Federal Home Loan Bank Of New York 10-Q 2013 Q1 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period ended March 31, 2013

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

Commission file number: 000-51397

Federal Home Loan Bank of New York

(Exact name of registrant as specified in its charter)

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

(212) 681-6000

(Registrant’s telephone number, including area code)

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

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

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

Large accelerated filer o	Accelerated filer o
Non-accelerated filer x	Smaller reporting company o
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)  Yes o No x

The number of shares outstanding of the issuer’s common stock as of April 30, 2013 was 47,672,902.

FEDERAL HOME LOAN BANK OF NEW YORK

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2013

Table of Contents

	Page
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (Unaudited):
Statements of Condition (Unaudited) as of March 31, 2013 and December 31, 2012	3
Statements of Income (Unaudited) for the Three Months ended March 31, 2013 and 2012	4
Statements of Comprehensive Income (Unaudited) for the Three Months ended March 31, 2013 and 2012	5
Statements of Capital (Unaudited) for the Three Months ended March 31, 2013 and 2012	6
Statements of Cash Flows (Unaudited) for the Three Months ended March 31, 2013 and 2012	7
Notes to Financial Statements (Unaudited)	9
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	46
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	91
ITEM 4. CONTROLS AND PROCEDURES	94
PART II. OTHER INFORMATION	95
ITEM 1. LEGAL PROCEEDINGS	95
ITEM 1A. RISK FACTORS	95
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	95
ITEM 3. DEFAULTS UPON SENIOR SECURITIES	95
ITEM 4. MINE SAFETY DISCLOSURES	95
ITEM 5. OTHER INFORMATION	95
ITEM 6. EXHIBITS	96

2

Federal Home Loan Bank of New York

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

As of March 31, 2013 and December 31, 2012

	March 31, 2013			December 31, 2012
Assets
Cash and due from banks (Note 3)	$	4,699,867		$	7,553,188
Federal funds sold (Note 4)	10,119,000			4,091,000
Available-for-sale securities, net of unrealized gains of $21,715 at March 31, 2013 and $22,506 at December 31, 2012 (Note 6)	2,093,172			2,308,774
Held-to-maturity securities (Note 5)	11,173,926			11,058,764
Advances (Note 7) (Includes $500,534 at March 31, 2013 and $500,502 at December 31, 2012 at fair value under the fair value option)	71,723,154			75,888,001
Mortgage loans held-for-portfolio, net of allowance for credit losses of $6,709 at March 31, 2013 and $6,982 at December 31, 2012 (Note 8)	1,885,165			1,842,816
Accrued interest receivable	193,273			179,044
Premises, software, and equipment	12,663			11,576
Derivative assets (Note 16)	11,236			41,894
Other assets	11,849			13,743
Total assets	$	101,923,305		$	102,988,800
Liabilities and capital
Liabilities
Deposits (Note 9)
Interest-bearing demand	$	2,051,943		$	1,994,974
Non-interest-bearing demand	19,591			19,537
Term	46,000			40,000
Total deposits	2,117,534			2,054,511
Consolidated obligations, net (Note 10)
Bonds (Includes $10,037,764 at March 31, 2013 and $12,740,883 at December 31, 2012 at fair value under the fair value option)	61,014,301			64,784,321
Discount notes (Includes $1,949,723 at March 31, 2013 and $1,948,987 at December 31, 2012 at fair value under the fair value option)	32,554,976			29,779,947
Total consolidated obligations	93,569,277			94,564,268
Mandatorily redeemable capital stock (Note 12)	26,172			23,143
Accrued interest payable	168,534			127,664
Affordable Housing Program (Note 11)	128,512			134,942
Derivative liabilities (Note 16)	390,935			426,788
Other liabilities	164,371			165,655
Total liabilities	96,565,335			97,496,971
Commitments and Contingencies (Notes 12, 16 and 18)
Capital (Note 12)
Capital stock ($100 par value), putable, issued and outstanding shares: 46,266 at March 31, 2013 and 47,975 at December 31, 2012	4,626,559			4,797,457
Retained earnings
Unrestricted	800,818			797,567
Restricted (Note 12)	110,178			96,185
Total retained earnings	910,996			893,752
Total accumulated other comprehensive loss (Note 13)	(179,585		)	(199,380		)
Total capital	5,357,970			5,491,829
Total liabilities and capital	$	101,923,305		$	102,988,800

