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Pursuant to Section 12(b) or 12(g) of the Securities Exchange Act of 1934
Federally chartered corporation (State or other jurisdiction of incorporation or organization) | 13-6400946 (I.R.S. employer identification number) |
101 Park Avenue New York, NY (Address of principal executive offices) | 10178 (Zip Code) |
(Registrant’s telephone number, including area code)
Common Stock, par value $100
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Commercial | Thrift | Credit | Insurance | |||||||||||||
Banks | Institutions | Unions | Companies | |||||||||||||
June 30, 2005 | 150 | 124 | 27 | — | ||||||||||||
December 31, 2004 | 148 | 127 | 27 | — | ||||||||||||
December 31, 2003 | 150 | 132 | 25 | — | ||||||||||||
December 31, 2002 | 138 | 136 | 21 | 1 |
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• | Adjustable-Rate Credit Advances (“ARC”). An Adjustable-Rate Credit advances are medium- and long-term lending that can be pegged to one of a variety of indices, such as 1-month LIBOR, 3-month LIBOR, or Fed Funds rate. Members use an Adjustable-Rate Credit Advance to manage interest rate and basis risks by efficiently matching the interest rate index and the repricing of the characteristics of floating-rate assets and liabilities. The interest rate is set and reset (depending upon the maturity of the advance and the type of index) at a spread to that designated index. Principal is due at maturity and interest payments are due at every reset date including the final payment. | ||
• | Convertible Advances . Regular Convertible Advances are medium- to long-term lending that are structured so that the member sells the FHLBNY an option or a strip of options (Bermudan). If the advance is put by the FHLBNY at the end of the lockout period, the member has the option to convert the funding to an advance product of their choice at current market rates, or pay off the advance. The Repurchase Agreement Advances Convertible advance is a variation of Convertible Advance. It is competitively priced because of the additional flexibility of being collateralize with eligible securities. The interest rate is fixed on the initial advance. The advance selected after the call can be used on either a fixed- or floating-rate at the then current market rates. | ||
• | Fixed-Rate Advance . Fixed-Rate Advances are flexible funding tools that can be used by members to meet short-to long-term liquidity needs. Terms vary from 2-years to 30-years. | ||
• | Overnight Repricing Advance Program . The Overnight Line of Credit (“OLOC”) advances are short- term, flexible, readily accessible revolving lines of credit for immediate liquidity needs. Advances issued under the Overnight Letter of Credit commitments mature on the next succeeding business day at which time the advance is repaid. Interest is calculated on a 360-day basis and is charged daily, and is priced at a spread to the then-prevailing Federal funds rate. | ||
• | Repurchase Agreement (“Repo”) Advance . Repurchase Agreement Advances are secured by eligible securities that can be structured to have fixed or adjustable interest rates, “bullet” or quarterly interest payments, and a put option by which the FHLBNY receives an option to require payments after a predetermined lockout period. Members may use U.S Treasuries, Agency- issued debentures and mortgage-backed securities as collateral. | ||
• | Mortgage-Matched Advance . Mortgage-matched advances are medium- or long-term lending that are fixed- rate, with fixed amortizing schedules and are structured to match the payment characteristics of a mortgage loan or portfolio of the member. Terms offered are from one to 30 years, with constant principal and interest payments. |
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1 | Registered trademark of the Federal Home Loan Bank of Chicago. |
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• | Conforming loan size, which is established annually as required by the Acquired Member Assets Regulation and may not exceed the loan limits permitted to be set by the other Government |
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Sponsored Entities (e.g. Fannie Mae and Freddie Mac) each year. Mortgage Partnership Finance purchases loans that are limited to OFHEO’s single- family loan limits; fixed-rate fully amortizing loans. |
• | Fixed-rate, fully-amortizing loans with terms from 5 to 30 years; |
• | Secured by first liens on residential owner occupied primary residences and second homes; primary residences may be up to four units. |
• | Condominium, planned unit development and manufactured homes are acceptable property types as are mortgages on leasehold estates (though manufactured homes must be on land owned in fee simple by the borrower); |
• | 95% maximum loan-to-value ratio (“LTV”); except for FHLBank Affordable Housing Program mortgage loans which may have loan-to-value ratios up to 100% (but may not exceed 105% total loan-to-value ratio, which compares the property value to the total amount of all mortgages outstanding against a property) and Veterans Administration and Federal Housing Administration insured Mortgage Partnership Finance Loans which may not exceed the loan-to-value ratio limits set by Federal Housing Administration and VA; |
• | Mortgage Partnership Finance Loans with loan-to-value ratios greater than 80.0% require certain amounts of mortgage guaranty insurance (“MI”), from a mortgage guaranty insurance company rated at least “AA” or “Aa” and acceptable to Standard & Poor’s Rating Services, a division of the McGraw-Hill Companies (“S&P”); |
• | Unseasoned or current production with up to 5 payments made by the borrowers; |
• | Credit reports and credit scores for each borrower; for borrowers with no credit score, alternative verification of credit is permitted; |
• | Analysis of debt ratios; |
• | Verification of income and sources of funds, if applicable; |
• | Property appraisal; |
• | Customary property or hazard insurance, and flood insurance, if applicable; from insurers acceptably rated as detailed in the Mortgage Partnership Finance Guides; |
• | Title insurance or, in those areas where title insurance is not customary, an attorney’s opinion of title; |
• | The mortgage documents, mortgage transaction, and mortgaged property must comply with all applicable laws and loans must be documented using standard Fannie Mae/Freddie Mac Uniform Instruments; |
• | Loans that are not ratable by a rating agency are not eligible for delivery under the Mortgage Partnership Finance Program; and |
• | Loans that are classified as high cost, high rate, high risk, HOEPA loans or loans in similar categories defined under predatory lending or abusive lending laws are not eligible for delivery under the Mortgage Partnership Finance Program. |
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* | The First Loss Account feature is offered with all conventional mortgage loan products. |
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• | The First Loss Account starts out at zero on the day the first Mortgage Partnership Finance Loan under a Master Commitment is purchased but increases monthly over the life of the Master Commitment at a rate that ranges from 0.03% to 0.05% (3 to 5 basis points) per annum based on the month end outstanding aggregate principal balance of the Master Commitment. | |
• | Over time the First Loss Account is expected to cover expected losses on a Master Commitment, though losses early in the life of the Master Commitment could exceed the First Loss Account and be charged in part to the Participating Financial Institution’s Credit Enhancement Amount. |
• | The Participating Financial Institution’s Credit Enhancement Amount is sized using the Mortgage Partnership Finance Program methodology to equal the amount needed for the Master Commitment to have a rating equivalent to a “AA” rated mortgage backed security, without giving effect to the First Loss Account. | |
• | The Participating Financial Institution is paid a monthly credit enhancement fee, typically 0.10% (10 basis points) per annum, based on the aggregate outstanding principal balance of the Mortgage Partnership Finance Loans in the Master Commitment. |
• | The First Loss Account is equal to 1.00% (100 basis points) of the aggregate principal balance of the Mortgage Partnership Finance Loans funded under the Master Commitment. | |
• | Once the Master Commitment is fully funded, the First Loss Account is expected to cover expected losses on that Master Commitment. |
• | The Participating Financial Institution Credit Enhancement Amount is calculated using the Mortgage Partnership Finance Program methodology to equal the difference between the amount needed for the Master Commitment to have a rating equivalent to a “AA” rated mortgage backed security and the amount of the First Loss Account. | |
• | The credit enhancement fee is between 0.07% and 0.10% (7 and 10 basis points) per annum of the aggregate outstanding principal balance of the Mortgage Partnership Finance Loans in the Master Commitment. | |
• | In addition, the Participating Financial Institution monthly credit enhancement fee after the first two or three years becomes performance based in that it is reduced by losses charged to the First Loss Account. | |
• | Under the Mortgage Partnership Finance 100 product, Participating Financial Institution originate loans as agent for the MPF Bank and the Mortgage Partnership Finance Bank provides the funds to close the loans (“table funding”). This differs from the other Mortgage Partnership Finance products in which the MPF Bank purchases loans that have already been closed by the Participating Financial Institution. |
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• | The FLA is equal to 1.00% (100 basis points) of the aggregate principal balance of the MPF Loans funded under the Master Commitment. Once the Master Commitment is fully funded, the FLA is expected to cover expected losses on that Master Commitment. |
• | The PFI’s CE Amount is calculated using the MPF Program methodology to equal the difference between the amount needed for the Master Commitment to have a rating equivalent to a “AA” rated mortgage backed security and the amount of the FLA. | |
• | The credit enhancement fee is between 0.07% and 0.10% (7 and 10 basis points) per annum of the aggregate outstanding principal balance of the MPF Loans in the Master Commitment and is performance based in that it is reduced by losses charged to the FLA. |
• | Only Government Mortgage Partnership Finance Loans are eligible for sale under this product. | |
• | The Participating Financial Institution provides and maintains Federal Housing Administration insurance or a Veterans Administration guaranty for the Government Mortgage Partnership Finance Loans and the Participating Financial Institution is responsible for compliance with all Federal Housing Administration or Veterans Administration requirements and for obtaining the benefit of the Federal Housing Administration insurance or the Veterans Administration guaranty with respect to defaulted Government Mortgage Partnership Finance Loans. | |
• | The Participating Financial Institution’s servicing obligations are essentially identical to those undertaken for servicing loans in a Ginnie Mae security. Because the Participating Financial Institution servicing these Mortgage Partnership Finance Loans assumes the risk with respect to amounts not reimbursed by either the Federal Housing Administration or Veterans Administration, the structure results in the Mortgage Partnership Finance Banks having assets that are expected to perform the same as Ginnie Mae securities. | |
• | The Participating Financial Institution is paid a monthly Government Loan fee equal to 0.02% (2 basis points) per annum based on the month end outstanding aggregate principal balance of the Master Commitment in addition to the customary 44 basis point (0.44%) per annum servicing fee that is retained by the Participating Financial Institution on a monthly basis based on the outstanding aggregate principal balance of the Mortgage Partnership Finance Loans. | |
• | Only Participating Financial Institutions that are licensed or qualified to originate and service Federal Housing Administration and Veterans Administration loans and that maintain a mortgage loan delinquency ratio that is acceptable to the Mortgage Partnership Finance Provider and that is comparable to the national average and/or regional delinquency rates as published by the Mortgage Bankers Association from time-to-time are eligible to sell and service Government Mortgage Partnership Finance Loans under the Mortgage Partnership Finance Program. |
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• | The FLA is equal to an agreed upon number of basis points of the aggregate principal balance of the MPF Loans funded under the Master Commitment that is not less than the amount of expected losses on the Master Commitment. | |
• | Once the Master Commitment is fully funded, the FLA is expected to cover expected losses on that Master Commitment. |
• | The PFI is required to provide an SMI policy covering the MPF Loans in the Master Commitment and having a deductible initially equal to the FLA. | |
• | Depending upon the amount of the SMI policy, the PFI may or may not have a separate CE Amount obligation. | |
• | The total amount of the PFI’s CE Amount (including the SMI policy) is calculated using the MPF Program methodology to equal the difference between the amount needed for the Master Commitment to have a rating equivalent to a “AA” rated mortgage backed security and the amount of the FLA. | |
• | The performance based portion of the credit enhancement fee is typically between 0.06% and 0.07% (6 and 7 basis points) per annum of the aggregate outstanding balance of the MPF Loans in the Master Commitment. The performance based fee is reduced by losses charge to the FLA and is delayed for one year from the date MPF Loans are sold to the MPF Bank. The fixed portion of the credit enhancement fee is typically 0.07% (7 basis points) per annum of the aggregate outstanding principal balance of the MPF Loans in the Master Commitment. The lower performance based credit enhancement fee is for Master Commitments without a direct PFI CE Amount obligation. |
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Participating | ||||||||||||||
Financial | Average | |||||||||||||
Mortgage | Institution | Preferred | Credit | Servicing | ||||||||||
Partnership | Direct Credit | Financial | Enhancement Fee | Fee to | ||||||||||
Finance Bank | Enhancement | Institution Credit | to Participating | Credit | Participating | |||||||||
First Loss | Size | Enhancement | Financial | Enhancement | Financial | |||||||||
Product Name | Account * | Description | Size* | Institution | Fee Offset 1 | Institution | ||||||||
Original | 3 to 5 basis | Equivalent to | 3.17 | % | 9 to 11 basis | No | 25 basis | |||||||
Mortgage | points/added | “AA” | points/year – paid | points/year | ||||||||||
Partnership | each year based | monthly | ||||||||||||
Finance | on the unpaid | |||||||||||||
balance | ||||||||||||||
Mortgage | 100 basis points | After First Loss | 0.88 | % | 7 to 10 basis | Yes – After | 25 basis | |||||||
Partnership | fixed based on | Account to | points/year – paid | first 2 to 3 | points/year | |||||||||
Finance 100 | the size of the | “AA” | monthly; | years | ||||||||||
loan pool at | performance based | |||||||||||||
closing | after 2 or 3 years | |||||||||||||
Mortgage | 100 basis points | After First Loss | 0.67 | % | 7 to 10 basis | Yes | 25 basis | |||||||
Partnership | fixed based on | Account to | points/year – paid | points/year | ||||||||||
Finance 125 | the size of the | “AA” | monthly; | |||||||||||
loan pool at | performance based | |||||||||||||
closing | ||||||||||||||
Mortgage | Sized to equal | 0-20 bps after | 0.04 | % | 13 or 14 basis | Yes, for | 25 basis | |||||||
Partnership | expected losses | First Loss | points/year | performance | points/year | |||||||||
Finance Plus | Account and | divided between a | based fee | |||||||||||
SMI | fixed fee and a | |||||||||||||
performance based | ||||||||||||||
(delayed for 1 | ||||||||||||||
year) fee; all | ||||||||||||||
fees paid monthly | ||||||||||||||
Mortgage | N/A | N/A | N/A | 2 basis points/ | N/A | 44 basis | ||||||||
Partnership | (Unreimbursed | year — paid | points/year | |||||||||||
Finance for | Servicing | monthly2 | ||||||||||||
Federal Housing | Expenses) | |||||||||||||
Administration/ | ||||||||||||||
Veteran’s | ||||||||||||||
Administration |
* | As of June 30, 2005 and December 31, 2004 | |
1 | May not exceed the First Loss Account amount for the life of the pool. | |
2 | Government Loan Fee |
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• | Instruments such as common stock that represent ownership in an entity. Exceptions include stock in small business investment companies and certain investments targeted at low-income persons or communities; | ||
• | Instruments issued by non-U.S. entities, other than those issued by U.S. branches and agency offices of foreign commercial banks; and | ||
• | Non-investment-grade debt instruments. Exceptions include certain investments targeted at low-income persons or communities and instruments that were downgraded after purchase. |
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• | Interest-only or principal-only stripped mortgage-backed securities; | ||
• | Residual-interest or interest-accrual classes of collateralized mortgage obligations (“CMOs”) and real estate mortgage investment conduits (“REMICs”); | ||
• | Fixed-rate or floating-rate mortgage-backed securities that on the trade date are at rates equal to their contractual caps and whose average lives vary by more than six years under an assumed instantaneous interest rate change of 300 basis points; and | ||
• | Non-U.S. dollar denominated securities. |
• | Cash; | ||
• | Obligations of, or fully guaranteed by, the United States; | ||
• | Secured advances; | ||
• | Mortgages that have any guaranty, insurance, or commitment from the United States or any agency of the United States; | ||
• | Investments described in section 16(a) of the FHLBank Act, including securities that a fiduciary or trust fund may purchase under the laws of the state in which the FHLBank is located; and | ||
• | Other securities that are rated Aaa by Moody’s or AAA by Standard & Poor’s. |
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For the three months | For the six months | |||||||||||||||||||||||||||
ended June 30, | ended June 30, | For the years ended December 31, | ||||||||||||||||||||||||||
2005 | 2004 | 2005 | 2004 | 2004 | 2003 | 2002 | ||||||||||||||||||||||
Retained earnings, beginning balance | $ | 255,268 | $ | 141,299 | $ | 223,434 | $ | 126,697 | $ | 126,697 | $ | 244,436 | $ | 177,008 | ||||||||||||||
Net Income for the period | 53,475 | 48,776 | 112,775 | 75,920 | 161,276 | 45,816 | 234,090 | |||||||||||||||||||||
308,743 | 190,075 | 336,209 | 202,617 | 287,973 | 290,252 | 411,098 | ||||||||||||||||||||||
Dividend paid* | (41,559 | ) | (13,330 | ) | (69,025 | ) | (25,872 | ) | (64,539 | ) | (163,555 | ) | (166,662 | ) | ||||||||||||||
Retained earnings, ending balance | $ | 267,184 | $ | 176,745 | $ | 267,184 | $ | 176,745 | $ | 223,434 | $ | 126,697 | $ | 244,436 | ||||||||||||||
* | Dividends are not accrued; they are declared and paid in the month following the end of the quarter. |
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Statement of Condition (dollars in millions, | June 30, | As of December 31, | ||||||||||||||||||||||
except ratios) | 2005 | 2004 | 2003 | 2002 | 2001 | 2000 | ||||||||||||||||||
Investments (1) | $ | 21,079 | $ | 18,363 | $ | 14,217 | $ | 23,598 | $ | 19,200 | $ | 22,406 | ||||||||||||
Advances | 64,566 | 68,507 | 63,923 | 68,926 | 60,962 | 52,396 | ||||||||||||||||||
Mortgage loans held for investment, net | 1,385 | 1,178 | 672 | 435 | 425 | 528 | ||||||||||||||||||
Total assets | 87,429 | 88,439 | 79,230 | 93,606 | 81,240 | 76,600 | ||||||||||||||||||
Deposits and other borrowings | 2,424 | 2,297 | 2,100 | 2,743 | 2,862 | 2,162 | ||||||||||||||||||
Consolidated Obligations, net | 79,321 | 80,157 | 70,857 | 83,512 | 72,628 | 69,563 | ||||||||||||||||||
Mandatorily Redeemable Stock | 35 | 127 | — | — | — | — | ||||||||||||||||||
AHP Liability | 84 | 82 | 93 | 110 | 105 | 88 | ||||||||||||||||||
REFCORP Liability | 15 | 10 | — | 14 | 20 | 19 | ||||||||||||||||||
Capital stock | 3,699 | 3,655 | 3,639 | 4,051 | 3,733 | 3,626 | ||||||||||||||||||
Unrestricted Retained earnings | 266 | 223 | 127 | 244 | 177 | 121 | ||||||||||||||||||
Restricted retained earnings* | 1 | — | — | — | — | — | ||||||||||||||||||
Total capital ratio (2) | 4.54 | % | 4.38 | % | 4.75 | % | 4.59 | % | 4.81 | % | 4.89 | % | ||||||||||||
Leverage ratio (6) | 21.86 | 22.08 | 21.04 | 21.79 | 20.78 | 20.44 |
Statements of Condition | Three months ended June 30, | Six months ended June 30 , | For the years ended December 31, | |||||||||||||||||||||||||||||||||
Averages (dollars in millions , | 2005 | 2004 | 2005 | 2004 | 2004 | 2003 | 2002 | 2001 | 2000 | |||||||||||||||||||||||||||
except percentages) | ||||||||||||||||||||||||||||||||||||
Investments (1) | $ | 20,059 | $ | 20,052 | $ | 19,257 | $ | 16,816 | $ | 17,642 | $ | 19,833 | $ | 20,677 | $ | 22,017 | $ | 20,076 | ||||||||||||||||||
Advances | 64,269 | 64,800 | 65,070 | 64,581 | 65,289 | 70,943 | 64,210 | 54,295 | 46,851 | |||||||||||||||||||||||||||
Mortgage loans held for investment, | 1,353 | 863 | 1,304 | 787 | 928 | 527 | 400 | 475 | 376 | |||||||||||||||||||||||||||
Total assets | 86,202 | 84,735 | 86,142 | 82,667 | 84,344 | 92,747 | 86,682 | 77,972 | 68,311 | |||||||||||||||||||||||||||
Deposits and other borrowings | 2,293 | 2,102 | 2,225 | 2,215 | 1,968 | 2,952 | 2,908 | 2,825 | 1,814 | |||||||||||||||||||||||||||
Consolidated Obligations , net (5) | 78,286 | 93,571 | 78,200 | 74,013 | 76,105 | 81,818 | 76,907 | 70,077 | 62,149 | |||||||||||||||||||||||||||
Mandatorily Redeemable Stock | 36 | 259 | 64 | 298 | 238 | — | — | — | — | |||||||||||||||||||||||||||
AHP Liability | 82 | 82 | 81 | 86 | 83 | 105 | 107 | 97 | 76 | |||||||||||||||||||||||||||
REFCORP Liability | 8 | 8 | 6 | 3 | 4 | 5 | 8 | 12 | 9 | |||||||||||||||||||||||||||
Capital stock | 3,652 | 3,643 | 3,616 | 3,819 | 3,554 | 4,082 | 3,768 | 3,673 | 3,354 | |||||||||||||||||||||||||||
Retained earnings | 251 | 145 | 238 | 135 | 159 | 193 | 204 | 129 | 98 |
For the three months | For the six months | |||||||||||||||||||||||||||||||||||
ended June 30 , | ended June 30 , | For the years ended December 31, | ||||||||||||||||||||||||||||||||||
Operating Results | 2005 | 2004 | 2005 | 2004 | 2004 | 2003 | 2002 | 2001 | 2000 | |||||||||||||||||||||||||||
(dollars in millions , except percentages ) | ||||||||||||||||||||||||||||||||||||
Net interest income (3) | $ | 94 | $ | 69 | $ | 192 | $ | 121 | $ | 268 | $ | 298 | $ | 389 | $ | 408 | $ | 410 | ||||||||||||||||||
Net income (5) | $ | 53 | $ | 49 | $ | 113 | $ | 77 | $ | 161 | $ | 46 | $ | 234 | $ | 285 | $ | 277 | ||||||||||||||||||
Dividends paid in cash** | $ | 42 | $ | 13 | $ | 69 | $ | 26 | $ | 65 | $ | 164 | $ | 167 | $ | 229 | $ | 227 | ||||||||||||||||||
AHP expense | $ | 6 | $ | 6 | $ | 13 | $ | 9 | $ | 19 | $ | 5 | $ | 26 | $ | 32 | $ | 31 | ||||||||||||||||||
Refcorp Expense | $ | 13 | $ | 12 | $ | 28 | $ | 19 | $ | 40 | $ | 11 | $ | 59 | $ | 71 | $ | 69 | ||||||||||||||||||
Return on average equity | 5.43 | % | 5.17 | % | 5.86 | % | 3.89 | % | 4.34 | % | 1.08 | % | 5.89 | % | 7.50 | % | 8.02 | % | ||||||||||||||||||
Return on average assets | 0.25 | % | 0.23 | % | 0.26 | % | 0.19 | % | 0.19 | % | 0.05 | % | 0.27 | % | 0.37 | % | 0.41 | % | ||||||||||||||||||
Operating Expenses | $ | 14 | $ | 12 | $ | 29 | $ | 24 | $ | 51 | $ | 48 | $ | 39 | $ | 35 | $ | 34 | ||||||||||||||||||
Weighted average dividend rate (4) | 4.70 | % | 1.58 | % | 3.85 | % | 1.52 | % | 1.83 | % | 5.33 | % | 4.51 | % | 6.29 | % | 6.95 | % | ||||||||||||||||||
Operating Expenses as a percent of average assets | 0.07 | % | 0.06 | % | 0.07 | % | 0.06 | % | 0.06 | % | 0.05 | % | 0.04 | % | 0.04 | % | 0.05 | % |
(1) | Investments include held-to-maturity securities, available-for-sale securities, interest-bearing deposits, Federal funds sold and Loans to other FHLBanks. | |
(2) | Total capital ratio is capital stock plus retained earnings and accumulated other comprehensive income (loss) as a percentage of total assets at period-end. | |
(3) | Net interest income is net interest income before the provision for credit losses on mortgage loans. | |
(4) | Represents cash dividend paid, divided by weighted average capital stock outstanding. | |
(5) | See “Management’s Discussion and Analysis — Analysis of Interest Spreads” | |
(6) | Leverage ratio is the percentage of total assets minus allowance for credit losses divided by total capital. | |
* | Balance represents amount necessary to bring six different Mortgage Partnership Finance Pools of loans to double-A rating using Standards & Poor’s Levels model. | |
** | Dividends are declared and paid within the same month |
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2004 | ||||||||||||||||
4th Quarter | 3rd Quarter | 2nd Quarter | 1st Quarter | |||||||||||||
Interest income | $ | 584,507 | $ | 496,911 | $ | 435,920 | $ | 409,634 | ||||||||
Interest expense | 507,037 | 426,950 | 366,859 | 358,939 | ||||||||||||
Net interest income | 77,470 | 69,961 | 69,061 | 50,695 | ||||||||||||
Provision for credit loss | — | — | — | — | ||||||||||||
Non-interest income (expense) | (1,947 | ) | (130 | ) | 10,989 | 55 | ||||||||||
Non-interest (expense) income | (31,348 | ) | (28,650 | ) | (31,274 | ) | (23,606 | ) | ||||||||
Net income | $ | 44,175 | $ | 41,181 | $ | 48,776 | $ | 27,144 | ||||||||
2003 | ||||||||||||||||
4th Quarter | 3rd Quarter | 2nd Quarter | 1st Quarter | |||||||||||||
Interest income | $ | 422,193 | $ | 505,132 | $ | 562,641 | $ | 570,476 | ||||||||
Interest expense | 372,559 | 423,096 | 479,825 | 486,451 | ||||||||||||
Net interest income | 49,634 | 82,036 | 82,816 | 84,025 | ||||||||||||
Provision for credit loss | — | (4 | ) | (19 | ) | (57 | ) | |||||||||
Non-interest income (expense) | 2,292 | (188,088 | ) | 809 | (117 | ) | ||||||||||
Non-interest (expense) income | (23,407 | ) | 18,397 | (30,593 | ) | (31,908 | ) | |||||||||
Net income | $ | 28,519 | $ | (87,659 | ) | $ | 53,013 | $ | 51,943 | |||||||
2002 | ||||||||||||||||
4th Quarter | 3rd Quarter | 2nd Quarter | 1st Quarter | |||||||||||||
Interest income | $ | 638,684 | $ | 651,788 | $ | 638,739 | $ | 670,160 | ||||||||
Interest expense | 546,183 | 561,762 | 551,432 | 550,777 | ||||||||||||
Net interest income | 92,501 | 90,026 | 87,307 | 119,383 | ||||||||||||
Provision for credit loss | 203 | (387 | ) | (19 | ) | (33 | ) | |||||||||
Non-interest income (expense) | (6,028 | ) | (7,107 | ) | (4,355 | ) | (15,111 | ) | ||||||||
Non-interest (expense) income | (32,302 | ) | (29,324 | ) | (29,529 | ) | (31,135 | ) | ||||||||
Net income | $ | 54,374 | $ | 53,208 | $ | 53,404 | $ | 73,104 | ||||||||
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• | Demand for FHLBNY advances resulting from changes in FHLBNY members’ deposit flows and credit demands; | ||
• | Volatility of market prices, rates, and indices or other factors that could affect the value of investments or collateral held by the FHLBNY as security for the obligations of FHLBNY members and counterparties to derivatives and similar agreements, which could result from the effects of, and changes in, various monetary or fiscal policies and regulations, including those determined by the Federal Reserve Board and the Federal Deposit Insurance Corporation; | ||
• | Political events, including legislative, regulatory, judicial, or other developments that affect the FHLBNY, its members, counterparties, and/or investors in the consolidated obligations of the FHLBanks, such as changes in the Federal Home Loan Bank Act or Finance Board regulations that affect FHLBNY’s operations and regulatory oversight; | ||
• | Competitive forces, including other sources of funding available to FHLBNY members without limitation, other entities borrowing funds in the capital markets, the ability to attract and retain skilled individuals; and general economic and market conditions. | ||
• | The pace of technological change and the ability to develop and support technology and information systems, including the Internet, sufficient to manage the risks of the FHLBNY’s business effectively; | ||
• | Changes in investor demand for consolidated obligations and/or the terms of derivatives and similar agreements, including without limitation changes in the relative attractiveness of consolidated obligations as compared to other investment opportunities; | ||
• | Timing and volume of market activity; | ||
• | Ability to introduce new products and services and to successfully manage the risks associated with those products and services, including new types of collateral used to secure advances; | ||
• | Risk of loss arising from litigation filed against one or more of the FHLBanks; and | ||
• | Inflation/deflation. |
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June 30, | March 31 | December 31 | November 30 | September 30 | June 30, | December 31, | ||||||||||||||||||||||
2005 | 2005 | 2004 | 2004 | 2004 | 2004 | 2003 | ||||||||||||||||||||||
Federal Funds Rate | 3.31 | 2.62 | 2.31 | 1.94 | 1.88 | 1.25 | 0.94 | |||||||||||||||||||||
3-month LIBOR | 3.55 | 3.09 | 2.56 | 2.41 | 2.02 | 1.61 | 1.15 | |||||||||||||||||||||
Prime Rate | 6.25 | 5.75 | 5.25 | 5.00 | 4.75 | 4.25 | 4.00 | |||||||||||||||||||||
15-year residential mortgage note rate | 4.72 | 5.24 | 4.79 | 4.83 | 4.78 | 5.29 | 4.78 | |||||||||||||||||||||
30-year residential mortgage note rate | 5.13 | 5.65 | 5.36 | 5.39 | 5.37 | 5.87 | 5.47 | |||||||||||||||||||||
1- year Adjustable Rate Mortgage | 3.65 | 3.86 | 3.46 | 3.43 | 3.21 | 3.41 | 3.37 |
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• | Monitoring the creditworthiness and financial condition of the institutions to which it lends funds. | ||
• | Reviewing the quality and value of collateral pledged by members to secure advances. | ||
• | Estimating borrowing capacity based on collateral value and type for each member, including assessment of margin requirements based on factors such as cost to liquidate and inherent risk exposure based on collateral type. | ||
• | Evaluating historical loss experience. |
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• | Evaluation of members to ensure that they meet the eligibility standards for participation in the Mortgage Partnership Finance Program. | ||
• | Evaluation of the purchased loans to ensure that they are qualifying conventional, conforming fixed rate, first lien mortgage loans with fully amortizing loan terms of up to 30 years, secured by owner-occupied, single-family residential properties. | ||
• | Estimation of loss exposure and historical loss experience to establish an adequate level of loss reserves. |
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• | Approximately 5 percent of assets (State or local housing agency obligations, available-for-sale mortgage-backed securities, certain variable rate mortgage-backed securities, and certain mortgage-backed securities backed by manufactured homes) are valued using market pricing and a combination of dealer, market maker, or other external pricing source. |
• | The fair values derived from the use of Level 2 estimates are not material. |
• | All of the FHLBNY’s asset securities are marketable and can, theoretically, be priced using open market quotes. However, they generally do not have enough liquidity and would require special quotes from market makers. The fair values of about 95% of mortgage-backed securities and 100% of mortgage loans are computed using market information (pricing and spreads) as inputs to standard option valuation models. | ||
• | The fair values of all derivatives are valued using market information, including forward rates and expected volatilities, as inputs to standard option valuation models. | ||
• | With regard to the FHLBNY’s liabilities, the consolidated obligations do have a secondary market but there are limits to its liquidity and the FHLBNY’s ability to obtain timely quotes, particularly with regard to option-embedded issues that are seldom traded. Therefore, FHLBNY prices its bonds off of the current consolidated obligations market curve, which has a daily active market. The fair values of consolidated obligation debt (bonds and discount notes) are computed using standard option valuation models using market data: 1) CO debt curve that is available to the public and published by the Office of Finance, and 2) LIBOR curve and volatilities. | ||
• | Variable rate advances are valued with market spreads, volatilities and using standard option valuation models. |
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• | Fixed-rate advances with or without put options are valued with internal assumptions and using standard valuation models. |
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• | Hedging strategy | ||
• | Identification of the item being hedged | ||
• | Determination of the accounting designation under SFAS 133 | ||
• | Determination of method used to assess the effectiveness of the hedge relationship | ||
• | Assessment that the hedge is expected to be effective in the future if designated as a hedge under SFAS 133 |
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1. | First, net interest spread still remained compressed during the second quarter of 2004 from the carrying costs of high-priced liabilities that were associated with $1.9 billion in long-term mortgage-backed securities sold in the third quarter of 2003 because of deteriorating creditworthiness of those securities. The effort to restructure the liabilities and reduce the high-priced funding was underway but not concluded. | ||
2. | Second, the volume of the advance business, which had declined during early 2004 in the aftermath of the FHLBNY’s decision to reduce dividend pay-out, increased during the three months ended June 30, 2005. In addition, the mix of the advance business, which was trending towards the relatively lower margin, short-term advances during the first half of 2004, reversed somewhat and demand for the relatively higher margin, fixed-rate advances increased in the three months ended June 30, 2005. | ||
3. | Third, the benefits from selective pricing increases instituted during the latter part of 2004 were being realized in the three- and six- months ended June 30, 2005. |
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June 30, 2005 | December 31, 2004 | December 31, 2003 | ||||||||||||||||||||||
Percentage | Percentage | Percentage | ||||||||||||||||||||||
Amounts | of total | Amounts | of total | Amounts | of total | |||||||||||||||||||
Adjustable Rate Credit — ARCs | $ | 12,702,249 | 19.95 | % | $ | 13,891,305 | 20.65 | % | $ | 10,775,890 | 17.45 | % | ||||||||||||
Fixed rate Advances* | 26,484,794 | 41.60 | % | 24,116,211 | 35.86 | % | 25,340,399 | 41.03 | % | |||||||||||||||
Repurchase (Repo) Agreement | 18,939,043 | 29.75 | % | 19,526,844 | 29.03 | % | 19,341,419 | 31.31 | % | |||||||||||||||
Short-Term Advances | 3,521,075 | 5.53 | % | 7,761,630 | 11.54 | % | 4,449,251 | 7.20 | % | |||||||||||||||
Mortgage Matched Advances | 936,726 | 1.47 | % | 1,032,075 | 1.53 | % | 974,873 | 1.58 | % | |||||||||||||||
Overnight Line of Credit (OLOC) Advances | 974,462 | 1.53 | % | 841,225 | 1.25 | % | 778,258 | 1.26 | % | |||||||||||||||
All other categories | 107,540 | 0.17 | % | 95,336 | 0.14 | % | 103,990 | 0.17 | % | |||||||||||||||
Total par value of advances | $ | 63,665,889 | 100.00 | % | $ | 67,264,626 | 100.00 | % | $ | 61,764,080 | 100.00 | % | ||||||||||||
* | Include putable advances |
For the three months | For the six months | For the years ended | ||||||||||||||||||||||||||
ended June 30, | ended June 30, | December, 31 | ||||||||||||||||||||||||||
2005 | 2004 | 2005 | 2004 | 2004 | 2003 | 2002 | ||||||||||||||||||||||
ARC Advances | $ | 96,573 | $ | 31,384 | $ | 182,794 | $ | 64,024 | 188,119 | 166,775 | 239,315 | |||||||||||||||||
Fixed Advances | 271,502 | 267,689 | 530,117 | 541,096 | 1,071,656 | 1,237,177 | 1,313,752 | |||||||||||||||||||||
Short Term Advances | 38,832 | 18,444 | 77,092 | 32,336 | 97,134 | 72,349 | 78,344 | |||||||||||||||||||||
Community Investment Advances | 1,265 | 1,164 | 2,531 | 2,400 | 4,777 | 5,310 | 5,621 | |||||||||||||||||||||
Overnight Line of Credit Advances | 7,497 | 1,705 | 14,236 | 3,611 | 10,310 | 7,410 | 6,494 | |||||||||||||||||||||
Affordable Housing Program Advances | 88 | 121 | 175 | 250 | 460 | 567 | 600 | |||||||||||||||||||||
Repurchase Agreement Advances | 205,957 | 201,733 | 410,862 | 406,503 | 807,557 | 897,264 | 912,514 | |||||||||||||||||||||
Mortgage Match Advances | 9,107 | 10,305 | 18,857 | 20,232 | 40,532 | 42,115 | 41,634 | |||||||||||||||||||||
Total Interest Income | $ | 630,821 | $ | 532,545 | $ | 1,236,664 | $ | 1,070,452 | $ | 2,220,545 | $ | 2,428,967 | $ | 2,598,274 | ||||||||||||||
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June 30, 2005 | December 31, 2004 | |||||||||||||||
Weighted | Weighted | |||||||||||||||
Average | Average | |||||||||||||||
Amount | Rate | Amount | Rate | |||||||||||||
Overdrawn demand deposit accounts | $ | 2,575 | 4.15 | % | $ | 237 | 4.75 | % | ||||||||
Due in one year or less | 17,729,901 | 3.69 | % | 23,111,281 | 2.90 | % | ||||||||||
Due after one year through two years | 5,759,085 | 3.60 | % | 7,583,635 | 3.38 | % | ||||||||||
Due after two years through three years | 12,948,917 | 3.73 | % | 7,967,893 | 3.05 | % | ||||||||||
Due after three years through four years | 3,975,621 | 4.40 | % | 8,435,962 | 3.79 | % | ||||||||||
Due after four years through five years | 4,926,920 | 5.30 | % | 2,300,288 | 4.91 | % | ||||||||||
Thereafter | 18,322,870 | 4.24 | % | 17,865,330 | 4.65 | % | ||||||||||
Total par value | 63,665,889 | 4.02 | % | 67,264,626 | 3.62 | % | ||||||||||
Discount on AHP advances* | (701 | ) | (786 | ) | ||||||||||||
Net premium on advances* | 1,453 | 1,784 | ||||||||||||||
SFAS 133 hedging adjustments* | 899,419 | 1,241,863 | ||||||||||||||
Total | $ | 64,566,060 | $ | 68,507,487 | ||||||||||||
* | Discount on Affordable Housing Program advances are amortized to interest income on a straight-line basis, results of which closely approximated the level-yield method, and were not significant for all periods reported. Amortization of fair value basis adjustments were a charge to interest income and amounted to ($0.1) million for the three months ended June 30, 2005 and 2004. Amortization of fair value basis adjustments was also a charge to interest income and amounted to ($0.4) million and ($1.3) million for the years ended December 31, 2004 and 2003. All other amortization charged to interest income aggregated ($0.9) million for the three months ended June 30, 2005 and 2004. All other amortization charged to interest income aggregated ($3.8) million and ($0.3) million for the years ended December 31, 2004 and 2003. | |
Approximately 72.2%, or $46.0 billion, of the par value of advances at June 30, 2005 had a remaining maturity greater than one year. Approximately 65.6% or $44.2 billion of the par value of advances outstanding at December 31, 2004 had a remaining maturity greater than one year, compared to 69.1%, or $42.7 billion at December 31, 2003. |
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June 30, 2005 | December 31, 2004 | December 31, 2003 | ||||||||||||||||||||||
Percentage | Percentage | Percentage | ||||||||||||||||||||||
Amount | of total | Amount | of total | Amount | of total | |||||||||||||||||||
Fixed-rate | $ | 50,961,065 | 80.04 | % | $ | 53,373,084 | 79.35 | % | $ | 50,975,990 | 82.53 | % | ||||||||||||
Variable-rate | 10,976,630 | 17.24 | % | 11,959,522 | 17.78 | % | 9,141,090 | 14.80 | % | |||||||||||||||
Variable-rate capped | 1,728,194 | 2.72 | % | 1,932,020 | 2.87 | % | 1,647,000 | 2.67 | % | |||||||||||||||
Total par value | $ | 63,665,889 | 100.00 | % | $ | 67,264,626 | 100.00 | % | $ | 61,764,080 | 100.00 | % | ||||||||||||
June 30, | December 31, | December 31, | ||||||||||
2005 | 2004 | 2003 | ||||||||||
LIBOR indexed | $ | 12,145,249 | $ | 13,791,055 | $ | 10,740,540 | ||||||
Federal Funds | 556,650 | 100,137 | 35,000 | |||||||||
Prime | 350 | 350 | 350 | |||||||||
FHLBank Discount Rate | — | — | 12,200 | |||||||||
$ | 12,702,249 | $ | 13,891,542 | $ | 10,788,090 | |||||||
June 30, | December 31, | December 31, | ||||||||||
2005 | 2004 | 2003 | ||||||||||
Overdrawn demand deposit accounts | $ | 2,575 | $ | 237 | $ | — | ||||||
Due in one year or less | 34,532,119 | 39,671,293 | 37,657,829 | |||||||||
Due after one year through two years | 10,260,518 | 10,042,141 | 9,074,033 | |||||||||
Due after two years through three years | 13,194,155 | 9,475,176 | 7,357,562 | |||||||||
Due after three years through four years | 2,576,071 | 5,718,400 | 4,160,400 | |||||||||
Due after four years through five years | 1,513,720 | 804,388 | 2,478,153 | |||||||||
Thereafter | 1,586,731 | 1,552,991 | 1,039,103 | |||||||||
Total par value | $ | 63,665,889 | $ | 67,264,626 | $ | 61,767,080 | ||||||
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June 30, 2005 | ||||||||||||||||
vs. | ||||||||||||||||
December 31, 2004 | ||||||||||||||||
June 30, | December 31, | Dollar | Percentage | |||||||||||||
2005 | 2004 | Variance | Variance | |||||||||||||
State or local housing agency obligations | $ | 1,024,256 | $ | 1,056,982 | $ | (32,726 | ) | (3.10 | %) | |||||||
Mortgage- backed securities | 11,320,098 | 11,527,055 | (206,957 | ) | (1.80 | %) | ||||||||||
Total investment securities | 12,344,354 | 12,584,037 | (239,683 | ) | (1.90 | %) | ||||||||||
Interest- bearing deposits | 6,704,888 | 2,806,870 | 3,898,018 | 138.87 | % | |||||||||||
Federal funds sold | 2,030,000 | 2,972,000 | (942,000 | ) | (31.70 | %) | ||||||||||
Total investments Book Values | $ | 21,079,242 | $ | 18,362,907 | $ | 2,716,335 | 14.79 | % | ||||||||
December 31, 2004 | ||||||||||||||||
vs. | ||||||||||||||||
December 31, 2003 | ||||||||||||||||
December 31, | December 31, | Dollar | Percentage | |||||||||||||
2004 | 2003 | Variance | Variance | |||||||||||||
State or local housing agency obligations | $ | 1,056,982 | $ | 1,164,486 | $ | (107,504 | ) | (9.23 | %) | |||||||
Mortgage- backed securities | 11,527,055 | 10,194,881 | 1,332,174 | 13.07 | % | |||||||||||
Total investment securities | 12,584,037 | 11,359,367 | 1,224,670 | 10.78 | % | |||||||||||
Interest- bearing deposits | 2,806,870 | 1,654,603 | 1,152,267 | 69.64 | % | |||||||||||
Federal funds sold | 2,972,000 | 1,143,000 | 1,829,000 | 160.02 | % | |||||||||||
Total investments Book Values | $ | 18,362,907 | $ | 14,156,970 | $ | 4,205,937 | 29.71 | % | ||||||||
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June 30, 2005 | December 31, 2004 | December 31, 2003 | ||||||||||
U.S. government sponsored entity residential mortgage-backed securities | $ | 4,912,267 | $ | 4,867,676 | $ | 1,218,189 | ||||||
U.S. agency residential mortgage-backed securities | 196,882 | 217,710 | 27,142 | |||||||||
Home equity loans | 2,290,350 | 3,165,078 | 5,628,195 | |||||||||
Non-federal agency residential mortgage-backed securities | 1,492,787 | 655,964 | 503,074 | |||||||||
Non-federal agency commercial mortgage-backed securities | 2,029,181 | 2,188,732 | 2,305,857 | |||||||||
Manufactured Housing loans | 398,631 | 431,895 | 512,424 | |||||||||
Total mortgage-backed and asset- backed securities | $ | 11,320,098 | $ | 11,527,055 | $ | 10,194,881 | ||||||
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NRSRO Ratings- June 30, 2005 | ||||||||||||||||
Issued, guaranteed or insured by: | Amount | AAA | AA | A | ||||||||||||
Pools of Mortgages | ||||||||||||||||
Fannie Mae | $ | 2,184,633 | $ | 2,184,633 | $ | — | $ | — | ||||||||
Freddie Mac | 607,054 | 607,054 | — | — | ||||||||||||
Total pools of mortgages | 2,791,687 | 2,791,687 | — | — | ||||||||||||
Collateralized Mortgage Obligations (CMOs)/Real Estate Mortgage Investment Conduits (REMICs) | ||||||||||||||||
Fannie Mae | 904,997 | 904,997 | — | — | ||||||||||||
Freddie Mac | 1,215,583 | 1,215,583 | — | — | ||||||||||||
Ginnie Mae | 196,882 | 196,882 | — | — | ||||||||||||
Total CMOs/REMICs | 2,317,462 | 2,317,462 | — | — | ||||||||||||
Non-GSE MBS | ||||||||||||||||
Pools | 98,982 | 98,982 | — | — | ||||||||||||
CMOs/REMICs | 1,393,805 | 1,393,805 | — | — | ||||||||||||
Commercial mortgage-backed securities | 2,029,181 | 2,029,181 | — | — | ||||||||||||
Total non-federal-agency MBS | 3,521,968 | 3,521,968 | — | — | ||||||||||||
Asset-Backed Securities | ||||||||||||||||
Manufactured housing (insured) | 398,631 | 398,631 | — | — | ||||||||||||
Home equity loans (insured) | 1,188,079 | 1,188,079 | — | — | ||||||||||||
Home equity loans (uninsured) | 1,102,271 | 1,102,271 | — | — | ||||||||||||
Total asset-backed securities | 2,688,981 | 2,688,981 | — | — | ||||||||||||
Total mortgage-backed securities | $ | 11,320,098 | $ | 11,320,098 | $ | — | $ | — | ||||||||
Other | ||||||||||||||||
State and local housing finance agency obligations | $ | 1,024,256 | $ | 441,722 | $ | 582,534 | $ | — | ||||||||
Interest-bearing deposits | 6,704,827 | — | 5,261,470 | 1,343,570 | ||||||||||||
Federal funds sold | 2,030,000 | — | 1,330,000 | 700,000 | ||||||||||||
Loans to other FHLB | — | — | — | — | ||||||||||||
Total other | $ | 9,759,083 | $ | 441,722 | $ | 7,174,004 | $ | 2,043,570 | ||||||||
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NRSRO Ratings - December 31, 2004 | ||||||||||||||||
Issued, guaranteed or insured by: | Amount | AAA | AA | A | ||||||||||||
Pools of Mortgages | ||||||||||||||||
Fannie Mae | $ | 2,370,522 | $ | 2,370,522 | $ | — | $ | — | ||||||||
Freddie Mac | 656,542 | 656,542 | — | — | ||||||||||||
Total pools of mortgages | 3,027,064 | 3,027,064 | — | — | ||||||||||||
Collateralized Mortgage Obligations (CMOs)/Real Estate Mortgage Investment Conduits (REMICs) | ||||||||||||||||
Fannie Mae | 759,270 | 759,270 | — | — | ||||||||||||
Freddie Mac | 1,081,342 | 1,081,342 | — | — | ||||||||||||
Ginnie Mae | 217,710 | 217,710 | — | — | ||||||||||||
Total CMOs/REMICs | 2,058,322 | 2,058,322 | — | — | ||||||||||||
Non-GSE MBS | ||||||||||||||||
CMOs/REMICs | 655,964 | 655,964 | — | — | ||||||||||||
Commercial mortgage-backed securities | 2,188,732 | 2,188,732 | — | — | ||||||||||||
Total non-federal-agency MBS | 2,844,696 | 2,844,696 | — | — | ||||||||||||
Asset-Backed Securities | ||||||||||||||||
Manufactured housing (insured) | 431,895 | 431,895 | — | — | ||||||||||||
Home equity loans (insured) | 3,165,078 | 3,165,078 | — | — | ||||||||||||
Home equity loans (uninsured) | — | — | — | — | ||||||||||||
Total asset-backed securities | 3,596,973 | 3,596,973 | — | — | ||||||||||||
Total mortgage-backed securities | $ | 11,527,055 | $ | 11,527,055 | $ | — | $ | — | ||||||||
Other | ||||||||||||||||
State and local housing finance agency obligations | $ | 1,056,982 | $ | 374,842 | $ | 682,140 | $ | — | ||||||||
Interest-bearing deposits | 2,806,870 | 19,170 | 653,938 | 2,133,762 | ||||||||||||
Federal funds sold | 2,972,000 | — | — | 2,972,000 | ||||||||||||
Total other | $ | 6,835,852 | $ | 394,012 | $ | 1,336,078 | $ | 5,105,762 | ||||||||
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NRSRO Ratings- December 31, 2003 | ||||||||||||||||
Issued, guaranteed or insured by: | Amount | AAA | AA | A | ||||||||||||
Pools of Mortgages | ||||||||||||||||
Fannie Mae | $ | 745,523 | $ | 745,523 | $ | — | $ | — | ||||||||
Freddie Mac | 440,375 | 440,375 | — | — | ||||||||||||
Total pools of mortgages | 1,185,898 | 1,185,898 | — | — | ||||||||||||
Collateralized Mortgage Obligations (CMOs)/Real Estate Mortgage Investment Conduits (REMICs) | ||||||||||||||||
Fannie Mae | 25,443 | 25,443 | — | — | ||||||||||||
Freddie Mac | 6,848 | 6,848 | — | — | ||||||||||||
Ginnie Mae | 27,142 | 27,142 | — | — | ||||||||||||
Total CMOs/REMICs | 59,433 | 59,433 | — | — | ||||||||||||
Non-GSE MBS | ||||||||||||||||
CMOs/REMICs | 503,074 | 503,074 | — | — | ||||||||||||
Commercial mortgage-backed securities | 2,305,857 | 2,305,857 | — | — | ||||||||||||
Total non-federal-agency MBS | 2,808,931 | 2,808,931 | — | — | ||||||||||||
Asset-Backed Securities | ||||||||||||||||
Manufactured housing (insured) | 512,424 | 512,424 | — | — | ||||||||||||
Home equity loans (insured) | 2,590,258 | 2,590,258 | — | — | ||||||||||||
Home equity loans (uninsured) | 3,037,937 | 3,037,937 | — | — | ||||||||||||
Total asset-backed securities | 6,140,619 | 6,140,619 | — | — | ||||||||||||
Total mortgage-backed securities | $ | 10,194,881 | $ | 10,194,881 | $ | — | $ | — | ||||||||
Other | ||||||||||||||||
State and local housing finance agency obligations | $ | 1,164,486 | $ | 457,755 | $ | 706,731 | $ | — | ||||||||
Interest-bearing deposits | 1,654,603 | 32,689 | 853,470 | 768,444 | ||||||||||||
Federal funds sold | 1,143,000 | — | 353,000 | 790,000 | ||||||||||||
Loans to other FHLB | 60,000 | 60,000 | — | — | ||||||||||||
Total other | $ | 4,022,089 | $ | 550,444 | $ | 1,913,201 | $ | 1,558,444 | ||||||||
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June 30, 2005 | ||||||||||||||||
Gross | Gross | Estimated | ||||||||||||||
Amortized | Unrealized | Unrealized | Fair | |||||||||||||
Cost | Gains | Losses | Value | |||||||||||||
State or local housing agency obligations | $ | 1,024,256 | $ | 24,373 | $ | — | 1,048,629 | |||||||||
Mortgage-backed securities | 9,677,170 | 155,487 | (23,817 | ) | 9,808,840 | |||||||||||
Total | $ | 10,701,426 | $ | 179,860 | $ | (23,817 | ) | $ | 10,857,469 | |||||||
December 31, 2004 | ||||||||||||||||
Gross | Gross | Estimated | ||||||||||||||
Amortized | Unrealized | Unrealized | Fair | |||||||||||||
Cost | Gains | Losses | Value | |||||||||||||
State or local housing agency obligations | $ | 1,056,982 | $ | 26,669 | $ | (718 | ) | $ | 1,082,933 | |||||||
Mortgage-backed securities | 10,813,692 | 220,060 | (21,808 | ) | 11,011,944 | |||||||||||
Total | $ | 11,870,674 | $ | 246,729 | $ | (22,526 | ) | $ | 12,094,877 | |||||||
December 31, 2003 | ||||||||||||||||
Gross | Gross | Estimated | ||||||||||||||
Amortized | Unrealized | Unrealized | Fair | |||||||||||||
Cost | Gains | Losses | Value | |||||||||||||
State or local housing agency obligations | $ | 1,164,486 | $ | 33,269 | $ | (508 | ) | $ | 1,197,247 | |||||||
Mortgage-backed securities | 10,194,881 | 361,756 | (5,596 | ) | 10,551,041 | |||||||||||
Total | $ | 11,359,367 | $ | 395,025 | $ | (6,104 | ) | $ | 11,748,288 | |||||||
June 30, 2005 | December 31, 2004 | December 31, 2003 | ||||||||||||||||||||||||||||||||||
Amortized | Estimated | Weighted | Amortized | Estimated | Weighted | Amortized | Estimated | Weighted | ||||||||||||||||||||||||||||
Cost | Fair Value | Avg Yield | Cost | Fair Value | Avg Yield | Cost | Fair Value | Avg Yield | ||||||||||||||||||||||||||||
State and Local Housing Finance Agencies | ||||||||||||||||||||||||||||||||||||
Due in one year or less | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||||||||||
Due after one year through five years | — | — | — | — | — | — | ||||||||||||||||||||||||||||||
Due after five years through ten years | 45,203 | 47,022 | 6.35 | % | 48,063 | 50,156 | 6.35 | % | 67,332 | 70,563 | 6.35 | % | ||||||||||||||||||||||||
Due after ten years | 979,053 | 1,001,607 | 4.55 | % | 1,008,919 | 1,032,777 | 3.80 | % | 1,097,154 | 1,126,684 | 3.15 | % | ||||||||||||||||||||||||
1,024,256 | 1,048,629 | 1,056,982 | 1,082,933 | 1,164,486 | 1,197,247 | |||||||||||||||||||||||||||||||
Mortgage-backed Securities | ||||||||||||||||||||||||||||||||||||
Due in one year or less | ||||||||||||||||||||||||||||||||||||
Due after one year through five years | 1,412,119 | 1,500,366 | 6.72 | % | 1,512,286 | 1,622,348 | 6.71 | % | 984,411 | 1,077,053 | 6.43 | % | ||||||||||||||||||||||||
Due after five years through ten years | 13,794 | 13,792 | 6.25 | % | 17,402 | 17,641 | 6.24 | % | 660,645 | 746,269 | 7.11 | % | ||||||||||||||||||||||||
Due after ten years | 8,251,257 | 8,294,682 | 4.96 | % | 9,284,004 | 9,361,955 | 4.82 | % | 8,549,825 | 8,727,719 | 4.40 | % | ||||||||||||||||||||||||
9,677,170 | 9,808,840 | 10,813,692 | 11,011,944 | 10,194,881 | 10,551,041 | |||||||||||||||||||||||||||||||
Total | $ | 10,701,426 | $ | 10,857,469 | $ | 11,870,674 | $ | 12,094,877 | $ | 11,359,367 | $ | 11,748,288 | ||||||||||||||||||||||||
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June 30, 2005 | December 31, 2004 | December 31, 2003 | ||||||||||
Non-mortgage-backed securities | ||||||||||||
Due in one year or less | 0.00 | % | 0.00 | % | 0.00 | % | ||||||
Due after one year through five years | 0.00 | % | 0.00 | % | 0.00 | % | ||||||
Due after five years through ten years | 4.41 | % | 4.55 | % | 5.78 | % | ||||||
Due after ten years | 95.59 | % | 95.45 | % | 94.22 | % |
June 30, 2005 | December 31, 2004 | December 31, 2003 | ||||||||||||||||||||||
Amortized | Estimated | Amortized | Estimated | Amortized | Estimated | |||||||||||||||||||
Cost | Fair Value | Cost | Fair Value | Cost | Fair Value | |||||||||||||||||||
Mortgage-backed securities | ||||||||||||||||||||||||
Due in one year or less | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||
Due after one year through five years | 1,412,119 | 1,500,367 | 1,512,286 | 1,632,348 | 984,411 | 1,077,053 | ||||||||||||||||||
Due after five years through ten years | 13,794 | 13,792 | 17,402 | 17,641 | 660,645 | 746,269 | ||||||||||||||||||
Due after ten years | 8,251,257 | 8,294,682 | 9,284,004 | 9,361,955 | 8,549,825 | 8,727,719 | ||||||||||||||||||
Total mortgage-backed securities | $ | 9,677,170 | $ | 9,808,841 | $ | 10,813,692 | $ | 11,011,944 | $ | 10,194,881 | $ | 10,551,041 | ||||||||||||
Mortgage-backed securities were allocated, based on contractual principal maturities assuming no prepayment. |
June 30, 2005 | ||||||||||||||||
Gross | Gross | Estimated | ||||||||||||||
