UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
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þ |
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2009
Commission file number: 000-51397
Federal Home Loan Bank of New York
(Exact name of registrant as specified in its charter)
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Federal
(State or other jurisdiction of
incorporation or organization)
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13-6400946
(I.R.S. Employer
Identification No.) |
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101 Park Avenue, New York, N.Y.
(Address of principal executive offices)
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10178
(Zip Code) |
(212) 681-6000
(Registrants telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter
period that the registrant was required to submit and post such files). Yes o No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large
accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the
Exchange Act.
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Large accelerated filer o
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Accelerated filer o
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Non-accelerated filer þ
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Smaller reporting company o |
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(Do not check if a smaller reporting company) |
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of
the Exchange Act). Yes o No þ
The number of shares outstanding of the issuers common stock as of October 31, 2009 was
50,585,269.
FEDERAL HOME LOAN BANK OF NEW YORK
FORM 10-Q FOR THE QUARTERLY PERIOD ENDED September 30, 2009
Table of Contents
Federal Home Loan Bank of New York
Statements of Condition Unaudited (in thousands, except per share data)
As of September 30, 2009 and December 31, 2008
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September 30, 2009 |
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December 31, 2008 |
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Assets |
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|
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Cash and due from banks (Note 2) |
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$ |
1,189,158 |
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$ |
18,899 |
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Interest-bearing deposits (Note 3) |
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|
|
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12,169,096 |
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Federal funds sold |
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3,900,000 |
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|
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Available-for-sale securities, net of unrealized losses
of $16,085 at September 30, 2009 and $64,420 at December 31, 2008 (Note 5) |
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2,362,592 |
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|
2,861,869 |
|
Held-to-maturity securities (Note 4) |
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Long-term securities |
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10,478,027 |
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10,130,543 |
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Certificates of deposit |
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2,000,000 |
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1,203,000 |
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Advances (Note 6) |
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95,944,732 |
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109,152,876 |
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Mortgage loans held-for-portfolio, net of allowance for credit losses
of $3,358 at September 30, 2009 and $1,406 at December 31, 2008 (Note 7) |
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1,336,228 |
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1,457,885 |
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Accrued interest receivable |
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354,934 |
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492,856 |
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Premises, software, and equipment |
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14,596 |
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|
13,793 |
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Derivative assets (Note 15) |
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9,092 |
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|
20,236 |
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Other assets |
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14,957 |
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18,838 |
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Total assets |
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$ |
117,604,316 |
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$ |
137,539,891 |
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Liabilities and capital |
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Liabilities |
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Deposits (Note 9) |
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Interest-bearing demand |
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$ |
2,255,403 |
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$ |
1,333,750 |
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Non-interest bearing demand |
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4,968 |
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|
828 |
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Term |
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15,600 |
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|
117,400 |
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Total deposits |
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2,275,971 |
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1,451,978 |
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Consolidated obligations, net (Note 8) |
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Bonds (Includes $2,385,968 at September 30, 2009 and $998,942 at December 31, 2008
at fair value under the fair value option) |
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69,670,836 |
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82,256,705 |
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Discount notes |
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38,385,244 |
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46,329,906 |
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Total consolidated obligations |
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108,056,080 |
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128,586,611 |
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Mandatorily redeemable capital stock (Note 11) |
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127,882 |
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143,121 |
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|
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Accrued interest payable |
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337,221 |
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|
426,144 |
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Affordable Housing Program (Note 10) |
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144,822 |
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|
122,449 |
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Payable to REFCORP (Note 10) |
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38,692 |
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|
4,780 |
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Derivative liabilities (Note 15) |
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871,744 |
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861,660 |
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Other liabilities |
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91,115 |
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75,753 |
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Total liabilities |
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111,943,527 |
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131,672,496 |
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Commitments and Contingencies (Notes 8, 10, 15 and 17) |
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Capital (Note 11) |
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Capital stock ($100 par value), putable, issued and outstanding shares: |
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51,422 and 55,857 at September 30, 2009 and December 31, 2008 |
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5,142,154 |
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5,585,700 |
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Retained earnings |
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666,237 |
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382,856 |
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Accumulated other comprehensive income (loss) (Note 12) |
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Net unrealized loss on available-for-sale securities |
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(16,085 |
) |
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(64,420 |
) |
Non-credit portion of OTTI on held-to-maturity securities |
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(103,884 |
) |
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|
Accretion of non-credit portion of impairment losses on held-to-maturity securities |
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3,421 |
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Net unrealized loss on hedging activities |
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(24,504 |
) |
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|
(30,191 |
) |
Employee supplemental retirement plans (Note 14) |
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(6,550 |
) |
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|
(6,550 |
) |
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|
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|
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Total capital |
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5,660,789 |
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5,867,395 |
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Total liabilities and capital |
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$ |
117,604,316 |
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$ |
137,539,891 |
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The accompanying notes are an integral part of the unaudited financial statements.
1
Federal Home Loan Bank of New York
Statements of Income Unaudited (in thousands, except per share data)
For the three and nine months ended September 30, 2009 and 2008
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Three months ended |
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Nine months ended |
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September 30, |
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September 30, |
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2009 |
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2008 |
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2009 |
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2008 |
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Interest income |
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Advances (Note 6) |
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$ |
240,573 |
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$ |
678,896 |
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$ |
1,094,089 |
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$ |
2,211,823 |
|
Interest-bearing deposits (Note 3) |
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|
1,014 |
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|
3,240 |
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|
19,054 |
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|
17,086 |
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Federal funds sold |
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|
1,864 |
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|
21,316 |
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|
1,933 |
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|
|
69,921 |
|
Available-for-sale securities (Note 5) |
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|
6,590 |
|
|
|
24,441 |
|
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|
22,881 |
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|
|
57,016 |
|
Held-to-maturity securities (Note 4) |
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|
|
|
|
|
|
|
|
|
|
|
|
|
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Long-term securities |
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|
111,232 |
|
|
|
138,412 |
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|
355,916 |
|
|
|
396,660 |
|
Certificates of deposit |
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|
851 |
|
|
|
51,287 |
|
|
|
1,392 |
|
|
|
212,525 |
|
Mortgage loans held-for-portfolio (Note 7) |
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|
17,405 |
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|
|
19,316 |
|
|
|
54,679 |
|
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|
58,348 |
|
Loans to other FHLBanks and other |
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|
1 |
|
|
|
30 |
|
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|
1 |
|
|
|
33 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
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|
Total interest income |
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|
379,530 |
|
|
|
936,938 |
|
|
|
1,549,945 |
|
|
|
3,023,412 |
|
|
|
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|
|
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|
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|
|
|
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|
|
|
|
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|
|
|
|
|
|
|
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|
Interest expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated obligations-bonds (Note 8) |
|
|
191,708 |
|
|
|
628,394 |
|
|
|
783,695 |
|
|
|
1,952,228 |
|
Consolidated obligations-discount notes (Note 8) |
|
|
31,647 |
|
|
|
141,309 |
|
|
|
173,228 |
|
|
|
559,153 |
|
Deposits (Note 9) |
|
|
516 |
|
|
|
7,370 |
|
|
|
2,002 |
|
|
|
33,235 |
|
Mandatorily redeemable capital stock (Note 11) |
|
|
1,807 |
|
|
|
1,950 |
|
|
|
5,478 |
|
|
|
8,884 |
|
Cash collateral held and other borrowings |
|
|
|
|
|
|
242 |
|
|
|
49 |
|
|
|
982 |
|
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|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest expense |
|
|
225,678 |
|
|
|
779,265 |
|
|
|
964,452 |
|
|
|
2,554,482 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
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|
Net interest income before provision for credit losses |
|
|
153,852 |
|
|
|
157,673 |
|
|
|
585,493 |
|
|
|
468,930 |
|
|
|
|
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|
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|
|
|
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|
|
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|
|
|
|
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|
|
|
|
|
|
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|
Provision (recovery) for credit losses on mortgage loans |
|
|
598 |
|
|
|
(31 |
) |
|
|
1,966 |
|
|
|
215 |
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income after provision for credit losses |
|
|
153,254 |
|
|
|
157,704 |
|
|
|
583,527 |
|
|
|
468,715 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Other income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service fees |
|
|
1,101 |
|
|
|
934 |
|
|
|
3,181 |
|
|
|
2,422 |
|
Instruments held at fair value Unrealized gain (Note 16) |
|
|
426 |
|
|
|
3,582 |
|
|
|
8,653 |
|
|
|
3,582 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total OTTI losses |
|
|
(30,169 |
) |
|
|
|
|
|
|
(118,160 |
) |
|
|
|
|
Portion of loss recognized in other comprehensive income |
|
|
26,486 |
|
|
|
|
|
|
|
103,884 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net impairment losses recognized in earnings |
|
|
(3,683 |
) |
|
|
|
|
|
|
(14,276 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net realized and unrealized gain (loss)
on derivatives and hedging activities (Note 15) |
|
|
59,639 |
|
|
|
(25,515 |
) |
|
|
124,613 |
|
|
|
(65,196 |
) |
Net realized gain from sale of available-for-sale and
redemption of held-to-maturity securities (Notes 4 and 5) |
|
|
|
|
|
|
|
|
|
|
721 |
|
|
|
1,058 |
|
Provision for derivative counterparty credit losses (Notes 15 and 17) |
|
|
|
|
|
|
(64,523 |
) |
|
|
|
|
|
|
(64,523 |
) |
Other |
|
|
(39 |
) |
|
|
92 |
|
|
|
59 |
|
|
|
(42 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other income (loss) |
|
|
57,444 |
|
|
|
(85,430 |
) |
|
|
122,951 |
|
|
|
(122,699 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating |
|
|
17,810 |
|
|
|
16,549 |
|
|
|
53,970 |
|
|
|
49,489 |
|
Finance Agency and Office of Finance |
|
|
1,834 |
|
|
|
1,350 |
|
|
|
5,663 |
|
|
|
4,268 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other expenses |
|
|
19,644 |
|
|
|
17,899 |
|
|
|
59,633 |
|
|
|
53,757 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before assessments |
|
|
191,054 |
|
|
|
54,375 |
|
|
|
646,845 |
|
|
|
292,259 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Affordable Housing Program (Note 10) |
|
|
15,780 |
|
|
|
4,638 |
|
|
|
53,363 |
|
|
|
24,764 |
|
REFCORP (Note 10) |
|
|
35,055 |
|
|
|
9,947 |
|
|
|
118,696 |
|
|
|
53,499 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assessments |
|
|
50,835 |
|
|
|
14,585 |
|
|
|
172,059 |
|
|
|
78,263 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
140,219 |
|
|
$ |
39,790 |
|
|
$ |
474,786 |
|
|
$ |
213,996 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share (Note 13) |
|
$ |
2.70 |
|
|
$ |
0.79 |
|
|
$ |
8.93 |
|
|
$ |
4.55 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends paid per share |
|
$ |
1.40 |
|
|
$ |
1.62 |
|
|
$ |
3.54 |
|
|
$ |
5.67 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of the unaudited financial statements.
2
Federal Home Loan Bank of New York
Statements of Capital Unaudited (in thousands, except per share data)
For the nine months ended September 30, 2009 and 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
|
|
|
|
Capital Stock1 |
|
|
|
|
|
|
Other |
|
|
|
|
|
|
Total |
|
|
|
Class B |
|
|
Retained |
|
|
Comprehensive |
|
|
Total |
|
|
Comprehensive |
|
|
|
Shares |
|
|
Par Value |
|
|
Earnings |
|
|
Income (Loss) |
|
|
Capital |
|
|
Income (Loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2007 |
|
|
43,680 |
|
|
$ |
4,367,971 |
|
|
$ |
418,295 |
|
|
$ |
(35,675 |
) |
|
$ |
4,750,591 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from sale of capital stock |
|
|
36,970 |
|
|
|
3,697,013 |
|
|
|
|
|
|
|
|
|
|
|
3,697,013 |
|
|
|
|
|
Redemption of capital stock |
|
|
(24,964 |
) |
|
|
(2,496,361 |
) |
|
|
|
|
|
|
|
|
|
|
(2,496,361 |
) |
|
|
|
|
Shares reclassified to mandatorily
redeemable capital stock |
|
|
(648 |
) |
|
|
(64,759 |
) |
|
|
|
|
|
|
|
|
|
|
(64,759 |
) |
|
|
|
|
Cash dividends ($5.67 per share) on
capital stock |
|
|
|
|
|
|
|
|
|
|
(250,104 |
) |
|
|
|
|
|
|
(250,104 |
) |
|
|
|
|
Net Income |
|
|
|
|
|
|
|
|
|
|
213,996 |
|
|
|
|
|
|
|
213,996 |
|
|
$ |
213,996 |
|
Net change in Accumulated other
comprehensive income (Loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net unrealized loss on
available-for-sale securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(43,952 |
) |
|
|
(43,952 |
) |
|
|
(43,952 |
) |
Hedging activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,755 |
) |
|
|
(1,755 |
) |
|
|
(1,755 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
168,289 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, September 30, 2008 |
|
|
55,038 |
|
|
$ |
5,503,864 |
|
|
$ |
382,187 |
|
|
$ |
(81,382 |
) |
|
$ |
5,804,669 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2008 |
|
|
55,857 |
|
|
$ |
5,585,700 |
|
|
$ |
382,856 |
|
|
$ |
(101,161 |
) |
|
$ |
5,867,395 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from sale of capital stock |
|
|
26,932 |
|
|
|
2,693,233 |
|
|
|
|
|
|
|
|
|
|
|
2,693,233 |
|
|
|
|
|
Redemption of capital stock |
|
|
(31,363 |
) |
|
|
(3,136,345 |
) |
|
|
|
|
|
|
|
|
|
|
(3,136,345 |
) |
|
|
|
|
Shares reclassified to mandatorily
redeemable capital stock |
|
|
(4 |
) |
|
|
(434 |
) |
|
|
|
|
|
|
|
|
|
|
(434 |
) |
|
|
|
|
Cash dividends ($3.54 per share) on
capital stock |
|
|
|
|
|
|
|
|
|
|
(191,405 |
) |
|
|
|
|
|
|
(191,405 |
) |
|
|
|
|
Net Income |
|
|
|
|
|
|
|
|
|
|
474,786 |
|
|
|
|
|
|
|
474,786 |
|
|
$ |
474,786 |
|
Net change in Accumulated other
comprehensive income (Loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-credit portion of OTTI on
held-to-maturity securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(103,884 |
) |
|
|
(103,884 |
) |
|
|
(103,884 |
) |
Accretion of non-credit portion of
impairment losses on
held-to-maturity securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,421 |
|
|
|
3,421 |
|
|
|
3,421 |
|
Net unrealized gain on
available-for-sale securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
48,335 |
|
|
|
48,335 |
|
|
|
48,335 |
|
Hedging activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,687 |
|
|
|
5,687 |
|
|
|
5,687 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
428,345 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, September 30, 2009 |
|
|
51,422 |
|
|
$ |
5,142,154 |
|
|
$ |
666,237 |
|
|
$ |
(147,602 |
) |
|
$ |
5,660,789 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of the unaudited financial statements.
3
Federal Home Loan Bank of New York
Statements of Cash Flows Unaudited (in thousands)
For the nine months ended September 30, 2009 and 2008
|
|
|
|
|
|
|
|
|
|
|
Nine months ended |
|
|
|
September 30, |
|
|
|
2009 |
|
|
2008 |
|
Operating activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income |
|
$ |
474,786 |
|
|
$ |
213,996 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments to reconcile net income to net cash provided by
operating activities: |
|
|
|
|
|
|
|
|
Depreciation and amortization: |
|
|
|
|
|
|
|
|
Net premiums and discounts on consolidated obligations,
investments, mortgage loans and other adjustments |
|
|
(95,490 |
) |
|
|
(103,645 |
) |
Concessions on consolidated obligations |
|
|
4,977 |
|
|
|
6,904 |
|
Premises, software, and equipment |
|
|
4,020 |
|
|
|
3,575 |
|
Provision for derivative counterparty credit losses |
|
|
|
|
|
|
64,523 |
|
Provision for credit losses on mortgage loans |
|
|
1,966 |
|
|
|
215 |
|
Net realized (gains) from redemption of held-to-maturity securities |
|
|
(281 |
) |
|
|
(1,058 |
) |
Net realized (gains) from sale of available-for-sale securities |
|
|
(440 |
) |
|
|
|
|
Credit impairment losses on held-to-maturity securities |
|
|
14,276 |
|
|
|
|
|
Change in net fair value adjustments on derivatives and hedging activities |
|
|
68,323 |
|
|
|
(468,072 |
) |
Change in fair value adjustments on financial instruments held at fair value |
|
|
(8,653 |
) |
|
|
(3,582 |
) |
Net change in: |
|
|
|
|
|
|
|
|
Accrued interest receivable |
|
|
137,921 |
|
|
|
110,871 |
|
Derivative assets due to accrued interest |
|
|
184,842 |
|
|
|
151,442 |
|
Derivative liabilities due to accrued interest |
|
|
(250,161 |
) |
|
|
(91,585 |
) |
Other assets |
|
|
4,830 |
|
|
|
(48,769 |
) |
Affordable Housing Program liability |
|
|
22,373 |
|
|
|
3,323 |
|
Accrued interest payable |
|
|
(95,244 |
) |
|
|
(4,878 |
) |
REFCORP liability |
|
|
33,912 |
|
|
|
(14,093 |
) |
Other liabilities |
|
|
(5,759 |
) |
|
|
(20,024 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total adjustments |
|
|
21,412 |
|
|
|
(414,853 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided (used) by operating activities |
|
|
496,198 |
|
|
|
(200,857 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing activities |
|
|
|
|
|
|
|
|
Net change in: |
|
|
|
|
|
|
|
|
Interest-bearing deposits |
|
|
13,471,204 |
|
|
|
(341,090 |
) |
Federal funds sold |
|
|
(3,900,000 |
) |
|
|
(2,031,000 |
) |
Deposits with other FHLBanks |
|
|
(84 |
) |
|
|
(127 |
) |
Premises, software, and equipment |
|
|
(4,823 |
) |
|
|
(3,876 |
) |
Held-to-maturity securities: |
|
|
|
|
|
|
|
|
Long-term securities |
|
|
|
|
|
|
|
|
Purchased |
|
|
(2,754,476 |
) |
|
|
(2,142,900 |
) |
Repayments |
|
|
2,283,149 |
|
|
|
1,862,789 |
|
In-substance maturities |
|
|
38,251 |
|
|
|
94,634 |
|
Net change in certificates of deposit |
|
|
(797,000 |
) |
|
|
5,284,200 |
|
Available-for-sale securities: |
|
|
|
|
|
|
|
|
Purchased |
|
|
(613 |
) |
|
|
(3,244,285 |
) |
Proceeds |
|
|
420,607 |
|
|
|
251,777 |
|
Proceeds from sales |
|
|
132,095 |
|
|
|
546 |
|
Advances: |
|
|
|
|
|
|
|
|
Principal collected |
|
|
320,102,436 |
|
|
|
389,788,259 |
|
Made |
|
|
(308,324,718 |
) |
|
|
(410,797,243 |
) |
Mortgage loans held-for-portfolio: |
|
|
|
|
|
|
|
|
Principal collected |
|
|
235,596 |
|
|
|
135,832 |
|
Purchased and originated |
|
|
(117,152 |
) |
|
|
(105,733 |
) |
Loans to other FHLBanks |
|
|
|
|
|
|
|
|
Loans made |
|
|
(400,000 |
) |
|
|
(661,000 |
) |
Principal collected |
|
|
400,000 |
|
|
|
716,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided (used) by investing activities |
|
|
20,784,472 |
|
|
|
(21,193,217 |
) |
|
|
|
|
|
|
|
The accompanying notes are an integral part of these unaudited financial statements.
4
Federal Home Loan Bank of New York
Statements of Cash Flows Unaudited (in thousands)
For the nine months ended September 30, 2009 and 2008
|
|
|
|
|
|
|
|
|
|
|
Nine months ended |
|
|
|
September 30, |
|
|
|
2009 |
|
|
2008 |
|
Financing activities |
|
|
|
|
|
|
|
|
Net change in: |
|
|
|
|
|
|
|
|
Deposits and other borrowings 1 |
|
$ |
531,109 |
|
|
$ |
1,601,874 |
|
Short-term loans from other FHLBanks: |
|
|
|
|
|
|
|
|
Proceeds from loans |
|
|
|
|
|
|
1,260,000 |
|
Payments for loans |
|
|
|
|
|
|
(1,260,000 |
) |
Consolidated obligation bonds: |
|
|
|
|
|
|
|
|
Proceeds from issuance |
|
|
35,112,667 |
|
|
|
55,509,862 |
|
Payments for maturing and early retirement |
|
|
(47,224,995 |
) |
|
|
(30,051,498 |
) |
Consolidated obligation discount notes: |
|
|
|
|
|
|
|
|
Proceeds from issuance |
|
|
814,559,648 |
|
|
|
536,200,240 |
|
Payments for maturing |
|
|
(822,438,650 |
) |
|
|
(542,193,830 |
) |
Capital stock: |
|
|
|
|
|
|
|
|
Proceeds from issuance |
|
|
2,693,233 |
|
|
|
3,697,013 |
|
Payments for redemption / repurchase |
|
|
(3,136,345 |
) |
|
|
(2,496,361 |
) |
Redemption of Mandatorily redeemable capital stock |
|
|
(15,673 |
) |
|
|
(159,857 |
) |
Cash dividends paid 2 |
|
|
(191,405 |
) |
|
|
(250,104 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used) provided by financing activities |
|
|
(20,110,411 |
) |
|
|
21,857,339 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase in cash and cash equivalents |
|
|
1,170,259 |
|
|
|
463,265 |
|
Cash and cash equivalents at beginning of the period |
|
|
18,899 |
|
|
|
7,909 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of the period |
|
$ |
1,189,158 |
|
|
$ |
471,174 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures: |
|
|
|
|
|
|
|
|
Interest paid |
|
$ |
1,161,678 |
|
|
$ |
2,096,160 |
|
Affordable Housing Program payments 3 |
|
$ |
30,990 |
|
|
$ |
21,441 |
|
REFCORP payments |
|
$ |
84,784 |
|
|
$ |
67,593 |
|
Transfers of mortgage loans to real estate owned |
|
$ |
1,091 |
|
|
$ |
356 |
|
Portion of non-credit OTTI losses on held-to-maturity securities |
|
$ |
103,884 |
|
|
$ |
|
|
|
|
|
1 |
|
Includes $227,796 of cash out-flows from derivatives for the nine months ended
September 30, 2009 and $477,204 cash in-flows for the nine months ended September 30, 2008. |
|
2 |
|
Does not include payments to holders of Mandatorily redeemable capital stock. |
|
3 |
|
AHP payments = (beginning accrual - ending accrual) + AHP assessment for the period;
payments represent funds released to the Affordable Housing Program. |
The accompanying notes are an integral part of these 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 FHLBNYs defined geographic district is New
Jersey, New York, Puerto Rico, and the U.S. Virgin Islands. The FHLBNY provides a readily
available, low-cost source of funds for its member institutions. The FHLBNY does not have any
wholly or partially owned subsidiaries, nor does it have an equity position in any partnerships,
corporations, or off-balance-sheet special purpose entities.
The FHLBNY obtains its funds from several sources. A primary source is the issuance of FHLBank
debt instruments, called consolidated obligations, to the public. The issuance and servicing of
consolidated obligations are performed by the Office of Finance, a joint office of the FHLBanks.
These debt instruments represent the joint and several obligations of all the FHLBanks. Additional
sources of FHLBNY funding are member deposits and the issuance of capital stock. Deposits may be
accepted from member financial institutions and federal instrumentalities.
Members of the cooperative must purchase FHLBNY stock according to regulatory requirements (See
Note 11 Capital, Capital Ratios, and Mandatorily Capital Stock for more information). The
business of the cooperative is to provide liquidity for the members (primarily in the form of loans
referred to as advances) and to provide a return on members investment in FHLBNY stock in the
form of a dividend. Since the members are both stockholders and customers, the Bank operates such
that there is a trade-off between providing value to them via low pricing for advances with a
relatively lower dividend versus higher advances pricing with a relatively higher dividend. The
FHLBNY is managed to deliver balanced value to members, rather than to maximize profitability or
advance volume through low pricing.
All federally insured depository institutions, insured credit unions and insurance companies
engaged in residential housing finance can apply for membership in the FHLBank in their district.
All members are required to purchase capital stock in the FHLBNY as a condition of membership. A
member of another FHLBank or a financial institution that is not a member of any FHLBank may also
hold FHLBNY stock as a result of having acquired an FHLBNY member. Because the Bank operates as a
cooperative, the FHLBNY conducts business with related parties in the normal course of business and
considers all members and non-member stockholders as related parties in addition to the other
FHLBanks. See Note 18 Related party transactions for more information.
The FHLBNYs primary business is making collateralized advances to members which is the principal
factor that impacts the financial condition of the FHLBNY.
As of July 30, 2008, the FHLBNY is supervised and regulated by the Federal Housing Finance Agency
(Finance Agency), which is an independent agency in the executive branch of the U.S. government.
With the passage of the Housing and Economic Recovery Act of 2008 (Housing Act), the Finance
Agency was established and became the new independent Federal regulator (the Regulator) of the
FHLBanks, effective July 30, 2008. The Finance Board, the FHLBanks former regulator, was
merged into the Finance Agency as of October 27, 2008. The Finance Board was
abolished one year after the date of enactment of the Housing Act. Finance Board regulations,
orders, determinations and resolutions remain in effect until modified, terminated, set aside or
superseded in accordance with the Housing Act by the FHFA Director, a court of competent
jurisdiction or by operation of the law.
6
The Finance Agency ensures that the FHLBNY carries out its housing and community development
mission, remains adequately capitalized and able to raise funds in the capital markets, and
operates in a safe and sound manner. However, while the Finance Agency establishes regulations
governing the operations of the FHLBanks, each FHLBank functions as a separate entity with its own
management, employees and board of directors.
Tax Status
The FHLBanks, including the FHLBNY, are exempt from ordinary federal, state, and local
taxation except for local real estate tax.
Assessments
Resolution Funding Corporation (REFCORP) Assessments. Although the FHLBNY is exempt from
ordinary federal, state, and local taxation except for local real estate tax, it is required to
make payments to REFCORP.
REFCORP was established by Congress in 1989 to help facilitate the U.S. governments bailout of
failed financial institutions. The REFCORP assessments are used by the U.S. Treasury to pay a
portion of the annual interest expense on long-term obligations issued to finance a portion of the
cost of the bailout. Principal of those long-term obligations is paid from a segregated account
containing zero-coupon U.S. government obligations, which were purchased using funds that Congress
directed the FHLBanks to provide for that purpose in 1989.
Each FHLBank is required to pay 20 percent of income calculated in accordance with accounting
principles generally accepted in the U.S. (GAAP) after the assessment for Affordable Housing
Program, but before the assessment for the REFCORP. The Affordable Housing Program and REFCORP
assessments are calculated simultaneously because of their dependence on each other. The FHLBNY
accrues its REFCORP assessment on a monthly basis.
The Resolution Funding Corporation has been designated as the calculation agent for the Affordable
Housing Program and REFCORP assessments. Each FHLBank provides the amount of quarterly income
before Affordable Housing Program and REFCORP and other information to the Resolution Funding
Corporation, which then performs the calculations for each quarter end.
Affordable Housing Program (AHP or Affordable Housing Program) Assessments. Section 10(j) of
the FHLBank Act requires each FHLBank to establish an Affordable Housing Program. Each FHLBank
provides subsidies in the form of direct grants and below-market interest rate advances to members
who use the funds to assist in the purchase, construction, or rehabilitation of housing for very
low-, low-, and moderate-income households. Annually, the FHLBanks must set aside for the
Affordable Housing Program the greater of $100 million or 10 percent of regulatory net income.
Regulatory net income is defined as GAAP net income before interest expense related to mandatorily
redeemable capital stock under the accounting guidance for certain financial instruments with
characteristics of both liabilities and equity, and the assessment for Affordable Housing Program, but after the assessment
for REFCORP. The exclusion of interest expense related to mandatorily redeemable capital stock is
a regulatory interpretation of the Finance Agency. The FHLBNY accrues the AHP expense monthly.
7
Basis of Presentation
The preparation of financial statements in accordance with generally accepted accounting
principles in the U.S. requires management to make a number of judgments, estimates, and
assumptions that affect the reported amounts of assets and liabilities, the disclosure of
contingent assets and liabilities (if applicable), and the reported amounts of income and expense
during the reported periods. Although management believes these judgments, estimates, and
assumptions to be appropriate, actual results may differ. The information contained in these
financial statements is unaudited. In the opinion of management, normal recurring adjustments
necessary for a fair presentation of the interim period results have been made. Certain amounts in
the comparable 2007 and 2008 presentations have been conformed to the 2009 presentation and the
impact of the changes was insignificant.
These unaudited financial statements should be read in conjunction with the FHLBNYs audited
financial statements for the year ended December 31, 2008, included in Form 10-K filed on March 27,
2009.
See Note 1 Summary of Significant Accounting Policies in Notes to the Financial Statements of
the Federal Home Loan Bank of New York filed on Form 10-K on March 27, 2009, which contains a
summary of the Banks significant accounting policies.
Note 1. Recently Issued Accounting Standards and Interpretations, and Significant
Accounting Policies and Estimates
Recently issued Accounting Standards and Interpretations
Accounting for the Consolidation of Variable Interest Entities On June 12, 2009, the FASB
issued guidance to improve financial reporting by enterprises involved with variable interest
entities (VIEs) and to provide more relevant and reliable information to users of financial
statements. This guidance amends the manner in which entities evaluate whether consolidation is
required for VIEs. The guidance also requires that an entity continually evaluate VIEs for
consolidation, rather than making such an assessment based upon the occurrence of triggering
events. Additionally, the guidance requires enhanced disclosures about how an entitys involvement
with a VIE affects its financial statements and its exposure to risks. This guidance is effective
as of the beginning of each reporting entitys first annual reporting period that begins after
November 15, 2009 (January 1, 2010 for the FHLBNY), for interim periods within that first annual
reporting period and for interim and annual reporting periods thereafter. Earlier application is
prohibited. The FHLBNY is evaluating the impact of this pronouncement
on its financial statements, results of operations and cash flows,
which is not expected to be significant.
Accounting for Transfers of Financial Assets On June 12, 2009, the FASB issued guidance, which
is intended to improve the relevance, representational faithfulness, and comparability of the
information that a reporting entity provides in its financial reports about a transfer of financial
assets; the effects of a transfer on its financial position, financial performance, and cash flows;
and a transferors continuing involvement in transferred financial assets. Key provisions of the
guidance include (i) the removal of the concept of qualifying special purpose entities, (ii) the
introduction of the concept of a participating interest, in circumstances in which a portion of a financial asset has been transferred and (iii)
the requirement that to qualify for sale accounting, the transferor must evaluate whether it
maintains effective control over transferred financial assets either directly or indirectly. The
guidance also requires enhanced disclosures about transfers of financial assets and a transferors
continuing involvement. This guidance is effective as of the beginning of each reporting entitys
first annual reporting period that begins after November 15, 2009 (January 1, 2010 for the FHLBNY),
for interim periods within that first annual reporting period and for interim and annual reporting
periods thereafter. Earlier application is prohibited. The FHLBNY is evaluating the effect of the
adoption of this guidance on its financial condition, results of operations and cash flows, which
is not expected to be significant.
8
Codification of Accounting Standards On June 29, 2009, the FASB established FASBs Accounting
Standards Codification (Codification) as the single source of authoritative GAAP recognized by the
FASB to be applied by nongovernmental entities. SEC rules and interpretive releases are also
sources of authoritative GAAP for SEC registrants. The Codification is effective for interim and
annual periods ending after September 15, 2009. The FHLBNY adopted the Codification on September
30, 2009. As the Codification is not intended to change or alter previous GAAP, its adoption did
not affect the FHLBNYs financial condition, results of operations or cash flows. Because the
Codification is the single source of authoritative U.S. GAAP, the notes will generally not refer to
the Codification.
Subsequent Events On May 28, 2009, the FASB issued guidance establishing general standards of
accounting for and disclosure of events that occur after the balance sheet date but before
financial statements are issued or are available to be issued (FASB ASC 855-10). This guidance
sets forth: (1) the period after the balance sheet date during which management of a reporting
entity should evaluate events or transactions that may occur for potential recognition or
disclosure in the financial statements; (2) the circumstances under which an entity should
recognize events or transactions occurring after the balance sheet date in its financial
statements; and (3) the disclosures that an entity should make about events or transactions that
occurred after the balance sheet date, including disclosure of the date through which an entity has
evaluated subsequent events and whether that represents the date the financial statements were
issued or were available to be issued. This guidance does not apply to subsequent events or
transactions that are within the scope of other applicable GAAP that provide different guidance on
the accounting treatment for subsequent events or transactions. This guidance is effective for
interim and annual financial periods ending after June 15, 2009. The FHLBNY adopted this guidance
for the period ended June 30, 2009. Its adoption resulted in additional disclosures in the
financial statements in Form 10-Q for the periods ended June 30, 2009 and September 30, 2009. For
more information, see Note 20 Subsequent events.
Enhanced Disclosures about Derivative Instruments and Hedging Activities On March 19, 2008, the
FASB issued guidance which is intended to improve financial reporting about derivative instruments
and hedging activities by requiring enhanced disclosures to enable investors to better understand
their effects on an entitys financial position, financial performance, and cash flows (FASB ASC
815-10-65-1). The standard is effective for financial statements issued for fiscal years and
interim periods beginning after November 15, 2008 (January 1, 2009 for the FHLBNY). Since the new
guidance only requires additional disclosures concerning derivatives and hedging activities, its
adoption as of January 1, 2009 did not have an effect on our financial condition, results of
operations or cash flows. The expanded disclosures related to this guidance are included in Note
15 Derivatives and hedging activities.
In September 2008, the FASB issued guidance to require enhanced disclosures about credit
derivatives and guarantees and amend the existing guidance on guarantors accounting and disclosure
requirements for guarantees, including indirect guarantees of indebtedness of others (FASB ASC
460-10) to exclude credit derivative instruments accounted for at fair value under the accounting standard for
derivatives and hedge accounting (FASB ASC 815-10). The new guidance is effective for financial
statements issued for reporting periods ending after November 15, 2008. Since the new guidance
only requires additional disclosures concerning credit derivatives and guarantees, its adoption as
of January 1, 2009 did not have an effect on our financial condition, results of operations or cash
flows.
9
Recognition and Presentation of Other-Than-Temporary Impairments On April 9, 2009, the FASB
issued guidance for recognition and presentation of other-than-temporary impairment (OTTI) (FASB
ASC 320-10-65-1). The new guidance is intended to provide greater clarity to investors about the
credit and noncredit component of an OTTI event and to more effectively communicate when an OTTI
event has occurred. The guidance applies to debt securities and requires that the total OTTI be
presented in the statement of income with an offset for the amount of impairment that is recognized
in other comprehensive income, which is the noncredit component. Noncredit component losses are to
be recorded in other comprehensive income if an investor can assert that (a) it does not have the
intent to sell or (b) it is not more likely than not that it will have to sell the security prior
to its anticipated recovery, and (c) it expects to recover the amortized cost basis of the
security. The FHLBNY early adopted this guidance at January 1, 2009, and has recorded OTTI on its
securities under the new rules. No cumulative effect transition adjustment was recorded since the
FHLBNY had no OTTI prior to 2009. The expanded disclosures related to the new guidance are
included in Note 4 Held-to-maturity securities and Note 5 Available-for-sale securities.
Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have
Significantly Decreased and Identifying Transactions That Are Not Orderly On April 9, 2009, the
FASB issued guidance, which clarifies the approach to, and provides additional factors to consider
in estimating fair value when the volume and level of activity for the asset or liability have
significantly decreased (FASB ASC 820-10-65-4). It also includes guidance on identifying
circumstances that indicate a transaction is not orderly. The guidance is effective and should be
applied prospectively for financial statements issued for interim and annual reporting periods
ending after June 15, 2009, with early adoption permitted for reporting periods ending after March
15, 2009. If an entity elected to early adopt this guidance, it must also have concurrently
adopted the OTTI guidance. The FHLBNY elected to early adopt this guidance effective January 1,
2009. The enhanced disclosures related to this guidance are included in Note 16 Fair Values of
Financial Instruments.
Interim Disclosures about Fair Value of Financial Instruments. On April 9, 2009, the FASB issued
guidance to require disclosures about the fair value of financial instruments, including disclosure
of the method(s) and significant assumptions used to estimate the fair value of financial
instruments, in interim financial statements as well as in annual financial statements (FASB ASC
825-10-65-1). Previously, these disclosures were required only in annual financial statements. The
guidance is effective and should be applied prospectively for financial statements issued for
interim and annual reporting periods ending after June 15, 2009, with early adoption permitted for
reporting periods ending after March 15, 2009. An entity may early adopt this guidance only if it
also concurrently adopted guidance discussed in the previous paragraphs regarding fair value and
the OTTI guidance. The FHLBNY elected to early adopt this guidance effective January 1, 2009. Its
adoption resulted in increased interim financial statement disclosures, but did not affect the
FHLBNYs financial condition, results of operations or cash flows.
10
Significant Accounting Policies and Estimates
The FHLBNY has identified certain accounting policies that it believes are significant because
they require management to make subjective judgments about matters that are inherently uncertain
and because of the likelihood that materially different amounts would be reported under different
conditions or by using different assumptions. These policies include estimating the allowance for
credit losses on the advance and mortgage loan portfolios, evaluating the impairment of the Banks
securities portfolios, estimating the liabilities for employee benefit programs, and estimating
fair values of certain assets and liabilities.
Fair Value Measurements and Disclosures The accounting standards on fair value
measurements and disclosures discusses how entities should measure fair value based on whether the
inputs to those valuation techniques are observable or unobservable. Observable inputs reflect
market data obtained from independent sources or those that can be directly corroborated to market
sources, while unobservable inputs reflect the FHLBNYs market assumptions. Fair value is defined
as the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction in the principal or most advantageous market for the asset or liability between market
participants at the measurement date. This definition is based on an exit price rather than
transaction (entry) price.
In determining fair value, FHLBNY uses various valuation methods, including both the market and
income approaches. The accounting guidance on fair value measurements and disclosures establishes
a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and
minimizes the use of unobservable inputs by requiring that the most observable inputs be used when
available. Observable inputs are inputs that market participants would use in pricing the asset or
liability, and would be based on market data obtained from sources independent of FHLBNY.
Unobservable inputs are inputs that reflect FHLBNYs assumptions about the parameters market
participants would use in pricing the asset or liability, and would be based on the best
information available in the circumstances.
The fair value hierarchy is broken down into three levels based on the reliability of inputs as
follows:
Level 1 Quoted prices for identical instruments in active markets.
Level 2 Quoted prices for similar instruments in active markets; quoted prices for
identical or similar instruments in markets that are not active; and model-based valuations in
which all significant inputs and significant parameters are observable in active markets.
Level 3 Valuations based upon valuation techniques in which significant inputs and
significant parameters are unobservable.
The availability of observable inputs can vary from product to product and is affected by a wide
variety of factors including, for example, the characteristics peculiar to the transaction. To the
extent that valuation is based on models or inputs that are less observable or unobservable in the
market, the determination of fair value requires more judgment. Accordingly, the degree of
judgment exercised by FHLBNY in determining fair value is greatest for instruments categorized as
Level 3. In certain cases, the inputs used to measure fair value may fall into different levels of
the fair value hierarchy. In such cases, for disclosure purpose the level in the fair value
hierarchy within which the fair value measurement falls is determined based on the lowest level
input that is significant to the fair value measurement in its entirety.
At September 30, 2009 and December 31, 2008, the FHLBNY measured and recorded fair values using the
above guidance in the Statements of Condition for derivatives, available-for-sale securities, for
certain consolidated obligation bonds that were designated and recorded at fair value using the
fair value option (FVO) accounting guidance for financial assets and liabilities, and at September
30, 2009, for certain held-to-maturity securities determined to be OTTI and measured at fair value
on a non-recurring basis. At September 30, 2009 and December 31, 2008, the Bank had designated
consolidated obligation debt of $2.4 billion and $983.0 million under the FVO.
11
A significant percentage of fixed-rate advances and consolidated obligation bonds are hedged to
mitigate the risk of fair value changes from changes in the interest rate environment and are
typically accounted under hedge accounting rules in a fair value hedging relationship. When the
FHLBNY deems that a hedge relationship is either not operationally practical or considers the hedge
may not be highly effective under accounting standard on derivative and hedging, the FHLBNY may
designate certain advances and consolidated obligation bonds as economic hedges.
Fair Values of Derivative positions The FHLBNY is an end-user of over-the-counter
(OTC) derivatives to hedge assets and liabilities under hedge accounting rules to mitigate fair
value risks. In addition, the Bank records the fair value of an insignificant amount of
mortgage-delivery commitments as derivatives, also under derivative and hedge accounting rules.
For additional information, see Note 15 Derivatives and hedging activities.
Valuations of derivative assets and liabilities reflect the value of the instrument including the
value associated with counterparty risk. Derivative values also take into account the FHLBNYs own
credit standing. The valuation of the derivative instrument reflects the net credit differential
between the FHLBNY and its counterparties to its derivative contracts. The computed fair values of
the FHLBNYs OTC derivatives take into consideration the effects of legally enforceable master
netting agreements that allow the FHLBNY to settle positive and negative positions and offset cash
collateral with the same counterparty on a net basis. On a contract-by-contract basis, the
collateral and netting arrangements sufficiently mitigated the impact of the credit differential
between the FHLBNY and its counterparties to an immaterial level such that an adjustment for
nonperformance risk was not deemed necessary. Fair values of the derivatives were computed using
quantitative models and employed multiple market inputs including interest rates, prices and
indices to generate continuous yield or pricing curves and volatility factors. These multiple
market inputs were predominantly actively quoted and verifiable through external sources, including
brokers and market transactions.
Fair Values of investments classified as available-for-sale securities Changes in the
values of available-for-sale securities are recorded in Accumulated other comprehensive income
(loss), which is a component of members capital, with an offset to the recorded value of the
investments in the Statements of Condition. The Banks entire portfolio of mortgage-backed
securities classified as available-for-sale (AFS) is comprised of securities issued by GSE
variable rate collateralized mortgage obligations which are marketable at recorded fair values. A
small percentage of the AFS portfolio at September 30, 2009 and December 31, 2008 consisted of
investments in equity and bond mutual funds held by grantor trusts owned by the FHLBNY. The unit
prices, or the Net asset values, of the underlying mutual funds were available through publicly
viewable web sites and the units were marketable at recorded fair values. In summary, the recorded
fair values of available-for-sale securities in the Statements of Condition at September 30, 2009
and December 31, 2008 reflected the estimated price at which the positions could be sold.
All of the FHLBNYs mortgage-backed securities classified as available-for-sale are marketable and
the fair value of these investment securities is estimated by management using specialized pricing
services that employ pricing models or quoted prices of securities with similar characteristics.
Inputs into the pricing models are market based and observable. Examples of securities, which
would generally be classified within Level 2 of the valuation hierarchy and valued using the
market approach as defined under the accounting standard for fair value measurements and
disclosures, include GSE issued collateralized mortgage obligations and money market funds.
12
See Note 16 Fair Values of Financial Instruments for additional disclosures with respect to the
Levels associated with assets and liabilities recorded on the Banks Statements of Condition at
September 30, 2009 and December 31, 2008. See Note 16 Fair Values of Financial Instruments for
more information about fair value disclosures of financial instruments.
Fair Value on a Nonrecurring Basis Certain held-to-maturity investment securities are
measured at fair value on a nonrecurring basis; that is, they are not measured at fair value on an
ongoing basis but are subject to fair-value adjustments in certain circumstances (for example, when
there is evidence of other-than-temporary impairment). The FHLBNY early adopted the new guidance
on recognition and presentation of other-than-temporary impairments. In accordance with this
guidance, held-to-maturity mortgage-backed securities with unpaid
principal balance of $197.2 million and fair value of $125.8 million at September 30, 2009 were determined to be credit
impaired as a result of evidence of other-than-temporary impairment
(OTTI) in the current year third quarter. The impairment
consisted of credit loss component of $3.7 million recorded as a charge to earnings in
the three months ended September 30, 2009. The non-credit component of OTTI was a loss
of $26.5 million, which was recorded in Accumulated other comprehensive income (loss).
Financial Assets and Financial Liabilities recorded under the Fair Value Option The
accounting standards on the fair value option for financial assets and liabilities, created a fair
value option allowing, but not requiring, an entity to irrevocably elect fair value as the initial
and subsequent measurement attribute for certain financial assets and financial liabilities with
changes in fair value recognized in earnings as they occur. In the third quarter of 2008 and
thereafter, the FHLBNY has elected the FVO designation for certain consolidated obligation bonds.
The changes in fair values of the designated bonds are economically hedged by interest rate swaps.
See Note 16 Fair Values of Financial Instruments for more information.
Investments
Early adoption by the FHLBNY of the guidance on interim disclosures about fair value of financial
instruments at January 1, 2009 required the Bank to incorporate certain clarifications and
definitions in its investment policies. The new guidance amends the accounting rules for
investments in debt and equity securities, and is primarily intended to provide greater clarity to
investors about the credit and noncredit component of an OTTI event and to more effectively
communicate when an OTTI event has occurred. The new guidance has been incorporated in the Banks
investment policies as summarized below.
Held-to-maturity securities The FHLBNY classifies investments for which it has both the ability
and intent to hold to maturity as held-to-maturity investments, and are recorded at amortized cost
basis. Amortized cost basis includes adjustments made to the cost of an investment for accretion,
amortization, collection of cash, and fair value hedge accounting adjustments. If a
held-to-maturity security is determined to be OTTI, the amortized cost basis of the security is
adjusted for credit losses. Amortized cost basis of a held-to-maturity OTTI security is further adjusted for impairment related to all
other factors (also referred to as the non-credit component of OTTI) recognized in Accumulated
other comprehensive income (loss), and the adjusted amortized cost basis is the carrying value of
the OTTI security reported in the Statements of Condition. Carrying value for a held-to-maturity
security that is not impaired is its amortized cost basis.
13
Under the accounting guidance for investments in debt and equity securities, changes in
circumstances may cause the FHLBNY to change its intent to hold certain securities to maturity
without calling into question its intent to hold other debt securities to maturity in the future.
Thus, the sale or transfer of a held-to-maturity security due to changes in circumstances, such as
evidence of significant deterioration in the issuers creditworthiness or changes in regulatory
requirements, is not considered inconsistent with its original classification. Other events that
are isolated, nonrecurring, and unusual for the FHLBNY that could not have been reasonably
anticipated may cause the FHLBNY to sell or transfer a held-to-maturity security without
necessarily calling into question its intent to hold other debt securities to maturity. The Bank
did not transfer or sell any held-to-maturity securities due to changes in circumstances thus far
in 2009 as well as in 2008 or 2007.
In accordance with accounting guidance for investments in debt and equity securities, sales of debt
securities that meet either of the following two conditions may be considered as maturities for
purposes of the classification of securities: (1) the sale occurs near enough to its maturity date
(or call date if exercise of the call is probable) such that interest rate risk is substantially
eliminated as a pricing factor and the changes in market interest rates would not have a
significant effect on the securitys fair value, or (2) the sale of a security occurs after the
FHLBNY has already collected a substantial portion (at least 85 percent) of the principal
outstanding at acquisition due either to prepayments on the debt security or to scheduled payments
on a debt security paid over its term.
Available-for-sale securities The FHLBNY classifies investments that it may sell before maturity
as available-for-sale and carries them at fair value. Fair value changes are recorded in
Accumulated other comprehensive income until the security is sold or is expected to be sold.
The FHLBNY classifies investments that it may sell before maturity as available-for-sale and
carries them at fair value. The change in fair value of the available-for-sale securities is
recorded in other comprehensive income as a net unrealized gain or loss on available-for-sale
securities. If available-for-sale securities had been hedged under a fair value hedge qualifying
under the accounting for derivatives and hedging, the FHLBNY would record the portion of the change
in value related to the risk being hedged in Other income (loss) as a Net realized and unrealized
gain (loss) on derivatives and hedging activities together with the related change in the fair
value of the derivative, and would record the remainder of the change in Accumulated other
comprehensive income as a Net unrealized gain (loss) on available-for-sale securities. If
available-for-sale securities had been hedged under a cash flow hedge qualifying under the
accounting standard for derivatives and hedging, the FHLBNY would record the effective portion of
the change in value of the derivative related to the risk being hedged in other comprehensive
income as a Net unrealized gain (loss) on derivatives and hedging activities. The ineffective
portion would be recorded in Other income (loss) and presented as a Net realized and unrealized
gain (loss) on derivatives and hedging activities. The FHLBNY computes the amortization and
accretion of premiums and discounts on mortgage-backed securities using the level-yield method over
the estimated lives of the securities. The FHLBNYs estimated life method requires a retrospective
adjustment of the effective yield each time the FHLBNY changes the estimated life as if the new
estimate had been known at the original acquisition date of the asset.
The FHLBNY computes the amortization and accretion of premiums and discounts on investments other
than mortgage-backed securities using the level-yield method to the contractual maturities of the
investments.
The FHLBNY computes gains and losses on sales of investment securities using the specific
identification method and includes these gains and losses in Other income (loss). The FHLBNY
treats securities purchased under agreements to resell as collateralized financings because the
counterparty retains control of the securities.
14
Other than-temporary Impairment Accounting and Governance Policies
Impairment analysis and Pricing of mortgage-backed securities, and Bond insurer methodology.
The FHLBNY regularly evaluates its investments for impairment and determines if unrealized
losses are temporary based in part on the creditworthiness of the issuers and the underlying
collateral. A security is considered impaired if its fair value is less than its amortized cost
basis. Amortized cost basis includes adjustments made to the cost of an investment for accretion,
amortization, collection of cash, previous OTTI recognized in earnings and fair value hedge
accounting adjustments. If management has made a decision to sell such an impaired security,
OTTI is considered to have occurred. If a decision to sell the impaired investment has not been
made, but management concludes that it is more likely than not that it will be required to sell
such a security before recovery of the amortized cost basis of the security, an OTTI is also
considered to have occurred.
Even if management does not intend to sell such an impaired security, an OTTI has occurred if
analysis determines that a credit loss exists. The difference between the present value of the
cash flows expected to be collected and the amortized cost basis is a credit loss. To determine if
a credit loss exists, management compares the present value of the cash flows expected to be
collected to the amortized cost basis of the security. If the present value of the cash flows
expected to be collected is less than the securitys amortized cost, an OTTI exists, irrespective
of whether management will be required to sell such a security. The Banks methodology to
calculate the present value of expected cash flows is to discount the expected cash flows
(principal and interest) of a fixed-rate security that is deemed as OTTI by using the effective
interest rate of the security as of the date it was acquired. For a variable-rate security that is
evaluated for OTTI, the expected cash flows are computed using a forward-rate curve.
If management determines that it intends to sell a security in an unrealized loss position or can
no longer assert that it will not be required to sell such as security before recovery of the
amortized cost basis of the security, the entire OTTI is recorded as a charge to earnings in the
period management reaches such a decision.
However, if management determines that OTTI exists only because of a credit loss (even if it does
not intend to sell or it will not be required to sell such a security), the amount of impairment
related to credit loss will affect earnings and the amount of loss related to factors other than
credit loss is recognized as a component of Accumulated other comprehensive income (loss).
If the FHLBNY determines that OTTI has occurred, it accounts for the investment security as if it
had been purchased on the measurement date of the other-than-temporary impairment. The investment
security is written down to fair value, which becomes its new amortized cost basis. The new
amortized cost basis is not adjusted for subsequent recoveries in fair value.
For securities designated as available-for-sale, subsequent unrealized changes to the fair values
(other than OTTI) are recorded in Accumulated other comprehensive income (loss). For securities
designated as held-to-maturity, the amount of OTTI recorded in Accumulated other comprehensive
income (loss) for the non-credit component of OTTI is amortized prospectively over the remaining
life of the securities based on the timing and amounts of estimated future cash flows.
Amortization out of Accumulated other comprehensive income (loss) is offset by an increase in the
carrying value of securities until the securities are repaid or are sold or subsequent OTTI is
recognized in earnings.
If subsequent evaluation indicates a significant increase in cash flows greater than previously
expected to be collected or if actual cash flows are significantly greater than previously
expected, the increases are accounted for as a prospective adjustment to the accretable yield
through interest income. In subsequent periods, if the fair value of the investment security has
further declined below its then-current carrying value and there has been a decrease in the
estimated cash flows the FHLBNY expects to collect, the FHLBNY will deem the security as OTTI.
15
OTTI Governance Committee On April 28, 2009, and May 7, 2009, the Finance Agency, the FHLBanks
regulator, provided the FHLBanks with guidance on the process for determining OTTI with respect to
the FHLBanks holdings of private-label MBS and their adoption of the guidance for recognition and
presentation of other-than-temporary impairment in the first quarter of 2009. The goal of the
guidance is to promote consistency among all FHLBanks in the process for determining OTTI for
private-label MBS.
Beginning with the second quarter of 2009, consistent with the objectives of the Finance Agency
guidance, the FHLBanks formed an OTTI Governance Committee (OTTI Committee) with the
responsibility for reviewing and approving the key modeling assumptions, inputs, and methodologies
to be used by the FHLBanks to generate the cash flow projections used in analyzing credit losses
and determining OTTI for private-label MBS. The OTTI Committee charter was approved on June 11,
2009, and provides a formal process by which the FHLBanks can provide input on and approve the
assumptions.
Although a FHLBank may engage another FHLBank to perform its OTTI analysis under the guidelines of
the OTTI Committee, each FHLBank is responsible for making its own determination of impairment and
the reasonableness of assumptions, inputs, and methodologies used and for performing the required
present value calculations using appropriate historical cost bases and yields. FHLBanks that hold
the same private-label MBS are required to consult with one another to make sure that any decision
that a commonly held private-label MBS is other-than-temporarily impaired, including the
determination of fair value and the credit loss component of the unrealized loss, is consistent
among those FHLBanks.
The OTTI Committees role and scope with respect to the assessment of credit impairment for the
FHLBNYs private-label MBS are discussed below under Impairment analysis of mortgage-backed
securities.
Pricing Committee In an effort to achieve consistency among all of the FHLBanks of the
pricing of investments of mortgage-backed securities, in the third quarter of 2009 the FHLBanks
also formed the MBS Pricing Governance Committee, which was responsible for developing a fair value
methodology for mortgage-backed securities that all FHLBanks could adopt. Consistent with the
guidance from the Pricing Committee, the FHLBNY updated its methodology used to estimate the
fair value of mortgage-backed securities during the quarter ended September 30, 2009. Under the
approved methodology, the FHLBNY requests prices for all mortgage-backed securities from four
specific third-party vendors. Prior to the change, the FHLBNY used three of the four vendors
specified by the Pricing Committee. Depending on the number of prices received from the four vendors for each
security, the FHLBNY selects a median or average price as defined by the methodology. The
methodology also incorporates variance thresholds to assist in identifying median or average prices
that may require further review by the FHLBNY. In certain limited instances (i.e., prices are outside of
variance thresholds or the third-party services do not provide a price), the FHLBNY will obtain a
price from securities dealers that is deemed most appropriate after consideration of all relevant
facts and circumstances that would be considered by market participants. Prices for CUSIPs held in
common with other FHLBanks are reviewed for consistency. The
incorporation of the Pricing Committee guidelines did not have a
significant impact in the FHLBNYs estimate of the fair values
of its investment securities as of September 30, 2009.
16
Bond Insurer analysis Certain held-to-maturity private-label MBS owned by the FHLBNY are insured
by third-party bond insurers (monoline insurers). The bond insurance on these investments
guarantees the timely payments of principal and interest if these payments cannot be satisfied from
the cash flows of the underlying mortgage pool. Private-label insured securities are cash flow
tested for credit impairment. The cash flow analysis of the MBS protected by such third-party
insurance looks first to the performance of the underlying security, considering its embedded
credit enhancements in the form of excess spread, overcollateralization, and credit subordination,
to determine the collectability of all amounts due. If these protections are deemed insufficient
to make timely payment of all amounts due, then the FHLBNY considers the capacity of the
third-party bond insurer to cover any shortfalls.
Certain monoline insurers have been subject to adverse ratings, rating downgrades, and weakening
financial performance measures. In estimating the insurers capacity to provide credit protection
in the future to cover any decrease in cash flows expected to be collected for securities deemed to
be OTTI, the FHLBNY has developed a methodology to assess the ability
of the monoline insurers to meet
future insurance obligations. The methodology establishes boundaries that can be used on a
consistent basis, and includes both quantitative and qualitative factors.
This methodology calculates the length of time a monoline is expected to remain financially viable
to pay claims for securities insured; it employs for the most part, publicly available information
to identify cash flows used up by a monoline for insurance claims. Based on the monolines
existing insurance reserves, the methodology attempts to predict the length of time over which the
monolines claims-paying resource could sustain bond insurance losses. The methodology provides an
indicator of a point in time in the future when the monolines claim-paying resource are estimated
to be exhausted.
For the FHLBNYs insured securities that are deemed to be credit impaired absent insurer
protection, the methodology compares the timing and amount of the cash flow shortfall to the timing
of when a monolines claim-paying resource is deemed exhausted. The analysis quantifies both the
timing and the amount of cash flow shortfall that the insurer is unlikely to be able to cover.
However, estimation of an insurers financial strength to remain viable over a long time horizon
requires significant judgment and assumptions. Predicting when the insurers may no longer have the
ability to perform under their contractual agreements, then comparing the timing and amounts of
cash flow shortfalls of securities that are credit impaired absent insurer protection requires
significant judgment.
Determining a monolines financial viability is primarily based on an analysis which establishes
quantitative boundaries to provide consistency in the assessment of OTTI under different fact
patterns. Because predicting outcomes over a distant time horizon is inherently subjective, the
FHLBNY employs qualitative factors to assist in the identification of critical quantitative inputs
and assumptions.
The FHLBNY believes that bond insurance is an inherent aspect of credit support within the
structure of the security itself and it is appropriate to include insurance in its evaluation of
expected cash flows and determination of OTTI. The FHLBNY has also established that the terms of
insurance enable the insurance to travel with the security if the security is sold in the future.
Currently, the monolines that provide insurance for the Banks securities are going concerns and
are honoring claims with their existing capital resources. Within the boundaries set in the
methodology outlined above, the Bank believes it is appropriate to assert that insurer credit
support can be relied upon over a certain period of time. As with all assumptions, changes to
these assumptions may result in materially different outcomes and the realization of additional
other-than-temporary impairment charges in the future.
17
Impairment analysis of mortgage-backed securities
Securities with a fair value below amortized cost basis are considered impaired. Determining
whether a decline in fair value is OTTI requires significant judgment. The FHLBNY evaluates its
individual held-to-maturity investment in private-label issued mortgage- and asset-backed
securities for OTTI on a quarterly basis. As part of this process, the FHLBNY assesses if it has
an intention to sell the security or it is more likely than not that it will be required to sell
the impaired investment before recovery of its amortized cost basis. At September 30, 2009, to
assess whether the entire amortized cost bases of the FHLBNYs private-label MBS will be recovered,
the Bank performed cash flow analysis for 100% of its private-label MBS, including bonds
determined to be other-than-temporarily impaired in a previous reporting period. In prior quarters
of 2009 and at December 31, 2008, the Bank had identified private-label MBS with weak performance
measures indicating the possibility of other-than-temporary impairment based on the Banks
screening and monitoring parameters, which included pricing, credit rating and credit enhancement
coverage. Bonds selected through the screening process were cash flow tested for impairment.
Bonds determined to be credit impaired at September 30, 2009 were cash flow tested for credit
impairment previously.
Cash flow analysis derived from the FHLBNYs own assumptions The FHLBNY cash flow tested 100% of
its private-label MBS. Assessment for impairment employed by the FHLBNYs own techniques and
assumptions were determined primarily using historical performance data of the 54 private-label
MBS. These assumptions and performance measures were benchmarked by comparing to performance
parameters from market consensus, data obtained from a specialized consulting service, and to the
assumptions and parameters provided by the OTTI Committee for the FHLBNYs private-label MBS.
The
FHLBNYs analysis was performed using an internal process to develop bond performance parameters
and a third party process to generate expected cash flows to be
collected. The Banks internal process
calculated the historical average of each bonds prepayments, defaults, and loss severities, and
considered other factors such as delinquencies and foreclosures. Assumptions were primarily based
on historical performance statistics extracted from reports from trustees, loan servicer reports
and other sources. In arriving at historical performance assumptions, which is the FHLBNYs
expected case assumptions, the FHLBNY also considered various characteristics of each security
including, but not limited to, the following: the credit rating and related outlook or status; the
creditworthiness of the issuers of the debt securities; the underlying type of collateral; the year
of securitization or vintage, the duration and level of the unrealized loss, credit enhancements,
if any; and other collateral-related characteristics such as FICO® credit scores, and delinquency
rates. The relative importance of this information varies based on the facts and circumstances
surrounding each security, as well as the economic environment at the time of assessment.
Each bonds performance parameters, primarily prepayments, defaults and loss severities, which were
calculated by the Banks internal approach were then input into a third party
specialized cash flow model that allocated the projected collateral level losses to
the various security classes in the securitization structure in accordance with its prescribed cash
flow and loss allocation rules. In a securitization in which the credit enhancement for the senior
securities was derived from the presence of subordinate securities, losses were generally allocated
first to the subordinate securities until their principal balance was reduced to zero.
18
If the security is insured by a bond insurer and the security relies on the insurer for support
either currently or potentially in future periods, the FHLBNY performed another analysis to assess
the financial strength of the monoline insurers. The results of the insurer financial analysis
(monoline burn-out period) were then incorporated in the third-party cash flow model, as a key
input. If the cash flow model projected cash flow shortfalls (credit impairment) on an insured
security, the monolines burn-out period, an end date for credit support, was then input to the
cash flow model. The end date, also referred to as the burn-out date, provided the necessary
information to the cash flow model for the continuation of cash flows until the burn-out date. Any
cash flow shortfalls that occurred beyond the burn-out date was considered to be not recoverable
and the insured security was then deemed to be credit impaired.
In determining monoline insurer support, the Bank considered the contractual terms of the insurance
guarantee, and whether the credit protection under the terms of the agreement would travel with
the security.
Role and scope of the OTTI Governance Committee
Starting with the third quarter, the OTTI Committee has adopted guidelines that require each
FHLBank to assess credit impairment by cash flow testing of 100% of private-label securities that
are within its scope. Of the 54 private-label MBS owned by the FHLBNY, 26 MBS backed by sub-prime
loans, commercial real estate loans, home equity loans, and manufactured housing loans were deemed
to be outside the scope of the OTTI Committee because loan level
collateral data was not available, and 28 securities were modeled in
the OTTI Committee common platform as described below.
The FHLBNY developed key modeling assumptions and forecasted cash
flows using the FHLBNYs own assumptions for 100% of its
private-label MBS.
Cash flow derived from the OTTI Committee common platform Consistent with
the guidelines provided by the OTTI Committee, the FHLBNY has contracted with the FHLBank of San
Francisco to perform cash-flow analyses for 13 of its residential private-label MBS. The unpaid
principal balance of the 13 securities was $414.7 million at September 30, 2009. The FHLBNY has
also contracted with the FHLBank of Chicago to perform cash flow analyses for 15 of its subprime
private-label MBS. The unpaid principal balance was $197.7 million at September 30, 2009.
Although the FHLBNY has engaged the two FHLBanks to perform the cash flow analysis for 28
private-label MBS, the FHLBNY has reviewed the underlying assumptions and is ultimately
responsible for making its own determination of impairment and the reasonableness of assumptions,
inputs, and methodologies used and performing the required present value calculations using
appropriate historical cost bases and yields.
The two FHLBanks performed cash flow analysis for the 28 securities using two third-party models.
The first model considered borrower characteristics and the particular attributes of the loans
underlying a security in conjunction with assumptions about future changes in home prices and
interest rates, to project prepayments, defaults and loss severities. A significant input to the
first model was the forecast of future housing price changes for the relevant states and core based
statistical areas (CBSAs), which were based upon an assessment of the individual housing markets.
CBSA refers collectively to metropolitan and micropolitan statistical areas as defined by the
United States Office of Management and Budget; as currently defined, a CBSA must contain at least
one urban area with a population of 10,000 or more people. The FHLBanks housing price forecast
assumed CBSA level current-to-trough home price declines ranging from 0 percent to 20 percent over
the next 9 to 15 months. Thereafter, home prices were projected to increase 0 percent in the first six months, 0.5 percent in the next six months, 3
percent in the second year and 4 percent in each subsequent year.
19
The month-by-month projections of future loan performance derived from the first model, which
reflected projected prepayments, defaults and loss severities, were then input into a second model
that allocated the projected loan level cash flows and losses to the various security classes in
the securitization structure in accordance with its prescribed cash flow and loss allocation rules.
In a securitization in which the credit enhancement for the senior securities was derived from the
presence of subordinate securities, losses were generally allocated first to the subordinate
securities until their principal balance was reduced to zero. The projected cash flows were based on a number of assumptions and expectations, and the results of
these models can vary significantly with changes in assumptions and expectations. The scenario of
cash flows determined based on model approach described above reflects a best estimate scenario and
includes a base case current to trough housing price forecast and a base case housing price
recovery path described in the prior paragraph. The cash flows tested on the securities within the
scope of the OTTI Committee resulted in the credit impairment of three securities which were also
deemed to be credit impaired by the FHLBNYs cash flow analysis.
GSE issued securities The FHLBNY evaluates its individual securities issued by Fannie Mae and
Freddie Mac or a government agency by considering the creditworthiness and performance of the debt
securities and the strength of the GSEs guarantees of the securities. Based on the Banks
analysis, GSE and agency issued securities are performing in accordance with their contractual
agreements. The Housing Act contains provisions allowing the U.S. Treasury to provide support to
Fannie Mae and Freddie Mac. In September 2008, the U.S. Treasury and the Finance Agency placed
Fannie Mae and Freddie Mac into conservatorship in an attempt to stabilize their financial
conditions and their ability to support the secondary mortgage market. The FHLBNY believes that it
will recover its investments in GSE and agency issued securities given the current levels of
collateral and credit enhancements and guarantees that exist to protect the investments.
Mortgage Loans Held-for-portfolio
The FHLBNY participates in the Mortgage Partnership Finance program®
(MPF ®) by purchasing and originating conventional mortgage loans from
its participating members, herein after referred to as Participating Financial Institutions
(PFI). Federal Housing Administration (FHA) and Veterans Administration (VA) insured loans
purchased were not a significant total of the outstanding mortgage loans held-for-portfolio at
September 30, 2009 and December 31, 2008. The FHLBNY manages the liquidity, interest rate and
prepayment option risk of the MPF loans, while the PFIs retain servicing activities. The FHLBNY
and the PFI share the credit risks of the uninsured MPF loans by structuring potential credit
losses into layers. Collectability of the loans is first supported by liens on the real estate
securing the loan. For conventional mortgage loans, additional loss protection is provided by
private mortgage insurance required for MPF loans with a loan-to-value ratio of more than 80% at
origination, which is paid for by the borrower. Credit losses are absorbed by the FHLBNY to the
extent of the First Loss Account (FLA) for which the maximum exposure is estimated to be $13.9
million and $13.8 million at September 30, 2009 and at December 31, 2008. The aggregate amount of
FLA is memorialized and tracked but is neither recorded nor reported as a loan loss reserve in the
FHLBNYs financial statements. If second losses beyond this layer are incurred, they are
absorbed through a credit enhancement provided by the PFI. The credit enhancement held by PFIs
ensures that the lender retains a credit stake in the loans it sells to the FHLBNY or originates as
an agent for the FHLBNY (only relates to MPF 100 product). For assuming this risk, PFIs receive
monthly credit enhancement fees from the FHLBNY.
The amount of the credit enhancement is computed with the use of a Standard & Poors model to
determine the amount of credit enhancement necessary to bring a pool of uninsured loans to AA
credit risk. The credit enhancement becomes an obligation of the PFI. For certain MPF products,
the credit enhancement fee is accrued and paid each month. For other MPF products, the credit
enhancement fee is accrued monthly and is paid monthly after the FHLBNY has accrued 12 months of
credit enhancement fees.
20
Delivery commitment fees are charged to a PFI for extending the scheduled delivery period of the
loans. Pair-off fees may be assessed and charged to PFI when the settlement of the delivery
commitment (1) fails to occur, or (2) the principal amount of the loans purchased by the FHLBNY
under a delivery commitment is not equal to the contract amount beyond established limits.
Extension fees are received when a member requests to extend the period of the delivery commitment
beyond the original stated maturity.
The FHLBNY records credit enhancement fees as a reduction to mortgage loan interest income. The
FHLBNY records other non-origination fees, such as delivery commitment extension fees and
pair-off-fees, as derivative income over the life of the commitment. All such fees were
inconsequential for all periods reported. Mortgage loans are recorded at fair value on settlement
date.
The FHLBNY defers and amortizes premiums, costs, and discounts as interest income using the level
yield method to the loans contractual maturities. The FHLBNY classifies mortgage loans as
held-for-portfolio and, accordingly, reports them at their principal amount outstanding, net of
premiums, costs and discounts.
The FHLBNY places a mortgage loan on non-accrual status when the collection of the contractual
principal or interest is 90 days or more past due. When a mortgage loan is placed on non-accrual
status, accrued but uncollected interest is reversed against interest income.
Allowance for credit losses on mortgage loans. The Bank performs periodic reviews of its
portfolio to identify the losses inherent within the portfolio and to determine the likelihood of
collection of the principal and interest. Mortgage loans, that are either classified under
regulatory criteria (Special Mention, Sub-standard, or Loss) or past due, are separated from the
aggregate pool and evaluated separately for impairment.
The allowance for credit losses on mortgage loans was $3.4 million and $1.4 million as of September
30, 2009 and December 31, 2008.
The Bank identifies inherent losses through analysis of the conventional loans (FHA and VA are
insured loans, and excluded from the analysis) that are not adversely classified or past due.
Reserves are based on the estimated costs to recover any portions of the MPF loans that are not FHA
and VA insured. When a loan is foreclosed, the Bank will charge to the loan loss reserve account
for any excess of the carrying value of the loan over the net realizable value of the foreclosed
loan.
If adversely classified, or on non-accrual status, reserves for conventional mortgage loans, except
FHA and VA insured loans, are analyzed under liquidation scenarios on a loan level basis, and
identified losses are fully reserved. FHA and VA insured mortgage loans have minimal inherent
credit risk; risk generally arises mainly from the servicers defaulting on their obligations. FHA
and VA insured mortgage loans, if adversely classified, will have reserves established only in the event of a default of a PFI.
