Federal Home Loan Bank Of New York 10-Q 2007 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 ended June 30, 2007

OR

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

Commission file number: 000-51397

Federal Home Loan Bank of New York

(Exact name of registrant as specified in its charter)

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

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

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

36,343,097 shares of Class B capital stock, par value $100 per share, were outstanding at July 31, 2007.

FEDERAL HOME LOAN BANK OF NEW YORK
FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2007
Table of Contents

	Page
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS (Unaudited):
Statements of Condition (Unaudited) as of June 30, 2007 and December 31, 2006		1
Statements of Income (Unaudited) for the Three and Six Months Ended June 30, 2007 and 2006		2
Statements of Capital (Unaudited) for the Six Months Ended June 30, 2007 and 2006		3
Statements of Cash Flows (Unaudited) for the Six Months Ended June 30, 2007 and 2006		4
Notes to Financial Statements (Unaudited)		6
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		28
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		64
Item 4T. CONTROLS AND PROCEDURES		70
Part II. OTHER INFORMATION		71
Item 1. LEGAL PROCEEDINGS		71
Item 1A. RISK FACTORS		71
Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS		71
Item 3. DEFAULTS UPON SENIOR SECURITIES		71
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS		71
Item 5. OTHER INFORMATION		71
Item 6. EXHIBITS		72
Exhibit 31.01
Exhibit 31.02
Exhibit 32.01
Exhibit 32.02

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Statements of Condition — Unaudited (in thousands, except par value)

As of June 30, 2007 and December 31, 2006

	June 30, 2007			December 31, 2006
Assets
Cash and due from banks	$	22,479		$	38,850
Interest-bearing deposits, includes $0 pledged at June 30, 2007 and December 31, 2006		6,845,100			5,591,077
Federal funds sold		4,520,000			3,661,000
Held-to-maturity securities, includes $0 pledged at June 30, 2007 and December 31, 2006 (Note 2)		10,976,168			11,251,098
Advances (Note 3)		61,234,817			59,012,394
Mortgage loans held-for-portfolio, net of allowance for credit losses of$593 at June 30, 2007 and December 31, 2006 (Note 4)		1,510,052			1,483,419
Accrued interest receivable		420,622			406,123
Premises, software, and equipment, net		11,808			11,107
Derivative assets (Note 8)		305,795			224,775
Other assets		18,387			23,144
Total assets	$	85,865,228		$	81,702,987
Liabilities and capital
Liabilities
Deposits
Interest-bearing demand	$	2,193,410		$	2,307,733
Non-interest bearing demand		1,399			1,795
Term		42,000			80,000
Total deposits		2,236,809			2,389,528
Consolidated obligations (Note 5)
Bonds		65,780,089			62,042,675
Discount notes		12,780,495			12,191,553
Total consolidated obligations		78,560,584			74,234,228
Mandatorily redeemable capital stock (Note 6)		77,571			109,950
Accrued interest payable		714,322			735,215
Affordable Housing Program (Note 7)		107,996			101,898
Payable to REFCORP		17,657			17,475
Derivative liabilities (Note 8)		36,192			107,615
Other liabilities		81,301			102,685
Total liabilities		81,832,432			77,798,594
Commitments and Contingencies(Notes 5, 6, 8 and 13)
Capital(Note 6)
Capital stock ($100 par value), putable, issued and outstanding shares:
36,625 at June 30, 2007, and 35,463 at December 31, 2006		3,662,446			3,546,253
Unrestricted retained earnings		380,216			368,688
Accumulated other comprehensive income (loss) (Note 11)
Net unrealized loss on hedging activities		(4,081	)		(4,763	)
Employee supplemental retirement plans		(5,785	)		(5,785	)
Total capital		4,032,796			3,904,393
Total liabilities and capital	$	85,865,228		$	81,702,987

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

1

Statements of Income — Unaudited (in thousands, except per share data)
For the three and six months ended June 30, 2007 and 2006

	Three months ended						Six months ended
	June 30,						June 30,
	2007			2006			2007			2006
Interest income
Advances	$	806,965		$	805,165		$	1,584,459		$	1,506,941
Interest-bearing deposits		83,954			69,603			164,653			146,095
Federal funds sold		42,179			37,637			86,815			58,030
Held-to-maturity securities		149,655			138,345			302,618			268,197
Mortgage loans held-for-portfolio		19,715			18,728			39,233			37,586
Other		1			—			2			5
Total interest income		1,102,469			1,069,478			2,177,780			2,016,854
Interest expense
Consolidated obligations-bonds		781,091			698,646			1,547,848			1,325,397
Consolidated obligations-discount notes		171,157			234,125			342,436			436,952
Deposits		34,357			20,268			55,367			34,340
Mandatorily redeemable capital stock (Note 6)		1,632			258			3,780			578
Cash collateral held and other borrowings		1,375			958			2,805			1,124
Total interest expense		989,612			954,255			1,952,236			1,798,391
Net interest income before provision for credit losses		112,857			115,223			225,544			218,463
Provision for credit losses on mortgage loans		—			1			—			1
Net interest income after provision for credit losses		112,857			115,222			225,544			218,462
Other income (loss)
Service fees		835			855			1,662			1,662
Net realized and unrealized gain on derivatives and hedging activities (Note 8)		2,038			7,037			5,562			5,100
Losses from extinguishment of debt and other		(1,413	)		(4,245	)		(3,770	)		(4,240	)
Total other income		1,460			3,647			3,454			2,522
Other expenses
Operating		16,874			15,195			32,924			30,669
Finance Board and Office of Finance		1,130			993			2,512			2,274
Total other expenses		18,004			16,188			35,436			32,943
Income before assessments		96,313			102,681			193,562			188,041
Affordable Housing Program (Note 7)		8,029			8,408			16,187			15,409
REFCORP		17,657			18,855			35,475			34,527
Total assessments		25,686			27,263			51,662			49,936
Net income	$	70,627		$	75,418		$	141,900		$	138,105
Basic earnings per share (Note 14)	$	1.96		$	2.02		$	3.98		$	3.75
Cash dividends paid per share	$	1.85		$	1.29		$	3.61		$	2.58

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, 2007 and 2006

										Accumulated
	Capital Stock*									Other						Total
	Class B						Retained			Comprehensive			Total			Comprehensive
	Shares			Par Value			Earnings			Income (Loss)			Capital			Income (Loss)
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	)
Shares reclassified to mandatorily redeemable capital stock		(142	)		(14,236	)		—			—			(14,236	)
Net Income		—			—			138,105			—			138,105		$	138,105
Other comprehensive income (loss):
Net change in 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
Balance, December 31, 2006		35,463		$	3,546,253		$	368,688		$	(10,548	)	$	3,904,393
Proceeds from sale of capital stock		12,050			1,205,031			—			—			1,205,031
Redemption of capital stock		(10,819	)		(1,081,973	)		—			—			(1,081,973	)
Shares reclassified to mandatorily redeemable capital stock		(69	)		(6,865	)		—			—			(6,865	)
Net Income		—			—			141,900			—			141,900		$	141,900
Other comprehensive income (loss):
Net change in hedging activities		—			—			—			682			682			682
Cash dividends ($3.61 per share) on capital stock		—			—			(130,372	)		—			(130,372	)		—
																$	142,582
Balance, June 30, 2007		36,625		$	3,662,446		$	380,216		$	(9,866	)	$	4,032,796

* 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, 2007 and 2006

	Six months ended
	June 30,
	2007			2006
Operating activities
Net Income	$	141,900		$	138,105
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization:
Net premiums and discounts on consolidated obligations, investments, and mortgage loans		7,573			(1,403	)
Concessions on consolidated obligations		5,883			6,279
Premises, software, and equipment, net		2,116			2,039
Provision for credit losses on mortgage loans		—			1
Change in net fair value adjustments on derivatives and hedging activities		1,070			(209	)
Net change in:
Accrued interest receivable		(14,499	)		(22,159	)
Derivative assets due to accrued interest		(7,371	)		(189,475	)
Derivative liabilities due to accrued interest		(2,892	)		78,973
Other assets		3,291			2,747
Affordable Housing Program liability		6,098			2,876
Accrued interest payable		(20,892	)		122,415
REFCORP liability		182			4,793
Other liabilities		(21,349	)		10,502
Total adjustments		(40,790	)		17,379
Net cash provided by operating activities		101,110			155,484
Investing activities
Net change in:
Interest-bearing deposits		(1,254,000	)		2,074,332
Federal funds sold		(859,000	)		(429,000	)
Deposits with other FHLBank’s mortgage programs		(23	)		63
Held-to-maturity securities:
Purchased		(694,794	)		(2,570,516	)
Proceeds		968,473			1,333,311
Advances:
Principal collected		185,621,643			279,056,422
Made		(188,038,139	)		(284,971,011	)
Mortgage loans held-for-portfolio:
Principal collected		80,101			80,539
Purchased and originated		(107,624	)		(73,954	)
Principal collected on other loans made		70			102
Premises, software, and equipment, net		(2,817	)		(2,364	)
Net cash used in investing activities		(4,286,110	)		(5,502,076	)

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, 2007 and 2006

	Six months ended
	June 30,
	2007			2006
Financing activities
Net change in:
Deposits and other borrowings	$	(152,753	)	$	(440,591	)
Short-term borrowings from other FHLBanks:
Proceeds from borrowings		20,000			385,000
Payments for borrowings		(20,000	)		(385,000	)
Consolidated obligation bonds:
Proceeds from issuance		22,038,473			16,456,148
Payments for maturing and early retirement		(17,864,171	)		(13,645,378	)
Payments for transfers to other FHLBanks		(386,253	)		(252,931	)
Consolidated obligation discount notes:
Proceeds from issuance		184,317,744			299,371,986
Payments for maturing		(183,737,853	)		(296,340,926	)
Capital stock:
Proceeds from issuance		1,205,031			1,823,586
Payments for redemption		(1,081,973	)		(1,515,284	)
Redemption of Mandatorily redeemable capital stock		(39,244	)		(14,155	)
Cash dividends paid *		(130,372	)		(92,918	)
Net cash provided by financing activities		4,168,629			5,349,537
Net (decrease) increase in cash and cash equivalents		(16,371	)		2,945
Cash and cash equivalents at beginning of the period		38,850			22,114
Cash and cash equivalents at end of the period	$	22,479		$	25,059
Supplemental disclosures:
Interest paid	$	1,628,048		$	1,145,558
Affordable Housing Program payments **	$	10,089		$	12,533
REFCORP payments	$	35,294		$	29,734

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

The accompanying notes are an integral part of 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 the members (primarily in the form of advances) and to provide a return on members’ investment in FHLBNY stock in the form of a dividend. Since the members are both stockholders and customers, 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. This is the primary focus of the Bank’s operations and also the principal factor that impacts the financial condition of the FHLBNY.

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

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

The FHLBNY is exempt from ordinary federal, state, and local taxation except for local real estate tax.

Assessments

Assessments on net income —The Bank is required to make payments to the Resolution Funding Corporation based on percentage of its net income and to set aside funds from net income towards an “Affordable Housing Program.”

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 U.S. Treasury to pay a portion of the annual interest expense on long-term obligations issued to finance a portion of the cost of the bailout. Principal of those long-term obligations is paid from a segregated account containing zero-coupon U.S. government obligations, which were purchased using funds that Congress directed the FHLBanks to provide for that purpose.

Each FHLBank is required to pay 20 percent of income calculated in accordance with accounting principles generally accepted in the U.S. (“GAAP”) after the assessment for Affordable Housing Program, but before the assessment for the REFCORP. The Affordable Housing Program and REFCORP assessments are calculated simultaneously because of their interdependence on each other. The FHLBNY accrues its REFCORP assessment on a monthly basis. The Resolution Funding Corporation has been designated as the calculation agent for the Affordable Housing Program and REFCORP assessments. Each FHLBank provides the amount of quarterly 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 Standards 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 the AHP expense monthly.

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, normal recurring adjustments necessary for a fair statement of the interim period results have been made.

7

Notes to Financial Statements — Unaudited

These unaudited financial statements should be read in conjunction with the FHLBNY’s audited financial statements for the year ended December 31, 2006, included in Form 10-K filed on March 29, 2007.

Note 1 to the Financial Statements of the Federal Home Loan Bank of New York filed with Form 10-K on March 29, 2007 contains a summary of our significant accounting policies.

Note 1. Accounting Developments

Recently Issued Accounting Standards and Interpretations

SFAS 157 — In September 2005, the FASB issued SFAS 157, “Fair Value Measurements"(“SFAS 157”).
SFAS 157 defines fair value, establishes a framework for measuring fair value and enhances disclosure about fair value measurements required under other accounting pronouncements, but does not change existing guidance as to whether or not an instrument is carried at fair value. SFAS 157 nullifies the guidance in Emerging Issues Task Force Issue EITF 02-3, which precluded the recognition of a trading profit at the inception of a derivative contract, unless the fair value of such derivative is obtained from a quoted market price, or other valuation technique incorporating observable market data. SFAS 157 also precludes the use of a liquidity or block discount when measuring instruments traded in an active market at fair value. SFAS 157 requires that costs related to acquiring financial instruments carried at fair value should not be capitalized, but rather should be expensed as incurred. SFAS 157 also clarifies that an issuer’s credit standing should be considered when measuring liabilities at fair value.

SFAS 157 is effective for fiscal years beginning after November 15, 2007, with earlier application encouraged. SFAS 157 must be applied prospectively as of the beginning of the fiscal year in which it is initially adopted, except that the provisions related to block discounts and the guidance in EITF 02-3 are to be applied as a one time cumulative effect adjustment to opening retained earnings in the first interim period for the fiscal year in which SFAS 157 is initially applied. The Bank will adopt SFAS 157 on January 1, 2008, and is evaluating its potential effect on its financial statements.

SFAS 159 — On February 15, 2007, the FASB issued SFAS 159, “The Fair Value Option for Financial Assets and Financial Liabilities, including an amendment of FASB Statement 115”(“SFAS 159”).SFAS 159 creates a fair value option allowing an entity to irrevocably elect fair value as the initial and subsequent measurement attribute for certain financial assets and financial liabilities, with changes in fair value recognized in earnings as they occur. SFAS 159 also requires an entity to report those financial assets and financial liabilities measured at fair value in a manner that separates those reported fair values from the carrying amounts of assets and liabilities measured using another measurement attribute on the face of the statement of financial position. Lastly, SFAS 159 requires an entity to provide information that would allow users to understand the effect on earnings of changes in the fair value on those instruments selected for the fair value election. SFAS 159 is effective for fiscal years beginning after November 15, 2007 (January 1, 2008 for the Bank). The Bank is continuing to evaluate the financial assets and liabilities, if any, for which the fair value option under SFAS 159 would be elected, and to assess the impact on its financial condition, results of operations and cash flows if such election was made.

FSP FIN 39-1 — In April 2007, the FASB directed the FASB Staff to issue FSP No. FIN 39-1, "Amendment of FASB Interpretation No. 39.” (“FSP FIN 39-1”). FSP FIN 39-1 modifies FIN No. 39, "Offsetting of Amounts Related to Certain Contracts”, and permits companies to offset cash collateral receivables or payables with net derivative positions under certain circumstances. FSP FIN 39-1 is effective for fiscal years beginning after November 15, 2007, with early adoption permitted. If the Bank adopts the provisions under the FSP, it does not expect implementation to have a material impact on reported results of operations or financial condition.

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, 2007
			Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
State and local housing agency obligations	$	600,408	$	6,328	$	(884	)	$	605,852
Mortgage-backed securities		10,375,760		23,082		(216,028	)		10,182,814
Total	$	10,976,168	$	29,410	$	(216,912	)	$	10,788,666

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

9

Notes to Financial Statements — Unaudited

Temporary impairment¹. 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, 2007 and December 31, 2006. 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.

	June 30, 2007 (in thousands)
	Less than 12 months				12 months or more				Total
	Estimated Fair		Unrealized		Estimated Fair		Unrealized		Estimated Fair		Unrealized
	Value		Losses		Value		Losses		Value		Losses
Mortgage-backed securities — fixed rate
AAA-rated	$	5,179,397	$	76,680	$	2,563,414	$	139,342	$	7,742,811	$	216,022
AA-rated		—		—		—		—		—		—
Below AA		—		—		—		—		—		—
Mortgage-backed securities — variable rate
AAA-rated		5,778		6		—		—		5,778		6
AA-rated		—		—		—		—		—		—
Below AA		—		—		—		—		—		—
		5,185,175		76,686		2,563,414		139,342		7,748,589		216,028
State and local housing finance agencies — fixed rate
AAA-rated		933		27		—		—		933		27
AA-rated		34,598		482		9,625		375		44,223		857
Below AA		—		—		—		—		—		—
		35,531		509		9,625		375		45,156		884
	$	5,220,706	$	77,195	$	2,573,039	$	139,717	$	7,793,745	$	216,912

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

¹ 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 its 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 above analysis represent temporary impairment at June 30, 2007 and December 31, 2006.