Amortized | Unrealized | Unrealized | Fair | |||||||||||||
Cost | Gains | Losses | Value | |||||||||||||
Mortgage-backed securities | $ | 1,643,218 | $ | 3,144 | $ | 3,435 | $ | 1,642,927 | ||||||||
Total | $ | 1,643,218 | $ | 3,144 | $ | 3,435 | $ | 1,642,927 | ||||||||
December 31, 2004 | ||||||||||||||||
Gross | Gross | Estimated | ||||||||||||||
Amortized | Unrealized | Unrealized | Fair | |||||||||||||
Cost | Gains | Losses | Value | |||||||||||||
Mortgage-backed securities | $ | 711,123 | $ | 2,240 | $ | — | $ | 713,363 | ||||||||
Total | $ | 711,123 | $ | 2,240 | $ | — | $ | 713,363 | ||||||||
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June 30, 2005 | December 31, 2004 | |||||||||||||||
Amortized | Estimated | Amortized | Estimated | |||||||||||||
Cost | Fair Value | Cost | Fair Value | |||||||||||||
Due in one year or less | $ | — | $ | — | $ | — | $ | — | ||||||||
Due after one year through five years | — | — | — | — | ||||||||||||
Due after five years through ten years | — | — | — | — | ||||||||||||
Due after ten years | 1,643,218 | 1,642,927 | 711,123 | 713,363 | ||||||||||||
Total | $ | 1,643,218 | $ | 1,642,927 | $ | 711,123 | $ | 713,363 | ||||||||
• | Mortgage Partnership Finance single-family fully amortizing residential loans comprise of “Fixed 15” years or less, greater than 15 years but less than or equal to 20 years and greater than 20 years but less than or equal to 30 years maturity. Property types consist of 1-4 family attached, detached, and planned unit developments, condominiums, and non-mobile manufactured housing properties. | ||
• | Multi-family portfolio consists of “Ten-year balloon” notes collateralized by multi-family units from 5 to 1000 units in the metropolitan area of New York. These participations were purchased under Community Mortgage Asset program, which has been suspended indefinitely and the portfolio is running off. Loans were underwritten to debt service coverage not to be less than 125% and loan to value not to exceed 75%. |
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• | The non-residential loan is a community development syndication loan with four banks participating. Citicorp, Carver Federal, Chase Manhattan Development Corp and the FHLBNY. The FHLBNY’s prorated share is 40%. The property is collateralized by a retail building of approximately 50,000 square feet occupied by a grocery store as the single tenant. |
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June 30, 2005 | December 31, 2004 | December 31, 2003 | December 31, 2002 | |||||||||||||
Original MPF | $ | 122,364 | $ | 113,155 | $ | 74,940 | $ | 11,557 | ||||||||
MPF 100 | 48,524 | 46,617 | 40,158 | 20,224 | ||||||||||||
MPF 125 | 480,271 | 455,477 | 382,783 | 259,251 | ||||||||||||
MPF 125 Plus | 696,501 | 522,375 | 98,597 | 3,262 | ||||||||||||
Other | 16,858 | 20,631 | 38,818 | 82,518 | ||||||||||||
$ | 1,364,518 | $ | 1,158,255 | $ | 635,296 | $ | 376,812 | |||||||||
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June 30, 2005 | December 31, 2004 | December 31, 2003 | ||||||||||||||||||||||
2005 | Percentage | 2004 | Percentage | 2003 | Percentage | |||||||||||||||||||
Real Estate: | ||||||||||||||||||||||||
Fixed medium-term single-family mortgages | $ | 570,618 | 41.5 | % | $ | 516,666 | 44.2 | % | $ | 283,300 | 42.6 | % | ||||||||||||
Fixed long-term single-family mortgages | 794,039 | 57.7 | % | 641,730 | 54.8 | % | 352,140 | 52.9 | % | |||||||||||||||
Multi-family mortgages | 8,415 | 0.6 | % | 9,493 | 0.8 | % | 27,081 | 4.1 | % | |||||||||||||||
Non-residential mortgages | 2,743 | 0.2 | % | 2,771 | 0.2 | % | 2,824 | 4.0 | % | |||||||||||||||
Total par value | 1,375,815 | 100.0 | % | 1,170,660 | 100.0 | % | 665,345 | 100.0 | % | |||||||||||||||
Net unamortized premiums | 15,093 | 13,294 | 6,736 | |||||||||||||||||||||
Net unamortized discounts | (5,782 | ) | (5,364 | ) | — | |||||||||||||||||||
70 | ||||||||||||||||||||||||
Total mortgage loans held for investment | $ | 1,385,126 | $ | 1,178,590 | $ | 672,151 | ||||||||||||||||||
June 30, 2005 | December 31, 2004 | December 31, 2003 | ||||||||||
Federal Housing Administration and Veteran Administration insured loans | $ | 16,858 | $ | 20,632 | $ | 38,819 | ||||||
Conventional loans | 1,347,800 | 1,137,765 | 596,621 | |||||||||
Others | 11,157 | 12,264 | 29,905 | |||||||||
Total par value | $ | 1,375,815 | $ | 1,170,661 | $ | 665,345 | ||||||
December 31, | ||||||||||||
June 30, 2005 | 2004 | 2003 | ||||||||||
Mortgage loans held for portfolio, net of provisions for credit losses | $ | 1,384,560 | $ | 1,178,083 | $ | 671,644 | ||||||
Nonperforming mortgage loans held for portfolio | $ | 432 | $ | 519 | $ | 115 | ||||||
Mortgage loans held for portfolio past due 90 days or more and still accruing interest | $ | 1,302 | $ | 1,898 | $ | 2,732 | ||||||
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For the three months | For the six months | For the years ended | ||||||||||||||||||||||||||
ended June 30, | ended June 30, | December 31, | ||||||||||||||||||||||||||
2005 | 2004 | 2005 | 2004 | 2004 | 2003 | 2002 | ||||||||||||||||||||||
Interest contractually due during the period | $ | 14 | $ | 12 | $ | 36 | $ | 22 | $ | 51 | $ | 30 | $ | 24 | ||||||||||||||
Interest actually received during the period | 14 | 12 | 36 | 22 | 51 | 29 | 22 | |||||||||||||||||||||
Shortfall | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 1 | $ | 2 | ||||||||||||||
For the three months | For the six months | For the years ended | ||||||||||||||||||||||||||
ended June 30, | ended June 30, | December 31, | ||||||||||||||||||||||||||
2005 | 2004 | 2005 | 2004 | 2004 | 2003 | 2002 | ||||||||||||||||||||||
Balance, beginning of period | $ | 541 | $ | 507 | $ | 507 | $ | 507 | $ | 507 | 428 | 193 | ||||||||||||||||
Charge offs | — | — | — | — | — | — | — | |||||||||||||||||||||
Recoveries | — | — | — | — | — | — | — | |||||||||||||||||||||
Net charge- off | — | — | — | — | — | — | — | |||||||||||||||||||||
Provision for credit losses | 24 | — | 58 | — | — | 79 | 235 | |||||||||||||||||||||
Balance, end of period | $ | 565 | $ | 507 | $ | 565 | $ | 507 | $ | 507 | $ | 507 | $ | 428 | ||||||||||||||
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June 30, 2005 | December 31, 2004 | December 31, 2003 | ||||||||||||||||||||||
Weighted | Weighted | Weighted | ||||||||||||||||||||||
Average | Average | Average | ||||||||||||||||||||||
Maturity | Amount | Rate | Amount | Rate | Amount | Rate | ||||||||||||||||||
1 year or less | $ | 20,454,240 | 3.27 | % | $ | 25,348,025 | 2.64 | % | $ | 15,611,780 | 3.39 | % | ||||||||||||
over 1 year through 2 years | 14,636,895 | 3.43 | % | 16,297,480 | 3.41 | % | 15,914,075 | 2.86 | % | |||||||||||||||
over 2 years through 3 years | 8,965,050 | 3.69 | % | 8,688,675 | 3.54 | % | 10,291,170 | 3.90 | % | |||||||||||||||
over 3 years through 4 years | 4,339,870 | 3.97 | % | 4,561,750 | 4.00 | % | 5,104,750 | 3.97 | % | |||||||||||||||
over 4 years through 5 years | 2,636,650 | 4.19 | % | 2,227,200 | 3.89 | % | 3,407,900 | 4.17 | % | |||||||||||||||
over 5 years through 6 years | 1,028,350 | 4.57 | % | 1,226,100 | 4.20 | % | ||||||||||||||||||
Thereafter | 3,508,050 | 4.91 | % | 2,434,650 | 5.14 | % | 2,078,600 | 5.18 | % | |||||||||||||||
Total par value | 54,540,755 | 60,586,130 | 53,634,375 | |||||||||||||||||||||
Bond premiums | 83,000 | 112,768 | 158,398 | |||||||||||||||||||||
Bond discounts | (19,703 | ) | (19,957 | ) | (20,002 | ) | ||||||||||||||||||
SFAS 133 fair value adjustments | (212,926 | ) | (161,370 | ) | 281,283 | |||||||||||||||||||
Deferred net gains on terminated hedges | (3,776 | ) | (2,215 | ) | (2,185 | ) | ||||||||||||||||||
Total | $ | 54,387,350 | $ | 60,515,356 | $ | 54,051,869 | ||||||||||||||||||
June 30, 2005 | December 31, 2004 | December 31, 2003 | ||||||||||
Due or callable in one year or less | $ | 36,225,240 | $ | 37,897,285 | $ | 25,354,280 | ||||||
Due or callable after one year through two years | 8,171,895 | 12,616,220 | 14,461,575 | |||||||||
Due or callable after two years through three years | 5,287,550 | 4,948,175 | 7,871,170 | |||||||||
Due or callable after three years through four years | 2,479,870 | 3,202,750 | 2,542,250 | |||||||||
Due or callable after four years through five years | 1,001,150 | 696,700 | 2,637,900 | |||||||||
Thereafter | 1,375,050 | 1,225,000 | 767,200 | |||||||||
Total par value | $ | 54,540,755 | $ | 60,586,130 | $ | 53,634,375 | ||||||
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June 30, 2005 | December 31, 2004 | December 31, 2003 | ||||||||||
Fixed-rate, Non-callable | $ | 32,819,695 | $ | 34,635,470 | $ | 35,022,275 | ||||||
Fixed-rate, Callable | 13,682,260 | 19,001,260 | 12,453,000 | |||||||||
Step Ups | 5,518,000 | 1,260,000 | 50,000 | |||||||||
Single-index Floating Rate | 2,520,800 | 5,689,400 | 6,109,100 | |||||||||
Total par value | $ | 54,540,755 | $ | 60,586,130 | $ | 53,634,375 | ||||||
Weighted | ||||||||||||
Book | Par | Average | ||||||||||
Value | Value | Interest Rate | ||||||||||
June 30, 2005 | $ | 24,933,620 | $ | 25,015,952 | 3.06 | % | ||||||
December 31, 2004 | $ | 19,641,626 | $ | 19,670,201 | 1.90 | % | ||||||
December 31, 2003 | $ | 16,804,767 | $ | 16,819,977 | 0.99 | % | ||||||
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For the three months | For the six months | |||||||||||||||||||||||||||||||
ended June 30, | Dollar | Percentage | ended June 30, | Dollar | Percentage | |||||||||||||||||||||||||||
2005 | 2004 | Variance | Variance | 2005 | 2004 | Variance | Variance | |||||||||||||||||||||||||
Interest Income | ||||||||||||||||||||||||||||||||
Advances | $ | 516,446 | $ | 270,691 | $ | 245,755 | 90.79 | % | $ | 975,209 | $ | 536,200 | $ | 439,009 | 81.87 | % | ||||||||||||||||
Mortgage loans held for portfolio | 16,713 | 12,089 | 4,624 | 38.25 | % | 32,728 | 21,271 | 11,457 | 53.86 | % | ||||||||||||||||||||||
Other | 215,275 | 153,140 | 62,135 | 40.57 | % | 408,023 | 288,083 | 119,940 | 41.63 | % | ||||||||||||||||||||||
Total interest income | 748,434 | 435,920 | 312,514 | 71.69 | % | 1,415,960 | 845,554 | 570,406 | 67.46 | % | ||||||||||||||||||||||
Interest Expense | ||||||||||||||||||||||||||||||||
Consolidated obligations | 637,652 | 361,157 | 276,495 | 76.56 | % | 1,194,950 | 712,709 | 482,241 | 67.66 | % | ||||||||||||||||||||||
Other | 16,402 | 5,703 | 10,699 | 187.60 | % | 29,185 | 11,785 | 17,400 | 147.65 | % | ||||||||||||||||||||||
Total interest expense | 654,054 | 366,860 | 287,194 | 78.28 | % | 1,224,135 | 724,494 | 499,641 | 68.96 | % | ||||||||||||||||||||||
Net interest income before mortgage loan loss provision | $ | 94,380 | $ | 69,060 | $ | 25,320 | 36.66 | % | $ | 191,825 | $ | 121,060 | $ | 70,765 | 58.45 | % | ||||||||||||||||
For the years ended | ||||||||||||||||
December 31, | Dollar | Percentage | ||||||||||||||
2004 | 2003 | Variance | Variance | |||||||||||||
Interest Income | ||||||||||||||||
Advances | $ | 1,247,568 | $ | 1,292,990 | $ | (45,422 | ) | (3.51 | %) | |||||||
Mortgage loans held for portfolio | 48,291 | 29,099 | 19,192 | 65.95 | % | |||||||||||
Other | 631,113 | 738,366 | (107,253 | ) | (14.53 | %) | ||||||||||
Total interest income | 1,926,972 | 2,060,455 | (133,483 | ) | (6.48 | %) | ||||||||||
Interest Expense | ||||||||||||||||
Consolidated obligations | 1,631,221 | 1,733,663 | (102,442 | ) | (5.91 | %) | ||||||||||
Other | 27,259 | 28,269 | (1,010 | ) | (3.57 | %) | ||||||||||
Total interest expense | 1,658,480 | 1,761,932 | (103,452 | ) | (5.87 | %) | ||||||||||
Net interest income before mortgage loan loss provision | $ | 268,492 | $ | 298,523 | $ | (30,031 | ) | (10.06 | %) | |||||||
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For the years ended | ||||||||||||||||
December 31, | Dollar | Percentage | ||||||||||||||
2003 | 2002 | Variance | Variance | |||||||||||||
Interest Income | ||||||||||||||||
Advances | $ | 1,292,990 | $ | 1,684,716 | $ | (391,726 | ) | (23.25 | %) | |||||||
Mortgage loans held for portfolio | 29,099 | 26,413 | 2,686 | 10.17 | % | |||||||||||
Other | 738,366 | 888,242 | (149,876 | ) | (16.87 | %) | ||||||||||
Total interest income | 2,060,455 | 2,599,371 | (538,916 | ) | (20.73 | %) | ||||||||||
Interest Expense | ||||||||||||||||
Consolidated obligations | 1,733,663 | 2,167,227 | (433,564 | ) | (20.01 | %) | ||||||||||
Other | 28,269 | 42,926 | (14,657 | ) | (34.14 | %) | ||||||||||
Total interest expense | 1,761,932 | 2,210,153 | (448,221 | ) | (20.28 | %) | ||||||||||
Net interest income before mortgage loan loss provision | $ | 298,523 | $ | 389,218 | $ | (90,695 | ) | (23.30 | %) | |||||||
For the years ended | ||||||||||||||||
December 31, | Dollar | Percentage | ||||||||||||||
2002 | 2001 | Variance | Variance | |||||||||||||
Interest Income | ||||||||||||||||
Advances | $ | 1,684,716 | $ | 2,584,644 | $ | (899,928 | ) | (34.82 | %) | |||||||
Mortgage loans held for portfolio | 26,413 | 34,129 | (7,716 | ) | (22.61 | %) | ||||||||||
Other | 888,242 | 1,250,503 | (362,261 | ) | (28.97 | %) | ||||||||||
Total interest income | 2,599,371 | 3,869,276 | (1,269,905 | ) | (32.82 | %) | ||||||||||
Interest Expense | ||||||||||||||||
Consolidated obligations | 2,167,227 | 3,353,476 | (1,186,249 | ) | (35.37 | %) | ||||||||||
Other | 42,926 | 107,404 | (64,478 | ) | (60.03 | %) | ||||||||||
Total interest expense | 2,210,153 | 3,460,880 | (1,250,727 | ) | (36.14 | %) | ||||||||||
Net interest income before mortgage loan loss provision | $ | 389,218 | $ | 408,396 | $ | (19,178 | ) | (4.70 | %) | |||||||
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For the three months | For the six months | For the years ended | ||||||||||||||||||||||||||
ended June 30, | ended June 30, | December 31, | ||||||||||||||||||||||||||
2005 | 2004 | 2005 | 2004 | 2004 | 2003 | 2002 | ||||||||||||||||||||||
Gross interest income before adjustment for interest rate swaps | $ | 1,285,252 | $ | 700,934 | $ | 1,680,920 | $ | 958,912 | $ | 2,900,021 | $ | 3,197,213 | $ | 3,551,726 | ||||||||||||||
Net interest adjustment for interest rate swaps | (536,818 | ) | (265,014 | ) | (264,960 | ) | (113,358 | ) | (973,049 | ) | (1,136,758 | ) | (952,355 | ) | ||||||||||||||
Total interest income reported | $ | 748,434 | $ | 435,920 | $ | 1,415,960 | $ | 845,554 | $ | 1,926,972 | $ | 2,060,455 | $ | 2,599,371 | ||||||||||||||
Gross interest expense before adjustment for interest rate swaps | $ | (935,994 | ) | $ | (507,520 | ) | $ | (1,254,537 | ) | $ | (726,482 | ) | $ | (2,107,988 | ) | $ | (2,391,360 | ) | $ | (2,956,227 | ) | |||||||
Net interest adjustment for interest interest rate swaps | 281,940 | 140,660 | 30,402 | 1,988 | 449,520 | 629,428 | 746,074 | |||||||||||||||||||||
Total interest expense reported | $ | (654,054 | ) | $ | (366,860 | ) | $ | (1,224,135 | ) | $ | (724,494 | ) | $ | (1,658,468 | ) | $ | (1,761,932 | ) | $ | (2,210,153 | ) | |||||||
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For the six months ended | ||||||||||||||||||||||||
June 30, 2005 | June 30, 2004 | |||||||||||||||||||||||
Interest | Interest | |||||||||||||||||||||||
(dollars in millions) | Average | Income/ | Rate | Average | Income/ | Rate | ||||||||||||||||||
Balance | Expense | (Annualized) | Balance | Expense | (Annualized) | |||||||||||||||||||
Earning Assets: | ||||||||||||||||||||||||
Advances | $ | 65,070 | $ | 975 | 3.02 | % | $ | 64,581 | $ | 536 | 1.67 | % | ||||||||||||
Interest-earning deposits | 4,519 | 63 | 2.82 | % | 4,297 | 22 | 1.05 | % | ||||||||||||||||
Federal funds sold | 2,551 | 35 | 2.77 | % | 891 | 5 | 1.03 | % | ||||||||||||||||
Investments | 12,185 | 310 | 5.13 | % | 11,627 | 261 | 4.53 | % | ||||||||||||||||
Mortgage loans | 1,304 | 33 | 5.06 | % | 787 | 21 | 5.45 | % | ||||||||||||||||
Total interest- earning assets | 85,629 | 1,416 | 3.33 | % | 82,183 | 845 | 2.07 | % | ||||||||||||||||
Funded By: | ||||||||||||||||||||||||
Consolidated obligations | 78,200 | 1,195 | 3.08 | % | 74,013 | 713 | 1.94 | % | ||||||||||||||||
Interest-bearing deposits and other borrowings | 2,287 | 29 | 2.57 | % | 2,498 | 13 | 1.05 | % | ||||||||||||||||
Total interest-bearing liabilities | 80,487 | 1,224 | 3.07 | % | 76,511 | 726 | 1.91 | % | ||||||||||||||||
Capital and other non-interest-bearing funds | 5,142 | — | — | 5,673 | — | — | ||||||||||||||||||
Total Funding | $ | 85,629 | 1,224 | $ | 82,184 | 726 | ||||||||||||||||||
Net Interest Spread | $ | 192 | 0.2677 | % | $ | 119 | 0.1618 | % | ||||||||||||||||
Net Interest margin (Net interest income/Earning Assets) | 0.452 | % | 0.294 | % | ||||||||||||||||||||
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For the six months ended | ||||||||||||
June 30, 2005 vs. June 30, 2004 | ||||||||||||
Increase (decrease) | ||||||||||||
Volume | Rate | Total | ||||||||||
Interest Income | ||||||||||||
Advances | $ | 4.1 | $ | 434.9 | $ | 439.0 | ||||||
Interest-earning deposits | 1.2 | 39.7 | 40.9 | |||||||||
Federal funds sold | 8.5 | 22.1 | 30.6 | |||||||||
Investments | 12.5 | 36.1 | 48.6 | |||||||||
Mortgage loans | 14.0 | (2.5 | ) | 11.5 | ||||||||
Total interest income | 40.3 | 530.3 | 570.6 | |||||||||
Interest Expense | ||||||||||||
Consolidated obligations | 40.3 | 441.9 | 482.2 | |||||||||
Deposits and borrowings | (1.1 | ) | 17.2 | 16.1 | ||||||||
Total interest expense | 39.2 | 459.1 | 498.3 | |||||||||
Changes in Net Interest Income | $ | 1.1 | $ | 71.2 | $ | 72.3 | ||||||
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For the three months ended | ||||||||||||||||||||||||
June 30, 2005 | June 30, 2004 | |||||||||||||||||||||||
Interest | Interest | |||||||||||||||||||||||
(dollars in millions) | Average | Income/ | Average | Income/ | ||||||||||||||||||||
Balance | Balance | Rate | Balance | Expense | Rate | |||||||||||||||||||
Earning Assets: | ||||||||||||||||||||||||
Advances | $ | 64,269 | $ | 516 | 3.26 | % | $ | 64,797 | $ | 271 | 1.69 | % | ||||||||||||
Interest-earning deposits | 5,279 | 40 | 3.06 | % | 5,545 | 15 | 1.07 | % | ||||||||||||||||
Federal funds sold | 2,781 | 21 | 3.01 | % | 925 | 2 | 1.04 | % | ||||||||||||||||
Investments | 11,992 | 155 | 5.24 | % | 12,079 | 136 | 4.57 | % | ||||||||||||||||
Mortgage loans | 1,352 | 17 | 5.01 | % | 862 | 12 | 5.69 | % | ||||||||||||||||
Other loans | — | — | — | — | — | — | ||||||||||||||||||
Total interest-earning assets | 85,673 | 749 | 3.54 | % | 84,208 | 436 | 2.10 | % | ||||||||||||||||
Funded By: | ||||||||||||||||||||||||
Consolidated obligations | 78,285 | 638 | 3.30 | % | 76,199 | 361 | 1.92 | % | ||||||||||||||||
Interest-bearing deposits and other borrowings | 2,324 | 16 | 2.85 | % | 2,669 | 6 | 0.86 | % | ||||||||||||||||
Total interest-bearing liabilities | 80,609 | 654 | 3.29 | % | 78,868 | 367 | 1.89 | % | ||||||||||||||||
Capital and other non-interest- bearing funds | 5,064 | — | — | 5,340 | — | — | ||||||||||||||||||
Total Funding | $ | 85,673 | 654 | $ | 84,208 | 367 | ||||||||||||||||||
Net Interest Spread | $ | 95 | 0.2524 | % | $ | 69 | 0.2131 | % | ||||||||||||||||
Net Interest margin (Net interest income/Earning Assets) | 0.447 | % | 0.333 | % | ||||||||||||||||||||
For the three months ended | ||||||||||||
June 30, 2005 vs. June 30, 2004 | ||||||||||||
Increase (decrease) | ||||||||||||
Volume | Rate | Total | ||||||||||
Interest Income | ||||||||||||
Advances | $ | (2.2 | ) | $ | 248.0 | $ | 245.8 | |||||
Interest-earning deposits | (.7 | ) | 25.8 | 25.1 | ||||||||
Federal funds sold | 4.8 | 13.5 | 18.3 | |||||||||
Investments | (1.0 | ) | 19.7 | 18.7 | ||||||||
Mortgage loans | 6.9 | (2.3 | ) | 4.6 | ||||||||
Other loans | — | — | — | |||||||||
Total interest income | 7.8 | 304.7 | 312.5 | |||||||||
Interest Expense | ||||||||||||
Consolidated obligations | 9.9 | 266.6 | 276.5 | |||||||||
Deposits and borrowings | (0.7 | ) | 11.4 | 10.7 | ||||||||
Total interest expense | 9.2 | 278.0 | 287.2 | |||||||||
Changes in Net Interest Income | $ | (1.4 | ) | $ | 26.7 | $ | 25.3 | |||||
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For the years ended | ||||||||||||||||||||||||||||||||||||
December 31, 2004 | December 31, 2003 | December 31, 2002 | ||||||||||||||||||||||||||||||||||
Interest | Interest | Interest | ||||||||||||||||||||||||||||||||||
(dollars in millions) | Average | Income/ | Average | Income/ | Average | Income/ | ||||||||||||||||||||||||||||||
Balance | Expense | Rate | Balance | Expense | Rate | Balance | Expense | Rate | ||||||||||||||||||||||||||||
Earning Assets: | ||||||||||||||||||||||||||||||||||||
Advances | $ | 65,289 | $ | 1,248 | 1.91 | % | $ | 70,942 | $ | 1,293 | 1.82 | % | $ | 64,209 | $ | 1,685 | 2.62 | % | ||||||||||||||||||
Interest-earning deposits | 4,461 | 61 | 1.37 | % | 5,547 | 67 | 1.21 | % | 6,327 | 114 | 1.80 | % | ||||||||||||||||||||||||
Federal funds sold | 1,094 | 16 | 1.50 | % | 1,350 | 16 | 1.22 | % | 2,666 | 46 | 1.74 | % | ||||||||||||||||||||||||
Investments | 12,087 | 553 | 4.58 | % | 12,936 | 652 | 5.04 | % | 11,683 | 725 | 6.21 | % | ||||||||||||||||||||||||
Mortgage loans | 928 | 48 | 5.20 | % | 528 | 29 | 5.51 | % | 400 | 26 | 6.60 | % | ||||||||||||||||||||||||
Other loans | 7 | 1 | 1.89 | % | 68 | 3 | 3.75 | % | 67 | 3 | 4.49 | % | ||||||||||||||||||||||||
Total interest-earning assets | 83,866 | 1,927 | 2.30 | % | 91,371 | 2,060 | 2.26 | % | 85,352 | 2,599 | 3.04 | % | ||||||||||||||||||||||||
Funded By: | ||||||||||||||||||||||||||||||||||||
Consolidated obligations | 76,105 | 1,631 | 2.14 | % | 81,817 | 1,734 | 2.12 | % | 76,907 | 2,167 | 2.82 | % | ||||||||||||||||||||||||
Interest-bearing deposits and other borrowings | 1,969 | 27 | 1.38 | % | 2,976 | 28 | 0.95 | % | 2,908 | 43 | 1.48 | % | ||||||||||||||||||||||||
Total interest-bearing liabilities | 78,074 | 1,658 | 2.12 | % | 84,793 | 1,762 | 2.08 | % | 79,815 | 2,210 | 2.77 | % | ||||||||||||||||||||||||
Capital and other non-interest-bearing funds | 5,792 | — | — | 6,578 | — | — | 5,537 | — | — | |||||||||||||||||||||||||||
Total Funding | $ | 83,866 | 1,658 | 1.98 | % | $ | 91,371 | 1,762 | 1.93 | % | $ | 85,352 | 2,210 | 2.59 | % | |||||||||||||||||||||
Net Interest Spread | $ | 269 | 0.174 | % | $ | 298 | 0.177 | % | $ | 389 | 0.276 | % | ||||||||||||||||||||||||
Net Interest margin (Net interest income/Earning Assets) | 0.321 | % | 0.326 | % | 0.455 | % | ||||||||||||||||||||||||||||||
�� |
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For the year ended | ||||||||||||
December 31, 2004 vs. December 31, 2003 | ||||||||||||
(in millions) | Increase (decrease) | |||||||||||
Volume | Rate | Total | ||||||||||
Interest Income | ||||||||||||
Advances | $ | (103.0 | ) | $ | 57.6 | $ | (45.4 | ) | ||||
Interest-earning deposits | (13.1 | ) | 7.1 | (6.0 | ) | |||||||
Federal funds sold | (3.1 | ) | 3.1 | — | ||||||||
Investments | (42.8 | ) | (55.9 | ) | (98.7 | ) | ||||||
Mortgage loans | 22.1 | (2.9 | ) | 19.2 | ||||||||
Other loans | (2.4 | ) | (0.1 | ) | (2.5 | ) | ||||||
Total interest income | (142.3 | ) | 9.0 | (133.4 | ) | |||||||
Interest Expense | ||||||||||||
Consolidated obligations | (121.0 | ) | 18.6 | (102.4 | ) | |||||||
Deposits and borrowings | (9.6 | ) | 8.6 | (1.0 | ) | |||||||
Total interest expense | (130.6 | ) | 27.2 | (103.4 | ) | |||||||
Changes in Net Interest Income | $ | (11.7 | ) | $ | (18.2 | ) | $ | (30.0 | ) | |||
December 31, 2003 vs. December 31, 2002 | ||||||||||||
(in millions) | Increase (decrease) | |||||||||||
Volume | Rate | Total | ||||||||||
Interest Income | ||||||||||||
Advances | $ | 176.7 | $ | (568.4 | ) | $ | (391.7 | ) | ||||
Interest-earning deposits | (14.0 | ) | (32.6 | ) | (46.6 | ) | ||||||
Federal funds sold | (22.9 | ) | (7.0 | ) | (29.9 | ) | ||||||
Investments | 77.8 | (150.7 | ) | (72.9 | ) | |||||||
Mortgage loans | 8.4 | (5.7 | ) | 2.7 | ||||||||
Other loans | 0.01 | (0.5 | ) | (0.5 | ) | |||||||
Total interest income | 226.0 | (764.9 | ) | (538.9 | ) | |||||||
Interest Expense | ||||||||||||
Consolidated obligations | 138.4 | (571.9 | ) | (433.5 | ) | |||||||
Deposits and borrowings | 1.0 | (15.7 | ) | (14.7 | ) | |||||||
Total interest expense | 139.4 | (587.6 | ) | (448.2 | ) | |||||||
Changes in Net Interest Income | $ | 86.6 | $ | (177.3 | ) | $ | (90.7 | ) | ||||
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For the three months | For the six months | For the years ended | ||||||||||||||||||||||||||
ended June 30, | ended June 30, | December 31, | ||||||||||||||||||||||||||
2005 | 2004 | 2005 | 2004 | 2004 | 2003 | 2002 | ||||||||||||||||||||||
Other income: | ||||||||||||||||||||||||||||
Service fees | 1,048 | 1,258 | 2,188 | $ | 2,407 | $ | 4,751 | $ | 4,936 | $ | 4,103 | |||||||||||||||||
Net realized and unrealized gain (loss) on derivatives and hedging activities | (5,386 | ) | 12,342 | (4,331 | ) | 11,248 | 8,274 | (827 | ) | (9,712 | ) | |||||||||||||||||
Net realized (loss) from sale of held-to-maturity securities | — | — | — | — | (189,226 | ) | — | |||||||||||||||||||||
Other, net | (1,432 | ) | (2,611 | ) | (5,186 | ) | (2,610 | ) | (4,059 | ) | — | (26,994 | ) | |||||||||||||||
Total Other income | $ | (5,770 | ) | $ | 10,989 | $ | (7,329 | ) | $ | 11,045 | $ | 8,966 | $ | (185,117 | ) | $ | (32,603 | ) | ||||||||||
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For the three months | For the six months ended | For the years ended | ||||||||||||||||||||||||||
June 30, | June 30, | December 31, | ||||||||||||||||||||||||||
2005 | 2004 | 2005 | 2004 | 2004 | 2003 | 2002 | ||||||||||||||||||||||
Other expenses: | ||||||||||||||||||||||||||||
Operating | $ | 14,337 | $ | 12,003 | $ | 28,989 | $ | 24,106 | $ | 51,103 | $ | 47,749 | $ | 39,014 | ||||||||||||||
Finance Board and Office of Finance | 1,376 | 1,499 | 2,897 | 2,905 | 4,812 | 4,964 | 4,399 | |||||||||||||||||||||
Other, net | — | — | — | — | — | (1,746 | ) | (5,656 | ) | |||||||||||||||||||
Total other expenses | $ | 15,713 | $ | 13,502 | $ | 31,886 | $ | 27,011 | $ | 55,915 | $ | 50,967 | $ | 37,757 | ||||||||||||||
For the three months | For the six months | For the years ended | ||||||||||||||||||||||||||
ended June 30, | ended June 30, | December 31, | ||||||||||||||||||||||||||
2005 | 2004 | 2005 | 2004 | 2004 | 2003 | 2002 | ||||||||||||||||||||||
Salaries and employee benefits | $ | 9,380 | $ | 7,739 | $ | 18,876 | $ | 15,623 | $ | 34,042 | $ | 29,811 | $ | 26,095 | ||||||||||||||
Temporary workers | 160 | 59 | 280 | 80 | 202 | 868 | 173 | |||||||||||||||||||||
Occupancy | 867 | 852 | 1,725 | 1,707 | 3,505 | 3,504 | 2,556 | |||||||||||||||||||||
Depreciation and leasehold improvements | 1,035 | 922 | 2,070 | 1,845 | 3,990 | 2,936 | 2,635 | |||||||||||||||||||||
Computer service agreements and contractual service | 728 | 849 | 2,083 | 1,943 | 3,233 | 2,169 | 2,338 | |||||||||||||||||||||
Professional fees | 796 | 99 | 1,324 | 149 | 728 | 1,870 | 537 | |||||||||||||||||||||
Legal | 244 | 210 | 490 | 477 | 862 | 1,142 | 961 | |||||||||||||||||||||
Other | 1,127 | 1,273 | 2,141 | 2,282 | 4,541 | 5,449 | 3,719 | |||||||||||||||||||||
Total operating expenses | $ | 14,337 | $ | 12,003 | $ | 28,989 | $ | 24,106 | $ | 51,103 | $ | 47,749 | $ | 39,014 | ||||||||||||||
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Meeting Fee | Annual Limit | |||||||||||||||
(in whole dollars) | (in whole dollars) | |||||||||||||||
Position | 2005 | 2004 | 2005 | 2004 | ||||||||||||
Chairman | $ | 3,545 | $ | 3,426 | $ | 27,405 | $ | 27,405 | ||||||||
Vice Chairman | 2,836 | 2,741 | 21,924 | 21,924 | ||||||||||||
Director | 2,127 | 2,056 | 16,443 | 16,443 |
• | Meetings of the Board and Board committees, | |
• | Meetings requested by the Federal Housing Finance and Federal Home Loan Bank System committees, | |
• | Meetings of the Council of Federal Home Loan Banks and its committees, | |
• | Attendance at other events on behalf of the Bank with prior approval of the Board of Directors. |
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June 30, 2005 | For the years ended December 31, | |||||||||||||||||||
2005 | 2004 | 2004 | 2003 | 2002 | ||||||||||||||||
Beginning balance | $ | 81,580 | $ | 92,541 | $ | 92,541 | $ | 109,848 | $ | 104,674 | ||||||||||
Additions from current year’s assessments | 12,692 | 8,889 | 18,643 | 5,091 | 26,010 | |||||||||||||||
Net disbursements for grants and progams | (9,900 | ) | (17,058 | ) | (29,604 | ) | (22,398 | ) | (20,836 | ) | ||||||||||
Ending balance | $ | 84,372 | $ | 84,372 | $ | 81,580 | $ | 92,541 | $ | 109,848 | ||||||||||
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June 30, 2005 | December 31, 2004 | December 31, 2003 | December 31, 2002 | |||||||||||||
Advances | $ | 64,566,060 | $ | 68,507,487 | $ | 63,923,184 | $ | 68,926,073 | ||||||||
Mortgage loans before allowance for credit losses | $ | 1,385,125 | $ | 1,178,590 | $ | 672,151 | $ | 435,561 | ||||||||
Non-performing mortgage loans | $ | 432 | $ | 519 | $ | 115 | $ | 129 | ||||||||
Mortgage loans past due 90 days or more and still accruing interest (FHA & VA) | $ | 1,302 | $ | 1,898 | $ | 2,732 | $ | 7,428 | ||||||||
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For the three months | For the six months | For the year ended | ||||||||||||||||||
ended June 30, | ended June 30, | December 31, | ||||||||||||||||||
2005 | 2004 | 2005 | 2004 | 2004 | ||||||||||||||||
Balance, beginning of period | $ | 541 | $ | 507 | $ | 507 | $ | 507 | $ | 507 | ||||||||||
Charge offs | — | — | — | — | — | |||||||||||||||
Recoveries | — | — | — | — | — | |||||||||||||||
Net charge-off | — | — | — | — | — | |||||||||||||||
Provision for credit losses | 24 | — | 58 | — | — | |||||||||||||||
Balance, end of period | $ | 565 | $ | 507 | $ | 565 | $ | 507 | $ | 507 | ||||||||||
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June 30, 2005 | ||||||||||||
Percent of | ||||||||||||
City | State | Advances | Advances** | |||||||||
North Fork Bank | Mattituck | NY | $ | 5,800,015 | 9.10 | % | ||||||
New York Community Bank | Westbury | NY | 5,686,287 | 8.90 | % | |||||||
HSBC Bank USA, National Association | Buffalo | NY | 5,011,737 | 7.90 | % | |||||||
Hudson City Savings Bank | Paramus | NJ | 3,600,000 | 5.70 | % | |||||||
Independence Community Bank* | Brooklyn | NY | 3,333,000 | 5.20 | % | |||||||
$ | 23,431,039 | 36.80 | % | |||||||||
December 31, 2004 | ||||||||||||
Percent of | ||||||||||||
City | State | Advances | Advances** | |||||||||
GreenPoint Bank | New York | NY | $ | 5,125,015 | 7.60 | % | ||||||
HSBC Bank USA | Buffalo | NY | 5,011,786 | 7.50 | % | |||||||
New York Community Bank | Westbury | NY | 4,644,290 | 6.90 | % | |||||||
Independence Community Bank* | New York | NY | 3,958,000 | 5.90 | % | |||||||
Manufacturers and Traders Trust Company* | Buffalo | NY | 3,529,333 | 5.20 | % | |||||||
$ | 22,268,424 | 33.10 | % | |||||||||
* | Officer of member bank also served on the Board of Directors of the FHLBNY | |
** | Percentage calculated on par value of advances before adjustment for SFAS 133. |
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June 30, 2005 | ||||||||
Mortgage | Percent of Total | |||||||
Loans | Mortgage Loans | |||||||
Manufacturers and Traders Trust Company | $ | 699,256 | 51.25 | % | ||||
Astoria Federal Savings and Loan Association | 280,089 | 20.53 | % | |||||
Elmira Savings and Loan F.A. | 119,760 | 8.78 | % | |||||
Ocean First Bank | 45,937 | 3.37 | % | |||||
The Lyons National Bank | 31,296 | 2.29 | % | |||||
All others | 188,180 | 13.79 | % | |||||
Total | $ | 1,364,518 | 100.00 | % | ||||
December 31, 2004 | ||||||||
Mortgage | Percent of Total | |||||||
Loans | Mortgage Loans | |||||||
Manufacturers and Traders Trust Company | $ | 525,619 | 45.38 | % | ||||
Astoria Federal Savings and Loan Association | 272,979 | 23.57 | % | |||||
Elmira Savings and Loan. F.A. | 115,779 | 10.00 | % | |||||
Ocean First Bank | 31,220 | 2.70 | % | |||||
The Lyons National Bank | 26,049 | 2.25 | % | |||||
All others | 186,609 | 16.11 | % | |||||
Total | $ | 1,158,255 | 100.00 | % | ||||
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For the three months | For the six months | For the years ended December 31, | ||||||||||||||||||||||||||
ended June 30, | ended June 30, | |||||||||||||||||||||||||||
2005 | 2004 | 2005 | 2004 | 2004 | 2003 | 2002 | ||||||||||||||||||||||
Beginning balance | $ | 12,497 | $ | 8,993 | $ | 11,710 | $ | 5,607 | $ | 5,607 | $ | 3,367 | $ | 1,384 | ||||||||||||||
Additions | 523 | 1,256 | 1,310 | 4,642 | 6,103 | 2,240 | 1,983 | |||||||||||||||||||||
Charge-offs | — | — | — | — | — | — | — | |||||||||||||||||||||
Recoveries | — | — | — | — | — | — | — | |||||||||||||||||||||
Ending balance | $ | 13,020 | $ | 10,249 | $ | 13,020 | $ | 10,249 | $ | 11,710 | $ | 5,607 | $ | 3,367 | ||||||||||||||
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• | Prospective assessment. Upon designation of the hedging relationship and on an ongoing basis, FHLBNY will be required to demonstrate that it expects the hedging relationships to be highly effective. This is a forward-looking relationship consideration. The FHLBNY uses sensitivity analysis employing an option adjusted valuation model to generate changes in market value of the hedged item and the swap. These projected market values are then analyzed over multiple instantaneous, parallel, rate shocks. The hedge is expected to be highly effective if the change in fair value of the swap divided by the change in the fair value of the hedged item is within the 80%-120% dollar value offset boundaries. | |
• | Retrospective assessment. At least quarterly, FHLBNY will be required to determine whether the hedging relationship was highly effective in offsetting changes in fair value or cash flows through the date of the periodic assessment. This is an evaluation of the past experience. |
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Derivatives | Hedging | Notional | ||||||
Terms | Strategy | Accounting Designation | Amount (in millions) | |||||
Pay fixed, receive floating interest rate swap | To convert fixed rate on a fixed rate advance to a LIBOR floating rate | Fair Value Hedge | $ | 33,333 | ||||
Purchased interest rate cap | To offset the cap embedded in the variable rate advance | Fair Value Hedge | $ | 1,668 | ||||
Receive fixed, pay floating interest rate swap (non- callable) | To convert the fixed rate consolidated obligation debt to a LIBOR floating rate | Fair Value Hedge | $ | 14,825 | ||||
Pay fixed, receive LIBOR interest rate swap | To offset the variability of cash flows associated with interest payments on forecasted issuance of fixed rate consolidated obligation debt. | Cash flow hedge | $ | 150 | ||||
Received fixed, pay floating interest rate swap with an option to call. | To convert the fixed rate consolidated obligation debt to LIBOR floating rate; swap is callable on the same day as the consolidated obligation debt. | Fair Value Hedge | $ | 16,666 | ||||
Intermediary positions Interest rate swaps Interest rate caps | To offset interest rate swaps and caps executed with members by executing offsetting derivatives with counterparties. | Economic Hedge | $ | 132 |
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Short-Cut | Long-Haul | Total | ||||||||||||||||||||||
Notional | Fair Values | Notional | Fair Values | Notional | Fair Values | |||||||||||||||||||
Derivative Hedging by Product Type: | ||||||||||||||||||||||||
Advances | $ | 31,309 | $ | (847 | ) | $ | 2,024 | $ | (53 | ) | $ | 33,333 | $ | (900 | ) | |||||||||
Consolidated Obligations | 9,530 | (45 | ) | 22,111 | (183 | ) | 31,641 | (228 | ) | |||||||||||||||
Mortgage Commitments* | — | 4 | — | 4 | 0 | |||||||||||||||||||
Others* | — | — | 1,800 | — | 1,800 | — | ||||||||||||||||||
$ | 40,839 | $ | (892 | ) | $ | 25,939 | $ | (236 | ) | $ | 66,778 | $ | (1,128 | ) | ||||||||||
SFAS 133 Hedge Classification: | ||||||||||||||||||||||||
Fair Value Hedge | $ | 40,839 | $ | (892 | ) | $ | 23,985 | $ | (232 | ) | $ | 64,824 | $ | (1,124 | ) | |||||||||
Cash Flow Hedges | 154 | (4 | ) | 154 | (4 | ) | ||||||||||||||||||
Intermediation | — | — | 132 | — | 132 | — | ||||||||||||||||||
Economic Hedges | — | — | 1,668 | — | 1,668 | — | ||||||||||||||||||
$ | 40,839 | $ | (892 | ) | $ | 25,939 | $ | (236 | ) | $ | 66,778 | $ | (1,128 | ) | ||||||||||
* | Fair Values are not significant |
Short-Cut | Long-Haul | Total | ||||||||||||||||||||||
Notional | Fair Values | Notional | Fair Values | Notional | Fair Values | |||||||||||||||||||
Derivative Hedging by Product Type: | ||||||||||||||||||||||||
Advances | $ | 28,356 | $ | (1,173 | ) | $ | 1,346 | $ | (65 | ) | $ | 29,702 | $ | (1,238 | ) | |||||||||
Consolidated Obligations | 14,248 | (33 | ) | 20,074 | (135 | ) | 34,322 | (168 | ) | |||||||||||||||
Mortgage Commitments* | 10 | — | — | — | 10 | — | ||||||||||||||||||
Others* | — | — | 2,111 | — | 2,111 | — | ||||||||||||||||||
$ | 42,614 | $ | (1,206 | ) | $ | 23,531 | $ | (200 | ) | $ | 66,145 | $ | (1,406 | ) | ||||||||||
SFAS 133 Hedge Classification: | ||||||||||||||||||||||||
Fair Value Hedge | $ | 41,892 | $ | (1,209 | ) | $ | 21,420 | $ | (200 | ) | $ | 63,312 | $ | (1,409 | ) | |||||||||
Cash Flow Hedges | 722 | 3 | — | — | 722 | 3 | ||||||||||||||||||
Intermediation | — | — | 112 | — | 112 | — | ||||||||||||||||||
Economic Hedges | — | — | 1,999 | — | 1,999 | — | ||||||||||||||||||
$ | 42,614 | $ | (1,206 | ) | $ | 23,531 | $ | (200 | ) | $ | 66,145 | $ | (1,406 | ) | ||||||||||
* | Fair Values are not significant |
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Short-Cut | Long-Haul | Total | ||||||||||||||||||||||
Notional | Fair Values | Notional | Fair Values | Notional | Fair Values | |||||||||||||||||||
Derivative Hedging by Product Type: | ||||||||||||||||||||||||
Advances | $ | 31,071 | $ | (2,043 | ) | $ | 1,381 | $ | (111 | ) | $ | 32,452 | $ | (2,154 | ) | |||||||||
Consolidated Obligations | 27,547 | 273 | 126 | — | 27,673 | 273 | ||||||||||||||||||
Mortgage Commitments* | 10 | — | — | — | 10 | — | ||||||||||||||||||
Others* | — | — | 1,954 | (3 | ) | 1,954 | (3 | ) | ||||||||||||||||
$ | 58,628 | $ | (1,770 | ) | $ | 3,461 | $ | (114 | ) | $ | 62,089 | $ | (1,884 | ) | ||||||||||
SFAS 133 Hedge Classification: | ||||||||||||||||||||||||
Fair Value Hedge | $ | 58,617 | $ | (1,770 | ) | $ | 1,381 | $ | (111 | ) | $ | 59,998 | $ | (1,881 | ) | |||||||||
Cash Flow Hedges | 136 | — | — | — | 136 | — | ||||||||||||||||||
Intermediation | — | — | 132 | (3 | ) | 132 | (3 | ) | ||||||||||||||||
Economic Hedges | — | — | 1,822 | — | 1,822 | — | ||||||||||||||||||
$ | 58,753 | $ | (1,770 | ) | $ | 3,335 | $ | (114 | ) | $ | 62,088 | $ | (1,884 | ) | ||||||||||
* | Fair Values are not significant |
June 30, 2005 | December 31, 2004 | December 31, 2003 | ||||||||||||||||||||||
Total estimated | Total estimated | Total estimated | ||||||||||||||||||||||
fair value | fair value | fair value | ||||||||||||||||||||||
(excluding | (excluding | (excluding | ||||||||||||||||||||||
Total notional | accrued | Total notional | accrued | Total notional | accrued | |||||||||||||||||||
amount | interest) | amount | interest) | amount | interest ) | |||||||||||||||||||
Advances — fair value hedges | $ | 33,333,340 | $ | (900,004 | ) | $ | 29,701,594 | $ | (1,237,680 | ) | $ | 32,451,842 | $ | (2,153,535 | ) | |||||||||
Advances — economic hedges | 1,668,195 | (10 | ) | 1,999,140 | (3,413 | ) | 1,822,500 | (3,424 | ) | |||||||||||||||
Consolidated obligations — fair value hedges | 31,490,992 | (224,699 | ) | 33,610,060 | (168,178 | ) | 27,546,546 | 273,360 | ||||||||||||||||
Mortgage loans — commitment | 3,536 | 10 | 10,316 | 16 | 9,681 | (35 | ) | |||||||||||||||||
Balance sheet — economic hedges | — | — | — | — | — | — | ||||||||||||||||||
Cash Flow — anticipated transactions | 150,000 | (3,493 | ) | 712,150 | 3,057 | 126,450 | (48 | ) | ||||||||||||||||
Intermediary positions — economic hedges | 132,000 | 7 | 112,000 | 9 | 132,000 | 13 | ||||||||||||||||||
Total notional and fair value | $ | 66,778,063 | $ | (1,128,189 | ) | $ | 66,145,260 | $ | (1,406,189 | ) | $ | 62,089,019 | $ | (1,883,669 | ) | |||||||||
Total derivatives excluding accrued interest | $ | (1,128,189 | ) | $ | (1,406,189 | ) | $ | (1,883,669 | ) | |||||||||||||||
Accrued interest | 73,639 | 45,042 | 29,635 | |||||||||||||||||||||
Net derivative balance | $ | (1,054,550 | ) | $ | (1,361,147 | ) | $ | (1,854,034 | ) | |||||||||||||||
Net derivative asset balance | $ | 3,625 | $ | 11,048 | $ | 59,240 | ||||||||||||||||||
Net derivative liability balance | (1,058,175 | ) | (1,372,195 | ) | (1,913,274 | ) | ||||||||||||||||||
Net derivative balance | $ | (1,054,550 | ) | $ | (1,361,147 | ) | $ | (1,854,034 | ) | |||||||||||||||
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For the three months | For the six months | For the years | ||||||||||||||||||||||||||
ended June 30, | ended June 30, | ended December 31, | ||||||||||||||||||||||||||
2005 | 2004 | 2005 | 2004 | 2004 | 2003 | 2002 | ||||||||||||||||||||||
Accumulated gains and losses, beginning of year | $ | 11,443 | $ | (545 | ) | $ | 898 | $ | (13 | ) | $ | (13 | ) | $ | — | $ | — | |||||||||||
Net hedging transactions | (9,475 | ) | 3,012 | 711 | 2,507 | 2,161 | (31 | ) | — | |||||||||||||||||||
Reclassified into earnings | (659 | ) | 11 | (300 | ) | (16 | ) | (1,250 | ) | 18 | — | |||||||||||||||||
Accumulated gains and losses, end of year | $ | 1,309 | $ | 2,478 | $ | 1,309 | $ | 2,478 | $ | 898 | $ | (13 | ) | $ | — | |||||||||||||
For the three months ended June 30, 2005 | ||||||||||||||||||||||||||||
Consolidated | Consolidated | |||||||||||||||||||||||||||
MPF | Obligation | Obligation | Economic | Intermediary | ||||||||||||||||||||||||
Earnings Impact | Advances | Loans | Bonds | Discount Notes | Hedges | Positions | Total | |||||||||||||||||||||
Amortization/accretion of hedging activities in net margin | $ | (96 | ) | $ | 33 | $ | (1,555 | ) | $ | — | $ | — | $ | — | $ | (1,618 | ) | |||||||||||
Net realized and unrealized gains (losses) on derivatives and hedging activities | (5,579 | ) | (33 | ) | 30 | 169 | 28 | (1 | ) | (5,386 | ) | |||||||||||||||||
Total | $ | (5,675 | ) | $ | — | $ | (1,525 | ) | $ | 169 | $ | 28 | $ | (1 | ) | $ | (7,004 | ) | ||||||||||
For the three months ended June 30 , 2004 | ||||||||||||||||||||||||
Consolidated | ||||||||||||||||||||||||
MPF | Obligation | Economic | Intermediary | |||||||||||||||||||||
Earnings Impact | Advances | Loans | Bonds | Hedges | Positions | Total | ||||||||||||||||||
Amortization/accretion of hedging activities in net margin | $ | (61 | ) | $ | 10 | $ | 1,700 | $ | — | $ | — | $ | 1,649 | |||||||||||
Net realized and unrealized gains (losses) on derivatives and hedging activities | (2,466 | ) | (10 | ) | 13,254 | 1,565 | (1 | ) | 12,342 | |||||||||||||||
Total | $ | (2,527 | ) | $ | — | $ | 14,954 | $ | 1,565 | $ | (1 | ) | $ | 13,991 | ||||||||||
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For the six months ended June 30, 2005 | ||||||||||||||||||||||||||||
Consolidated | Consolidated | |||||||||||||||||||||||||||
MPF | Obligation | Obligation | Economic | Intermediary | ||||||||||||||||||||||||
Earnings Impact | Advances | Loans | Bonds | Discount Notes | Hedges | Positions | Total | |||||||||||||||||||||
Amortization/accretion of hedging activities in net margin | $ | (268 | ) | $ | 75 | $ | 1,003 | $ | — | $ | — | $ | — | $ | 810 | |||||||||||||
Net realized and unrealized gains (losses) on derivatives and hedging activities | (7,204 | ) | (75 | ) | 1,273 | 169 | 1,508 | (2 | ) | (4,331 | ) | |||||||||||||||||
Total | $ | (7,472 | ) | $ | — | $ | 2,276 | $ | 169 | $ | 1,508 | $ | (2 | ) | $ | (3,521 | ) | |||||||||||
For the six months ended June 30, 2004 | ||||||||||||||||||||||||
Consolidated | ||||||||||||||||||||||||
MPF | Obligation | Economic | Intermediary | |||||||||||||||||||||
Earnings Impact | Advances | Loans | Bonds | Hedges | Positions | Total | ||||||||||||||||||
Amortization/accretion of hedging activities in net margin | $ | (215 | ) | $ | (16 | ) | $ | 5,935 | $ | — | $ | — | $ | 5,704 | ||||||||||
Net realized and unrealized gains (losses) on derivatives and hedging activities | (3,397 | ) | 16 | 13,280 | 1,351 | (2 | ) | 11,248 | ||||||||||||||||
Total | $ | (3,612 | ) | $ | — | $ | 19,215 | $ | 1,351 | $ | (2 | ) | $ | 16,952 | ||||||||||
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For the year ended December 31, 2004 | ||||||||||||||||||||||||
Consolidated | ||||||||||||||||||||||||
MPF | Obligation | Economic | Intermediary | |||||||||||||||||||||
Earnings Impact | Advances | Loans | Bonds | Hedges | Positions | Total | ||||||||||||||||||
Amortization/accretion of hedging activities in net margin | $ | (154 | ) | $ | (26 | ) | $ | 4,235 | $ | — | $ | — | $ | 4,055 | ||||||||||
Net realized and unrealized gains (losses) on derivatives and hedging activities | (955 | ) | 26 | 26 | — | — | (903 | ) | ||||||||||||||||
Total | $ | (1,109 | ) | $ | — | $ | 4,261 | $ | — | $ | — | $ | 3,152 | |||||||||||
For the year ended December 31, 2003 | ||||||||||||||||||||||||
Consolidated | ||||||||||||||||||||||||
MPF | Obligation | Economic | Intermediary | |||||||||||||||||||||
Earnings Impact | Advances | Loans | Bonds | Hedges | Positions | Total | ||||||||||||||||||
Amortization/accretion of hedging activities in net margin | $ | (1,289 | ) | $ | 18 | $ | 23,783 | $ | — | $ | — | $ | 22,512 | |||||||||||
Net realized and unrealized gains (losses) on derivatives and hedging activities | (4,077 | ) | (18 | ) | 93 | 3,167 | 8 | (827 | ) | |||||||||||||||
Total | $ | (5,366 | ) | $ | — | $ | 23,876 | $ | 3,167 | $ | 8 | $ | 21,685 | |||||||||||
For the year ended December 31, 2002 | ||||||||||||||||||||||||
Consolidated | ||||||||||||||||||||||||
MPF | Obligation | Economic | Intermediary | |||||||||||||||||||||
Earnings Impact | Advances | Loans | Bonds | Hedges | Positions | Total | ||||||||||||||||||
Amortization/accretion of hedging activities in net margin | $ | (437 | ) | $ | — | $ | 24,084 | $ | — | $ | — | $ | 23,647 | |||||||||||
Net realized and unrealized gains (losses) on derivatives and hedging activities | (6,775 | ) | — | 528 | (3,468 | ) | 3 | (9,712 | ) | |||||||||||||||
Total | $ | (7,212 | ) | $ | — | $ | 24,612 | $ | (3,468 | ) | $ | 3 | $ | 13,935 | ||||||||||
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June 30, 2005 | ||||||||||||||||
Total Net | ||||||||||||||||
Number of | Notional | Exposure at | Net Exposure | |||||||||||||
Credit Rating | Counterparties | Balance | Fair Value | after Collateral | ||||||||||||
AAA | 1 | $ | 4,124,428 | $ | — | $ | — | |||||||||
AA | 8 | 33,834,035 | 877 | 877 | ||||||||||||
A | 7 | 24,479,856 | 2,720 | 2,720 | ||||||||||||
BBB | 1 | 4,270,208 | ||||||||||||||
Members | 4 | 66,000 | 17 | — | ||||||||||||
Delivery Commitments | — | 3,536 | 10 | — | ||||||||||||
Total | 21 | $ | 66,778,063 | $ | 3,624 | $ | 3,597 | |||||||||
December 31, 2004 | ||||||||||||||||
Total Net | ||||||||||||||||
Number of | Notional | Exposure at | Net Exposure | |||||||||||||
Credit Rating | Counterparties | Balance | Fair Value | after Collateral | ||||||||||||
AAA | $ | — | $ | — | $ | — | ||||||||||
AA | 5 | 22,276,326 | 10,982 | 10,382 | ||||||||||||
A | 12 | 43,802,618 | — | — | ||||||||||||
Members | 3 | 56,000 | 43 | 7 | ||||||||||||
Delivery Commitments | 10,316 | 16 | — | |||||||||||||
Total | 20 | $ | 66,145,260 | $ | 11,041 | $ | 10,389 | |||||||||
December 31, 2003 | ||||||||||||||||
Total Net | ||||||||||||||||
Number of | Notional | Exposure at | Net Exposure | |||||||||||||
Credit Rating | Counterparties | Balance | Fair Value | after Collateral | ||||||||||||
AAA | — | $ | — | $ | — | $ | — | |||||||||
AA | 5 | 19,987,621 | 39,686 | 9,639 | ||||||||||||
A | 10 | 42,025,717 | 19,189 | 15,784 | ||||||||||||
Members | 4 | 66,000 | 365 | — | ||||||||||||
Delivery Commitments | — | 9,681 | — | — | ||||||||||||
Total | 19 | $ | 62,089,019 | $ | 59,240 | $ | 25,423 | |||||||||
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Payments due or expiration terms by period as of June 30, 2005 | ||||||||||||||||||||
> 1 year | > 3 years | |||||||||||||||||||
<= 1 year | <= 3 years | <= 5 years | > 5 years | Total | ||||||||||||||||
Contractual Obligations | ||||||||||||||||||||
Consolidated obligations-bonds at par | $ | 20,454,240 | $ | 23,601,945 | $ | 6,976,520 | $ | 3,508,050 | $ | 54,540,755 | ||||||||||
Mandatorily redeemable capital stock | 15,494 | 3,134 | 16,698 | 289 | 35,615 | |||||||||||||||
Premise and equipment (rental and lease obligations) | 2,819 | 5,650 | 4,598 | 16,484 | 29,551 | |||||||||||||||
Total contractual obligations | 20,472,553 | 23,610,729 | 6,997,816 | 3,524,823 | 54,605,921 | |||||||||||||||
Other commitments | ||||||||||||||||||||
Standby letters of credit | 82,309 | 15,705 | 17,053 | 11,699 | 126,766 | |||||||||||||||
Standby bond purchase agreements | 543,721 | — | — | — | 543,721 | |||||||||||||||
Unused lines of credit and other commitments | 10,164,278 | — | — | — | 10,164,278 | |||||||||||||||
Consolidated obligation bonds traded not settled | 631,385 | — | — | — | 631,385 | |||||||||||||||
Open delivery commitments | 3,536 | — | — | — | 3,536 | |||||||||||||||
Total other commitments | 11,425,229 | 15,705 | 17,053 | 11,699 | 11,469,686 | |||||||||||||||
Total commitments | $ | 31,897,782 | $ | 23,626,434 | $ | 7,014,869 | $ | 3,536,522 | $ | 66,075,607 | ||||||||||
Payments due or expiration terms by period as of December 31, 2004 | ||||||||||||||||||||
> 1 year | > 3 years | |||||||||||||||||||
<= 1 year | <= 3 years | <= 5 years | > 5 years | Total | ||||||||||||||||
Contractual Obligations | ||||||||||||||||||||
Consolidated obligations-bonds at par | $ | 25,348,025 | $ | 24,986,155 | $ | 6,788,950 | $ | 3,463,000 | $ | 60,586,130 | ||||||||||
Mandatorily redeemable capital stock | 106,141 | 175 | 9,923 | 10,342 | 126,581 | |||||||||||||||
Premise and equipment (rental and lease obligations) | 2,845 | 5,535 | 4,976 | 17,751 | 31,107 | |||||||||||||||
Total contractual obligations | 25,457,011 | 24,991,865 | 6,803,849 | 3,491,093 | 60,743,818 | |||||||||||||||
Other contractual obligations | ||||||||||||||||||||
Standby letters of credit | 76,359 | 11,524 | 21,465 | 10,120 | 119,468 | |||||||||||||||
Standby bond purchase agreements | 543,721 | — | — | — | 543,721 | |||||||||||||||
Unused lines of credit and other commitments | 10,376,197 | — | — | — | 10,376,197 | |||||||||||||||
Consolidated obligation bonds traded not settled | 400,650 | — | — | — | 400,650 | |||||||||||||||
Open delivery commitments | 10,316 | — | — | — | 10,316 | |||||||||||||||
Total other contractual obligations | 11,407,243 | 11,524 | 21,465 | 10,120 | 11,450,352 | |||||||||||||||
Total commitments | $ | 36,864,254 | $ | 25,003,389 | $ | 6,825,314 | $ | 3,501,213 | $ | 72,194,170 | ||||||||||
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Average Deposit | Average | |||||||||||
For the quarter ended | Reserve Required | Operational Liquidity | Excess | |||||||||
June 30, 2004 | $ | 2,084 | $ | 42,169 | $ | 40,085 | ||||||
September 30, 2004 | 4,968 | 43,531 | 38,563 | |||||||||
December 31, 2004 | 5,281 | 45,207 | 39,926 | |||||||||
March 31, 2005 | 2,150 | 44,667 | 42,517 | |||||||||
June 30, 2005 | 2,222 | 43,642 | 41,420 |
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Average Balance Sheet | Average | |||||||||||
Liquidity | Operational | |||||||||||
For the quarter ended | Requirement | Liquidity | Excess | |||||||||
June 30, 2004 | $ | 8,536 | $ | 19,273 | $ | 10,737 | ||||||
September 30, 2004 | 8,160 | 17,544 | 9,384 | |||||||||
December 31, 2004 | 4,300 | 16,510 | 12,210 | |||||||||
March 31, 2005 | 5,507 | 16,311 | 10,804 | |||||||||
June 30, 2005 | 5,484 | 16,988 | 11,504 |
Average Five Day | Average | |||||||||||
For the quarter ended | Requirement | Contingency Liquidity | Excess | |||||||||
June 30, 2004 | $ | 5,937 | $ | 15,328 | $ | 9,391 | ||||||
September 30, 2004 | 4,711 | 13,943 | 9,232 | |||||||||
December 31, 2004 | 4,507 | 13,641 | 9,134 | |||||||||
March 31, 2005 | 3,600 | 13,709 | 10,109 | |||||||||
June 30, 2005 | 4,785 | 14,615 | 9,830 |
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• | Cash; | ||
• | Obligations of, or fully guaranteed by, the United States; | ||
• | Secured advances; | ||
• | Mortgages that have any guaranty, insurance, or commitment from the United States or any agency of the United States; | ||
• | Investments described in section 16(a) of the FHLBank Act, including securities that a fiduciary or trust fund may purchase under the laws of the state in which the FHLBank is located; and | ||
• | Other securities that are rated Aaa by Moody’s or AAA by Standard & Poor’s. |
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• | 20% of the sum of its daily average overnight and demand deposits and other overnight borrowings, and | ||
• | 10% of the sum of its daily average term deposits, consolidated obligations and other borrowings that mature within one year. |
• | Overnight funds and overnight deposits placed with eligible financial institutions; | ||
• | Overnight and term-resale agreements with eligible counterparties that mature in 31 days or less and that use for collateral (1) securities that are eligible investments under the investment guidelines, and (2) mortgages insured by the Federal Housing Administration or guaranteed by the Veterans Administration; | ||
• | Negotiable certificates of deposit placed with eligible financial institutions; bankers’ acceptances drawn on and accepted by eligible financial institutions; and commercial paper issued in U.S. financial markets and rated P-1 by Moody’s or A-1 by Standard & Poor’s, that on settlement date have a remaining term to maturity not exceeding 9 months. | ||
• | Marketable direct obligations of the U.S. government that mature in 36 months or less; | ||
• | Marketable direct obligations of U.S. government-sponsored agencies and instrumentalities that mature in 36 months or less and for which the credit of such institution is pledged for repayment of both principal and interest; and | ||
• | Cash and collected balances held at a Federal Reserve Bank or other eligible financial institutions, net of member pass-throughs. |
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June 30, | December 31, | December 31, | ||||||||||
2005 | 2004 | 2003 | ||||||||||
Consolidated Obligations: | ||||||||||||
Bonds | $ | 54,387,350 | $ | 60,515,356 | $ | 54,051,869 | ||||||
