Federal Home Loan Bank Of New York 10-Q 2006 Q2 Quarterly report

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 endedJune 30, 2006

OR

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

Commission file number: 0-51397

Federal Home Loan Bank of New York

(Exact name of registrant as specified in its charter)

Federal
(State or other jurisdiction of
incorporation or organization) 13-6400946
(I.R.S. Employer
Identification No.)

101 Park Avenue, New York, New York
(Address of principal executive offices) 10178
(Zip Code)

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

     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.

Yesþ            Noo

     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large accelerated filero      Accelerated filero      Non-accelerated filerþ

     Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yeso            Noþ

     At July 31, 2006, the Registrant had 39,834,248 shares of stock outstanding.

FEDERAL HOME LOAN BANK OF NEW YORK
FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2006
TABLE OF CONTENTS

	Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited):
Statements of Condition (Unaudited) as of June 30, 2006 and December 31, 2005		1
Statements of Income (Unaudited) for the Three and Six Months Ended June 30, 2006 and 2005		2
Statements of Capital (Unaudited) for the Six Months Ended June 30, 2006 and 2005		3
Statements of Cash Flows (Unaudited) for the Six Months Ended June 30, 2006 and 2005		4
Notes to Financial Statements (Unaudited)		6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		30
Item 3. Quantitative and Qualitative Disclosures About Market Risk		60
Item 4. Controls and Procedures		66
PART II. OTHER INFORMATION
Item 1. Legal Proceedings		67
Item 1A. Risk Factors		67
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		67
Item 3. Defaults Upon Senior Securities		67
Item 4. Submission of Matters to a Vote of Security Holders		67
Item 5. Other Information		67
Item 6. Exhibits		68
Signatures		69
EX-31.1: CERTIFICATION
EX-31.2: CERTIFICATION
EX-32.1: CERTIFICATION
EX-32.2: CERTIFICATION
EX-99.1: COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Statements of Condition – Unaudited (in thousands, except par value)
As of June 30, 2006 and December 31, 2005

	June 30, 2006			December 31, 2005
Assets
Cash and due from banks	$	25,059		$	22,114
Interest-bearing deposits, includes $7,500 pledged at June 30, 2006, and $244,800 at December 31, 2005		6,624,713			8,699,107
Federal funds sold		3,354,000			2,925,000
Held-to-maturity securities, includes $0 pledged at June 30, 2006 and December 31, 2005 (Note 2)		10,800,720			9,566,441
Advances (Note 3)		67,268,273			61,901,534
Mortgage loans held-for-portfolio, net of allowance for credit losses of $583 at June 30, 2006, and $582 at December 31, 2005 (Note 4)		1,459,607			1,466,943
Accrued interest receivable		399,412			377,253
Premises and equipment, net		11,582			11,257
Derivative assets (Note 8)		210,287			19,197
Other assets		20,037			24,672
Total assets	$	90,173,690		$	85,013,518
Liabilities and capital
Liabilities
Deposits
Interest-bearing demand	$	2,094,370		$	2,637,168
Non-interest bearing demand		1,256			969
Term		104,883			19,525
Total deposits		2,200,509			2,657,662
Consolidated obligations, net (Note 5)
Bonds		59,166,300			56,768,622
Discount Notes		23,552,353			20,510,525
Total consolidated obligations		82,718,653			77,279,147
Mandatorily redeemable capital stock (Note 6)		18,168			18,087
Accrued interest payable		620,732			498,318
Affordable Housing Program (Note 7)		93,880			91,004
Payable to REFCORP		18,854			14,062
Derivative liabilities (Note 8)		170,095			491,866
Other liabilities		105,057			77,992
Total liabilities		85,945,948			81,128,138
Commitments and Contingencies(Notes 5, 6, 8 and 13)
Capital(Notes 6 and 14)
Capital stock ($100 par value), putable, issued and outstanding shares: 38,846 at June 30, 2006, and 35,905 at December 31, 2005		3,884,520			3,590,454
Unrestricted retained earnings		336,600			291,413
Accumulated other comprehensive income (loss) (Note 11)
Net unrealized gain on hedging activities		9,223			5,352
Minimum liability on benefit equalization plan		(2,601	)		(1,839	)
Total capital		4,227,742			3,885,380
Total liabilities and capital	$	90,173,690		$	85,013,518

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

1

Statements of Income – Unaudited (in thousands, except per share value)
For the Three and Six Months Ended June 30, 2006 and 2005

	Three months ended						Six months ended
	June 30,						June 30,
	2006			2005			2006			2005
Interest income
Advances	$	805,165		$	516,446		$	1,506,941		$	975,209
Interest-bearing deposits		69,603			39,775			146,095			63,120
Federal funds sold		37,637			20,664			58,030			35,069
Available-for-sale securities		—			7,239			—			12,283
Held-to-maturity securities		138,345			147,588			268,197			297,533
Mortgage loans held-for-portfolio		18,728			16,713			37,586			32,728
Other		—			9			5			18
Total interest income		1,069,478			748,434			2,016,854			1,415,960
Interest expense
Consolidated obligations bonds		698,646			478,891			1,325,397			930,337
Consolidated obligations discount notes		234,125			158,761			436,952			264,613
Deposits		20,268			15,574			34,340			27,674
Mandatorily redeemable stock (Note 6)		258			785			578			1,453
Cash collateral held and other borrowings		958			43			1,124			58
Total interest expense		954,255			654,054			1,798,391			1,224,135
Net interest income before provision for credit losses		115,223			94,380			218,463			191,825
Provision for credit losses on mortgage loans		1			24			1			58
Net interest income after provision for credit losses		115,222			94,356			218,462			191,767
Other income (loss)
Service fees		855			1,048			1,662			2,188
Net realized and unrealized gain (loss) on derivatives and hedging activities ( Note 8)		7,037			(5,386	)		5,100			(4,331	)
Losses from extinguishment of debt and other		(4,245	)		(1,432	)		(4,240	)		(5,186	)
Total other income (loss)		3,647			(5,770	)		2,522			(7,329	)
Other expenses
Operating		15,195			14,337			30,669			28,989
Finance Board and Office of Finance		993			1,376			2,274			2,897
Total other expenses		16,188			15,713			32,943			31,886
Income before assessments		102,681			72,873			188,041			152,552
Affordable Housing Program (Note 7)		8,408			6,029			15,409			12,692
REFCORP		18,855			13,369			34,527			28,194
Total assessments		27,263			19,398			49,936			40,886
Income before cumulative effect of change in accounting principle		75,418			53,475			138,105			111,666
Cumulative effect of change in accounting principle		—			—			—			1,109
Net income	$	75,418		$	53,475		$	138,105		$	112,775
Basic earnings per share: (Note 14)
Earnings before cumulative effect of change in accounting principle	$	2.02		$	1.46		$	3.75		$	3.09
Cumulative effect of change in accounting principle		—			—			—			0.03
Net earnings per share	$	2.02		$	1.46		$	3.75		$	3.12
Cash dividends paid per share	$	1.29		$	1.16		$	2.58		$	1.93

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

2

Statements of Capital – Unaudited (in thousands, except per share data)
For the Six Months Ended June 30, 2006 and 2005

																Accumulated
	Capital Stock*						Capital Stock*									Other						Total
	Pre-Exchange						Class B						Retained			Comprehensive			Total			Comprehensive
	Shares			Par Value			Shares			Pav Value			Earnings			Income (Loss)			Capital			Income (Loss)
Balance, December 31, 2004		36,550		$	3,655,047			—		$	—		$	223,434		$	649		$	3,879,130
Proceeds from sale of capital stock		13,336			1,333,542			—			—			—			—			1,333,542
Redemption of capital stock		(12,896	)		(1,289,678	)		—			—			—			—			(1,289,678	)
Net Income		—			—									112,775			—			112,775		$	112,775
Other comprehensive income (loss ):
Net unrealized loss on available-for-sale securities		—			—			—			—			—			(2,530	)		(2,530	)		(2,530	)
Net unrealized gain on hedging activities		—			—			—			—			—			411			411			411
Cash dividends ($1.93 per share) on capital stock		—			—			—			—			(69,025	)					(69,025	)		—
																						$	110,656
Balance, June 30, 2005		36,990		$	3,698,911			—		$	—		$	267,184		$	(1,470	)	$	3,964,625
Balance, December 31, 2005								35,905		$	3,590,454		$	291,413		$	3,513		$	3,885,380
Proceeds from sale of capital stock								18,236			1,823,586			—			—			1,823,586
Redemption of capital stock								(15,153	)		(1,515,284	)		—			—			(1,515,284	)
Transfer of mandatorily redeemable stock								(142	)		(14,236	)		—			—			(14,236	)
Net Income								—			—			138,105			—			138,105		$	138,105
Other comprehensive income (loss):
Net unrealized gain on hedging activities								—			—			—			3,872			3,872			3,872
Additional minimum liability on benefit equalization plan								—			—			—			(763	)		(763	)		(763	)
Cash dividends ($2.58 per share) on capital stock								—			—			(92,918	)		—			(92,918	)		—
																						$	141,214
Balance, June 30, 2006		—		$	—			38,846		$	3,884,520		$	336,600		$	6,622		$	4,227,742

* putable stock

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

3

Statements of Cash Flows – Unaudited (in thousands)
For the Six Months Ended June 30, 2006 and 2005

	Six months ended
	June 30,
	2006			2005
Operating Activities
Net Income	$	138,105		$	112,775
Cumulative effect of change in accounting principle		—			(1,109	)
Income before cumulative effect of change in accounting principle		138,105			111,666
Adjustments to reconcile net income before cumulative effect of change in accounting principle to net cash provided by operating activities:
Depreciation and amortization:
Net premiums and discounts on consolidated obligations, investments, and mortgage loans		(1,403	)		31,112
Concessions on consolidated obligations		6,279			5,827
Premises and equipment		2,039			2,070
Provision for credit losses on mortgage loans		1			58
(Gain) loss due to change in net fair value adjustments on derivatives and hedging activities		(209	)		12,742
Net change in:
Accrued interest receivable		(22,159	)		(16,550	)
Derivative assets due to accrued interest		(189,475	)		(42,344	)
Derivative liabilities due to accrued interest		78,973			13,747
Other assets		2,747			(6,284	)
Affordable Housing Program liability		2,876			2,792
Accrued interest payable		122,415			1,315
REFCORP liability		4,793			4,591
Other liabilities		10,502			9,520
Total adjustments		17,379			18,596
Net cash provided by operating activities		155,484			130,262
Investing activities
Net change in:
Interest-bearing deposits		2,074,332			(3,898,150	)
Federal funds sold		(429,000	)		942,000
Held-to-maturity securities:
Purchased		(2,570,516	)		(378,652	)
Proceeds		1,333,311			1,552,023
Available-for-sale securities:
Purchased		—			(1,020,179	)
Proceeds		—			88,050
Advances:
Principal collected		279,056,422			228,653,069
Made		(284,971,011	)		(225,054,333	)
Mortgage loans held-for-portfolio:
Principal collected		80,539			70,634
Purchased and originated		(73,954	)		(277,592	)
Principal collected on other loans made		102			93
Net decrease in deposits with other FHLBank’s mortgage programs		63			132
Premises and equipment		(2,364	)		(1,206	)
Net cash (used in) provided by investing activities		(5,502,076	)		675,889

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

4

Statements of Cash Flows – Unaudited (in thousands)
For the Six Months Ended June 30, 2006 and 2005

	Six months ended
	June 30,
	2006			2005
Financing activities
Net change in:
Deposits and other borrowings	$	(440,591	)	$	126,539
Consolidated obligation bonds:
Proceeds from issuance		16,456,148			11,092,144
Payments for maturing and early retirement		(13,898,309	)		(17,135,345	)
Consolidated obligation discount notes:
Proceeds from issuance		299,371,986			370,004,284
Payments for maturing		(296,340,926	)		(364,777,509	)
Capital stock:
Proceeds from issuance		1,823,586			1,333,542
Payments for redemption		(1,515,284	)		(1,289,678	)
Payments for redemption of mandatorily redeemable capital stock		(14,155	)		(90,966	)
Cash dividends paid *		(92,918	)		(69,025	)
Net cash provided by (used in) financing activities		5,349,537			(806,014	)
Net increase in cash and cash equivalents		2,945			137
Cash and cash equivalents at beginning of the period		22,114			22,376
Cash and cash equivalents at end of the period	$	25,059		$	22,513
Supplemental disclosures:
Interest paid	$	1,145,558		$	1,174,891
Affordable Housing Program payments **	$	12,533		$	9,900
REFCORP payments	$	29,734		$	23,602
Investing activities
Loans made to other FHLBanks	$	50,063		$	—
Principal collected on loans to other FHLBanks		(50,000	)		—
Net change in loans to other FHLBanks***	$	63		$	—
Financing activities
Proceeds from short-term borrowings from other FHLBanks	$	385,000		$	555,000
Payment of short-term borrowings from other FHLBanks		(385,000	)		(555,000	)
Net change in borrowings from other FHLBanks	$	—		$	—

*	Does not include payments to holders of mandatorily redeemable capital stock.
**	AHP payments = (beginning accrual — ending accrual) + AHP assessment for the year; payments represent funds released to the Affordable Housing Program.
***	2006 amount represents demand deposit activity with the MPF Provider.

The accompanying notes are an integral part of the 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 includes New Jersey, New York, Puerto Rico, and the U.S. Virgin Islands. The FHLBNY provides a readily available, low-cost source of funds for its member institutions. The FHLBNY does not have any wholly or partially owned subsidiaries, nor does it have an equity position in any partnerships, corporations, or off-balance-sheet special purpose entities.

Members of the cooperative must purchase FHLBNY stock according to regulatory requirements. The business of the cooperative is to provide liquidity for our members (primarily in the form of advances) and to provide a return on their investment in FHLBNY stock in the form of a dividend. Since the members are both stockholders and customers, there is a trade-off between providing value to them via low pricing for advances with a relatively lower dividend versus higher advances pricing with a relatively higher dividend. This means that the FHLBNY is managed to deliver balanced value to members, rather than to maximize profitability or advance volume through low pricing.

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

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

The FHLBNY is supervised and regulated by the Federal Housing Finance Board (“Finance Board”), which is an independent agency in the executive branch of the U.S. government. The Finance Board ensures that the FHLBNY carries out its housing and community development mission, remains adequately capitalized and able to raise funds in the capital markets, and operates in a safe and sound manner. However, while the Finance Board establishes regulations governing the operations of the FHLBanks, the Bank functions as a separate entity with its own management, employees and board of directors.

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

The Code of Business Conduct and Ethics is posted on the Corporate Governance Section of the FHLBNY’s website atwww.fhlbny.com

6

Notes to Financial Statements — Unaudited

Tax Status

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

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

Each FHLBank is required to pay 20 percent of income calculated in accordance with accounting principles generally accepted in the U.S. (“GAAP”) after the assessment for Affordable Housing Program, but before the assessment for the REFCORP. The Affordable Housing Program and REFCORP assessments are calculated simultaneously because of their interdependence on each other. The FHLBNY accrues its REFCORP assessment on a monthly basis.

The Resolution Funding Corporation has been designated as the calculation agent for Affordable Housing Program and REFCORP assessments. Each FHLBank provides its net income before Affordable Housing Program and REFCORP to the Resolution Funding Corporation, which then performs the calculations for each quarter end.

Affordable Housing Program (“AHP”) 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 Standard No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity”, and the assessment for Affordable Housing Program, but after the assessment for REFCORP. The exclusion of interest expense related to mandatorily redeemable capital stock is a regulatory interpretation of the Finance Board. The FHLBNY accrues this expense monthly based on its income.

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 report period. Although management believes these judgments, estimates, and assumptions to be reasonably accurate, actual results may differ. The information contained in the financial statements is unaudited. In the opinion of management, only normal recurring adjustments necessary for a fair statement of the interim period results have been made.

These unaudited financial statements should be read in conjunction with the FHLBNY’s audited financial statements for the year ended December 31, 2005, included in Form 10-K filed on March 30, 2006.

7

Notes to Financial Statements — Unaudited

Note 1 to Financial Statements of the Federal Home Loan Bank of New York filed with Form 10-K on March 30, 2006 contains a summary of our significant accounting policies.

Note 1. Accounting Developments

Recently Issued Accounting Standards & Interpretations

SFAS 156 — In March 2006, the FASB issued Statement of Financial Accounting Standards (“SFAS”) No. 156,“Accounting for Servicing of Financial Assets” (“SFAS 156”).