Reserves are based on aging, collateral value and estimated costs to recover any uninsured portion
of the MPF loan.
The FHLBNY also holds participation interests in residential and community development mortgage
loans through its Community Mortgage Asset (CMA) program. Acquisition of participations under
the CMA program was suspended indefinitely in November 2001, and outstanding balance was
approximately $4.0 million at September 30, 2009 and December 31, 2008. If adversely classified,
CMA loans will have additional reserves established based on the shortfall of the underlying
estimated liquidation value of collateral to cover the remaining balance of the CMA loan. Reserve
values are calculated by subtracting the estimated liquidation value of the collateral (after sale
value) from the current remaining balance of the CMA loan.
21
Note 2. Cash and due from banks
Cash on hand, cash items in the process of collection, and amounts due from correspondent banks and
the Federal Reserve Banks are included in cash and due from banks.
Compensating balances
The Bank maintained average required clearing balances with various Federal Reserve Banks of
approximately $1.0 million for the periods ended September 30, 2009 and December 31, 2008. The
Bank uses earnings credits on these balances to pay for services received from the Federal Reserve
Banks.
Pass-through deposit reserves
The Bank acts as a pass-through correspondent for member institutions required to deposit reserves
with the Federal Reserve Banks. Pass-through reserves deposited with Federal Reserve Banks were
$27.1 million and $31.0 million as of September 30, 2009 and December 31, 2008. The Bank includes
member reserve balances in other liabilities in the Statements of Condition.
Note 3. Interest-bearing deposits
In October 2008, the Board of Governors of the Federal Reserve System directed the Federal Reserve
Banks (FRB) to pay interest on balances in excess of certain required reserve and clearing
balances. The formula for calculating interest earned is based on average excess balances over the
calculation period; rates are generally tied to the federal funds rate. On July 1, 2009, the
FHLBNY was no longer eligible to collect interest on excess balances with the FRB. The FRB will
pay interest only on required reserves. At December 31, 2008, excess balances placed with the FRB
were classified as interest- bearing deposit. At September 30, 2009, the balance with the FRB did
not earn interest and was classified as Cash and Due from Banks.
Note 4. Held-to-maturity securities
Held-to-maturity securities consist of mortgage- and asset-backed securities (collectively
mortgage-backed securities or MBS), state and local housing finance agency bonds, and short-term
certificates of deposits issued by highly rated banks and financial institutions.
At September 30, 2009 and December 31, 2008, the FHLBNY had pledged MBS with an amortized cost
basis of $2.2 million and $2.7 million to the FDIC in connection with deposits maintained by the
FDIC at the FHLBNY.
22
Mortgage-backed securities The carrying value and amortized cost basis of investments in
mortgage-backed securities issued by Federal National Mortgage Association (Fannie Mae) and the
Federal Home Loan Mortgage Corp. (Freddie Mac) (together, government sponsored enterprises or
GSE) and a U.S. government agency at September 30, 2009 was $8.5 billion, or 88.2% of the
carrying value of total MBS classified as held-to-maturity. The comparable carrying value of GSE
issued MBS at December 31, 2008 was $7.6 billion, or 81.3% of total MBS classified as
held-to-maturity. The carrying value (amortized cost less non-credit component of OTTI) of
privately issued mortgage- and asset-backed securities at September 30, 2009 and December 31, 2008
was $1.2 billion and $1.7 billion. Privately issued MBS primarily included asset-backed
securities, mortgage pass-throughs and Real Estate Mortgage Investment Conduit bonds, and
securities supported by manufactured housing loans.
Certificates of deposits Investments in certificates of deposit are also classified as
held-to-maturity. All such investments mature within one year. The amortized cost basis of
certificates of deposit was $2.0 billion at September 30, 2009 and $1.2 billion at December 31,
2008.
State and local housing finance agency bonds Investments in primary public and private
placements of taxable obligations of state and local housing finance authorities (HFA) were
classified as held-to-maturity and the amortized cost basis was $791.2 million and $804.1 million
at September 30, 2009 and December 31, 2008.
Impairment analysis of GSE issued securities The FHLBNY evaluates its individual securities
issued by Fannie Mae and Freddie Mac or a government agency by considering the creditworthiness and
performance of the debt securities and the strength of the GSEs guarantees of the securities.
Based on the Banks analysis, GSE and agency issued securities are performing in accordance with
their contractual agreements. The Housing Act contains provisions allowing the U.S. Treasury to
provide support to Fannie Mae and Freddie Mac. In September 2008, the U.S. Treasury and the
Finance Agency placed Fannie Mae and Freddie Mac into conservatorship in an attempt to stabilize
their financial conditions and their ability to support the secondary mortgage market. The FHLBNY
believes that it will recover its investments in GSE and agency issued securities given the current
levels of collateral and credit enhancements and guarantees that exist to protect the investments.
Impairment analysis of held-to-maturity non-agency private-label mortgage- and
asset-backed securities (PLMBS) To assess whether the entire amortized cost bases of the Banks
private-label MBS will be recovered, the Bank performed cash flow analysis for one hundred percent
of the FHLBNYs private-label MBS outstanding at September 30, 2009, including private-label MBS that were
determined to be other-than-temporarily impaired in a previous reporting period.
Based on the results of its cash flow analyses, the FHLBNY determined that it was likely that it
will not fully recover the amortized cost of ten of its private-label MBS and,
accordingly, these securities were deemed to be OTTI at September 30, 2009. The impaired
securities included seven securities, with total unpaid principal balance of $124.7 million at
September 30, 2009, that had previously been identified as OTTI and three securities,
with total unpaid principal balance of $72.5 million at September 30, 2009, that were
determined to be OTTI as of September 30, 2009. The cash flow analysis compared the present value
of the cash flows expected to be collected from the ten securities to the securities
amortized cost bases. The difference, the credit loss of $3.7 million, was recorded as a charge to
current year third quarter earnings. The non-credit component of OTTI associated with the
impairment in the third quarter was $26.5 million and was recorded as a loss in Accumulated other
comprehensive income (loss). In all fifteen securities have been deemed OTTI through the current
year third quarter. Thirteen impaired securities are insured by bond insurers, Ambac and MBIA.
The Banks analysis of the two bond insurers concluded that future credit losses due to projected
collateral shortfalls of the impaired securities would not be fully supported by the two bond
insurers.
23
The cumulative credit impairment expenses recorded through earnings year-to-date September 30, 2009
was $14.3 million as a charge to earnings recorded in Other income (loss). The non-credit
component of OTTI recorded in Accumulated other comprehensive income through the third quarter was
$103.9 million. The Bank did not experience any OTTI during 2008 or 2007.
At December 31, 2008, the FHLBNYs screening and monitoring process, which included pricing, credit rating and credit enhancement coverage, had identified 21 private-label MBS with
weak performance measures indicating the possibility of OTTI. Bonds selected through the screening
process were cash flow tested for credit impairment. Fourteen of the securities were determined to
be impaired absent bond insurer support to meet scheduled cash flows in the future. The remaining
securities were considered to be only temporarily impaired based on cash flow analysis. Based on
financial analysis of the bond insurers it was deemed that Ambac and MBIA had the ability to meet
future claims, and the fourteen bonds were determined to be also temporarily impaired at December
31, 2008.
In the first and second quarters of 2009, the FHLBNY also employed its screening procedures and
identified private-label MBS with weaker performance measures. Bonds selected through the
screening process were cash flow tested for credit impairment. Certain insured bonds that were
determined to be credit impaired at December 31, 2008 absent insurer support were determined to be
OTTI because of deteriorating financial conditions of MBIA and Ambac. First MBIA and then Ambac
was downgraded and released financial information and results that the FHLBNYs views resulted in
the shortening of the bond insurance support period, a quantitative measure under the FHLBNYs bond
insurer analysis methodology. With the incremental shortening of the insurance support period of a
credit impaired bond starting with the first quarter of 2009 because of deteriorating financial
conditions at Ambac and MBIA, the FHLBNY recognized larger amounts of cash flow shortfalls at each
of the quarters for certain insured bonds. Certain uninsured bonds were determined to be credit
impaired also based on cash flow testing for credit impairment in the second and third quarters of
2009. Observed historical performance parameters of certain securities have deteriorated in 2009,
and these factors have increased loss severities in the cash flow analyses of those private-label
MBS.
The projected cash flows were based on a number of assumptions and expectations, and the results of
these models can vary significantly with changes in assumptions and expectations. The scenario of
cash flows determined reflected the FHLBNYs best estimate scenario.
24
The table below summarizes the key characteristics of the 15 OTTI securities at September 30, 2009
(dollars in thousands):
|
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|
|
September 30, 2009 |
|
|
|
|
|
|
|
Insurer MBIA |
|
|
Insurer
Ambac |
|
|
Uninsured |
|
|
OTTI |
|
|
Gross OTTI Losses |
|
Security |
|
|
|
|
|
|
|
|
|
Fair |
|
|
|
|
|
|
Fair |
|
|
|
|
|
|
Fair |
|
|
Credit |
|
|
Non-credit |
|
|
Less than |
|
|
More than |
|
Classification |
|
Count |
|
|
UPB |
|
|
Value |
|
|
UPB |
|
|
Value |
|
|
UPB |
|
|
Value |
|
|
Loss |
|
|
Loss |
|
|
12 months |
|
|
12 months |
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
RMBS-Prime* |
|
|
1 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
56,867 |
|
|
$ |
54,687 |
|
|
$ |
(438 |
) |
|
$ |
(2,766 |
) |
|
$ |
(3,204 |
) |
|
$ |
|
|
HEL Subprime* |
|
|
14 |
|
|
|
35,616 |
|
|
|
20,653 |
|
|
|
181,995 |
|
|
|
117,651 |
|
|
|
62,461 |
|
|
|
38,392 |
|
|
|
(13,838 |
) |
|
|
(101,118 |
) |
|
|
|
|
|
|
(114,956 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
15 |
|
|
$ |
35,616 |
|
|
$ |
20,653 |
|
|
$ |
181,995 |
|
|
$ |
117,651 |
|
|
$ |
119,328 |
|
|
$ |
93,079 |
|
|
$ |
(14,276 |
) |
|
$ |
(103,884 |
) |
|
$ |
(3,204 |
) |
|
$ |
(114,956 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
RMBS-Prime Private-label MBS supported by prime residential loans; HEL Subprime MBS supported by home equity loans. |
The table below summarizes the key characteristics of the securities that were deemed OTTI in
the third quarter of 2009 (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Q3 2009 activity |
|
|
|
|
|
|
|
Insurer MBIA |
|
|
Insurer
Ambac |
|
|
Uninsured |
|
|
OTTI |
|
|
Gross OTTI Losses |
|
Security |
|
|
|
|
|
|
|
|
|
Fair |
|
|
|
|
|
|
Fair |
|
|
|
|
|
|
Fair |
|
|
Credit |
|
|
Non-credit |
|
|
Less than |
|
|
More than |
|
Classification |
|
Count |
|
|
UPB |
|
|
Value |
|
|
UPB |
|
|
Value |
|
|
UPB |
|
|
Value |
|
|
Loss |
|
|
Loss |
|
|
12 months |
|
|
12 months |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RMBS-Prime* |
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
HEL Subprime* |
|
|
10 |
|
|
|
13,304 |
|
|
|
7,680 |
|
|
|
121,435 |
|
|
|
79,700 |
|
|
|
62,460 |
|
|
|
38,392 |
|
|
|
(3,683 |
) |
|
|
(26,486 |
) |
|
|
|
|
|
|
(30,169 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
10 |
|
|
$ |
13,304 |
|
|
$ |
7,680 |
|
|
$ |
121,435 |
|
|
$ |
79,700 |
|
|
$ |
62,460 |
|
|
$ |
38,392 |
|
|
$ |
(3,683 |
) |
|
$ |
(26,486 |
) |
|
|
|
|
|
$ |
(30,169 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
RMBS-Prime Private-label MBS supported by prime residential loans; HEL Subprime MBS supported by home equity loans. |
The table below summarizes the weighted average and range of Key Base Assumptions at September
30, 2009 for all 15 securities that were deemed OTTI through the third quarter of 2009
(dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Key Base Assumption - OTTI Securities |
|
|
|
|
|
|
|
CDR |
|
|
CPR |
|
|
Loss Severity % |
|
|
|
Count |
|
|
Average |
|
|
Range |
|
|
Average |
|
|
Range |
|
|
Average |
|
|
Range |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prime-RMBS* |
|
|
1 |
|
|
|
22.2 |
|
|
|
22.2 |
|
|
|
2.0 |
|
|
|
2.0 |
|
|
|
40.0 |
|
|
|
40.0 |
|
HEL-Subprime* |
|
|
14 |
|
|
|
7.3 |
|
|
|
14.62-2 |
|
|
|
6.9 |
|
|
|
15.03-3.21 |
|
|
|
90.0 |
|
|
|
110-70.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
15 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
RMBS-Prime Private-label MBS supported by prime residential loans; |
|
|
|
HEL Subprime MBS supported by home equity loans. |
Conditional Prepayment Rate(CPR): 1-((1-SMM^12) where, SMM is defined as the Single Monthly
Mortality (SMM) = (Voluntary partial and full prepayments + repurchases + Liquidated
Balances)/Beginning Principal Balance Scheduled Principal). Voluntary prepayment excludes the
liquidated balances mentioned above.
Conditional Default Rate (CDR): 1-((1-MDR)^12) where, MDR is defined as the Monthly Default
Rate (MDR) = (Beginning Principal Balance of Liquidated Loans)/(Total Beginning Principal
Balance).
Loss Severity* (Principal and interest in the current period) = Sum (Total Realized Loss
Amount)/Sum (Beginning Principal and interest Balance of Liquidated Loans).
|
|
|
* |
|
If the present value of cash flows expected to be collected (discounted at the securitys
effective yield) is less than the amortized cost basis of the security, an other-than-temporary
impairment is considered to have occurred because the entire amortized cost basis of the security
will not be recovered. The Bank considers whether or not it will recover the entire amortized cost
of the security by comparing the present value of the cash flows expected to be collected from the
security (discounted at the securitys effective yield) with the amortized cost basis of the
security. |
Monoline support Thirteen insured securities have been identified as credit impaired despite
credit protection from Ambac and MBIA to meet scheduled payments in the future. Cash flows on
certain insured securities are currently experiencing cash flow shortfalls. Ambac and MBIA are
currently paying claims in order to meet current cash flow deficiency within the structure of the
securities. Of the thirteen insured securities determined to be OTTI, eleven are insured by Ambac Assurance Corp (Ambac) and
two by MBIA Insurance Corp (MBIA). Two OTTI securities, a triple-A and a double-B rated
security, are uninsured.
25
Monoline Analysis and Methodology The two monoline insurers have been subject to adverse ratings,
rating downgrades, and weakening financial performance measures. Rating downgrade implies an
increased risk that the insurer will fail to fulfill its obligations to reimburse the investor for
claims under the insurance policies. Monoline insurers are segmented into two categories of claims
paying ability (1) Adequate, and (2) At Risk. These categories represent an assessment of an
insurers ability to perform as a financial guarantor.
Adequate. Monolines determined to possess adequate claims paying ability are expected to provide
full protection on their insured private-label mortgage-backed securities. Accordingly, bonds
insured by monolines with adequate ability to cover written insurance are run with full financial
guarantee set to on in the cashflow model.
At Risk. For monolines with at risk coverage, further analysis is performed to establish an
expected case regarding the time horizon of the monolines ability to fulfill its financial
obligations and provide credit support. Accordingly, bonds insured by monolines in the at risk
category are run with a partial financial guarantee in the cashflow model. This partial claim
paying condition is expressed in the cashflow model by specifying a guarantee ignore date. The
ignore date is based on the burnout period calculation method.
Burnout Period. The projected time horizon of credit protection provided by an insurer is a
function of claim paying resources and anticipated claims in the future. This assumption is
referred to as the burnout period and is expressed in months, and is computed by dividing each
(a) insurers total claims paying resources by the (b) burnout rate projection. This variable
uses monthly or aggregate dollar amount of claims each insurer has paid most recently, and
additional qualitative information pertinent to the financial guarantor.
Based on the methodology, the Bank has classified FSA as adequate, and MBIA and Ambac as at risk.
The Bank analyzed the going-concern basis of Ambac and MBIA and their financial strength to
perform with respect to their contractual obligations for the securities owned by the FHLBNY; the
monolines are currently performing under the terms of their contractual agreements with respect to
the FHLBNYs insured bonds. However, estimation of an insurers financial strength to remain
viable over a long time horizon requires significant judgment and assumptions. Predicting when the
insurers may no longer have the ability to perform under their contractual agreements, then
comparing the timing and amounts of cash flow shortfalls of securities that are credit impaired to
when insurer protection may not be available, and determining credit impairment is judgmental.
26
The monoline analysis methodology resulted in the following Protection time horizon dates for
Ambac and MBIA:
|
|
|
|
|
|
|
|
|
|
|
Protection time horizon calculation |
|
|
|
Ambac |
|
|
MBIA |
|
|
|
|
|
|
|
|
|
|
Burnout period (months) |
|
|
83 |
|
|
|
31 |
|
Coverage ignore date |
|
|
7/31/2016 |
|
|
|
3/31/2012 |
|
Number of OTTI securities |
|
|
11 |
|
|
|
2 |
|
With respect to the Banks remaining investments, the Bank believes no OTTI exists. The
Banks conclusion is based upon multiple factors: bond issuers continued satisfaction of their
obligations under the contractual terms of the securities; the estimated performance of the
underlying collateral; the evaluation of the fundamentals of the issuers financial condition; and
the estimated support from the monoline insurers under the contractual terms of insurance.
Management has not made a decision to sell such securities at September 30, 2009. Management has
also concluded that it is more likely than not that it will not be required to sell such securities
before recovery of the amortized cost basis of the securities. Based on factors outlined above,
the FHLBNY believes that the remaining securities classified as held-to-maturity were not
other-than-temporarily impaired as of September 30, 2009.
However, without recovery in the near term such that liquidity returns to the mortgage-backed
securities market and spreads return to levels that reflect underlying credit characteristics, or
if the credit losses of the underlying collateral within the mortgage-backed securities perform
worse than expected, or if the presumption of the ability of monoline insurers to support the
insured securities identified at September 30, 2009 as dependent on insurance is negatively
impacted by the insurers future financial performance, additional OTTI may be recognized in future
periods.
The following table provides rollforward information of the credit component of OTTI recognized as
a charge to earnings related to held-to-maturity securities for which a significant portion of the
OTTI (non-credit component) was recognized in Accumulated other comprehensive income (loss) (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
Nine months ended |
|
|
|
September 30, |
|
|
September 30, |
|
|
September 30, |
|
|
September 30, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
Beginning balance |
|
$ |
10,593 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions to the credit component
for OTTI loss not previously recognized |
|
|
1,459 |
|
|
|
|
|
|
|
14,276 |
|
|
|
|
|
Additional credit losses for which an OTTI
charge was previously recognized |
|
|
2,224 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Increases in cash flows expected to be collected,
recognized over the remaining life of
the securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance |
|
$ |
14,276 |
|
|
$ |
|
|
|
$ |
14,276 |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27
Major Security Types
Amortized cost basis, as defined under the recently issued guidance on recognition and presentation
of other-than-temporary impairment, includes adjustments made to the cost of an investment for
accretion, amortization, collection of cash, and fair value hedge accounting adjustments. If a
held-to-maturity security is determined to be OTTI, the amortized cost basis of the security is
adjusted for previous OTTI recognized in earnings. Amortized cost basis of a held-to-maturity OTTI
security is further adjusted for impairment related to all other factors (also referred to as the
non-credit component of OTTI) recognized in Accumulated other comprehensive income (loss), and the
adjusted amortized cost basis is the carrying value of the OTTI security reported in the Statements
of Condition. Carrying value of a held-to-maturity security that is not OTTI is its amortized cost
basis.
The amortized cost basis, the gross unrealized gains and losses, the fair values of
held-to-maturity securities, and OTTI recognized in Accumulated other comprehensive income were as
follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2009 |
|
|
|
Amortized |
|
|
|
|
|
|
|
|
|
|
Gross |
|
|
Gross |
|
|
|
|
|
|
Cost |
|
|
OTTI |
|
|
Carrying |
|
|
Unrecognized |
|
|
Unrecognized |
|
|
Fair |
|
Issued, guaranteed or insured |
|
Basis |
|
|
in OCI |
|
|
Value |
|
|
Holding Gains |
|
|
Holding Losses |
|
|
Value |
|
Pools of Mortgages |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae |
|
$ |
1,194,202 |
|
|
$ |
|
|
|
$ |
1,194,202 |
|
|
$ |
47,563 |
|
|
$ |
|
|
|
$ |
1,241,765 |
|
Freddie Mac |
|
|
354,212 |
|
|
|
|
|
|
|
354,212 |
|
|
|
15,657 |
|
|
|
|
|
|
|
369,869 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total pools of mortgages |
|
|
1,548,414 |
|
|
|
|
|
|
|
1,548,414 |
|
|
|
63,220 |
|
|
|
|
|
|
|
1,611,634 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collateralized Mortgage Obligations/Real
Estate Mortgage Investment Conduits |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae |
|
|
2,370,747 |
|
|
|
|
|
|
|
2,370,747 |
|
|
|
70,184 |
|
|
|
(4,176 |
) |
|
|
2,436,755 |
|
Freddie Mac |
|
|
4,384,624 |
|
|
|
|
|
|
|
4,384,624 |
|
|
|
132,871 |
|
|
|
(7,914 |
) |
|
|
4,509,581 |
|
Ginnie Mae |
|
|
187,470 |
|
|
|
|
|
|
|
187,470 |
|
|
|
148 |
|
|
|
(1,432 |
) |
|
|
186,186 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total CMOs/REMICs |
|
|
6,942,841 |
|
|
|
|
|
|
|
6,942,841 |
|
|
|
203,203 |
|
|
|
(13,522 |
) |
|
|
7,132,522 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ginnie Mae-CMBS |
|
|
49,706 |
|
|
|
|
|
|
|
49,706 |
|
|
|
263 |
|
|
|
|
|
|
|
49,969 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GSE MBS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CMOs/REMICs |
|
|
485,419 |
|
|
|
(2,545 |
) |
|
|
482,874 |
|
|
|
2,533 |
|
|
|
(10,732 |
) |
|
|
474,675 |
|
Commercial mortgage-backed securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-federal-agency MBS |
|
|
485,419 |
|
|
|
(2,545 |
) |
|
|
482,874 |
|
|
|
2,533 |
|
|
|
(10,732 |
) |
|
|
474,675 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset-Backed Securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Manufactured housing (insured) |
|
|
208,544 |
|
|
|
|
|
|
|
208,544 |
|
|
|
|
|
|
|
(46,536 |
) |
|
|
162,008 |
|
Home equity loans (insured) |
|
|
324,833 |
|
|
|
(74,915 |
) |
|
|
249,918 |
|
|
|
8,515 |
|
|
|
(34,559 |
) |
|
|
223,874 |
|
Home equity loans (uninsured) |
|
|
227,546 |
|
|
|
(23,003 |
) |
|
|
204,543 |
|
|
|
|
|
|
|
(44,662 |
) |
|
|
159,881 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total asset-backed securities |
|
|
760,923 |
|
|
|
(97,918 |
) |
|
|
663,005 |
|
|
|
8,515 |
|
|
|
(125,757 |
) |
|
|
545,763 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total mortgage-backed securities |
|
$ |
9,787,303 |
|
|
$ |
(100,463 |
) |
|
$ |
9,686,840 |
|
|
$ |
277,734 |
|
|
$ |
(150,011 |
) |
|
$ |
9,814,563 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
State and local housing finance
agency obligations |
|
|
791,187 |
|
|
|
|
|
|
|
791,187 |
|
|
|
5,325 |
|
|
|
(14,527 |
) |
|
|
781,985 |
|
Certificates of deposit |
|
|
2,000,000 |
|
|
|
|
|
|
|
2,000,000 |
|
|
|
3 |
|
|
|
|
|
|
|
2,000,003 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other |
|
$ |
2,791,187 |
|
|
$ |
|
|
|
$ |
2,791,187 |
|
|
$ |
5,328 |
|
|
$ |
(14,527 |
) |
|
$ |
2,781,988 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2008 |
|
|
|
Amortized |
|
|
Gross |
|
|
Gross |
|
|
|
|
|
|
Cost |
|
|
Unrealized |
|
|
Unrealized |
|
|
Fair |
|
Issued, guaranteed or insured |
|
Basis |
|
|
Holding Gains |
|
|
Holding Losses |
|
|
Value |
|
Pools of Mortgages |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae |
|
$ |
1,400,058 |
|
|
$ |
26,789 |
|
|
$ |
|
|
|
$ |
1,426,847 |
|
Freddie Mac |
|
|
422,088 |
|
|
|
7,860 |
|
|
|
|
|
|
|
429,948 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total pools of mortgages |
|
|
1,822,146 |
|
|
|
34,649 |
|
|
|
|
|
|
|
1,856,795 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collateralized Mortgage Obligations/Real
Estate Mortgage Investment Conduits |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae |
|
|
2,032,051 |
|
|
|
51,138 |
|
|
|
(125 |
) |
|
|
2,083,064 |
|
Freddie Mac |
|
|
3,722,840 |
|
|
|
101,595 |
|
|
|
(30 |
) |
|
|
3,824,405 |
|
Ginnie Mae |
|
|
6,325 |
|
|
|
|
|
|
|
(187 |
) |
|
|
6,138 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total CMOs/REMICs |
|
|
5,761,216 |
|
|
|
152,733 |
|
|
|
(342 |
) |
|
|
5,913,607 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ginnie Mae-CMBS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GSE MBS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CMOs/REMICs |
|
|
609,907 |
|
|
|
|
|
|
|
(42,706 |
) |
|
|
567,201 |
|
Commercial mortgage-backed securities |
|
|
266,994 |
|
|
|
149 |
|
|
|
(127 |
) |
|
|
267,016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-federal-agency MBS |
|
|
876,901 |
|
|
|
149 |
|
|
|
(42,833 |
) |
|
|
834,217 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset-Backed Securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Manufactured housing (insured) |
|
|
229,714 |
|
|
|
|
|
|
|
(75,418 |
) |
|
|
154,296 |
|
Home equity loans (insured) |
|
|
376,587 |
|
|
|
|
|
|
|
(144,957 |
) |
|
|
231,630 |
|
Home equity loans (uninsured) |
|
|
259,879 |
|
|
|
|
|
|
|
(79,112 |
) |
|
|
180,767 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total asset-backed securities |
|
|
866,180 |
|
|
|
|
|
|
|
(299,487 |
) |
|
|
566,693 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total mortgage-backed securities |
|
$ |
9,326,443 |
|
|
$ |
187,531 |
|
|
$ |
(342,662 |
) |
|
$ |
9,171,312 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
State and local housing finance
agency obligations |
|
|
804,100 |
|
|
|
6,573 |
|
|
|
(47,512 |
) |
|
|
763,161 |
|
Certificates of deposit |
|
|
1,203,000 |
|
|
|
328 |
|
|
|
|
|
|
|
1,203,328 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other |
|
$ |
2,007,100 |
|
|
$ |
6,901 |
|
|
$ |
(47,512 |
) |
|
$ |
1,996,489 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29
Unrealized Losses
The following tables summarize held-to-maturity securities with fair values below their amortized
cost basis. The fair values and gross unrealized holding losses are aggregated by major security
type and by the length of time individual securities have been in a continuous unrealized loss
position. (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2009 |
|
|
|
Less than 12 months |
|
|
12 months or more |
|
|
Total |
|
|
|
Estimated |
|
|
Unrealized |
|
|
Estimated |
|
|
Unrealized |
|
|
Estimated |
|
|
Unrealized |
|
|
|
Fair Value |
|
|
Losses |
|
|
Fair Value |
|
|
Losses |
|
|
Fair Value |
|
|
Losses |
|
Non-MBS Investment Securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
State and local
housing agency
obligations |
|
$ |
254,366 |
|
|
$ |
(14,527 |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
254,366 |
|
|
$ |
(14,527 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Non-MBS |
|
|
254,366 |
|
|
|
(14,527 |
) |
|
|
|
|
|
|
|
|
|
|
254,366 |
|
|
|
(14,527 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MBS Investment Securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MBS Other US Obligations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ginnie Mae |
|
|
136,455 |
|
|
|
(1,415 |
) |
|
|
2,789 |
|
|
|
(17 |
) |
|
|
139,244 |
|
|
|
(1,432 |
) |
MBS-GSE |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae |
|
|
771,784 |
|
|
|
(4,171 |
) |
|
|
2,869 |
|
|
|
(5 |
) |
|
|
774,653 |
|
|
|
(4,176 |
) |
Freddie Mac |
|
|
1,384,438 |
|
|
|
(7,914 |
) |
|
|
|
|
|
|
|
|
|
|
1,384,438 |
|
|
|
(7,914 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total MBS-GSE |
|
|
2,156,222 |
|
|
|
(12,085 |
) |
|
|
2,869 |
|
|
|
(5 |
) |
|
|
2,159,091 |
|
|
|
(12,090 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MBS-Private-Label |
|
|
54,687 |
|
|
|
(367 |
) |
|
|
932,366 |
|
|
|
(225,892 |
) |
|
|
987,053 |
|
|
|
(226,259 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total MBS |
|
|
2,347,364 |
|
|
|
(13,867 |
) |
|
|
938,024 |
|
|
|
(225,914 |
) |
|
|
3,285,388 |
|
|
|
(239,781 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
2,601,730 |
|
|
$ |
(28,394 |
) |
|
$ |
938,024 |
|
|
$ |
(225,914 |
) |
|
$ |
3,539,754 |
|
|
$ |
(254,308 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2008 |
|
|
|
Less than 12 months |
|
|
12 months or more |
|
|
Total |
|
|
|
Estimated |
|
|
Unrealized |
|
|
Estimated |
|
|
Unrealized |
|
|
Estimated |
|
|
Unrealized |
|
|
|
Fair Value |
|
|
Losses |
|
|
Fair Value |
|
|
Losses |
|
|
Fair Value |
|
|
Losses |
|
Non-MBS Investment Securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
State and local
housing agency
obligations |
|
$ |
78,261 |
|
|
$ |
(16,065 |
) |
|
$ |
84,108 |
|
|
$ |
(31,447 |
) |
|
$ |
162,369 |
|
|
$ |
(47,512 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Non-MBS |
|
|
78,261 |
|
|
|
(16,065 |
) |
|
|
84,108 |
|
|
|
(31,447 |
) |
|
|
162,369 |
|
|
|
(47,512 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MBS Investment Securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MBS Other US Obligations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ginnie Mae |
|
|
6,137 |
|
|
|
(187 |
) |
|
|
|
|
|
|
|
|
|
|
6,137 |
|
|
|
(187 |
) |
MBS-GSE |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae |
|
|
3,452 |
|
|
|
(125 |
) |
|
|
|
|
|
|
|
|
|
|
3,452 |
|
|
|
(125 |
) |
Freddie Mac |
|
|
1,102 |
|
|
|
(30 |
) |
|
|
32 |
|
|
|
|
|
|
|
1,134 |
|
|
|
(30 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total MBS-GSE |
|
|
4,554 |
|
|
|
(155 |
) |
|
|
32 |
|
|
|
|
|
|
|
4,586 |
|
|
|
(155 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MBS-Private-Label |
|
|
509,273 |
|
|
|
(115,061 |
) |
|
|
718,321 |
|
|
|
(227,259 |
) |
|
|
1,227,594 |
|
|
|
(342,320 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total MBS |
|
|
519,964 |
|
|
|
(115,403 |
) |
|
|
718,353 |
|
|
|
(227,259 |
) |
|
|
1,238,317 |
|
|
|
(342,662 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
598,225 |
|
|
$ |
(131,468 |
) |
|
$ |
802,461 |
|
|
$ |
(258,706 |
) |
|
$ |
1,400,686 |
|
|
$ |
(390,174 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30
Note 5. Available-for-sale securities
Impairment analysis on Available-for-sale securities The Banks portfolio of mortgage-backed
securities classified as available-for-sale (AFS) is comprised entirely of securities issued by
GSEs collateralized mortgage obligations which are pass through securities. The FHLBNY evaluates
its individual securities issued by Fannie Mae and Freddie Mac by considering the creditworthiness
and performance of the debt securities and the strength of the government-sponsored enterprises
guarantees of the securities. Based on the Banks analysis, GSE securities are performing in
accordance with their contractual agreements. The Housing Act contains provisions allowing the
U.S. Treasury to provide support to Fannie Mae and Freddie Mac. The U.S. Treasury and the Finance
Agency placed Fannie Mae and Freddie Mac into conservatorship in an attempt to stabilize their
financial conditions and their ability to support the secondary mortgage market. The FHLBNY
believes that it will recover its investments in GSE issued securities given the current levels of
collateral, credit enhancements and guarantees that exist to protect the investments. Management
has not made a decision to sell such securities at September 30, 2009. Management also concluded
that it is more likely than not that it will not be required to sell such securities before
recovery of the amortized cost basis of the security. The FHLBNY believes that these securities
were not other-than-temporarily impaired as of September 30, 2009 and December 31, 2008. The Bank
established certain grantor trusts to fund current and future payments under certain supplemental
pension plans and these are classified as available-for-sale. The grantor trusts invest in money
market and bond funds. Investments in equity and fixed-income funds are redeemable at short
notice, and realized gains and losses from investments in the funds were not significant. No
available-for-sale-securities had been pledged at September 30, 2009 and December 31, 2008.
The amortized cost basis, gross unrealized gains, losses, and the fair value of investments
classified as available-for-sale were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2009 |
|
|
|
Amortized |
|
|
Gross |
|
|
Gross |
|
|
|
|
|
|
Cost |
|
|
Unrealized |
|
|
Unrealized |
|
|
Fair |
|
|
|
Basis |
|
|
Gains |
|
|
Losses |
|
|
Value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash equivalents |
|
$ |
1,272 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
1,272 |
|
Equity funds |
|
|
9,445 |
|
|
|
43 |
|
|
|
(1,984 |
) |
|
|
7,504 |
|
Fixed income funds |
|
|
3,253 |
|
|
|
255 |
|
|
|
|
|
|
|
3,508 |
|
Mortgage-backed securities |
|
|
2,364,707 |
|
|
|
4,329 |
|
|
|
(18,728 |
) |
|
|
2,350,308 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
2,378,677 |
|
|
$ |
4,627 |
|
|
$ |
(20,712 |
) |
|
$ |
2,362,592 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2008 |
|
|
|
Amortized |
|
|
Gross |
|
|
Gross |
|
|
|
|
|
|
Cost |
|
|
Unrealized |
|
|
Unrealized |
|
|
Fair |
|
|
|
Basis |
|
|
Gains |
|
|
Losses |
|
|
Value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash equivalents |
|
$ |
836 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
836 |
|
Equity funds |
|
|
8,978 |
|
|
|
|
|
|
|
(3,516 |
) |
|
|
5,462 |
|
Fixed income funds |
|
|
3,833 |
|
|
|
66 |
|
|
|
(10 |
) |
|
|
3,889 |
|
Mortgage-backed securities |
|
|
2,912,642 |
|
|
|
364 |
|
|
|
(61,324 |
) |
|
|
2,851,682 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
2,926,289 |
|
|
$ |
430 |
|
|
$ |
(64,850 |
) |
|
$ |
2,861,869 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
There were no AFS mortgage-backed securities supported by commercial loans at September 30, 2009
and December 31, 2008.
31
Unrealized Losses Available-for-sale securities (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2009 |
|
|
|
Less than 12 months |
|
|
12 months or more |
|
|
Total |
|
|
|
Estimated |
|
|
Unrealized |
|
|
Estimated |
|
|
Unrealized |
|
|
Estimated |
|
|
Unrealized |
|
|
|
Fair Value |
|
|
Losses |
|
|
Fair Value |
|
|
Losses |
|
|
Fair Value |
|
|
Losses |
|
Mortgage-backed securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MBS-GSE |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae |
|
$ |
144,044 |
|
|
$ |
(327 |
) |
|
$ |
1,059,185 |
|
|
$ |
(12,230 |
) |
|
$ |
1,203,229 |
|
|
$ |
(12,557 |
) |
Freddie Mac |
|
|
|
|
|
|
|
|
|
|
689,462 |
|
|
|
(6,171 |
) |
|
|
689,462 |
|
|
|
(6,171 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total MBS-GSE |
|
|
144,044 |
|
|
|
(327 |
) |
|
|
1,748,647 |
|
|
|
(18,401 |
) |
|
|
1,892,691 |
|
|
|
(18,728 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Temporarily Impaired |
|
$ |
144,044 |
|
|
$ |
(327 |
) |
|
$ |
1,748,647 |
|
|
$ |
(18,401 |
) |
|
$ |
1,892,691 |
|
|
$ |
(18,728 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2008 |
|
|
|
Less than 12 months |
|
|
12 months or more |
|
|
Total |
|
|
|
Estimated |
|
|
Unrealized |
|
|
Estimated |
|
|
Unrealized |
|
|
Estimated |
|
|
Unrealized |
|
|
|
Fair Value |
|
|
Losses |
|
|
Fair Value |
|
|
Losses |
|
|
Fair Value |
|
|
Losses |
|
Mortgage-backed securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MBS-GSE |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae |
|
$ |
1,662,928 |
|
|
$ |
(35,047 |
) |
|
$ |
142,630 |
|
|
$ |
(3,539 |
) |
|
$ |
1,805,558 |
|
|
$ |
(38,586 |
) |
Freddie Mac |
|
|
957,617 |
|
|
|
(21,744 |
) |
|
|
39,077 |
|
|
|
(994 |
) |
|
|
996,694 |
|
|
|
(22,738 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total MBS-GSE |
|
|
2,620,545 |
|
|
|
(56,791 |
) |
|
|
181,707 |
|
|
|
(4,533 |
) |
|
|
2,802,252 |
|
|
|
(61,324 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Temporarily Impaired |
|
$ |
2,620,545 |
|
|
$ |
(56,791 |
) |
|
$ |
181,707 |
|
|
$ |
(4,533 |
) |
|
$ |
2,802,252 |
|
|
$ |
(61,324 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes: Does not include unrealized losses of $2.0 million and $3.5 million at September 30, 2009
and December 31, 2008 in several grantor trusts comprising of money market and mutual funds.
Amortized cost of available-for-sale securities includes adjustments made to the cost basis of
an investment for accretion, amortization, collection of cash, previous OTTI recognized in
earnings and/or fair value hedge accounting adjustments. There were no AFS securities
determined to be OTTI at September 30, 2009. No securities were hedged at September 30, 2009.
Gross unrealized losses at September 30, 2009 and December 31, 2008 were caused by interest rate
changes, credit spread widening and reduced liquidity in the applicable markets. The FHLBNY has
reviewed the investment security holdings and determined, based on creditworthiness of the
securities and including any underlying collateral and/or insurance provisions of the security,
that unrealized losses in the analysis above represent temporary impairment.
32
Note 6. Advances
Redemption terms
Contractual redemption terms and yields of advances were as follows (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2009 |
|
|
December 31, 2008 |
|
|
|
|
|
|
|
Weighted 2 |
|
|
|
|
|
|
|
|
|
|
Weighted 2 |
|
|
|
|
|
|
|
|
|
|
Average |
|
|
Percentage |
|
|
|
|
|
|
Average |
|
|
Percentage |
|
|
|
Amount |
|
|
Yield |
|
|
of Total |
|
|
Amount |
|
|
Yield |
|
|
of Total |
|
|
Overdrawn demand deposit accounts |
|
$ |
|
|
|
|
|
% |
|
|
|
% |
|
$ |
|
|
|
|
|
% |
|
|
|
% |
Due in one year or less |
|
|
20,222,153 |
|
|
|
1.98 |
|
|
|
22.08 |
|
|
|
32,420,095 |
|
|
|
2.52 |
|
|
|
31.36 |
|
Due after one year through two years |
|
|
15,572,319 |
|
|
|
3.00 |
|
|
|
17.00 |
|
|
|
16,150,121 |
|
|
|
3.71 |
|
|
|
15.62 |
|
Due after two years through three years |
|
|
8,933,691 |
|
|
|
2.99 |
|
|
|
9.75 |
|
|
|
7,634,680 |
|
|
|
3.76 |
|
|
|
7.39 |
|
Due after three years through four years |
|
|
6,604,702 |
|
|
|
3.20 |
|
|
|
7.21 |
|
|
|
6,852,514 |
|
|
|
3.74 |
|
|
|
6.63 |
|
Due after four years through five years |
|
|
3,565,489 |
|
|
|
3.38 |
|
|
|
3.89 |
|
|
|
3,210,575 |
|
|
|
3.88 |
|
|
|
3.11 |
|
Due after five years through six years |
|
|
1,787,448 |
|
|
|
3.77 |
|
|
|
1.95 |
|
|
|
836,689 |
|
|
|
3.74 |
|
|
|
0.81 |
|
Thereafter |
|
|
34,916,207 |
|
|
|
3.80 |
|
|
|
38.12 |
|
|
|
36,275,053 |
|
|
|
3.96 |
|
|
|
35.08 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total par value |
|
|
91,602,009 |
|
|
|
3.12 |
% |
|
|
100.00 |
% |
|
|
103,379,727 |
|
|
|
3.44 |
% |
|
|
100.00 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount on AHP advances 1 |
|
|
(275 |
) |
|
|
|
|
|
|
|
|
|
|
(330 |
) |
|
|
|
|
|
|
|
|
Hedging adjustments 1 |
|
|
4,342,998 |
|
|
|
|
|
|
|
|
|
|
|
5,773,479 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
95,944,732 |
|
|
|
|
|
|
|
|
|
|
$ |
109,152,876 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 |
|
Discounts on AHP advances were amortized to interest income using the level-yield method and were not significant for all periods reported. Interest rates on AHP advances ranged from 1.25% to 4.00% at September 30, 2009 and 1.25% to 6.04% at December 31, 2008. |
|
2 |
|
The weighed average yield is the weighted average coupon
rates for advances, unadjusted for swaps. For floating-rate advances, the weighted average rate is the rate outstanding
at the reporting dates. |
The following summarizes advances by year of maturity or next call date (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2009 |
|
|
December 31, 2008 |
|
|
|
|
|
|
|
Percentage of |
|
|
|
|
|
|
Percentage of |
|
|
|
Amount |
|
|
Total |
|
|
Amount |
|
|
Total |
|
|
Overdrawn demand deposit accounts |
|
$ |
|
|
|
|
|
% |
|
$ |
|
|
|
|
|
% |
Due or putable in one year or less |
|
|
53,090,265 |
|
|
|
57.96 |
|
|
|
63,251,007 |
|
|
|
61.18 |
|
Due or putable after one year through two years |
|
|
18,689,569 |
|
|
|
20.40 |
|
|
|
18,975,821 |
|
|
|
18.36 |
|
Due or putable after two years through three years |
|
|
8,427,941 |
|
|
|
9.20 |
|
|
|
10,867,530 |
|
|
|
10.51 |
|
Due or putable after three years through four years |
|
|
5,838,402 |
|
|
|
6.37 |
|
|
|
5,293,364 |
|
|
|
5.12 |
|
Due or putable after four years through five years |
|
|
3,085,989 |
|
|
|
3.37 |
|
|
|
2,728,075 |
|
|
|
2.64 |
|
Due or putable after five years through six years |
|
|
156,448 |
|
|
|
0.17 |
|
|
|
230,189 |
|
|
|
0.22 |
|
Thereafter |
|
|
2,313,395 |
|
|
|
2.53 |
|
|
|
2,033,741 |
|
|
|
1.97 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total par value |
|
|
91,602,009 |
|
|
|
100.00 |
% |
|
|
103,379,727 |
|
|
|
100.00 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount on AHP advances |
|
|
(275 |
) |
|
|
|
|
|
|
(330 |
) |
|
|
|
|
Hedging adjustments |
|
|
4,342,998 |
|
|
|
|
|
|
|
5,773,479 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
95,944,732 |
|
|
|
|
|
|
$ |
109,152,876 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
33
Note 7. Mortgage loans held-for-portfolio
Mortgage Partnership Finance program, (MPF) constitutes the majority of the mortgage loans
held-for-portfolio. The MPF program involves investment by the FHLBNY in mortgage loans that are
purchased from or originated through its participating financial institutions (PFIs). The
members retain servicing rights and may credit-enhance the portion of the loans participated to the
FHLBNY. No intermediary trust is involved.
The following table presents information on mortgage loans held-for-portfolio (dollars in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2009 |
|
|
December 31, 2008 |
|
|
|
|
|
|
|
Percentage of |
|
|
|
|
|
|
Percentage of |
|
|
|
Amount |
|
|
Total |
|
|
Amount |
|
|
Total |
|
Real Estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed medium-term single-family mortgages |
|
$ |
406,055 |
|
|
|
30.38 |
% |
|
$ |
467,845 |
|
|
|
32.15 |
% |
Fixed long-term single-family mortgages |
|
|
926,537 |
|
|
|
69.32 |
|
|
|
983,493 |
|
|
|
67.58 |
|
Multi-family mortgages |
|
|
3,934 |
|
|
|
0.30 |
|
|
|
4,009 |
|
|
|
0.27 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total par value |
|
|
1,336,526 |
|
|
|
100.00 |
% |
|
|
1,455,347 |
|
|
|
100.00 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unamortized premiums |
|
|
9,257 |
|
|
|
|
|
|
|
10,662 |
|
|
|
|
|
Unamortized discounts |
|
|
(5,641 |
) |
|
|
|
|
|
|
(6,310 |
) |
|
|
|
|
Basis adjustment 1 |
|
|
(556 |
) |
|
|
|
|
|
|
(408 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total mortgage loans held-for-portfolio |
|
|
1,339,586 |
|
|
|
|
|
|
|
1,459,291 |
|
|
|
|
|
Allowance for credit losses |
|
|
(3,358 |
) |
|
|
|
|
|
|
(1,406 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total mortgage loans held-for-portfolio after
allowance for credit losses |
|
$ |
1,336,228 |
|
|
|
|
|
|
$ |
1,457,885 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 |
|
Represents fair value basis of open and closed delivery commitments. |
The FHLBNY and its members share the credit risk of MPF loans by structuring potential credit
losses into layers (See Significant Accounting Policies and Estimates in Note 1 in the Banks most
recent Form 10-K filed on March 27, 2009). The first layer is typically 100 basis points but
varies with the particular MPF program. The amount of the first layer, or First Loss Account
(FLA), was estimated as $14.0 million and $13.8 million at September 30, 2009 and December 31,
2008. The FLA is not recorded or reported as a reserve for loan losses as it serves as a
memorandum information account. The FHLBNY is responsible for absorbing the first layer. The
second layer is that amount of credit obligation that the Participating Financial Institution
(PFI) has taken on which will equate the loan to a double-A rating. The FHLBNY pays a Credit
Enhancement fee to the PFI for taking on this obligation. The FHLBNY assumes all residual risk.
Credit Enhancement fees accrued were $0.4 million for the third quarters of 2009 and 2008, and $1.2
million and $1.3 million for the nine months ended September 30, 2009 and 2008. The fees were
reported as a reduction to mortgage loan interest income. The amount of charge-offs in each period
reported was insignificant and it was not necessary for the FHLBNY to recoup any losses from the
PFIs.
34
The following provides rollforward analysis of the allowance for credit losses (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30, |
|
|
Nine months ended September 30, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance |
|
$ |
2,760 |
|
|
$ |
879 |
|
|
$ |
1,406 |
|
|
$ |
633 |
|
Charge-offs |
|
|
|
|
|
|
(4 |
) |
|
|
(14 |
) |
|
|
(4 |
) |
Provision for credit losses on mortgage loans |
|
|
598 |
|
|
|
(31 |
) |
|
|
1,966 |
|
|
|
215 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance |
|
$ |
3,358 |
|
|
$ |
844 |
|
|
$ |
3,358 |
|
|
$ |
844 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The First Loss Account (FLA) memorializes the first tier of credit exposure and is neither an
indication of inherent losses in the loan portfolio nor a loan loss reserve.
As of September 30, 2009 and December 31, 2008, the FHLBNY had $13.0 million and $4.8 million of
non-accrual loans. The estimated fair value of the mortgage loans as of September 30, 2009 and
December 31, 2008 are reported in Note 16 Fair Values of Financial Instruments. Mortgage loans
are considered impaired when, based on current information and events, it is probable that the
FHLBNY will be unable to collect all principal and interest amounts due according to the
contractual terms of the mortgage loan agreements.
The following table summarizes mortgage loans held-for-portfolio, all Veterans Administrations
insured loans, past due 90 days or more and still accruing interest (in thousands):
|
|
|
|
|
|
|
|
|
|
|
September 30, 2009 |
|
|
December 31, 2008 |
|
|
|
|
|
|
|
|
|
|
Secured by 1-4 family |
|
$ |
698 |
|
|
$ |
507 |
|
|
|
|
|
|
|
|
Note 8. Consolidated obligations
Consolidated obligations are the joint and several obligations of the FHLBanks and consist of bonds
and discount notes. The FHLBanks issue consolidated obligations through the Office of Finance as
their fiscal agent. Consolidated bonds are issued primarily to raise intermediate- and long-term
funds for the FHLBanks and are not subject to any statutory or regulatory limits on maturity.
Consolidated discount notes are issued primarily to raise short-term funds. Discount notes sell at
less than their face amount and are redeemed at par value when they mature.
The Finance Agency, at its discretion, may require any FHLBank to make principal or interest
payments due on any consolidated obligations. Although it has never occurred, to the extent that
an FHLBank would make a payment on a consolidated obligation on behalf of another FHLBank, the
paying FHLBank would be entitled to reimbursement from the non-complying FHLBank. However, if the
Finance Agency determines that the non-complying FHLBank is unable to satisfy its obligations, then
the Finance Agency may allocate the outstanding liability among the remaining FHLBanks on a pro
rata basis in proportion to each FHLBanks participation in all consolidated obligations
outstanding, or on any other basis the Finance Agency may determine.
Based on managements review, the FHLBNY has no reason to record actual or contingent liabilities
with respect to the occurrence of events or circumstances that would require the FHLBNY to assume
an obligation on behalf of other FHLBanks. The par amounts of the FHLBanks outstanding
consolidated obligations, including consolidated obligations held by other FHLBanks, were approximately $1.0
trillion and $1.3 trillion as of September 30, 2009 and December 31, 2008.
Finance Agency regulations require the FHLBanks to maintain, in the aggregate, unpledged qualifying
assets equal to the consolidated obligations outstanding. Qualifying assets are defined as cash;
secured advances; assets with an assessment or rating at least equivalent to the current assessment
or rating of the consolidated obligations; obligations, participations, mortgages, or other
securities of or issued by the United States or an agency of the United States; and securities in
which fiduciary and trust funds may invest under the laws of the state in which the FHLBank is
located.
35
The FHLBNY met the qualifying unpledged asset requirements in each of the period ends in this
report as follows:
|
|
|
|
|
|
|
|
|
|
|
September 30, 2009 |
|
|
December 31, 2008 |
|
|
|
|
|
|
|
|
|
|
Percentage of unpledged qualifying assets to consolidated obligations |
|
|
109 |
% |
|
|
107 |
% |
|
|
|
|
|
|
|
General Terms
Consolidated obligations are issued with either fixed- or variable-rate coupon payment terms that
use a variety of indices for interest rate resets. These indices include the London Interbank
Offered Rate (LIBOR), Constant Maturity Treasury (CMT), 11th District Cost of Funds Index
(COFI), and others. In addition, to meet the expected specific needs of certain investors in
consolidated obligations, both fixed- and variable-rate bonds may also contain certain features
that may result in complex coupon payment terms and call options. When such consolidated
obligations are issued, the FHLBNY may enter into derivatives containing offsetting features that
effectively convert the terms of the bond to those of a simple variable- or fixed-rate bond.
These consolidated obligations, beyond having fixed-rate or simple variable-rate coupon payment
terms, may also include Optional Principal Redemption Bonds (callable bonds) that the FHLBNY may
redeem in whole or in part at its discretion on predetermined call dates, according to the terms of
the bond offerings.
With respect to interest payment terms, consolidated bonds may also have step-up, or step-down
terms. Step-up bonds generally pay interest at increasing fixed rates for specified intervals over
the life of the bond. Step-down bonds pay interest at decreasing fixed rates. These bonds
generally contain provisions enabling the FHLBNY to call the bonds at its option on predetermined
exercise dates at par.
36
The following summarizes consolidated obligations issued by the FHLBNY and outstanding at September
30, 2009 and December 31, 2008 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
September 30, 2009 |
|
|
December 31, 2008 |
|
|
Consolidated obligation bonds-amortized cost |
|
$ |
68,849,386 |
|
|
$ |
80,978,383 |
|
Fair value basis adjustments |
|
|
817,374 |
|
|
|
1,254,523 |
|
Fair value basis on terminated hedges |
|
|
3,108 |
|
|
|
7,857 |
|
Fair value option valuation adjustments and accrued interest |
|
|
968 |
|
|
|
15,942 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Consolidated obligation-bonds |
|
$ |
69,670,836 |
|
|
$ |
82,256,705 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount notes-amortized cost |
|
$ |
38,385,244 |
|
|
$ |
46,329,545 |
|
Fair value basis adjustments |
|
|
|
|
|
|
361 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Consolidated obligation-discount notes |
|
$ |
38,385,244 |
|
|
$ |
46,329,906 |
|
|
|
|
|
|
|
|
Redemption Terms of consolidated obligation bonds
The following is a summary of consolidated bonds outstanding by year of maturity (dollars in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2009 |
|
|
December 31, 2008 |
|
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
|
|
|
|
Average |
|
|
Percentage |
|
|
|
|
|
|
Average |
|
|
Percentage |
|
Maturity |
|
Amount |
|
|
Rate 1 |
|
|
of total |
|
|
Amount |
|
|
Rate 1 |
|
|
of total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One year or less |
|
$ |
35,806,100 |
|
|
|
1.36 |
% |
|
|
52.06 |
% |
|
$ |
49,568,550 |
|
|
|
1.93 |
% |
|
|
61.23 |
% |
Over one year through two years |
|
|
19,296,100 |
|
|
|
2.00 |
|
|
|
28.06 |
|
|
|
16,192,550 |
|
|
|
3.20 |
|
|
|
20.00 |
|
Over two years through three years |
|
|
5,434,495 |
|
|
|
2.59 |
|
|
|
7.90 |
|
|
|
5,299,700 |
|
|
|
3.73 |
|
|
|
6.55 |
|
Over three years through four years |
|
|
2,956,730 |
|
|
|
4.05 |
|
|
|
4.30 |
|
|
|
2,469,575 |
|
|
|
4.75 |
|
|
|
3.05 |
|
Over four years through five years |
|
|
1,943,800 |
|
|
|
4.13 |
|
|
|
2.82 |
|
|
|
3,352,450 |
|
|
|
3.99 |
|
|
|
4.14 |
|
Over five years through six years |
|
|
1,224,850 |
|
|
|
4.94 |
|
|
|
1.78 |
|
|
|
989,300 |
|
|
|
5.06 |
|
|
|
1.22 |
|
Thereafter |
|
|
2,110,200 |
|
|
|
5.30 |
|
|
|
3.08 |
|
|
|
3,082,050 |
|
|
|
5.35 |
|
|
|
3.81 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total par value |
|
|
68,772,275 |
|
|
|
2.01 |
% |
|
|
100.00 |
% |
|
|
80,954,175 |
|
|
|
2.64 |
% |
|
|
100.00 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bond premiums |
|
|
112,091 |
|
|
|
|
|
|
|
|
|
|
|
63,737 |
|
|
|
|
|
|
|
|
|
Bond discounts |
|
|
(34,980 |
) |
|
|
|
|
|
|
|
|
|
|
(39,529 |
) |
|
|
|
|
|
|
|
|
Fair value basis adjustments |
|
|
817,374 |
|
|
|
|
|
|
|
|
|
|
|
1,254,523 |
|
|
|
|
|
|
|
|
|
Fair value basis adjustments on terminated hedges |
|
|
3,108 |
|
|
|
|
|
|
|
|
|
|
|
7,857 |
|
|
|
|
|
|
|
|
|
Fair value option valuation adjustments and accrued interest |
|
|
968 |
|
|
|
|
|
|
|
|
|
|
|
15,942 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total bonds |
|
$ |
69,670,836 |
|
|
|
|
|
|
|
|
|
|
$ |
82,256,705 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 |
|
Weighted average rate represents the weighted average coupons of bonds, unadjusted for swaps. The weighted average coupon of bonds outstanding at September 30, 2009 and December 31, 2008, represent contractual coupons payable to investors. |
37
The following summarizes bonds outstanding by year of maturity or next call date (dollars in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2009 |
|
|
December 31, 2008 |
|
|
|
|
|
|
|
Percentage of |
|
|
|
|
|
|
Percentage of |
|
|
|
Amount |
|
|
total |
|
|
Amount |
|
|
total |
|
Year of Maturity or next call date |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Due or callable in one year or less |
|
$ |
41,328,100 |
|
|
|
60.09 |
% |
|
$ |
53,034,550 |
|
|
|
65.51 |
% |
Due or callable after one year through two years |
|
|
16,921,400 |
|
|
|
24.61 |
|
|
|
15,472,350 |
|
|
|
19.11 |
|
Due or callable after two years through three years |
|
|
3,389,495 |
|
|
|
4.93 |
|
|
|
4,843,700 |
|
|
|
5.98 |
|
Due or callable after three years through four years |
|
|
2,696,730 |
|
|
|
3.92 |
|
|
|
1,445,575 |
|
|
|
1.79 |
|
Due or callable after four years through five years |
|
|
1,326,800 |
|
|
|
1.93 |
|
|
|
2,954,450 |
|
|
|
3.65 |
|
Due or callable after five years through six years |
|
|
1,114,850 |
|
|
|
1.62 |
|
|
|
684,800 |
|
|
|
0.85 |
|
Thereafter |
|
|
1,994,900 |
|
|
|
2.90 |
|
|
|
2,518,750 |
|
|
|
3.11 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total par value |
|
|
68,772,275 |
|
|
|
100.00 |
% |
|
|
80,954,175 |
|
|
|
100.00 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bond premiums |
|
|
112,091 |
|
|
|
|
|
|
|
63,737 |
|
|
|
|
|
Bond discounts |
|
|
(34,980 |
) |
|
|
|
|
|
|
(39,529 |
) |
|
|
|
|
Fair value basis adjustments |
|
|
817,374 |
|
|
|
|
|
|
|
1,254,523 |
|
|
|
|
|
Fair value basis adjustments on terminated hedges |
|
|
3,108 |
|
|
|
|
|
|
|
7,857 |
|
|
|
|
|
Fair value option valuation adjustments and accrued interest |
|
|
968 |
|
|
|
|
|
|
|
15,942 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total bonds |
|
$ |
69,670,836 |
|
|
|
|
|
|
$ |
82,256,705 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount notes
Consolidated discount notes are issued to raise short-term funds. Discount notes are consolidated
obligations with original maturities up to one year. These notes are issued at less than their
face amount and redeemed at par when they mature. The FHLBNYs outstanding consolidated discount
notes were as follows (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
September 30, 2009 |
|
|
December 31, 2008 |
|
|
Par value |
|
$ |
38,406,688 |
|
|
$ |
46,431,347 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortized cost |
|
$ |
38,385,244 |
|
|
$ |
46,329,545 |
|
Fair value basis
adjustments |
|
|
|
|
|
|
361 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
38,385,244 |
|
|
$ |
46,329,906 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
interest rate |
|
|
0.26 |
% |
|
|
1.00 |
% |
|
|
|
|
|
|
|
Note 9. Deposits
The FHLBNY accepts demand, overnight and term deposits from its members. A member that services
mortgage loans may deposit in the FHLBNY funds collected in connection with the mortgage loans,
pending disbursement of such funds to the owners of the mortgage loans.
The following table summarizes term deposits (in thousands):
|
|
|
|
|
|
|
|
|
|
|
September 30, 2009 |
|
|
December 31, 2008 |
|
|
Due in one year or less |
|
$ |
15,600 |
|
|
$ |
117,400 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total term deposits |
|
$ |
15,600 |
|
|
$ |
117,400 |
|
|
|
|
|
|
|
|
38
Note 10. Affordable Housing Program and REFCORP
The FHLBank Act requires each FHLBank to establish an AHP. Each FHLBank provides subsidies in the
form of direct grants and below-market interest rate advances to members who use the funds to
assist the purchase, construction, or rehabilitation of housing for very low-, low-, and
moderate-income households. Annually, the FHLBanks must set aside for the AHP the greater of $100
million or 10% of regulatory income. The FHLBNY charges the amount set aside for AHP to income and
recognizes it as a liability. The FHLBNY relieves the AHP liability as members use the subsidies.
If the result of the aggregate 10% calculation described above is less than $100 million for all
twelve FHLBanks, then the FHLBank Act requires the shortfall to be allocated among the FHLBanks
based on the ratio of each FHLBanks income before AHP and REFCORP to the sum of the income before
AHP and REFCORP of the twelve FHLBanks. There was no shortfall during the current or prior period
quarters.
Regulatory income is income before assessments, and before interest expense related to mandatorily
redeemable capital stock under the accounting guidance for certain financial instruments with
characteristics of both liabilities and equity, but after the assessment for REFCORP. The
exclusion of interest expense related to mandatorily redeemable capital stock is a regulatory
interpretation. The AHP and REFCORP assessments are calculated simultaneously because of their
interdependence on each other. Each FHLBank accrues this expense monthly based on its income
before assessments. An FHLBank reduces its AHP liability as members use subsidies.
The following provides rollforward information with respect to changes in Affordable Housing
Program liabilities (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30, |
|
|
Nine months ended September 30, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance |
|
$ |
140,037 |
|
|
$ |
124,170 |
|
|
$ |
122,449 |
|
|
$ |
119,052 |
|
Additions from current periods assessments |
|
|
15,780 |
|
|
|
4,638 |
|
|
|
53,363 |
|
|
|
24,764 |
|
Net disbursements for grants and programs |
|
|
(10,995 |
) |
|
|
(6,433 |
) |
|
|
(30,990 |
) |
|
|
(21,441 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance |
|
$ |
144,822 |
|
|
$ |
122,375 |
|
|
$ |
144,822 |
|
|
$ |
122,375 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Each FHLBank is required to pay to REFCORP 20 percent of income calculated in accordance with GAAP
after the assessment for AHP, but before the assessment for REFCORP. REFCORP has been designated
as the calculation agent for AHP and REFCORP assessments. Each FHLBank provides its net income
before AHP and REFCORP to REFCORP, which then performs the calculations for each quarter end.
39
Note 11. Capital, Capital Ratios, and Mandatorily Redeemable Capital Stock
The FHLBanks, including the FHLBNY, have a cooperative structure. To access FHLBNYs products and
services, a financial institution must be approved for membership and purchase capital stock in
FHLBNY. The members stock requirement is generally based on its use of FHLBNY products, subject
to a minimum membership requirement, as prescribed by the FHLBank Act and the FHLBNY Capital Plan.
FHLBNY stock can be issued, exchanged, redeemed and repurchased only at its stated par value of
$100 per share. It is not publicly traded. An option to redeem capital stock that is greater than
a members minimum requirement is held by both the member and the FHLBNY.
The FHLBNY offers two sub-classes of Class B capital stock, Class B1 and Class B2. Class B1 stock
is issued to meet membership stock purchase requirements. Class B2 stock is issued to meet
activity-based requirements. The FHLBNY requires member institutions to maintain Class B1 stock
based on a percentage of the members mortgage-related assets, and Class B2 stock-based on a
percentage of advances and acquired member assets outstanding and certain commitments outstanding
with the FHLBNY. Class B1 and Class B2 shares have the same voting and dividend rights.
Any member that withdraws from membership must wait 5 years from the termination of the charter for
all capital stock that is held as a condition of membership unless the institution has cancelled
its notice of withdrawal prior to that date and before being readmitted to membership in any
FHLBank. Commencing in 2008, the Bank at its discretion, may repay a non-members membership stock
before expiration of the five-year waiting period1.
The FHLBNY is subject to risk-based capital rules. Specifically, the FHLBNY is subject to three
capital requirements. First, the FHLBNY must maintain at all times permanent capital in an amount
at least equal to the sum of its credit, market, and operations risks capital requirements
calculated in accordance with the FHLBNY policy and the rules and regulations of the Federal
Housing Finance Agency (Finance Agency). Only permanent capital, defined as Class B stock and
retained earnings, satisfies this risk-based capital requirement. The Finance Agency may require
the FHLBNY to maintain a greater amount of permanent capital than is required as defined by the
risk-based capital requirements. In addition, the FHLBNY is required to maintain at least a 4%
total capital-to-asset ratio and at least a 5% leverage ratio at all times. The leverage ratio is
defined as the sum of permanent capital weighted 1.5 times plus allowance for loan loss reserves
and nonpermanent capital weighted 1.0 times plus allowance for loan loss reserves divided by total
assets. The FHLBNY was in compliance with the capital rules and requirements for all periods
reported.
|
|
|
1 |
|
On December 12, 2007 the Finance Board, the predecessor of the Finance Agency, approved amendments
to the FHLBNYs capital plan, which allow the FHLBNY to recalculate the membership stock purchase
requirement any time after 30 days subsequent to a merger. The amendments also permit the FHLBNY
to use a zero mortgage asset base in performing the calculation, which recognizes the fact that the
corporate entity that was once its member no longer exists. As a result of these amendments, the
FHLBNY could determine that all of the membership stock formerly held by the member would become
excess stock, which would give the FHLBNY the discretion, but not the obligation, to repurchase
that stock prior to the expiration of the five-year notice period. |
40
Capital Ratios
The following table summarizes the Banks risk-based capital ratios (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2009 |
|
|
December 31, 2008 |
|
|
|
Required 4 |
|
|
Actual |
|
|
Required 4 |
|
|
Actual |
|
Regulatory capital requirements: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Risk-based capital1 |
|
$ |
558,940 |
|
|
$ |
5,936,273 |
|
|
$ |
650,333 |
|
|
$ |
6,111,676 |
|
Total capital-to-asset ratio |
|
|
4.00 |
% |
|
|
5.05 |
% |
|
|
4.00 |
% |
|
|
4.44 |
% |
Total capital2 |
|
$ |
4,704,173 |
|
|
$ |
5,939,631 |
|
|
$ |
5,501,596 |
|
|
$ |
6,113,082 |
|
Leverage ratio |
|
|
5.00 |
% |
|
|
7.57 |
% |
|
|
5.00 |
% |
|
|
6.67 |
% |
Leverage capital3 |
|
$ |
5,880,216 |
|
|
$ |
8,907,767 |
|
|
$ |
6,876,995 |
|
|
$ |
9,168,920 |
|
|
|
|
1 |
|
Actual Risk-based capital is capital stock and retained earnings plus mandatorily redeemable capital stock. Section 932.2 of the Finance Agencys regulations also refers to this amount as Permanent Capital. |
|
2 |
|
Required Total capital is 4% of total assets. Actual Total capital is Actual Risk-based capital plus allowance for credit losses. Does not include reserves for the Lehman Brothers receivable which is a specific reserve. |
|
3 |
|
Actual Leverage capital is Risk-based capital times 1.5 plus allowance for loan losses. |
|
4 |
|
Required minimum. |
Mandatorily Redeemable Capital Stock
Generally, the FHLBNYs capital stock is redeemable at the option of either the member or the
FHLBNY subject to certain conditions, and is subject to the provisions under the accounting
guidance for certain financial instruments with characteristics of both liabilities and equity.
The FHLBNY is a cooperative whose member financial institutions own almost all of the FHLBNYs
capital stock. Member shares cannot be purchased or sold except between the Bank and its members
at its $100 per share par value. Also, the FHLBNY does not have equity securities that trade in a
public market. Future filings with the SEC will not be in anticipation of the sale of equity
securities in a public market as the FHLBNY is prohibited by law from doing so, and the FHLBNY is
not controlled by an entity that has equity securities traded or contemplated to be traded in a
public market. Therefore, the FHLBNY is a nonpublic entity based on the definition given in the
accounting guidance for certain financial instruments with characteristics of both liabilities and
equity. In addition, although the FHLBNY is a nonpublic entity, the FHLBanks issue consolidated
obligations that are traded in the public market. Based on this factor, the FHLBNY complies with
the provisions of the accounting guidance for certain financial instruments with characteristics
of both liabilities and equity as a nonpublic SEC registrant.
41
In accordance with the accounting guidance for certain financial instruments with characteristics
of both liabilities and equity, the FHLBNY reclassifies the stock subject to redemption from equity
to a liability once a member: irrevocably exercises a written redemption right; gives notice of
intent to withdraw from membership; or attains non-member status by merger or acquisition, charter
termination, or involuntary termination from membership. Under such circumstances, the member
shares will then meet the definition of a mandatorily redeemable financial instrument and are
reclassified to a liability at fair value. Dividends on member shares classified as a liability in
the Statements of Condition and an offset in the Statements of Income as an interest expense. The
repayment of these mandatorily redeemable financial instruments, once settled, is reflected as
financing cash outflows in the Statements of Cash Flows. In compliance with this provision,
dividends on mandatorily redeemable capital stock in the amounts of $1.8 million and $2.0 million
for the three months ended September 30, 2009 and 2008, and $5.5 million and $8.9 million for the
nine months ended September 30, 2009 and 2008 were recorded as interest expense.
If a member cancels its notice of voluntary withdrawal, the FHLBNY will reclassify the mandatorily
redeemable capital stock from a liability to equity. After the reclassification, dividends on the
capital stock will no longer be classified as interest expense.
At September 30, 2009 and December 31, 2008, mandatorily redeemable capital stock of $127.9 million
and $143.1 million were held by former members who had attained non-member status by virtue of
being acquired by non-members. A small number of members had also become non-members by relocating
their charters to outside the FHLBNYs membership district.
Anticipated redemptions of mandatorily redeemable capital stock were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
September 30, 2009 |
|
|
December 31, 2008 |
|
|
|
|
|
|
|
|
|
|
Redemption less than one year |
|
$ |
82,076 |
|
|
$ |
38,328 |
|
Redemption from one year to less than three years |
|
|
38,724 |
|
|
|
83,159 |
|
Redemption from three years to less than five years |
|
|
2,123 |
|
|
|
14,646 |
|
Redemption after five years or greater |
|
|
4,959 |
|
|
|
6,988 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
127,882 |
|
|
$ |
143,121 |
|
|
|
|
|
|
|
|
Anticipated redemptions assume the Bank will follow its current practice of daily redemption of
capital in excess of the amount required to support advances. Commencing January 1, 2008, the Bank
may also redeem, at its discretion, non-members membership stock.