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

3

Federal Home Loan Bank of New York

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

For the three months ended March 31, 2013 and 2012

	March 31,
	2013			2012
Interest income
Advances (Note 7)	$	109,993		$	137,272
Interest-bearing deposits (Note 3)	811			657
Federal funds sold (Note 4)	4,265			2,360
Available-for-sale securities (Note 6)	4,753			6,686
Held-to-maturity securities (Note 5)	59,741			69,335
Mortgage loans held-for-portfolio (Note 8)	16,794			15,827
Loans to other FHLBanks (Note 19)	14			1
Total interest income	196,371			232,138
Interest expense
Consolidated obligations-bonds (Note 10)	75,843			99,766
Consolidated obligations-discount notes (Note 10)	17,087			10,195
Deposits (Note 9)	162			244
Mandatorily redeemable capital stock (Note 12)	253			761
Cash collateral held and other borrowings (Note 19)	2			17
Total interest expense	93,347			110,983
Net interest income before provision for credit losses	103,024			121,155
(Reversal)/Provision for credit losses on mortgage loans	(37		)	861
Net interest income after provision for credit losses	103,061			120,294
Other income (loss)
Service fees and other	2,355			1,920
Instruments held at fair value - Unrealized gains (Note 17)	3,679			7,198
Total OTTI losses	—			(295		)
Net amount of impairment losses reclassified from Accumulated other comprehensive loss	—			(263		)
Net impairment losses recognized in earnings	—			(558		)
Net realized and unrealized gains on derivatives and hedging activities (Note 16)	1,383			24,226
Net realized gains from sale of available-for-sale securities and redemption of held-to-maturity securities (Notes 5 and 6)	—			256
Losses from extinguishment of debt	(7,931		)	(14,778		)
Total other (loss) income	(514		)	18,264
Other expenses
Operating	7,225			7,399
Compensation and benefits	14,106			14,230
Finance Agency and Office of Finance	3,451			3,617
Total other expenses	24,782			25,246
Income before assessments	77,765			113,312
Affordable Housing Program Assessments (Note 11)	7,802			11,407
Net income	$	69,963		$	101,905
Basic earnings per share (Note 14)	$	1.50		$	2.29
Cash dividends paid per share	$	1.13		$	1.26

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

4

Federal Home Loan Bank of New York

Statements of Comprehensive Income — Unaudited (in thousands)

For the three months ended March 31, 2013 and 2012

	Three months ended March 31,
	2013			2012
Net Income	$	69,963		$	101,905
Other Comprehensive income (loss)
Net unrealized gains/losses on available-for-sale securities
Unrealized (losses) gains	(791		)	466
Net non-credit portion of other-than-temporary impairment losses on held-to-maturity securities
Non-credit portion of other-than-temporary impairment losses	—			(132		)
Reclassification of non-credit portion included in net income	—			395
Accretion of non-credit portion	2,594			2,459
Total net non-credit portion of other-than-temporary impairment gains on held-to-maturity securities	2,594			2,722
Net unrealized gains/losses relating to hedging activities
Unrealized gains	16,544			16,502
Reclassification of losses included in net income	1,067			1,002
Total net unrealized gains relating to hedging activities	17,611			17,504
Pension and postretirement benefits	381			—
Total other comprehensive income	19,795			20,692
Total comprehensive income	$	89,758		$	122,597

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

5

Federal Home Loan Bank of New York

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

For the three months ended March 31, 2013 and 2012

														Accumulated
	Capital Stock (a)													Other
	Class B					Retained Earnings								Comprehensive			Total
	Shares		Par Value			Unrestricted			Restricted		Total			Income (Loss)			Capital
Balance, December 31, 2011	44,906		$	4,490,601		$	722,198		$	24,039	$	746,237		$	(190,427	)	$	5,046,411
Proceeds from issuance of capital stock	6,531		653,140			—			—		—			—			653,140
Repurchase/redemption of capital stock	(5,619	)	(561,932		)	—			—		—			—			(561,932		)
Cash dividends ($1.26 per share) on capital stock	—		—			(57,393		)	—		(57,393		)	—			(57,393		)
Comprehensive income	—		—			81,524			20,381		101,905			20,692			122,597
Balance, March 31, 2012	45,818		$	4,581,809		$	746,329		$	44,420	$	790,749		$	(169,735	)	$	5,202,823
Balance, December 31, 2012	47,975		$	4,797,457		$	797,567		$	96,185	$	893,752		$	(199,380	)	$	5,491,829
Proceeds from issuance of capital stock	7,191		719,067			—			—		—			—			719,067
Repurchase/redemption of capital stock	(8,859	)	(885,903		)	—			—		—			—			(885,903		)
Shares reclassified to mandatorily redeemable capital stock	(41	)	(4,062		)	—			—		—			—			(4,062		)
Cash dividends ($1.13 per share) on capital stock	—		—			(52,719		)	—		(52,719		)	—			(52,719		)
Comprehensive income	—		—			55,970			13,993		69,963			19,795			89,758
Balance, March 31, 2013	46,266		$	4,626,559		$	800,818		$	110,178	$	910,996		$	(179,585	)	$	5,357,970