SFAS 156 amends SFAS 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities”, with respect to the accounting for separately-recognized servicing assets and liabilities. SFAS 156 requires all separately-recognized servicing assets and liabilities to be initially measured at fair value, and permits companies to elect, on a class-by-class basis, to account for servicing assets and liabilities on either a lower of cost or market value basis or a fair value measurement basis.

The new standard provides some relief for servicers that use derivatives to economically hedge fluctuations in the fair value of their servicing rights. In a rising interest rate environment, losses on derivatives used for hedging must be recognized. However, corresponding increases in the fair value of the related servicing rights previously could not be recognized since SFAS 140 mandated that servicing rights be carried at the lower of cost or market. This situation generates income volatility.

SFAS 156 also changes how gains and losses are computed in transfers or securitizations that qualify for “sale treatment” in which the transferor retains the right to service the transferred financial assets. Under SFAS 156, servicing assets must be initially recorded at fair value and treated as part of the proceeds received by the transferor, thus affecting the gain/loss calculations.

The Bank has chosen not to early adopt and will apply the provisions of SFAS 156 as of January 1, 2007. The Bank is in the process of evaluating the impact of adopting SFAS 156, and implementation of the standard is not expected to have a significant impact on the Bank.

As discussed in Note 2 to the Financial Statements in the Bank’s Form 10-K filed on March 30, 2006, the adoption of Derivatives Implementation Group (“DIG”) Issue B38, “Evaluation of Net Settlement with Respect to the Settlement of a Debt Instrument through Exercise of an Embedded Put Option or Call Option”and DIG Issue B39,“Application of Paragraph 13(b) to Call Options That Are Exercisable Only by the Debtor,”did not have a material impact on the operations and financial condition of the FHLBNY.

The Bank continues to evaluate the impact of adopting SFAS No. 155, “Accounting for Certain Hybrid Financial Instruments an amendment of FASB Statements No. 133 and 140” (“SFAS 155”), and has not determined the effect, if any, that the implementation of SFAS 155 will have on its earnings or financial position. The Bank will apply the guidance under SFAS 155 commencing with the first quarter of 2007.

8

Notes to Financial Statements — Unaudited

Note 2. Held-to-maturity Securities

Held-to-maturity securities consisted of mortgage- and asset-backed securities (“MBS”), and state and local housing finance agency bonds. The amortized cost and the fair value of these securities were as follows (in thousands):

	June 30, 2006
			Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
State and local housing agency obligations	$	665,809	$	7,663	$	(655	)	$	672,817
Mortgage-backed securities		10,134,911		26,834		(278,968	)		9,882,777
Total	$	10,800,720	$	34,497	$	(279,623	)	$	10,555,594

	December 31, 2005
			Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
State and local housing agency obligations	$	992,578	$	16,069	$	—		$	1,008,647
Mortgage-backed securities		8,573,863		72,908		(125,844	)		8,520,927
Total	$	9,566,441	$	88,977	$	(125,844	)	$	9,529,574

9

Notes to Financial Statements — Unaudited

Temporary impairment. The following tables summarize held-to-maturity securities with fair values below their amortized cost, i.e., in an unrealized loss position at June 30, 2006 and December 31, 2005. The fair values and unrealized losses are aggregated by major security type and rating, and by the length of time individual securities have been in a continuous unrealized loss position. Securities, to which different rating levels have been assigned by different rating agencies, i.e., split ratings, are assigned to the lower rating category.

Temporary impairment at June 30, 2006 (in thousands):

	June 30, 2006
	Less than 12 months				12 months or more
	Estimated Fair		Unrealized		Estimated Fair		Unrealized
	Value		Losses		Value		Losses
Mortgage-and asset-backed securities — fixed rate
AAA-rated	$	3,940,224	$	70,867	$	3,774,817	$	206,034
AA-rated		—		—		—		—
Below AA		—		—		—		—
Mortgage-and asset-backed securities — variable rate
AAA-rated		302,721		2,067		—		—
AA-rated		—		—		—		—
Below AA		—		—		—		—
Total mortgage-and asset-backed securities		4,242,945		72,934		3,774,817		206,034
State and local housing finance agencies — fixed rate
AAA-rated		940		35		—		—
AA-rated		15,385		620		—		—
Below AA		—		—		—		—
State and local housing finance agencies — variable rate
AAA-rated		—		—		—		—
AA-rated		—		—		—		—
Below AA		—		—		—		—
Total State and local housing finance agency bonds		16,325		655		—		—
Total temporarily impaired	$	4,259,270	$	73,589	$	3,774,817	$	206,034

There were 63 securities in a temporarily impaired condition for 12 months or longer at June 30, 2006, representing 32.5% of MBS in terms of the number of positions. In terms of the book value at June 30, 2006, the percentage was 37.2% or $3.8 billion.

The FHLBNY has both the intent and financial ability to hold the temporarily impaired securities to anticipated recovery of their value. In addition, 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 represent temporary impairment at June 30, 2006.

10

Notes to Financial Statements — Unaudited

Temporary impairment at December 31, 2005 (in thousands):

	December 31, 2005
	Less than 12 months				12 months or more
	Estimated Fair		Unrealized		Estimated Fair		Unrealized
	Value		Losses		Value		Losses
Mortgage-and asset-backed securities — fixed rate
AAA-rated	$	2,812,278	$	46,888	$	2,548,174	$	78,914
AA-rated		—		—		—		—
Below AA		—		—		—		—
Mortgage-and asset-backed securities — variable rate
AAA-rated		134,958		42		—		—
AA-rated		—		—		—		—
Below AA		—		—		—		—
Total mortgage-and asset-backed securities		2,947,236		46,930		2,548,174		78,914
State and local housing finance agencies — fixed rate
AAA-rated		—		—		—		—
AA-rated		—		—		—		—
Below AA		—		—		—		—
State and local housing finance agencies — variable rate
AAA-rated		—		—		—		—
AA-rated		—		—		—		—
Below AA		—		—		—		—
Total State and local housing finance agencies		—		—		—		—
Total temporarily impaired	$	2,947,236	$	46,930	$	2,548,174	$	78,914

There were 37 securities in a temporarily impaired condition for 12 months or longer at December 31, 2005, representing 22.0% of MBS in terms of the numbers of position. In terms of the book value at December 31, 2005, the percentage was 29.7%, or $2.5 billion.

Note 3. Advances

Advances outstanding at June 30, 2006 and December 31, 2005 are summarized below (dollars in thousands):

	June 30, 2006						December 31, 2005
				Weighted						Weighted
	Amount			Average Yield			Amount			Average Yield
Overdrawn demand deposit accounts	$	—			—		$	—			—
Due in one year or less		17,831,886			4.97	%		15,645,155			4.12	%
Due after one year through two years		14,411,479			4.84	%		8,858,008			4.16	%
Due after two years through three years		6,409,955			4.83	%		11,493,647			4.45	%
Due after three years through four years		4,488,544			5.40	%		2,641,601			4.90	%
Due after four years through five years		6,116,007			5.24	%		7,615,315			5.42	%
Thereafter		18,350,024			4.05	%		15,439,581			4.00	%
Total par value		67,607,895			4.73	%		61,693,307			4.35	%
Discount on AHP advances		(571	)					(624	)
Net premium on advances		808						1,122
SFAS 133 hedging adjustments		(339,859	)					207,729
Total	$	67,268,273					$	61,901,534

11

Notes to Financial Statements — Unaudited

Note 4. Mortgage Loans

Mortgage Partnership Finance® Program (“MPF”®) loans predominate the mortgage loans held for investment. The MPF program involves investment by the FHLBNY in mortgage loans that are purchased from its participating members. Included in the total are outstanding balances of $47.6 million and $48.7 million at June 30, 2006 and December 31, 2005, comprising of mortgage loans originated by the FHLBNY. The FHLBNY’s member institutions create, service, and credit-enhance the loans. No intermediary trusts are involved. Loans in the Community Mortgage Partnership Asset (“CMA”) program, which has been inactive since 2001, were $6.8 million and $9.7 million at June 30, 2006 and December 31, 2005.

The following summarizes investments in mortgage loans (dollars in thousands):

	June 30, 2006						December 31, 2005
	2006			Percentage			2005			Percentage
Real Estate:
Fixed medium-term single-family mortgages	$	595,742			41.0	%	$	596,236			40.8	%
Fixed long-term single-family mortgages		850,612			58.5	%		853,738			58.5	%
Multi-family mortgages		6,846			0.5	%		6,859			0.5	%
Non-residential mortgages		—			—			2,713			0.2	%
Total par value		1,453,200			100.0	%		1,459,546			100.0	%
Net unamortized premiums		13,789						14,789
Net unamortized discounts		(6,452	)					(6,381	)
Basis adjustment		(347	)					(429	)
Total mortgage loans held-for-portfolio		1,460,190						1,467,525
Allowance for credit losses		(583	)					(582	)
Total mortgage loans held-for-portfolio after allowance for credit losses	$	1,459,607					$	1,466,943

The FHLBNY and its members share the credit risk of MPF loans by structuring potential credit losses into layers. The first layer is typically 100 basis points but varies with the particular MPF program. The First Loss Account is not recorded or reported as a reserve for loan losses. The FHLBNY is responsible for absorbing losses in the first layer. The second layer is that amount of credit obligations that the Participating Financial Institution (“PFI”) has taken on which will equate the loan to a double-A rating. The FHLBNY pays a Credit Enhancement fee to the PFI for taking on this obligation. The FHLBNY assumes all residual risk. Credit Enhancement fees accrued aggregated $0.4 million and $0.4 million for the three months ended June 30, 2006 and 2005, and $0.8 million and $0.7 million for the six months ended June 30, 2006 and 2005. Credit Enhancement fees 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.

12

Notes to Financial Statements — Unaudited

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

	Three months ended				Six months ended
	June 30,				June 30,
	2006		2005		2006		2005
Beginning balance	$	11,443	$	10,123	$	11,318	$	9,336
Additions		192		523		317		1,310
Charge-offs		—		—		—		—
Recoveries		—		—		—		—
Ending balance	$	11,635	$	10,646	$	11,635	$	10,646

Note 5. Consolidated Obligations

Consolidated obligations are the joint and several obligations of the FHLBanks and consist of consolidated bonds and discount notes. The following summarizes consolidated obligations issued by the FHLBNY and outstanding at June 30, 2006 and December 31, 2005 (in thousands):

	June 30, 2006			December 31, 2005
Consolidated obligation bonds — amortized cost	$	59,694,545		$	57,147,738
Basis adjustments		(528,245	)		(379,116	)
Total Consolidated obligation — bonds	$	59,166,300		$	56,768,622
Discount notes — amortized cost	$	23,552,353		$	20,510,525
Total Consolidated obligation — discount notes	$	23,552,353		$	20,510,525

13

Notes to Financial Statements — Unaudited

Note 6. Capital, Capital Ratios, and Mandatorily Redeemable Capital Stock

The FHLBanks, including 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 based on the amount of mortgage-related assets on the member’s balance sheet and its use of FHLBNY advances. FHLBNY stock can be issued, exchanged, redeemed and repurchased only at its stated par value of $100 per share. The stock is not publicly traded.

The Gramm-Leach-Bliley Act (“GLB Act”) allows the FHLBanks to have two classes of stock, and each class may have sub-classes. Class A stock is conditionally redeemable on six months written notice from the member, and class B stock is conditionally redeemable on five years written notice from the member. Membership is voluntary for all members. Members that withdraw from a FHLBank may not reapply for membership of any FHLBank for five years from the date of withdrawal. The transfer of membership without interruption between two FHLBanks is not considered to be a termination of membership for this purpose.

The FHLBNY’s capital stock at June 30, 2006 is Class B stock which is sub-divided into membership stock and activity-based stock.

The FHLBNY is subject to risk-based capital rules and three capital requirements under the new capital structure plan adopted on December 1, 2005. The FHLBNY must maintain at all times permanent capital in an amount at least equal to the sum of its credit, market, and operations risk capital requirements as calculated in accordance with the FHLBNY policy and rules and regulations of the Finance Board. Only permanent capital, defined as Class B stock and retained earnings, satisfies this risk-based capital requirement. The Finance Board may require the FHLBNY to maintain a greater amount of permanent capital than is required. In addition, the FHLBNY is required to maintain at least a 4% total capital-to-asset ratio and at least a 5% leverage ratio at all times. The leverage ratio is defined as the sum of permanent capital weighted 1.5 times and nonpermanent capital weighted 1.0 time divided by total assets. The FHLBNY was in compliance with the aforementioned capital rules and requirements. Mandatorily redeemable capital stock, which is reclassified from equity to a liability, is considered capital for determining the FHLBNY’s compliance with its regulatory requirements.

14

Notes to Financial Statements — Unaudited

Capital Ratios

The following table shows the risk-based capital ratios at June 30, 2006 and December 31, 2005 (dollars in thousands):

	June 30, 2006						December 31, 2005
	Required			Actual			Required			Actual
Regulatory capital requirements:
Risk-based capital	$	698,106		$	4,239,288		$	626,486		$	3,899,954
Total capital-to-asset ratio		4.00	%		4.70	%		4.00	%		4.57	%
Total capital	$	3,606,948		$	4,239,288		$	3,400,541		$	3,899,954
Leverage ratio		5.00	%		7.05	%		5.00	%		6.88	%
Leverage capital	$	4,508,684		$	6,358,931		$	4,250,676		$	5,849,931

Mandatorily Redeemable Capital Stock

The FHLBNY’s capital stock is redeemable at the option of either the member or 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.

Mandatorily redeemable stock at June 30, 2006 and December 31, 2005 represented stock held by:

• Former members who were no longer FHLBNY members by virtue of being acquired by members of another FHLBank; or

• Former members who were no longer FHLBNY members by virtue of being acquired by an institution that is not a member of any FHLBank.

Such stock will be repurchased when it is no longer needed to meet stock ownership requirements for transactions outstanding with the Bank.

The FHLBNY repurchases excess activity-based capital stock daily. The three other triggering events that could cause the FHLBNY to repurchase capital stock are:

• a member requests redemption of excess stock;

• a member delivers notice of its intent to withdraw from membership;

• a member attains non-member status (through merger into or acquisition by a non-member, or involuntary termination from membership).

A member’s request to redeem excess Membership Stock will be considered to be revocable until the stock is repaid. Based on the fact that the member’s request to redeem excess Membership Stock can be withdrawn by the member without penalty, the FHLBNY considers the member’s intent regarding such request to not be substantive in nature and therefore no reclassification to a liability will be necessary at the time the request is delivered.

When a member delivers a notification of its intent to withdraw from membership, the reclassification from equity to a liability will become effective upon receipt of the notification. The FHLBNY considers the member’s intent regarding such notification to be substantive in nature and, therefore, reclassification to liability will be necessary at the time the notification of the intent to withdraw is delivered.

15

Notes to Financial Statements — Unaudited

Anticipated redemption of mandatorily redeemable capital stock was as follows at June 30, 2006 and December 31, 2005 (in thousands):

	June 30, 2006		December 31, 2005
Redemption within one year	$	326	$	109
Redemption after one year through two years		8,550		7,904
Redemption after three years through five years		9,253		10,034
Redemption after six years through ten years		39		40
Total	$	18,168	$	18,087

The following table provides roll-forward information with respect to changes in mandatorily redeemable capital stock liabilities for the three and six months ended June 30, 2006 and 2005 (in thousands):

	Three months ended						Six months ended
	June 30,						June 30,
	June 30, 2006			June 30, 2005			June 30, 2006			June 30, 2005
Beginning balance	$	27,413		$	35,728		$	18,087		$	126,581
Capital stock subject to mandatory redemption reclassified from equity		326			—			14,236			—
Redemption of mandatorily redeemable capital stock		(9,571	)		(113	)		(14,155	)		(90,966	)
Ending balance	$	18,168		$	35,615		$	18,168		$	35,615
Accrued interest payable	$	249		$	418		$	249		$	418

Note 7. Affordable Housing Program

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

	Three months ended						Six months ended
	June 30,						June 30,
	2006			2005			2006			2005
Beginning balance	$	93,711		$	83,025		$	91,004			81,580
Additions from current period’s assessments		8,408			6,029			15,409			12,692
Net disbursements for grants and programs		(8,239	)		(4,682	)		(12,533	)		(9,900	)
Ending balance	$	93,880		$	84,372		$	93,880		$	84,372

16

Notes to Financial Statements — Unaudited

Note 8. Derivatives

The contractual or notional amount of derivatives reflects the involvement of the FHLBNY in the various classes of financial instruments. The notional amount of derivatives does not measure the credit exposure of the FHLBNY, and the maximum credit exposure of the FHLBNY is substantially less than the notional amount. The maximum credit risk is the estimated cost of replacing: favorable interest-rate swaps; forward agreements; mandatory delivery contracts for mortgage loans outstanding at June 30, 2006; and purchased caps and floors if the counterparty defaults and the related collateral, if any, is of no value to the FHLBNY.