10

Notes to Financial Statements — Unaudited

Note 3. Advances

Advances outstanding are summarized below by contractual maturities (dollars in thousands):

	June 30, 2007						December 31, 2006
				Weighted1						Weighted1
	Amount			Average Yield			Amount			Average Yield
Overdrawn demand deposit accounts	$	5,519			6.10	%	$	498			6.05	%
Due in one year or less		15,702,305			5.02			12,273,636			4.91
Due after one year through two years		7,494,345			5.01			12,450,960			4.99
Due after two years through three years		4,660,791			5.31			4,108,983			5.05
Due after three years through four years		4,781,428			5.30			5,744,505			5.45
Due after four years through five years		3,542,861			5.00			2,591,828			4.86
Due after five years through six years		1,642,033			3.54			2,279,706			4.18
Thereafter		23,576,484			4.37			19,539,154			4.22
Total par value		61,405,766			4.77	%		58,989,270			4.73	%
Discount on AHP advances *		(466	)					(519	)
Net premium on advances *		174						489
SFAS 133 hedging basis adjustments *		(170,657	)					23,154
Total	$	61,234,817					$	59,012,394

*	Premiums on advances and discounts on AHP advances are amortized to interest income using the level-yield method and were not significant for all periods reported. Amortization of fair value basis adjustments was a charge to interest income of $0.3 million for the six months ended June 30, 2007 and 2006.
1	The weighed average yield is the weighted average coupon rates for advances, unadjusted for swaps.

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

	June 30, 2007			December 31, 2006
Overdrawn demand deposit accounts	$	5,519		$	498
Due or putable in one year or less		36,822,517			29,962,181
Due or putable after one year through two years		13,953,995			16,745,798
Due or putable after two years through three years		4,666,891			6,341,532
Due or putable after three years through four years		1,832,578			2,504,205
Due or putable after four years through five years		2,509,611			1,668,578
Due or putable after five years through six years		157,533			442,706
Thereafter		1,457,122			1,323,772
Total par value		61,405,766			58,989,270
Discount on AHP advances		(466	)		(519	)
Net premium on advances		174			489
SFAS 133 hedging basis adjustments		(170,657	)		23,154
Total	$	61,234,817		$	59,012,394

11

Notes to Financial Statements — Unaudited

Note 4. Mortgage Loans

Mortgage loans are comprised primarily of Mortgage Partnership Finance^® Program (“MPF”^®) loans. In this program the FHLBNY invests in mortgage loans that are purchased from its participating members. The FHLBNY’s member institutions create, service, and credit-enhance the loans. No intermediary trusts are involved. Totals include $43.3 million and $45.7 million at June 30, 2007 and December 31, 2006, comprised of mortgage loans originated by the FHLBNY. Loans in the Community Mortgage Partnership Asset program, which has been inactive since 2001, were $4.8 million and $4.9 million at June 30, 2007 and December 31, 2006. The following summarizes investments in mortgage loans (dollars in thousands):

	June 30, 2007						December 31, 2006
	2007			Percentage			2006			Percentage
Real Estate:
Fixed medium-term single-family mortgages	$	558,887			37.1	%	$	575,114			38.9	%
Fixed long-term single-family mortgages		941,495			62.6			897,153			60.7
Multi-family mortgages		4,792			0.3			4,940			0.4
Total par value		1,505,174			100.0	%		1,477,207			100.0	%
Unamortized premiums		12,571						13,323
Unamortized discounts		(6,707	)					(6,288	)
Basis adjustment1		(393	)					(230	)
Total mortgage loans held-for-portfolio		1,510,645						1,484,012
Allowance for credit losses		(593	)					(593	)
Total mortgage loans held-for-portfolio after allowance for credit losses	$	1,510,052					$	1,483,419

¹ Represents open and closed delivery commitments accounted for as economic hedges.

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 FHLBNY is responsible for absorbing losses in the first layer, as summarized below in the “memo” First Loss Account roll-forward analysis. The First Loss Account is not recorded or reported as a reserve for loan losses. 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 credit rating. The FHLBNY pays a Credit Enhancement fee to the PFI for taking on this obligation. The FHLBNY assumes all residual risk. Credit Enhancement fees accrued were $0.4 million for the second quarter of 2007 and 2006. For the first six months of 2007 and 2006, fees accrued were $0.9 million and $0.8 million. Credit Enhancement fees are reported as a reduction to mortgage loan interest income. The amount of charge-offs in each period reported was insignificant and it was not necessary for the FHLBNY to recoup any losses from the PFIs.

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

	Three months ended				Six months ended
	June 30,				June 30,
	2007		2006		2007		2006
Beginning balance	$	12,372	$	11,443	$	12,162	$	11,318
Additions		261		192		471		317
Charge-offs		—		—		—		—
Recoveries		—		—		—		—
Ending balance	$	12,633	$	11,635	$	12,633	$	11,635

12

Notes to Financial Statements — Unaudited

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 (in thousands):

	June 30, 2007			December 31, 2006
Consolidated obligation bonds — amortized cost	$	65,985,080		$	62,195,674
FAS 133 Basis adjustments		(204,000	)		(151,222	)
Deferred net gains on terminated hedges		(991	)		(1,777	)
Total Consolidated obligation — bonds	$	65,780,089		$	62,042,675
Discount notes — amortized cost	$	12,780,495		$	12,191,553
Total Consolidated obligation — discount notes	$	12,780,495		$	12,191,553

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 an 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, 2007 is Class B stock which is sub-divided into membership stock and activity-based stock.

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

13

Notes to Financial Statements — Unaudited

Capital Ratios

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

	June 30, 2007						December 31, 2006
	Required*			Actual			Required*			Actual
Regulatory capital requirements:
Risk-based capital1	$	697,279		$	4,120,232		$	611,861		$	4,024,891
Total capital-to-asset ratio		4.00	%		4.80	%		4.00	%		4.93	%
Total capital2	$	3,434,609		$	4,120,825		$	3,268,119		$	4,025,483
Leverage ratio		5.00	%		7.20	%		5.00	%		7.39	%
Leverage capital3	$	4,293,261		$	6,180,941		$	4,085,149		$	6,037,335

1.	Actual “Risk-based capital” is capital stock and retained earnings plus mandatorily redeemable capital stock. Section 932.2 of the Finance Board’s regulations also refers to this amount as “Permanent Capital.”
2.	Actual “Total capital” is “Risk-based capital” plus allowance for credit losses.
3.	Actual Leverage capital is “Risk-based capital” times 1.5 plus allowance for loan losses.
*	Minimum required.

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, 2007 and December 31, 2006 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.

14

Notes to Financial Statements — Unaudited

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

	June 30, 2007		December 31, 2006
Redemption less than one year	$	14,079	$	43,184
Redemption from one year to less than three years		36,123		29,109
Redemption from three years to less than five years		20,506		30,679
Redemption after five years or greater		6,863		6,978
Total	$	77,571	$	109,950

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

Dividends related to capital stock classified as mandatorily redeemable were accrued at an estimated dividend rate and reported as interest expense in the statements of income. At June 30, 2007, the FHLBNY had estimated a 7.5% (annualized) dividend payout due to holders of mandatorily redeemable capital stock averaging $79.9 million during the second quarter of 2007, and a liability of $1.5 million representing accrued dividend was recognized as an interest expense. The actual rate of dividend that was paid on July 31, 2007 was 7.5% (annualized).

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

	Three months ended						Six months ended
	June 30,						June 30,
	2007			2006			2007			2006
Beginning balance	$	111,782		$	27,413		$	109,950		$	18,087
Capital stock subject to mandatory redemption reclassified from equity		—			326			6,865			14,236
Redemption of mandatorily redeemable capital stock*		(34,211	)		(9,571	)		(39,244	)		(14,155	)
Ending balance	$	77,571		$	18,168		$	77,571		$	18,168
Accrued interest payable	$	1,494		$	249		$	1,494		$	249

* Redemption includes repayment of excess stock.
(Accrual is at 7.50% annualized rate for June 30, 2007; 5.25% annualized for June 30, 2006)

15

Notes to Financial Statements — Unaudited

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,
	2007			2006			2007			2006
Beginning balance	$	104,572		$	93,711		$	101,898		$	91,004
Additions from current period’s assessments		8,029			8,408			16,187			15,409
Net disbursements for grants and programs		(4,605	)		(8,239	)		(10,089	)		(12,533	)
Ending balance	$	107,996		$	93,880		$	107,996		$	93,880

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 and purchased caps and floors if the counterparty defaults and the related collateral, if any, is of no value to the FHLBNY at June 30, 2007 and December 31, 2006.

The FHLBNY uses derivatives in three ways: by designating them as a fair value or cash flow hedge of an underlying financial instrument or a forecasted transaction; by acting as an intermediary; or in asset-liability management (i.e., an economic hedge). For example, the FHLBNY uses derivatives in its overall interest-rate risk management to adjust the interest-rate sensitivity of consolidated obligations to approximate more closely the interest-rate sensitivity of assets (both advances and investments), and/or to adjust the interest-rate sensitivity of advances, investments or mortgage loans to approximate more closely the interest-rate sensitivity of liabilities. In addition to using derivatives to manage mismatches of interest rates between assets and liabilities, the FHLBNY also uses derivatives to manage embedded options in assets and liabilities; to hedge the market value of existing assets and liabilities and anticipated transactions; to hedge the duration risk of prepayable instruments; and to reduce funding costs.

An economic hedge is defined as a derivative that hedges specific or non-specific underlying assets, liabilities or firm commitments. Hedges designated as economic do not qualify for hedge accounting under the rules of SFAS 133, but is an acceptable hedging strategy under the FHLBNY’s risk management program. These strategies also comply with Finance Board’s regulatory requirements prohibiting speculative use of derivatives. An economic hedge, by definition, introduces the potential for earnings variability due to the changes in fair value recorded on the derivatives that are not offset by corresponding changes in the value of the economically hedged assets, liabilities, or firm commitments.

The FHLBNY does not take speculative positions with derivatives or any other financial instruments, and does not have any special purpose entities or any other types of off-balance sheet conduits.

16

Notes to Financial Statements — Unaudited

The following table presents outstanding notional balances and estimated fair value gains and (losses) of derivatives by SFAS 133 hedge type (in thousands):

	June 30, 2007					December 31, 2006
			Estimated					Estimated
	Notional		Fair Value			Notional		Fair Value
Interest rate swaps
Fair value	$	80,072,679	$	(38,875	)	$	76,125,220	$	(183,808	)
Cash flow		60,000		(133	)		—		—
Economic		2,350,000		(2,921	)		175,000		(253	)
Interest rate caps/floors
Economic-Fair value changes		1,172,694		(3	)		1,237,694		—
Mortgage delivery commitments (MPF)
Economic-Fair value changes		1,377		(6	)		9,497		(35	)
Other
Intermediation *		80,000		25			50,000		3
Total	$	83,736,750	$	(41,913	)	$	77,597,411	$	(184,093	)
Total derivatives, excluding accrued interest			$	(41,913	)			$	(184,093	)
Accrued interest				311,516					301,253
Net derivative balance			$	269,603				$	117,160
Net derivative asset balance			$	305,795				$	224,775
Net derivative liability balance				(36,192	)				(107,615	)
Net derivative balance			$	269,603				$	117,160

* Classified as economic.

The categories-“Fair value”,” Commitment”, and “Cash Flow” hedges — represent derivative transactions accounted for as hedges. If any such hedges do not qualify for hedge accounting under the provisions of SFAS 133, they are classified as “Economic” hedges. Changes in fair values of economic hedges are recorded through the income statement without the offset of corresponding changes in the fair value of the hedged item. Changes in fair values of SFAS 133 qualifying derivative transactions are also recorded through the income statement with the offset of corresponding changes in the fair values of the hedged item.

Derivative gains and losses reclassified from accumulated other comprehensive income (loss) to current period income

The following table summarizes changes in derivative gains and (losses) and reclassifications into earnings from accumulated other comprehensive income (loss) in the statements of condition (in thousands):

	Three months ended						Six months ended
	June 30,						June 30,
	2007			2006			2007			2006
Accumulated (losses)/gains from cash flow hedges, beginning of year	$	(4,775	)	$	8,780		$	(4,763	)	$	5,352
Net hedging transactions		914			1,253			1,053			5,224
Reclassified into earnings		(220	)		(810	)		(371	)		(1,353	)
Accumulated (losses)/gains from cash flow hedges, end of year	$	(4,081	)	$	9,223		$	(4,081	)	$	9,223

17

Notes to Financial Statements — Unaudited

Earnings impact of hedging activities

Net realized and unrealized gain (loss) from derivatives and hedging activities
As a result of applying SFAS 133, the FHLBNY reported the following net gains (losses) from derivatives and hedging activities (in thousands):

	Three months ended						Six months ended
	June 30,						June 30,
	2007			2006			2007			2006
Gains related to fair value changes — Interest rate swaps	$	2,698		$	6,544		$	5,937		$	5,659
Losses related to fair value changes — Options		(647	)		(2,012	)		(1,359	)		(4,244	)
Net interest accruals — Options		836			2,501			1,839			3,701
Losses related to fair value changes MPF — Economic hedges		(128	)		(44	)		(197	)		(7	)
(Losses) gains related to fair value changes — Economic hedges*		(1,592	)		47			(1,609	)		(10	)
Net interest accruals — Economic hedges*		871			1			951			1
Net gains (losses) on derivatives and hedging activities	$	2,038		$	7,037		$	5,562		$	5,100

* Economic hedges include intermediation and swaps not qualifying for hedge accounting under SFAS 133.

Interest accruals associated with hedges are allocated to their hedge category in the table above to more precisely match gains and losses from hedging activities. Prior period presentation has been conformed to match current period presentation, and had no impact on the net gains (losses) on derivatives and hedging activities.

Cash Flow Hedges

There were no material amounts for second quarter of 2007 or 2006 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 $0.5 million of net gains recorded in accumulated other comprehensive income at June 30, 2007, will be recognized in earnings.

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 employees of the FHLBNY. For accounting purposes, the DB Plan is a multi-employer plan that 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 Defined Contribution Plan for Financial Institutions, a tax-qualified defined contribution plan. The Bank’s contributions are a matching contribution equal to a percentage of voluntary employee contributions, subject to certain limitations.

In addition, the FHLBNY maintains a Benefit Equalization Plan (“BEP”) that restores defined benefits and contribution benefits to those employees who have had their qualified defined benefit and defined contribution benefits limited by IRS regulations. The 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. At June 30, 2007, there were no funded plan assets to meet plan obligations. In the third quarter of 2007, the Bank established and funded a grantor trust to meet benefit obligations.

18

Notes to Financial Statements — Unaudited

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,
	2007		2006		2007		2006
Defined Benefit Plan	$	1,456	$	1,450	$	2,912	$	2,900
Benefit Equalization Plan (Defined benefits)		309		500		618		1,000
Defined Contribution Plan and BEP thrift		331		317		711		599
Postretirement Health Benefit Plan		481		363		962		725
Total retirement plan expenses	$	2,577	$	2,630	$	5,203	$	5,224

Components of the net periodic pension cost for the defined benefit component of the BEP, an unfunded plan¹, were as follows (in thousands):

	Three months ended						Six months ended
	June 30,						June 30,
	2007			2006			2007			2006
Service cost	$	103		$	150		$	205		$	300
Interest cost		161			200			323			400
Amortization of unrecognized prior service cost		(25	)		(13	)		(50	)		(25	)
Amortization of unrecognized net loss		70			163			140			325
Net periodic benefit cost	$	309		$	500		$	618		$	1,000

¹ A grantor trust was created in the third quarter of 2007 and the Bank funded the trust with $11.0 million in cash towards the BEP liabilities.

Key assumptions used in determining the supplemental retirement plan cost for the first three and six months ended June 30, 2007 included a discount rate of 5.65%, salary increases of 5.5%, and an amortization period of 8 years. The measurement date used to determine the net periodic cost was December 31, 2006. 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 29, 2007.

Components of the net periodic postretirement health benefit cost for the FHLBNY’s Postretirement Health Benefit Plan were as follows (in thousands):

	Three months ended				Six months ended
	June 30,				June 30,
	2007		2006		2007		2006
Service cost (benefits attributed to service during the period)	$	218	$	135	$	437	$	270
Interest cost on accumulated postretirement health benefit obligation		203		148		406		295
Amortization of loss		60		80		119		160
Net periodic postretirement health benefit cost	$	481	$	363	$	962	$	725

Key assumptions used in determining the Postretirement Health Benefit Plan for the first three and six months ended June 30, 2007 included a discount rate of 5.65%, and health care cost trend rate of 4.5%. The measurement date used to determine the net periodic cost was December 31, 2006. 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 29, 2007.

19

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 with related parties at June 30, 2007 and December 31, 2006 as well as transactions for the three and six months ended June 30, 2007 and 2006.

