt to a LIBOR floating rate;	Fair Value Hedge	$	2,148
	swap is callable on the same day as
	the consolidated obligation bond debt.
Receive fixed, pay floating interest rate swap	To convert the fixed rate consolidated	Economic Hedge of fair value risk	$	7,509
(non-callable)	obligation discount note debt to a LIBOR floating rate.	Fair Value Hedge	$	779
Basis swap	To convert non-LIBOR index to LIBOR	Economic Hedge of cash flows	$	14,360
	to reduce interest rate sensitivity and
	repricing gaps.
Basis swap	To convert 1M LIBOR index to 3M LIBOR	Economic Hedge of cash flows	$	10,590
	to reduce interest rate sensitivity and
	repricing gaps.
Receive fixed, pay floating interest rate swap	Fixed rate callable bond converted	SFAS 159	$	983
with an option to call at the swap counterparty’s	to a LIBOR floating rate; matched to
option	callable bond accounted for under
	the fair value option of SFAS 159.
Pay fixed, receive floating interest rate swap	Economic hedge on the Balance Sheet	Economic Hedge	$	1,050
Receive fixed, pay floating interest rate swap	Economic hedge on the Balance Sheet	Economic Hedge	$	1,050
Purchased interest rate cap	Economic hedge on the Balance Sheet	Economic Hedge	$	1,892
Intermediary positions	To offset interest rate swaps and caps	Economic Hedge of fair value risk	$	300
Interest rate swaps	executed with members by executing
Interest rate caps	offsetting derivatives with counterparties.

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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):

	March 31, 2009					December 31, 2008
			Estimated					Estimated
	Notional		Fair Value			Notional		Fair Value
Interest rate swaps
Fair value — SFAS 133	$	87,696,111	$	(4,012,802	)	$	84,582,796	$	(4,531,004	)
Economic		38,179,569		(36,802	)		39,691,142		(76,412	)
Fair value matched to hedge liabilities designated under SFAS 159		25,000		15			983,000		7,699
Interest rate caps/floors
Economic-fair value changes		2,357,000		9,820			2,357,000		8,174
Mortgage delivery commitments (MPF)
Economic-fair value changes		3,739		2			10,395		(108	)
Other
Intermediation		280,000		331			300,000		484
Total	$	128,541,419	$	(4,039,436	)	$	127,924,333	$	(4,591,167	)
Total derivatives, excluding accrued interest			$	(4,039,436	)			$	(4,591,167	)
Cash collateral pledged to counteparties				3,071,120					3,836,370
Cash collateral received from counterparties				(88,321	)				(61,209	)
Accrued interest				36,329					(25,418	)
Net derivative balance			$	(1,020,308	)			$	(841,424	)
Net derivative asset balance			$	11,463				$	20,236
Net derivative liability balance				(1,031,771	)				(861,660	)
Net derivative balance			$	(1,020,308	)			$	(841,424	)

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Derivative Financial Instruments by Product

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

	March 31, 2009					December 31, 2008
			Total estimated					Total estimated
			fair value					fair value
			(excluding					(excluding
	Total notional		accrued			Total notional		accrued
	amount		interest)			amount		interest)
Fair value hedges under SFAS 133
Advances-fair value hedges	$	65,880,831	$	(5,076,005	)	$	61,673,607	$	(5,758,653	)
Consolidated obligations-fair value hedges		21,815,280		1,063,203			22,909,189		1,227,649
Economic hedges
Advances-economic hedges		857,200		(16,371	)		1,082,700		(24,520	)
Consolidated obligations-economic hedges		35,687,369		(14,754	)		36,973,442		(45,884	)
MPF loan-commitments		3,739		2			10,395		(108	)
Balance sheet (Caps)-economic hedges		1,892,000		9,814			1,892,000		8,164
Intermediary positions-economic hedges		280,000		331			300,000		484
Macro hedges		2,100,000		(5,671	)		2,100,000		(5,998	)
FVO-Designated derivatives (Economic hedges)
Interest rate swaps-Consolidated Obligation-Bonds		25,000		15			983,000		7,699
Total notional and fair value	$	128,541,419	$	(4,039,436	)	$	127,924,333	$	(4,591,167	)
Total derivatives, excluding accrued interest			$	(4,039,436	)			$	(4,591,167	)
Cash collateral pledged to counterparties				3,071,120					3,836,370
Cash collateral received from counterparties				(88,321	)				(61,209	)
Accrued interest				36,329					(25,418	)
Net derivative balance			$	(1,020,308	)			$	(841,424	)
Net derivative asset balance			$	11,463				$	20,236
Net derivative liability balance				(1,031,771	)				(861,660	)
Net derivative balance			$	(1,020,308	)			$	(841,424	)

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Asset Quality and Concentration- Advances, Investment securities, Mortgage loans, and Counterparty risks

The FHLBNY incurs credit risk — the risk of loss due to default — in its lending, investing, and hedging activities. It has instituted processes to help manage and mitigate this risk. Despite such processes, some amount of credit risk will always exist. External events, such as severe economic downturns, declining real estate values (both residential and non-residential), changes in monetary policy, adverse events in the capital markets, and other developments, could lead to member or counterparty default or impact the creditworthiness of investments. Such events would have a negative impact upon the FHLBNY’s income and financial performance.

The Bank faced an event of default in 2008 with the bankruptcy of one of its derivative counterparties. On September 15, 2008, Lehman Brothers Holdings, Inc. (LBHI), the parent company of Lehman Brothers Special Financing Inc. (LBSF) and a guarantor of LBSF’s obligations filed for protection under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court in the Southern District of New York. LBSF was a counterparty to FHLBNY on multiple derivative transactions with a total notional amount of $16.5 billion at the time of termination of the FHLBanks’ derivative transactions with LBSF. The FHLBNY had deposited $509.6 million with LBSF in cash as collateral. The LBSF default was unforeseen and despite the Bank’s risk management practices and policies — selection of counterparties with strong reputation, collateral requirements and credit monitoring, and other processes, the default caused the Bank to reserve $64.5 million as a charge to income in the third quarter of 2008 as the bankruptcy of LBHI and LBSF made the timing and the amount of the recovery uncertain.

The following table sets forth five year history of the FHLBNY’s advances and mortgage loan portfolios as of March 31, 2009 and December 31 for the years ended 2004 through 2008, (in thousands):

	March 31,		December 31,
	2009		2008		2007		2006		2005		2004
Advances	$	104,463,598	$	109,152,876	$	82,089,667	$	59,012,394	$	61,901,534	$	68,507,487
Mortgage loans before allowance for credit losses	$	1,432,747	$	1,459,291	$	1,492,261	$	1,484,012	$	1,467,525	$	1,178,590

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 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.

121

The FHLBNY’s members are required to pledge collateral to secure advances. Eligible collateral includes (1) one-to-four-family and multi-family mortgages; (2) U.S. Treasury and government-agency securities; (3) mortgage-backed securities; and (4) certain other collateral which is real estate-related and has a readily ascertainable value, and in which the FHLBNY can perfect a security interest.

The FHLBNY has the right to take such steps, as it deems necessary, to protect its secured position on outstanding advances, including requiring additional collateral (whether or not such additional collateral would otherwise be eligible to secure a loan). The FHLBNY also has a statutory lien under the FHLBank Act on the capital stock of its members, which serves as further collateral for members’ indebtedness to the FHLBNY.

The FHLBNY has established asset classification and reserve policies. All adversely classified assets of the FHLBNY will have a reserve established for probable losses. Based upon the collateral held as security and prior repayment histories, no allowance for losses on advances is currently deemed necessary by management.

The FHLBNY uses methodologies to identify and measure credit risk arising from: creditworthiness risk arising from members, counterparties, and other entities; collateral risk arising from type, quality, and lien status; and concentration risk arising from borrower, portfolio, geographic area, industry, or product type.

Creditworthiness Risk — Advances

The FHLBNY’s potential exposure to creditworthiness risk arises from the deterioration of the financial health of FHLBNY members. The FHLBNY manages its exposure to the creditworthiness of members by monitoring their collateral and advance levels daily and by analyzing their financial health each quarter.

Collateral Risk — Advances

The FHLBNY is exposed to collateral risk if it is unable to perfect its interest in pledged collateral, or when the liquidation value of pledged collateral does not fully cover the FHLBNY’s exposure. The FHLBNY manages this risk by pricing collateral on a weekly basis, performing on-site reviews of pledged mortgage collateral from time to time, and reviewing pledged portfolio concentrations on a quarterly basis. The FHLBNY requires that members pledge a specific amount of excess collateral above the par amount of their outstanding obligations. Members provide the FHLBNY with reports of pledged collateral and the FHLBNY evaluates the eligibility and value of the pledged collateral.

The FHLBNY’s loan and collateral agreements give the FHLBNY a security interest in assets held by borrowers that is sufficient to cover their obligations to the FHLBNY. The FHLBNY may supplement this security interest by imposing additional reporting, segregation or delivery requirements on the borrower. The FHLBNY assigns specific collateral requirements to a borrower, based on a number of factors. These include, but are not limited to: (1) the borrower’s overall financial condition; (2) the degree of complexity involved in the pledging, verifying, and reporting of collateral between the borrower and the FHLBNY, especially when third-party pledges, custodians, outside service providers and pledges to other entities are involved; and (3) the type of collateral pledged.

122

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 evaluates liquidation values on a weekly basis.

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.

Credit Risk and Concentration Risk — Advances

While the FHLBNY has never experienced a credit loss on an advance, the expanded eligible collateral for Community Financial Institutions and non-member housing associates permitted, but not required, by the Finance Agency provides the potential for additional credit risk for the FHLBNY. It is the FHLBNY’s current policy 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 March 31, 2009 and December 31, 2008. Management does not anticipate any credit losses, and accordingly, the FHLBNY has not provided an allowance for credit losses on advances. The FHLBNY’s potential credit risk from advances is concentrated in commercial banks, savings institutions and insurance companies. At March 31, 2009 and December 31, 2008, the Bank had advances of $52.8 billion and $52.2 billion outstanding to five member institutions, representing 53.1% and 50.4% of total advances outstanding, and sufficient collateral was held to cover the advances to these institutions.