The following table presents outstanding notional balances and estimated fair values of the derivatives by SFAS 133 hedge type at June 30, 2006 and December 31, 2005 (in thousands):

	June 30, 2006					December 31, 2005
			Estimated					Estimated
	Notional		Fair Value			Notional		Fair Value
Interest rate swaps
Fair value	$	77,928,687	$	(191,584	)	$	70,724,618	$	(594,584	)
Cash flow		389,000		(235	)		788,000		528
Economic		—		—			5,000		(128	)
Interest rate caps/floors*
Fair value		1,558,194		(6	)		1,618,194		(7	)
Mortgage delivery commitments
Fair value		1,363		(5	)		657		—
Other
Intermediation*		30,000		4			130,000		5
Total notional and fair value	$	79,907,244	$	(191,826	)	$	73,266,469	$	(594,186	)

* Classified as economic hedges.

Reconciliation of fair value basis to the Statements of Condition is included in the following table.

17

Notes to Financial Statements — Unaudited

The following table reconciles derivatives data by hedging classifications at June 30, 2006 and December 31, 2005 (in thousands):

	June 30, 2006					December 31, 2005
			Total estimated					Total estimated
			fair value					fair value
			(excluding					(excluding
	Total notional		accrued			Total notional		accrued
	amount		interest)			amount		interest)
Advances — fair value hedges	$	35,663,582	$	338,625		$	32,662,378	$	(208,249	)
Advances — economic hedges		1,558,194		(6	)		1,618,194		(7	)
Consolidated obligations — fair value hedges		42,265,105		(530,209	)		38,062,240		(386,335	)
Consolidated obligations — economic hedges		—		—			5,000		(128	)
Mortgage loans — delivery commitments		1,363		(5	)		657		—
Balance sheet — economic hedges		—		—			—		—
Cash Flow — anticipated transactions		389,000		(235	)		788,000		528
Intermediary positions — economic hedges		30,000		4			130,000		5
Total notional and fair value	$	79,907,244	$	(191,826	)	$	73,266,469	$	(594,186	)
Total derivatives excluding accrued interest			$	(191,826	)			$	(594,186	)
Accrued interest				232,018					121,517
Net derivative balance			$	40,192				$	(472,669	)
Net derivative asset balance			$	210,287				$	19,197
Net derivative liability balance				(170,095	)				(491,866	)
Net derivative balance			$	40,192				$	(472,669	)

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 current period earnings and for the periods reported from Accumulated other comprehensive income (loss) in the Statements of Condition (in thousands):

	Three months ended						Six months ended
	June 30,						June 30,
	2006			2005			2006			2005
Beginning balance	$	8,780		$	11,443		$	5,352		$	898
Net fair value changes		1,253			(9,475	)		5,224			1,371
Reclassified into earnings		(810	)		(659	)		(1,353	)		(960	)
Ending balance	$	9,223		$	1,309		$	9,223		$	1,309

18

Notes to Financial Statements — Unaudited

Earnings Impact of Hedging Activities

Net Realized and Unrealized Gain (Loss) on Derivatives and Hedging Activities

As a result of applying SFAS 133, the FHLBNY reported the following net gains (losses) on derivatives and hedging activities for the three and six months ended June 30, 2006 and 2005 (in thousands):

	Three months ended					Six months ended
	June 30,					June 30,
	2006		2005			2006			2005
Gains (losses) related to fair value hedge ineffectiveness	$	6,985	$	(5,414	)	$	5,108		$	(5,839	)
Gains (losses) on economic hedges		52		28			(8	)		1,508
Net gains (losses) on derivatives and hedging activities	$	7,037	$	(5,386	)	$	5,100		$	(4,331	)

Cash Flow Hedges

There were no material amounts for the six months ended June 30, 2006 and 2005 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. Over the next twelve months, it is expected that $3.6 million of net gains recorded in Accumulated other comprehensive income at June 30, 2006, will be recognized in earnings.

19

Notes to Financial Statements — Unaudited

Note 9. Employee Retirement Plans

The FHLBNY 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 FHLBNY. For accounting purposes, the DB Plan is a multi-employer plan and does not segregate its assets, liabilities, or costs by participating employer. As a result, disclosure of the accumulated benefit obligations, plan assets, and the components of annual pension expense attributable to the FHLBNY are not made.

The FHLBNY also participates in the Pentegra administered Financial Institution Thrift Plan, a 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 thrift 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 FHLBNY also offers a Postretirement Health Benefit Plan to retirees. There are no funded plan assets that have been designated to provide postretirement health benefits.

The following table presents employee retirement plan expenses (in thousands):

	Three months ended				Six months ended
	June 30,				June 30,
	2006		2005		2006		2005
Defined Benefit Plan	$	1,450	$	1,572	$	2,900	$	3,143
Benefit Equalization Plan (Defined benefits)		500		494		1,000		988
		1,950		2,066		3,900		4,131
Financial Institution Thrift Plan and BEP Thrift		317		216		599		538
Postretirement Health Benefit Plan		363		406		725		812
Total retirement plan expenses	$	2,630	$	2,688	$	5,224	$	5,481

Components of the net periodic pension cost for the defined benefit component of the BEP, an unfunded plan, were as follows for the three and six months ended June 30, 2006 and 2005 (in thousands):

	Three months ended						Six months ended
	June 30,						June 30,
	2006			2005			2006			2005
Service Cost	$	150		$	174		$	300		$	348
Interest Cost		200			166			400			332
Amortization of unrecognized prior service cost		(13	)		(12	)		(25	)		(24	)
Amortization of unrecognized net loss		163			166			325			332
Net periodic benefit cost	$	500		$	494		$	1,000		$	988

20

Notes to Financial Statements — Unaudited

Key assumptions used in determining the supplemental retirement plan cost included a discount rate of 5.5%, salary increase of 5.5%, and an amortization period of 7 years. The measurement date used to determine the net periodic cost was December 31, 2005. The total amount of benefits paid and expected to be paid under this plan is not expected to be materially different from amounts disclosed in the Bank’s Form 10-K filed on March 30, 2006.

Components of the net periodic postretirement benefit cost for the FHLBNY’s Postretirement Health Benefits Plan were as follows for the three and six months ended June 30, 2006 and 2005 (in thousands):

	Three months ended				Six months ended
	June 30,				June 30,
	2006		2005		2006		2005
Service cost (benefits attributed to service during the period)	$	135	$	170	$	270	$	340
Interest cost on accumulated postretirement benefit obligation		148		144		295		288
Amortization of loss		80		92		160		184
Net periodic postretirement benefit cost	$	363	$	406	$	725	$	812

Key assumptions used in determining the Postretirement Health Benefit Plan included a discount rate of 5.5%, and health care cost trend rate of 4.5%. The measurement date used to determine the net periodic cost was December 31, 2005. The total amount of benefits paid and expected to be paid under this plan is not expected to be materially different from amounts disclosed in the Bank’s Form 10-K filed on March 30, 2006.

21

Notes to Financial Statements — Unaudited

Note 10. Related Party Transactions

The FHLBNY is a cooperative and the members own almost all of the stock of the FHLBNY. 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 FHLBNY considers its transactions with its members and non-member stockholders as related party transactions in addition to transactions with other FHLBanks, the Office of Finance, and the Finance Board.

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 following tables summarize outstanding balances and transactions with related parties at June 30, 2006 and December 31, 2005.

Related Party: Outstanding Assets, Liabilities and Equity (in thousands):

	June 30, 2006				December 31, 2005
	Related		Unrelated		Related		Unrelated
Assets
Cash and due from banks	$	—	$	25,059	$	—	$	22,114
Interest-bearing deposits		238		6,624,475		300		8,698,807
Federal funds sold		—		3,354,000		—		2,925,000
Held-to-maturity securities		—		10,800,720		—		9,566,441
Advances		67,268,273		—		61,901,534		—
Mortgage loans*		—		1,459,607		—		1,466,943
Accrued interest receivable		308,325		91,087		276,796		100,457
Premises and equipment, net		—		11,582		—		11,257
Derivative assets		—		210,287		—		19,197
Other assets**		—		20,037		—		24,672
Total Assets	$	67,576,836	$	22,596,854	$	62,178,630	$	22,834,888
Liabilities and Capital
Deposits	$	2,200,509	$	—	$	2,657,662	$	—
Consolidated obligations		—		82,718,653		—		77,279,147
Mandatorily redeemable capital stock		18,168		—		18,087		—
Accrued interest payable		—		620,732		—		498,318
Affordable Housing Program***		93,880		—		91,004		—
Payable to REFCORP		—		18,854		—		14,062
Derivative liabilities		—		170,095		—		491,866
Other liabilities****		64,032		41,025		47,468		30,524
Total liabilities		2,376,589		83,569,359		2,814,221		78,313,917
Capital		4,227,742		—		3,885,380		—
Total liabilities and Capital	$	6,604,331	$	83,569,359	$	6,699,601	$	78,313,917

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

22

Notes to Financial Statements — Unaudited

Related Party: Income and Expense transactions (in thousands):

	Three months ended
	June 30, 2006					June 30, 2005
	Related		Unrelated			Related		Unrelated
Interest income
Advances	$	805,165	$	—		$	516,446	$	—
Interest-bearing deposits *		—		69,603			—		39,775
Federal funds sold		—		37,637			—		20,664
Available-for-sale securities		—		—			—		7,239
Held-to-maturity securities		—		138,345			—		147,588
Mortgage loans **		—		18,728			—		16,713
Loans to other FHLBanks		7		—			—		—
Others		—		(7	)		—		9
Total interest income	$	805,172	$	264,306		$	516,446	$	231,988
Interest expense
Consolidated obligations	$	—	$	932,771		$	—	$	637,652
Deposits		20,268		—			15,574		—
Mandatorily redeemable stock		258		—			785		—
Cash collateral held and other borrowings		112		846			38		5
Total interest expense	$	20,638	$	933,617		$	16,397	$	637,657
Service fees	$	855	$	—		$	1,048	$	—

*	Includes interest income from cash collateral pledged, and de minimis amount of interest income from MPF service provider.
**	Includes de minimis amount of mortgage interest income from loans purchased from members of another FHLBank.

	Six months ended
	June 30, 2006					June 30, 2005
	Related		Unrelated			Related		Unrelated
Interest income
Advances	$	1,506,941	$	—		$	975,209	$	—
Interest-bearing deposits *		—		146,095			—		63,120
Federal funds sold		—		58,030			—		35,069
Available-for-sale securities		—		—			—		12,283
Held-to-maturity securities		—		268,197			—		297,533
Mortgage loans **		—		37,586			—		32,728
Loans to other FHLBanks		7		—			—		—
Others		—		(2	)		—		18
Total interest income	$	1,506,948	$	509,906		$	975,209	$	440,751
Interest expense
Consolidated obligations	$	—	$	1,762,349		$	—	$	1,194,950
Deposits		34,340		—			27,674		—
Mandatorily redeemable stock		578		—			1,453		—
Cash collateral held and other borrowings		122		1,002			44		14
Total interest expense	$	35,040	$	1,763,351		$	29,171	$	1,194,964
Service fees	$	1,662	$	—		$	2,188	$	—

*	Includes interest income from cash collateral pledged, and de minimis amount of interest income from MPF service provider.
**	Includes de minimis amount of mortgage interest income from loans purchased from members of another FHLBank.

23

Notes to Financial Statements — Unaudited

Note 11. Total Comprehensive Income

Total comprehensive income was comprised of Net Income and Accumulated other comprehensive income (loss), which included gains on available-for-sale securities, cash flow hedging activities, and additional minimum liability on the Benefit Equalization Plan.

Changes in Accumulated other comprehensive income (loss) for the three and six months ended June 30, 2006 and 2005 were as follows (in thousands):

	Three months ended June 30,
	Available-						Benefit			Accumulated other					Total
	for-sale			Cash-flow			Equalization			Comprehensive			Net		Comprehensive
	securities			hedges			Plan			Income (Loss)			Income		Income
Balance, March 31, 2005	$	2,527		$	11,443		$	(2,489	)	$	11,481
Net change		(2,817	)		(10,134	)		—			(12,951	)	$	53,475	$	40,524
Balance, June 30, 2005	$	(290	)	$	1,309		$	(2,489	)	($	(1,470	)
Balance, March 31, 2006	$	—		$	8,780		$	(2,601	)	$	6,179
Net change		—			443			—			443		$	75,418	$	75,861
Balance, June 30, 2006	$	—		$	9,223		$	(2,601	)	$	6,622

	Six months ended June 30,
	Available-					Benefit			Accumulated other					Total
	for-sale			Cash-flow		Equalization			Comprehensive			Net		Comprehensive
	securities			hedges		Plan			Income (Loss)			Income		Income
Balance, December 31, 2004	$	2,240		$	898	$	(2,489	)	$	649
Net change		(2,530	)		411		—			(2,119	)	$	112,775	$	110,656
Balance, June 30, 2005	$	(290	)	$	1,309	$	(2,489	)	$	(1,470	)
Balance, December 31, 2005	$	—		$	5,352	$	(1,839	)	$	3,513
Net change		—			3,871		(762	)		3,109		$	138,105	$	141,214
Balance, June 30, 2006	$	—		$	9,223	$	(2,601	)	$	6,622

24

Notes to Financial Statements — Unaudited

Note 12. Estimated Fair Values

The carrying value and estimated fair values of the FHLBNY’s financial instruments as of June 30, 2006 were as follows (in thousands):

	June 30, 2006
	Carrying		Net Unrealized			Estimated
Financial Instruments	Value		Gains/Losses			FairValue
Assets
Cash and due from banks	$	25,059	$	—		$	25,059
Interest-bearing deposits		6,624,713		(1,045	)		6,623,668
Federal funds sold		3,354,000		(66	)		3,353,934
Held-to-maturity securities		10,800,720		(245,126	)		10,555,594
Advances		67,268,273		(176,551	)		67,091,722
Mortgage loans		1,459,607		(61,362	)		1,398,245
Accrued interest receivable		399,412		—			399,412
Derivative assets		210,287		—			210,287
Other financial assets		1,435		3			1,438
Liabilities
Deposits		2,200,509		(8	)		2,200,501
Consolidated obligations:
Bonds		59,166,300		(407,961	)		58,758,339
Discount notes		23,552,353		(5,516	)		23,546,837
Mandatorily redeemable capital stock		18,168		—			18,168
Accrued interest payable		620,732		—			620,732
Derivative liabilities		170,095		—			170,095
Other financial liabilities		69,720		—			69,720

The carrying value and estimated fair values of the FHLBNY’s financial instruments as of December 31, 2005 were as follows (in thousands):

	December 31, 2005
	Carrying		Net Unrealized			Estimated
Financial Instruments	Value		Gains/Losses			FairValue
Assets
Cash and due from banks	$	22,114	$	—		$	22,114
Interest-bearing deposits		8,699,107		(1,205	)		8,697,902
Federal funds sold		2,925,000		28			2,925,028
Held-to-maturity securities		9,566,441		(36,867	)		9,529,574
Advances		61,901,534		(122,412	)		61,779,122
Mortgage loans		1,466,943		(21,503	)		1,445,440
Accrued interest receivable		377,253		—			377,253
Derivative assets		19,197		—			19,197
Other financial assets		1,074		—			1,074
Liabilities
Deposits		2,657,662		(2	)		2,657,660
Consolidated obligations:
Bonds		56,768,622		(178,235	)		56,590,387
Discount notes		20,510,525		(3,115	)		20,507,410
Mandatorily redeemable capital stock		18,087		—			18,087
Accrued interest payable		498,318		—			498,318
Derivative liabilities		491,866		—			491,866
Other financial liabilities		54,638		—			54,638

25

Notes to Financial Statements — Unaudited

Note 13. 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 Board. Neither the FHLBNY nor any other FHLBank has had to assume or pay the consolidated obligation of another FHLBank. The FHLBNY does not believe that it will be called upon to pay the consolidated obligations of another FHLBank in the future. Under FASB interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees Including indirect guarantees of indebtedness of others”(“FIN 45”), FHLBNY 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 a liability for its joint and several obligations related to other FHLBanks’ consolidated obligations at June 30, 2006 or December 31, 2005. The par amounts of the twelve FHLBanks’ outstanding consolidated obligations, including the FHLBNY’s, were approximately $958.6 billion and $937.5 billion at June 30, 2006 and December 31, 2005, respectively.