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

	June 30, 2007				December 31, 2006
	Related		Unrelated		Related		Unrelated
Assets
Cash and due from banks	$	—	$	22,479	$	—	$	38,850
Interest-bearing deposits		100		6,845,000		77		5,591,000
Federal funds sold		—		4,520,000		—		3,661,000
Held-to-maturity securities		—		10,976,168		—		11,251,098
Advances		61,234,817		—		59,012,394		—
Mortgage loans*		—		1,510,052		—		1,483,419
Accrued interest receivable		326,736		93,886		319,687		86,436
Premises, software, and equipment, net		—		11,808		—		11,107
Derivative assets		—		305,795		—		224,775
Other assets**		—		18,387		—		23,144
Total assets	$	61,561,653	$	24,303,575	$	59,332,158	$	22,370,829
Liabilities and capital
Deposits	$	2,236,809	$	—	$	2,389,528	$	—
Consolidated obligations		—		78,560,584		—		74,234,228
Mandatorily redeemable capital stock		77,571		—		109,950		—
Accrued interest payable		—		714,322		—		735,215
Affordable Housing Program***		107,996		—		101,898		—
Payable to REFCORP		—		17,657		—		17,475
Derivative liabilities		—		36,192		—		107,615
Other liabilities****		43,230		38,071		43,265		59,420
Total liabilities		2,465,606		79,366,826		2,644,641		75,153,953
Capital		4,032,796		—		3,904,393		—
Total liabilities and capital	$	6,498,402	$	79,366,826	$	6,549,034	$	75,153,953

*	Includes insignificant amounts 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.

20

Notes to Financial Statements — Unaudited

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

	Three months ended
	June 30, 2007				June 30, 2006
	Related		Unrelated		Related		Unrelated
Interest income
Advances	$	806,965	$	—	$	805,165	$	—
Interest-bearing deposits *		—		83,954		—		69,603
Federal funds sold		—		42,179		—		37,637
Held-to-maturity securities		—		149,655		—		138,345
Mortgage loans **		—		19,715		—		18,728
Loans to other FHLBanks		—		—		7		—
Others		—		1		—		(7	)
Total interest income	$	806,965	$	295,504	$	805,172	$	264,306
Interest expense
Consolidated obligations	$	—	$	952,248	$	—	$	932,771
Deposits		34,357		—		20,268		—
Mandatorily redeemable capital stock		1,632		—		258		—
Cash collateral held and other borrowings		—		1,375		112		846
Total interest expense	$	35,989	$	953,623	$	20,638	$	933,617
Service fees	$	835	$	—	$	855	$	—

*	Includes de minimis amounts of interest income from MPF service provider.
**	Includes de minimis amounts of mortgage interest income from loans purchased from members of other FHLBanks.

	Six months ended
	June 30, 2007				June 30, 2006
	Related		Unrelated		Related		Unrelated
Interest income
Advances	$	1,584,459	$	—	$	1,506,941	$	—
Interest-bearing deposits *		—		164,653		—		146,095
Federal funds sold		—		86,815		—		58,030
Held-to-maturity securities		—		302,618		—		268,197
Mortgage loans **		—		39,233		—		37,586
Loans to other FHLBanks		—		—		7		—
Others		—		2		—		(2	)
Total interest income	$	1,584,459	$	593,321	$	1,506,948	$	509,906
Interest expense
Consolidated obligations	$	—	$	1,890,284	$	—	$	1,762,349
Deposits		55,367		—		34,340		—
Mandatorily redeemable capital stock		3,780		—		578		—
Cash collateral held and other borrowings		3		2,802		122		1,002
Total interest expense	$	59,150	$	1,893,086	$	35,040	$	1,763,351
Service fees	$	1,662	$	—	$	1,662	$	—

*	Includes de minimis amounts of interest income from MPF service provider.
**	Includes de minimis amounts of mortgage interest income from loans purchased from members of other FHLBanks.

21

Notes to Financial Statements — Unaudited

Debt transferred to other FHLBanks — In the three and six months ended June 30, 2007, the FHLBNY transferred $100.0 million and $383.0 million of consolidated obligation debt to other FHLBanks, at a cost that exceeded book value by $1.4 million and $3.8 million. Transfers were at negotiated market prices.

Note 11. Total Comprehensive Income

Total comprehensive income was comprised of net income and accumulated other comprehensive income (loss), which included cash flow hedging activities, and additional liability for employee supplemental retirement plans. Changes in accumulated other comprehensive income (loss) for the three and six months ended June 30, 2007 and 2006 were as follows (in thousands):

	Three months ended June 30, 2007
										Accumulated
	Cash			Benefit			Postretirement			Other					Total
	Flow			Equalization			Health Benefit			Comprehensive			Net		Comprehensive
	Hedges			Plan			Plan			Income (Loss)			Income		Income
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
Balance, March 31, 2007	$	(4,775	)	$	(1,965	)	$	(3,820	)	$	(10,560	)
Net change		694			—			—			694		$	70,627	$	71,321
Balance, June 30, 2007	$	(4,081	)	$	(1,965	)	$	(3,820	)	$	(9,866	)

	Six months ended June 30, 2007
										Accumulated
	Cash			Benefit			Postretirement			Other					Total
	Flow			Equalization			Health Benefit			Comprehensive			Net		Comprehensive
	Hedges			Plan			Plan			Income (Loss)			Income		Income
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
Balance, December 31, 2006	$	(4,763	)	$	(1,965	)	$	(3,820	)	$	(10,548	)
Net change		682			—			—			682		$	141,900	$	142,582
Balance, June 30, 2007	$	(4,081	)	$	(1,965	)	$	(3,820	)	$	(9,866	)

22

Notes to Financial Statements — Unaudited

Note 12. Estimated Fair Values

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

	June 30, 2007
	Carrying		Net Unrealized			Estimated
Financial Instruments	Value		Gains/Losses			Fair Value
Assets
Cash and due from banks	$	22,479	$	—		$	22,479
Interest-bearing deposits		6,845,100		43			6,845,143
Federal funds sold		4,520,000		7			4,520,007
Held-to-maturity securities		10,976,168		(187,502	)		10,788,666
Advances		61,234,817		(69,702	)		61,165,115
Mortgage loans		1,510,052		(52,443	)		1,457,609
Accrued interest receivable		420,622		—			420,622
Derivative assets		305,795		—			305,795
Other financial assets		2,716		—			2,716
Liabilities
Deposits		2,236,809		1			2,236,810
Consolidated obligations:
Bonds		65,780,089		(227,594	)		65,552,495
Discount notes		12,780,495		(887	)		12,779,608
Mandatorily redeemable capital stock		77,571		—			77,571
Accrued interest payable		714,322		—			714,322
Derivative liabilities		36,192		—			36,192
Other financial liabilities		50,497		—			50,497

	December 31, 2006
	Carrying		Net Unrealized			Estimated
Financial Instruments	Value		Gains/Losses			Fair Value
Assets
Cash and due from banks	$	38,850	$	—		$	38,850
Interest-bearing deposits		5,591,077		62			5,591,139
Federal funds sold		3,661,000		17			3,661,017
Held-to-maturity securities		11,251,098		(81,329	)		11,169,769
Advances		59,012,394		(55,450	)		58,956,944
Mortgage loans		1,483,419		(24,284	)		1,459,135
Accrued interest receivable		406,123		—			406,123
Derivative assets		224,775		—			224,775
Other financial assets		2,105		6			2,111
Liabilities
Deposits		2,389,528		1			2,389,529
Consolidated obligations:
Bonds		62,042,675		(184,723	)		61,857,952
Discount notes		12,191,553		(1,229	)		12,190,324
Mandatorily redeemable capital stock		109,950		—			109,950
Accrued interest payable		735,215		—			735,215
Derivative liabilities		107,615		—			107,615
Other financial liabilities		52,506		—			52,506

23

Notes to Financial Statements — Unaudited

Note 13. Commitments and Contingencies

The primary duty of the Finance Board is to ensure that the FHLBanks operate in a financially safe and sound manner. The Finance Board has the power to supervise the FHLBanks and to promulgate and enforce such regulations and orders as are necessary from time to time to carry out the provisions of the Federal Home Loan Bank Act. 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 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 liability 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, 2007 or December 31, 2006. The par amounts of the twelve FHLBanks’ outstanding consolidated obligations, including the FHLBNY’s, were approximately $970.9 billion and $951.9 billion at June 30, 2007 and December 31, 2006.

Commitments for additional advances totaled approximately $20.6 billion and $21.2 billion as of June 30, 2007 and December 31, 2006. Such commitments are conditional, and generally are 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 letters of credit. The FHLBNY may, at its discretion, permit the member to finance repayment of this obligation by receiving a collateralized advance. Outstanding standby letters of credit were approximately $410.4 million and $331.1 million as of June 30, 2007 and December 31, 2006, and had original terms of up to fifteen years, with a final expiration in 2019. Unearned fees on standby letters of credit are recorded as other liabilities and were not significant as of June 30, 2007 and December 31, 2006. Based on management’s credit analyses and collateral requirements, the FHLBNY does not deem it necessary to record 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 $9.5 million in mortgage loans at June 30, 2007 and December 31, 2006, 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. The FHLBNY had also entered into conditional agreements under “Master Commitments” with its members in the MPF program to purchase mortgage loans in aggregate amount of $318.8 million and $223.9 million as of June 30, 2007 and December 31, 2006.

The FHLBNY executes derivatives with major banks and broker-dealers (“derivative counterparties”), and generally enters into bilateral collateral agreements. When derivative counterparties are at risk, the Bank would typically pledge cash collateral to mitigate the counterparties’ credit exposure. Such market value exposure was below the threshold agreements with counterparties at June 30, 2007 and December 31, 2006. As a result, it did not become necessary for the FHLBNY to pledge collateral at either date to mitigate the derivative counterparties’ credit exposure related to derivative contracts with the FHLBNY.

24

Notes to Financial Statements — Unaudited

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 $161.5 million and $124.0 million delivered by derivative counterparties and held by the FHLBNY at June 30, 2007 and December 31, 2006. Cash collateral received is interest-bearing, and reported as interest-bearing deposits in the statements of condition. It is not the Bank’s current practice to net cash collateral with derivative assets and liabilities.

The FHLBNY charged to operating expense rental costs of approximately $0.8 million and $0.9 million for the three months ended June 30, 2007 and 2006 and $1.6 million for the six months ended June 30, 2007 and 2006. Lease agreements for the Bank’s 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, 2007 (in thousands):

	Payments due or expiration terms by period
	Less than		One year		Greater than three		Greater than
	one year		to three years		years to five years		five years		Total
Contractual Obligations
Consolidated obligations-bonds at par	$	27,368,815	$	28,153,130	$	5,946,050	$	4,529,800	$	65,997,795
Mandatorily redeemable capital stock		14,079		36,123		20,506		6,863		77,571
Premise and equipment (rental and lease obligations)		2,992		4,589		4,346		12,047		23,974
Total contractual obligations		27,385,886		28,193,842		5,970,902		4,548,710		66,099,340
Other commitments
Standby letters of credit		364,883		16,126		19,643		9,728		410,380
Unused lines of credit and other conditional commitments		20,561,410		—		—		—		20,561,410
Consolidated obligation bonds/discount notes traded not settled		1,516,065		—		—		—		1,516,065
Open delivery commitments (MPF)		1,377		—		—		—		1,377
Total other commitments		22,443,735		16,126		19,643		9,728		22,489,232
Total obligations and commitments	$	49,829,621	$	28,209,968	$	5,990,545	$	4,558,438	$	88,588,572

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.

25

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,
	2007			2006			2007			2006
Net income	$	70,627		$	75,418		$	141,900		$	138,105
Net income available to stockholders	$	70,627		$	75,418		$	141,900		$	138,105
Weighted average shares of capital		36,814			37,608			36,599			37,014
Less: Mandatorily redeemable capital stock		(799	)		(190	)		(958	)		(225	)
Average number of shares of capital used to calculate earnings per share		36,015			37,418			35,641			36,789
Net earnings per share of capital	$	1.96		$	2.02		$	3.98		$	3.75

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

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, 2007 and interest income earned for the three and six months ended June 30, 2007 (dollars in thousands):

	June 30, 2007
			Par		Percent of			Interest Income
	City	State	Advances		Total *			Three months		Six months
Hudson City Savings Bank	Paramus	NJ	$	12,116,000		19.7	%	$	123,238	$	225,175
New York Community Bank	Westbury	NY		7,438,673		12.1			88,019		178,175
HSBC Bank USA, National Association	New York	NY		4,508,850		7.3			62,812		130,110
Manufacturers and Traders Trust Company	Buffalo	NY		4,096,074		6.7			50,216		96,560
Astoria Federal Savings and Loan Assn.	Long Island City	NY		2,542,000		4.1			31,669		61,022
Total			$	30,701,597		49.9	%	$	355,954	$	691,042

* Percentage calculated on par value of advances.

26

Notes to Financial Statements — Unaudited

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):

	June 30, 2006
			Par		Percent of			Interest Income
	City	State	Advances		Total*			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	New York	NY		4,509,779		6.7			61,953		118,754
Manufacturers and Traders Trust Company	Buffalo	NY		3,548,383		5.2			47,241		92,533
Total			$	29,821,857		44.1	%	$	318,383	$	599,055

* Percentage calculated on par value of advances.

The following table summarizes advances to the top 5 members at December 31, 2006, and interest income earned for the twelve months ended December 31, 2006 (dollars in thousands):

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

* Percentage calculated on par value of advances.

27

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

Forward-Looking Statements

Statements contained in this report, including statements describing the objectives, projections, estimates, or predictions of the Federal Home Loan Bank of New York (“FHLBNY” or “Bank”), may be “forward-looking statements.” All statements other than statements of historical fact are statements that could potentially be forward-looking statements. These statements may use forward-looking terminology, such as “anticipates,” “believes,” “could,” “estimates,” “may,” “should,” “will,” or other variations on these terms or their negatives. These statements may involve matters pertaining to, but not limited to, projections regarding revenue, income, earnings, capital expenditures, dividends, the capital structure and other financial items; statements of plans or objectives for future operations; expectations of future economic performance; and statements of assumptions underlying certain of the foregoing types of statements.

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

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

28

Executive Overview

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

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

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

Business Overview

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

Net Income

Second Quarter — The FHLBNY reported 2007 second quarter net income of $70.6 million, or $1.96 per share, compared with net income of $75.4 million, or $2.02 per share, for the second quarter of 2006. Return on average equity, defined as net income divided by average capital stock plus average retained earnings and accumulated other comprehensive income, for the quarter was 7.16%, compared to 7.45% for the second quarter of 2006.

Prior year second quarter net income was higher and benefited from higher average interest-earning assets, and slightly higher net interest income, which for the FHLBNY is the primary source of revenue. Net interest income for the second quarter of 2007 was $112.9 million compared to $115.2 million in the second quarter of 2006.

29

Non-interest income in the current quarter was also lower by $2.2 million from the prior year second quarter. Non-interest income was comprised of fees from delivery of corresponding banking services to members, net realized and unrealized gains and losses from hedging activities, and losses from debt extinguishment. First quarter net gain from hedging activities was $2.0 million compared to $7.0 million in the second quarter of 2006. Second quarter 2006 gain primarily represented changes in fair value basis adjustments from the refinement of fair value estimation process for hedged consolidated bonds. In the current period, there were no material refinements to hedge measurement methodology. Loss from debt extinguishment was $1.4 million in the second quarter of 2007 compared to a loss of $4.3 million in the prior year period.

Operating expenses, including the allocated costs of running the Office of Finance and the Finance Board, were $18.0 million, an increase of $1.8 million from $16.2 million in the prior year period, and was another factor that explains the decline in net income.

Year-to-date — Net income for the first six months of 2007 was $141.9 million, or $3.98 per share, compared with $138.1 million, or $3.75 per share. Return on average equity was 7.27% for the first six months of 2007 compared with 6.95% for the prior year period. Net Income is principally impacted by changes in net interest income. Current year-to-date results benefited from an increase in net interest margin that contributed $7.1 million in pre-assessment net income; the primary component of the increase was rate related, partly offset by decline in intermediation volume, defined as average interest-earning assets. Increases in yields and coupons in a higher interest rate environment contributed $13.5 million, partly offset by a $6.4 million decline in net interest income due to declining intermediation volume. Net interest income in the current year periods also benefited from investing stockholders’ capital to fund higher coupon interest-earning assets in a rising interest rate environment. Operating expenses were $32.9 million in the second quarter, higher by $2.2 million compared to prior year period.

Advances — 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 the principal factor that impacts the financial condition of the FHLBNY. Reported Advances to members were $61.2 billion at June 30, 2007, up from $59.0 billion at December 31, 2006. One member was acquired by a non-member in the first quarter of 2007. No member was acquired by a non-member in the second quarter of 2007. Advances as a percentage of total assets was 71.3% at June 30, 2007, compared with 72.2% at December 31, 2006.

Dividend — A cash dividend of $1.85 per share of capital stock (7.50% annualized return on capital stock) was paid in April 2007 for the first quarter of 2007, up from $1.29 paid for the prior year period. For the first six months of 2007 and 2006, cash dividends paid, including the aforementioned, totaled $3.61 and $2.58 per share. An annualized dividend of 7.50% ($1.87 per share) was paid on July 31, 2007 to members for the second quarter, up from 5.75% ($1.43 per share) paid for the prior year period.

Stockholders’ Equity —Stockholders’ equity comprised of capital stock, retained earnings and accumulated comprehensive income, increased by $128.4 million to $4.0 billion at June 30, 2007, from December 31, 2006. Cash dividends paid from equity was $65.2 million in each of the two quarters in 2007. Capital stock, a component of equity, increased by $116.2 million to $3.7 billion at June 30, 2007, from December 31, 2006. The increase in capital stock is consistent with increases in advances borrowed by members. Members are required to purchase stock as a prerequisite to membership, and the amount is also determined by a percentage of advances borrowed from the FHLBNY. Under the FHLBNY’s present practice of repurchasing excess stock, the amount of capital stock outstanding varies in line with members’ outstanding borrowings. Stock in excess of amount necessary to support advance activity is redeemed daily.