Discount Notes | 24,933,620 | 19,641,626 | 16,804,767 | |||||||||
$ | 79,320,970 | $ | 80,156,982 | $ | 70,856,636 | |||||||
Unpledged assets | ||||||||||||
Cash | 22,513 | 22,376 | 20,793 | |||||||||
Less: Member pass through Federal Reserve | (60,959 | ) | (54,082 | ) | (57,678 | ) | ||||||
Secured Advances | 64,566,060 | 68,507,487 | 63,923,184 | |||||||||
Investments and Other | 21,079,241 | 18,362,906 | 14,156,970 | |||||||||
Mortgage loans | 1,384,560 | 1,178,083 | 671,644 | |||||||||
Other loans | 417,776 | 511 | 60,686 | |||||||||
Accrued interest receivable on Advances and Investments | 332,317 | 315,768 | 287,827 | |||||||||
Less: Pledged assets | (774,827 | ) | (1,091,677 | ) | (1,653,686 | ) | ||||||
86,966,681 | 87,241,372 | 77,409,740 | ||||||||||
Excess Unpledged assets | $ | 7,645,711 | $ | 7,084,390 | $ | 6,553,104 | ||||||
June 30, | December 31, | December 31, | ||||||||||
2005 | 2004 | 2003 | ||||||||||
Percentage of unpledged qualified assets to consolidated obligations | 110 | % | 109 | % | 109 | % | ||||||
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June 30, 2005 | December 31, 2004 | December 31, 2003 | ||||||||||||||||||||||
�� | Actual | Limits | Actual | Limits | Actual | Limits | ||||||||||||||||||
Mortgage securities investment authority | 283 | % | 300 | % | 287 | % | 300 | % | 279 | % | 300 | % | ||||||||||||
Leverage limits | ||||||||||||||||||||||||
Ratio of total assets to capital limit | 21.83 | 25 times | 22.10 | 25 times | 21.04 | 25 times | ||||||||||||||||||
Percentage of non-mortgage assets to total assets* | 2.88 | % | 11.00 | % | (0.34 | )% | 11.00 | % | (3.44 | )% | 11.00 | % | ||||||||||||
* | Under applicable regulations (12 CFR Part 966.3), deposit liabilities are subtracted and capital are subtracted from non-mortgage assets before calculating the ratio of non-mortgage assets to total assets. A negative percentage also indicates the limit has been met. For the purposes of this section, the amount of non-mortgage assets (after subtracting deposits and capital) equals total assets after deduction of: advances, acquired member assets, standby letters of credit, intermediary derivative contracts, and certain investments in mortgage-backed securities and state or local governmental units or agencies. |
June 30, 2005 | December 31, 2004 | |||||||
Redemption within one year | $ | 15,493 | $ | 106,141 | ||||
Redemption after one year through two years | 3,135 | 175 | ||||||
Redemption after three years through five years | 16,698 | 9,923 | ||||||
Redemption after six years through ten years | 289 | 10,294 | ||||||
Redemption after eleven years though fifteen years | — | 48 | ||||||
$ | 35,615 | $ | 126,581 | |||||
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For the three months | For the six months | |||||||||||||||
(Dollars in thousands) | ended June 30, | ended June 30, | ||||||||||||||
2005 | 2004 | 2005 | 2004 | |||||||||||||
Earnings: | ||||||||||||||||
Income before assessments | $ | 72,873 | $ | 66,547 | $ | 152,552 | $ | 105,094 | ||||||||
Fixed Charges | 654,054 | 366,860 | 1,224,135 | 724,494 | ||||||||||||
Total Earnings | $ | 726,927 | $ | 433,407 | $ | 1,376,687 | $ | 829,588 | ||||||||
Fixed Charges: | ||||||||||||||||
Interest Expense | $ | 654,054 | $ | 366,860 | $ | 1,224,135 | $ | 724,494 | ||||||||
Estimated interest component of other expenses* | — | — | — | — | ||||||||||||
Total Fixed Charges | $ | 654,054 | $ | 366,860 | $ | 1,224,135 | $ | 724,494 | ||||||||
Ratio of earnings to fixed charges | 1.11 | 1.18 | 1.12 | 1.15 | ||||||||||||
For the years ended December 31, | ||||||||||||||||||||
2004 | 2003 | 2002 | 2001 | 2000 | ||||||||||||||||
Earnings: | ||||||||||||||||||||
Income before assessments | $ | 221,543 | $ | 62,360 | $ | 318,623 | $ | 384,514 | $ | 376,471 | ||||||||||
Fixed Charges | 1,658,480 | 1,761,932 | 2,210,153 | 3,460,880 | 4,016,936 | |||||||||||||||
Total Earnings | $ | 1,880,023 | $ | 1,824,292 | $ | 2,528,776 | $ | 3,845,394 | 4,393,407 | |||||||||||
Fixed Charges: | ||||||||||||||||||||
Interest Expense | $ | 1,658,480 | $ | 1,761,932 | $ | 2,210,153 | $ | 3,460,880 | $ | 4,016,936 | ||||||||||
Estimated interest component of other expenses* | — | — | — | — | — | |||||||||||||||
Total Fixed Charges | $ | 1,658,480 | $ | 1,761,932 | $ | 2,210,153 | $ | 3,460,880 | $ | 4,016,936 | ||||||||||
Ratio of earnings to fixed charges | 1.13 | 1.04 | 1.14 | 1.11 | 1.09 | |||||||||||||||
* | Not considered significant |
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–14.17% on December 31, 2004 under the 200 basis-point up and down shocks. The December 2004 values in the down shock were actually based upon a –150 basis-point shock from the shock to prevent negative interest rates from the shock in the low interest rate environment.
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Duration of Equity (in years) | June 30, 2005 | December 31, 2004 | December 31, 2003 | December 31, 2002 | ||||||||||||
Base | 0.82 | 1.50 | 2.18 | 0.84 | ||||||||||||
Up-Base | 3.34 | 3.46 | 2.99 | 2.98 | ||||||||||||
Down-Base | -1.21 | -1.43 | 1.83 | 0.48 | ||||||||||||
Duration Gap (in months) | 0.12 | 0.50 | 0.86 | 0.08 |
2005 Duration Measures | ||||||||||||||||
(as of month-end, in years) | ||||||||||||||||
Duration of | Duration | Duration | Duration | |||||||||||||
Assets | Liabilities | Gap | Equity | |||||||||||||
January | 0.67 | 0.64 | 0.03 | 1.20 | ||||||||||||
February | 0.71 | 0.64 | 0.07 | 2.17 | ||||||||||||
March | 0.74 | 0.66 | 0.08 | 2.34 | ||||||||||||
April | 0.68 | 0.64 | 0.05 | 1.63 | ||||||||||||
May | 0.64 | 0.62 | 0.01 | 0.88 | ||||||||||||
June | 0.62 | 0.61 | 0.01 | 0.82 |
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2004 Duration Measures | ||||||||||||||||
(as of month-end, in years) | ||||||||||||||||
Duration of | Duration | Duration | Duration of | |||||||||||||
Assets | Liabilities | Gap | Equity | |||||||||||||
January | 0.75 | 0.66 | 0.09 | 2.46 | ||||||||||||
February | 0.71 | 0.64 | 0.07 | 2.12 | ||||||||||||
March | 0.73 | 0.69 | 0.04 | 1.57 | ||||||||||||
April | 0.81 | 0.71 | 0.10 | 2.66 | ||||||||||||
May | 0.82 | 0.69 | 0.13 | 3.36 | ||||||||||||
June | 0.85 | 0.72 | 0.13 | 3.25 | ||||||||||||
July | 0.82 | 0.70 | 0.12 | 3.11 | ||||||||||||
August | 0.77 | 0.68 | 0.09 | 2.46 | ||||||||||||
September | 0.76 | 0.68 | 0.08 | 2.41 | ||||||||||||
October | 0.71 | 0.65 | 0.06 | 1.89 | ||||||||||||
November | 0.71 | 0.63 | 0.08 | 2.28 | ||||||||||||
December | 0.69 | 0.65 | 0.04 | 1.50 |
2003 Duration Measures | ||||||||||||||||
(as of month-end, in years) | ||||||||||||||||
Assets | Liabilities | Gap | Equity | |||||||||||||
January | 0.76 | 0.71 | 0.05 | 1.80 | ||||||||||||
February | 0.73 | 0.71 | 0.03 | 1.25 | ||||||||||||
March | 0.73 | 0.69 | 0.04 | 1.48 | ||||||||||||
April | 0.71 | 0.67 | 0.03 | 1.38 | ||||||||||||
May | 0.67 | 0.63 | 0.04 | 1.49 | ||||||||||||
June | 0.71 | 0.66 | 0.06 | 1.86 | ||||||||||||
July | 0.74 | 0.64 | 0.10 | 2.99 | ||||||||||||
August | 0.79 | 0.68 | 0.12 | 3.12 | ||||||||||||
September | 0.74 | 0.75 | (0.01 | ) | 0.56 | |||||||||||
October | 0.74 | 0.71 | 0.03 | 1.34 | ||||||||||||
November | 0.80 | 0.71 | 0.08 | 2.38 | ||||||||||||
December | 0.80 | 0.73 | 0.07 | 2.18 |
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as of June 30, 2005
(in millions)
Interest Rate Sensitivity Period | ||||||||||||||||||||
More than | More than | More than | ||||||||||||||||||
6 Months or | 6 Months to | 1 Year to | 3 Years to | More than | ||||||||||||||||
Less | 1 Year | 3 Years | 5 Years | 5 Years | ||||||||||||||||
Interest-earning assets: | ||||||||||||||||||||
Non-MBS Investments | $ | 9,555 | $ | 128 | $ | 439 | $ | 299 | $ | 715 | ||||||||||
MBS Investments | 3,359 | 708 | 3,142 | 2,201 | 1,910 | |||||||||||||||
Adjustable-rate loans and advances | 12,702 | — | — | — | — | |||||||||||||||
Fixed-rate loans and advances | 11,083 | 3,979 | 9,834 | 7,934 | 18,133 | |||||||||||||||
Swaps hedging advances | 31,096 | (1,985 | ) | (5,104 | ) | (6,121 | ) | (17,887 | ) | |||||||||||
Net fixed-rate loans and advances | 42,179 | 1,994 | 4,730 | 1,813 | 246 | |||||||||||||||
Interbank loans | — | — | — | — | — | |||||||||||||||
Total interest-earning assets | $ | 67,795 | $ | 2,830 | $ | 8,311 | $ | 4,313 | $ | 2,871 | ||||||||||
Interest-bearing liabilities: | ||||||||||||||||||||
Deposits | $ | 2,422 | $ | 2 | $ | — | $ | — | $ | — | ||||||||||
Discount notes | 24,879 | 55 | — | — | — | |||||||||||||||
Swaps hedging discount notes | — | — | — | — | — | |||||||||||||||
Net discount notes | 24,879 | 55 | — | — | — | |||||||||||||||
FHLB bonds | 9,413 | 11,604 | 24,315 | 6,984 | 2,288 | |||||||||||||||
Swaps hedging bonds | 27,397 | (7,633 | ) | (15,451 | ) | (3,404 | ) | (910 | ) | |||||||||||
Net FHLB bonds | 36,810 | 3,971 | 8,864 | 3,580 | 1,378 | |||||||||||||||
Total interest-bearing liabilities | $ | 64,111 | $ | 4,028 | $ | 8,864 | $ | 3,580 | $ | 1,378 | ||||||||||
Post hedge gaps: | ||||||||||||||||||||
Periodic Gap | $ | 3,684 | $ | (1,198 | ) | $ | (553 | ) | $ | 733 | $ | 1,493 | ||||||||
Cumulative gap | $ | 3,684 | $ | 2,486 | $ | 1,933 | $ | 2,666 | $ | 4,159 |
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Interest Rate Sensitivity Period-December 31, 2004 | ||||||||||||||||||||
More than | More than | More than | ||||||||||||||||||
6 Months or | 6 Months to | 1 Year to | 3 Years to | More than | ||||||||||||||||
Less | 1 Year | 3 Years | 5 Years | 5 Years | ||||||||||||||||
Interest-earning assets: | ||||||||||||||||||||
Non-MBS Investments | $ | 6,616 | $ | 129 | $ | 383 | $ | 242 | $ | 636 | ||||||||||
MBS Investments | 2,907 | 800 | 2,760 | 2,962 | 2,095 | |||||||||||||||
Adjustable-rate loans and advances | 13,891 | — | — | — | — | |||||||||||||||
Net | 23,414 | 929 | 3,143 | 3,204 | 2,731 | |||||||||||||||
Fixed-rate loans and advances | 14,370 | 4,457 | 9,063 | 7,939 | 17,546 | |||||||||||||||
Swaps hedging advances | 28,851 | (2,176 | ) | (3,995 | ) | (5,450 | ) | (17,230 | ) | |||||||||||
Net fixed-rate loans and advances | 43,221 | 2,281 | 5,068 | 2,489 | 316 | |||||||||||||||
Total interest-earning assets | $ | 66,635 | $ | 3,210 | $ | 8,211 | $ | 5,693 | $ | 3,047 | ||||||||||
Interest-bearing liabilities: | ||||||||||||||||||||
Deposits | $ | 2,296 | $ | 1 | $ | — | $ | — | $ | — | ||||||||||
Discount notes | 19,609 | 33 | — | — | — | |||||||||||||||
Net discount notes | 19,609 | 33 | — | — | — | |||||||||||||||
FHLB bonds | 18,522 | 6,995 | 25,627 | 7,064 | 2,471 | |||||||||||||||
Swaps hedging bonds | 23,091 | (3,848 | ) | (15,675 | ) | (2,525 | ) | (1,043 | ) | |||||||||||
Net FHLB bonds | 41,613 | 3,147 | 9,952 | 4,539 | 1,428 | |||||||||||||||
Total interest-bearing liabilities | $ | 63,518 | $ | 3,181 | $ | 9,952 | $ | 4,539 | $ | 1,428 | ||||||||||
Post hedge gaps: | ||||||||||||||||||||
Gaps | $ | 3,118 | $ | 29 | $ | (1,741 | ) | $ | 1,154 | $ | 1,619 | |||||||||
Cumulative gaps | $ | 3,118 | $ | 3,147 | $ | 1,406 | $ | 2,560 | $ | 4,179 |
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Interest Rate Sensitivity Period - December 31, 2003 | ||||||||||||||||||||
More than | More than | More than | ||||||||||||||||||
6 Months or | 6 Months to | 1 Year to | 3 Years to | More than | ||||||||||||||||
Less | 1 Year | 3 Years | 5 Years | 5 Years | ||||||||||||||||
Interest-earning assets: | ||||||||||||||||||||
Non-MBS Investments | $ | 3,652 | $ | 78 | $ | 243 | $ | 150 | $ | 504 | ||||||||||
MBS Investments | 3,428 | 788 | 2,071 | 2,502 | 1,407 | |||||||||||||||
Adjustable-rate loans and advances | 10,788 | — | — | — | ||||||||||||||||
Net | 17,868 | 866 | 2,314 | 2,652 | 1,911 | |||||||||||||||
Fixed-rate loans and advances | 10,554 | 3,178 | 10,320 | 8,467 | 18,458 | |||||||||||||||
Swaps hedging advances | 30,583 | (1,182 | ) | (5,508 | ) | (5,840 | ) | (18,052 | ) | |||||||||||
Net fixed-rate loans and advances | 41,137 | 1,996 | 4,812 | 2,627 | 406 | |||||||||||||||
Interbank loans | 60 | — | — | — | — | |||||||||||||||
Total interest-earning assets | $ | 59,065 | $ | 2,862 | $ | 7,126 | $ | 5,279 | $ | 2,317 | ||||||||||
Interest-bearing liabilities: | ||||||||||||||||||||
Deposits | $ | 2,097 | $ | 6 | $ | — | $ | — | $ | — | ||||||||||
Discount notes | 16,232 | 574 | — | — | — | |||||||||||||||
Swaps hedging discount notes | 7 | (7 | ) | — | — | — | ||||||||||||||
Net discount notes | 16,239 | 567 | — | — | — | |||||||||||||||
FHLB bonds | 12,559 | 7,323 | 23,885 | 7,369 | 2,637 | |||||||||||||||
Swaps hedging bonds | 23,237 | (4,411 | ) | (14,246 | ) | (2,810 | ) | (1,770 | ) | |||||||||||
Net FHLB bonds | 35,796 | 2,912 | 9,639 | 4,559 | 867 | |||||||||||||||
Total interest-bearing liabilities | $ | 54,132 | $ | 3,485 | $ | 9,639 | $ | 4,559 | $ | 867 | ||||||||||
Post hedge gaps: | ||||||||||||||||||||
Gaps | $ | 4,933 | $ | (623 | ) | $ | (2,514 | ) | $ | 720 | $ | 1,449 | ||||||||
Cumulative gaps | $ | 4,933 | $ | 4,309 | $ | 1,796 | $ | 2,515 | $ | 3,964 |
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Moody's Investors Service | Standard & Poors | |||||||||
Year | Outlook | Rating | Short-Term Outlook | Rating | ||||||
2002 | July 31, 2002 - Affirmed | P-1 | March 22, 2002 | Short Term rating affirmed | A-1+ | |||||
2003 | March 17, 2003 | Short Term rating affirmed | A-1+ | |||||||
August 8, 2003 | Short Term rating affirmed | A-1+ | ||||||||
September 26, 2003 | Short Term rating affirmed | A-1+ | ||||||||
November 17, 2003 | Short Term rating affirmed | A-1+ | ||||||||
2004 | April 15, 2004 | Short Term rating affirmed | A-1+ | |||||||
2005 | April 29, 2005 | Short Term rating affirmed | A-1+ |
Moody's Investors Service | Standard & Poors | |||||||||||
Year | Outlook | Rating | Long-Term Outlook | Rating | ||||||||
2002 | July 31, 2002 - | Aaa/Stable | March 22, 2002 | Long Term rating affirmed | outlook stable | AAA/Stable | ||||||
Affirmed | ||||||||||||
2003 | September 26, 2003 - | Aaa/Stable | March 17, 2003 | Long Term rating affirmed | outlook stable | AAA/Stable | ||||||
Affirmed | August 8, 2003 | Long Term rating affirmed | outlook revised to negative | AAA/Negative | ||||||||
September 26, 2003 | Long Term rating downgraded | outlook revised to stable | AA+/Stable | |||||||||
November 17, 2003 | Long Term rating affirmed | outlook stable | AA+/Stable | |||||||||
2004 | April 15, 004 | Long Term rating affirmed | outlook stable | AA+/Stable | ||||||||
2005 | March 21, 2005 - | Aaa/Stable | April 29, 2005 | Long Term rating affirmed | outlook stable | AA+/Stable | ||||||
Affirmed |
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ITEM 4: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT |
Number of | Percent of | ||||||||||||
City | State | Shares Owned | Outstanding Shares | ||||||||||
HSBC Bank USA, National Association | Buffalo | NY | $ | 359,565 | 9.62 | % | |||||||
North Fork Bank | Mattituck | NY | 290,001 | 7.76 | % | ||||||||
New York Community Bank | Westbury | NY | 284,315 | 7.61 | % | ||||||||
Hudson City Savings Bank | Paramus | NJ | 180,000 | 4.82 | % | ||||||||
Independence Community Bank | Brooklyn | NY | 166,650 | 4.46 | % | ||||||||
$ | 1,280,531 | 34.27 | % | ||||||||||
Number of | Percent of | ||||||||||||
City | State | Shares Owned | Outstanding Shares | ||||||||||
HSBC Bank USA National Association | Buffalo | NY | $ | 330,336 | 9.04 | % | |||||||
GreenPoint Bank | New York | NY | 256,251 | 7.01 | % | ||||||||
New York Community Bank | Westbury | NY | 232,215 | 6.35 | % | ||||||||
Independence Community Bank | New York | NY | 197,900 | 5.41 | % | ||||||||
Manufacturers and Traders Trust Company | Buffalo | NY | 176,467 | 4.83 | % | ||||||||
$ | 1,193,169 | 32.64 | % | ||||||||||
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Percentage | ||||||||||||||
Shares | of total | |||||||||||||
Name | Director | City | State | owned | capital | |||||||||
New York Community Bank | Joseph R. Ficalora | Westbury | New York | 2,843 | 7.61 | % | ||||||||
Independence Community Bank | Harry P. Doherty | Staten Island | New York | 1,667 | 4.46 | % | ||||||||
Hudson City Savings Bank | Ronald E Hermance | Paramus | New Jersey | 1,800 | 4.82 | % | ||||||||
Astoria Federal Savings & Loan Assoc | George L. Engelke | Lake Success | New York | 1,231 | 3.30 | % | ||||||||
First Niagara Bank | G. Thomas Bowers | Lockport | New York | 486 | 1.30 | % | ||||||||
Community Bank, N.A. | Sanford A. Belden | DeWitt | New York | 353 | 0.95 | % | ||||||||
Banco Santander Puerto Rico | Jose Ramon Gonzalez | Hato Rey | Puerto Rico | 375 | 1.00 | % | ||||||||
Oritani Savings Bank | Kevin J. Lynch | Hackensack | New Jersey | 91 | 0.24 | % | ||||||||
Metuchen Savings Bank | Katherine J. Liseno | Metuchen | New Jersey | 17 | 0.04 | % | ||||||||
Franklyn Savings Bank | David W. Lindstrom | Pilesgrove | New Jersey | 15 | 0.04 | % | ||||||||
First Federal Savings of Middletown | Kennth J. Abt | Middletown | New York | 3 | 0.01 | % | ||||||||
8,881 | 23.77 | % | ||||||||||||
Percentage | ||||||||||||||
Shares | of total | |||||||||||||
Name | Director | City | State | owned | capital | |||||||||
Independence Community Bank | Harry P. Doherty | Brooklyn | New York | 1,979 | 5.41 | % | ||||||||
Manufacturers and Traders Trust Company | Atwood Collins III | Buffalo | New York | 1,765 | 4.83 | % | ||||||||
Astoria Federal Savings and Loan Assn. | George L. Engelke, Jr. | Lake Success | New York | 1,637 | 4.48 | % | ||||||||
Community Bank, N.A. | Sanford A. Belden | DeWitt | New York | 425 | 1.16 | % | ||||||||
Banco Santander Puerto Rico | Josè Ramon González | Hato Rey | Puerto Rico | 375 | 1.03 | % | ||||||||
First Niagara Bank | G. Thomas Bowers | Lockport | New York | 285 | 0.78 | % | ||||||||
Kearny Federal Savings Bank | Leopold W. Montanaro | Kearny | New Jersey | 114 | 0.31 | % | ||||||||
Boiling Springs Savings Bank | Edward C. Gibney | Rutherford | New Jersey | 38 | 0.10 | % | ||||||||
Metuchen Savings Bank | Katherine J. Liseno | Metuchen | New Jersey | 19 | 0.05 | % | ||||||||
Franklin Savings Bank, S.L.A. | David W. Lindstrom | Woodstown | New Jersey | 14 | 0.04 | % | ||||||||
First Federal Savings of Middletown | Kenneth J. Abt | Middletown | New York | 2 | 0.01 | % | ||||||||
6,653 | 18.20 | % | ||||||||||||
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Expiration | ||||||||||||
Director | of Term | |||||||||||
Name | Age | Since | December 31, | |||||||||
Kenneth J. Abt | 62 | 1998 | 2006 | |||||||||
Sanford A. Belden | 62 | 2004 | 2006 | |||||||||
G. Thomas Bowers | 62 | 2000 | 2005 | |||||||||
Harry P. Doherty | 63 | 2000 | 2005 | |||||||||
Harold E. Doley, III | 36 | 2003 | 2005 | |||||||||
George L. Engelke, Jr. | 66 | 1999 | 2007 | |||||||||
Anne Evans Estabrook | 60 | 2004 | 2006 | |||||||||
Joseph R. Ficalora | 58 | 2005 | 2007 | |||||||||
José Ramon González | 50 | 2004 | 2006 | |||||||||
Ronald E. Hermance, Jr. | 57 | 2005 | 2007 | |||||||||
David W. Lindstrom | 65 | 2003 | 2005 | |||||||||
Katherine J. Liseno | 60 | 2004 | 2006 | |||||||||
Kevin J. Lynch | 58 | 2005 | 2007 | |||||||||
Richard S. Mroz | 43 | 2002 | 2006 |
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Employee of | ||||
Executive officer | Position held | bank since | ||
Alfred A. DelliBovi | President & Chief Executive Officer | 11/30/92 | ||
James A. Gilmore | Senior Vice President & Head of Marketing & Sales | 02/14/84 | ||
Robert R. Hans | Senior Vice President & Head of Technology & Support Services | 01/03/72 * | ||
Paul B. Heroux | Senior Vice President & Head of Member Services | 02/27/84 | ||
Peter S. Leung | Senior Vice President & Chief Risk Officer | 01/20/04 | ||
Patrick A. Morgan | Senior Vice President & Chief Financial Officer | 02/16/99 | ||
Kevin Neylan | Senior Vice President of Strategic Planning & Organizational Performance | 04/30/01 | ||
Craig E. Reynolds | Senior Vice President & Head of Asset Liability Management | 06/27/94 |
* | Rehired 9/16/75 |
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Employee of | ||||
Executive officer | Position held | bank since | ||
Alfred A. DelliBovi | President & Chief Executive Officer | 11/30/92 | ||
James A. Gilmore | Senior Vice President & Head of Marketing & Sales | 02/14/84 | ||
Robert R. Hans | Senior Vice President & Head of Technology & Support Services | 01/03/72 * | ||
Paul B. Heroux | Senior Vice President & Head of Member Services | 02/27/84 | ||
Peter S. Leung | Senior Vice President & Chief Risk Officer | 01/20/04 | ||
Patrick A. Morgan | Senior Vice President & Chief Financial Officer | 02/16/99 | ||
Kevin Neylan | Senior Vice President of Strategic Planning & Organizational Performance | 04/30/01 | ||
Craig E. Reynolds | Senior Vice President & Head of Asset Liability Management | 06/27/94 |
* | Rehired 9/16/75 |
Annual Compensation | ||||||||||||||||||||||||
All Other | ||||||||||||||||||||||||
Incentive | Other | LTIP | Other | |||||||||||||||||||||
Name and Principal Position | Year | Salary | Payment | Compensation | Payouts | Compensation | ||||||||||||||||||
Alfred A. DelliBovi | 2004 | $ | 511,846 | $ | 160,050 | $ | — | $ | — | $ | 41,665 | |||||||||||||
President & | 2003 | 511,630 | 44,132 | |||||||||||||||||||||
Chief Executive Officer | 2002 | 483,691 | 334,640 | 37,712 | ||||||||||||||||||||
Paul B. Heroux | 2004 | $ | 242,666 | $ | 53,996 | $ | — | $ | — | $ | 15,799 | |||||||||||||
Senior Vice President & | 2003 | 241,465 | 15,778 | |||||||||||||||||||||
Chief Credit Officer | 2002 | 204,103 | 100,863 | 13,740 | ||||||||||||||||||||
Craig E. Reynolds | 2004 | $ | 239,508 | $ | 53,494 | $ | — | $ | — | $ | 23,366 | |||||||||||||
Senior Vice President & | 2003 | 239,441 | 23,366 | |||||||||||||||||||||
ALCO Risk Team Chair | 2002 | 230,703 | 114,004 | 15,104 | ||||||||||||||||||||
Peter S. Leung | 2004 | $ | 319,077 | $ | 86,397 | $ | — | $ | — | $ | 111,911 | |||||||||||||
Senior Vice President & | 2003 | — | ||||||||||||||||||||||
Chief Risk Officer | 2002 | — | ||||||||||||||||||||||
David C. Atilio* | 2004 | $ | 97,050 | $ | — | $ | — | $ | — | $ | 12,773 | |||||||||||||
former Executive Vice President & | 2003 | 370,629 | 29,949 | |||||||||||||||||||||
Chief Financial Officer | 2002 | 313,281 | 185,779 | 29,603 |
** | Includes 401(k) employer match, leased car and key-man insurance. |
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2005 | 2004 | 2003 | 2002 | |||||||||||||||||||||||||||||
Dividend | Dividend | Dividend | Dividend | |||||||||||||||||||||||||||||
Month Paid | Amount | Rate | Amount | Rate | Amount | Rate | Amount | Rate | ||||||||||||||||||||||||
January | $ | 28,715,153 | 3.05 | % | $ | 13,847,480 | 1.45 | % | $ | 55,510,425 | 5.58 | % | $ | 40,157,381 | 4.39 | % | ||||||||||||||||
April | 42,573,260 | 4.70 | % | 14,680,897 | 1.58 | % | 54,043,185 | 5.36 | % | 40,429,800 | 4.52 | % | ||||||||||||||||||||
July | 45,969,840 | 5.00 | % | 20,173,495 | 2.08 | % | 54,001,228 | 5.05 | % | 33,610,040 | 3.67 | % | ||||||||||||||||||||
October | 21,114,755 | 2.22 | % | — | — | 52,447,445 | 5.45 | % | ||||||||||||||||||||||||
$ | 117,258,253 | $ | 69,816,627 | $ | 163,554,838 | $ | 166,644,666 | |||||||||||||||||||||||||
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(a) | such proceeding results in a final judgment on the merits or otherwise in favor of such Covered Person; or | |
(b) | the liabilities and expenses do not relate to conduct that: |
(i) | involved a knowing and culpable violation of the law by the Covered Person; or | ||
(ii) | enabled the Covered Person to receive an improper personal benefit; or | ||
(iii) | showed a conscious disregard for the duty of the Covered Person to the FHLBNY under circumstances in which the Covered Person was aware that his or her conduct or omission created an unjustified risk of serious injury to the FHLBNY; or | ||
(iv) | constituted a sustained and unexcused pattern of inattention that amounted to an abdication of such Covered Person’s duty to the FHLBNY. |
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Statements of Income for the three and six months ended June 30, 2005 and 2004 (page FF-3)
Statements of Capital for the six months ended June 30, 2005 and 2004 (page FF-4)
Statements of Cash Flows for the six months ended June 30, 2005 and 2004 (pages FF-5
through FF-6) Notes to Financial Statements (pages FF-7 through FF-56)
Statements of Condition as of December 31, 2004 and December 31, 2003 (page F-3)
Statements of Income for the years ended December 31, 2004, 2003 and 2002 (page F-4)
Statements of Capital for the years ended December 31, 2004, 2003 and 2002 (page F-5)
Statements of Cash Flows for the years ended December 31, 2004, 2003 and 2002 (pages F-6 through F-7)
Notes to Financial Statements (pages F-8 through F-52)
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(a) | Financial Statements | |
(b) | Exhibits were filed with the first filing on June 30, 2005 |
3(i) | Organization Certificate of the Registrant. | |||
3(ii) | By-Laws of the Registrant. | |||
10. | Material Contracts. | |||
10.1 | Participating Financial Institution Agreement (PFI Agreement); includes credit enhancement agreement. | |||
10.2 | Acquired Member Assets regulations | |||
10.3 | Typical purchase agreement (Mortgage Partnership Finance) | |||
99. | Additional exhibits. |
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Federal Home Loan Bank of New York | ||||
August 29, 2005 | By /S/ Patrick A. Morgan | |||
Date | Senior Vice President and Chief Financial Officer |
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Federal Home Loan Bank of
New York
June 30, 2005
FF-1
Table of Contents
June 30, 2005 and December 31, 2004
June 30, | December 31, | |||||||
2005 | 2004 | |||||||
Assets | ||||||||
Cash and due from banks (Notes 1 and 3) | $ | 22,513 | $ | 22,376 | ||||
Interest-bearing deposits, includes $0.8 billion pledged at June 30, 2005, and $1.1 billion at December 31, 2004 (Note 4) | 6,704,888 | 2,806,870 | ||||||
Federal funds sold | 2,030,000 | 2,972,000 | ||||||
Available-for-sale securities, at fair value (Note 6) | 1,642,927 | 713,363 | ||||||
Held-to-maturity securities, includes $0 pledged at June 30, 2005 and December 31, 2004 (Note 5) | 10,701,426 | 11,870,674 | ||||||
Advances (Note 7) | 64,566,060 | 68,507,487 | ||||||
Mortgage loans, net of allowance for credit losses of $565 at June 30, 2005, and $507 at December 31, 2004 (Note 9) | 1,384,560 | 1,178,083 | ||||||
Accrued interest receivable | 332,317 | 315,768 | ||||||
Premises and equipment, net | 12,167 | 13,030 | ||||||
Derivative assets (Note 19) | 3,624 | 11,048 | ||||||
Other assets | 28,625 | 28,261 | ||||||
Total assets | $ | 87,429,107 | $ | 88,438,960 | ||||
Liabilities and capital | ||||||||
Liabilities | ||||||||
Deposits (Note 11) | ||||||||
Interest-bearing demand | $ | 2,378,227 | $ | 2,194,359 | ||||
Non-interest bearing demand | 231 | 1,660 | ||||||
Term | 45,700 | 101,000 | ||||||
Total deposits | 2,424,158 | 2,297,019 | ||||||
Consolidated obligations, net (Note 13) | ||||||||
Bonds | 54,387,350 | 60,515,356 | ||||||
Discount Notes | 24,933,620 | 19,641,626 | ||||||
Total consolidated obligations | 79,320,970 | 80,156,982 | ||||||
Mandatorily redeemable capital stock (Notes 14 and 15) | 35,615 | 126,581 | ||||||
Accrued interest payable | 439,058 | 437,743 | ||||||
Affordable Housing Program (Notes 1 and 8) | 84,372 | 81,580 | ||||||
Payable to REFCORP (Notes 1 and 8) | 14,558 | 9,966 | ||||||
Derivative liabilities (Note 19) | 1,058,175 | 1,372,195 | ||||||
Other liabilities | 87,576 | 77,764 | ||||||
Total liabilities | 83,464,482 | 84,559,830 | ||||||
Commitments and Contingencies (Notes 8, 13, 19 and 21) | ||||||||
Capital (Notes 1, 14 and 15) | ||||||||
Capital stock ($100 par value), puttable, issued and outstanding 36,990 at June 30, 2005, and 36,550 at December 31, 2004 | 3,698,911 | 3,655,047 | ||||||
Unrestricted retained earnings | 265,820 | 223,434 | ||||||
Restricted retained earnings (Notes 1 and 15) | 1,364 | — | ||||||
Accumulated other comprehensive income (loss) (Note 16) | ||||||||
Net unrealized (loss) gain on available-for-sale securities | (290 | ) | 2,240 | |||||
Net unrealized gain on hedging activities | 1,309 | 898 | ||||||
Additional minimum liability on benefits equalization plan | (2,489 | ) | (2,489 | ) | ||||
Total capital | 3,964,625 | 3,879,130 | ||||||
Total liabilities and capital | $ | 87,429,107 | $ | 88,438,960 | ||||
FF-2
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For the three and six months ended June 30, 2005 and 2004
For the three months ended | For the six months ended | ||||||||||||||||
June 30, | June 30, | ||||||||||||||||
2005 | 2004 | 2005 | 2004 | ||||||||||||||
Interest income | |||||||||||||||||
Advances (Note 7) | $ | 516,446 | $ | 270,691 | $ | 975,209 | $ | 536,200 | |||||||||
Interest-bearing deposits | 39,775 | 14,687 | 63,120 | 22,285 | |||||||||||||
Federal funds sold | 20,664 | 2,370 | 35,069 | 4,543 | |||||||||||||
Available-for-sale securities (Note 6) | 7,239 | 460 | 12,283 | 460 | |||||||||||||
Held-to-maturity securities (Note 5) | 147,588 | 135,598 | 297,533 | 260,720 | |||||||||||||
Mortgage loans and participations, including fees (Note 9) | 16,713 | 12,089 | 32,728 | 21,271 | |||||||||||||
Loans to other FHLBanks (Note 10) | — | 12 | — | 50 | |||||||||||||
Other | 9 | 13 | 18 | 25 | |||||||||||||
Total interest income | 748,434 | 435,920 | 1,415,960 | 845,554 | |||||||||||||
Interest expense | |||||||||||||||||
Consolidated obligations (Note 13) | 637,652 | 361,157 | 1,194,950 | 712,709 | |||||||||||||
Deposits (Note 11) | 15,574 | 4,222 | 27,674 | 8,941 | |||||||||||||
Other borrowings (Note 12) | 828 | 1,481 | 1,511 | 2,844 | |||||||||||||
Total interest expense | 654,054 | 366,860 | 1,224,135 | 724,494 | |||||||||||||
Net interest income before provision for credit losses | 94,380 | 69,060 | 191,825 | 121,060 | |||||||||||||
Provision for credit losses on mortgage loans | 24 | — | 58 | — | |||||||||||||
Net interest income after provision for credit losses | 94,356 | 69,060 | 191,767 | 121,060 | |||||||||||||
Other income | |||||||||||||||||
Service fees | 1,048 | 1,258 | 2,188 | 2,407 | |||||||||||||
Net realized and unrealized gain (loss) on derivatives and hedging activities (Notes 1 and 19) | (5,386 | ) | 12,342 | (4,331 | ) | 11,248 | |||||||||||
Other, net (Note 13) | (1,432 | ) | (2,611 | ) | (5,186 | ) | (2,610 | ) | |||||||||
Total other income | (5,770 | ) | 10,989 | (7,329 | ) | 11,045 | |||||||||||
Other expenses | |||||||||||||||||
Operating | 14,337 | 12,003 | 28,989 | 24,106 | |||||||||||||
Finance Board and Office of Finance (Note 1) | 1,376 | 1,499 | 2,897 | 2,905 | |||||||||||||
Total other expenses | 15,713 | 13,502 | 31,886 | 27,011 | |||||||||||||
Income before assessments | 72,873 | 66,547 | 152,552 | 105,094 | |||||||||||||
Affordable Housing Program (Notes 1 and 8) | 6,029 | 5,578 | 12,692 | 8,889 | |||||||||||||
REFCORP (Notes 1 and 8) | 13,369 | 12,193 | 28,194 | 18,980 | |||||||||||||
Total assessments | 19,398 | 17,771 | 40,886 | 27,869 | |||||||||||||
Income before cumulative effect of change in accounting principle | 53,475 | 48,776 | 111,666 | 77,225 | |||||||||||||
Cumulative effect of change in accounting principle (Note 2) | — | — | 1,109 | (1,305 | ) | ||||||||||||
Net income | $ | 53,475 | $ | 48,776 | $ | 112,775 | $ | 75,920 | |||||||||
Basic earnings per s hare: (Note 17) | |||||||||||||||||
Earnings before cumulative effect of change in accounting principle | $ | 1.46 | $ | 1.35 | $ | 3.09 | $ | 2.20 | |||||||||
Cumulative effect of change in accounting principle | — | — | 0.03 | (0.04 | ) | ||||||||||||
Net earnings per share | $ | 1.46 | $ | 1.35 | $ | 3.12 | $ | 2.16 | |||||||||
FF-3
Table of Contents
For the periods ended June 30, 2005 and 2004
Accumulated | ||||||||||||||||||||||||
Other | Total | |||||||||||||||||||||||
Capital Stock* | Retained | Comprehensive | Total | Comprehensive | ||||||||||||||||||||
Shares | Par Value | Earnings ** | Income (Loss) | Capital | Income | |||||||||||||||||||
Balance, December 31, 2003 | 36,386 | $ | 3,638,720 | $ | 126,697 | $ | (2,026 | ) | $ | 3,763,391 | ||||||||||||||
Proceeds from sale of capital stock | 11,992 | 1,199,205 | — | — | 1,199,205 | |||||||||||||||||||
Redemption of capital stock | (9,054 | ) | (905,419 | ) | — | — | (905,419 | ) | ||||||||||||||||
Net Income | — | 75,920 | — | 75,920 | $ | 75,920 | ||||||||||||||||||
Net Shares reclassified to mandatorily redeemable capital stock | (2,334 | ) | (233,363 | ) | — | (233,363 | ) | |||||||||||||||||
Other comprehensive Income (loss) | ||||||||||||||||||||||||
Net unrealized (loss) on available- for-sale securities | (450 | ) | (450 | ) | (450 | ) | ||||||||||||||||||
Net unrealized gain on hedging activities | 2,491 | 2,491 | 2,491 | |||||||||||||||||||||
Cash dividends ($1.52 per share) on capital stock | — | — | (25,872 | ) | — | (25,872 | ) | |||||||||||||||||
$ | 77,961 | |||||||||||||||||||||||
Balance, June 30, 2004 | 36,990 | 3,699,143 | 176,745 | 15 | 3,875,903 | |||||||||||||||||||
Proceeds from sale of capital stock | 9,750 | 974,964 | — | — | 974,964 | |||||||||||||||||||
Redemption of capital stock | (8,945 | ) | (894,537 | ) | — | — | (894,537 | ) | ||||||||||||||||
Net Income | — | — | 85,356 | — | 85,356 | 85,356 | ||||||||||||||||||
Net Shares reclassified to mandatorily redeemable capital stock | (1,245 | ) | (124,523 | ) | (124,523 | ) | ||||||||||||||||||
Other comprehensive Income (loss) | ||||||||||||||||||||||||
Net unrealized gain on available-for-sale securities | 2,690 | 2,690 | 2,690 | |||||||||||||||||||||
Net unrealized (loss) on hedging activity | — | — | — | (1,580 | ) | (1,580 | ) | (1,580 | ) | |||||||||||||||
Additional minimum liability on Benefit Equalization Plan | — | — | — | (476 | ) | (476 | ) | (952 | ) | |||||||||||||||
Cash dividends ($2.15 per share) on capital stock | — | — | (38,667 | ) | — | (38,667 | ) | |||||||||||||||||
$ | 85,514 | |||||||||||||||||||||||
Balance, December 31, 2004 | 36,550 | 3,655,047 | 223,434 | 649 | 3,879,130 | |||||||||||||||||||
Proceeds from sale of capital stock | 13,336 | 1,333,542 | — | — | 1,333,542 | |||||||||||||||||||
Redemption of capital stock | (12,896 | ) | (1,289,678 | ) | — | — | (1,289,678 | ) | ||||||||||||||||
Net Income | 112,775 | — | 112,775 | 112,775 | ||||||||||||||||||||
Other comprehensive Income (loss) | ||||||||||||||||||||||||
Net unrealized (loss) on available-for-sale securities | (2,530 | ) | (2,530 | ) | (2,530 | ) | ||||||||||||||||||
Net unrealized gain on hedging activity | — | — | — | 411 | 411 | 411 | ||||||||||||||||||
Cash dividends ($3.85 per share) on capital stock | — | — | (69,025 | ) | (69,025 | ) | ||||||||||||||||||
$ | 110,656 | |||||||||||||||||||||||
Balance, June 30, 2005 | 36,990 | $ | 3,698,911 | $ | 267,184 | $ | (1,470 | ) | $ | 3,964,625 | ||||||||||||||
* | puttable | |
** | Includes restricted retained earnings of $ 1,364 at June 30, 2005 and $ 0 at June 30, 2004 and December 31, 2004. |
FF-4
Table of Contents
For the six months ended June 30, 2005 and 2004
Six months ended June 30, | ||||||||
2005 | 2004 | |||||||
Operating activities | ||||||||
Net Income | $ | 112,775 | $ | 75,920 | ||||
Cumulative effect of change in accounting principle | (1,109 | ) | 1,305 | |||||
Income before cumulative effect of change in accounting principle | 111,666 | 77,225 | ||||||
Adjustments to reconcile net income before cumulative effect of change in accounting principle to net cash provided by operating activities | ||||||||
Depreciation and amortization | ||||||||
Net premiums and discounts on consolidated obligations, investments , and mortgage loans | 31,112 | (5,972 | ) | |||||
Concessions on consolidated obligations | 5,827 | 8,755 | ||||||
Premises and equipment | 2,070 | 1,844 | ||||||
Provision for credit losses on mortgage loans | 58 | — | ||||||
(Gain) loss due to change in net fair value adjustments on derivatives and hedging activities | 12,742 | (11,041 | ) | |||||
Losses on extinguishment of debt | 5,305 | 2,697 | ||||||
(Decrease) increase in accrued interest receivable | (16,550 | ) | 7,649 | |||||
(Decrease) Increase in derivative assets, net accrued interest | (42,344 | ) | 17,966 | |||||
Increase (decrease) in derivative liabilities , net accrued interest | 13,747 | (9,296 | ) | |||||
(Increase) decrease in other assets | (6,284 | ) | 7,487 | |||||
Increase (decrease) in Affordable Housing Program liability | 2,792 | (8,105 | ) | |||||
Increase (decrease) in accrued interest payable | 1,315 | (22,993 | ) | |||||
Increase in REFCORP liability | 4,591 | 11,652 | ||||||
Increase in other liabilities | 9,520 | 3,212 | ||||||
Total adjustments | 23,901 | 3,855 | ||||||
Net cash provided by operating activities | 135,567 | 81,080 | ||||||
Investing activities | ||||||||
Net (increase) in interest-bearing deposits | (3,898,150 | ) | (4,184,590 | ) | ||||
Net decrease in federal funds sold | 942,000 | 506,000 | ||||||
Purchase of held-to-maturity securities | (378,652 | ) | (2,315,789 | ) | ||||
Proceeds from maturities of held-to-maturity securities | 1,552,023 | 1,809,384 | ||||||
Purchase of available-for-sale securities | (1,020,179 | ) | (697,756 | ) | ||||
Proceeds from sale of available-for-sale securities | 88,050 | — | ||||||
Principal collected on advances | 228,653,069 | 334,518,937 | ||||||
Advances made | (225,054,333 | ) | (336,247,433 | ) | ||||
Purchase of mortgage loans held for investment | (277,592 | ) | (351,740 | ) | ||||
Principal collected on mortgage loans held for investment | 70,634 | 76,161 | ||||||
Principal collected on other loans made | 93 | 86 | ||||||
Net decrease in loans to other FHLBanks | — | 60,000 | ||||||
Net decrease in deposits with other FHLBanks mortgage programs | 132 | 378 | ||||||
(Increase) in premises and equipment | (1,206 | ) | (695 | ) | ||||
Net cash provided by (used in) investing activities | 675,889 | (6,827,057 | ) | |||||
FF-5
Table of Contents
For the six months ended June 30, 2005 and 2004
Six months ended June 30, | ||||||||
2005 | 2004 | |||||||
Financing activities | ||||||||
Net increase (decrease) in deposits | $ | 127,139 | $ | (703,602 | ) | |||
Net (decrease) increase in other borrowings | (600 | ) | 1,422 | |||||
Net proceeds from issuance of consolidated obligation bonds | 11,092,144 | 18,336,711 | ||||||
Net proceeds from issuance of consolidated obligation discount notes | 370,004,284 | 565,075,477 | ||||||
Payments for maturing consolidated obligation bonds | (17,140,650 | ) | (14,343,282 | ) | ||||
Payments for maturing/retiring consolidated obligation discount notes | (364,777,509 | ) | (561,884,305 | ) | ||||
Proceeds from issuance of capital stock | 1,333,542 | 1,199,205 | ||||||
Payments for redemption of capital stock | (1,289,678 | ) | (905,419 | ) | ||||
Payments for redemption of mandatorily redeemable capital stock | (90,966 | ) | — | |||||
Cash dividends paid | (69,025 | ) | (25,872 | ) | ||||
Net cash (used in) provided by financing activities | (811,319 | ) | 6,750,335 | |||||
Net increase in cash and cash equivalents | 137 | 4,358 | ||||||
Cash and cash equivalents at beginning of the period | 22,376 | 20,793 | ||||||
Cash and cash equivalents at end of the period | $ | 22,513 | $ | 25,151 | ||||
Supplemental disclosures: | ||||||||
Interest paid | $ | 1,174,891 | $ | 728,332 | ||||
AHP payments * | 9,900 | 16,994 | ||||||
REFCORP payments ** | 23,602 | — | ||||||
Investing activities | ||||||||
Loans made to other FHLBanks | $ | — | $ | (1,275,000 | ) | |||
Principal collected on loans to other FHLBanks | — | 1,335,000 | ||||||
Net change in loans to other FHLBanks | $ | — | $ | 60,000 | ||||
Financing activities | ||||||||
Proceeds from short-term borrowings from other FHLBanks | $ | 555,000 | $ | 1,816,000 | ||||
Payment of short-term borrowings from other FHLBanks | (555,000 | ) | (1,816,000 | ) | ||||
Net change in borrowings from other FHLBanks | $ | — | $ | — | ||||
* | AHP payments = (beginning accrual — ending accrual) + AHP assessment for the year, and represents funds released to the AHP program. | |
** | No payment was made for the first six months of 2004 due to an overpayment of REFCORP during the third quarter of 2003. |
FF-6
Table of Contents
Basis of Presentation | ||
The accompanying interim unaudited financial statements of the Federal Home Loan Bank of New York have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of financial condition, results of operations, capital and cash flows for the interim periods have been made. The results of operations for the three and six months ended June 30, 2005 and June 30, 2004 are not necessarily indicative of the results of operations expected for the remainder of the year. The interim financial statements should be read in conjunction with the audited financial statements and notes thereto for the year ended December 31, 2004. | ||
Background Information | ||
The Federal Home Loan Bank of New York (“FHLBNY” or the “Bank”), a federally chartered corporation, is one of 12 district Federal Home Loan Banks (“FHLBanks”). The FHLBanks serve the public by enhancing the availability of credit for residential mortgages and targeted community development. The FHLBNY provides a readily available, low-cost source of funds to its member institutions. The FHLBNY is a cooperative, which means that current members own nearly all of the outstanding capital stock of the FHLBNY and may receive dividends on their investment. Regulated financial depositories and insurance companies engaged in residential housing finance may apply for membership. | ||
Former members own the remaining capital stock to support business transactions still carried on the FHLBNY’s Statement of Condition. All members must purchase stock in the FHLBNY. As a result of these requirements, the FHLBNY conducts business with related parties in the normal course of business. As is the nature of a cooperative, the FHLBNY considers all members as related parties in addition to other FHLBanks. See Note 10 for more information. | ||
The Federal Housing Finance Board (“Finance Board”), an independent agency in the executive branch of the United States Government, supervises and regulates the FHLBanks and the Office of Finance. The Finance Board’s principal purpose is to ensure that the FHLBanks operate in a safe and sound manner. In addition, the Finance Board ensures that the FHLBanks carry out their housing finance mission, remain adequately capitalized, and can raise funds in the capital markets. Also, the Finance Board establishes policies and regulations covering the operations of the FHLBanks. Each FHLBank operates as a separate entity with its own management, employees, and board of directors. The FHLBNY does not have any special purpose entities or any other type of off-balance sheet conduits. | ||
The FHLBanks’ debt instruments (“consolidated obligations”) are the joint and several obligations of all the FHLBanks and are the primary source of funds for the FHLBanks. Deposits, other borrowings, and capital stock issued to members provide other funds. The FHLBanks primarily use these funds to provide advances to members and to purchase loans from members through its Mortgage Partnership Finance® (“MPF”®) program. Some FHLBanks also provide member institutions with correspondent services, such as wire transfer, security safekeeping, and settlement. |
FF-7
Table of Contents
1. | Summary of Significant Accounting Policies | |
Use of Estimates | ||
The preparation of financial statements requires management to make assumptions and estimates. These assumptions and estimates affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities and the reported amounts of income and expense. Actual results could differ from these estimates. | ||
Federal Funds Sold | ||
Federal funds sold represents short-term, unsecured lending to major banks. The amount of unsecured credit risk that may be extended to individual counterparties is commensurate with the counterparty’s credit quality, which is determined by credit ratings of counterparty’s debt securities or deposits as reported by nationally recognized statistical rating organizations. Federal funds sold are recorded at cost on settlement date, and interest is accrued using contractual rates. | ||
Investments | ||
The FHLBNY carries, at cost, investments for which it has both the ability and intent to hold to maturity, adjusted for the amortization of premiums and accretion of discounts using the level-yield method. | ||
Under Statement of Financial Accounting Standards No. 115, “Accounting for Certain Investments in Debt and Equity Securities,”(“SFAS 115”) changes in circumstances may cause the FHLBNY to change its intent to hold a certain security to maturity without calling into question its intent to hold other debt securities to maturity in the future. Thus, the sale or transfer of a held-to-maturity security due to certain changes in circumstances, such as evidence of significant deterioration in the issuer’s creditworthiness or changes in regulatory requirements, is not considered to be inconsistent with its original classification. Other events that are isolated, nonrecurring, and unusual for the FHLBNY that could not have been reasonably anticipated may cause the FHLBNY to sell or transfer a held-to-maturity security without necessarily calling into question its intent to hold other debt securities to maturity. | ||
In addition, in accordance with SFAS 115, sales of debt securities that meet either of the following two conditions may be considered as maturities for purposes of the classification of securities: 1) the sale occurs near enough to its maturity date (or call date if exercise of the call is probable) that interest rate risk is substantially eliminated as a pricing factor and the changes in market interest rates would not have a significant effect on the security’s fair value, or 2) the sale of a security occurs after the FHLBNY has already collected a substantial portion (at least 85 percent) of the principal outstanding at acquisition due either to prepayments on the debt security or to scheduled payments on a debt security payable in equal instalments (both principal and interest) over its term. | ||
The FHLBNY classifies certain investments that it may sell before maturity as Available-for-sale and carries them at fair value. The change in fair value of the Available-for-sale securities not being hedged by derivative instruments is recorded in Other comprehensive income as a net unrealized gain or loss on Available-for-sale securities. For Available-for-sale securities that have been hedged under a qualifying fair value hedge, the FHLBNY records the portion of the change in value related to the risk being hedged in other income as “Net realized and unrealized gain (loss) on derivatives and hedging activities” together with the related change in the fair value of the derivative, and records the remainder of the change in Other comprehensive income as |
FF-8
Table of Contents
“Net unrealized gain (loss) on available-for-sale securities.” For Available-for-sale securities that have been hedged under a qualifying cash flow hedge, the FHLBNY records the effective portion of the change in value of the derivative related to the risk being hedged in Other comprehensive income as a “Net unrealized gain (loss) on hedging activities.” The ineffective portion is recorded in Other income and presented as “Net realized and unrealized gain (loss) on derivatives and hedging activities.” To date, the FHLBNY has not hedged any available-for-sale securities. | ||
The FHLBNY computes the amortization and accretion of premiums and discounts on mortgage-backed securities using the retrospective method over the contractual lives of securities. The retrospective life method requires a retrospective adjustment of the effective yield each time the FHLBNY changes the estimated life as if the new estimate had been known since the original acquisition date of the asset. | ||
The FHLBNY computes the amortization and accretion of premiums and discounts on other investments using the level-yield method to the contractual maturity of the securities. | ||
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. The FHLBNY treats securities purchased under agreements to resell as collateralized financings. | ||
The FHLBNY regularly evaluates outstanding investments for impairment and determines if unrealized losses are temporary based in part on the creditworthiness of the issuers and the underlying collateral as well as a determination of the FHLBNY’s intent to hold such securities through to recovery of the unrealized losses. If there is an other-than-temporary impairment in value of an investment, the decline in value is recognized as a loss and presented in the Statement of Income as a loss on securities. The FHLBNY has not experienced any other-than-temporary impairment in value of investments during any periods reported. | ||
Advances | ||
The FHLBNY presents advances, net of unearned commitment fees and discounts on advances for the Affordable Housing Program (AHP), as discussed below. The FHLBNY credits interest on advances to income as earned using the interest method. Following the requirements of the Federal Home Loan Bank Act of 1932 (the “Act”), as amended, the FHLBNY obtains sufficient collateral on advances to protect it from losses. The Act limits eligible collateral to certain investment securities, residential mortgage loans, cash or deposits with the FHLBNY, and other eligible real estate-related assets. As Note 7 more fully describes, community financial institutions (FDIC-insured institutions with assets of $548 million or less during 2004) are subject to more expanded statutory collateral rules for small business and agricultural loans. The FHLBNY has not incurred any credit losses on advances since its inception. Based upon the collateral held as security on the advances and repayment history, management of the FHLBNY believes that an allowance for credit losses on advances is unnecessary. | ||
Mortgage Loans and Participations | ||
The FHLBNY participates in the MPF program by purchasing 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 aggregate about 1.22% of the remaining outstanding mortgage loans held for investment at June 30, 2005. The FHLBNY manages the liquidity, interest rate and prepayment option risk of the MPF loans, while the members retain servicing activities. The FHLBNY and the PFI share the credit risks of the uninsured MPF loans by structuring potential credit losses into layers. |
FF-9
Table of Contents
Collectibility of the loans is first supported by liens on the real estate securing the loan. For conventional mortgage loans, additional loss protection is provided by private mortgage insurance (“PMI”) 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 First Loss Account (“FLA”), for which the maximum exposure is estimated to be $13 million and $11.7 million at June 30, 2005 and December 31, 2004. The aggregate amount of FLA is memorialized and tracked but is neither recorded nor reported as a loan loss reserve in the FHLBNY’s financial statements. If “second losses” beyond this layer are incurred, they are absorbed through a credit enhancement provided by the PFI. The credit enhancement held by PFIs ensures that the lender retains a credit stake in the loans it originates. For managing this risk, PFIs receive monthly “credit enhancement fees” from the FHLBNY. | ||
The amount of the credit enhancement is computed with the use of a Standard & Poor’s model to determine the amount of credit enhancement necessary to bring a pool of uninsured loans to “AA” credit risk. The credit enhancement becomes an obligation of the PFI. For taking on the credit enhancement obligation, the PFI receives a credit enhancement fee that is paid by the FHLBNY. For certain MPF products, the credit enhancement fee is accrued and paid each month. For other MPF products, the credit enhancement fee is accrued and paid monthly 12 months in arrears. | ||
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 loan purchased by the FHLBNY under a delivery commitment is not equal to the contract amount beyond established limits. The related amounts are not significant for all periods reported. | ||
The FHLBNY defers and amortizes premiums and discounts as interest income over the contractual life of the related mortgage loans. The FHLBNY records credit enhancement fee expense in interest income from mortgage loans, and records other non-origination fees, such as delivery commitment extension fees and pair-off fees, in Other income. The FHLBNY classifies mortgage loans as held-for-investment and, accordingly, reports them at their principal amount outstanding, net of premiums and discounts. | ||
The FHLBNY places a mortgage loan on non-accrual status when the collection of the contractual principal or interest is 90 days or more past due. When a mortgage loan is placed on non-accrual status, accrued but uncollected interest is reversed against interest income. The FHLBNY records cash payments received on non-accrual loans as interest income and a reduction of principal. | ||
Allowance for loan losses - Management performs periodic reviews of its portfolio to identify the losses inherent within the portfolio and to determine the likelihood of collection of the portfolio. Mortgage loans, that are 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. | ||
If adversely classified, or on non-accrual status, reserves for mortgage loans, except FHA and VA insured loans, are analyzed under liquidation scenarios on a loan level basis, and identified losses greater than $1,000 are fully reserved. FHA and VA insured mortgage loans have minimal inherent credit risk; risk generally arises mainly from the servicer defaulting on their obligations. FHA and VA mortgage loans, if adversely classified, will have reserves established only in the event of a default of a PFI. Reserves are based on the estimated costs to recover any uninsured portion of the MPF loan. |
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Management of the FHLBNY identifies inherent losses through analysis of the conventional loans (not FHA and VA insured loans) that are not classified or past due. In the absence of historical loss data, the practice is to look at loss histories of pools of loans, at other financial institutions, with similar characteristics to determine a reasonable basis for loan loss allowance. Management continues to evaluate this practice for appropriateness. | ||