Commitments for additional advances totalled approximately $20.0 billion and $20.8 billion as of June 30, 2006 and December 31, 2005, respectively. Commitments are conditional, and generally 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 issued on behalf of members for a fee to facilitate residential housing, community lending, and members’ asset/liability management or to provide liquidity. Members assume an unconditional obligation to reimburse the FHLBNY for value given by the FHLBNY to the beneficiary under the standby letter of credit. The FHLBNY may, in its discretion, permit the member to finance repayment of this obligation by receiving a collateralized advance. Outstanding standby letters of credit were approximately $237.1 million and $238.3 million as of June 30, 2006 and December 31, 2005, respectively, and had original terms of up to fifteen years, with a final expiration in 2019. Unearned fees on standby letters of credit are recorded in other liabilities and were not significant as of June 30, 2006 and December 31, 2005. 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. Standby letters of credit are fully collateralized at the time of issuance.

The FHLBNY was unconditionally obligated to purchase $1.4 million and $0.7 million in mortgage loans at June 30, 2006 and December 31, 2005, respectively under the MPF Program. Commitments are generally for periods not to exceed 45 days. In accordance with 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 amount of $411.8 million and $379.8 million as of June 30, 2006 and December 31, 2005.

The FHLBNY executes derivatives with major banks and broker-dealers and generally enters into bilateral collateral agreements. As of June 30, 2006 and December 31, 2005, interest-bearing deposits included $7.5 million and $244.8 million in cash pledged as collateral by the FHLBNY to broker-dealers and banks, together referred to as derivative counterparties, to mitigate the derivative counterparties’ credit exposure related to derivatives contracts with the FHLBNY. The FHLBNY was also exposed to credit risk associated with derivative contracts, which is measured as the replacement cost of derivatives in a gain position. The FHLBNY’s credit exposure was mitigated by cash collateral of $127.6 million and $7.3 million delivered by derivative counterparties and held by the FHLBNY at June 30, 2006 and December 31, 2005.

26

Notes to Financial Statements — Unaudited

The FHLBNY charged to operating expenses rental costs of approximately $0.9 million and $0.8 million for the three months ended June 30, 2006 and 2005, and $1.6 million and $1.5 million for the six months ended at June 30, 2006 and 2005. Lease agreements for FHLBNY premises generally provide for increases in the basic rentals resulting from increases in property taxes and maintenance expenses. Such increases are not expected to have a material effect on the FHLBNY.

The following table summarizes commitments and contingencies as of June 30, 2006 (in thousands):

	June 30, 2006
	Payments due or expiration terms by period
			> 1 year		> 3 years
	<= 1 year		<= 3 years		<= 5 years		> 5 years		Total
Contractual Obligations
Consolidated obligations-bonds at par	$	24,770,155	$	26,553,395	$	4,942,200	$	3,423,850	$	59,689,600
Mandatorily redeemable capital stock		326		8,550		9,253		39		18,168
Premise and equipment (rental and lease obligations)		2,816		5,531		4,346		14,217		26,910
Total contractual obligations		24,773,297		26,567,476		4,955,799		3,438,106		59,734,678
Other contractual obligations
Standby letters of credit		194,105		26,283		5,034		11,699		237,121
Consolidated obligations bonds traded not settled		1,550,000		—		—		—		1,550,000
Unused lines of credit and other conditional commitments		20,013,031		—		—		—		20,013,031
Open delivery commitments		1,362		—		—		—		1,362
Total other contractual obligations		21,758,498		26,283		5,034		11,699		21,801,514
Total commitments	$	46,531,795	$	26,593,759	$	4,960,833	$	3,449,805	$	81,536,192

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

The FHLBNY is subject to legal proceedings arising in the normal course of business. After consultation with legal counsel, the FHLBNY does not anticipate that the ultimate liability, if any, arising out of these matters will have a material effect on the FHLBNY’s financial condition or results of operations.

27

Notes to Financial Statements — Unaudited

Note 14. Earnings per Share of Capital

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

	Three months ended						Six months ended
	June 30,						June 30,
	2006			2005			2006			2005
Net income before cumulative effect of change	$	75,418		$	53,475		$	138,105		$	111,666
Cumulative effect of change in accounting principle		—			—			—			1,109
Net income available to stockholders	$	75,418		$	53,475		$	138,105		$	112,775
Weighted average shares of capital		37,608			36,877			37,014			36,807
Less: Mandatorily redeemable capital		(190	)		(356	)		(225	)		(620	)
Average number of shares of capital used to calculate earnings per share	��	37,418			36,521			36,789			36,187
Earnings per share of capital before cumulative effect of change in accounting principle	$	2.02		$	1.46		$	3.75		$	3.09
Cumulative effect of change in accounting principle		—			—			—			0.03
Net earnings per share of capital	$	2.02		$	1.46		$	3.75		$	3.12

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

28

Notes to Financial Statements — Unaudited

Note 15. Segment Information

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 following table summarizes advances to the top 5 members at June 30, 2006 and interest income earned for the three and six months ended June 30, 2006 (dollars in thousands):

			As of June 30, 2006
			Par		Percent of Total			Interest Income
	City	State	Advances		Par Advances			Three Months		Six Months
North Fork Bank	Mattituck	NY	$	7,700,015		11.4	%	$	67,153	$	117,043
New York Community Bank	Westbury	NY		7,113,680		10.5	%		76,814		156,218
Hudson City Savings Bank	Paramus	NJ		6,950,000		10.3	%		65,222		114,507
HSBC Bank USA, National Association	Wilmington	DE		4,509,779		6.7	%		61,953		118,754
Manufacturers and Traders Trust Co.	Buffalo	NY		3,548,383		5.2	%		47,241		92,533
Total			$	29,821,857		44.1	%	$	318,383	$	599,055

The following table summarizes advances to the top 5 members at June 30, 2005 and interest income earned for the six months ended June 30, 2005 (dollars in thousands):

			June 30, 2005
			Par		Percent of Total			Interest
	City	State	Advances		Par Advances			Income
North Fork Bank	Mattituck	NY	$	5,800,015		9.10	%	$	112,494
New York Community Bank	Westbury	NY		5,686,287		8.90	%		122,121
HSBC Bank USA, National Association	Wilmington	DE		5,011,737		7.90	%		70,929
Hudson City Savings Bank	Paramus	NJ		3,600,000		5.70	%		62,310
Independence Community Bank	Brooklyn	NY		3,333,000		5.20	%		69,539
Total			$	23,431,039		36.80	%	$	437,393

The following table summarizes advances to the top 5 members at December 31, 2005, and interest income earned for the twelve months ended December 31, 2005 (dollars in thousands):

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

29

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 filing with the Securities and Exchange Commission.

30

Business Overview

Financial Performance. 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. 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 liquidity to satisfy member demand for short- and long-term funds, repay maturing consolidated obligations, and meet other obligations. The dividends paid by FHLBNY are largely the result of the FHLBNY’s earnings on invested member capital, net earnings on member credit, mortgage loans and investments, offset in part by the FHLBNY’s operating expenses and assessments. FHLBNY’s board of directors and management determine the pricing of member credit and dividend policies based on the needs of its members.

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.

Financial Highlights

The FHLBNY reported 2006 second-quarter net income of $75.4 million, or $2.02 per share of capital stock, compared with net income of $53.5 million, or $1.46 per share of capital stock, for the second quarter of 2005. Annualized return on average stockholders’ equity, defined as capital stock, retained earnings and accumulated other comprehensive income (loss), increased to 7.45% for the second-quarter in 2006 compared to 5.43% in the comparative quarter in 2005. Annualized return on average earning assets increased to 55.3 basis points in the second-quarter in 2006, up from 44.7 basis points in the comparable quarter in 2005. Average stockholders’ equity increased to $4.0 billion during the second quarter in 2006, up from $3.9 billion average during the comparable quarter in 2005.

Net income for the first six months of 2006 was $138.1 million, or $3.75 per share, compared with $112.8 million, or $3.12 per share, in the comparable period last year.

The increase is primarily attributable to both higher yields on assets and increase in net interest spread between the cost of funding and yields on assets. Increase in net income is also from continuing improvement in execution of debt issuances, on a swapped out basis, as well as higher earnings in a rising rate environment from deployment of members’ capital and retained earnings.

A cash dividend of $1.29 per share of capital was paid in January 2006 for the fourth quarter of 2005, up from $0.77 paid in January 2005 for the fourth quarter 2004. A cash dividend of $1.29 per share was paid in April 2006 for the first quarter of 2006. Also, a cash dividend of $1.43 per share was paid in July 2006 for the second quarter of 2006.

Net interest income after provision for credit losses, a key metric for the FHLBNY, grew to $115.2 million for the second quarter in 2006, up from $94.4 million in the comparable quarter in 2005. Net interest income for the six months ended June 30, 2006 was $218.5 million, compared with $191.8 million for the comparable period last year. Net interest income represents the difference between income from interest-earning assets and interest expense on interest-bearing liabilities. The difference, also

31

referred to as net interest spread, was 30.3 basis points in the second quarter 2006, up from 25.2 basis points in the comparable quarter in 2005. For the six months ended June 30, 2006, net interest spread was 28.4 basis points, compared with 26.8 basis points for the six months ended June 30, 2005. Total reported assets at June 30, 2006 were $90.2 billion, an increase from $85.0 billion at December 31, 2005. Reported amount of advances outstanding at June 30, 2006 was $67.3 billion, compared to $61.9 billion at December 31, 2005. These advances amounts included the basis adjustment associated with the fair value of hedged advances. Par amount of advances outstanding, a better measure of demand, at June 30, 2006 was $67.6 billion, up from $61.7 billion at December 31, 2005.

32

Selected financial data are presented below (Unaudited)

	June 30,			Year ended December 31,
Statements of Condition (dollars in millions)	2006			2005			2004			2003			2002			2001
Investments (1)	$	20,779		$	21,190		$	18,363		$	14,217		$	23,598		$	19,200
Advances		67,268			61,902			68,507			63,923			68,926			60,962
Mortgage loans		1,460			1,467			1,178			672			435			425
Total assets		90,174			85,014			88,439			79,230			93,606			81,240
Deposits and borrowings		2,201			2,658			2,297			2,100			2,743			2,862
Consolidated obligations		82,719			77,279			80,157			70,857			83,512			72,628
Mandatorily redeemable stock		18			18			127			—			—			—
AHP liability		94			91			82			93			110			105
REFCORP liability		19			14			10			—			14			20
Capital stock		3,885			3,590			3,655			3,639			4,051			3,733
Retained earnings		337			291			223			127			244			177
Equity to asset ratio (2)		4.68	%		4.57	%		4.38	%		4.75	%		4.59	%		4.81	%

	Three months ended				Six months ended
	June 30,				June 30,				Year ended December 31,
Averages	2006		2005		2006		2005		2005		2004		2003		2002		2001
Investments (1)	$	18,975	$	20,059	$	18,728	$	19,257	$	19,944	$	17,642	$	19,833	$	20,677	$	22,017
Advances		64,337		64,269		63,432		65,070		63,446		65,289		70,943		64,210		54,295
Mortgage loans		1,457		1,353		1,460		1,304		1,360		928		527		400		475
Total assets		85,482		86,202		84,274		86,142		85,254		84,344		92,747		86,682		77,972
Deposits and borrowings		1,827		2,293		1,605		2,225		2,112		1,968		2,952		2,908		2,825
Consolidated obligations		78,523		78,286		77,546		78,200		77,629		76,105		81,818		76,907		70,077
Mandatorily redeemable
Capital stock		19		36		23		64		56		238		—		—		—
AHP liability		92		82		92		81		84		83		105		107		97
REFCORP liability		9		8		8		6		7		4		2		8		12
Capital stock		3,742		3,652		3,679		3,616		3,604		3,554		4,082		3,768		3,673
Retained earnings		307		251		297		238		251		159		193		204		129

	Three months ended						Six months ended
	June 30,						June 30,						Year ended December 31,
Operating Results	2006			2005			2006			2005			2005			2004			2003			2002			2001
(dollars in millions,
except earnings and
dividends per share)
Net interest income (3)	$	115		$	94		$	219		$	192		$	395		$	268		$	299		$	389		$	408
Net income		75			53			138			113			230			161			46			234			285
Dividends paid in cash		47			42			93			69			162			65			164			167			229
AHP expense		8			6			15			13			26			19			5			26			32
REFCORP expense		19			13			35			28			58			40			11			59			71
Return on average equity*		7.45	%		5.43	%		6.95	%		5.86	%		5.97	%		4.34	%		1.08	%		5.89	%		7.50	%
Return on average assets*		0.35	%		0.25	%		0.33	%		0.26	%		0.27	%		0.19	%		0.05	%		0.27	%		0.37	%
Operating expenses	$	15		$	14		$	31		$	29		$	59		$	51		$	48		$	39		$	35
Operating expenses as a percent of average assets*		0.07	%		0.07	%		0.07	%		0.07	%		0.07	%		0.06	%		0.05	%		0.04	%		0.04	%
Earnings per share	$	2.02		$	1.46		$	3.75		$	3.12		$	6.36		$	4.55		$	1.12		$	6.21		$	7.76
Dividend per share	$	1.29		$	1.16		$	2.58		$	1.93		$	4.50		$	1.83		$	3.97		$	4.51		$	6.29
Headcount		225			214			225			214			221			210			206			200			201

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

33

Critical Accounting Policies and Estimates

The FHLBNY has identified certain accounting policies that it believes are critical because they require management to make subjective judgments about matters that are inherently uncertain and because of the likelihood that materially different amounts would be reported under different conditions or using different assumptions. These policies include estimating the allowance for credit losses on the advance and mortgage loan portfolios; estimating the liabilities for unfunded pension liabilities; estimating fair values on certain assets and liabilities. The FHLBNY accounts for derivatives in accordance with SFAS 133, “Accounting for Derivative Instruments and hedging Activities”, and specifically identifies the hedged assets or liabilities and the associated hedging strategy.

For additional information, refer to the Management’s Discussion and Analysis section that describes the critical accounting policies, and Note 1 to the Financial Statements in the FHLBNY’s Form 10-K filed on March 30, 2006.

Recently Issued Accounting Standards and Interpretations

SFAS 156 — In March 2006, the FASB issued SFAS No. 156,“Accounting for Servicing of Financial Assets” (“SFAS 156”).SFAS 156 amends SFAS 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities”with respect to the accounting for separately - - recognized servicing assets and liabilities. SFAS 156 requires all separately- recognized servicing assets and liabilities to be initially measured at fair value, and permits companies to elect, on a class-by-class basis, to account for servicing assets and liabilities on either a lower of cost or market value basis or a fair value measurement basis. The new standard provides some relief for servicers that use derivatives to economically hedge fluctuations in the fair value of their servicing rights. In a rising interest rate environment, losses on derivatives used for hedging must be recognized. However, corresponding increases in the fair value of the related servicing rights previously could not be recognized since SFAS 140 mandates that servicing rights be carried at the lower of cost or market. This situation generates income volatility.

SFAS 156 also changes how gains and losses are computed in transfers or securitizations that qualify for “sale treatment” in which the transferor retains the right to service the transferred financial assets. Under SFAS 156, servicing assets must be initially recorded at fair value and treated as part of the proceeds received by the transferor, thus affecting the gain/loss calculations.

The Bank has chosen not to early adopt and will apply the provisions of SFAS 156 as of January 1, 2007. The Bank is in the process of evaluating the impact of adopting SFAS 156, and implementation of the standard is not expected to have a significant impact on the Bank.

As discussed in Note 2 to the Financial Statements in the Bank’s Form 10-K filed on March 30, 2006, the adoption of Derivatives Implementation Group (“DIG”) Issues B38, “Evaluation of Net Settlement with Respect to the Settlement of a Debt Instrument through Exercise of an Embedded Put Option or Call Option”and DIG Issue B39,“Application of Paragraph 13(b) to Call Options That Are Exercisable Only by the Debtor,”did not have a material impact on the operations and financial condition of the FHLBNY.

The Bank continues to evaluate the impact of adopting SFAS No. 155 the impact of adopting, “Accounting for Certain Hybrid Financial Instruments an amendment of FASB Statements No. 133 and 140” (“SFAS 155”), and has not determined the effect, if any, that the implementation of SFAS 155 will have on its earnings or financial position. The Bank will apply the guidance under SFAS 155 commencing with the first quarter of 2007.

34

Results of Operations

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, AHP and REFCORP assessments, and operating expenses. 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, together referred to as assessments.