30

Selected financial data are presented below (Unaudited)

Statements of Condition	June 30,			December 31,
(dollars in millions)	2007			2006			2005			2004			2003			2002
Investments (1)	$	22,341		$	20,503		$	21,190		$	18,363		$	14,217		$	23,598
Advances		61,235			59,012			61,902			68,507			63,923			68,926
Mortgage loans		1,510			1,483			1,467			1,178			672			435
Total assets		85,865			81,703			85,014			88,439			79,230			93,606
Deposits and borrowings		2,237			2,390			2,658			2,297			2,100			2,743
Consolidated obligations		78,561			74,234			77,279			80,157			70,857			83,512
Mandatorily redeemable capital stock		78			110			18			127			—			—
AHP liability		108			102			91			82			93			110
REFCORP liability		18			17			14			10			—			14
Capital stock		3,662			3,546			3,590			3,655			3,639			4,051
Retained earnings		380			369			291			223			127			244
Equity to asset ratio (2)		4.70	%		4.79	%		4.57	%		4.38	%		4.75	%		4.59	%

	Three months ended				Six months ended
Statements of Condition	June 30,				June 30,				Year ended December 31,
Averages(in millions)	2007		2006		2007		2006		2006		2005		2004		2003		2002
Investments (1)	$	20,256	$	18,975	$	20,385	$	18,728	$	19,490	$	19,944	$	17,642	$	19,833	$	20,677
Advances		60,143		64,337		59,368		63,432		64,658		63,446		65,289		70,943		64,210
Mortgage loans		1,501		1,457		1,495		1,460		1,471		1,360		928		527		400
Total assets		82,665		85,482		82,017		84,274		86,319		85,254		84,344		92,747		86,682
Deposits and borrowings		2,840		1,827		2,376		1,605		1,773		2,112		1,968		2,952		2,908
Consolidated obligations		74,779		78,523		74,665		77,546		79,314		77,629		76,105		81,818		76,907
Mandatorily redeemable capital stock		80		19		96		23		51		56		238		—		—
AHP liability		105		92		104		92		95		84		83		105		107
REFCORP liability		9		9		9		8		9		7		4		2		8
Capital stock		3,601		3,742		3,564		3,679		3,737		3,604		3,554		4,082		3,768
Retained earnings		354		307		351		297		314		251		159		193		204

Operating Results	Three months ended						Six months ended
(dollars in millions, except earnings	June 30,						June 30,						Year ended December 31,
and dividends per share)	2007			2006			2007			2006			2006			2005			2004			2003			2002
Net interest income (3)	$	113		$	115		$	226		$	219		$	470		$	395		$	268		$	299		$	389
Net income		71			75			142			138			285			230			161			46			234
Dividends paid in cash		65			47			130			93			208			162			66			164			167
AHP expense		8			8			16			15			32			26			19			5			26
REFCORP expense		18			19			35			35			71			58			40			11			59
Return on average equity* (4)		7.16	%		7.45	%		7.27	%		6.95	%		7.04	%		5.97	%		4.34	%		1.08	%		5.89	%
Return on average assets*		0.34	%		0.35	%		0.35	%		0.33	%		0.33	%		0.27	%		0.19	%		0.05	%		0.27	%
Operating expenses	$	17		$	15		$	33		$	31		$	63		$	59		$	51		$	48		$	39
Operating expenses ratio* (5)		0.08	%		0.07	%		0.08	%		0.07	%		0.07	%		0.07	%		0.06	%		0.05	%		0.04	%
Earnings per share	$	1.96		$	2.02		$	3.98		$	3.75		$	7.63		$	6.36		$	4.55		$	1.12		$	6.21
Dividend per share	$	1.85		$	1.29		$	3.61		$	2.58		$	5.59		$	4.50		$	1.83		$	3.97		$	4.51
Headcount (Full/part time)		247			225			247			225			232			221			210			206			200

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

31

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 pension liabilities; and estimating fair values of 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 Note 1 to the Financial Statements in the FHLBNY’s most recent Form 10-K filed on March 29, 2007.

Recently Issued Accounting Standards and Interpretations

SFAS 157 — In September 2005, the FASB issued SFAS 157, “Fair Value Measurements”(“SFAS 157”).
SFAS 157 defines fair value, establishes a framework for measuring fair value and enhances disclosure about fair value measurements required under other accounting pronouncements, but does not change existing guidance as to whether or not an instrument is carried at fair value. SFAS 157 nullifies the guidance in Emerging Issues Task Force EITF 02-3, which precluded the recognition of a trading profit at the inception of a derivative contract, unless the fair value of such derivative is obtained from a quoted market price or other valuation technique incorporating observable market data. SFAS 157 also precludes the use of a liquidity or block discount when measuring instruments traded in an active market at fair value. SFAS 157 requires that costs related to acquiring financial instruments carried at fair value should not be capitalized, but rather should be expensed as incurred. SFAS 157 also clarifies when an issuer’s credit standing should be considered in measuring liabilities at fair value.

SFAS 157 is effective for fiscal years beginning after November 15, 2007, with earlier application encouraged. SFAS 157 must be applied prospectively as of the beginning of the fiscal year in which it is initially adopted, except that the provisions related to block discounts and the guidance in EITF 02-3 are to be applied as a one time cumulative effect adjustment to opening retained earnings in the first interim period for the fiscal year in which SFAS 157 is initially applied. The Bank will adopt SFAS 157 on January 1, 2008, and is evaluating its potential effect on its financial statements.

SFAS 159 — On February 15, 2007, the FASB issued SFAS 159, “The Fair Value Option for Financial Assets and Financial Liabilities, including an amendment of FASB Statement 115”(“SFAS 159”).SFAS 159 creates a fair value option allowing an entity to irrevocably elect fair value as the initial and subsequent measurement attribute for certain financial assets and financial liabilities, with changes in fair value recognized in earnings as they occur. SFAS 159 also requires an entity to report those financial assets and financial liabilities measured at fair value in a manner that separates those reported fair values from the carrying amounts of assets and liabilities measured using another measurement attribute on the face of the statement of financial position. Lastly, SFAS 159 requires an entity to provide information that would allow users to understand the effect on earnings of changes in the fair value on those instruments selected for the fair value election. SFAS 159 is effective for fiscal years beginning after November 15, 2007 (January 1, 2008 for the Bank). The Bank is continuing to evaluate the financial assets and liabilities, if any, for which the fair value option under SFAS 159 would be elected, and to assess the impact on its financial condition, results of operations and cash flows if such election was made.

32

FSP FIN 39-1 — In April 2007, the FASB directed the FASB Staff to issue FSP No. FIN 39-1, “Amendment of FASB Interpretation No. 39”(“FSP FIN 39-1”). FSP FIN 39-1 modifies FIN No. 39, “Offsetting of Amounts Related to Certain Contracts”, and permits companies to offset cash collateral receivables or payables with net derivative positions under certain circumstances. FSP FIN 39-1 is effective for fiscal years beginning after November 15, 2007, with early adoption permitted. If the Bank adopts the provisions under the FSP, it does not expect implementation to have a material impact on reported results of operations or financial condition.

Results of Operations

The following section provides a discussion of the Federal Home Loan Bank of New York’s results of operations. For a discussion of the critical accounting estimates used by the Bank that affect its results of operations, see page 32 of this Form 10-Q and pages 42-47 of the FHLBNY’s Annual Report on Form 10-K for the year ended December 31, 2006.

Net Interest Income — Net interest income is the principal source of revenue for the Bank. Net interest income is impacted by member demand for advances and investment activity, the yields from advances and investments, and the cost of consolidated obligation debt that is issued by the Bank to fund advances and investments. The execution of interest rate swaps in the derivative market at a constant spread to LIBOR, in effect converting fixed-rate advances and fixed-rate debt to conventional adjustable-rate instruments indexed to LIBOR, results in an important intermediation for the Bank between the capital markets and the swap market. The intermediation permits the Bank to raise funds at lower costs than would otherwise be available through the issuance of simple fixed- or floating-rate debt in the capital markets. Income earned from assets funded by member capital and retained earnings, which are non-interest bearing, is another important consideration for the FHLBNY. All of these factors may fluctuate based on changes in interest rates, demand by members for advances, investor demand for debt issued by the FHLBanks, and the change in the spread between the yields on advances and investments, and the cost of financing these assets by the issuance of debt to investors.

Net interest income after provisions for credit losses was $112.9 million for the second quarter of 2007, down by $2.3 million from the prior year period. Net interest income represents the difference between income from interest-earning assets and interest expenses paid on interest-bearing liabilities. For the first six months of 2007, net interest income was $225.5 million, up by $7.1 million from the prior year period.

Net interest spread was 29.1 basis points for the second quarter of 2007, slightly down from 30.3 basis points from the prior year period. Net interest spread is defined as the difference between yield on interest-earning assets and yield on interest-bearing liabilities. Net interest margin, defined as annualized net interest income as a percentage of average earning assets was 55.3 basis points for the second quarter of 2007, unchanged from the prior year period.

For the first six months of 2007, net interest spread was 30.2 basis points, slightly higher than 28.4 basis points for the prior year period. Net interest margin for the first six months of 2007 was 56.0 basis points, also better than the prior year period margin of 52.7 basis points.

The FHLBNY earns income from investing its members’ capital to fund interest-earning assets. In the rising interest rate environment, deployment of capital, retained earnings and net non-interest bearing liabilities, referred to as deployed capital, provided the FHLBNY with significant income. As an illustration, an average of $4.2 billion in deployed capital earned a yield of 5.40%, the reported annualized yield on aggregate interest-earning assets for the second quarter of 2007. In contrast, the Bank’s average deployed capital in the prior year period was slightly higher at $4.4 billion, but earned a lower yield of 5.11%. Similarly, for the first six months of 2007, the Bank earned a yield of 5.41% on average deployed capital of $4.1 billion. In the prior year period, the yield was lower by 55 basis points and even though average deployed capital was higher by about $300.0 million, deployed capital made a stronger contribution to net interest income as a result of a rising rate environment in the three and six months ended June 30, 2007 compared to the same periods in 2006.

33

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

	Three months ended
	June 30,
					Dollar			Percentage
	2007		2006		Variance			Variance
Interest income
Advances	$	806,965	$	805,165	$	1,800			0.22	%
Interest-bearing deposits		83,954		69,603		14,351			20.62
Federal funds sold		42,179		37,637		4,542			12.07
Held-to-maturity securities		149,655		138,345		11,310			8.18
Mortgage loans held-for-portfolio		19,715		18,728		987			5.27
Other		1		—		1			0.00
Total interest income		1,102,469		1,069,478		32,991			3.08
Interest expense
Consolidated obligations-bonds		781,091		698,646		82,445			11.80
Consolidated obligations-discount notes		171,157		234,125		(62,968	)		(26.90	)
Deposits		34,357		20,268		14,089			69.51
Mandatorily redeemable capital stock		1,632		258		1,374			532.56
Cash collateral held and other borrowings		1,375		958		417			43.53
Total interest expense		989,612		954,255		35,357			3.71
Net interest income before provisions for credit losses	$	112,857	$	115,223	$	(2,366	)		(2.05	)%

	Six months ended
	June 30,
					Dollar			Percentage
	2007		2006		Variance			Variance
Interest income
Advances	$	1,584,459	$	1,506,941	$	77,518			5.14	%
Interest-bearing deposits		164,653		146,095		18,558			12.70
Federal funds sold		86,815		58,030		28,785			49.60
Held-to-maturity securities		302,618		268,197		34,421			12.83
Mortgage loans held-for-portfolio		39,233		37,586		1,647			4.38
Other		2		5		(3	)		(60.00	)
Total interest income		2,177,780		2,016,854		160,926			7.98
Interest expense
Consolidated obligations-bonds		1,547,848		1,325,397		222,451			16.78
Consolidated obligations-discount notes		342,436		436,952		(94,516	)		(21.63	)
Deposits		55,367		34,340		21,027			61.23
Mandatorily redeemable capital stock		3,780		578		3,202			553.98
Cash collateral held and other borrowings		2,805		1,124		1,681			149.56
Total interest expense		1,952,236		1,798,391		153,845			8.56
Net interest income before provisions for credit losses	$	225,544	$	218,463	$	7,081			3.24	%

34

Interest Income

Reported interest income includes the impact of interest rate derivatives.

Second Quarter — Total interest income for the second quarter of 2007 was $1.1 billion, up by $33.0 million from prior year period. Changes in rate and intermediation volume explain the change from prior year period. Increases in yields and coupons of interest-earning assets in a higher interest rate environment contributed $68.5 million to the growth in reported interest income. In the second quarter of 2007, average overall yield of interest-earning assets grew by 29 basis points to 5.40% and the weighted average yield from advances improved by 31 basis points. Coupons of short-term and variable-rate advances benefited the most from an inverted yield curve environment. Increased balance sheet liquidity resulted in increased balance sheet leverage; increased investments in short-term money market instruments with relatively higher yields also contributed to the increase in second quarter’s total interest income.

Investments in variable-rate MBS and acquisitions of fixed-rate MBS also benefited from higher coupons in a rising rate environment in the current quarter compared to prior year period. Overall yields from long-term investments grew by only 9 basis points in the second quarter of 2007, compared to prior year period, and lagged the overall increase in yields. This is a reflection of the Bank’s cautious approach in its investment in MBS.

Positive rate-related trends were partly offset by declining intermediation volume, which lowered interest income by $35.5 million. Intermediation volume, also referred to as transaction volume, is defined as the daily average transaction balances. Primary cause of lower interest income was lower advance intermediation volume in the second quarter of 2007 of about $4.2 billion as demand for member borrowing trended down compared to prior year period.

To enhance its liquidity, the Bank increased interest-bearing deposits and Federal funds sold, and funding these assets with the issuance of longer term consolidated bonds. MBS investment volume was also higher in the second quarter of 2007. In the prior year second quarter, the Bank acquired MBS very late in the quarter and its contribution to earnings was not fully realized until the third quarter of 2006.

Total interest income included advance prepayment fees of $0.7 million in the second quarter compared to $5.5 million in prior year period. The Bank 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 advance. Prepayment fees associated with hedged advances are recorded in interest income after adjusting for the fair value of the related hedge. Prepayment fees from commercial mortgage-backed securities included in total interest income was $1.0 million for the second quarter of 2007, slightly down from $1.4 million in the prior year period.

Year-to-date — For the first six months of 2007, total interest income was $2.2 billion, up by $161.0 million from prior year period. Intermediation volume, defined as average interest earning assets, declined and caused a decline in interest income by $53.2 million. This was offset by a rate related increase of $214.2 million, primarily from higher coupons and yields in a higher rate environment. Average yield on earning assets increased by 55 basis points to 5.41% for the current year period compared to prior year period. Average earning assets were $81.3 billion in the first six months of 2007, down by $2.3 billion from prior year period. Advance intermediation volume was down by $4.0 billion, and the decline was partly offset by increased volume of investments.

35

Advance prepayment fees recorded in interest income were $2.6 million for the current period, down from $6.0 million in prior year period, a reflection of slow-down in member initiated prepayment activity in current period. Fees from prepayment of commercial mortgage-backed securities, included in interest income from investments, were also lower and totaled $2.7 million in the first six months of 2007, compared to $3.4 million in the prior year period.

Impact of hedging interest income — Cash flow from interest rate swaps was also a critical component of interest income earned from advances. The FHLBNY executes interest rate swaps to modify the effective interest rate terms of many of its fixed-rate advance products, and typically all of its convertible or putable advances. In these swaps, the FHLBNY effectively converts a fixed-rate stream of cash flows from the advance to a floating-rate stream of cash flows, indexed to LIBOR. The impact of swapping fixed- for floating-interest rate in which the FHLBNY pays out fixed-rate and receives LIBOR-indexed cash flows in an interest rate swap agreement made a positive cash in-flow for the second quarter of 2007. Positive cash flows from such hedging activities improved earnings by $88.2 million in the second quarter of 2007, an increase of $37.7 million from the prior year second quarter. For the first six months of 2007, cash flows from hedging activities contributed $172.6 million, up by $109.9 million from the prior year period. In a hedge of an advance, the Bank structures the interest rate swap whereby the Bank pays the swap counterparty fixed coupon, and receives variable cash flows, typically indexed to the 3-month LIBOR rate. This structure generates positive cash flows when the 3-month LIBOR rates are higher than the contractual pay-fixed leg of the interest rate exchange agreement. If the swap is a callable swap, it is typically associated with a putable advance, and until the derivative counterparty exercises the option to terminate the swap, the swap’s cash flows will continue to impact earnings. Typically, in a rising rate environment, derivative counterparties will exercise the right to put the option and terminate the swap. Generally, the Bank would then put the advance and offer new advance to members at the then prevailing market terms.

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

	Three months ended				Six months ended
	June 30,				June 30,
	2007		2006		2007		2006
Advance Interest Income
Advance interest income before adjustment for interest rate swaps	$	718,786	$	754,665	$	1,411,852	$	1,444,223
Net interest adjustment from interest rate swaps		88,179		50,500		172,607		62,718
Total Advance interest income reported	$	806,965	$	805,165	$	1,584,459	$	1,506,941

Interest Expense

Reported interest expense includes the impact of interest rate derivatives.