The FHLBNY also holds participation interest in residential and community development mortgage loans through its Community Mortgage Asset (“CMA”) program. Acquisition of participations under the CMA program were suspended indefinitely in November 2001, and the outstanding balance was down to $11.2 million at June 30, 2005. 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. | ||
The FHLBNY has established an allowance for credit losses in the amount of $0.6 million and $0.5 million as of June 30, 2005 and December 31, 2004 respectively. | ||
Affordable Housing Program | ||
The FHLBank Act requires each FHLBank to establish and fund an AHP (see Note 8). The FHLBNY charges the required funding for AHP to earnings and establishes a liability. The AHP funds provide subsidies to members to assist in the purchase, construction, or rehabilitation of housing for very low-, low-, and moderate-income households. The FHLBNY also issues AHP advances at interest rates below the customary interest rate for non-subsidized advances. When the FHLBNY makes an AHP advance, the present value of the variation in the cash flow caused by the difference between the AHP advance interest rate and the Bank’s related cost of funds for comparable maturity funding is charged against the AHP liability. It is then recorded as a discount on the AHP advance. The amount of such discounts recognized was inconsequential for all periods reported. As an alternative, the FHLBNY has the authority to make the AHP subsidy available to members as a grant. | ||
Certain advances under the Community lending program are offered to members at favorable rates as part of the FHLBNY’s mission related program. The interest income recognized is based on contractual terms. The rates are slightly lower than market rates but never less than the FHLBNY’s cost of funds. Advances offered through these programs are fully collaterized. | ||
AHP assessment is based on a fixed percentage of annual net income before assessments and before adjustment for dividends associated with mandatorily redeemable capital stock reported as an expense under SFAS 150 “Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity”. If the FHLBNY incurs a loss for the entire year, no assessment or assessment credit is due or accrued. | ||
Prepayment Fees | ||
The FHLBNY charges its members a prepayment fee when members prepay certain advances before the original maturity. The FHLBNY reports prepayment fees associated with hedged advances and the corresponding gains or losses from the termination of the advances in interest |
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income from advances. Prepayment fees not associated with hedged advances are also reported in interest income from advances. | ||
When terms are modified for an existing advance, the FHLBNY evaluates whether the advance meets the criteria to qualify as a modification of an existing advance or a new advance. If the advance qualifies as a modification, the net fee on the prepaid advance is deferred, recorded in the basis of the advance, and amortized over the life of the modified advance. This amortization is recorded in advance interest income. If the modified advance is hedged, it is marked to fair value after the amortization of the basis adjustment. This amortization results in offsetting amounts being recorded in Interest income and Net realized and unrealized gain (loss) on derivatives and hedging activities in Other income. Amortization amounted to $0.9 million and $1.9 million, for the three and six months ended June 30, 2005 and $0.9 million and $1.9 million for the three and six months ended June 30, 2004. Amortization is reported in Net unrealized and realized gain (loss) on derivatives and hedging activities. | ||
If the advance is determined to be a new advance, net prepayment fees are recorded in interest income from advances. | ||
Commitment Fees | ||
The FHLBNY records the present value of fees receivable from standby letters of credit as an asset and an offsetting liability for the obligation to stand ready. Fees, which are generally received for one year in advance, are recorded as unrecognized standby commitment fees (deferred credit) and amortized monthly over the commitment period. The amount of fees is not significant for all periods reported. | ||
Derivatives | ||
Accounting for derivatives is addressed in Statement of Financial Accounting Standards (SFAS) No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended by SFAS No. 137, Accounting for Derivative Instruments and Hedging Activities—Deferral of Effective Date of FASB Statement No. 133, SFAS No. 138, Accounting for Certain Derivative Instruments and Certain Hedging Activities, and SFAS No. 149, Amendment of Statement 133 on Derivative Instruments and Hedging Activities (herein referred to as “SFAS 133”). All derivatives are recognized on the balance sheet at their fair values. Each derivative is designated as one of the following: |
(1) | a hedge of the fair value of a recognized asset or liability or an unrecognized firm commitment (a “fair value” hedge); | ||
(2) | a hedge of a forecasted transaction or the variability of cash flows that are to be received or paid in connection with a recognized asset or liability (a “cash flow” hedge); | ||
(3) | a hedge of the foreign currency component of a hedged item in a fair value or cash flow hedge; | ||
(4) | a non-qualifying hedge of an asset or liability (“economic hedge”) for asset-liability management purposes; or | ||
(5) | a non-qualifying hedge of another derivative (an “intermediation” hedge) that is offered as a product to members or used to offset other derivatives with non-member counterparties. |
Changes in the fair value of a derivative not qualifying as a hedge are recorded in current period earnings with no fair value adjustment to an asset or liability. Both the net interest on the derivative and the fair value adjustments are recorded in other income as “net realized and unrealized gain (loss) on derivatives and hedging activities.” |
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The FHLBNY routinely issues debt and makes advances in which a derivative instrument is “embedded.” Upon execution of these transactions, the FHLBNY assesses whether the economic characteristics of the embedded derivative are clearly and closely related to the economic characteristics of the remaining component of the advance or debt (the host contract) and whether a separate, non-embedded instrument with the same terms as the embedded instrument would meet the definition of a derivative instrument. If the FHLBNY determines that (1) the embedded derivative has economic characteristics that are not clearly and closely related to the economic characteristics of the host contract and (2) a separate, stand-alone instrument with the same terms would qualify as a derivative instrument, the embedded derivative would be separated from the host contract, carried at fair value. However, if the entire contract (the host contract and the embedded derivative) is to be measured at fair value, with changes in fair value reported in current earnings (such as an investment security classified as “trading” under SFAS 115, Accounting for Certain Investments in Debt and Equity Securities), or if the FHLBNY cannot reliably identify and measure the embedded derivative for purposes of separating that derivative from its host contract, the entire contract would be carried on the balance sheet at fair value and no portion of the contract is designated as a hedging instrument. | ||
When hedge accounting is discontinued because the FHLBNY determines that the derivative no longer qualifies as an effective fair value hedge of an existing hedged item, the FHLBNY continues to carry the derivative on the balance sheet at its fair value, ceases to adjust the hedged asset or liability for changes in fair value, and begins amortizing the cumulative basis adjustment on the hedged item into earnings over the remaining life of the hedged item using a method which closely approximates the level-yield methodology. | ||
When hedge accounting is discontinued because the FHLBNY determines that the derivative no longer qualifies as an effective cash flow hedge of an existing hedged item, the FHLBNY continues to carry the derivative on the balance sheet at its fair value and reclassifies the cumulative other comprehensive income adjustment to earnings when earnings are affected by the existing hedge item, which is the original forecasted transaction. | ||
Under limited circumstances, when the FHLBNY discontinues cash flow hedge accounting because it is no longer probable that the forecasted transaction will occur in the originally expected period plus the following two months, but it is probable the transaction will still occur in the future, the gain or loss on the derivative remains in accumulated other comprehensive income and is recognized in earnings when the forecasted transaction affects earnings. However, if it is probable that a forecasted transaction will not occur by the end of the originally specified time period or within two months after that, the gains and losses that were accumulated in other comprehensive income are recognized immediately in earnings. | ||
When hedge accounting is discontinued because the hedged item no longer meets the definition of a firm commitment, the FHLBNY continues to carry the derivative on the balance sheet at its fair value, removing from the balance sheet any asset or liability that was recorded to recognize the firm commitment and recording it as a gain or loss in current period earnings. |
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The FHLBNY records derivatives on trade date except when the derivative hedges an advance or consolidated obligation that is required by generally accepted accounting principles to be recorded on its settlement date. In those instances, the FHLBNY records the derivatives on the settlement date and the derivative subsequently is marked to its fair value at each period end. The FHLBNY has defined its market settlement conventions to be five business days or less for advances and thirty calendar days or less, using a next business day convention, for consolidation obligations. These market settlement conventions are the shortest period possible for each type of advances and consolidated obligations from the time the instruments are committed to the time they settle. The difference between reporting these hedging derivatives at trade date and settlement date is not material to the financial statements. | ||
Mandatorily Redeemable Capital Stock | ||
The FHLBanks adopted SFAS 150, “Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity (“SFAS 150”) as of January 1, 2004. In compliance with SFAS 150, the FHLBNY reclassifies stock subject to redemption from equity to liability once a member exercises a written redemption right, gives notice of intent to withdraw from membership, or attains non-member status by merger or acquisition, charter termination, or involuntary termination from membership. Shares of capital stock meeting this definition are reclassified to a liability at fair value. Unpaid dividends related to capital stock classified as a liability are accrued at the expected dividend rate and reported as interest expense in the Statements of Income. The repayment of these mandatorily redeemable financial instruments is reflected as a cash outflow in the financing activities section of the Statements of Cash Flows. | ||
The FHLBNY reports capital stock subject to mandatory redemption at the redemption value of the stock, which is par plus accrued dividends. The FHLBanks have a unique cooperative structure. Stocks can only be acquired by members at par value and redeemed at par value. Stock is not traded and no market mechanism exists for the exchange of stock outside the cooperative structure. | ||
Premises and Equipment | ||
The FHLBNY recorded premises and equipment at cost less accumulated depreciation and amortization of approximately $12.2 million, and $13.0 million as of June 30, 2005 and December 31, 2004. Depreciation and amortization expense was $1.0 million and $2.0 million for the three and six months ended June 30, 2005 and $0.9 million and $1.9 million for the three and six months ended June 30 2004. The FHLBNY computes depreciation and amortization using the straight-line method over the estimated useful lives of assets ranging from three to thirteen years. It amortizes leasehold improvements on the straight-line basis over the shorter of the estimated useful life of the improvement or the remaining term of the lease. The Bank capitalizes improvements and major renewals but expenses ordinary maintenance and repairs when incurred. The FHLBNY includes gains and losses on disposal of premises and equipment in Other income. The net realized gain (loss) on disposal of premises and equipment was not significant for all periods reported. | ||
Concessions on Consolidated Obligations | ||
The FHLBNY defers and amortizes concessions over the contractual maturity of the bonds, using a methodology which closely approximates the level-yield method. Concessions are paid to dealers in connection with the sale of consolidated obligation bonds. The Office of Finance prorates the amount of the concession to the FHLBNY based upon the percentage of the debt issued that is assumed by the FHLBNY. Unamortized concessions were $22.4 million and $20.1 million as of June 30, 2005 and December 31, 2004, and were included in Other assets. |
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Amortization of such concessions, included in consolidated obligation interest expense, totaled $3.8 million and $7.0 million, for the three months and six months ended June 30, 2005 and $3.9 million and $9.8 million for the three and six months ended June 30, 2004. The FHLBNY charges to expense as incurred the concessions applicable to the sale of consolidated obligation discount notes because of their short maturities. These amounts are also recorded in consolidated obligations interest expense. | ||
Discounts and Premiums on Consolidated Obligations | ||
The FHLBNY amortizes the discounts on consolidated obligation discount notes, using the level-yield method, over the term of the related notes and amortizes the discounts and premiums on callable and non-callable consolidated bonds, also using the level-yield method, over the contractual terms to maturity of the consolidated obligation bonds. | ||
Resolution Funding Corporation (REFCORP) Assessments | ||
Although the FHLBNY is exempt from ordinary federal, state, and local taxation except for local real estate tax, it is required to make payments to REFCORP. Each FHLBank is required to pay 20% of net earnings after AHP to REFCORP. The FHLBank will expense this amount until the aggregate amounts actually paid by all twelve FHLBanks are equivalent to a $300 million annual annuity whose final maturity date is April 15, 2030, at which point the required payment of each FHLBank to REFCORP will be fully satisfied. The Finance Board, in consultation with the Secretary of the Treasury, will select the appropriate discounting factors to be used in this annuity calculation. The cumulative amount to be paid to REFCORP by the FHLBNY is not determinable at this time, due to the interrelationships of all future FHLBanks’ earnings. The FHLBanks’ payments through second quarter of 2005 defease all future benchmark payments after the third quarter of 2018 and $17 million of the $75 million benchmark payment for the third quarter of 2018. Because the Assessment is based on net income at all the FHLBanks, which cannot be forecasted with reasonable certainty, the timing of the satisfaction of the REFCORP assessment cannot be predicted. | ||
REFCORP assessment, as discussed above, is based on a fixed percentage of net income after AHP assessment. If a full-year loss is incurred, no assessment or assessment credit is due or accrued. | ||
Finance Board and Office of Finance Expenses | ||
The FHLBNY is assessed for its proportionate share of the costs of operating the Finance Board and the Office of Finance. The Finance Board is authorized to impose assessments on the FHLBanks, including FHLBNY, in amounts sufficient to pay the Finance Board’s annual operating expenses. Each FHLBank is assessed a prorated amount based on each FHLBank’s capital stock outstanding as a percentage of total capital stock of all 12 FHLBanks. | ||
The Office of Finance is also authorized to impose assessments on the FHLBanks, including the FHLBNY, in amounts sufficient to pay the Office of Finance’s annual operating and capital expenditures. Each FHLBank is assessed a prorated amount based on the amount of capital stock outstanding, the volume of consolidated obligations issued, and the amount of consolidated obligations outstanding as percentage of the total of the items for all 12 FHLBanks. | ||
Estimated Fair Values | ||
Many of the Bank’s financial instruments lack an available trading market, characterized by transactions between a willing buyer and a willing seller engaging in an exchange transaction. Therefore, the FHLBNY uses significant estimates and present-value calculations when disclosing estimated fair values. Note 20 details the estimated fair values of the Bank’s financial instruments. |
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Earnings per Common Share | ||
SFAS 128 addresses the presentation of basic and diluted earnings per share (“EPS”) in the income statement. Basic earnings per share is computed by dividing income available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflect the potential dilution that could occur if convertible securities or other contracts to issue common stock were converted or exercised into common stock. Capital stock classified as mandatorily redeemable capital stock is excluded from this calculation. Basic and diluted earnings per share are the same for the FHLBNY as the Bank has no additional potential common shares that may be dilutive. | ||
Cash Flows | ||
In the statements of cash flows, the FHLBNY considers Cash and due from banks as Cash and cash equivalents. | ||
Reclassifications | ||
Certain amounts in the 2004 financial statements have been reclassified to conform to the 2005 presentation. In particular, for the three and six months ended June 30, 2004, the FHLBNY has reclassified prepayment fee income on the Statements of Income. Previously, prepayment fee income was classified as separate line item within Other income. These amounts have been reclassified and are now included in Interest Income for the three and six months ended June 30, 2004. As a result of this reclassification, net interest income after provisions for credit losses, and Other Income were adjusted by $4.0 million and $5.0 million for the three and six months ended June 30, 2004 respectively. (See Note 7). | ||
The FHLBNY has reclassified $1.4 million to “restricted retained earnings” as of June 30, 2005 representing the unpaid principal balance of certain acquired mortgages with a credit rating below an established minimum. The amount of the “restricted retained earnings” will decline as the balance on those assets declines or until the FHLBNY converts to its new capital structure plan. The restriction on the FHLBNY’s retained earnings had no impact on the results of operations, and was not material to the FHLBNY’s capital or unrestricted retained earnings and represents less than four cents per share on the FHLBNY’s 37 million shares of capital stock outstanding as of June 30, 2005. | ||
2. | Accounting Adjustments, Changes in Accounting Principles, and Recently Issued Accounting Standards & Interpretations | |
Accounting Adjustments | ||
During the second quarter of 2005, the FHLBNY further refined the manner in which it measured ineffectiveness for certain highly-effective consolidated obligation and advance hedging relationships. The FHLBNY believes the refined methodology is closely in compliance with the valuation methodology prescribed under SFAS 133. | ||
Under the FHLBNY’s prior approach in use since June 2004, the FHLBNY had appropriately adjusted the basis adjustment of the hedged consolidated bonds in the first period of the hedging relationship to ensure that only changes in value attributable to changes in interest rates were included in the basis adjustment. However, the FHLBNY had not continued to make adjustments to the changes in fair value of the hedged instruments to eliminate changes in value attributable to the passage of time from the calculated basis adjustments. In the second quarter of 2005, the FHLBNY retroactively computed the appropriate adjustments and recorded a charge to earnings of $3.9 million dollars with an offsetting increase in the basis of the hedged consolidated obligation bonds. |
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The FHLBNY had previously measured the ineffectiveness of hedged advances by discounting the future cash flows of the hedged advances by LIBOR, the FHLBNY’s adopted benchmark interest rate. However, the initial present value of cash flows was assumed to be the par value of the advance and a beginning model value was not calculated for comparison with end of period valuations. This resulted in an inappropriate gain being recorded in the first hedge period, and the reversing effects of the inappropriate gain being reflected over the remaining hedge period. | ||
Under the more refined methodology, the FHLBNY has discounted the future cash flows of the hedged advance by adding a spread to the benchmark swap curve to adjust for the credit spread between the FHLBNY’s advance and the swap curve. This methodology eliminates the initial present value differences between par and the present value of future cash flows at hedge inception, and is in compliance with SFAS 133. As a result of the inappropriate use of its previous methodology, the FHLBNY made a cumulative change for prior periods in its second quarter financial statements to implement the refined methodology, resulting in a $3.5 million charge to earnings. | ||
Change in Accounting Principle for Amortization and Accretion of Premiums and Discounts on Mortgage Loans | ||
Amortization and accretion on premiums and discounts on mortgage loans have been computed by the contractual method in accordance with Statement of Financial Accounting Standards No. 91, “Accounting for Nonrefundable Fees and Costs Associated with Originating or Acquiring Loans and Initial Direct Costs of Leases” (“FAS 91”), effective January 1, 2005. Previously, amortization and accretion of premiums and discounts was computed using the retrospective method with estimated life, which requires a retrospective adjustment each time the FHLBNY changes the estimated remaining life of the mortgage loans. The retrospective method is intended to correct prior period reported amounts as if the new estimate had been known since the original acquisition date of the mortgage loans. While both methods are acceptable under GAAP, we believe that the contractual method is preferable because under the contractual method, the income effects of premiums and discounts are recognized in a manner that is reflective of the actual behavior of the mortgage loans during the period in which the behavior occurs without regard to changes in estimates based on assumptions about future borrower behavior. As a result of the change in accounting principle, income of $1.1 million, before assessments, was recorded on January 1, 2005 as a cumulative effect of change in accounting principle. | ||
Change in Accounting Principle — Adoption of SFAS 150 | ||
The FASB issued Statement of Financial Accounting Standards No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity” (“SFAS 150”) in May 2003. This statement establishes a standard for how certain financial instruments with characteristics of both liabilities and equity are classified in the financial statements and provides accounting guidance for, among other things, mandatorily redeemable financial instruments. | ||
The FHLBNY adopted SFAS 150 as of January 1, 2004 as it met the definition of a non-public entity as defined in SFAS 150. In analyzing the conclusion regarding the appropriate effective date applicable, the FHLBNY considered the FASB guidance regarding the application of the effective dates to nonpublic entities as outlined in FAS 150 and in FSP FAS 150-3, Effective Date, Disclosures, and Transition for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable noncontrolling Interests under FASB |
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Statement No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity. For mandatorily redeemable financial instruments of a nonpublic entity, FAS 150 was effective for existing or new contracts for fiscal periods beginning after December 15, 2003. FSP FAS 150-3 extended the effective date for mandatorily redeemable financial instruments issued by nonpublic entities that were not SEC registrants or otherwise met the definition as defined in footnote 1 of that Standard. FAS 150 defines a nonpublic entity as “any entity other than one (a) whose equity securities trade in a public market either on a stock exchange (domestic or foreign) or in the over-the-counter market, including securities quoted only locally or regionally, (b) that makes a filing with a regulatory agency in preparation for the sale of any class of equity securities in a public market, or (c) that is controlled by an entity covered by (a) or (b)”. | ||
The FHLBank System is comprised of twelve district FHLBanks, which are separate cooperatives whose member financial institutions own all of the capital stock in each respective FHLBank. Member shares are not and will not be publicly traded and cannot be purchased or sold except between an FHLBank and its members and only at their $100 per share par value. The FHLBanks are each in the process of registering their capital stock with the SEC, but not for the purpose of any public sale of those equity securities, which is prohibited by law. Based on the characteristics of the FHLBNY’s stock and the definition in FAS 150 of a nonpublic entity, the FHLBNY concluded that the FHLBanks, including the FHLBNY are nonpublic entities. This conclusion is based on the fact that the FHLBNY does do not have any equity securities which trade in a public market; future filings with the SEC are not in anticipation of the sale of equity securities in a public market, as the FHLBanks, including the FHLBNY, are prohibited by law from ever doing so. The FHLBanks are not controlled by an entity, which has equity securities traded or contemplated to be traded in a public market. | ||
An adoption date of January 1, 2004 is also consistent with the transition rules of FAS 150 as they apply to a calendar year-end SEC registrant that had public debt outstanding but whose equity was not publicly traded. Applying FAS 150 on this date would make the FHLBNY’s financial statements consistent with all other entities that do not have publicly traded equity but that have either publicly traded debt or are otherwise deemed an SEC registrant. | ||
In accordance with the transition provisions of SFAS 150, the FHLBNY recorded the cumulative effect adjustment loss of $1.3 million as of January 1, 2004. The adjustment was with respect to dividends paid on January 31, 2004 for the quarter-ended December 31, 2003 on capital stock that was considered to be mandatorily redeemable on January 1, 2004. In accordance with the FHLBNY’s interpretation of SFAS 150, the dividend was treated as part of the redemption value of the stock. | ||
In addition, on January 1, 2004, the FHLBank reclassified $358.0 million of its outstanding capital stock to “Mandatorily redeemable capital stock” in the liability section of the Statements of Condition. Dividends on mandatorily redeemable capital stock were reported as interest expense in the amount of $0.8 million and $1.5 million for the three and six months ended June 30, 2005 and $1.4 million and $4.1 million for three and six months ended June 30, 2004 respectively. | ||
Although the mandatorily redeemable capital stock is not included in capital for financial reporting purposes, based on guidance from the Finance Board, such outstanding stock is considered capital for regulatory purposes. See Note 15 for more information, including significant restrictions on stock redemption. |
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Proposed rule under EITF 03-01 | ||
EITF Issue No. 03-1, The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments. In March 2004, the FASB reached a consensus regarding the application of an impairment model to determine whether investments are other-than-temporarily impaired. The provisions of this rule are required to be applied prospectively to all current and future investments accounted for in accordance with SFAS No. 115, Accounting for Certain Investments in Debt and Equity Securities. On September 15, 2004, the FASB issued proposed FASB Staff Position (FSP) EITF 03-1-a, Implementation Guidance for the Application of Paragraph 16 of EITF Issue No. 03-1, “The Meaning of Other-Than Temporary Impairment and Its Application to Certain Investments” (“FSP EITF 03-1-a”) to provide guidance on the application of paragraph 16 of EITF 03-1 to debt securities that are impaired because of interest rate and/or sector spread increases. On September 30, 2004, the FASB issued FSP EITF Issue 03-1-1, Effective Date of Paragraphs 10-20 of EITF Issue No. 03-1, “The Meaning of Other-Than Temporary Impairment and Its Application to Certain Investments” (“FSP EITF 03-1-1”), which deferred the effective date of the impairment measurement and recognition provisions contained in specific paragraphs of EITF 03-1 and expanded the scope of proposed FSP EITF 03-1-a to include all securities, not only debt securities. The comment period for proposed FSP EITF 03-1-a ended on October 29, 2004 and the effective date has been deferred indefinitely. The deferral of the effective date for paragraphs 10-20 of EITF 03-1 as reported in FSP EITF 03-1-1 will be superseded concurrently with the final issuance of proposed FSP EITF Issue 03-1-a. | ||
The FHLBNY does not expect the new rules to have a material impact on its results of operations at the time of adoption. The FHLBNY purchases investments for its held-to-maturity portfolio only when it has the intent and financial ability to hold the investments to maturity. See Note 5 and 6 for impairment disclosures related to Held-to-maturity and available for-sale-securities. | ||
Accounting for share-based payments | ||
In December 2004, the FASB issued SFAS 123R, which revises SFAS 123 and supersedes APB 25. In March 2005, the SEC issued SAB 107 which provides interpretive guidance on SFAS 123R. Accounting and reporting under SFAS 123R is generally similar to the SFAS 123 approach. However, SFAS 123R requires all share-based payments to employees, including grants of employee stock options, to be recognized in the income statement based on their fair values. Pro forma disclosure is no longer an alternative. SFAS 123R permits adoption using one of two methods — modified prospective or modified retrospective. The FHLBNY does not expect this rule to have any impact on its results of operation, since the FHLBNY does not provide stock based compensation. | ||
3. | Cash and Due from Banks | |
Cash on hand, cash items in the process of collection, and amounts due from correspondent banks and the Federal Reserve Banks are included in cash. | ||
Compensating Balances | ||
The FHLBNY maintained average required clearing balances with various Federal Reserve Banks of approximately $1.0 million for the six months ended June 30, 2005 and the year ended December 31, 2004. These are required clearing balances and may not be withdrawn; however, the FHLBNY may use earnings credits on these balances to pay for services received from the Federal Reserve Banks. |
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Pass-through Deposit Reserves | ||
The FHLBNY 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 $61.0 million and $54.0 million as of June 30, 2005 and December 31, 2004. The FHLBNY includes member reserve balances in Other liabilities in the Statements of Condition. | ||
4. | Interest-Bearing Deposits | |
Interest-bearing deposits consist of deposits at financial institutions and certificates of deposit issued by banks and financial institutions. As of June 30, 2005 and December 31, 2004, interest-bearing deposits included cash pledged as collateral of $ 775.0 million and $1,092.0 million to broker dealers and banks who have credit risk exposure related mainly to derivative contracts. | ||
5. | Held-to-Maturity Securities | |
Held-to-maturity securities consist of mortgage- and asset-backed securities (collectively mortgage-backed securities or “MBS”), and state and local housing finance agency bonds. Held-to-maturity securities included securities issued by the Federal National Mortgage Association (“Fannie Mae”) and the Federal Home Loan Mortgage Co. (“Freddie Mac”). Neither Fannie Mae nor Freddie Mac are agencies of the U.S. Government nor are their securities guaranteed by the U.S. Government. | ||
Major Security Types | ||
The amortized cost, gross unrealized gains and losses and the fair value of Held-to-maturity securities were as follows (in thousands): |
June 30, 2005 | ||||||||||||||||
Gross | Gross | Estimated | ||||||||||||||
Amortized | Unrealized | Unrealized | Fair | |||||||||||||
Cost | Gains | Losses | Value | |||||||||||||
State or local housing agency obligations | $ | 1,024,256 | $ | 24,373 | $ | — | 1,048,629 | |||||||||
Mortgage-backed securities | 9,677,170 | 155,487 | 23,817 | 9,808,840 | ||||||||||||
Total | $ | 10,701,426 | $ | 179,860 | $ | 23,817 | $ | 10,857,469 | ||||||||
December 31, 2004 | ||||||||||||||||
Gross | Gross | Estimated | ||||||||||||||
Amortized | Unrealized | Unrealized | Fair | |||||||||||||
Cost | Gains | Losses | Value | |||||||||||||
State or local housing agency obligations | $ | 1,056,982 | $ | 26,669 | $ | 718 | $ | 1,082,933 | ||||||||
Mortgage-backed securities | 10,813,692 | 220,060 | 21,808 | 11,011,944 | ||||||||||||
Total | $ | 11,870,674 | $ | 246,729 | $ | 22,526 | $ | 12,094,877 | ||||||||
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Temporary Impairment | ||
The following table summarizes Held-to-maturity securities with fair values below their amortized cost, i.e., in an unrealized loss position, as of June 30, 2005 and December 31, 2004. The fair values and unrealized losses are aggregated by major security type and rating, and by the length of time individual securities have been in a continuous unrealized loss position. Securities to which different rating levels have been assigned by different rating agencies, i.e., split ratings, are assigned to the lower rating category. | ||
The FHLBNY has both the intent and financial ability to hold the temporarily impaired securities to recovery of their value. In addition, the FHLBNY has reviewed the investment security holdings and determined, based on creditworthiness of the securities and including any underlying collateral and/or insurance provisions of the security, that unrealized losses in the analysis below represent temporary impairment at June 30, 2005 and December 31, 2004. | ||
Temporary impairment at June 30, 2005 (in thousands): |
Less than 12 months | 12 months or more | |||||||||||||||
Estimated Fair | Unrealized | Estimated Fair | Unrealized | |||||||||||||
Value | Losses | Value | Losses | |||||||||||||
Mortgage- and residential asset-backed securities - fixed rate | ||||||||||||||||
AAA-rated | $ | 2,447,782 | $ | 13,225 | $ | 1,497,402 | $ | 10,585 | ||||||||
AA-rated | — | — | — | — | ||||||||||||
Below AA | — | — | — | — | ||||||||||||
Mortgage- and residential asset-backed securities - variable rate | ||||||||||||||||
AAA-rated | 577,739 | 3,442 | — | — | ||||||||||||
AA-rated | — | — | — | — | ||||||||||||
Below AA | — | — | — | — | ||||||||||||
3,025,521 | 16,667 | 1,497,402 | 10,585 | |||||||||||||
State and local housing finance agencies- fixed rate | ||||||||||||||||
AAA-rated | — | — | — | — | ||||||||||||
AA-rated | — | — | — | — | ||||||||||||
Below AA | — | — | — | — | ||||||||||||
State and local housing finance agencies- variable rate | ||||||||||||||||
AAA-rated | — | — | ||||||||||||||
AA-rated | — | — | ||||||||||||||
Below AA | — | — | — | — | ||||||||||||
— | — | — | — | |||||||||||||
Total temporarily impaired | $ | 3,025,521 | $ | 16,667 | $ | 1,497,402 | $ | 10,585 | ||||||||
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Temporary impairment at December 31, 2004 (in thousands): |
Less than 12 months | 12 months or more | |||||||||||||||
Estimated Fair | Unrealized | Estimated Fair | Unrealized | |||||||||||||
Value | Losses | Value | Losses | |||||||||||||
Mortgage- and residential asset-backed securities - fixed rate | ||||||||||||||||
AAA-rated | $ | 3,904,642 | $ | 21,212 | $ | 7,357 | $ | 236 | ||||||||
AA-rated | — | — | — | — | ||||||||||||
Below AA | — | — | — | — | ||||||||||||
Mortgage- and residential asset-backed securities - variable rate | ||||||||||||||||
AAA-rated | 181,751 | 360 | — | — | ||||||||||||
AA-rated | — | — | — | — | ||||||||||||
Below AA | — | — | — | — | ||||||||||||
4,086,393 | 21,572 | 7,357 | 236 | |||||||||||||
State and local housing finance agencies-fixed rate | ||||||||||||||||
AAA-rated | — | — | — | — | ||||||||||||
AA-rated | — | — | — | — | ||||||||||||
Below AA | — | — | — | — | ||||||||||||
State and local housing finance agencies-variable rate | ||||||||||||||||
AAA-rated | — | — | 39,645 | 355 | ||||||||||||
AA-rated | — | — | 24,636 | 363 | ||||||||||||
Below AA | — | — | — | — | ||||||||||||
— | — | 64,281 | 718 | |||||||||||||
Total temporarily impaired | $ | 4,086,393 | $ | 21,572 | $ | 71,638 | $ | 954 | ||||||||
Redemption Terms | ||
The amortized cost, estimated fair value and weighted average yield of Held-to-maturity securities, by contractual maturity, are shown below (in thousands). Expected maturities of some securities and mortgage-backed securities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment fees. |
June 30, 2005 | December 31, 2004 | |||||||||||||||||||||||||||
Amortized | Estimated | Weighted | Amortized | Estimated | Weighted | |||||||||||||||||||||||
Cost | Fair Value | Average | Cost | Fair Value | Average | |||||||||||||||||||||||
Yield | Yield | |||||||||||||||||||||||||||
State and Local Housing Finance Agencies | ||||||||||||||||||||||||||||
Due in one year or less | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||||||
Due after one year through five years | — | — | — | — | ||||||||||||||||||||||||
Due after five years through ten years | 45,203 | 47,022 | 6.35 | % | 48,063 | 50,156 | 6.35 | % | ||||||||||||||||||||
Due after ten years | 979,053 | 1,001,607 | 4.55 | % | 1,008,919 | 1,032,777 | 3.80 | % | ||||||||||||||||||||
1,024,256 | 1,048,629 | 1,056,982 | 1,082,933 | |||||||||||||||||||||||||
Mortgage-backed Securities | ||||||||||||||||||||||||||||
Due in one year or less | ||||||||||||||||||||||||||||
Due after one year through five years | 1,412,119 | 1,500,366 | 6.72 | % | 1,512,286 | 1,632,348 | 6.71 | % | ||||||||||||||||||||
Due after five years through ten years | 13,794 | 13,792 | 6.25 | % | 17,402 | 17,641 | 6.24 | % | ||||||||||||||||||||
Due after ten years | 8,251,257 | 8,294,682 | 4.96 | % | 9,284,004 | 9,361,955 | 4.82 | % | ||||||||||||||||||||
9,677,170 | 9,808,840 | 10,813,692 | 11,011,944 | |||||||||||||||||||||||||
Total | $ | 10,701,426 | $ | 10,857,469 | $ | 11,870,674 | $ | 12,094,877 | ||||||||||||||||||||
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The amortized cost of mortgage-backed securities, classified as Held-to-maturity includes net of premiums of $26.2 million and $26.3 million as of June 30, 2005 and December 31, 2004 respectively. Amortization, net of accretion, that was included in interest income was $3.2 million and $4.1 million for the three and six months ended June 30, 2005 and $(2.8) million and $(6.4) million for the three and six months ended June 30, 2004. | ||
Interest Rate Payment Terms | ||
The following table summarizes interest rate payment terms for securities classified as held-to-maturity (in thousands): |
June 30, 2005 | December 31, 2004 | |||||||
Amortized cost of held-to-maturity securities other than mortgage - backed securities | ||||||||
Fixed-rate | $ | 344,556 | $ | 355,902 | ||||
Variable-rate | 679,700 | 701,080 | ||||||
1,024,256 | 1,056,982 | |||||||
Amortized cost of held-to-maturity mortgage related securities | ||||||||
Pass through securities | ||||||||
Fixed-rate | 5,346,677 | 5,760,446 | ||||||
Variable-rate | 887,231 | 1,321,394 | ||||||
Collateralized mortgage obligations | ||||||||
Fixed-rate | 3,404,879 | 3,687,353 | ||||||
Variable-rate | 38,383 | 44,499 | ||||||
9,677,170 | 10,813,692 | |||||||
Total | $ | 10,701,426 | $ | 11,870,674 | ||||
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6. | Available-for-Sale Securities | |
Available-for-sale securities consisted of variable-rate mortgage-backed securities. Unrealized gains and losses are summarized as follows (in thousands). |
June 20, 2005 | ||||||||||||||||
Gross | Gross | Estimated | ||||||||||||||
Amortized | Unrealized | Unrealized | Fair | |||||||||||||
Cost | Gains | Losses | Value | |||||||||||||
Mortgage-backed securities | $ | 1,643,218 | $ | 3,144 | $ | 3,435 | $ | 1,642,927 | ||||||||
Total | $ | 1,643,218 | $ | 3,144 | $ | 3,435 | $ | 1,642,927 | ||||||||
Less than 12 months | 12 months or more | |||||||||||||||
Estimated Fair | Unrealized | Estimated Fair | Unrealized | |||||||||||||
Value | Losses | Value | Losses | |||||||||||||
Mortgage-backed securities | $ | 711,123 | $ | 2,240 | $ | — | $ | 713,363 | ||||||||
Total | $ | 711,123 | $ | 2,240 | $ | — | $ | 713,363 | ||||||||
Available-for-sale securities include securities issued by the Federal National Mortgage Association (“Fannie Mae”) and the Federal Home Loan Mortgage Co. (“Freddie Mac”). Neither Fannie Mae nor Freddie Mac are agencies of the U.S. Government nor are their securities guaranteed by the U.S. Government. | ||
There were no proceeds from the sale of Available-for-sale securities, for the three and six months ended June 30, 2005. There were no sale during the comparable period in 2004. There were no amounts that were reclassified from accumulated other comprehensive income for the three and six months ended June 30, 2005 representing net gains(losses). | ||
Redemption Terms | ||
The amortized cost, estimated fair value and weighted average yield of Available-for-sale securities, by contractual maturity, are shown below (in thousands). Expected maturities of some securities and mortgage-backed securities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment fees. There was no impairment at June 30, 2005, or at December 31, 2004. |
June 30, 2005 | December 31, 2004 | |||||||||||||||||||||||||||
Amortized | Estimated | Weighted | Amortized | Estimated | Weighted | |||||||||||||||||||||||
Cost | Fair Value | Average | Cost | Fair Value | Average | |||||||||||||||||||||||
Yield | Yield | |||||||||||||||||||||||||||
Due in one year or less | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||||||
Due after one year through five years | — | — | — | — | ||||||||||||||||||||||||
Due after five years through ten years | — | — | — | — | ||||||||||||||||||||||||
Due after ten years | 1,643,218 | 1,642,927 | 3.34 | % | 711,123 | 713,363 | 2.48 | % | ||||||||||||||||||||
Total | $ | 1,643,218 | $ | 1,642,927 | $ | 711,123 | $ | 713,363 | ||||||||||||||||||||
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There were no significant amounts of premiums and discounts amortized for the three or six months ended June 30, 2005 and 2004 or for the year ended December 31, 2004. Amortized cost substantially equaled par. | ||
7. | Advances | |
Redemption Terms | ||
Advances outstanding including AHP advances, at interest rates ranging from 1.25% to 8.29% at June 30, 2005, and 1.25% to 8.29% at December 31, 2004, are summarized below (dollars in thousands): |
June 30, 2005 | December 31, 2004 | |||||||||||||||
Weighted | Weighted | |||||||||||||||
Average | Average | |||||||||||||||
Amount | Rate | Amount | Rate | |||||||||||||
Overdrawn demand deposit accounts | $ | 2,575 | 4.15 | % | $ | 237 | 4.75 | % | ||||||||
Due in one year or less | 17,729,901 | 3.69 | % | 23,111,281 | 2.90 | % | ||||||||||
Due after one year through two years | 5,759,085 | 3.60 | % | 7,583,635 | 3.38 | % | ||||||||||
Due after two years through three years | 12,948,917 | 3.73 | % | 7,967,893 | 3.05 | % | ||||||||||
Due after three years through four years | 3,975,621 | 4.40 | % | 8,435,962 | 3.79 | % | ||||||||||
Due after four years through five years | 4,926,920 | 5.30 | % | 2,300,288 | 4.91 | % | ||||||||||
Thereafter | 18,322,870 | 4.24 | % | 17,865,330 | 4.65 | % | ||||||||||
Total par value | 63,665,889 | 4.02 | % | 67,264,626 | 3.62 | % | ||||||||||
Discount on AHP advances* | (701 | ) | (786 | ) | ||||||||||||
Net premium on advances* | 1,453 | 1,784 | ||||||||||||||
SFAS 133 hedging adjustments* | 899,419 | 1,241,863 | ||||||||||||||
Total | $ | 64,566,060 | $ | 68,507,487 | ||||||||||||
* | Discount on AHP advances are amortized to interest income on a straight-line basis, the results of which closely approximates the level-yield method, and were not significant for all periods reported. Amortization of fair value basis adjustments and discontinued hedges were a charge to interest income and the amounts were not siginificant for the six months ended June 30, 2005 and 2004. All other amortization charged to interest income were not significant for the three months ended June 30, 2005 and 2004. |
Prepayment fees charged to members when members prepay certain advances before original maturity are included in interest income from advances. The weighted average yield reported above is the weighted average based on original coupon rates of advances. Net prepayment fees reported in interest income were $0.1 million and $35 million, for the three and six months ended June 30, 2005, and $9.9 million and $12.4 million for the three and six months ended June 30 2004. Amortization of basis on modified advances and discontinued hedges was a charge to interest income and $1.0 million and $1.9 million for the three and six months ended June 30, 2005, and $1.0 million and $1.9 million for three and six months ended June 30, 2004. | ||
The FHLBNY offers convertible advances to members. With a convertible advance, the FHLBNY effectively purchases a put option from the member that allows the FHLBNY to terminate the fixed-rate advance, which is normally exercised when interest rates have increased from those prevailing at the time the advance was made. The FHLBNY can offer additional credit on new terms. As of June 30, 2005 and December 31, 2004, the FHLBNY had convertible advances outstanding totaling $27 billion and $24.5 billion. |
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The following table summarizes advances by next put date (in thousands): |
June 30, 2005 | December 31, 2004 | |||||||
Overdrawn demand deposit accounts | $ | 2,575 | $ | 237 | ||||
Due in one year or less | 34,532,119 | 39,671,293 | ||||||
Due after one year through two years | 10,260,518 | 10,042,141 | ||||||
Due after two years through three years | 13,194,155 | 9,475,176 | ||||||
Due after three years through four years | 2,576,071 | 5,718,400 | ||||||
Due after four years through five years | 1,513,720 | 804,388 | ||||||
Thereafter | 1,586,731 | 1,552,991 | ||||||
Total par value | $ | 63,665,889 | $ | 67,264,626 | ||||
Security Terms The FHLBNY lends to financial institutions involved in housing finance within its district. The FHLBank Act requires the FHLBNY to obtain sufficient collateral on advances to protect against losses and to accept as collateral on such advances only certain U.S. government or government agency securities, residential mortgage loans, cash or deposits in the FHLBNY and other eligible real estate-related assets. However, Community Financial Institutions (“CFIs”) are subject to expanded statutory collateral provisions dealing with loans to small business or agriculture. It is the FHLBNY’s policy not to accept such collateral for advances. Borrowing members pledge their capital stock of the FHLBNY as additional collateral for advances. As of June 30, 2005 and December 31, 2004, the FHLBNY had rights to collateral with an estimated value greater than outstanding advances. Based upon the financial condition of the member, the FHLBNY: |
(1) | Allows a member to retain possession of the collateral assigned to the FHLBNY, if the member executes a written security agreement and agrees to hold such collateral for the benefit of the FHLBNY; or | ||
(2) | Requires the member specifically to assign or place physical possession of such collateral with the FHLBNY or its safekeeping agent. |
Beyond these provisions, Section 10(e) of the FHLBank Act affords any security interest granted by a member to the FHLBNY priority over the claims or rights of any other party. The two exceptions are claims that would be entitled to priority under otherwise applicable law or perfected security interests. | ||
All member obligations with the FHLBNY must be fully collateralized throughout their entire term. The market value of collateral pledged to cover the $63.7 billion par value of the outstanding advances as of June 30, 2005 totaled $152.4 billion, consisting of $125.1 billion in market value of eligible mortgages and $27.4 billion in market value of eligible securities, including cash collateral. | ||
As of June 30, 2005, other outstanding member obligations totaling $136.3 million were collateralized by an additional $754 million of pledged collateral. The pledged collateral comprised of $689.6 million in mortgage loans and $64.4 million in securities and cash collateral. The outstanding member obligations consisted of $126.8 million of standby letters of credit (“LOC”); $0.02 million of collateralized value of outstanding derivatives, and $9.5 million representing the members’ credit enhancement guarantee amount |
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(“MPFCE”) on loans sold to the FHLBNY through the MPF program. The FHLBNY’s underwriting and collateral requirements for securing LOCs are the same as its requirements for securing advances. | ||
The total of collateral pledged to the FHLBNY includes excess collateral pledged above the FHLBNY’s minimum collateral requirements. These minimum requirements range from 103% to 125% of outstanding advances, based on the collateral type. It is not uncommon for members to maintain excess collateral positions with the FHLBNY for future liquidity needs. Based on several factors (e.g.; advance type, collateral type or member financial condition) members are required to comply with specified collateral requirements, including but not limited to, a detailed listing of pledged mortgage collateral and/or delivery of pledged collateral to FHLBNY or its designated collateral custodian(s). For example, all pledged securities collateral must be delivered to the FHLBNY’s nominee name at Citibank, N.A., its securities safekeeping custodian. Mortgage collateral that is required to be in the FHLBNY’s possession is typically delivered to the FHLBNY’s Jersey City, NJ facility. However, in certain instances, delivery to an FHLBNY approved custodian may be allowed. | ||
As of June 30, 2005, of the $153.2 billion in pledged collateral securing all outstanding member obligations, $27.6 billion was in the FHLBNY’s physical possession or that of its safekeeping agent(s); $125.6 billion was specifically listed; and $0.3 billion was permitted by the FHLBNY to be physically retained by the borrowing member without detailed reporting required. | ||
Credit Risk | ||
While the FHLBNY has never experienced a credit loss on an advance, the expanded eligible collateral for CFIs and nonmember housing associates provides the potential for additional credit risk for the FHLBNY. The management of the FHLBNY has the policies and procedures in place to appropriately manage this credit risk. There were no past due advances and all advances were current at June 30, 2005 and December 31, 2004. Management does not anticipate any credit losses, and accordingly, the FHLBNY has not provided an allowance for credit losses on advances. | ||
The Bank’s potential credit risk from advances is concentrated in commercial banks and savings institutions. As of June 30, 2005, the FHLBNY had advances of $103.8 million to Washington Mutual Bank, FA, a member of the FHLBank of San Francisco, representing .167% of total advances outstanding. These advances were acquired by Washington Mutual Bank, FA as a result of its acquisition of The Dime Savings Bank of New York, FSB. The FHLBNY also had advances of $23.4 billion outstanding to five member institutions, representing 36.80% of total advances outstanding at June 30, 2005. The FHLBNY held sufficient collateral to cover the advances to these institutions, and the Bank does not expect to incur any credit losses. |
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Interest Rate Payment Terms | ||
The following table details interest rate payment terms for advances (dollars in thousands): |
June 30, 2005 | December 31, 2004 | |||||||||||||||
Percentage | Percentage | |||||||||||||||
Amount | of total | Amount | of total | |||||||||||||
Fixed-rate | $ | 50,961,065 | 80.04 | % | $ | 53,373,084 | 79.35 | % | ||||||||
Variable-rate | 10,976,630 | 17.25 | % | 11,959,522 | 17.78 | % | ||||||||||
Variable-rate capped | 1,728,194 | 2.71 | % | 1,932,020 | 2.87 | % | ||||||||||
Total par value | $ | 63,665,889 | 100.00 | % | $ | 67,264,626 | 100.00 | % | ||||||||