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Top Five Advance Holders

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

Top five advance holders at March 31, 2009

	March 31, 2009
					Percentage of
			Par		Total Par Value			Interest
	City	State	Advances		of Advances			Income
Hudson City Savings Bank 1	Paramus	NJ	$	17,575,000		17.7	%	$	176,070
Metropolitan Life Insurance Company	New York	NY		15,105,000		15.2			103,306
New York Community Bank 1	Westbury	NY		8,143,214		8.2			77,380
Manufacturers and Traders Trust Company	Buffalo	NY		7,479,282		7.5			36,499
Prudential Insurance Co. of America	Newark	NJ		4,500,000		4.5			24,618
Total			$	52,802,496		53.1	%	$	417,873

¹ Officer of member bank also serves on the Board of Directors of the FHLBNY.

Top five advance holders at March 31, 2008

	March 31, 2008
					Percentage of
			Par		Total Par Value			Interest
	City	State	Advances		of Advances			Income
Hudson City Savings Bank	Paramus	NJ	$	15,275,000		18.4	%	$	159,048
New York Community Bank	Westbury	NY		8,088,623		9.8			91,160
Manufacturers and Traders Trust Company	Buffalo	NY		6,430,522		7.8			68,568
Metropolitan Life Insurance Company	New York	NY		5,405,000		6.5			54,569
HSBC Bank USA, National Association	New York	NY		4,008,445		4.8			52,707
Total			$	39,207,590		47.3	%	$	426,052

Top five advance holders at December 31, 2008

	December 31, 2008
					Percentage of
			Par		Total Par Value			Interest
	City	State	Advances		of Advances			Income
Hudson City Savings Bank	Paramus	NJ	$	17,525,000		17.0	%	$	671,146
Metropolitan Life Insurance Company	New York	NY		15,105,000		14.6			260,420
Manufacturers and Traders Trust Company	Buffalo	NY		7,999,689		7.7			257,649
New York Community Bank	Westbury	NY		7,796,517		7.5			337,019
Astoria Federal Savings and Loan Assn.	Long Island City	NY		3,738,000		3.6			151,066
Total			$	52,164,206		50.4	%	$	1,677,300

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Advances outstanding to former members are summarized as below (in thousands):

	Ultimate	Member of	Advances
Former Member	Acquiree Bank	FHLB	as of March 31, 2009
Citizens Bank, National Association	RBS Citizens, National Association	Boston	$	1,500,000
Independence Community Bank	Sovereign Bank	Pittsburgh		510,000
The Yardville National Bank	PNC Bank, N.A.	Pittsburgh		223,000
Summit Bank	Bank of America, N.A.	Atlanta		210,573
Susquehanna Patriot Bank	Susquehanna Bank	Pittsburgh		100,000
Others	Various	Various		88,877
Total			$	2,632,450

	Ultimate	Member of	Advances
Former Member	Acquiree Bank	FHLB	as of December 31, 2008
Citizens Bank, National Association	RBS Citizens, National Association	Boston	$	1,500,000
Independence Community Bank	Sovereign Bank	Pittsburgh		575,000
The Yardville National Bank	PNC Bank, N.A.	Pittsburgh		223,000
Summit Bank	Bank of America, N.A.	Atlanta		215,516
Susquehanna Patriot Bank	Susquehanna Bank	Pittsburgh		100,000
Others	Various	Various		89,154
Total			$	2,702,670

125

Investment quality

At March 31, 2009, long-term investments were principally comprised of (1) Mortgage-backed securities classified as held-to-maturity at amortized cost basis of $9.1 billion, of which 83.1% comprised of securities issued by government sponsored enterprises and U.S. government agency, (2) Available-for-sale securities at fair value basis of $2.6 billion of GSE issued mortgage-backed securities. In addition, the FHLBNY had investments at amortized cost basis of $802.6 million in primary public and private placements of taxable obligations of state and local housing finance authorities classified as held-to-maturity.

The FHLBNY’s short-term investments consisted of interest-bearing balances at the Federal Reserve Bank, certificates of deposits, and Federal funds sold at March 31, 2009. The Bank invests in certificates of deposit with maturities not exceeding one year issued by major financial institutions, recorded at amortized cost and classified as held-to-maturity.

The FHLBNY’s investments are summarized below (dollars in thousands):

	March 31,		December 31,		Dollar				Percentage
	2009		2008		Variance				Variance
State and local housing agency obligations 1	$	802,637	$	804,100	$	(1,463	)			(0.18	)%
Mortgage-backed securities
Available-for-sale securities, at fair value		2,632,144		2,851,682		(219,538	)			(7.70	)
Held-to-maturity securities, at amortized cost		9,132,442		9,326,443		(194,001	)			(2.08	)
Total long-term securities		12,567,223		12,982,225		(415,002	)			(3.20	)
Grantor trusts 2		9,852		10,187		(335	)			(3.29	)
Certificates of deposit 1		300,000		1,203,000		(903,000	)			(75.06	)
Federal funds sold		500,000		—		500,000		NA
Total investments	$	13,377,075	$	14,195,412	$	(818,337	)			(5.76	)%

1	Classified as held-to-maturity securities, at amortized cost.
2	Classified as available-for-sale securities, at fair value represent investments in registered mutual funds and other fixed-income securities maintained under the grantor trusts.
Note:	Excludes $8.6 billion in interest-earning balance at Federal Reserve Bank of New York at March 31, 2009 ($12.2 billion at December 31, 2008).

Investment rating

External ratings and the changes in a security’s external rating are factors in the FHLBNY’s assessment of impairment; a rating or a rating change alone is not necessarily indicative of impairment or absence of impairment.

Mortgage-backed securities — Mortgage-backed securities were classified as either available-for-sale or Held-to-maturity.

Available-for-sale — At March 31, 2009 and December 31, 2008, all MBS classified as available-for-sale were rated triple-A by a Nationally Recognized Statistical Rating Organization (“NRSRO”). All available-for-sale securities were securities issued by Federal National Mortgage Association (“Fannie Mae”) and the Federal Home Loan Mortgage Corp (“Freddie Mac”).

126

Held-to-maturity — At March 31, 2009, Fannie Mae and Freddie Mac and government agency issued securities made up 83.1% of MBS classified as held-to-maturity compared to 81.3% at December 31, 2008. Triple-A rated MBS classified as HTM aggregated $8.5 billion, or 92.8% of MBS at March 31, 2009, compared to $8.7 billion or 93.4% at December 31, 2008. Double-A rated securities totaled $299.8 million, or 3.3% compared to $229.7 million, or 2.5% at December 31, 2008. Less than 0.3% of securities were rated below investment grade (two securities deemed as OTTI; single-B and double-B) at March 31, 2009.

• State and local housing finance agency bonds — At March 31, 2009 the percentage of state and housing finance agency bonds that were rated triple-A was 9.3%. Double-A rated securities were $671.8 million, or 83.7%. The remaining securities were rated triple-B. At December 31, 2008 the percentage of state and housing finance agency bonds that were rated triple-A was 9.3%. Double-A rated securities were $673.0 million, or 83.7%. The remaining securities were rated triple-B.

• Short-term instruments — Substantially all short-term investments in certificates of deposits were to financial institutions that were rated single — A, or better at March 31, 2009 and December 31, 2008.

127

The following tables contain information about credit ratings of the Bank’s investments in held-to-maturity and available-for-sale securities at March 31, 2009 and December 31, 2008 (in thousands):

External ratings — Held-to-maturity securities — March 31, 2009:

			NRSRO Ratings- March 31, 2009
	Amortized										Below
	Cost										Investment
Issued, guaranteed or insured by:	Basis		AAA		AA		A		BBB		Grade
Pools of Mortgages
Fannie Mae	$	1,344,738	$	1,344,738	$	—	$	—	$	—	$	—
Freddie Mac		405,368		405,368		—		—		—		—
Total pools of mortgages		1,750,106		1,750,106		—		—		—		—
Collateralized Mortgage Obligations/Real Estate Mortgage Investment Conduits
Fannie Mae		2,222,312		2,222,312		—		—		—		—
Freddie Mac		3,560,423		3,560,423		—		—		—		—
Ginnie Mae		6,063		6,063		—		—		—		—
Total CMOs/REMICs		5,788,798		5,788,798		—		—		—		—
Ginnie Mae-CMBS		50,000		50,000		—		—		—		—
Non-GSE MBS
CMOs/REMICs		576,729		483,727		—		57,511		35,491		—
Commercial mortgage-backed securities		143,631		143,631		—		—		—		—
Total non-federal-agency MBS		720,360		627,358		—		57,511		35,491		—
Asset-Backed Securities
Manufactured housing (insured)		223,445		—		223,445		—		—		—
Home equity loans (insured)		349,370		11,811		76,321		122,106		117,324		21,808
Home equity loans (uninsured)		250,363		250,363		—		—		—		—
Total asset-backed securities		823,178		262,174		299,766		122,106		117,324		21,808
Total mortgage-backed securities	$	9,132,442	$	8,478,436	$	299,766	$	179,617	$	152,815	$	21,808
Other
State and local housing finance agency obligations	$	802,637	$	74,637	$	671,780	$	—	$	56,220	$	—
Certificates of deposit		300,000		—		—		300,000		—		—
Total other	$	1,102,637	$	74,637	$	671,780	$	300,000	$	56,220	$	—

128

External ratings — Held-to-maturity securities — December 31, 2008:

	Amortized		NRSRO Ratings - December 31, 2008
Issued, guaranteed or insured by:	Cost Basis		AAA		AA		A		BBB
Pools of Mortgages
Fannie Mae	$	1,400,058	$	1,400,058	$	—	$	—	$	—
Freddie Mac		422,088		422,088		—		—		—
Total pools of mortgages		1,822,146		1,822,146		—		—		—
Collateralized Mortgage Obligations/Real Estate Mortgage Investment Conduits
Fannie Mae		2,032,050		2,032,050		—		—		—
Freddie Mac		3,722,840		3,722,840		—		—		—
Ginnie Mae		6,325		6,325		—		—		—
Total CMOs/REMICs		5,761,215		5,761,215		—		—		—
Non-GSE MBS
CMOs/REMICs		609,908		509,056		—		62,401		38,451
Commercial mortgage-backed securities		266,994		266,994		—		—		—
Total non-federal-agency MBS		876,902		776,050		—		62,401		38,451
Asset-Backed Securities
Manufactured housing (insured)		229,714		—		229,714		—		—
Home equity loans (insured)		376,587		86,662		—		130,277		159,648
Home equity loans (uninsured)		259,879		259,879		—		—		—
Total asset-backed securities		866,180		346,541		229,714		130,277		159,648
Total mortgage-backed securities	$	9,326,443	$	8,705,952	$	229,714	$	192,678	$	198,099
Other
State and local housing finance agency obligations	$	804,100	$	74,881	$	672,999	$	—	$	56,220
Certificates of deposit		1,203,000		—		628,000		575,000		—
Total other	$	2,007,100	$	74,881	$	1,300,999	$	575,000	$	56,220

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External ratings — Available-for-sale securities — March 31, 2009:

			NRSRO Ratings - March 31, 2009
Issued, guaranteed or insured by:	Fair Value		AAA		AA		A
Pools of Mortgages
Fannie Mae	$	—	$	—	$	—	$	—
Freddie Mac		—		—		—		—
Total pools of mortgages		—		—		—		—
Collateralized Mortgage Obligations/Real Estate Mortgage Investment Conduits
Fannie Mae		1,808,937		1,808,937		—		—
Freddie Mac		823,207		823,207		—		—
Ginnie Mae		—		—		—		—
Total CMOs/REMICs		2,632,144		2,632,144		—		—
Non-GSE MBS
CMOs/REMICs		—		—		—		—
Commercial mortgage-backed securities		—		—		—		—
Total non-federal-agency MBS		—		—		—		—
Asset-Backed Securities
Manufactured housing (insured)		—		—		—		—
Home equity loans (insured)		—		—		—		—
Home equity loans (uninsured)		—		—		—		—
Total asset-backed securities		—		—		—		—
Total mortgage-backed securities	$	2,632,144	$	2,632,144	$	—	$	—

130

External ratings — Available-for-sale securities — December 31, 2008:

			NRSRO Ratings - December 31, 2008
Issued, guaranteed or insured by:	Fair Value		AAA		AA		A
Pools of Mortgages
Fannie Mae	$	—	$	—	$	—	$	—
Freddie Mac		—		—		—		—
Total pools of mortgages		—		—		—		—
Collateralized Mortgage Obligations/Real Estate Mortgage Investment Conduits
Fannie Mae		1,854,988		1,854,988		—		—
Freddie Mac		996,694		996,694		—		—
Ginnie Mae		—		—		—		—
Total CMOs/REMICs		2,851,682		2,851,682		—		—
Non-GSE MBS
CMOs/REMICs		—		—		—		—
Commercial mortgage-backed securities		—		—		—		—
Total non-federal-agency MBS		—		—		—		—
Asset-Backed Securities
Manufactured housing (insured)		—		—		—		—
Home equity loans (insured)		—		—		—		—
Home equity loans (uninsured)		—		—		—		—
Total asset-backed securities		—		—		—		—
Total mortgage-backed securities	$	2,851,682	$	2,851,682	$	—	$	—

Fannie Mae and Freddie Mac Securities

The FHLBNY’s mortgage-backed securities were predominantly issued by Fannie Mae and Freddie Mac.

The Housing Act contains provisions allowing the U.S. Treasury to provide support to Fannie Mae and Freddie Mac. Fannie Mae and Freddie Mac are in conservatorship, with the Finance Agency named as conservator, who will manage Fannie Mae and Freddie Mac in an attempt to stabilize their financial conditions and their ability to support the secondary mortgage market.

Available-for-sale securities — All MBS outstanding at March 31, 2009 and December 31, 2008 and classified as AFS were issued by Fannie Mae and Freddie Mac.

Held-to-maturity securities — comprised of 83.1% and 81.3% of MBS also issued by Fannie Mae, Freddie Mac and a government agency at March 31, 2009 and December 31, 2008.

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The following table summarizes the amortized cost basis of mortgage-backed securities classified as held-to-maturity securities by issuer (amortized cost basis; dollars in thousands):

	March 31,		Percentage			December 31,		Percentage
	2009		of total			2008		of total
U.S. government sponsored enterprise residential mortgage-backed securities	$	7,532,841		82.48	%	$	7,577,036		81.24	%
U.S. agency residential mortgage-backed securities		6,063		0.07			6,325		0.07
U.S. agency commercial mortgage-backed securities		50,000		0.55			—		—
Private-label issued securities backed by home equity loans		599,733		6.57			636,466		6.83
Private-label issued residential mortgage-backed securities		576,729		6.31			609,908		6.54
Private-label issued commercial mortgage-backed securities		143,631		1.57			266,994		2.86
Private-label issued securities backed by manufactured housing loans		223,445		2.45			229,714		2.46
Total Held-to-maturity securities — MBS	$	9,132,442		100.00	%	$	9,326,443		100.00	%

Non-agency Private label mortgage- and- asset-backed securities

At March 31, 2009, the Bank also held MBS that were privately issued. All private label MBS were classified as held-to-maturity. The following table summarizes private-label mortgage- and asset-backed securities by fixed- or variable-rate coupon types (dollars in thousands — Unpaid principal balances — UPB):

	March 31, 2009						December 31, 2008
			Variable						Variable
Private-label MBS	Fixed Rate		Rate		Total		Fixed Rate		Rate		Total
Private-label RMBS
Prime	$	563,881	$	4,773	$	568,654	$	596,430	$	4,811	$	601,241
Alt-A		8,494		4,033		12,527		9,129		4,177		13,306
Total PL RMBS		572,375		8,806		581,181		605,559		8,988		614,547
Private-label CMBS
Prime		143,497		—		143,497		266,860		—		266,860
Total PL CMBS		143,497		—		143,497		266,860		—		266,860
Home Equity Loans
Subprime		488,799		126,359		615,158		504,565		132,135		636,700
Total Home Equity Loans		488,799		126,359		615,158		504,565		132,135		636,700
Manufactured Housing Loans
Subprime		223,469		—		223,469		229,738		—		229,738
Total Manufactured Housing Loans		223,469		—		223,469		229,738		—		229,738
Total UPB of private-label MBS	$	1,428,140	$	135,165	$	1,563,305	$	1,606,722	$	141,123	$	1,747,845

Unpaid principal balance (UPB) is also known as the current amortized par amount of a mortgage-backed security.

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Impairment Analysis

Determining whether a decline in fair value is other-than-temporary requires significant judgment. Securities with a fair value below amortized cost basis is considered impaired. The FHLBNY evaluates its individual Held-to-maturity investment in private label issued mortgage-and- asset backed securities for OTTI on a quarterly basis. As part of this process, the FHLBNY assesses it intention to sell the security and in addition makes an assessment whether it is more likely than not that the FHLBNY will be required to sell the investments before recovery of their amortized cost bases.

To determine which individual securities are at risk for other-than-temporary impairment, the FHLBNY considers various characteristics of each security including, but not limited to, the following: the credit rating and related outlook or status; the creditworthiness of the issuers of the debt securities; the underlying type of collateral; the year of securitization or vintage, the duration and level of the unrealized loss; any credit enhancements or insurance for securities that were “wrapped” at inception; and certain other collateral-related characteristics such as FICO^® credit scores, and delinquency rates. The relative importance of this information varies based on the facts and circumstances surrounding each security, as well as the economic environment at the time of assessment, and, if insured, the financial strength of the monoline insurers when the security relies on the insurer for support either currently or potentially in future periods. In determining monoline insurer support, the Bank considers the contractual terms of the insurance guarantee, and whether the credit protection under the terms of the agreement travels with the security.

See Significant Accounting Policies and Estimates in Note 1 for an understanding of the Bank’s investment and impairment policies and estimates.

Industry analysis of delinquency performance of mortgage-backed securities indicates that loans supporting securities issued in 2005, 2006 and 2007 are exhibiting significantly higher delinquency rates than those supporting securities issued in earlier years. The FHLBNY believes the year of issuance or origination (vintage) of the collateral supporting MBS is an important factor in projecting cash flow performance and assessing their credit performance. The Bank’s private label issued MBS (“PLMBS”) are relatively seasoned securities. At March 31, 2009 and December 31, 2008, the unpaid principal balances of securities issued in 2005 and 2006 aggregated $198.4 and $212.2 million, representing 12.8% and 12.1% of private label MBS. These securities were residential mortgage-backed securities collateralized by loans to prime borrowers and performing. All other PLMBS were issued prior in 2004 or earlier. All securities screened and deemed to be “at risk” of OTTI were issued prior to 2004.

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

133

Non-agency private-label mortgage — and asset-backed securities (“PLMBS”) — At March 31, 2009, the FHLBNY evaluated all 55 (55 at December 31, 2008) non-agency private label residential and asset-backed MBS in its investment portfolio by performing a security-level review. Commercial mortgage- backed securities were also reviewed at a security level. As a result of this security level review, the FHLBNY identified 19 securities at March 31, 2009 (21 at December 31, 2008) residential mortgage-backed securities with weaker performance measures considered to be “at risk” of other-than-temporary impairment. These securities were evaluated further by analyzing the expected cash flows to be collected based on the structure of the security under certain assumptions, such as estimated default rates, loss severity and prepayment speeds, and monoline support to determine whether the FHLBNY expects to receive the contractual cash flows when it is entitled. For more information, see Significant Accounting Policies and Estimates in Note 1.