Second Quarter — Total interest expense for the second quarter of 2007 was $989.6 million, up by $35.4 million from prior year period. In a rising rate environment, funding costs have grown even as transaction volume, measured in terms of average balance sheet outstanding, has declined. Increases were rate-related as new debt was issued at higher coupons in a rising rate environment to replace maturing debt, or to replace debt that had to be called in parallel with the call by derivative counterparties on the interest rate swap that hedged the debt. Rate related increases added $67.3 million to funding costs, while decline in average balance sheet reduced funding costs by $31.9 million, for a net increase of $35.4 million in funding cost for the second quarter of 2007 from prior year period. The FHLBNY continued to fund its assets through the issuance of consolidated obligation bonds and discount notes to investors in the global debt markets. Funding costs of consolidated obligation debt, on an after-swap basis, constituted 96.2% of total interest expense, slightly below 97.8% for the comparable period in 2006. The Bank did not hedge its discount notes.

36

Interest expense of consolidated obligation bonds in the second quarter of 2007 was $781.1 million, up by $82.5 million from $698.6 million in the prior year period. As a percentage of total interest expense, it represented 78.9%, up from 73.2% in the prior year period. The increased use of bonds in 2007 has offset the decline in use of discount notes. Interest expense associated with discount notes as a percentage of total interest expenses was 17.3% in the second quarter of 2007, down from 24.5% in the prior year period. Interest expense metrics included the impact of cash flows associated with bond hedging activity. Interest expense accruals comprised of coupon payments to investors holding the Bank’s debt, and cash flows associated with interest rate swaps in which the Bank paid to derivatives counterparties variable-rate LIBOR-indexed cash flows, and received fixed-rate cash flows. Such interest rate exchange agreements resulted in additional expense accruals of $44.3 million for the second quarter of 2007, compared to $72.1 million for the prior year period.

We believe the 12 FHLBanks (including the FHLBNY) have been able to execute their bond issuances to a receptive investor and dealer community despite the uncertainties in a rising rate environment. Investor demand for callable debt has remained brisk, and the FHLBNY has been able to increase the issuance of callable bonds at favorable spreads. For the second quarter of 2007, average yield of consolidated obligations (bonds and discount notes) increased by 29 basis points from the prior year period, and matched the growth in net yields from interest-bearing assets in the comparable periods. In a rising rate environment, debt issued by Government Sponsored Entities (“GSE”), including FHLBank debt (consolidated obligations) appears to outperform other credit products measured in terms of asset swap spreads to LIBOR rates, a measure that is very relevant as the FHLBNY tends to convert a significant percentage of its fixed-rate debt to LIBOR-indexed floating rate cash flows. We believe that as rates rise, investor demand tends to grow and funding cost for the Bank tends to improve.

Interest expense associated with term and overnight discount notes was $171.2 million for the second quarter of 2007, down from $234.1 million in prior year period. Even as discount notes remained as an important funding tool for day-to-day balance sheet management because of their ease and flexibility of issuance, the Bank reduced its reliance on discount notes in the current year because of the relatively higher cost of issuing short-maturity debt (discount notes) in a downward sloping yield curve. Relative spread to 3-month LIBOR was tighter during most of the current year and the Bank was able to achieve better short-term funding executions through the issuance of alternative funding structures, such as the issuance of fixed-rate callable debt with very short lock-out periods in conjunction with the execution of receive- fixed, pay-LIBOR indexed interest rate swaps with mirrored short lock-out call terms. In a rising-rate environment, derivative counterparties tended to exercise their right to terminate the swap; in turn, the Bank exercised its right to call the bond, effectively converting a medium-term debt into a short-term debt at better overall spreads to LIBOR than the issuance of term discount notes. Late in the second quarter of 2007, the yield curve steepened sharply and favorable execution spreads for such lockout callable debt declined for such short lock-out callable debt.

Year-to-date — For the first six months of 2007, total interest expense was $2.0 billion, up by $153.9 million from the prior year period. Rate related increase in funding costs was $200.6 million, and was partly offset by $46.8 million in reduction in funding costs due to lower funding needs due to a lower average balance sheet. Average balance sheet was $82.0 billion in the first six months of 2007, down from $84.3 billion in the prior year period. The impact of lower funding needs reduced aggregate funding cost by $46.8 million, from the prior year period. Coupon and yield increases in a higher interest rate environment caused funding costs to increase by $200.6 million in the first six months of 2007, from the prior year period.

37

Interest expense, net of the impact of interest rate swaps associated with consolidated obligation bonds was $1.6 billion, up by $222.5 million from prior year period. Interest expense associated with consolidated obligation discount notes was $342.4 million, down by $94.5 million from prior year period. As a percentage of total expense, discount notes accounted for 17.5% for the first six month of 2007, compared to 24.3% in the prior year period. Through most of the first six months of 2007, the Bank opted to reduce the issuance of discount notes because of more attractive alternative funding structures. Debt market pricing for consolidated obligation discount notes was uneven through most of the first six months of 2007. Earlier in the year, discount note pricing was particularly tight and unattractive, and in response to market conditions, the Bank reduced issuances. Midway through the second quarter of 2007, pricing returned to more normal levels.

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

In the second quarter of 2007, the net impact of accruals of receive-fixed interest-rate swaps and pay-LIBOR indexed cash flows associated with SFAS 133 qualifying debt hedges increased debt expense by $44.3 million, down from $72.1 million for the prior year period. For the first six months of 2007, interest accruals associated with receive-fixed, pay-LIBOR-indexed cash flows resulted in additional expense of $97.1 million, compared to $124.5 million for prior year period.

In both current and prior year periods, the Bank’s obligation to pay-variable cash flows, indexed to LIBOR, exceeded the swap counterparties’ obligations to pay the Bank fixed coupons. In a rising rate environment, variable coupons will typically exceed historically lower fixed coupons. Swap counterparties, who will receive the higher variable-rate cash flows will only exercise their option to call the swap (with a callable swap), if they expect future cash flows to be less than the fixed-rate cash flows the counterparties are obligated to pay to the Bank.

The negative impact of interest rate exchanges associated with debt hedging activities has declined in the current year primarily as a result of the narrowing gap between fixed coupons being paid to the Bank and the LIBOR-indexed variable coupons being paid by the Bank in the interest rate exchange agreements. Changes in the term structure of interest rates in the second quarter of 2007 tended to narrow the spread differential between the Bank’s fixed-rate coupons on the fixed leg of the swap and the LIBOR-indexed coupons on the variable leg of the swap. Also, debt hedge volume declined in the current year as a result of a lower average balance sheet, when compared to prior year periods.

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

	Three months ended						Six months ended
	June 30,						June 30,
	2007			2006			2007			2006
Consolidated bonds-Interest expense
Gross interest expense before adjustment for interest rate swaps	$	(736,788	)	$	(626,548	)	$	(1,450,746	)	$	(1,200,848	)
Net interest adjustment for interest rate swaps		(44,303	)		(72,098	)		(97,102	)		(124,549	)
Total Consolidated bonds-interest expense reported	$	(781,091	)	$	(698,646	)	$	(1,547,848	)	$	(1,325,397	)

38

Net Interest Spread— For the second quarter of 2007, net spread earned was 29.1 basis points, slightly down from 30.3 basis points in the prior year period. In the second quarter, the Bank put in place a plan to increase liquidity by inventorying money market investments and funding increased assets by issuing debt with slightly longer effective duration or maturity. Even though yields on short-term investments were relatively attractive, the spread differential between such investments and the cost of carrying the investments narrowed. The cost of debt increased by 30 basis points in the second quarter of 2007 from prior year period. In contrast, average yield from short-term deposits increased by 25 basis points.

Yields from traditionally high-yielding mortgage-backed securities lagged behind the overall increase in yields on interest-earning assets, and grew by only 9 basis points to yield 5.56%. In contrast, short-term money market yields increased by 45 basis points in the current quarter from prior year period. The Bank has remained opportunistic in acquiring mortgage-backed securities and has acquired such securities only when they met the Bank’s risk/reward profile.

Net margin, which is a measure of balance sheet efficiency, was 55.3 basis points for the second quarter of 2007, unchanged from prior year period. Net margin is net interest income divided by average earning assets and is reported on an annualized basis.

For the first six months of 2007, net spread earned was 30.2 basis points, up from 28.4 basis points in the prior year period, an indicator of a better margin performance in the first quarter of 2007 than the second quarter of 2007. In the first quarter, member borrowings of short-term advances with relatively high margins were a factor. In the second quarter of 2007, members adjusted their borrowing pattern, reducing their demand for shorter-term borrowing.

Spread/Yield Analysis:

The following tables summarize the Bank’s net interest income and net interest yield and provides an attribution of changes in rates and volumes of the FHLBNY’s interest-earning assets and interest bearing liabilities.

Spread and yield analysis for the second quarter of 2007 and 2006:

	Three months ended
	June 30, 2007							June 30, 2006
			Interest							Interest
	Average		Income/					Average		Income/
(dollars in thousands)	Balance		Expense		Rate1			Balance		Expense		Rate1
Earning Assets:
Advances	$	60,142,518	$	806,965		5.38	%	$	64,337,207	$	805,165		5.07	%
Interest-earning deposits		6,286,066		83,954		5.36			5,704,216		69,603		4.91
Federal funds sold		3,181,868		42,179		5.32			3,038,143		37,637		5.07
Investments		10,787,948		149,655		5.56			10,231,743		138,345		5.47
Mortgage loans and other loans		1,501,489		19,716		5.27			1,457,451		18,728		5.29
Total interest-earning assets	$	81,899,889	$	1,102,469		5.40	%	$	84,768,760	$	1,069,478		5.11	%
Funded By:
Consolidated obligations	$	74,778,519	$	952,248		5.11	%	$	78,522,711	$	932,771		4.82	%
Interest-bearing deposits and other borrowings		2,919,565		37,364		5.13			1,845,834		21,484		4.61
Total interest-bearing liabilities		77,698,084		989,612		5.11	%		80,368,545		954,255		4.81	%
Capital and other non-interest-bearing funds		4,201,805		—					4,400,215		—
Total Funding	$	81,899,889		989,612				$	84,768,760		954,255
Net Interest Spread			$	112,857		0.2906	%			$	115,223		0.3030	%
Net Interest Margin (Net interest income/Earning Assets) 2						0.553	%						0.553	%

² Annualized

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Spread and yield analysis for the first six months of 2007 and 2006:

	Six months ended
	June 30, 2007							June 30, 2006
			Interest							Interest
	Average		Income/					Average		Income/
(dollars in thousands)	Balance		Expense		Rate1			Balance		Expense		Rate1
Earning Assets:
Advances	$	59,368,132	$	1,584,459		5.38	%	$	63,431,685	$	1,506,941		4.79	%
Interest-earning deposits		6,194,230		164,653		5.36			6,317,274		146,095		4.66
Federal funds sold		3,289,044		86,815		5.32			2,434,337		58,030		4.81
Investments		10,901,741		302,618		5.60			9,975,687		268,197		5.42
Mortgage loans and other loans		1,494,550		39,235		5.29			1,460,502		37,591		5.25
Total interest-earning assets	$	81,247,697	$	2,177,780		5.41	%	$	83,619,485	$	2,016,854		4.86	%
Funded By:
Consolidated obligations	$	74,664,760	$	1,890,284		5.11	%	$	77,545,997	$	1,762,349		4.58	%
Interest-bearing deposits and other borrowings		2,471,879		61,952		5.05			1,628,016		36,042		4.46
Total interest-bearing liabilities		77,136,639		1,952,236		5.10	%		79,174,013		1,798,391		4.58	%
Capital and other non-interest-bearing funds		4,111,058		—					4,445,472		—
Total Funding	$	81,247,697	$	1,952,236					83,619,485		1,798,391
Net Interest Spread			$	225,544		0.3016	%			$	218,463		0.2843	%
Net Interest Margin (Net interest income/Earning Assets) 2						0.560	%						0.527	%

Note¹: Reported yields with respect to advances and debt may not necessarily equal the coupons on the instruments as derivatives are extensively used to change the yield and optionality characteristics of the underlying hedged items. When fixed-rate debt is issued by the Bank and hedged with an interest rate derivative, it effectively converts the debt into a simple floating-rate bond, typically resulting in funding at an advantageous price. Similarly, the Bank makes fixed-rate advances to members and hedges the advance with a pay-fixed, receive-variable interest rate derivative that effectively converts the fixed-rate asset to one that floats with prevailing LIBOR rates. Average balance sheet information is presented as it is more representative of activity throughout the periods presented. For most components of the average balances, a daily weighted average balance is calculated for the period. When daily weighted average balance information is not available, a simple monthly average balance is calculated. Average yields are derived by dividing income by the average balances of the related assets and average costs are derived by dividing expenses by the average balances of the related liabilities.

² Annualized

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Rate and Volume Analysis

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

	Three months ended
	June 30, 2007 vs. June 30, 2006
	Increase (decrease)
	Volume			Rate		Total
Interest Income
Advances	$	(52,495	)	$	54,295	$	1,800
Interest-earning deposits		7,100			7,251		14,351
Federal funds sold		1,781			2,761		4,542
Investments		7,520			3,790		11,310
Mortgage loans		566			422		988
Total interest income		(35,528	)		68,519		32,991
Interest Expense
Consolidated obligations		(44,477	)		63,954		19,477
Deposits and borrowings		12,496			3,384		15,880
Total interest expense		(31,981	)		67,338		35,357
Changes in Net Interest Income	$	(3,547	)	$	1,181	$	(2,366	)

	Six months ended
	June 30, 2007 vs. June 30, 2006
	Increase (decrease)
	Volume			Rate		Total
Interest Income
Advances	$	(96,538	)	$	174,056	$	77,518
Interest-earning deposits		(2,846	)		21,404		18,558
Federal funds sold		20,375			8,410		28,785
Investments		24,897			9,524		34,421
Mortgage loans		876			768		1,644
Total interest income		(53,236	)		214,162		160,926
Interest Expense
Consolidated obligations		(65,480	)		193,415		127,935
Deposits and borrowings		18,682			7,228		25,910
Total interest expense		(46,798	)		200,643		153,845
Changes in Net Interest Income	$	(6,438	)	$	13,519	$	7,081

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Non-Interest Income

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

	Three months ended						Six months ended
	June 30,						June 30,
	2007			2006			2007			2006
Other income (loss):
Service fees	$	835		$	855		$	1,662		$	1,662
Net realized and unrealized gain (loss) on derivatives and hedging activities		2,038			7,037			5,562			5,100
Losses from extinguishment of debt and other		(1,413	)		(4,245	)		(3,770	)		(4,240	)
Total other income	$	1,460		$	3,647		$	3,454		$	2,522

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

Net realized and unrealized gain (loss) on derivatives and hedging activities — The Bank records all derivatives as either assets or liabilities in the statements of condition at their estimated fair value and recognizes changes in fair value in the statements of income. Changes in the fair value of the Bank’s derivatives, including a small amount of mortgage commitments, resulted in reported gains of $2.0 million in the second quarter of 2007 compared to $7.0 million in the second quarter of 2006. For the first six months of 2007, the reported gain was $5.6 million compared to $5.1 million for the prior year period.

Hedging fair value gains and losses under SFAS 133 hedge accounting rules are included in other income (loss) as “Net realized and unrealized gain (loss) on derivatives and hedging activities.” The Bank has not early adopted SFAS 159, “The Fair Value Option for Financial Assets and Financial Liabilities, including an amendment of FASB Statement 115”(“SFAS 159”).

The net contractual interest accruals on interest rate swaps considered as not qualifying for hedge accounting and interest received from in-the-money options are also included in “Net realized and unrealized gain (loss) on derivatives and hedging activities.”

Net realized and unrealized gains and losses from hedging activities are typically determined by changes in the benchmark interest rate (designated as LIBOR by the FHLBNY) and the degree of ineffectiveness of hedging relationships between the change in the fair value of derivatives and change in the fair value of the hedged assets and liabilities attributable to changes in benchmark interest rate. Typically, such gains and losses represent hedge inefficiency or hedge ineffectiveness between changes in the fair value of the hedged item and changes in the fair value of the derivative.

42

The primary components of reported gains and losses from hedging activities for the second quarter and the first six months of 2007 compared to prior year periods are discussed below:

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

• SFAS 133 qualifying fair value hedges of the Bank’s debt resulted in net unrealized and realized gains of $2.3 million in the second quarter of 2007 on total notional hedged amount of $41.5 billion. In comparison, gain in the prior year second quarter from SFAS 133 qualifying hedges was $6.1 million, and primarily represented changes in fair value basis adjustments from the refinement of fair value estimation process for hedged consolidated bonds. For more details, refer to the Bank’s Form 10-Q for the period ended June 30, 2006, filed on August 14, 2006. For the first six months of 2007, net realized and unrealized gain from SFAS 133 qualifying hedges was $4.1 million.