42
Note 12. Total comprehensive income
Changes in Accumulated other comprehensive income (loss) and total comprehensive income were as
follows for the three and nine months ended September 30, 2009 and 2008 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30, 2009 |
|
|
|
|
|
|
|
|
|
|
|
Accretion of |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
non-credit portion |
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
|
|
|
|
Available- |
|
|
Non-credit |
|
|
of impairment |
|
|
Cash |
|
|
Supplemental |
|
|
Other |
|
|
|
|
|
|
Total |
|
|
|
for-sale |
|
|
OTTI on HTM |
|
|
losses on |
|
|
flow |
|
|
Retirement |
|
|
Comprehensive |
|
|
Net |
|
|
Comprehensive |
|
|
|
securities |
|
|
securities |
|
|
HTM securities |
|
|
hedges |
|
|
Plans |
|
|
Income (Loss) |
|
|
Income |
|
|
Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2008 |
|
$ |
(29,612 |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
(33,698 |
) |
|
$ |
(5,087 |
) |
|
$ |
(68,397 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change |
|
|
(14,713 |
) |
|
|
|
|
|
|
|
|
|
|
1,728 |
|
|
|
|
|
|
|
(12,985 |
) |
|
$ |
39,790 |
|
|
$ |
26,805 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2008 |
|
$ |
(44,325 |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
(31,970 |
) |
|
$ |
(5,087 |
) |
|
$ |
(81,382 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2009 |
|
$ |
(10,129 |
) |
|
$ |
(77,398 |
) |
|
$ |
239 |
|
|
$ |
(26,402 |
) |
|
$ |
(6,550 |
) |
|
$ |
(120,240 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change |
|
|
(5,956 |
) |
|
|
(26,486 |
) |
|
|
3,182 |
|
|
|
1,898 |
|
|
|
|
|
|
|
(27,362 |
) |
|
$ |
140,219 |
|
|
$ |
112,857 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2009 |
|
$ |
(16,085 |
) |
|
$ |
(103,884 |
) |
|
$ |
3,421 |
|
|
$ |
(24,504 |
) |
|
$ |
(6,550 |
) |
|
$ |
(147,602 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended September 30, 2009 |
|
|
|
|
|
|
|
|
|
|
|
Accretion of |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
non-credit portion |
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
|
|
|
|
Available- |
|
|
Non-credit |
|
|
of impairment |
|
|
Cash |
|
|
Supplemental |
|
|
Other |
|
|
|
|
|
|
Total |
|
|
|
for-sale |
|
|
OTTI on HTM |
|
|
losses on |
|
|
flow |
|
|
Retirement |
|
|
Comprehensive |
|
|
Net |
|
|
Comprehensive |
|
|
|
securities |
|
|
securities |
|
|
HTM securities |
|
|
hedges |
|
|
Plans |
|
|
Income (Loss) |
|
|
Income |
|
|
Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2007 |
|
$ |
(373 |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
(30,215 |
) |
|
$ |
(5,087 |
) |
|
$ |
(35,675 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change |
|
|
(43,952 |
) |
|
|
|
|
|
|
|
|
|
|
(1,755 |
) |
|
|
|
|
|
|
(45,707 |
) |
|
$ |
213,996 |
|
|
$ |
168,289 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2008 |
|
$ |
(44,325 |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
(31,970 |
) |
|
$ |
(5,087 |
) |
|
$ |
(81,382 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2008 |
|
$ |
(64,420 |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
(30,191 |
) |
|
$ |
(6,550 |
) |
|
$ |
(101,161 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change |
|
|
48,335 |
|
|
|
(103,884 |
) |
|
|
3,421 |
|
|
|
5,687 |
|
|
|
|
|
|
|
(46,441 |
) |
|
$ |
474,786 |
|
|
$ |
428,345 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2009 |
|
$ |
(16,085 |
) |
|
$ |
(103,884 |
) |
|
$ |
3,421 |
|
|
$ |
(24,504 |
) |
|
$ |
(6,550 |
) |
|
$ |
(147,602 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
43
Note 13. Earnings per share of capital
The following table sets forth the computation of earnings per share (dollars in thousands except
per share amounts):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30, |
|
|
Nine months ended September 30, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
140,219 |
|
|
$ |
39,790 |
|
|
$ |
474,786 |
|
|
$ |
213,996 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available to stockholders |
|
$ |
140,219 |
|
|
$ |
39,790 |
|
|
$ |
474,786 |
|
|
$ |
213,996 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares of capital |
|
|
53,233 |
|
|
|
52,000 |
|
|
|
54,505 |
|
|
|
48,757 |
|
Less: Mandatorily redeemable capital stock |
|
|
(1,280 |
) |
|
|
(1,538 |
) |
|
|
(1,351 |
) |
|
|
(1,742 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Average number of shares of capital used to calculate
earnings per share |
|
|
51,953 |
|
|
|
50,462 |
|
|
|
53,154 |
|
|
|
47,015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings per share of capital |
|
$ |
2.70 |
|
|
$ |
0.79 |
|
|
$ |
8.93 |
|
|
$ |
4.55 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 14. Employee retirement plans
The Bank participates in the Pentegra Defined Benefit Plan for Financial Institutions (DB Plan).
The DB Plan is a tax-qualified multiple-employer defined benefit pension plan that covers all
officers and employees of the Bank. For accounting purposes, the DB Plan is a multi-employer plan
and does not segregate its assets, liabilities, or costs by participating employer. The Bank also
participates in the Pentegra Defined Contribution Plan for Financial Institutions, a tax-qualified
defined contribution plan. The Banks contributions are a matching contribution equal to a
percentage of voluntary employee contributions, subject to certain limitations.
In addition, the Bank maintains a Benefit Equalization Plan (BEP) that restores defined benefits
and contribution benefits to those employees who have had their qualified defined benefit and
defined contribution benefits limited by IRS regulations. The contribution component of the BEP is
a supplemental defined contribution plan. The plans liability consists of the accumulated
compensation deferrals and accrued interest on the deferrals. The BEP is an unfunded plan. The
Bank has established several grantor trusts to meet future benefit obligations and current payments
to beneficiaries in supplemental pension plans. The Bank also offers a Retiree Medical Benefit
Plan, which is a postretirement health benefit plan. There are no funded plan assets that have
been designated to provide postretirement health benefits.
Effective January 1, 2009, the Bank offers a Nonqualified Deferred Compensation Plan to certain
officer employees and to the members of the Board of Directors of the Bank. Participants in the
plan may elect to defer all or a portion of their compensation earned. The deferment period is
generally for a minimum period of five years. Amounts recorded as a liability were de minimis at
September 30, 2009.
44
Retirement Plan Expenses Summary
The following table presents employee retirement plan expenses for the periods ended (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30, |
|
|
Nine months ended September 30, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Defined Benefit Plan |
|
$ |
1,441 |
|
|
$ |
1,556 |
|
|
$ |
4,324 |
|
|
$ |
4,545 |
|
Benefit Equalization Plan (defined benefit) |
|
|
515 |
|
|
|
469 |
|
|
|
1,544 |
|
|
|
1,408 |
|
Defined Contribution Plan and BEP Thrift |
|
|
582 |
|
|
|
162 |
|
|
|
1,366 |
|
|
|
650 |
|
Postretirement Health Benefit Plan |
|
|
251 |
|
|
|
250 |
|
|
|
753 |
|
|
|
749 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total retirement plan expenses |
|
$ |
2,789 |
|
|
$ |
2,437 |
|
|
$ |
7,987 |
|
|
$ |
7,352 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit Equalization Plan (BEP)
The plans liability consisted of the accumulated compensation deferrals and accrued interest on
the deferrals. There were no plan assets that have been designated for the BEP plan.
Components of the net periodic pension cost for the defined benefit component of the BEP, an
unfunded plan, were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30, |
|
|
Nine months ended September 30, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
Service cost |
|
$ |
153 |
|
|
$ |
154 |
|
|
$ |
458 |
|
|
$ |
460 |
|
Interest cost |
|
|
263 |
|
|
|
235 |
|
|
|
789 |
|
|
|
708 |
|
Amortization of unrecognized prior service cost |
|
|
(36 |
) |
|
|
(35 |
) |
|
|
(108 |
) |
|
|
(107 |
) |
Amortization of unrecognized net loss |
|
|
135 |
|
|
|
115 |
|
|
|
405 |
|
|
|
347 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic benefit cost |
|
$ |
515 |
|
|
$ |
469 |
|
|
$ |
1,544 |
|
|
$ |
1,408 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Key assumptions and other information for the actuarial calculations to determine benefit
obligations for the Banks BEP were as follows (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
September 30, 2009 |
|
|
December 31, 2008 |
|
|
|
|
|
|
|
|
|
|
Discount rate * |
|
|
6.14 |
% |
|
|
6.14 |
% |
Salary increases |
|
|
5.50 |
% |
|
|
5.50 |
% |
Amortization period (years) |
|
|
8 |
|
|
|
8 |
|
Benefits paid during the periods |
|
$ |
(544 |
) |
|
$ |
(392 |
) |
|
|
|
* |
|
The discount rate was based on the Citigroup Pension Liability Index at December 31, 2008 and adjusted for durations. |
The total amounts of benefits paid and expected to be paid under this plan are not expected to be
materially different from amount disclosed in the Banks Form 10-K filed on March 27, 2009.
45
Postretirement Health Benefit Plan
The Bank has a postretirement health benefit plan for retirees. Employees over the age of 55 are
eligible provided they have completed ten years of service after age 45.
Components of the net periodic benefit cost for the postretirement health benefit plan were (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30, |
|
|
Nine months ended September 30, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost (benefits attributed to service during the period) |
|
$ |
139 |
|
|
$ |
129 |
|
|
$ |
417 |
|
|
$ |
385 |
|
Interest cost on accumulated postretirement health benefit obligation |
|
|
217 |
|
|
|
225 |
|
|
|
651 |
|
|
|
680 |
|
Amortization of loss |
|
|
78 |
|
|
|
78 |
|
|
|
234 |
|
|
|
232 |
|
Amortization of prior service cost/(credit) |
|
|
(183 |
) |
|
|
(182 |
) |
|
|
(549 |
) |
|
|
(548 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic postretirement health benefit cost |
|
$ |
251 |
|
|
$ |
250 |
|
|
$ |
753 |
|
|
$ |
749 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Key assumptions and other information to determine obligation for the Banks postretirement health
benefit plan were as follows:
|
|
|
|
|
|
|
|
|
|
|
September 30, 2009 |
|
|
December 31, 2008 |
|
|
|
|
|
|
|
|
|
|
Weighted average discount rate
at the end of the year* |
|
|
6.14 |
% |
|
|
6.14 |
% |
|
|
|
|
|
|
|
|
|
Health care cost trend rates: |
|
|
|
|
|
|
|
|
Assumed for next year |
|
|
7.00 |
% |
|
|
7.00 |
% |
Ultimate rate |
|
|
5.00 |
% |
|
|
5.00 |
% |
Year that ultimate rate is reached |
|
|
2011 |
|
|
|
2011 |
|
Alternative amortization methods used to amortize |
|
|
|
|
|
|
Prior service cost |
|
Straight - line |
|
|
Straight - line |
|
Unrecognized net (gain) or loss |
|
Straight - line |
|
|
Straight - line |
|
|
|
|
* |
|
The discount rate was based on the Citigroup Pension Liability Index at December 31, 2008 and adjusted for durations. |
The total amounts of benefits paid and expected to be paid under this plan are not expected to be
materially different from amount disclosed in the Banks Form 10-K filed on March 27, 2009.
Note 15. Derivatives and hedging activities
General The FHLBNY may enter into interest-rate swaps, swaptions, and interest-rate cap and floor
agreements to manage its exposure to changes in interest rates. The FHLBNY may also use
cancellable swaps to potentially adjust the effective maturity, repricing frequency, or option
characteristics of financial instruments to achieve risk management objectives. The FHLBNY uses
derivatives in three ways: by designating them as a fair value or cash flow hedge of an underlying
financial instrument or a forecasted transaction; by acting as an intermediary; or by designating
the derivative as an asset-liability management hedge (i.e., an economic hedge). For example,
the FHLBNY uses derivatives in its overall interest-rate risk management to adjust the
interest-rate sensitivity of consolidated obligations to approximate more closely the interest-rate
sensitivity of assets (both advances and investments), and/or to adjust the interest-rate
sensitivity of advances, investments or mortgage loans to approximate more closely the
interest-rate sensitivity of liabilities. In addition to using derivatives to manage mismatches of
interest rates between assets and liabilities, the FHLBNY also uses derivatives: to manage embedded
options in assets and liabilities; to hedge the market value of existing assets and liabilities and
anticipated transactions; to hedge the duration risk of prepayable instruments; and to reduce
funding costs where possible.
46
In an economic hedge, a derivative hedges specific or non-specific underlying assets, liabilities
or firm commitments, but the hedge does not qualify for hedge accounting under the accounting
standards for derivatives and hedging; it is, however, an acceptable hedging strategy under the
FHLBNYs risk management program. These strategies also comply with the Finance Agencys
regulatory requirements prohibiting speculative use of derivatives. An economic hedge introduces
the potential for earnings variability due to the changes in fair value recorded on the derivatives
that are not offset by corresponding changes in the value of the economically hedged assets,
liabilities, or firm commitments. The FHLBNY will execute an interest rate swap to match the terms
of a asset or liability that is elected under the fair value option (FVO) in accordance with the
accounting standards on the fair value option for financial assets and liabilities. The swap is
designated as an economic hedge to mitigate the volatility of the FVO designated asset or liability
due to change in the full fair value of the designated asset or liability. In the third quarter of
2008 and thereafter, the FHLBNY elected the FVO for certain consolidated obligation bonds and
executed interest rate swaps to offset the fair value changes of the bonds. At September 30, 2009
and December 31, 2008, par amounts of debt designated under the FVO were $2.4 billion and $983.0
million.
The FHLBNY, consistent with Finance Agencys regulations, enters into derivatives to manage the
market risk exposures inherent in otherwise unhedged assets and funding positions. The FHLBNY
utilizes derivatives in the most cost efficient manner and may enter into derivatives as economic
hedges that do not qualify for hedge accounting under the accounting standards for derivatives and
hedging. As a result, when entering into such non-qualified hedges, the FHLBNY recognizes only the
change in fair value of these derivatives in Other income (loss) as a Net realized and unrealized
gain (loss) on derivatives and hedging activities with no offsetting fair value adjustments for the
hedged asset, liability, or firm commitment.
Derivatives and hedging activities
Consolidated Obligations The FHLBNY manages the risk arising from changing market prices and
volatility of a consolidated obligation by matching the cash inflows on the derivative with the
cash outflows on the consolidated obligation. While consolidated obligations are the joint and
several obligations of the FHLBanks, one or more FHLBanks may individually serve as counterparties
to derivative agreements associated with specific debt issues. For instance, in a typical
transaction, fixed-rate consolidated obligations are issued for one or more FHLBanks, and each of
those FHLBanks could enter into an interest rate swap contract in which the counterparty pays to
the FHLBank fixed cash flows designed to mirror in timing and amount the cash outflows the FHLBank
pays on the consolidated obligations. Such transactions are treated as fair value hedges under
the accounting standards for derivatives and hedging.
The issuance of the FHLB fixed-rate bonds to investors and the execution of interest rate swaps
typically result in cash flow pattern in which the FHLBNY has effectively converted the bonds cash
flows to variable cash flows that closely match the interest payments it receives on short-term or
variable-rate advances. From time-to-time, this intermediation between the capital and swap
markets has permitted the FHLBNY to raise funds at a lower cost than would otherwise be available
through the issuance of simple fixed- or floating-rate consolidated obligations in the capital
markets. The FHLBNY does not issue consolidated obligations denominated in currencies other than
U.S. dollars.
47
The FHLBNY has also issued variable-rate consolidated obligations bonds indexed to 1- month LIBOR,
the U.S. Prime rate, or federal funds rate and has simultaneously executed interest-rate swaps to
hedge the basis risk of the variable rate debt to 3-month LIBOR, the Banks preferred funding base.
The interest rate swaps were accounted as economic hedges of the floating-rate bonds.
In the
third quarter of 2008 and thereafter, the FHLBNY had elected the fair value option in
accordance with the accounting standards on the fair value option for financial assets and
liabilities for certain consolidated obligation bonds and these were measured under the provisions
of the accounting standards on fair value measurements and disclosures as of September 30, 2009 and
December 31, 2008.
Advances With a putable advance (also referred to as convertible) borrowed by a member, the
FHLBNY may purchase from the member a put option that enables the FHLBNY to effectively convert an
advance from fixed-rate to floating-rate if interest rates increase, or to terminate the advance
and extend additional credit on new terms. The FHLBNY may hedge a convertible advance by entering
into a cancelable derivative where the FHLBNY pays fixed and receives variable. This type of hedge
is treated as a fair value hedge under the accounting standards for derivatives and hedging. The
swap counterparty can cancel the derivative on the put date, which would normally occur in a rising
rate environment, and the FHLBNY can terminate the advance and extend additional credit on new
terms.
The optionality embedded in certain financial instruments held by the FHLBNY can create interest
rate risk. When a member prepays an advance, the FHLBNY could suffer lower future income if the
principal portion of the prepaid advance were reinvested in lower-yielding assets that continue to
be funded by higher-cost debt. To protect against this risk, the FHLBNY generally charges a
prepayment fee that makes it financially indifferent to a borrowers decision to prepay an advance.
When the Bank offers advances (other than short-term) that members may prepay without a prepayment
fee, it usually finances such advances with callable debt. The Bank has not elected the FVO for
any advances.
Mortgage Loans The FHLBNY invests in mortgage assets. The prepayment options embedded in
mortgage assets can result in extensions or reductions in the expected maturities of these
investments, depending on changes in estimated prepayment speeds. Finance Agency regulations limit
this source of interest-rate risk by restricting the types of mortgage assets the Bank may own to
those with limited average life changes under certain interest-rate shock scenarios and by
establishing limitations on duration of equity and changes in market value of equity. The FHLBNY
may manage against prepayment and duration risk by funding some mortgage assets with consolidated
obligations that have call features. In addition, the FHLBNY may use derivatives to manage the
prepayment and duration variability of mortgage assets. Net income could be reduced if the FHLBNY
replaces the mortgages with lower yielding assets and if the Banks higher funding costs are not
reduced concomitantly.
The FHLBNY manages the interest rate and prepayment risks associated with mortgages through debt
issuance. The FHLBNY issues both callable and non-callable debt to achieve cash flow patterns and
liability durations similar to those expected on the mortgage loans. The FHLBNY analyzes the
duration, convexity and earnings risk of the mortgage portfolio on a regular basis under various
rate scenarios. The Bank has not elected the FVO for any mortgage loans.
Firm Commitment Strategies Mortgage delivery commitments are considered derivatives under the
accounting standards for derivatives and hedging, and the FHLBNY accounts for them as freestanding
derivatives, and records the fair values of mortgage loan delivery commitments on the balance sheet
with an offset to current period earnings. Fair values of the mortgage delivery commitments were
de minimis for all periods reported.
48
The FHLBNY may also hedge a firm commitment for a forward starting advance through the use of an
interest-rate swap. In this case, the swap will function as the hedging instrument for both the
firm commitment and the subsequent advance. The basis movement associated with the firm commitment
will be added to the basis of the advance at the time the commitment is terminated and the advance
is issued. The basis adjustment will then be naturally amortized into interest income over the
life of the advance.
Forward Settlements There were no forward settled securities at September 30, 2009 and
December 31, 2008 that would settle outside the shortest period of time for the settlement of such
securities.
Anticipated Debt Issuance The FHLBNY enters into interest-rate swaps on the anticipated issuance
of debt to lock in a spread between the earning asset and the cost of funding. The swap is
terminated upon issuance of the debt instrument, and amounts reported in Accumulated other
comprehensive income (loss) are reclassified to earnings in the periods in which earnings are
affected by the variability of the cash flows of the debt that was issued.
Intermediation To meet the hedging needs of its members, the FHLBNY acts as an intermediary
between the members and the other counterparties. This intermediation allows smaller members
access to the derivatives market. The derivatives used in intermediary activities do not qualify
for hedge accounting treatment under the accounting standards for derivatives and hedging and are
separately marked-to-market through earnings. The net impact of the accounting for these
derivatives has a de minimis affect on the operating results of the FHLBNY.
Derivative agreements in which the FHLBNY is an intermediary may arise when the FHLBNY: (1) enters
into offsetting derivatives with members and other counterparties to meet the needs of its members,
and (2) enters into derivatives to offset the economic effect of other derivative agreements that
are no longer designated as hedges to either advances, investments, or consolidated obligations.
Collateral with respect to derivatives with member institutions includes collateral assigned to the
FHLBNY as evidenced by a written security agreement and held by the member institution for the
benefit of the FHLBNY.
Economic hedges At September 30, 2009 and December 31, 2008, economic hedges were comprised
primarily of: (1) short- and medium-term interest rate swaps that hedged the basis risk (Prime
rate, Fed fund rate, and the 1-month LIBOR index) of variable-rate bonds issued by the FHLBNY.
These swaps were considered freestanding derivatives. The FHLBNY believes the operational cost of
designating the basis hedges in a qualifying hedge under the accounting standards for derivatives
and hedging would outweigh the benefits of applying hedge accounting. (2) Interest rate caps to
hedge balance sheet risk were considered freestanding derivatives. (3) Interest rate swaps hedging
interest rate risk within the balance sheet. (4) Interest rate swaps that had been accounted under
the provisions of the accounting standards for derivatives and hedging but had been de-designated
from hedge accounting as they were assessed as being not highly effective hedges. (5) Interest
rate swaps executed to offset the fair value changes of bonds designated in accordance with the
accounting standards on the fair value option for financial assets and liabilities. Changes in
fair values of all freestanding derivatives are recorded in Other income as a Net realized and
unrealized gain (loss) from derivatives and hedging activities. The FHLBNY is not a derivatives
dealer and does not trade derivatives for short-term profit.
49
Cash Flow hedges
There were no material amounts for the first, second, or third quarters in 2009 and 2008 that were
reclassified into earnings as a result of the discontinuance of cash flow hedges because it became
probable that the original forecasted transactions would not occur by the end of the originally
specified time period or within a two-month period thereafter. The maximum length of time over
which the Bank typically hedges its exposure to the variability in future cash flows for forecasted
transactions is between three and six months. No cash flow hedges were outstanding at September
30, 2009 and December 31, 2008. The effective portion of the gain or loss on swaps designated and
qualifying as a cash flow hedging instrument is reported as a component of Accumulated other
comprehensive income and reclassified into earnings in the same period during which the hedged
forecasted transaction affects earnings.
Derivative Instruments and Hedging activities
Interest rate swaps, swaptions, and cap and floor agreements (collectively, derivatives) enable the
FHLBNY to manage its exposure to changes in interest rates by adjusting the effective maturity,
repricing frequency, or option characteristics of financial instruments. The FHLBNY, to a limited
extent, also uses interest rate swaps to hedge changes in interest rates prior to debt issuance and
essentially to lock in the FHLBNYs funding cost.
Finance Agency regulations prohibit the speculative use of derivatives. The FHLBNY does not take
speculative positions with derivatives or any other financial instruments, or trade derivatives for
short-term profits. The FHLBNY does not have any special purpose entities or any other types of
off-balance sheet conduits. The FHLBNY established several small grantor trusts related to
employee benefits programs.
The notional amounts of derivatives are not recorded as assets or liabilities in the Statements of
Condition, rather the fair values of all derivatives are recorded as either derivative asset or
derivative liability. Although notional principal is a commonly used measure of volume in the
derivatives market, it is not a meaningful measure of market or credit risk since the notional
amount does not change hands (other than in the case of foreign currency swaps, of which the FHLBNY
has none).
All derivatives are recorded on the Statements of Condition at their estimated fair value and
designated as either fair value or cash flow hedges for qualifying hedges, or as non-qualifying
hedges (economic hedges or customer intermediations) under the accounting standards for derivatives
and hedging. In an economic hedge, the Bank retains or executes derivative contracts, which are
economically effective in reducing interest-rate risk or balance sheet risk. Such derivatives are
designated as economic hedges either because a qualifying hedge is not available, the hedge is not
able to demonstrate that it would be effective on an ongoing basis as a qualifying hedge, or the
cost of a qualifying hedge is not economical. Changes in the fair value of a derivative are
recorded in current period earnings for a fair value hedge, or in Accumulated other comprehensive
income (loss) for the effective portion of fair value changes of a cash flow hedge.
Interest income and interest expense from interest rate swaps used for hedging are reported
together with interest on the instrument being hedged if the swap qualifies for hedge accounting
under the accounting standards for derivatives and hedging. If the swap is designated as an
economic hedge, interest accruals are recorded in Other income (loss) as a Net realized and
unrealized gain (loss) on derivatives and hedging activities.
50
The FHLBNY uses derivatives in three ways: (1) as a fair value or cash flow hedge of an underlying
financial instrument or as a cash flow hedge of a forecasted transaction; (2) as intermediation
hedges to offset derivative positions (e.g., caps) sold to members; and (3) as an economic hedge,
defined as a non-qualifying hedge of an asset or liability and used as an asset/liability
management tool. The FHLBNY uses derivatives to adjust the interest rate sensitivity of
consolidated obligations to more closely approximate the sensitivity of assets or to adjust the
interest rate sensitivity of advances to more closely approximate the sensitivity of liabilities.
In addition, the FHLBNY uses derivatives to: (4) offset embedded options in assets and liabilities,
(5) hedge the market value of existing assets, liabilities, and anticipated transactions; or (6)
reduce funding costs.
The following tables present notional amounts and fair values of derivative instruments as of
September 30, 2009 and December 31, 2008 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2009 |
|
|
|
Notional Amount of |
|
|
Derivative |
|
|
Derivative |
|
|
|
Derivatives |
|
|
Assets |
|
|
Liabilities |
|
Fair value of derivatives instruments |
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives in fair value hedging relationships |
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps |
|
$ |
97,418,662 |
|
|
$ |
1,077,145 |
|
|
$ |
(4,655,105 |
) |
|
|
|
|
|
|
|
|
|
|
Total derivatives in hedging relationships |
|
$ |
97,418,662 |
|
|
$ |
1,077,145 |
|
|
$ |
(4,655,105 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives not designated as hedging instruments |
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps |
|
$ |
32,341,126 |
|
|
$ |
199,206 |
|
|
$ |
(79,515 |
) |
Interest rate caps or floors |
|
|
2,282,000 |
|
|
|
66,637 |
|
|
|
(8,787 |
) |
Mortgage delivery commitments |
|
|
11,843 |
|
|
|
35 |
|
|
|
|
|
Other* |
|
|
2,665,000 |
|
|
|
4,123 |
|
|
|
(652 |
) |
|
|
|
|
|
|
|
|
|
|
Total derivatives not designated as hedging instruments |
|
$ |
37,299,969 |
|
|
$ |
270,001 |
|
|
$ |
(88,954 |
) |
|
|
|
|
|
|
|
|
|
|
Total derivatives before netting and collateral adjustments |
|
$ |
134,718,631 |
|
|
$ |
1,347,146 |
|
|
$ |
(4,744,059 |
) |
|
|
|
|
|
|
|
|
|
|
|
Netting adjustments |
|
|
|
|
|
$ |
(1,338,054 |
) |
|
$ |
1,338,054 |
|
Cash collateral and related accrued interest |
|
|
|
|
|
|
|
|
|
|
2,534,261 |
|
|
|
|
|
|
|
|
|
|
|
|
Total collateral and netting adjustments |
|
|
|
|
|
$ |
(1,338,054 |
) |
|
$ |
3,872,315 |
|
|
|
|
|
|
|
|
|
|
|
|
Total reported on the Statements of Condition |
|
|
|
|
|
$ |
9,092 |
|
|
$ |
(871,744 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*Other: |
|
Comprised of $2.4 billion notional of swaps in economic hedges of debt designated under the FVO, and $0.3 billion swaps
intermediated for members. |
51
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2008 |
|
|
|
Notional Amount of |
|
|
Derivative |
|
|
Derivative |
|
|
|
Derivatives |
|
|
Assets |
|
|
Liabilities |
|
Fair value of derivatives instruments |
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives in fair value hedging relationships |
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps |
|
$ |
84,582,796 |
|
|
$ |
1,640,507 |
|
|
$ |
(6,117,173 |
) |
|
|
|
|
|
|
|
|
|
|
Total derivatives in hedging relationships |
|
$ |
84,582,796 |
|
|
$ |
1,640,507 |
|
|
$ |
(6,117,173 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives not designated as hedging instruments |
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps |
|
$ |
39,691,142 |
|
|
$ |
207,243 |
|
|
$ |
(361,836 |
) |
Interest rate caps or floors |
|
|
2,357,000 |
|
|
|
16,318 |
|
|
|
(8,360 |
) |
Mortgage delivery commitments |
|
|
10,395 |
|
|
|
2 |
|
|
|
(110 |
) |
Other* |
|
|
1,283,000 |
|
|
|
25,558 |
|
|
|
(18,734 |
) |
|
|
|
|
|
|
|
|
|
|
Total derivatives not designated as hedging instruments |
|
$ |
43,341,537 |
|
|
$ |
249,121 |
|
|
$ |
(389,040 |
) |
|
|
|
|
|
|
|
|
|
|
Total derivatives before netting and collateral adjustments |
|
$ |
127,924,333 |
|
|
$ |
1,889,628 |
|
|
$ |
(6,506,213 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Netting adjustments |
|
|
|
|
|
$ |
(1,808,183 |
) |
|
$ |
1,808,183 |
|
Cash collateral and related accrued interest |
|
|
|
|
|
|
(61,209 |
) |
|
|
3,836,370 |
|
|
|
|
|
|
|
|
|
|
|
|
Total collateral and netting adjustments |
|
|
|
|
|
$ |
(1,869,392 |
) |
|
$ |
5,644,553 |
|
|
|
|
|
|
|
|
|
|
|
|
Total reported on the Statements of Condition |
|
|
|
|
|
$ |
20,236 |
|
|
$ |
(861,660 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*Other: |
|
Comprised of $1.0 billion notional of swaps in economic hedges of debt designated under the FVO, and $0.3 billion swaps
intermediated for members. |
52
The following table presents the components of net gains (losses) on derivatives and hedging
activities as presented in the Statements of Income for the three and nine months ended September
30, 2009 and 2008 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
Nine months ended |
|
|
|
September 30, |
|
|
September 30, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
|
|
Gain (Loss) |
|
|
Gain (Loss) |
|
|
Gain (Loss) |
|
|
Gain (Loss) |
|
Derivatives designated as hedging instruments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advances |
|
$ |
182 |
|
|
$ |
5,259 |
|
|
$ |
(5,107 |
) |
|
$ |
3,621 |
|
Consolidated obligations-bonds |
|
|
167 |
|
|
|
6,604 |
|
|
|
18,187 |
|
|
|
2,619 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net gain (loss) related to fair value hedge ineffectiveness |
|
$ |
349 |
|
|
$ |
11,863 |
|
|
$ |
13,080 |
|
|
$ |
6,240 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net gain (loss) related to cash flow hedge ineffectiveness |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
(9 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives not designated as hedging instruments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Economic hedges |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advances |
|
$ |
(1,475 |
) |
|
$ |
(44 |
) |
|
$ |
3,887 |
|
|
$ |
1,066 |
|
Consolidated obligations-bonds |
|
|
28,420 |
|
|
|
(23,375 |
) |
|
|
101,662 |
|
|
|
(41,517 |
) |
Consolidated obligations-discount notes |
|
|
(5,711 |
) |
|
|
(2,829 |
) |
|
|
409 |
|
|
|
(5,723 |
) |
Member intermediation |
|
|
(16 |
) |
|
|
68 |
|
|
|
(189 |
) |
|
|
66 |
|
Balance sheet Macro hedges swaps |
|
|
210 |
|
|
|
19,983 |
|
|
|
2,617 |
|
|
|
19,983 |
|
Accrued interest-swaps |
|
|
18,362 |
|
|
|
(20,745 |
) |
|
|
(37,772 |
) |
|
|
(36,915 |
) |
Accrued interest-intermediation |
|
|
20 |
|
|
|
2 |
|
|
|
64 |
|
|
|
5 |
|
Caps and floors |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advances |
|
|
(305 |
) |
|
|
(578 |
) |
|
|
(1,056 |
) |
|
|
(1,531 |
) |
Balance sheet |
|
|
19,196 |
|
|
|
(7,626 |
) |
|
|
50,613 |
|
|
|
(4,621 |
) |
Accrued interest-options |
|
|
(1,786 |
) |
|
|
(19 |
) |
|
|
(3,731 |
) |
|
|
99 |
|
Mortgage delivery commitments |
|
|
47 |
|
|
|
141 |
|
|
|
(49 |
) |
|
|
17 |
|
Swaps under fair value option |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated obligations-bonds |
|
|
1,549 |
|
|
|
(2,356 |
) |
|
|
(5,825 |
) |
|
|
(2,356 |
) |
Accrued interest on FVO swaps |
|
|
779 |
|
|
|
|
|
|
|
903 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net gain (loss) related to derivatives not designated as hedging instruments |
|
$ |
59,290 |
|
|
$ |
(37,378 |
) |
|
$ |
111,533 |
|
|
$ |
(71,427 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net gain (loss) on derivatives and hedging activities |
|
$ |
59,639 |
|
|
$ |
(25,515 |
) |
|
$ |
124,613 |
|
|
$ |
(65,196 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
53
The following table presents, by type of hedged item, the gains (losses) on derivatives and the
related hedged items in fair value hedging relationships and the impact of those derivatives for
the three months ended September 30, 2009 and 2008 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30, |
|
|
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives on |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives on |
|
|
|
Gain (Loss) on |
|
|
Gain (Loss) on |
|
|
Earnings |
|
|
Net Interest |
|
|
Gain (Loss) on |
|
|
Gain (Loss) on |
|
|
Earnings |
|
|
Net Interest |
|
|
|
Derivative |
|
|
Hedged Item |
|
|
Impact |
|
|
Income |
|
|
Derivative |
|
|
Hedged Item |
|
|
Impact |
|
|
Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives designated
as hedging instruments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advances |
|
$ |
(582,983 |
) |
|
$ |
583,165 |
|
|
$ |
182 |
|
|
$ |
(503,185 |
) |
|
$ |
(335,331 |
) |
|
$ |
340,590 |
|
|
$ |
5,259 |
|
|
$ |
(171,690 |
) |
Consolidated obligations-bonds |
|
|
98,668 |
|
|
|
(98,501 |
) |
|
|
167 |
|
|
|
151,467 |
|
|
|
10,563 |
|
|
|
(3,959 |
) |
|
|
6,604 |
|
|
|
118,620 |
|
Consolidated obligations-notes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value hedges ineffectiveness |
|
$ |
(484,315 |
) |
|
$ |
484,664 |
|
|
$ |
349 |
|
|
$ |
(351,718 |
) |
|
$ |
(324,768 |
) |
|
$ |
336,631 |
|
|
$ |
11,863 |
|
|
$ |
(53,070 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flow hedges ineffectiveness |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives not designated
as hedging instruments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advances |
|
$ |
(1,475 |
) |
|
$ |
|
|
|
$ |
(1,475 |
) |
|
$ |
|
|
|
$ |
(44 |
) |
|
$ |
|
|
|
$ |
(44 |
) |
|
$ |
|
|
Consolidated obligations-bonds |
|
|
28,420 |
|
|
|
|
|
|
|
28,420 |
|
|
|
|
|
|
|
(23,375 |
) |
|
|
|
|
|
|
(23,375 |
) |
|
|
|
|
Consolidated obligations-notes |
|
|
(5,711 |
) |
|
|
|
|
|
|
(5,711 |
) |
|
|
|
|
|
|
(2,829 |
) |
|
|
|
|
|
|
(2,829 |
) |
|
|
|
|
Member intermediation |
|
|
(16 |
) |
|
|
|
|
|
|
(16 |
) |
|
|
|
|
|
|
68 |
|
|
|
|
|
|
|
68 |
|
|
|
|
|
Balance sheet Macro hedges swaps |
|
|
210 |
|
|
|
|
|
|
|
210 |
|
|
|
|
|
|
|
19,983 |
|
|
|
|
|
|
|
19,983 |
|
|
|
|
|
Accrued interest-swaps |
|
|
18,362 |
|
|
|
|
|
|
|
18,362 |
|
|
|
|
|
|
|
(20,745 |
) |
|
|
|
|
|
|
(20,745 |
) |
|
|
|
|
Accrued interest-intermediation |
|
|
20 |
|
|
|
|
|
|
|
20 |
|
|
|
|
|
|
|
2 |
|
|
|
|
|
|
|
2 |
|
|
|
|
|
Caps and floors |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advances |
|
|
(305 |
) |
|
|
|
|
|
|
(305 |
) |
|
|
|
|
|
|
(578 |
) |
|
|
|
|
|
|
(578 |
) |
|
|
|
|
Balance sheet |
|
|
19,196 |
|
|
|
|
|
|
|
19,196 |
|
|
|
|
|
|
|
(7,626 |
) |
|
|
|
|
|
|
(7,626 |
) |
|
|
|
|
Accrued interest-options |
|
|
(1,786 |
) |
|
|
|
|
|
|
(1,786 |
) |
|
|
|
|
|
|
(19 |
) |
|
|
|
|
|
|
(19 |
) |
|
|
|
|
Mortgage delivery commitments |
|
|
47 |
|
|
|
|
|
|
|
47 |
|
|
|
|
|
|
|
141 |
|
|
|
|
|
|
|
141 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
(427,353 |
) |
|
$ |
484,664 |
|
|
$ |
57,311 |
|
|
$ |
(351,718 |
) |
|
$ |
(359,790 |
) |
|
$ |
336,631 |
|
|
$ |
(23,159 |
) |
|
$ |
(53,070 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
54
The following table presents, by type of hedged item, the gains (losses) on derivatives and the
related hedged items in fair value hedging relationships and the impact of those derivatives for
the nine months ended September 30, 2009 and 2008 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended September 30, |
|
|
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives on |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives on |
|
|
|
Gain (Loss) on |
|
|
Gain (Loss) on |
|
|
Earnings |
|
|
Net Interest |
|
|
Gain (Loss) on |
|
|
Gain (Loss) on |
|
|
Earnings |
|
|
Net Interest |
|
|
|
Derivative |
|
|
Hedged Item |
|
|
Impact |
|
|
Income |
|
|
Derivative |
|
|
Hedged Item |
|
|
Impact |
|
|
Income |
|
|
Derivatives designated
as hedging instruments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advances |
|
$ |
1,419,019 |
|
|
$ |
(1,424,126 |
) |
|
$ |
(5,107 |
) |
|
$ |
(1,252,775 |
) |
|
$ |
(337,111 |
) |
|
$ |
340,732 |
|
|
$ |
3,621 |
|
|
$ |
(341,522 |
) |
Consolidated obligations-bonds |
|
|
(418,734 |
) |
|
|
436,921 |
|
|
|
18,187 |
|
|
|
384,150 |
|
|
|
(44,921 |
) |
|
|
47,540 |
|
|
|
2,619 |
|
|
|
288,228 |
|
Consolidated obligations-notes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
474 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value hedges ineffectiveness |
|
$ |
1,000,285 |
|
|
$ |
(987,205 |
) |
|
$ |
13,080 |
|
|
$ |
(868,151 |
) |
|
$ |
(382,032 |
) |
|
$ |
388,272 |
|
|
$ |
6,240 |
|
|
$ |
(53,294 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flow hedges ineffectiveness |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
(9 |
) |
|
$ |
|
|
|
$ |
(9 |
) |
|
$ |
|
|
|
Derivatives not designated
as hedging instruments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advances |
|
$ |
3,887 |
|
|
$ |
|
|
|
$ |
3,887 |
|
|
$ |
|
|
|
$ |
1,066 |
|
|
$ |
|
|
|
$ |
1,066 |
|
|
$ |
|
|
Consolidated obligations-bonds |
|
|
101,662 |
|
|
|
|
|
|
|
101,662 |
|
|
|
|
|
|
|
(41,517 |
) |
|
|
|
|
|
|
(41,517 |
) |
|
|
|
|
Consolidated obligations-notes |
|
|
409 |
|
|
|
|
|
|
|
409 |
|
|
|
|
|
|
|
(5,723 |
) |
|
|
|
|
|
|
(5,723 |
) |
|
|
|
|
Member intermediation |
|
|
(189 |
) |
|
|
|
|
|
|
(189 |
) |
|
|
|
|
|
|
66 |
|
|
|
|
|
|
|
66 |
|
|
|
|
|
Balance sheet Macro hedges swaps |
|
|
2,617 |
|
|
|
|
|
|
|
2,617 |
|
|
|
|
|
|
|
19,983 |
|
|
|
|
|
|
|
19,983 |
|
|
|
|
|
Accrued interest-swaps |
|
|
(37,772 |
) |
|
|
|
|
|
|
(37,772 |
) |
|
|
|
|
|
|
(36,915 |
) |
|
|
|
|
|
|
(36,915 |
) |
|
|
|
|
Accrued interest-intermediation |
|
|
64 |
|
|
|
|
|
|
|
64 |
|
|
|
|
|
|
|
5 |
|
|
|
|
|
|
|
5 |
|
|
|
|
|
Caps and floors |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advances |
|
|
(1,056 |
) |
|
|
|
|
|
|
(1,056 |
) |
|
|
|
|
|
|
(1,531 |
) |
|
|
|
|
|
|
(1,531 |
) |
|
|
|
|
Balance sheet |
|
|
50,613 |
|
|
|
|
|
|
|
50,613 |
|
|
|
|
|
|
|
(4,621 |
) |
|
|
|
|
|
|
(4,621 |
) |
|
|
|
|
Accrued interest-options |
|
|
(3,731 |
) |
|
|
|
|
|
|
(3,731 |
) |
|
|
|
|
|
|
99 |
|
|
|
|
|
|
|
99 |
|
|
|
|
|
Mortgage delivery commitments |
|
|
(49 |
) |
|
|
|
|
|
|
(49 |
) |
|
|
|
|
|
|
17 |
|
|
|
|
|
|
|
17 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
1,116,740 |
|
|
$ |
(987,205 |
) |
|
$ |
129,535 |
|
|
$ |
(868,151 |
) |
|
$ |
(451,112 |
) |
|
$ |
388,272 |
|
|
$ |
(62,840 |
) |
|
$ |
(53,294 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
55
The effect of cash flow hedge related derivative instruments for the three and nine months ended
September 30, 2009 and 2008 were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30, |
|
|
|
2009 |
|
|
2008 |
|
|
|
OCI |
|
|
OCI |
|
|
|
Gains/(Losses) |
|
|
Gains/(Losses) |
|
|
|
|
|
|
|
Location: |
|
|
Amount |
|
|
Ineffectiveness |
|
|
|
|
|
|
Location: |
|
|
Amount |
|
|
Ineffectiveness |
|
|
|
Recognized in |
|
|
Reclassified to |
|
|
Reclassified to |
|
|
Recognized in |
|
|
Recognized in |
|
|
Reclassified to |
|
|
Reclassified to |
|
|
Recognized in |
|
|
|
OCI 1 |
|
|
Earnings 1 |
|
|
Earnings 1 |
|
|
Earnings |
|
|
OCI 1, 2 |
|
|
Earnings 1 |
|
|
Earnings 1 |
|
|
Earnings |
|
|
The effect of cash flow hedge related to Interest rate swaps |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advances |
|
$ |
|
|
|
Interest Income |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Interest Income |
|
$ |
|
|
|
$ |
|
|
Consolidated obligations-bonds |
|
|
|
|
|
Interest Expense |
|
|
1,898 |
|
|
|
|
|
|
|
61 |
|
|
Interest Expense |
|
|
1,667 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
|
|
|
|
|
|
|
$ |
1,898 |
|
|
$ |
|
|
|
$ |
61 |
|
|
|
|
|
|
$ |
1,667 |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended September 30, |
|
|
|
2009 |
|
|
2008 |
|
|
|
OCI |
|
|
OCI |
|
|
|
Gains/(Losses) |
|
|
Gains/(Losses) |
|
|
|
|
|
|
|
Location: |
|
|
Amount |
|
|
Ineffectiveness |
|
|
|
|
|
|
Location: |
|
|
Amount |
|
|
Ineffectiveness |
|
|
|
Recognized in |
|
|
Reclassified to |
|
|
Reclassified to |
|
|
Recognized in |
|
|
Recognized in |
|
|
Reclassified to |
|
|
Reclassified to |
|
|
Recognized in |
|
|
|
OCI 1 |
|
|
Earnings 1 |
|
|
Earnings 1 |
|
|
Earnings |
|
|
OCI 1, 2 |
|
|
Earnings 1 |
|
|
Earnings |
|
|
Earnings |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
effect of cash flow hedge related to Interest rate swaps |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advances |
|
$ |
|
|
|
Interest Income |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Interest Income |
|
$ |
|
|
|
$ |
|
|
Consolidated obligations-bonds |
|
|
|
|
|
Interest Expense |
|
|
5,687 |
|
|
|
|
|
|
|
(6,109 |
) |
|
Interest Expense |
|
|
4,345 |
|
|
|
9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
|
|
|
|
|
|
|
$ |
5,687 |
|
|
$ |
|
|
|
$ |
(6,109 |
) |
|
|
|
|
|
$ |
4,345 |
|
|
$ |
9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 |
|
Effective portion |
|
|
|
2 |
|
Represents effective portion of basis adjustments to OCI
during the period from cash flow hedging transactions. |
56
Note 16. Fair Values of Financial Instruments
Items Measured at Fair Value on a Recurring Basis
The following table presents for each hierarchy level, the FHLBNYs assets and liabilities that
were measured at fair value on its Statements of Condition at September 30, 2009 and December 31,
2008
(in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Netting |
|
|
|
Total |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Adjustments |
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale securities |
|
$ |
2,362,592 |
|
|
$ |
|
|
|
$ |
2,362,592 |
|
|
$ |
|
|
|
$ |
|
|
Derivative assets |
|
|
9,092 |
|
|
|
|
|
|
|
1,347,146 |
|
|
|
|
|
|
|
(1,338,054 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets at fair value |
|
$ |
2,371,684 |
|
|
$ |
|
|
|
$ |
3,709,738 |
|
|
$ |
|
|
|
$ |
(1,338,054 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated obligations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bonds |
|
$ |
(2,385,968 |
) |
|
$ |
|
|
|
$ |
(2,385,968 |
) |
|
$ |
|
|
|
$ |
|
|
Derivative liabilities |
|
|
(871,744 |
) |
|
|
|
|
|
|
(4,744,059 |
) |
|
|
|
|
|
|
3,872,315 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities at fair value |
|
$ |
(3,257,712 |
) |
|
$ |
|
|
|
$ |
(7,130,027 |
) |
|
$ |
|
|
|
$ |
3,872,315 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Netting |
|
|
|
Total |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Adjustments |
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale securities |
|
$ |
2,861,869 |
|
|
$ |
|
|
|
$ |
2,861,869 |
|
|
$ |
|
|
|
$ |
|
|
Derivative assets |
|
|
20,236 |
|
|
|
|
|
|
|
1,386,859 |
|
|
|
|
|
|
|
(1,366,623 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets at fair value |
|
$ |
2,882,105 |
|
|
$ |
|
|
|
$ |
4,248,728 |
|
|
$ |
|
|
|
$ |
(1,366,623 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated obligations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bonds |
|
$ |
(998,942 |
) |
|
$ |
|
|
|
$ |
(998,942 |
) |
|
$ |
|
|
|
$ |
|
|
Derivative liabilities |
|
|
(861,660 |
) |
|
|
|
|
|
|
(5,978,026 |
) |
|
|
|
|
|
|
5,116,366 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities at fair value |
|
$ |
(1,860,602 |
) |
|
$ |
|
|
|
$ |
(6,976,968 |
) |
|
$ |
|
|
|
$ |
5,116,366 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
57
Items Measured at Fair Value on a Nonrecurring Basis
Certain assets and liabilities would be measured at fair value on a nonrecurring basis, and for the
FHLBNY, such items may include mortgage loans in foreclosure, or mortgage loans and
held-to-maturity securities written down to fair value. Certain private-label held-to-maturity MBS
were written down to fair value as a result of OTTI during the three quarters ended September 30,
2009. The fair value of MBS for which a non-recurring change in
fair value has been recorded at September 30, 2009 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit Loss * |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2009 |
|
|
|
Fair Value |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Three months |
|
|
Nine months |
|
Held-to-maturity securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Private-label residential MBS |
|
$ |
125,771 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
125,771 |
|
|
$ |
3,683 |
|
|
$ |
14,276 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
125,771 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
125,771 |
|
|
$ |
3,683 |
|
|
$ |
14,276 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
Note: The credit losses recognized in the current year third quarter of $3.7 million were
associated with the held-to-maturity (HTM) securities determined to be OTTI at September 30,
2009. The credit impaired HTM securities were recorded in the Statements of Condition at their
total fair values of $125.8 million at September 30, 2009. Cumulative credit losses of $14.3
million include credit losses on HTM securities that were previously impaired. For HTM
securities that were previously credit impaired but no additional credit impairment were deemed
necessary in the current quarter, the securities were recorded- consistent with accounting rules-at
their carrying values and not re-adjusted to their fair values. |
58
Estimated fair values Summary Tables
The Bank early adopted the new guidance on interim disclosures about fair value of financial
instruments as of January 1, 2009. The FHLBNY has consistently presented estimated fair value
disclosures in interim financial statements in prior periods, although it has not been required to
under pre-existing GAAP disclosure requirements, as it believed fair values provided useful
information to investors and its stockholders with respect to significant changes in the estimated
fair values of the FHLBNYs financial instruments.
The carrying value and estimated fair values of the FHLBNYs financial instruments as of September
30, 2009 and December 31, 2008 were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2009 |
|
|
December 31, 2008 |
|
|
|
Carrying |
|
|
Estimated |
|
|
Carrying |
|
|
Estimated |
|
Financial Instruments |
|
Value |
|
|
Fair Value |
|
|
Value |
|
|
Fair Value |
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and due from banks |
|
$ |
1,189,158 |
|
|
$ |
1,189,158 |
|
|
$ |
18,899 |
|
|
$ |
18,899 |
|
Interest-bearing deposits |
|
|
|
|
|
|
|
|
|
|
12,169,096 |
|
|
|
12,170,681 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal funds sold |
|
|
3,900,000 |
|
|
|
3,899,997 |
|
|
|
|
|
|
|
|
|
Available-for-sale securities |
|
|
2,362,592 |
|
|
|
2,362,592 |
|
|
|
2,861,869 |
|
|
|
2,861,869 |
|
Held-to-maturity securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term securities |
|
|
10,478,027 |
|
|
|
10,596,548 |
|
|
|
10,130,543 |
|
|
|
9,934,473 |
|
Certificates of deposit |
|
|
2,000,000 |
|
|
|
2,000,003 |
|
|
|
1,203,000 |
|
|
|
1,203,328 |
|
Advances |
|
|
95,944,732 |
|
|
|
96,375,258 |
|
|
|
109,152,876 |
|
|
|
109,421,358 |
|
Mortgage loans, net |
|
|
1,336,228 |
|
|
|
1,402,028 |
|
|
|
1,457,885 |
|
|
|
1,496,329 |
|
Accrued interest receivable |
|
|
354,934 |
|
|
|
354,934 |
|
|
|
492,856 |
|
|
|
492,856 |
|
Derivative assets |
|
|
9,092 |
|
|
|
9,092 |
|
|
|
20,236 |
|
|
|
20,236 |
|
Other financial assets |
|
|
4,224 |
|
|
|
4,224 |
|
|
|
2,713 |
|
|
|
2,713 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits |
|
|
2,275,971 |
|
|
|
2,275,983 |
|
|
|
1,451,978 |
|
|
|
1,452,648 |
|
Consolidated obligations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bonds |
|
|
69,670,836 |
|
|
|
70,032,687 |
|
|
|
82,256,705 |
|
|
|
82,533,048 |
|
Discount notes |
|
|
38,385,244 |
|
|
|
38,396,793 |
|
|
|
46,329,906 |
|
|
|
46,408,907 |
|
Mandatorily redeemable capital stock |
|
|
127,882 |
|
|
|
127,882 |
|
|
|
143,121 |
|
|
|
143,121 |
|
Accrued interest payable |
|
|
337,221 |
|
|
|
337,221 |
|
|
|
426,144 |
|
|
|
426,144 |
|
Derivative liabilities |
|
|
871,744 |
|
|
|
871,744 |
|
|
|
861,660 |
|
|
|
861,660 |
|
Other financial liabilities |
|
|
33,784 |
|
|
|
33,784 |
|
|
|
38,594 |
|
|
|
38,594 |
|
59
The following table summarizes the activity related to consolidated obligation bonds for which
the Bank elected the fair value option (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
Nine months ended |
|
|
|
September 30, |
|
|
September 30, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
Balance, beginning of the period |
|
$ |
550,303 |
|
|
$ |
|
|
|
$ |
998,942 |
|
|
$ |
|
|
New transaction elected for fair value option |
|
|
1,835,000 |
|
|
|
589,000 |
|
|
|
2,385,000 |
|
|
|
589,000 |
|
Maturities and terminations |
|
|
|
|
|
|
|
|
|
|
(983,000 |
) |
|
|
|
|
Change in fair value |
|
|
(426 |
) |
|
|
(3,582 |
) |
|
|
(8,653 |
) |
|
|
(3,582 |
) |
Change in
accrued interest* |
|
|
1,091 |
|
|
|
|
|
|
|
(6,321 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, end of the period |
|
$ |
2,385,968 |
|
|
$ |
585,418 |
|
|
$ |
2,385,968 |
|
|
$ |
585,418 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
De minimis amounts of change in accrued interest in 2008. |
The following table presents the change in fair value include in the Statements of Income for
the consolidated obligation bonds designated in accordance with the accounting standards on the
fair value option for financial assets and liabilities (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30, |
|
|
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
|
Total change in |
|
|
|
|
|
|
|
|
|
|
Total change in |
|
|
|
Interest expense on |
|
|
Net gain(loss) due |
|
|
fair value included |
|
|
Interest expense on |
|
|
Net gain(loss) due |
|
|
fair value included |
|
|
|
consolidated |
|
|
to changes in fair |
|
|
in current period |
|
|
consolidated |
|
|
to changes in fair |
|
|
in current period |
|
|
|
obligation bonds |
|
|
value |
|
|
earnings |
|
|
obligation bonds |
|
|
value |
|
|
earnings |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
obligations-bonds |
|
$ |
(1,091 |
) |
|
$ |
426 |
|
|
$ |
(665 |
) |
|
$ |
|
|
|
$ |
3,582 |
|
|
$ |
3,582 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended September 30, |
|
|
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
|
Total change in |
|
|
|
|
|
|
|
|
|
|
Total change in |
|
|
|
Interest expense on |
|
|
Net gain(loss) due |
|
|
fair value included |
|
|
Interest expense on |
|
|
Net gain(loss) due |
|
|
fair value included |
|
|
|
consolidated |
|
|
to changes in fair |
|
|
in current period |
|
|
consolidated |
|
|
to changes in fair |
|
|
in current period |
|
|
|
obligation bonds |
|
|
value |
|
|
earnings |
|
|
obligation bonds |
|
|
value |
|
|
earnings |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
obligations-bonds |
|
$ |
(2,380 |
) |
|
$ |
8,653 |
|
|
$ |
6,273 |
|
|
$ |
|
|
|
$ |
3,582 |
|
|
$ |
3,582 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table compares the aggregate fair value and aggregate remaining contractual fair
value and aggregate remaining contractual principal balance outstanding of consolidated obligation
bonds for which the fair value option has been elected (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2009 |
|
|
|
|
|
|
|
|
|
|
|
Fair value |
|
|
|
Principal Balance |
|
|
Fair value |
|
|
over/(under) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated obligations-bonds |
|
$ |
2,385,000 |
|
|
$ |
2,385,968 |
|
|
$ |
968 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2008 |
|
|
|
|
|
|
|
|
|
|
|
Fair value |
|
|
|
Principal Balance |
|
|
Fair value |
|
|
over/(under) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated obligations-bonds |
|
$ |
983,000 |
|
|
$ |
998,942 |
|
|
$ |
15,942 |
|
|
|
|
|
|
|
|
|
|
|
60
Notes to Estimated Fair Values of financial instruments
The fair value of financial instruments is defined as the price FHLBNY would receive to sell
an asset in an orderly transaction between market participants at the measurement date. A
financial liabilitys fair value is defined as the amount that would be paid to transfer the
liability to a new obligor, not the amount that would be paid to settle the liability with the
creditor. Where available, fair values are based on observable market prices or parameters, or
derived from such prices or parameters. Where observable prices are not available, valuation
models and inputs are utilized. These valuation techniques involve some level of management
estimation and judgment, the degree of which is dependent on the price transparency for the
instruments or markets and the instruments complexity.
The fair values of financial assets and liabilities reported in the tables above are discussed
below. For additional information also see Significant Accounting Policies and Estimates in Note
1. The Fair Value Summary Tables above do not represent an estimate of the overall market value of
the FHLBNY as a going concern, which would take into account future business opportunities and the
net profitability of assets versus liabilities.
The estimated fair value amounts have been determined by the FHLBNY using procedures described
below. Because an active secondary market does not exist for a portion of the FHLBNYs financial
instruments, in certain cases, fair values are not subject to precise quantification or
verification and may change as economic and market factors and evaluation of those factors change.
Cash and due from banks
The estimated fair value approximates the recorded book balance.
Interest-bearing deposits and Federal funds sold
The FHLBNY determines estimated fair values of certain short-term investments by calculating the
present value of expected future cash flows from the investments. The discount rates used in these
calculations are the current coupons of investments with similar terms.
Investment securities
The fair value of mortgage-backed investment securities is estimated by management using
information from specialized pricing services that use pricing models or quoted prices of
securities with similar characteristics. Inputs into the pricing models employed by pricing
services for most of the Banks investments are market based and observable and are considered
Level 2. The valuation techniques used by pricing services employ cash flow generators and
option-adjusted spread models. Pricing spreads used as inputs in the models are based on new issue
and secondary market transactions if securities that are traded in sufficient volumes in the
secondary market. The valuation of the Banks private-label securities that are all designated as
held-to-maturity may require pricing services to use significant
inputs that are subjective and are generally considered to be Level 3 because the inputs may not be market based and observable. Beginning
with the current year third quarter, the FHLBNY requests prices for all mortgage-backed securities
from four specific third-party vendors. Prior to the change, the FHLBNY used three vendors. The
adoption of the fourth pricing vendor had no material impact on the financial results, financial
position or cash flows of the Bank. Depending on the number of prices received from the four
vendors for each security, the FHLBNY selects a median or average price. The Banks pricing
methodology also incorporates variance thresholds to assist in identifying median or average prices
that may require further review. In certain limited instances (i.e., prices are outside of
variance thresholds or the third-party services do not provide a price), the FHLBNY will obtain a
price from securities dealers that is deemed most appropriate after consideration of all relevant
facts and circumstances that would be considered by market participants.
61
In accordance with the amended guidance under the accounting standards for investments in debt and
equity securities, certain held-to-maturity private-label mortgage-backed securities were written
down to their fair value as a result of a recognition of OTTI during the three quarters in 2009.
The OTTI impaired securities are classified in the table of items
measured at fair value on a nonrecurring basis as Level 3 financial instruments in accordance with
the accounting standards for fair value measurements and disclosures,
and valuation hierarchy as of
September 30, 2009. This determination was made based on managements view that the OTTI
private-label instruments and certain other private-label MBS may not have an active market because
of the specific vintage of the impaired securities as well as inherent conditions surrounding the
trading of private-label mortgage-backed securities. Fair values of these securities were
determined by management using third party specialized vendor pricing services that made
appropriate adjustments to observed prices of comparable securities that were being transacted in
orderly market. Fair values of the OTTI securities recorded in the Statements of Condition at
September 30, 2009 were $125.8 million.
The fair value of housing finance agency bonds is estimated by management using information
primarily from specialized dealers.
For more information, see Significant Accounting Policies and Estimates in Note 1 for corroboration
and other analytical procedures performed by the FHLBNY. Examples of securities priced under such
a valuation technique, and which are classified within Level 2 of the valuation hierarchy and
valued using the market approach as defined under the accounting standards for fair value
measurements and disclosures, include GSE issued collateralized mortgage obligations and money
market funds.
Advances
The fair values of advances are computed using standard option valuation models. The most
significant inputs to the valuation model are (1) consolidated obligation debt curve, published by
the Office of Finance and available to the public, and (2) LIBOR swap curves and volatilities. The
Bank considers both these inputs to be market based and observable as they can be directly
corroborated by market participants.
Mortgage loans
The fair value of MPF loans and loans in the inactive CMA programs are priced using a valuation
technique referred to as the market approach as defined in the accounting standards for fair
value measurements and disclosures. Loans are aggregated into synthetic pass-through securities
based on product type, loan origination year, gross coupon and loan term. Thereafter, these are
compared against closing TBA prices extracted from independent sources. All significant inputs
to the loan valuations are market based and observable.
Accrued interest receivable and payable
The estimated fair values approximate the recorded book value because of the relatively short
period of time between their origination and expected realization.
62
Derivative assets and liabilities
The FHLBNYs derivatives are traded in the over-the-counter market and are valued using discounted
cash flow models that use as their basis, readily observable and market based inputs. Significant
inputs include interest rates and volatilities. These derivative positions are classified within
Level 2 of the valuation hierarchy, and include interest rate swaps, swaptions, interest rate caps
and floors, and mortgage delivery commitments. The accounting standard for fair value measurements
and disclosures clarified that the valuation of derivative assets and liabilities must reflect the
value of the instrument including the values associated with counterparty risk and must also take
into account the companys own credit standing and non-performance risk. The Bank has collateral
agreements with all its derivative counterparties and enforces collateral exchanges at least
weekly. The computed fair values of the
FHLBNYs derivatives took into consideration the effects of legally enforceable master netting
agreements that allow the FHLBNY to settle positive and negative positions and offset cash
collateral with the same counterparty on a net basis. The Bank and each derivative counterparty
have bilateral collateral thresholds that take into account both the Banks and counterpartys
credit ratings. As a result of these practices and agreements and the FHLBNYs assessment of any
change in its own credit spread, the Bank has concluded that the impact of the credit differential
between the Bank and its derivative counterparties was sufficiently mitigated to an immaterial
level that no credit adjustments were deemed necessary to the recorded fair value of derivative
assets and derivative liabilities in the Statements of Conditions at September 30, 2009 and
December 31, 2008.
Deposits
The FHLBNY determines estimated fair values of deposits by calculating the present value of
expected future cash flows from the deposits. The discount rates used in these calculations are
the current cost of deposits with similar terms.
Consolidated obligations
The FHLBNY estimates fair values based on the cost of raising comparable term debt and prices its
bonds and discount notes based on the current consolidated obligations market curve, which has a
daily active market. The fair values of consolidated obligation debt (bonds and discount notes)
are computed using a standard option valuation model using market based and observable inputs: (1)
consolidated obligation debt curve that is available to the public and published by the Office of
Finance, and (2) LIBOR curve and volatilities. Model adjustments that are not market-observable
are not considered significant.
Mandatorily redeemable capital stock
The FHLBNY considers the fair value of capital subject to mandatory redemption, as the redemption
value of the stock, which is generally par plus accrued estimated dividend. The FHLBNY has a
cooperative structure. Stock can only be acquired by members at par value and redeemed at par
value. Stock is not traded publicly and no market mechanism exists for the exchange of stock
outside the cooperative structure.
63
Note 17. Commitments and contingencies
The FHLBanks have joint and several liability for all the consolidated obligations issued on their
behalf. Accordingly, should one or more of the FHLBanks be unable to repay their participation in
the consolidated obligations, each of the other FHLBanks could be called upon to repay all or part
of such obligations, as determined or approved by the Finance Agency. Neither the FHLBNY nor any
other FHLBank has ever had to assume or pay the consolidated obligations of another FHLBank. The
FHLBNY does not believe that it will be called upon to pay the consolidated obligations of another
FHLBank in the future. Under the amended provisions of accounting standard for guarantees, the
Bank would have been required to recognize the fair value of the FHLBNYs joint and several
liability for all the consolidated obligations, as discussed above. However, the FHLBNY considers
the joint and several liabilities as similar to a related party guarantee, which meets the scope
exception under the accounting standard for guarantees. Accordingly, the FHLBNY has not
recognized the fair value of a liability for its joint and several obligations related to other
FHLBanks consolidated obligations at September 30, 2009 and December 31, 2008. The par amount of
the twelve FHLBanks outstanding consolidated obligations, including the FHLBNYs, were
approximately $1.0 trillion and $1.3 trillion at September 30, 2009 and December 31, 2008.
Standby letters of credit are executed for a fee on behalf of members to facilitate residential
housing, community lending, and members asset/liability management or to provide liquidity. A
standby letter of credit is a financing arrangement between the FHLBNY and its member. Members
assume an unconditional obligation to reimburse the FHLBNY for value given by the FHLBNY to the
beneficiary under the terms of the standby letter of credit. The FHLBNY may, in its discretion,
permit the member to finance repayment of their obligation by receiving a collateralized advance.
Outstanding standby letters of credit were approximately $891.2 million and $908.6 million as of
September 30, 2009 and December 31, 2008, respectively and had original terms of up to 15 years,
with a final expiration in 2019. Standby letters of credit are fully collateralized. Unearned
fees on standby letters of credit were recorded in other liabilities and were not significant as of
September 30, 2009 and December 31, 2008. Based on managements credit analyses and collateral
requirements, the FHLBNY does not deem it necessary to have any provision for credit losses on
these commitments and letters of credit.
During the third quarter of 2008, each FHLBank, including the FHLBNY, entered into a Lending
Agreement with the U.S. Treasury in connection with the U.S. Treasurys establishment of the
Government Sponsored Enterprise Credit Facility (GSECF), as authorized by the Housing Act. The
GSECF is designed to serve as a contingent source of liquidity for the housing government-sponsored
enterprises, including each of the 12 FHLBanks. Any borrowings by one or more of the FHLBanks
under the GSECF are considered consolidated obligations with the same joint and several liability
as all other consolidated obligations. The terms of any borrowings are agreed to at the time of
issuance. Loans under the Lending Agreement are to be secured by collateral acceptable to the U.S.
Treasury, which consists of FHLBank advances to members that have been collateralized in accordance
with regulatory standards and mortgage-backed securities issued by Fannie Mae or Freddie Mac. Each
FHLBank is required to submit to the Federal Reserve Bank of New York, acting as fiscal agent of
the U.S. Treasury, a list of eligible collateral updated on a weekly basis. As of September 30,
2009 and December 31, 2008, the FHLBNY had provided the U.S. Treasury listings of advance
collateral amounting to $17.8 billion and $16.3 billion, which provides for maximum borrowings of
$15.5 billion and $14.2 billion at September 30, 2009 and December 31, 2008. The amount of
collateral can be increased or decreased (subject to the approval of the U.S. Treasury) at any time
through the delivery of an updated listing of collateral. As of September 30, 2009, no FHLBank had
drawn on this available source of liquidity. This temporary authorization expires December 31,
2009 and supplements the existing limit of $4.0 billion.
64
Under the MPF program, the Bank was unconditionally obligated to purchase $12.0 million and $10.4
million in mortgage loans at September 30, 2009 and December 31, 2008. Commitments are generally
for periods not to exceed 45 days. Such commitments entered into after June 30, 2003 were recorded
as derivatives at their fair value under the accounting standards for derivatives and hedging. In
addition, the FHLBNY had entered into conditional agreements under Master Commitments with its
members in the MPF program to purchase mortgage loans in aggregate of $494.3 million and $246.9
million as of September 30, 2009 and December 31, 2008.
The FHLBNY generally executes derivatives with major banks and broker-dealers and generally enters
into bilateral collateral agreements. When counterparties are exposed, the Bank would typically
pledge cash collateral to mitigate the counterpartys credit exposure. To mitigate the
counterparties exposures, the FHLBNY pledged $2.5 billion and $3.8 billion in cash as collateral
at September 30, 2009 and December 31, 2008, and these amounts were reported as a component of
Derivative liabilities. At September 30, 2009 and December 31, 2008, the FHLBNY was also exposed
to credit risk associated with outstanding derivative transactions measured by the replacement cost
of derivatives in a gain position. The Banks credit exposure at September 30, 2009 as defined
above was below the threshold agreements with derivative counterparties and no collateral was
required to be pledged by counterparties. At December 31, 2008, the Banks credit exposure was
reduced by cash collateral of $61.2 million delivered by derivatives counterparties and held by the
Bank. The amount was recorded as a reduction to Derivative assets at December 31, 2008.
Net rental expense and the cost of operating leases for the three and nine months ended September
30, 2009 and 2008 were not material. The lease agreements for FHLBNY premises provide for
increases in the basic rentals resulting from increases in property taxes and maintenance expenses.
Such increases are not expected to have a material effect on the FHLBNYs results of operations or
financial condition.
65
The following table summarizes contractual obligations and contingencies as of September 30, 2009
(in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2009 |
|
|
|
Payments due or expiration terms by period |
|
|
|
Less than |
|
|
One year |
|
|
Greater than three |
|
|
Greater than |
|
|
|
|
|
|
one year |
|
|
to three years |
|
|
years to five years |
|
|
five years |
|
|
Total |
|
Contractual Obligations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated obligations-bonds at par
1 |
|
$ |
35,806,100 |
|
|
$ |
24,730,595 |
|
|
$ |
4,900,530 |
|
|
$ |
3,335,050 |
|
|
$ |
68,772,275 |
|
Mandatorily redeemable capital stock 1 |
|
|
82,076 |
|
|
|
38,724 |
|
|
|
2,123 |
|
|
|
4,959 |
|
|
|
127,882 |
|
Premises (lease obligations) 2 |
|
|
3,060 |
|
|
|
6,120 |
|
|
|
5,635 |
|
|
|
7,011 |
|
|
|
21,826 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total contractual obligations |
|
|
35,891,236 |
|
|
|
24,775,439 |
|
|
|
4,908,288 |
|
|
|
3,347,020 |
|
|
|
68,921,983 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other commitments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Standby letters of credit |
|
|
863,242 |
|
|
|
4,937 |
|
|
|
15,255 |
|
|
|
7,778 |
|
|
|
891,212 |
|
Consolidated obligation-bonds/
discount notes
traded not settled |
|
|
2,302,700 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,302,700 |
|
Investment securities traded not settled |
|
|
25,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,000 |
|
Open delivery commitments (MPF) |
|
|
11,843 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,843 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other commitments |
|
|
3,202,785 |
|
|
|
4,937 |
|
|
|
15,255 |
|
|
|
7,778 |
|
|
|
3,230,755 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total obligations and commitments |
|
$ |
39,094,021 |
|
|
$ |
24,780,376 |
|
|
$ |
4,923,543 |
|
|
$ |
3,354,798 |
|
|
$ |
72,152,738 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 |
|
Mandatorily redeemable capital stock is categorized by the dates at which the corresponding
advances outstanding mature. Excess capital stock is redeemed at that time, and hence, these
dates better represent the related commitments than the put dates associated with capital stock,
under which stock may not be redeemed until the later of five years from the date the member
becomes a nonmember or the related advance matures. Callable bonds contain exercise date or a
series of exercise dates that may result in a shorter redemption period. |
|
2 |
|
Immaterial amount of commitments for equipment leases not included. |
The FHLBNY does not anticipate any credit losses from its off-balance sheet commitments and
accordingly no provision for losses was required.