The following summarizes key characteristics of the 19 securities considered to be at risk of OTTI at March 31, 2009. The amortized cost basis of these held-to-maturity securities are before impairment charge offs (dollars in thousands):

			AMBAC				MBIA				Uninsured
			Amortized		Fair		Amortized		Fair		Amortized		Fair		Gross
Ratings	Count		Cost Basis		Value		Cost Basis		Value		Cost Basis		Value		Losses
AAA		6	$	—	$	—	$	—	$	—	$	117,561	$	63,078	$	(54,483	)
AA		—		—		—		—		—		—		—		—
A		3		87,099		46,833		—		—		—		—		(40,266	)
BBB		8		108,065		63,380		—		—		—		—		(44,685	)
BB		1		—		—		13,752		8,273		—		—		(5,479	)
B		1		—		—		23,259		13,535		—		—		(9,724	)
Total		19	$	195,164	$	110,213	$	37,011	$	21,808	$	117,561	$	63,078	$	(154,637	)

Securities deemed as OTTI — Based on the management’s determination of expected cash flow shortfall of two securities insured by MBIA concurrently with the determination that MBIA’s claim paying ability would not be sufficient in future periods, management concluded that two securities had become other-than-temporarily impaired at March 31, 2009. The Bank has early adopted FSP FAS 115-2 and FAS 124-2, and has applied accounting provisions under the FSPs to write down the two securities to their fair values at March 31, 2009. Recognition of impairment resulted in a charge of $5.3 million to current year first quarter earnings and the amount represented management’s best estimate of credit losses. Factors other than credit losses were $9.9 million and were charged directly to Accumulated other comprehensive loss at March 31, 2009. The amortized cost basis of the two securities prior to the write down was $37.0 million. The new amortized cost basis is $21.8 million, which is the fair value of the two securities at March 31, 2009.

The table below summarizes the key characteristics of the two securities deemed as OTTI at March 31, 2009 (dollars in thousands):

			Insurer MBIA				OTTI						Gross Losses
			Amortized		Fair		Credit			Non-credit			Less than		More than
Ratings	Count		Cost Basis		Value		Loss			Loss			12 months		12 months
BB		1	$	13,752	$	8,273	$	(1,926	)	$	(3,553	)	$	—	$	(5,479	)
B		1		23,259		13,535		(3,339	)		(6,385	)		—		(9,724	)
Total		2	$	37,011	$	21,808	$	(5,265	)	$	(9,938	)	$	—	$	(15,203	)

134

With respect to the Bank’s remaining investments, the Bank believes no OTTI exists. The Bank’s conclusion was based upon multiple factors: bond issuers’ continued satisfaction of their obligations under the contractual terms of the securities; the estimated performance of the underlying collateral; the evaluation of the fundamentals of the issuers’ financial condition; and the estimated support from the monoline insurers under the contractual terms of insurance. Management has not made a decision to sell such securities at March 31, 2009. Management has also concluded that it is more likely than not that it will not be required to sell such as security before recovery of the amortized cost basis of the security.

Based on factors outlined above, the FHLBNY believes that the remaining securities classified as held-to-maturity were not other-than-temporarily impaired as of March 31, 2009 and December 31, 2008.

However, without recovery in the near term such that liquidity returns to the mortgage-backed securities market and spreads return to levels that reflect underlying credit characteristics, or if the credit losses of the underlying collateral within the mortgage-backed securities perform worse than expected, or if the presumption of the ability of monoline insurers to support the insured securities identified at March 31, 2009 as dependent on insurance is negatively impacted by the insurers’ future financial performance, it would be likely that additional OTTI may be recognized in future periods.

The following table summarizes PLMBS stratified by year of securitization, and the unpaid principal balance as a percentage of fair value (dollars in thousands):

	March 31, 2009							December 31, 2008
					% of							% of
By Year of Securitization	Fair Value		UPB		UPB			Fair Value		UPB		UPB
RMBS
Prime
2006	$	82,254	$	93,928		87.57	%	$	80,308	$	101,843		78.85	%
2005		98,096		104,449		93.92			102,839		110,334		93.21
2004 and earlier		356,477		370,277		96.27			372,406		389,064		95.72
Total of RMBS Prime		536,827		568,654		94.40			555,553		601,241		92.40
Alt-A
2004 and earlier		10,251		12,527		81.83			11,648		13,306		87.54
Total of RMBS		547,078		581,181		94.13			567,201		614,547		92.30
CMBS
Prime
2004 and earlier		143,248		143,497		99.83			267,016		266,860		100.06
HEL
Subprime
2004 and earlier		372,025		615,158		60.48			412,397		636,700		64.77
Manufactured Housing Loans
Subprime
2004 and earlier		150,724		223,469		67.45			154,296		229,738		67.16
Total of all Private-label MBS	$	1,213,075	$	1,563,305		77.60	%	$	1,400,910	$	1,747,845		80.15	%

135

The following table presents additional information of the fair values and gross unrealized losses of PLMBS by year of securitization and external rating at March 31, 2009 (in thousands):

	March 31, 2009
	Unpaid Principal Balance
											Below				Gross
	Ratings										Investment		Amortized		Unrealized					Total OTTI
Private-label MBS	Subtotal		Triple-A		Double-A		Single-A		Triple-B		Grade		Cost		(Losses)			Fair Value		Losses
RMBS
Prime
2006	$	93,928	$	—	$	—	$	58,047	$	35,881	$	—	$	93,002	$	(10,747	)	$	82,254	$	—
2005		104,449		104,449		—		—		—		—		102,437		(4,341	)		98,096		—
2004 and earlier		370,277		370,277		—		—		—		—		368,760		(12,283	)		356,477		—
Total RMBS Prime		568,654		474,726		—		58,047		35,881		—		564,199		(27,371	)		536,827		—
Alt-A
2004 and earlier		12,527		12,527		—		—		—		—		12,530		(2,279	)		10,251		—
Total RMBS		581,181		487,253		—		58,047		35,881		—		576,729		(29,650	)		547,078		—
CMBS
Prime
2004 and earlier		143,497		143,497		—		—		—		—		143,631		(383	)		143,248		—
HEL
Subprime
2004 and earlier		615,158		262,248		76,333		122,228		117,334		37,015		599,733		(237,647	)		372,025		(15,203	)
Manufactured Housing Loans
Subprime
2004 and earlier		223,469		—		223,469		—		—		—		223,445		(72,722	)		150,724		—
Total PLMBS	$	1,563,305	$	892,998	$	299,802	$	180,275	$	153,215	$	37,015	$	1,543,538	$	(340,402	)	$	1,213,075	$	(15,203	)

136

The following table presents additional information of the fair values and gross unrealized losses of PLMBS by year of securitization and external rating at December 31, 2008 (in thousands):

	December 31, 2008
	Unpaid Principal Balance												Gross
	Ratings										Amortized		Unrealized
Private-label MBS	Subtotal		Triple-A		Double-A		Single-A		Triple-B		Cost		(Losses)			Fair Value
RMBS
Prime
2006	$	101,843	$	—	$	—	$	62,968	$	38,874	$	100,851	$	(20,544	)	$	80,308
2005		110,334		110,334		—		—		—		108,254		(5,415	)		102,839
2004		168,166		168,166		—		—		—		168,173		(8,363	)		159,810
2003 and earlier		220,898		220,898		—		—		—		219,318		(6,722	)		212,596
Total RMBS Prime		601,241		499,398		—		62,968		38,874		596,596		(41,044	)		555,553
Alt-A
2003 and earlier		13,306		13,306		—		—		—		13,310		(1,662	)		11,648
Total RMBS		614,547		512,704		—		62,968		38,874		609,906		(42,706	)		567,201
CMBS
Prime
2003 and earlier		266,860		266,860		—		—		—		266,994		(127	)		267,016
HEL
Subprime
2003 and earlier		636,700		346,631		—		130,404		159,665		636,466		(224,069	)		412,397
Manufactured Housing Loans
Subprime
2003 and earlier		229,738		—		229,738		—		—		229,714		(75,418	)		154,296
Total PLMBS	$	1,747,845	$	1,126,195	$	229,738	$	193,372	$	198,539	$	1,743,080	$	(342,320	)	$	1,400,910

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Weighted-average market price offers an analysis of unrealized loss percentage; a comparison of the weighted-average credit support to weighted-average collateral delinquency percentage is another indicator of the credit support available to absorb potential cash flow shortfalls.

	March 31, 2009
			Original
	Weighted-		Weighted-			Weighted-			Weighted-Average
	Average Market		Average Credit			Average Credit			Collateral
Private-label MBS	Price 1		Support %			Support %			Delinquency %
RMBS
Prime
2006	$	87.57		3.71	%		4.69	%		0.93	%
2005		93.92		2.67			3.35			1.27
2004 and earlier		96.27		1.56			2.51			0.38
Total RMBS Prime		94.40		2.12			3.02			0.63
Alt-A
2004 and earlier		81.83		10.38			31.81			7.97
Total RMBS		94.13		2.30			3.64			0.79
CMBS
Prime
2004 and earlier		99.83		26.59			48.33			—
HEL
Subprime
2004 and earlier		60.48		58.27			65.84			14.65
Manufactured Housing Loans
Subprime
2004 and earlier		67.45		58.23			56.06			3.64
Total Private-label MBS	$	77.60		34.55	%		39.71	%		6.58	%

¹ Represents weighted-average market price based on par equaling $100.00. Combined weighted-average collateral delinquency rates will be calculated based on UPB amount.

Definitions:

Original Weighted-Average Credit Support % represents the arithmetic mean of a cohort of securities by vintage; credit support is defined as the credit protection level at the time the mortgage-backed securities closed. Support is expressed as a percentage of the sum of: subordinate bonds, reserve funds, guarantees, overcollateralization, divided by the original collateral balance.

Weighted-Average Credit Support % represents the arithmetic mean of a cohort of securities by vintage; credit support is defined as the credit protection level as of the mortgage-backed securities most current payment date. Support is expressed as a percentage of the sum of: subordinate bonds, reserve funds, guarantees, overcollateralization, divided by the most current unpaid collateral balance.

Weighted-average collateral delinquency % represents the arithmetic mean of a cohort of securities by vintage: collateral delinquency is defined as the sum of the unpaid principal balance of loans underlying the mortgage-backed security where the borrower is 60 or more days past due, or in bankruptcy proceedings, or the loan is in foreclosure, or has become real estate owned divided by the aggregate unpaid collateral balance.