• SFAS 133 non-qualifying fair value hedges resulted in net unrealized losses of $1.3 million on total notional amount of $2.4 billion for the second quarter of 2007, and a loss of $1.6 million for the first six months of 2007. In the prior year period, there were no debt hedges that did not qualify for SFAS 133 hedge accounting. Losses from non-qualifying hedges are classified as economic hedges. While such hedges did not meet the SFAS 133 hedge accounting criteria, the hedges were executed to mitigate business risk and met the Bank’s risk management objectives.

Advance Hedging — Changes in the benchmark interest rate (LIBOR for the Bank) and the implied volatilities of interest rates of fair value hedges using pay-fixed, receive-variable swaps associated with SFAS 133 qualifying hedges of the Bank’s advances for the second quarter of 2007 resulted in reported ineffectiveness, including amortization of basis adjustments, of $0.5 million on a hedged total notional amount of $38.6 billion. For the comparable second quarter of 2006, reported net unrealized and realized gain was $0.4 million on total notional amount of $35.6 billion. For the first six months of 2007, reported ineffectiveness was $1.9 million, compared to $1.1 million in the prior year period.

Option values of caps and floors — For the second quarter of 2007, changes in the fair value basis of options resulted in $0.7 million in reported realized losses, principally from market-amortization of the time value of purchased options approaching expiration. Net interest income accruals from in-the-money option contracts associated with variable-rate advances contributed $0.8 million in realized gains. Purchased options, indexed to LIBOR, became in-the-money during 2006 as short-term interest rates rose past the contractual “strike-prices” of option contracts, and the Bank accrued to income the difference between the option strike price and prevailing LIBOR rates. Under hedge accounting rules, such periodic contractual interest income is also considered as cash flows from economic hedges and is reported in “Net realized and unrealized gain (loss) on derivatives and hedging activities.” The change in fair value basis of options in the second quarter of 2006 resulted in a loss of $2.0 million, which was offset by $2.5 million of interest income accrued from in-the-money options. For the first six months of 2007, changes in the fair value basis of options resulted in a loss of $1.4 million, offset by $1.8 million in interest income accrued from in-the-money options.

Debt Extinguishment — Losses from extinguishment of debt consisted principally of the recorded loss from the retirement of consolidated obligation bonds. In the second quarter of 2007, the Bank retired $100.0 million of consolidated obligation debt at a cost that exceeded book value by $1.4 million. In the prior year period, $248.0 million of debt was retired at a cost that exceeded book value by $4.3 million. For the first six months of 2007, loss from debt extinguishment was $3.8 million and $383.0 million of debt was retired. There was no debt retired in the first quarter of 2006. The debt was retired in 2007 by transferring the debt obligation to another FHLBank at negotiated market prices. Debt transferred were fixed-rate and non-callable and with coupons that were higher than the prevailing market coupons.

When assets are prepaid in advance of their expected or contractual maturities, the Bank also attempts to extinguish debt in order to re-align asset and liability cash flow patterns and debt extinguished were associated with prepayments of advances and commercial mortgage-backed securities.

43

Non-Interest Expense

Operating expenses include the administrative and overhead costs of running the Bank and costs of providing advances, managing the investment portfolios, and delivering correspondent services. The FHLBanks pay 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 also are assessed the operating expenses of the Finance Board, the regulator of the FHLBanks.

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

	Three months ended				Six months ended
	June 30,				June 30,
	2007		2006		2007		2006
Other expenses:
Operating	$	16,874	$	15,195	$	32,924	$	30,669
Finance Board and Office of Finance		1,130		993		2,512		2,274
Total other expenses	$	18,004	$	16,188	$	35,436	$	32,943

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

	Three months ended				Six months ended
	June 30,				June 30,
	2007		2006		2007		2006
Salaries and employee benefits	$	10,378	$	9,526	$	21,135	$	19,563
Temporary workers		78		94		159		94
Occupancy		991		1,006		1,958		1,894
Depreciation and leasehold amortization		1,111		1,020		2,116		2,039
Computer service agreements and contractual services		1,317		992		2,651		2,607
Professional fees		1,260		909		1,715		1,105
Legal		218		214		437		428
Other		1,521		1,434		2,753		2,939
Total operating expenses	$	16,874	$	15,195	$	32,924	$	30,669

Salary and benefit costs of staff added in mid-2006 had a partial impact in the second quarter of 2006, and a full impact in the current periods of 2007; additional open staff positions were filled in 2007. Computer service and maintenance agreements have increased primarily from contractually agreed pricing adjustments to annual maintenance costs. The Bank has also contracted for additional software and systems in 2007. The increase in professional fees was related to certain consulting projects initiated in the second quarter of 2007.

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 “Assessments” in notes to unaudited financial statements.

REFCORP assessment on net income was $17.7 million for the second quarter of 2007, compared to $18.9 million for the prior year period. For the first six months of 2007, the REFCORP assessment was $35.5 million, compared to $34.5 million for the prior year period. The assessments that were set aside from net income for the Affordable Housing Program (AHP) were $8.0 million for the second quarter of 2007, compared to $8.4 million for the prior year period. For the first six months of 2007, the amount set aside was $16.2 million, compared to $15.4 million for the prior year period. Both the REFCORP and AHP assessments are based on income and decrease or increase reflect changes in pre-assessment income for the three and six months ended June 30, 2007 over the comparable period in 2006.

44

Financial Position — Assets, Liabilities and Shareholders’ Capital

Selected balance sheet data (in thousands)

	June 30, 2007		December 31, 2006
Assets
Cash and due from banks	$	22,479	$	38,850
Interest-bearing deposits		6,845,100		5,591,077
Federal funds sold		4,520,000		3,661,000
Held-to-maturity securities		10,976,168		11,251,098
Advances		61,234,817		59,012,394
Mortgage loans held-for-portfolio		1,510,052		1,483,419
Accrued interest receivable		420,622		406,123
Premises, software, and equipment, net		11,808		11,107
Derivative assets		305,795		224,775
All other assets		18,387		23,144
Total assets	$	85,865,228	$	81,702,987
Liabilities
Deposits
Interest-bearing demand	$	2,193,410	$	2,307,733
Non-interest bearing demand		1,399		1,795
Term		42,000		80,000
Total deposits		2,236,809		2,389,528
Consolidated obligations
Bonds		65,780,089		62,042,675
Discount notes		12,780,495		12,191,553
Total consolidated obligations		78,560,584		74,234,228
Mandatorily redeemable capital stock		77,571		109,950
Accrued interest payable		714,322		735,215
Affordable Housing Program		107,996		101,898
Payable to REFCORP		17,657		17,475
Derivative liabilities		36,192		107,615
Other liabilities		81,301		102,685
Total liabilities		81,832,432		77,798,594
Shareholders’ Capital		4,032,796		3,904,393
Total liabilities and capital	$	85,865,228	$	81,702,987

Balance sheet overview

At June 30, 2007, the Bank’s total assets were $85.9 billion, an increase of $4.2 billion, or 5.1%, from December 31, 2006. Growth was primarily from two sources. Advances to members increased by $2.2 billion as a result of borrowings of $1.6 billion in long- and medium-term advances by one new member. Growth was also in short-term money market investments — interest-bearing deposits and Federal funds sold — with the goal of increasing balance sheet liquidity, which resulted in increased leverage; leverage is defined as total assets as a multiple of shareholders’ capital.

45

Management perceived some volatility in the credit markets, and to ensure members’ liquidity needs are met the Bank increased its liquidity by increasing its investments in money market instruments. As a result, balance sheet leverage increased. At June 30, 2007, balance sheet leverage was 21.3 times shareholders’ capital, up from 20.9 at December 31, 2006.

Members are required to purchase capital stock to support their borrowings from the Bank, and as a result stockholders’ capital increases and decreases with members’ advance borrowings. As capital increases or declines in line with higher or lower volumes of advances, the Bank adjusts its assets by increasing or decreasing holdings of short-term investments in certificates of deposit, and to some extent its positions in Federal funds sold, which it inventories to accommodate unexpected member needs for liquidity.

At June 30, 2007, the Bank’s total liabilities were $81.8 billion, an increase of $4.0 billion, or 5.1%, from December 31, 2006. The increase was primarily from issuances of long- and medium-term consolidated obligation bonds.

Advances

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

Reported book value of advances was $61.2 billion at June 30, 2007, up from $59.0 billion at December 31, 2006. Reported book value at June 30, 2007 included net unrealized losses of $170.7 million resulting from fair value hedge basis adjustments under SFAS 133 hedge accounting rules, compared to net unrealized gains of $23.2 million at December 31, 2006. Fair value basis of previously recorded realized gains and losses from discontinued hedges, net of amortization, was not material. Unrealized gains and losses represent changes in the fair values of hedged advances under the provisions of hedge accounting rules under SFAS 133.

Par amount of advances grew by $2.4 billion at June 30, 2007, compared to December 31, 2006. The growth or decline in advances reflects demand by members for both short-term liquidity and term funding driven by economic factors, such as availability to the Bank’s members of alternative funding sources that are more attractive, or by the interest rate environment and the outlook for the economy. Members may choose to prepay advances, which may incur prepayment penalty fees, based on their expectations of interest rate changes and demand for liquidity.

Demand may also be influenced by the dividend payout rate to members on their capital stock investment in the FHLBNY. Members are required to invest in FHLBNY’s capital stock in the form of membership stock and activity stock. Advance volume is also influenced by merger activity where members are either acquired by non-members or acquired by members of another FHLBank. When FHLBNY members are acquired by members of another FHLBank or a non-member, they no longer qualify for membership in the FHLBNY and the FHLBNY may not offer advances to non-members. Subsequent to the merger, maturing advances may not be replaced, which has an immediate impact on short-term and overnight lending.

46

Advances — By type

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

	June 30, 2007						December 31, 2006
				Percentage						Percentage
	Amounts			of total			Amounts			of total
Adjustable Rate Credit — ARCs	$	14,374,544			23.41	%	$	13,251,464			22.47	%
Fixed Rate Advances		31,521,589			51.33			29,873,543			50.64
Repurchase (Repo) Agreement Advances		12,531,292			20.41			11,969,036			20.29
Short-Term Advances		863,980			1.41			1,824,705			3.09
Mortgage Matched Advances		699,640			1.14			757,050			1.28
Overnight Line of Credit (OLOC) Advances		1,229,739			2.00			1,187,685			2.02
All other categories		184,982			0.30			125,787			0.21
Total par value of advances		61,405,766			100.00	%		58,989,270			100.00	%
Discount on AHP Advances		(466	)					(519	)
Net premium on advances		174						489
SFAS 133 hedging adjustments		(170,657	)					23,154
Total	$	61,234,817					$	59,012,394

Member demand for advances — Other than borrowings of $1.6 billion by a new member advance borrowings from the broader membership base grew by $0.8 billion, or 1.4%, to $61.4 billion in par amounts at June 30, 2007 compared to December 31, 2006.

ARC Advances — Increases in ARC Advances were almost entirely associated with a borrowing of $1.1 billion in long- and medium-term advances by one new member. ARC Advances are medium- and long-term loans that can be pegged to a variety of indices, such as 1-month LIBOR, 3-month LIBOR, or the Federal funds rate. Members use an ARC Advance to manage interest rate and basis risks by efficiently matching the interest rate index and repricing characteristics of floating-rate assets and liabilities. The interest rate is set and reset (depending upon the maturity of the advance and the type of index) at a spread to that designated index. Principal is due at maturity and interest payments are due at every reset date, including the final payment. ARC Advances have continued to be a significant category of advances.

Fixed-rate Convertible (putable) Advances — One large member’s increased borrowing in the first quarter of 2007 of convertible fixed-rate advances accounted for the increase in Fixed-rate advances at June 30, 2007. The competitively priced convertible fixed-rate advances were in demand by members in the second quarter. Increase in demand was offset by member initiated prepayments and Bank initiated puts of convertible advances. Prepayments initiated by a small number of members in the second quarter of 2007 caused advances to decline by $377.3 million. Also, in the second quarter, the Bank exercised its option to put $3.1 billion of convertible advances back to its member-borrowers. Members were offered “replacement” advances at prevailing terms, and new borrowings offset Bank initiated puts.

Fixed-rate advances are flexible funding tools that can be used by members to meet short- to long-term liquidity needs. Terms vary from 2 days to 30 years. Fixed-rate advances were the largest category of advances. 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 member’s cost of the advance. These advances are known as “convertible” or “putable” advances. On the date of the put, the existing advance is matured. The member may request an advance of any type or term within the available suite of advance products that is offered to all members on that day. In order to qualify for an advance, regardless of whether or not the advance is replacement funding, a member must meet the Bank’s credit and collateral criteria.

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REPO Advances— The increase in Repo Advances was primarily associated with a borrowing by the new member of a $500.0 million long-term non-putable advance. Other than this new advance, outstanding balances remained largely unchanged, and have not exhibited the same declining trends as seen in the past. REPO Advances are secured by eligible securities and can be structured to have a fixed or variable interest rate, “bullet” or quarterly interest payments, and a put option, by which the FHLBNY receives an option to require payment after a predetermined lockout period. Members may use U.S. Treasuries, Agency-issued debentures, and mortgage-backed securities as collateral.

Short-term Advances — Short-term fixed-rate advances were at their historical low-point in the first quarter of 2007, and increased to $864.0 million at June 30, 2007 from $750.7 million at March 31, 2007, but down from $1.8 billion at December 31, 2006. Member demand has been very weak and can be explained by the relatively higher coupons in the short-end of the term structure of interest rates in an inverted yield curve environment that has been prevalent through most of 2007.

Member prepayment activity—Member initiated prepayment activity increased during the second quarter of 2007 to $377.3 million, up from $200.0 million in the first quarter of 2007. Activity was concentrated among a few large members.

Merger activity—One member was acquired by a non-member in the first quarter of 2007. The amount was not considered significant in terms of advance activity.

Impact of hedging —The Bank hedges certain advances under the provisions of SFAS 133 by the use of both callable and non-callable interest rate swaps as fair value hedges. Certain LIBOR-indexed advances have “capped” coupons. These caps were offset by purchased options (caps) with mirror-image terms. Fair value changes of caps due to changes in the benchmark rate and option volatilities were recorded through “Net realized and unrealized gains losses on derivative and hedging activities”, a component of other income.

The most significant elements that impacted balance sheet reporting included the recording of fair value basis adjustments. Also, when advances were hedged by callable swaps, the possibility of exercise of the swaps and the associated advances shortened the effective maturities of the advances. The impact on the Bank’s income from hedging advances is discussed in “Results of Operations” elsewhere in the MD&A. Its impact as a risk management tool is discussed in Item 3 “Quantitative and Qualitative Disclosures about Market Risk.”

The Bank hedged $38.6 billion of par amounts of advances outstanding, representing 62.9% of par amounts of advances outstanding at June 30, 2007, compared to $35.6 billion at December 31, 2006, or 60.3% of par amounts. The small increase reflects the increase in fixed-rate putable advances which are typically swapped back to LIBOR-indexed cash flows. The Bank’s derivatives book at June 30, 2007, also included $1.2 billion ($1.3 billion at December 31, 2006) in purchased interest rate “caps”; such options were an economic hedge of “capped” variable-rate advances borrowed by members.

The Bank uses interest rate derivatives to hedge the risk of changes in the benchmark rate, which the FHLBNY has adopted as LIBOR, and is also the discounting basis for computing changes in fair values of hedged advances. Recorded fair value basis adjustments in the statements of condition were associated with hedging activities under the provisions of SFAS 133. At June 30, 2007, the fair value basis adjustment was $170.7 million representing net unrealized losses, compared to $23.2 million in net unrealized gains at December 31, 2006. Fair value changes are typically from changes in the term structure of medium- and short-term rates, from changes in volatilities of such rates, and from the growth or decline in hedge volume. Compared to December 31, 2006, the yield curve at June 30, 2007 had “steepened”, and the effect of a relatively positive sloping yield curve has been higher rates at the longer-end of the curve. Since hedged advances are typically fixed-rate and long in tenor, in a rising rate environment, fixed-rate advances exhibit declining fair value basis adjustments. The unrealized loss position is consistent with the upward sloping term structure of interest rates at June 30, 2007. Changes due to amortization of previously recorded realized gains and losses were not material. Unrealized gains and losses represented by the fair value basis adjustments were almost entirely offset by fair value unrealized losses and gains of the derivatives associated with the fair value hedges.

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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, 2007 and December 31, 2006, the FHLBNY’s investments consisted of investment securities classified as held-to-maturity, interest-bearing deposits at highly-rated financial institutions, and Federal funds sold. The FHLBNY does not actively trade its investment securities.

The following table summarizes changes in investment by category (including held-to-maturity securities) (dollars in thousands):

	June 30,		December 31,		Dollar			Percentage
	2007		2006		Variance			Variance
State and local housing agency obligations	$	600,408	$	618,810	$	(18,402	)		(2.97	)%
Mortgage-backed securities		10,375,760		10,632,288		(256,528	)		(2.41	)
Total investment securities		10,976,168		11,251,098		(274,930	)		(2.44	)
Interest-bearing deposits *		6,845,000		5,591,000		1,254,000			22.43
Federal funds sold		4,520,000		3,661,000		859,000			23.46
Total investments	$	22,341,168	$	20,503,098	$	1,838,070			8.96	%

* Excludes bank deposits at another FHLBank.