Variable-rate advances were mainly indexed to the Federal funds effective rate or LIBOR. | ||
8. | Affordable Housing Program | |
Section 10(j) of the FHLBank Act requires each FHLBank to establish an AHP. Each FHLBank provides subsidies in the form of direct grants and below-market interest rate advances to members who use the funds to assist the purchase, construction, or rehabilitation of housing for very low-, low- and moderate-income households. Annually, the FHLBanks must set aside for the AHP the greater of $100 million or 10% of the current year’s adjusted income after the assessment for REFCORP. The FHLBNY charges the amount set aside for AHP to income and recognizes it as a liability. The FHLBNY relieves the AHP liability as members use subsidies. If the result of the aggregate 10% calculation described above is less than $100 million for all twelve FHLBanks, then the Act requires the shortfall to be allocated among the FHLBanks, based on the ratio of each FHLBank’s income before AHP and REFCORP to the sum of the income before AHP and REFCORP of the twelve FHLBanks. There was no shortfall in either 2005 or 2004. The FHLBNY had outstanding principal in AHP-related advances of $8.0 million, and $8.1 million as of June 30, 2005 and December 31, 2004. | ||
9. | Mortgage Loans Held for Investment | |
The FHLBNY’s mortgage loan portfolio is made up almost entirely of the MPF program. In the CMA program, FHLBNY participated in residential, multi-family and community economic development mortgage loans originated by its members. The members retain servicing rights and may credit-enhance the portion of the loans participated to the FHLBNY. The FHLBNY did not acquire interests in any loans under the CMA program in any periods reported. Acquisitions under the CMA program were suspended indefinitely in November 2001. | ||
The MPF program involves investment by the FHLBNY in mortgage loans that are purchased from its participating members. The total loans represent loans held for investment under the MPF program whereby the FHLBNY’s members create, service, and credit-enhance home mortgage loans that are purchased by the FHLBNY. No intermediary trusts were involved. |
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June 30, 2005 | December 31, 2004 | |||||||||||||||
2005 | Percentage | 2004 | Percentage | |||||||||||||
Real Estate: | ||||||||||||||||
Fixed medium-term single-family mortgages | $ | 570,618 | 41.5 | % | $ | 516,666 | 44.2 | % | ||||||||
Fixed long-term single-family mortgages | 794,039 | 57.7 | % | 641,730 | 54.8 | % | ||||||||||
Multi-family mortgages | 8,415 | 0.6 | % | 9,493 | 0.8 | % | ||||||||||
Non-residential mortgages | 2,743 | 0.2 | % | 2,771 | 0.2 | % | ||||||||||
Total par value | 1,375,815 | 100.0 | % | 1,170,660 | 100.0 | % | ||||||||||
Net unamortized premiums | 15,093 | 13,294 | ||||||||||||||
Net unamortized discounts | (5,783 | ) | (5,364 | ) | ||||||||||||
Total mortgage loans held for investment | $ | 1,385,125 | $ | 1,178,590 | ||||||||||||
Amortization expense, net of accretion, that was reported as a charge to interest income was $1.4 million and $0.5 million for the three and six months ended June 30, 2005 and $0.3 million and $0.8 million for the three and six months ended June 30, 2004. Amortization of the fair value hedge basis adjustment was insignificant for all periods reported. | ||
The par value of mortgage loans held for investment outstanding as of June 30, 2005 and December 31, 2004, was comprised of Federal Housing Administration and Veteran Administration insured loans totaling $16.9 million and $20.6 million , and conventional and other loans totaling $1.4 billion and $1.2 billion, respectively. As also discussed in Note 1, Summary of Significant Accounting Policies- Mortgage loans and participations, the FHLBNY and its members share the credit risk of MPF loans by structuring potential credit losses into layers. The first layer is typically 100 basis points but varies with the particular MPF program. The amount of the first layer, or FLA, was estimated as $13 million and $12 million at June 30, 2005 and December 31, 2004. The FLA is not recorded or reported as a reserve for loan losses. The FHLBNY is responsible for absorbing the first layer. The second layer is that amount of credit obligations that the 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 paid or deemed paid to PFIs aggregated $0.4 million and $0.7 million for the three and six months ended June 30, 2005 and $ 0.2 million and $0.4 million for the three and six months ended June 30, 2004 and were a charge to interest income. | ||
The amounts of charge-offs in all periods reported were insignificant and it was not necessary for the FHLBNY to recoup any losses from the PFIs. |
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The allowance for credit losses was as follows (in thousands): |
For the three months | For the six months | For the year ended | ||||||||||||||||||
ended June 30, | ended June 30, | December 31, | ||||||||||||||||||
2005 | 2004 | 2005 | 2004 | 2004 | ||||||||||||||||
Balance, beginning of period | $ | 541 | $ | 507 | $ | 507 | $ | 507 | $ | 507 | ||||||||||
Charge offs | — | — | — | — | — | |||||||||||||||
Recoveries | — | — | — | — | — | |||||||||||||||
Net charge- off | — | — | — | — | — | |||||||||||||||
Provision for credit losses | 24 | — | 58 | — | — | |||||||||||||||
Balance, end of period | $ | 565 | $ | 507 | $ | 565 | $ | 507 | $ | 507 | ||||||||||
As of June 30, 2005 and December 31, 2004, the FHLBNY had $0.4 million and $0.5 million of non-accrual loans. The estimated fair value of the mortgage loans as of June 30, 2005 and December 31, 2004 is reported in Note 20. Mortgage loans, other than those included in large groups of smaller-balance homogeneous loans, are considered impaired when, based on current information and events, it is probable that the FHLBNY will be unable to collect all principal and interest amounts due according to the contractual terms of the mortgage loan agreements. As of June 30, 2005 and December 31, 2004, the FHLBNY had no investment in impaired mortgage loans, other than the non-accrual loans. | ||
The following table summarizes Mortgage loans held for investment, all Federal Housing Administration and Veterans Administrations insured loans, past due 90 days or more and still accruing interest (in thousands): |
June 30, 2005 | December 31, 2004 | |||||||
Secured by 1-4 family | $ | 1,375 | $ | 1,898 | ||||
10. | Related Party Transactions | |
The FHLBNY is a cooperative and the members own almost all of the stock of the FHLBNY. 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. Therefore, in the normal course of business, the FHLBNY extends credit to members, whose officers may serve as directors of the FHLBNY, on market terms that are no more favorable to them than comparable transactions with other members. Capital stock ownership is a prerequisite to transacting any business with the FHLBNY. | ||
The FHLBNY considers its transactions with its members and non-member stockholders as transactions with related parties in addition to transactions with other FHLBanks, the Office of Finance, and the Finance Board. | ||
The FHLBNY has purchased 7 mortgage-backed securities, aggregating $733.7 million, that are securitized by affiliates of its member financial institutions, and 2 mortgage-backed securities, aggregating $6.6 million, that are securitized by a member. These securities were |
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acquired through security dealers in the normal course of business, and at market terms. At June 30, 2005 or December 31, 2004, no mortgage-backed securities or other investments had been acquired from other FHLBanks. | |||
The FHLBNY may from time to time borrow or sell overnight and term Federal funds at market rates to members. | |||
In limited circumstances, the FHLBNY may transfer Consolidated Obligation Bonds to or from other FHLBanks in exchange for cash (See Note 13). | |||
In the MPF program, the FHLBNY may participate out certain portions of its purchases of mortgage loans from its members. Transactions are at market rates. The Federal Home Loan Bank of Chicago, the MPF program provider’s cumulative share of interest in the MPF loans originated by members of the FHLBNY was $531.7 million from inception of the program through mid-2004. Since then, the FHLBNY does not share its purchases. Fees paid to the Federal Home Loan Bank of Chicago were $25 thousand and $102 thousand and $187 thousand and $29 thousand for the three and six months ended June 30, 2005 and 2004. | |||
Notional amounts of $132 million and $112 million were outstanding at June 30, 2005 and December 31, 2004 in which the FHLBNY acted as an intermediary to sell derivatives to members. These were offset by identical transactions with unrelated derivatives counterparties. Fair values of these transactions at June 30, 2005 and December 31, 2004 were not material. The intermediated derivative transactions were fully collateralized. | |||
Loans to Other FHLBanks | |||
There were no uncollateralized loans to other FHLBanks as of June 30, 2005 and December 31, 2004. Such uncollateralized loans averaged $0 and $4.3 million, $0 and $9.5 million for the three and six months ended June 30, 2005 and 2004. |
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The following tables summarize outstanding balances and transactions with related parties at June 30, 2005 and December 31, 2004 (in thousands): | |||
Related Party: Outstanding Assets, Liabilities and Equity |
June 30, 2005 | December 31, 2004 | |||||||||||||||
Related | Unrelated | Related | Unrelated | |||||||||||||
Assets | ||||||||||||||||
Cash and due from banks | $ | — | $ | 22,513 | $ | — | $ | 22,376 | ||||||||
Interest-bearing deposits | — | 6,704,888 | — | 2,806,870 | ||||||||||||
Federal funds sold | — | 2,030,000 | — | 2,972,000 | ||||||||||||
Available-for-sale securities | — | 1,642,927 | — | 713,363 | ||||||||||||
Held-to-maturity securities | — | 10,701,426 | — | 11,870,674 | ||||||||||||
Advances | 64,566,060 | — | 68,507,487 | — | ||||||||||||
Mortgage loans* | — | 1,384,560 | — | 1,178,083 | ||||||||||||
Loans to other FHLBanks | — | — | — | — | ||||||||||||
Accrued interest receivable | 258,501 | 73,816 | 252,517 | 63,251 | ||||||||||||
Premises and equipment, net | — | 12,167 | — | 13,030 | ||||||||||||
Derivative assets | — | 3,624 | — | 11,048 | ||||||||||||
Other assets** | — | 28,625 | — | 28,261 | ||||||||||||
$ | 64,824,561 | $ | 22,604,546 | $ | 68,760,004 | $ | 19,678,956 | |||||||||
Liabilities | ||||||||||||||||
Deposits | $ | 2,424,158 | $ | — | $ | 2,297,019 | $ | — | ||||||||
Consolidated obligations | — | 79,320,970 | — | 80,156,982 | ||||||||||||
Mandatorily redeemable capital stock | 35,615 | — | 126,581 | — | ||||||||||||
Accrued interest payable | — | 439,058 | — | 437,743 | ||||||||||||
Affordable Housing Program | 84,372 | — | 81,580 | — | ||||||||||||
Payable to REFCORP | — | 14,558 | — | 9,966 | ||||||||||||
Derivative liabilities | — | 1,058,175 | — | 1,372,195 | ||||||||||||
Other liabilities*** | — | 87,576 | 54,082 | 23,682 | ||||||||||||
Total liabilities | 2,544,145 | 80,920,337 | 2,559,262 | 82,000,568 | ||||||||||||
Capital | 3,964,625 | — | 3,879,130 | — | ||||||||||||
$ | 6,508,770 | $ | 80,920,337 | $ | 6,438,392 | $ | 82,000,568 | |||||||||
* | Includes de minimus amount of mortage loans purchased from members of another FHL Bank. | |
** | Includes not significant amount of miscellaneous assets that are considered related party. | |
*** | Includes members pass-through reserves. |
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Related Party: Income and Expense transactions for the three months ended: |
June 30, 2005 | June 30, 2004 | |||||||||||||||
Related | Unrelated | Related | Unrelated | |||||||||||||
Interest income | ||||||||||||||||
Advances | $ | 516,447 | $ | — | $ | 270,691 | $ | — | ||||||||
Interest-bearing deposits | — | 39,774 | — | 14,688 | ||||||||||||
Federal funds sold | — | 20,664 | — | 2,370 | ||||||||||||
Available-for-sale securities | — | 7,239 | — | 459 | ||||||||||||
Held-to-maturity securities | — | 147,588 | — | 135,598 | ||||||||||||
Mortgage loans and participations* | — | 16,712 | — | 12,089 | ||||||||||||
Loans to other FHLBanks | — | — | — | 12 | ||||||||||||
Collateral pledged and other | — | 10 | — | 13 | ||||||||||||
Total interest income | $ | 516,447 | $ | 231,987 | $ | 270,691 | $ | 165,229 | ||||||||
Interest expense | ||||||||||||||||
Consolidated obligations | $ | — | $ | 637,652 | $ | 361,157 | ||||||||||
Deposits | 15,574 | — | 4,222 | — | ||||||||||||
Other borrowings | 38 | 784 | 58 | 1,422 | ||||||||||||
Cash collateral held | — | 5 | — | — | ||||||||||||
Total interest expense | $ | 15,612 | $ | 638,441 | $ | 4,280 | $ | 362,579 | ||||||||
Service fees | $ | 1,047 | — | $ | 1,258 | — | ||||||||||
* | Includes de minimus amount of mortgage interest income from loans purchased from members of another FHLBank. |
Related Party: Income and Expense transactions for the six months ended: |
June 30, 2005 | June 30, 2004 | ||||||||||||||||
Related | Unrelated | Related | Unrelated | ||||||||||||||
Interest income | |||||||||||||||||
Advances | $ | 975,209 | $ | — | $ | 536,200 | $ | — | |||||||||
Interest-bearing deposits | — | 63,120 | — | 22,285 | |||||||||||||
Federal funds sold | — | 35,068 | — | 4,543 | |||||||||||||
Available-for-sale securities | — | 12,283 | — | 460 | |||||||||||||
Held-to-maturity securities | — | 297,533 | — | 260,720 | |||||||||||||
Mortgage loans and participations* | — | 32,728 | — | 21,271 | |||||||||||||
Loans to other FHLBanks | — | — | — | 50 | |||||||||||||
Collateral pledged and other | — | 19 | — | 25 | |||||||||||||
Total interest income | $ | 975,209 | $ | 440,751 | $ | 536,200 | $ | 309,354 | |||||||||
Interest expense | |||||||||||||||||
Consolidated obligations | $ | — | $ | 1,194,950 | $ | 712,709 | |||||||||||
Deposits | 27,674 | — | 8,941 | — | |||||||||||||
Other borrowings | 44 | 1,467 | 70 | 2,774 | |||||||||||||
Cash collateral held | — | — | — | — | |||||||||||||
Total interest expense | $ | 27,718 | $ | 1,196,417 | $ | 9,011 | $ | 715,483 | |||||||||
Service fees | $ | 2,188 | — | $ | 2,407 | — | |||||||||||
* | Includes de minimus amount of mortgage interest income from loans purchased from members of another FHLBank. |
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11. | Deposits | |
The FHLBNY offers demand and overnight deposits to 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): |
June 30, 2005 | December 31, 2004 | |||||||
Due in one year or less | $ | 45,700 | $ | 101,000 | ||||
Total term deposits | $ | 45,700 | $ | 101,000 | ||||
12. | Borrowings | |
Securities Sold under Agreements to Repurchase | ||
The FHLBNY had no amounts of securities sold under agreement to repurchase as June 30, 2005 or December 31, 2004. | ||
Other Federal Home Loan Banks | ||
The FHLBNY borrows from other FHLBanks, generally for a period of one day. Such borrowings averaged $3.1 million and $13.7 million for the six months ended June 30, 2005 and 2004. The average for the year ended December 31, 2004 was $9.5 million. There were no borrowings outstanding as of June 30, 2005 and December 31, 2004. | ||
13. | Consolidated Obligations | |
Consolidated obligations are the joint and several obligations of the FHLBanks and consist of consolidated bonds and discount notes. The FHLBanks issue consolidated obligations through the Office of Finance as their 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. These notes sell at less than their face amount and are redeemed at par value when they mature. | ||
The Finance Board, at its discretion, may require any FHLBank to make principal or interest payments due on any consolidated obligations. Although it has never occurred, to the extent that an FHLBank would make a payment on a consolidated obligation on behalf of another FHLBank, the paying FHLBank would be entitled to reimbursement from the non-complying FHLBank. However, if the Finance Board determines that the non-complying FHLBank is unable to satisfy its obligations, then the Finance Board may allocate the outstanding liability among the remaining FHLBanks on a pro rata basis in proportion to each FHLBank’s participation in all consolidated obligations outstanding, or on any other basis the Finance Board may determine. | ||
Based on management’s review, the FHLBNY has no reason to record actual or contingent liabilities with respect to the occurrence of events or circumstances that would require the FHLBNY to assume such an obligation on behalf of other FHLBanks. |
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The par amounts of the FHLBanks’ outstanding consolidated obligations, including consolidated obligations held by other FHLBanks, were approximately $908.3 billion and $869.2 billion as of June 30, 2005 and December 31, 2004, respectively. | ||
Finance Board regulations require the FHLBanks to maintain, in the aggregate, unpledged qualifying assets equal to the consolidated obligations outstanding. Qualifying assets are defined as cash; secured advances; assets with an assessment or rating at least equivalent to the current assessment or rating of the consolidated obligations; obligations, participations, mortgages, or other securities of or issued by the United States or an agency of the United States; and such securities in which fiduciary and trust funds may invest under the laws of the state in which the FHLBank is located. | ||
The FHLBNY met the qualifying unpledged asset requirements in each of the periods reported as follows: |
June 30, | December 31, | |||||||
2005 | 2004 | |||||||
Percentage of unpledged qualified assets to consolidated obligations | 110 | % | 109 | % | ||||
On June 2, 2000, the Finance Board set the FHLBanks’ leverage limit requirements. The Finance Board limits each FHLBank’s assets generally to no more than 21 times its capital. Nevertheless, an FHLBank whose non-mortgage assets, after deducting deposits and capital, do not exceed 11% of its assets may have total assets in an amount not greater than 25 times its capital. At June 30, 2005 and December 31, 2004, FHLBNY met its regulatory requirements as follows: |
June 30, 2005 | December 31, 2004 | |||||||||||||||
Actual | Limits | Actual | Limits | |||||||||||||
Mortgage securities investment authority | 283 | % | 300 | % | 287 | % | 300 | % | ||||||||
Leverage limits | ||||||||||||||||
Ratio of total assets to capital limit | 21.83 | 25 times | 22.10 | 25 times | ||||||||||||
Percentage of non-mortgage assets to total assets* | 2.88 | % | 11.00 | % | (0.34 | )% | 11.00 | % | ||||||||
* | Under applicable regulations (12 CFR Part 966.3), deposit liabilities and capital are subtracted from non-mortgage assets before calculating the ratio of non-mortgage assets to total assets. A negative percentage also indicates the limit has been met. For the purposes of this section, the amount of non-mortgage assets (after subtracting deposits and capital) equals total assets after deduction of: advances, acquired member assets, standby letters of credit, intermediary derivative contracts, and certain investments in MBS and state or local governmental units or agencies. |
To provide the holders of consolidated obligations issued before January 29, 1993 (prior bondholders) with the protection equivalent to that provided under the FHLBanks’ previous leverage limit of twelve times the FHLBanks’ capital stock, prior bondholders have a claim on a certain amount of the qualifying assets [Special Asset Account (SAA)] if capital stock is less than 8.33% of consolidated obligations. As of December 31, 2004, the combined FHLBanks’ capital stock was 4.56% of the par value of consolidated obligations outstanding, and the SAA balance was approximately $219 thousand. Further, the regulations require each FHLBank to transfer qualifying assets in the amount of its allocated share of the FHLBanks’ SAA to a trust for the benefit of the prior bondholders, if its capital-to-assets ratio falls below 2%.
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General Terms | ||
Consolidated obligations are issued with either fixed- or variable-rate coupon payment terms that use a variety of indices for interest rate resets. These indices include the London Interbank Offered Rate (LIBOR), Constant Maturity Treasury (CMT), 11th District Cost of Funds Index (COFI), and others. In addition, to meet the expected specific needs of certain investors in consolidated obligations, both fixed- and variable-rate bonds may also contain certain features that may result in complex coupon payment terms and call options. When such consolidated obligations are issued, the FHLBNY enters 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 payments, consolidated bonds may also have the following terms: | ||
Step-up Bonds generally pay interest at increasing fixed rates for specified intervals over the life of the bond. These bonds generally contain provisions enabling the FHLBNY to call bonds at its option on the step-up dates; | ||
Zero-Coupon Bonds are long-term discounted instruments that earn a fixed yield to maturity or the optional principal redemption date. All principle and interest are paid at maturity or on the optional principle redemption dare, if exercised prior to maturity. | ||
Redemption Terms | ||
The following is a summary of consolidated bonds outstanding by year of maturity (dollars in thousands): |
June 30, 2005 | December 31, 2004 | |||||||||||||||
Weighted | Weighted | |||||||||||||||
Average | Average | |||||||||||||||
Maturity | Amount | Rate | Amount | Rate | ||||||||||||
1 year or less | $ | 20,454,240 | 3.27 | % | $ | 25,348,025 | 2.64 | % | ||||||||
over 1 year through 2 years | 14,636,895 | 3.43 | % | 16,297,480 | 3.41 | % | ||||||||||
over 2 years through 3 years | 8,965,050 | 3.69 | % | 8,688,675 | 3.54 | % | ||||||||||
over 3 years through 4 years | 4,339,870 | 3.97 | % | 4,561,750 | 4.00 | % | ||||||||||
over 4 years through 5 years | 2,636,650 | 4.19 | % | 2,227,200 | 3.89 | % | ||||||||||
over 5 years through 6 years | 1,028,350 | 4.57 | % | |||||||||||||
Thereafter | 3,508,050 | 4.91 | % | 2,434,650 | 5.14 | % | ||||||||||
Total par value | 54,540,755 | 60,586,130 | ||||||||||||||
Bond premiums | 83,000 | 112,768 | ||||||||||||||
Bond discounts | (19,703 | ) | (19,957 | ) | ||||||||||||
SFAS 133 fair value adjustments | (212,926 | ) | (161,370 | ) | ||||||||||||
Deferred net gains on terminated hedges | (3,776 | ) | (2,215 | ) | ||||||||||||
Total | $ | 54,387,350 | $ | 60,515,356 | ||||||||||||
Amortization of bond premiums that was a reduction of interest expense totaled $15.7 and $31.7 million and $14.3 million and $28.5 million for the three and six months ended June 30, 2005 and 2004. Amortization of net gains from terminated hedges were $0.5 million and $0.7 million for the |
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three and six months ended June 30, 2005 and $0.4 million and $0.8 million for the three and six months ended June 30, 2004. | ||
During the six months ended June 30, 2005, the FHLBNY retired $114.5 million of consolidated obligation bonds at a cost that exceeded book value by $5.3 million and for the six months ended June 30, 2004, the FHLBNY retired $88.6 million of consolidated obligation bonds at a cost that exceeded book value by $2.5 million. The cost is included in Other income — Other net. The debt retired was primarily associated with the prepayment of advances for which prepayment fees were received. During 2004, the FHLBNY retired $110 million of consolidated obligation bonds at a cost that exceeded book value by $4.2 million. | ||
Consolidated obligation bonds outstanding as of June 30, 2005 and December 31, 2004 include callable bonds totaling $19.2 billion and $20.2 billion respectively. The FHLBNY uses fixed-rate callable debt to finance callable advances and mortgage-backed securities. Simultaneous with such a debt issue, the FHLBNY may also enter into an interest-rate swap (in which the FHLBNY pays variable and receives fixed) with a call feature that mirrors the option embedded in the debt (a sold callable swap). The combined sold callable swap and callable debt allows the Bank to provide members attractively priced, variable-rate advances. |
June 30, 2005 | December 31, 2004 | |||||||
Non-callable/non-putable | $ | 35,369,695 | $ | 40,355,470 | ||||
Callable | 19,171,060 | 20,230,660 | ||||||
Total par value | $ | 54,540,755 | $ | 60,586,130 | ||||
The following table summarizes consolidated obligation bonds outstanding at June 30, 2005 and December 31, 2004 by year of maturity or next call date (in thousands): |
June 30, 2005 | December 31, 2004 | |||||||
Year of Maturity or next call date | ||||||||
Due or callable in one year or less | $ | 36,225,240 | $ | 37,897,285 | ||||
Due or callable after one year through two years | 8,171,895 | 12,616,220 | ||||||
Due or callable after two years through three years | 5,287,550 | 4,948,175 | ||||||
Due or callable after three years through four years | 2,479,870 | 3,202,750 | ||||||
Due or callable after four years through five years | 1,001,150 | 696,700 | ||||||
Thereafter | 1,375,050 | 1,225,000 | ||||||
Total par value | $ | 54,540,755 | $ | 60,586,130 | ||||
Interest Rate Payment Terms | ||
The following table summarizes interest rate payment terms for consolidated obligation bonds at June 30, 2005 and December 31, 2004 (in thousands). |
June 30, 2005 | December 31, 2004 | |||||||
Fixed-rate, Non-callable | $ | 32,819,695 | $ | 34,635,470 | ||||
Fixed-rate, Callable | 13,682,260 | 19,001,260 | ||||||
Step Ups | 5,518,000 | 1,260,000 | ||||||
Single-index Floating Rate | 2,520,800 | 5,689,400 | ||||||
Total par value | $ | 54,540,755 | $ | 60,586,130 | ||||
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Interbank Transfers of Consolidated Obligation Bonds | ||
In order to meet the FHLBNY’s asset and liability management objectives, during 2004, $214.3 million par value of consolidated obligation bonds were transferred to the FHLBNY from other FHLBanks in exchange for cash. Par amount of $106.5 million matures on September 16, 2013; par amount of $63.0 million matures April 15, 2009; par amount of $33.5 million matures February 15, 2008; and par amount of $11.3 million matures August 18, 2009. There was one $6.0 million consolidated obligation transferred in the second quarter of 2005 which matures February 18, 2015. The average outstanding of transferred consolidated obligations during the year ended December 31, 2004 was $152.9 million. Book value of consolidated obligation bonds transferred during 2004 was $213.2 million. Bonds transferred during the six months ended June 30, 2004 aggregated $162.5 million at par. | ||
Discount Notes | ||
Consolidated obligation discount notes are issued to raise short-term funds. Discount notes are consolidated obligations with original maturities up to 360 days. These notes are issued at less than their face amount and redeemed at par when they mature. The FHLBNY’s outstanding consolidated obligation discount notes, all of which are due within one year, were as follows (dollars in thousands): |
Weighted | ||||||||||||
Book | Par | Average | ||||||||||
Value | Value | Interest Rate | ||||||||||
June 30, 2005 | $ | 24,933,620 | $ | 25,015,952 | 3.06 | % | ||||||
December 31, 2004 | $ | 19,641,626 | $ | 19,670,201 | 1.90 | % | ||||||
The FHLBank Act authorizes the Secretary of the Treasury, at his or her discretion, to purchase consolidated obligations of the FHLBanks aggregating not more than $4 billion. The terms, conditions, and interest rates are determined by the Secretary of the Treasury. There were no such purchases by the U.S. Treasury during the six months ended June 30, 2005 and the year ended December 31, 2004. |
14. | Mandatorily Redeemable Capital Stock | |
The FHLBNY’s capital stock is redeemable at the option of both the member and the FHLBNY with certain conditions. Capital stock that is mandatorily redeemable, as interpreted under SFAS 150, is considered a liability rather than capital as described more fully in Notes 1 and 2. The FHLBNY considers stock as mandatorily redeemable once a member delivers a written redemption request, or provides a notice of intent to withdraw from membership, or attains non-member status by merger or acquisition, charter termination, or involuntary termination from membership. 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. | ||
At June 30, 2005 and December 31, 2004, the mandatorily redeemable capital stock totaled $35.7 million and $126.6 million respectively, and was held by banks attaining non-member status by virtue of being acquired by non-members. Substantially all of the banks became non-members in 2002. |
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Anticipated redemption terms of mandatorily redeemable capital stock were as follows at June 30, 2005 (in thousands): |
June 30, 2005 | December 31, 2004 | |||||||
Redemption within one year | $ | 15,493 | $ | 106,141 | ||||
Redemption after one year through two years | 3,135 | 175 | ||||||
Redemption after three years through five years | 16,698 | 9,923 | ||||||
Redemption after six years through ten years | 289 | 10,294 | ||||||
Redemption after eleven years through fifteen years | — | 48 | ||||||
$ | 35,615 | $ | 126,581 | |||||
No member’s or non-members’ redemption request remained pending at June 30, 2005. | ||
Dividends related to capital stock classified as mandatorily redeemable were accrued at an estimated dividend rate and reported as interest expense in the Statements of Income. At June 30, 2005, the FHLBNY had estimated a 4.70% dividend payout due to holders of mandatorily redeemable capital stock averaging $64.4 million during the second quarter of 2005, and a liability of $0.4 million representing accrued dividend was recognized as an expense. | ||
At December 31, 2004, the FHLBNY had estimated a 3.0% dividend payout due to holders of mandatorily redeemable capital stock averaging $162.9 million during the fourth quarter of 2004, and a liability of $1.2 million representing accrued dividend was recognized as an expense. The actual dividend that was paid on January 31, 2005 was 3.05% (annualized), or $1.3 million. | ||
The FHLBNY’s activity for mandatorily redeemable capital stock for the period ended June 30, 2005 and December 31, 2004 were as follows (in thousands). |
June 30, 2005 | December 31, 2004 | |||||||
Balance, beginning of period | $ | 126,581 | $ | — | ||||
Capital stock subject to mandatory redemption reclassified from equity on adoption of SFAS150 | — | 357,887 | ||||||
Redemption of mandatorily redeemable capital stock | (90,966 | ) | (231,306 | ) | ||||
Balance, end of period | $ | 35,615 | $ | 126,581 | ||||
15. | Capital | |
The FHLBanks, including FHLBNY, have a unique cooperative structure. To access FHLBNY’s products and services, a financial institution must be approved for membership and purchase capital stock in FHLBNY. The members’ stock requirement is generally based on its use of FHLBNY products, subject to a minimum membership requirement, as prescribed by the FHLBank Act. FHLBNY stock can be issued, exchanged, redeemed and repurchased only at its stated par value of $100 per share. It is not publicly traded. Each member is required to hold capital stock in the FHLBNY equal to the greater of: |
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• | 5 % of the member’s total outstanding advances or | ||
• | 1% of the member’s total unpaid principal balance of residential mortgage loans (usually as of the most recent year-end), or | ||
• | $500 |
Option to redeem capital stock that is greater than a member’s minimum requirement is held by both the member and the FHLBNY. | ||
In November 1999, the FHLBank Act was significantly modified by the Federal Home Loan Bank System Modernization Act, which was enacted as Title VI of the Gramm-Leach-Bliley Act (“GLB Act”). The GLB Act established voluntary membership for all members. Any member may withdraw from membership and have its capital stock redeemed after providing to the FHLBNY the required notice. Withdrawal from membership requires six months’ notice. Members that withdraw from membership must wait five years before being readmitted to membership to any FHLBank. | ||
The GLB Act will result in a number of changes in the capital structure of the FHLBanks. The final Finance Board capital rule was published on January 30, 2001, and required each FHLBank to submit a capital structure plan (“Capital Plan”) to the Finance Board by October 29, 2001 in accordance with the provisions of the GLB Act and final capital rule. The Finance Board approved the FHLBNY’s Capital Plan on July 18, 2002. FHLBNY’s plan to convert to the new stock by October 2003 was deferred as a result of the loss of $189.2 million from the sale of credit deteriorated MBS in the third quarter of 2003. | ||
Until the new Capital Plan is implemented, the current capital rules remain in effect. The FHLBNY does not expect any negative consequences from the delay. In particular, the Act requires members to purchase capital stock equal to the greater of 1 percent of their mortgage-related assets or 5 percent of outstanding FHLBank advances. However, the GLB Act removed the provision that required a non-thrift member to purchase additional stock to borrow from the FHLBank if the non-thrift member’s mortgage-related assets were less than 65 percent of total assets. A member may, at the FHLBank’s discretion, redeem at par value any capital stock greater than its statutory requirement or sell it at par value to another member of that FHLBank. | ||
Under the new rules, each FHLBank may offer two classes of stock. Members can redeem Class A stock by giving six month’s notice, and members can redeem Class B stock by giving 5 year’s notice. Only “permanent” capital, defined as retained earnings and Class B stock, satisfies the FHLBank risk based capital requirement. In addition, the GLB Act specifies a 5 percent minimum leverage ratio based on total capital and a 4 percent minimum capital ratio that does not include the 1.5 weighting factor applicable to the permanent capital that is used in determining compliance with the 5 percent minimum leverage ratio. | ||
The FHLBanks adopted SFAS 150 as of January 1, 2004. In compliance with SFAS 150, the FHLBanks will reclassify stock subject to redemption from equity to liability once a member exercises a written redemption right, gives notice of intent to withdraw from membership, or attains non-member status by merger or acquisition, charter termination, or involuntary termination from membership, since the shares of capital stock will then meet the definition of a mandatorily redeemable financial instrument. Shares of capital stock meeting this definition are reclassified to a liability at fair value. Dividends related to capital stock classified as a liability are accrued at |
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the expected dividend rate and reported as interest expense in the Statements of Income. The repayment of these mandatorily redeemable financial instruments is reflected as a cash outflow in the financing activities section of the Statements of Cash Flows. | ||
The Finance Board has confirmed that the SFAS 150 accounting treatment for certain shares of its capital stock will not affect the definition of total capital for purposes of determining the FHLBank’s compliance with its regulatory capital requirements, calculating its mortgage securities investment authority (300 percent of total capital), calculating its unsecured credit exposure to other GSEs (100 percent of total capital), or calculating its unsecured credit limits to other counterparties (various percentages of total capital depending on the rating of the counterparty). | ||
When the new capital structure plan has been implemented, the FHLBNY will be subject to risk-based capital rules. | ||
The FHLBNY’s board of directors may declare and pay dividends in either cash or capital stock only from unrestricted retained and current earnings. | ||
The FHLBNY’s leverage ratio of 21.83 and 22.10 representing total assets to capital at June 30, 2005 and December 31, 2004 were in compliance with the Finance Board’s leverage ratio requirements. (See Note 13 – Consolidated obligations). | ||
The FHLBNY has $1.4 million of “restricted retained earnings” as of June 30, 2005 representing the unpaid principal balance of certain acquired mortgages with a credit rating below an established minimum. Additional details are noted under Note 1– Reclassifications. |
16. | Total Comprehensive Income | |
Total comprehensive income is comprised of Net Income and Accumulated other comprehensive income (loss), which includes unrealized gains on Available-for-sale securities, cash flow hedging activities and additional minimum liability on Benefits Equalization Plan. | ||
Details of the Accumulated other comprehensive income and Total comprehensive income for the three and six months ended June 30, 2005 and 2004 were as follows (in thousands): |
Three months ended June 30, 2005 and 2004 | ||||||||||||||||||||||||
Available- | Benefit | Accumulated other | Total | |||||||||||||||||||||
for-sale | Cash-flow | Equalization | Comprehensive | Comprehensive | ||||||||||||||||||||
Securities | Hedges | Plan | Income (Loss) | Net Income | Income | |||||||||||||||||||
Three months ended June 30, 2004 | ||||||||||||||||||||||||
Balance, March 31, 2004 | $ | — | $ | (545 | ) | $ | (2,013 | ) | $ | (2,558 | ) | |||||||||||||
Net change | (450 | ) | 3,023 | — | 2,573 | $ | 48,776 | $ | 51,349 | |||||||||||||||
Balance, June 30, 2004 | $ | (450 | ) | $ | 2,478 | $ | (2,013 | ) | $ | 15 | ||||||||||||||
Three months ended June 30, 2005 | ||||||||||||||||||||||||
Balance, March 31, 2005 | $ | 2,527 | $ | 11,443 | $ | (2,489 | ) | $ | 11,481 | |||||||||||||||
Net change | (2,817 | ) | (10,134 | ) | — | (12,951 | ) | $ | 53,475 | $ | 40,524 | |||||||||||||
Balance, June 30, 2005 | $ | (290 | ) | $ | 1,309 | $ | (2,489 | ) | $ | (1,470 | ) | |||||||||||||
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Six months ended June 30, 2005 and 2004 | ||||||||||||||||||||||||
Available- | Benefit | Accumulated other | Total | |||||||||||||||||||||
for-sale | Cash-flow | Equalization | Comprehensive | Comprehensive | ||||||||||||||||||||
Securities | Hedges | Plan | Income (Loss) | Net Income | Income | |||||||||||||||||||
Six months ended June 30, 2004 | ||||||||||||||||||||||||
Balance, December 31, 2003 | — | $ | (13 | ) | $ | (2,013 | ) | $ | (2,026 | ) | ||||||||||||||
Net change | (450 | ) | 2,491 | — | 2,041 | $ | 75,920 | $ | 77,961 | |||||||||||||||
Balance, June 30, 2004 | $ | (450 | ) | $ | 2,478 | $ | (2,013 | ) | $ | 15 | ||||||||||||||
Six months ended June 30, 2005 | ||||||||||||||||||||||||
Balance, December 31, 2004 | $ | 2,240 | $ | 898 | $ | (2,489 | ) | $ | 649 | |||||||||||||||
Net change | (2,530 | ) | 411 | — | (2,119 | ) | $ | 112,775 | $ | 110,656 | ||||||||||||||
Balance, June 30, 2005 | $ | (290 | ) | $ | 1,309 | $ | (2,489 | ) | $ | (1,470 | ) | |||||||||||||
17. | Earnings per Share of Capital | |
The following table sets forth the computation of earnings per share of capital (in thousands except per share amounts): |
For the three months ended | For the six months ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2005 | 2004 | 2005 | 2004 | |||||||||||||
Net income before cumulative effect of change in accounting principles | $ | 53,475 | $ | 48,776 | $ | 111,666 | $ | 77,225 | ||||||||
Cumulative effect of change in accounting principle | — | — | 1,109 | (1,305 | ) | |||||||||||
Net income available to stockholders | $ | 53,475 | $ | 48,776 | $ | 112,775 | $ | 75,920 | ||||||||
Weighted average shares of capital | 36,877 | 39,008 | 36,807 | 38,190 | ||||||||||||
Less: Mandatorily redeemable capital | (356 | ) | (2,750 | ) | (620 | ) | (3,089 | ) | ||||||||
Average number of shares of capital used to calculate earnings per share | 36,521 | 36,258 | 36,187 | 35,101 | ||||||||||||
Earnings per share of capital before cumulative effect of change in accounting principle | $ | 1.46 | $ | 1.35 | $ | 3.09 | $ | 2.20 | ||||||||
Cumulative effect of change in accounting principle | — | — | 0.03 | (0.04 | ) | |||||||||||
Net earnings per share of capital | $ | 1.46 | $ | 1.35 | $ | 3.12 | $ | 2.16 | ||||||||
Basic and diluted earnings per share of capital are the same. The FHLBNY has no dilutive potential common shares or other common stock equivalents. |
18. | Employee Retirement Plans | |
The FHLBNY participates in the Pentegra Defined Benefit Plan for Financial Institutions (“DB Plan”), a defined-benefit plan. The plan covers substantially all officers and employees of the FHLBNY. The Bank’s contributions to DB through June 30, 1987 represented the normal cost of the plan. The plan reached the full-funding limitation, as defined by the Employee Retirement Income Security Act, for the plan year beginning July 1, 1987, because of favorable investment and other actuarial experience during previous years. As a result, DB suspended employer contributions |
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for all plan years ending after June 30, 1987 through 2001. Contributions to the plan resumed in 2002. Contributions to DB charged to operating expenses for the three and six months ended June 30, 2005 and 2004 were $2.0 million, $1.2 million, $4.1 million, and $2.3 million respectively. The DB is a multi-employer plan and does not segregate its assets, liabilities, or costs by participating employer. As a result, disclosure of the accumulated benefit obligations, plan assets, and the components of annual pension expense attributable to the FHLBNY are not made. | ||
The FHLBNY also participates in the Pentegra Defined Contribution Plan for Financial Institutions a defined contribution plan. The Bank’s contributions are equal to a percentage of participants’ compensation and a matching contribution equal to a percentage of voluntary employee contributions, subject to certain limitations. The FHLBNY contributed $0.3 million, $0.2 million $0.5 million, and $0.6 million for the six months ended June 30, 2005 and 2004. | ||
In addition, the FHLBNY maintains a deferred compensation plan, available to all employees, which is, in substance, an unfunded supplemental retirement plan, referred to as the Benefits Equalization Plan. The plan’s liability consists of the accumulated compensation deferrals and accrued earnings on the deferrals. | ||
Components of the net periodic pension cost for the FHLBNY’s supplemental retirement plan were as follows for the six-month periods ended (in thousands): |
For the three months ended | For the Six months ended | |||||||||||||||
June 30, 2005 | June 30, 2004 | June 30, 2005 | June 30, 2004 | |||||||||||||
Service | $ | (174 | ) | $ | (150 | ) | $ | (348 | ) | $ | (300 | ) | ||||
Interest | (166 | ) | (166 | ) | (332 | ) | (332 | ) | ||||||||
Amortization of unrecognized prior service cost | 12 | 13 | 24 | 26 | ||||||||||||
Amortization of unrecognized net loss | (166 | ) | (168 | ) | (332 | ) | (336 | ) | ||||||||
Amortization of unrecognized net obligation | — | — | — | — | ||||||||||||
Net periodic benefit cost | $ | (494 | ) | $ | (471 | ) | $ | (988 | ) | $ | (942 | ) | ||||
The net periodic benefit cost for 2005 is expected to be $1.8 million. | |||
The FHLBNY also offers a postretirement health benefit plan to retirees. There are no funded plan assets that have been designated to provide postretirement health benefits. Assumptions used in determining the accumulated postretirement benefit obligation (“APBO”) included a discount rate of 5.75%. The effect of a percentage point increase in the assumed healthcare trend rates would be an increase in postretirement benefit expense of $0.2 million and in APBO of $1.6 million. The effect of a percentage point decrease in the assumed healthcare trend rates would be an decrease in postretirement benefit expense of $0.2 million and in APBO of $1.3 million. Employees over the age of 55 are eligible provided they have completed ten years of service after age 45. | |||
Components of the net periodic postretirement benefit cost for the FHLBNY’s postretirement health were as follows for the six-month |
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For the three months ended | For the Six months ended | |||||||||||||||
June 30, 2005 | June 30, 2004 | June 30, 2005 | June 30, 2004 | |||||||||||||
Service cost (benefits attributed to services during the period) | $ | (170 | ) | $ | (125 | ) | $ | (340 | ) | $ | (250 | ) | ||||
Interest cost on accumulated postretirement benefit obligations | (144 | ) | (124 | ) | (288 | ) | (248 | ) | ||||||||
Amortization of loss | (92 | ) | (90 | ) | (184 | ) | (180 | ) | ||||||||
Net periodic postretirement benefit cost | $ | (406 | ) | $ | (339 | ) | $ | (812 | ) | $ | (678 | ) | ||||
19. | Derivatives | |
The contractual or notional amount of derivatives reflects the involvement of the FHLBNY in the various classes of financial instruments. The notional amount of derivatives does not measure the credit risk exposure of the FHLBNY, and the maximum credit exposure of the FHLBNY is substantially less than the notional amount. The maximum credit risk is the estimated cost of replacing favorable interest-rate swaps, forward agreements, mandatory delivery contracts for mortgage loans executed after June 30, 2003, and purchased caps and floors if the counterparty defaults and the related collateral, if any, is of no value to the FHLBNY. This collateral has not been sold or re-pledged. | ||
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 in the FHLBNY’S view, the appropriate measure of credit risk. Substantially, all derivative contracts are subject to master netting agreements or other right of offset arrangements. At June 30, 2005 and December 31, 2004, the FHLBNY’s maximum credit risk, as defined above, was approximately $3.6 million and $11.0 million without recognition of collateral held by the FHLBNY. These totals included $12.0 million and $17.9 million of net accrued interest receivable. In determining maximum credit risk, the FHLBNY considers accrued interest receivables and payables, and the legal right to offset assets and liabilities by counterparty. One counterparty with an A rating accounted for $2.7 million, or 75.04%, of the exposure. The FHLBNY held $0 and $0.6 million in cash as collateral as of June 30, 2005 and December 31, 2004. | ||
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. Note 21 discusses assets pledged by the FHLBNY to these counterparties. | ||
Intermediation | ||
Derivative agreements in which the FHLBNY is an intermediary may arise when the FHLBNY: (1) enters into offsetting derivatives with members and other counterparties to meet the needs of its members, and (2) enters into derivatives to offset the economic effect of other derivative agreements that are no longer designated to either advances, investments, or consolidated obligations. The notional principal of derivatives in which the FHLBNY was an intermediary was $132.0 million and $112.0 million as of June 30, 2005 and December 31, 2004. 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. |
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Hedging Activities | ||
General – The FHLBNY may enter into interest-rate swaps, swaptions, and interest-rate cap and floor agreements (collectively, derivatives) to manage its exposure to changes in interest rates. The FHLBNY may adjust the effective maturity, repricing frequency, or option characteristics of financial instruments to achieve risk management objectives. The FHLBNY uses derivatives in three ways: by designating them as a fair value or cash flow hedge of an underlying financial instrument or a forecasted transaction; by acting as an intermediary; or in asset-liability management (i.e., a non-SFAS 133 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. | ||
A non-SFAS 133 economic hedge is defined as a derivative that hedges specific or non-specific underlying assets, liabilities or firm commitments, but does not qualify for hedge accounting under the rules of SFAS 133 but is an acceptable hedging strategy under the Bank’s risk management program. These strategies also comply with Finance Board’s regulatory requirements. An economic hedge, by definition, introduces the potential for earnings variability due to the changes in fair value recorded on the derivative(s) that are not offset by corresponding changes in the value of the economically hedged assets, liabilities, or firm commitments. | ||
The FHLBNY, consistent with Finance Board’s regulation, enters into derivatives only to reduce the market risk exposures inherent in otherwise unhedged assets and funding positions. The FHLBNY utilizes derivatives in the most cost-efficient manner and may enter into derivatives that do not necessarily qualify for hedge accounting under SFAS 133 accounting rules. As a result, when entering into such non-qualified hedges, the FHLBNY recognizes only the change in fair value of these derivatives together with any realized gains and losses in Other income as Net realized and unrealized gain (loss) on derivatives and hedging activities, with no offsetting fair value adjustments for the asset, liability, or firm commitment. | ||
Consolidated Obligations – The FHLBNY manages the risk arising from changing market prices and volatility of a consolidated obligation by matching the cash inflow on the derivative with the cash outflow on the consolidated obligation. In addition, the FHLBNY requires collateral agreements on all derivative agreements with non-members. While consolidated obligations are the joint and several obligations of the FHLBanks, one or more FHLBanks may individually serve as counterparties to derivative agreements associated with specific debt issues. For instance, in a typical transaction, fixed-rate consolidated obligations are issued for one or more FHLBanks, and each of those FHLBanks simultaneously enters into a matching derivative in which the counterparty pays to the FHLBank fixed cash flows designed to mirror in timing and amount the cash outflows the FHLBank pays on the consolidated obligation. Such transactions are treated as fair-value hedges under SFAS 133. In this typical transaction, the FHLBank pays a variable cash flow that closely matches the interest payments it receives on short-term or variable-rate advances. This intermediation between the capital and swap markets permits the FHLBNY to raise funds at lower costs than would otherwise be available through the issuance of simple fixed- or floating-rate consolidated obligations in the capital markets. |
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Advances – With issuances of convertible advances, the FHLBNY may purchase from the member a put option that enables the FHLBNY to terminate an advance if interest rates increase, and to extend additional credit on new terms. The FHLBNY may hedge a convertible advance by entering into a cancellable derivative where the FHLBNY pays fixed and receives variable. This type of hedge is treated as a fair value hedge under SFAS 133. The swap counterparty can cancel the derivative on the put date, which would normally occur in a rising rate environment, and the FHLBNY can convert the advance to a floating rate or 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 invested in lower-yielding assets that continue to be funded by higher-cost debt. To protect against this risk, the FHLBNY generally charges a prepayment fee that makes it financially indifferent to a borrower’s decision to prepay an advance. When the Bank offers advances (other than short-term advances) that members may prepay without a prepayment fee, it usually finances such advances with callable debt or otherwise hedges the options. | ||
Mortgage Loans – The FHLBNY invests in mortgage assets. The prepayment options embedded in mortgage assets can result in extensions or reductions in the expected maturities of these investments, depending on changes in estimated prepayment speeds. Finance Board regulation limits 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 change in market value of equity. The FHLBNY may manage against prepayment and duration risk by funding some mortgage assets with consolidated obligations that have call features. In addition, the FHLBNY may use derivatives to manage the prepayment and duration variability of mortgage assets. Net income could be reduced if the FHLBNY replaces the mortgages with lower yielding assets and if the Bank’s higher funding costs are not reduced concomitantly. | ||
The FHLBNY manages the interest-rate and prepayment risks associated with mortgages through debt issuance. The FHLBNY issues both callable and non-callable debt to achieve cash flow patterns and liability durations similar to those expected on the mortgage loans. | ||
The FHLBNY analyzes the duration, convexity, and earnings risk of the mortgage portfolio on a regular basis under various rate scenarios. | ||
Firm Commitment Strategies – Prior to July 1, 2003, the FHLBNY hedged the market value of purchase commitments on fixed-rate mortgage loans by using derivatives with similar market value sensitivity characteristics. When these derivatives settled, the commitment’s current market value was included with the basis of the mortgage loans and amortized accordingly. These transactions were treated as fair value hedges. Mortgage purchase commitments entered into after June 30, 2003 are considered derivatives. Accordingly, both the commitment and the derivatives used in the firm commitment hedging strategy are recorded on the balance sheet at fair value, with changes in fair value recognized in the current-period earnings. | ||
The amount of net gains/losses recognized in earnings when an hedged commitment no longer qualifies as a fair value hedge was not significant. |