138

	December 31, 2008
			Original
	Weighted-		Weighted-			Weighted-			Weighted-Average
	Average Market		Average Credit			Average Credit			Collateral
Private-label MBS	Price 1		Support %			Support %			Delinquency %
RMBS
Prime
2006	$	78.85		3.71	%		4.56	%		0.86	%
2005		93.21		2.68			3.26			1.00
2004		95.03		2.05			2.86			0.40
2003 and earlier		96.24		1.21			2.17			0.27
Total RMBS Prime		92.40		2.14			2.97			0.54
Alt-A
2003 and earlier		87.54		10.22			31.60			10.56
Total RMBS		92.30		2.31			3.59			0.76
CMBS
Prime
2003 and earlier		100.06		26.69			38.73			—
HEL
Subprime
2003 and earlier		64.77		58.31			65.66			12.53
Manufactured Housing Loans
Subprime
2003 and earlier		67.16		58.26			55.99			1.88
Total Private-label MBS	$	80.15		33.79	%		38.45	%		5.08	%

¹ Represents weighted-average market price based on par equaling $100.00. Combined weighted-average collateral delinquency rates will be calculated based on UPB amount.

139

External ratings are just one factor that is considered in analyzing if a security is other-than-temporarily impaired. The table below compares delinquency percentage across PLMBS security types, ratings and gross unrealized losses. (dollars in thousands):

	March 31, 2009								December 31, 2008
			Gross			Weighted- Average					Gross			Weighted- Average
	Amortized		Unrealized			Collateral			Amortized		Unrealized			Collateral
Private-label MBS	Cost		(Losses)			Delinquency %1			Amortized Cost		(Losses)			Delinquency %1
RMBS
Prime
Rated Triple A	$	471,197	$	(16,624	)		0.57	%	$	495,744	$	(20,500	)		0.48	%
Rated Single A		57,511		(7,343	)		0.82			62,401		(12,027	)		0.76
Rated Triple B		35,491		(3,404	)		1.11			38,451		(8,517	)		1.01
Total of RMBS Prime		564,199		(27,371	)		0.63			596,596		(41,044	)		0.54
Alt-A
Rated Triple A		12,530		(2,279	)		7.97			13,310		(1,662	)		10.56
Total of RMBS		576,729		(29,650	)		0.79			609,906		(42,706	)		0.76
CMBS
Prime
Rated Triple A		143,631		(383	)		—			266,994		(127	)		—
HEL
Subprime
Rated Triple A		262,174		(106,157	)		16.53			346,541		(105,673	)		13.54
Rated Double A		76,321		(24,302	)		5.69			—		—			—
Rated Single A		122,106		(49,611	)		10.93			130,277		(50,977	)		5.68
Rated Triple B		117,324		(47,639	)		15.81			159,648		(67,419	)		15.96
Below Investment Grade		21,808		(9,938	)		28.51			—		—			—
Total of HEL Subprime		599,733		(237,647	)		14.65			636,466		(224,069	)		12.53
Manufactured Housing Loans
Subprime
Rated Double A		223,445		(72,722	)		3.64			229,714		(75,418	)		1.88
Grand Total	$	1,543,538	$	(340,402	)		6.58	%	$	1,743,080	$	(342,320	)		5.08	%

¹ Weighted-average collateral delinquency rate is determined based on the underlying loans that are 60 days or more past due. The reported delinquency percentage represents weighted-average based on the dollar amounts of the individual securities in the category and their respective delinquencies. Combined weighted-average collateral delinquency rates are calculated based on UPB amount.

140

Mortgage loans held-for-portfolio

Underwriting standards — Summarized below are the principal underwriting criteria for the Bank’s Mortgage Partnership Finance Program or MPF through which the Bank acquires mortgage loans for its own portfolio. For a fuller description of the MPF loan mortgage loan standards, refer to pages 8 though 17 of the Bank’s most recent Form 10-K filed on March 27, 2009.

Mortgage loans delivered under the MPF Program must meet certain underwriting and eligibility requirements. 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 family residential properties and single unit second homes. Not eligible for delivery under the MPF Program are mortgage loans that are not ratable by S&P, or loans that are classified as high cost, high rate, or high risk. Collectability of mortgage loans is supported by liens on real estate securing the loan. For conventional loans, defined as mortgage loans other than VA and FHA insured 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. The FHLBNY is responsible for losses up to the “first loss level”. Losses beyond this layer are absorbed through credit enhancement provided by the member participating in the Mortgage Partnership Program. All residual credit exposure is FHLBNY’s responsibility. The amount of credit enhancement is computed with the use of a Standard & Poor’s model to bring a pool of uninsured loans to “AA” credit risk. The credit enhancement is an obligation of the member.

The following provides a roll-forward analysis of the memo First Loss Account (in thousands):

	Three months ended March 31,
	2009		2008
Beginning balance	$	13,765	$	12,947
Additions		83		125
Charge-offs		—		—
Recoveries		—		—
Ending balance	$	13,848	$	13,072

The First Loss Account (“FLA”) memorializes the first tier of credit exposure and is neither an indication of inherent losses in the loan portfolio nor a loan loss reserve.

Mortgage insurer risk — Credit enhancement is the obligation of the PFI (“Participating Financial Institution”). The PFI’s credit enhancement amount represents a contingent liability to pay the credit losses with respect to the loans purchased by the FHLBNY. In certain instances, the PFI is required under the MPF agreement to purchase supplemental mortgage insurance (“SMI”). The PFI may also require the borrower to purchase private mortgage insurance (“PMI”). Under the MPF program, all insurer providers are required to maintain a credit rating of double-A or better. If a PMI provider is downgraded, the FHLBNY may request the servicer to obtain replacement PMI coverage with a different provider. If a SMI provider is downgraded below a double-A rating, the PFI is required to replace the SMI policy or to provide its own undertaking equivalent to the SMI coverage. However, it is possible that replacement coverage may be unavailable or may result in additional cost to the FHLBNY.

The FHLBNY has purchased certain loans for which the PFI has either purchased SMI or the borrower has purchased PMI from Mortgage Guaranty Insurance Corporation (“MGIC”). The amounts of such loans were not significant at March 31, 2009 or December 31, 2008.

In March 2009, S&P lowered MGIC’s rating to double-B In the first quarter of 2009, both Moody’s and Fitch downgraded MGIC to triple-B.

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The FHLBNY is reviewing its options, and believes that any re-negotiation of SMI/PMI and or transfer of the SMI/PMI to another insurer would have no material impact on the Bank’s reported results of operations, financial condition or cash flows.

The allowance for credit losses with respect to the mortgage loans held-for-portfolio was as follows (in thousands):

	Three months ended March 31,
	2009		2008
Beginning balance	$	1,405	$	633
Charge-offs		—		—
Recoveries		—		—
Net charge-offs		—		—
Provision for credit losses on mortgage loans		443		30
Ending balance	$	1,848	$	663

Nonperforming mortgage loans represent conventional mortgage loans that are placed on non-accrual and nonperforming status when the collection of contractual principal or interest from the borrower is 90 days or more past due. Loans (excluding Federal Housing Administration and Veterans Administration insured loans) that are 90 days or more past due are considered as non-accrual. Other than the non-accrual loans, no mortgage loans or advances were impaired at March 31, 2009 or December 31, 2008.

Nonperforming mortgage loans and mortgage loans 90 days or more past due and still accruing were as follows (in thousands):

	March 31, 2009		December 31, 2008
Mortgage loans, net of provisions for credit losses	$	1,430,899	$	1,457,885
Non-performing mortgage loans held-for-portfolio	$	7,088	$	4,792
Mortgage loans past due 90 days or more and still accruing interest	$	719	$	507

The FHLBNY’s interest contractually due and actually received for nonperforming mortgage loans held-for-portfolio was as follows (in thousands):

	Three months ended March 31,
	2009		2008
Interest contractually due	$	112	$	50
Interest actually received		98		39
Shortfall	$	14	$	11
Interest reported as income 1	$	—	$	—

¹ The Bank does not recognize interest received as income from uninsured loans past due 90-days or greater.

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Derivative Credit Risk Exposure

The FHLBNY is subject to credit risk due to the risk of nonperformance by counterparties to the derivative agreements. The FHLBNY transacts most of its derivatives with large banks and major broker-dealers. Some of these banks and broker-dealers or their affiliates buy, sell, and distribute consolidated obligations. The FHLBNY 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. The FHLBNY manages counterparty credit risk through credit analysis and collateral requirements and by following the requirements set forth in Finance Agency’s regulations.

The contractual or notional amount of derivatives reflects the involvement of the FHLBNY in the various classes of financial instruments, but it does not measure the credit risk exposure of the FHLBNY, and the maximum credit exposure of the FHLBNY is substantially less than the notional amount. The maximum credit risk is the estimated cost of replacing 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 March 31, 2009 and December 31, 2008, the Bank’s credit risk, as defined above, was approximately $11.5 million and $20.2 million after the recognition of collateral held by the FHLBNY.

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

	March 31, 2009
					Total Net
	Number of		Notional		Exposure at		Net Exposure
Credit Rating	Counterparties		Balance		Fair Value		after Collateral
AAA		1	$	11,707,390	$	—	$	—
AA		5		29,168,929		—		—
A		8		87,521,361		89,558		1,237
Members		2		140,000		—		—
Delivery Commitments		—		3,739		—		—
Total		16	$	128,541,419	$	89,558	$	1,237

	December 31, 2008
					Total Net
	Number of		Notional		Exposure at		Net Exposure
Credit Rating	Counterparties		Balance		Fair Value		after Collateral
AAA		1	$	9,167,456	$	—	$	—
AA		6		39,939,946		—		—
A		7		78,656,536		64,890		3,681
Members		3		150,000		8,465		—
Delivery Commitments		—		10,395		—		—
Total		17	$	127,924,333	$	73,355	$	3,681

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

Exposure — At March 31, 2009, the FHLBNY’s credit risk was $11.5 million after recognition of cash collateral held by the FHLBNY. The comparable exposure was $20.2 million at December 31, 2008. In determining credit risk, the FHLBNY considers accrued interest receivable and payable, and the legal right to offset assets and liabilities by counterparty. The FHLBNY attempts to mitigate its exposure by requiring derivative counterparties to pledge cash collateral, if the amount of exposure is above the collateral threshold agreements. Derivative counterparties had pledged $88.3 million in cash to the FHLBNY at March 31, 2009; the comparable cash held as collateral by the FHLBNY was $61.2 million at December 31, 2008.