66
Note 18. Related party transactions
The FHLBNY is a cooperative and the members own almost all of the stock of the Bank. Stock that is
not owned by members is held by former members. The majority of the members of the Board of
Directors of the FHLBNY are elected by and from the membership. The FHLBNY conducts its advances
business almost exclusively with members. The Bank considers its transactions with its members and
non-member stockholders as related party transactions in addition to transactions with other
FHLBanks, the Office of Finance, and the Finance Agency. All transactions with all members,
including those whose officers may serve as directors of the FHLBNY, are at terms that are no more
favorable than comparable transactions with other members.
The FHLBNY may from time to time borrow or sell overnight and term Federal funds at market rates to
members.
Debt Transfers
During the current year and prior year three quarters, there was no transfer of consolidated
obligation bonds to other FHLBanks. Generally, when debt is transferred, it is exchanged for a
cash price that represents the fair market value of the debt. Additionally, no debt was
transferred to the FHLBNY from another FHLBank for the first three quarters of 2009 and 2008.
At trade date, the transferring bank notifies the Office of Finance of a change in primary obligor
for the transferred debt.
Advances sold or transferred
No advances were transferred/sold to the FHLBNY or from the FHLBNY to another FHLBank in the
current year or prior year three quarters ended September 30.
Loans to other Federal Home Loan Banks
In the current year third quarter, the FHLBNY extended an overnight loan of $400.0 million to
another FHLBank for one day. No loans were made to another FHLBank in the current year prior two
quarters. In the prior year, the Bank made four overnight loans for a total of $661.0 million.
Generally, loans made to other FHLBanks are uncollateralized.
Borrowings from other Federal Home Loan Banks
In the current year three quarters, the FHLBNY had not borrowed funds from another FHLBank that
were material. In the prior year three quarters, the FHLBNY had borrowed eight overnight loans for
a total of $1.3 billion. The FHLBNY borrows from other FHLBanks, generally for a period of one day
and are not collateralized.
67
The following tables summarize outstanding balances with related parties at September 30, 2009 and
December 31, 2008, and transactions for the three and nine months ended September 30, 2009 and 2008
(in thousands):
Related Party: Outstanding Assets, Liabilities and Capital
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2009 |
|
|
December 31, 2008 |
|
|
|
Related |
|
|
Unrelated |
|
|
Related |
|
|
Unrelated |
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and due from banks |
|
$ |
|
|
|
$ |
1,189,158 |
|
|
$ |
|
|
|
$ |
18,899 |
|
Interest-bearing deposits |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,169,096 |
|
Federal funds sold |
|
|
|
|
|
|
3,900,000 |
|
|
|
|
|
|
|
|
|
Available-for-sale securities |
|
|
|
|
|
|
2,362,592 |
|
|
|
|
|
|
|
2,861,869 |
|
Held-to-maturity securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term securities |
|
|
|
|
|
|
10,478,027 |
|
|
|
|
|
|
|
10,130,543 |
|
Certificates of deposit |
|
|
|
|
|
|
2,000,000 |
|
|
|
|
|
|
|
1,203,000 |
|
Advances |
|
|
95,944,732 |
|
|
|
|
|
|
|
109,152,876 |
|
|
|
|
|
Mortgage loans 1 |
|
|
|
|
|
|
1,336,228 |
|
|
|
|
|
|
|
1,457,885 |
|
Accrued interest receivable |
|
|
308,036 |
|
|
|
46,898 |
|
|
|
433,755 |
|
|
|
59,101 |
|
Premises, software, and equipment |
|
|
|
|
|
|
14,596 |
|
|
|
|
|
|
|
13,793 |
|
Derivative assets 2 |
|
|
|
|
|
|
9,092 |
|
|
|
|
|
|
|
20,236 |
|
Other assets 3 |
|
|
237 |
|
|
|
14,720 |
|
|
|
153 |
|
|
|
18,685 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
96,253,005 |
|
|
$ |
21,351,311 |
|
|
$ |
109,586,784 |
|
|
$ |
27,953,107 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and capital |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits |
|
$ |
2,275,971 |
|
|
$ |
|
|
|
$ |
1,451,978 |
|
|
$ |
|
|
Consolidated obligations |
|
|
|
|
|
|
108,056,080 |
|
|
|
|
|
|
|
128,586,611 |
|
Mandatorily redeemable capital stock |
|
|
127,882 |
|
|
|
|
|
|
|
143,121 |
|
|
|
|
|
Accrued interest payable |
|
|
42 |
|
|
|
337,179 |
|
|
|
814 |
|
|
|
425,330 |
|
Affordable Housing Program 4 |
|
|
144,822 |
|
|
|
|
|
|
|
122,449 |
|
|
|
|
|
Payable to REFCORP |
|
|
|
|
|
|
38,692 |
|
|
|
|
|
|
|
4,780 |
|
Derivative liabilities 2 |
|
|
|
|
|
|
871,744 |
|
|
|
|
|
|
|
861,660 |
|
Other liabilities 5 |
|
|
27,125 |
|
|
|
63,990 |
|
|
|
31,003 |
|
|
|
44,750 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
$ |
2,575,842 |
|
|
$ |
109,367,685 |
|
|
$ |
1,749,365 |
|
|
$ |
129,923,131 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital |
|
|
5,660,789 |
|
|
|
|
|
|
|
5,867,395 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and capital |
|
$ |
8,236,631 |
|
|
$ |
109,367,685 |
|
|
$ |
7,616,760 |
|
|
$ |
129,923,131 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 |
|
Includes insignificant amounts of mortgage loans purchased from members of another
FHLBank. |
|
2 |
|
Derivative assets and liabilities include insignificant fair values due to intermediation activities on behalf of members. |
|
3 |
|
Includes insignificant amounts of miscellaneous assets that are considered related party. |
|
4 |
|
Represents funds not yet disbursed to eligible programs. |
|
5 |
|
Related column includes member pass-through reserves at the Federal Reserve Bank. |
68
Related Party: Income and Expense transactions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
|
September 30, 2009 |
|
|
September 30, 2008 |
|
|
|
Related |
|
|
Unrelated |
|
|
Related |
|
|
Unrelated |
|
Interest income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advances |
|
$ |
240,573 |
|
|
$ |
|
|
|
$ |
678,896 |
|
|
$ |
|
|
Interest-bearing deposits 1 |
|
|
|
|
|
|
1,014 |
|
|
|
|
|
|
|
3,240 |
|
Federal funds sold |
|
|
|
|
|
|
1,864 |
|
|
|
|
|
|
|
21,316 |
|
Available-for-sale securities |
|
|
|
|
|
|
6,590 |
|
|
|
|
|
|
|
24,441 |
|
Held-to-maturity securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term securities |
|
|
|
|
|
|
111,232 |
|
|
|
|
|
|
|
138,412 |
|
Certificates of deposit |
|
|
|
|
|
|
851 |
|
|
|
|
|
|
|
51,287 |
|
Mortgage loans 2 |
|
|
|
|
|
|
17,405 |
|
|
|
|
|
|
|
19,316 |
|
Loans to other FHLBanks and other |
|
|
1 |
|
|
|
|
|
|
|
30 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest income |
|
$ |
240,574 |
|
|
$ |
138,956 |
|
|
$ |
678,926 |
|
|
$ |
258,012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated obligations |
|
$ |
|
|
|
$ |
223,355 |
|
|
$ |
|
|
|
$ |
769,703 |
|
Deposits |
|
|
516 |
|
|
|
|
|
|
|
7,370 |
|
|
|
|
|
Mandatorily redeemable capital stock |
|
|
1,807 |
|
|
|
|
|
|
|
1,950 |
|
|
|
|
|
Cash collateral held and other borrowings |
|
|
|
|
|
|
|
|
|
|
2 |
|
|
|
240 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest expense |
|
$ |
2,323 |
|
|
$ |
223,355 |
|
|
$ |
9,322 |
|
|
$ |
769,943 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service fees |
|
$ |
1,101 |
|
|
$ |
|
|
|
$ |
934 |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 |
|
Includes de minimis amounts of interest income from MPF service provider. |
|
2 |
|
Includes de minimis amounts of mortgage interest income from loans purchased from
members of another FHLBank. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended |
|
|
|
September 30, 2009 |
|
|
September 30, 2008 |
|
|
|
Related |
|
|
Unrelated |
|
|
Related |
|
|
Unrelated |
|
Interest income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advances |
|
$ |
1,094,089 |
|
|
$ |
|
|
|
$ |
2,211,823 |
|
|
$ |
|
|
Interest-bearing deposits 1 |
|
|
|
|
|
|
19,054 |
|
|
|
|
|
|
|
17,086 |
|
Federal funds sold |
|
|
|
|
|
|
1,933 |
|
|
|
|
|
|
|
69,921 |
|
Available-for-sale securities |
|
|
|
|
|
|
22,881 |
|
|
|
|
|
|
|
57,016 |
|
Held-to-maturity securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term securities |
|
|
|
|
|
|
355,916 |
|
|
|
|
|
|
|
396,660 |
|
Certificates of deposit |
|
|
|
|
|
|
1,392 |
|
|
|
|
|
|
|
212,525 |
|
Mortgage loans 2 |
|
|
|
|
|
|
54,679 |
|
|
|
|
|
|
|
58,348 |
|
Loans to other FHLBanks and other |
|
|
1 |
|
|
|
|
|
|
|
33 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest income |
|
$ |
1,094,090 |
|
|
$ |
455,855 |
|
|
$ |
2,211,856 |
|
|
$ |
811,556 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated obligations |
|
$ |
|
|
|
$ |
956,923 |
|
|
$ |
|
|
|
$ |
2,511,381 |
|
Deposits |
|
|
2,002 |
|
|
|
|
|
|
|
33,235 |
|
|
|
|
|
Mandatorily redeemable capital stock |
|
|
5,478 |
|
|
|
|
|
|
|
8,884 |
|
|
|
|
|
Cash collateral held and other borrowings |
|
|
|
|
|
|
49 |
|
|
|
162 |
|
|
|
820 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest expense |
|
$ |
7,480 |
|
|
$ |
956,972 |
|
|
$ |
42,281 |
|
|
$ |
2,512,201 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service fees |
|
$ |
3,181 |
|
|
$ |
|
|
|
$ |
2,422 |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 |
|
Includes de minimis amounts of interest income from MPF service provider. |
|
2 |
|
Includes de minimis amounts of mortgage interest income from loans purchased from members of another FHLBank. |
69
Note 19. Segment information and concentration
The FHLBNY manages its operations as a single business segment. Management and the FHLBNYs 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 FHLBNYs
advance portfolio and its source of revenues.
The FHLBNY has a unique cooperative structure and is owned by member institutions located within a
defined geographic district. The Banks market is the same as its membership district which
includes New Jersey, New York, Puerto Rico, and the U.S. Virgin Islands. Institutions that are
members of the FHLBNY must have their principal places of business within this market, but may also
operate elsewhere.
The FHLBNYs primary business is making low-cost, collateralized loans, known as advances, to its
members. Members use advances as a source of funding to supplement their deposit-gathering
activities. As a cooperative, the FHLBNY prices advances at minimal net spreads above the cost of
its funding to deliver maximum value to members. Advances to large members constitute a
significant percentage of FHLBNYs advance portfolio and its source of revenues.
The FHLBNYs total assets and capital could significantly decrease if one or more large members
were to withdraw from membership or decrease business with the Bank. Members might withdraw or
reduce their business as a result of consolidating with an institution that is a member of another
FHLBank, or for other reasons. The FHLBNY has considered the impact of losing one or more large
members. In general, a withdrawing member would be required to repay all indebtedness prior to the
redemption of its capital stock. Under current conditions, the FHLBNY does not expect the loss of
a large member to impair its operations, since the FHLBank Act of 1999 does not allow the FHLBNY to
redeem the capital of an existing member if the redemption would cause the FHLBNY to fall below its
capital requirements. Consequently, the loss of a large member should not result in an inadequate
capital position for the FHLBNY. However, such an event could reduce the amount of capital that
the FHLBNY has available for continued growth. This could have various ramifications for the
FHLBNY, including a possible reduction in net income and dividends, and a lower return on capital
stock for remaining members.
70
The top five advance holders at September 30, 2009, December 31, 2008 and September 30, 2008, and
associated interest income are summarized as follows (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of |
|
|
|
|
|
|
|
|
|
|
|
|
Par |
|
|
Total Par Value |
|
|
Interest Income |
|
|
|
City |
|
State |
|
|
Advances |
|
|
of Advances |
|
|
Three months |
|
|
Nine months |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hudson City Savings Bank 1 |
|
Paramus |
|
NJ |
|
$ |
17,325,000 |
|
|
|
18.9 |
% |
|
$ |
178,896 |
|
|
$ |
532,100 |
|
Metropolitan Life Insurance Company |
|
New York |
|
NY |
|
|
14,280,000 |
|
|
|
15.6 |
|
|
|
84,277 |
|
|
|
279,360 |
|
New York Community Bank 1 |
|
Westbury |
|
NY |
|
|
8,148,476 |
|
|
|
8.9 |
|
|
|
78,413 |
|
|
|
233,129 |
|
Manufacturers and Traders Trust Company |
|
Buffalo |
|
NY |
|
|
5,493,756 |
|
|
|
6.0 |
|
|
|
19,133 |
|
|
|
83,856 |
|
The Prudential Life Insurance Company of
America |
|
Newark |
|
NJ |
|
|
3,500,000 |
|
|
|
3.8 |
|
|
|
22,448 |
|
|
|
71,473 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
|
|
$ |
48,747,232 |
|
|
|
53.2 |
% |
|
$ |
383,167 |
|
|
$ |
1,199,918 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 |
|
Officer of member bank also
serves on the Board of Directors of the FHLBNY. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of |
|
|
|
|
|
|
|
|
|
|
|
|
Par |
|
|
Total Par Value |
|
|
Interest |
|
|
|
City |
|
State |
|
|
Advances |
|
|
of Advances |
|
|
Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hudson City Savings Bank 1 |
|
Paramus |
|
NJ |
|
$ |
17,525,000 |
|
|
|
17.0 |
% |
|
$ |
671,146 |
|
Metropolitan Life Insurance Company |
|
New York |
|
NY |
|
|
15,105,000 |
|
|
|
14.6 |
|
|
|
260,420 |
|
Manufacturers and Traders Trust Company |
|
Buffalo |
|
NY |
|
|
7,999,689 |
|
|
|
7.7 |
|
|
|
257,649 |
|
New York Community Bank |
|
Westbury |
|
NY |
|
|
7,796,517 |
|
|
|
7.5 |
|
|
|
337,019 |
|
Astoria Federal Savings and Loan Assn. |
|
Long Island City |
|
NY |
|
|
3,738,000 |
|
|
|
3.6 |
|
|
|
151,066 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
|
|
$ |
52,164,206 |
|
|
|
50.4 |
% |
|
$ |
1,677,300 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 |
|
As of December 31, 2008 Officer of member bank also
served on the Board of Directors of the FHLBNY. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of |
|
|
|
|
|
|
|
|
|
|
|
|
Par |
|
|
Total Par Value |
|
|
Interest Income |
|
|
|
City |
|
State |
|
|
Advances |
|
|
of Advances |
|
|
Three months |
|
|
Nine months |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hudson City Savings Bank 1 |
|
Paramus |
|
NJ |
|
$ |
16,775,000 |
|
|
|
16.5 |
% |
|
$ |
174,289 |
|
|
$ |
494,241 |
|
Metropolitan Life Insurance Company |
|
New York |
|
NY |
|
|
10,230,000 |
|
|
|
10.1 |
|
|
|
52,746 |
|
|
|
151,855 |
|
New York Community Bank |
|
Westbury |
|
NY |
|
|
8,513,619 |
|
|
|
8.4 |
|
|
|
80,807 |
|
|
|
257,201 |
|
Manufacturers and Traders Trust Company |
|
Buffalo |
|
NY |
|
|
8,204,802 |
|
|
|
8.1 |
|
|
|
63,175 |
|
|
|
192,037 |
|
Merrill Lynch Bank & Trust Co., FSB |
|
New York |
|
NY |
|
|
6,200,000 |
|
|
|
6.1 |
|
|
|
14,891 |
|
|
|
32,494 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
|
|
$ |
49,923,421 |
|
|
|
49.2 |
% |
|
$ |
385,908 |
|
|
$ |
1,127,828 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 |
|
As of September 30, 2008 Officer of member bank also
served on the Board of Directors of the FHLBNY. |
71
The following table summarizes capital stock held by members who were beneficial owners of
more than 5% of the FHLBNYs outstanding capital stock as of September 30, 2009 and December 31,
2008 (shares in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number |
|
|
Percent |
|
|
|
September 30, 2009 |
|
of shares |
|
|
of total |
|
Name of beneficial owner |
|
Principal Executive Office Address |
|
owned |
|
|
capital stock |
|
Hudson City Savings Bank 1 |
|
West 80 Century Road Paramus, NJ 07652 |
|
|
8,770 |
|
|
|
16.64 |
% |
Metropolitan Life Insurance Company |
|
200 Park Ave New York, NY 10166 |
|
|
7,689 |
|
|
|
14.59 |
|
New York Community Bank 1 |
|
615 Merrick Ave Westbury, NY 11590 |
|
|
4,140 |
|
|
|
7.85 |
|
Manufacturers and Traders Trust Company |
|
One M&T Plaza Buffalo, NY 14203 |
|
|
3,174 |
|
|
|
6.02 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23,773 |
|
|
|
45.10 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
1 |
|
Officer of member bank also serves on the Board of Directors of the FHLBNY. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number |
|
|
Percent |
|
|
|
December 31, 2008 |
|
of shares |
|
|
of total |
|
Name of beneficial owner |
|
Principal Executive Office Address |
|
owned |
|
|
capital stock |
|
Hudson City Savings Bank* |
|
West 80 Century Road, Paramus, NJ 07652 |
|
|
8,656 |
|
|
|
15.11 |
% |
Metropolitan Life Insurance Company |
|
200 Park Ave., New York, NY 10166 |
|
|
8,302 |
|
|
|
14.49 |
|
Manufacturers and Traders Trust Company |
|
One M & T Plaza, Buffalo, NY 14203 |
|
|
4,327 |
|
|
|
7.55 |
|
New York Community Bank |
|
615 Merrick Avenue, Westbury, NY 11590 |
|
|
3,928 |
|
|
|
6.86 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,213 |
|
|
|
44.01 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
As of December 31, 2008, officer of member bank served as a member of the Board of Directors of
the FHLBNY. |
72
Note 20. Subsequent events
Subsequent events are events or transactions that occur after the balance sheet date but before
financial statements are issued or are available to be issued. There are two types of subsequent events:
a. The first type consists of events or transactions that provide additional evidence about
conditions that existed at the date of the balance sheet, including the estimates inherent in
the process of preparing financial statements (that is, recognized subsequent events).
b. The second type consists of events that provide evidence about conditions that did not
exist at the date of the balance sheet but arose after that date (that is, nonrecognized
subsequent events).
The FHLBNY has evaluated subsequent
events through November 13, 2009, which is the date its interim financial statements were issued.
Monoline support - Of
the 15 securities determined to have OTTI, 11 are insured by Ambac
Assurance Corp, and two are insured by MBIA Insurance Corp. The Bank
analyzed the bond insurers as going-concerns as well as their
financial strength to assess their ability to perform under their
contractual obligations for the securities owned by the FHLBNY.
All bond insurers are currently performing under the terms of their
contractual agreements with respect to the FHLBNYs insured
bonds. However, estimation of an insurers financial strength
over a long time horizon requires significant judgment and
assumptions. The estimation process includes predicting when the
insurers may no longer have the ability to perform under their
contractual agreements and then comparing the timing and amounts of
cash flow shortfalls of securities that are credit impaired to when
insurer protection may not be available.
The Banks Bond
insurer analysis is outlined under Significant Accounting
Policies and Estimates in Note 1, and in Note 4
Held-to-maturity securities, and the analysis concluded at
September 30, 2009 that the projected time horizon for Ambac
Assurance Corp to provide full insurance protection with respect to
11 insured bonds was 83 months, or through July 31, 2016.
For two bonds insured by MBIA Insurance Corp., full protection was
projected to be provided for 31 months, or through
March 31, 2012. The Bank refers to these dates as the
guarantee ignore dates, implying that security cash flow
shortfalls after that date would not receive any credit protection
from the two bond insurers.
On November 9, 2009,
Ambac Financial Group Inc., the parent company of Ambac Assurance
Corp., and MBIA Inc., the parent company of MBIA Insurance Corp.,
issued interim financial statements for the quarter ended
September 30, 2009. The FHLBNYs review of the interim
financial statements noted the worsening operating conditions of the
parent companies. The Banks monoline analysis and methodology
relies on the claims paying ability of Ambac Assurance Corp and MBIA
Insurance Corp to project the guarantee ignore dates
described above, and based on publicly available financial
information, the Banks monoline analysis did not indicate that
any significant changes to the guarantee ignore dates
were warranted.
As a result of the issuance
of the interim financial statements of MBIA Inc., and Ambac Financial
Group Inc., there have been a series of articles in the financial
news media about the worsening financial condition of the two bond
insurers. An article purported that Ambac Financial Group Inc., was
likely to file for bankruptcy protection. State insurance
regulators indicated that the insurance subsidiary (Ambac Assurance
Corp.) was not subject to federal bankruptcy proceedings and that
state law would govern. The FHLBNY prepared an analysis of its
exposure on the basis of a scenario in which one or both bond
insurers would cease to cover any cash flow shortfalls on the
FHLBNYs insured MBS. The analysis indicated that under this
scenario, the FHLBNY would have recognized additional credit losses
of approximately $7.0 million on a pre-assessment basis as of
September 30, 2009.
Termination of nonqualified
supplemental pension plans — Three nonqualified supplemental pension
plans were terminated effective November 10, 2009, and will have no effect
on the Bank’s financial results, financial position or cash flows for all reported periods.
73
Item 2. MANAGEMENTS 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
Banks filings with the Securities and Exchange Commission.
74
Executive Overview
This overview of managements discussion and analysis highlights selected information and may
not contain all of the information that is important to readers of this Form 10-Q. For a more
complete understanding of events, trends and uncertainties, as well as the liquidity, capital,
credit and market risks, and critical accounting estimates, affecting the Federal Home Loan Bank of
New York (FHLBNY or Bank), this Form 10-Q should be read in its entirety and in conjunction
with the Banks most recent Form 10-K filed on March 27, 2009.
Cooperative business model. As a cooperative, the FHLBNY seeks to maintain a balance
between its public policy mission and its ability to provide adequate returns on the capital
supplied by its members. The FHLBNY achieves this balance by delivering low-cost financing to
members to help them meet the credit needs of their communities and by paying a dividend on the
members capital stock. Reflecting the FHLBNYs cooperative nature, the FHLBNYs 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 FHLBNYs earnings on
invested member capital, net earnings on advances to members, mortgage loans and investments,
offset in part by the FHLBNYs operating expenses and assessments. FHLBNYs board of directors and
management determine the pricing of member credit and dividend policies based on the needs of its
members and the cooperative.
Historical Perspective. The fundamental business of the FHLBNY is to provide member
institutions and housing associates with advances and other credit products in a wide range of
maturities to meet their needs. Congress created the FHLBanks in 1932 to improve the availability
of funds to support home ownership. Although the FHLBanks were initially capitalized with
government funds, members have provided all of the FHLBanks capital for over 50 years.
To accomplish its public purpose, the FHLBanks, including the FHLBNY, offer a readily available,
low-cost source of funds, called advances, to member institutions and certain housing associates.
Congress originally granted access to advances only to those institutions with the potential to
make and hold long-term, amortizing home mortgage loans. Such institutions were primarily federally
and state chartered savings and loan associations, cooperative banks, and state-chartered savings
banks (thrift institutions). FHLBanks and its member thrift institutions are an integral part of
the home mortgage financing system in the United States.
However, a variety of factors, including a severe recession, record-high interest rates, and
deregulation, resulted in significant financial losses for thrift institutions in the 1980s. In
response to the significant cost borne by the American taxpayer to resolve the failed thrift
institutions, Congress restructured the home mortgage financing system in 1989 with the passage of
the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA). Through this
legislation, Congress reaffirmed the housing finance mission of the FHLBanks and expanded
membership eligibility in the FHLBanks to include commercial banks and credit unions with a
commitment to housing finance.
Different FHLBank Business Strategies. Each FHLBank is operated as a separate entity with
its own management, employees and board of directors. In addition, all FHLBanks operate under the
Finance Agencys supervisory and regulatory framework. However, each FHLBanks management and board
of directors determine the best approach for meeting its business objectives and serving its
members. As such, the management and board of directors of each FHLBank have developed different
business
strategies and initiatives to fulfill that FHLBanks mission, and they re-evaluate these strategies
and initiatives from time to time.
75
Business segment. The FHLBNY manages its operations as a single business segment.
Advances to members are the primary focus of the FHLBNYs 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 the Resolution
Funding Corporation (REFCORP), and set aside a percentage of its income towards an Affordable
Housing Program (AHP). Together they are referred to as assessments.
Explanation of the use of certain non-GAAP measures of Interest Income and Expense, Net
Interest income and margin. The FHLBNY has presented its results of operations in accordance
with U.S. generally accepted accounting principles. The FHLBNY has also presented certain
information regarding its Interest Income and Expense, Net Interest income and Net Interest spread
that combines interest expense on debt with net interest paid on interest rate swaps associated
with debt that were hedged on an economic basis. These are non-GAAP financial measures used by
management that the FHLBNY believes are useful to investors and members of the FHLBNY in
understanding the Banks operational performance and business and performance trends. Although the
FHLBNY believes these non-GAAP financial measures enhance investor and members understanding of
the Banks business and performance, these non-GAAP financial measures should not be considered an
alternative to GAAP. When discussing non-GAAP measures, the Bank has provided GAAP measures in
parallel.
Third Quarter 2009 Highlights
The FHLBNY reported current year third quarter Net income of $140.2 million, or $2.70 per
share, compared with $39.8 million, or $0.79 per share for the prior year third quarter.
Net income for the current year third quarter benefited from $59.6 million fair value gains
principally from favorable fair value changes of interest rate swaps and interest rate caps
designated in economic hedges of certain GSE floating-rate MBS. Fair value gains of interest rate
swaps were primarily from swaps that had matured or were nearing maturity. When interest rate swaps
are held to their contractual maturity (or put/call dates), nearly all of the cumulative net fair
value gains and losses that are unrealized will generally reverse over time, and fair value changes
will sum to zero. Favorable fair value changes of purchased caps also designated as an economic
hedge of the balance sheet were also a significant component of the recorded gains in the current
year third quarter. Long-term rates have been rising and in this interest rate environment,
purchased caps will show favorable fair value gains. Such gains are unrealized and will also
reverse if the caps are held to their contractual maturities.
Net interest income in the current year third quarter was $153.3 million, slightly lower than
$157.7 million in the prior year period. Net interest income is the primary contributor to Net
Income for the FHLBNY. Favorable increases from higher intermediation volume of interest-bearing
assets, principally advance volume, was offset by the impact of unfavorable rate related changes in
the current year third quarter compared to prior year period. The Bank earned considerably lower
interest income from investing its members capital to fund interest-earning assets in the low
interest rate environment in the current year third quarter. The cost of debt, relative to yields
from invested assets, continued to decline, and the interest margin in the current year third
quarter widened from the prior year period and partly offset the unfavorable impact of rate related
changes, although margins appear to be gradually narrowing. The Bank funded a significant
percentage of its balance sheet assets utilizing a mix of discount notes and short-term debt at
advantageous spreads, although the Bank has reduced its reliance on discount notes in
the current year quarter because of tightening spreads making discount notes less advantageous.
Discount notes have maturities ranging from overnight to 365 days.
76
FHLBanks issuances of long-term debt continued to be impacted by the general dislocation in the
capital markets, and factors outside the control of the FHLBanks have generally made it
uneconomical for the FHLBanks to issue longer-term debt. Yields demanded by investors for
longer-term FHLBank debt and spreads between 3-month LIBOR and FHLBank long-term debt yield have
remained at levels that make it expensive for the FHLBNY to issue term debt and offer longer-term
advances to members even if there was sufficient investor demand for such debt. That scenario
appears to be gradually changing at least with respect to funding costs for 5-year and shorter
maturity debt.
An other-than-temporary impairment (OTTI) of $3.7 million was recorded as a charge to earnings
recorded in Other income (loss) in the current year third quarter. In the first two quarters, the
Bank had also recorded a charge of $10.6 million. In the third quarter, management determined that
three held-to-maturity private-label MBS had become credit impaired, and the Bank recognized a
credit impairment of $1.5 million. The Banks impairment assessment of certain MBS that were
previously determined to be OTTI also resulted in the recognition of $2.2 million in additional
credit impairment charges, for a total charge of $3.7 million recorded through earnings in the
current year. The charges represented the credit loss component of OTTI. The non-credit component
of OTTI associated with the impairment in the third quarter was $26.5 million and was recorded as a
loss in Accumulated other comprehensive income (loss). Although thirteen of the fifteen securities
that have been impaired through the current year third quarter are insured by bond insurers, Ambac
and MBIA, the Banks analysis of the two bond insurers concluded that future credit losses due to
projected collateral shortfalls of the impaired securities would not be fully supported by the two
bond insurers. See Significant Accounting Policies and Estimates in Note 1 and Note 4
Held-to-maturity securities for more information about impairment methodology and bond insurer
analysis.
Operating Expenses were $17.8 million for the current year third quarter, up by 7.6%, or $1.3
million, from the prior year third quarter. The Banks contribution towards the operating expenses
of the Office of Finance and the Finance Agency was $1.8 million in the current year third quarter,
up by 35.9% from $1.4 million for the prior year period.
REFCORP assessments were $35.1 million in current year third quarter, up by $25.1 million from the
prior year third quarter. AHP assessments were $15.8 million, up by $11.1 million from the prior
year period. Assessments are calculated on Net income before assessments and the increases were due
to higher Net income in current year third quarter compared to prior year period.
Cash dividends of $1.40 per share of capital stock (5.6% annualized return on capital stock) was
paid in the current year third quarter, compared to cash dividend of $1.62 per share of capital
stock (6.50% annualized return on capital stock) paid in the prior year period.
Advances borrowed by members stood at $95.9 billion at September 30, 2009, a decline of $13.2
billion from the outstanding balance at December 31, 2008. Compared to balances at December 31,
2008, short-term fixed-rate advances, adjustable-rate advances, and overnight borrowings declined
at September 30, 2009.
77
Shareholders equity, the sum of Capital stock, Retained earnings, and Accumulated other
comprehensive income (loss) was $5.7 billion at September 30, 2009, a decline of $206.6 million
from December 31, 2008, primarily as a result of decline in members Capital stock. Capital stock
at September 30, 2009 was $5.1 billion, a decline of $443.6 million as compared to December 31,
2008. The decrease in Capital stock was consistent with decrease in advances borrowed by members
since members are required to
purchase stock as a prerequisite to membership and to hold FHLBNY stock as a percentage of advances
borrowed from the FHLBNY. The Banks current practice is to redeem stock in excess of the amount
necessary to support advance activity on a daily basis. As a result, the amount of capital stock
outstanding varies in line with members outstanding advance borrowings. Retained earning were
$666.2 million, up by $283.4 million from December 31, 2008. Dividends paid out of retained
earnings amounted to $191.4 million in the current year three quarters, compared to $250.1 million
in the prior year periods.
Accumulated other comprehensive income (loss), also a component of shareholders equity was a loss
of $147.6 million at September 30, 2009 compared to a loss of $101.2 million at December 31, 2008,
and comprised of net unrealized losses from cash flow hedging activities, additional liabilities on
employee pension plans, net unrealized fair value losses on available-for-sale securities, and
non-credit component of OTTI on held-to-maturity securities.
Year-to-date 2009 Highlights
The FHLBNY reported year-to-date Net income of $474.8 million, or $8.93 per share, compared
with $214.0 million, or $4.55 per share for the prior year period.
Net interest income was $583.5 million for the current year period, up $114.8 million to $468.7
million from the prior year period. The primary drivers were (1) an increase in transaction volume
in the current year period, and (2) a decline in debt costs relative to earnings from advances to
members and investments. Increased use of short-term debt and discount notes, which continued to be
issued to investors at advantageous spreads, resulted in improved net interest margin. The
favorable gains were partly offset by lower earnings from the deployment of member capital to fund
interest earning-assets because of the lower interest rate environment in the current year period.
Net realized and unrealized gain (loss) from derivatives and hedging activities was a gain of
$124.6 million in the current period. In contrast, the Bank recorded a loss of $65.2 million from
derivatives and hedging activities for the prior year period.
The Banks analysis of its investments determined that fifteen held-to-maturity private-label MBS
were credit impaired and to be OTTI, and $14.3 million was recorded as a charge to Other income
(loss) in the current year period. Although thirteen securities are insured by Ambac and MBIA, the
Banks analysis of the two bond insurers concluded that future credit losses due to projected
collateral shortfalls of the impaired securities would not be fully supported by the two bond
insurers. The non-credit component of OTTI recorded in Accumulated other comprehensive income
through the third quarter was $103.9 million.
78
2009 Business Outlook
The following forward-looking statements are based upon the current beliefs and expectations
of the FHLBNYs management and are subject to risks and uncertainties which could cause the
FHLBNYs actual results to differ materially from those set forth in such forward-looking
statements.
The financial crises in the U.S. markets and economy and the global economic slowdown is expected
to continue through 2009 and 2010. The resulting loss of confidence across global and local markets
has created liquidity crises in the financial markets. In response to these circumstances, the U.S.
Treasury, the Federal Reserve System and the FDIC have taken a variety of extraordinary measures
designed to restore confidence in the financial markets and to strengthen financial institutions,
including capital injections, guarantees of bank liabilities and the acquisition of illiquid assets
from banks. These U.S. government initiatives through guarantees in the capital markets may have
resulted in structural changes in the debt market, which in turn may have far-reaching impact on
the ability of the FHLBanks to compete for funds in the financial markets. We are unable at this
time to predict the outcome of these changes.
The outlook for the remainder of 2009 is also predicated on the direction of the U.S. economy,
particularly the slowdown in the housing market, as well as the continued uncertainties in the
financial markets. Against that backdrop, management of the Bank believes it is also difficult to
predict member demand for advances, which are the primary focus of the FHLBNYs operations and the
principal factor that impacts its operating results. Earnings in 2008 were adversely impacted by
the provision for credit losses resulting from the bankruptcy filing of Lehman Brothers Holdings
Inc. and its subsidiary Lehman Brothers Special Financing Inc. Bankruptcy proceedings are ongoing.
A credit OTTI charge of $3.7 million was recorded for the FHLBNYs MBS portfolios in the third
quarters of 2009, which increased the cumulative credit impairment losses recognized to $14.3
million through the current year third quarter. Impairment was recorded despite the fact that many
of the credit impaired bonds are insured by bond insurers, Ambac and MBIA, because it was deemed
unlikely that MBIA and Ambac would be able to perform under their contractual obligations to
support all projected future cash flow shortfalls. Without recovery in the near term such that
liquidity returns to the mortgage-backed securities market, or if the credit losses of the
underlying collateral within the mortgage-backed securities perform worse than expected, or if the
presumption of the ability of monoline insurers to support the insured securities that are
considered to be dependent on insurance is negatively impacted by their future financial
performance, additional other-than-temporary impairment may occur in future periods. Recognition of
additional credit impairment would negatively impact the FHLBNYs Net income.
Generally, the growth or decline in advances is reflective of demand by members for both short-term
liquidity and long-term funding driven by economic factors such as availability to the Banks
members of alternative funding sources that are more attractive, the interest rate environment, and
the outlook for the economy. Members may choose to prepay advances, which may incur prepayment
fees, based on their expectations of interest rate changes and demand for liquidity. Demand for
advances may also be influenced by the dividend payout rate to members on their capital stock
investment in the FHLBNY. Members are required to invest in FHLBNYs capital stock in the form of
membership stock and activity-based stock, which a member is required to purchase in order to
borrow advances. Advance volume is also influenced by merger activity where members are either
acquired by non-members or acquired by members of another FHLBank. When FHLBNY members are acquired
by members of another FHLBank or a non-member, they no longer qualify for membership in the FHLBNY
and the FHLBNY cannot renew outstanding advances or provide new advances to former members.
Subsequent to the merger, maturing advances may not be replaced, which has an immediate impact on
short-term and overnight advance lending.
79
In the FHLBNYs membership district, the housing markets in New York and New Jersey appear to have
fared relatively better than the housing market in general so far; some forecasts are predicting
that the New York and New Jersey housing markets may yet experience further downturn. The Puerto
Rico economy has been in recession for several years and forecasts are that it will continue.
The FHLBNY earns income from investing its members capital to fund interest-earning assets. The
two principal factors that impact earnings from capital are the average amount of capital
outstanding in a period and the interest rate environment in the period. These factors determine
the potential earnings from deployed capital, and both factors are subject to change. The Bank
cannot predict with certainty the level of earnings from capital. In a lower interest rate
environment, deployed capital, which consists of capital stock, retained earnings, and net
non-interest bearing liabilities, will provide relatively lower income. On the other hand, if
member borrowings continue to grow, capital will grow and provide a higher potential for earnings.
The FHLBNYs primary source of funds is the sale of consolidated obligations in the capital
markets, and its ability to obtain funds through the sale of consolidated obligations depends in
part on prevailing conditions in the capital markets, which are beyond the FHLBNYs control. The
FHLBNY may not be able to obtain funding on acceptable terms, if at all, given the extraordinary
market conditions and structural changes in the debt market. If the FHLBNY cannot access funding
when needed on acceptable terms, its ability to support and continue operations could be adversely
affected, which could negatively affect its financial condition and results of operations.
Following the conservatorship of Fannie Mae and Freddie Mac, market pricing of FHLBank issued debt
indicates that market participants believe that obligations of the two GSEs offer lower credit risk
than FHLBank debt obligations, which are generally grouped into the same GSE asset class as Fannie
Mae and Freddie Mac. As a result, investors are more likely to require a premium to acquire FHLBank
debt relative to debt issued by Fannie Mae and Freddie Mac. The cost of the FHLBanks longer-term
debt has also increased sharply relative to LIBOR as investors were only willing to purchase debt
with very short-term maturities. To the extent the FHLBanks receive sub-optimal funding, the Banks
member institutions may in turn experience higher costs for advance borrowings. To the extent the
FHLBanks may not be able to issue long-term debt at economical spreads relative to the 3-month
LIBOR rate, the Banks member institutions borrowing choices may also be limited.
A significant amount of FHLBank bonds have matured through the third quarter of 2009 and refunding
needs have been significant for medium and long-term bonds. If the bond market cannot support
future issuances of medium and long-term bonds, it will put greater pressure on the FHLBank bonds
and investors may demand higher yields. Alternatively, the FHLBanks may resort to the issuance of
discount notes, which have maturities of up to a year only, to fill any refunding gap. Discount
notes may themselves face increased challenges as competition increases from Treasury bills as the
Treasury funds multiple programs implemented for the current crises. The impact of the recession
may reduce member demand for liquidity and may reduce the pressure on the FHLBanks to refinance
maturing bonds in 2009.
80
Selected financial data are presented below (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Statements of Condition |
|
September 30, |
|
|
December 31, |
|
(dollars in millions) |
|
2009 |
|
|
2008 |
|
|
2007 |
|
|
2006 |
|
|
2005 |
|
|
2004 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments (1) |
|
$ |
18,741 |
|
|
$ |
14,195 |
|
|
$ |
25,034 |
|
|
$ |
20,503 |
|
|
$ |
20,945 |
|
|
$ |
17,271 |
|
Interest
bearing balance at FRB ** |
|
|
|
|
|
|
12,169 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advances |
|
|
95,945 |
|
|
|
109,153 |
|
|
|
82,090 |
|
|
|
59,012 |
|
|
|
61,902 |
|
|
|
68,507 |
|
Mortgage loans |
|
|
1,336 |
|
|
|
1,458 |
|
|
|
1,492 |
|
|
|
1,483 |
|
|
|
1,467 |
|
|
|
1,178 |
|
Total assets |
|
|
117,604 |
|
|
|
137,540 |
|
|
|
109,245 |
|
|
|
81,579 |
|
|
|
84,761 |
|
|
|
87,347 |
|
Deposits and borrowings |
|
|
2,276 |
|
|
|
1,452 |
|
|
|
1,606 |
|
|
|
2,266 |
|
|
|
2,650 |
|
|
|
2,297 |
|
Consolidated obligations |
|
|
108,056 |
|
|
|
128,587 |
|
|
|
101,117 |
|
|
|
74,234 |
|
|
|
77,279 |
|
|
|
80,157 |
|
Mandatorily redeemable capital
stock |
|
|
128 |
|
|
|
143 |
|
|
|
239 |
|
|
|
110 |
|
|
|
18 |
|
|
|
127 |
|
AHP liability |
|
|
145 |
|
|
|
122 |
|
|
|
119 |
|
|
|
102 |
|
|
|
91 |
|
|
|
82 |
|
REFCORP liability |
|
|
39 |
|
|
|
5 |
|
|
|
24 |
|
|
|
17 |
|
|
|
14 |
|
|
|
10 |
|
Capital stock |
|
|
5,142 |
|
|
|
5,586 |
|
|
|
4,368 |
|
|
|
3,546 |
|
|
|
3,590 |
|
|
|
3,655 |
|
Retained earnings |
|
|
666 |
|
|
|
383 |
|
|
|
418 |
|
|
|
369 |
|
|
|
291 |
|
|
|
223 |
|
Equity to asset ratio (2) |
|
|
4.81 |
% |
|
|
4.27 |
% |
|
|
4.35 |
% |
|
|
4.79 |
% |
|
|
4.58 |
% |
|
|
4.44 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
Nine months ended |
|
|
|
|
Statements of Condition |
|
September 30, |
|
|
September 30, |
|
|
Years ended December 31, |
|
Averages (dollars in millions) |
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
|
2008 |
|
|
2007 |
|
|
2006 |
|
|
2005 |
|
|
2004 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments (1) |
|
$ |
19,764 |
|
|
$ |
24,592 |
|
|
$ |
5,053 |
|
|
$ |
3,429 |
|
|
$ |
2,253 |
|
|
$ |
22,155 |
|
|
$ |
19,431 |
|
|
$ |
19,347 |
|
|
$ |
16,292 |
|
Interest bearing balance at FRB ** |
|
|
|
|
|
|
|
|
|
|
8,062 |
|
|
|
|
|
|
|
1,322 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advances |
|
|
96,704 |
|
|
|
93,246 |
|
|
|
100,574 |
|
|
|
88,040 |
|
|
|
92,617 |
|
|
|
65,454 |
|
|
|
64,658 |
|
|
|
63,446 |
|
|
|
65,289 |
|
Mortgage loans |
|
|
1,357 |
|
|
|
1,454 |
|
|
|
1,403 |
|
|
|
1,466 |
|
|
|
1,465 |
|
|
|
1,502 |
|
|
|
1,471 |
|
|
|
1,360 |
|
|
|
928 |
|
Total assets |
|
|
120,754 |
|
|
|
120,599 |
|
|
|
128,215 |
|
|
|
114,537 |
|
|
|
119,710 |
|
|
|
89,961 |
|
|
|
86,319 |
|
|
|
85,254 |
|
|
|
84,344 |
|
Interest-bearing deposits and other
borrowings |
|
|
2,083 |
|
|
|
1,653 |
|
|
|
2,006 |
|
|
|
1,998 |
|
|
|
2,003 |
|
|
|
2,202 |
|
|
|
1,709 |
|
|
|
2,100 |
|
|
|
1,971 |
|
Consolidated obligations |
|
|
109,125 |
|
|
|
111,452 |
|
|
|
116,171 |
|
|
|
104,937 |
|
|
|
109,691 |
|
|
|
82,233 |
|
|
|
79,314 |
|
|
|
77,629 |
|
|
|
76,105 |
|
Mandatorily redeemable capital stock |
|
|
128 |
|
|
|
154 |
|
|
|
135 |
|
|
|
174 |
|
|
|
166 |
|
|
|
146 |
|
|
|
51 |
|
|
|
56 |
|
|
|
238 |
|
AHP liability |
|
|
139 |
|
|
|
123 |
|
|
|
132 |
|
|
|
122 |
|
|
|
122 |
|
|
|
108 |
|
|
|
95 |
|
|
|
84 |
|
|
|
83 |
|
REFCORP liability |
|
|
23 |
|
|
|
8 |
|
|
|
23 |
|
|
|
10 |
|
|
|
6 |
|
|
|
10 |
|
|
|
9 |
|
|
|
7 |
|
|
|
4 |
|
Capital stock |
|
|
5,195 |
|
|
|
5,046 |
|
|
|
5,315 |
|
|
|
4,701 |
|
|
|
4,923 |
|
|
|
3,771 |
|
|
|
3,737 |
|
|
|
3,604 |
|
|
|
3,554 |
|
Retained earnings |
|
|
611 |
|
|
|
388 |
|
|
|
522 |
|
|
|
391 |
|
|
|
381 |
|
|
|
362 |
|
|
|
314 |
|
|
|
251 |
|
|
|
159 |
|
|
Operating Results and other data |
|
Three months ended |
|
|
Nine months ended |
|
|
|
|
(dollars in millions) |
|
September 30, |
|
|
September 30, |
|
|
Years ended December 31, |
|
(except earnings and dividends per share) |
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
|
2008 |
|
|
2007 |
|
|
2006 |
|
|
2005 |
|
|
2004 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income (3) |
|
$ |
154 |
|
|
$ |
158 |
|
|
$ |
585 |
|
|
$ |
469 |
|
|
$ |
694 |
|
|
$ |
499 |
|
|
$ |
470 |
|
|
$ |
395 |
|
|
$ |
268 |
|
Net income |
|
|
140 |
|
|
|
40 |
|
|
|
475 |
|
|
|
214 |
|
|
|
259 |
|
|
|
323 |
|
|
|
285 |
|
|
|
230 |
|
|
|
161 |
|
Dividends paid in cash (6) |
|
|
74 |
|
|
|
76 |
|
|
|
191 |
|
|
|
250 |
|
|
|
294 |
|
|
|
273 |
|
|
|
208 |
|
|
|
162 |
|
|
|
66 |
|
AHP expense |
|
|
16 |
|
|
|
5 |
|
|
|
53 |
|
|
|
25 |
|
|
|
30 |
|
|
|
37 |
|
|
|
32 |
|
|
|
26 |
|
|
|
19 |
|
REFCORP expense |
|
|
35 |
|
|
|
10 |
|
|
|
119 |
|
|
|
53 |
|
|
|
65 |
|
|
|
81 |
|
|
|
71 |
|
|
|
58 |
|
|
|
40 |
|
Return on average equity* (4) |
|
|
9.79 |
% |
|
|
2.95 |
% |
|
|
11.06 |
% |
|
|
5.68 |
% |
|
|
4.95 |
% |
|
|
7.85 |
% |
|
|
7.04 |
% |
|
|
5.97 |
% |
|
|
4.34 |
% |
Return on average assets* |
|
|
0.46 |
% |
|
|
0.13 |
% |
|
|
0.50 |
% |
|
|
0.25 |
% |
|
|
0.22 |
% |
|
|
0.36 |
% |
|
|
0.33 |
% |
|
|
0.27 |
% |
|
|
0.19 |
% |
Operating expenses |
|
$ |
18 |
|
|
$ |
17 |
|
|
$ |
54 |
|
|
$ |
49 |
|
|
$ |
66 |
|
|
$ |
67 |
|
|
$ |
63 |
|
|
$ |
59 |
|
|
$ |
51 |
|
Operating expenses ratio* (5) |
|
|
0.06 |
% |
|
|
0.05 |
% |
|
|
0.06 |
% |
|
|
0.06 |
% |
|
|
0.06 |
% |
|
|
0.07 |
% |
|
|
0.07 |
% |
|
|
0.07 |
% |
|
|
0.06 |
% |
Earnings per share |
|
$ |
2.70 |
|
|
$ |
0.79 |
|
|
$ |
8.93 |
|
|
$ |
4.55 |
|
|
$ |
5.26 |
|
|
$ |
8.57 |
|
|
$ |
7.63 |
|
|
$ |
6.36 |
|
|
$ |
4.55 |
|
Dividend per share |
|
$ |
1.40 |
|
|
$ |
1.62 |
|
|
$ |
3.54 |
|
|
$ |
5.67 |
|
|
$ |
6.55 |
|
|
$ |
7.51 |
|
|
$ |
5.59 |
|
|
$ |
4.50 |
|
|
$ |
1.83 |
|
Headcount (Full/part time) |
|
|
259 |
|
|
|
251 |
|
|
|
259 |
|
|
|
251 |
|
|
|
251 |
|
|
|
246 |
|
|
|
232 |
|
|
|
221 |
|
|
|
210 |
|
|
|
|
(1) |
|
Investments include held-to-maturity securities, available for-sale securities, Federal funds,
and loans to other FHLBanks. |
|
(2) |
|
Equity to asset ratio is capital stock plus retained earnings and accumulated other
comprehensive income (loss) as a percentage of total assets. |
|
(3) |
|
Net interest income is net interest income before the provision for credit losses on mortgage
loans. |
|
(4) |
|
Return on average equity is net income as a percentage of average capital stock plus average
retained earnings and average accumulated other
comprehensive income (loss). |
|
(5) |
|
Operating expenses as a percentage of total average assets. |
|
(6) |
|
Excludes dividends paid to non members classified as interest expense under the accounting
standards for certain financial instruments with characteristics of both liabilities and equity. |
|
* |
|
Annualized. |
|
** |
|
FRB program commenced in October 2008. On July 1,
2009, the Bank was no longer eligible to collect interest on excess
balances. The average balance is annualized YTD. |
81
Results of Operations
The following section provides a comparative discussion of the FHLBNYs results of operations
for the current year and prior year third quarter and year-to-date periods. For a discussion of the
significant accounting estimates used by the FHLBNY that affect the results of operations, see
Significant Accounting Policies and Estimates in Note 1 to this Form 10-Q and in the Banks most
recent Form 10-K filed on March 27, 2009.
The FHLBNY manages its operations as a single business segment. Advances to members are the primary
focus of the FHLBNYs operations, and is the principal factor that impacts its operating results.
Interest income from advances is the principal source of revenue. The primary expenses are interest
paid on consolidated obligations debt, operating expenses, principally administrative and overhead
expenses, and Assessments on Net income. The FHLBNY is exempt from ordinary federal, state, and
local taxation except for local real estate tax. It is required to make payments to REFCORP and set
aside funds from its income towards an Affordable Housing Program (AHP), together referred to as
Assessments. Other significant factors affecting the Banks Net income include the volume and
timing of investments in mortgage-backed securities, realized and unrealized gains and losses from
derivatives and hedging activities, losses from the recognition of credit impairment on
investments, and earnings from shareholders capital.
Net income
The FHLBNY reported current year third quarter Net income of $140.2 million, or $2.70 per
share, compared with Net income of $39.8 million, or $0.79 per share in the prior year period.
Current year-to-date Net income was $474.8 million, or $8.93 per share, compared with prior year
period Net income of $214.0 million, or $4.55 per share.
Net interest income in the current year third quarter was $153.3 million, slightly lower than
$157.7 million in the prior year period. Net interest income is the primary contributor to Net
Income for the FHLBNY. Favorable increases from higher intermediation volume of interest-bearing
assets, principally advance volume, was offset by the impact of unfavorable rate related changes in
the current year third quarter compared to prior year period. The Bank earned lower interest income
from investing its members capital to fund interest-earning assets in the lower interest rate
environment in the current year third quarter. The cost of debt, relative to yields from invested
assets, continued to decline, and interest margin in the current year third quarter widened from
the prior year period and partly offset the impact of rate related unfavorable changes, although
margins appear to be gradually narrowing. The Bank funded a significant percentage of its balance
sheet assets utilizing a mix of discount notes and short-term debt at advantageous spreads.
Discount notes have maturities ranging from overnight to 365 days. In the current year third
quarter, the Bank has reduced its reliance on discount notes, relative to prior periods because of
tightening spreads making discount notes less advantageous.
Net interest income was $583.5 million for the current year-to-date period, up by $114.8 million
from the prior year period. The primary driver was the decline in debt costs relative to earnings
from advances to members and investments as the Bank issued greater amounts of discount notes
during most of the first two quarters of the current year at advantageous spreads to finance a
significant percentage of its balance sheet assets.
82
The credit portion of OTTI of $3.7 million was recorded as a charge to current year third quarter
earnings, and represented the credit loss component of OTTI on (1) Three private-label
held-to-maturity MBS, two insured by Ambac, and one uninsured security deemed to be credit impaired
in the current year third quarter, and (2) Seven private-label held-to-maturity securities insured
by Ambac and MBIA that had been previously deemed to be OTTI.
All ten securities, including the insured securities, were determined to be credit impaired, as it
was deemed unlikely that the two bond insurers would be able to perform under their contractual
obligation to support projected shortfall in expected cash flows to be collected. On a year-to-date
basis, the Bank has recorded $14.3 million in credit impairment charges through earnings.
Reported Net realized and unrealized loss from derivative and hedging activities (hedging
activities or derivative and hedging activities) was a gain of $59.6 million in the current year
third quarter in contrast to a loss of $25.5 million in the prior year period. On a year-to-date
basis, the Bank recorded a gain of $124.6 million compared to a loss of $65.2 million in the prior
year period. In order to manage the FHLBNYs interest rate risk profile, management of the FHLBNY
routinely uses derivatives to manage the interest rate risk inherent in the Banks assets and
liabilities. The hedging gains were primarily due to (1) Favorable fair value changes of interest
rate swaps and options designated as economic hedges of debt issued by the FHLBNY, and (2) Reversal
of unfavorable fair value changes recorded in the prior year periods. When derivative instruments
are held to their contractual maturity (or put/call dates), nearly all of the cumulative net fair
value gains and losses that are unrealized will generally reverse over time.
Operating expenses were $17.8 million for the current year third quarter, up by $1.3 million from
the prior year period. On a year-to-date basis, Operating expenses were $54.0 million, up from
$49.5 million in the prior year period. REFCORP assessments were $35.1 million in current year
third quarter, up by $25.1 million from the prior year period. AHP assessments were $15.8 million,
up by $11.1 million from the prior year period. On a year-to-date basis, the combined REFCORP and
AHP assessments were $172.1 million in the current year period, up from $78.3 million in the prior
year period. Assessments are calculated on Net income before assessments and the increases were due
to higher Net income in current year periods compared to prior year periods.
The annualized return on average equity (ROE), which is Net income divided by average Capital
stock, Retained earnings, and Accumulated other comprehensive income, in the current year third
quarter was 9.8% compared with 3.0% for the prior year period. On a year-to-date basis, ROE was
11.1% for the current year period, compared to 5.7% for the prior year period.
83
Interest Income
Interest income from advances and investments in mortgage-backed securities are the principal
source of income for the FHLBNY. Changes in both rate and intermediation volume (average
interest-yielding assets) explain the change in the current year from the prior year.
The principal components of interest income are summarized below (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30, |
|
|
Nine months ended September 30, |
|
|
|
|
|
|
|
|
|
|
|
Percentage |
|
|
|
|
|
|
|
|
|
|
Percentage |
|
|
|
2009 |
|
|
2008 |
|
|
Variance |
|
|
2009 |
|
|
2008 |
|
|
Variance |
|
Interest Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advances |
|
$ |
240,573 |
|
|
$ |
678,896 |
|
|
|
(64.56 |
)% |
|
$ |
1,094,089 |
|
|
$ |
2,211,823 |
|
|
|
(50.53 |
)% |
Interest-bearing deposits |
|
|
1,014 |
|
|
|
3,240 |
|
|
|
(68.70 |
) |
|
|
19,054 |
|
|
|
17,086 |
|
|
|
11.52 |
|
Federal funds sold |
|
|
1,864 |
|
|
|
21,316 |
|
|
|
(91.26 |
) |
|
|
1,933 |
|
|
|
69,921 |
|
|
|
(97.24 |
) |
Available-for-sale securities |
|
|
6,590 |
|
|
|
24,441 |
|
|
|
(73.04 |
) |
|
|
22,881 |
|
|
|
57,016 |
|
|
|
(59.87 |
) |
Held-to-maturity securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term securities |
|
|
111,232 |
|
|
|
138,412 |
|
|
|
(19.64 |
) |
|
|
355,916 |
|
|
|
396,660 |
|
|
|
(10.27 |
) |
Certificates of deposit |
|
|
851 |
|
|
|
51,287 |
|
|
|
(98.34 |
) |
|
|
1,392 |
|
|
|
212,525 |
|
|
|
(99.35 |
) |
Mortgage loans held-for-portfolio |
|
|
17,405 |
|
|
|
19,316 |
|
|
|
(9.89 |
) |
|
|
54,679 |
|
|
|
58,348 |
|
|
|
(6.29 |
) |
Loans to other FHLBanks and other |
|
|
1 |
|
|
|
30 |
|
|
|
(96.67 |
) |
|
|
1 |
|
|
|
33 |
|
|
|
(96.97 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest income |
|
$ |
379,530 |
|
|
$ |
936,938 |
|
|
|
(59.49 |
)% |
|
$ |
1,549,945 |
|
|
$ |
3,023,412 |
|
|
|
(48.74 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impact of hedging advances Cash flows from interest rate swaps are a critical component of
interest income earned from advances. The FHLBNY executes interest rate swaps to modify the
effective interest rate terms of many of its fixed-rate advance products and typically all of its
convertible or putable advances. In these swaps, the FHLBNY effectively converts a fixed-rate
stream of cash flows from its fixed-rate advances to a floating-rate stream of cash flows,
typically indexed to LIBOR. In the current year and prior year periods, cash flow patterns from
derivatives were in line with the Banks interest rate risk management practices and effectively
converted fixed-rate cash flows of hedged advances to LIBOR indexed cash flows. Derivative
strategies are used to manage the interest rate risk inherent in fixed-rate advances and are
designed to protect future interest income.
The table below summarizes interest income earned from advances and the impact of interest rate
derivatives (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
Nine months ended |
|
|
|
September 30, |
|
|
September 30, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
Advance Interest Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advance interest income before adjustment for interest rate swaps |
|
$ |
743,687 |
|
|
$ |
850,236 |
|
|
$ |
2,345,699 |
|
|
$ |
2,551,947 |
|
Net interest
adjustment from interest rate swaps 1 |
|
|
(503,114 |
) |
|
|
(171,340 |
) |
|
|
(1,251,610 |
) |
|
|
(340,124 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Advance interest income reported |
|
$ |
240,573 |
|
|
$ |
678,896 |
|
|
$ |
1,094,089 |
|
|
$ |
2,211,823 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In an interest rate hedge of fixed-rate advances, the swaps are structured to effectively
convert the combined cash flows of the advances and the swaps to LIBOR-based cash flows. In
compliance with the terms of the swap agreement, the FHLBNY pays the swap counterparty fixed-rate
cash flows, which typically mirrors the coupon on the advance. In return, the swap counterparty
pays the FHLBNY a pre-determined spread plus the prevailing LIBOR, which by agreement re-sets
generally every three months. In the table above, the unfavorable cash flow patterns of the
interest rate swaps are indicative of the declining LIBOR rates (obligation of the swap
counterparty) compared to fixed-rate obligation of the FHLBNY. The Bank is generally indifferent to
changes in the cash flow patterns as it typically hedges its fixed-rate consolidated obligation
debt, which is the Banks primary funding base, and achieves it overall net interest spread
objective.
84
Under GAAP, net interest adjustments from derivatives as reported in the table above may be offset
against the hedged financial instrument (e.g. advance) only if the derivative is in a hedge
qualifying relationship. If the hedge does not qualify, and the Bank designates the hedge as an
economic hedge, the net interest adjustments from derivatives are not recorded with the advance.
Instead, the net interest adjustments from swaps are recorded in Other income (loss) as a Net
realized and unrealized gains and losses from hedging activities. Thus, the accounting designation
of a hedge may have a significant impact on reported Interest income from advances. There were no
material amounts of net interest adjustments from interest rate swaps designated as economic hedges
of advances that were reported in Other income in the current year or prior year periods related to
swaps associated with advances.
Interest Expense
The FHLBNYs primary source of funding is through the issuance of consolidated obligation
bonds and discount notes in the global debt markets. Consolidated obligation bonds may be short,
medium- and long-term, while discount notes are short-term instruments. To fund its assets, the
FHLBNY considers its interest rate risk and liquidity requirements in conjunction with consolidated
obligation buyers preferences and capital market conditions when determining the characteristics
of debt to be issued. Typically, the Bank has used fixed-rate callable and non-callable bonds to
fund mortgage-related assets and advances. Discount notes are generally issued to fund advances and
investments with shorter-interest rate reset characteristics.
The principal categories of Interest Expense are summarized below (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30, |
|
|
Nine months ended September 30, |
|
|
|
|
|
|
|
|
|
|
|
Percentage |
|
|
|
|
|
|
|
|
|
|
Percentage |
|
|
|
2009 |
|
|
2008 |
|
|
Variance |
|
|
2009 |
|
|
2008 |
|
|
Variance |
|
Interest Expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated obligations-bonds |
|
$ |
191,708 |
|
|
$ |
628,394 |
|
|
|
(69.49 |
)% |
|
$ |
783,695 |
|
|
$ |
1,952,228 |
|
|
|
(59.86 |
)% |
Consolidated obligations-discount notes |
|
|
31,647 |
|
|
|
141,309 |
|
|
|
(77.60 |
) |
|
|
173,228 |
|
|
|
559,153 |
|
|
|
(69.02 |
) |
Deposits |
|
|
516 |
|
|
|
7,370 |
|
|
|
(93.00 |
) |
|
|
2,002 |
|
|
|
33,235 |
|
|
|
(93.98 |
) |
Mandatorily redeemable capital stock |
|
|
1,807 |
|
|
|
1,950 |
|
|
|
(7.33 |
) |
|
|
5,478 |
|
|
|
8,884 |
|
|
|
(38.34 |
) |
Cash collateral held and other borrowings |
|
|
|
|
|
|
242 |
|
|
|
(100.00 |
) |
|
|
49 |
|
|
|
982 |
|
|
|
(95.01 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest expense |
|
$ |
225,678 |
|
|
$ |
779,265 |
|
|
|
(71.04 |
)% |
|
$ |
964,452 |
|
|
$ |
2,554,482 |
|
|
|
(62.24 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense is principally the coupon payments to investors holding the Banks
consolidated obligation debt. Recorded interest expense in the Statements of Income is adjusted for
the cash flows associated with interest rate swaps in which the Bank generally pays variable-rate
LIBOR-indexed cash flows to derivative counterparties and, in exchange, the Bank receives
fixed-rate cash flows, which
typically mirror the fixed-rate coupon payments to investors holding the debt. The Bank generally
hedges its long-term fixed-rate bonds and almost all fixed-rate callable bonds in hedges that
qualify for hedge accounting. In the current year and prior year periods, the Bank economically
hedged certain floating-rate bonds that were not indexed to 3-month LIBOR. The Bank also
economically hedged certain short-term fixed-rate debt and discount notes because it believed that
the hedges would not be highly effective in offsetting changes in the fair values of the debt and
the swap.
85
Impact of hedging debt Cash flows from interest rate swaps are an important component of interest
expense on debt. The FHLBNY issues both fixed-rate callable and non-callable debt. Typically, the
Bank issues callable debt with the simultaneous execution of cancellable interest rate swaps to
modify the effective interest rate terms and the effective durations of its fixed-rate callable
debt. A substantial percentage of non-callable fixed-rate debt is also swapped to plain vanilla
LIBOR-indexed cash flows.
These hedging strategies benefit the Bank in two principal ways: (1) fixed-rate callable bond in
conjunction with interest rate swap containing a call feature that mirrors the option embedded in
the callable bond enables the FHLBNY to meet its funding needs at yields not otherwise directly
attainable through the issuance of callable debt; and, (2) the issuance of fixed-rate debt and the
simultaneous execution of an interest rate swap convert the debt to an adjustable-rate instrument
tied to an index, typically 3-month LIBOR. Derivative strategies are used to manage the interest
rate risk inherent in fixed-rate debt and certain floating-rate debt that are not indexed to
3-month LIBOR rates. The strategies are designed to protect future interest income. The economic
hedge of debt issued to indices other than 3-month LIBOR (Prime, Federal funds, and 1-month LIBOR)
is designed to effectively convert the cash flows of the debt to 3-month LIBOR.
The table below summarizes interest expense paid on consolidated obligation bonds and the impact of
interest rate swaps (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
Nine months ended |
|
|
|
September 30, |
|
|
September 30, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
Consolidated bonds and discount notes-Interest expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bonds-Interest expense before adjustment for swaps |
|
$ |
343,175 |
|
|
$ |
747,014 |
|
|
$ |
1,167,845 |
|
|
$ |
2,240,456 |
|
Discount notes-Interest expense before adjustment for swaps |
|
|
31,647 |
|
|
|
141,309 |
|
|
|
173,702 |
|
|
|
559,153 |
|
Net interest
adjustment for interest rate swaps 1 |
|
|
(151,467 |
) |
|
|
(118,620 |
) |
|
|
(384,624 |
) |
|
|
(288,228 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Consolidated bonds and discount notes-interest expense reported |
|
$ |
223,355 |
|
|
$ |
769,703 |
|
|
$ |
956,923 |
|
|
$ |
2,511,381 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Generally, in an interest rate hedge of fixed-rate debt, the swaps are structured to
effectively convert the combined cash flows of the consolidated obligation bonds and the swaps to
3-month LIBOR-based cash flows. In compliance with the terms of the swap agreement, the FHLBNY pays
the swap counterparty generally 3-month LIBOR (which re-sets every 3 month to prevailing 3-month
LIBOR) adjusted for a fixed spread. In return, the swap counterparty pays the FHLBNY fixed-rate
cash flows, which typically mirrors the coupon on the bonds. In the table above, the favorable cash
flow patterns of the interest rate swaps are indicative of the declining LIBOR rates (the FHLBNYs
obligation) compared to fixed-rate obligation of the swap counterparty. The Bank is generally
indifferent to changes in the cash flow patterns as it typically hedges its fixed-rate advances to
effectively receive LIBOR based floating-rate cash flows, and achieves it overall net interest
spread objective.
Under GAAP, net interest adjustments from derivatives (as reported in the table above) may be
offset against the hedged financial instrument (e.g. consolidated obligation bonds and discount
notes) only if the derivative is in a hedge qualifying relationship. If the hedge does not qualify,
the Bank designates the hedge as an economic hedge, the net interest adjustments from derivatives
are not recorded with the
hedged debt. Instead, the net interest adjustments from swaps are recorded in Other income (loss)
as a Net realized and unrealized gains and losses from derivatives and hedging activities. Thus,
the accounting designation of a hedge may have a significant impact on reported Interest expense
from consolidated obligation bonds and discount notes.
86
In the current year third quarter and year-to-date periods, significant amounts of bonds and
discount notes were hedged on an economic basis primarily because of the uncertainty whether the
hedges would be highly effective in offsetting changes in fair values of the debt and the
derivatives. Generally, all floating-rate bonds indexed to the Federal Funds Effective rate, the
Prime Rate, and the 1-month LIBOR rates were hedged on an economic basis. Certain longer-term
discount notes (which have maturities up to one year) were also hedged on an economic basis, as
were certain short-term fixed-rate bonds, all for the reason that the Bank was not certain that the
hedges would be highly effective. The net interest adjustments were a favorable cash flows of $19.1
million, associated with all economic swaps. On a GAAP basis, the favorable adjustments were not
recorded to reduce Interest expense and were instead recorded as gain from hedging activities in
Other income as a Net realized and unrealized gains and losses from derivatives and hedging
activities. The impact on Net Income was zero. In the prior year period, the net interest
adjustments were unfavorable and the impact to Interest expense and hedging activities was in
reverse. Unfavorable net interest adjustments from swaps designated as economic hedges of debt was
$20.7 million that could not be recorded under GAAP to increase Interest expense, but had to
recorded as a loss from hedging activities in the prior year period. Impact on Net Income was also
zero.
On a year-to-date basis, the net interest from swaps designated as economic hedges were $36.9
million unfavorable adjustments for the current year and the prior year periods. Under GAAP, the
unfavorable adjustments could not be recorded as an increase to Interest expense. Instead the
adjustments were recorded as a loss from hedging activities. The impact on Net income would sum to
zero.
Net interest income
Net interest income is the principal source of revenue for the Bank, and represents the
difference between income from interest-earning assets and interest expense paid on
interest-bearing liabilities. Net interest income is impacted by a variety of factors member
demand for advances and investment activity, the yields from advances and investments, and the cost
of consolidated obligation debt that is issued by the Bank to fund advances and investments. The
execution of interest rate swaps in the derivative market at a constant spread to LIBOR, in effect
converting fixed-rate advances and fixed-rate debt to conventional adjustable-rate instruments
indexed to LIBOR, results in an important intermediation for the Bank between the capital markets
and the swap market. The intermediation has typically permitted the Bank to raise funds at lower
costs than would otherwise be available through the issuance of simple fixed- or floating-rate debt
in the capital markets. The FHLBNYs deploys the hedging strategies to protect future Net interest
income, but may reduce income in the short-run, although the FHLBNY expects them to benefit future
periods. Income earned from assets funded by member capital and retained earnings, referred to as
deployed capital, which are non-interest bearing, is another important consideration for the
FHLBNY. All of these factors may fluctuate based on changes in interest rates, demand by members
for advances, investor demand for debt issued by the FHLBNY and the change in the spread between
the yields on advances and investments and the cost of financing these assets by the issuance of
debt to investors.
87
Net interest income after provision for credit losses on mortgage loans was $153.3 million for the
current year third quarter, slightly down from $157.7 million from the prior year third quarter.