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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 rolled into the basis of the advance at the time the commitment is terminated and the advance is issued. The basis adjustment will then be amortized into interest income over the life of the advance. | ||
Investments – The FHLBNY invests in mortgage and residential asset-backed securities, mortgage-backed securities and mortgage loans held for investment, U.S. agency securities and the taxable portion of state or local housing finance agency securities. The interest-rate and prepayment risks associated with these investment securities are managed through debt issuance. | ||
Forward Settlements – There were no forward settled securities recorded at June 30, 2005 or at December 31, 2004. | ||
Anticipated Debt Issuance – The FHLBNY may enter 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. | ||
The FHLBNY is not a derivative dealer and does not trade derivatives for short-term profit. | ||
Credit Risk – The FHLBNY is subject to credit risk due to the risk of nonperformance by counterparties to the derivative agreements. The degree of counterparty risk on derivative agreements depends on the extent to which master netting arrangements are included in such contracts to mitigate the risk. The FHLBNY manages counterparty credit risk through credit analysis and collateral requirements and by following the requirements set forth in Finance Board’s regulations. Based on credit analyses and collateral requirements, the management of the FHLBNY does not anticipate any credit losses on its derivative agreements. | ||
The FHLBNY has not issued consolidated obligations denominated in currencies other than U.S. dollars. | ||
To meet the hedging needs of its members, the FHLBNY acts as an intermediary between the members and the other counterparties. This intermediation allows smaller members access to the swap market. The derivatives used in intermediary activities do not qualify for SFAS 133 hedge accounting treatment and are separately marked-to-market through earnings. The net results of the accounting for these derivatives do not significantly affect the operating results of the FHLBNY. |
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June 30, 2005 | December 31, 2004 | |||||||||||||||
Estimated | Estimated | |||||||||||||||
Notional | Fair Value | Notional | Fair Value | |||||||||||||
Interest Rate Swaps | ||||||||||||||||
Fair value | $ | 64,824,332 | $ | (1,124,703 | ) | $ | 63,311,654 | $ | (1,405,858 | ) | ||||||
Cash Flow | 150,000 | (3,493 | ) | 712,150 | 3,058 | |||||||||||
Economic | 67,140 | (3,402 | ) | |||||||||||||
Interest Rate Caps/Floors | ||||||||||||||||
Fair Value | 1,668,195 | (10 | ) | 1,932,000 | (11 | ) | ||||||||||
Mortgage Delivery Commitments | ||||||||||||||||
Cash Flow | 3,536 | 10 | 10,316 | 16 | ||||||||||||
Other Intermediation | 132,000 | 7 | 112,000 | 9 | ||||||||||||
Total | $ | 66,778,063 | $ | (1,128,189 | ) | $ | 66,145,260 | $ | (1,406,188 | ) | ||||||
Net Realized and Unrealized Gain (Loss) on Derivatives and Hedging Activities As a result of SFAS 133, the FHLBNY recorded the following net gains (losses) on derivatives and hedging activities for the three and six months ended June 30, 2005 and 2004 (in thousands). |
Three months ended | ||||||||
June 30, | June 30, | |||||||
2005 | 2004 | |||||||
Net gains (losses) on derivatives and hedging activities | ||||||||
Gains (losses) related to fair value hedge ineffectiveness | $ | (3,705 | ) | $ | 11,918 | |||
(Losses) gains on economic hedges | (1,681 | ) | 424 | |||||
Net (losses) gains on derivatives and hedging activities | $ | (5,386 | ) | $ | 12,342 | |||
Six months ended | ||||||||
June 30, | June 30, | |||||||
2005 | 2004 | |||||||
Net gains (losses) on derivatives and hedging activities | ||||||||
Gains (losses) related to fair value hedge ineffectiveness | $ | (2,784 | ) | $ | 11,885 | |||
(Losses) gains on economic hedges | (1,547 | ) | (637 | ) | ||||
Net (losses) gains on derivatives and hedging activities | $ | (4,331 | ) | $ | 11,248 | |||
Amortization of basis resulting from modified advance hedges amounted to $0.9 million and $1.9 million for three and six months ended June 30, 2005 and 2004 and were included in interest income from advances. | ||
Cash Flow Hedges | ||
There were no material amounts for the three or six months ended June 30, 2005 and June 30, 2004 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. Over the next six months, it is expected that $1.1 million of net gains recorded in Other comprehensive income at June 30, 2005, will be recognized in earnings. The maximum length of time over which the FHLBNY is hedging its exposure to the variability in future cash flows for forecasted transactions, excluding |
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those forecasted transactions related to the payment of variable interest on existing financial instruments, is six months. |
20. | Estimated Fair Values | |
The following estimated fair value amounts have been determined by the FHLBNY, using available market information and the FHLBNY’s judgment of appropriate valuation methods. These estimates were based on pertinent information available to the FHLBNY as of June 30, 2005 and December 31, 2004. Although the FHLBNY uses its judgment in estimating the fair value of these financial instruments, there are inherent limitations in any estimation technique or valuation methodology. For example, because an active secondary market does not exist for a portion of the FHLBNY’s financial instruments, in certain cases, fair values are not subject to precise quantification or verification and may change as economic and market factors and evaluation of those factors change. Therefore, these estimated fair values are not necessarily indicative of the amounts that would be realized in current market transactions. The Fair Value Summary Tables do not represent an estimate of the overall market value of the FHLBNY as a going concern, which would take into account future business opportunities. | ||
Cash and Due from Banks | ||
The estimated fair value approximates the recorded book balance. | ||
Interest-Bearing Deposits and Investment Securities | ||
The estimated fair value is derived from quoted prices, excluding accrued interest, as of the last business day of the period. | ||
Federal Funds Sold | ||
To estimate the fair values, the cash flows are discounted using the appropriate market rates for the applicable maturity. | ||
Advances and Other Loans | ||
The FHLBNY determines the estimated fair value of advances with fixed rates and advances with complex floating rates by calculating the present value of expected future cash flows from the advances and excluding amounts for accrued interest receivable. The discount rates used in these calculations are the replacement advance rates for advances with similar terms. Following the Finance Board’s advances regulations, advances with a maturity and repricing period greater than six months require a prepayment fee sufficient to make the FHLBNY financially indifferent to the borrower’s decision to prepay the advances. Therefore, the estimated fair value of advances does not assume prepayment risk. | ||
Mortgage Loans and Participations | ||
The estimated fair values for mortgage loans are determined based on quoted market prices of similar mortgage loans. These prices, however, can change rapidly based upon market conditions and are highly dependent upon the underlying prepayment assumptions. | ||
Accrued Interest Receivable and Payable | ||
The estimated fair value approximates the recorded book value. |
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Derivative Assets/Liabilities | ||
The FHLBNY estimated fair values of derivatives based on expected cash flows. The fair values are netted by counterparty where such legal right exists. If these netted amounts are positive, they are classified as an asset and if negative, a liability. | ||
Deposits | ||
The FHLBNY determines estimated fair values of deposits by calculating the present value of expected future cash flows from the deposits. The discount rates used in these calculations are the current cost of deposits with similar terms. | ||
Consolidated Obligations | ||
The FHLBNY estimates fair values based on the cost of raising comparable term debt. The estimated cost of issuing debt includes non-interest selling costs. | ||
Borrowings | ||
The FHLBNY determines the estimated fair value of borrowings with fixed rates by calculating the present value of expected future cash flows from the borrowings. The discount rates used in these calculations are the cost of borrowings with similar terms. | ||
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 dividend. The FHLBank’s have a unique cooperative structure. Stocks can only be acquired by members at par value and redeemed at par value. Stock is not traded and no market mechanism exists for the exchange of stock outside the cooperative structure. | ||
Commitments | ||
The estimated fair values of standby letters of credit, standby bond purchase agreements, and commitments to extend credit are based on discounted cash flows from expected fees through the expiration of the agreements, commitments and standby letters of credit. |
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The carrying value and estimated fair values of the FHLBNY’s financial instruments as of June 30, 2005 were as follows (in thousands): |
Net | ||||||||||||
Unrealized | Estimated | |||||||||||
Carrying | Gains | Fair | ||||||||||
Financial Instruments | Value | Losses | Value | |||||||||
Assets | ||||||||||||
Cash and due from banks | $ | 22,513 | $ | — | $ | 22,513 | ||||||
Interest-bearing deposits | 6,704,888 | 352 | 6,704,536 | |||||||||
Federal funds sold | 2,030,000 | 87 | 2,029,913 | |||||||||
Available-for sale securities | 1,642,927 | — | 1,642,927 | |||||||||
Held-to-maturity securities | 10,701,426 | 156,043 | 10,857,469 | |||||||||
Advances | 64,566,060 | 23,361 | 64,542,699 | |||||||||
Mortgage loans, net | 1,384,560 | 13,723 | 1,398,283 | |||||||||
Other loans | — | — | — | |||||||||
Accrued interest receivable | 332,317 | — | 332,317 | |||||||||
Derivative assets | 3,624 | — | 3,624 | |||||||||
Other assets | 28,625 | 19 | 28,644 | |||||||||
Liabilities | ||||||||||||
Deposits | 2,424,158 | 12 | 2,424,146 | |||||||||
Consolidated obligations | ||||||||||||
Discount notes | 24,933,620 | 4,541 | 24,929,079 | |||||||||
Bonds | 54,387,350 | 54,981 | 54,442,331 | |||||||||
Mandatorily redeemable capital stock | 35,615 | — | 35,615 | |||||||||
Accrued interest payable | 439,058 | — | 439,058 | |||||||||
Derivative liabilities | 1,058,175 | — | 1,058,175 | |||||||||
Other Liabilities | 87,576 | — | 87,576 |
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The carrying values and estimated fair values of the FHLBNY’s financial instruments as of December 31, 2004, were as follows (in thousands): |
Net | ||||||||||||
Unrealized | Estimated | |||||||||||
Carrying | Gains | Fair | ||||||||||
Financial Instruments | Value | Losses | Value | |||||||||
Assets | ||||||||||||
Cash and due from banks | $ | 22,376 | $ | — | $ | 22,376 | ||||||
Interest-bearing deposits | 2,806,870 | 27 | 2,806,897 | |||||||||
Federal funds sold | 2,972,000 | 19 | 2,971,981 | |||||||||
Available-for sale securities | 713,363 | — | 713,363 | |||||||||
Held-to-maturity securities | 11,870,674 | 224,203 | 12,094,877 | |||||||||
Advances | 68,507,487 | 3,466 | 68,504,021 | |||||||||
Mortgage loans, net | 1,178,083 | 11,860 | 1,189,943 | |||||||||
Accrued interest receivable | 315,768 | — | 315,768 | |||||||||
Derivative assets | 11,048 | — | 11,048 | |||||||||
Other Assets | 28,261 | 23 | 28,284 | |||||||||
Liabilities | ||||||||||||
Deposits | 2,297,019 | 3 | 2,297,016 | |||||||||
Consolidated obligations | ||||||||||||
Discount notes | 19,641,626 | 3,134 | 19,638,492 | |||||||||
Bonds | 60,515,356 | 166,313 | 60,681,669 | |||||||||
Mandatorily redeemable capital stock | 126,581 | — | 126,581 | |||||||||
Accrued interest payable | 437,743 | — | 437,743 | |||||||||
Derivative liabilities | 1,372,195 | — | 1,372,195 | |||||||||
Other Liabilities | 77,764 | — | 77,764 |
21. | Commitments and Contingencies | |
As described in Note 13, the FHLBanks have joint and several liability for all the consolidated obligations issued on their behalf. Accordingly, should one or more of the FHLBanks be unable to repay their participation in the consolidated obligations, each of the other FHLBanks could be called upon to repay all or part of such obligations, as determined or approved by the Finance Board. Neither the FHLBNY nor any other FHLBank has had to assume or pay the consolidated obligation of another FHLBank. The FHLBNY does not believe that it will be called upon to pay the consolidated obligations of another FHLBank in the future. Under FASB interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, including indirect guarantees of indebtedness of other” (“FIN 45”), FIN 45 would have required FHLBNY to recognize the fair value of the FHLBNY’s joint and several liability for all the consolidated obligations, as discussed above. However, the FHLBNY considers the joint and several liability as similar to a related party guarantee, which meets a scope exception in FIN 45. Accordingly, the FHLBNY has not recognized a liability for its joint and several obligations related to other FHLBanks’ consolidated obligations at June 30, 2005 or December 31, 2004. | ||
Commitments for additional advances totalled approximately $10.2 billion and $10.4 billion as of June 30, 2005 and December 31, 2004. Commitments generally are for periods of up to twelve months. Extension of credit under these commitments is subject to certain collateral requirements and other financial criteria at the time the commitment is drawn upon. Standby letters of credit are executed for members for a fee. A standby letter of credit is a financing arrangement between the FHLBNY and its member. If the FHLBNY is required to make payment for a beneficiary’s draw, |
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these amounts are converted into collateralized advances to the member. Outstanding standby letters of credit were approximately $126.8 million and $119.5 million as of June 30, 2005 and December 31, 2004, respectively and had original terms of up to fifteen years, with a final expiration in 2019. Unearned fees on standby letters of credit are recorded in other liabilities were not significant as of June 30, 2005 and December 31, 2004 Unearned fees for transactions prior to 2003, as well as the value of the guarantees related to standby letters of credit entered into after 2002, are recorded in other liabilities. Based on management’s credit analyses and collateral requirements, the FHLBNY does not deem it necessary to have any provision for credit losses on these commitments and letters of credit. Standby letters of credit are fully collateralized at the time of issuance. The estimated fair values of commitments and letters of credit as of June 30, 2005 and December 31, 2004 approximated the carrying values. | ||
The FHLBNY has entered into standby bond purchase agreements related to securities issued by state housing authorities within its district whereby the FHLBNY, for a fee, agrees to purchase and hold the authorities’ bonds until the designated marketing agent can find a suitable investor or the housing authority repurchases the bonds, according to a schedule established by the standby agreement. Each standby agreement dictates the specific terms that would require the FHLBNY to purchase the bonds. The bond purchase commitments entered into by the FHLBNY expire on August 1, 2005. Some commitments are renewable at the option of the FHLBNY. Total commitments for bond purchases were $543.7 million as of June 30, 2005 and December 31, 2004, with the New York City Transitional Finance Authority. The FHLBNY was not required to purchase any bonds under these agreements since the inception of the commitment. The estimated fair values of standby bond purchase agreements as of June 30, 2005 and December 31, 2004 approximate the carrying value. | ||
Commitments which unconditionally obligate the FHLBNY to fund or purchase mortgage loans under the MPF program totalled $3.5 million and $10.3 million as of June 30, 2005 and December 31, 2004, respectively. Commitments are generally for periods not to exceed 60 days. In accordance with SFAS 149, such commitments entered into after June 30, 2003 were recorded as derivatives at their fair value. In addition, the FHLBNY had entered into conditional agreements under “Master Commitments” with its members in the MPF program to fund or purchase in aggregate $567.3 million and $486.7 million as of June 30, 2005 and December 31, 2004. | ||
The FHLBNY generally executes derivatives with major banks and broker-dealers and generally enters into bilateral collateral agreements. As of June 30, 2005 and December 31, 2004, interest-bearing deposits included $775 million and $1,092 million in cash pledged as collateral to broker-dealers and banks with credit-risk exposure to the FHLBNY related to derivatives. | ||
The FHLBNY charged to operating expenses net rental costs of approximately $0.8 milllion and $1.5 million for the three and six months ended June 30, 2005 and $0.7 million and $1.5 million for the three and six months ended June 30, 2004. Lease agreements for FHLBNY premises generally provide for increases in the basic rentals resulting from increases in property taxes and maintenance expenses. Such increases are not expected to have a material effect on the FHLBNY. |
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The following table summarizes commitments and contingencies as of June 30, 2005 (in thousands): |
Payments due or expiration terms by period as of June 30, 2005 | ||||||||||||||||||||
> 1 year | > 3 years | |||||||||||||||||||
<= 1 year | <= 3 years | <= 5 years | > 5 years | Total | ||||||||||||||||
Contractual Obligations | ||||||||||||||||||||
Consolidated obligations-bonds at par | $ | 20,454,240 | $ | 23,601,945 | $ | 6,976,520 | $ | 3,508,050 | $ | 54,540,755 | ||||||||||
Mandatorily redeemable capital stock | 15,494 | 3,134 | 16,698 | 289 | 35,615 | |||||||||||||||
Premise and equipment (rental and lease obligations) | 2,819 | 5,650 | 4,598 | 16,484 | 29,551 | |||||||||||||||
Total contractual obligations | 20,472,553 | 23,610,729 | 6,997,816 | 3,524,823 | 54,605,921 | |||||||||||||||
Other commitments | ||||||||||||||||||||
Standby letters of credit | 82,309 | 15,705 | 17,053 | 11,699 | 126,766 | |||||||||||||||
Standby bond purchase agreements | 543,721 | — | — | — | 543,721 | |||||||||||||||
Unused lines of credit and other commitments | 10,164,278 | — | — | — | 10,164,278 | |||||||||||||||
Consolidated obligation bonds traded not settled | 631,385 | — | — | — | 631,385 | |||||||||||||||
Open delivery commitments | 3,536 | — | — | — | 3,536 | |||||||||||||||
Total other commitments | 11,425,229 | 15,705 | 17,053 | 11,699 | 11,469,686 | |||||||||||||||
Total commitments | $ | 31,897,782 | $ | 23,626,434 | $ | 7,014,869 | $ | 3,536,522 | $ | 66,075,607 | ||||||||||
The FHLBNY does not anticipate any credit losses from its off-balance sheet commitments and accordingly no provision for loan losses on such commitments is required. | ||
The FHLBNY is subject to legal proceedings arising in the normal course of business. After consultation with legal counsel, the FHLBNY does not anticipate that the ultimate liability, if any, arising out of these matters will have a material effect on the FHLBNY’s financial condition or results of operations. |
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22. | Segment Information | |
The FHLBNY manages its operations as a single business segment. Management and the FHLBNY’s Board of Directors review enterprise-wide financial information in order to make operating decisions and assess performance. | ||
The FHLBNY has a unique cooperative structure and is owned by member institutions located within a defined geographic district. The Bank’s market is the same as its membership district – New Jersey, New York, Puerto Rico, and the U.S. Virgin Islands. Institutions that are members of the FHLBNY must have their principal places of business within this market, but may also operate elsewhere. | ||
The FHLBNY’s primary business is making low-cost, collateralized loans, known as “advances,” to its members. Members use advances as a source of funding to supplement their deposit-gathering activities. As a cooperative, the FHLBNY prices advances at minimal net spreads above the cost of its funding to deliver maximum value to members. | ||
Advances to large members constitute a significant percentage of FHLBNY’s advance portfolio and its source of revenues. | ||
The FHLBNY’s total assets and capital could significantly decrease if one or more large members were to withdraw from membership or decrease business with the Bank. Members might withdraw or reduce their business as a result of consolidating with an institution that was a member of another FHLBank, or for other reasons. The FHLBNY has considered the impact of losing one or more large members. In general, a withdrawing member would be required to repay all indebtedness prior to the redemption of its capital stock. Under current conditions, the FHLBNY does not expect the loss of a large member to impair its operations. Since the FHLBank Act, as modified in 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, 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, in turn, 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. | ||
The following table summarizes advances to the top 5 members at June 30, 2005 (in thousands): |
June 30, 2005 | ||||||||||||
Percent of | ||||||||||||
City | State | Advances | Advances | |||||||||
North Fork Bank | Mattituck | NY | $ | 5,800,015 | 9.10 | % | ||||||
New York Community Bank | Westbury | NY | 5,686,287 | 8.90 | % | |||||||
HSBC Bank USA, National Association | Buffalo | NY | 5,011,737 | 7.90 | % | |||||||
Hudson City Savings Bank | Paramus | NJ | 3,600,000 | 5.70 | % | |||||||
Independence Community Bank* | Brooklyn | NY | 3,333,000 | 5.20 | % | |||||||
$ | 23,431,039 | 36.80 | % | |||||||||
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The following table summarizes advance interest income from the top 5 members and non-members during the three and six months ended June 30, 2005 and 2004 (in thousands): | ||
Three months ended June 30, 2005: |
North Fork Bank | $ | 71,199 | ||
New York Community Bank | 64,942 | |||
HSBC Bank USA, National Association | 38,829 | |||
Independence Community Bank | 34,017 | |||
Hudson City Savings Bank | 33,364 | |||
$ | 242,351 | |||
Three months ended June 30, 2004 |
New York Community Bank | $ | 50,323 | ||
GreenPoint Bank | 38,701 | |||
Independence Community Bank | 36,366 | |||
Hudson City Savings Bank | 30,381 | |||
Astoria Federal Savings and Loan Association | 25,996 | |||
$ | 181,767 | |||
Six months ended June 30, 2005 |
New York Community Bank | $ | 122,121 | ||
North Fork Bank | 112,494 | |||
HSBC Bank USA, National Association | 70,929 | |||
Independence Community Bank | 69,539 | |||
Hudson City Savings Bank | 62,310 | |||
$ | 437,393 | |||
Six months ended June 30, 2004 |
New York Community Bank | $ | 98,751 | ||
North Fork Bank | 75,970 | |||
Hudson City Savings Bank | 62,538 | |||
Astoria Federal Savings and Loan Assoc. | 62,380 | |||
Independence Community Bank | 58,431 | |||
$ | 358,070 | |||
At June 30, 2005, the FHLBNY had 301 members. Interest revenue received from New York Community Bank aggregated $122.1 million or 9.87 % of total revenue for the six months ended June 30, 2005. |
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FF-57
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Federal Home Loan Bank of
New York
December 31, 2004
F-1
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Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of
the Federal Home Loan Bank of New York
In our opinion, the accompanying statements of condition and the related statements of income, capital and cash flows present fairly, in all material respects, the financial position of the Federal Home Loan Bank of New York (the “Bank”) at December 31, 2004 and 2003, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2004 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Bank’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
As discussed in Note 2, the Bank adopted Statement of Financial Accounting Standards No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity, on January 1, 2004.
March 7, 2005, except for the cash flow disclosure under Note 10, as to which the date is June 22, 2005
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Federal Home Loan Bank of New York
Statements of Condition (in thousands, except par values)
December 31, 2004 and 2003
2004 | 2003 | |||||||
Assets | ||||||||
Cash and due from banks (Notes 1 and 3) | $ | 22,376 | $ | 20,793 | ||||
Interest-bearing deposits, includes $1.1 billion pledged at December 31, 2004, and $1.7 billion at December 31, 2003 (Note 4) | 2,806,870 | 1,654,603 | ||||||
Federal funds sold | 2,972,000 | 1,143,000 | ||||||
Available-for-sale securities, net of unrealized gain of $2.2 million at December 31, 2004 and $0 at December 31, 2003 (Note 6) | 713,363 | — | ||||||
Held-to-maturity securities, includes $0 pledged at December 31, 2004 and 2003 (Note 5) | 11,870,674 | 11,359,367 | ||||||
Advances (Note 7) | 68,507,487 | 63,923,184 | ||||||
Mortgage loans, net of allowance for credit losses of $507 at December 31, 2004, and December, 2003 (Note 9) | 1,178,083 | 671,644 | ||||||
Loans to other FHL Banks (Note 10) | — | 60,000 | ||||||
Accrued interest receivable | 315,768 | 287,827 | ||||||
Premises and equipment, net | 13,030 | 15,921 | ||||||
Derivative assets (Note 19) | 11,048 | 59,240 | ||||||
Other assets | 28,261 | 34,850 | ||||||
Total assets | $ | 88,438,960 | $ | 79,230,429 | ||||
Liabilities and capital | ||||||||
Liabilities | ||||||||
Deposits (Note 11) | ||||||||
Interest-bearing demand | $ | 2,194,359 | $ | 1,960,800 | ||||
Non-interest bearing demand | 1,660 | 971 | ||||||
Term | 101,000 | 138,450 | ||||||
Total deposits | 2,297,019 | 2,100,221 | ||||||
Consolidated obligations, net (Note 13) | ||||||||
Bonds | 60,515,356 | 54,051,869 | ||||||
Discount Notes | 19,641,626 | 16,804,767 | ||||||
Total consolidated obligations | 80,156,982 | 70,856,636 | ||||||
Mandatorily redeemable capital stock (Notes 14 and 15) | 126,581 | — | ||||||
Accrued interest payable | 437,743 | 426,437 | ||||||
Affordable Housing Program (Notes 1 and 8) | 81,580 | 92,541 | ||||||
Payable to REFCORP (Notes 1 and 8) | 9,966 | — | ||||||
Derivative liabilities (Note 19) | 1,372,195 | 1,913,274 | ||||||
Other liabilities | 77,764 | 77,929 | ||||||
Total liabilities | 84,559,830 | 75,467,038 | ||||||
Commitments and Contingencies (Notes 8, 13, 19 and 21) | ||||||||
Capital (Notes 1, 14 and 15) | ||||||||
Capital stock ($100 par value), putable, issued and outstanding 36,550 at December 31, 2004, and 36,386 at December 31, 2003 | 3,655,047 | 3,638,720 | ||||||
Unrestricted retained earnings | 223,434 | 126,697 | ||||||
Accumulated other comprehensive income (loss) - (Note 16) | ||||||||
Net unrealized gain on available-for-sale securities | 2,240 | — | ||||||
Net unrealized gain (loss) on hedging activities | 898 | (13 | ) | |||||
Additional minimum liability on benefits equalization plan | (2,489 | ) | (2,013 | ) | ||||
Total capital | 3,879,130 | 3,763,391 | ||||||
Total liabilities and capital | $ | 88,438,960 | $ | 79,230,429 | ||||
The accompanying notes are an integral part of these financial statements.
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Federal Home Loan Bank of New York
Statements of Income (in thousands, except per share data)
Years Ended December 31, 2004, 2003 and 2002
2004 | 2003 | 2002 | ||||||||||
Interest income | ||||||||||||
Advances (Note 7) | $ | 1,247,568 | $ | 1,292,990 | $ | 1,684,716 | ||||||
Interest-bearing deposits | 61,096 | 67,113 | 113,778 | |||||||||
Federal funds sold | 16,434 | 16,493 | 46,326 | |||||||||
Available-for-sale securities (Note 6) | 7,797 | — | — | |||||||||
Held-to-maturity securities (Note 5) | 545,660 | 652,207 | 725,126 | |||||||||
Mortgage loans and participations, including fees (Note 9) | 48,291 | 29,099 | 26,413 | |||||||||
Loans to other FHLBanks (Note 10) | 78 | 2,491 | 2,995 | |||||||||
Other | 48 | 62 | 17 | |||||||||
Total interest income | 1,926,972 | 2,060,455 | 2,599,371 | |||||||||
Interest expense | ||||||||||||
Consolidated obligations (Note 13) | 1,631,221 | 1,733,663 | 2,167,227 | |||||||||
Deposits (Note 11) | 21,913 | 27,977 | 43,460 | |||||||||
Other borrowings (Note 12) | 5,312 | 268 | 103 | |||||||||
Cash collateral held | 34 | 24 | 363 | |||||||||
Total interest expense | 1,658,480 | 1,761,932 | 2,210,153 | |||||||||
Net interest income before provision for credit losses | 268,492 | 298,523 | 389,218 | |||||||||
Provision for credit losses on mortgage loans | — | 79 | 235 | |||||||||
Net interest income after provision for credit losses | 268,492 | 298,444 | 388,983 | |||||||||
Other income | ||||||||||||
Service fees | 4,751 | 4,936 | 4,103 | |||||||||
Net realized and unrealized gain (loss) on derivatives and hedging activities (Notes 1 and 19) | 8,274 | (827 | ) | (9,712 | ) | |||||||
Net realized loss from sale of held-to-maturity securities (Note 5) | — | (189,226 | ) | — | ||||||||
Other, net (Note 13) | (4,059 | ) | — | (26,994 | ) | |||||||
Total other income | 8,966 | (185,117 | ) | (32,603 | ) | |||||||
Other expenses | ||||||||||||
Operating | 51,103 | 47,749 | 39,014 | |||||||||
Finance Board and Office of Finance (Note 1) | 4,812 | 4,964 | 4,399 | |||||||||
Other | — | (1,746 | ) | (5,656 | ) | |||||||
Total other expenses | 55,915 | 50,967 | 37,757 | |||||||||
Income before assessments | 221,543 | 62,360 | 318,623 | |||||||||
Affordable Housing Program (Notes 1 and 8) | 18,643 | 5,091 | 26,010 | |||||||||
REFCORP (Notes 1 and 8) | 40,319 | 11,453 | 58,523 | |||||||||
Total assessments | 58,962 | 16,544 | 84,533 | |||||||||
Income before cumulative effect of change in accounting principle | 162,581 | 45,816 | 234,090 | |||||||||
Cumulative effect of change in accounting principle (Note 2) | (1,305 | ) | — | — | ||||||||
Net income | $ | 161,276 | $ | 45,816 | $ | 234,090 | ||||||
Basic earnings per share: (Note 17) | ||||||||||||
Earnings before cumulative effect of change in accounting principle | $ | 4.59 | $ | 1.12 | $ | 6.21 | ||||||
Cumulative effect of change in accounting principle | (0.04 | ) | — | — | ||||||||
Net earnings per share | $ | 4.55 | $ | 1.12 | $ | 6.21 | ||||||
The accompanying notes are an integral part of these financial statements.
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Federal Home Loan Bank of New York
Statements of Capital (in thousands, except per share data)
Years Ended December 31, 2004, 2003 and 2002
Accumulated | ||||||||||||||||||||||||
Other | Total | |||||||||||||||||||||||
Capital Stock* | Retained | Comprehensive | Total | Comprehensive | ||||||||||||||||||||
Shares | Par Value | Earnings | Income(Loss) | Capital | Income | |||||||||||||||||||
Balance, December 31, 2001 | 37,329 | $ | 3,732,980 | $ | 177,008 | $ | — | $ | 3,909,988 | |||||||||||||||
Proceeds from sale of capital stock | 9,679 | 967,926 | — | — | 967,926 | |||||||||||||||||||
Redemption of capital stock | (6,497 | ) | (649,724 | ) | — | — | (649,724 | ) | ||||||||||||||||
Net income | — | — | 234,090 | — | 234,090 | $ | 234,090 | |||||||||||||||||
Cash dividends ($4.51 per share) on capital stock | — | — | (166,662 | ) | — | (166,662 | ) | |||||||||||||||||
$ | 234,090 | |||||||||||||||||||||||
Balance, December 31, 2002 | 40,511 | 4,051,182 | 244,436 | — | 4,295,618 | |||||||||||||||||||
Proceeds form sale of capital stock | 15,080 | 1,508,038 | — | — | 1,508,038 | |||||||||||||||||||
Redemption of capital stock | (19,205 | ) | (1,920,500 | ) | — | — | (1,920,500 | ) | ||||||||||||||||
Net income | — | — | 45,816 | — | 45,816 | $ | 45,816 | |||||||||||||||||
Other comprehensive loss | ||||||||||||||||||||||||
Net unrealized gain (loss) on hedging activity | — | — | — | (13 | ) | (13 | ) | (13 | ) | |||||||||||||||
Additional minimum liability on Benefit Equalization Plan | — | — | — | (2,013 | ) | (2,013 | ) | (2,013 | ) | |||||||||||||||
Cash dividends ($3.97 per share) on capital stock | — | — | (163,555 | ) | — | (163,555 | ) | |||||||||||||||||
$ | 43,790 | |||||||||||||||||||||||
Balance, December 31, 2003 | 36,386 | 3,638,720 | 126,697 | (2,026 | ) | 3,763,391 | ||||||||||||||||||
Proceeds from sale of capital stock | 21,742 | 2,174,170 | — | — | 2,174,170 | |||||||||||||||||||
Redemption of capital stock | (17,999 | ) | (1,799,956 | ) | — | — | (1,799,956 | ) | ||||||||||||||||
Net shares reclassified to mandatorily redeemable capital stock | (3,579 | ) | (357,887 | ) | (357,887 | ) | ||||||||||||||||||
Net income | 161,276 | — | 161,276 | $ | 161,276 | |||||||||||||||||||
Other comprehensive income (loss) | ||||||||||||||||||||||||
Net unrealized gain on available-for-sale securities | 2,240 | 2,240 | 2,240 | |||||||||||||||||||||
Net unrealized gain (loss) on hedging activities | — | — | — | 911 | 911 | 911 | ||||||||||||||||||
Additional minimum liability on Benefit Equalization Plan | — | — | — | (476 | ) | (476 | ) | (476 | ) | |||||||||||||||
Cash dividends ($1.83 per share) on capital stock | — | — | (64,539 | ) | (64,539 | ) | ||||||||||||||||||
$ | 163,951 | |||||||||||||||||||||||
Balance, December 31, 2004 | 36,550 | $ | 3,655,047 | $ | 223,434 | $ | 649 | $ | 3,879,130 | |||||||||||||||
* | Putable |
The accompanying notes are an integral part of these financial statements.
F-5
Table of Contents
Federal Home Loan Bank of New York
Statements of Cash Flows (in thousands)
Years Ended December 31, 2004, 2003 and 2002
2004 | 2003 | 2002 | ||||||||||
Operating activities | ||||||||||||
Net Income | $ | 161,276 | $ | 45,816 | $ | 234,090 | ||||||
Cumulative effect of change in accounting principle | 1,305 | — | — | |||||||||
Income before cumulative effect of change in accounting principle | 162,581 | 45,816 | 234,090 | |||||||||
Adjustments to reconcile net income before cumulative effect of change in accounting principle to net cash provided by (used in) operating activities | ||||||||||||
Depreciation and amortization | ||||||||||||
Net premiums and discounts on consolidated obligations, investments, and mortgage loans | (1,969 | ) | (37,759 | ) | 162,650 | |||||||
Concessions on consolidated obligations | 14,440 | 25,809 | 23,565 | |||||||||
Amortization of basis on hedges | (3,055 | ) | (133 | ) | (725 | ) | ||||||
Premises and equipment | 3,990 | 3,714 | 2,635 | |||||||||
Provision for credit losses on mortgage loans | — | 79 | 235 | |||||||||
Net realized losses on sale of held-to-maturity securities | — | 189,226 | — | |||||||||
Loss (gain) due to change in net fair value adjustments on derivatives and hedging activities | 1,245 | 2,502 | 1,882 | |||||||||
Losses on extinguishment of debt | 4,184 | — | 26,093 | |||||||||
(Decrease) increase in accrued interest receivable | (27,941 | ) | 89,382 | 279 | ||||||||
(Decrease) increase in derivative assets, net accrued interest | (455 | ) | 39,930 | 71,000 | ||||||||
(Decrease) increase in derivative liabilities, net accrued interest | (14,952 | ) | (11,193 | ) | 17,968 | |||||||
Decrease in other assets | (8,026 | ) | (13,707 | ) | (30,888 | ) | ||||||
(Decrease) increase in Affordable Ho using Program liability and discount on AHP advances | (10,961 | ) | (17,308 | ) | 5,174 | |||||||
Increase (decrease) in accrued interest payable | 11,306 | (113,044 | ) | (92,057 | ) | |||||||
Increase (decrease) in REFCORP liability | 9,966 | (13,846 | ) | (6,460 | ) | |||||||
(Decrease) increase in other liabilities | (165 | ) | 38,230 | (11,719 | ) | |||||||
Total adjustments | (22,393 | ) | 181,882 | 169,632 | ||||||||
Net cash provided by operating activities | 140,188 | 227,698 | 403,722 | |||||||||
Investing activities | ||||||||||||
Net (increase) decrease in interest-bearing deposits | (1,152,991 | ) | 5,994,891 | (1,733,219 | ) | |||||||
Net (increase) decrease in Federal funds sold | (1,829,000 | ) | 1,789,000 | (1,498,000 | ) | |||||||
Proceeds from sale of held-to-maturity securities | — | 1,597,881 | — | |||||||||
Purchase of held-to-maturity securities | (4,036,184 | ) | (4,815,770 | ) | (4,634,517 | ) | ||||||
Proceeds from maturities of held-to-maturity securities | 3,512,602 | 4,634,611 | 3,470,860 | |||||||||
Purchase of available-for-sale securities | (711,130 | ) | — | — | ||||||||
Principal collected on advances | 533,224,883 | 845,456,110 | 820,551,704 | |||||||||
Advances made | (538,667,268 | ) | (841,209,805 | ) | (826,905,941 | ) | ||||||
Purchase of mortgage loans held for investment | (654,856 | ) | (870,668 | ) | (208,987 | ) | ||||||
Principal collected on mortgage loans held for investment | 145,882 | 632,602 | 198,003 | |||||||||
Principal collected on other loans made | 175 | 161 | 162 | |||||||||
Net decrease (increase) in deposits with other FHLBanks’ mortgage programs | 724 | (474 | ) | 18 | ||||||||
(Increase) in premises and equipment | (1,098 | ) | (4,989 | ) | (9,503 | ) | ||||||
Net cash (used in) provided by investing activities | (10,168,261 | ) | 13,203,550 | (10,769,420 | ) | |||||||
The accompanying notes are an integral part of these financial statements.
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Federal Home Loan Bank of New York
Statements of Cash Flows (in thousands)
Years Ended December 31, 2004, 2003 and 2002
2004 | 2003 | 2002 | ||||||||||
Financing activities | ||||||||||||
Net increase (decrease) in deposits | 196,798 | (642,456 | ) | (119,185 | ) | |||||||
Net proceeds from issuance of consolidated obligation bonds | 29,544,145 | 44,534,244 | 44,339,349 | |||||||||
Net proceeds from issuance of consolidated obligation discount notes | 961,591,191 | 1,023,313,238 | 533,019,759 | |||||||||
Payments for maturing consolidated obligation bonds | (22,585,164 | ) | (51,570,185 | ) | (33,133,118 | ) | ||||||
Payments for maturing/retiring consolidated obligation discount notes | (958,794,378 | ) | (1,028,534,705 | ) | (533,840,698 | ) | ||||||
Proceeds from issuance of capital stock | 2,174,169 | 1,508,038 | 967,926 | |||||||||
Payments for redemption of capital stock | (1,799,955 | ) | (1,920,500 | ) | (649,724 | ) | ||||||
Payments for redemption of mandatorily redeemable capital stock | (231,306 | ) | . | — | ||||||||
Cash dividends paid | (65,844 | ) | (163,555 | ) | (166,662 | ) | ||||||
Net cash provided by (used in) financing activities | 10,029,656 | (13,475,881 | ) | 10,417,647 | ||||||||
Net increase (decrease) in cash and cash equivalents | 1,583 | (44,633 | ) | 51,949 | ||||||||
Cash and cash equivalents at beginning of the period | 20,793 | 65,426 | 13,477 | |||||||||
Cash and cash equivalents at end of the period | $ | 22,376 | $ | 20,793 | $ | 65,426 | ||||||
Supplemental disclosures | ||||||||||||
Interest paid | $ | 1,116,132 | $ | 2,046,886 | $ | 1,919,101 | ||||||
AHP payments* | 30,266 | 22,398 | 20,836 | |||||||||
REFCORP payments | 15,437 | 40,085 | 64,983 |
*AHP payments = (beginning accrual - ending accrual) + AHP assessment for the year, and represents funds released to the AHP program. |
The accompanying notes are an integral part of these financial statements.
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Federal Home Loan Bank of New York
Notes to Financial Statements
Background Information
The Federal Home Loan Bank of New York (“FHLBNY” or the “Bank”), a federally chartered corporation, is one of 12 district Federal Home Loan Banks (“FHLBanks”). The FHLBanks serve the public by enhancing the availability of credit for residential mortgages and targeted community development. The FHLBNY provides a readily available, low-cost source of funds to its member institutions. The FHLBNY is a cooperative, which means that current members own nearly all of the outstanding capital stock of the FHLBNY and may receive dividends on their investment. Regulated financial depositories and insurance companies engaged in residential housing finance may apply for membership.
Former members own the remaining capital stock to support business transactions still carried on the FHLBNY’s Statement of Condition. All members must purchase stock in the FHLBNY. As a result of these requirements, the FHLBNY conducts business with related parties in the normal course of business. As is the nature of a cooperative, the FHLBNY considers all members as related parties in addition to other FHLBanks. See Note 10 for more information.
The Federal Housing Finance Board (“Finance Board”), an independent agency in the executive branch of the United States Government, supervises and regulates the FHLBanks and the Office of Finance. The Finance Board’s principal purpose is to ensure that the FHLBanks operate in a safe and sound manner. In addition, the Finance Board ensures that the FHLBanks carry out their housing finance mission, remain adequately capitalized, and can raise funds in the capital markets. Also, the Finance Board establishes policies and regulations covering the operations of the FHLBanks. Each FHLBank operates as a separate entity with its own management, employees, and board of directors. The FHLBNY does not have any special purpose entities or any other type of off-balance sheet conduits.
The FHLBanks’ debt instruments (“consolidated obligations”) are the joint and several obligations of all the FHLBanks and are the primary source of funds for the FHLBanks. Deposits, other borrowings, and capital stock issued to members provide other funds. The FHLBanks primarily use these funds to provide advances to members and to purchase loans from members through its Mortgage Purchase Program (“MPP”)/Mortgage Partnership Finance® (MPF®) program. Some FHLBanks also provide member institutions with correspondent services, such as wire transfer, security safekeeping, and settlement.
1. | Summary of Significant Accounting Policies |
Use of Estimates
The preparation of financial statements requires management to make assumptions and estimates. These assumptions and estimates affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities and the reported amounts of income and expense. Actual results could differ from these estimates.
Federal Funds Sold
Federal funds sold represents short-term, unsecured lending to major banks. The amount of unsecured credit risk that may be extended to individual counterparties is commensurate with the counterparty’s credit quality, which is determined by credit ratings of counterparty’s debt securities or deposits as reported by nationally recognized statistical rating organizations. Federal funds sold are recorded at cost on settlement date, and interest is accrued using contractual rates.
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Federal Home Loan Bank of New York
Notes to Financial Statements
Investments
The FHLBNY carries, at cost, investments for which it has both the ability and intent to hold to maturity, adjusted for the amortization of premiums and accretion of discounts using the level-yield method.
Under Statement of Financial Accounting Standards No. 115, “Accounting for Certain Investments in Debt and Equity Securities,” (“SFAS 115”) changes in circumstances may cause the FHLBNY to change its intent to hold a certain security to maturity without calling into question its intent to hold other debt securities to maturity in the future. Thus, the sale or transfer of a held-to-maturity security due to certain changes in circumstances, such as evidence of significant deterioration in the issuer’s creditworthiness or changes in regulatory requirements, is not considered to be inconsistent with its original classification. Other events that are isolated, nonrecurring, and unusual for the FHLBNY that could not have been reasonably anticipated may cause the FHLBNY to sell or transfer a held-to-maturity security without necessarily calling into question its intent to hold other debt securities to maturity.
In addition, in accordance with SFAS 115, sales of debt securities that meet either of the following two conditions may be considered as maturities for purposes of the classification of securities: 1) the sale occurs near enough to its maturity date (or call date if exercise of the call is probable) that interest rate risk is substantially eliminated as a pricing factor and the changes in market interest rates would not have a significant effect on the security’s fair value, or 2) the sale of a security occurs after the FHLBNY has already collected a substantial portion (at least 85 percent) of the principal outstanding at acquisition due either to prepayments on the debt security or to scheduled payments on a debt security payable in equal instalments (both principal and interest) over its term.
The FHLBNY classifies certain investments that it may sell before maturity as available-for-sale and carries them at fair value. The change in fair value of the available-for-sale securities not being hedged by derivative instruments is recorded in other comprehensive income as a net unrealized gain or loss on available-for-sale securities. For available-for-sale securities that have been hedged under a qualifying fair value hedge, the FHLBNY records the portion of the change in value related to the risk being hedged in other income as “net realized and unrealized gain (loss) on derivatives and hedging activities” together with the related change in the fair value of the derivative, and records the remainder of the change in other comprehensive income as “net unrealized gain (loss) on available-for-sale securities.” For available-for-sale securities that have been hedged under a qualifying cash flow hedge, the FHLBNY records the effective portion of the change in value of the derivative related to the risk being hedged in other comprehensive income as a “net unrealized gain (loss) on hedging activities.” The ineffective portion is recorded in other income and presented as “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 securities. The estimated life method requires a retrospective adjustment of the effective yield each time the FHLBNY changes the estimated life as if the new estimate had been known since the original acquisition date of the asset.
The FHLBNY computes the amortization and accretion of premiums and discounts on other investments using the level-yield method to the contractual maturity of the securities.
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Federal Home Loan Bank of New York
Notes to Financial Statements
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. The FHLBNY treats securities purchased under agreements to resell as collateralized financings.
The FHLBNY regularly evaluates outstanding investments for impairment and determines if unrealized losses are temporary based in part on the creditworthiness of the issuers and the underlying collateral as well as a determination of the FHLBNY’s intent to hold such securities through to recovery of the unrealized losses. If there is an other-than-temporary impairment in value of an investment, the decline in value is recognized as a loss and presented in the Statement of Income as a loss on securities. The FHLBNY has not experienced any other-than-temporary impairment in value of investments during 2004, 2003 or 2002.
Advances
The FHLBNY presents advances, net of unearned commitment fees and discounts on advances for the Affordable Housing Program (AHP), as discussed below. The FHLBNY credits interest on advances to income as earned using the interest method. Following the requirements of the Federal Home Loan Bank Act of 1932 (the “Act”), as amended, the FHLBNY obtains sufficient collateral on advances to protect it from losses. The Act limits eligible collateral to certain investment securities, residential mortgage loans, cash or deposits with the FHLBNY, and other eligible real estate-related assets. As Note 7 more fully describes, community financial institutions (FDIC-insured institutions with assets of $548 million or less during 2004) are subject to more expanded statutory collateral rules for small business and agricultural loans. The FHLBNY has not incurred any credit losses on advances since its inception. Based upon of the collateral held as security on the advances and repayment history, management of the FHLBNY believes that an allowance for credit losses on advances is unnecessary.
Mortgage Loans and Participations
The FHLBNY participates in the MPF program by purchasing 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 aggregate about 2% of the remaining outstanding mortgage loans held for investment at December 31, 2004. The FHLBNY manages the liquidity, interest rate and prepayment option risk of the MPF loans, while the members retain servicing activities. The FHLBNY and the PFI share the credit risks of the uninsured MPF loans by structuring potential credit losses into layers. Collectibility of the loans is first supported by liens on the real estate securing the loan. For conventional mortgage loans, additional loss protection is provided by private mortgage insurance (“PMI”) 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 First Loss Account (“FLA”), for which the maximum exposure is estimated to be $11.7 million and $5.6 million at December 31, 2004 and 2003. The aggregate amount of FLA is memorialized and tracked but is neither recorded nor reported as a loan loss reserve in the FHLBNY’s financial statements. If “second losses” beyond this layer are incurred, they are absorbed through a credit enhancement provided by the PFI. The credit enhancement held by PFIs ensures that the lender retains a credit stake in the loans it originates. For managing this risk, PFIs receive monthly “credit enhancement fees” from the FHLBNY.
The amount of the credit enhancement is computed with the use of a Standard & Poor’s model to determine the amount of credit enhancement necessary to bring a pool of uninsured loans to “AA” credit risk. The credit enhancement becomes an obligation of the PFI. For taking on the credit enhancement obligation, the PFI receives a credit enhancement fee that is paid by the FHLBNY.
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Federal Home Loan Bank of New York
Notes to Financial Statements
For certain MPF products, the credit enhancement fee is accrued and paid each month. For other MPF products, the credit enhancement fee is accrued monthly and is paid monthly after the FHLBNY has accrued 12 months of credit enhancement fees.
Delivery commitment fees are charged to a PFI for extending the scheduled delivery period of the loans. Pair - off fees may be assessed and charged to PFI when the settlement of the delivery commitment 1) fails to occur, or 2) the principal amount of the loan purchased by the FHLBNY under a delivery commitment is not equal to the contract amount beyond established limits. The related amounts are not significant for all periods reported.
The FHLBNY defers and amortizes premiums and discounts as interest income over the estimated life of the related mortgage loans. The FHLBNY aggregates the mortgage loans by similar characteristics (type, maturity, and note rate) in determining prepayment estimates. The FHLBNY records credit enhancement fee expense in interest income from mortgage loans, and records other non-origination fees, such as delivery commitment extension fees and pair-off fees, in Other income. The FHLBNY classifies mortgage loans as held-for-investment and, accordingly, reports them at their principal amount outstanding, net of premiums and discounts.
The FHLBNY places a mortgage loan on non-accrual status when the collection of the contractual principal or interest is 90 days or more past due. When a mortgage loan is placed on non-accrual status, accrued but uncollected interest is reversed against interest income. The FHLBNY records cash payments received on non-accrual loans as interest income and a reduction of principal.
Allowance for loan losses - Management performs periodic reviews of its portfolio to identify the losses inherent within the portfolio and to determine the likelihood of collection of the portfolio. Mortgage loans, that are 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.
If adversely classified, or on non-accrual status, reserves for mortgage loans, except FHA and VA insured loans, are analyzed under liquidation scenarios on a loan level basis, and identified losses greater than $1,000 are fully reserved. FHA and VA insured mortgage loans have minimal inherent credit risk; risk generally arises mainly from the servicer defaulting on their obligations. FHA and VA mortgage loans, if adversely classified, will have reserves established only in the event of a default of a PFI. Reserves are based on the estimated costs to recover any uninsured portion of the MPF loan.
Management of the FHLBNY identifies inherent losses through analysis of the conventional loans (not FHA and VA insured loans) that are not classified or past due. In the absence of historical loss data, the practice is to look at loss histories of pools of loans, at other financial institutions, with similar characteristics to determine a reasonable basis for loan loss allowance. Management continues to evaluate this practice for appropriateness.
The FHLBNY also holds participation interest in residential and community development mortgage loans through its pilot Community Mortgage Asset (“CMA”) program. Acquisition of participations under the CMA program were suspended indefinitely in November 2001, and was down to $12.4 million at 2004. 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
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Federal Home Loan Bank of New York
Notes to Financial Statements
estimated liquidation value of the collateral (after sale value) from the current remaining balance of the CMA Loan.
The FHLBNY has established an allowance for credit losses in the amount of $507,000 as of December 31, 2004 and 2003.