Held-to-maturity Securities

Held-to-maturity securities included privately issued mortgage and asset-backed securities, collectively referred to as “MBS” that were rated “Aaa” by Moody’s or “AAA” by S&P, and mortgage-pass-throughs and Real Estate Mortgage Investment Conduit bonds issued by government sponsored mortgage agencies. In addition, the FHLBNY had investments in primary public and private placements of taxable obligations of state and local housing finance authorities (“HFA”) that were rated at least “Aa” by Moody’s or “AA” by S&P. Investment in mortgage-backed securities provides a reliable income stream. Limits for the size of the MBS portfolio are defined by Finance Board regulations, which limits holding of MBS to 300% of capital. At June 30, 2007 and December 31, 2006, the Bank was within these limits.

At June 30, 2007, held-to-maturity securities declined slightly to $11.0 billion, compared to $11.3 billion at December 31, 2006.

• Mortgage-backed securities comprised of fixed- and variable-rate investments were $10.4 billion at June 30, 2007, down from $10.6 billion at December 31, 2006. Fixed-rate MBS was $10.1 billion, slightly down from $10.4 billion at December 31, 2006; variable-rate MBS was $249.7 million, down from $274.5 million at December 31, 2006.

• Investment in HFA bonds was $600.4 million, down from $618.8 million at December 31, 2006. No acquisitions were made during 2007.

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Held-to-maturity investments in MBS and HFA bonds were allowed to decline as paydowns, prepayments and natural maturities exceeded new acquisitions. During the six months ended June 30, 2007, acquisitions totaled $694.8 million (all mortgage-backed securities); in contrast, paydowns of MBS and HFA bonds were $968.5 million.

During most of 2007, MBS spreads remained “tight” inhibiting opportunities for acquisitions. Only when pricing met the Bank’s risk-reward preferences, did the Bank consider an acquisition, and as a result purchases of new MBS investments have remained opportunistic. In the first quarter, the Bank committed to purchase $100.0 million in a triple-A, agency issued collateralized mortgage obligation securities (“CMO”) that settled in April 2007. Additional acquisitions of $594.8 million were made in the second quarter of 2007, consisting of triple-A, agency issued CMOs.

Held-to-maturity MBS at June 30, 2007 included $811.0 million of seasoned MBS supported by non-conforming residential mortgage loans with a market value of $800.6 million. These securities were collateralized at the time of issuance by loans with a weighted average FICO score of 660 or less. In addition, the held-to-maturity portfolio also included $93.9 million (market value $89.1 million) of seasoned MBS supported by loans with high loan-to-value ratios (“HLTVs”). The HLTV securities were collateralized at the time of issuance by loans with a weighted average FICO score of 695 or greater. All MBS, including the aforementioned securities, were rated triple-A at the time of purchase, and at June 30, 2007 and December 31, 2006.

The FHLBNY conducts a review and evaluation of the securities portfolio to determine if the decline, if any, in the fair value of a security below its carrying value is other than temporary. The FHLBNY generally views changes in fair value caused by changes in interest rates as temporary, which is consistent with the FHLBNY’s experience. The FHLBNY has both the intent and financial ability to hold the temporarily impaired securities until recovery of their value.

Short-term investments

High quality short-term investments such as Federal funds and certificates of deposits were held at June 30, 2007 and December 31, 2006, and provided the liquidity necessary to meet member credit needs and a reasonable return on members’ short-term deposits. Both short- and long-term investments were used by the FHLBNY to employ excess capital and generated additional returns for its members. Short-term investments were higher at June 30, 2007, compared to December 31, 2006, and provided a flexible means of implementing the asset-liability management decision to increase liquidity.

Federal funds sold — Inventory of Federal funds sold was $4.5 billion, up from $3.7 billion at December 31, 2006. Historically, the FHLBNY has been a provider of Federal funds to its members, allowing the FHLBNY to warehouse and provide balance sheet liquidity to meet unexpected member borrowing demands. The increase during 2007 was part of the Bank’s decision to increase short-term liquidity.

Certificates of deposits — At June 30, 2007, certificates of deposit at highly-rated financial institutions, all maturing within 12 months or less, were $6.9 billion, up from $5.6 billion at December 31, 2006.

Cash collateral pledged — The FHLBNY generally executes derivatives with major banks and broker-dealers and typically enters into bilateral collateral agreements. When counterparties are exposed, the Bank’s derivatives are in a net unrealized loss position, and the Bank would be called upon to pledge cash collateral to mitigate the counterparties’ credit exposure. Collateral agreements in place include certain thresholds and pledge requirements that are generally triggered if exposures exceed the agreed upon thresholds. As of June 30, 2007 and December 31, 2006, no cash had been required to be pledged by the Bank.

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Mortgage Loans Held-for-Portfolio

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

	June 30, 2007						December 31, 2006
	2007			Percentage			2006			Percentage
Real Estate:
Fixed medium-term single-family mortgages	$	558,887			37.1	%	$	575,114			38.9	%
Fixed long-term single-family mortgages		941,495			62.6			897,153			60.7
Multi-family mortgages		4,792			0.3			4,940			0.4
Total par value		1,505,174			100.0	%		1,477,207			100.0	%
Unamortized premiums		12,571						13,323
Unamortized discounts		(6,707	)					(6,288	)
Basis adjustment1		(393	)					(230	)
Total mortgage loans held-for-portfolio		1,510,645						1,484,012
Allowance for credit losses		(593	)					(593	)
Total mortgage loans held-for-portfolio after allowance for credit losses	$	1,510,052					$	1,483,419

¹ Represents open and closed delivery commitments accounted for as economic hedges.

At June 30, 2007, the portfolio of mortgage loans was comprised principally of investments in Mortgage Partnership Finance loans (“MPF”^®) at a book value of $1.5 billion, a net increase of $26.6 million from the investments of MPF at December 31, 2006. During the two quarters ended June 30, 2007, the Bank added $108.1 million in new MPF loans; run-offs, in contrast, were $80.8 million in the same period. 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.

Investment in Community Mortgage Asset loans (“CMA”), which has not been active since 2001, has declined steadily over time, was $4.8 million, slightly down from December 31, 2006.

Deposit Liabilities

Deposits liabilities comprised of member deposits and interest-bearing deposits pledged to the Bank as cash collateral by derivative counterparties, and from time-time may also include unsecured overnight borrowings from other FHLBanks:

Member deposits — The FHLBNY operates deposit programs for the benefit of its members. Deposits are primarily short-term in nature, with the majority maintained in demand accounts that reprice daily based upon rates prevailing in the overnight Federal funds market. Members’ liquidity preferences are the primary determinant of the level of deposits. Total deposits at June 30, 2007, including demand and term aggregated $2.2 billion slightly down from $2.4 billion at December 31, 2006. Member deposits have fluctuated during the two quarters in 2007, averaging $1.8 billion in the first quarter and $2.7 billion in the second quarter. However, member deposits are not a significant source of liquidity for the Bank.

Cash collateral held — Cash collateral pledged to the FHLBNY by derivative counterparties at June 30, 2007 was $161.5 million compared to $124.0 million at December 31, 2006. These deposits were interest-bearing demand deposits that repriced daily based principally upon rates prevailing in the overnight Federal funds market. Derivative counterparties are required by agreement to pledge collateral to the FHLBNY to cover the FHLBNY’s credit exposure in the event of counterparty default. At June 30, 2007 and December 31, 2006, the FHLBNY’s exposure was represented by derivatives in an unrealized gain position, after giving effect to threshold triggers under collateral agreements with derivative counterparties.

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Borrowings from other FHLBanks —The Bank borrows from other FHLBanks, generally for a period of one day. There were no borrowings outstanding at either June 30, 2007 or December 31, 2006. During the two quarters ended June 30, 2007, the Bank had borrowed $20.0 million at market terms.

Consolidated Obligations and Debt Financing Activity

The primary source of funds for the FHLBNY continued to be through issuance of consolidated obligation bonds and discount notes, together referred to as consolidated obligations.

Reported amounts of consolidated obligations outstanding, comprising of bonds and discount notes, at June 30, 2007 and December 31, 2006 were $78.6 billion and $74.2 billion, and funded 91.5% and 90.8% of total assets at those dates. These ratios have remained substantially unchanged over the years, indicative of the stable funding strategy pursued by the FHLBNY.

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

	June 30, 2007			December 31, 2006
Fixed-rate, non-callable	$	38,299,795		$	37,328,640
Fixed-rate, callable		19,735,000			17,039,000
Step Up, non-callable		—			50,000
Step Up, callable		2,453,000			3,688,000
Single-index floating rate		5,510,000			4,100,000
Total par value		65,997,795			62,205,640
Bond premiums		19,896			23,334
Bond discounts		(32,611	)		(33,300	)
SFAS 133 fair value basis adjustments		(204,000	)		(151,222	)
Deferred net gains on terminated hedges		(991	)		(1,777	)
Total carrying value	$	65,780,089		$	62,042,675

At June 30, 2007, fixed-rate callable debt increased by $2.7 billion, from December 31, 2006, primarily due to increased issuances of callable bonds because of favorable execution levels during most of the six months ended June 30, 2007. With a callable bond, the Bank purchases a call option from the investor, and the option allows the Bank to terminate the bond at predetermined call dates. Relative to other types of funding, investors have been receptive to callable-bond yields offered by the Bank.

Fixed-rate non-callable debt increased by $1.0 billion primarily due to the issuances of 1-year bullet debt. The short-term debt was at spreads that were more favorable than one-year discount notes or swapped, short-lock out callable debt. The issuance of floating-rate, LIBOR-indexed bonds increased by $1.4 billion, which were also executed at levels that were equal to or better than discount notes. In an environment of an inverted yield curve, market demand for step-up bonds has not been strong.

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

					Weighted
	Book		Par		Average
	Value		Value		Interest Rate
June 30, 2007	$	12,780,495	$	12,836,516		5.11	%
December 31, 2006	$	12,191,553	$	12,255,625		5.10	%

The ratio of discount notes to total assets at June 30, 2007 has remained at 14.9%, the ratio at December 31, 2006. While the outstanding balance of discount notes has increased at June 30, 2007, compared to December 31, 2006, its usage and issuance during 2007 declined compared to the second quarter of 2006. For the second quarter and the first six months of 2007, discount notes, on average, funded 15.9% and 16.1% of total assets. The comparable ratio was 22.7% and 22.6% for the second quarter and the first six months of 2006. In 2007, the Bank increased use of structured bonds associated with interest rate swaps to replace declining issuances of discount notes. This was in response to investor demand for the longer-term consolidated obligation bonds, particularly fixed-rate, callable bonds and the Bank’s view that the issuance of discount notes were at unfavorable yields relative to LIBOR.

Consolidated Obligation bonds by maturity.

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

	June 30, 2007						December 31, 2006
				Weighted						Weighted
				Average						Average
Maturity	Amount			Rate			Amount			Rate
One year or less	$	27,368,815			4.62	%	$	25,888,510			4.35	%
Over one year through two years		19,525,730			4.80			20,458,280			4.69
Over two years through three years		8,627,400			5.08			6,007,350			4.80
Over three years through four years		2,463,600			4.94			3,275,700			4.62
Over four years through five years		3,482,450			5.23			2,077,900			5.00
Over five years through six years		557,000			5.20			529,800			4.71
Thereafter		3,972,800			5.32			3,968,100			5.29
Total par value		65,997,795			4.83	%		62,205,640			4.60	%
Bond premiums		19,896						23,334
Bond discounts		(32,611	)					(33,300	)
SFAS 133 fair value basis adjustments		(204,000	)					(151,222	)
Deferred net gains on terminated hedges		(991	)					(1,777	)
Total carrying value	$	65,780,089					$	62,042,675

In the second quarter of 2007, the Bank increased issuances of debt with maturities of over two years through five years, and bonds outstanding in those maturity bands totaled $14.6 billion, representing 22.1% of par amounts of bonds outstanding at June 30, 2007. In contrast, the comparable percentage was 18.3%, or $11.4 billion, at December 31, 2006. Investor demand for these maturity tenors was relatively stronger and the Bank was able to execute issuances at favorable levels.

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Impact of hedging fixed-rate debt

The most significant elements that impacted balance sheet reporting of debt included the recording of fair value basis adjustments. Also, when callable bonds were hedged by callable swaps, the possibility of exercise of the call shortened the expected maturity of the bond. The impact to the Bank’s income is discussed in this MD&A under “Results of Operations.” Its impact as a risk management tool is discussed under Item 3 “Quantitative and Qualitative Disclosures about Market Risk.”

Fair value basis adjustments — The reported carrying value of hedged consolidated bonds were adjusted for changes in their fair value basis adjustments that were attributable to the risk being hedged in accordance with hedge accounting rules. The Bank hedged the risk of changes in the benchmark interest rate, which the Bank has designated as LIBOR.

Of the par amounts of $66.0 billion in bonds outstanding at June 30, 2007, the Bank had hedged $43.8 billion, representing 66.4% of total par. At December 31, 2006, the notional amount of swapped out debt stood at $40.7 billion on total debt of $62.2 billion, representing 65.4% of total par amount of consolidated obligation bonds. The Bank also executes hedges of anticipated issuances of debt.

The reported carrying value of hedged consolidated bonds is adjusted for changes in their fair value basis adjustments that are attributable to the risk being hedged in accordance with hedge accounting rules. Amounts reported for consolidated obligation debt in the statements of condition included hedging fair value basis adjustments of $204.0 million, representing unrealized gains at June 30, 2007, an increase of $52.8 million compared to $151.2 million at December 31, 2006. Changes in fair value basis reflect changes in the term structure of interest rates, the shape of the yield curve at the measurement dates, the value and implied volatility of call options of callable bonds, and from the growth or decline in hedge volume. Hedge volume, defined as the notional amount of hedged debt outstanding, increased to $43.8 billion at June 30, 2007, from $40.6 billion at December 31, 2006. Increase in hedge volume at June 30, 2007, compared to year-end 2006, was a factor in explaining the increase in unrealized gains as represented by the fair value basis of hedged debt. In a rising rate environment, fixed-rate debt will exhibit fair value gains, and the change is consistent with the sudden steepening of the yield curve. Forward rates in the 1-3 year sector have steepened significantly at June 30, 2007, compared to December 31, 2006. This had the effect of increasing fair value gains as the Bank’s fixed-rate bond maturity concentration was significant in those maturity categories at June 30, 2007. Changes due to amortization of previously recorded realized gains and losses were not material. Unrealized gains associated with hedged debt were almost entirely offset by unrealized losses associated with the interest rate swaps that hedged the consolidated obligation bonds at June 30, 2007 and December 31, 2006.

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Consolidated Obligation bonds by maturity or next call date.

The issuance of a callable bond with an associated callable swap significantly alters the contractual maturity characteristics of the original bond, and introduces the possibility of an exercise call date that is significantly shorter than the contractual maturity.

The following table summarizes the consolidated bonds outstanding by years to maturity or next call date (in thousands):

	June 30, 2007			December 31, 2006
Year of Maturity or next call date
Due or callable in one year or less	$	43,348,515		$	40,152,210
Due or callable after one year through two years		14,978,530			14,786,280
Due or callable after two years through three years		2,667,900			1,959,650
Due or callable after three years through four years		1,257,900			1,608,000
Due or callable after four years through five years		1,112,450			928,900
Due or callable after five years through six years		274,000			284,800
Thereafter		2,358,500			2,485,800
Total par value		65,997,795			62,205,640
Bond premiums		19,896			23,334
Bond discounts		(32,611	)		(33,300	)
SFAS 133 fair value adjustments		(204,000	)		(151,222	)
Deferred net gains on terminated hedges		(991	)		(1,777	)
Total carrying value	$	65,780,089		$	62,042,675

Mandatorily Redeemable Capital Stock

The FHLBNY’s capital stock is redeemable at the option of both the member and the FHLBNY subject to certain conditions. Dividends related to capital stock classified as mandatorily redeemable are accrued at an estimated dividend rate and reported as interest expense in the statements of income. Redeemable capital stock is generally accounted for under the provisions of SFAS 150 “Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity,”(“SFAS 150”). Mandatorily redeemable stock at June 30, 2007 and December 31, 2006 represented stock held by former members who were no longer members by virtue of being acquired by members of other FHLBanks. Such stock will be repaid when the stock is no longer required to support outstanding transactions with the FHLBNY.

No member had notified the FHLBNY at June 30, 2007 or at December 31, 2006 of their intention to voluntarily withdraw from membership. The Bank reclassifies stock of members to a liability on the day the member’s charter is dissolved upon acquisition by a non-member.

At June 30, 2007 the amount of mandatorily redeemable stock classified as a liability was $77.6 million, compared to $109.9 million at December 31, 2006. In the six months ended June 30, 2007, one member was acquired by a non-member and $6.9 million of capital stock was reclassified from capital to liability. In the same period, $39.2 million of stock in excess of collateral requirements was repaid to non-members for maturing advances held by former members. In accordance with Finance Board regulations, non-members cannot renew their advance borrowings at maturity.

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Derivative Instruments

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

Section 956.6(a) of the Finance Board regulations prohibits the speculative use of derivatives, and the FHLBNY does not enter into speculative positions with derivatives or any other financial instruments, or trade derivatives for short-term profits. The FHLBNY does not have any special purpose entities or any other types of off-balance sheet conduits.