At March 31, 2009, the FHLBNY had posted $3.1 billion in cash as collateral to derivative counterparties to mitigate derivatives in a net fair value liability position. The FHLBNY is exposed to the extent that a counterparty may not re-pay the posted cash collateral to the FHLBNY under unforeseen circumstances, such as bankruptcy; in such an event the FHLBNY would then exercise its rights under the “International Swaps and Derivatives Association agreement” (“ISDA”) to replace the derivatives in a liability position (gain position for the acquiring counterparty) with another available counterparty in exchange for cash delivered to the FHLBNY. To the extent that the fair values of the replacement derivatives are less than the cash collateral posted, the FHLBNY may not receive cash equal to the amount posted received.

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Derivative counterparty ratings — The Bank’s credit exposure at March 31, 2009, in a gain position, after recognition of cash collateral was to derivative counterparties with a single-A credit rating as assigned by a Nationally Recognized Statistical Rating Organization (“NRSRO”). The Bank was also exposed to member institutions on whose behalf the FHLBNY had acted as an intermediary, and the exposure was also collateralized under standard agreements with the FHLBNY’s members. Acting as an intermediary, the Bank had also purchased equivalent notional amounts of derivatives from unrelated derivative counterparties.

Risk mitigation — The FHLBNY attempts to 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 ISDA with the FHLBNY and, in addition, execute the Credit Support Annex to the ISDA that provides for collateral support at predetermined thresholds. These annexes contain enforceable provisions for requiring collateral on certain derivative contracts that are in gain positions. The annexes also define the maximum net unsecured credit exposure amounts that may exist before collateral delivery is required. Typically, the maximum amount is based upon an analysis of individual counterparty’s rating and exposure. The FHLBNY also attempts to manage counterparty credit risk through credit analysis, collateral management and other credit enhancements, such as guarantees, and by following the requirements set forth in the Finance Agency’s regulations.

Despite these risk mitigating policies and processes, on September 15, 2008, an event of default occurred under outstanding derivative contracts with total notional amounts of $16.5 billion between Lehman Brothers Special Financing Inc. (“LBSF”) and the FHLBNY when credit support provider Lehman Brothers Holdings Inc. commenced a case under Chapter 11 of the U.S. Bankruptcy Code on October 3, 2008. The Bank had deposited $509.6 million with LBSF as cash collateral. Since the default, the FHLBNY has replaced most of the derivatives that had been executed between LBSF and the FHLBNY through new agreements with other derivative counterparties. The Lehman bankruptcy proceedings are ongoing.

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Liquidity

The FHLBNY’s primary source of liquidity is the issuance of consolidated obligation bonds and discount notes. To refinance maturing consolidated obligations, the Bank relies on the willingness of the investors to purchase new issuances. The FHLBNY has access to the discount note market and the efficiency of issuing discount notes is an important factor as a source of liquidity since discount notes can be issued any time and in a variety of amounts and maturities. Member deposits and capital stock purchased by members are another source of funds. Short-term unsecured borrowings from other FHLBanks and in the Federal funds market provide additional sources of liquidity. With the passage of the Housing Act on July 30, 2008, the U.S. Treasury is authorized to purchase obligations issued by the FHLBanks, in any amount deemed appropriate by the U.S. Treasury. This temporary authorization expires December 31, 2009 and supplements the existing limit of $4 billion. See Note 17 — Commitments and Contingencies for more information of the U.S. Treasury’s establishment of the Government Sponsored Enterprise Credit Facility (GSECF), which is designed to serve as a contingent source of liquidity for the FHLBanks via issuance of consolidated obligations to the U.S. Treasury.

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

Finance Agency Regulations — Liquidity

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

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

• Obligations of the United States;

• Deposits in banks or trust companies; or

• Advances with a maturity not to exceed five years.

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

Violations of the liquidity requirements would invoke non-compliance penalties under discretionary powers given to the Finance Agency 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 Bank is required to maintain certain liquidity measures in accordance with the FHLBank Act and policies developed by the FHLBNY management as approved by the FHLBNY’s Board of Directors.

The specific liquidity requirements applicable to the FHLBNY are described in the next three sections:

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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. The FHLBNY met these requirements at all times.

Deposit liquidity is calculated daily. Quarterly average reserve requirements and actual reserves are summarized below (in millions):

	Average Deposit		Average Actual
For the quarters ended	Reserve Required		Deposit Liquidity		Excess
March 31, 2009	$	1,753	$	63,267	$	61,514
December 31, 2008		2,022		66,246		64,224

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

The following table summarizes operational liquidity (in millions):

	Average Balance Sheet		Average Actual
For the quarters ended	Liquidity Requirement		Operational Liquidity		Excess
March 31, 2009	$	9,543	$	20,893	$	11,350
December 31, 2008		8,226		14,827		6,601

Contingency Liquidity. The FHLBNY is required by Finance Agency regulations to hold “contingency liquidity” in an amount sufficient to meet its liquidity needs if it is unable 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. Contingency liquidity is reported daily. The FHLBNY met these requirements at all times.

The following table summarizes contingency liquidity (in millions):

	Average Five Day		Average Actual
For the quarters ended	Requirement		Contingency Liquidity		Excess
March 31, 2009	$	7,443	$	18,709	$	11,266
December 31, 2008		4,727		12,930		8,203

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Leverage and unpledged assets to debt requirements

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

The FHLBNY met the qualifying unpledged asset requirements in each of the periods reported as follows (in thousands):

	March 31, 2009			December 31, 2008
Consolidated Obligations:
Bonds	$	69,582,076		$	82,256,705
Discount Notes		48,721,626			46,329,906
Total consolidated obligations		118,303,702			128,586,611
Unpledged assets
Cash		32,136			18,899
Less: Member pass-through reserves at the FRB		(40,527	)		(31,003	)
Secured Advances		104,463,598			109,152,876
Investments 1		21,979,464			26,364,661
Mortgage loans		1,430,899			1,457,885
Accrued interest receivable on advances and investments		411,500			492,856
Less: Pledged Assets		(2,528	)		(2,669	)
		128,274,542			137,453,505
Excess unpledged assets	$	9,970,840		$	8,866,894

¹ At March 31, 2009, the Bank pledged $2.5 million to the FDIC see Note 4- Held-to-maturity securities. The Bank also provided to the U.S. Treasury a listing of $23.8 billion in advances with respect to a lending agreement. See Note 17 — Commitments and Contingencies.

Mortgage investment authority

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

	March 31, 2009						December 31, 2008
	Actual			Limits			Actual			Limits
Mortgage securities investment authority 1		197	%		300	%		207	%		300	%

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

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

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

The credit ratings of the FHLBNY and changes thereof were as follows at March 31, 2009.

Long Term:

	Moody’s Investors Service		S & P
Year	Outlook	Rating	Long-Term Outlook			Rating
2009	February 2, 2009 - Affirmed	Aaa/Stable
2008	October 29, 2008 - Affirmed	Aaa/Stable	June 16, 2008	Long-Term rating affirmed	outlook stable	AAA/Stable
	April 17, 2008 - Affirmed	Aaa/Stable
2006			September 21, 2006	Long-Term rating upgraded	outlook stable	AAA/Stable

Short Term:

	Moody’s Investors Service		S & P
Year	Outlook	Rating	Short-Term Outlook		Rating
2009	February 2, 2009 - Affirmed	P-1
2008	October 29, 2008 - Affirmed	P-1	June 16, 2008	Short-Term rating affirmed	A-1+
	April 17, 2008 - Affirmed	P-1
2006			September 21, 2006	Short-Term rating affirmed	A-1+

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Legislative and Regulatory Developments

Changes to Regulation of U.S. government-sponsored enterprises.

In July 2008, the “Housing and Economic Recovery Act of 2008” (the “Housing Act”) was enacted and had no impact on the Bank’s business, results of operations, financial condition or cash flows for the periods reported in this Form 10-Q. Among other changes, the Housing Act established an independent federal regulator, the Federal Housing Finance Agency (the “Finance Agency”), which became the new federal regulator of the FHLBanks, Fannie Mae and Freddie Mac effective on July 30, 2008. The Finance Agency is headed by a single Director (the “FHFA Director”), and under the Housing Act, the initial FHFA Director is James Lockhart, who had most recently served as the Director of the Office of Federal Housing Enterprise Oversight within the U.S. Department of Housing and Urban Development. The Federal Housing Finance Board (the “Finance Board”), the FHLBanks’ former regulator, will be abolished one year after the date of enactment of the Housing Act. During the one-year transition period, the Finance Board will be responsible for winding up its affairs. Finance Board regulations, orders, determinations and resolutions remain in effect until modified, terminated, set aside or superseded in accordance with the law, by the FHFA Director, a court of competent jurisdiction or by operation of the law. The FHLBNY has determined that changes in regulations will have no material impact on its business or financial position or results of operations and cash flows.

U.S. Treasury Department’s Financial Stability Plan

In February 2009, the U.S. Treasury announced a Financial Stability Plan to address the global capital markets crisis and U.S. economic recession that continues into 2009. The plan consists of comprehensive stress tests of certain financial institutions, the provision of capital injections to certain financial institutions, controls on the use of capital injections, a purchase program for certain illiquid assets, limits on executive compensation, anti-foreclosure and housing support requirements, and small business and community lending initiatives. The FHLBanks are not subject to the stress tests as mandated under the Financial Stability Plan.

Interim Final Rule Regarding Capital Classifications and Critical Capital Levels for the FHLBanks.