Net income for the second quarter 2006 was $75.4 million, compared with $53.5 million for the comparable quarter in 2005. Net income is after the deduction of AHP and REFCORP assessments, which are a fixed percentage of the FHLBNY’s pre-assessment income. In a rising rate environment, the FHLBNY continued to earn significant income from interest earning assets funded by non-interest bearing capital and other funds. Member demand for advances has been increasing; maturing advances have been replaced by new advances at higher rates and at pricing initiatives implemented during late 2004. These factors taken together also contributed to the increase in net income. In addition, net income for the second quarter in 2006 has also benefited from relatively better execution of debt issuances compared to the second quarter in 2005. Repricing of unswapped, fixed-rate debt has lagged behind in a steadily rising interest rate environment, also contributing to a lower overall increase in funding costs. Investments in mortgage-backed securities increased during the three months ended June 30, 2006, compared with the prior quarter in 2006, but still lags the levels during most of the three and six months ended June 30, 2005. Increased investment in MBS, relative to prior quarter in 2006 had a positive income impact during the current quarter. Mortgage-backed securities typically yield higher coupons, compared to other investments allowed under the FHLBNY’s current investment policy. Operating expenses increased by $0.9 million and $1.7 million in the three and six months ended June 30, 2006, compared with the same periods in 2005.

Net Interest Income

Net interest income is the principal source of revenue for the FHLBNY and the primary factors that impact it are yields from advances, investment yields, and the cost of consolidated obligation debt. The execution of interest rate swaps in the derivative market at a constant spread to LIBOR, in effect converting fixed-rate assets and debt to conventional adjustable-rate instruments tied to LIBOR, is also a factor. Income earned from assets funded by member capital and retained earnings, which are non-interest bearing, is another important consideration for the FHLBNY.

35

The following tables summarize key changes in the components of net interest income (dollar amounts in thousands):

	Three months ended
	June 30,
					Dollar			Percentage
	2006		2005		Variance			Variance
Interest Income
Advances	$	805,165	$	516,446	$	288,719			55.90	%
Investments		245,585		215,266		30,319			14.08	%
Mortgage loans held-for-portfolio		18,728		16,713		2,015			12.06	%
Other		—		9		(9	)		-100.00	%
Total interest income	$	1,069,478	$	748,434	$	321,044			42.90	%
Interest Expense
Consolidated obligations	$	932,771	$	637,652	$	295,119			46.28	%
Other		21,484		16,402		5,082			30.98	%
Total interest expense	$	954,255	$	654,054	$	300,201			45.90	%
Net interest income before provision for credit losses	$	115,223	$	94,380	$	20,843			22.08	%

	Six months ended
	June 30,
					Dollar			Percentage
	2006		2005		Variance			Variance
Interest Income
Advances	$	1,506,941	$	975,209	$	531,732			54.52	%
Investments		472,322		408,005		64,317			15.76	%
Mortgage loans held-for-portfolio		37,586		32,728		4,858			14.84	%
Other		5		18		(13	)		-70.12	%
Total interest income	$	2,016,854	$	1,415,960	$	600,894			42.44	%
Interest Expense
Consolidated obligations	$	1,762,349	$	1,194,950	$	567,399			47.48	%
Other		36,042		29,185		6,857			23.50	%
Total interest expense	$	1,798,391	$	1,224,135	$	574,256			46.91	%
Net interest income before provision for credit losses	$	218,463	$	191,825	$	26,638			13.89	%

Reported net interest income after provisions for credit losses of $115.2 million for the second quarter in 2006 was up 22.0% compared to $94.4 million for the comparable quarter in 2005. For the six months ended June 30, 2006, net interest income was ahead by 13.9% over the same period in 2005.

Second quarter 2006 net interest income continued to benefit from maturing advances being replaced by new advances at new pricing initiated during 2004. In a rising interest rate environment, deployment of capital, retained earnings and net non-interest bearing liabilities, defined as deployed capital, provided the FHLBNY with significant income. On average, $4.4 billion in deployed capital earned an average estimated yield of 5.11%, the overall reported yield on interest-earning assets, compared to a similar yield

36

of 3.54% for the comparable period in 2005 on a higher average deployed capital of $5.1 billion. As a result, in the three months ended June 30, 2006, deployed capital made a stronger contribution to net interest income compared to the same period in 2005. New acquisitions of mortgage-backed securities (“MBS”), to replace paydowns of MBS as well as to increase the held-to-maturity portfolio, have been at higher coupons in a rising rate environment. The impact of the general increase in the interest rate environment has also increased the cost of debt. However, because of improved execution of debt issuances on a swapped basis, the increase has been restrained. For the three months ended June 30, 2006, the overall yield on interest-yielding assets has increased by 157 basis points. In contrast, during the same period, the increase in the cost of debt, on a swapped out basis, has increased by only 152 basis points. Interest income included advance prepayment fees of $5.5 million and $5.9 million for the three and six months ended June 30, 2006, and $0.1 million and $6.3 million for the comparable periods in 2005. The FHLBNY charges a prepayment fee when certain advances are prepaid before their contractual maturity dates or their contractual optional prepayment dates. The FHLBNY generally requires advances with a maturity or repricing period greater than six months to carry a fee sufficient to make the Bank financially indifferent to the borrower’s decision to prepay the advances. Prepayment fees associated with hedged advances are recorded in interest income after adjusting for the fair value of hedged advances.

Spread/Yield Analysis

The following table summarizes certain information about average balances of the FHLBNY’s assets and liabilities and their related yields and cost for the three months ended June 30, 2006 and 2005. 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.

	Three months ended
	June 30, 2006							June 30, 2005
			Interest							Interest
	Average		Income/					Average		Income/
(dollars in millions)	Balance		Expense		Rate			Balance		Expense		Rate
Earning Assets:
Advances	$	64,337	$	805		5.07	%	$	64,269	$	516		3.26	%
Interest-earning deposits		5,704		69		4.91	%		5,279		40		3.06	%
Federal funds sold		3,038		38		5.07	%		2,781		21		3.01	%
Investments		10,232		138		5.47	%		11,992		155		5.24	%
Mortgage loans and other loans		1,458		19		5.29	%		1,352		17		5.01	%
Total interest-earning assets	$	84,769	$	1,069		5.11	%	$	85,673	$	749		3.54	%
Funded By:
Consolidated obligations	$	78,523	$	933		4.82	%	$	78,285	$	638		3.30	%
Interest-bearing deposits and other borrowings		1,846		21		4.61	%		2,324		16		2.85	%
Total interest-bearing liabilities		80,369		954		4.81	%		80,609		654		3.29	%
Capital and other non-interest bearing funds		4,400		—					5,064		—
Total Funding	$	84,769	$	954				$	85,673	$	654
Net Interest Spread			$	115		0.303	%			$	95		0.252	%
Net Interest margin
(Net interest income/earning assets)						0.553	%						0.447	%

37

The following table summarizes certain information about average balances of the FHLBNY’s assets and liabilities and their related yields and cost for the six months ended June 30, 2006 and 2005.

	Six months ended
	June 30, 2006							June 30, 2005
			Interest							Interest
	Average		Income/					Average		Income/
(dollars in millions)	Balance		Expense		Rate			Balance		Expense		Rate
Earning Assets:
Advances	$	63,432	$	1,507		4.79	%	$	65,070	$	975		3.02	%
Interest-earning deposits		6,317		146		4.66	%		4,519		63		2.82	%
Federal funds sold		2,434		58		4.81	%		2,551		35		2.77	%
Investments		9,976		268		5.42	%		12,185		310		5.13	%
Mortgage loans and other loans		1,461		38		5.25	%		1,304		33		5.06	%
Total interest-earning assets	$	83,620	$	2,017		4.86	%	$	85,629	$	1,416		3.33	%
Funded By:
Consolidated obligations	$	77,546	$	1,762		4.58	%	$	78,200	$	1,195		3.08	%
Interest-bearing deposits and other borrowings		1,628		36		4.46	%		2,287		29		2.57	%
Total interest-bearing liabilities		79,174		1,798		4.58	%		80,487		1,224		3.07	%
Capital and other non-interest bearing funds		4,446		—					5,142		—
Total Funding	$	83,620	$	1,798				$	85,629	$	1,224
Net Interest Spread			$	219		0.284	%			$	192		0.268	%
Net Interest margin
(Net interest income/earning assets)						0.527	%						0.452	%

38

Rate and Volume Analysis

The Rate and Volume Analysis exhibits changes in interest income, interest expense, and net interest income that are due to changes in volumes and rates. The following tables present the extent to which changes in interest rates and changes in the volume of interest-earning assets and interest-bearing liabilities affected the FHLBNY’s interest income and interest expense during the three and six months ended June 30, 2006 and 2005.

	Three months ended
	June 30, 2006 vs. June 30, 2005
	Increase (decrease)
(dollars in millions)	Volume			Rate		Total
Interest Income
Advances	$	.5		$	288.2	$	288.7
Interest-earning deposits		3.2			26.6		29.8
Federal funds sold		1.9			15.1		17.0
Investments		(22.8	)		6.3		(16.5	)
Mortgage loans		1.3			.7		2.0
Total interest income		(15.9	)		336.9		321.0
Interest Expense
Consolidated obligations		1.9			293.3		295.2
Deposits and borrowings		(3.4	)		8.4		5.0
Total interest expense		(1.5	)		301.7		300.2
Changes in Net Interest Income	$	(14.4	)	$	35.2	$	20.8

	Six months ended
	June 30, 2006 vs. June 30, 2005
	Increase (decrease)
(dollars in millions)	Volume			Rate			Total
Interest Income
Advances	$	(24.6	)	$	556.3		$	531.7
Interest-earning deposits		25.1			57.9			83.0
Federal funds sold		(1.5	)		24.5			23.0
Investments		(56.2	)		14.6			(41.6	)
Mortgage loans		5.4			(.6	)		4.8
Total interest income		(51.8	)		652.7			600.9
Interest Expense
Consolidated obligations		(10.0	)		577.4			567.4
Deposits and borrowings		(8.3	)		15.2			6.9
Total interest expense		(18.3	)		592.6			574.3
Changes in Net Interest Income	$	(33.5	)	$	60.1		$	26.6

While balance sheet aggregate assets increased to $90.2 billion at June 30, 2006, the increases were mainly concentrated towards the close of the current quarter; average asset balances for the three and six months ended June 30, 2006 lagged behind the averages during the comparable periods in 2005. Average total assets for the six months ended June 30, 2006 were $84.3 billion, compared to $86.1 billion during the comparable period in 2005. Lower asset balances in 2006 were largely related to decline in advances during the second half of 2005, with $61.9 billion in reported advances at the start of 2006. From that low base at the start of 2006, advances have gradually increased through 2006, with a very strong growth

39

in the closing weeks of June 2006. Balance sheet leverage, defined as the ratio of total assets to shareholders’ equity, was lower during most of 2006 through reduced holdings of short-term money market investments in certificates of deposits and federal funds sold, as member demand for short-term liquidity was soft during the last two quarters, compared to comparable periods in 2005. Historically, the FHLBNY has maintained liquid funds as a means to ensure members’ borrowing needs. Acquisition of MBS to replace paydowns and maturing MBS as well as to grow the held-to-maturity portfolio have been restrained during most of 2006 as management did not believe that the then existing market conditions were favorable. Conditions improved during the close of the current quarter and acquisitions of high-quality Agency-issued MBS have increased the MBS portfolio of held-to-maturity securities to $10.1 billion at June 30, 2006. Investments in held-to-maturity state and local housing finance agency bonds were allowed to decline to $0.7 billion at June 30, 2006.

Reported yields with respect to advances and debt do not necessarily equal the coupons on the instruments. The FHLBNY uses derivatives extensively to change the yield and optionality characteristics of the underlying hedged items. When fixed-rate debt is issued by the FHLBNY and hedged with an interest rate swap, it effectively converts the debt into a simple floating-rate bond, typically resulting in funding at an advantageous price. Similarly, the FHLBNY makes fixed-rate advances to members and may hedge the advance with a pay-fixed, receive-variable interest rate swap that effectively converts the fixed-rate asset to one that floats with prevailing LIBOR rates.

The following table summarizes the impact of interest rate swaps on gross interest income and interest expense for the three and six months ended June 30, 2006 and 2005 (in thousands):

	Three months ended					Six months ended
	June 30,					June 30,
	2006		2005			2006		2005
Interest Income
Gross interest income before adjustment for interest rate swaps	$	1,018,977	$	861,792		$	1,954,136	$	1,680,920
Net interest adjustment for interest rate swaps		50,501		(113,358	)		62,718		(264,960	)
Total interest income reported	$	1,069,478	$	748,434		$	2,016,854	$	1,415,960
Interest Expense
Gross interest expense before adjustment for interest rate swaps	$	882,157	$	656,047		$	1,673,842	$	1,254,541
Net interest adjustment for interest rate swaps		72,098		(1,993	)		124,549		(30,406	)
Total interest expense reported	$	954,255	$	654,054		$	1,798,391	$	1,224,135

40

Non-Interest Income

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

	Three months ended						Six months ended
	June 30,						June 30,
	2006			2005			2006			2005
Other income (loss):
Service fees	$	855		$	1,048		$	1,662		$	2,188
Net realized and unrealized gain (loss) on derivatives and hedging activities		7,037			(5,386	)		5,100			(4,331	)
Losses from extinguishment of debt and other		(4,245	)		(1,432	)		(4,240	)		(5,186	)
Total other income (loss)	$	3,647		$	(5,770	)	$	2,522		$	(7,329	)

Service fees were derived primarily from providing correspondent banking services to members, and fees earned on standby letters of credit.

Net realized and unrealized gains and losses from hedging activities were typically determined by changes in the interest rate environment and the degree of ineffectiveness of hedging relationships between the change in the fair value of derivatives and change in the fair value of the hedged assets and liabilities attributable to changes in interest rates. In aggregate, the FHLBNY recorded net realized and unrealized gains of $7.0 million, and $5.1 million for the three and six months ended June 30, 2006, compared to a loss of $5.4 million, and $4.3 million in the three and six months ended June 30, 2005. Net gain of $7.0 million from hedging activities for the three months ended June 30, 2006, primarily represented changes in fair value basis adjustments from the refinement of its fair value estimation process for hedged consolidated bonds.

During the three months ended June 30, 2006, the FHLBNY retired $248.0 million of consolidated obligation debt at a cost that exceeded book value by $4.3 million. No debt was retired in the first quarter of 2006. During the three and six months ended June 30, 2005, the FHLBNY retired $40.0 million and $114.5 million of consolidated obligation debt at a cost that exceeded book value by $1.5 million and $5.3 million, respectively. Debt retired was principally associated with prepayments of MBS and advances.

Non-Interest Expense

Operating expenses include the administrative and overhead costs of operating the Bank and operating costs of providing advances, managing the investment portfolios, and providing correspondent services. The FHLBanks fund the costs 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 assessed the operating expenses of the Finance Board, the regulator of the FHLBanks, with complete control of its operating expenses.

41

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

	Three months ended				Six months ended
	June 30,				June 30,
	2006		2005		2006		2005
Other expenses:
Operating	$	15,195	$	14,337	$	30,669	$	28,989
Finance Board and Office of Finance		993		1,376		2,274		2,897
Total other expenses	$	16,188	$	15,713	$	32,943	$	31,886

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

	Three months ended				Six months ended
	June 30,				June 30,
	2006		2005		2006		2005
Salaries and employee benefits	$	9,526	$	9,380	$	19,563	$	18,876
Occupancy		1,006		867		1,894		1,725
Depreciation and leasehold amortization		1,020		1,035		2,039		2,070
Computer service agreements and contractual services		992		728		2,607		2,083
Professional fees		909		796		1,105		1,324
Legal		214		244		428		490
Other		1,528		1,287		3,033		2,421
Total operating expenses	$	15,195	$	14,337	$	30,669	$	28,989

Staff additions in financial reporting, general increases in salaries, payroll and medical costs were the primary causes of the increases in salaries and employee benefits expenses.

Assessments

Each FHLBank is required to set aside a portion of earnings to fund its Affordable Housing Program and to satisfy its Resolution Funding Corporation assessment. These are more fully described under the section “Tax Status” in Notes to Financial Statements.

For the three and six months ended June 30, 2006, the FHLBNY accrued $18.9 million and $34.5 million towards its expense obligations to the Resolution Funding Corporation, compared to accruals of $13.4 million and $28.2 million in the comparable period in 2005. The Affordable Housing Program accrual expense was $8.4 million and $15.4 million for the three and six months ended June 30, 2006, compared to $6.0 million and $12.7 million for the comparable period in 2005. Assessments are analogous to a tax on income and the increase reflects the increase in pre-assessment income for the three and six months ended June 30, 2006 compared to the same period in 2005.