Net interest income is the principal source of revenue for the Bank. It represents the difference
between income from interest-earning assets and interest expense paid on interest-bearing
liabilities. Volume, as measured by average earning assets minus interest costing liabilities, was
higher in the current year third quarter
relative to prior year period and contributed $34.9 million in higher Net interest income. The
favorable contribution from volume increases were offset by unfavorable rate related changes in
yields from earning assets minus yields paid on liabilities, which resulted in a decline in Net
interest income by $38.8 million in the current year third quarter. The Bank earned lower interest
income from investing its members capital to fund interest-earning assets in the low interest rate
environment in the current year third quarter.
On a year-to-date basis, Net interest income after provision for credit losses on mortgage loans
was $583.5 million for the current year period, up 24.5% or $114.8 million from the prior year
period. Volume increased, primarily from advances, and contributed $98.8 million to the increase.
Rate related changes in yields from earning assets minus yields paid on interest costing
liabilities was also favorable and contributed $17.7 million. Decline in debt costs relative to
earnings from advances to members and investments was a factor in improved Net interest margin as
the Bank, reacting to market place demand for shorter-term bonds, increased issuances of short-term
debt and discount notes to fund its assets at a net favorable spread. The Bank earned lower
interest income from investing its members capital to fund interest-earning assets in the lower
interest rate environment in the current year period relative to prior year period.
88
The following tables summarize key changes in the components of Net interest income (dollars
in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30, |
|
|
|
|
|
|
|
|
|
|
|
Percentage |
|
|
|
2009 |
|
|
2008 |
|
|
Variance |
|
Interest Income |
|
|
|
|
|
|
|
|
|
|
|
|
Advances |
|
$ |
240,573 |
|
|
$ |
678,896 |
|
|
|
(64.56 |
)% |
Interest-bearing deposits |
|
|
1,014 |
|
|
|
3,240 |
|
|
|
(68.70 |
) |
Federal funds sold |
|
|
1,864 |
|
|
|
21,316 |
|
|
|
(91.26 |
) |
Available-for-sale securities |
|
|
6,590 |
|
|
|
24,441 |
|
|
|
(73.04 |
) |
Held-to-maturity securities |
|
|
|
|
|
|
|
|
|
|
|
|
Long-term securities |
|
|
111,232 |
|
|
|
138,412 |
|
|
|
(19.64 |
) |
Certificates of deposit |
|
|
851 |
|
|
|
51,287 |
|
|
|
(98.34 |
) |
Mortgage loans held-for-portfolio |
|
|
17,405 |
|
|
|
19,316 |
|
|
|
(9.89 |
) |
Loans to other FHLBanks and other |
|
|
1 |
|
|
|
30 |
|
|
|
(96.67 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest income |
|
|
379,530 |
|
|
|
936,938 |
|
|
|
(59.49 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Expense |
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated obligations-bonds |
|
|
191,708 |
|
|
|
628,394 |
|
|
|
(69.49 |
) |
Consolidated obligations-discount notes |
|
|
31,647 |
|
|
|
141,309 |
|
|
|
(77.60 |
) |
Deposits |
|
|
516 |
|
|
|
7,370 |
|
|
|
(93.00 |
) |
Mandatorily redeemable capital stock |
|
|
1,807 |
|
|
|
1,950 |
|
|
|
(7.33 |
) |
Cash collateral held and other borrowings |
|
|
|
|
|
|
242 |
|
|
|
(100.00 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest expense |
|
|
225,678 |
|
|
|
779,265 |
|
|
|
(71.04 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income before provision for credit losses |
|
$ |
153,852 |
|
|
$ |
157,673 |
|
|
|
(2.42 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended September 30, |
|
|
|
|
|
|
|
|
|
|
|
Percentage |
|
|
|
2009 |
|
|
2008 |
|
|
Variance |
|
Interest Income |
|
|
|
|
|
|
|
|
|
|
|
|
Advances |
|
$ |
1,094,089 |
|
|
$ |
2,211,823 |
|
|
|
(50.53 |
)% |
Interest-bearing deposits |
|
|
19,054 |
|
|
|
17,086 |
|
|
|
11.52 |
|
Federal funds sold |
|
|
1,933 |
|
|
|
69,921 |
|
|
|
(97.24 |
) |
Available-for-sale securities |
|
|
22,881 |
|
|
|
57,016 |
|
|
|
(59.87 |
) |
Held-to-maturity securities |
|
|
|
|
|
|
|
|
|
|
|
|
Long-term securities |
|
|
355,916 |
|
|
|
396,660 |
|
|
|
(10.27 |
) |
Certificates of deposit |
|
|
1,392 |
|
|
|
212,525 |
|
|
|
(99.35 |
) |
Mortgage loans held-for-portfolio |
|
|
54,679 |
|
|
|
58,348 |
|
|
|
(6.29 |
) |
Loans to other FHLBanks and other |
|
|
1 |
|
|
|
33 |
|
|
|
(96.97 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest income |
|
|
1,549,945 |
|
|
|
3,023,412 |
|
|
|
(48.74 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Expense |
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated obligations-bonds |
|
|
783,695 |
|
|
|
1,952,228 |
|
|
|
(59.86 |
) |
Consolidated obligations-discount notes |
|
|
173,228 |
|
|
|
559,153 |
|
|
|
(69.02 |
) |
Deposits |
|
|
2,002 |
|
|
|
33,235 |
|
|
|
(93.98 |
) |
Mandatorily redeemable capital stock |
|
|
5,478 |
|
|
|
8,884 |
|
|
|
(38.34 |
) |
Cash collateral held and other borrowings |
|
|
49 |
|
|
|
982 |
|
|
|
(95.01 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest expense |
|
|
964,452 |
|
|
|
2,554,482 |
|
|
|
(62.24 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income before provision for credit losses |
|
$ |
585,493 |
|
|
$ |
468,930 |
|
|
|
24.86 |
% |
|
|
|
|
|
|
|
|
|
|
89
The Bank deploys hedging strategies to protect future net interest income. With an interest
rate swap strategy, the Bank generally attempts to convert its fixed-rate interest income and
expense to 3-month LIBOR (floating-rate cash flows), and certain floating-rate debt not linked to
3-month LIBOR. The Bank is generally indifferent to net swap interest expense or income since the
interest-rate exchange between the Bank and swap counterparties are designed to achieve the Banks
Net interest rate spread objectives when considered together with the hedged assets and
liabilities.
Net interest accruals of derivatives designated in a fair value or cash flow hedge qualifying under
the derivatives and hedge accounting rules are recorded as adjustments to the interest income or
interest expense of the hedged assets or liabilities, and may have a significant impact on Net
interest income.
Under GAAP, net interest adjustments from derivatives (as reported in the table below) may be
offset against the hedged financial instrument (e.g. advances, consolidated obligation bonds and
discount notes) only if the derivative is in a qualifying hedge relationship. If the hedge does
not qualify and the Bank designates the hedge as an economic hedge, the net interest adjustments
from the derivatives are not recorded with the hedged asset or liability. Instead, the net
interest adjustments from swaps are recorded in Other income (loss) as a Net realized and
unrealized gains and losses from derivatives and hedging activities. Thus, the accounting
designation of a hedge may have a significant impact on reported Net interest income.
The following table summarizes Net interest adjustments from hedge qualifying interest-rate swaps
to Net interest income (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
Nine months ended |
|
|
|
September 30, |
|
|
September 30, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Income |
|
$ |
882,644 |
|
|
$ |
1,108,278 |
|
|
$ |
2,801,555 |
|
|
$ |
3,363,536 |
|
Net interest adjustment from interest rate swaps |
|
|
(503,114 |
) |
|
|
(171,340 |
) |
|
|
(1,251,610 |
) |
|
|
(340,124 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Reported Interest Income |
|
|
379,530 |
|
|
|
936,938 |
|
|
|
1,549,945 |
|
|
|
3,023,412 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Expense |
|
|
377,145 |
|
|
|
897,885 |
|
|
|
1,349,076 |
|
|
|
2,842,710 |
|
Net interest adjustment from interest rate swaps |
|
|
(151,467 |
) |
|
|
(118,620 |
) |
|
|
(384,624 |
) |
|
|
(288,228 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Reported Interest Expense |
|
|
225,678 |
|
|
|
779,265 |
|
|
|
964,452 |
|
|
|
2,554,482 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Interest income (Margin) |
|
$ |
153,852 |
|
|
$ |
157,673 |
|
|
$ |
585,493 |
|
|
$ |
468,930 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest adjustment interest rate swaps |
|
$ |
(351,647 |
) |
|
$ |
(52,720 |
) |
|
$ |
(866,986 |
) |
|
$ |
(51,896 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
90
A significant amount of swaps were designated as economic hedges of consolidated obligation
debt in a hedge strategy that converted floating-rate debt indexed to 1-month LIBOR, the Prime
rate, and the Federal Funds Effective rate to 3-month LIBOR cash flows. The Bank also economically
hedged certain short-term fixed-rate debt and discount notes that it also believed would not be
highly effective in offsetting changes in the fair values of the debt and the swap. Under GAAP,
interest income or expense from such derivatives are recorded as derivative gains and losses in
Other income (loss) as a Net realized and unrealized gain (loss) from derivatives and hedging
activities. In the current year third quarter, on an economic basis, the impact of derivatives
would have been to increase Net interest income before provision for credit losses by $19.1
million, and to increase net interest spread by 7 basis points to 52 basis points. In contrast, in
the prior year period, Net interest income before provision for credit losses on an economic basis
would have been lower by $20.7 million, and net interest spread lower by 7 basis points to 30 basis
points. On a year-to-date basis, the impact increased GAAP reported Net interest income by $36.9
in the current year and prior year periods, and had the effect of improving reported net interest
spread by 5 basis points. On an economic basis, such interest accrual adjustments on swaps
designated as economic hedges would not have been recorded as hedging gains and losses in Other
income as a Net realized and unrealized gain (loss) from derivatives and hedging activities, and
the impact on Net income would sum to zero.
The following table contrasts Net interest income, Net income spread and Return on earning assets
between GAAP and economic basis1 (dollar amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30, 2009 |
|
|
Three months ended September 30, 2008 |
|
|
|
Amount |
|
|
ROA |
|
|
Net Spread |
|
|
Amount |
|
|
ROA |
|
Net Spread |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP net interest income |
|
$ |
153,852 |
|
|
|
0.51 |
% |
|
|
0.45 |
% |
|
$ |
157,673 |
|
|
|
0.52 |
% |
|
|
0.37 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income (expense) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Swaps not designated in a
hedging relationship |
|
|
19,141 |
|
|
|
0.06 |
|
|
|
0.07 |
|
|
|
(20,745 |
) |
|
|
(0.07 |
) |
|
|
(0.07 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Economic net interest income |
|
$ |
172,993 |
|
|
|
0.57 |
% |
|
|
0.52 |
% |
|
$ |
136,928 |
|
|
|
0.45 |
% |
|
|
0.30 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended September 30, 2009 |
|
|
Nine months ended September 30, 2008 |
|
|
|
Amount |
|
|
ROA |
|
|
Net Spread |
|
|
Amount |
|
|
ROA |
|
|
Net Spread |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP net interest income |
|
$ |
585,493 |
|
|
|
0.61 |
% |
|
|
0.53 |
% |
|
$ |
468,930 |
|
|
|
0.55 |
% |
|
|
0.37 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income (expense) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Swaps not designated in a
hedging relationship |
|
|
(36,869 |
) |
|
|
(0.03 |
) |
|
|
(0.05 |
) |
|
|
(36,915 |
) |
|
|
(0.04 |
) |
|
|
(0.05 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Economic net interest income |
|
$ |
548,624 |
|
|
|
0.58 |
% |
|
|
0.48 |
% |
|
$ |
432,015 |
|
|
|
0.51 |
% |
|
|
0.32 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 |
|
Explanation of the use of certain non-GAAP measures of Interest Income
and Expense, Net Interest income and margin. The FHLBNY has presented its results of operations in
accordance with U.S. generally accepted accounting principles. The FHLBNY has also presented
certain information regarding its Interest Income and Expense, Net Interest income and Net Interest
spread that combines interest expense on debt with net interest paid on interest rate swaps
associated with debt that were hedged on an economic basis. These are non-GAAP financial measures
used by management that the FHLBNY believes are useful to investors and members of the FHLBNY in
understanding the Banks operational performance and business and performance trends. Although the
FHLBNY believes these non-GAAP financial measures enhance investor and members understanding of
the Banks business and performance, these non-GAAP financial measures should not be considered an
alternative to GAAP. When discussing non-GAAP measures, the Bank has provided GAAP measures in
parallel. |
91
Earnings from member capital The FHLBNY earns income from investing its members capital to
fund interest-earning assets. Member capital increased in the current year third quarter and
year-to-date relative to prior year periods when the surge in advances borrowed by members occurred
in the fourth quarter of 2008. As a result, deployed capital, which is capital stock, retained earnings and net
non-interest bearing liabilities grew and provided the FHLBNY with a significant source of income.
The lower interest rate environment in the current year periods had an adverse rate related impact
on earnings from member capital. An average $8.8 billion in deployed capital in the current year
third quarter earned a yield of 1.25%, the annualized yield on aggregate interest-earning assets in
the third quarter. In contrast, in the prior year third quarter, the Banks average deployed
capital was $6.7 billion, significantly lower than the average in the current year, but earned a
higher yield of 3.11%. Based on an assumption that deployed capital was invested to earn 1.25%,
the annualized yield on aggregate earning assets in current year third quarter, and 3.11% in the
prior year period, the Bank would have earned $27.6 million from deployed capital in current year
third quarter, down from $51.7 million in the prior year period. Typically, the Bank earns
relatively greater income in a higher interest rate environment on a given amount of average
deployed capital. On a year-to-date basis, the contrast from earnings from deployed capital in the
current year period compared to prior year period would have been more significant. In the current
year period year-to-date, would have earned $111.5 million compared to $178.1 million in the prior
year period.
92
Spread/Yield Analysis:
The following table summarizes the Banks net interest income and net interest yield and provides
an attribution of changes in rates and volumes of the FHLBNYs interest-earning assets and
interest-bearing liabilities for the third quarters of 2009 and 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
|
September 30, 2009 |
|
|
September 30, 2008 |
|
|
|
|
|
|
|
Interest |
|
|
|
|
|
|
|
|
|
|
Interest |
|
|
|
|
|
|
Average |
|
|
Income/ |
|
|
|
|
|
|
Average |
|
|
Income/ |
|
|
|
|
(dollars in thousands) |
|
Balance |
|
|
Expense |
|
|
Rate 1 |
|
|
Balance |
|
|
Expense |
|
|
Rate 1 |
|
Earning Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advances |
|
$ |
96,703,710 |
|
|
$ |
240,573 |
|
|
|
0.99 |
% |
|
$ |
93,245,965 |
|
|
$ |
678,896 |
|
|
|
2.90 |
% |
Certificates of deposit and others |
|
|
4,105,978 |
|
|
|
1,866 |
|
|
|
0.18 |
|
|
|
7,759,515 |
|
|
|
54,527 |
|
|
|
2.80 |
|
Federal funds sold and other overnight funds |
|
|
5,105,043 |
|
|
|
1,864 |
|
|
|
0.14 |
|
|
|
3,911,620 |
|
|
|
21,316 |
|
|
|
2.17 |
|
Investments |
|
|
12,907,450 |
|
|
|
117,822 |
|
|
|
3.62 |
|
|
|
13,548,202 |
|
|
|
162,853 |
|
|
|
4.78 |
|
Mortgage and other loans |
|
|
1,360,907 |
|
|
|
17,405 |
|
|
|
5.07 |
|
|
|
1,464,801 |
|
|
|
19,346 |
|
|
|
5.25 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-earning assets |
|
$ |
120,183,088 |
|
|
$ |
379,530 |
|
|
|
1.25 |
% |
|
$ |
119,930,103 |
|
|
$ |
936,938 |
|
|
|
3.11 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funded By: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated obligations-bonds |
|
$ |
69,604,012 |
|
|
$ |
191,708 |
|
|
|
1.09 |
|
|
$ |
86,739,278 |
|
|
$ |
628,394 |
|
|
|
2.88 |
|
Consolidated obligations-discount notes |
|
|
39,520,933 |
|
|
|
31,647 |
|
|
|
0.32 |
|
|
|
24,712,661 |
|
|
|
141,309 |
|
|
|
2.27 |
|
Interest-bearing deposits and
other borrowings |
|
|
2,084,189 |
|
|
|
516 |
|
|
|
0.10 |
|
|
|
1,672,191 |
|
|
|
7,612 |
|
|
|
1.81 |
|
Mandatorily redeemable capital stock |
|
|
127,964 |
|
|
|
1,807 |
|
|
|
5.60 |
|
|
|
153,827 |
|
|
|
1,950 |
|
|
|
5.04 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-bearing liabilities |
|
|
111,337,098 |
|
|
|
225,678 |
|
|
|
0.80 |
% |
|
|
113,277,957 |
|
|
|
779,265 |
|
|
|
2.74 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital and other non-interest-
bearing funds |
|
|
8,845,990 |
|
|
|
|
|
|
|
|
|
|
|
6,652,146 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Funding |
|
$ |
120,183,088 |
|
|
$ |
225,678 |
|
|
|
|
|
|
$ |
119,930,103 |
|
|
$ |
779,265 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Interest Income/Spread |
|
|
|
|
|
$ |
153,852 |
|
|
|
0.45 |
% |
|
|
|
|
|
$ |
157,673 |
|
|
|
0.37 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Interest Margin |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Net interest income/Earning Assets) |
|
|
|
|
|
|
|
|
|
|
0.51 |
% |
|
|
|
|
|
|
|
|
|
|
0.52 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 |
|
Reported yields with respect to advances and debt may not necessarily equal
the coupons on the instruments as derivatives are extensively used to change
the yield and optionality characteristics of the underlying hedged items. When
fixed-rate debt is issued by the Bank and hedged with an interest rate
derivative, it effectively converts the debt into a simple floating-rate bond.
Similarly, the Bank makes fixed-rate advances to members and hedges the advance
with a pay-fixed, receive-variable interest rate derivative that effectively
converts the fixed-rate asset to one that floats with prevailing LIBOR rates.
Average balance sheet information is presented as it is more representative of
activity throughout the periods presented. For most components of the average
balances, a daily weighted average balance is calculated for the period. When
daily weighted average balance information is not available, a simple monthly
average balance is calculated. Average yields are derived by dividing income
by the average balances of the related assets and average costs are derived by
dividing expenses by the average balances of the related liabilities. Yields
and rates are annualized. |
93
The following table summarizes the Banks Net interest income and net interest yield and
provides an attribution of changes in rates and volumes of the FHLBNYs interest-earning assets and
interest-bearing liabilities for the nine months ended September 30, 2009 and 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended |
|
|
|
September 30, 2009 |
|
|
September 30, 2008 |
|
|
|
|
|
|
|
Interest |
|
|
|
|
|
|
|
|
|
|
Interest |
|
|
|
|
|
|
Average |
|
|
Income/ |
|
|
|
|
|
|
Average |
|
|
Income/ |
|
|
|
|
(dollars in thousands) |
|
Balance |
|
|
Expense |
|
|
Rate 1 |
|
|
Balance |
|
|
Expense |
|
|
Rate 1 |
|
Earning Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advances |
|
$ |
100,573,968 |
|
|
$ |
1,094,089 |
|
|
|
1.45 |
% |
|
$ |
88,040,082 |
|
|
$ |
2,211,823 |
|
|
|
3.36 |
% |
Certificates of deposit and others |
|
|
3,244,842 |
|
|
|
20,447 |
|
|
|
0.84 |
|
|
|
8,668,826 |
|
|
|
229,611 |
|
|
|
3.54 |
|
Federal funds sold and other overnight funds |
|
|
9,640,541 |
|
|
|
1,933 |
|
|
|
0.03 |
|
|
|
3,475,434 |
|
|
|
69,921 |
|
|
|
2.69 |
|
Investments |
|
|
12,660,109 |
|
|
|
378,797 |
|
|
|
4.00 |
|
|
|
12,191,208 |
|
|
|
453,676 |
|
|
|
4.97 |
|
Mortgage and other loans |
|
|
1,404,958 |
|
|
|
54,679 |
|
|
|
5.20 |
|
|
|
1,470,088 |
|
|
|
58,381 |
|
|
|
5.30 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-earning assets |
|
$ |
127,524,418 |
|
|
$ |
1,549,945 |
|
|
|
1.62 |
% |
|
$ |
113,845,638 |
|
|
$ |
3,023,412 |
|
|
|
3.55 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funded By: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated obligations-bonds |
|
$ |
71,387,598 |
|
|
$ |
783,695 |
|
|
|
1.47 |
|
|
$ |
78,654,860 |
|
|
$ |
1,952,228 |
|
|
|
3.32 |
|
Consolidated obligations-discount notes |
|
|
44,783,185 |
|
|
|
173,228 |
|
|
|
0.52 |
|
|
|
26,281,678 |
|
|
|
559,153 |
|
|
|
2.84 |
|
Interest-bearing deposits and
other borrowings |
|
|
2,040,807 |
|
|
|
2,051 |
|
|
|
0.13 |
|
|
|
2,044,758 |
|
|
|
34,217 |
|
|
|
2.24 |
|
Mandatorily redeemable capital stock |
|
|
135,084 |
|
|
|
5,478 |
|
|
|
5.42 |
|
|
|
174,156 |
|
|
|
8,884 |
|
|
|
6.81 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-bearing liabilities |
|
|
118,346,674 |
|
|
|
964,452 |
|
|
|
1.09 |
% |
|
|
107,155,452 |
|
|
|
2,554,482 |
|
|
|
3.18 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital and other non-interest-
bearing funds |
|
|
9,177,744 |
|
|
|
|
|
|
|
|
|
|
|
6,690,186 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Funding |
|
$ |
127,524,418 |
|
|
$ |
964,452 |
|
|
|
|
|
|
$ |
113,845,638 |
|
|
$ |
2,554,482 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Interest Income/Spread |
|
|
|
|
|
$ |
585,493 |
|
|
|
0.53 |
% |
|
|
|
|
|
$ |
468,930 |
|
|
|
0.37 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Interest Margin |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Net interest income/Earning Assets) |
|
|
|
|
|
|
|
|
0.61 |
% |
|
|
|
|
|
|
|
|
|
|
0.55 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
94
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 FHLBNYs interest income and interest expense (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
|
September 30, 2009 vs. September 30, 2008 |
|
|
|
Increase (decrease) |
|
|
|
Volume |
|
|
Rate |
|
|
Total |
|
Interest Income |
|
|
|
|
|
|
|
|
|
|
|
|
Advances |
|
$ |
25,244 |
|
|
$ |
(463,567 |
) |
|
$ |
(438,323 |
) |
Certificates of deposit and others |
|
|
(25,744 |
) |
|
|
(26,947 |
) |
|
|
(52,691 |
) |
Federal funds sold and other overnight funds |
|
|
6,522 |
|
|
|
(25,974 |
) |
|
|
(19,452 |
) |
Investments |
|
|
(7,724 |
) |
|
|
(37,307 |
) |
|
|
(45,031 |
) |
Mortgage loans and other loans |
|
|
(1,376 |
) |
|
|
(535 |
) |
|
|
(1,911 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest income |
|
|
(3,078 |
) |
|
|
(554,330 |
) |
|
|
(557,408 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Expense |
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated obligations-bonds |
|
|
(124,479 |
) |
|
|
(312,207 |
) |
|
|
(436,686 |
) |
Consolidated obligations-discount notes |
|
|
84,907 |
|
|
|
(194,569 |
) |
|
|
(109,662 |
) |
Deposits and borrowings |
|
|
1,881 |
|
|
|
(8,977 |
) |
|
|
(7,096 |
) |
Mandatorily redeemable capital stock |
|
|
(329 |
) |
|
|
186 |
|
|
|
(143 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest expense |
|
|
(38,020 |
) |
|
|
(515,567 |
) |
|
|
(553,587 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in Net Interest Income |
|
$ |
34,942 |
|
|
$ |
(38,763 |
) |
|
$ |
(3,821 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended |
|
|
|
September 30, 2009 vs. September 30, 2008 |
|
|
|
Increase (decrease) |
|
|
|
Volume |
|
|
Rate |
|
|
Total |
|
Interest Income |
|
|
|
|
|
|
|
|
|
|
|
|
Advances |
|
$ |
314,598 |
|
|
$ |
(1,432,332 |
) |
|
$ |
(1,117,734 |
) |
Certificates of deposit and others |
|
|
(143,533 |
) |
|
|
(65,664 |
) |
|
|
(209,197 |
) |
Federal funds sold and other overnight funds |
|
|
123,919 |
|
|
|
(191,907 |
) |
|
|
(67,988 |
) |
Investments |
|
|
17,433 |
|
|
|
(92,312 |
) |
|
|
(74,879 |
) |
Mortgage loans and other loans |
|
|
(2,584 |
) |
|
|
(1,085 |
) |
|
|
(3,669 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest income |
|
|
309,833 |
|
|
|
(1,783,300 |
) |
|
|
(1,473,467 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Expense |
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated obligations-bonds |
|
|
(180,209 |
) |
|
|
(988,324 |
) |
|
|
(1,168,533 |
) |
Consolidated obligations-discount notes |
|
|
393,265 |
|
|
|
(779,190 |
) |
|
|
(385,925 |
) |
Deposits and borrowings |
|
|
(66 |
) |
|
|
(32,100 |
) |
|
|
(32,166 |
) |
Mandatorily redeemable capital stock |
|
|
(1,991 |
) |
|
|
(1,415 |
) |
|
|
(3,406 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest expense |
|
|
210,999 |
|
|
|
(1,801,029 |
) |
|
|
(1,590,030 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in Net Interest Income |
|
$ |
98,834 |
|
|
$ |
17,729 |
|
|
$ |
116,563 |
|
|
|
|
|
|
|
|
|
|
|
95
Non-Interest Income (Loss)
The principal components of non-interest income are described below:
Service fees Service fees are derived primarily from providing correspondent banking services to
members and fees earned on standby letters of credit. Service fees have declined over
the years due to declining demand for such services. The Bank does not consider income from such
services as a significant element of its operations.
Net realized and unrealized gain (loss) on derivatives and hedging activities The Bank may
designate a derivative as either a hedge of the fair value of a recognized fixed-rate asset or
liability or an unrecognized firm commitment (fair value hedge), a forecasted transaction, or the
variability of future cash flows of a floating-rate asset or liability (cash flow hedge). The Bank
may also designate a derivative in an economic hedge, which does not qualify for hedge accounting
under the accounting standards for derivatives and hedging.
Changes in the fair value of a derivative that qualifies as a fair value hedge under the accounting
standards for derivatives and hedging and the offsetting gain or loss on the hedged asset or
liability that is attributable to the hedged risk are recorded in Other income (loss) as a Net
realized and unrealized gain (loss) on derivatives and hedging activities. To the extent changes
in the fair value of the derivative is not entirely offset by changes in the fair value of the
hedged asset or liability, the net impact from hedging activities is recorded as hedge
ineffectiveness.
Net interest accruals of derivatives designated in a qualifying fair value or cash flow hedges
under the accounting standards for derivatives and hedging are recorded as adjustments to the
interest income or interest expense of the hedged assets or liabilities. Net interest accruals of
derivatives that do not qualify for hedge accounting under the accounting standards for derivatives
and hedging and interest received from in-the-money options are recorded in Other income (loss) as
a Net realized and unrealized gain (loss) on derivatives and hedging activities.
The effective portion of changes in the fair value of a derivative that is designated and qualifies
as a cash flow hedge under the accounting standards for derivatives and hedging are recorded in
Accumulated other comprehensive income (loss).
For all qualifying hedge relationships under the accounting standards for derivatives and hedging,
hedge ineffectiveness resulting from differences between changes in fair values or cash flows of
the hedged item and changes in fair value of the derivatives are recognized in Other income (loss)
as a Net realized and unrealized gain (loss) on derivatives and hedging activities.
Net realized and unrealized gains and losses from qualifying hedging activities under the
accounting standards for derivatives and hedging are typically determined by changes in the
benchmark interest rate (designated as LIBOR by the FHLBNY) and the degree of ineffectiveness of
hedging relationships between the change in the fair value of derivatives and the change in the
fair value of the hedged assets and liabilities attributable to changes in benchmark interest rate.
Typically, such gains and losses represent hedge ineffectiveness between changes in the fair value
of the hedged item and changes in the fair value of the derivative.
96
Redemption of Extinguishment of debt The Bank retires debt principally to reduce future debt
costs when the associated asset is either prepaid or terminated early. Typically, debt retirement
is associated with the prepayments of advances and commercial mortgage-backed securities for which
the Bank may receive prepayment fees. When assets are prepaid ahead of their expected or
contractual maturities, the
Bank also attempts to extinguish debt (consolidated obligation bonds) in order to realign asset and
liability cash flow patterns. Bond retirement typically requires a payment of a premium resulting
in a loss.
Non-Interest Income
The following table summarizes non-interest income (loss) (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
Nine months ended |
|
|
|
September 30, |
|
|
September 30, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
Other income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service fees |
|
$ |
1,101 |
|
|
$ |
934 |
|
|
$ |
3,181 |
|
|
$ |
2,422 |
|
Instruments held at fair value Unrealized gain |
|
|
426 |
|
|
|
3,582 |
|
|
|
8,653 |
|
|
|
3,582 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total OTTI losses |
|
|
(30,169 |
) |
|
|
|
|
|
|
(118,160 |
) |
|
|
|
|
Portion of loss recognized in other comprehensive income |
|
|
26,486 |
|
|
|
|
|
|
|
103,884 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net impairment losses recognized in earnings |
|
|
(3,683 |
) |
|
|
|
|
|
|
(14,276 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net realized and unrealized gain (loss) on
derivatives and hedging activities |
|
|
59,639 |
|
|
|
(25,515 |
) |
|
|
124,613 |
|
|
|
(65,196 |
) |
Net realized gain from sale of available-for-sale
and held-to-maturity securities |
|
|
|
|
|
|
|
|
|
|
721 |
|
|
|
1,058 |
|
Provision for derivative counterparty credit losses |
|
|
|
|
|
|
(64,523 |
) |
|
|
|
|
|
|
(64,523 |
) |
Other |
|
|
(39 |
) |
|
|
92 |
|
|
|
59 |
|
|
|
(42 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other income (loss) |
|
$ |
57,444 |
|
|
$ |
(85,430 |
) |
|
$ |
122,951 |
|
|
$ |
(122,699 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
97
Net impairment losses recognized in earnings on held-to-maturity securities -
Other-than-temporary impairment
An other-than-temporary impairment (OTTI) of $3.7 million was recorded as a charge to Other
income (loss) in the current year third quarter. In the first two quarters, the Bank had also
recorded a charge of $10.6 million. In the third quarter, management determined that three
held-to-maturity private-label MBS had become credit impaired, and the Bank recognized a credit
impairment of $1.5 million. The Banks impairment assessment of certain MBS that were previously
determined to be OTTI also resulted in the recognition of $2.2 million in additional credit
impairment charges, for a total charge of $3.7 million recorded through earnings in the current
year third quarter. The charges represented the credit loss component of OTTI. The non-credit
component of OTTI associated with the impairment in the third quarter was $26.5 million and was
recorded as a loss in Accumulated other comprehensive income (loss). Although thirteen of the
fifteen securities that have been impaired through the current year third quarter are insured by
bond insurers, Ambac and MBIA, the Banks analysis of the two bond insurers concluded that future
credit losses due to projected collateral shortfalls of the impaired securities would not be fully
supported by the two bond insurers.
On a year-to-date basis, the Banks analysis of its investments determined that fifteen
held-to-maturity private-label MBS were credit impaired and to be OTTI, and $14.3 million was
recorded as a charge to Other income (loss). The non-credit component of OTTI recorded in
Accumulated other comprehensive income through the third quarter was $103.9 million. The Bank did
not experience any OTTI during 2008 or 2007.
The table below summarizes the sources of the credit losses recognized year-to-date September 30,
2009 (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2009 |
|
|
|
|
|
|
|
Insurer MBIA |
|
|
Insurer
Ambac |
|
|
Uninsured |
|
|
OTTI |
|
|
Gross OTTI Losses |
|
Security |
|
|
|
|
|
|
|
|
|
Fair |
|
|
|
|
|
|
Fair |
|
|
|
|
|
|
Fair |
|
|
Credit |
|
|
Non-credit |
|
|
Less than |
|
|
More than |
|
Classification |
|
Count |
|
|
UPB |
|
|
Value |
|
|
UPB |
|
|
Value |
|
|
UPB |
|
|
Value |
|
|
Loss |
|
|
Loss |
|
|
12 months |
|
|
12 months |
|
|
RMBS-Prime* |
|
|
1 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
56,867 |
|
|
$ |
54,687 |
|
|
$ |
(438 |
) |
|
$ |
(2,766 |
) |
|
$ |
(3,204 |
) |
|
$ |
|
|
HEL Subprime* |
|
|
14 |
|
|
|
35,616 |
|
|
|
20,653 |
|
|
|
181,995 |
|
|
|
117,651 |
|
|
|
62,461 |
|
|
|
38,392 |
|
|
|
(13,838 |
) |
|
|
(101,118 |
) |
|
|
|
|
|
|
(114,956 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
15 |
|
|
$ |
35,616 |
|
|
$ |
20,653 |
|
|
$ |
181,995 |
|
|
$ |
117,651 |
|
|
$ |
119,328 |
|
|
$ |
93,079 |
|
|
$ |
(14,276 |
) |
|
$ |
(103,884 |
) |
|
$ |
(3,204 |
) |
|
$ |
(114,956 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
RMBS-Prime Private-label MBS supported by prime residential loans; HEL Subprime MBS supported by home equity loans. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Q3 2009 activity |
|
|
|
|
|
|
|
Insurer MBIA |
|
|
Insurer
Ambac |
|
|
Uninsured |
|
|
OTTI |
|
|
Gross OTTI Losses |
|
Security |
|
|
|
|
|
|
|
|
|
Fair |
|
|
|
|
|
|
Fair |
|
|
|
|
|
|
Fair |
|
|
Credit |
|
|
Non-credit |
|
|
Less than |
|
|
More than |
|
Classification |
|
Count |
|
|
UPB |
|
|
Value |
|
|
UPB |
|
|
Value |
|
|
UPB |
|
|
Value |
|
|
Loss |
|
|
Loss |
|
|
12 months |
|
|
12 months |
|
|
RMBS-Prime* |
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
HEL Subprime* |
|
|
10 |
|
|
|
13,304 |
|
|
|
7,680 |
|
|
|
121,435 |
|
|
|
79,700 |
|
|
|
62,460 |
|
|
|
38,392 |
|
|
|
(3,683 |
) |
|
|
(26,486 |
) |
|
|
|
|
|
|
(30,169 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
10 |
|
|
$ |
13,304 |
|
|
$ |
7,680 |
|
|
$ |
121,435 |
|
|
$ |
79,700 |
|
|
$ |
62,460 |
|
|
$ |
38,392 |
|
|
$ |
(3,683 |
) |
|
$ |
(26,486 |
) |
|
$ |
|
|
|
$ |
(30,169 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
RMBS-Prime Private-label MBS supported by prime residential loans; HEL Subprime MBS supported by home equity loans. |
Bond insurer counterparty risks - The current weakened financial condition of Ambac Assurance
Corp., (Ambac) and MBIA Insurance Corp (MBIA) creates a risk that these counterparties will
fail to fulfill their claims paying obligations for certain insured private-label MBS owned by the
FHLBNY. The FHLBNY has determined that the two monoline insurers are at risk with respect to their
claims paying ability, and has also determined that the FHLBNY may rely on the two bond insurers to
remain as viable financial guarantors until July 31, 2016 with respect to Ambac, and March 31, 2012
with respect to MBIA. The FHLBNYs cash flow assessment has determined that absent bond insurance,
certain private-label MBS will experience credit impairment in future periods, and has deemed such
MBS as OTTI, and recorded credit impairment losses. If the financial condition of the two bond
insurers worsens, it could result in a shortening of the length of time the securities could rely
on the two bond insurers for cash flow support. This in turn would result in the recognition of
additional credit impairment losses on securities already deemed OTTI.
The following table summarizes MBS insured by MBIA and Ambac, and identifies additional
credit losses should the two bond insurers fail to provide any support effective September 2009.
The analysis below is a point in time analysis and forecasted credit losses may be greater should
the underlying collateral within the insured MBS perform worse than expected as of September 30,
2009 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Insurer MBIA |
|
|
Cumulative OTTI Recorded |
|
|
Additional |
|
|
|
No. of |
|
|
Amortized |
|
|
Carrying |
|
|
Fair |
|
|
Credit |
|
|
Non-credit |
|
|
Credit losses if zero |
|
Ratings |
|
Securities |
|
|
Cost Basis |
|
|
Value |
|
|
Value |
|
|
Loss |
|
|
Loss |
|
|
insurance assumed |
|
Impaired |
|
|
2 |
|
|
$ |
30,242 |
|
|
$ |
20,600 |
|
|
|
20,653 |
|
|
$ |
(5,370 |
) |
|
$ |
(10,075 |
) |
|
$ |
(1,036 |
) |
Unimpaired |
|
|
1 |
|
|
|
2,948 |
|
|
|
2,948 |
|
|
|
2,337 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
3 |
|
|
$ |
33,189 |
|
|
$ |
23,548 |
|
|
$ |
22,990 |
|
|
$ |
(5,370 |
) |
|
$ |
(10,075 |
) |
|
$ |
(1,036 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Insurer Ambac |
|
|
Cumulative OTTI Recorded |
|
|
Additional |
|
|
|
No. of |
|
|
Amortized |
|
|
Carrying |
|
|
Fair |
|
|
Credit |
|
|
Non-credit |
|
|
Credit losses if zero |
|
Ratings |
|
Securities |
|
|
Cost Basis |
|
|
Value |
|
|
Value |
|
|
Loss |
|
|
Loss |
|
|
insurance assumed |
|
Impaired |
|
|
11 |
|
|
$ |
174,462 |
|
|
$ |
109,189 |
|
|
|
117,651 |
|
|
$ |
(7,411 |
) |
|
$ |
(68,040 |
) |
|
$ |
(5,804 |
) |
Unimpaired |
|
|
2 |
|
|
|
36,400 |
|
|
|
36,400 |
|
|
|
22,853 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
13 |
|
|
$ |
210,862 |
|
|
$ |
145,590 |
|
|
$ |
140,504 |
|
|
$ |
(7,411 |
) |
|
$ |
(68,040 |
) |
|
$ |
(5,804 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
98
Earnings impact of Instruments held at fair value
Under the accounting standards on the fair value option (FVO) for financial assets and
liabilities, the FHLBNY elected to carry certain consolidated obligation bonds at fair value. The
Bank records the unrealized gains and losses on these liabilities in instruments held at fair
value. In general, transactions elected for the fair value option are in economic hedge
relationships. The notional amounts of interest rate swaps executed and outstanding at September
30, 2009 and 2008 were $2.4 billion and $589.0 million and were executed to offset the fair value
volatility of consolidated obligation bonds elected under the fair value option.
The fair value adjustments on consolidated obligation bonds carried at fair value in the current
year third quarter resulted in net unrealized gain of $0.4 million recorded in earnings, compared
to a gain of $3.6 million in the prior year period. On a year-to-date basis, net fair value gains
of $8.7 million were recorded in the current year period compared to $3.6 million in the prior year
period. Gains in the current year-to-date period primarily represented the reversal of bonds that
were in net unrealized loss positions at the beginning of the current year. When bonds recorded at
fair value are held to maturity, their cumulative fair value changes sum to zero at maturity.
These gains were partially offset by losses on derivatives that economically hedged the debt.
Earnings impact of derivatives and hedging activities Net realized and unrealized gain (loss)
from derivatives and hedging activities.
The FHLBNY reported the following net gains (losses) from derivatives and hedging activities (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
Nine months ended |
|
|
|
September 30, |
|
|
September 30, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
Earnings impact of derivatives and hedging activities gain (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives designated as hedging instruments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flow hedges-ineffectiveness |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
(9 |
) |
Fair value hedges-ineffectiveness |
|
|
349 |
|
|
|
11,863 |
|
|
|
13,080 |
|
|
|
6,240 |
|
Derivatives not designated as hedging instruments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Economic hedges-fair value changes-options |
|
|
18,891 |
|
|
|
(8,204 |
) |
|
|
49,557 |
|
|
|
(6,152 |
) |
Net interest income-options |
|
|
(1,786 |
) |
|
|
(19 |
) |
|
|
(3,731 |
) |
|
|
99 |
|
Economic hedges-fair value changes-MPF delivery commitments |
|
|
47 |
|
|
|
141 |
|
|
|
(49 |
) |
|
|
17 |
|
Fair value changes-economic hedges 1 |
|
|
21,218 |
|
|
|
(26,180 |
) |
|
|
105,769 |
|
|
|
(46,108 |
) |
Net interest expense-economic hedges 1 |
|
|
18,382 |
|
|
|
(20,743 |
) |
|
|
(37,708 |
) |
|
|
(36,910 |
) |
Balance sheet Macro hedges swaps |
|
|
210 |
|
|
|
19,983 |
|
|
|
2,617 |
|
|
|
19,983 |
|
Derivatives designated under fair value option |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value changes-interest rate swaps/Bonds |
|
|
2,328 |
|
|
|
(2,356 |
) |
|
|
(4,922 |
) |
|
|
(2,356 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net impact on derivatives and hedging activities |
|
$ |
59,639 |
|
|
$ |
(25,515 |
) |
|
$ |
124,613 |
|
|
$ |
(65,196 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 |
|
Includes de minimis amount of net gains on member intermediated swaps. |
99
Key components of hedging activities recorded in the Statements of Income for the current and
prior year second quarter and year-to-date recorded as a Net realized and unrealized gain (loss)
from hedging activities are described below.
The recorded hedging gains for the current year quarter were primarily due to: (1) Favorable
changes in fair values of interest rate swaps designated in economic hedges of consolidated
obligation bonds. (2) Favorable changes in fair values of interest rate caps designated in
economic hedges of the balance sheet. In a rising rate environment, purchased caps will show
favorable fair value gains. Such gains are unrealized and will also reverse if the caps are held
to their contractual maturities. (3) Income recorded due to favorable cash flows associated with
the interest rate exchange agreements of swaps designated as economic hedges.
Hedge ineffectiveness resulting from qualifying hedges of advances and consolidated obligation
liabilities under the accounting standards for derivatives and hedging were not significant in the
current year third quarter. Hedge ineffectiveness is typically the difference between changes in
fair values of interest rate swaps and hedged consolidated obligation bonds and advances.
The recorded hedging gains for the year-to-date current year period were also primarily due to
favorable changes in the fair values of interest rate swaps designated in economic hedges of
consolidated obligation bonds and favorable changes in the fair values of interest rate caps, as
well as the reversal of previously recognized unrealized net fair value losses on interest rate
swaps. Favorable changes in the current year-to-date period were partly offset by unfavorable
expense related to the cash flows (interest accruals) associated with the interest rate exchange
agreements of swaps designated as economic hedges.
Economic hedges An economic hedge represents derivative transactions that are an approved risk
management hedge but may not qualify for hedge accounting treatment under the accounting standards
for derivatives and hedging. When derivatives are designated as economic hedges, the fair value
changes due to changes in the interest rate and volatility of rates are recorded through the
Statements of Income without the offsetting change in the fair values of the hedged advances and
debt as would be afforded under the derivatives and hedge accounting rules. In general, the
FHLBNYs derivatives are held to maturity or to their call or put dates. At inception, the fair
value is at market and is generally zero. Until the derivative matures or is called or put on
pre-determined dates, fair values will fluctuate with changes in the interest rate environment and
volatility observed in the swap market. At maturity or scheduled call or put dates, the fair value
will generally reverse to zero as the Banks derivatives settle at par. Therefore, nearly all of
the cumulative net gains and losses that are unrealized will reverse over the remaining contractual
terms so that the cumulative gains or losses will sum to zero over the contractual maturity,
scheduled call, or put dates.
However, interest income and expense have economic consequences since they result in exchanges of
cash payments or receipts. If a derivative is prepaid prior to maturity or at predetermined call
and put dates, they are settled at the then existing fair values in cash. Under hedge accounting
rules, net swap interest expense and income associated with swaps in economic hedges of assets and
liabilities are recorded as hedging losses and gains. In the current quarter, net cash flows were
favorable and gains were recorded, in contrast to unfavorable net cash flows for the current
year-to-date period.
Qualifying hedges under the accounting standards for derivatives and hedging Hedge
ineffectiveness occurs when changes in the fair value of the derivative and the associated hedged
financial instrument, generally a debt or advance, do not perfectly offset each other. Hedge
ineffectiveness is associated with changes in the benchmark interest rate and volatility and the
extent of the mismatch of the structure of a derivative and the hedged financial instrument.
100
Economic hedges
|
|
Interest rate swaps In the current year three quarters, the primary economic hedges were
: (1) Interest rate Basis swaps that synthetically converted floating-rate funding based on
Prime rate, Federal funds rate, and the 1-month LIBOR rate to 3-month LIBOR rate. (2)
Interest rate swaps hedging balance sheet risk. (3) Interest rate swaps hedging discount
notes. (4) Interest-rate swaps hedging short-term fixed-rate consolidated obligation bonds.
Changes in the fair values of interest rate swaps in economic hedges, often referred to as
one-sided marks resulted in a net favorable fair value gains of $42.1 million in the current
year third quarter and $65.8 million year-to-date. As described in the previous paragraph,
most of the net fair value gains are reversal of previously recorded fair value losses.
Included in the net gain were favorable cash flows (interest accruals) of $19.1 million
recorded as income in the current year third quarter associated with the interest rate swaps
in economic hedges; in contrast, on a year-to-date basis, included in the net gain the cash
flow accrual was a loss of $36.9 million due to unfavorable cash flows associated with
interest rate swaps designated in economic hedges. |
|
|
Interest rate caps were also designated as economic hedges, and fair value changes of
purchased caps resulted also contributed to recorded fair value gains from derivatives and
hedging activities in the current year third quarter. The Bank has $1.9 billion (notional
amount) in purchased interest rate caps and mitigates certain balance sheet risk metrics. The
fair values of the caps were recorded as derivative assets in the Statements of Condition with
an offset in the Statements of Income as Net realized and unrealized gain (loss) from
derivatives and hedging activities. In a rising interest rate environment at September 30,
2009, relative to December 31, 2008, the fair values of interest rate caps exhibited favorable
fair value gains, which will reverse over the contractual life of the caps if held to
maturity. |
Qualifying hedges under the accounting standards for derivatives and hedging
Net fair value changes from qualifying hedges under the accounting standards for derivatives and
hedging resulted in recorded net fair value gain of $0.3 million in current year third quarter and
$13.1 million year-to-date 2009. Typically, gains and losses in a qualifying hedge represent hedge
ineffectiveness due to changes in fair values of hedged advances and debt from changes in the
benchmark rate (LIBOR for the Bank) that are not entirely offset by changes in the fair values of
the swaps.
Derivative gains and losses reclassified from Accumulated other comprehensive income (loss) to
current period income The following table summarizes changes in derivative gains and (losses) and
reclassifications into earnings from Accumulated other comprehensive income (loss) in the
Statements of Condition (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
Nine months ended |
|
|
|
September 30, |
|
|
September 30, |
|
Accumulated other comprehensive income/(loss) from cash flow hedges |
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
|
Beginning of period |
|
$ |
(26,402 |
) |
|
$ |
(33,698 |
) |
|
$ |
(30,191 |
) |
|
$ |
(30,215 |
) |
Net hedging transactions |
|
|
|
|
|
|
61 |
|
|
|
|
|
|
|
(6,100 |
) |
Reclassified into earnings |
|
|
1,898 |
|
|
|
1,667 |
|
|
|
5,687 |
|
|
|
4,345 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
End of period |
|
$ |
(24,504 |
) |
|
$ |
(31,970 |
) |
|
$ |
(24,504 |
) |
|
$ |
(31,970 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
101
Cash Flow Hedges
There were no material amounts for the current or prior year first quarters that were reclassified
from Accumulated other comprehensive income (loss) into earnings as a result of the discontinuance
of cash flow hedges because it became probable that the original forecasted transactions would not
occur by the end of the originally specified time period or within a two-month period thereafter.
Ineffectiveness from hedges designated as cash flow hedges was not material in any periods reported
in this Form 10-Q.
Over the next twelve months, it is expected that $7.1 million of net losses recorded in Accumulated
other comprehensive income (loss) will be recognized as a charge to earnings.
Debt Extinguishment
The Bank retired $500.0 million of consolidated obligation bond in the current year third quarter
at a loss of $69.5 thousand. No debt was retired or transferred in the prior two quarters of 2009.
Other Expenses (Non-Interest Expense)
The primary components of Other expenses are Operating expenses and Assessments. Operating
expenses included the administrative and overhead costs of operating the Bank and the operating
costs of providing advances and managing collateral associated with the advances, managing the
investment portfolios, and providing correspondent banking services to members.
The FHLBanks, including the FHLBNY, fund the cost of the Office of Finance, a joint office of the
FHLBanks that facilitates issuing and servicing the consolidated obligations of the FHLBanks,
preparation of the combined quarterly and annual financial reports, and certain other functions.
The FHLBanks are also assessed the operating expenses of the Finance Agency, the regulator of the
FHLBanks.
The following table sets forth the principal components of Other expenses (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30, |
|
|
Nine months ended September 30, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
Other expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating |
|
$ |
17,810 |
|
|
$ |
16,549 |
|
|
$ |
53,970 |
|
|
$ |
49,489 |
|
Finance Agency and Office of Finance |
|
|
1,834 |
|
|
|
1,350 |
|
|
|
5,663 |
|
|
|
4,268 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other expenses |
|
$ |
19,644 |
|
|
$ |
17,899 |
|
|
$ |
59,633 |
|
|
$ |
53,757 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
102
Operating Expenses
The following table summarizes the major categories of operating expenses (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30, |
|
|
|
|
|
|
|
Percentage of |
|
|
|
|
|
|
Percentage of |
|
|
|
2009 |
|
|
total |
|
|
2008 |
|
|
total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and employee benefits |
|
$ |
12,075 |
|
|
|
67.80 |
% |
|
$ |
11,134 |
|
|
|
67.28 |
% |
Temporary workers |
|
|
3 |
|
|
|
0.02 |
|
|
|
115 |
|
|
|
0.69 |
|
Occupancy |
|
|
1,128 |
|
|
|
6.33 |
|
|
|
1,092 |
|
|
|
6.60 |
|
Depreciation and leasehold amortization |
|
|
1,369 |
|
|
|
7.69 |
|
|
|
1,217 |
|
|
|
7.35 |
|
Computer service agreements and contractual services |
|
|
1,395 |
|
|
|
7.83 |
|
|
|
945 |
|
|
|
5.71 |
|
Professional and legal fees |
|
|
356 |
|
|
|
2.00 |
|
|
|
642 |
|
|
|
3.88 |
|
Other* |
|
|
1,484 |
|
|
|
8.33 |
|
|
|
1,404 |
|
|
|
8.49 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
$ |
17,810 |
|
|
|
100.00 |
% |
|
$ |
16,549 |
|
|
|
100.00 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended September 30, |
|
|
|
|
|
|
|
Percentage of |
|
|
|
|
|
|
Percentage of |
|
|
|
2009 |
|
|
total |
|
|
2008 |
|
|
total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and employee benefits |
|
$ |
36,036 |
|
|
|
66.77 |
% |
|
$ |
33,515 |
|
|
|
67.72 |
% |
Temporary workers |
|
|
128 |
|
|
|
0.24 |
|
|
|
220 |
|
|
|
0.44 |
|
Occupancy |
|
|
3,273 |
|
|
|
6.06 |
|
|
|
3,097 |
|
|
|
6.26 |
|
Depreciation and leasehold amortization |
|
|
4,020 |
|
|
|
7.45 |
|
|
|
3,575 |
|
|
|
7.22 |
|
Computer service agreements and contractual services |
|
|
4,670 |
|
|
|
8.65 |
|
|
|
3,162 |
|
|
|
6.39 |
|
Professional and legal fees |
|
|
1,144 |
|
|
|
2.12 |
|
|
|
1,604 |
|
|
|
3.24 |
|
Other* |
|
|
4,699 |
|
|
|
8.71 |
|
|
|
4,316 |
|
|
|
8.73 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
$ |
53,970 |
|
|
|
100.00 |
% |
|
$ |
49,489 |
|
|
|
100.00 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
Other primarily represents audit fees, Director fees
and expenses, Insurance and telecommunications |
Assessments
Each FHLBank is required to set aside a portion of earnings to fund its Affordable Housing Program
(AHP) and to satisfy its Resolution Funding Corporation assessment (REFCORP). AHP assessments
are set aside from Net income for future grants and contributions towards the program. REFCORP
expenses are paid to the United States Treasury.
Both the REFCORP and AHP assessments are based on income and the increases reflect the change in
pre-assessment income for the current year third quarter and year-to-date compared to the prior
year periods.
103
Financial
Condition: Assets, Liabilities, and Capital
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in |
|
|
Net change in |
|
(Dollars in thousands) |
|
September 30, 2009 |
|
|
December 31, 2008 |
|
|
dollar amount |
|
|
percentage |
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and due from banks |
|
$ |
1,189,158 |
|
|
$ |
18,899 |
|
|
$ |
1,170,259 |
|
|
|
NM |
% |
Interest-bearing deposits |
|
|
|
|
|
|
12,169,096 |
|
|
|
(12,169,096 |
) |
|
|
(100.00 |
) |
Federal funds sold |
|
|
3,900,000 |
|
|
|
|
|
|
|
3,900,000 |
|
|
|
100.00 |
|
Available-for-sale securities |
|
|
2,362,592 |
|
|
|
2,861,869 |
|
|
|
(499,277 |
) |
|
|
(17.45 |
) |
Held-to-maturity securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term securities |
|
|
10,478,027 |
|
|
|
10,130,543 |
|
|
|
347,484 |
|
|
|
3.43 |
|
Certificates of deposit |
|
|
2,000,000 |
|
|
|
1,203,000 |
|
|
|
797,000 |
|
|
|
66.25 |
|
Advances |
|
|
95,944,732 |
|
|
|
109,152,876 |
|
|
|
(13,208,144 |
) |
|
|
(12.10 |
) |
Mortgage loans held-for-portfolio |
|
|
1,336,228 |
|
|
|
1,457,885 |
|
|
|
(121,657 |
) |
|
|
(8.34 |
) |
Accrued interest receivable |
|
|
354,934 |
|
|
|
492,856 |
|
|
|
(137,922 |
) |
|
|
(27.98 |
) |
Premises, software, and equipment |
|
|
14,596 |
|
|
|
13,793 |
|
|
|
803 |
|
|
|
5.82 |
|
Derivative assets |
|
|
9,092 |
|
|
|
20,236 |
|
|
|
(11,144 |
) |
|
|
(55.07 |
) |
Other assets |
|
|
14,957 |
|
|
|
18,838 |
|
|
|
(3,881 |
) |
|
|
(20.60 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
117,604,316 |
|
|
$ |
137,539,891 |
|
|
$ |
(19,935,575 |
) |
|
|
(14.49 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing demand |
|
$ |
2,255,403 |
|
|
$ |
1,333,750 |
|
|
$ |
921,653 |
|
|
|
69.10 |
% |
Non-interest bearing demand |
|
|
4,968 |
|
|
|
828 |
|
|
|
4,140 |
|
|
|
500.00 |
|
Term |
|
|
15,600 |
|
|
|
117,400 |
|
|
|
(101,800 |
) |
|
|
(86.71 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deposits |
|
|
2,275,971 |
|
|
|
1,451,978 |
|
|
|
823,993 |
|
|
|
56.75 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated obligations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bonds |
|
|
69,670,836 |
|
|
|
82,256,705 |
|
|
|
(12,585,869 |
) |
|
|
(15.30 |
) |
Discount notes |
|
|
38,385,244 |
|
|
|
46,329,906 |
|
|
|
(7,944,662 |
) |
|
|
(17.15 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consolidated obligations |
|
|
108,056,080 |
|
|
|
128,586,611 |
|
|
|
(20,530,531 |
) |
|
|
(15.97 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mandatorily redeemable capital stock |
|
|
127,882 |
|
|
|
143,121 |
|
|
|
(15,239 |
) |
|
|
(10.65 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued interest payable |
|
|
337,221 |
|
|
|
426,144 |
|
|
|
(88,923 |
) |
|
|
(20.87 |
) |
Affordable Housing Program |
|
|
144,822 |
|
|
|
122,449 |
|
|
|
22,373 |
|
|
|
18.27 |
|
Payable to REFCORP |
|
|
38,692 |
|
|
|
4,780 |
|
|
|
33,912 |
|
|
|
709.46 |
|
Derivative liabilities |
|
|
871,744 |
|
|
|
861,660 |
|
|
|
10,084 |
|
|
|
1.17 |
|
Other liabilities |
|
|
91,115 |
|
|
|
75,753 |
|
|
|
15,362 |
|
|
|
20.28 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
111,943,527 |
|
|
|
131,672,496 |
|
|
|
(19,728,969 |
) |
|
|
(14.98 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital |
|
|
5,660,789 |
|
|
|
5,867,395 |
|
|
|
(206,606 |
) |
|
|
(3.52 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and capital |
|
$ |
117,604,316 |
|
|
$ |
137,539,891 |
|
|
$ |
(19,935,575 |
) |
|
|
(14.49 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
104
Balance sheet overview
At September 30, 2009, the FHLBNYs Total assets were $117.6 billion, a decrease of $19.9
billion, or 14.5%, from December 31, 2008. The Banks balance sheet management strategy has been
to keep balance sheet growth or decline in line with the changes in member demand for advances.
Advances borrowed by members stood at $95.9 billion at September 30, 2009, a decline of $13.3
billion, or 12.1% from the outstanding balance at December 31, 2008. Member demand for advance
borrowings in the current year third quarter has been concentrated in the longer-term fixed-rate
advance products, and weak demand for short-term fixed-rate and adjustable-rate borrowings. It
appears that members are attempting to lock-in longer maturity borrowings at prevailing interest
rates. Outstanding amounts of short-term fixed-rate advances, adjustable-rate advances, and
overnight borrowings declined at September 30, 2009 compared to outstanding balances at December
31, 2008. Decline of $1.5 billion in the recorded
fair value basis of hedged advances from the amounts recorded at December 31, 2008 was another
factor that explains the decline in advances as reported in the Statements of Condition at
September 30, 2009.
At June 30, 2009, the Bank held $13.9 billion ($12.2 billion at December 31, 2008) in
interest-earning demand balances at the FRB, which were reported as Interest-bearing deposits in
the Statements of Condition. The liquid investment at the FRB is consistent with the Banks goals
of maintaining liquidity for its members. Historically, the Bank has maintained a significant
inventory of liquid Federal funds and short-term certificates deposits at highly rated financial
institutions to ensure liquidity for its members borrowing needs, especially in the existing
volatile credit markets. Commencing July, 1, 2009, the FRB will no longer pay interest to the
FHLBNY for funds invested in excess of required reserves and it is likely that the Bank will
utilize the federal funds market to achieve its goals of keeping liquid assets for its members
needs.
Amortized cost basis of investments designated as available-for-sale MBS was $2.4 billion at
September 30, 2009, down from $2.9 billion at December 31, 2008. Investments designated as
available for sale were MBS issued by GSEs and are reported at their fair values. Fair values of
MBS classified as available-for-sale were $2.4 billion at September 30, 2009, slightly down from
$2.9 billion at December 31, 2008. Net unrealized fair value losses were $16.1 million at
September 30, 2009, a significant improvement from net unrealized losses of $64.4 million at
December 31, 2008.
Investments designated as held-to-maturity are recorded at carrying value. Carrying value is the
amortized cost basis of the investment if a security is not determined to be OTTI. If a
held-to-maturity security has been determined to be OTTI, amortized cost basis is adjusted to its
fair value at the time of impairment and is the carrying value of the security. Carrying value is
subsequently adjusted for accretion of non-credit portion of OTTI recorded in Accumulated other
comprehensive income (loss). Carrying value is not subsequently adjusted to fair value unless
additional OTTI is recognized. The carrying value of held-to-maturity MBS was $9.7 billion at
September 30, 2009, slightly higher than $9.3 billion at December 31, 2008. The amortized cost
basis of 15 held-to-maturity private label securities were determined to be OTTI because of
evidence of credit impairment and were written down to their fair values at the OTTI determination
dates. The cumulative credit impairment expenses recorded through earnings year-to-date September
30, 2009 was $14.3 million as a charge to earnings recorded in Other income (loss). The non-credit
component of OTTI recorded in Accumulated other comprehensive income through the third quarter was
$103.9 million. The Bank did not experience any OTTI during 2008 or 2007.
At September 30, 2009, balance sheet leverage of 20.8 times shareholders capital was lower from
23.4 times capital at December 31, 2008. The change in leverage reflects the Banks balance sheet
management strategy of keeping the balance sheet change in line with the changes in member demand
for advances. Increases or decreases in investments have a direct impact on leverage, but
generally, growth in or shrinkage of advances does not significantly impact balance sheet leverage
under existing capital stock management practices. This is because changes in shareholders
capital are in line with changes in advances, and the ratio of assets to capital generally remains
unchanged. Under existing capital management practices, members are required to purchase capital
stock to support their borrowings from the Bank, and when capital stock is in excess of the amount
that is required to support advance borrowings, the Bank redeems the excess capital stock
immediately. Therefore, stockholders capital increases and decreases with members advance
borrowings, and the capital to asset ratios remains unchanged. As capital increases or declines in
line with higher or lower volumes of advances, the Bank may also adjust its assets by increasing or
decreasing holdings of short-term investments in certificates of deposit, and, to some extent, its
positions in Federal funds sold, which it inventories to accommodate unexpected member needs for
liquidity.
105
Advances
The FHLBNYs primary business is making collateralized loans, known as advances, to members.
Reported book value of advances was $95.9 billion at September 30, 2009, compared to $109.2 billion
at December 31, 2008. Advances outstanding have been steadily declining through the last three
quarters $100.5 billion at June 30, 2009, down from $104.5 billion at March 31, 2009. Advance
book values include fair value basis adjustments of $4.3 billion at September 30, 2009, compared to
$5.8 billion at December 31, 2008. Fair value basis adjustments are recorded under the hedge
accounting provisions. Par amount of advances outstanding was $91.6 billion at September 30, 2009,
compared to $103.4 billion at December 31, 2008.
The FHLBNYs willingness to be a reliable provider of well-priced funds to our members reflects the
FHLBNYs ability to raise funding in the marketplace through the issuance of consolidated
obligation bonds and discount notes to local and global investors.
Generally, the growth or decline in advances is reflective of demand by members for both short-term
liquidity and term funding driven by economic factors, such as availability to the Banks members
of alternative funding sources that are more attractive, or by the interest rate environment and
the outlook for the economy. Members may choose to prepay advances (which may incur prepayment
penalty fees), based on their expectations of interest rate changes and demand for liquidity.
Demand may also be influenced by the dividend payout to members on their capital stock investment
in the FHLBNY. Members are required to invest in FHLBNYs capital stock in the form of membership
and activity stock. Advance volume is also influenced by merger activity where members are either
acquired by non-members or acquired by members of another FHLBank. When FHLBNY members are
acquired by members of another FHLBank or a non-member, they no longer qualify for membership and
the FHLBNY may not offer renewals or additional advances to non-members. Subsequent to the merger,
maturing advances may not be replaced, which has an immediate impact on short-term and overnight
lending to members.
106
Advances Product Types
The following table summarizes par values of advances by product type (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2009 |
|
|
December 31, 2008 |
|
|
|
|
|
|
|
Percentage |
|
|
|
|
|
|
Percentage |
|
|
|
Amounts |
|
|
of total |
|
|
Amounts |
|
|
of total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustable Rate Credit ARCs |
|
$ |
15,529,850 |
|
|
|
16.95 |
% |
|
$ |
20,205,850 |
|
|
|
19.55 |
% |
Fixed Rate Advances |
|
|
72,008,539 |
|
|
|
78.61 |
|
|
|
71,860,685 |
|
|
|
69.51 |
|
Short-Term Advances |
|
|
1,927,110 |
|
|
|
2.10 |
|
|
|
7,793,500 |
|
|
|
7.54 |
|
Mortgage Matched Advances |
|
|
600,018 |
|
|
|
0.66 |
|
|
|
693,559 |
|
|
|
0.67 |
|
Overnight Line of Credit (OLOC) Advances |
|
|
631,095 |
|
|
|
0.69 |
|
|
|
2,039,423 |
|
|
|
1.97 |
|
All other categories |
|
|
905,397 |
|
|
|
0.99 |
|
|
|
786,710 |
|
|
|
0.76 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total par value |
|
|
91,602,009 |
|
|
|
100.00 |
% |
|
|
103,379,727 |
|
|
|
100.00 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount on AHP Advances |
|
|
(275 |
) |
|
|
|
|
|
|
(330 |
) |
|
|
|
|
Hedging adjustments |
|
|
4,342,998 |
|
|
|
|
|
|
|
5,773,479 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
95,944,732 |
|
|
|
|
|
|
$ |
109,152,876 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compared to balances at December 31, 2008, Short-term fixed-rate advances, Adjustable-rate
advances, and overnight borrowings declined at September 30, 2009.
Member demand for advance products
Adjustable Rate Advances (ARC Advances) Demand for ARC advances in the current
year has declined over the three quarters. Outstanding member borrowings were $20.2 billion at
December 31, 2008, declined to $18.5 billion at March 31, 2009 and to $17.3 billion at June 30,
2009, and was $15.5 billion at September 30, 2009. Generally, the FHLBNYs larger members have
been the more significant borrowers of ARCs.
ARC advances are medium- and long-term loans that can be linked to a variety of indices, such
as 1-month LIBOR, 3-month LIBOR, the Federal funds rate, or Prime. Members use ARC advances to
manage interest rate and basis risks by efficiently matching the interest rate index and
repricing characteristics of floating-rate assets. The interest rate is set and reset
(depending upon the maturity of the advance and the type of index) at a spread to that
designated index. Principal is due at maturity and interest payments are due at every reset
date, including the final payment date.
Fixed-rate Advances Demand for long-term fixed-rate advances has been soft in the
last two quarters after a strong first quarter. Earlier this year, primary demand was for
fixed-rate advances collateralized by pledged securities. In the current year third quarter,
fixed-rate advances collateralized by marketable securities declined slightly to $25.9 million
from $26.4 billion, the outstanding balance at December 31, 2008. Demand for Repo Advances has
been uneven through the three quarters. At March 31, 2009, borrowed amounts grew to $28.0
billion, and then declined to $26.1 billion at June 30, 2009. Repo Advances are offered at a
pricing advantage to members in recognition of the value of the liquid security collateral.
Changes in such borrowings are a reflection of member preference to inventory their securities
holdings. A significant component of Fixed-rate advances is putable advances, also referred to
as Convertible Advances. Putable advances also include Repo Advances that have put or
convertible option features. Outstanding amounts of putable advances were $42.0 billion at
September 30, 2009, $43.2 billion at June 30, 2009 and March 31, 2009, compared to $43.4
billion at December 31, 2008. Historically, Fixed-rate, putable advances have been more
competitively priced relative to fixed-rate bullet advances because of the put feature that
the Bank purchases from the member, driving down the coupon on the advance. In
the present interest rate environment, the price advantage is not significant because of
constraints in offering longer-term-advances that has also narrowed the price advantage of
putable advances.
107
Fixed-rate advances are flexible funding tools that can be used by members to meet short- to
long-term liquidity needs. Terms vary from two days to 30 years. Fixed-rate advances,
comprising putable and non-putable advances were the largest category of advances at September
30, 2009 and December 31, 2008.
Short-term Advances Demand for Short-term fixed-rate advances in the current year
third quarter has been very weak and outstanding balances declined to $1.9 billion at September
30, 2009, a low point for the product, compared to $7.8 billion at December 31, 2008. Although
demand for the product has been weak, balances declined unevenly during the year. In the first
quarter of 2009, outstanding balances had declined to $4.6 billion. In the second quarter,
because of stronger demand, balances grew to $5.2 billion.
Overnight Line of Credit (OLOC Advances) Overnight borrowings were weak during the year
and at September 30, 2009 and outstanding amounts declined.
The OLOC program gives members a short-term, flexible, readily accessible revolving line of
credit for immediate liquidity needs. OLOC Advances mature on the next business day, at which
time the advance is repaid.
Member demand for the OLOC Advances may also reflect the seasonal needs of certain member banks
for their short-term liquidity requirements. Some large members also use OLOC advances to
adjust their balance sheet in line with their own leverage targets.
Merger Activity
Merger activity is an important factor and, if significant, would contribute to an uneven pattern
in advance balances. Merger activity may result in the loss of new business if the member is
acquired by a non-member. The FHLBank Act does not permit new advances to replace maturing
advances to former members. Advances held by members who are acquired by non-members may remain
outstanding until their contractual maturities. Merger activity may also result in a decline in
the advance book if the acquired member decides to prepay existing advances partially or in full
depending on the post-merger liquidity needs.
One member was acquired by a non-member financial institution in the current year third quarter.
The former member is not considered to have a significant borrowing potential. There were no
members acquired by non-members in the two previous quarters. In the prior year first three
quarters, non-members acquired four members.
Prepayment of Advances
Early prepayment initiated by members and former members is another important factor that impacts
advances to members. The FHLBNY charges a member a prepayment fee when the member prepays certain
advances before the original maturity. Member initiated prepayments have not been a significant
factor in the current year relative to last year. Par amounts of advances prepaid totaled $92.0
million in the third quarter and $72.0 million in the prior two quarters. In contrast, in the
first three quarters of 2008, prepayments totaled $3.8 billion. The Bank recorded net prepayment
fees of $0.5 million in the current year third quarter, and $20.5 million on a year-to-date basis.
In the prior year first three quarters,
net prepayment fees recorded was $20.0 million. For advances that are prepaid and hedged under
hedge accounting rules, the FHLBNY generally terminates the hedging relationship upon prepayment
and adjusts the prepayments fees received for the associated fair value basis of the hedged prepaid
advance.
108
Impact of Derivatives and hedging activities advances
The Bank hedges certain advances by the use of both cancellable and non-cancellable interest rate
swaps. These qualify as fair value hedges under the derivatives and hedge accounting rules.
Recorded fair value basis adjustments to advances in the Statements of Condition were a result of
these hedging activities. The Bank hedges the risk of changes in the benchmark rate, which the
FHLBNY has adopted as LIBOR and is also the discounting basis for computing changes in fair values
of hedged advances. Net interest accruals from qualifying hedges under the derivatives and hedge
accounting rules are recorded with interest income from advances in the Statements of Income. Fair
value changes of qualifying hedged advances under the derivatives and hedge accounting rules are
recorded as a Net realized and unrealized gain (loss) on derivative and hedging activities, a
component of Other income (loss) also in the Statements of Income. An offset is recorded as fair
value basis adjustment to the carrying amount of the advances in the Statements of Condition.