All derivatives are recorded on the statements of condition at their estimated fair value and designated as either fair value or cash flow hedges for SFAS 133-qualifying hedges or as non-SFAS 133-qualifying hedges (economic hedges, or customer intermediations). In an economic hedge, the Bank retains or executes derivative contracts, which are economically effective in reducing risk, either because a SFAS 133-qualifying hedge was not available or because the cost of a qualifying hedge was not economical. Interest income and interest expense from interest rate swaps used for hedging are reported with interest on the instrument being hedged. Any changes in the fair value of a derivative are recorded in current period earnings or other comprehensive income, depending on the type of hedge designation.

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

At June 30, 2007, the notional amount of derivatives outstanding was $83.7 billion, up from $77.6 billion at December 31, 2006, and was primarily attributable to increased members’ use of putable advances. The greater volume of putable advances required increased executions of interest rate derivatives to hedge associated interest rate risk. The Bank also increased issuances of callable debt in association with interest rate swaps that featured “mirror-image” call options.

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Derivative Financial Instruments by Product —The following table summarizes the notional amounts and estimated fair values of derivative financial instruments (excluding accrued interest) by product and type of accounting treatment. The table also reconciles fair value basis gains and (losses) of derivatives to the statements of condition (in thousands):

	June 30, 2007					December 31, 2006
			Total estimated					Total estimated
			fair value					fair value
			(excluding					(excluding
	Total notional		accrued			Total notional		accrued
	amount		interest)			amount		interest)
Advances — fair value hedges	$	38,585,944	$	169,777		$	35,615,115	$	(23,889	)
Advances (Caps) — economic hedges		1,172,694		(3	)		1,237,694		—
Consolidated obligations — fair value hedges		41,486,735		(208,652	)		40,510,105		(159,919	)
Consolidated obligations — economic hedges		2,350,000		(2,921	)		175,000		(253	)
Mortgage loans — commitment		1,377		(6	)		9,497		(35	)
Cash Flow- anticipated transactions		60,000		(133	)		—		—
Intermediary positions — economic hedges		80,000		25			50,000		3
Total notional and fair value	$	83,736,750	$	(41,913	)	$	77,597,411	$	(184,093	)
Total derivatives, excluding accrued interest			$	(41,913	)			$	(184,093	)
Accrued interest				311,516					301,253
Net derivative balance			$	269,603				$	117,160
Net derivative asset balance			$	305,795				$	224,775
Net derivative liability balance				(36,192	)				(107,615	)
Net derivative balance			$	269,603				$	117,160

The categories — “Fair value,” “Commitment” and “Cash flow” hedges — represent derivative transactions accounted for as hedges. The category “Economic” hedges represent derivative transactions under hedge strategies that did not qualify for hedge accounting treatment under SFAS 133.

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

Although notional amount is a commonly used measure of volume in the derivatives market, it is not a meaningful measure of market or credit risk since derivative counterparties do not exchange the notional amount (except in the case of foreign currency swaps). Counterparties use the notional amounts of derivative instruments to calculate contractual cash flows to be exchanged. The fair value of a derivative in a gain position is a more meaningful measure of the FHLBNY’s current market exposure on derivatives. The FHLBNY estimates exposure to credit loss on derivative instruments by calculating the replacement cost, on a present value basis, to settle at current market prices all outstanding derivative contracts in a gain position.

All derivative contracts with non-members are subject to master netting agreements or other right of offset arrangements. At June 30, 2007, the FHLBNY’s maximum credit risk, as defined above, was approximately $305.8 million without recognition of collateral held by the FHLBNY, up from $224.8 million at December 31, 2006. In determining maximum credit risk, the FHLBNY considers accrued interest receivable and payable, and the legal right to offset assets and liabilities by counterparty. The FHLBNY mitigates its exposure by requiring derivative counterparties to pledge cash collateral, if the amount of exposure is above the collateral threshold agreements. Derivative counterparties had pledged $161.5 million in cash to the FHLBNY at June 30, 2007. At December 31, 2006, the comparable cash held by the FHLBNY was $124.0 million.

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Asset Quality

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

	June 30, 2007		December 31, 2006
Advances	$	61,234,817	$	59,012,394
Mortgage loans before allowance for credit losses	$	1,510,645	$	1,484,012

Advances

The FHLBNY’s credit risk from advances at June 30, 2007 and December 31, 2006 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, 75 years ago. Based on the collateral held as security and prior repayment history, no allowance for losses is currently deemed necessary.

Mortgage loans held-for-portfolio

Underwriting standards— Summarized are the principal underwriting criteria. For a fuller description of MPF loan mortgage standards, please refer to pages 7 though 16 of the Bank’s most recent Form 10-K filed on March 29, 2007.

Mortgage loans delivered under the MPF Program must meet certain underwriting and eligibility requirements. Loans must be qualifying 5- to 30-year conforming conventional or Government fixed-rate, fully amortizing mortgage loans, secured by first liens on owner-occupied one-to-four unit single-family residential properties and single unit second homes. Not eligible for delivery under the MPF Program are mortgage loans that are not ratable by S&P, or loans that are classified as high cost, high rate, and high risk.

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 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.

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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,
	2007		2006		2007		2006
Beginning balance	$	12,372	$	11,443	$	12,162	$	11,318
Additions		261		192		471		317
Charge-offs		—		—		—		—
Recoveries		—		—		—		—
Ending balance	$	12,633	$	11,635	$	12,633	$	11,635

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 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,
	2007		2006		2007		2006
Beginning balance	$	593	$	582	$	593	$	582
Charge-offs		—		—		—		—
Recoveries		—		—		—		—
Net charge-offs		—		—		—		—
Provision for credit losses		—		1		—		1
Ending balance	$	593	$	583	$	593	$	583

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, 2007 or December 31, 2006.

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

	June 30, 2007		December 31, 2006
Mortgage loans, net of provisions for credit losses	$	1,510,052	$	1,483,419
Non-performing mortgage loans held-for-portfolio	$	1,540	$	2,089
Mortgage loans past due 90 days or more and still accruing interest	$	360	$	850

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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,
	2007		2006		2007		2006
Interest contractually due	$	22	$	13	$	34	$	15
Interest actually received		18		13		30		15
Shortfall	$	4	$	—	$	4	$	—
Interest reported as income1	$	—	$	—	$	—	$	—

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

At June 30, 2007 and December 31, 2006, mortgage loans in foreclosure totaled $0.9 million. 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, 2007.

Securities Impairment

Temporary impairment

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, 2007 and December 31, 2006.

The FHLBNY has both the intent and financial ability to hold its 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, 2007 and December 31, 2006.

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 issuances. 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 total system consolidated obligation debt. 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.

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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 these requirements at all times.

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

	Average Deposit		Average Actual
For the quarters ended	Reserve Required		Deposit Liquidity		Excess
June 30, 2007	$	2,726	$	35,853	$	33,127
March 31, 2007		1,796		37,559		35,763
December 31, 2006		1,944		42,386		40,442

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

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

	Average Balance Sheet		Average Actual
For the quarters ended	Liquidity Requirement		Operational Liquidity		Excess
June 30, 2007	$	2,186	$	15,653	$	13,467
March 31, 2007		3,482		16,033		12,551
December 31, 2006		5,852		16,970		11,118

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 to access the consolidated obligation debt markets for at least five business days. Contingency liquidity includes (1) marketable assets with a maturity of one year or less; (2) self-liquidating assets with a maturity of one year or less; (3) assets that are generally acceptable as collateral in the repurchase market; and (4) irrevocable lines of credit from financial institutions receiving not less than the second-highest credit rating from a nationally recognized statistical rating organization. Contingency liquidity is reported daily. The FHLBNY met these requirements at all times.

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

	Average Five Day		Average Actual
For the quarters ended	Requirement		Contingency Liquidity		Excess
June 30, 2007	$	1,115	$	14,460	$	13,345
March 31, 2007		1,476		14,509		13,033
December 31, 2006		2,130		14,852		12,722

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Leverage and unpledged assets 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, 2007			December 31, 2006
Consolidated Obligations:
Bonds	$	65,780,089		$	62,042,675
Discount Notes		12,780,495			12,191,553
Total consolidated obligations		78,560,584			74,234,228
Unpledged assets
Cash		22,479			38,850
Less: Member pass-through reserves at the FRB		(43,230	)		(43,265	)
Secured Advances		61,234,817			59,012,394
Investments		22,341,268			20,503,175
Mortgage Loans		1,510,052			1,483,419
Other loans		43			112
Accrued interest receivable on advances and investments		420,622			406,123
Less: Pledged Assets		—			—
		85,486,051			81,400,808
Excess unpledged assets	$	6,925,467		$	7,166,580

Mortgage investment authority

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

	June 30, 2007						December 31, 2006
	Actual			Limits			Actual			Limits
Mortgage securities investment authority1		257	%		300	%		254	%		300	%

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

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The credit ratings of the FHLBNY and changes thereof were as follows at June 30, 2007.

Long Term:

	Moody's Investors Service		S & P
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 —	Aaa/Stable	March 17, 2003	Long Term rating affirmed	outlook stable	AAA/Stable
	Affirmed		August 8, 2003	Long Term rating affirmed	outlook negative	AAA/Negative
			September 26, 2003	Long Term rating downgraded	outlook 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	August 11, 2006	Long Term rating affirmed	outlook stable	AA+/Stable
			September 21, 2006	Long Term rating upgraded	outlook stable	AAA/Stable

Short Term:

	Moody's Investors Service		S & P
Year	Outlook	Rating	Short-Term Outlook		Rating
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	August 11, 2006	Short Term rating affirmed	A-1+
			September 21, 2006	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 was amended during the first quarter of 2007 to lower the risk limits. The new limit requires that the Bank maintain its duration of equity, or interest rate sensitivity, within a range of +/- four years (which until this year had been +/- 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 amended 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 +/- six years, down from +/- seven years until this year. 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, 2007 to June 30, 2007, duration of equity increased from 1.12 years to 1.86 years, indicating marginally higher sensitivity to changes in interest rates. The Bank’s risk level remained within its risk limits. As of June 30, 2007, the cumulative one-year gap between assets and liabilities was $3.4 billion, up $906 million from March 2007.

During the period March 31, 2007 to June 30, 2007, 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 its 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.

More information with respect to derivatives and hedging activities is available in Note 19 to 2006 annual financial statements included in Form10-K filed on March 29, 2007.

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Because a significant portion of the FHLBNY’s balance sheet as of June 30, 2007 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. These 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 a 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.

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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 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 modeling processes. As of June 30, 2007, the FHLBNY’s one-year net interest income from spread at risk measures were (6.05%) and 5.37% compared to (9.92%) and 11.66% on March 31, 2007 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, 2007 and at March 31, 2007. 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, 2007, and December 31, 2006 (in years):

Duration of Equity (in years)	June 30, 2007			December 31, 2006
Base		1.86			1.10
Up-Base		2.74			2.84
Down-Base		(3.21	)		(3.11	)
Duration Gap (in years)		0.06			0.03

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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 2007 and 2006.he the behavior of the FHLBNY’s duration of equity at the end of the following months during 2007 and 2006.

	2007 Duration Measures
	(as of month-end, in years)
	Duration of		Duration of		Duration		Duration of
	Assets		Liabilities		Gap		Equity
January		0.61		0.57		0.05		1.48
February		0.58		0.56		0.02		0.96
March		0.57		0.54		0.03		1.12
April		0.57		0.53		0.04		1.30
May		0.60		0.53		0.06		1.82
June		0.60		0.54		0.06		1.86

Note: Numbers may not add due to rounding.

	2006 Duration Measures
	(as of month-end, in years)
	Duration of		Duration of		Duration			Duration of
	Assets		Liabilities		Gap			Equity
January		0.59		0.58		0.01			0.81
February		0.59		0.58		0.00			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
July		0.55		0.52		0.03			1.16
August		0.55		0.54		0.00			0.62
September		0.54		0.55		(0.01	)		0.42
October		0.57		0.56		0.01			0.71
November		0.53		0.55		(0.02	)		0.10
December		0.60		0.58		0.03			1.10

Note: Numbers may not add due to rounding.

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The following tables display the FHLBNY’s maturity/repricing gaps¹ as of June 30, 2007 (in millions):

	Interest Rate Sensitivity
	June 30, 2007
			More than			More than			More than
	Six months		six months to			one year to			three years to			More than
	or less		one year			three years			five years			five years
Interest-earning assets:
Non-MBS Investments	$	11,769	$	107		$	395		$	308		$	897
MBS Investments		1,102		1,248			3,260			1,876			2,891
Adjustable-rate loans and advances		14,375		—			—			—			—
Net unswapped		27,246		1,355			3,655			2,184			3,788
Fixed-rate loans and advances		5,363		3,470			7,202			7,088			23,909
Swaps hedging advances		37,026		(2,121	)		(4,504	)		(6,640	)		(23,760	)
Net fixed-rate loans and advances		42,389		1,349			2,698			448			148
Loans to other FHLBanks		—		—			—			—			—
Total interest-earning assets	$	69,634	$	2,704		$	6,353		$	2,632		$	3,936
Interest-bearing liabilities:
Deposits	$	2,236	$	—		$	—		$	—		$	—
Discount notes		12,780		—			—			—			—
Swapped discount notes		—		—			—			—			—
Net discount notes		12,780		—			—			—			—
Consolidated Obligation Bonds
FHLB bonds		16,198		13,671			26,289			6,047			3,780
Swaps hedging bonds		35,000		(10,967	)		(18,779	)		(3,170	)		(2,085	)
Net FHLB bonds		51,198		2,705			7,510			2,877			1,695
Total interest-bearing liabilities	$	66,214	$	2,705		$	7,510		$	2,877		$	1,695
Post hedge gaps:
Periodic gap	$	3,420	$	(1	)	$	(1,157	)	$	(246	)	$	2,241
Cumulative gaps	$	3,420	$	3,419		$	2,261		$	2,016		$	4,257

Note: Numbers may not add due to rounding.

¹ Repricings are estimated at the scheduled rate reset dates for floating rate instruments, and at maturity for fixed rate instruments. For callable instruments, the repricing period is estimated by the earlier of the estimated call date under current interest rate environment or the instrument’s contractual maturity.

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

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

Note: Numbers may not add due to rounding.

¹ Repricings are estimated at the scheduled rate reset dates for floating rate instruments, and at maturity for fixed rate instruments. For callable instruments, the repricing period is estimated by the earlier of the estimated call date under current interest rate environment or the instrument’s contractual maturity.

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Item 4T. CONTROLS AND PROCEDURES

(a)

Evaluation of Disclosure Controls and Procedures: An evaluation of the Bank’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Act”) was carried out under the supervision and with the participation of the Bank’s President and Chief Executive Officer, Alfred A. DelliBovi, and Senior Vice President and Chief Financial Officer, Patrick A. Morgan, at June 30, 2007. Based on this evaluation, they concluded that as of June 30, 2007, the Bank’s disclosure controls and procedures were effective, at a reasonable level of assurance, in ensuring that the information required to be disclosed by the Bank in the reports it files or submits under the Act is (i) accumulated and communicated to the Bank’s management (including the President and Chief Executive Officer and Senior Vice President and Chief Financial Officer) in a timely manner, and (ii) recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.

(b)

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

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Part II. OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS

From time to time, the FHLBNY is involved in disputes or regulatory inquiries that arise in the ordinary course of business. At the present time, there are no material pending legal proceedings against the FHLBNY.

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, 2006.

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

Not applicable.

Item 3. DEFAULTS UPON SENIOR SECURITIES

None.

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

None.

Item 5. OTHER INFORMATION

None.

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Item 6. EXHIBITS

Exhibit No.	Identification of Exhibit
31.01	Certification Pursuant to Rules 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934 and Section 302 of the Sarbanes-Oxley Act of 2002 by Chief Executive Officer
31.02	Certification Pursuant to Rules 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934 and Section 302 of the Sarbanes-Oxley Act of 2002 by Chief Financial Officer
32.01	Certification of Chief Executive Officer furnished pursuant to Section 906 of the Sarbanes-Oxley Act 2002, 18 U.S.C. Section 1350
32.02	Certification of Chief Financial Officer furnished pursuant to Section 906 of the Sarbanes-Oxley Act 2002, 18 U.S.C. Section 1350

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SIGNATURES

Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

FEDERAL HOME LOAN BANK OF NEW YORK (Registrant)
By:	/s/ Patrick A. Morgan
	Patrick A. Morgan
	Senior Vice President and Chief Financial Officer Federal Home Loan Bank of New York (on behalf of the Registrant and as Principal Financial Officer)

Date: August 13, 2007

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EXHIBIT INDEX

Exhibit No.	Identification of Exhibit
31.01	Certification Pursuant to Rules 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934 and Section 302 of the Sarbanes-Oxley Act of 2002 by Chief Executive Officer
31.02	Certification Pursuant to Rules 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934 and Section 302 of the Sarbanes-Oxley Act of 2002 by Chief Financial Officer
32.01	Certification of Chief Executive Officer furnished pursuant to Section 906 of the Sarbanes-Oxley Act 2002, 18 U.S.C. Section 1350
32.02	Certification of Chief Financial Officer furnished pursuant to Section 906 of the Sarbanes-Oxley Act 2002, 18 U.S.C. Section 1350

74