42

Financial Position — Assets, Liabilities and Shareholders’ Capital

Total balance sheet assets at June 30, 2006 stood at $90.2 billion, up $5.2 billion from $85.0 billion at December 31, 2005. Interest-bearing deposits, comprised principally of short-term certificates of deposits held by highly-rated financial institutions, were down to $6.6 billion at June 30, 2006, compared to $8.7 billion at December 31, 2005. Investments in Federal funds, mainly overnight, were $3.4 billion at June 30, 2006, up from $2.9 billion at December 31, 2005. The FHLBNY has begun to selectively increase its acquisition of MBS to increase its held-to-maturity portfolio, and to replace paydowns and maturing securities. Investments in MBS increased to $10.1 billion at June 30, 2006, compared with $9.1 billion at March 31, 2006 and $8.6 billion at December 31, 2005, an indication of the selective nature of acquisitions of MBS. Outstanding investments in state and housing bonds have declined to $0.7 billion, down from $1.0 billion at December 31, 2005, and are reported as held-to-maturity securities in the Statements of Condition.

Reported book value of advances was $67.3 billion at June 30, 2006, up from $61.9 billion at December 31, 2005. Reported book value at June 30, 2006 included a basis adjustment of $339.9 million, representing unrealized fair value losses, compared to an unrealized gain of $207.7 million at December 31, 2005. Unrealized gains and losses represent changes in the fair values of hedged advances under the provisions of hedge accounting rules. Par amount of advances, a better measure of demand, was $67.6 billion at June 30, 2006, up from $61.7 billion at December 31, 2005. Demand for advances, measured in par amounts, has averaged $64.5 billion during the second quarter in 2006, and $63.5 billion, on a six-month average basis in 2006.

The FHLBNY continued to rely primarily on consolidated obligation bonds and discount notes to fund its assets. Bonds at June 30, 2006 funded 65.6% of assets, and discount notes funded 26.1%; the comparable percentages at December 31, 2005 were 66.8% for bonds and 24.1% for discount notes, indicative of a virtually unchanged funding strategy.

Mandatorily redeemable capital, representing mainly activity-based capital stock in support of advances held by non-members, aggregated $18.2 million at June 30, 2006, almost unchanged from December 31, 2005. Two members were acquired by non-members during the six months ended June 30, 2006, and capital stock aggregating $14.2 million was reclassified to a liability. These additions to mandatorily redeemable capital were offset by redemption of excess stock of all non-members when their advance borrowings matured or prepaid during the six months ended June 30, 2006. Excess activity stock of non-members and members are redeemed daily. Excess membership stock and membership stock held by non-members are typically redeemed annually.

Capital stock at June 30, 2006 stood at $3.9 billion, up from $3.6 billion at December 31, 2005. There was no excess stock at June 30, 2006 or at December 31, 2005. Retained earnings grew to $336.6 million at June 30, 2006, up from $291.4 million at December 31, 2005.

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Advances

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

Advances – By type

The following table summarizes advances by product types (dollars in thousands):

	June 30, 2006					December 31, 2005
			Percentage					Percentage
	Amounts		of total			Amounts		of total
Adjustable Rate Credit — ARCs	$	13,737,179		20.32	%	$	13,545,279		21.95	%
Fixed Rate Advances		29,396,503		43.48	%		25,652,854		41.58	%
Repurchase (Repo) Agreement		14,165,278		20.95	%		15,564,415		25.23	%
Short-Term Advances		7,428,290		10.99	%		4,163,555		6.75	%
Mortgage Matched Advances		855,983		1.27	%		913,534		1.48	%
Overnight Line of Credit (OLOC) Advances		1,905,975		2.82	%		1,751,168		2.84	%
All other categories		118,687		0.17	%		102,502		0.17	%
Total par value of advances	$	67,607,895		100.00	%	$	61,693,307		100.00	%

Demand for Repo advances and short-term fixed-rate advances fluctuates with members’ needs for short-term funding, the availability of collateral and competitive pricing. Repo advances are collateralized by eligible securities, which are typically mortgage-backed securities, Agency-issued debentures, and U.S. Treasury securities. Repo advances may be structured as “bullets” or with a put option by which the FHLBNY may put the advance after a predetermined lockout period. During the first half of 2006, member demand for Repo advances was generally weak. The largest component of the decline in the Repo advance category was Repo convertible with the put feature as members chose not to replace advances that were put or matured with new Repo convertible funding.

During most of the six months ended June 30 2006, member appetite for short-term, fixed-rate advances remained soft, averaging $3.0 billion in the first quarter of 2006, and $4.3 billion in the second quarter of 2006, compared to the outstanding amount at December 31, 2005 of $4.2 billion. In June 2006, demand was strong and member borrowings raised the amount outstanding to $7.4 billion, an increase of $3.2 billion over the balance at December 31, 2005. Most of the increase was due to the actions of a single member that chose to re-position its wholesale borrowings away from Repo borrowings from the FHLBNY and other sources into short-term fixed-rate advances. The member’s desire to secure its wholesale borrowings with non-securities collateral was the primary factor in the change.

During most of the six months ended June 30, 2006, Adjustable-Rate Credit Advances (“ARC Advances”) have been at the $14.2 billion level, compared to the December 31, 2005 balance of $13.5 billion. This category declined in the month of June 2006 to end the second quarter of 2006 at $13.7 billion. ARC advances are medium- and long-term lending and are typically indexed to LIBOR or Federal funds rates. Approximately $1.0 billion of ARC advances have terms of less than a year, and reprice daily at a rate that is indexed to overnight Federal funds rates. Demand for LIBOR and Federal funds indexed advances has been stable during most of 2006.

Demand for Fixed Rate advances was strong during both quarters of 2006 and the outstanding amounts have steadily increased from $25.7 billion at December 31, 2005 to $29.4 billion at June 30, 2006, an increase of $3.7 billion. Within this category, the largest increase was in member demand for fixed-rate putable advances. Fixed-rate, putable advances are competitively priced where the FHLBNY has purchased the option from the member to put the advance back to borrowers (members) at predetermined exercise dates. This feature lowers the members’ cost of the advance. These advances are known as

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“convertible” or “putable” advances. Growth in putable advances is largely attributable to the borrowing preference of a small number of members that are experiencing strong asset growth.

On March 12, 2006, Capital One Financial Corporation (“Capital One”) and North Fork Bankcorporation, Inc (“North Fork”) announced a definitive agreement under which Capital One will acquire North Fork. Capital One is a holding company of certain financial institutions that are members of other FHLBanks. North Fork is a member of the FHLBNY.

Under Finance Board rules, when North Fork is acquired by Capital One and if its charter is dissolved, North Fork will be considered a non-member for the purpose of being eligible for additional borrowings. The FHLBNY may not advance additional funds to North Fork, but may allow existing advances to mature or be liquidated in an orderly manner. Under that scenario, the accounting provisions of SFAS 150 will require the FHLBNY to reclassify to a liability stock held by North Fork. The FHLBNY has not yet determined if North Fork will continue to operate within its existing charter. At June 30, 2006, the par amount of advances outstanding to North Fork aggregated $7.7 billion; interest income derived from North Fork amounted to $67.2 million and $117.0 million for the three and six months ended June 30, 2006. Capital stock held by North Fork at June 30, 2006 aggregated $425.4 million.

Investments

The FHLBNY acquires investments authorized by Finance Board policies and regulations, and it maintains substantial investments in high-quality, short- and intermediate-term financial instruments. At June 30, 2006 and December 31, 2005, the FHLBNY’s investments consisted of investment securities classified as held-to-maturity, interest-bearing deposits, bank certificates of deposits, and Federal funds sold. During 2005, the FHLBNY also had an available-for-sale portfolio comprising of variable rate mortgage-backed securities, all of which were sold in 2005, and there were no outstanding securities in the available-for-sale portfolio at June 30, 2006 or December 31, 2005.

The following table summarizes changes in investment by category (including held-to-maturity securities) between December 31, 2005 and June 30, 2006 (dollars in thousands):

					Dollar			Percentage
	June 30, 2006		December 31, 2005		Variance			Variance
State and local housing agency obligations	$	665,809	$	992,578	$	(326,769	)		-32.92	%
Mortgage-backed securities		10,134,911		8,573,863		1,561,048			18.21	%
Total investment securities		10,800,720		9,566,441		1,234,279			12.90	%
Interest-bearing deposits		6,624,713		8,699,107		(2,074,394	)		-23.85	%
Federal funds sold		3,354,000		2,925,000		429,000			14.67	%
Total investments	$	20,779,433	$	21,190,548	$	(411,115	)		-1.94	%

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Held-to-maturity Securities

Mortgage-backed securities (“MBS”) constituted the predominant component of the held-to-maturity securities. All mortgage-backed securities were rated triple-A by a nationally recognized statistical rating organization. Management did not believe market conditions and pricing of MBS during most of 2006 were favorable and acquisitions were restrained and selective as it elected instead to grow the held-to-maturity portfolio of MBS moderately. Market conditions for acquisition have improved during the end of the second quarter and provided the opportunity for adding, high-quality, Agency-issued MBS. The mortgage-backed securities portfolio stood at $10.1 billion at June 30, 2006, up from $8.6 billion at December 31, 2005.

Limits for adding to the MBS portfolio to the FHLBNY’s assets are defined by Finance Board regulations. While the Finance Board regulations allow the FHLBNY to purchase MBS up to 300% of capital, the FHLBNY decided to forgo the relatively higher income stream from MBS and opted instead to take a conservative posture with respect to acquisition of mortgage- and asset-backed securities. MBS as a percentage of capital, as defined by Finance Board regulations, stood at 247% at June 30, 2006 compared to 220% at December 31, 2005, well within the 300% limit. Average outstanding MBS during the six months ended June 30, 2006 has been $9.1 billion, compared to the outstanding balance of $8.6 billion at December 31, 2005.

The FHLBNY’s remaining held-to-maturity investments at June 30, 2006 consisted of $665.8 million in housing-related obligations of state and local governments and their housing agencies. The outstanding balance was down from $992.6 million at December 31, 2005. These obligations carried a rating of double-A or higher.

Estimated fair values of mortgage-backed securities in an unrealized loss position were below book value at June 30, 2006 and December 31, 2005 by $278.9 million and $125.8 million, respectively. These unrealized losses were partially offset by securities in an unrealized gain position aggregating $26.8 million and $72.9 million at June 30, 2006 and December 31, 2005, respectively. The fair value of held-to-maturity mortgage-backed securities, which are primarily fixed-rate securities at June 30, 2006 and December 31, 2005, is based on securities dealers’ market values or derived from quoted market prices of similar mortgage loans. Substantially, all of the state and local housing agency bonds were in an unrealized gain position at June 30, 2006 and December 31, 2005. Fair values of fixed-rate securities are affected by changes in market interest rates. The FHLBNY conducts a review and evaluation of the securities portfolio to determine if the decline, if any, in the fair value of any security below its carrying value is other than temporary. The FHLBNY generally views changes in fair value caused by changes in interest rates as temporary, which is consistent with the FHLBNY’s experience. The FHLBNY has both the intent and financial ability to hold the temporarily impaired securities until recovery of their value.

Investments in short-term and overnight assets

Money-market investments—At June 30, 2006, interest-bearing deposits included investments in certificates of deposits, all maturing within twelve months, totalled $6.6 billion, down from $8.7 billion at December 31, 2005. Federal funds sold at June 30, 2006 stood at $3.4 billion, up from $2.9 billion at December 31, 2005. The FHLBNY maintains a significant portfolio of highly liquid Federal funds as a means to ensure liquidity for its members borrowing needs. Historically, the FHLBNY has been a major provider of Federal funds, allowing the FHLBNY to warehouse and provide balance sheet liquidity to meet unexpected member borrowing demands. Both short- and long-term investments are also used by the FHLBNY to generate additional returns on capital for its members.

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Cash collateral pledged—Cash deposits pledged by the FHLBNY to derivative counterparties declined in parallel with the decline in the fair value exposure of FHLBNY’s derivatives positions to derivatives counterparties at June 30, 2006. The pledged balances, all interest-earning cash deposits, were $7.5 million at June 30, 2006 compared to $244.8 million at December 31, 2005.

Mortgage Loans Held-for-Portfolio

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

	June 30, 2006						December 31, 2005
	2006			Percentage			2005			Percentage
Real Estate:
Fixed medium-term single-family mortgages	$	595,742			41.0	%	$	596,236			40.8	%
Fixed long-term single-family mortgages		850,612			58.5	%		853,738			58.5	%
Multi-family mortgages		6,846			0.5	%		6,859			0.5	%
Non-residential mortgages		—			—			2,713			0.2	%
Total par value		1,453,200			100.0	%		1,459,546			100.0	%
Net unamortized premiums		13,789						14,789
Net unamortized discounts		(6,452	)					(6,381	)
Basis adjustment		(347	)					(429	)
Total mortgage loans held-for-portfolio		1,460,190						1,467,525
Allowance for credit losses		(583	)					(582	)
Total mortgage loans held-for-portfolio after allowance for credit losses	$	1,459,607					$	1,466,943

The total portfolio of mortgage loans comprised principally of investments in Mortgage Partnership Finance loans (“MPF”). Community Mortgage Asset loans (“CMA”), which has not been active since 2001 and has declined steadily over time, aggregated $6.8 million and $9.7 million at June 30, 2006 and December 31, 2005, respectively. During the three months ended June 30, 2006, the FHLBNY added $45.0 million in new MPF loans, compared with $28.9 million in the first quarter of 2006. Paydowns of all loans, including CMA, were $38.9 million during the first quarter of 2006 compared with $41.6 million for the three months ended June 30, 2006. The FHLBNY does not expect the MPF loans to increase substantially, and provides this product to its members as another alternative for members to sell their mortgage production.

Deposit Liabilities

Member deposits —At June 30, 2006, the FHLBNY’s deposit liabilities were comprised of demand and other term deposits predominantly from members with the remainder from eligible entities. Deposits at June 30, 2006 aggregated $2.2 billion, compared to $2.7 billion at December 31, 2005. Member deposit balances are typically higher at quarter-end dates. The average demand deposit balances for the first and the second quarter in 2006 were $1.4 billion and $1.8 billion.

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 re-price daily based upon rates prevailing in the overnight Federal funds market. Members’ liquidity preferences are the primary determinant of the level of deposits.

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Cash collateral held —Cash collateral pledged to the FHLBNY by derivatives counterparties at June 30, 2006 was $127.6 million compared to $7.3 million at December 31, 2005. Derivatives counterparties are required by agreement to pledge to the FHLBNY collateral to cover the Bank’s credit exposure, in the event of counterparty default, of all derivatives in an unrealized gain position. The increase in the pledged balances reflects the corresponding increase in the net unrealized gain position of certain derivative contracts with derivatives counterparties.

Consolidated Obligations

The reported carrying value of hedged consolidated debt is adjusted for changes in their fair value basis adjustments that are attributable to the risk being hedged in accordance with hedge accounting rules. Amounts reported for consolidated obligation debt in the Statements of Condition included hedging fair value basis adjustments of $525.8 million in unrealized gains at June 30, 2006, compared to $375.9 million at December 31, 2005. 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. The fair value basis typically shows market value gains when interest rates rise. Unrealized gains associated with hedged debt were almost entirely offset by unrealized losses associated with the interest rate swaps that hedged the consolidated obligation bonds at June 30, 2006 and December 31, 2005. At June 30, 2006 and December 31, 2005 there were no consolidated obligation discount notes that were hedged, although during 2005, the FHLBNY management executed discount note hedges from time to time in amounts that were not significant.

Consolidated obligation bonds – types

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

	June 30, 2006			December 31, 2005
Fixed-rate, Non-callable	$	35,607,400		$	34,113,135
Fixed-rate, callable		17,619,000			15,687,300
Step Up, callable		5,593,000			6,443,000
Single-index floating rate		870,200			875,000
Total par		59,689,600			57,118,435
Bond premiums		28,900			48,547
Bond discounts		(23,956	)		(19,244	)
SFAS 133 fair value adjustments		(525,757	)		(375,885	)
Deferred net gains on terminated hedges		(2,487	)		(3,231	)
Total carrying value	$	59,166,300		$	56,768,622

The Bank’s funding strategy has remained unchanged.