The Bank primarily hedges putable or convertible advances and certain bullet fixed-rate advances
that qualify under the hedging provisions of the accounting standards for derivatives and hedging.
Notional amounts of advances hedged by the use of interest rate swaps in economic hedges were not
significant.
At September 30, 2009, $66.5 billion in interest rate swaps hedged advances (both economically and
under the hedging provisions of the accounting standards for derivatives and hedging compared to
$62.3 billion at December 31, 2008.
Derivative transactions are employed to hedge fixed-rate advances in the following manner and to
achieve the following principal objectives:
The FHLBNY:
|
|
makes extensive use of the derivatives to restructure interest rates on fixed-rate
advances, both putable or convertible and non-putable (bullet), to better match the FHLBNYs
cash flows, to enhance yields, and to manage risk from a changing interest rate environment. |
|
|
converts at the time of issuance, certain simple fixed-rate bullet and putable fixed-rate
advances into synthetic floating-rate advances by the simultaneous execution of interest rate
swaps that convert the cash flows of the fixed-rate advances to conventional adjustable rate
instruments tied to an index, typically 3-month LIBOR. |
|
|
uses derivatives to manage the risks arising from changing market prices and volatility of
a fixed coupon advance by matching the cash flows of the advance to the cash flows of the
derivative, and making the FHLBNY indifferent to changes in market conditions. Putable
advances are typically hedged by an offsetting derivative with a mirror-image call option with
identical terms. |
|
|
adjusts the reported carrying value of hedged fixed-rate advances for changes in their fair
value (fair value basis or fair value) that are attributable to the risk being hedged in
accordance with hedge accounting rules. Amounts reported for advances in the Statements of
Condition include fair value hedge basis adjustments. |
109
The most significant element that impacts balance sheet reporting of advances is the recording of
fair value basis adjustments to the carrying value of advances in the Statements of Condition. In
addition,
when putable advances are hedged by cancellable swaps, the possibility of exercise of the call
shortens the expected maturity of the advance. The impact of derivatives to the Banks income is
discussed in this MD&A under Results of Operations. Fair value basis adjustments as measured
under the hedging rules are impacted by both hedge volume and the interest rate environment and the
volatility of the rate environment.
Hedge volume At September 30, 2009 and December 31, 2008, almost all putable fixed-rate advances
were hedged by interest rate swaps that qualified under fair value hedge accounting rules. The
Bank also hedges certain long-term, single maturity (bullet) advances to hedge fair value risk from
changes in the benchmark rate.
Hedge volume as measured by the amount of notional amounts of interest rate swaps outstanding that
hedged advances, both economic and under hedging provisions of the accounting standards for
derivatives and hedging, increased to $66.5 billion at September 30, 2009, compared to $62.3
billion at December 31, 2008. These amounts included notional amounts of swaps of $0.1 billion and
$0.6 billion at September 30, 2009 and December 31, 2008 that were in an economic hedge of
advances. Changes in fair values of the swaps designated as economic hedges were recorded through
earnings without the offset of changes in the fair values of the advances.
The largest component of interest rate swaps hedging advances at September 30, 2009 was comprised
of $40.1 billion in putable advances, slightly below $41.8 billion at December 31, 2008.
Generally, the Bank hedges almost all putable advances with a cancellable interest rate swap. The
put option in the advance is owned by the FHLBNY and mirrors the cancellable swap option terms
owned by the swap counterparty. The Banks putable advance, also referred to as a convertible
advance, contains a put option purchased by the Bank from the member. Under the terms of the put
option, the Bank has the right to terminate the advance at agreed upon dates. The period until the
option is exercisable is known as the lockout period. If the advance is put by the FHLBNY at the
end of the lockout period, the member can borrow an advance product of the members choice at the
then prevailing market rates and at the then existing terms and conditions.
In addition, certain LIBOR-indexed advances have capped coupons that are in effect sold to
borrowers. The fair value changes of the sold caps are offset by fair value changes of purchased
options (caps) with mirror-image terms. Fair value changes of caps due to changes in the benchmark
rate and option volatilities are recorded in Other income (loss) as a Net realized and unrealized
gain (loss) on derivatives and hedging activities in the Statements of Income. Notional amounts of
purchased interest rate caps to hedge embedded caps were $0.4 billion and $0.5 billion at
September 30, 2009 and December 31, 2008, and were designated as economic hedges of caps embedded
in the variable-rate advances borrowed by members.
Fair value basis adjustments The Bank uses interest rate derivatives to hedge the risk of changes
in the benchmark rate, which the FHLBNY has adopted as LIBOR, and is also the discounting basis for
computing changes in fair values of hedged advances. Recorded fair value basis adjustments in the
Statements of Condition were associated with hedging activities under the hedge accounting
provisions. Advances designated at inception as economic hedges do not generate basis adjustments
and these were insignificant at September 30, 2009 and December 31, 2008. Reported book value of
advances at September 30, 2009 included net fair value basis gains of $4.3 billion at September 30,
2009, compared to $5.8 billion at December 31, 2008 and represented net fair value basis
adjustments under hedge accounting rules, and were primarily unrealized gains.
110
Unrealized fair value basis gains were consistent with the forward yield curves at September 30,
2009 and December 31, 2008 that were projecting forward rates below the fixed-rate coupons of
advances that had
been issued in prior periods at the then prevailing higher interest-rate environment. Since hedged
advances are typically fixed-rate, in a declining interest rate environment relative to the coupons
of the advances, fixed-rate advances will exhibit net unrealized fair value basis gains. At
September 30, 2009 and December 31, 2008, unrealized gains from fair value basis adjustments to
advances were almost entirely offset by net fair value unrealized losses of the derivatives
associated with the fair value hedges of advances, thereby achieving the Banks hedging objectives
of mitigating fair value basis risk.
Hedge volume as represented by the notional amounts of advances hedged in qualifying hedges
increased at September 30, 2009 in line with the increase in hedged long-term fixed-rate advances
compared to December 31, 2008. The notional amounts of swaps that were associated in hedging
relationships under hedge accounting rules stood at $66.4 billion at September 30, 2009, up from
$61.7 billion at December 31, 2008. The net fair value basis adjustments of hedged advances in an
unrealized gain position declined to $4.3 billion at September 30, 2009 from $5.8 billion at
December 31, 2008 primarily as a result of the steepening of the yield curve at September 30, 2009
relative to December 31, 2008. As an illustration, the yield of the 5-year swap curve was 2.32% at
September 30, 2009 compared to 1.55% at December 31, 2008.
Investments
The FHLBNY maintains investments for liquidity purposes, to manage capital stock repurchases
and redemptions, to provide additional earnings, and to ensure the availability of funds to meet
the credit needs of its members. The FHLBNY also maintains longer-term investment portfolios,
which are principally mortgage-backed securities issued by government-sponsored mortgage agencies,
a smaller portfolio of MBS issued by private enterprises, and securities issued by state or local
housing finance agencies.
Mortgage- and asset-backed securities acquired must carry the highest ratings from Moodys
Investors Service (Moodys) or Standard & Poors Rating Services (S&P) at the time of purchase.
Finance Agency regulations prohibit the FHLBanks, including the FHLBNY, from investing in certain
types of securities and limit the investment in mortgage- and asset-backed securities.
Limits on the size of the MBS portfolio are defined by Finance Agency regulations, which limits
holding of MBS to 300% of capital. At September 30, 2009 and December 31, 2008, the Bank was
within that limit.
On March 24, 2008, the Board of Directors of the Federal Housing Finance Board, predecessor to the
Finance Agency adopted Resolution 2008-08, which temporarily expanded the authority of a FHLBank to
purchase mortgage-backed securities (MBS) under certain conditions. The resolution allowed a
FHLBank to increase its investments in MBS issued by Fannie Mae and Freddie Mac by an amount equal
to three times its capital, which is to be calculated in addition to the existing limit. The
expanded authority permitted MBS to be as much as 600% of the FHLBNYs capital. Currently, the
FHLBNY has not exercised the expanded authority provided under the temporary regulations to
purchase MBS issued by Fannie Mae and Freddie Mac.
OTTI In the current year third quarter based on the managements determination of a decrease in
cash flows expected to be collected (cash flow shortfall) three held-to-maturity private-label MBS
were deemed credit impaired, and the Bank recognized a credit impairment charge to earnings of $1.5
million. The Banks credit impairment assessment of certain MBS that were previously determined to
be OTTI also resulted in the recognition of $2.2 million in additional credit impairment charges,
for a total charge of $3.7 million recorded through earnings in the current year third quarter.
The charges represented the credit loss component of OTTI. The non-credit component of OTTI
associated with the impairment in
the third quarter was $26.5 million and was recorded as a loss in Accumulated other comprehensive
income (loss). In all fifteen securities have been deemed OTTI through the current year third
quarter. Thirteen impaired securities are insured by bond insurers, Ambac and MBIA. The Banks
analysis of the two bond insurers concluded that future credit losses due to projected collateral
shortfalls of the impaired securities would not be fully supported by the two bond insurers.
111
The cumulative credit impairment expenses recorded through earnings year-to-date September 30, 2009
was $14.3 million as a charge to earnings recorded in Other income (loss). The non-credit
component of OTTI recorded in Accumulated other comprehensive income through the third quarter was
$103.9 million. The Bank did not experience any OTTI during 2008 or 2007.
The tables below summarize the key characteristics of the OTTI securities at September 30, 2009
(dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2009 |
|
|
|
|
|
|
|
Insurer MBIA |
|
|
Insurer
Ambac |
|
|
Uninsured |
|
|
OTTI |
|
|
Gross OTTI Losses |
|
Security |
|
|
|
|
|
|
|
|
|
Fair |
|
|
|
|
|
|
Fair |
|
|
|
|
|
|
Fair |
|
|
Credit |
|
|
Non-credit |
|
|
Less than |
|
|
More than |
|
Classification |
|
Count |
|
|
UPB |
|
|
Value |
|
|
UPB |
|
|
Value |
|
|
UPB |
|
|
Value |
|
|
Loss |
|
|
Loss |
|
|
12 months |
|
|
12 months |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RMBS-Prime* |
|
|
1 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
56,867 |
|
|
$ |
54,687 |
|
|
$ |
(438 |
) |
|
$ |
(2,766 |
) |
|
$ |
(3,204 |
) |
|
$ |
|
|
HEL Subprime* |
|
|
14 |
|
|
|
35,616 |
|
|
|
20,653 |
|
|
|
181,995 |
|
|
|
117,651 |
|
|
|
62,461 |
|
|
|
38,392 |
|
|
|
(13,838 |
) |
|
|
(101,118 |
) |
|
|
|
|
|
|
(114,956 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
15 |
|
|
$ |
35,616 |
|
|
$ |
20,653 |
|
|
$ |
181,995 |
|
|
$ |
117,651 |
|
|
$ |
119,328 |
|
|
$ |
93,079 |
|
|
$ |
(14,276 |
) |
|
$ |
(103,884 |
) |
|
$ |
(3,204 |
) |
|
$ |
(114,956 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
RMBS-Prime Private-label MBS supported by prime residential loans; HEL Subprime MBS supported
by home equity loans. |
The table below summarizes the key characteristics of the securities that were deemed OTTI in
the third quarter of 2009 (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Q3 2009 activity |
|
|
|
|
|
|
|
Insurer MBIA |
|
|
Insurer
Ambac |
|
|
Uninsured |
|
|
OTTI |
|
|
Gross OTTI Losses |
|
Security |
|
|
|
|
|
|
|
|
|
Fair |
|
|
|
|
|
|
Fair |
|
|
|
|
|
|
Fair |
|
|
Credit |
|
|
Non-credit |
|
|
Less than |
|
|
More than |
|
Classification |
|
Count |
|
|
UPB |
|
|
Value |
|
|
UPB |
|
|
Value |
|
|
UPB |
|
|
Value |
|
|
Loss |
|
|
Loss |
|
|
12 months |
|
|
12 months |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RMBS-Prime* |
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
HEL Subprime* |
|
|
10 |
|
|
|
13,304 |
|
|
|
7,680 |
|
|
|
121,435 |
|
|
|
79,700 |
|
|
|
62,460 |
|
|
|
38,392 |
|
|
|
(3,683 |
) |
|
|
(26,486 |
) |
|
|
|
|
|
|
(30,169 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
10 |
|
|
$ |
13,304 |
|
|
$ |
7,680 |
|
|
$ |
121,435 |
|
|
$ |
79,700 |
|
|
$ |
62,460 |
|
|
$ |
38,392 |
|
|
$ |
(3,683 |
) |
|
$ |
(26,486 |
) |
|
$ |
|
|
|
$ |
(30,169 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
RMBS-Prime Private-label MBS supported by prime residential loans; HEL Subprime MBS supported
by home equity loans. |
112
The following table summarizes changes in investments by categories (including
held-to-maturity securities, available-for-sale securities, and money market investments) between
September 30, 2009 and December 31, 2008. Amounts are after writing down the amortized cost basis
of held-to-maturity impaired securities to fair values at the time of impairment. No securities
classified as available-for-sale are OTTI. (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, |
|
|
December 31, |
|
|
Dollar |
|
|
Percentage |
|
|
|
2009 |
|
|
2008 |
|
|
Variance |
|
|
Variance |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
State and local housing agency obligations 1 |
|
$ |
791,187 |
|
|
$ |
804,100 |
|
|
$ |
(12,913 |
) |
|
|
(1.61 |
)% |
Mortgage-backed securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale securities, at fair value |
|
|
2,350,308 |
|
|
|
2,851,682 |
|
|
|
(501,374 |
) |
|
|
(17.58 |
) |
Held-to-maturity securities, at carrying value |
|
|
9,686,840 |
|
|
|
9,326,443 |
|
|
|
360,397 |
|
|
|
3.86 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,828,335 |
|
|
|
12,982,225 |
|
|
|
(153,890 |
) |
|
|
(1.19 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Grantor trusts 2 |
|
|
12,284 |
|
|
|
10,187 |
|
|
|
2,097 |
|
|
|
20.59 |
|
Certificates of deposit 1 |
|
|
2,000,000 |
|
|
|
1,203,000 |
|
|
|
797,000 |
|
|
|
66.25 |
|
Federal funds sold |
|
|
3,900,000 |
|
|
|
|
|
|
|
3,900,000 |
|
|
|
NA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total investments |
|
$ |
18,740,619 |
|
|
$ |
14,195,412 |
|
|
$ |
4,545,207 |
|
|
|
32.02 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 |
|
Classified as held-to-maturity securities, at carrying value. |
|
2 |
|
Classified as available-for-sale securities, at fair value
and represents investments in registered mutual funds and other fixed-income
securities maintained under the grantor trusts. |
Long-term investments
At September 30, 2009 and December 31, 2008, investments with original contractual maturities
that were long-term comprised of mortgage- and asset-backed securities, and investment in
securities issued by state and local housing agencies. These investments were classified as either
held-to-maturity or available-for-sale securities in accordance with accounting standard on
investments in debt and equity securities as amended by the guidance on recognition and
presentation of other-than-temporary impairments. Several grantor trusts have been established and
owned by the FHLBNY to fund current and potential future payments to retirees for supplemental
pension plan obligations. The trust funds are invested in fixed-income and equity funds, which
were classified as available-for-sale.
113
Mortgage-backed securities By issuer
Composition of FHLBNYs held-to-maturity mortgage-backed securities was as follows (carrying
values; dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, |
|
|
Percentage |
|
|
December 31, |
|
|
Percentage |
|
|
|
2009 |
|
|
of total |
|
|
2008 |
|
|
of total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. government sponsored enterprise residential mortgage-backed securities |
|
$ |
8,303,785 |
|
|
|
85.72 |
% |
|
$ |
7,577,036 |
|
|
|
81.24 |
% |
U.S. agency residential mortgage-backed securities |
|
|
187,470 |
|
|
|
1.94 |
|
|
|
6,325 |
|
|
|
0.07 |
|
U.S. agency commercial mortgage-backed securities |
|
|
49,706 |
|
|
|
0.51 |
|
|
|
|
|
|
|
|
|
Private-label issued securities backed by home equity loans |
|
|
454,461 |
|
|
|
4.69 |
|
|
|
636,466 |
|
|
|
6.83 |
|
Private-label issued residential mortgage-backed securities |
|
|
482,874 |
|
|
|
4.99 |
|
|
|
609,908 |
|
|
|
6.54 |
|
Private-label issued commercial mortgage-backed securities |
|
|
|
|
|
|
|
|
|
|
266,994 |
|
|
|
2.86 |
|
Private-label issued securities backed by manufactured housing loans |
|
|
208,544 |
|
|
|
2.15 |
|
|
|
229,714 |
|
|
|
2.46 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Held-to-maturity securities-mortgage-backed securities |
|
$ |
9,686,840 |
|
|
|
100.00 |
% |
|
$ |
9,326,443 |
|
|
|
100.00 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Held-to-maturity mortgage- and asset-backed securities (MBS) Government sponsored
enterprise (GSE) and U.S. government agency issued MBS aggregated $8.5 billion and $7.6 billion
at September 30, 2009 and December 31, 2008. They represented 88.2% and 81.3% of total MBS
classified as held-to-maturity at those dates. Privately issued mortgage-backed securities made up
11.8% and 18.7% at September 30, 2009 and December 31, 2008 and included commercial mortgage- and
asset-backed securities, and mortgage-pass-throughs and Real Estate Mortgage Investment Conduit
bonds.
In the current year first three quarters, the Bank acquired $2.8 billion of GSE and U.S. government
agency issued MBS for the held-to-maturity portfolio. Securities acquired were triple-A rated.
The Banks conservative purchasing practice over the years is evidenced by the high concentration
of mortgage-backed securities issued by a GSE.
Local and housing finance agency bonds The FHLBNY had investments in primary public and private
placements of taxable obligations of state and local housing finance authorities (HFA) classified
as held-to-maturity. Investments in state and local housing finance bonds help to fund mortgages
that finance low- and moderate-income housing. In the current year third quarter, the Bank
acquired $25.0 million of a bond issued by a housing agency.
Available-for-sale securities The FHLBNY classifies investments that it may sell before maturity
as available-for-sale and carries them at fair value. Fair value changes are recorded in
Accumulated other comprehensive income until the security is sold or is anticipated to be sold.
Composition of FHLBNYs available-for-sale securities was as follows (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, |
|
|
Percentage |
|
|
December 31, |
|
|
Percentage |
|
|
|
2009 |
|
|
of total |
|
|
2008 |
|
|
of total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae |
|
$ |
1,626,069 |
|
|
|
69.19 |
% |
|
$ |
1,854,988 |
|
|
|
65.05 |
% |
Freddie Mac |
|
|
724,239 |
|
|
|
30.81 |
|
|
|
996,694 |
|
|
|
34.95 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total AFS mortgage-backed securities |
|
|
2,350,308 |
|
|
|
100.00 |
% |
|
|
2,851,682 |
|
|
|
100.00 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Grantor Trusts Mutual funds |
|
|
12,284 |
|
|
|
|
|
|
|
10,187 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Available-for-sale portfolio |
|
$ |
2,362,592 |
|
|
|
|
|
|
$ |
2,861,869 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At September 30, 2009 and December 31, 2008, the entire AFS portfolio of mortgage-backed
securities was comprised of securities issued by Fannie Mae and Freddie Mac.
114
Held-to-maturity securities
Composition and fair values of the FHLBNYs held-to-maturity securities were as follows (dollars in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2009 |
|
|
|
Amortized |
|
|
|
|
|
|
|
|
|
|
Gross |
|
|
Gross |
|
|
|
|
|
|
Cost |
|
|
OTTI |
|
|
Carrying |
|
|
Unrecognized |
|
|
Unrecognized |
|
|
Fair |
|
Issued, guaranteed or insured |
|
Basis |
|
|
in OCI |
|
|
Value |
|
|
Holding Gains |
|
|
Holding Losses |
|
|
Value |
|
Pools of Mortgages |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae |
|
$ |
1,194,202 |
|
|
$ |
|
|
|
$ |
1,194,202 |
|
|
$ |
47,563 |
|
|
$ |
|
|
|
$ |
1,241,765 |
|
Freddie Mac |
|
|
354,212 |
|
|
|
|
|
|
|
354,212 |
|
|
|
15,657 |
|
|
|
|
|
|
|
369,869 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total pools of mortgages |
|
|
1,548,414 |
|
|
|
|
|
|
|
1,548,414 |
|
|
|
63,220 |
|
|
|
|
|
|
|
1,611,634 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collateralized Mortgage Obligations/Real
Estate Mortgage Investment Conduits |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae |
|
|
2,370,747 |
|
|
|
|
|
|
|
2,370,747 |
|
|
|
70,184 |
|
|
|
(4,176 |
) |
|
|
2,436,755 |
|
Freddie Mac |
|
|
4,384,624 |
|
|
|
|
|
|
|
4,384,624 |
|
|
|
132,871 |
|
|
|
(7,914 |
) |
|
|
4,509,581 |
|
Ginnie Mae |
|
|
187,470 |
|
|
|
|
|
|
|
187,470 |
|
|
|
148 |
|
|
|
(1,432 |
) |
|
|
186,186 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total CMOs/REMICs |
|
|
6,942,841 |
|
|
|
|
|
|
|
6,942,841 |
|
|
|
203,203 |
|
|
|
(13,522 |
) |
|
|
7,132,522 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ginnie Mae-CMBS |
|
|
49,706 |
|
|
|
|
|
|
|
49,706 |
|
|
|
263 |
|
|
|
|
|
|
|
49,969 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GSE MBS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CMOs/REMICs |
|
|
485,419 |
|
|
|
(2,545 |
) |
|
|
482,874 |
|
|
|
2,533 |
|
|
|
(10,732 |
) |
|
|
474,675 |
|
Commercial mortgage-backed
securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-federal-agency MBS |
|
|
485,419 |
|
|
|
(2,545 |
) |
|
|
482,874 |
|
|
|
2,533 |
|
|
|
(10,732 |
) |
|
|
474,675 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset-Backed Securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Manufactured housing (insured) |
|
|
208,544 |
|
|
|
|
|
|
|
208,544 |
|
|
|
|
|
|
|
(46,536 |
) |
|
|
162,008 |
|
Home equity loans (insured) |
|
|
324,833 |
|
|
|
(74,915 |
) |
|
|
249,918 |
|
|
|
8,515 |
|
|
|
(34,559 |
) |
|
|
223,874 |
|
Home equity loans (uninsured) |
|
|
227,546 |
|
|
|
(23,003 |
) |
|
|
204,543 |
|
|
|
|
|
|
|
(44,662 |
) |
|
|
159,881 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total asset-backed securities |
|
|
760,923 |
|
|
|
(97,918 |
) |
|
|
663,005 |
|
|
|
8,515 |
|
|
|
(125,757 |
) |
|
|
545,763 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total mortgage-backed securities |
|
$ |
9,787,303 |
|
|
$ |
(100,463 |
) |
|
$ |
9,686,840 |
|
|
$ |
277,734 |
|
|
$ |
(150,011 |
) |
|
$ |
9,814,563 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
State and local housing finance
agency obligations |
|
|
791,187 |
|
|
|
|
|
|
|
791,187 |
|
|
|
5,325 |
|
|
|
(14,527 |
) |
|
|
781,985 |
|
Certificates of deposit |
|
|
2,000,000 |
|
|
|
|
|
|
|
2,000,000 |
|
|
|
3 |
|
|
|
|
|
|
|
2,000,003 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other |
|
$ |
2,791,187 |
|
|
$ |
|
|
|
$ |
2,791,187 |
|
|
$ |
5,328 |
|
|
$ |
(14,527 |
) |
|
$ |
2,781,988 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
115
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2008 |
|
|
|
Amortized |
|
|
Gross |
|
|
Gross |
|
|
|
|
|
|
Cost |
|
|
Unrealized |
|
|
Unrealized |
|
|
Fair |
|
Issued, guaranteed or insured |
|
Basis |
|
|
Holding Gains |
|
|
Holding Losses |
|
|
Value |
|
Pools of Mortgages |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae |
|
$ |
1,400,058 |
|
|
$ |
26,789 |
|
|
$ |
|
|
|
$ |
1,426,847 |
|
Freddie Mac |
|
|
422,088 |
|
|
|
7,860 |
|
|
|
|
|
|
|
429,948 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total pools of mortgages |
|
|
1,822,146 |
|
|
|
34,649 |
|
|
|
|
|
|
|
1,856,795 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collateralized Mortgage Obligations/Real
Estate Mortgage Investment Conduits |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae |
|
|
2,032,051 |
|
|
|
51,138 |
|
|
|
(125 |
) |
|
|
2,083,064 |
|
Freddie Mac |
|
|
3,722,840 |
|
|
|
101,595 |
|
|
|
(30 |
) |
|
|
3,824,405 |
|
Ginnie Mae |
|
|
6,325 |
|
|
|
|
|
|
|
(187 |
) |
|
|
6,138 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total CMOs/REMICs |
|
|
5,761,216 |
|
|
|
152,733 |
|
|
|
(342 |
) |
|
|
5,913,607 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ginnie Mae-CMBS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GSE MBS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CMOs/REMICs |
|
|
609,907 |
|
|
|
|
|
|
|
(42,706 |
) |
|
|
567,201 |
|
Commercial mortgage-backed securities |
|
|
266,994 |
|
|
|
149 |
|
|
|
(127 |
) |
|
|
267,016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-federal-agency MBS |
|
|
876,901 |
|
|
|
149 |
|
|
|
(42,833 |
) |
|
|
834,217 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset-Backed Securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Manufactured housing (insured) |
|
|
229,714 |
|
|
|
|
|
|
|
(75,418 |
) |
|
|
154,296 |
|
Home equity loans (insured) |
|
|
376,587 |
|
|
|
|
|
|
|
(144,957 |
) |
|
|
231,630 |
|
Home equity loans (uninsured) |
|
|
259,879 |
|
|
|
|
|
|
|
(79,112 |
) |
|
|
180,767 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total asset-backed securities |
|
|
866,180 |
|
|
|
|
|
|
|
(299,487 |
) |
|
|
566,693 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total mortgage-backed securities |
|
$ |
9,326,443 |
|
|
$ |
187,531 |
|
|
$ |
(342,662 |
) |
|
$ |
9,171,312 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
State and local housing finance
agency obligations |
|
|
804,100 |
|
|
|
6,573 |
|
|
|
(47,512 |
) |
|
|
763,161 |
|
Certificates of deposit |
|
|
1,203,000 |
|
|
|
328 |
|
|
|
|
|
|
|
1,203,328 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other |
|
$ |
2,007,100 |
|
|
$ |
6,901 |
|
|
$ |
(47,512 |
) |
|
$ |
1,966,489 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
116
External rating information of the held-to-maturity portfolio was as follows. (Carrying value
in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Below |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment |
|
|
|
|
|
|
AAA-rated |
|
|
AA-rated |
|
|
A-rated |
|
|
BBB-rated |
|
|
Grade |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities |
|
$ |
9,078,224 |
|
|
$ |
315,823 |
|
|
$ |
72,762 |
|
|
$ |
32,564 |
|
|
$ |
187,467 |
|
|
$ |
9,686,840 |
|
State and local housing bonds |
|
|
73,313 |
|
|
|
638,509 |
|
|
|
23,145 |
|
|
|
56,220 |
|
|
|
|
|
|
|
791,187 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Long-term securities |
|
|
9,151,537 |
|
|
|
954,332 |
|
|
|
95,907 |
|
|
|
88,784 |
|
|
|
187,467 |
|
|
|
10,478,027 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Certificates of deposit |
|
|
|
|
|
|
1,000,000 |
|
|
|
1,000,000 |
|
|
|
|
|
|
|
|
|
|
|
2,000,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
9,151,537 |
|
|
$ |
1,954,332 |
|
|
$ |
1,095,907 |
|
|
$ |
88,784 |
|
|
$ |
187,467 |
|
|
$ |
12,478,027 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2008 |
|
|
|
AAA-rated |
|
|
AA-rated |
|
|
A-rated |
|
|
BBB-rated |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities |
|
$ |
8,705,952 |
|
|
$ |
229,714 |
|
|
$ |
192,678 |
|
|
$ |
198,099 |
|
|
$ |
9,326,443 |
|
State and local housing bonds |
|
|
74,881 |
|
|
|
672,999 |
|
|
|
|
|
|
|
56,220 |
|
|
|
804,100 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Long-term securities |
|
|
8,780,833 |
|
|
|
902,713 |
|
|
|
192,678 |
|
|
|
254,319 |
|
|
|
10,130,543 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term securities
Certificates of deposit |
|
|
|
|
|
|
628,000 |
|
|
|
575,000 |
|
|
|
|
|
|
|
1,203,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
8,780,833 |
|
|
$ |
1,530,713 |
|
|
$ |
767,678 |
|
|
$ |
254,319 |
|
|
$ |
11,333,543 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rating information of the available-for-sale portfolios was as follows. (Fair values in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2009 |
|
|
|
AAA-rated |
|
|
AA-rated |
|
|
A-rated |
|
|
BBB-rated |
|
|
Unrated |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities |
|
$ |
2,350,308 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
2,350,308 |
|
Other Grantor trusts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,284 |
|
|
|
12,284 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
2,350,308 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
12,284 |
|
|
$ |
2,362,592 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2008 |
|
|
|
AAA-rated |
|
|
AA-rated |
|
|
A-rated |
|
|
BBB-rated |
|
|
Unrated |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities |
|
$ |
2,851,682 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
2,851,682 |
|
Other Grantor trusts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,187 |
|
|
|
10,187 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
2,851,682 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
10,187 |
|
|
$ |
2,861,869 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair values of investment securities
In an effort to achieve consistency among all of the FHLBanks of the pricing of investments of
mortgage-backed securities, in the third quarter of 2009 the FHLBanks formed the MBS Pricing
Governance Committee which was responsible for developing a fair value methodology for
mortgage-backed securities that all FHLBanks could adopt. Consistent with the guidance from the
Governance Committee, the FHLBNY changed the methodology used to estimate the fair value of
mortgage-backed securities during the quarter ended September 30, 2009. Under the approved
methodology, the Bank requests prices for all mortgage-backed securities from four specific
third-party vendors, and, depending on the number of prices received for each security, selects a
median or average price as defined by the methodology. The methodology also incorporates variance
thresholds to assist in identifying median or average prices that may require further review. In
certain limited instances (i.e., prices are outside of variance thresholds or the third-party
services do not provide a price), the Bank will obtain a price from securities dealers that is
deemed most appropriate after consideration of all relevant facts and circumstances that would be
considered by market participants. Prices for CUSIPs held in common with other FHLBanks are
reviewed for consistency.
Prior to the adoption of the new pricing methodology, the Bank used a similar process that utilized
three third-party vendors and similar variance thresholds. This change in pricing methodology did
not have a significant impact on the Banks estimated fair values of its mortgage-backed
securities.
117
In adopting this common methodology, the fair values of mortgage-backed investment securities are
estimated by FHLBNYs management who remains responsible for the selection and application of its
fair value methodology and the reasonableness of assumptions and inputs used. The four specialized
pricing services use pricing models or quoted prices of securities with similar characteristics.
Inputs into the pricing models employed by pricing services for most of the Banks investments are
market based and observable and are considered Level 2. The valuation techniques used by pricing
services employ cash flow generators and option-adjusted spread models. Pricing spreads used as
inputs in the models are based on new issue and secondary market transactions if securities that
are traded in sufficient volumes in
the secondary market. The valuation of the Banks private-label securities that are all designated
as held-to-maturity may require pricing services to use significant inputs that are subjective and
may be considered to be Level 3 because the inputs may not be market based and observable.
Private-label securities are classified as held-to-maturity and are recorded in the balance sheet
at their carrying values. For a comparison of carrying values and fair values of held-to-maturity
securities, see tables above. Through the three quarters in 2009, fifteen held-to-maturity
private-label mortgage-backed securities were deemed to be credit impaired and to be OTTI. The
fair values of the OTTI securities recorded as the carrying values of the securities credit
impaired at September 30, 2009 was $125.8 million and were considered to be the equivalent of Level
3 financial instruments within the fair value hierarchy under the accounting standards for fair
value measurements and disclosures. This determination was made based on managements view that
the OTTI private-label instruments may not have an active market because of the specific vintage of
the impaired securities as well as inherent conditions surrounding the trading of private-label
mortgage-backed securities; fair values of the securities were determined by management using third
party specialized vendor pricing services that made appropriate adjustments to observed prices of
comparable securities that were being transacted in an orderly market.
For more information about the corroboration and other analytical procedures performed by the
FHLBNY, see Significant Accounting Policies and Significant Estimates in Note 1, and Note 16 Fair
Values of Financial Instruments. Examples of securities priced under such a valuation technique,
which are classified within Level 2 of the valuation hierarchy and valued using the market
approach as defined in the accounting standards for fair value measurements and disclosures,
include GSE issued collateralized mortgage obligations and money market funds.
The FHLBNY conducts a review and evaluation of the securities portfolio to determine, based on
the creditworthiness of the securities and including any underlying collateral and/or insurance
provisions of the security, if the decline, if any, in the fair value of a security below its
carrying value is other-than-temporary. Based on detailed credit analysis on a security level, the
Bank has concluded that other than the fifteen securities determined to be credit impaired, gross
unrealized losses for the remainder of Banks investment securities were primarily caused by
interest rate changes, credit spread widening and reduced liquidity and the securities were
temporarily impaired as defined under the new guidance for recognition and presentation of
other-than-temporary impairment. For information about the Banks Impairment Analysis and
conclusions, investment ratings, and investment quality see Asset Quality and Concentration
Advances, Investment securities, Mortgage loans, and Counterparty risks in this MD&A. Also, see
Note 4 Held-to-maturity securities and Note 5 Available-for-sale securities.
118
Contractual maturities Mortgage-backed securities
The amortized cost basis and estimated fair values of held-to-maturity securities by contractual
maturity are shown below (in thousands). Expected maturities of certain securities will differ
from contractual maturities because borrowers may have the right to call or prepay obligations with
or without call or prepayment fees.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2009 |
|
|
December 31, 2008 |
|
|
|
Amortized |
|
|
Fair |
|
|
Amortized |
|
|
Fair |
|
|
|
Cost Basis |
|
|
Value |
|
|
Cost Basis |
|
|
Value |
|
State and local housing agency obligations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Due in one year or less |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Due after one year through five years |
|
|
14,985 |
|
|
|
15,191 |
|
|
|
17,665 |
|
|
|
18,209 |
|
Due after five years through ten years |
|
|
62,065 |
|
|
|
63,002 |
|
|
|
60,400 |
|
|
|
55,060 |
|
Due after ten years |
|
|
714,137 |
|
|
|
703,792 |
|
|
|
726,035 |
|
|
|
689,892 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
State and local housing agency obligations |
|
|
791,187 |
|
|
|
781,985 |
|
|
|
804,100 |
|
|
|
763,161 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Due in one year or less |
|
|
|
|
|
|
|
|
|
|
257,999 |
|
|
|
258,120 |
|
Due after one year through five years |
|
|
2,872 |
|
|
|
2,839 |
|
|
|
|
|
|
|
|
|
Due after five years through ten years |
|
|
1,147,404 |
|
|
|
1,183,248 |
|
|
|
1,142,000 |
|
|
|
1,149,541 |
|
Due after ten years |
|
|
8,637,027 |
|
|
|
8,628,476 |
|
|
|
7,926,444 |
|
|
|
7,763,651 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities |
|
|
9,787,303 |
|
|
|
9,814,563 |
|
|
|
9,326,443 |
|
|
|
9,171,312 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Certificates of deposit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Due in one year or less |
|
|
2,000,000 |
|
|
|
2,000,003 |
|
|
|
1,203,000 |
|
|
|
1,203,328 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Certificates of deposit |
|
|
2,000,000 |
|
|
|
2,000,003 |
|
|
|
1,203,000 |
|
|
|
1,203,328 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total held-to-maturity securities |
|
$ |
12,578,490 |
|
|
$ |
12,596,551 |
|
|
$ |
11,333,543 |
|
|
$ |
11,137,801 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term investments
The FHLBNY typically maintains substantial investments in high quality, short- and
intermediate-term financial instruments, such as certificates of deposits and overnight and term
Federal funds sold to highly rated financial institutions. These investments provide the liquidity
necessary to meet members credit needs. Short-term investments also provide a flexible means of
implementing the asset/liability management decisions to increase liquidity. The Bank invests in
certificates of deposits with maturities not exceeding 270 days and issued by major financial
institutions; certificates of deposits are recorded at amortized cost basis as held-to maturity
investment. Cash pledged to derivative counterparties to meet collateral requirements are interest
bearing and are reported as a deduction (netting adjustment) to Derivative liabilities in the
Statements of Condition.
119
Investments Policies and practices
Finance Agency regulations limit investment in housing-related obligations of state and local
governments and their housing finance agencies to obligations that carry ratings of double-A or
higher. Finance Agency regulations further limit the mortgage-backed and asset-backed investments
of each FHLBank to 300% of that FHLBanks capital. The FHLBNY was within the 300% limit for all
periods reported. The FHLBNYs held-to-maturity securities consisted of mortgage-backed and
residential asset-backed securities, and housing finance agency bonds.
The FHLBNY does not preclude or specifically seek out investments any differently than it would in
the normal course of acquiring securities for investments, unless it is prohibited by existing
regulations. The FHLBNYs practice is not to lend unsecured funds to members, including overnight
Federal funds sold and certificates of deposits. Unsecured lending to members is not prohibited by
Finance Agency regulations or Board of Directors policy. The FHLBNY is prohibited from purchasing
a consolidated obligation issued directly by another FHLBank, but may acquire consolidated
obligations for investment in the secondary market after the bond settles. There were no
investments in consolidated obligations by the FHLBNY at September 30, 2009 and at December 31,
2008.
The FHLBNYs investment in mortgage-backed securities during all periods reported complied with
FHLBNYs Board-approved policy of acquiring mortgage-backed securities issued or guaranteed by the
government-sponsored housing enterprises, or prime residential mortgages rated triple-A by both
Moodys and Standard & Poors rating services at acquisition.
120
Mortgage Loans Held-for-Portfolio
At September 30, 2009, the portfolio of mortgage loans was comprised of investments in Mortgage
Partnership Finance loans (MPF or MPF Program) and Community Mortgage Asset loans (CMA).
More details about the MPF program can be found in Mortgage Partnership Finance Program under the
caption Acquired Member Assets Program in the Banks most recently filed Form 10-K on March 27,
2009. In the CMA program, the FHLBNY holds participation interests in residential and community
development mortgage loans. Acquisition of participations under the CMA program was suspended
indefinitely in November 2001 and the loans are being paid down under their contractual terms.
Paydowns outpaced acquisitions in the current year first three quarters and as a result, the MPF
portfolio declined relative to December 31, 2008. The FHLBNY does not expect the MPF loans to
increase substantially, and the Bank provides this product to its members as another alternative
for its members to sell their mortgage production.
The following table presents information on mortgage loans held-for-portfolio (dollars in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2009 |
|
|
December 31, 2008 |
|
|
|
|
|
|
|
Percentage of |
|
|
|
|
|
|
Percentage of |
|
|
|
Amount |
|
|
Total |
|
|
Amount |
|
|
Total |
|
Real Estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed medium-term single-family mortgages |
|
$ |
406,055 |
|
|
|
30.38 |
% |
|
$ |
467,845 |
|
|
|
32.15 |
% |
Fixed long-term single-family mortgages |
|
|
926,537 |
|
|
|
69.32 |
|
|
|
983,493 |
|
|
|
67.58 |
|
Multi-family mortgages |
|
|
3,934 |
|
|
|
0.30 |
|
|
|
4,009 |
|
|
|
0.27 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total par value |
|
|
1,336,526 |
|
|
|
100.00 |
% |
|
|
1,455,347 |
|
|
|
100.00 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unamortized premiums |
|
|
9,257 |
|
|
|
|
|
|
|
10,662 |
|
|
|
|
|
Unamortized discounts |
|
|
(5,641 |
) |
|
|
|
|
|
|
(6,310 |
) |
|
|
|
|
Basis adjustment 1 |
|
|
(556 |
) |
|
|
|
|
|
|
(408 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total mortgage loans held-for-portfolio |
|
|
1,339,586 |
|
|
|
|
|
|
|
1,459,291 |
|
|
|
|
|
Allowance for credit losses |
|
|
(3,358 |
) |
|
|
|
|
|
|
(1,406 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total mortgage loans held-for-portfolio after
allowance for credit losses |
|
$ |
1,336,228 |
|
|
|
|
|
|
$ |
1,457,885 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 |
|
Represents fair value basis of open and closed delivery commitments. |
Debt Financing Activity and Consolidated Obligations
Consolidated obligations, which are the joint and several obligations of the FHLBanks, are the
principal funding source for the FHLBNYs operations and consist of consolidated bonds and
consolidated discount notes. Discount notes are consolidated obligations with maturities up to 365
days, and consolidated bonds have maturities of one year or longer. Member deposits, capital and,
to a lesser extent borrowings from other FHLBanks, are also funding sources.
Consolidated Obligation Liabilities
The issuance and servicing of consolidated obligations debt are performed by the Office of Finance,
a joint office of the FHLBanks established by the Finance Agency. Each FHLBank independently
determines its participation in each issuance of consolidated obligations based on, among other
factors, its own funding and operating requirements, maturities, interest rates, and other terms
available for consolidated obligations in the market place. Although the FHLBNY is primarily
liable for its portion of consolidated obligations (i.e., those issued on its behalf), the FHLBNY
is also jointly and severally liable with the other FHLBanks for the payment of principal and
interest on the consolidated obligations of all the FHLBanks. The FHLBanks, including the FHLBNY,
have emphasized diversification of funding sources and channels as the need for funding from the
capital markets has grown.
121
The two major debt programs offered by the Office of Finance are the Global Debt Program and the
TAP. The FHLBNY participates in both programs.
The Global Debt Program provides the FHLBanks with the ability to distribute debt into multiple
primary markets across the globe. The FHLBank global debt issuance facility has been in place
since July 1994. FHLBank global bonds are known for their variety and flexibility; all can be
customized to meet changing market demand with different structures, terms and currencies. Global
Debt Program bonds are available in maturities ranging from one year to 30 years with the majority
of global issues between one and five years. The most common Global Debt Program structures are
bullets, floaters and fixed-rate callable bonds with maturities of one through ten years. Issue
sizes are typically from $500 million to $5 billion and individual bonds can be reopened to meet
additional demand. Bullets are the most common global bonds, particularly in sizes of $3 billion
or larger.
In mid-1999, the Office of Finance implemented the TAP issue program on behalf of the FHLBanks.
This program consolidates domestic bullet bond issuance through daily auctions of common maturities
by reopening previously issued bonds. Effectively, the program has reduced the number of separate
FHLBanks bullet issues and individual issues have grown as large as $1 billion. The increased
issue sizes have a number of market benefits for investors, dealers and the 12 FHLBanks. TAP
issues have improved market awareness, expanded secondary market trading opportunities, improved
liquidity and stimulated greater demand from investors and dealers seeking high-quality Government
Sponsored Enterprises securities with U.S. Treasury-like characteristics. The TAP issues follow
the same 3-month quarterly cycles used for the issuance of on-the-run Treasury securities and
also have semi-annual coupon payment dates (March, June, September and December). The coupons for
new issues are determined by the timing of the first auction during a given quarter.
The FHLBanks also issue global consolidated obligations-bonds. Effective in January 2009, a debt
issuance process was implemented by the FHLBanks and the Office of Finance to provide a scheduled
monthly issuance of global bullet consolidated obligations-bonds. As part of this process,
management from each of the FHLBanks will determine and communicate a firm commitment to the Office
of Finance for an amount of scheduled global debt to be issued on its behalf. If the FHLBanks
orders do not meet the minimum debt issue size, the proceeds are allocated to all FHLBanks based on
the larger of the FHLBanks commitment or allocated proceeds based on the individual FHLBanks
capital to total system capital. If the FHLBanks commitments exceed the minimum debt issue size
the proceeds are allocated based on relative capital of the FHLBanks with the allocation limited
to the lesser of the allocation amount or actual commitment amount. The Finance Agency and the
U.S. Secretary of the Treasury have oversight over the issuance of FHLBank debt through the Office
of Finance. The FHLBanks can, however, pass on any scheduled calendar slot and not issue any
global bullet consolidated obligations- bonds upon agreement of eight of the 12 FHLBanks.
In the third quarter of 2008, each FHLBank (including the FHLBNY) entered into a Lending Agreement
with the U.S. Treasury in connection with the U.S. Treasurys establishment of the Government
Sponsored Enterprise Credit Facility (GSECF), as authorized by the Housing Act. The GSECF is
designed to serve as a contingent source of liquidity for the housing government-sponsored
enterprises, including each of the 12 FHLBanks. Any borrowings by one or more of the
FHLBanks under the GSECF will be considered consolidated obligations with the same joint and
several liability as all other consolidated obligations. The terms of any borrowings will be
agreed to at the time of issuance. Loans under the Lending Agreement are to be secured by
collateral acceptable to the U.S. Treasury, which consists of FHLBank advances to members that have
been collateralized in accordance with regulatory standards and mortgage-backed securities issued
by the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation. Each
FHLBank is required to submit to the Federal Reserve Bank of New York, acting as fiscal agent of
the U.S. Treasury, a list of eligible collateral, updated on a weekly basis. As of September 30,
2009 and December 31, 2008, the FHLBNY had provided the U.S. Treasury with listings of advance
collateral amounting to $17.8 billion and $16.3 billion. The amount of collateral can be increased
or decreased (subject to the approval of the U.S. Treasury) at any time through the delivery of an
updated listing of collateral. As of December 31, 2008 and at the date of this Form 10-Q report,
no FHLBank has drawn on this available source of liquidity.
122
The FHLBanks, including the FHLBNY, continue to issue debt that is both competitive and attractive
in the marketplace. In addition, the FHLBanks continuously monitor and evaluate their debt
issuance practices to ensure that consolidated obligations are efficiently and competitively
priced. Consolidated obligations are issued with either fixed- or variable-rate coupon payment
terms that use a variety of indices for interest rate resets. These indices include the London
Interbank Offered Rate (LIBOR), Constant Maturity Treasury (CMT), 11th District Cost of Funds
Index (COFI), Prime rate, the Federal funds rate, and others. In addition, to meet the expected
specific needs of certain investors in consolidated obligations, both fixed- and variable-rate
bonds may also contain certain features that will result in complex coupon payment terms and call
options. When the FHLBNY cannot use such complex coupons to hedge its assets, FHLBNY enters into
derivative transactions containing offsetting features that effectively convert the terms of the
bond to those of a simple variable-rate bond.
The consolidated obligations, beyond having fixed- or variable-rate coupon payment terms, may also
be Optional Principal Redemption Bonds (callable bonds) that the FHLBNY may redeem in whole or in
part at its discretion on predetermined call dates according to the terms of the bond offerings.
Highlights Debt issuance and funding management
The primary source of funds for the FHLBNY continued to be through issuance of consolidated
obligation bonds and discount notes. Reported amounts of consolidated obligations outstanding,
comprising of bonds and discount notes, at September 30, 2009 and December 31, 2008 were
$108.1 billion and $128.6 billion, and funded 91.9% and 93.5% of Total assets at those dates.
These financing ratios have remained substantially unchanged over the years at around 90%,
indicative of the stable funding strategy pursued by the FHLBNY to rely on FHLBank debt for
financing its activities.
Investor demand for FHLBank debt The cost of term debt issuance has continued to be under
pressure in the current year first three quarters. Key investors from Asia have continued to
reduce acquisitions of FHLBank debt and have very limited participation in in recent debt
issuances. Following the conservatorship of Fannie Mae and Freddie Mac, market pricing of FHLBank
issued debt indicated that market participants believe that obligations of the two GSEs offer lower
credit risk than FHLBank debt obligations, which are generally grouped into the same GSE asset
class as Fannie Mae and Freddie Mac. As a result, investors are more likely to require a premium
to acquire FHLBank debt relative to debt issued by Fannie Mae and Freddie Mac. GSE debt pricing
itself has been under competitive pressure with the FDIC announcing guarantees to debt offered by
commercial banks and other financial institutions. However, the Federal Reserves program of
purchasing GSE debt for up to $200 billion has helped to narrow the spreads of GSE debt to U.S.
Treasuries from the levels existing earlier in the year.
Money market funds and other domestic fund managers have stepped up to become key investors of
FHLBank short-term debt. While this has positive implications for demand for FHLBank debt, it has
put further pressure on sharply increased demand for even shorter bond maturities. Money funds
appear to be maintaining average investment maturities of 50 days with a ceiling of 90 days as
mandated under certain regulatory provisions.
123
All of these factors and the general dislocation in the capital markets are counteracting efforts
by the FHLBanks to issue debt with maturities longer than one year. These factors, outside the
control of the FHLBanks, have generally made it uneconomical for the FHLBanks to issue longer-term
debt. Yields demanded by investors for longer-term FHLBank debt and spreads between 3-month LIBOR
and FHLBank long-term debt yield have remained at levels that make it expensive for the FHLBNY to
issue term debt and offer longer-term advances to members even if there was sufficient investor
demand for such debt. That scenario appears to be gradually changing at least with respect to
funding costs for 5-year and shorter maturity debt. In the second and third quarters of the
current year, the FHLBanks have been successfully placing more term debt in the form of Global Bond
offerings and callables, but it is too early to predict if this trend will continue. Domestic
banks, flush with cash, and the more active international investors have been participants in the
market for FHLBank debt. However, the FHLBanks continue to be disproportionately exposed to the
money fund industry, and in response the FHLBank debt issuances have continued to maintain the
short-term issuance practices implemented late last year.
Unless investors recommit to the term funding market in sufficient volume, the FHLBanks will
continue to meet funding needs in the very short end of the funding market. Investor demand in the
first two quarters of 2009 had been for ultra-short-term bullet and callable bonds, short-term
floating-rate bonds, discount notes. In the third quarter, demand appears to have shifted away
from floaters and ultra short-term discount notes.
Bonds with a one-year maturity and a short lockout call option had traditionally been in demand
because of their attractive pricing, and offered an alternative investment to 3-month discount
notes. Since the market dislocation and up until June 2009, demand had been very weak. However,
in the third quarter of 2009, short lockout callables (with call dates as short as 3 month from
issue date) have been in demand once again as investors see a pricing advantage over similar
maturity discount notes. Short-term bonds with no call options with maturities of up to two years
have also been popular with investors. Much of the demand has been from money funds that were
experiencing bond maturities. The money fund sector continues to be significant acquirer of
FHLBank discount notes as a safe, high-quality, liquid investment that has been attractively priced
on a risk-adjusted basis relative to U.S. Treasury bills. For fund managers, discount notes are
fundamental to balancing investment returns and protecting the $1.00 constant net asset value for
money funds, since discount notes mature at a par amount of $1.00 as well. In the current year
third quarter, discount note pricing has narrowed to the one month LIBOR index, making it a less
attractive funding instrument for the FHLBanks, relative to prior periods. Also in the third
quarter of 2009, short-term LIBOR rates reset lower and resulted in the tightening of discount note
spreads to LIBOR on a range of short-term maturities, from overnight to 12 months. From the
12-month point and beyond, the yield curve steepens. Demand for callable step-up bonds in a
variety of maturities has been steady and the FHLBanks have responded by increasing the issuance of
such bond structures. Issuance of simple floating rate bonds have been almost non-existent because
of weak demand and unattractive pricing. Floaters indexed to Fed Funds were issued early in the
third quarter but this bond structure has not been in demand because coupons were perceived as less
attractive by investors relative their popularity with investors in 2008.
124
Funding tactical changes To accommodate members funding needs at reasonable spreads, the FHLBNY
has been responsive to investor preferences and changing demands, the FHLBNY has continued to make
tactical adjustments to the FHLBNY funding strategies. In the first two quarters of 2009 in
response to strong investor demand for shorter-term FHLBank bonds and discount notes, the FHLBNY
sharply increased its issuances of discount notes and short-term bullet bonds, which are
non-callable with a single maturity at end. In the third quarter, as discount note pricing became
relatively unattractive, the FHLBNY reduced its issuances of discount notes. The FHLBNY will
continue to refine and adjust its funding tactics and as conditions in the debt market changes, the
FHLBNY will also react promptly. The principal tactical funding strategy changes employed in
executing issuances of debt were:
|
|
In response to market demand for shorter-term debt in the first two quarters of 2009, the
Bank had increased its issuance of discount notes, which have maturities from overnight to
365 days. The upward trends in issuance volume of discount notes at that time were
illustrative of the tactical adjustments adopted by the FHLBNY to changing conditions earlier
in the year. Average outstanding balances of discount notes, a measure of volume, was $24.7
billion in the third quarter of 2008. It increased to $34.5 billion in the fourth quarter of
2008. In the first and second quarters of 2009, volume rose dramatically to $46.2 billion and
$48.7 billion. |
|
|
In the third quarter of 2009, as one month LIBOR reset lower, discount note pricing became
relatively unattractive as spreads to LIBOR tightened, and average outstanding balances of
discount notes was allowed to decline to $38.8 billion. The utilization rate of discount
notes to fund total assets is another useful measurement indicator of the Banks funding
tactics. At March 31, 2009, discount notes outstanding were $48.7 billion, and funded 38.0%
of the total assets at that date; at June 30, 2009, outstanding balance was $47.3 billion and
funded 36.6% of total assets. At September 30, 2009, outstanding balance was $38.4 billion
and funded 32.6 % of total assets, compared to $46.3 billion at December 31, 2008, which
funded 33.7% of total assets. |
|
|
In the first two quarters of 2009, the FHLBNY had also relied more on overnight and very
short-term discount notes to take advantage of lower funding costs of overnight issuance of
discount notes. In the third quarter of 2009, the FHLBNY reduced its issuance of overnight
discount notes, partly as a result of the Federal Reserves action to eliminate interest on
excess reserves, partly as a result of tightening of spreads, and partly because the FHLBNY
determined that term discount notes would better match its regulatory liquidity profile. At
June 30, 2009, overnight discount notes outstanding were $11.3 billion. In contrast,
overnight discount notes declined to $1.5 billion at September 30, 2009. |
|
|
Floating-rate bonds outstanding at September 30, 2009 declined during the third quarter, a
trend observed during most of the earlier two quarters. Maturing bonds were not replaced
because of unfavorable spreads demanded by investors and compared to other GSE issued
LIBOR-indexed floaters. In 2008, the FHLBNY had issued short-term floating-rate bonds,
indexed to rates other than 3-month LIBOR and had swapped the coupons back to 3-month LIBOR. |
|
|
Reacting to investor preference for shorter term debt, the FHLBNY increased the issuance of
medium-term non-callable bonds. Investors have been receptive to FHLBanks non-callable bonds
compared to alternative debt available in the capital markets and execution pricing has been
relatively more favorable for the FHLBank bonds. At June 30, 2009, fixed-rate non-callable
bonds were $41.5 billion. In the third quarter, the FHLBNY increased issuances of
non-callable bonds to replace maturing discount notes and outstanding balances rose to $47.5
billion at September 30, 2009. The outstanding balance was $36.4 billion at December 31,
2008. |
125
|
|
FHLBank callable-bonds, which have been traditionally considered by investors to be
competitively priced, were under price pressure in 2008 and in the first two quarters of 2009,
and the Banks use of funding with callable debt had declined because of the erosion of their
price advantage. In the first two quarters, investor preferences were for short maturity
bullet bonds and floaters primarily due to demand from the domestic money funds. In the
current year third quarter, short lock-out callables were in demand by investors who saw a
yield advantage over similar maturity discount notes; issuance volume increased and
outstanding balances grew from $3.3 billion at June 30, 2009 to $4.8 billion at September 30,
2009. The outstanding balance at December 31, 2008 was also $4.8 billion. |
Debt extinguishment No debt was transferred to another FHLBank in the current year first three
quarters. In the current year third quarter, the FHLBNY retired $0.5 billion through a debt
buyback from an unrelated financial institution at a loss of $69.5 thousand.
Consolidated obligation bonds
The following summarizes types of bonds issued and outstanding (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2009 |
|
|
December 31, 2008 |
|
|
|
|
|
|
|
Percentage of |
|
|
|
|
|
|
Percentage of |
|
|
|
Amount |
|
|
Total |
|
|
Amount |
|
|
Total |
|
|
Fixed-rate, non-callable |
|
$ |
47,549,475 |
|
|
|
69.14 |
% |
|
$ |
36,367,875 |
|
|
|
44.92 |
% |
Fixed-rate, callable |
|
|
4,839,800 |
|
|
|
7.04 |
|
|
|
4,828,300 |
|
|
|
5.96 |
|
Step Up, non-callable |
|
|
73,000 |
|
|
|
0.10 |
|
|
|
|
|
|
|
|
|
Step Up, callable |
|
|
2,192,500 |
|
|
|
3.19 |
|
|
|
73,000 |
|
|
|
0.09 |
|
Step Down, callable |
|
|
|
|
|
|
|
|
|
|
15,000 |
|
|
|
0.02 |
|
Single-index floating rate |
|
|
14,117,500 |
|
|
|
20.53 |
|
|
|
39,670,000 |
|
|
|
49.01 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total par value |
|
|
68,772,275 |
|
|
|
100.00 |
% |
|
|
80,954,175 |
|
|
|
100.00 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bond premiums |
|
|
112,091 |
|
|
|
|
|
|
|
63,737 |
|
|
|
|
|
Bond discounts |
|
|
(34,980 |
) |
|
|
|
|
|
|
(39,529 |
) |
|
|
|
|
Fair value basis adjustments |
|
|
817,374 |
|
|
|
|
|
|
|
1,254,523 |
|
|
|
|
|
Fair value basis adjustments on terminated hedges |
|
|
3,108 |
|
|
|
|
|
|
|
7,857 |
|
|
|
|
|
Fair value option valuation adjustments and accrued interest |
|
|
968 |
|
|
|
|
|
|
|
15,942 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total bonds |
|
$ |
69,670,836 |
|
|
|
|
|
|
$ |
82,256,705 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funding Mix
The FHLBNY has consistently demonstrated the ability to seek out the most attractively priced
funding the capital market has to offer by being flexible in the debt structure the Bank is willing
to offer to meet the borrowing needs of its members and to achieve managements asset/liability
goals. As investor demand in the current year third quarter shifted from discount notes and
floating-rate debt to fixed-rate bullet and callable debt, the FHLBNY has also been opportunistic
in pursuing the debt structure most in demand at a reasonable price consistent with the Banks
asset/liability match.
In the current year first three quarters, the FHLBNY issued fixed-rate and discount notes in a mix
of issuances to achieve its asset/liability management goals and be responsive to the changing
market dynamics. The funding fix has resulted in a greater diversity of debt structures and
funding alternatives, indicative of the flexibility of the Banks funding tactics in a volatile
environment. The issuance of bonds has been the primary financing vehicle for the Bank, although
the use of term and overnight discount notes remain a vital source of funding requirements because
of the ease of issuance of discount notes as a flexible funding tool for day-to-day operations.
126
Hedge ratio, or the percentage of debt hedged versus debt not hedged, and the mix between the use
of non-cancellable and cancellable interest rate swaps to hedge bonds reflects the Banks balance
sheet management preferences and the attractiveness of the pricing of cancellable swaps. The ratio
of discount notes to bonds is another balance sheet management tool and that too is predicated on
factors such as asset-liability cash-gap management and the attractiveness of the pricing of
discount notes. In prior years, the use of term discount notes generally had declined because of
the relative pricing advantage of issuing floating-rate, LIBOR-indexed debt or by issuing
short-term callable debt and swapping out the fixed-rate cash flows for LIBOR-indexed cash flows by
the simultaneous execution of cancellable interest rate swaps.
In the current year first two quarters, the Bank increased its holdings of term discount notes
mainly because of favorable investor demand and pricing relative to term funding. In the third
quarter, discount note issuance was reduced. Still, consolidated obligation bonds remained the
primary financing basis for the FHLBNY.
Fixed-rate non-callable bonds With the decline in balance sheet assets at September 30, 2009,
relative to December 31, 2008, the Bank reduced its outstanding debt. While over all debt
declined, the amount and percentage of fixed-rate non-callable bonds, also referred to as bullet
bonds, increased and represented 69.1% of total par amounts of debt outstanding at September 30,
2009. The comparable percentage of non-callable debt to total debt was 44.9% at December 31, 2008.
Issuances of non-callable debt are predicated partly on pricing of such debt and investor demand,
and partly on the need to achieve asset/liability management goals. The Bank has made a strong
effort to issue fixed-rate longer-term debt and lock-in the relative low rates in the current
interest-rate environment. This has been a challenge as investor appetite for term debt has
continued to be lukewarm, given investor preference for discount notes, short-term bullets and
callable debt.
Fixed-rate callable bonds With a callable bond, the Bank purchases a call option from the
investor and the option allows the Bank to terminate the bond at predetermined call dates at par.
When the Bank purchases the call option from investors it typically lowers the cost to the
investor, who has traditionally been receptive to callable-bond yields offered by the FHLBNY. The
Bank may also issue callable debt on an unswapped basis in a financing strategy to match the
estimated prepayment characteristics of mortgage-backed securities and mortgage loans
held-for-portfolio. As estimated lives and prepayment speeds of MBS and mortgage loans change with
changes in the interest rate environment, those same factors are also likely to impact the call
exercise feature of callable debt. These factors tend to shorten or lengthen the effective lives
of the debt with changes in the interest rate environment, thereby achieving an offset to the
prepayment options of MBS and mortgage loans.
In the current year third quarter the FHLBanks may be seeing the beginning of an increased investor
appetite for callable FHLBank bonds. The use of callable debt had declined over the years as
investor demand for term debt had been very soft and the pricing advantage offered to investors for
selling the call option tended to narrow as the term of the bond shortened. Spreads to both U.S.
Treasury securities and LIBOR had widened and the unfavorable trend continued through the current
year first two quarters. The Banks acquisition of fixed-rate mortgage-backed securities has been
very selective, another factor that limited the FHLBNYs issuance of callable bonds, which offers a
call structure that could be matched to the paydown structures of mortgage-backed securities.
Still another factor has been the increased frequency of callable bond redemptions associated with
the calls on the associated interest rate swaps. Increased call frequency has been the result of
declining interest rates and as a result, outstanding amounts of fixed-rate callable debt were
allowed to decline as maturing or called bonds were replaced by non-callable bonds. In the current
year third quarter, FHLBank callable bonds saw encouraging investor demand for fixed-rate and
step-up callable bonds. Additionally, the pricing of short lockout callables were an attractive
alternative to 3-month discount notes to investors and the FHLBNY. All these factors have tended
to result in an increase in outstanding balances at September 30, 2009 compared to June 30, 2009.
127
Floating-rate bonds Generally, maturing floating-rate bonds were not replaced in the current year
first three quarters and outstanding debt declined at September 30, 2009 relative to June 30, 2009
and December 31, 2008. Floating-rate bonds were extensively used in 2008, when the Bank issued
floating-rate debt, indexed to 1-month LIBOR, Prime, and Fed effective rates, an innovative shift
in funding tactics to take advantage of the historical wide spread between 3-month LIBOR and other
indices. By executing interest rate swaps concurrently with the issuances of the floating-rate
bonds and swapping the non-3 month LIBOR indices for 3-month LIBOR, the Bank effectively created
variable funding that was indexed to 3-month LIBOR.
Impact of hedging fixed-rate consolidated obligation bonds
The Bank hedges certain fixed-rate debt by the use of both cancellable and non-cancellable interest
rate swaps in fair value hedges under the accounting standards for derivatives and hedging. The
Bank may also hedge the anticipatory issuance of bonds under the provisions of cash flow hedging
rules as provided in the accounting standards for derivatives and hedging (None were outstanding at
December 31, 2008 or September 30, 2009).
Net interest accruals from qualifying interest rate swaps under the derivatives and hedge
accounting rules are recorded together with interest expense of consolidated obligation bonds in
the Statements of Income. Fair value changes of debt in a qualifying fair value hedge are recorded
in Other income (loss) as a Net realized and unrealized gain (loss) on derivative and hedging
activities; an offset is recorded as a fair value basis adjustment to the carrying amount of the
debt in the balance sheet. Net interest accruals associated with derivatives not qualifying under
derivatives and hedge accounting rules are recorded in Other income (loss) as a Net realized and
unrealized gain (loss) on derivatives and hedging activities.
Derivatives are employed to hedge consolidated bonds in the following manner to achieve the
indicated principal objectives:
The FHLBNY:
|
|
Makes extensive use of the derivatives to restructure interest rates on consolidated
obligation bonds, both callable and non-callable, to better meet its members funding needs,
to reduce funding costs, and to manage risk in a changing market environment. |
|
|
Converts at the time of issuance, certain simple fixed-rate bullet and callable bonds into
synthetic floating-rate bonds by the simultaneous execution of interest rate swaps that
convert the cash flows of the fixed-rate bonds to conventional adjustable rate instruments
tied to an index, typically 3-month LIBOR. |
|
|
Uses derivatives to manage the risk arising from changing market prices and volatility of a
fixed coupon bond by matching the cash flows of the bond to the cash flows of the derivative
and making the FHLBNY indifferent to changes in market conditions. Except when issued to fund
MBS and MPF loans, callable bonds are typically hedged by an offsetting derivative with a
mirror-image call option and identical terms. |
128
|
|
Adjusts the reported carrying value of hedged consolidated bonds for changes in their fair
value (fair value basis adjustments or fair value) that are attributable to the risk being
hedged in accordance with hedge accounting rules. Amounts reported for consolidated
obligation bonds in the Statements of Condition include fair value basis adjustments. |
|
|
Lowers its funding cost by the issuance of a callable bond and the execution of an
associated interest rate swap with mirrored call options, which results in funding at a lower
cost than the FHLBNY would otherwise have achieved. The issuance of callable bonds and the
simultaneous swapping with a derivative instrument depends on the price relationships in both
the bond and the derivatives markets. |
The most significant element that impacts balance sheet reporting of debt is the recording of fair
value basis and valuation adjustments. In addition, when callable bonds are hedged by cancellable
swaps, the possibility of exercise of the call shortens the expected maturity of the bond. The
impact of hedging debt on recorded interest expense is discussed in this MD&A under Results of
Operations. Its impact as a risk management tool is discussed under Item 3 Quantitative and
Qualitative Disclosures about Market Risk.
Fair value basis and valuation adjustments The Bank uses interest rate derivatives to hedge the
risk of changes in the benchmark rate, which the FHLBNY has adopted as LIBOR, and is also the
discounting basis for computing changes in fair values of hedged advances. The Bank recorded net
unrealized fair value losses of $0.8 billion and $1.3 billion as part of the carrying values of
consolidated obligation bonds in the Statements of Condition at September 30, 2009 and December 31,
2008. Under the derivatives and hedge accounting provisions, the reported carrying value of
consolidated obligation bonds is adjusted for changes in their fair value basis attributable to the
risk being hedged. Carrying values of bonds designated under the fair value option, are also
adjusted for valuation adjustments to recognize changes in the full fair value of the bonds elected
under the fair value option and measured under the accounting standards for fair value measurements
and disclosures. These valuation adjustments were not material at September 30, 2009 or December
31, 2008.
Changes in fair value basis reflect changes in the term structure of interest rates, the shape of
the yield curve at the measurement dates, the value and implied volatility of call options of
callable bonds, and from the growth or decline in hedge volume.
Hedge volume As of September 30, 2009 and December 31, 2008, the Bank had hedged $31.0 billion
($25.3 billion non-callable; $5.7 billion callable) and $22.0 billion ($20.0 billion non-callable;
$2.0 billion callable) of fixed-rate consolidated bonds to hedge fair value risk from changes in
the benchmark rate. Almost all callable bonds were hedged by cancellable swaps at September 30,
2009 and December 31, 2008. These hedges were in qualifying hedge relationships under the
provisions of the accounting standards for derivatives and hedging, which effectively converted the
fixed-rate exposure of the bonds to a variable-rate exposure, generally indexed to 3-month LIBOR.
The Banks callable bonds contain a call option purchased by the Bank from the investor. Under the
terms of the call option, the Bank has the right to terminate the bond at agreed upon dates.
At September 30, 2009, outstanding par value of consolidated obligation bonds elected under the
fair value option was $2.4 billion compared to $983.0 million at December 31, 2008.
129
The following summarizes debt that were economically hedged by interest-rate swaps with matching
terms at September 30, 2009:
Floating-rate debt At September 30, 2009, the FHLBNY had executed economic hedges of $9.6
billion of floating-rate bonds that were indexed to interest rates other than 3-month LIBOR by
entering into swap agreements with derivative counterparties that synthetically converted the
floating rate debt cash flows to 3-month LIBOR. The comparable floating-rate debt that was
economically hedged at December 31, 2008 was $25.0 billion. Hedges deemed at inception as
economic do not generate basis adjustments on the hedged instruments since their carrying
values are not adjusted for fair value changes.
Fixed-rate debt The Bank had economic hedges of $12.9 billion of short-term fixed-rate debt
at September 30, 2009 compared to $4.5 billion at December 31, 2008. At inception of the
hedges, the Bank did not believe that the hedges would be highly effective in offsetting fair
value changes between the derivative and the bonds and accounted for the derivatives as
freestanding derivatives.
Impact of changes in interest rate The carrying amounts of consolidated obligations bonds
included fair value basis losses of $0.8 billion at September 30, 2009, compared to fair value
basis losses of $1.3 billion at December 31, 2008. Changes in fair value basis reflect changes in
the term structure of interest rates, the shape of the yield curve at the measurement dates, and
the value and implied volatility of call options of callable bonds.
Fair value basis losses at September 30, 2009 and December 31, 2008 were consistent with the
forward yield curves at those dates that were projecting forward rates below the fixed-rate coupons
of bonds hedged under the derivatives and hedge accounting rules and bonds designated under the
FVO. Most of the hedged bonds had been issued in prior periods at the then prevailing higher
interest-rate environment. Since such bonds are typically fixed-rate, in a declining interest rate
environment, fixed-rate bonds exhibit unrealized fair value basis losses recorded under the
derivatives and hedge accounting rules. Unrealized losses from fair value basis adjustments on
hedged bonds were almost entirely offset by net fair value unrealized gains from derivatives
associated with the hedged bonds, thereby achieving the Banks hedging objectives of mitigating
fair value basis risk. The net fair value basis adjustments of hedged consolidated obligation
bonds in an unrealized loss position at September 30, 2009 declined relative to December 31, 2008
primarily as a result of the steepening of the forward yield curve at September 30, 2009 relative
to December 31, 2008. As an illustration, the yield of a 5-year swap curve was 2.32% at September
30, 2009 compared to 1.55% at December 31, 2008.