(a)   Putable stock

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

6

Federal Home Loan Bank of New York

Statements of Cash Flows — Unaudited (in thousands)

For the three months ended March 31, 2013 and 2012

	Three months ended March 31,
	2013			2012
Operating activities
Net Income	$	69,963		$	101,905
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization:
Net premiums and discounts on consolidated obligations, investments, mortgage loans and other adjustments	5,045			2,360
Concessions on consolidated obligations	963			1,174
Premises, software, and equipment	983			1,143
(Reversal)/Provision for credit losses on mortgage loans	(37		)	861
Net realized gains from redemption of held-to-maturity securities	—			(256		)
Credit impairment losses on held-to-maturity securities	—			558
Change in net fair value adjustments on derivatives and hedging activities	46,834			23,671
Change in fair value adjustments on financial instruments held at fair value	(3,679		)	(7,198		)
Losses from extinguishment of debt	7,931			14,778
Net change in:
Accrued interest receivable	(13,972		)	6,722
Derivative assets due to accrued interest	(17,825		)	(10,245		)
Derivative liabilities due to accrued interest	10,928			(5,719		)
Other assets	2,766			2,420
Affordable Housing Program liability	(6,430		)	3,175
Accrued interest payable	41,032			38,580
Other liabilities	(3,908		)	(1,895		)
Total adjustments	70,631			70,129
Net cash provided by operating activities	140,594			172,034
Investing activities
Net change in:
Interest-bearing deposits	249,034			79,687
Federal funds sold	(6,028,000		)	(6,605,000		)
Deposits with other FHLBanks	(124		)	(70		)
Premises, software, and equipment	(2,070		)	(703		)
Held-to-maturity securities:
Purchased	(661,209		)	(1,312,188		)
Repayments	548,211			583,790
In-substance maturities	—			4,998
Available-for-sale securities:
Repayments	215,390			194,347
Proceeds from sales	204		��	171
Advances:
Principal collected	98,083,797			99,236,510
Made	(94,280,061		)	(100,670,982		)
Mortgage loans held-for-portfolio:
Principal collected	95,586			78,343
Purchased	(140,390		)	(153,272		)
Proceeds from sales of REO	—			237
Net cash used in investing activities	(1,919,632		)	(8,564,132		)

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

7

Federal Home Loan Bank of New York

Statements of Cash Flows — Unaudited (in thousands)

For the three months ended March 31, 2013 and 2012

	Three months ended March 31,
	2013			2012
Financing activities
Net change in:
Deposits and other borrowings	$	63,200		$	1,367,425
Derivative contracts with financing element	(56,607		)	(70,339		)
Consolidated obligation bonds:
Proceeds from issuance	8,776,549			11,070,584
Payments for maturing and early retirement	(12,383,131		)	(16,871,058		)
Net payments on bonds transferred to other FHLBanks (a)	(28,943		)	—
Consolidated obligation discount notes:
Proceeds from issuance	31,927,844			36,972,787
Payments for maturing	(29,152,607		)	(34,581,969		)
Capital stock:
Proceeds from issuance of capital stock	719,067			653,140
Payments for repurchase/redemption of capital stock	(885,903		)	(561,932		)
Redemption of mandatorily redeemable capital stock	(1,033		)	(11,867		)
Cash dividends paid (b)	(52,719		)	(57,393		)
Net cash used in financing activities	(1,074,283		)	(2,090,622		)
Net decrease in cash and due from banks	(2,853,321		)	(10,482,720		)
Cash and due from banks at beginning of the period	7,553,188			10,877,790
Cash and due from banks at end of the period	$	4,699,867		$	395,070
Supplemental disclosures:
Interest paid	$	46,484		$	83,085
Affordable Housing Program payments (c)	$	14,232		$	8,232
Transfers of mortgage loans to real estate owned	$	580		$	99
Portion of non-credit OTTI gains on held-to-maturity securities	$	—		$	(263	)

(a)For information about bonds transferred to other FHLBanks, see Note 19. Related Party Transactions.

(b)Does not include payments to holders of mandatorily redeemable capital stock. Such payments are reported as interest expense.