Affordable Housing Program
The FHLBank Act requires each FHLBank to establish and fund an AHP (see Note 8). The FHLBNY charges the required funding for AHP to earnings and establishes a liability. The AHP funds provide subsidies to members to assist in the purchase, construction, or rehabilitation of housing for very low-, low-, and moderate-income households. The FHLBNY also issues AHP advances at interest rates below the customary interest rate for non-subsidized advances. When the FHLBNY makes an AHP advance, the present value of the variation in the cash flow caused by the difference between the AHP advance interest rate and the Bank’s related cost of funds for comparable maturity funding is charged against the AHP liability. It is then recorded as a discount on the AHP advance. The amount of such discounts recognized was inconsequential for all years reported. As an alternative, the FHLBNY has the authority to make the AHP subsidy available to members as a grant.
AHP Assessment is based on a fixed percentage of annual net income before assessments and before adjustment for dividends associated with mandatorily redeemable capital stock reported as an expense under SFAS 150. “Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity”. If the FHLBNY incurs a loss for the entire year, no assessment or assessment credit is due or accrued.
Prepayment Fees
The FHLBNY charges its members a prepayment fee when members prepay certain advances before the original maturity. The FHLBNY reports prepayment fees associated with hedged advances and the corresponding gains or losses from the termination of the advances in interest income from advances. Prepayment fees not associated with hedged advances are also reported in interest income from advances.
When terms are modified for an existing advance, the FHLBNY evaluates whether the advance meets the criteria to qualify as a modification of an existing advance or a new advance. If the advance qualifies as a modification, the net fee on the prepaid advance is deferred, recorded in the basis of the advance, and amortized over the life of the modified advance. This amortization is recorded in advance interest income. If the modified advance is hedged, it is marked to fair value after the amortization of the basis adjustment. This amortization results in offsetting amounts being recorded in Interest income and Net realized and unrealized gain (loss) on derivatives and hedging activities in Other income. Amortization amounted to $3,785,000, $3,213,000, and $99,500 for the years ended December 31, 2004, 2003 and 2002 and are reported in Net unrealized and realized gain (loss) on derivatives and hedging activities.
If the advance is determined to be a new advance, net prepayment fees are recorded in interest income from advances.
Commitment Fees
The FHLBNY records the present value of fees receivable from standby letters of credit as an asset and an offsetting liability for the obligation to stand ready. Fees, which are generally received for one year in advance, are recorded as unrecognized standby commitment fees (deferred credit) and
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Federal Home Loan Bank of New York
Notes to Financial Statements
amortized monthly over the commitment period. The amount of fees is not significant for all periods reported. | ||||
Derivatives Accounting for derivatives is addressed in Statement of Financial Accounting Standards (SFAS) No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended by SFAS No. 137, Accounting for Derivative Instruments and Hedging Activities – Deferral of Effective Date of FASB Statement No. 133, SFAS No. 138, Accounting for Certain Derivative Instruments and Certain Hedging Activities, and SFAS No. 149, Amendment of Statement 133 on Derivative Instruments and Hedging Activities (herein referred to as “SFAS 133”). All derivatives are recognized on the balance sheet at their fair values. Each derivative is designated as one of the following: |
(1) | a hedge of the fair value of a recognized asset or liability or an unrecognized firm commitment (a “fair value” hedge); | |||
(2) | a hedge of a forecasted transaction or the variability of cash flows that are to be received or paid in connection with a recognized asset or liability (a “cash flow” hedge); | |||
(3) | a hedge of the foreign currency component of a hedged item in a fair value or cash flow hedge; | |||
(4) | a non-qualifying hedge of an asset or liability (“economic hedge”) for asset-liability management purposes; or | |||
(5) | a non-qualifying hedge of another derivative (an “intermediation” hedge) that is offered as a product to members or used to offset other derivatives with non-member counterparties. |
Changes in the fair value of a derivative not qualifying as a hedge are recorded in current period earnings with no fair value adjustment to an asset or liability. Both the net interest on the derivative and the fair value adjustments are recorded in other income as “net realized and unrealized gain (loss) on derivatives and hedging activities.” | ||||
The FHLBNY routinely issues debt and makes advances in which a derivative instrument is “embedded.” Upon execution of these transactions, the FHLBNY assesses whether the economic characteristics of the embedded derivative are clearly and closely related to the economic characteristics of the remaining component of the advance or debt (the host contract) and whether a separate, non-embedded instrument with the same terms as the embedded instrument would meet the definition of a derivative instrument. If the FHLBNY determines that (1) the embedded derivative has economic characteristics that are not clearly and closely related to the economic characteristics of the host contract and (2) a separate, stand-alone instrument with the same terms would qualify as a derivative instrument, the embedded derivative would be separated from the host contract, carried at fair value. However, if the entire contract (the host contract and the embedded derivative) is to be measured at fair value, with changes in fair value reported in current earnings (such as an investment security classified as “trading” under SFAS 115, Accounting for Certain Investments in Debt and Equity Securities), or if the FHLBNY cannot reliably identify and measure the embedded derivative for purposes of separating that derivative from its host contract, the entire contract would be carried on the balance sheet at fair value and no portion of the contract is designated as a hedging instrument. | ||||
When hedge accounting is discontinued because the FHLBNY determines that the derivative no longer qualifies as an effective fair value hedge of an existing hedged item, the FHLBNY continues to carry the derivative on the balance sheet at its fair value, ceases to adjust the hedged asset or liability for changes in fair value, and begins amortizing the cumulative basis adjustment on the |
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Federal Home Loan Bank of New York
Notes to Financial Statements
hedged item into earnings over the remaining life of the hedged item using a method which closely approximates the level-yield methodology.
When hedge accounting is discontinued because the FHLBNY determines that the derivative no longer qualifies as an effective cash flow hedge of an existing hedged item, the FHLBNY continues to carry the derivative on the balance sheet at its fair value and reclassifies the cumulative other comprehensive income adjustment to earnings when earnings are affected by the existing hedge item, which is the original forecasted transaction.
Under limited circumstances, when the FHLBNY discontinues cash flow hedge accounting because it is no longer probable that the forecasted transaction will occur in the originally expected period plus the following two months, but it is probable the transaction will still occur in the future, the gain or loss on the derivative remains in accumulated other comprehensive income and is recognized as earnings when the forecasted transaction affects earnings. However, if it is probable that a forecasted transaction will not occur by the end of the originally specified time period or within two months after that, the gains and losses that were accumulated in other comprehensive income are recognized immediately in earnings.
When hedge accounting is discontinued because the hedged item no longer meets the definition of a firm commitment, the FHLBNY continues to carry the derivative on the balance sheet at its fair value, removing from the balance sheet any asset or liability that was recorded to recognize the firm commitment and recording it as a gain or loss in current period earnings.
During the second quarter of 2004, the FHLBNY changed its manner of assessing effectiveness for certain highly-effective hedging relationship transactions used since the adoption of SFAS 133 on January 1, 2001. See Note 2 for more information.
Mandatorily Redeemable Capital Stock
The FHLBanks adopted SFAS 150, “Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity (“SFAS 150”) as of January 1, 2004. In compliance with SFAS 150, the FHLBNY reclassifies stock subject to redemption from equity to liability once a member exercises a written redemption right, gives notice of intent to withdraw from membership, or attains non-member status by merger or acquisition, charter termination, or involuntary termination from membership. Shares of capital stock meeting this definition are reclassified to a liability at fair value. Unpaid dividends related to capital stock classified as a liability are accrued at the expected dividend rate and reported as interest expense in the Statements of Income. The repayment of these mandatorily redeemable financial instruments is reflected as a cash outflow in the financing activities section of the Statements of Cash Flows.
The FHLBNY reports capital stock subject to mandatory redemption at the redemption value of the stock, which is par plus accrued dividends. The FHLBanks have a unique cooperative structure. Stocks can only be acquired by members at par value and redeemed at par value. Stock is not traded and no market mechanism exists for the exchange of stock outside the cooperative structure.
Premises and Equipment
The FHLBNY recorded premises and equipment at cost less accumulated depreciation and amortization of approximately $13,030,000, and $15,921,000 as of December 31, 2004, and December 31, 2003. Depreciation and amortization expense was $3,990,000, $3,714,000, and $2,635,000 for the years ended December 31, 2004, 2003 and 2002. The FHLBNY computes depreciation and amortization using the straight-line method over the estimated useful lives of
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Federal Home Loan Bank of New York
Notes to Financial Statements
assets ranging from three to thirteen years. It amortizes leasehold improvements on the straight-line basis over the shorter of the estimated useful life of the improvement or the remaining term of the lease. The Bank capitalizes improvements and major renewals but expenses ordinary maintenance and repairs when incurred. The FHLBNY includes gains and losses on disposal of premises and equipment in Other income. The net realized gain (loss) on disposal of premises and equipment was not significant in 2004, 2003 and 2002.
Concessions on Consolidated Obligations
The FHLBNY defers and amortizes concessions over the contractual maturity of the bonds, using a methodology which closely approximates the level-yield method. Concessions are paid to dealers in connection with the sale of consolidated obligation bonds. The Office of Finance prorates the amount of the concession to the FHLBNY based upon the percentage of the debt issued that is assumed by the FHLBNY. Unamortized concessions were $20,127,00, and $16,975,000 as of December 31, 2004, and 2003 and were included in Other assets. Amortization of such concessions, included in consolidated obligation interest expense, totaled $16,669,000, $27,916,700, and $25,921,300 for the years ended December 31, 2004, 2003 and 2002. The FHLBNY charges to expense as incurred the concessions applicable to the sale of consolidated obligation discount notes because of their short maturities. These amounts are also recorded in consolidated obligations interest expense.
Discounts and Premiums on Consolidated Obligations
The FHLBNY expenses the discounts on consolidated obligation discount notes, using the level-yield method, over the term of the related notes and amortizes the discounts and premiums on callable and non-callable consolidated bonds, also using the level-yield method, over the term to maturity of the consolidated obligation bonds.
Resolution Funding Corporation (REFCORP) Assessments
Although the FHLBNY is exempt from ordinary federal, state, and local taxation except for local real estate tax, it is required to make payments to REFCORP. Each FHLBank is required to pay 20% of net earnings after AHP to REFCORP. The FHLBank will expense this amount until the aggregate amounts actually paid by all twelve FHLBanks are equivalent to a $300 million annual annuity whose final maturity date is April 15, 2030, at which point the required payment of each FHLBank to REFCORP will be fully satisfied. The Finance Board, in consultation with the Secretary of the Treasury, will select the appropriate discounting factors to be used in this annuity calculation. The cumulative amount to be paid to REFCORP by the FHLBNY is not determinable at this time, due to the interrelationships of all future FHLBanks’ earnings. The FHLBanks’ payments through 2004 defease all future benchmark payments after the second quarter of 2019 and $45 million of the $75 million benchmark payment for the second quarter of 2019. Because the Assessment is based on net income at all the FHLBanks, which cannot be forecasted with reasonable certainty, satisfaction of the REFCORP assessment cannot be predicted.
REFCORP assessment, as discussed above, is based on a fixed percentage of net income after AHP assessment. If a full-year loss is incurred, no assessment or assessment credit is due or accrued.
Finance Board and Office of Finance Expenses
The FHLBNY is assessed for its proportionate share of the costs of operating the Finance Board and the Office of Finance. The Finance Board is authorized to impose assessments on the FHLBanks including FHLBNY, in amounts sufficient to pay the Finance Board’s annual operating expenses. Each FHLBank is assessed a prorated amount based on each FHLBank’s capital stock outstanding as a percentage of total capital stock of all 12 FHLBanks.
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Federal Home Loan Bank of New York
Notes to Financial Statements
The Office of Finance is also authorized to impose assessments on the FHLBanks, including the FHLBNY, in amounts sufficient to pay the Office of Finance’s annual operating and capital expenditures. Each FHLBank is assessed a prorated amount based on the amount of capital stock outstanding, the volume of consolidated obligations issued, and the amount of consolidated obligations outstanding as percentage of the total of the items for all 12 FHLBanks.
Estimated Fair Values
Many of the Bank’s financial instruments lack an available trading market, characterized by transactions between a willing buyer and a willing seller engaging in an exchange transaction. Therefore, the FHLBNY uses significant estimates and present-value calculations when disclosing estimated fair values. Note 20 details the estimated fair values of the Bank’s financial instruments.
Earnings per Common Share
SFAS 128 addresses the presentation of basic and diluted earnings per share (“EPS”) in the income statement. Basic earnings per share is computed by dividing income available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflect the potential dilution that could occur if convertible securities or other contracts to issue common stock were converted or exercised into common stock. Capital stock classified as mandatorily redeemable capital stock is excluded from this calculation. Basic and diluted earnings per share are the same for the FHLBNY as the Bank has no additional potential common shares that may be dilutive.
Cash Flows
In the statements of cash flows, the FHLBNY considers Cash and due from banks as Cash and cash equivalents.
Reclassifications
Certain amounts in the 2003 and 2002 financial statements have been reclassified to conform to the 2004 presentation In particular, for the years ended December 31, 2003 and 2002, the FHLBNY has reclassified prepayment fee income on the Statements of Income. Previously, prepayment fee income was classified as separate line item within Other income. These amounts have been reclassified and are now included in Interest Income for the years ended December 31, 2003 and 2002. As a result of this reclassification, net interest income after provisions for credit losses, and Other Income were adjusted by $8,037,000 and $ 40,394,000 for the years ended December 31, 2003 and 2002. (See Note 7).
2. | Accounting Adjustments, Changes in Accounting Principles, and Recently Issued Accounting Standards & Interpretations |
Accounting Adjustments
During the second quarter of 2004, the FHLBNY changed the manner in which it assesses effectiveness for certain highly-effective consolidated obligation hedging relationships. Under the FHLBNY’s prior approach, the FHLBNY inappropriately assumed no ineffectiveness for these hedging transactions since the consolidated obligation and the designated interest rate swap agreement had identical terms with the exception that the interest rate swaps used in these relationships were structured with one settlement amount under the receive side of the swap that differed from all other receive-side settlements by an amount equivalent to the concession cost associated with the consolidated obligation. During 2004, the FHLBNY changed its method of accounting for these relationships to begin measuring effectiveness for such transactions during each reporting period. The FHLBNY assessed the impact of this change on all prior annual periods
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Federal Home Loan Bank of New York
Notes to Financial Statements
since the adoption of SFAS 133 on January 1, 2001, and all prior quarterly periods for 2004 and 2003, and determined that had the FHLBNY applied this approach since January 1, 2001 it would not have had a material impact on the results of operations or financial condition of the FHLBNY for any of these prior reporting periods. The FHLBNY recorded a $9.3 million increase to income before assessments included in other income in net realized and unrealized gains (losses) on derivatives and hedging activities, as well as an increase of $6.9 million in net income in the second quarter of 2004. These amounts include adjustments of $12.0 million gain related to periods prior to January 1, 2004, and reflect the accounting as if the FHLBNY had employed the new approach from the date of adoption of SFAS 133 until its implementation of the new approach for measuring effectiveness.
Change in Accounting Principle — Adoption of SFAS 150
The FASB issued Statement of Financial Accounting Standards No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity” (herein referred to as “SFAS 150”) in May 2003. This statement establishes a standard for how certain financial instruments with characteristics of both liabilities and equity are classified in the financial statements and provides accounting guidance for, among other things, mandatorily redeemable financial instruments.
In accordance with the transition provisions of SFAS 150, the FHLBNY recorded the cumulative effect adjustment loss of $1,305,000 as of January 1, 2004. The adjustment was with respect to dividends paid on January 31, 2004 for the quarter-ended December 31, 2003 on capital stock that was considered to be mandatorily redeemable on January 1, 2004. In accordance with the FHLBNY’s interpretation of SFAS 150, the dividend was treated as part of the redemption value of the stock.
In addition, on January 1, 2004, the FHLBank reclassified $357,887,000 of its outstanding capital stock to “Mandatorily redeemable capital stock” in the liability section of the Statements of Condition. For the year ended December 31, 2004, dividends on mandatorily redeemable capital stock in the amount of $6,506,000 were reported as interest expense.
Although the mandatorily redeemable capital stock is not included in capital for financial reporting purposes, based on guidance from the Finance Board, such outstanding stock is considered capital for regulatory purposes. See Note 15 for more information, including significant restrictions on stock redemption.
Proposed rule under EITF 03-01
EITF Issue No, 03-1, The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments. In March 2004, the FASB reached a consensus regarding the application of an impairment model to determine whether investments are other-than-temporarily impaired. The provisions of this rule are required to be applied prospectively to all current and future investments accounted for in accordance with SFAS No. 115, Accounting for Certain Investments in Debt and Equity Securities. On September 15, 2004, the FASB issued proposed FASB Staff Position (FSP) EITF 03-1-a Implementation Guidance for the Application of Paragraph 16 of EITF Issue No. 03-1, “The Meaning of Other-Than Temporary Impairment and Its Application to Certain Investments” (“FSP EITF 03-1-a”) to provide guidance on the application of paragraph 16 of EITF 03-1 to debt securities that are impaired because of interest rate and/or sector spread increases. On September 30, 2004, the FASB issued FSP EITF Issue 03-1-1 Effective Date of Paragraphs 10- 20 of EITF Issue No. 03-1, “The Meaning of Other-Than Temporary Impairment and Its Application to Certain Investments” (“FSP EITF 03-1-1”), which deferred the effective date of the impairment
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Federal Home Loan Bank of New York
Notes to Financial Statements
measurement and recognition provisions contained in specific paragraphs of EITF 03-1 and expanded the scope of proposed FSP EITF 03-1-a to include all securities, not only debt securities. The comment period for proposed FSP EITF 03-1-a ended on October 29, 2004 and the effective date has been deferred indefinitely. The deferral of the effective date for paragraphs 10-20 of EITF 03-1 as reported in FSP EITF 03-1-1 will be superseded concurrently with the final issuance of proposed FSP EITF Issue 03-1-a.
The FHLBNY does not expect the new rules to have a material impact on its results of operations at the time of adoption. The FHLBNY purchases investments for its held-to-maturity portfolio only when it has the intent and financial ability to hold the investments to maturity. See Note 5 for impairment disclosures related to held-to-maturity securities.
3. | Cash and Due from Banks |
Cash on hand, cash items in the process of collection, and amounts due from correspondent banks and the Federal Reserve Banks are included in cash.
Compensating Balances
The FHLBNY maintained average required clearing balances with various Federal Reserve Banks of approximately $1,000,000 for the years ended December 31, 2004 and 2003. These are required clearing balances and may not be withdrawn; however, the FHLBNY may use earnings credits on these balances to pay for services received from the Federal Reserve Banks.
Pass-through Deposit Reserves
The FHLBNY 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 $54,082,000 and $57,678,000 as of December 31, 2004 and 2003. The FHLBNY includes member reserve balances in Other liabilities in the Statements of Condition.
4. | Interest-Bearing Deposits |
Interest-bearing deposits consist of deposits at financial institutions and certificates of deposit issued by banks and financial institutions. As of December 31, 2004 and 2003, Interest-bearing deposits included cash pledged as collateral of $1.1 billion and $1.7 billion to broker dealers and banks who have credit risk exposure related mainly to derivative contracts.
5. | Held-to-Maturity Securities |
Held-to-maturity securities consist of mortgage- and asset-backed securities (collectively mortgage-backed securities or “MBS”), and state and local housing finance agency bonds. During the third quarter of 2003, the FHLBNY determined that there had been a significant deterioration in the creditworthiness of certain uninsured securities with an amortized cost of $1,033 million backed by manufactured housing loans and certain other uninsured asset-backed securities with an amortized cost of $944 million backed by residential and business loans. The securities were classified as held-to-maturity, and all of these securities had been rated triple-A by at least two rating agencies at the time of purchase. To avoid exposure over time to further credit deterioration and in accordance with the provisions of SFAS 115, the FHLBNY sold held-to-maturity, mortgage-backed securities, incurring a loss on the sale of approximately $189.0 million and reducing the Bank’s net income by approximately $139.0 million.
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Federal Home Loan Bank of New York
Notes to Financial Statements
Held-to-maturity securities included securities issued by the Federal National Mortgage Association (“Fannie Mae”) and the Federal Home Loan Mortgage Co. (“Freddie Mac”). Neither Fannie Mae nor Freddie Mac are agencies of the U.S. Government nor are their securities guaranteed by the U.S. Government.
Major Security Types
The amortized cost, gross unrealized gains and losses and the fair value of Held-to-maturity securities were as follows (in thousands):
December 31, 2004 | ||||||||||||||||
Gross | Gross | Estimated | ||||||||||||||
Amortized | Unrealized | Unrealized | Fair | |||||||||||||
Cost | Gains | Losses | Value | |||||||||||||
State or local housing agency obligations | $ | 1,056,982 | $ | 26,669 | $ | (718 | ) | $ | 1,082,933 | |||||||
Mortgage-backed securities | 10,813,692 | 220,060 | (21,808 | ) | 11,011,944 | |||||||||||
Total | $ | 11,870,674 | $ | 246,729 | $ | (22,526 | ) | $ | 12,094,877 | |||||||
December 31, 2003 | ||||||||||||||||
Gross | Gross | Estimated | ||||||||||||||
Amortized | Unrealized | Unrealized | Fair | |||||||||||||
Cost | Gains | Losses | Value | |||||||||||||
State or local housing agency obligations | $ | 1,164,486 | $ | 33,269 | $ | (508 | ) | $ | 1,197,247 | |||||||
Mortgage-backed securities | 10,194,881 | 361,756 | (5,596 | ) | 10,551,041 | |||||||||||
Total | $ | 11,359,367 | $ | 395,025 | $ | (6,104 | ) | $ | 11,748,288 | |||||||
Temporary Impairment
The following table summarizes Held-to-maturity securities with fair values below their amortized cost, i.e., in an unrealized loss position, as of December 31, 2004 and 2003. The fair values and unrealized losses are aggregated by major security type and rating, and by the length of time individual securities have been in a continuous unrealized loss position. Securities to which different rating levels have been assigned by different rating agencies, i.e., split ratings, are assigned to the lower rating category (in thousands).
The FHLBNY has both the intent and financial ability to hold the temporarily impaired securities to recovery of their value. In addition, the FHLBNY has reviewed the investment security holdings and determined, based on creditworthiness of the securities and including any underlying collateral and/or insurance provisions of the security, that unrealized losses in the analysis below represent temporary impairment at December 31, 2004 and 2003.
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Federal Home Loan Bank of New York
Notes to Financial Statements
Temporary impairment at December 31,2004 (in thousands):
Less than 12 months | 12 months or more | |||||||||||||||
Estimated | Unrealized | Estimated | Unrealized | |||||||||||||
Fair Value | Losses | Fair Value | Losses | |||||||||||||
Mortgage - and residential asset-backed securities - fixed rate | ||||||||||||||||
AAA-rated | $ | 3,904,642 | $ | 21,212 | $ | 7,357 | $ | 236 | ||||||||
AA-rated | — | — | — | — | ||||||||||||
Below AA | — | — | — | — | ||||||||||||
Mortgage - - and residential asset-backed securities - variable rate | ||||||||||||||||
AAA-rated | 181,751 | 360 | — | — | ||||||||||||
AA-rated | — | — | — | — | ||||||||||||
Below AA | — | — | — | — | ||||||||||||
4,086,393 | 21,572 | 7,357 | 236 | |||||||||||||
State and local housing finance agencies-fixed rate | ||||||||||||||||
AAA-rated | — | — | — | — | ||||||||||||
AA-rated | — | — | — | — | ||||||||||||
Below AA | — | — | — | — | ||||||||||||
State and local housing finance agencies-variable rate | ||||||||||||||||
AAA-rated | — | — | 39,645 | 355 | ||||||||||||
AA-rated | — | — | 24,636 | 363 | ||||||||||||
Below AA | — | — | — | — | ||||||||||||
— | — | 64,281 | 718 | |||||||||||||
Total temporarily impaired | $ | 4,086,393 | $ | 21,572 | $ | 71,638 | $ | 954 | ||||||||
Temporary impairment at December 31,2003 (in thousands):
Less than 12 months | 12 months or more | |||||||||||||||
Estimated | Unrealized | Estimated | Unrealized | |||||||||||||
Fair Value | Losses | Fair Value | Losses | |||||||||||||
Mortgage - and residential asset-backed securities - - fixed rate | ||||||||||||||||
AAA-rated | $ | 1,450,501 | $ | 4,373 | $ | 217 | $ | 2 | ||||||||
AA-rated | — | — | — | — | ||||||||||||
Below AA | — | — | — | — | ||||||||||||
Mortgage - and residential asset-backed securities - - variable rate | ||||||||||||||||
AAA-rated | 1,238,679 | 938 | 107,998 | 283 | ||||||||||||
AA-rated | — | — | — | — | ||||||||||||
Below AA | — | — | — | — | ||||||||||||
2,689,180 | 5,311 | 108,215 | 285 | |||||||||||||
State and local housing finance agencies-fixed rate | ||||||||||||||||
AAA-rated | — | — | — | — | ||||||||||||
AA-rated | — | — | — | — | ||||||||||||
Below AA | — | — | — | — | ||||||||||||
State and local housing finance agencies-variable rate | ||||||||||||||||
AAA-rated | — | — | 39,770 | 230 | ||||||||||||
AA-rated | — | — | 24,722 | 278 | ||||||||||||
Below AA | — | — | — | — | ||||||||||||
— | — | 64,492 | 508 | |||||||||||||
Total temporarily impaired | $ | 2,689,180 | $ | 5,311 | $ | 172,707 | $ | 793 | ||||||||
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Federal Home Loan Bank of New York
Notes to Financial Statements
Redemption Terms
The amortized cost and estimated fair value of held-to-maturity securities, by contractual maturity, are shown below (in thousands). Expected maturities of some securities and mortgage-backed securities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment fees.
December 31, 2004 | December 31, 2003 | |||||||||||||||
Amortized | Estimated | Amortized | Estimated | |||||||||||||
Cost | Fair Value | Cost | Fair Value | |||||||||||||
Due in one year or less | $ | — | $ | — | $ | — | $ | — | ||||||||
Due after one year through five years | — | — | — | — | ||||||||||||
Due after five years through ten years | 48,063 | 50,156 | 67,332 | 70,563 | ||||||||||||
Due after ten years | 1,008,919 | 1,032,777 | 1,097,154 | 1,126,684 | ||||||||||||
1,056,982 | 1,082,933 | 1,164,486 | 1,19,7,247 | |||||||||||||
Mortgage-backed securities | 10,813,692 | 11,011,944 | 10,194,881 | 10,551,041 | ||||||||||||
Total | $ | 11,870,674 | $ | 12,094,877 | $ | 11,359,367 | $ | 11,748,288 | ||||||||
The amortized cost of mortgage-backed securities classified as Held-to-maturity includes net premiums of were $26,319,000, and $34,135,000 as of December 31, 2004 and 2003. Amortization expense, net of accretion, that was charged to interest income was $12.3 million and $0.9 million for the years ended December 31, 2004 and 2003.
Interest Rate Payment Terms
The following table summarizes interest rate payment terms for securities classified as held-to-maturity (in thousands):
December 31, | ||||||||
2004 | 2003 | |||||||
Amortized cost of held-to-maturity securities other than mortgage - backed securities | ||||||||
Fixed-rate | $ | 355,902 | $ | 401,791 | ||||
Variable-rate | 701,080 | 762,695 | ||||||
1,056,982 | 1,164,486 | |||||||
Amortized cost of held-to-maturity mortgage related securities | ||||||||
Pass through securities | ||||||||
Fixed-rate | 5,760,446 | 1,185,898 | ||||||
Variable-rate | 1,321,394 | |||||||
Collateralized mortgage obligations | ||||||||
Fixed-rate | 3,687,353 | 6,539,026 | ||||||
Variable-rate | 44,499 | 2,469,957 | ||||||
10,813,692 | 10,194,881 | |||||||
Total | $ | 11,870,674 | $ | 11,359,367 | ||||
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Federal Home Loan Bank of New York
Notes to Financial Statements
6. | Available-for-Sale Securities |
Available-for-sale securities consisted of variable-rate mortgage-backed securities. Unrealized gains and losses are summarized as follows (in thousands). There were no available-for sale securities prior to 2004.
December 31, 2004 | ||||||||||||||||
Gross | Gross | Estimated | ||||||||||||||
Amortized | Unrealized | Unrealized | Fair | |||||||||||||
Cost | Gains | Losses | Value | |||||||||||||
Mortgage-backed securities | $ | 711,123 | $ | 2,240 | $ | — | $ | 713,363 | ||||||||
Total | $ | 711,123 | $ | 2,240 | $ | — | $ | 713,363 | ||||||||
Available-for-sale Securities include securities issued by the Federal National Mortgage Association (“Fannie Mae”) and the Federal Home Loan Mortgage Co. (“Freddie Mac”). Neither Fannie Mae nor Freddie Mac are agencies of the U.S. Government nor are their securities guaranteed by the U.S. Government.
Redemption Terms
The amortized cost and estimated fair value of Available-for-sale securities, by contractual maturity, are shown below (in thousands). Expected maturities of some securities and mortgage-backed securities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment fees. There was no impairment at December 31, 2004.
December 31, 2004 | ||||||||
Amortized | Estimated | |||||||
Cost | Fair Value | |||||||
Due in one year or less | $ | — | $ | — | ||||
Due after one year through five years | — | — | ||||||
Due after five years through ten years | — | — | ||||||
Due after ten years | 711,123 | 713,363 | ||||||
Total | $ | 711,123 | $ | 713,363 | ||||
There were no significant amounts of premiums and discounts amortized for the year ended December 31, 2004. Amortized cost substantially equaled par.
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Federal Home Loan Bank of New York
Notes to Financial Statements
7. | Advances |
Redemption Terms
Advances outstanding at December 31, including AHP advances, at interest rates ranging from 1.25% to 8.29% in 2004, and 0.8% to 9.87% in 2003, are summarized below (dollars in thousands):
December 31, 2004 | December 31, 2003 | |||||||||||||||
Weighted | Weighted | |||||||||||||||
Amount | Average | Amount | Average | |||||||||||||
Overdrawn demand deposit accounts | $ | 237 | 4.75 | % | $ | — | — | |||||||||
Due in one year or less | 23,111,281 | 2.90 | % | 19,054,973 | 2.12 | % | ||||||||||
Due after one year through two years | 7,583,635 | 3.38 | % | 9,428,476 | 3.22 | % | ||||||||||
Due after two years through three years | 7,967,893 | 3.05 | % | 5,712,807 | 3.31 | % | ||||||||||
Due after three years through four years | 8,435,962 | 3.79 | % | 3,341,100 | 3.89 | % | ||||||||||
Due after four years through five years | 2,300,288 | 4.91 | % | 5,424,315 | 4.44 | % | ||||||||||
Thereafter | 17,865,330 | 4.65 | % | 18,802,409 | 4.76 | % | ||||||||||
Total par value | 67,264,626 | 3.62 | % | 61,764,080 | 3.50 | % | ||||||||||
Discount on AHP advances* | (786 | ) | (1,066 | ) | ||||||||||||
Net premium on advances* | 1,784 | 2,450 | ||||||||||||||
SFAS 133 hedging adjustments* | 1,241,863 | 2,157,720 | ||||||||||||||
Total | $ | 68,507,487 | $ | 63,923,184 | ||||||||||||
*Discount on AHP advances are amortized to interest income on a straight-line basis and were not significant for all periods reported. Amortization of fair value basis adjustments were a charge to interest income and amounted to ($0.4) million and ($1.3) million for the years ended December 31, 2004 and 2003. All other amortization charged to interest income aggregated ($0.7) million and ($0.3 million) for the years ended December 31, 2004 and 2003. |
Prepayment fees charged to members when members prepay certain advances before original maturity are included in interest income from advances. The weighted average yield reported above is the weighted average original coupon rates of advances. Net prepayment fees reported in interest income were $6.4 million, $8.1 million, and $40.4 million for the years ended December 31, 2004, 2003, and 2002. Amortization of basis on modified advances was a charge to interest income and aggregated $3.8 million, $3.2 million, and $0.1 million for the years ended December 31, 2004, 2003, and 2002.
The FHLBNY offers convertible advances to members. With a convertible advance, the FHLBNY effectively purchases a put option from the member that allows the FHLBNY to terminate the fixed-rate advance, which is normally exercised when interest rates have increased from those prevailing at the time the advance was made. The FHLBNY can then convert the advance to floating rate or terminate the advance and extend additional credit on new terms. As of December 31, 2004 and 2003, the FHLBNY had convertible advances outstanding totaling $24,451,000,000, and $26,514,000,000.
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Federal Home Loan Bank of New York
Notes to Financial Statements
The following table summarizes advances by year of maturity or next put date (in thousands):
December 31, | ||||||||
2004 | 2003 | |||||||
Overdrawn demand deposit accounts | $ | 237 | $ | — | ||||
Due in one year or less | 39,671,293 | 37,657,829 | ||||||
Due after one year through two years | 10,042,141 | 9,074,033 | ||||||
Due after two years through three years | 9,475,176 | 7,357,562 | ||||||
Due after three years through four years | 5,718,400 | 4,160,400 | ||||||
Due after four years through five years | 804,388 | 2,478,153 | ||||||
Thereafter | 1,552,991 | 1,036,103 | ||||||
Total par value | $ | 67,264,626 | $ | 61,764,080 | ||||
Security Terms
The FHLBNY lends to financial institutions involved in housing finance within its district. The FHLBank Act requires the FHLBNY to obtain sufficient collateral on advances to protect against losses and to accept as collateral on such advance only certain U.S. government or government agency securities, residential mortgage loans, cash or deposits in the FHLBNY and other eligible real estate-related assets. However, Community Financial Institutions (“CFIs”) are subject to expanded statutory collateral provisions dealing with loans to small business or agriculture. It is the FHLBNY’s policy not to accept such collateral for advances. Borrowing members pledge their capital stock of the FHLBNY as additional collateral for advances. As of December 31, 2004 and 2003, the FHLBNY had rights to collateral with an estimated value greater than outstanding advances. Based upon the financial condition of the member, the FHLBNY:
(1) | Allows a member to retain possession of the collateral assigned to the FHLBNY, if the member executes a written security agreement and agrees to hold such collateral for the benefit of the FHLBNY; or | |||
(2) | Requires the member specifically to assign or place physical possession of such collateral with the FHLBNY or its safekeeping agent. |
Beyond these provisions, Section 10(e) of the FHLBank Act affords any security interest granted by a member to the FHLBNY priority over the claims or rights of any other party. The two exceptions are claims that would be entitled to priority under otherwise applicable law or perfected security interests.
All member obligations with the FHLBNY must be fully collateralized throughout their entire term. The market value of collateral pledged to cover the $67.3 billion par value in outstanding advances as of December 31, 2004 totalled $148.4 billion, consisting of $120,0 billion in market value of eligible mortgages and $28.4 billion in market value of eligible securities, including cash collateral.
As of December 31, 2004, other outstanding member obligations totalling $128.5 million were collateralized by an additional $820.6 million of pledged collateral. The pledged collateral comprised of $754.4 million in mortgage loans and $66.2 million in securities and cash collateral. The outstanding member obligations consisted of $119.5 million of standby letters of credit (“LOC”); $1.0 million of collateralized value of outstanding derivatives, and $8.0 million representing the members’ credit enhancement guarantee amount (“MPFCE”) on loans sold to the FHLBNY through the MPF program. The FHLBNY’s underwriting and collateral requirements for securing LOCs are the same as its requirements for securing advances.
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Federal Home Loan Bank of New York
Notes to Financial Statements
The total of collateral pledged to the FHLBNY includes excess collateral pledged above the FHLBNY’s minimum collateral requirements. These minimum requirements range from 103% to 125% of outstanding advances, based on the collateral type. It is not uncommon for members to maintain excess collateral positions with the FHLBNY for future liquidity needs. Based on several factors (e.g.; advance type, collateral type or member financial condition) members are required to comply with specified collateral requirements, including but not limited to, a detailed listing of pledged mortgage collateral and/or delivery of pledged collateral to FHLBNY or its designated collateral custodian(s). For example, all pledged securities collateral must be delivered to the FHLBNY’s nominee name at Citibank, N.A., its securities safekeeping custodian. Mortgage collateral that is required to be in the FHLBNY’s possession is typically delivered to the FHLBNY’s Jersey City, NJ facility. However, in certain instances, delivery to an FHLBNY approved custodian may be allowed.
As of December 31, 2084, of the $149.2 billion in pledged collateral securing all outstanding member obligations, $28.5 billion was in the FHLBNY’s physical possession or that of its safekeeping agent(s); $120.5 billion was specifically listed; and $.2 billion was permitted by the FHLBNY to be physically retained by the borrowing member without detailed reporting required.
Credit Risk
While the FHLBNY has never experienced a credit loss on an advance, the expanded eligible collateral for CFIs and nonmember housing associates provides the potential for additional credit risk for the FHLBNY. The management of the FHLBNY has the policies and procedures in place to appropriately manage this credit risk. There were no past due advances and all advances were current for each of the periods ended December 31, 2003 and 2004. Management does not anticipate any credit losses, and accordingly, the FHLBNY has not provided an allowance for credit losses on advances.
The Bank’s potential credit risk from advances is concentrated in commercial banks and savings institutions. As of December 31, 2004, the FHLBNY had advances of $1.9 billion to Washington Mutual Bank, FA, a member of the FHLBank of San Francisco, representing 2.80% of total advances outstanding. These advances were acquired by Washington Mutual Bank, FA as a result of its acquisition of The Dime Savings Bank of New York, FSB. The FHLBNY also had advances of $22.3 billion outstanding to five member institutions, representing 33.10% of total advances outstanding at December 31, 2004. The FHLBNY held sufficient collateral to cover the advances to these institutions, and the Bank does not expect to incur any credit losses.
Interest Rate Payment Terms
The following table details interest rate payment terms for advances (dollars in thousands):
December 31, 2004 | December 31, 2003 | |||||||||||||||
Percentage | Percentage | |||||||||||||||
Amount | of total | Amount | of total | |||||||||||||
Fixed-rate | $ | 53,373,084 | 79.35 | % | $ | 50,975,990 | 82.53 | % | ||||||||
Variable-rate | 11,959,522 | 17.78 | % | 9,141,090 | 14.80 | % | ||||||||||
Variable-rate capped | 1,932,020 | 2.87 | % | 1,647,000 | 2.67 | % | ||||||||||
Total par value | $ | 67,264,626 | 100.00 | % | $ | 61,764,080 | 100.00 | % | ||||||||
Variable-rate advances were mainly indexed to the Federal funds effective rate or LIBOR.
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Federal Home Loan Bank of New York
Notes to Financial Statements
8. | Affordable Housing Program and REFCORP | |||
Section 10(j) of the FHLBank Act requires each FHLBank to establish an AHP. Each FHLBank provides subsidies in the form of direct grants and below-market interest rate advances to members who use the funds to assist the purchase, construction, or rehabilitation of housing for very low-, low-, and moderate-income households. Annually, the FHLBanks must set aside for the AHP the greater of $100 million or 10% of the current year’s adjusted income after the assessment for REFCORP. The FHLBNY charges the amount set aside for AHP to income and recognizes it as a liability. The FHLBNY relieves the AHP liability as members use subsidies. If the result of the aggregate 10% calculation described above is less than $100 million for all twelve FHLBanks, then the Act requires the shortfall to be allocated among the FHLBanks, based on the ratio of each FHLBank’s then the 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 in either 2004 or 2003. The FHLBNY had outstanding principle in AHP-related advances of $8,108,000, and $12,387,000 as of December 31, 2004 and 2003. | ||||
9. | Mortgage Loans Held for Investment | |||
The FHLBNY’s mortgage loan portfolio is made up almost entirely of the MPF program. In the CMA program, FHLBNY participated in residential, multi-family and community economic development mortgage loans originated by its members. The members retain servicing rights and may credit-enhance the portion of the loans participated to the FHLBNY. The FHLBNY did not acquire interests in any loans under the CMA program in 2004 and 2003. Acquisitions under the CMA program were suspended indefinitely in November 2001. | ||||
The MPF program involves investment by the FHLBNY in mortgage loans that are purchased from its participating members. The total loans represent loans held for investment under the MPF program whereby the FHLBNY’s members create, service, and credit-enhance home mortgage loans that are purchased by the FHLBNY. | ||||
The MPF outstanding at December 31, 2004 and 2003 represent mortgage loans purchased directly from members participating in the MPF program. No intermediary trusts were involved. | ||||
The following table presents information on mortgage loans held for investment (in thousands): |
2004 | Percentage | 2003 | Percentage | |||||||||||||
Real Estate | ||||||||||||||||
Fixed medium-term single-family mortgages | $ | 516,666 | 44.2 | % | $ | 283,300 | 42.6 | % | ||||||||
Fixed long-term single-family mortgages | 641,730 | 54.8 | % | 352,140 | 52.9 | % | ||||||||||
Multi-family mortgages | 9,493 | 0.8 | % | 27,081 | 4.1 | % | ||||||||||
Non-residential mortgages | 2,771 | 0.2 | % | 2,824 | 0.4 | % | ||||||||||
Total par value | 1,170,660 | 100.0 | % | 665,345 | 100.0 | % | ||||||||||
Net unamortized premiums | 13,294 | 6,736 | ||||||||||||||
Net unamortized discounts | (4,882 | ) | — | |||||||||||||
Basis adjustment | (482 | ) | 70 | |||||||||||||
Total mortgage loans held for investment | $ | 1,178,590 | $ | 672,151 | ||||||||||||
Amortization expense, net of accretion, that was reported as a charge to interest income was $1.9 million and $1.5 million for the years ended December 31, 2004 and 2003. Amortization of the basis adjustment was insignificant for all periods reported. |
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Federal Home Loan Bank of New York
Notes to Financial Statements
The par value of mortgage loans held for investment outstanding as of December 31, 2004 and 2003, was comprised of Federal Housing Administration and Veteran Administration insured loans totaling $20,632,000 and $38,818,000, and conventional and other loans totaling $1,150,029,000 and $626,527,000, respectively. As also discussed in Note 1, Summary of Significant Accounting Policies- Mortgage loans and participations, the FHLBNY and its members share the credit risk of MPF loans by structuring potential credit losses into layers. The first layer is typically 100 basis points but varies with the particular MPF program. The amount of the first layer, or FLA, was estimated as $11.7 million and $5.6 million at December 31, 2004 and 2003. The FLA is not recorded or reported as a reserve for loan losses. The FHLBNY is responsible for absorbing the first layer. The second layer is that amount of credit obligations that the 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 assume all residual risk. Credit Enhancement fees paid or deemed paid to PFIs aggregated $0.9 million and $0.4 million for the years ended December 31, 2004 and 2003 and were a charge to interest income. | ||||
The amounts of charge-offs in all periods reported were insignificant and it was not necessary for the FHLBNY to recoup any losses from the PFIs. | ||||
The allowance for credit losses was as follows (in thousands): |
For the years ended | ||||||||||||
December 31, | ||||||||||||
2004 | 2003 | 2002 | ||||||||||
Balance, beginning of period | $ | 507 | $ | 428 | $ | 193 | ||||||
Charge offs | — | — | — | |||||||||
Recoveries | — | — | — | |||||||||
Net charge-off | — | — | — | |||||||||
Provision for credit losses | — | 79 | 235 | |||||||||
Balance, end of period | $ | 507 | $ | 507 | $ | 428 | ||||||
As of December 31, 2004 and 2003, the FHLBNY had $519,000 and $115,000 of non-accrual loans. The estimated fair value of the mortgage loans as of December 31, 2004 and 2003 is reported in Note 20. Mortgage loans, other than those included in large groups of smaller-balance homogeneous loans, are considered impaired when, based on current information and events, it is probable that the FHLBNY will be unable to collect all principal and interest amounts due according to the contractual terms of the mortgage loan agreements. As of December 31, 2004 and 2003, the FHLBNY had no investment in impaired mortgage loans, other than the nonaccrual loans. | ||||
The following table summarizes Mortgage loans held for investment, all Veterans Administrations insured loans, past due 90 days or more and still accruing interest (in thousands): |
December 31, | ||||||||
2004 | 2003 | |||||||
Secured by 1-4 family | $ | 1,898 | $ | 2,732 | ||||
10. | Related Party Transactions | |||
The FHLBNY is a cooperative and the members own all of the stock of the FHLBNY. The majority of the members of the Board of Directors of the FHLBNY are elected by and from the |
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Federal Home Loan Bank of New York
membership. The FHLBNY conducts its advances business almost exclusively with members. Therefore, in the normal course of business, the FHLBNY extends credit to members, whose officers may serve as directors of the FHLBNY, on market terms that are no more favorable to them than comparable transactions with other members. Capital stock ownership is a prerequisite to transacting any business with the FHLBNY.
The FHLBNY considers its transactions with its members and non-member stockholders as related parties in addition to transactions with other FHLBanks, the Office of Finance, and the Finance Board.
The FHLBNY may from time to time borrow or sell overnight and term Federal funds at market rates to members. In limited circumstances, the FHLBNY may transfer Consolidated Obligation Bonds to or from other FHLBanks in exchange for cash (See Note 13). In the MPF program, the FHLBNY may participate out certain portions of its purchases of mortgage loans from its members. Transactions are at market rates (See Note 9). No mortgage-backed securities were acquired from other FHLBanks.
Loans to Other FHLBanks
Uncollateralized loans to other FHLBanks as of December 31, 2004 and 2003 were $0 and $60,000,000. Such uncollateralized loans averaged $6,653,000, and $68,189,000 for the years ended December 31, 2004 and 2003. The maximum balance was $385,000,000 and $350,000,000 for the years ended December 31, 2004 and 2003.