On January 27, 2009, the Finance Agency issued an interim final rule, effective January 30, 2009, with a request for comment to implement certain provisions of the Housing Act that require the Finance Agency Director to establish criteria based on the amount and type of capital held by an FHLBank for each of the following capital classifications: adequately capitalized, undercapitalized, significantly undercapitalized and critically undercapitalized. This interim rule defines critical capital for the FHLBanks, and establishes the criteria for each of the capital classifications identified in the Housing Act. An FHLBank is considered adequately capitalized only if it holds sufficient capital to meet both its risk-based and minimum capital requirements. An FHLBank is undercapitalized if it fails to meet any one of its minimum or risk-based capital requirements, but such deficiency is not large enough to classify the FHLBank as significantly undercapitalized or critically undercapitalized. The critical capital level is the level at which an FHLBank would be categorized as critically undercapitalized. An FHLBank would be considered critically undercapitalized whenever its total capital is two percent or less of its total assets. An FHLBank is significantly undercapitalized if the amount of capital held by the FHLBank is less than 75 percent of the capital levels needed for the FHLBank to meet either its risk-based or minimum capital requirements. The interim final rule also implements prompt corrective action authority over the FHLBanks. Fannie Mae and Freddie Mac already are subject to similar prompt corrective action provisions, which were adopted in the Federal Housing Enterprises Financial Safety and Soundness Act of 1992. The interim final rule provides for comments to be received on or before May 15, 2009.

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Proposed Federal Legislation Permitting Bankruptcy “Cramdowns” on First Mortgages of Owner-Occupied Homes

Federal legislation has been proposed that would allow bankruptcy cramdowns on first mortgages of owner-occupied homes as a response to the U.S. economic recession and attendant U.S. housing recession. The proposed legislation would allow a bankruptcy judge to reduce the principal amount of such mortgages to the current market value of the property, such reduction currently being prohibited by the Bankruptcy Reform Act of 1994. If passed, this legislation may impact the value of the FHLBNY’s mortgage asset portfolio, as well as the value of its pledged collateral from members.

Government Sponsored Enterprise Credit Facility (GSECF).

On September 7, 2008, the U.S. Treasury, as authorized by the Housing Act, established the GSECF that is designed to serve as a contingent source of liquidity for the housing government-sponsored enterprises, including each of the 12 FHLBanks. In exchange for funding, the U.S. Treasury would receive an FHLBank consolidated obligation. The FHLBanks would secure repayment by pledging eligible collateral, which would consist of advances made by the FHLBanks and mortgage-backed securities issued by Freddie Mac and Fannie Mae. As of March 31, 2009, the FHLBNY had not drawn on this available source of liquidity.

FDIC Creates Temporary Liquidity Guarantee Program for Bank Debt

In October 2008, under special systemic risk powers, the FDIC announced it will provide a 100 percent guarantee for newly issued senior unsecured debt and non-interest bearing transaction deposit accounts at FDIC-insured institutions. The guarantee of funds in non-interest bearing transaction deposit accounts will expire December 31, 2009. A 10 basis point surcharge would be applied to non-interest bearing transaction deposit accounts not otherwise covered by the existing deposit insurance limit of $250,000.

The program to guarantee debt will apply to all newly issued senior unsecured debt issued on or before October 31, 2009, including promissory notes, commercial paper, inter-bank funding, and any unsecured portion of secured debt. The amount of debt covered by the guarantee may not exceed 125 percent of debt that was outstanding as of September 30, 2008 that was scheduled to mature before October 31, 2009. For eligible debt issued on or before October 31, 2009, coverage would only be provided through June 30, 2012, even if the liability has not matured. For all newly issued senior unsecured debt, an annualized fee equal to 75 basis points would be multiplied by the amount of debt issued.

In February 2009, the FDIC issued an interim rule to modify the TLGP to include certain issuances of mandatory convertible debt. The intent of the mandatory convertible debt amendment to the TLGP is to give eligible entities additional flexibility to obtain funding from investors with longer-term investment horizons. Further, mandatory convertible debt issuances could reduce the concentration of FDIC-guaranteed debt maturing in mid 2012, which might otherwise have to be rolled into new debt. The comment period for this interim rule closed on March 19, 2009.

FDIC Increases Deposit Insurance Premiums and Changes Risk-Based Premiums

In December 2008, the FDIC approved an increase in deposit insurance premiums effective the first quarter of 2009. On February 27, 2009, the FDIC approved a final regulation that would increase the deposit insurance premium assessment for those FDIC-insured institutions that have outstanding FHLBank advances and other secured liabilities to the extent that the institution’s ratio of secured liabilities to domestic deposits exceeds 25 percent. The FHLBNY is currently evaluating the effect this final ruling will have on its members.

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Emergency Economic Stabilization Act

In October 2008, the U.S. President signed into law the EESA. The EESA establishes a $700 billion program that gives the Secretary of the Treasury (the “Secretary”) broad powers to apply these funds as deemed appropriate. The Secretary is to purchase troubled assets and stabilize credit markets. The authority terminates on December 31, 2009 although the Secretary may extend the program for an additional ten months by submitting a written certification to Congress.

Federal Reserve Board of Governors Announces Securities Purchase Plan

As an additional measure to further support the functioning of financial markets, in September 2008, the Federal Reserve Board of Governors announced that the Federal Reserve Banks would begin purchasing short-term debt obligations issued by Fannie Mae, Freddie Mac, and the FHLBanks in the secondary market. Similar to secondary market purchases of Treasury securities, purchases of Fannie Mae, Freddie Mac, and FHLBank debt will be conducted with the Federal Reserve Banks’ primary dealers through a series of competitive auctions.

Establishment of an Independent Director Election Process

The Housing Act provides that an FHLBank’s board of directors shall be comprised of a majority of “member directors,” who are directors or officers of members, and a minority of non-member “independent” directors, who shall comprise not less than two-fifths of the members of the board of directors. Prior to July 30, 2008, the Finance Board was responsible for selecting appointive directors to serve on the Bank’s Board of Directors. As a result of the passage of the Housing Act and subsequent Finance Agency rulemaking, all members within the Bank’s five-state district will now elect the Bank’s independent directors — formerly known as “appointive directors” — after first being nominated by the Bank’s Board of Directors in consultation with the Affordable Housing Advisory Council.

For information on the FHLBNY’s director election process, refer to Item 4 — Submission of Matters to a Vote of Security Holders.

Finance Agency’s Temporary Increase on Purchase of MBS

In March 2008, the Finance Agency (known as the Finance Board at the time of passage) passed a resolution authorizing the FHLBanks to increase their purchases of agency MBS. Pursuant to the resolution, the limit on the FHLBank’s MBS investment authority would increase from 300 percent of regulatory capital to 600 percent of regulatory capital for two years. The resolution required an FHLBank to notify the Finance Agency prior to its first acquisition under the expanded authority and include in its notification a description of the risk management principles underlying its purchase. The expanded authority is limited to Fannie Mae and Freddie Mac securities. The securities purchased under the increased authority must be backed by mortgages that were originated after January 1, 2008 and comply with Federal bank regulatory guidance on non-traditional and subprime mortgage lending. The FHLBNY has not increased its investments in additional agency MBS allowed under the Finance Agency resolution.

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ITEM 3. 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 positions protect the FHLBNY’s capital from large changes in value arising from interest rate or volatility changes.

The primary tool used by management to achieve the desired risk profile is the use of interest rate exchange agreements (“Swaps”). All the LIBOR-based advances are long-term advances that are swapped to 3- or 1-month LIBOR or possess adjustable rates that periodically reset to a LIBOR index. Similarly, a majority of the long-term consolidated obligations are swapped to 3- or 1-month LIBOR. These features create a relatively steady income that changes in concert with prevailing interest rate changes to maintain a spread to short-term rates.

Despite its conservative philosophy, IRR does arise from a number of aspects of the FHLBNY’s portfolio. These include the embedded prepayment rights, refunding needs, rate resets between the FHLBNY’s short-term assets and liabilities, and basis risks arising from differences between the yield curves associated with the FHLBNY’s assets and its liabilities. To address these risks, the FHLBNY uses certain key IRR measures including re-pricing gaps, duration of equity (“DOE”), value at risk (“VaR”), net interest income (“NII”) at risk, key rate durations (“KRD”), and forecasted dividend rates.

Risk Measurements. The FHLBNY’s Risk Management Policy sets up a series of risk limits that the FHLBNY calculates on a regular basis. The risk limits are as follows:

• The option-adjusted DOE is limited to a range of +/- four years in the rates unchanged case and to a range of +/- six years in the +/-200bps shock cases. Due to the low interest rate environment beginning in early 2008, the -200bps shocks were restricted during the quarter ends to -85bps for March 2008, -115bps for June 2008, and -100bps for September 2008. The DOE downshock limits were adjusted in those cases to +/-4.85 years in March, +/-5.18 years in June, and +/-5.00 years in September. In December 2008 and March 2009 rates were too low for a constrained downshock and the test was not performed.

• The one-year cumulative re-pricing gap is limited to 10 percent of total assets.

• The sensitivity of expected net interest income over a one-year period is limited to a -15 percent change under both the +/-200bps shocks compared to the rates unchanged case.

• The potential decline in the market value of equity is limited to a 10 percent change under the +/-200bps shocks.

• KRD exposure at any of nine term points (3-month, 1-year, 2-year, 3-year, 5-year, 7-year, 10-year, 15-year, and 30-year) is limited to between +/-12 months.