Discount Notes
Consolidated obligation discount notes provide the FHLBNY with short-term and overnight funds.
Discount notes have maturities of up to one year and are offered daily through a dealer-selling
group; the notes are sold at a discount from their face amount and mature at par.
Through a sixteen-member selling group, the Office of Finance, acting on behalf of the twelve
Federal Home Loan Banks, offers discount notes. In addition, the Office of Finance offers discount
notes in four standard maturities in two auctions each week. The FHLBNY used discount notes to
fund short-term advances, longer-term advances with short repricing intervals, convertible advances
and money market investments.
130
The following summarizes discount notes issued and outstanding (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
September 30, 2009 |
|
|
December 31, 2008 |
|
|
|
|
|
|
|
|
|
|
Par value |
|
$ |
38,406,688 |
|
|
$ |
46,431,347 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortized cost |
|
$ |
38,385,244 |
|
|
$ |
46,329,545 |
|
Fair value basis adjustments |
|
|
|
|
|
|
361 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
38,385,244 |
|
|
$ |
46,329,906 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average interest rate |
|
|
0.26 |
% |
|
|
1.00 |
% |
|
|
|
|
|
|
|
In the current year first two quarters, the Bank had increased its holdings of term discount notes
mainly because of favorable investor demand and pricing relative to term funding. In the current
year third quarter, discount notes pricing was relatively less attractive as a funding vehicle
given alternative funding options and the Bank reduced its reliance on discount notes, particularly
the use of overnight discount notes, partly as a result of the Federal Reserves action to
eliminate interest on excess reserves, partly as a result of tightening of spreads, and partly
because the FHLBNY determined that term discount notes would better match its regulatory liquidity
profile. In the current year first two quarters, the Bank issued $736.2 billion of discount notes;
in contrast, in the third quarter the Bank issued only $82.4 billion.
Generally, discount notes are utilized in funding short-term advances, some long-term advances as
well as held-to-maturity and money market investments. The efficiency of issuing discount notes
continues to be another factor in its use as a popular funding vehicle as discount notes can be
issued any time and in a variety of amounts and maturities in contrast to other short-term funding
sources, such as the issuance of callable debt with an associated interest rate derivative with
matching terms. The importance of the instrument in day-to-day funding operations is illustrated
by the very significant volume of the cash flows generated by discount note issuance. For the
current year first three quarters, the Bank issued $814.6 billion in discount notes. In the same
period, cash flows from the issuance of consolidated obligation bonds were $35.1 billion.
Contrasting transaction volumes between bonds and discount notes provides an indication that
discount notes continued to be an important source of short-term funding.
As of September 30, 2009, there were no discount note hedges under the accounting standards for
derivatives and hedging; at December 31, 2008, the Bank had hedged $779.0 million of discount notes
to hedge fair value risk from changes in the benchmark rate in qualifying hedge relationships under
the derivatives and hedge accounting rules. The Bank generally hedges discount notes in economic
hedges to convert the fixed-rate exposure of the discount notes to a variable-rate exposure,
generally indexed to 3-month LIBOR. At September 30, 2009 and December 31, 2008, the Bank had also
had executed economic hedges of $7.5 billion and $7.5 billion of discount notes to mitigate fair
value risk.
Deposit Liabilities
Deposit liabilities comprised of member deposits and, from time-to-time, may also include unsecured
overnight borrowings from other FHLBanks.
Member deposits The FHLBNY operates deposit programs for the benefit of its members. Deposits
are primarily short-term in nature with the majority maintained in demand accounts that reprice
daily based upon rates prevailing in the overnight Federal funds market. Members liquidity
preferences are the primary determinant of the level of deposits. Total deposits at September 30,
2009 were $2.3 billion including demand and term, up from $1.5 billion at December 31, 2008.
Fluctuations in member deposits have little impact on the Bank and are not a significant source of
liquidity for the Bank.
Borrowings from other FHLBanks The Bank borrows from other FHLBanks, generally for a period of
one day. There were no borrowings outstanding at September 30, 2009 or December 31, 2008.
131
Stockholders Capital, Capital Ratios, and Mandatorily Redeemable Capital Stock
The FHLBanks, including FHLBNY, have a unique cooperative structure. To access FHLBNYs products
and services, a financial institution must be approved for membership and purchase capital stock in
FHLBNY. The members stock requirement is based on the amount of mortgage-related assets on the
members balance sheet and its use of FHLBNY advances, as prescribed by the FHLBank Act, which
reflects the value of having ready access to FHLBNY as a reliable source of low-cost funds. FHLBNY
stock can be issued, exchanged, redeemed and repurchased only at its stated par value of $100 per
share. The shares are not publicly traded.
Stockholders Capital Stockholders Capital comprised of capital stock, retained earnings and
Accumulated other comprehensive income (loss), and decreased by $206.6 million to $5.7 billion at
September 30, 2009 from $5.9 billion at December 31, 2008.
Capital stock Capital stock, par value $100, was $5.1 billion at September 30, 2009, down from
$5.6 billion at December 31, 2008. The decrease in capital stock was consistent with decreases in
advances borrowed by members. Since members are required to purchase stock as a percentage of
advances borrowed from the FHLBNY, a decline in advances will typically result in a decline in
capital stock. In addition, under our present practice, stock in excess of the amount necessary to
support advance activity is redeemed daily by the FHLBNY. Therefore, the amount of capital stock
outstanding varies directly with members outstanding borrowings under the provisions requiring
members to purchase stock to support borrowings and its practice of redeeming excess capital stock.
Retained earnings Retained earnings rose to $666.2 million at September 30, 2009 compared to
$382.9 million at December 31, 2008. Net income year-to-date September 30, 2009 was $474.8
million, and $191.4 million in dividend payments were made to members. Net income year-to-date
prior year was $214.0 million, and dividend payments were $250.1 million. For more information
about the Banks retained earning policy, refer to the section Retained Earnings and Dividend
Policy in the Banks most recently Form 10-K filed on March 27, 2009.
Accumulated other comprehensive income Accumulated other comprehensive income (loss) was a net
loss of $147.6 million at September 30, 2009 compared to a loss of $101.2 million at December 31,
2008. These amounts comprised of: (1) Net unrealized fair value losses on available-for-sale
securities of $16.1 million ($64.4 million at December 31, 2008); (2) Net unrealized losses from
cash flow hedges of $24.5 million ($30.2 million at December 31, 2008), principally from terminated
hedges of anticipated issuances of debt; these unrealized losses will be recorded as an expense
over the terms of the hedged bonds as a yield adjustment to the fixed coupons of the debt. Over
the next 12 months it is expected that $7.1 million of net losses will be reclassified as a charge
to earnings; (3) Minimum additional actuarially determined liabilities due on the Banks
supplemental pension plans of $6.6 million at September 30, 2009 and December 31, 2008; and (4)
Non-credit component of OTTI on credit impaired held-to-maturity mortgage-backed securities of a
loss $100.5 million at September 30, 2009, net of accretion, and $0 at December 31, 2008.
132
Mandatorily redeemable capital stock The FHLBNYs 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 in
accordance with accounting standards for distinguishing liabilities from equity in case of certain
financial instruments with characteristics of both liabilities and equity. Mandatorily redeemable
capital stock at September 30, 2009 and December 31, 2008 represented stock held primarily by
former members who were no longer members by virtue of being acquired by members of other FHLBanks.
Under existing practice, such stock will be repaid when the stock is no longer required to support
outstanding transactions with the FHLBNY.
The FHLBNY reclassifies the stock subject to redemption from equity to liability once a member:
irrevocably exercises a written redemption right; gives notice of intent to withdraw from
membership; or attains non-member status by merger or acquisition, charter termination, or
involuntary termination from membership.
Voluntary withdrawal from membership No member had notified the FHLBNY at September 30, 2009 or
at December 31, 2008 of their intention to voluntarily withdraw from membership. No members or
non-members redemption request remained pending at September 30, 2009 or December 31, 2008.
Members acquired by non-members The Bank reclassifies stock of members to a liability on the day
the members charter is dissolved.
The following table provides rollforward information with respect to changes in mandatorily
redeemable capital stock liabilities (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30, |
|
|
Nine months ended September 30, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
|
Beginning balance |
|
$ |
128,254 |
|
|
$ |
169,302 |
|
|
$ |
143,121 |
|
|
$ |
238,596 |
|
Capital stock subject to mandatory redemption
reclassified from equity |
|
|
434 |
|
|
|
|
|
|
|
434 |
|
|
|
64,759 |
|
Redemption of mandatorily redeemable capital stock 1 |
|
|
(806 |
) |
|
|
(25,804 |
) |
|
|
(15,673 |
) |
|
|
(159,857 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance |
|
$ |
127,882 |
|
|
$ |
143,498 |
|
|
$ |
127,882 |
|
|
$ |
143,498 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued interest payable |
|
$ |
1,807 |
|
|
$ |
2,513 |
|
|
$ |
1,807 |
|
|
$ |
2,513 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 |
|
Redemption includes repayment of excess stock. (The annualized rate accrual is at 5.6% for September 30, 2009 and 6.50% for September 30, 2008) |
In the current year first two quarters no amount of mandatorily redeemable stock were classified as
a liability as no member was acquired by a non-member. In the third quarter, one member was
acquired by a non-member and $0.4 million of stock was reclassified to a liability. In the prior
year first three quarters four members were acquired by non-members and $64.8 million of capital
was reclassified from capital to a liability.
Capital stock held by non-members will be repaid at maturity of the advances borrowed by
non-members. In accordance with Finance Agency regulations, non-members cannot renew their advance
borrowings at maturity. Such capital is considered mandatorily redeemable in accordance with
accounting standards for distinguishing liabilities from equity in case of certain financial
instruments with characteristics of both liabilities and equity.
133
Under the provisions of the Banks Capital Plan, a notice of intent to withdraw from membership
must be provided to the FHLBNY five years prior to the withdrawal date. At the end of such a
five-year period, the FHLBNY will redeem the capital stock unless it is needed to meet any
applicable minimum stock investment requirements. Under current practice, the FHLBNY redeems all
stock in excess of that required to support outstanding advances. The practice of redeeming excess
capital stock also applies to the redemption of mandatorily redeemable stock held by former members
in excess of amounts required to support advances outstanding to the former members. Typically,
mandatorily redeemable capital stock would remain outstanding as a liability until the stock is no
longer required to support outstanding advances to the former member, which is generally at
maturity of the advance.
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 FHLBNYs funding cost.
Finance Agency regulations prohibit the speculative use of derivatives. The FHLBNY does not take
speculative positions with derivatives or any other financial instruments, or trade derivatives for
short-term profits. The FHLBNY does not have any special purpose entities or any other types of
off-balance sheet conduits. The FHLBNY established several small grantor trusts related to
employee benefits programs.
The notional amounts of derivatives are not recorded as assets or liabilities in the Statements of
Condition, rather the fair values of all derivatives are recorded as either a Derivative asset or a
Derivative liability. Although notional principal is a commonly used measure of volume in the
derivatives market, it is not a meaningful measure of market or credit risk since the notional
amount does not change hands (other than in the case of currency swaps, of which the FHLBNY has
none).
All derivatives are recorded on the Statements of Condition at their estimated fair value and
designated as either fair value or cash flow hedges for qualifying hedges, or as non-qualifying
hedges (economic hedges or customer intermediations) under the derivatives and hedge accounting
rules. In an economic hedge, the Bank retains or executes derivative contracts, which are
economically effective in reducing risk, because a qualifying hedge was not available, or the hedge
was not able to demonstrate that it would be highly effective on an ongoing basis as a qualifying
hedge, or the cost of a qualifying hedge was not economical. Interest income and interest expense
from interest rate swaps used for hedging are reported together with interest on the instrument
being hedged. Any changes in the fair value of a derivative are recorded in current period
earnings or in Accumulated other comprehensive income (loss), depending on the hedge designation.
The FHLBNY uses derivatives in three ways: (1) as fair value or cash flow hedges of an underlying
financial instrument or as a cash flow hedge of a forecasted transaction; (2) as intermediation
hedges to offset derivative positions (e.g., caps) sold to members; and (3) as economic hedges,
defined as a non-qualifying hedge of an asset or liability and used as an asset/liability
management tool. The FHLBNY uses derivatives to adjust the interest rate sensitivity of
consolidated obligations and advances to more closely approximate the sensitivity of assets or to
adjust the interest rate sensitivity of advances to more closely approximate the sensitivity of
liabilities. In addition, the FHLBNY uses derivatives to: offset embedded options in assets and
liabilities; to hedge the market value of existing assets, liabilities, and anticipated
transactions; or to reduce funding costs. For additional information, see Note 15 Derivatives
and Hedging activities.
134
The following table summarizes the principal derivatives hedging strategies (millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2009 |
|
|
December 31, 2008 |
|
Derivatives/Terms |
|
Hedging Strategy |
|
Accounting Designation |
|
Notional Amount |
|
|
Notional Amount |
|
Pay fixed, receive floating interest rate swap |
|
To convert fixed rate on a fixed rate advance to a LIBOR floating rate |
|
Economic Hedge of fair value risk |
|
$ |
142 |
|
|
$ |
618 |
|
Pay fixed, receive floating interest rate swap cancelable by counterparty |
|
To convert fixed rate on a fixed rate advance to a LIBOR floating rate putable advance |
|
Fair Value Hedge |
|
$ |
40,590 |
|
|
$ |
41,824 |
|
Pay fixed, receive floating interest rate swap no longer cancelable by counterparty |
|
To convert fixed rate on a fixed rate advance to a LIBOR floating rate no-longer putable |
|
Fair Value Hedge |
|
$ |
2,329 |
|
|
$ |
1,405 |
|
Pay fixed, receive floating interest rate swap non-cancelable |
|
To convert fixed rate on a fixed rate advance to a LIBOR floating rate non-putable |
|
Fair Value Hedge |
|
$ |
23,407 |
|
|
$ |
18,444 |
|
Purchased interest rate cap |
|
To offset the cap embedded in the variable rate advance |
|
Economic Hedge of fair value risk |
|
$ |
390 |
|
|
$ |
465 |
|
Receive fixed, pay floating interest rate swap |
|
To convert fixed rate consolidated obligation bond debt to a LIBOR floating rate |
|
Economic Hedge of fair value risk |
|
$ |
12,948 |
|
|
$ |
4,515 |
|
Receive fixed, pay floating interest rate swap cancelable by counterparty |
|
To convert fixed rate consolidated obligation bond debt to a LIBOR floating rate callable bond |
|
Fair Value Hedge |
|
$ |
5,758 |
|
|
$ |
2,148 |
|
Receive fixed, pay floating interest rate swap no longer cancelable |
|
To convert fixed rate consolidated obligation bond debt to a LIBOR floating rate no-longer callable |
|
Fair Value Hedge |
|
$ |
448 |
|
|
$ |
373 |
|
Receive fixed, pay floating interest rate swap non-cancelable |
|
To convert fixed rate consolidated obligation bond debt to a LIBOR floating rate non-callable |
|
Fair Value Hedge |
|
$ |
24,887 |
|
|
$ |
19,609 |
|
Receive fixed, pay floating interest rate swap (non-callable) |
|
To convert the fixed rate consolidated obligation discount note debt to a LIBOR floating rate. |
|
Fair Value Hedge |
|
$ |
|
|
|
$ |
779 |
|
Receive fixed, pay floating interest rate swap (non-callable) |
|
To convert the fixed rate consolidated obligation discount note debt to a LIBOR floating rate. |
|
Economic Hedge of fair value risk |
|
$ |
7,526 |
|
|
$ |
7,509 |
|
Basis swap |
|
To convert non-LIBOR index to LIBOR to reduce interest rate sensitivity and repricing gaps. |
|
Economic Hedge of cash flows |
|
$ |
3,785 |
|
|
$ |
14,360 |
|
Basis swap |
|
To convert 1M LIBOR index to 3M LIBOR to reduce interest rate sensitivity and repricing gaps. |
|
Economic Hedge of cash flows |
|
$ |
5,840 |
|
|
$ |
10,590 |
|
Receive fixed, pay floating interest rate swap no longer cancelable |
|
Fixed rate callable bond converted to a LIBOR floating rate; matched to callable bond accounted for under fair value option. |
|
Fair Value Option |
|
$ |
|
|
|
$ |
400 |
|
Receive fixed, pay floating interest rate swap with an option to call at the swap counterpartys option |
|
Fixed rate callable bond converted to a LIBOR floating rate; matched to callable bond accounted for under fair value option. |
|
Fair Value Option |
|
$ |
2,385 |
|
|
$ |
583 |
|
Pay fixed, receive floating interest rate swap |
|
Economic hedge on the Balance Sheet |
|
Economic Hedge |
|
$ |
1,050 |
|
|
$ |
1,050 |
|
Receive fixed, pay floating interest rate swap |
|
Economic hedge on the Balance Sheet |
|
Economic Hedge |
|
$ |
1,050 |
|
|
$ |
1,050 |
|
Purchased interest rate cap |
|
Economic hedge on the Balance Sheet |
|
Economic Hedge |
|
$ |
1,892 |
|
|
$ |
1,892 |
|
Intermediary positions Interest rate swaps and caps |
|
To offset interest rate swaps and caps executed with members by executing offsetting derivatives with counterparties |
|
Economic Hedge of fair value risk |
|
$ |
280 |
|
|
$ |
300 |
|
135
Derivative Financial Instruments by hedge designation
The following table summarizes the notional amounts and estimated fair values of derivative
financial instruments (excluding accrued interest) by hedge designation.
The table also provides a reconciliation of fair value basis gains and (losses) of derivatives to
the Statements of Condition (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2009 |
|
|
December 31, 2008 |
|
|
|
|
|
|
|
Estimated |
|
|
|
|
|
|
Estimated |
|
|
|
Notional |
|
|
Fair Value |
|
|
Notional |
|
|
Fair Value |
|
Interest rate swaps |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives in fair value hedging relationships |
|
$ |
97,418,662 |
|
|
$ |
(3,547,978 |
) |
|
$ |
84,582,796 |
|
|
$ |
(4,531,004 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total derivatives
designated as hedging
instruments |
|
$ |
97,418,662 |
|
|
$ |
(3,547,978 |
) |
|
$ |
84,582,796 |
|
|
$ |
(4,531,004 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives not designated as hedging instruments |
|
|
32,341,126 |
|
|
|
50,183 |
|
|
|
39,691,142 |
|
|
|
(76,412 |
) |
Derivatives designated under fair value option |
|
|
2,385,000 |
|
|
|
1,874 |
|
|
|
983,000 |
|
|
|
7,699 |
|
Interest rate caps/floors |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Economic-fair value changes |
|
|
2,282,000 |
|
|
|
58,777 |
|
|
|
2,357,000 |
|
|
|
8,174 |
|
Mortgage delivery commitments (MPF) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Economic-fair value changes |
|
|
11,843 |
|
|
|
35 |
|
|
|
10,395 |
|
|
|
(108 |
) |
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intermediation |
|
|
280,000 |
|
|
|
295 |
|
|
|
300,000 |
|
|
|
484 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
134,718,631 |
|
|
$ |
(3,436,814 |
) |
|
$ |
127,924,333 |
|
|
$ |
(4,591,167 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total derivatives, excluding accrued interest |
|
|
|
|
|
$ |
(3,436,814 |
) |
|
|
|
|
|
$ |
(4,591,167 |
) |
Cash collateral pledged to counteparties |
|
|
|
|
|
|
2,534,261 |
|
|
|
|
|
|
|
3,836,370 |
|
Cash collateral received from counterparties |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(61,209 |
) |
Accrued interest |
|
|
|
|
|
|
39,901 |
|
|
|
|
|
|
|
(25,418 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net derivative balance |
|
|
|
|
|
$ |
(862,652 |
) |
|
|
|
|
|
$ |
(841,424 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net derivative asset balance |
|
|
|
|
|
$ |
9,092 |
|
|
|
|
|
|
$ |
20,236 |
|
Net derivative liability balance |
|
|
|
|
|
|
(871,744 |
) |
|
|
|
|
|
|
(861,660 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net derivative balance |
|
|
|
|
|
$ |
(862,652 |
) |
|
|
|
|
|
$ |
(841,424 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
136
Derivative Financial Instruments by Product
The following table summarizes the notional amounts and estimated fair values of derivative
financial instruments (excluding accrued interest) by product and type of accounting treatment.
The categories of Fair value, Commitment, and Cash flow hedges represented derivative
transactions accounted for as hedges. The category of Economic hedges represented derivative
transactions under hedge strategies that did not qualify for hedge accounting treatment under the
derivatives and hedge accounting rules but were an approved risk management strategy.
The table also provides a reconciliation of fair value basis gains and (losses) of derivatives to
the Statements of Condition (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2009 |
|
|
December 31, 2008 |
|
|
|
|
|
|
|
Total estimated |
|
|
|
|
|
|
Total estimated |
|
|
|
|
|
|
|
fair value |
|
|
|
|
|
|
fair value |
|
|
|
|
|
|
|
(excluding |
|
|
|
|
|
|
(excluding |
|
|
|
Total notional |
|
|
accrued |
|
|
Total notional |
|
|
accrued |
|
|
|
amount |
|
|
interest) |
|
|
amount |
|
|
interest) |
|
Derivatives designated as hedging instruments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advances-fair value hedges |
|
$ |
66,325,882 |
|
|
$ |
(4,354,109 |
) |
|
$ |
61,673,607 |
|
|
$ |
(5,758,653 |
) |
Consolidated obligations-fair value hedges |
|
|
31,092,780 |
|
|
|
806,131 |
|
|
|
22,909,189 |
|
|
|
1,227,649 |
|
Derivatives not designated as hedging instruments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advances-economic hedges |
|
|
531,729 |
|
|
|
(968 |
) |
|
|
1,082,700 |
|
|
|
(24,520 |
) |
Consolidated obligations-economic hedges |
|
|
30,099,397 |
|
|
|
56,439 |
|
|
|
36,973,442 |
|
|
|
(45,884 |
) |
MPF loan-commitments |
|
|
11,843 |
|
|
|
35 |
|
|
|
10,395 |
|
|
|
(108 |
) |
Balance sheet |
|
|
1,892,000 |
|
|
|
58,777 |
|
|
|
1,892,000 |
|
|
|
8,164 |
|
Intermediary positions-economic hedges |
|
|
280,000 |
|
|
|
295 |
|
|
|
300,000 |
|
|
|
484 |
|
Balance sheet Macro hedges swaps |
|
|
2,100,000 |
|
|
|
(5,288 |
) |
|
|
2,100,000 |
|
|
|
(5,998 |
) |
Derivatives designated under fair value option |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps-consolidated obligations-bonds |
|
|
2,385,000 |
|
|
|
1,874 |
|
|
|
983,000 |
|
|
|
7,699 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total notional and fair value |
|
$ |
134,718,631 |
|
|
$ |
(3,436,814 |
) |
|
$ |
127,924,333 |
|
|
$ |
(4,591,167 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total derivatives, excluding accrued interest |
|
|
|
|
|
$ |
(3,436,814 |
) |
|
|
|
|
|
$ |
(4,591,167 |
) |
Cash collateral pledged to counterparties |
|
|
|
|
|
|
2,534,261 |
|
|
|
|
|
|
|
3,836,370 |
|
Cash collateral received from counterparties |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(61,209 |
) |
Accrued interest |
|
|
|
|
|
|
39,901 |
|
|
|
|
|
|
|
(25,418 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net derivative balance |
|
|
|
|
|
$ |
(862,652 |
) |
|
|
|
|
|
$ |
(841,424 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net derivative asset balance |
|
|
|
|
|
$ |
9,092 |
|
|
|
|
|
|
$ |
20,236 |
|
Net derivative liability balance |
|
|
|
|
|
|
(871,744 |
) |
|
|
|
|
|
|
(861,660 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net derivative balance |
|
|
|
|
|
$ |
(862,652 |
) |
|
|
|
|
|
$ |
(841,424 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
137
Asset Quality and Concentration Advances, Investment securities, Mortgage loans, and Counterparty
risks
The FHLBNY incurs credit risk the risk of loss due to default in its lending, investing, and
hedging activities. It has instituted processes to help manage and mitigate this risk. Despite
such processes, some amount of credit risk will always exist. External events, such as severe
economic downturns, declining real estate values (both residential and non-residential), changes in
monetary policy, adverse events in the capital markets, and other developments, could lead to
member or counterparty default or impact the creditworthiness of investments. Such events would
have a negative impact upon the FHLBNYs income and financial performance.
The Bank faced an event of default in 2008 with the bankruptcy of one of its derivative
counterparties. On September 15, 2008, Lehman Brothers Holdings, Inc. (LBHI), the parent company
of Lehman Brothers Special Financing Inc. (LBSF) and a guarantor of LBSFs obligations filed for
protection under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy
Court in the Southern District of New York. LBSF was a counterparty to FHLBNY on multiple
derivative transactions with a total notional amount of $16.5 billion at the time of termination of
the Banks derivative transactions with LBSF. The FHLBNY had deposited $509.6 million with LBSF in
cash as collateral. The LBSF default was unforeseen and despite the Banks risk management
practices and policies selection of counterparties with strong reputation, collateral
requirements and credit monitoring, and other processes, the default caused the Bank to reserve
$64.5 million as a charge to income in the third quarter of 2008 as the bankruptcy of LBHI and LBSF
made the timing and the amount of the recovery uncertain.
The following table sets forth five-year history of the FHLBNYs advances and mortgage loan
portfolios as of September 30, 2009 and December 31 for the years ended 2004 through 2008 (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, |
|
|
December 31, |
|
|
|
2009 |
|
|
2008 |
|
|
2007 |
|
|
2006 |
|
|
2005 |
|
|
2004 |
|
|
Advances |
|
$ |
95,944,732 |
|
|
$ |
109,152,876 |
|
|
$ |
82,089,667 |
|
|
$ |
59,012,394 |
|
|
$ |
61,901,534 |
|
|
$ |
68,507,487 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage loans before
allowance for credit losses |
|
$ |
1,339,586 |
|
|
$ |
1,459,291 |
|
|
$ |
1,492,261 |
|
|
$ |
1,484,012 |
|
|
$ |
1,467,525 |
|
|
$ |
1,178,590 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advances
The FHLBNY closely monitors the creditworthiness of the institutions to which it lends. The FHLBNY
also closely monitors the quality and value of the assets that are pledged as collateral by its
members. The FHLBNY periodically assesses the mortgage underwriting and documentation standards of
its borrowing members. In addition, the FHLBNY has collateral policies and restricted lending
procedures in place to manage its exposure to those members experiencing difficulty in meeting
their capital requirements or other standards of creditworthiness.
The FHLBNY has not experienced any losses on credit extended to any member since its inception.
The FHLBank Act affords any security interest granted to the FHLBNY by a member, or any affiliate
of such member, priority over the claims and rights of any party (including any receiver,
conservator, trustee, or similar party) having the rights of a lien creditor. However, the
FHLBNYs security interest is not entitled to priority over claims and rights that (1) would be
entitled to priority under applicable law, or (2) are held by a bona fide purchaser for value or by
parties that are secured by actual perfected security interests.
138
The FHLBNYs members are required to pledge collateral to secure advances. Eligible collateral
includes: (1) one-to-four-family and multi-family mortgages; (2) U.S. Treasury and
government-agency securities; (3) mortgage-backed securities; and (4) certain other collateral
which is real estate-related and has a readily ascertainable value, and in which the FHLBNY can
perfect a security interest. The FHLBNY has the right to take such steps, as it deems necessary,
to protect its secured position on outstanding advances, including requiring additional collateral
(whether or not such additional collateral would otherwise be eligible to secure a loan). The
FHLBNY also has a statutory lien under the FHLBank Act on the capital stock of its members, which
serves as further collateral for members indebtedness to the FHLBNY.
The FHLBNY has established asset classification and reserve policies. All adversely classified
assets of the FHLBNY will have a reserve established for probable losses. Based upon the
collateral held as security and prior repayment histories, no allowance for losses on advances is
currently deemed necessary by management.
The FHLBNY uses methodologies to identify and measure credit risk arising from: creditworthiness
risk arising from members, counterparties, and other entities; collateral risk arising from type,
quality, and lien status; and concentration risk arising from borrower, portfolio, geographic area,
industry, or product type.
Creditworthiness Risk Advances
The FHLBNYs potential exposure to creditworthiness risk arises from the deterioration of the
financial health of FHLBNY members. The FHLBNY manages its exposure to the creditworthiness of
members by monitoring their collateral and advance levels daily and by analyzing their financial
health each quarter.
Collateral Risk Advances
The FHLBNY is exposed to collateral risk if it is unable to perfect its interest in pledged
collateral, or when the liquidation value of pledged collateral does not fully cover the FHLBNYs
exposure. The FHLBNY manages this risk by pricing collateral on a weekly basis, performing on-site
reviews of pledged mortgage collateral from time to time, and reviewing pledged portfolio
concentrations on a quarterly basis. The FHLBNY requires that members pledge a specific amount of
excess collateral above the par amount of their outstanding obligations. Members provide the
FHLBNY with reports of pledged collateral and the FHLBNY evaluates the eligibility and value of the
pledged collateral.
The FHLBNYs loan and collateral agreements give the FHLBNY a security interest in assets held by
borrowers that is sufficient to cover their obligations to the FHLBNY. The FHLBNY may supplement
this security interest by imposing additional reporting, segregation or delivery requirements on
the borrower. The FHLBNY assigns specific collateral requirements to a borrower, based on a number
of factors. These include, but are not limited to: (1) the borrowers overall financial condition;
(2) the degree of complexity involved in the pledging, verifying, and reporting of collateral
between the borrower and the FHLBNY, especially when third-party pledges, custodians, outside
service providers and pledges to other entities are involved; and (3) the type of collateral
pledged.
The FHLBNY has also established collateral maintenance levels for borrower collateral that are
intended to help ensure that the FHLBNY has sufficient collateral to cover credit extensions and
reasonable expenses arising from potential collateral liquidation and other unknown factors.
Collateral maintenance levels are designated by collateral type and are periodically adjusted to
reflect current market and business conditions. Maintenance levels for individual borrowers may
also be adjusted, based on the overall financial condition of the borrower or another, third-party
entity involved in the collateral relationship with the FHLBNY. Borrowers are required to maintain
an amount of eligible collateral with a liquidation value at least equal to the borrowers current
collateral maintenance level. All borrowers that pledge mortgage loans as collateral are also
required to provide, on a monthly or quarterly basis, a detailed listing of mortgage loans pledged.
The FHLBNY uses this detailed reporting to monitor and track payment performance of the collateral
and to assess the risk profile of the pledged collateral based on mortgage characteristics,
geographic concentrations and other pertinent risk factors.
139
Drawing on current industry standards, the FHLBNY establishes collateral valuation methodologies
for each collateral type and calculates the estimated liquidation value of the pledged collateral
to determine whether a borrower has satisfied its collateral maintenance requirement. The FHLBNY
evaluates liquidation values on a weekly basis.
The FHLBNY makes on-site review of borrowers in connection with the evaluation of the borrowers
pledged mortgage collateral. This review involves a qualitative assessment of risk factors that
includes an examination of legal documentation, credit underwriting, and loan-servicing practices
on mortgage collateral. The FHLBNY has developed the on-site review process to more accurately
value each borrowers pledged mortgage portfolio based on current secondary-market standards. The
results of the review may lead to adjustments in the estimated liquidation value of pledged
collateral. The FHLBNY may also make additional market value adjustments to a borrowers pledged
mortgage collateral based on the quality and accuracy of the automated data provided to the FHLBNY.
Credit Risk and Concentration Risk Advances
While the FHLBNY has never experienced a credit loss on an advance, the expanded eligible
collateral for Community Financial Institutions and non-member housing associates permitted, but
not required, by the Finance Agency provides the potential for additional credit risk for the
FHLBNY. It is the FHLBNYs current policy not to accept expanded eligible collateral from
Community Financial Institutions. The management of the FHLBNY has the policies and procedures in
place to appropriately manage credit risk associated with the advance business. In extending
credit to a member, the FHLBNY adheres to specific credit policy limits approved by its Board of
Directors. The FHLBNY has not established limits for the concentrations of specific types of
advances, but management reports the activity in advances to the Board each month. Each quarter,
management reports the concentrations of convertible advances made to individual members. There
were no past due advances and all advances were current at September 30, 2009 and December 31,
2008. Management does not anticipate any credit losses, and accordingly, the FHLBNY has not
provided an allowance for credit losses on advances. The FHLBNYs potential credit risk from
advances is concentrated in commercial banks, savings institutions and insurance companies. At
September 30, 2009 and December 31, 2008, the Bank had advances of $48.7 billion and $52.2 billion
outstanding to five member institutions, representing 53.2% and 50.4% of total advances
outstanding, and sufficient collateral was held to cover the advances to these institutions.
140
Top Five Advance Holders
The following table summarizes the top five advance holders (dollars in thousands):
Top five advance holders at September 30, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Par |
|
|
Total Par Value |
|
|
Interest Income |
|
|
|
City |
|
|
State |
|
|
Advances |
|
|
of Advances |
|
|
Three months |
|
|
Nine months |
|
|
Hudson City Savings Bank 1 |
|
Paramus |
|
NJ |
|
$ |
17,325,000 |
|
|
|
18.9 |
% |
|
$ |
178,896 |
|
|
$ |
532,100 |
|
Metropolitan Life Insurance Company |
|
New York |
|
NY |
|
|
14,280,000 |
|
|
|
15.6 |
|
|
|
84,277 |
|
|
|
279,360 |
|
New York Community Bank 1 |
|
Westbury |
|
NY |
|
|
8,148,476 |
|
|
|
8.9 |
|
|
|
78,413 |
|
|
|
233,129 |
|
Manufacturers and Traders Trust Company |
|
Buffalo |
|
NY |
|
|
5,493,756 |
|
|
|
6.0 |
|
|
|
19,133 |
|
|
|
83,856 |
|
The Prudential Life Insurance Company of America |
|
Newark |
|
NJ |
|
|
3,500,000 |
|
|
|
3.8 |
|
|
|
22,448 |
|
|
|
71,473 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
|
|
|
|
$ |
48,747,232 |
|
|
|
53.2 |
% |
|
$ |
383,167 |
|
|
$ |
1,199,918 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 |
|
Officer of member bank also serves on the Board of Directors of the FHLBNY. |
Top five advance holders at September 30, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Par |
|
|
Total Par Value |
|
|
Interest Income |
|
|
|
City |
|
|
State |
|
|
Advances |
|
|
of Advances |
|
|
Three months |
|
|
Nine months |
|
|
Hudson City Savings Bank 1 |
|
Paramus |
|
NJ |
|
$ |
16,775,000 |
|
|
|
16.5 |
% |
|
$ |
174,289 |
|
|
$ |
494,241 |
|
Metropolitan Life Insurance Company |
|
New York |
|
NY |
|
|
10,230,000 |
|
|
|
10.1 |
|
|
|
52,746 |
|
|
|
151,855 |
|
New York Community Bank |
|
Westbury |
|
NY |
|
|
8,513,619 |
|
|
|
8.4 |
|
|
|
80,807 |
|
|
|
257,201 |
|
Manufacturers and Traders Trust Company |
|
Buffalo |
|
NY |
|
|
8,204,802 |
|
|
|
8.1 |
|
|
|
63,175 |
|
|
|
192,037 |
|
Merrill Lynch Bank & Trust Co., FSB |
|
New York |
|
NY |
|
|
6,200,000 |
|
|
|
6.1 |
|
|
|
14,891 |
|
|
|
32,494 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
|
|
|
|
$ |
49,923,421 |
|
|
|
49.2 |
% |
|
$ |
385,908 |
|
|
$ |
1,127,828 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 |
|
As of September 30, 2008, Officer of member bank also served on the Board of Directors of the FHLBNY. |
Top five advance holders at December 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Par |
|
|
Total Par Value |
|
|
Interest |
|
|
|
City |
|
|
State |
|
|
Advances |
|
|
of Advances |
|
|
Income |
|
|
Hudson City Savings Bank * |
|
Paramus |
|
NJ |
|
$ |
17,525,000 |
|
|
|
17.0 |
% |
|
$ |
671,146 |
|
Metropolitan Life Insurance Company |
|
New York |
|
NY |
|
|
15,105,000 |
|
|
|
14.6 |
|
|
|
260,420 |
|
Manufacturers and Traders Trust Company |
|
Buffalo |
|
NY |
|
|
7,999,689 |
|
|
|
7.7 |
|
|
|
257,649 |
|
New York Community Bank |
|
Westbury |
|
NY |
|
|
7,796,517 |
|
|
|
7.5 |
|
|
|
337,019 |
|
Astoria Federal Savings and Loan Assn. |
|
Long Island City |
|
NY |
|
|
3,738,000 |
|
|
|
3.6 |
|
|
|
151,066 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
|
|
|
|
$ |
52,164,206 |
|
|
|
50.4 |
% |
|
$ |
1,677,300 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
At December 31, 2008, officer of member bank also served on the Board of Directors of the FHLBNY. |
141
Advances outstanding to former members are summarized as below (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Ultimate |
|
Member of |
|
Advances |
|
Former Member |
|
Acquiree Bank |
|
FHLB |
|
as of September 30, 2009 |
|
Citizens Bank, National
Association |
|
RBS Citizens, National Association |
|
Boston |
|
$ |
1,250,000 |
|
Independence Community Bank |
|
Sovereign Bank |
|
Pittsburgh |
|
|
510,000 |
|
The Yardville National Bank |
|
PNC Bank, N.A. |
|
Pittsburgh |
|
|
215,000 |
|
Summit Bank |
|
Bank of America, N.A. |
|
Atlanta |
|
|
201,499 |
|
Susquehanna Patriot Bank |
|
Susquehanna Bank |
|
Pittsburgh |
|
|
100,000 |
|
Others |
|
Various |
|
Various |
|
|
87,514 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
$ |
2,364,013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ultimate |
|
Member of |
|
Advances |
|
Former Member |
|
Acquiree Bank |
|
FHLB |
|
as of December 31, 2008 |
|
Citizens Bank, National Association |
|
RBS Citizens, National Association |
|
Boston |
|
$ |
1,500,000 |
|
Independence Community Bank |
|
Sovereign Bank |
|
Pittsburgh |
|
|
575,000 |
|
The Yardville National Bank |
|
PNC Bank, N.A. |
|
Pittsburgh |
|
|
223,000 |
|
Summit Bank |
|
Bank of America, N.A. |
|
Atlanta |
|
|
215,516 |
|
Susquehanna Patriot Bank |
|
Susquehanna Bank |
|
Pittsburgh |
|
|
100,000 |
|
Others |
|
Various |
|
Various |
|
|
89,154 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
$ |
2,702,670 |
|
|
|
|
|
|
|
|
|
142
Investment quality
At September 30, 2009, long-term investments were principally comprised of (1) Mortgage-backed
securities classified as held-to-maturity at a carrying value of $9.7 billion, of which 88.2%
comprised of securities issued by government sponsored enterprises and U.S. government agency, (2)
Available-for-sale securities at fair value basis of $2.4 billion, entirely of GSE issued
mortgage-backed securities. In addition, the FHLBNY had investments of $791.2 million in primary
public and private placements of taxable obligations of state and local housing finance authorities
classified as held-to-maturity.
The FHLBNYs short-term investments consisted of certificates of deposits with maturities not
exceeding one year issued by major financial institutions, and Federal funds sold.
The FHLBNYs investments are summarized below (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, |
|
|
December 31, |
|
|
Dollar |
|
|
Percentage |
|
|
|
2009 |
|
|
2008 |
|
|
Variance |
|
|
Variance |
|
|
State and local housing agency obligations 1 |
|
$ |
791,187 |
|
|
$ |
804,100 |
|
|
$ |
(12,913 |
) |
|
|
(1.61 |
)% |
Mortgage-backed securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale securities, at fair value |
|
|
2,350,308 |
|
|
|
2,851,682 |
|
|
|
(501,374 |
) |
|
|
(17.58 |
) |
Held-to-maturity securities, at carrying
value |
|
|
9,686,840 |
|
|
|
9,326,443 |
|
|
|
360,397 |
|
|
|
3.86 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,828,335 |
|
|
|
12,982,225 |
|
|
|
(153,890 |
) |
|
|
(1.19 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Grantor trusts 2 |
|
|
12,284 |
|
|
|
10,187 |
|
|
|
2,097 |
|
|
|
20.59 |
|
Certificates of deposit 1 |
|
|
2,000,000 |
|
|
|
1,203,000 |
|
|
|
797,000 |
|
|
|
66.25 |
|
Federal funds sold |
|
|
3,900,000 |
|
|
|
|
|
|
|
3,900,000 |
|
|
|
NA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total investments |
|
$ |
18,740,619 |
|
|
$ |
14,195,412 |
|
|
$ |
4,545,207 |
|
|
|
32.02 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 |
|
Classified as held-to-maturity securities, at carrying value. |
|
2 |
|
Classified as available-for-sale securities, at fair value represent investments in
registered mutual funds and other fixed-income securities maintained under the grantor trusts. |
Investment rating
External ratings and the changes in a securitys external rating are factors in the FHLBNYs
assessment of impairment; a rating or a rating change alone is not necessarily indicative of
impairment or absence of impairment.
Mortgage-backed securities Mortgage-backed securities were classified as either
Available-for-sale or Held-to-maturity.
Available-for-sale At September 30, 2009 and December 31, 2008, all MBS classified as
available-for-sale were rated triple-A by a Nationally Recognized Statistical Rating Organization
(NRSRO). All available-for-sale securities were securities issued by Federal National Mortgage
Association (Fannie Mae) and the Federal Home Loan Mortgage Corp (Freddie Mac).
Held-to-maturity At September 30, 2009, Fannie Mae and Freddie Mac and a government agency issued
securities made up 88.2% of MBS classified as held-to-maturity compared to 81.3% at December 31,
2008.
143
The following tables contain information about credit ratings of the Banks investments in
held-to-maturity and available-for-sale securities at September 30, 2009 and December 31, 2008 (in
thousands):
External ratings Held-to-maturity securities September 30, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NRSRO Ratings - September 30, 2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Below |
|
|
|
Carrying |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment |
|
Issued, guaranteed or insured |
|
Value |
|
|
AAA |
|
|
AA |
|
|
A |
|
|
BBB |
|
|
Grade |
|
Pools of Mortgages |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae |
|
$ |
1,194,202 |
|
|
$ |
1,194,202 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Freddie Mac |
|
|
354,212 |
|
|
|
354,212 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total pools of mortgages |
|
|
1,548,414 |
|
|
|
1,548,414 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collateralized Mortgage Obligations/Real
Estate Mortgage Investment Conduits |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae |
|
|
2,370,747 |
|
|
|
2,370,747 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Freddie Mac |
|
|
4,384,624 |
|
|
|
4,384,624 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ginnie Mae |
|
|
187,470 |
|
|
|
187,470 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total CMOs/REMICs |
|
|
6,942,841 |
|
|
|
6,942,841 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ginnie Mae-CMBS |
|
|
49,706 |
|
|
|
49,706 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GSE MBS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CMOs/REMICs |
|
|
482,874 |
|
|
|
347,447 |
|
|
|
13,588 |
|
|
|
42,546 |
|
|
|
|
|
|
|
79,293 |
|
Commercial mortgage-backed securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-federal-agency MBS |
|
|
482,874 |
|
|
|
347,447 |
|
|
|
13,588 |
|
|
|
42,546 |
|
|
|
|
|
|
|
79,293 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset-Backed Securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Manufactured housing (insured) |
|
|
208,544 |
|
|
|
|
|
|
|
208,544 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Home equity loans (insured) |
|
|
249,918 |
|
|
|
10,733 |
|
|
|
72,997 |
|
|
|
30,216 |
|
|
|
27,798 |
|
|
|
108,174 |
|
Home equity loans (uninsured) |
|
|
204,543 |
|
|
|
179,083 |
|
|
|
20,694 |
|
|
|
|
|
|
|
4,766 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total asset-backed securities |
|
|
663,005 |
|
|
|
189,816 |
|
|
|
302,235 |
|
|
|
30,216 |
|
|
|
32,564 |
|
|
|
108,174 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total mortgage-backed securities |
|
$ |
9,686,840 |
|
|
$ |
9,078,224 |
|
|
$ |
315,823 |
|
|
$ |
72,762 |
|
|
$ |
32,564 |
|
|
$ |
187,467 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
State and local housing finance
agency obligations |
|
$ |
791,187 |
|
|
$ |
73,313 |
|
|
$ |
638,509 |
|
|
$ |
23,145 |
|
|
$ |
56,220 |
|
|
$ |
|
|
Certificates of deposit |
|
|
2,000,000 |
|
|
|
|
|
|
|
1,000,000 |
|
|
|
1,000,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other |
|
$ |
2,791,187 |
|
|
$ |
73,313 |
|
|
$ |
1,638,509 |
|
|
$ |
1,023,145 |
|
|
$ |
56,220 |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
144
External ratings Held-to-maturity securities December 31, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying |
|
|
NRSRO Ratings - December 31, 2008 |
|
Issued, guaranteed or insured |
|
Value |
|
|
AAA |
|
|
AA |
|
|
A |
|
|
BBB |
|
Pools of Mortgages |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae |
|
$ |
1,400,058 |
|
|
$ |
1,400,058 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Freddie Mac |
|
|
422,088 |
|
|
|
422,088 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total pools of mortgages |
|
|
1,822,146 |
|
|
|
1,822,146 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collateralized Mortgage Obligations/Real
Estate Mortgage Investment Conduits |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae |
|
|
2,032,050 |
|
|
|
2,032,050 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Freddie Mac |
|
|
3,722,840 |
|
|
|
3,722,840 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Ginnie Mae |
|
|
6,325 |
|
|
|
6,325 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total CMOs/REMICs |
|
|
5,761,215 |
|
|
|
5,761,215 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GSE MBS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CMOs/REMICs |
|
|
609,908 |
|
|
|
509,056 |
|
|
|
|
|
|
|
62,401 |
|
|
|
38,451 |
|
Commercial mortgage-backed securities |
|
|
266,994 |
|
|
|
266,994 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-federal-agency MBS |
|
|
876,902 |
|
|
|
776,050 |
|
|
|
|
|
|
|
62,401 |
|
|
|
38,451 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset-Backed Securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Manufactured housing (insured) |
|
|
229,714 |
|
|
|
|
|
|
|
229,714 |
|
|
|
|
|
|
|
|
|
Home equity loans (insured) |
|
|
376,587 |
|
|
|
86,662 |
|
|
|
|
|
|
|
130,277 |
|
|
|
159,648 |
|
Home equity loans (uninsured) |
|
|
259,879 |
|
|
|
259,879 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total asset-backed securities |
|
|
866,180 |
|
|
|
346,541 |
|
|
|
229,714 |
|
|
|
130,277 |
|
|
|
159,648 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total mortgage-backed securities |
|
$ |
9,326,443 |
|
|
$ |
8,705,952 |
|
|
$ |
229,714 |
|
|
$ |
192,678 |
|
|
$ |
198,099 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
State and local housing finance
agency obligations |
|
$ |
804,100 |
|
|
$ |
74,881 |
|
|
$ |
672,999 |
|
|
$ |
|
|
|
$ |
56,220 |
|
Certificates of deposit |
|
|
1,203,000 |
|
|
|
|
|
|
|
628,000 |
|
|
|
575,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other |
|
$ |
2,007,100 |
|
|
$ |
74,881 |
|
|
$ |
1,300,999 |
|
|
$ |
575,000 |
|
|
$ |
56,220 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
145
External ratings Available-for-sale securities September 30, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NRSRO Ratings - September 30, 2009 |
|
Issued, guaranteed or insured |
|
Fair Value |
|
|
AAA |
|
|
AA |
|
|
A |
|
Pools of Mortgages |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Freddie Mac |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total pools of mortgages |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collateralized Mortgage Obligations/Real
Estate Mortgage Investment Conduits |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae |
|
|
1,626,069 |
|
|
|
1,626,069 |
|
|
|
|
|
|
|
|
|
Freddie Mac |
|
|
724,239 |
|
|
|
724,239 |
|
|
|
|
|
|
|
|
|
Ginnie Mae |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total CMOs/REMICs |
|
|
2,350,308 |
|
|
|
2,350,308 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GSE MBS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CMOs/REMICs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial mortgage-backed securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-federal-agency MBS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset-Backed Securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Manufactured housing (insured) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home equity loans (insured) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home equity loans (uninsured) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total asset-backed securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total mortgage-backed securities |
|
$ |
2,350,308 |
|
|
$ |
2,350,308 |
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
146
External ratings Available-for-sale securities December 31, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NRSRO Ratings - December 31, 2008 |
|
Issued, guaranteed or insured |
|
Fair Value |
|
|
AAA |
|
|
AA |
|
|
A |
|
Pools of Mortgages |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Freddie Mac |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total pools of mortgages |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collateralized Mortgage Obligations/Real
Estate Mortgage Investment Conduits |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae |
|
|
1,854,988 |
|
|
|
1,854,988 |
|
|
|
|
|
|
|
|
|
Freddie Mac |
|
|
996,694 |
|
|
|
996,694 |
|
|
|
|
|
|
|
|
|
Ginnie Mae |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total CMOs/REMICs |
|
|
2,851,682 |
|
|
|
2,851,682 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GSE MBS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CMOs/REMICs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial mortgage-backed securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-federal-agency MBS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset-Backed Securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Manufactured housing (insured) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home equity loans (insured) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home equity loans (uninsured) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total asset-backed securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total mortgage-backed securities |
|
$ |
2,851,682 |
|
|
$ |
2,851,682 |
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae and Freddie Mac Securities
The FHLBNYs mortgage-backed securities were predominantly issued by Fannie Mae and Freddie Mac.
The Housing Act contains provisions allowing the U.S. Treasury to provide support to Fannie Mae and
Freddie Mac. Fannie Mae and Freddie Mac are in conservatorship, with the Finance Agency named as
conservator, who will manage Fannie Mae and Freddie Mac in an attempt to stabilize their financial
conditions and their ability to support the secondary mortgage market.
Available-for-sale securities All MBS outstanding at September 30, 2009 and December 31, 2008 and
classified as AFS were issued by Fannie Mae and Freddie Mac.
Held-to-maturity securities Comprised of 88.2% and 81.2% of MBS also issued by Fannie Mae,
Freddie Mac and a government agency at September 30, 2009 and December 31, 2008.
147
The following table summarizes the carrying value basis of held-to-maturity mortgage-backed
securities by issuer (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, |
|
|
Percentage |
|
|
December 31, |
|
|
Percentage |
|
|
|
2009 |
|
|
of total |
|
|
2008 |
|
|
of total |
|
|
U.S. government sponsored enterprise residential
mortgage-backed securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fannie Mae |
|
$ |
3,564,949 |
|
|
|
36.80 |
% |
|
$ |
3,432,108 |
|
|
|
36.80 |
% |
Freddie Mac |
|
|
4,738,836 |
|
|
|
48.92 |
|
|
|
4,144,928 |
|
|
|
44.44 |
|
U.S. agency residential mortgage-backed securities |
|
|
187,470 |
|
|
|
1.94 |
|
|
|
6,325 |
|
|
|
0.07 |
|
U.S. agency commercial mortgage-backed securities |
|
|
49,706 |
|
|
|
0.51 |
|
|
|
|
|
|
|
|
|
Private-label issued securities |
|
|
1,145,879 |
|
|
|
11.83 |
|
|
|
1,743,082 |
|
|
|
18.69 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Held-to-maturity securities-mortgage-backed securities |
|
$ |
9,686,840 |
|
|
|
100.00 |
% |
|
$ |
9,326,443 |
|
|
|
100.00 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-agency Private label mortgage and asset-backed securities
At September 30, 2009, the Bank also held MBS that were privately issued. All private-label MBS
were classified as held-to-maturity. The following table summarizes private-label mortgage- and
asset-backed securities by fixed- or variable-rate coupon types (Unpaid principal balance; in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2009 |
|
|
December 31, 2008 |
|
|
|
|
|
|
Variable |
|
|
|
|
|
|
|
|
Variable |
|
|
|
|
Private-label MBS |
|
Fixed Rate |
|
|
Rate |
|
|
Total |
|
|
Fixed Rate |
|
|
Rate |
|
|
Total |
|
Private-label RMBS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prime |
|
$ |
473,648 |
|
|
$ |
4,643 |
|
|
$ |
478,291 |
|
|
$ |
596,430 |
|
|
$ |
4,811 |
|
|
$ |
601,241 |
|
Alt-A |
|
|
7,471 |
|
|
|
3,838 |
|
|
|
11,309 |
|
|
|
9,129 |
|
|
|
4,177 |
|
|
|
13,306 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total PL RMBS |
|
|
481,119 |
|
|
|
8,481 |
|
|
|
489,600 |
|
|
|
605,559 |
|
|
|
8,988 |
|
|
|
614,547 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Private-label CMBS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prime |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
266,860 |
|
|
|
|
|
|
|
266,860 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total PL CMBS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
266,860 |
|
|
|
|
|
|
|
266,860 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home Equity Loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subprime |
|
|
453,025 |
|
|
|
113,399 |
|
|
|
566,424 |
|
|
|
504,565 |
|
|
|
132,135 |
|
|
|
636,700 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Home Equity Loans |
|
|
453,025 |
|
|
|
113,399 |
|
|
|
566,424 |
|
|
|
504,565 |
|
|
|
132,135 |
|
|
|
636,700 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Manufactured Housing Loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subprime |
|
|
208,566 |
|
|
|
|
|
|
|
208,566 |
|
|
|
229,738 |
|
|
|
|
|
|
|
229,738 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Manufactured Housing Loans |
|
|
208,566 |
|
|
|
|
|
|
|
208,566 |
|
|
|
229,738 |
|
|
|
|
|
|
|
229,738 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total UPB of private-label MBS |
|
$ |
1,142,710 |
|
|
$ |
121,880 |
|
|
$ |
1,264,590 |
|
|
$ |
1,606,722 |
|
|
$ |
141,123 |
|
|
$ |
1,747,845 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unpaid principal balance (UPB) is also known as the current face or par amount of a
mortgage-backed security.
148
Impairment Analysis
Securities with a fair value below amortized cost basis are considered impaired. Determining
whether a decline in fair value is OTTI requires significant judgment. The FHLBNY evaluates its
individual held-to-maturity investment in private-label issued mortgage- and asset-backed
securities for OTTI on a quarterly basis. As part of this process, the FHLBNY assesses if it has
an intention to sell the security or it is more likely than not that it will be required to sell
the impaired investment before recovery of its amortized cost basis.
To assess whether the entire amortized cost bases of the Banks private-label MBS will be
recovered, the Bank performed cash flow analysis for 100% of the FHLBNYs private-label MBS
outstanding at September 30, 2009, including private-label MBS that were determined to be
other-than-temporarily impaired in a previous reporting period. For more information about the
Banks critical policies and procedures and the role of the OTTI Committee in the pricing and
assessment of OTTI, see Note 1. Significant Accounting Policies and Estimates.
Based on the results of its cash flow analyses, the FHLBNY determined that it was likely that it
will not fully recover the amortized cost bases of ten of its private-label MBS and, accordingly,
these securities were deemed to be OTTI at September 30, 2009. The impaired securities included
seven securities, with total unpaid principal balance of $124.7 million at September 30, 2009, that
had previously been identified as OTTI and three securities, with total unpaid principal balance of
$72.5 million at September 30, 2009, that were determined to be OTTI as of September 30, 2009. The
cash flow analysis compared the present value of the cash flows expected to be collected from the
ten securities to the securities amortized cost bases. The difference, the credit loss of $3.7
million, was recorded as a charge to current year third quarter earnings. The non-credit component
of OTTI associated with the impairment in the third quarter was $26.5 million and was recorded as a
loss in Accumulated other comprehensive income (loss). In all fifteen securities have been deemed
OTTI through the current year third quarter. Thirteen impaired securities are insured by bond
insurers, Ambac and MBIA. The Banks analysis of the two bond insurers concluded that future
credit losses due to projected collateral shortfalls of the impaired securities would not be fully
supported by the two bond insurers.
The cumulative credit impairment expenses recorded through earnings year-to-date September 30, 2009
was $14.3 million as a charge to earnings recorded in Other income (loss). The non-credit
component of OTTI recorded in Accumulated other comprehensive income through the third quarter was
$103.9 million. The Bank did not experience any OTTI during 2008 or 2007.
At December 31, 2008, the FHLBNYs screening and monitoring process, which included pricing, credit rating and credit enhancement coverage, had identified 21 private-label MBS with
weak performance measures indicating the possibility of OTTI. Bonds selected through the screening
process were cash flow tested for credit impairment. Fourteen of the securities were determined to
be impaired absent bond insurer support to meet scheduled cash flows in the future. The remaining
securities were considered to be only temporarily impaired based on cash flow analysis. Based on
financial analysis of the bond insurers it was deemed that Ambac and MBIA had the ability to meet
future claims, and the fourteen bonds were determined to be also temporarily impaired at December
31, 2008.
149
In the first and second quarters of 2009, the FHLBNY also employed its screening procedures and
identified private-label MBS with weaker performance measures. Bonds selected through the
screening process were cash flow tested for credit impairment. Certain insured bonds that were
determined to be credit impaired at December 31, 2008 absent insurer support were determined to be
OTTI because of deteriorating financial conditions of MBIA and Ambac. First MBIA and then Ambac
was downgraded and released financial information and results that the FHLBNYs views resulted in
the shortening of the
bond insurance support period, a quantitative measure under the FHLBNYs bond insurer analysis
methodology. With the incremental shortening of the insurance support period of a credit impaired
bond starting with the first quarter of 2009 because of deteriorating financial conditions at Ambac
and MBIA, the FHLBNY recognized larger amounts of cash flow shortfalls at each of the quarters for
certain insured bonds. Certain uninsured bonds were determined to be credit impaired also based on
cash flow testing for credit impairment in the second and third quarters of 2009. Observed
historical performance parameters of certain securities have deteriorated in 2009, and these
factors have increased loss severities in the cash flow analyses of those private-label MBS.
The projected cash flows were based on a number of assumptions and expectations, and the results of
these models can vary significantly with changes in assumptions and expectations. The scenario of
cash flows determined reflected the FHLBNYs best estimate scenario.
Security vintage information Industry analysis of delinquency performance of mortgage-backed
securities indicates that loans supporting securities issued in 2005, 2006 and 2007 are exhibiting
significantly higher delinquency rates than those supporting securities issued in earlier years.
The FHLBNY believes the year of issuance or origination (vintage) of the collateral supporting MBS
is an important factor in projecting cash flow performance and assessing their credit performance.
The Banks private-label issued MBS (PLMBS) are relatively seasoned securities. At September 30,
2009 and December 31, 2008, the unpaid principal balances of securities issued in 2005 and 2006
totaled $159.2 million and $212.2 million, representing 12.5% and 12.1% of all private label MBS.
The securities issued in 2005 and 2006 are residential mortgage-backed securities collateralized by
loans to prime borrowers. One such residential mortgage-backed security issued in 2005 with an
unpaid balance of $56.9 million has been determined to be OTTI. The fourteen other securities
determined to be OTTI are MBS supported home equity loans collateralized by residential homes to
subprime borrowers. These securities were all issued prior to 2005.
GSE issued securities The FHLBNY evaluates its individual securities issued by Fannie Mae and
Freddie Mac or a government agency by considering the creditworthiness and performance of the debt
securities and the strength of the GSEs guarantees of the securities. Based on the Banks
analysis, GSE and agency issued securities are performing in accordance with their contractual
agreements. The Housing Act contains provisions allowing the U.S. Treasury to provide support to
Fannie Mae and Freddie Mac. In September 2008, the U.S. Treasury and the Finance Agency placed
Fannie Mae and Freddie Mac into conservatorship in an attempt to stabilize their financial
conditions and their ability to support the secondary mortgage market. The FHLBNY believes that it
will recover its investments in GSE and agency issued securities given the current levels of
collateral and credit enhancements and guarantees that exist to protect the investments.
Remaining private-label held-to-maturity MBS With respect to the Banks remaining investments,
the Bank believes no OTTI exists. The Banks conclusion is based upon multiple factors: bond
issuers continued satisfaction of their obligations under the contractual terms of the securities;
the estimated performance of the underlying collateral; the evaluation of the fundamentals of the
issuers financial condition; and the estimated support from the monoline insurers under the
contractual terms of insurance. Management has not made a decision to sell such securities at
September 30, 2009. Management has also concluded that it is more likely than not that it will not
be required to sell such securities before recovery of the amortized cost basis of the securities.
Based on factors outlined above, the FHLBNY believes that the remaining securities classified as
held-to-maturity were not other-than-temporarily impaired as of September 30, 2009.
150
However, without recovery in the near term such that liquidity returns to the mortgage-backed
securities market and spreads return to levels that reflect underlying credit characteristics, or
if the credit losses of the underlying collateral within the mortgage-backed securities perform
worse than expected, or if the presumption of the ability of monoline insurers to support the
insured securities identified at September
30, 2009 as dependent on insurance is negatively impacted by the insurers future financial
performance, it would be likely that additional OTTI may be recognized in future periods.
The table below summarizes the key characteristics of the 15 OTTI securities at September 30, 2009)
(dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2009 |
|
|
|
|
|
|
|
Insurer MBIA |
|
|
Insurer
Ambac |
|
|
Uninsured |
|
|
OTTI |
|
|
Gross OTTI Losses |
|
Security |
|
|
|
|
|
|
|
|
|
Fair |
|
|
|
|
|
|
Fair |
|
|
|
|
|
|
Fair |
|
|
Credit |
|
|
Non-credit |
|
|
Less than |
|
|
More than |
|
Classification |
|
Count |
|
|
UPB |
|
|
Value |
|
|
UPB |
|
|
Value |
|
|
UPB |
|
|
Value |
|
|
Loss |
|
|
Loss |
|
|
12 months |
|
|
12 months |
|
|
RMBS-Prime* |
|
|
1 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
56,867 |
|
|
$ |
54,687 |
|
|
$ |
(438 |
) |
|
$ |
(2,766 |
) |
|
$ |
(3,204 |
) |
|
$ |
|
|
HEL Subprime* |
|
|
14 |
|
|
|
35,616 |
|
|
|
20,653 |
|
|
|
181,995 |
|
|
|
117,651 |
|
|
|
62,461 |
|
|
|
38,392 |
|
|
|
(13,838 |
) |
|
|
(101,118 |
) |
|
|
|
|
|
|
(114,956 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
15 |
|
|
$ |
35,616 |
|
|
$ |
20,653 |
|
|
$ |
181,995 |
|
|
$ |
117,651 |
|
|
$ |
119,328 |
|
|
$ |
93,079 |
|
|
$ |
(14,276 |
) |
|
$ |
(103,884 |
) |
|
$ |
(3,204 |
) |
|
$ |
(114,956 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
RMBS-Prime Private-label MBS supported by prime residential loans; HEL Subprime MBS supported
by home equity loans. |
The table below summarizes the key characteristics of the securities that were deemed OTTI in the
third quarter of 2009 (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Q3 2009 activity |
|
|
|
|
|
|
|
Insurer MBIA |
|
|
Insurer
Ambac |
|
|
Uninsured |
|
|
OTTI |
|
|
Gross OTTI Losses |
|
Security |
|
|
|
|
|
|
|
|
|
Fair |
|
|
|
|
|
|
Fair |
|
|
|
|
|
|
Fair |
|
|
Credit |
|
|
Non-credit |
|
|
Less than |
|
|
More than |
|
Classification |
|
Count |
|
|
UPB |
|
|
Value |
|
|
UPB |
|
|
Value |
|
|
UPB |
|
|
Value |
|
|
Loss |
|
|
Loss |
|
|
12 months |
|
|
12 months |
|
|
RMBS-Prime* |
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
HEL Subprime* |
|
|
10 |
|
|
|
13,304 |
|
|
|
7,680 |
|
|
|
121,435 |
|
|
|
79,700 |
|
|
|
62,460 |
|
|
|
38,392 |
|
|
|
(3,683 |
) |
|
|
(26,486 |
) |
|
|
|
|
|
|
(30,169 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
10 |
|
|
$ |
13,304 |
|
|
$ |
7,680 |
|
|
$ |
121,435 |
|
|
$ |
79,700 |
|
|
$ |
62,460 |
|
|
$ |
38,392 |
|
|
$ |
(3,683 |
) |
|
$ |
(26,486 |
) |
|
$ |
|
|
|
$ |
(30,169 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
RMBS-Prime Private-label MBS supported by prime residential loans; HEL Subprime MBS supported
by home equity loans. |
Bond insurer counterparty risks - The current weakened financial condition of Ambac Assurance
Corp., (Ambac) and MBIA Insurance Corp (MBIA) creates a risk that these counterparties will
fail to fulfill their claims paying obligations for certain insured private-label MBS owned by the
FHLBNY. The FHLBNY has determined that the two monoline insurers are at risk with respect to their
claims paying ability, and has also determined that the FHLBNY may rely on the two bond insurers to
remain as viable financial guarantors until July 31, 2016 with respect to Ambac, and March 31, 2012
with respect to MBIA. The FHLBNYs cash flow assessment has determined that absent bond insurance,
certain private-label MBS will experience credit impairment in future periods, and has deemed such
MBS as OTTI, and recorded credit impairment losses. If the financial condition of the two bond
insurers worsens, it could result in a shortening of the length of time the securities could rely
on the two bond insurers for cash flow support. This in turn would result in the recognition of
additional credit impairment losses on securities already deemed OTTI.
The following table summarizes MBS insured by MBIA and Ambac, and identifies additional
credit losses should the two bond insurers fail to provide any support effective September 2009.