Short term, uncollateralized loans to other FHLBanks at December 31, 2003 were as follows (dollars in thousands):
December 31, 2003 | ||||||||
Weighted | ||||||||
Principal | Average | |||||||
Year of Maturity | Amount | Rate % | ||||||
Due in one year or less | $ | 60,000 | 0.91 | % | ||||
Cash flow disclosure
Net changes in loans to other FHLBanks were included in advance activities on the cash flow statements, while net changes in borrowings from other FHLBanks were included in the net increase (decrease) in deposits on the cash flow statements. The following table summarizes the cash flow activities for loans to and borrowings from other FHLBanks (in thousands):
For the years ended December 31, | ||||||||||||
2004 | 2003 | 2002 | ||||||||||
Investing activities | ||||||||||||
Loans made to other FHLBanks | $ | (1,575,000 | ) | $ | (7,453,000 | ) | $ | (4,228,000 | ) | |||
Principal collected on loans to other FHLBanks | 1,635,000 | 7,443,000 | 4,228,000 | |||||||||
Net change in loans to other FHLBanks | $ | 60,000 | $ | (10,000 | ) | — | ||||||
Financing activities | ||||||||||||
Proceeds from short-term borrowings from other FHLBanks | $ | 2,801,000 | $ | 6,456,000 | $ | 1,555,000 | ||||||
Payments of short-term borrowings from other FHLBanks | (2,801,000 | ) | (6,456,000 | ) | (1,555,000 | ) | ||||||
Net change in borrowings from other FHLBanks | $ | — | $ | — | $ | — | ||||||
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Federal Home Loan Bank of New York
Notes to Financial Statements
The following tables summarize outstanding balances and transactions with related parties at December 31, 2004 and 2003 (in thousands): | ||||
Related Party: Outstanding Assets, Liabilities and Equity |
December 31, 2004 | December 31, 2003 | |||||||||||||||
Related | Unrelated | Related | Unrelated | |||||||||||||
Assets | ||||||||||||||||
Cash and due from banks | $ | — | $ | 22,376 | $ | — | $ | 20,793 | ||||||||
Interest-bearing deposits | — | 2,806,870 | — | 1,654,603 | ||||||||||||
Federal funds sold | — | 2,972,000 | — | 1,143,000 | ||||||||||||
Available-for-sale securities | — | 713,363 | — | — | ||||||||||||
Held-to-maturity securities | — | 11,870,674 | — | 11,359,367 | ||||||||||||
Advances | 68,507,487 | — | 63,923,184 | — | ||||||||||||
Mortgage loans* | — | 1,178,083 | — | 671,644 | ||||||||||||
Loans to other FHLBanks | — | — | 60,000 | — | ||||||||||||
Accrued interest receivable | 252,517 | 63,251 | 241,204 | 46,623 | ||||||||||||
Premises and equipment, net | — | 13,030 | — | 15,921 | ||||||||||||
Derivative assets | — | 11,048 | — | 59,240 | ||||||||||||
Other assets** | — | 28,261 | — | 34,850 | ||||||||||||
Total assets | $ | 68,760,004 | $ | 19,678,956 | $ | 64,224,388 | $ | 15,006,041 | ||||||||
Liabilities | ||||||||||||||||
Deposits | $ | 2,297,019 | $ | — | $ | 2,100,221 | $ | — | ||||||||
Consolidated obligations | — | 80,156,982 | — | 70,856,636 | ||||||||||||
Mandatorily redeemable capital stock | 126,581 | — | — | — | ||||||||||||
Accrued interest payable | — | 437,743 | — | 426,437 | ||||||||||||
Affordable Housing Program | 81,580 | — | 92,541 | — | ||||||||||||
Payable to REFCORP | — | 9,966 | — | — | ||||||||||||
Derivative liabilities | — | 1,372,195 | — | 1913,274 | ||||||||||||
Other liabilities*** | 54,082 | 23,682 | 57,678 | 20,251 | ||||||||||||
Total liabilities | 2,559,262 | 82,000,568 | 2,250,440 | 73,216,598 | ||||||||||||
Capital | 3,879,130 | — | 3,763,391 | — | ||||||||||||
$ | 6,438,392 | $ | 82,000,568 | $ | 6,013,831 | $ | 73,216,598 | |||||||||
* | Includes de minimus amount of mortgage loans purchased from members of another FHLBank. | |
** | Includes not significant amounts of miscellaneous assets that are considered related party | |
*** | Includes member pass-through reserves. |
Related Party: Income and Expense transactions |
December 31, 2004 | December 31, 2003 | December 31, 2002 | ||||||||||||||||||||||
Related | Unrelated | Related | Unrelated | Related | Unrelated | |||||||||||||||||||
Interest income | ||||||||||||||||||||||||
Advances | $ | 1,247,568 | $ | — | $ | 1,292,990 | $ | — | $ | 1,684,716 | $ | — | ||||||||||||
Interest-bearing deposits | — | 61,096 | — | 67,113 | — | 113,778 | ||||||||||||||||||
Federal funds sold | — | 16,434 | — | 16,493 | — | 46,326 | ||||||||||||||||||
Available-for-sale securities | — | 7,797 | — | — | — | — | ||||||||||||||||||
Held-to-maturity securities | — | 545,660 | — | 652,207 | — | 725,126 | ||||||||||||||||||
Mortgage loans and participations* | — | 48,291 | — | 29,099 | — | 26,413 | ||||||||||||||||||
Loans to other FHLBanks | 78 | — | 2,491 | — | 2,995 | — | ||||||||||||||||||
Collateral pledged | — | 48 | — | 62 | — | 17 | ||||||||||||||||||
Total interest income | $ | 1,247,646 | $ | 679,326 | $ | 1,295,481 | $ | 764,974 | $ | 1,687,711 | $ | 911,660 | ||||||||||||
Interest expense | ||||||||||||||||||||||||
Consolidated obligations | $ | — | $ | 1,631,221 | $ | — | $ | 1,733,663 | $ | — | $ | 2,167,227 | ||||||||||||
Deposits | 21,913 | — | 27,977 | — | 42,460 | — | ||||||||||||||||||
Other borrowings | — | 5,312 | — | 268 | — | 103 | ||||||||||||||||||
Cash collateral held | — | 34 | — | 24 | — | 363 | ||||||||||||||||||
Total Interest expense | $ | 21,913 | $ | 1,636,567 | $ | 27,977 | $ | 1,733,955 | $ | 42,460 | $ | 2,167,693 | ||||||||||||
Service fees | $ | 4,751 | $ | — | $ | 4,936 | $ | — | $ | 4,103 | $ | — | ||||||||||||
* | Includes de minimus amount of mortgage interest income from loans purchased from members of another FHLBank. |
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Federal Home Loan Bank of New York
Notes to Financial Statements
11. | Deposits | |||
The FHLBNY offers demand and overnight deposits to members. A member that services mortgage loans may deposit in the FHLBNY funds collected in connection with the mortgage loans, pending disbursement of such funds to the owners of the mortgage loans. | ||||
The following table summarizes Term deposits (in thousands): |
December 31, 2004 | December 31, 2003 | |||||||
Due in one year or less | $ | 101,000 | $ | 138,450 | ||||
Total term deposits | $ | 101,000 | $ | 138,450 | ||||
12. | Borrowings | |||
Securities Sold under Agreements to Repurchase | ||||
The FHLBNY had no amounts of securities sold under agreement to repurchase as December 31, 2004 and 2003. | ||||
Other Federal Home Loan Banks | ||||
The FHLBNY borrows from other FHLBanks, generally for a period of one day. Such borrowings averaged $9,483,607 and $22,208,219 for the years ended December 31, 2004 and 2003. There were no borrowings outstanding as of December 31, 2004 and 2003. | ||||
13. | Consolidated Obligations | |||
Consolidated obligations are the joint and several obligations of the FHLBanks and consist of consolidated bonds and discount notes. The FHLBanks issue consolidated obligations through the Office of Finance as their 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. These notes sell at less than their face amount and are redeemed at par value when they mature. | ||||
The Finance Board, at its discretion, may require any FHLBank to make principal or interest payments due on any consolidated obligations. Although it has never occurred, to the extent that an FHLBank would make a payment on a consolidated obligation on behalf of another FHLBank, the paying FHLBank would be entitled to reimbursement from the non-complying FHLBank. However, if the Finance Board determines that the non-complying FHLBank is unable to satisfy its obligations, then the Finance Board may allocate the outstanding liability among the remaining FHLBanks on a pro rata basis in proportion to each FHLBank’s participation in all consolidated obligations outstanding, or on any other basis the Finance Board may determine. | ||||
Based on management’s review, the FHLBNY has no reason to record actual or contingent liabilities with respect to the occurrence of events or circumstances that would require the FHLBNY to assume such 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 $869.2 billion and $759.5 billion as of December 31, 2004 and 2003, respectively. |
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Federal Home Loan Bank of New York
Notes to Financial Statements
Finance Board regulations require the FHLBanks to maintain, in the aggregate, unpledged qualifying assets equal to the consolidated obligations outstanding. Qualifying assets are defined as cash; secured advances; assets with an assessment or rating at least equivalent to the current assessment or rating of the consolidated obligations; obligations, participations, mortgages, or other securities of or issued by the United States or an agency of the United States; and such securities in which fiduciary and trust funds may invest under the laws of the state in which the FHLBank is located. | ||||
The FHLBNY met the qualifying unpledged asset requirements in each of the years reported as follows: |
December 31, | ||||||||
2004 | 2003 | |||||||
Percentage of unpledged qualified assets to consolidated obligations | 100 | % | 104 | % | ||||
On June 2, 2000, the Finance Board set the FHLBank’s leverage limit requirements. The Finance Board limits each FHLBank’s assets generally to no more than 21 times its capital. Nevertheless, an FHLBank whose non-mortgage assets, after deducting deposits and capital, do not exceed 11% of its assets may have total assets in an amount not greater than 25 times its capital. At December 31, 2004 and 2003, FHLBNY met its regulatory requirements as follows: |
December 31, 2004 | December 31, 2003 | |||||||||||||||
Actual | Limits | Actual | Limits | |||||||||||||
Mortgage securities investment authority | 287 | % | 300 | % | 279 | % | 300 | % | ||||||||
Leverage limits | ||||||||||||||||
Ratio of total assets to capital limit | 22.10 | 25 times | 21.04 | 25 times | ||||||||||||
Percentage of non-mortgage assets to total assets* | (0.34 | )% | 11.00 | % | (3.44 | )% | 11.00 | % | ||||||||
* | Under applicable regulations (12 CFR Part 966.3), deposit liabilities and capital are subtracted from non-mortgage assets before calculating the ratio of non-mortgage assets to total assets. A negative percentage also indicates the limit has been met. For the purposes of this section, the amount of non-mortgage assets (after subtracting deposits and capital) equals total assets after deduction of: advances, acquired member assets, standby letters of credit, intermediary derivative contracts, and certain investments in MBS and state or local governmental units or agencies. | |
To provide the holders of consolidated obligations issued before January 29, 1993 (prior bondholders) with the protection equivalent to that provided under the FHLBanks’ previous leverage limit of twelve times the FHLBanks’ capital stock, prior bondholders have a claim on a certain amount of the qualifying assets [Special Asset Account (SAA)] if capital stock is less than 8.33% of consolidated obligations. As of December 31, 2004 and 2003, the combined FHLBanks’ capital stock was 4.56% and 5.14% of the par value of consolidated obligations outstanding, and the SAA balance was approximately $219,000 in each of the years. Further, the regulations require each FHLBank to transfer qualifying assets in the amount of its allocated share of the FHLBanks’ SAA to a trust for the benefit of the prior bondholders, if its capital-to-assets ratio falls below 2%. | ||
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 |
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Federal Home Loan Bank of New York
Notes to Financial Statements
complex coupon payment terms and call options. When such consolidated obligations are issued, the FHLBNY enters 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 payments, consolidated bonds may also have the following terms: | ||||
Step-up Bonds generally pay interest at increasing fixed rates for specified intervals over the life of the bond. These bonds generally contain provisions enabling the FHLBNY to call bonds at its option on step-up dates; | ||||
Zero-Coupon Bonds are long-term discounted instruments that earn a fixed yield to maturity or the optional principal redemption date. All principal and interest are paid at maturity or on the optional principal redemption date, if exercised prior to maturity. | ||||
Redemption Terms | ||||
The following is a summary of the Bank’s participation in consolidated bonds outstanding by year of maturity (dollars in thousands): |
December 31, 2004 | December 31, 2003 | |||||||||||||||
Weighted | Weighted | |||||||||||||||
Average | Average | |||||||||||||||
Maturity | Amount | Rate | Amount | Rate | ||||||||||||
1 year or less | $ | 25,348,025 | 2.64 | % | $ | 15,611,780 | 3.39 | % | ||||||||
over 1 year through 2 years | 16,297,480 | 3.41 | % | 15,914,075 | 2.86 | % | ||||||||||
over 2 years through 3 years | 8,688,675 | 3.54 | % | 10,291,170 | 3.90 | % | ||||||||||
over 3 years through 4 years | 4,561,750 | 4.00 | % | 5,104,750 | 3.97 | % | ||||||||||
over 4 years through 5 years | 2,227,200 | 3.89 | % | 3,407,900 | 4.17 | % | ||||||||||
over 5 years through 6 years | 1,028,350 | 4.57 | % | 1,226,100 | 4.20 | % | ||||||||||
Thereafter | 2,434,650 | 5.14 | % | 2,078,600 | 5.18 | % | ||||||||||
Total par value | 60,586,130 | 53,634,375 | ||||||||||||||
Bond premiums | 112,768 | 158,398 | ||||||||||||||
Bond discounts | (19,957 | ) | (20,002 | ) | ||||||||||||
SFAS 133 fair value adjustments | (161,370 | ) | 281,283 | |||||||||||||
Deferred net gains on terminated hedges | (2,215 | ) | (2,185 | ) | ||||||||||||
Total | $ | 60,515,356 | $ | 54,051,869 | ||||||||||||
Amortization of bond premiums that was a reduction of interest expense totaled $57.0 million and $52.2 million for the years ended December 31, 2004 and 2003. Amortization of net gains from terminated hedges was $1.5 million and $0.1 million for the years ended December 31, 2004 and 2003. |
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Federal Home Loan Bank of New York
Notes to Financial Statements
During the year ended December 31, 2004, the FHLBNY retired $109,600,000 of consolidated bonds at a cost that exceeded book value by $4,184,000. The cost is included in Other income - Other net. The debt retired was associated with the prepayment of advances for which prepayment fees were received. During 2003, the FHLBNY retired no debt. | ||||
Consolidated bonds outstanding as of December 31, 2004 and 2003 include callable bonds totaling $20,230,660,000 and $12,472,100,000, respectively. The FHLBNY uses fixed-rate callable debt to finance callable advances and mortgage-backed securities. Simultaneous with such a debt issue, the FHLBNY may also enter an interest-rate swap (in which the FHLBNY pays variable and receives fixed) with a call feature that mirrors the option embedded in the debt (a sold callable swap). The combined sold callable swap and callable debt allows the Bank to provide members attractively priced, variable-rate advances. |
December 31, 2004 | December 31, 2003 | |||||||
Non-callable/non-putable | $ | 40,355,470 | $ | 41,162,275 | ||||
Callable | 20,230,660 | 12,472,100 | ||||||
Total par value | $ | 60,586,130 | $ | 53,634,375 | ||||
The following table summarizes consolidated bonds outstanding at December 31, 2004 and 2003 by year of maturity or next call date (in thousands): |
December 31, 2004 | December 31, 2003 | |||||||
Year of Maturity or next call date | ||||||||
Due or callable in one year or less | $ | 37,897,285 | $ | 25,354,280 | ||||
Due or callable after one year through two years | 12,616,220 | 14,461,575 | ||||||
Due or callable after two years through three years | 4,948,175 | 7,871,170 | ||||||
Due or callable after three years through four years | 3,202,750 | 2,542,250 | ||||||
Due or callable after four years through five years | 696,700 | 2,637,900 | ||||||
Thereafter | 1,225,000 | 767,200 | ||||||
Total par value | $ | 60,586,130 | $ | 53,634,375 | ||||
Interest Rate Payment Terms | ||||
The following table summarizes interest rate payment terms for consolidated bonds at December 31, 2004 and 2003 (in thousands). |
December 31, 2004 | December 31, 2003 | |||||||
Fixed-rate, non-callable | $ | 34,635,470 | $ | 35,022,275 | ||||
Fixed-rate, callable | 19,001,260 | 12,453,000 | ||||||
Step ups | 1,260,000 | 50,000 | ||||||
Single-index floating rate | 5,689,400 | 6,109,100 | ||||||
Total | $ | 60,586,130 | $ | 53,634,375 | ||||
Interbank Transfers of Consolidated Bonds | ||||
In order to meet the FHLBNY’s asset and liability management objectives, during 2004, $214.3 million par value of consolidated bonds were transferred to the FHLBNY from other FHLBanks in exchange for cash. Par amount of $106.5 million matures on September 16, 2013; par amount of $63.0 million matures April 15, 2009; par amount of $33.5 matures February 15, 2008; and par amount of $11.3 matures August 18, 2009. The average outstanding of transferred consolidated obligations during the year ended December 31, 2004 was $152.9 million. Book value of consolidated obligation bonds transferred during 2004 was $213.2 million. In 2003, two |
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Federal Home Loan Bank of New York
Notes to Financial Statements
consolidated obligation bonds aggregating $32.0 million at par were transferred to the FHLBNY from other FHLBanks in exchange for cash. | ||||
Discount Notes | ||||
Consolidated discount notes are issued to raise short-term funds. Discount notes are consolidated obligations with original maturities up to 360 days. These notes are issued at less than their face amount and redeemed at par when they mature. The FHLBNY’s outstanding in consolidated discount notes, all of which are due within one year, was as follows (dollars in thousands): |
Weighted | ||||||||||||
Book | Par | Average | ||||||||||
Value | Value | Interest Rate | ||||||||||
December 31, 2004 | $ | 19,641,626 | $ | 19,670,201 | 1.90 | % | ||||||
December 31, 2003 | $ | 16,804,767 | $ | 16,819,977 | 0.99 | % | ||||||
The FHLBank Act authorizes the Secretary of the Treasury, at his or her discretion, to purchase consolidated obligations of the FHLBanks aggregating not more than $4 billion. The terms, conditions, and interest rates are determined by the Secretary of the Treasury. There were no such purchases by the U.S. Treasury during the years ended December 31, 2004 and 2003. |
14. | Mandatorily Redeemable Capital Stock | |||
The FHLBNY’s capital stock is redeemable at the option of both the member and the FHLBNY with certain conditions. Capital stock that is mandatorily redeemable, as interpreted under SFAS 150, is considered a liability rather than capital as described more fully in Notes 1 and 2. The FHLBNY considers stock as mandatorily redeemable once a member delivers a written redemption request, or provides a notice of intent to withdraw from membership, or attains non-member status by merger or acquisition, charter termination, or involuntary termination from membership. 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. | ||||
At December 31, 2004, the mandatorily redeemable capital stock totaled $126,581,000 and was held by banks attaining non-member status by virtue of being acquired by non-members. Substantially all of the banks became non-members in 2002. | ||||
Anticipated redemption terms of mandatorily redeemable capital stock were as follows at December 31, 2004 (in thousands): |
December 31, 2004 | ||||
Redemption within one year | $ | 106,141 | ||
Redemption after one year through two years | 175 | |||
Redemption after three years through five years | 9,923 | |||
Redemption after six years through ten years | 10,294 | |||
Redemption after eleven years through fifteen years | 48 | |||
$ | 126,581 | |||
No member’s or non-members’ redemption request remained pending at December 31, 2004. |
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Federal Home Loan Bank of New York
Notes to Financial Statements
Dividends related to capital stock classified as mandatorily redeemable were accrued at an estimated dividend rate and reported as interest expense in the Statements of Income. At December 31, 2004, the FHLBNY had estimated a 3% dividend payout due to holders of mandatorily redeemable capital stock averaging $162,861,000 during the fourth quarter of 2004, and a liability of $1,228,000 representing accrued dividend was recognized as an expense. The actual dividend that was paid on January 31, 2005 was 3.05% (Annualized), or $1,249,000. | ||||
The FHLBNY’s activity for mandatorily redeemable capital stock was as follows in 2004 (in thousands). Rollforward amounts for 2003 and 2002 are not provided because the FHLBNY adopted SFAS 150 on January 1, 2004. |
December 31, 2004 | ||||
Balance, beginning of year | $ | — | ||
Capital stock subject to mandatory redemption reclassified from equity on adoption of SFAS 1 | 357,887 | |||
Redemption of mandatorily redeemable capital stock | (231,306 | ) | ||
Balance, end of year | $ | 126,581 | ||
Net accrued interest payable, end of the year (3% annualized) | $ | 1,228 | ||
15. | Capital | |||
The FHLBanks, including FHLBNY, have a unique cooperative structure. To access FHLBNY’s products and services, a financial institution must be approved for membership and purchase capital stock in FHLBNY. The members’ stock requirement is generally based on its use of FHLBNY products, subject to a minimum membership requirement, as prescribed by the FHLBank Act. FHLBNY stock can be issued, exchanged, redeemed and repurchased only at its stated par value of $100 per share. It is not publicly traded. Each member is required to hold capital stock in the FHLBNY equal to the greater of: |
• | 5 % of the member’s total outstanding advances or | |||
• | 1% of the member’s total unpaid principal balance of residential mortgage loans (usually as of the most recent year-end), or | |||
• | $500 |
Option to redeem capital stock that is greater than a member’s minimum requirement is held by both the member and the FHLBNY. |
In November 1999, the FHLBank Act was significantly modified by the Federal Home Loan Bank System Modernization Act, which was enacted as Title VI of the Gramm-Leach-Bliley Act (“GLB Act”). The GLB Act established voluntary membership for all members. Any member may withdraw from membership and have its capital stock redeemed after providing to the FHLBNY the required notice. Withdrawal from membership requires six months’ notice. Members that withdraw from membership must wait five years before being readmitted to membership to any FHLBank. |
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The GLB Act will result in a number of changes in the capital structure of the FHLBanks. The final Finance Board capital rule was published on January 30, 2001, and required each FHLBank to submit a capital structure plan (“Capital Plan”) to the Finance Board by October 29, 2001 in accordance with the provisions of the GLB Act and final capital rule. The Finance Board approved the FHLBNY’s Capital Plan on July 18, 2002. FHLBNY’s plan to convert to the new stock by October 2003 was deferred as a result of the loss of $189.2 million from the sale of credit deteriorated MBS in the third quarter of 2003. The FHLBNY plans to convert to the new plan during the fourth quarter of 2005. | ||||
Until the new Capital Plan is implemented, the current capital rules remain in effect. The FHLBNY does not expect any negative consequences from the delay. In particular, the Act requires members to purchase capital stock equal to the greater of 1 percent of their mortgage-related assets or 5 percent of outstanding FHLBank advances. However, the GLB Act removed the provision that required a non-thrift member to purchase additional stock to borrow from the FHLBank if the non-thrift member’s mortgage-related assets were less than 65 percent of total assets. A member may, at the FHLBank’s discretion, redeem at par value any capital stock greater than its statutory requirement or sell it at par value to another member of that FHLBank. | ||||
Under the new plan, each FHLBank may offer two classes of stock. Members can redeem Class A stock by giving six months’ notice, and members can redeem Class B stock by giving 5 year’s notice. Only “permanent” capital, defined as retained earnings and Class B stock, satisfies the FHLBank risk based capital requirement. In addition, the GLB Act specifies a 5 percent minimum leverage ratio based on total capital and a 4 percent minimum capital ratio that does not include the 1.5 weighting factor applicable to the permanent capital that is used in determining compliance with the 5 percent minimum leverage ratio. | ||||
The FHLBanks Adopted SFAS 150 as of January 1, 2004. In compliance with SFAS 150, the FHLBanks will reclassify stock subject to redemption from equity to liability once a member exercises a written redemption right, gives notice of intent to withdraw from membership, or attains non-member status by merger or acquisition, charter termination, or involuntary termination from membership, since the shares of capital stock will then meet the definition of a mandatorily redeemable financial instrument. Shares of capital stock meeting this definition are reclassified to a liability at fair value. Dividends related to capital stock classified as a liability are accrued at the expected dividend rate and reported as interest expense in the Statements of Incomes. The repayment of these mandatorily redeemable financial instruments is reflected as a cash outflow in the financing activities section of the Statements of Cash Flows. | ||||
The Finance Board has confirmed that the SFAS 150 accounting treatment for certain shares of its capital stock will not affect the definition of total capital for purposes of determining the FHLBank’s compliance with its regulatory capital requirements, calculating its mortgage securities investment authority (300 percent of total capital), calculating its unsecured credit exposure to other GSEs (100 percent of total capital), or calculating its unsecured credit limits to other counterparties (various percentages of total capital depending on the rating of the counterparty). | ||||
When the new capital structure plan has been implemented, the FHLBNY will be subject to risk-based capital rules. | ||||
The FHLBNY’s board of directors may declare and pay dividends in either cash or capital stock only from retained and current earnings. |
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The FHLBNY’s leverage ratio of 22.10 and 21.04 representing total assets to capital at December 31, 2004 and 2003 were in compliance with the Finance Board’s leverage ratio requirements. (See Note 13 – Consolidated obligations).
16. | Total Comprehensive Income |
Total comprehensive income is comprised of Net Income and Accumulated other comprehensive income (loss), which includes unrealized gains on Available-for-sale securities, cash flow hedging activities and additional minimum liability on Benefits Equalization Plan.
Changes in Accumulated other comprehensive income (loss) for the years ended December 31, 2002 through 2004 were as follows. (in thousands):
Available- | Benefit | Accumulated other | ||||||||||||||
for-sale | Cash-flow | Equalization | Comprehensive | |||||||||||||
securities | hedges | Plan | Income (Loss) | |||||||||||||
Balance, December 31, 2001 | $ | — | $ | — | $ | — | $ | — | ||||||||
Net change | — | — | — | — | ||||||||||||
Balance, December 31, 2002 | — | — | — | — | ||||||||||||
Net change | — | (13 | ) | (2,013 | ) | (2,026 | ) | |||||||||
Balance, December 31, 2003 | — | (13 | ) | (2,013 | ) | (2,026 | ) | |||||||||
Net change | 2,240 | 911 | (476 | ) | 2,675 | |||||||||||
Balance, December 31, 2004 | $ | 2,240 | $ | 898 | $ | (2,489 | ) | $ | 649 | |||||||
17. | Earnings per Share of Capital |
The following table sets forth the computation of earnings per share of capital (dollars in thousands):
2004 | 2003 | 2002 | ||||||||||
Net income before cumulative effect of change in accounting principle | $ | 162,581 | $ | 45,816 | $ | 234,090 | ||||||
Cumulative effect of change in accounting principle | (1,305 | ) | — | — | ||||||||
Net income available to stockholders | $ | 161,276 | 45,816 | $ | 234,090 | |||||||
Weighted average shares of capital | 37,917 | 40,816 | 37,674 | |||||||||
Less: Mandatorily redeemable capital | (2,467 | ) | — | — | ||||||||
Average number of shares of capital used to calculate earnings per share | 35,450 | $ | 40,816 | 37,674 | ||||||||
Earnings per share of capital before cumulative effect of change in accounting principle | $ | 4.59 | $ | 1.12 | $ | 6.21 | ||||||
Cumulative effect of change in accounting principle | (0.04 | ) | — | — | ||||||||
Net earnings per share of capital | $ | 4.55 | $ | 1.12 | $ | 6.21 | ||||||
Basic and diluted earnings per share of capital are the same. The FHLBNY has no dilutive potential common shares or other common stock equivalents.
18. | Employee Retirement Plans |
The FHLBNY participates in the Financial Institutions Retirement Fund (“FIRF”), a defined-benefit plan. The plan covers substantially all officers and employees of the FHLBNY. The Bank’s contributions to FIRF through June 30,1987 represented the normal cost of the plan. The plan reached the full-funding limitation, as defined by the Employee Retirement Income Security
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Act, for the plan year beginning July 1, 1987, because of favorable investment and other actuarial experience during previous years. As a result, FIRF suspended employer contributions for all plan years ending after June 30, 1987 through 2001. Contributions to the plan resumed in 2002. Contributions to FIRF charged to operating expenses for the years ended December 31, 2004, 2003 and 2002 were $4,803,000, $2,769,000 and $1,108,000 respectively. The FIRF is a multi-employer plan and does not segregate its assets, liabilities, or costs by participating employer. As a result, disclosure of the accumulated benefit obligations, plan assets, and the components of annual pension expense attributable to the FHLBNY are not made.
The FHLBNY also participates in the Financial Institutions Thrift Plan, a defined contribution plan. The Bank’s contributions are equal to a percentage of participants’ compensation and a matching contribution equal to a percentage of voluntary employee contributions, subject to certain limitations. The FHLBNY contributed $1,016,000, $1,040,000 and $653,000 for the years ended 31, 2004, 2003 and 2002.
In addition, the FHLBNY maintains a deferred compensation plan, available to all employees, which is, in substance, an unfunded supplemental retirement plan, referred to as the Benefits Equalization Plan. The plan’s liability consists of the accumulated compensation deferrals and accrued earnings on the deferrals.
The accrued pension cost for the FHLBNY’s supplemental retirement plan were as follows (in thousands):
2004 | 2003 | |||||||
Accumulated benefit obligation | $ | (8,819 | ) | $ | (6,760 | ) | ||
Effect of future salary increase | (2,606 | ) | (2,262 | ) | ||||
Projected benefit obligation | (11,425 | ) | (9,022 | ) | ||||
Unrecognized prior service cost | (383 | ) | (433 | ) | ||||
Unrecognized net loss | 2,989 | 2,695 | ||||||
Accrued Pension Cost | $ | (8,819 | ) | $ | (6,760 | ) | ||
Components of the projected benefit obligation for the FHLBNY’s supplemental retirement plan were as follows (in thousands):
2004 | 2003 | |||||||
Projected benefit obligation at the beginning of the year | $ | (10,760 | ) | $ | (6,929 | ) | ||
Service | (600 | ) | (379 | ) | ||||
Interest | (664 | ) | (512 | ) | ||||
Benefits paid | 303 | 207 | ||||||
Change in discount rate | (351 | ) | (1,409 | ) | ||||
Retiree and deferred vested cost | 647 | — | ||||||
Projected benefit obligation at the end of the year | $ | (11,425 | ) | $ | (9,022 | ) | ||
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Amounts recognized in the Statements of Condition and Income for the FHLBNY’s supplemental retirement plan were as follows (in thousands):
2004 | 2003 | |||||||
Accrued benefit liability | $ | (8,819 | ) | $ | (6,760 | ) | ||
Net amount recognized | 6,330 | 4,747 | ||||||
Accumulated other comprehensive loss | $ | (2,489 | ) | $ | (2,013 | ) | ||
Changes in the supplemental retirement plan assets were as follows (in thousands):
2004 | 2003 | |||||||
Fair value of the plan assets at the beginning of the year | $ | — | $ | — | ||||
Employer contributions | 303 | 207 | ||||||
Benefits paid | (303 | ) | (207 | ) | ||||
Fair value of the plan assets at the end of the year | $ | — | $ | — | ||||
Components of the net periodic pension cost for the FHLBNY’s supplemental retirement plan were as follows (in thousands):
2004 | 2003 | 2002 | ||||||||||
Service | $ | (600 | ) | $ | (379 | ) | $ | (389 | ) | |||
Interest | (664 | ) | (512 | ) | (404 | ) | ||||||
Amortization of unrecognized prior service cost | 50 | 50 | 50 | |||||||||
Amortization of unrecognized net loss | (671 | ) | (372 | ) | (326 | ) | ||||||
Amortization of unrecognized net obligation | — | — | (5 | ) | ||||||||
Net periodic benefit cost | $ | (1,885 | ) | $ | (1,213 | ) | $ | (1,074 | ) | |||
The measurement date used to determine current period benefit obligation for the supplemental retirement plan was December 31, 2004.
Key assumptions and other information for the actuarial calculations for the FHLBNY’s supplemental retirement plan were as follows:
2004 | 2003 | |||||||
Discount rate | 6.00 | % | �� | 6.25 | % | |||
Salary Increases | 5.50 | % | 5.50 | % | ||||
Amortization period (years) | 8 | 8 | ||||||
Benefits paid during the year | $ | 303,389 | $ | 207,036 |
The discount rate was reduced in 2004 to reflect the generally lower interest rate environment. Beginning in 2005, the discount rate will be based on the Citigroup Pension Liability Index.
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Estimated future benefit payments, which reflect expected future services, as appropriate, are expected to be paid as follows (in thousands):
Years | Payments | |||
2005 | $ | 393 | ||
2006 | 438 | |||
2007 | 502 | |||
2008 | 575 | |||
2009 | 631 | |||
2010-2014 | 4,192 | |||
$ | 6,731 | |||
The net periodic benefit cost for 2005 is expected to be $ 1,800,000.
The FHLBNY also offers a postretirement health benefit plan to retirees. There are no funded plan assets that have been designated to provide postretirement health benefits. Assumptions used in determining the accumulated postretirement benefit obligation included a discount rate of 5.75%. The effect of a percentage point increase in the assumed healthcare trend rates would be an increase in postretirement benefit expense of $211,000 and in APBO of $1,648,000. The effect of a percentage point decrease in the assumed healthcare trend rates would be an decrease in postretirement benefit expense of $170,000 and in APBO of $1,345,000. Employees over the age of 55 are eligible provided they have completed ten years of service after age 45.
Components of the accumulated postretirement benefit obligation for the Bank’s postretirement health benefits plan for the years ended December 31, 2004 and 2003 were (in thousands):
2004 | 2003 | |||||||
Accumulated postretirement benefit obligation at the beginning of the year | $ | (6,132 | ) | $ | (5,180 | ) | ||
Service Cost | (498 | ) | (277 | ) | ||||
Interest Cost | (495 | ) | (353 | ) | ||||
Actuarial Loss | (1,406 | ) | (653 | ) | ||||
Benefits paid | 326 | 365 | ||||||
Participants’ contributions | (41 | ) | (34 | ) | ||||
Change in plan assumptions | (1,232 | ) | — | |||||
Accumulated postretirement benefit obligation at the end of the year | (9,478 | ) | (6,132 | ) | ||||
Unrecognized net loss | 1,949 | — | ||||||
Accrued postretirement benefit cost | $ | (7,529 | ) | $ | (6,132 | ) | ||
Changes in postretirement health benefit plan assets were as follows (in thousands):
2004 | 2003 | |||||||
Fair value of plan assets at the beginning of the year | $ | — | $ | — | ||||
Employer Contributions | (285 | ) | (331 | ) | ||||
Participant’s contributions | (41 | ) | (34 | ) | ||||
Benefits Paid | 326 | 365 | ||||||
Fair value of plan assets at the end of the year | $ | — | $ | — | ||||
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Notes to Financial Statements
Components of the net periodic postretirement benefit cost for the FHLBNY’s postretirement health were as follows (in thousands):
2004 | 2003 | |||||||
Service cost (benefits attributed to service during the period) | $ | (498 | ) | $ | (277 | ) | ||
Interest cost on accumulated postretirement benefit obligation | (495 | ) | (353 | ) | ||||
Amortization of loss | (361 | ) | (80 | ) | ||||
Net periodic postretirement benefit cost | $ | (1,354 | ) | $ | (710 | ) | ||
The measurement date used to determine current year’s benefit obligation was December 31, 2004.
Key assumptions and other information for the FHLBNY’s postretirement health benefits plan were as follows:
2004 | 2003 | |||||||
Weighted average discount rate at the end of the year | 5.75 | % | 6.25 | % | ||||
Health care cost trend rates: | ||||||||
Assumed for next year | 9.00 | % | 8.00 | % | ||||
Ultimate rate | 4.50 | % | 4.50 | % | ||||
Year that ultimate rate is reached | 2010 | 2010 | ||||||
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 reduced in 2004 to reflect the generally lower interest rate environment. Beginning in 2005, the discount rate will be based on the Citigroup Pension Liability Index.
Estimated future benefits payments reflecting expected future services for the years ended December 31, were (in thousands):
Years | Payments | |||
2005 | $ | 330 | ||
2006 | 323 | |||
2007 | 363 | |||
2008 | 410 | |||
2009 | 450 | |||
2010-2014 | 2,864 |
The bank is expected to add $1,625,000 to its postretirement health benefits plan accrual for 2005.
19. | Derivatives |
The contractual or notional amount of derivatives reflects the involvement of the FHLBNY in the various classes of financial instruments. The notional amount of derivatives does not measure the credit risk exposure of the FHLBNY, and the maximum credit exposure of the FHLBNY is substantially less than the notional amount. The maximum credit risk is the estimated cost of replacing favorable interest-rate swaps, forward agreements, mandatory delivery contracts for mortgage loans executed after June 30, 2003, and purchased caps and floors if the counterparty defaults and the related collateral, if any, is of no value to the FHLBNY. This collateral has not been sold or re-pledged.
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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 in the FHLBNY’S view, the appropriate measure of credit risk. Substantially, all derivative contracts are subject to master netting agreements or other right of offset arrangements. At December 31, 2004 and 2003, the FHLBNY’s maximum credit risk, as defined above, was approximately $11,047,606 and $59,240,000 without recognition of collateral held by the FHLBNY. These totals included $17,888,297 and $44,587,000 of net accrued interest receivable. In determining maximum credit risk, the FHLBNY considers accrued interest receivables and payables, and the legal right to offset assets and liabilities by counterparty. One counterparty with a double – A rating accounted for $10.9 million, or 99%, of the exposure. The FHLBNY held $600,000 and $34,131,000 in cash as collateral as of December 31, 2004 and 2003.
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. Note 21 discusses assets pledged by the FHLBNY to these counterparties.
Intermediation
Derivative agreements in which the FHLBNY is an intermediary may arise when the FHLBNY: (1) enters into offsetting derivatives with members and other counterparties to meet the needs of its members, and (2) enters into derivatives to offset the economic effect of other derivative agreements that are no longer designated to either advances, investments, or consolidated obligations. The notional principal of derivatives in which the FHLBNY was an intermediary was $112,000,000 and $132,000,000 as of December 31, 2004 and 2003. 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.
Hedging Activities
General - - The FHLBNY may enter into interest-rate swaps, swaptions, and interest-rate cap and floor agreements (collectively, derivatives) to manage its exposure to changes in interest rates. The FHLBNY may adjust the effective maturity, repricing frequency, or option characteristics of financial instruments to achieve risk management objectives. The FHLBNY uses derivatives in three ways: by designating them as a fair value or cash flow hedge of an underlying financial instrument or a forecasted transaction; by acting as an intermediary; or in asset-liability management (i.e., a non-SFAS 133 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.
A non-SFAS 133 economic hedge is defined as a derivative that hedges specific or non-specific underlying assets, liabilities or firm commitments, but does not qualify for hedge accounting under the rules of SFAS 133 but is an acceptable hedging strategy under the Bank’s risk management program. These strategies also comply with Finance Board’s regulatory requirements. An economic hedge, by definition, introduces the potential for earnings variability due to the changes
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in fair value recorded on the derivative(s) that are not offset by corresponding changes in the value of the economically hedged assets, liabilities, or firm commitments.
The FHLBNY, consistent with Finance Board’s regulation, enters into derivatives only to reduce the market risk exposures inherent in otherwise unhedged assets and funding positions. The FHLBNY utilizes derivatives in the most cost-efficient manner and may enter into derivatives that do not necessarily qualify for hedge accounting under SFAS 133 accounting rules. As a result, when entering into such non-qualified hedges, the FHLBNY recognizes only the change in fair value of these derivatives in Other income as Net realized and unrealized gain (loss) on derivatives and hedging activities, with no offsetting fair value adjustments for the asset, liability, or firm commitment.
Consolidated Obligations - The FHLBNY manages the risk arising from changing market prices and volatility of a consolidated obligation by matching the cash inflow on the derivative with the cash outflow on the consolidated obligation. In addition, the FHLBNY requires collateral agreements on all derivative agreements with non-members. While consolidated obligations are the joint and several obligations of the FHLBanks, one of more FHLBanks may individually serve as counterparties to derivative agreements associated with specific debt issues. For instance, in a typical transaction, fixed-rate consolidated obligations are issued for one or more FHLBanks, and each of those FHLBanks simultaneously enters into a matching derivative in which the counterparty pays to the FHLBank fixed cash flows designed to mirror in timing and amount the cash outflows the FHLBank pays on the consolidated obligation. Such transactions are treated as fair-value hedges under SFAS 133. In this typical transaction, the FHLBank pays a variable cash flow that closely matches the interest payments it receives on short-term or variable-rate advances. This intermediation between the capital and swap markets permits the FHLBNY to raise funds at lower costs than would otherwise be available through the issuance of simple fixed- or floating-rate consolidated obligations in the capital markets.
Advances - With issuances of convertible advances, the FHLBNY may purchase from the member a put option that enables the FHLBNY to 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 cancellable derivative where the FHLBNY pays fixed and receives variable. This type of hedge is treated as a fair value hedge under SFAS 133. The swap counterparty can cancel the derivative on the put date, which would normally occur in a rising rate environment, and the FHLBNY can convert the advance to a floating rate or 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 invested in lower-yielding assets that continue to be funded by higher-cost debt. To protect against this risk, the FHLBNY generally charges a prepayment fee that makes it financially indifferent to a borrower’s decision to prepay an advance. When the Bank offers advances (other than short-term advances) that members may prepay without a prepayment fee, it usually finances such advances with callable debt or otherwise hedges the options.
Mortgage Loans - The FHLBNY invests in mortgage assets. The prepayment options embedded in mortgage assets can result in extensions or reductions in the expected maturities of these investments, depending on changes in estimated prepayment speeds. Finance Board regulation limits this source of interest-rate risk by restricting the types of mortgage assets the Bank may own
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to those with limited average life changes under certain interest-rate shock scenarios and by establishing limitations on duration of equity and change in market value of equity. The FHLBNY may manage against prepayment and duration risk by funding some mortgage assets with consolidated obligations that have call features. In addition, the FHLBNY may use derivatives to manage the prepayment and duration variability of mortgage assets. Net income could be reduced if the FHLBNY replaces the mortgages with lower yielding assets and if the Bank’s higher funding costs are not reduced concomitantly.
The FHLBNY manages the interest-rate and prepayment risks associated with mortgages through debt issuance. The FHLBNY issues both callable and non-callable debt to achieve cash flow patterns and liability durations similar to those expected on the mortgage loans.
The FHLBNY analyzes the duration, convexity, and earnings risk of the mortgage portfolio on a regular basis under various rate scenarios.
Firm Commitment Strategies - Prior to July 1, 2003, the FHLBNY hedged the market value of purchase commitments on fixed-rate mortgage loans by using derivatives with similar market value sensitivity characteristics. When these derivatives settled, the commitment’s current market value was included with the basis of the mortgage loans and amortized accordingly. These transactions were treated as fair value hedges. Mortgage purchase commitments entered into after June 30, 2003 are considered derivatives. Accordingly, both the commitment and the derivatives used in the firm commitment hedging strategy are recorded on the balance sheet at fair value, with changes in fair value recognized in the current-period earnings.
The FHLBNY may also hedge a firm commitment for a forward starting advance through the use of an interest-rate swap. In this case, the swap will function as the hedging instrument for both the firm commitment and the subsequent advance. The basis movement associated with the firm commitment will be rolled into the basis of the advance at the time the commitment is terminated and the advance is issued. The basis adjustment will then be amortized into interest income over the life of the advance.
Investments - The FHLBNY invests in mortgage and residential asset-backed securities, mortgage-backed securities and mortgage loans held for investment, U.S. agency securities and the taxable portion of state or local housing finance agency securities. The interest-rate and prepayment risks associated with these investment securities are managed through debt issuance.
Forward Settlements - There were no forward settled securities recorded at December 31, 2004 or at December 31, 2003.
Anticipated Debt Issuance - The FHLBNY may enter 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.
The FHLBNY is not a derivative dealer and does not trade derivatives for short-term profit.
Credit Risk - The FHLBNY is subject to credit risk due to the risk of nonperformance by counterparties to the derivative agreements. The degree of counterparty risk on derivative agreements depends on the extent to which master netting arrangements are included in such
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contracts to mitigate the risk. The FHLBNY manages counterparty credit risk through credit analysis and collateral requirements and by following the requirements set forth in Finance Board’s regulations. Based on credit analyses and collateral requirements, the management of the FHLBNY does not anticipate any credit losses on its derivative agreements.
The FHLBNY has not issued consolidated obligations denominated in currencies other than U.S. dollars.
To meet the hedging needs of its members, the FHLBNY acts as an intermediary between the members and the other counterparties. This intermediation allows smaller members access to the swap market. The derivatives used in intermediary activities do not qualify for SFAS 133 hedge accounting treatment and are separately marked-to-market through earnings. The net results of the accounting for these derivatives do not significantly affect the operating results of the FHLBNY.
The following table represents outstanding notional balances and estimated fair values of the derivatives outstanding at December 31, (in thousands):
December 31, 2004 | December 31, 2003 | |||||||||||||||
Estimated | Estimated | |||||||||||||||
Notional | Fair Value | Notional | Fair Value | |||||||||||||
Interest Rate Swaps | ||||||||||||||||
Fair value | $ | 63,311,654 | $ | (1,405,858 | ) | $ | 59,998,388 | $ | (1,880,175 | ) | ||||||
Cash Flow | 712,150 | 3,058 | 126,450 | (48 | ) | |||||||||||
Economic | 67,140 | (3,402 | ) | 108,000 | (3,415 | ) | ||||||||||
Interest Rate Caps/Floors | ||||||||||||||||
Fair Value | 1,932,000 | (11 | ) | 1,714,500 | (10 | ) | ||||||||||
Mortgage Delivery Commitments | ||||||||||||||||
Cash Flow | 10,316 | 16 | 9,681 | (35 | ) | |||||||||||
Other | ||||||||||||||||
Intermediation | 112,000 | 9 | 132,000 | 13 | ||||||||||||
Total | $ | 66,145,260 | $ | (1,406,188 | ) | $ | 62,089,019 | $ | (1,883,670 | ) | ||||||
Net Realized and Unrealized Gain (Loss) on Derivatives and Hedging Activities
As a result of SFAS 133, the FHLBNY recorded the following net gains (losses) on derivatives and hedging activities for the years ended December 31, 2004, 2003, and 2002 (in thousands).
December 31, | December 31, | December 31, | ||||||||||
2004 | 2003 | 2002 | ||||||||||
Net gains (losses) on derivatives and hedging activities | ||||||||||||
Gains (losses) related to fair value hedge ineffectiveness | $ | 12,153 | $ | 498 | $ | 438 | ||||||
(Losses) gains on economic hedges | (3,879 | ) | (1,325 | ) | (10,150 | ) | ||||||
Net (losses) gains on derivatives and hedging activities | $ | 8,274 | $ | (827 | ) | $ | (9,712 | ) | ||||
Amortization of basis resulting from modified advance hedges amounted to gains of $3.8 million, $3.2 million, and $0.1 million for the years ended December 31, 2004, 2003 and 2002.
Cash Flow Hedges
There were no material amounts for the years ended December 31, 2004, 2003 and 2002 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. Over the next 12 months, it is expected that $600,000 of net gains recorded in Other comprehensive income at December 31,
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2004, will be recognized in earnings. The maximum length of time over which the FHLBNY is hedging its exposure to the variability in future cash flows for forecasted transactions, excluding those forecasted transactions related to the payment of variable interest on existing financial instruments, is six months.
20. | Estimated Fair Values |
The following estimated fair value amounts have been determined by the FHLBNY, using available market information and the FHLBNY’s judgment of appropriate valuation methods. These estimates were based on pertinent information available to the FHLBNY as of December 31, 2004 and 2003. Although the FHLBNY uses its judgment in estimating the fair value of these financial instruments, there are inherent limitations in any estimation technique or valuation methodology. For example, because an active secondary market does not exist for a portion of the FHLBNY’s financial instruments, in certain cases, fair values are not subject to precise qualification or verification and may change as economic and market factors and evaluation of those factors change. Therefore, these estimated fair values are not necessarily indicative of the amounts that would be realised in current market transactions. The Fair Value Summary Tables do not represent an estimate of the overall market value of the FHLBNY as a going concern, which would take into account future business opportunities.
Cash and Due from Banks
The estimated fair value approximates the recorded book balance.
Interest-Bearing Deposits and Investment Securities
The estimated fair value is derived from quoted prices, excluding accrued interest, as of the last business day of the period.
Federal Funds Sold
To estimate the fair values, the cash flows are discounted using the appropriate market rates for the applicable maturity.
Advances and Other Loans
The FHLBNY determines the estimated fair value of advances with fixed rates and advances with complex floating rates by calculating the present value of expected future cash flows from the advances and excluding amounts for accrued interest receivable. The discount rates used in these calculations are the replacement advance rates for advances with similar terms. Following the Finance Board’s advances regulations, advances with a maturity and repricing period greater than six months require a prepayment fee sufficient to make the FHLBNY financially indifferent to the borrower’s decision to prepay the advances. Therefore, the estimated fair value of advances does not assume prepayment risk.
Mortgage Loans and Participations
The estimated fair values for mortgage loans are determined based on quoted market prices of similar mortgage loans. These prices, however, can change rapidly based upon market conditions and are highly dependent upon the underlying prepayment assumptions.
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Federal Home Loan Bank of New York
Notes to Financial Statements
Accrued Interest Receivable and Payable
The estimated fair value approximates the recorded book value.
Derivative Assets/Liabilities
The FHLBNY estimated fair values of derivatives based on expected cash flows. The fair values are netted by counterparty where such legal right exists. If these netted amounts are positive, they are classified as an asset and if negative, a liability.
Deposits
The FHLBNY determines estimated fair values of deposits by calculating the present value of expected future cash flows from the deposits. The discount rates used in these calculations are the current cost of deposits with similar terms.
Consolidated Obligations
The FHLBNY estimates fair values based on the cost of raising comparable term debt. The estimated cost of issuing debt includes non-interest selling costs.
Borrowings
The FHLBNY determines the estimated fair value of borrowings with fixed rates by calculating the present value of expected future cash flows from the borrowings. The discount rates used in these calculations are the cost of borrowings with similar terms.
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 dividend. The FHLBank’s have a unique cooperative structure. Stocks can only be acquired by members at par value and redeemed at par value. Stock is not traded and no market mechanism exists for the exchange of stock outside the cooperative structure.
Commitments
The estimated fair values of standby letters of credit, standby bond purchase agreements, and commitments to extend credit are based on discounted cash flows from expected fees through the expiration of the agreements, commitments and standby letters of credit.
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Federal Home Loan Bank of New York
Notes to Financial Statements
The carrying value and estimated fair values of the FHLBNY’s financial instruments as of December 31, 2004 were as follows (in thousands):
Net | ||||||||||||
Unrealized | Estimated | |||||||||||
Carrying | Gains | Fair | ||||||||||
Financial Instruments | Value | (Losses) | Value | |||||||||
Assets | ||||||||||||
Cash and due from banks | $ | 22,376 | $ | — | $ | 22,376 | ||||||
Interest-bearing deposits | 2,806,870 | 27 | 2,806,897 | |||||||||
Deposits for mortgage loan programs with other FHLBanks | — | — | — | |||||||||
Federal funds sold | 2,972,000 | (19 | ) | 2,971,981 | ||||||||
Available-for sale securities | 713,363 | — | 713,363 | |||||||||
Held-to-maturity securities | 11,870,674 | 224,203 | 12,094,877 | |||||||||
Advances | 68,507,487 | (3,466 | ) | 68,504,021 | ||||||||
Mortgage loans, net | 1,178,083 | 11,860 | 1,189,943 | |||||||||
Other loans | — | — | — | |||||||||
Accrued interest receivable | 315,768 | — | 315,768 | |||||||||
Derivative assets | 11,048 | — | 11,048 | |||||||||
Other assets | 28,261 | 23 | 28,284 | |||||||||
Liabilities | ||||||||||||
Deposits | 2,297,019 | (3 | ) | 2,297,016 | ||||||||
Consolidated obligations | ||||||||||||
Discount notes | 19,641,626 | 3,134 | 19,638,492 | |||||||||
Bonds | 60,515,356 | (166,313 | ) | 60,681,669 | ||||||||
Mandatorily redeemable capital stock | 126,581 | — | 126,581 | |||||||||
Accrued interest payable | 437,743 | — | 437,743 | |||||||||
Derivative liabilities | 1,372,195 | — | 1,372,195 | |||||||||
Other liabilities | 77,764 | — | 77,764 |
The carrying value and estimated fair values of the FHLBNY’s financial instruments as of December 31, 2003, were as follows (in thousands):
Net | ||||||||||||
Unrealized | Estimated | |||||||||||
Carrying | Gains | Fair | ||||||||||
Financial Instruments | Value | (Losses) | Value | |||||||||
Assets | ||||||||||||
Cash and due from banks | $ | 20,793 | $ | — | $ | 20,793 | ||||||
Interest-bearing deposits | 1,654,603 | — | 1,654,603 | |||||||||
Deposits for mortgage loan programs with other FHLBanks | 917 | — | 917 | |||||||||
Federal funds sold | 1,143,000 | — | 1,143,000 | |||||||||
Held-to-maturity securities | 11,359,367 | 388,921 | 11,748,288 | |||||||||
Advances | 63,923,184 | 266,366 | 64,189,550 | |||||||||
Mortgage loans, net | 671,644 | 15,156 | 686,800 | |||||||||
Loans due to other FHLBanks | 60,000 | — | 60,000 | |||||||||
Accrued interest receivable | 287,827 | — | 287,827 | |||||||||
Derivative assets | 59,240 | — | 59,240 | |||||||||
Liabilities | ||||||||||||
Deposits | 2,100,221 | — | 2,100,221 | |||||||||
Consolidated obligations | ||||||||||||
Discount notes | 16,804,767 | 65 | 16,804,702 | |||||||||
Bonds | 54,051,869 | (600,709 | ) | 54,652,578 | ||||||||
Accrued interest payable | 426,437 | — | 426,437 | |||||||||
Derivative liabilities | 1,913,274 | — | 1,913,274 | |||||||||
Other liabilities | 77,929 | — | 77,929 | |||||||||
Other | ||||||||||||
Standby letters of credit, standby bond purchase agreements, and commitments to extend credits | 147 | 2,024 | 2,171 |
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Federal Home Loan Bank of New York
Notes to Financial Statements
21. | Commitments and Contingencies | |||
As described in Note 13, the FHLBanks have joint and several liability for all the consolidated obligations issued on their behalf. Accordingly, should one or more of the FHLBanks be unable to repay their participation in the consolidated obligations, each of the other FHLBanks could be called upon to repay all or part of such obligations, as determined or approved by the Finance Board. Neither the FHLBNY nor any other FHLBank has had to assume or pay the consolidated obligation of FHLBank. The FHLBNY does not believe that it will be called upon to pay the consolidated obligations of another FHLBank in the future. Under FASB interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, including indirect guarantees of indebtedness of other” (“FIN 45”), FIN 45 would have required FHLBNY to recognize the fair value of the FHLBNY’s joint and several liability for all the consolidated obligations, as discussed above. However, the FHLBNY considers the joint and several liability as similar to a related party guarantee, and meets the scope exceptions in FIN 45. Accordingly, the FHLBNY has not recognized a liability for its joint and several obligations related to other FHLBanks’ consolidated obligations at December 31, 2004 and 2003. | ||||
Commitments for additional advances totalled approximately $10,376,197,000 and $10,575,207,000 as of December 31, 2004 and 2003. Commitments generally are for periods of up to twelve months. Extension of credit under these commitments is subject to certain collateral requirements and other financial criteria at the time the commitment is drawn upon. Standby letters of credit are executed for members for a fee. A standby letter of credit is a financing arrangement between the FHLBNY and its member. If the FHLBNY is required to make payment for a beneficiary’s draw, these amounts are converted into collateralized advances to the member. Outstanding standby letters of credit were approximately $119,468,000 and $81,3700,000 as of December 31, 2004 and 2003, respectively and had original terms of up to fifteen years, with a final expiration in 2019. Unearned fees on standby letters of credit are recorded in other liabilities were not significant as of December 31, 2004 and 2003. Unearned fees for transactions prior to 2003, as well as the value of the guarantees related to standby letters of credit entered into after 2002, are recorded in other liabilities. Based on management’s credit analyses and collateral requirements, the FHLBNY does not deem it necessary to have any provision for credit losses on these commitments and letters of credit. Standby letters of credit are fully collateralized at the time of issuance. The estimated fair values of commitments and letters of credit as of December 31, 2004 and 2003 are reported in Note 20. | ||||
The FHLBNY has entered into standby bond purchase agreements related to securities issued by state housing authorities within its district whereby the FHLBNY, for a fee, agrees to purchase and hold the authorities’ bonds until the designated marketing agent can find a suitable investor or the housing authority repurchases the bonds, according to a schedule established by the standby agreement. Each standby agreement dictates the specific terms that would require the FHLBNY to purchase the bonds. The bond purchase commitments entered into by the FHLBNY expire no later than 2005. Some commitments are renewable at the option of the FHLBNY. Total commitments for bond purchases were $543,721,000 as of December 31, 2004 and 2003, with the New York City Transitional Finance Authority. The FHLBNY was not required to purchase any bonds under these agreements since the inception of the commitment. The estimated fair values of standby bond purchase agreements as of December 31, 2004 and 2003 are reported in Note 20. |
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Federal Home Loan Bank of New York
Notes to Financial Statements
Commitments which unconditionally obligate the FHLBNY to fund or purchase mortgage loans under the MPF program totalled $10,316,000 and $9,681,000 as of December 31, 2004 and 2003. Commitments are generally for periods not to exceed 365 days. In accordance with SFAS 149, such commitments entered into after June 30, 2003 were recorded as derivatives at their fair value. In addition, the FHLBNY had entered into conditional agreements under “Master Commitments” with its members in the MPF program to fund or purchase in aggregate $486,746,000 and $333,467,000 as of December 31, 2004 and 2003. | ||||
The FHLBNY generally executes derivatives with major banks and broker-dealers and generally enters into bilateral collateral agreements. As of December 31, 2004 and 2003, interest-bearing deposits included $1,091,677,000 and $1,653,686,000 in cash pledged as collateral to broker-dealers and banks with credit-risk exposure to the FHLBNY related to derivatives. | ||||
The FHLBNY charged to operating expenses net rental costs of approximately $3,038,742, and $2,906,997 for years aided December 31, 2004 and 2003. Lease agreements for FHLBNY premises generally provide for increases in the basic rentals resulting from increases in property taxes and maintenance expenses. Such increases are not expected to have a material effect on the FHLBNY. | ||||
The following table summarizes commitments and contingencies as of December 31, 2004 (in thousands): |
Payments due or expiration terms by period | ||||||||||||||||||||
> l year | > 3 years | |||||||||||||||||||
<= 1 year | <= 3 year | <= 5 years | > 5 years | Total | ||||||||||||||||
Contractual Obligations | ||||||||||||||||||||
Consolidated obligations – bonds at par | $ | 25,348,025 | $ | 24,986,155 | $ | 6,788,950 | $ | 3,463,000 | $ | 60,586,130 | ||||||||||
Manditorily redeemable capital stock | 106,141 | 175 | 9,923 | 10,342 | 126,581 | |||||||||||||||
Premise and equipment (rental and lease obligations) | 2,845 | 5,535 | 4,976 | 17,751 | 31,107 | |||||||||||||||
Total contractual obligations | 25,457,011 | 24,991,865 | 6,803,849 | 3,491,093 | 60,743,818 | |||||||||||||||
Other contractual obligations | ||||||||||||||||||||
Standby letters of credit | 76,359 | 11,524 | 21,465 | 10,120 | 119,468 | |||||||||||||||
Standby bond purchase agreements | 543,721 | — | — | — | 543,721 | |||||||||||||||
Unused lines of credit and other commitments | 10,376,197 | — | — | — | 10,376,197 | |||||||||||||||
Consolidated obligation bonds traded not settled | 400,650 | — | — | — | 400,650 | |||||||||||||||
Open delivery commitments | 10,316 | — | — | — | 10,316 | |||||||||||||||
Total other contractual obligations | 11,407,243 | 11,524 | 21,465 | 10,120 | 11,450,352 | |||||||||||||||
Total commitments | $ | 36,864,254 | $ | 25,003,389 | $ | 6,825,314 | $ | 3,501,213 | $ | 72,194,170 | ||||||||||
The FHLBNY does not anticipate any credit losses from its off-balance sheet commitments and accordingly no provision for loan losses is required. | ||||
22. | Otter Developments | |||
The FHLBNY is subject to legal proceedings arising in the normal course of business. After consultation with legal counsel, the FHLBNY does not anticipate that the ultimate liability, if any, arising out of these matters will have a material effect on the FHLBNY’s financial condition or results of operations. |
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Federal Home Loan Bank of New York
Notes to Financial Statements
23. | Segment Information | |||
The FHLBNY manages its operations as a single business segment. Management and the FHLBNY’s Board of Directors review enterprise-wide financial information in order to make operating decisions and assess performance. | ||||
The FHLBNY has a unique cooperative structure and is owned by member institutions located within a defined geographic district. The Bank’s market is the same as its membership district – New Jersey, New York, Puerto Rico, and the U.S. Virgin Islands. Institutions that are members of the FHLBNY must have their principal places of business within this market, but may also operate elsewhere. | ||||
The FHLBNY’s primary business is making low-cost, collateralized loans, known as “advances,” to its members. Members use advances as a source of funding to supplement their deposit-gathering activities. As a cooperative, the FHLBNY prices advances at minimal net spreads above the cost of its funding to deliver maximum value to members. | ||||
Advances to large members constitute a significant percentage of FHLBNY’s advance portfolio and its source of revenues. | ||||
The FHLBNY’s total assets and capital could significantly decrease if one or more large members were to withdraw from membership or decrease business with the Bank. Members might withdraw or reduce their business as a result of consolidating with an institution that was a member of another FHLBank, or for other reasons. The FHLBNY has considered the impact of losing one or more large members. In general, a withdrawing member would be required to repay all indebtedness prior to the redemption of its capital stock. Under current conditions, the FHLBNY does not expect the loss of a large member to impair its operations. Since the FHLBank Act of 1999 does not allow the FHLBNY to redeem the capital of an existing member if the redemption would cause the FHLBNY to fall below its capital requirements, 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, in turn, 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. | ||||
The following table summarizes advances to the top 5 members at December 31, 2004 (in thousands): |
Percent of | ||||||||||||
City | State | Advances | Total Advances | |||||||||
GreenPoint Bank | New York | New York | $ | 5,125,015 | 7.60 | % | ||||||
HSBC Bank USA | Buffalo | New York | 5,011,786 | 7.50 | % | |||||||
New York Community Bank | Westbury | New York | 4,644,290 | 6.90 | % | |||||||
Independence Community Bank | New York | New York | 3,958,000 | 5.90 | % | |||||||
Manufacturers and Traders Trust Company | Buffalo | New York | 3,529,333 | 5.20 | % | |||||||
$ | 22,268,424 | 33.10 | % | |||||||||
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Federal Home Loan Bank of New York
Notes to Financial Statements
The following table summarizes advance interest income from the top 5 members and non-members during year ended December 31, 2004 (in thousands): |
December 31, 2004 | ||||
New York Community Bank | $ | 196,510 | ||
GreenPoint Bank | 145,738 | |||
Independence Community Bank | 131,164 | |||
Washington Mutual Bank | 60,887 | |||
HSBC Bank USA | 35,507 | |||
$ | 569,806 | |||
At December 31, 2004, the FHLBNY had 302 members. Interest revenues received from New York Community Bank aggregated $196,510,000, or 10.2% of total revenue for the year ended December 31, 2004. |
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