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The FHLBNY’s portfolio, including its derivatives, is tracked and the overall mismatch between assets and liabilities is summarized by using a DOE measure. The FHLBNY’s last five quarterly DOE results are shown in years in the table below (note that, due to the on-going low interest rate environment there was no downshock measurement performed in neither the fourth quarter of 2008 nor the first quarter of 2009):

	Base Case DOE		-200bps DOE		+200bps DOE
March 31, 2008		0.58		-2.95		3.48
June 30, 2008		0.87		-2.65		1.99
September 30, 2008		0.39		-2.51		1.66
December 31, 2008		-2.05		N/A		1.44
March 31, 2009		-2.24		N/A		1.23

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 while 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 solely rely on the DOE measure as a mismatch measure between its assets and liabilities. It also performs the more traditional gap measure that subtracts re-pricing/maturing liabilities from re-pricing/maturing assets over time. The FHLBNY observes the differences over various horizons, but has set a 10 percent of assets limit on cumulative re-pricings at the one-year point. This quarterly observation of the one-year cumulative re-pricing gap is provided in the table below and all values are below 10 percent of assets; well within the limit:

	One Year Re-
	pricing Gap
March 31, 2008	$3.725 Billion
June 30, 2008	$3.017 Billion
September 30, 2008	$3.359 Billion
December 31, 2008	$9.764 Billion
March 31, 2009	$7.593 Billion

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The FHLBNY’s review of potential interest rate risk issues also includes the effect of changes in interest rates on expected net income. The FHLBNY projects asset and liability volumes and spreads over a one-year horizon and then simulates expected income and expenses from those volumes and other inputs. The effects of changes in interest rates are measured to test whether the FHLBNY has too much exposure in its net interest income over the coming twelve-month period. To measure the effect, the change to the spread in the shocks is calculated and compared against the base case and subjected to a -15 percent limit. The quarterly sensitivity of the FHLBNY’s expected net interest income under both +/-200bps shocks over the next twelve months is provided in the table below (note that, due to the on-going low interest rate environment the downshock measurement was not performed in the fourth quarter of 2008 nor in the first quarter of 2009):

	Sensitivity in			Sensitivity in
	the -200bps			the +200bps
	Shock			Shock
March 31, 2008		-9.98	%		-9.42	%
June 30, 2008		1.64	%		-9.81	%
September 30, 2008		3.18	%		-5.91	%
December 31, 2008		N/A			24.73	%
March 31, 2009		N/A			13.11	%

Aside from net interest income, the other significant impact on changes in the interest rate environment is the potential impact on the value of the portfolio. These calculated and quoted market values are estimated based upon their financial attributes including optionality and then re-estimated under the assumption that interest rates suddenly rise or fall by 200bps. The worst effect, whether it is the up or the down shock, is compared to the internal limit of 10 percent. The quarterly potential maximum decline in the market value of equity under these 200bps shocks is provided below (note that, due to the on-going low interest rate environment the downshock measurement was not performed in the fourth quarter of 2008 nor in the first quarter of 2009):

	Downshock			+200bps Change in
	Change in MVE			MVE
March 31, 2008		-0.97	%		-5.11	%
June 30, 2008		-0.57	%		-3.41	%
September 30, 2008		-0.72	%		-2.50	%
December 31, 2008		N/A			-0.43	%
March 31, 2009		N/A			1.01	%

As noted, the potential declines under these shocks are within the FHLBNY’s limits of a maximum 10 percent.

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The following table displays the FHLBNY’s maturity/repricing gaps as of March 31, 2009 (in millions):

	Interest Rate Sensitivity
	March 31, 2009
			More than			More than			More than
	Six months		six months to			one year to			three years to			More than
	or less		one year			three years			five years			five years
Interest-earning assets:
Non-MBS Investments	$	13,534	$	236		$	427		$	186		$	363
MBS Investments		6,636		1,669			2,355			612			486
Adjustable-rate loans and advances		18,531		—			—			—			—
Net unswapped		38,701		1,906			2,782			798			849
Fixed-rate loans and advances		14,528		4,541			17,175			9,343			35,270
Swaps hedging advances		61,734		(2,765	)		(14,883	)		(8,859	)		(35,226	)
Net fixed-rate loans and advances		76,262		1,776			2,292			483			44
Loans to other FHLBanks		—		—			—			—			—
Total interest-earning assets	$	114,963	$	3,682		$	5,074		$	1,282		$	894
Interest-bearing liabilities:
Deposits	$	2,450	$	7		$	—		$	—		$	—
Discount notes		44,779		3,942			—			—			—
Swapped discount notes		3,692		(3,692	)		—			—			—
Net discount notes		48,471		250			—			—			—
Consolidated Obligation Bonds
FHLB bonds		29,424		13,833			16,543			5,322			3,375
Swaps hedging bonds		28,305		(11,689	)		(11,753	)		(3,473	)		(1,390	)
Net FHLB bonds		57,729		2,144			4,790			1,849			1,985
Total interest-bearing liabilities	$	108,650	$	2,402		$	4,790		$	1,849		$	1,985
Post hedge gaps1:
Periodic gap	$	6,312	$	1,280		$	284		$	(567	)	$	(1,092	)
Cumulative gaps	$	6,312	$	7,593		$	7,877		$	7,309		$	6,218

Note:	Numbers may not add due to rounding.
1	Repricing gaps are estimated at the scheduled rate reset dates for floating rate instruments, and at maturity for fixed rate instruments. For callable instruments, the repricing period is estimated by the earlier of the estimated call date under the current interest rate environment or the instrument’s contractual maturity.

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The following tables display the FHLBNY’s maturity/repricing gaps as of December 31, 2008 (in millions):

	Interest Rate Sensitivity
	December 31, 2008
			More than			More than			More than
	Six months		six months to			one year to			three years to			More than
	or less		one year			three years			five years			five years
Interest-earning assets:
Non-MBS Investments	$	18,298	$	405		$	404		$	126		$	259
MBS Investments		6,938		2,940			1,801			350			209
Adjustable-rate loans and advances		20,206		—			—			—			—
Net unswapped		45,442		3,345			2,206			475			468
Fixed-rate loans and advances		21,972		3,725			14,712			7,539			35,226
Swaps hedging advances		56,677		(2,842	)		(11,801	)		(6,864	)		(35,170	)
Net fixed-rate loans and advances		78,649		882			2,911			675			56
Loans to other FHLBanks		—		—			—			—			—
Total interest-earning assets	$	124,091	$	4,227		$	5,117		$	1,151		$	524
Interest-bearing liabilities:
Deposits	$	1,497	$	15		$	—		$	—		$	—
Discount notes		43,981		2,348			—			—			—
Swapped discount notes		2,031		(2,031	)		—			—			—
Net discount notes		46,012		318			—			—			—
Consolidated Obligation Bonds
FHLB bonds		36,367		16,153			19,613			5,405			3,441
Swaps hedging bonds		32,833		(14,640	)		(13,571	)		(3,178	)		(1,445	)
Net FHLB bonds		69,200		1,513			6,043			2,227			1,996
Total interest-bearing liabilities	$	116,709	$	1,846		$	6,043		$	2,227		$	1,996
Post hedge gaps1:
Periodic gap	$	7,382	$	2,382		$	(926	)	$	(1,076	)	$	(1,472	)
Cumulative gaps	$	7,382	$	9,764		$	8,837		$	7,761		$	6,289

Note:	Numbers may not add due to rounding.
1	Repricing gaps are estimated at the scheduled rate reset dates for floating rate instruments, and at maturity for fixed rate instruments. For callable instruments, the repricing period is estimated by the earlier of the estimated call date under the current interest rate environment or the instrument’s contractual maturity.

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Item 4T. 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 March 31, 2009. Based on this evaluation, they concluded that as of March 31, 2009, the Bank’s disclosure controls and procedures were effective, at a reasonable level of assurance, in ensuring that the information required to be disclosed by the Bank in the reports it files or submits under the Act is (i) accumulated and communicated to the Bank’s management (including the President and Chief Executive Officer and Senior Vice President and Chief Financial Officer) in a timely manner, and (ii) recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.

(b) Changes in Internal Control Over Financial Reporting: There were no changes in the Bank’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Act) during the Bank’s last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Bank’s internal control over financial reporting.

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Part II. OTHER INFORMATION

Item 1. 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. Information about a legal proceeding involving property of the FHLBNY was previously disclosed in Part 1, Item 3 of the FHLBNY’s 2008 Annual Report on Form 10-K filed on March 27, 2009.

Item 1A. RISK FACTORS

There have been no material changes from the risk factors included in the FHLBNY’s Form 10-K for the fiscal year ended December 31, 2008.

Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Not applicable.

Item 3. DEFAULTS UPON SENIOR SECURITIES

None.

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

None.

Item 5. OTHER INFORMATION

None.

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Item 6. EXHIBITS

Exhibit No.		Identification of Exhibit
	4.01	Amended FHLBNY Capital Plan (incorporated by reference to Exhibit 4.01 to the registrant’s Current Report on Form 8-K filed on April 1, 2009)
	10.01	Bank 2009 Incentive Compensation Plan* **
	10.02	Bank 2009 Director Compensation Policy *
	31.01	Certification Pursuant to Rules 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934 and Section 302 of the Sarbanes-Oxley Act of 2002 by Chief Executive Officer
	31.02	Certification Pursuant to Rules 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934 and Section 302 of the Sarbanes-Oxley Act of 2002 by Chief Financial Officer
	32.01	Certification of Chief Executive Officer furnished pursuant to Section 906 of the Sarbanes-Oxley Act 2002, 18 U.S.C. Section 1350
	32.02	Certification of Chief Financial Officer furnished pursuant to Section 906 of the Sarbanes-Oxley Act 2002, 18 U.S.C. Section 1350

*	This exhibit includes a management contract, compensatory plan or arrangement required to be noted herein.
**	Portion of the exhibit have been omitted and separately filed with the U.S. Securities and Exchange Commission with a request for confidential treatment.

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SIGNATURES

Pursuant to the requirements of the Securities and 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 (Registrant)
By:	/s/ Patrick A. Morgan
	Patrick A. Morgan
	Senior Vice President and Chief Financial Officer Federal Home Loan Bank of New York (on behalf of the Registrant and as Principal Financial Officer)

Date: May 15, 2009

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EXHIBIT INDEX

Exhibit No.		Description
	10.01	Bank 2009 Incentive Compensation Plan* **
	10.02	Bank 2009 Director Compensation Policy *
	31.01	Certification Pursuant to Rules 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934 and Section 302 of the Sarbanes-Oxley Act of 2002 by Chief Executive Officer
	31.02	Certification Pursuant to Rules 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934 and Section 302 of the Sarbanes-Oxley Act of 2002 by Chief Financial Officer
	32.01	Certification of Chief Executive Officer furnished pursuant to Section 906 of the Sarbanes-Oxley Act 2002, 18 U.S.C. Section 1350
	32.02	Certification of Chief Financial Officer furnished pursuant to Section 906 of the Sarbanes-Oxley Act 2002, 18 U.S.C. Section 1350

162