• The FHLBNY continued to fund its assets through the use of consolidated obligation bonds and to a lesser extent by consolidated obligation discount notes. Par amounts of consolidated obligation bonds, unadjusted for changes in fair values, aggregated $59.7 billion at June 30, 2006, compared with $57.1 billion at December 31, 2005. Principal amount of discount notes outstanding, representing amortized cost, aggregated $23.6 billion at June 30, 2006 compared to $20.5 billion at December 31, 2005. On a reported basis, including fair value basis adjustments,

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	together, they financed 91.7% of the $90.2 billion in total assets at June 30, 2006. The comparable financing ratio was 90.9% at December 31, 2005.
•	Consolidated obligation bonds issued and outstanding at June 30, 2006 and December 31, 2005 were primarily fixed-rate debt. However, the FHLBNY makes extensive use of derivatives to restructure interest rates on consolidated obligation bonds, both callable and non-callable, to better match its members’ funding needs, and also reduce funding costs. The FHLBNY converts at the time of issuance, certain simple fixed-rate bullet and callable bonds into a floating-rate bond with the simultaneous execution of interest rate swaps that will convert the cash flows of the fixed-rate bond to conventional adjustable rate instruments tied to an index, typically LIBOR. Of the par amount of $59.7 billion of bonds outstanding at June 30, 2006, the aggregate notional amount of swapped out debt stood at $41.5 billion, or 69.5% of total par amount of consolidated obligation debt. The comparable amount of hedged debt at December 31, 2005 was $38.1 billion, or 66.7%. The FHLBNY also 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. Typically, callable bonds are hedged by an offsetting derivative with a mirror-image call option with identical terms.
•	The funding mix between the use of fixed-rate non-callable and callable debt has been relatively stable. At June 30, 2006, callable, fixed-rate bonds constituted $17.6 billion, or 29.5% of par value of bonds, compared to $15.7 billion, or 27.5% at December 31, 2005. Callable debt and the associated interest rate swap provided funding for short-term assets. Call options on swapped bonds are typically exercised when the swap counterparty exercises its call option on the swap. Call options on unswapped bonds are generally exercised when the bond can be replaced at a lower economic cost. Thus, the issuance of a callable swap significantly alters the contractual maturity characteristics of the original bond and introduces the possibility of an exercise call date that will be significantly shorter than the contractual maturity.
•	The FHLBNY may also attempt to issue callable debt 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, it is also likely that the call exercise feature of callable debt will also 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.

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Consolidated Obligation bonds by maturity

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

	June 30, 2006						December 31, 2005
				Weighted						Weighted
				Average						Average
Maturity	Amount			Rate			Amount			Rate
1 year or less	$	24,770,155			4.13	%	$	21,715,080			3.57	%
over 1 year through 2 years		17,976,825			4.27	%		15,632,185			3.83	%
over 2 years through 3 years		8,576,570			4.33	%		11,266,170			4.19	%
over 3 years through 4 years		3,036,200			4.41	%		2,690,100			4.06	%
over 4 years through 5 years		1,906,000			4.91	%		2,250,700			4.35	%
over 5 years through 6 years		765,250			4.73	%		931,500			4.56	%
Thereafter		2,658,600			5.21	%		2,632,700			5.09	%
Total par value		59,689,600			4.30	%		57,118,435			3.90	%
Bond premiums		28,900						48,547
Bond discounts		(23,956	)					(19,244	)
SFAS 133 fair value adjustments		(525,757	)					(375,885	)
Deferred net gains on terminated hedges		(2,487	)					(3,231	)
Total carrying value	$	59,166,300					$	56,768,622

The contractual maturity profile of the consolidated obligation debt outstanding at June 30, 2006 has not changed significantly from December 31, 2005. Par amount of bonds maturing within the next three years represented 86.0% of the total par amount of all bonds outstanding at June 30, 2006, compared to 85.1% at December 31, 2005.

Discount notes

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

					Weighted
	Book		Par		Average
	Value		Value		Interest Rate
June 30, 2006	$	23,552,353	$	23,670,902		5.02	%
December 31, 2005	$	20,510,525	$	20,651,191		4.05	%

Discount notes, which have maturities of one year or less, were mostly utilized in funding short-term advances, some long-term advances as well as investments and money market investments.

Compared to most of 2005, the relative use of the short-term, discount notes as a funding vehicle had continued to decline, particularly in the first quarter of 2006, but has grown in importance in the second quarter of 2006. The discount note financing ratio, defined as the ratio of reported book value of discount notes to total assets at June 30, 2006 was 26.2%, compared to 24.1% at December 31, 2005.

The average amounts of discount notes outstanding for the six months ended June 30, 2006 aggregated $19.1 billion, compared to the average for the year ended December 31, 2005 of $20.7 billion. Total

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average assets were $84.3 billion during the six months ended June 30, 2006, compared to an average of $85.3 billion for all of 2005. The relative decrease in usage reflected comparative pricing of discount notes relative to alternative short-term funding sources, such as the issuance of callable debt with an associated interest rate derivative with matching terms. The importance of the instrument in day-to-day funding operations is best illustrated by measuring the annual cash flows generated by discount note issuances. For the six months ended June 30, 2006, the FHLBNY issued $299.4 billion and retired $296.3 billion in discount notes. In the same period, cash flows from issuance of consolidated obligation bonds were only $16.5 billion. Contrasting transaction volumes between bonds and discount notes provide an indication that discount notes continue to be an important source of short-term funding.

Mandatorily Redeemable Stock

The FHLBNY’s capital stock is redeemable at the option of both the member and the FHLBNY subject to certain conditions.

At June 30, 2006, total mandatorily redeemable stock was $18.2 million, almost unchanged from $18.1 million at December 31, 2005. These balances represented stocks held by non-members and former members who are no longer members by virtue of being acquired by non-members. Such stock will be repaid when the stock is no longer required to support outstanding transactions with the FHLBNY.

During the first six months of 2006, two members were acquired by non-members and capital stock of $14.2 million was reclassified to a liability. In the same period, $14.2 million of stock in excess of collateral requirements was repaid to non-members during the period for maturing advances held by former members. In accordance with Finance Board regulations, non-members cannot renew their advance borrowings at maturity.

The FHLBNY expects $0.3 million of mandatorily redeemable stock to be redeemed in the next twelve months, and virtually all stock within the next five years based on the expected maturity of advances to non-members.

Derivative Instruments

Derivative instruments are important tools that the Bank uses to manage interest rate risk and restructure interest rates on both the debt (consolidated obligations bonds and discount notes) and advances. 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. The FHLBNY does not take speculative positions with derivatives or any other financial instruments, or trade derivatives for short-term profits. Interest income and interest expense from interest rate swaps used for hedging are recorded along with interest on the instrument being hedged. The notional amounts of derivatives are not recorded as assets and liabilities on the balance sheet; rather, the fair value of all derivatives is recorded as either derivative asset or derivative liability on the balance sheet. 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, which the FHLBNY does not do). FHLBNY and derivatives counterparties use notional amounts to calculate cash flows to be exchanged, and the notional amounts are significantly greater than the potential market or credit loss that could result from such transactions. The fair value of derivatives in a gain position is a more meaningful measure of the FHLBNY’s current market exposure on derivatives.

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At June 30, 2006, the notional amount of derivatives outstanding was $79.9 billion, up from $73.3 billion at December 31, 2005, and was primarily attributable to increased members’ use of putable advances, and increased issuance of callable consolidated obligation bonds. Greater volume of callable debt and putable advances required increases in derivatives to hedge associated interest rate risk.

Estimated market value of derivative contracts in a gain position, which represented the FHLBNY’s credit exposure at June 30, 2006, totaled $210.3 million, compared to $19.2 million at December 31, 2005. The FHLBNY mitigates its exposure by requiring derivatives counterparties to pledge cash collateral, if the amount of exposure is above the collateral threshold agreements. Derivatives counterparties had pledged cash to the FHLBNY of $127.6 million and $7.3 million at June 30, 2006 and December 31, 2005, respectively.

Estimated market value of derivative liabilities, representing unrealized derivatives loss positions, which represented the net exposure of the FHLBNY to swap counterparties, aggregated $170.1 million and $491.9 million at June 30, 2006 and December 31, 2005. In accordance with collateral agreements with swap counterparties, the FHLBNY had pledged cash collateral of $7.5 million and $244.8 million at June 30, 2006 and December 31, 2005 to mitigate the credit exposure of the derivative counterparties.

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Asset Quality

The FHLBNY’s credit risk from advances at June 30, 2006 and December 31, 2005 was concentrated in commercial banks and savings institutions. All advances were fully collateralized. In addition, borrowing members pledge their stock of the FHLBNY as additional collateral for advances. The FHLBNY has not experienced any losses on credit extended to any member since its inception. Based on the collateral held as security and prior repayment history, no allowance for losses is currently deemed necessary.

The following table summarizes the FHLBNY’s loan portfolios (in thousands):

	June 30, 2006		December 31, 2005
Advances	$	67,268,273	$	61,901,534
Mortgage loans held-for-portfolio, net of provision for credit losses	$	1,459,607	$	1,466,943

Mortgage loans held-for-portfolio

Collectibility 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 First Loss Account (“FLA”) memorializes the first tier of credit exposure. The amount of the FLA is not an indication of inherent losses in the loan portfolio, and is not a loan loss reserve. The FHLBNY is responsible for losses up to this “first loss level”. Losses beyond this layer are absorbed through credit enhancement provided by the member participating in the Mortgage Partnership 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 determine the amount of credit enhancement necessary 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				Six months ended
	June 30,				June 30,
	2006		2005		2006		2005
Beginning balance	$	11,443	$	10,123	$	11,318	$	9,336
Additions		192		523		317		1,310
Charge-offs		—		—		—		—
Recoveries		—		—		—		—
Ending balance	$	11,635	$	10,646	$	11,635	$	10,646

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

	Three months ended				Six months ended
	June 30,				June 30,
	2006		2005		2006		2005
Beginning balance	$	582	$	541	$	582	$	507
Charge-offs		—		—		—		—
Recoveries		—		—		—		—
Net charge-offs		—		—		—		—
Provision for credit losses		1		24		1		58
Ending balance	$	583	$	565	$	583	$	565

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 Veteran 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 June 30, 2006 or December 31, 2005. Nonperforming mortgage loans and mortgage loans 90 days or more past due and still accruing were as follows (in thousands):

	June 30, 2006		December 31, 2005
Mortgage loans held-for-portfolio, net of provisions for credit losses	$	1,459,607	$	1,466,943
Nonperforming mortgage loans held-for-portfolio	$	951	$	803
Mortgage loans held-for-portfolio past due 90 days or more and still accruing interest	$	980	$	1,373

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

	Three months ended				Six months ended
	June 30,				June 30,
	2006		2005		2006		2005
Interest contractually due during the period	$	13	$	14	$	15	$	36
Interest actually received		13		14		15		36
Shortfall	$	—	$	—	$	—	$	—
Interest reported as income during the period	$	—	$	—	$	—	$	—

At June 30, 2006, mortgage loans in foreclosure totaled $0.2 million, compared to $0.7 million on December 31, 2005. The FHLBNY does not have any material amounts of real estate owned nor did it take possession of any material amounts of mortgage property during the six months ended June 30, 2006.

54

Securities Impairment

Temporary impairment.There were 63 and 37 securities in a temporarily impaired condition for 12-months or longer at June 30, 2006 and December 31, 2005, representing 32.5% and 22.0% of MBS in terms of the numbers of securities. In terms of the book value at June 30, 2006 and December 31, 2005, the percentage was 37.2% and 29.7%, or $3.8 billion and $2.5 billion, respectively.

Note 2 to the unaudited financial statements summarizes held-to-maturity securities with fair values below their amortized cost, in an unrealized loss position, as of June 30, 2006 and December 31, 2005.

The FHLBNY has both the intent and financial ability to hold the temporarily impaired securities to anticipated recovery of their value. In addition, the FHLBNY has reviewed the investment security holdings and determined, based on creditworthiness of the securities and including any underlying collateral and any insurance provisions of the security, that unrealized losses in the analysis represent temporary impairment at June 30, 2006 and December 31, 2005.

Liquidity

The FHLBNY’s primary source of liquidity is the issuance of consolidated obligations. To refinance maturing consolidated obligations, the FHLBNY relies on the willingness of the investors to purchase new issuance. Member deposits and capital stock purchased by members are another source of funds. Short-term unsecured borrowings from other FHLBanks and in the Federal funds market provide additional sources of liquidity. In addition, the Secretary of the Treasury is authorized to purchase up to $4.0 billion of consolidated obligations. The FHLBNY’s liquidity position remains in compliance with all regulatory requirements and it does not foresee any changes to that position. Violations would invoke non-compliance penalties and corrective actions under discretionary powers given to the Finance Board under applicable regulations.

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:

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 FHLBanks, or from any other governmental instrumentality. The FHLBNY met its requirements at all times.

55

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

	Average Deposit		Average Actual
Quarters ended	Reserve Required		Deposit Liquidity		Excess
June 30, 2006	$	1,976	$	45,797	$	43,821
March 31, 2006		1,378		45,001		43,623
December 31, 2005		1,976		42,602		40,626

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 its requirements at all times.

The following table summarizes excess operational liquidity (in millions):

	Average Balance Sheet		Average
Quarters ended	Liquidity Requirement		Operational Liquidity		Excess
June 30, 2006	$	4,388	$	16,444	$	12,056
March 31, 2006		4,252		17,007		12,755
December 31, 2005		4,314		17,328		13,014

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

The following table summarizes excess contingency liquidity (in millions):

	Average Five Day		Average
Quarters ended	Requirement		Contingency Liquidity		Excess
June 30, 2006	$	2,490	$	14,428	$	11,938
March 31, 2006		3,114		14,797		11,683
December 31, 2005		2,740		15,390		12,650

56

Leverage and unpledged asset to debt requirements

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

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

	June 30, 2006			December 31, 2005
Consolidated Obligations:
Bonds	$	59,166,300		$	56,768,622
Discount Notes		23,552,353			20,510,525
Total consolidated obligations		82,718,653			77,279,147
Unpledged assets
Cash		25,059			22,114
Less: Member pass-through reserves at the FRB		(64,032	)		(47,469	)
Secured Advances		67,268,273			61,901,534
Investments		20,779,433			21,190,548
Mortgage Loans		1,459,607			1,466,943
Other loans		219			320
Accrued interest receivable on advances and investments		399,412			377,254
Less: Pledged Assets		(7,475	)		(244,807	)
		89,860,496			84,666,437
Excess unpledged assets	$	7,141,843		$	7,387,290

Mortgage investment authority

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

	June 30, 2006						December 31, 2005
	Actual			Limits			Actual			Limits
Mortgage securities investment		247	%		300	%		220	%		300	%

57

Proposed Finance Board Rule to Change the Capital Structure of the FHLBanks

On March 15, 2006, the Finance Board published in the Federal Register a proposed rule that, if enacted, would:

• Establish a minimum retained earnings requirement equal to $50 million plus 1.0 % of an FHLBank’s average balance of non-advances assets. (Absent regulatory approval, dividend payments by those FHLBanks not in compliance with the minimum retained earnings requirement will be limited to 50 % of the FHLBank’s quarterly net income. Once a FHLBank achieves compliance with its minimum retained earnings requirement, the payment of dividends will, absent regulatory approval, be prohibited if the FHLBank subsequently falls below the requirement.);

• Require each FHLBank to declare and pay dividends only after the close of the quarter to which the dividend payment pertains and the Bank’s earnings for that quarter have been finalized; Prohibit the payment of dividends by a FHLBank in the form of additional shares of capital stock; and

• Limit excess stock (i.e., the aggregate amount of stock held by members in excess of their minimum investment requirements) to 1.0 % of an FHLBank’s total assets.

Should the proposed regulation be adopted as published, the FHLBNY believes that there will be no substantial effect on the FHLBNY’s financial management, business operations or dividend, or those of its members, for the following reasons:

• On June 30, 2006, the FHLBNY held $336.6 million in retained earnings. Using information regarding average non-advance assets for the fourth quarter of 2005, the FHLBNY estimates that the current retained earnings requirement under the proposed regulation would, if the regulation were to be adopted today, to be in excess of required retained earnings. The FHLBNY believes that it is highly probable that the FHLBNY will continue to meet this component of the proposed regulation in its current form.

• For a number of years, the FHLBNY has been declaring and paying dividends after the close of the quarter to which the dividend payment pertains and the FHLBNY’s earnings for that quarter have been calculated.

• The FHLBNY has never paid a stock dividend.

• The FHLBNY should not be affected by the provisions of the proposed rule pertaining to excess stock because, for some time, the FHLBNY has been redeeming excess activity-based capital stock on a daily basis.

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The credit ratings of the FHLBNY and changes thereof were as follows at June 30, 2006.