The analysis below is a point in time analysis and forecasted credit losses may be greater should
the underlying collateral within the insured MBS perform worse than expected as of September 30,
2009 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Insurer MBIA |
|
|
Cumulative OTTI Recorded |
|
|
Additional |
|
|
|
No. of |
|
|
Amortized |
|
|
Carrying |
|
|
Fair |
|
|
Credit |
|
|
Non-credit |
|
|
Credit losses if zero |
|
Ratings |
|
Securities |
|
|
Cost Basis |
|
|
Value |
|
|
Value |
|
|
Loss |
|
|
Loss |
|
|
insurance assumed |
|
Impaired |
|
|
2 |
|
|
$ |
30,242 |
|
|
$ |
20,600 |
|
|
|
20,653 |
|
|
$ |
(5,370 |
) |
|
$ |
(10,075 |
) |
|
$ |
(1,036 |
) |
Unimpaired |
|
|
1 |
|
|
|
2,948 |
|
|
|
2,948 |
|
|
|
2,337 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
3 |
|
|
$ |
33,189 |
|
|
$ |
23,548 |
|
|
$ |
22,990 |
|
|
$ |
(5,370 |
) |
|
$ |
(10,075 |
) |
|
$ |
(1,036 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Insurer Ambac |
|
|
Cumulative OTTI Recorded |
|
|
Additional |
|
|
|
No. of |
|
|
Amortized |
|
|
Carrying |
|
|
Fair |
|
|
Credit |
|
|
Non-credit |
|
|
Credit losses if zero |
|
Ratings |
|
Securities |
|
|
Cost Basis |
|
|
Value |
|
|
Value |
|
|
Loss |
|
|
Loss |
|
|
insurance assumed |
|
Impaired |
|
|
11 |
|
|
$ |
174,462 |
|
|
$ |
109,189 |
|
|
|
117,651 |
|
|
$ |
(7,411 |
) |
|
$ |
(68,040 |
) |
|
$ |
(5,804 |
) |
Unimpaired |
|
|
2 |
|
|
|
36,400 |
|
|
|
36,400 |
|
|
|
22,853 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
13 |
|
|
$ |
210,862 |
|
|
$ |
145,590 |
|
|
$ |
140,504 |
|
|
$ |
(7,411 |
) |
|
$ |
(68,040 |
) |
|
$ |
(5,804 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
151
The following table presents additional information of the fair values and gross unrealized losses
of PLMBS by year of securitization and external rating at September 30, 2009 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unpaid Principal Balance |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Below |
|
|
|
|
|
|
Gross |
|
|
|
|
|
|
|
|
|
|
Ratings |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment |
|
|
Amortized |
|
|
Unrealized |
|
|
|
|
|
|
Total OTTI |
|
Private-label MBS |
|
Subtotal |
|
|
Triple-A |
|
|
Double-A |
|
|
Single-A |
|
|
Triple-B |
|
|
Grade |
|
|
Cost |
|
|
(Losses) |
|
|
Fair Value |
|
|
Losses |
|
RMBS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prime |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006 |
|
$ |
70,033 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
42,949 |
|
|
$ |
|
|
|
$ |
27,084 |
|
|
$ |
69,330 |
|
|
$ |
(4,547 |
) |
|
$ |
64,783 |
|
|
$ |
|
|
2005 |
|
|
89,168 |
|
|
|
32,301 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
56,867 |
|
|
|
87,025 |
|
|
|
(924 |
) |
|
|
86,101 |
|
|
|
(3,204 |
) |
2004 and earlier |
|
|
319,090 |
|
|
|
305,225 |
|
|
|
13,865 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
317,752 |
|
|
|
(4,653 |
) |
|
|
313,454 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total RMBS Prime |
|
|
478,291 |
|
|
|
337,526 |
|
|
|
13,865 |
|
|
|
42,949 |
|
|
|
|
|
|
|
83,951 |
|
|
|
474,107 |
|
|
|
(10,124 |
) |
|
|
464,338 |
|
|
|
(3,204 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alt-A |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2004 and earlier |
|
|
11,309 |
|
|
|
11,309 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,312 |
|
|
|
(975 |
) |
|
|
10,337 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total RMBS |
|
|
489,600 |
|
|
|
348,835 |
|
|
|
13,865 |
|
|
|
42,949 |
|
|
|
|
|
|
|
83,951 |
|
|
|
485,419 |
|
|
|
(11,099 |
) |
|
|
474,675 |
|
|
|
(3,204 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CMBS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prime |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2004 and earlier |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HEL |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subprime |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2004 and earlier |
|
|
566,424 |
|
|
|
213,943 |
|
|
|
93,704 |
|
|
|
52,119 |
|
|
|
44,629 |
|
|
|
162,029 |
|
|
|
552,379 |
|
|
|
(168,624 |
) |
|
|
383,755 |
|
|
|
(114,956 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Manufactured
Housing Loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subprime |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2004 and earlier |
|
|
208,566 |
|
|
|
|
|
|
|
208,566 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
208,544 |
|
|
|
(46,536 |
) |
|
|
162,008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total PLMBS |
|
$ |
1,264,590 |
|
|
$ |
562,778 |
|
|
$ |
316,135 |
|
|
$ |
95,068 |
|
|
$ |
44,629 |
|
|
$ |
245,980 |
|
|
$ |
1,246,342 |
|
|
$ |
(226,259 |
) |
|
$ |
1,020,438 |
|
|
$ |
(118,160 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
152
The following table presents additional information of the fair values and gross unrealized losses
of PLMBS by year of securitization and external rating at December 31, 2008 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unpaid Principal Balance |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross |
|
|
|
|
|
|
Ratings |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortized |
|
|
Unrealized |
|
|
|
|
Private-label MBS |
|
Subtotal |
|
|
Triple-A |
|
|
Double-A |
|
|
Single-A |
|
|
Triple-B |
|
|
Cost |
|
|
(Losses) |
|
|
Fair Value |
|
RMBS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prime |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006 |
|
$ |
101,843 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
62,968 |
|
|
$ |
38,875 |
|
|
$ |
100,851 |
|
|
$ |
(20,544 |
) |
|
$ |
80,308 |
|
2005 |
|
|
110,334 |
|
|
|
110,334 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
108,254 |
|
|
|
(5,415 |
) |
|
|
102,839 |
|
2004 |
|
|
168,166 |
|
|
|
168,166 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
168,173 |
|
|
|
(8,363 |
) |
|
|
159,810 |
|
2003 and earlier |
|
|
220,898 |
|
|
|
220,898 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
219,318 |
|
|
|
(6,722 |
) |
|
|
212,596 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total RMBS Prime |
|
|
601,241 |
|
|
|
499,398 |
|
|
|
|
|
|
|
62,968 |
|
|
|
38,875 |
|
|
|
596,596 |
|
|
|
(41,044 |
) |
|
|
555,553 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alt-A |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2003 and earlier |
|
|
13,306 |
|
|
|
13,306 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,310 |
|
|
|
(1,662 |
) |
|
|
11,648 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total RMBS |
|
|
614,547 |
|
|
|
512,704 |
|
|
|
|
|
|
|
62,968 |
|
|
|
38,875 |
|
|
|
609,906 |
|
|
|
(42,706 |
) |
|
|
567,201 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CMBS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prime |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2003 and earlier |
|
|
266,860 |
|
|
|
266,860 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
266,994 |
|
|
|
(127 |
) |
|
|
267,016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HEL |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subprime |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2003 and earlier |
|
|
636,700 |
|
|
|
346,631 |
|
|
|
|
|
|
|
130,404 |
|
|
|
159,665 |
|
|
|
636,466 |
|
|
|
(224,069 |
) |
|
|
412,397 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Manufactured
Housing Loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subprime |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2003 and earlier |
|
|
229,738 |
|
|
|
|
|
|
|
229,738 |
|
|
|
|
|
|
|
|
|
|
|
229,714 |
|
|
|
(75,418 |
) |
|
|
154,296 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total PLMBS |
|
$ |
1,747,845 |
|
|
$ |
1,126,195 |
|
|
$ |
229,738 |
|
|
$ |
193,372 |
|
|
$ |
198,540 |
|
|
$ |
1,743,080 |
|
|
$ |
(342,320 |
) |
|
$ |
1,400,910 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
153
Weighted-average market price offers an analysis of unrealized loss percentage; a comparison of the
weighted-average credit support to weighted-average collateral delinquency percentage is another
indicator of the credit support available to absorb potential cash flow shortfalls.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2009 |
|
|
|
|
|
|
|
Original |
|
|
|
|
|
|
|
|
|
Weighted- |
|
|
Weighted- |
|
|
Weighted- |
|
|
Weighted-Average |
|
|
|
Average Market |
|
|
Average Credit |
|
|
Average Credit |
|
|
Collateral |
|
Private-label MBS |
|
Price 1 |
|
|
Support % |
|
|
Support % |
|
|
Delinquency % |
|
RMBS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prime |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006 |
|
$ |
92.50 |
|
|
|
3.73 |
% |
|
|
5.16 |
% |
|
|
3.79 |
% |
2005 |
|
|
96.56 |
|
|
|
2.72 |
|
|
|
3.78 |
|
|
|
1.69 |
|
2004 and earlier |
|
|
98.23 |
|
|
|
1.57 |
|
|
|
2.73 |
|
|
|
0.49 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total RMBS Prime |
|
|
97.08 |
|
|
|
2.10 |
|
|
|
3.28 |
|
|
|
1.20 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alt-A |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2004 and earlier |
|
|
91.40 |
|
|
|
10.56 |
|
|
|
32.08 |
|
|
|
8.66 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total RMBS |
|
|
96.95 |
|
|
|
2.30 |
|
|
|
3.95 |
|
|
|
1.37 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CMBS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prime |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2004 and earlier |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HEL |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subprime |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2004 and earlier |
|
|
67.75 |
|
|
|
57.97 |
|
|
|
65.32 |
|
|
|
16.35 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Manufactured Housing Loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subprime |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2004 and earlier |
|
|
77.68 |
|
|
|
58.01 |
|
|
|
55.91 |
|
|
|
3.54 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Private-label MBS |
|
$ |
80.69 |
|
|
|
36.42 |
% |
|
|
40.00 |
% |
|
|
8.44 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 |
|
Represents weighted-average market price based on par equaling $100.00. Combined
weighted-average collateral
delinquency rates is calculated based on UPB amount. |
Definitions:
Original Weighted-Average Credit Support percentage represents the arithmetic mean of a cohort of
securities by vintage; credit support is defined as the credit protection level at the time
the mortgage-backed securities closed. Support is expressed as a percentage of the sum of:
subordinate bonds, reserve funds, guarantees, overcollateralization, divided by the original
collateral balance.
Weighted-Average Credit Support percentage represents the arithmetic mean of a cohort of securities
by vintage; credit support is defined as the credit protection level as of the mortgage-backed
securities most current payment date. Support is expressed as a percentage of the sum of:
subordinate bonds, reserve funds, guarantees, overcollateralization, divided by the most current
unpaid collateral balance.
154
Weighted-average collateral delinquency percentage represents the arithmetic mean of a cohort of
securities by vintage: collateral delinquency is defined as the sum of the unpaid principal balance
of loans underlying the mortgage-backed security where the borrower is 60 or more days past due, or
in bankruptcy proceedings, or the loan is in foreclosure, or has become real estate owned divided
by the aggregate unpaid collateral balance.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2008 |
|
|
|
|
|
|
|
Original |
|
|
|
|
|
|
|
|
|
Weighted- |
|
|
Weighted- |
|
|
Weighted- |
|
|
Weighted-Average |
|
|
|
Average Market |
|
|
Average Credit |
|
|
Average Credit |
|
|
Collateral |
|
Private-label MBS |
|
Price 1 |
|
|
Support % |
|
|
Support % |
|
|
Delinquency % |
|
RMBS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prime |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006 |
|
$ |
78.85 |
|
|
|
3.71 |
% |
|
|
4.56 |
% |
|
|
0.86 |
% |
2005 |
|
|
93.21 |
|
|
|
2.68 |
|
|
|
3.26 |
|
|
|
1.00 |
|
2004 |
|
|
95.03 |
|
|
|
2.05 |
|
|
|
2.86 |
|
|
|
0.40 |
|
2003 and earlier |
|
|
96.24 |
|
|
|
1.21 |
|
|
|
2.17 |
|
|
|
0.27 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total RMBS Prime |
|
|
92.40 |
|
|
|
2.14 |
|
|
|
2.97 |
|
|
|
0.54 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alt-A |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2003 and earlier |
|
|
87.54 |
|
|
|
10.22 |
|
|
|
31.60 |
|
|
|
10.56 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total RMBS |
|
|
92.30 |
|
|
|
2.31 |
|
|
|
3.59 |
|
|
|
0.76 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CMBS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prime |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2003 and earlier |
|
|
100.06 |
|
|
|
26.69 |
|
|
|
38.73 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HEL |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subprime |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2003 and earlier |
|
|
64.77 |
|
|
|
58.31 |
|
|
|
65.66 |
|
|
|
12.53 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Manufactured Housing Loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subprime |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2003 and earlier |
|
|
67.16 |
|
|
|
58.26 |
|
|
|
55.99 |
|
|
|
1.88 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Private-label MBS |
|
$ |
80.15 |
|
|
|
33.79 |
% |
|
|
38.45 |
% |
|
|
5.08 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 |
|
Represents weighted-average market price based on par equaling $100.00. Combined
weighted-average collateral
delinquency rates will be calculated based on UPB amount. |
155
External ratings are just one factor that is considered in analyzing if a security is
other-than-temporarily impaired. The table below compares delinquency percentage across PLMBS
security types, ratings and gross unrealized losses. (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2009 |
|
|
December 31, 2008 |
|
|
|
|
|
|
|
Gross |
|
|
Weighted-Average |
|
|
|
|
|
|
Gross |
|
|
Weighted-Average |
|
|
|
Amortized |
|
|
Unrealized |
|
|
Collateral |
|
|
Amortized |
|
|
Unrealized |
|
|
Collateral |
|
Private-label MBS |
|
Cost |
|
|
(Losses) |
|
|
Delinquency % 1 |
|
|
Cost |
|
|
(Losses) |
|
|
Delinquency % 1 |
|
RMBS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prime |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rated Triple A |
|
$ |
336,135 |
|
|
$ |
(5,210 |
) |
|
|
0.46 |
% |
|
$ |
495,744 |
|
|
$ |
(20,500 |
) |
|
|
0.48 |
% |
Rated Double A |
|
|
13,588 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rated Single A |
|
|
42,546 |
|
|
|
(1,801 |
) |
|
|
2.64 |
|
|
|
62,401 |
|
|
|
(12,027 |
) |
|
|
0.76 |
|
Rated Triple B |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
38,451 |
|
|
|
(8,517 |
) |
|
|
1.01 |
|
Below Investment Grade |
|
|
81,838 |
|
|
|
(3,113 |
) |
|
|
3.61 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total of RMBS Prime |
|
|
474,107 |
|
|
|
(10,124 |
) |
|
|
1.20 |
|
|
|
596,596 |
|
|
|
(41,044 |
) |
|
|
0.54 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alt-A |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rated Triple A |
|
|
11,312 |
|
|
|
(975 |
) |
|
|
8.66 |
|
|
|
13,310 |
|
|
|
(1,662 |
) |
|
|
10.56 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total of RMBS |
|
|
485,419 |
|
|
|
(11,099 |
) |
|
|
1.37 |
|
|
|
609,906 |
|
|
|
(42,706 |
) |
|
|
0.76 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CMBS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prime |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rated Triple A |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
266,994 |
|
|
|
(127 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HEL |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subprime |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rated Triple A |
|
|
212,819 |
|
|
|
(62,676 |
) |
|
|
16.73 |
|
|
|
346,541 |
|
|
|
(105,673 |
) |
|
|
13.54 |
|
Rated Double A |
|
|
93,690 |
|
|
|
(24,923 |
) |
|
|
11.03 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Rated Single A |
|
|
50,073 |
|
|
|
(17,953 |
) |
|
|
15.58 |
|
|
|
130,277 |
|
|
|
(50,977 |
) |
|
|
5.68 |
|
Rated Triple B |
|
|
43,496 |
|
|
|
(15,848 |
) |
|
|
11.71 |
|
|
|
159,648 |
|
|
|
(67,419 |
) |
|
|
15.96 |
|
Below Investment Grade |
|
|
152,301 |
|
|
|
(47,224 |
) |
|
|
20.46 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total of HEL Subprime |
|
|
552,379 |
|
|
|
(168,624 |
) |
|
|
16.35 |
|
|
|
636,466 |
|
|
|
(224,069 |
) |
|
|
12.53 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Manufactured
Housing Loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subprime |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rated Double A |
|
|
208,544 |
|
|
|
(46,536 |
) |
|
|
3.54 |
|
|
|
229,714 |
|
|
|
(75,418 |
) |
|
|
1.88 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Grand Total |
|
$ |
1,246,342 |
|
|
$ |
(226,259 |
) |
|
|
8.44 |
% |
|
$ |
1,743,080 |
|
|
$ |
(342,320 |
) |
|
|
5.08 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 |
|
Weighted-average collateral delinquency rate is determined based on the underlying
loans that are 60 days or more past due. The reported
delinquency percentage represents weighted-average based on the dollar amounts of the
individual securities in the category and their respective
delinquencies. Combined weighted-average collateral delinquency rates are calculated based on
UPB amount. |
156
Mortgage loans held-for-portfolio
Underwriting standards Summarized below are the principal underwriting criteria for the Banks
Mortgage Partnership Finance Program or MPF through which the Bank acquires mortgage loans for its
own portfolio. For a fuller description of the MPF loan mortgage loan standards, refer to pages 8
though 17 of the Banks most recent Form 10-K filed on March 27, 2009.
Mortgage loans delivered under the MPF Program must meet certain underwriting and eligibility
requirements. Loans must be qualifying 5- to 30-year conforming conventional or Government
fixed-rate, fully amortizing mortgage loans, secured by first liens on owner-occupied one-to-four
family residential properties and single unit second homes. Not eligible for delivery under the
MPF Program are mortgage loans that are not ratable by S&P, or loans that are classified as high
cost, high rate, or high risk. Collectability of mortgage loans is supported by liens on real
estate securing the loan. For conventional loans, defined as mortgage loans other than VA and FHA
insured loans, additional loss protection is provided by private mortgage insurance required for
MPF loans with a loan-to-value ratio of more than 80% at origination, which is paid for by the
borrower. The FHLBNY is responsible for losses up to the first loss level. Losses beyond this
layer are absorbed through credit enhancement provided by the member participating in the Mortgage
Partnership Program. All residual credit exposure is FHLBNYs responsibility. The amount of
credit enhancement is computed with the use of a Standard & Poors model to bring a pool of
uninsured loans to AA credit risk. The credit enhancement is an obligation of the member.
The following provides a rollforward analysis of the memo First Loss Account (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30, |
|
|
Nine months ended September 30, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
|
Beginning balance |
|
$ |
13,948 |
|
|
$ |
13,328 |
|
|
$ |
13,765 |
|
|
$ |
12,947 |
|
Additions |
|
|
19 |
|
|
|
234 |
|
|
|
216 |
|
|
|
615 |
|
Charge-offs |
|
|
|
|
|
|
(20 |
) |
|
|
(14 |
) |
|
|
(20 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance |
|
$ |
13,967 |
|
|
$ |
13,542 |
|
|
$ |
13,967 |
|
|
$ |
13,542 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The First Loss Account (FLA) memorializes the first tier of credit exposure and is neither an
indication of inherent losses in the loan portfolio nor a loan loss reserve.
Mortgage insurer risk Credit enhancement is the obligation of the Participating Financial
Institution (PFI). The PFIs credit enhancement amount represents a contingent liability to pay
the credit losses with respect to the loans purchased by the FHLBNY. In certain instances, the PFI
is required under the MPF agreement to purchase supplemental mortgage insurance (SMI). The PFI
may also require the borrower to purchase private mortgage insurance (PMI). Under the MPF
program, all insurer providers are required to maintain a credit rating of double-A or better. If
a PMI provider is downgraded, the FHLBNY may request the servicer to obtain replacement PMI
coverage with a different provider. If a SMI provider is downgraded below a double-A rating, the
PFI is required to replace the SMI policy or to provide its own undertaking equivalent to the SMI
coverage. As of August 7, 2009, this requirement has been temporarily waived by the FHFA, the
FHLBanks regulators, for a period of one year for existing loans and six months for new loans with
certain conditions, including evaluation of the claims paying ability of SMI providers. This
waiver recognizes the fact that currently there is no mortgage insurer that underwrites SMI is
rated the second highest rating category or better by any Nationally Recognized Statistical Rating
Organization (NRSRO).
157
The FHLBNY has purchased certain loans for which the PFI has either purchased SMI or the borrower
has purchased PMI from Mortgage Guaranty Insurance Corporation (MGIC). The amounts of such loans
were not significant at September 30, 2009 or December 31, 2008. S&P rates MGIC as a double-B
mortgage insurer.
The allowance for credit losses with respect to the mortgage loans held-for-portfolio was as
follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30, |
|
|
Nine months ended September 30, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance |
|
$ |
2,760 |
|
|
$ |
879 |
|
|
$ |
1,406 |
|
|
$ |
633 |
|
Charge-offs |
|
|
|
|
|
|
(4 |
) |
|
|
(14 |
) |
|
|
(4 |
) |
Provision for credit losses on mortgage loans |
|
|
598 |
|
|
|
(31 |
) |
|
|
1,966 |
|
|
|
215 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance |
|
$ |
3,358 |
|
|
$ |
844 |
|
|
$ |
3,358 |
|
|
$ |
844 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonperforming mortgage loans represent conventional mortgage loans that are placed on non-accrual
and nonperforming status when the collection of contractual principal or interest from the borrower
is 90 days or more past due. Loans (excluding Federal Housing Administration and Veterans
Administration insured loans) that are 90 days or more past due are considered as non-accrual.
Other than the non-accrual loans, no mortgage loans or advances were impaired at September 30, 2009
or December 31, 2008.
Nonperforming mortgage loans and mortgage loans 90 days or more past due and still accruing were as
follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
September 30, 2009 |
|
|
December 31, 2008 |
|
|
|
|
|
|
|
|
|
|
Mortgage loans, net of provisions for credit losses |
|
$ |
1,336,228 |
|
|
$ |
1,457,885 |
|
|
|
|
|
|
|
|
|
Non-performing mortgage loans held-for-portfolio |
|
$ |
12,642 |
|
|
$ |
4,792 |
|
|
|
|
|
|
|
|
|
Mortgage loans past due 90 days or more and still accruing interest |
|
$ |
697 |
|
|
$ |
507 |
|
|
|
|
|
|
|
|
The FHLBNYs interest contractually due and actually received for nonperforming mortgage loans
held-for-portfolio was as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30, |
|
|
Nine months ended September 30, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest contractually due 1 |
|
$ |
200 |
|
|
$ |
54 |
|
|
$ |
505 |
|
|
$ |
122 |
|
Interest actually received |
|
|
179 |
|
|
|
46 |
|
|
|
452 |
|
|
|
102 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shortfall |
|
$ |
21 |
|
|
$ |
8 |
|
|
$ |
53 |
|
|
$ |
20 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 |
|
The Bank does not recognize interest received as income from uninsured loans past due
90-days or greater. |
158
Derivative Credit Risk Exposure
The FHLBNY is subject to credit risk due to the risk of nonperformance by counterparties to the
derivative agreements. The FHLBNY transacts most of its derivatives with large banks and major
broker-dealers. Some of these banks and broker-dealers or their affiliates buy, sell, and
distribute consolidated obligations. The FHLBNY is also subject to operational risks in the
execution and servicing of derivative transactions. The degree of counterparty credit risk may
depend, among other factors, on the extent to which netting procedures and/or the provision of
collateral are used to mitigate the risk. The FHLBNY manages counterparty credit risk through
credit analysis and collateral requirements and by following the requirements set forth in Finance
Agencys regulations. The contractual or notional amount of derivatives reflects the involvement
of the FHLBNY in the various classes of financial instruments, but it does not measure the credit
risk exposure of the FHLBNY, and the maximum credit exposure of the FHLBNY is substantially less
than the notional amount. The maximum credit risk is the estimated cost of replacing derivatives
in favorable fair value gain positions if the counterparty defaults and the related collateral, if
any, is of insufficient value to the FHLBNY.
The FHLBNY uses collateral agreements to mitigate counterparty credit risk in derivatives. When
the FHLBNY has more than one derivative transaction outstanding with a counterparty, and a legally
enforceable master netting agreement exists with the counterparty, the exposure, less collateral
held, represents the appropriate measure of credit risk. Substantially all derivative contracts
are subject to master netting agreements or other right of offset arrangements.
The following table summarizes the FHLBNYs credit exposure by counterparty credit rating (in
thousands, except number of counterparties).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2009 |
|
|
|
|
|
|
|
|
|
|
|
Total Net |
|
|
|
|
|
|
Number of |
|
|
Notional |
|
|
Exposure at |
|
|
Net Exposure (3) |
|
Credit Rating |
|
Counterparties |
|
|
Balance |
|
|
Fair Value |
|
|
after Cash Collateral |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AAA |
|
|
1 |
|
|
$ |
14,153,165 |
|
|
$ |
|
|
|
$ |
|
|
AA |
|
|
6 |
|
|
|
29,922,203 |
|
|
|
|
|
|
|
|
|
A |
|
|
8 |
|
|
|
90,491,420 |
|
|
|
|
|
|
|
|
|
Members
(Notes 1 and 2) |
|
|
2 |
|
|
|
140,000 |
|
|
|
9,092 |
|
|
|
9,092 |
|
Delivery Commitments |
|
|
|
|
|
|
11,843 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
17 |
|
|
$ |
134,718,631 |
|
|
$ |
9,092 |
|
|
$ |
9,092 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2008 |
|
|
|
|
|
|
|
|
|
|
|
Total Net |
|
|
|
|
|
|
Number of |
|
|
Notional |
|
|
Exposure at |
|
|
Net Exposure (3) |
|
Credit Rating |
|
Counterparties |
|
|
Balance |
|
|
Fair Value |
|
|
after Cash Collateral |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AAA |
|
|
1 |
|
|
$ |
9,167,456 |
|
|
$ |
|
|
|
$ |
|
|
AA |
|
|
6 |
|
|
|
39,939,946 |
|
|
|
|
|
|
|
|
|
A |
|
|
7 |
|
|
|
78,656,536 |
|
|
|
64,890 |
|
|
|
3,681 |
|
Members
(Notes 1 and 2) |
|
|
3 |
|
|
|
150,000 |
|
|
|
16,555 |
|
|
|
16,555 |
|
Delivery Commitments |
|
|
|
|
|
|
10,395 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
17 |
|
|
$ |
127,924,333 |
|
|
$ |
81,445 |
|
|
$ |
20,236 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note 1: |
|
Fair values of $9.1 million and $16.6 million comprising of intermediated transactions with members and
interest-rate caps sold to members (with capped floating-rate advances) were collateralized
at September 30, 2009 and December 31, 2008. |
Note 2: |
|
The FHLBNYs loan and collateral
agreements with its members give the FHLBNY a security interest in
the obligations of members, who are required to pledge collateral to
secure advances and
derivatives purchased by the FHLBNY as an intermediary on behalf of its members.
The FHLBNY has
also established collateral maintenance levels that are intended to help
ensure that the FHLBNY has
sufficient collateral to cover credit extensions and reasonable
expenses arising from potential collateral liquidation and other unknown factors. Eligible collateral includes:
(1) one-to-four-family and
multi-family mortgages; (2) U.S. Treasury and government-agency securities;
(3) mortgage-backed
securities; and (4) certain other collateral which is real estate-related and has a readily
ascertainable value, and in which the FHLBNY can perfect a security
interest. |
|
|
As a result of the loan and collateral agreements with its members, the FHLBNY believes that its
maximum credit exposure due to the intermediated transactions was $0 at September 30, 2009 and
December 31, 2008. |
Note 3: |
|
As
reported in the Statements of Condition. |
159
Risk measurement Although notional amount is a commonly used measure of volume in the derivatives
market, it is not a meaningful measure of market or credit risk since derivative counterparties do
not exchange the notional amount (except in the case of foreign currency swaps of which the FHLBNY
has none). Counterparties use the notional amounts of derivative instruments to calculate
contractual cash flows to be exchanged. The fair value of a derivative in a gain position is a
more meaningful measure of the FHLBNYs current market exposure on derivatives. The FHLBNY
estimates exposure to credit loss on derivative instruments by calculating the replacement cost, on
a present value basis, to settle at current market prices all outstanding derivative contracts in a
gain position, net of collateral pledged by the counterparty to mitigate the FHLBNYs exposure.
All derivative contracts with non-members are also subject to master netting agreements or other
right of offset arrangements.
Exposure At September 30, 2009, the FHLBNYs credit risk was $9.1 million after recognition of
cash collateral held by the FHLBNY. The comparable exposure was $20.2 million at December 31,
2008. In determining credit risk, the FHLBNY considers accrued interest receivable and payable,
and the legal right to offset assets and liabilities by counterparty. The FHLBNY attempts to
mitigate its exposure by requiring derivative counterparties to pledge cash collateral, if the
amount of exposure is above the collateral threshold agreements. At September 30, 2009, the fair
values of derivatives in a gain position were below the threshold and derivative counterparties
pledged no cash to the FHLBNY. At December 31, 2008, derivative counterparties had pledged $61.2
million in cash as collateral to the FHLBNY.
At September 30, 2009, the FHLBNY had posted $2.5 billion in cash as collateral to derivative
counterparties to mitigate derivatives in a net fair value liability (unfavorable) position. The
FHLBNY is exposed to the extent that a counterparty may not re-pay the posted cash collateral to
the FHLBNY under unforeseen circumstances, such as bankruptcy; in such an event the FHLBNY would
then exercise its rights under the International Swaps and Derivatives Association agreement
(ISDA) to replace the derivatives in a liability position (gain position for the acquiring
counterparty) with another available counterparty in exchange for cash delivered to the FHLBNY. To
the extent that the fair values of the replacement derivatives are less than the cash collateral
posted, the FHLBNY may not receive cash equal to the amount posted received.
Derivative counterparty ratings The Banks credit exposures at September 30, 2009, in a gain
position were to member institutions on whose behalf the FHLBNY had acted as an intermediary or had
sold interest rate caps, at the request of members, to create capped floating rate advance
borrowings. The exposures were collateralized under standard collateral agreements with the
FHLBNYs member. Acting as an intermediary, the Bank had also purchased equivalent notional
amounts of derivatives from unrelated derivative counterparties.
Risk mitigation The FHLBNY attempts to mitigate derivative counterparty credit risk by
contracting only with experienced counterparties with investment-grade credit ratings. Annually,
the FHLBNYs management and Board of Directors review and approve all non-member derivative
counterparties. Management monitors counterparties on an ongoing basis for significant business
events, including ratings actions taken by nationally recognized statistical rating organizations.
All approved derivatives counterparties must enter into a master ISDA agreement with the FHLBNY
and, in addition, execute the Credit Support Annex to the ISDA agreement that provides for
collateral support at predetermined thresholds. These annexes contain enforceable provisions for
requiring collateral on certain derivative contracts that are in gain positions. The annexes also
define the maximum net unsecured credit exposure amounts that may exist before collateral delivery
is required. Typically, the maximum amount is based
upon an analysis of individual counterpartys rating and exposure. The FHLBNY also attempts to
manage counterparty credit risk through credit analysis, collateral management and other credit
enhancements, such as guarantees, and by following the requirements set forth in the Finance
Agencys regulations.
160
Despite these risk mitigating policies and processes, on September 15, 2008, an event of default
occurred under outstanding derivative contracts with total notional amounts of $16.5 billion
between Lehman Brothers Special Financing Inc. (LBSF) and the FHLBNY when credit support provider
Lehman Brothers Holdings Inc. commenced a filing under
Chapter 11 of the U.S. Bankruptcy Code on
September 15, 2008. The Bank had deposited $509.6 million with LBSF as cash collateral. Since the
default, the FHLBNY has replaced most of the derivatives that had been executed between LBSF and
the FHLBNY through new agreements with other derivative counterparties. The Lehman bankruptcy
proceedings are ongoing.
Liquidity
The FHLBNYs primary source of liquidity is the issuance of consolidated obligation bonds and
discount notes. To refinance maturing consolidated obligations, the Bank relies on the willingness
of the investors to purchase new issuances. The FHLBNY has access to the discount note market and
the efficiency of issuing discount notes is an important factor as a source of liquidity since
discount notes can be issued any time and in a variety of amounts and maturities. Member deposits
and capital stock purchased by members are another source of funds. Short-term unsecured
borrowings from other FHLBanks and in the Federal funds market provide additional sources of
liquidity. With the passage of the Housing Act on July 30, 2008, the U.S. Treasury was authorized
to purchase obligations issued by the FHLBanks, in any amount deemed appropriate by the U.S.
Treasury. This temporary authorization expires December 31, 2009 and supplements the existing
facility of $4 billion. See Note 17 Commitments and Contingencies for more information of the
U.S. Treasurys establishment of the Government Sponsored Enterprise Credit Facility (GSECF), which
is designed to serve as a contingent source of liquidity for the FHLBanks via issuance of
consolidated obligations to the U.S. Treasury.
The FHLBNYs liquidity position remains in compliance with all regulatory requirements and it does
not foresee any changes to that position.
Finance Agency Regulations Liquidity
Beginning December 1, 2005, with the implementation of the Banks Capital Plan, the Financial
Management Policy rules of the Finance Agency with respect to liquidity were superseded by
regulatory requirements that are specified in Parts 917 and 965 of Finance Agency regulations and
are summarized below.
Each FHLBank shall at all times have at least an amount of liquidity equal to the current
deposits received from its members that may be invested in:
|
|
Obligations of the United States; |
|
|
Deposits in banks or trust companies; or |
|
|
Advances with a maturity not to exceed five years. |
In addition, each FHLBank shall provide for contingency liquidity, which is defined as the
sources of cash an FHLBank may use to meet its operational requirements when its access to the
capital markets is impeded. The FHLBNY met its contingency liquidity requirements and liquidity in
excess of requirements is summarized in the table titled Contingency Liquidity.
Violations of the liquidity requirements would invoke non-compliance penalties under discretionary
powers given to the Finance Agency under applicable regulations, which would include corrective
actions.
161
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 FHLBNYs 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 FHLBNYs
Board of Directors.
The specific liquidity requirements applicable to the FHLBNY are described in the next three
sections:
Deposit Liquidity. The FHLBNY is required to invest an aggregate amount at least equal to the
amount of current deposits received from the FHLBNYs members in (1) obligations of the U.S.
government; (2) deposits in banks or trust companies; or (3) advances to members with maturities
not exceeding five years. In addition to accepting deposits from its members, the FHLBNY may
accept deposits from any other FHLBank, or from any other governmental instrumentality. The FHLBNY
met these requirements for all periods reported.
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 |
|
September 30, 2009 |
|
$ |
2,189 |
|
|
$ |
55,890 |
|
|
$ |
53,701 |
|
June 30, 2009 |
|
|
2,190 |
|
|
|
57,886 |
|
|
|
55,696 |
|
March 31, 2009 |
|
|
1,753 |
|
|
|
63,267 |
|
|
|
61,514 |
|
December 31, 2008 |
|
|
2,022 |
|
|
|
66,246 |
|
|
|
64,224 |
|
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 Banks
operational liquidity needs by regularly comparing the Banks 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 for all periods reported.
162
The following table summarizes operational liquidity (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average Balance Sheet |
|
|
Average Actual |
|
|
|
|
For the quarters ended |
|
Liquidity Requirement |
|
|
Operational Liquidity |
|
|
Excess |
|
September 30, 2009 |
|
$ |
18,348 |
|
|
$ |
22,205 |
|
|
$ |
3,857 |
|
June 30, 2009 |
|
|
11,925 |
|
|
|
25,904 |
|
|
|
13,979 |
|
March 31, 2009 |
|
|
9,543 |
|
|
|
20,893 |
|
|
|
11,350 |
|
December 31, 2008 |
|
|
8,226 |
|
|
|
14,827 |
|
|
|
6,601 |
|
Contingency Liquidity. The FHLBNY is required by Finance Agency regulations to hold contingency
liquidity in an amount sufficient to meet its liquidity needs if it is unable to access the
consolidated obligation debt markets for at least five business days. Contingency liquidity
includes: (1) marketable assets with a maturity of one year or less; (2) self-liquidating assets
with a maturity of one year or less; (3) assets that are generally acceptable as collateral in the
repurchase market; and (4) irrevocable lines of credit from financial institutions receiving not
less than the second-highest credit rating from a nationally recognized statistical rating
organization. Contingency liquidity is reported daily. The FHLBNY met these requirements for all
periods reported.
The following table summarizes contingency liquidity (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average Five Day |
|
|
Average Actual |
|
|
|
|
For the quarters ended |
|
Requirement |
|
|
Contingency Liquidity |
|
|
Excess |
|
September 30, 2009 |
|
$ |
2,962 |
|
|
$ |
16,676 |
|
|
$ |
13,714 |
|
June 30, 2009 |
|
|
11,877 |
|
|
|
21,030 |
|
|
|
9,153 |
|
March 31, 2009 |
|
|
7,443 |
|
|
|
18,709 |
|
|
|
11,266 |
|
December 31, 2008 |
|
|
4,727 |
|
|
|
12,930 |
|
|
|
8,203 |
|
Leverage and unpledged assets to debt requirements
Finance Agency regulations require the FHLBanks to maintain, in the aggregate, unpledged qualifying
assets equal to the consolidated obligations outstanding. Qualifying assets are defined as: cash;
secured advances; assets with an assessment or rating at least equivalent to the current assessment
or rating of the consolidated obligations; obligations, participations, mortgages, or other
securities of or issued by the United States or an agency of the United States; and such securities
in which fiduciary and trust funds may invest under the laws of the state in which the FHLBank is
located.
The FHLBNY met the qualifying unpledged asset requirements in each of the periods reported as
follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
September 30, 2009 |
|
|
December 31, 2008 |
|
Consolidated Obligations: |
|
|
|
|
|
|
|
|
Bonds |
|
$ |
69,670,836 |
|
|
$ |
82,256,705 |
|
Discount Notes |
|
|
38,385,244 |
|
|
|
46,329,906 |
|
|
|
|
|
|
|
|
Total consolidated obligations |
|
|
108,056,080 |
|
|
|
128,586,611 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unpledged assets |
|
|
|
|
|
|
|
|
Cash |
|
|
1,189,158 |
|
|
|
18,899 |
|
Less: Member pass-through reserves at the FRB |
|
|
(27,125 |
) |
|
|
(31,003 |
) |
Secured Advances 1 |
|
|
95,944,732 |
|
|
|
109,152,876 |
|
Investments 1 |
|
|
18,740,856 |
|
|
|
26,364,661 |
|
Mortgage loans |
|
|
1,336,228 |
|
|
|
1,457,885 |
|
Accrued interest receivable on advances and investments |
|
|
354,934 |
|
|
|
492,856 |
|
Less: Pledged Assets |
|
|
(2,178 |
) |
|
|
(2,669 |
) |
|
|
|
|
|
|
|
|
|
|
117,536,605 |
|
|
|
137,453,505 |
|
|
|
|
|
|
|
|
Excess unpledged assets |
|
$ |
9,480,525 |
|
|
$ |
8,866,894 |
|
|
|
|
|
|
|
|
|
|
|
1 |
|
At September 30, 2009, the Bank pledged $2.2 million to the FDIC see Note 4-
Held-to-maturity securities. The Bank also provided to the U.S. Treasury a listing of $17.8
billion in advances with respect to a lending agreement. See Note 17 Commitments and
Contingencies. |
163
Mortgage investment authority
Finance Agency investment regulations limit the holding of mortgage-backed securities to 300% of
capital. The FHLBNY was in compliance with the regulations for all periods reported.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2009 |
|
|
December 31, 2008 |
|
|
|
Actual |
|
|
Limits |
|
|
Actual |
|
|
Limits |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage securities investment authority 1 |
|
|
207 |
% |
|
|
300 |
% |
|
|
207 |
% |
|
|
300 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 |
|
The measurement date is on a one-month look-back basis. |
On March 24, 2008, the Board of Directors of the Federal Housing Finance Board (Finance Board), the
predecessor of the Finance Agency, adopted Resolution 2008-08, which temporarily expanded the
authority of a FHLBank to purchase mortgage-backed securities (MBS) under certain conditions.
The resolution allows an FHLBank to increase its investments in MBS issued by Fannie Mae and
Freddie Mac by an amount equal to three times its capital, which is to be calculated in addition to
the existing Financial Management Policy limit.
All mortgage loans underlying any securities purchased under this authority must be originated
after January 1, 2008. The Finance Board, the predecessor of the Finance Agency, believes that
such loans are generally of higher credit quality than loans originated at an earlier time,
particularly in 2005 and 2006. The loans underlying any Fannie Mae and Freddie Mac issued MBS
acquired pursuant to the new authority must be underwritten to conform to standards imposed by the
federal banking agencies in the Interagency Guidance on Nontraditional Mortgage Product Risks
dated October 4, 2006 and the Statement on Subprime Mortgage Lending dated July 10, 2007.
The credit ratings of the FHLBNY and changes thereof were as follows at September 30, 2009.
Long Term:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Moodys Investors Service |
|
S & P |
|
Year |
|
Outlook |
|
Rating |
|
Long-Term Outlook |
|
Rating |
|
2009 |
|
June 19, 2009 - Affirmed |
|
Aaa/Stable |
|
July 13, 2009 |
|
Long-Term rating affirmed |
|
outlook stable |
|
AAA/Stable |
|
|
|
February 2, 2009 - Affirmed |
|
Aaa/Stable |
|
|
|
|
|
|
|
|
|
|
2008 |
|
October 29, 2008 - Affirmed |
|
Aaa/Stable |
|
June 16, 2008 |
|
Long-Term rating affirmed |
|
outlook stable |
|
AAA/Stable |
|
|
|
April 17, 2008 - Affirmed |
|
Aaa/Stable |
|
|
|
|
|
|
|
|
|
|
Short Term:
|
|
|
|
|
|
|
|
|
|
|
|
|
Moodys Investors Service |
|
S & P |
Year |
|
Outlook |
|
Rating |
|
Short-Term Outlook |
|
Rating |
2009 |
|
June 19, 2009 - Affirmed |
|
P-1 |
|
July 13, 2009 |
|
Short-Term rating affirmed |
|
A-1+ |
|
|
February 2, 2009 - Affirmed |
|
P-1 |
|
|
|
|
|
|
2008 |
|
October 29, 2008 - Affirmed |
|
P-1 |
|
June 16, 2008 |
|
Short-Term rating affirmed |
|
A-1+ |
|
|
April 17, 2008 - Affirmed |
|
P-1 |
|
|
|
|
|
|
164
Legislative and Regulatory Developments
Finance Agency Examination GuidanceExamination for Accounting Practices. On October 27, 2009,
the Finance Agency issued examination guidance and standards, which are effective immediately,
relating to the accounting practices (Examination Guidance) of Fannie Mae, Freddie Mac and the
FHLBanks (collectively, the Housing GSEs), consistent with the safety and soundness
responsibilities of the Finance Agency. The areas addressed by the Examination Guidance include: 1)
accounting policies and procedures; 2) Audit Committee; 3) independent internal audit function; 4)
accounting staff; 5) financial statements; 6) external auditor; and 7) review of audit and
accounting functions. This Examination Guidance is not intended to be in conflict with statutes,
regulations, and/or GAAP. Additionally, this Examination Guidance is not intended to relieve or
minimize the decision-making responsibilities, or regulated duties and responsibilities of a
Housing GSEs management, Board of Directors or Committees thereof.
Principles for Executive Compensation at the FHLBanks and Office of Finance. On October 27,
2009, the Finance Agency issued Advisory Bulletin 2009-AB-02, which is effective immediately,
outlining five guiding principles for sound incentive compensation practices to which the FHLBanks
and the Office of Finance should adhere in setting executive compensation policies and practices.
These principles are: 1) executive compensation must be reasonable and comparable to that offered
to executives in similar positions at other comparable financial institutions; 2) executive
incentive compensation should be consistent with sound risk management and preservation of the par
value of the FHLBanks capital stock; 3) a significant percentage of an executives incentive-based
compensation should be tied to longer-term performance and outcome-indicators; 4) a significant
percentage of an executives incentive-based compensation should be deferred and made contingent
upon performance over several years; and 5) the board of directors of each FHLBank and the Office
of Finance should promote accountability and transparency in the process of setting compensation.
In evaluating compensation at the FHLBanks and the Office of Finance, the Finance Agency will
consider the extent to which an executives compensation is consistent with these principles.
FHLBank Directors Compensation and Expenses. On October 23, 2009, the Finance Agency issued a
proposed rule to implement Section 1202 of the Housing Act, allowing each FHLBank to pay its
directors reasonable compensation and expenses, subject to the authority of the Director of the
Finance Agency (Director) to object to, and to prohibit prospectively, compensation and/or expenses
that the Director determines are not reasonable. The proposed rule would add section 1261 to Title
12 of the Code of Federal Regulations, to articulate the general standard under which the FHLBanks
may compensate their directors and to establish reporting requirements with respect to how the
FHLBanks compensate their directors. The Finance Agency will accept written comments on or before
December 7, 2009.
Temporary Liquidity Guarantee Program. On October 23, 2009, the FDIC published in the Federal
Register a final rule concerning the termination of the Debt Guarantee Program (DGP), a component
of the Temporary Liquidity Guarantee Program (TLGP). For most insured depository institutions and
other entities participating in this program, the DGP concluded on October 31, 2009, with the
FDICs guarantee expiring no later than December 31, 2012. The final rule establishes a limited
six-month emergency guarantee facility for entities that (following the termination of the DGP)
become unable to issue non-guaranteed debt to replace maturing senior unsecured debt due to market
disruptions or other circumstances beyond their control. This emergency guarantee facility is
available to qualified entities on an application basis and is subject to such restrictions and
conditions as the FDIC deems appropriate. If an entitys application is approved, the FDIC will
guarantee the applicants senior unsecured debt issued on or before April 20, 2010. The FDICs
guarantee of such debt will extend through the earliest of the mandatory conversion date (for
mandatory convertible debt), the stated maturity date or December 31,
2012. Debt guaranteed under the emergency guarantee facility will be subject to an annualized
assessment rate equal to a minimum of 300 basis points.
165
FHLBanks Boards of Directors: Eligibility and Elections. On October 7, 2009, the Finance
Agency adopted a final regulation, which became effective on November 6, 2009. The final regulation
largely codifies the interim final regulation previously issued by the Finance Agency on September
26, 2008. Changes in the final regulation included provisions: (1) requiring each FHLBanks board
of directors to annually determine how many of its independent directors should be designated
public interest directors (provided that each FHLBank at all times has at least two public interest
directors); (2) stating that where an FHLBanks board of directors acts to fill a member director
vacancy that occurs mid-term, that eligible candidates for such a position must be officers or
directors of a member institution at the time the FHLBank board of directors acts, not as of the
prior year-end; and (3) permitting an FHLBank that nominates more than one nominee for each open
independent director position to declare elected the nominee who receives the highest number of
votes, even if the total votes received is less than 20 percent of the eligible votes.
Statement of Policy on Qualifications for Failed Bank Acquisitions. On September 2, 2009, the
FDIC issued a final statement of policy, effective on August 26, 2009, providing guidance to
private capital investors interested in acquiring or investing in failed insured depository
institutions regarding the terms and conditions for such investments or acquisitions. This guidance
applies to 1) private capital investors in certain companies that seek to assume deposit
liabilities or both such deposit liabilities and assets from a failed insured depository
institution and 2) private capital investors involved in applications for deposit insurance in
conjunction with de novo charters issued in connection with the resolution of failed insured
depository institutions. Additionally, this final statement of policy provides, among other
measures, standards for capital support of an acquired depository institution; an agreement to a
cross guarantee over substantially commonly-owned depository institutions; limits on transactions
with affiliates; maintenance of continuity of ownership; and avoidance of secrecy law jurisdictions
as investment channels, absent consolidated home country supervision.
Capital Classifications and Critical Capital Levels for the FHLBanks. The Finance Agency
issued a final rule, effective August 4, 2009, to implement certain provisions of the Housing Act
that require the Director of the Finance Agency to establish criteria based on the amount and type
of capital held by an FHLBank for each of the following capital classifications: adequately
capitalized, undercapitalized, significantly undercapitalized and critically undercapitalized. This
regulation defines critical capital levels for the FHLBanks, establishes the criteria for each of
the capital classifications identified in the Housing Act and implements the Finance Agencys
prompt correction action authority over the FHLBanks. The Finance Agency may, in its discretion,
otherwise determine to classify an FHLBank as less-than-adequately capitalized. On July 20, 2009,
the Finance Agency published Advisory Bulletin 2009-AB-01 which identified preliminary FHLBank
capital classifications as a form of supervisory correspondence that should be treated by an
FHLBank as unpublished information. Under this Advisory Bulletin, preliminary FHLBank capital
classifications should be publicly disclosed only if the information is material to that FHLBanks
financial condition and business operations, provided that the disclosure is limited to a recital
of the factual content of the unpublished information. (See Note 11Capital for the FHLBanks
compliance with the final rule requirements.)
Board of Directors of FHLBank System Office of Finance. On August 4, 2009, the Finance Agency
issued a proposed rule related to the reconstitution and strengthening of the Office of Finance
Board of Directors. To achieve this goal, the proposed regulation would increase the size of the
Office of Finance Board of Directors, create a fully independent audit committee, provide for the
creation of other committees and set a method for electing independent directors, along with
setting qualifications for these directors. The Office of Finance is governed by a board of
directors, the composition and functions of
which are determined by the Finance Agencys regulations. Under existing Finance Agency
regulation, the Office of Finance Board of Directors is made up of two FHLBank Presidents and one
independent director (currently vacant). The Finance Agency has proposed that all twelve FHLBank
Presidents be members of the Office of Finance Board of Directors, along with three to five
independent directors. The independent directors would comprise the audit committee of the Office
of Finance Board of Directors with oversight responsibility for the combined financial reports.
Under the proposed rule, the audit committee of the Office of Finance would be responsible for
ensuring that the FHLBanks adopt consistent accounting policies and procedures so that the combined
financial reports will continue to be accurate and meaningful. On October 2, 2009, the Finance
Agency extended the comment period for this proposed rule from October 5, 2009 to November 4, 2009.
166
FHLBank Collateral for Advances and Interagency Guidance on Nontraditional Mortgage
Products. On August 4 2009, the Finance Agency issued a notice of study and recommendations
related to the FHLBanks advances collateral. The Housing Act requires the Director of the Finance
Agency to conduct a study, which must be submitted to the U.S. Congress, on the extent to which
loans and securities used as collateral to support FHLBank advances are consistent with the federal
financial institution regulatory agencies interagency guidance on nontraditional mortgage products
and the Finance Agency also addressed their statement on subprime mortgage lending. Furthermore,
the study must consider and recommend any additional regulations, guidance, advisory bulletins or
other administrative actions necessary to ensure that the FHLBanks are not supporting loans with
predatory characteristics. Comments on this study and recommendations were due to the Finance
Agency by October 5, 2009.
Affordable Housing Program Amendments: FHLBank Mortgage Refinancing Authority. On August 4,
2009, the Finance Agency published a second interim final rule related to authorization for the
FHLBanks to provide the existing AHP subsidy through their members to assist in the refinancing of
low or moderate income households mortgages under certain federal, state and local programs for
targeted refinancing. The first interim final rule authorized such subsidies to those qualifying
under the Hope for Homeowners Program. The second interim final rule expands the program to other
government eligible programs, including the Making Home Affordable Refinancing program. The
authority was provided in the Housing Act on a temporary basis until July 30, 2010. While this rule
is effective immediately, the Finance Agency accepted public comments on the second interim final
rule by October 5, 2009.
Record Retention. On August 4, 2009, the Finance Agency issued a proposed rule that would
require Freddie Mac, Fannie Mae, the FHLBanks and the Office of Finance to establish and maintain a
record retention program to ensure that records are readily accessible for examination and other
supervisory purposes. This proposed regulation seeks to assure strong record maintenance and
availability for the security of these entities and to facilitate effective supervision. Comments
on this proposed rule were due to the Finance Agency by October 5, 2009.
Money Market Fund Reform. On July 8, 2009, the Securities and Exchange Commission (SEC)
published a proposed rule on money market fund reform. The proposed reforms include the imposition
of new liquidity requirements for money market funds. As proposed, agency securities, including
certain FHLBank securities, would not be considered liquid assets for purposes of meeting the
proposed liquidity requirements. If these requirements were adopted as proposed, money market fund
demand for FHLBank consolidated discount notes could decrease. Comments on this proposed rule were
due to the SEC by September 8, 2009.
Proposed Rule to Amend FHLBank Membership for Community Development Financial Institutions
(CDFIs). On May 15, 2009, the Finance Agency published a proposed rule to amend its membership
regulations to authorize non-federally insured CDFIs to become members of an FHLBank. The
newly-eligible CDFIs include community development loan funds, community development venture
capital funds and state-chartered credit unions without federal insurance. The proposed rule sets
forth the
eligibility and procedural requirements for CDFIs that wish to become members of an FHLBank.
Comments on this proposed rule were due to the Finance Agency by July 14, 2009.
167
Guidance for Determining Other-Than-Temporary Impairment. On April 28, 2009 and May 7, 2009,
the Finance Agency provided the FHLBanks with guidance on the process for determining OTTI with
respect to the FHLBanks holdings of private-label MBS and the FHLBanks first quarter 2009
adoption of new U.S. GAAP regarding OTTI on investment securities. The goal of this guidance was to
promote consistency among all FHLBanks for determining OTTI for private-label MBS, based on the
understanding that investors in the FHLBanks consolidated obligations could better understand and
utilize the information in the FHLBanks combined financial reports if it is prepared on a more
consistent basis. In order to achieve this goal and move to a common analytical framework, and
recognizing that several FHLBanks intended to early adopt the new U.S. GAAP regarding OTTI on
investment securities, the Finance Agency guidance required all FHLBanks to early adopt this new
accounting treatment effective January 1, 2009 and, for purposes of making OTTI determinations
beginning with the first quarter of 2009, to use a consistent set of key modeling assumptions and
specified third-party models. For a discussion of the FHLBanks implementation of this OTTI
guidance, see Critical Accounting Estimates-OTTI for Investment Securities.
During the second quarter of 2009, the FHLBanks created an OTTI Governance Committee with
responsibility for reviewing and approving the key modeling assumptions, inputs and methodologies
to be used by the FHLBanks to generate cash flow projections used in analyzing credit losses and
determining OTTI for private-label MBS. The OTTI Governance Committee charter was approved on June
11, 2009 and provides a formal process by which the FHLBanks can provide input on and approve these
key OTTI assumptions.
In accordance with the guidance provided by the OTTI Governance Committee, an FHLBank may engage
another FHLBank to perform the cash flow analyses underlying its OTTI determinations. Each FHLBank
is responsible for making its own determination of impairment and the reasonableness of
assumptions, inputs and methodologies used, as well as performing the required present value
calculations using appropriate historical cost bases and yields. FHLBanks that hold common
private-label MBS are required to consult with one another to ensure that any decision that a
commonly-held private-label MBS is other-than-temporarily impaired, including the determination of
fair value and the credit loss component of the unrealized loss, is consistent among those
FHLBanks.
In order to promote consistency in the application of the assumptions and implementation of the
OTTI methodology, the FHLBanks have established control procedures whereby the FHLBanks that are
performing cash flow analyses select a sample group of private-label MBS and each perform cash flow
analyses on all such test MBS, using the assumptions approved by the OTTI Governance Committee.
These FHLBanks exchange and discuss the results and make any adjustments necessary to achieve
consistency among their respective cash flow models.
Finance
Agency Releases Its First Strategic Plan. On July 9, 2009, the Finance Agency released its first strategic plan since it was created. This
strategic plan details the goals and objectives that will guide the Finance Agency over the next
five years in its actions to restore the financial health of Fannie Mae and Freddie Mac, enhance
the Federal Home Loan Bank System and contribute to the strength and stability of the United
States housing finance market and affordable housing. This plan lists three goals of 1) safety
and soundness, 2) housing mission and conservatorship, and 3) a resource management strategy which
the Finance Agency will employ in fulfilling its mission to provide effective supervision,
regulation and housing mission oversight of Fannie
Mae, Freddie Mac and the FHLBanks to promote their safety and soundness, support housing finance
and affordable housing and support a stable and liquid mortgage market.
168
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market Risk Management. Market risk or interest rate risk (IRR) is the risk of loss to market
value or future earnings that may result from changes in the interest rate environment. Embedded
in IRR is a tradeoff of risk versus reward wherein the FHLBNY could earn higher income by having
higher IRR through greater mismatches between its assets and liabilities at the cost of potential
significant falls in market value and future income if the interest rate environment turned against
the FHLBNYs expectations. The FHLBNY has opted to retain a modest level of IRR which allows it to
preserve its capital value while generating steady and predictable income. In keeping with that
philosophy, the FHLBNYs balance sheet consists of predominantly short-term and LIBOR-based assets
and liabilities. More than 80 percent of the FHLBNYs financial assets are either short-term or
LIBOR-based, and a similar percentage of its liabilities are also either short-term or LIBOR based.
These positions protect the FHLBNYs capital from large changes in value arising from interest
rate or volatility changes.
The primary tool used by management to achieve the desired risk profile is the use of interest rate
exchange agreements (Swaps). All the LIBOR-based advances are long-term advances that are
swapped to 3- or 1-month LIBOR or possess adjustable rates that periodically reset to a LIBOR
index. Similarly, a majority of the long-term consolidated obligations are swapped to 3- or
1-month LIBOR. These features create a relatively steady income that changes in concert with
prevailing interest rate changes to maintain a spread to short-term rates.
Despite its conservative philosophy, IRR does arise from a number of aspects of the FHLBNYs
portfolio. These include the embedded prepayment rights, refunding needs, rate resets between the
FHLBNYs short-term assets and liabilities, and basis risks arising from differences between the
yield curves associated with the FHLBNYs assets and its liabilities. To address these risks, the
FHLBNY uses certain key IRR measures including re-pricing gaps, duration of equity (DOE), value
at risk (VaR), net interest income (NII) at risk, key rate durations (KRD), and forecasted
dividend rates.
Risk Measurements. The FHLBNYs Risk Management Policy sets up a series of risk limits that the
FHLBNY calculates on a regular basis. The risk limits are as follows:
|
|
|
The option-adjusted DOE is limited to a range of +/- four years in the rates unchanged
case and to a range of +/- six years in the +/-200bps shock cases. Due to the low
interest rate environment beginning in early 2008, the -200bps shock was restricted during
the quarter end to -100bps for September 2008. The DOE downshock limits were adjusted in
those cases to +/-5.00 years in September. In December 2008, March 2009, June 2009 and
September 2009 rates were too low for a constrained downshock and the test was not
performed. |
|
|
|
The one-year cumulative re-pricing gap is limited to 10 percent of total assets. |
|
|
|
The sensitivity of expected net interest income over a one-year period is limited to a
-15 percent change under both the +/-200bps shocks compared to the rates unchanged case. |
|
|
|
The potential decline in the market value of equity is limited to a 10 percent change
under the +/-200bps shocks. |
|
|
|
KRD exposure at any of nine term points (3-month, 1-year, 2-year, 3-year, 5-year,
7-year, 10-year, 15-year, and 30-year) is limited to between +/-12 months. |
169
The FHLBNYs portfolio, including its derivatives, is tracked and the overall mismatch between
assets and liabilities is summarized by using a DOE measure. The FHLBNYs last five quarterly DOE
results are shown in years in the table below (note that, due to the on-going low interest rate
environment there was no downshock measurement performed between the fourth quarter of 2008 and the
third quarter of 2009):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Base Case DOE |
|
|
-200bps DOE |
|
|
+200bps DOE |
|
September 30, 2008 |
|
|
0.39 |
|
|
|
-2.51 |
|
|
|
1.66 |
|
December 31, 2008 |
|
|
-2.05 |
|
|
|
N/A |
|
|
|
1.44 |
|
March 31, 2009 |
|
|
-2.24 |
|
|
|
N/A |
|
|
|
1.23 |
|
June 30, 2009 |
|
|
-0.83 |
|
|
|
N/A |
|
|
|
1.67 |
|
September 30, 2009 |
|
|
-0.39 |
|
|
|
N/A |
|
|
|
3.88 |
|
The DOE has remained within its limits. Duration indicates any cumulative repricing/maturity
imbalance in the FHLBNYs financial assets and liabilities. A positive DOE indicates that, on
average, the liabilities will reprice or mature sooner than the assets while a negative DOE
indicates that, on average, the assets will reprice or mature earlier than the liabilities. The
FHLBNY measures its DOE using software that incorporates any optionality within the FHLBNYs
portfolio using well-known and tested financial pricing theoretical models.
The FHLBNY does not solely rely on the DOE measure as a mismatch measure between its assets and
liabilities. It also performs the more traditional gap measure that subtracts re-pricing/maturing
liabilities from re-pricing/maturing assets over time. The FHLBNY observes the differences over
various horizons, but has set a 10 percent of assets limit on cumulative re-pricings at the
one-year point. This quarterly observation of the one-year cumulative re-pricing gap is provided
in the table below and all values are below 10 percent of assets; well within the limit:
|
|
|
|
|
|
|
One Year Re- |
|
|
pricing Gap |
September 30, 2008 |
|
$3.359 Billion |
December 31, 2008 |
|
$9.764 Billion |
March 31, 2009 |
|
$7.593 Billion |
June 30, 2009 |
|
$5.936 Billion |
September 30, 2009 |
|
$5.480 Billion |
170
The FHLBNYs review of potential interest rate risk issues also includes the effect of changes in
interest rates on expected net income. The FHLBNY projects asset and liability volumes and spreads
over a one-year horizon and then simulates expected income and expenses from those volumes and
other inputs. The effects of changes in interest rates are measured to test whether the FHLBNY has
too much exposure in its net interest income over the coming twelve-month period. To measure the
effect, the change to the spread in the shocks is calculated and compared against the base case and
subjected to a -15 percent limit. The quarterly sensitivity of the FHLBNYs expected net interest
income under both +/-200bps shocks over the next twelve months is provided in the table below (note
that, due to the on-going low interest rate environment the downshock measurement was not performed
between the fourth quarter of 2008 and the third quarter of 2009):
|
|
|
|
|
|
|
|
|
|
|
Sensitivity in |
|
|
Sensitivity in |
|
|
|
the -200bps |
|
|
the +200bps |
|
|
|
Shock |
|
|
Shock |
|
September 30, 2008 |
|
|
3.18 |
% |
|
|
-5.91 |
% |
December 31, 2008 |
|
|
N/A |
|
|
|
24.73 |
% |
March 31, 2009 |
|
|
N/A |
|
|
|
13.11 |
% |
June 30, 2009 |
|
|
N/A |
|
|
|
0.43 |
% |
September 30, 2009 |
|
|
N/A |
|
|
|
9.23 |
% |
Aside from net interest income, the other significant impact on changes in the interest rate
environment is the potential impact on the value of the portfolio. These calculated and quoted
market values are estimated based upon their financial attributes including optionality and then
re-estimated under the assumption that interest rates suddenly rise or fall by 200bps. The worst
effect, whether it is the up or the down shock, is compared to the internal limit of 10 percent.
The quarterly potential maximum decline in the market value of equity under these 200bps shocks is
provided below (note that, due to the on-going low interest rate environment the downshock
measurement was not performed between the fourth quarter of 2008 and the third quarter of 2009):
|
|
|
|
|
|
|
|
|
|
|
Downshock |
|
|
+200bps Change in |
|
|
|
Change in MVE |
|
|
MVE |
|
September 30, 2008 |
|
|
-0.72 |
% |
|
|
-2.50 |
% |
December 31, 2008 |
|
|
N/A |
|
|
|
-0.43 |
% |
March 31, 2009 |
|
|
N/A |
|
|
|
1.01 |
% |
June 30, 2009 |
|
|
N/A |
|
|
|
-1.81 |
% |
September 30, 2009 |
|
|
N/A |
|
|
|
-4.68 |
% |
As noted, the potential declines under these shocks are within the FHLBNYs limits of a maximum 10
percent.
171
The following table displays the FHLBNYs maturity/repricing gaps as of September 30, 2009 (in
millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Rate Sensitivity |
|
|
|
September 30, 2009 |
|
|
|
|
|
|
|
More than |
|
|
More than |
|
|
More than |
|
|
|
|
|
|
Six months |
|
|
six months to |
|
|
one year to |
|
|
three years to |
|
|
More than |
|
|
|
or less |
|
|
one year |
|
|
three years |
|
|
five years |
|
|
five years |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-MBS Investments |
|
$ |
10,354 |
|
|
$ |
174 |
|
|
$ |
410 |
|
|
$ |
243 |
|
|
$ |
540 |
|
MBS Investments |
|
|
6,580 |
|
|
|
1,365 |
|
|
|
2,681 |
|
|
|
891 |
|
|
|
649 |
|
Adjustable-rate loans and advances |
|
|
15,530 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net unswapped |
|
|
32,464 |
|
|
|
1,539 |
|
|
|
3,091 |
|
|
|
1,134 |
|
|
|
1,190 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed-rate loans and advances |
|
|
9,332 |
|
|
|
4,198 |
|
|
|
18,841 |
|
|
|
8,732 |
|
|
|
34,969 |
|
Swaps hedging advances |
|
|
63,711 |
|
|
|
(3,449 |
) |
|
|
(16,873 |
) |
|
|
(8,448 |
) |
|
|
(34,940 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net fixed-rate loans and advances |
|
|
73,042 |
|
|
|
749 |
|
|
|
1,968 |
|
|
|
284 |
|
|
|
29 |
|
Loans to other FHLBanks |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-earning assets |
|
$ |
105,506 |
|
|
$ |
2,288 |
|
|
$ |
5,059 |
|
|
$ |
1,418 |
|
|
$ |
1,218 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits |
|
$ |
2,287 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount notes |
|
|
36,617 |
|
|
|
1,768 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Swapped discount notes |
|
|
1,576 |
|
|
|
(1,576 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net discount notes |
|
|
38,193 |
|
|
|
192 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Obligation Bonds |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FHLB bonds |
|
|
19,320 |
|
|
|
18,270 |
|
|
|
23,178 |
|
|
|
4,839 |
|
|
|
3,242 |
|
Swaps hedging bonds |
|
|
40,906 |
|
|
|
(16,855 |
) |
|
|
(19,074 |
) |
|
|
(3,637 |
) |
|
|
(1,340 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net FHLB bonds |
|
|
60,227 |
|
|
|
1,415 |
|
|
|
4,104 |
|
|
|
1,202 |
|
|
|
1,902 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-bearing liabilities |
|
$ |
100,707 |
|
|
$ |
1,607 |
|
|
$ |
4,104 |
|
|
$ |
1,202 |
|
|
$ |
1,902 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Post hedge gaps1: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Periodic gap |
|
$ |
4,799 |
|
|
$ |
681 |
|
|
$ |
955 |
|
|
$ |
216 |
|
|
$ |
(684 |
) |
Cumulative gaps |
|
$ |
4,799 |
|
|
$ |
5,480 |
|
|
$ |
6,436 |
|
|
$ |
6,652 |
|
|
$ |
5,968 |
|
Note: Numbers may not add due to rounding.
|
|
|
1 |
|
Repricing gaps are estimated at the scheduled rate reset dates for floating rate instruments, and
at maturity for fixed rate instruments. For callable instruments, the repricing period is
estimated by the earlier of the estimated call date under the current interest rate environment or
the instruments contractual maturity. |
172
The following tables display the FHLBNYs maturity/repricing gaps as of December 31, 2008 (in
millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Rate Sensitivity |
|
|
|
December 31, 2008 |
|
|
|
|
|
|
|
More than |
|
|
More than |
|
|
More than |
|
|
|
|
|
|
Six months |
|
|
six months to |
|
|
one year to |
|
|
three years to |
|
|
More than |
|
|
|
or less |
|
|
one year |
|
|
three years |
|
|
five years |
|
|
five years |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-MBS Investments |
|
$ |
18,298 |
|
|
$ |
405 |
|
|
$ |
404 |
|
|
$ |
126 |
|
|
$ |
259 |
|
MBS Investments |
|
|
6,938 |
|
|
|
2,940 |
|
|
|
1,801 |
|
|
|
350 |
|
|
|
209 |
|
Adjustable-rate loans and advances |
|
|
20,206 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net unswapped |
|
|
45,442 |
|
|
|
3,345 |
|
|
|
2,206 |
|
|
|
475 |
|
|
|
468 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed-rate loans and advances |
|
|
21,972 |
|
|
|
3,725 |
|
|
|
14,712 |
|
|
|
7,539 |
|
|
|
35,226 |
|
Swaps hedging advances |
|
|
56,677 |
|
|
|
(2,842 |
) |
|
|
(11,801 |
) |
|
|
(6,864 |
) |
|
|
(35,170 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net fixed-rate loans and advances |
|
|
78,649 |
|
|
|
882 |
|
|
|
2,911 |
|
|
|
675 |
|
|
|
56 |
|
Loans to other FHLBanks |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-earning assets |
|
$ |
124,091 |
|
|
$ |
4,227 |
|
|
$ |
5,117 |
|
|
$ |
1,151 |
|
|
$ |
524 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits |
|
$ |
1,497 |
|
|
$ |
15 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Discount notes |
|
|
43,981 |
|
|
|
2,348 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Swapped discount notes |
|
|
2,031 |
|
|
|
(2,031 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net discount notes |
|
|
46,012 |
|
|
|
318 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Obligation Bonds |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FHLB bonds |
|
|
36,367 |
|
|
|
16,153 |
|
|
|
19,613 |
|
|
|
5,405 |
|
|
|
3,441 |
|
Swaps hedging bonds |
|
|
32,833 |
|
|
|
(14,640 |
) |
|
|
(13,571 |
) |
|
|
(3,178 |
) |
|
|
(1,445 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net FHLB bonds |
|
|
69,200 |
|
|
|
1,513 |
|
|
|
6,043 |
|
|
|
2,227 |
|
|
|
1,996 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-bearing liabilities |
|
$ |
116,709 |
|
|
$ |
1,846 |
|
|
$ |
6,043 |
|
|
$ |
2,227 |
|
|
$ |
1,996 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Post hedge gaps1: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Periodic gap |
|
$ |
7,382 |
|
|
$ |
2,382 |
|
|
$ |
(926 |
) |
|
$ |
(1,076 |
) |
|
$ |
(1,472 |
) |
Cumulative gaps |
|
$ |
7,382 |
|
|
$ |
9,764 |
|
|
$ |
8,837 |
|
|
$ |
7,761 |
|
|
$ |
6,289 |
|
Note: Numbers may not add due to rounding.
|
|
|
1 |
|
Repricing gaps are estimated at the scheduled rate reset dates for floating rate instruments, and
at maturity for fixed rate instruments. For callable instruments, the repricing period is
estimated by the earlier of the estimated call date under the current interest rate environment or
the instruments contractual maturity. |
173
Item 4T. CONTROLS AND PROCEDURES
|
(a) |
|
Evaluation of Disclosure Controls and Procedures: An evaluation of
the Banks 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 Banks President and Chief Executive Officer, Alfred
A. DelliBovi, and Senior Vice President and Chief Financial Officer,
Patrick A. Morgan, at September 30, 2009. Based on this evaluation, they
concluded that as of September 30, 2009, the Banks 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 Banks 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
Commissions rules and forms. |
|
|
(b) |
|
Changes in Internal Control Over Financial Reporting: There were no
changes in the Banks internal control over financial reporting (as
defined in Rules 13a-15(f) and 15d-15(f) under the Act) during the Banks
last fiscal quarter that have materially affected, or are reasonably
likely to materially affect, the Banks internal control over financial
reporting. |
174
Part II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
From time
to time, the FHLBNY is involved in disputes or regulatory inquiries
that arise in the ordinary course of business. At the present time,
there are no material pending legal proceedings against the FHLBNY.
Information
about a legal proceeding involving certain property of the FHLBNY was
previously disclosed in Part I, Item 3 of the FHLBNYs
2008 Annual Report on Form 10-K filed on March 27, 2009. At
that time, the FHLBNY reported that, on September 15, 2008, an
event of default occurred under outstanding derivative contracts with
a notional amount of $16.5 billion between Lehman Brothers
Special Financing Inc. (LBSF) and the Bank when credit
support provider Lehman Brothers Holdings Inc. (LBHI)
commenced a case under Chapter 11 of Title 11 of the United
States Code (the Bankruptcy Code). LBSF commenced a case
under Chapter 11 of the Bankruptcy Code on October 3, 2008.
The Bank had pledged $509.6 million to LBSF in cash as
collateral. The Bank had certain obligations due to LBSF as of
September 30, 2008. The net amount that was due to the Bank
after giving effect to obligations due to LBSF was approximately
$64.5 million as of September 30, 2008. As such, the Bank
has fully reserved the LBSF receivables as the bankruptcies of LBSF
and LBHI make the timing and the amount of the recovery uncertain.
On
September 22, 2009, the FHLBNY filed a proof of claim of
$64.5 million as a creditor in connection with the bankruptcy
proceedings. It is possible that, in the course of the bankruptcy
proceedings, the FHLBNY may recover some amount in a future period.
However, because the timing and the amount of such recovery remains
uncertain, the Bank has not recorded any estimated gain in its
financial statements. The amount that the Bank actually recovers will
ultimately be decided in the course of the bankruptcy proceedings.
Item 1A. RISK FACTORS
In addition to the Risk Factor set forth below, please refer to the Risk Factor section in our
Annual Report on Form 10-K, as filed with the Securities and Exchange
Commission on March 27, 2009.
Except for the below discussion, there have been no material changes from risk factors previously
disclosed in our Form 10-K.
The
FHLBNY relies on monoline bond insurer counterparties to provide insurance against the credit
impairment of investments in certain private-label mortgage backed securities held by the FHLBNY.
However, the continuing weakened financial condition of Ambac Assurance Corp. (Ambac) and MBIA
Insurance Corp (MBIA) creates a risk that these counterparties may fail to fulfill their
obligations to reimburse the FHLBNY for claims under certain insurance policies. In turn, this may
lead to the recognition of additional credit impairment on the FHLBNYs portfolio of private-label
insured mortgage-backed securities.
The FHLBNY has determined that Ambac and MBIA are at risk with respect to their claims paying
ability and their ability to perform as a financial guarantor. As a result, the FHLBNY has
determined that the FHLBNY may rely on these bond insurers to remain as viable financial guarantors
until July 31, 2016 with respect to Ambac, and until March 31, 2012 with respect to MBIA. The Bank
has determined that absent bond insurance, certain private-label MBS will experience credit
impairment in future periods, and the FHLBNY has deemed such MBS as OTTI and has recorded credit
impairment losses. If the ability of the two bond insurers to fulfill their obligations to the
FHLBNY worsens, it could result in the shortening of the length of time the securities could rely
on the two bond insurers for cash flow support in future periods. This in turn would result in the
recognition of additional credit impairment losses on securities deemed to be OTTI at
September 30, 2009.
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
See Current Report on Form 8-K filed on August 27, 2009, which describes the election of certain
members of the Board of Directors of the Bank, each of whom was elected pursuant to rules governing
the election of the Federal Home Loan Bank directors and which rules did not require the submission
of a vote to security holders.
Item 5. OTHER INFORMATION
None.
175
Item 6. EXHIBITS
|
|
|
|
|
Exhibit No. |
|
Identification of Exhibit |
|
|
|
|
|
|
3.01 |
|
|
Amended Bylaws (incorporated by reference to Exhibit 99.1 to the
registrants Current Report on Form 8-K filed on September 23, 2009) |
|
|
|
|
|
|
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 |
176
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:
November 13, 2009
177