Long Term:

	Moody‘s Investors Service		Standard & Poors
Year	Outlook	Rating	Long-Term Outlook			Rating
2002	July 31, 2002 — Affirmed	Aaa/Stable	March 22, 2002	Long Term rating affirmed	outlook stable	AAA/Stable
2003	September 26, 2003 — Affirmed	Aaa/Stable	March 17, 2003	Long Term rating affirmed	outlook stable	AAA/Stable
			August 8, 2003	Long Term rating affirmed	outlook revised to negative	AAA/Negative
			September 26, 2003	Long Term rating downgraded	outlook revised to stable	AA+/Stable
			November 17, 2003	Long Term rating affirmed	outlook stable	AA+/Stable
2004			April 15, 2004	Long Term rating affirmed	outlook stable	AA+/Stable
2005	October 14, 2005 — Affirmed	Aaa/Stable	April 29, 2005	Long Term rating affirmed	outlook stable	AA+/Stable
2006	February 9, 2006 — Affirmed	Aaa/Stable	April 29, 2005	Long Term rating affirmed	outlook stable	AA+/Stable

Short Term:

	Moody‘s Investors Service		Standard & Poors
Year	Outlook	Rating	Short-Term Outlook		Rating
2002	July 31, 2002 — Affirmed	P-1	March 22, 2002	Short Term rating affirmed	A-1+
2003			March 17, 2003	Short Term rating affirmed	A-1+
			August 8, 2003	Short Term rating affirmed	A-1+
			September 26, 2003	Short Term rating affirmed	A-1+
			November 17, 2003	Short Term rating affirmed	A-1+
2004			April 15, 2004	Short Term rating affirmed	A-1+
2005	October 14, 2005 — Affirmed	P-1	April 29, 2005	Short Term rating affirmed	A-1+
2006	February 9, 2006 — Affirmed	P-1	April 29, 2005	Short Term rating affirmed	A-1+

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Item 3. Quantitative and Qualitative Disclosures about Market Risk

Market Risk Management. Market risk, or interest rate risk, is the risk of loss in market value or future earnings that may result from changes in interest rates or market volatility. The FHLBNY’s tolerances for market risk are defined by the Risk Management Policy approved by its Board of Directors. The Risk Management Policy requires that the Bank maintain its duration of equity, or interest rate sensitivity, within a range of +/- five years. The FHLBNY uses option adjusted duration measurements to detail the sensitivity of equity market value and includes all financial instruments, including hedges. The policy also requires that, in simulated environments where market interest rates are increased or decreased by 200 basis points relative to current market rates, the FHLBNY’s duration of equity must remain within a range of +/- seven years. Management actively monitors and evaluates the effects of interest rate and market risk on earnings and on the market value of equity. The shock levels are chosen in accordance with internal policy and regulatory requirements to estimate the effects of significant interest rate changes on the FHLBNY’s market value.

The key elements of the FHLBNY’s strategy for interest rate risk management include (1) matching the cash flow patterns of assets and liabilities through time and under different interest rate scenarios; and (2) actively measuring and managing the balance sheet’s exposure to changes in interest rate levels (and associated spreads) and market volatilities.

Over the three-month period from March 31, 2006 to June 30, 2006, duration of equity increased from 1.16 years to 1.41 years, indicating higher sensitivity to changes in interest rates. The Bank’s risk level remained within the limits of +5/-5 years. The rise in duration is considered minor. Over the six-month period from December 2005 to June 30, 2006, duration rose 0.43 years. As of June 30, 2006, the cumulative one-year gap between assets and liabilities was $3.1 billion, down $43 million from March 2006 and up $537 million from December 2005.

During the period December 31, 2005 to June 30, 2006, the FHLBNY’s market risk profile changed as summarized in Duration of Equity tables in subsequent sections of “Market Risk Management”. They illustrate that the FHLBNY has remained within its policy and regulatory requirements during the period.

The FHLBNY’s funding consists of a combination of short- and long-term debt instruments which do not necessarily have matching interest rate sensitivities with the FHLBNY’s investments. To more closely match the sensitivity, the FHLBNY uses derivative instruments to adjust the effective maturities, repricing frequencies, or option characteristics of the debt in a way that is consistent with the overall risk management objectives of match funding.

The FHLBNY typically enters into interest rate swaps, swaptions and cap and floor agreements (collectively referred to as derivatives). The FHLBNY uses such derivatives in three ways: (1) as fair value or cash flow hedges of an underlying financial instrument or a forecasted transaction; (2) as economic hedges to offset derivative positions (e.g., caps) sold to members; and (3) as tools of asset/liability management. In the context of its asset/liability management strategy, the FHLBNY uses derivatives to adjust the interest rate sensitivity of consolidated obligations to more closely approximate the interest rate sensitivity of assets. For instance, the FHLBNY may use a swap to effectively convert a fixed-rate consolidated obligation into a floating-rate obligation with repricing characteristics close to those of the investment being funded.

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More information with respect to derivatives and hedging activities is available in Note 19 to annual financial statements included in Form10-K filed on March 30, 2006.

Because a significant portion (about 11.2%) of the FHLBNY’s balance sheet as of June 30, 2006 consists of mortgage-backed securities and other mortgage-related assets, the FHLBNY is exposed to mortgage prepayment risk. The FHLBNY is exposed to a degree of interest rate risk because the cash flows of the mortgage assets and the associated liabilities that fund them are not perfectly matched through time and across all possible interest rate scenarios. The cash flows from mortgage assets are highly sensitive to changes in interest rates because of the borrowers’ prepayment option. As interest rates decrease, borrowers are more likely to refinance fixed-rate mortgages, resulting in increased prepayments and mortgage cash flows that are received earlier than would otherwise occur. Replacing the higher-rate loans that are prepaid with lower-rate loans has the potential to reduce the FHLBNY’s interest spread unless the Bank can also reduce its debt cost. Conversely, an increase in interest rates may result in slower prepayments and mortgage cash flows being received later than would otherwise occur. In this case, the FHLBNY runs the risk that the debt may re-price faster than the mortgage assets and at a higher cost. This could also reduce the interest spread.

When purchasing mortgage assets, the FHLBNY attempts to issue liabilities with similar cash flows in order to achieve a stable net interest spread. The FHLBNY issues a mix of debt securities across a broad spectrum of final maturities to achieve the desired liability characteristics. Because the estimated lives of mortgage assets change as interest rates change, the FHLBNY issues callable debt or uses derivatives to alter the estimated life of liabilities and offset the expected change in cash flows of our mortgage assets.

Risk measurement at the FHLBNY takes two major forms: (1) ongoing business risk measures and analyses; and, (2) stress test scenarios. The first two categories of measures help the FHLBNY in its day-to-day risk management decisions. Stress test scenarios identify and quantify the FHLBNY’s exposure to extreme but improbable events.

Ongoing business risk measures and analyses seek to quantify the level of net interest income at risk (i.e., how much income the FHLBNY could lose as a result of various types of arbitrarily large interest rate shocks). These calculations essentially amount to studying the impact of stressful interest rate shocks on projected net interest income. The projections start from a “snapshot” of the current balance sheet and simulate its evolution, over a one-year horizon, taking into account business projections of the likely behavior of advances and assumptions about the net spread earned on each asset category. The result is a one-year projection of net interest income. Changes to that initial forecast by stressful interest rate scenarios then give the FHLBNY a measure of how much income it could gain or lose under each scenario. Experience has shown that such analyses, even though they rely heavily on assumptions, provide a reasonable measure of the risks that the FHLBNY incurs as a going concern, regardless of the interest rate environment. As defined by the FHLBNY, net interest income at risk measures the percentage change in projected net interest income from the spread between asset yields and liability costs resulting from an instantaneous, parallel +/- 200 basis-point rate shock. This risk measure is reported to the Board of Directors in accordance with the Risk Management Policy. To manage its interest rate risk, the FHLBNY keeps close watch on the difference between the interest rate sensitivity (duration) of its assets and the duration of its liabilities. This difference between the estimated durations of portfolio assets and liabilities is called the duration gap. The duration gap represents the extent to which estimated cash flows for assets and liabilities are matched, on average, over time and across interest rate scenarios. A positive duration gap signals a greater exposure to rising interest rates because it indicates that the duration of assets exceeds the duration of liabilities. A negative duration gap signals a greater exposure to declining interest rates because the duration of assets is less than the duration of liabilities.

A stress test aims at capturing the impact of extreme (but rare) market rate changes on the market value of equity and net interest income. The FHLBNY has developed a technique to identify the interest rate and

61

volatility scenario that can cause the most severe loss in the market value of equity, given current market and balance sheet conditions. Every month, this scenario is applied to the FHLBNY’s balance sheet and the resulting loss in the market value of equity is evaluated. Besides providing a measure of the potential loss under the extreme scenario, this technique enables the FHLBNY to identify the nature of the changes in market risk factors to which it is the most sensitive, allowing FHLBNY to take appropriate action to address those risk factors. The FHLBNY views such additional tests as an integral part of its risk management strategy.

The FHLBNY monitors the balance sheet and adjusts it as necessary to contain interest rate risk within the Bank’s policy limits on the sensitivity of net interest income from spread, the size of periodic repricing gaps, and equity duration.

Net Interest Income at Risk.During the one-year period, there were no substantive changes to the FHLBNY’s modelling processes. As of June 30, 2006, the FHLBNY’s one-year net interest income from spread at risk measures were 0.88% and -2.95% compared to 5.07% and –9.84% on March 31, 2006 and 4.29% and –2.93% on December 31, 2005 under the 200 basis-point up and down shocks. These figures are calculated from the perspective of an ongoing business and are, therefore, based on certain assumptions regarding the probable evolution of the FHLBNY’s main line of business, advances, and its cost of funds. The FHLBNY’s limit on net interest income from spread at risk is –15%. The Bank was, therefore, within its limit for net interest income sensitivity at June 30, 2006 and at December 31, 2005. The FHLBNY monitors its repricing gaps primarily to limit the variability of net interest income.

Sensitivity of Duration of Equity

The following table summarizes the sensitivity of the duration of equity as of June 30, 2006, and December 31, 2005 (in years):

	Duration of Equity
	(in years)
	June 30, 2006		December 31, 2005
Base		1.41		0.98
Up-Base		1.91		1.73
Down-Base		-2.16		-1.77
Duration Gap (in years)		0.04		0.02

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The following tables track the behavior of the FHLBNY’s duration of equity at the end of the following months during 2006 and 2005.

	2006 Duration Measures
	(as of month-end, in years)
	Duration of		Duration of		Duration of		Duration of
	Assets		Liabilities		Gap		Equity
January		0.59		0.58		0.01		0.81
February		0.59		0.58		—		0.66
March		0.61		0.58		0.03		1.16
April		0.61		0.56		0.04		1.38
May		0.62		0.56		0.06		1.84
June		0.59		0.55		0.04		1.41

	2005 Duration Measures
	(as of month-end, in years)
	Duration of		Duration of		Duration of		Duration of
	Assets		Liabilities		Gap		Equity
January		0.67		0.64		0.03		1.20
February		0.71		0.64		0.07		2.17
March		0.74		0.66		0.08		2.34
April		0.68		0.64		0.05		1.63
May		0.64		0.62		0.01		0.88
June		0.62		0.61		0.01		0.82
July		0.65		0.61		0.04		1.46
August		0.63		0.62		0.01		0.79
September		0.65		0.60		0.05		1.60
October		0.68		0.60		0.08		2.12
November		0.65		0.58		0.07		2.02
December		0.59		0.57		0.02		0.98

Note: Numbers may not add due to rounding.

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The following tables display the FHLBNY’s maturity/repricing gaps as of June 30, 2006 (in millions):

	Interest Rate Sensitivity
	June 30, 2006
			More than			More than			More than
	6 Months or		6 Months to			1 Year to			3 Years to			More than
	Less		1 Year			3 Years			5 Years			5 Years
Interest-earning assets:
Non-MBS Investments	$	10,429	$	104		$	386		$	308		$	878
MBS Investments		1,062		665			3,910			1,782			2,716
Adjustable-rate loans and advances		13,737		—			—			—			—
Net unswapped		25,228		769			4,296			2,090			3,594
Fixed-rate loans and advances		13,324		2,039			11,069			9,233			18,206
Swaps hedging advances		34,890		(825	)		(7,410	)		(8,668	)		(17,988	)
Net fixed-rate loans and advances		48,214		1,214			3,659			565			218
Loans to other FHLBanks		—		—			—			—			—
Total interest-earning assets	$	73,442	$	1,983		$	7,955		$	2,655		$	3,812
Interest-bearing liabilities:
Deposits	$	2,200	$	1		$	—		$	—		$	—
Discount notes		23,413		140			—			—			—
Swapped discount notes		—		—			—			—			—
Net discount notes		23,413		140			—			—			—
Consolidated Obligation Bonds
FHLB bonds		10,314		14,468			26,836			5,361			2,715
Swaps hedging bonds		34,105		(12,281	)		(18,366	)		(2,673	)		(785	)
Net FHLB bonds		44,419		2,187			8,470			2,688			1,930
Total interest-bearing liabilities	$	70,032	$	2,328		$	8,470		$	2,688		$	1,930
Post hedge gaps:
Periodic gap	$	3,411	$	(344	)	$	(515	)	$	(33	)	$	1,882
Cumulative gaps	$	3,411	$	3,067		$	2,552		$	2,519		$	4,401

64

The following tables display the FHLBNY’s maturity/repricing gaps as of December 31, 2005 (in millions):

	Interest Rate Sensitivity
	December 31, 2005
			More than			More than			More than
	6 Months or		6 Months to			1 Year to			3 Years to			More than
	Less		1 Year			3 Years			5 Years			5 Years
Interest-earning assets:
Non-MBS Investments	$	12,121	$	377		$	410		$	320		$	855
MBS Investments		1,157		603			3,202			1,627			1,985
Adjustable-rate loans and advances		13,545		—			—			—			—
Net unswapped		26,823		980			3,612			1,947			2,840
										��
Fixed-rate loans and advances		10,411		2,356			10,888			9,233			15,260
Swaps hedging advances		30,781		(769	)		(6,701	)		(8,281	)		(15,030	)
Net fixed-rate loans and advances		41,192		1,587			4,187			952			230
Loans to other FHLBanks		—		—			—			—			—
Total interest-earning assets	$	68,015	$	2,568		$	7,799		$	2,899		$	3,070
Interest-bearing liabilities:
Deposits	$	2,658	$	—		$	—		$	—		$	—
Discount notes		20,032		479			—			—			—
Swapped discount notes		—		—			—			—			—
Net discount notes		20,032		479			—			—			—
Consolidated Obligation Bonds
FHLB bonds		12,539		9,535			27,130			5,597			2,346
Swaps hedging bonds		30,299		(7,490	)		(18,731	)		(3,223	)		(855	)
Net FHLB bonds		42,838		2,045			8,399			2,374			1,491
Total interest-bearing liabilities	$	65,529	$	2,524		$	8,399		$	2,374		$	1,491
Post hedge gaps:
Periodic gap	$	2,487	$	44		$	(600	)	$	525		$	1,579
Cumulative gaps	$	2,487	$	2,530		$	1,930		$	2,456		$	4,035

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Item 4. CONTROLS AND PROCEDURES

Alfred A. DelliBovi, President and Chief Executive Officer, and Patrick A. Morgan, Senior Vice President and Chief Financial Officer, conducted an evaluation of the Bank’s disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of June 30, 2006. Based upon their evaluation, they each found that the Bank’s disclosure controls and procedures were effective to ensure that information required to be disclosed in the reports the Bank files and submits under the Exchange Act is recorded, processed, summarized and reported as and when required and that such information is accumulated and communicated to the Bank’s management as appropriate to allow timely decisions regarding required disclosure.

There were no changes in the Bank’s internal controls over financial reporting that occurred during the period covered by this report 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.

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, 2005.

ITEM 2. UNREGISTERED SALES OF EQUITY AND THE 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
10.1	Federal Home Loan Banks P & I Funding and Contingency Plan Agreement (the “Agreement”), dated June 23, 2006, by and among the Federal Home Loan Banks and the Office of Finance, a joint office of the Federal Home Loan Banks (see copy of the Agreement included as part of the Bank’s Form 8-K filed on June 27, 2006, which is incorporated herein by reference).
31.1	Certification Pursuant to Rules13a-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
31.2	Certification Pursuant to Rules13a-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
32.1	Certification of Chief Executive Officer furnished pursuant to Section 906 of the Sarbanes Oxley Act 2002, 18 U.S.C. Section 1350
32.2	Certification of Chief Financial Officer furnished pursuant to Section 906 of the Sarbanes Oxley Act 2002, 18 U.S.C. Section 1350
99.1	Computation of Ratios of Earnings to Fixed Charges

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SIGNATURE

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: August 11, 2006

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