(c)AHP payments = (beginning accrual - ending accrual) + AHP assessment for the period; payments represent funds released to the Affordable Housing Program.

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

8

Background

The Federal Home Loan Bank of New York (“FHLBNY” or “the Bank”) is a federally chartered corporation, and is one of twelve district Federal Home Loan Banks (“FHLBanks”).  The FHLBanks are U.S. government-sponsored enterprises (“GSEs”), organized under the authority of the Federal Home Loan Bank Act of 1932, as amended (“FHLBank Act”).  Each FHLBank is a cooperative owned by member institutions located within a defined geographic district.  The FHLBNY’s defined geographic district is New Jersey, New York, Puerto Rico, and the U.S. Virgin Islands.

Tax Status

The FHLBanks, including the FHLBNY, are exempt from ordinary federal, state, and local taxation except for real property taxes.

Assessments

Affordable Housing Program (“AHP”) Assessments. — Each FHLBank, including the FHLBNY, provides subsidies in the form of direct grants and below-market interest rate advances to members, who use the funds to assist in the purchase, construction or rehabilitation of housing for very low-, low- and moderate-income households.  Annually, the 12 FHLBanks must set aside the greater of $100 million or 10 percent of their regulatory defined net income for the Affordable Housing Program.

For more information about the AHP see the Bank’s most recent Form 10-K filed on March 25, 2013.

Basis of Presentation

The preparation of financial statements in accordance with generally accepted accounting principles in the U.S. requires management to make a number of judgments, estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities (if applicable), and the reported amounts of income and expense during the reported periods. Although management believes these judgments, estimates and assumptions to be appropriate, actual results may differ. The information contained in these financial statements is unaudited. In the opinion of management, normal recurring adjustments necessary for a fair presentation of the interim period results have been made.  These unaudited financial statements should be read in conjunction with the FHLBNY’s audited financial statements for the year ended December 31, 2012 included in Form 10-K filed on March 25, 2013.

Note   1.Significant Accounting Policies and Estimates.

Change in Accounting Principle

During the period ended December 31, 2012, the FHLBNY changed its presentation of the amortization of fair value hedge basis adjustments of modified advances.  From time to time, the FHLBNY will enter into an agreement with a member to modify the terms of an existing advance.  If the FHLBNY determines the modification is minor, the subsequent advance is considered a modification of the original advance.  If the modified advance is also hedged under a qualifying fair value hedge, the fair value basis adjustment at the modification date will be amortized over the life of the modified advance on a level-yield basis even if the modified advance was designated after modification in a fair value hedge relationship.  Prior to the change, the FHLBNY had previously made an accounting policy election to present the amortization of the hedge basis adjustment as a component of Interest income from advances.  FHLBNY began presenting the amortization of fair value basis of the modified hedged advance in Other income (loss) as a Net realized and unrealized gain (loss) on derivatives and hedging activities.  The change in presentation is preferable as the Interest income from advances would not be impacted by the amortization if the advance is continuously hedged, and the total Interest income and Net interest income would more closely reflect the economics of the FHLBNY’s interest margin.  The preferability of one acceptable method of accounting over another for hedge adjustments to an hedged item, which continues to be hedged when simultaneously dedesignated from one hedge relationship and redesignated into another hedge relationship, has not been addressed in any authoritative accounting literature.  The FHLBNY reclassified the appropriate line items in the Statements of Income for the first quarter of 2012, which reflects an increase in reported Interest income from Advances within Net interest income by $28.9 million and a corresponding decrease in Net realized and unrealized gains (losses) from derivatives and hedging actives in Other income.  The change in presentation had no impact on Net income for any periods in this report since the change impacted only the presentation of the amortization of the hedge basis adjustment.

9

The following table summarizes the reclassifications (in thousands):

	March 31, 2012
	Adjusted		As Previously Reported
Interest income
Advances	$	137,272	$	108,395
Total interest income	$	232,138	$	203,261
Net interest income before provision for credit losses	$	121,155	$	92,278
Net interest income after provision for credit losses	$	120,294	$	91,417
Other income (loss)
Net realized and unrealized gains on derivatives and hedging activities	$	24,226	$	53,103
Total other income	$	18,264	$	47,141

Significant Accounting Policies and Estimates

The FHLBNY has identified certain accounting policies that it believes are significant because they require management to make subjective judgments about matters that are inherently uncertain and because of the likelihood that materially different amounts would be reported under different conditions or by using different assumptions.  These policies include estimating the allowance for credit losses on the advance and mortgage loan portfolios, evaluating the impairment of the Bank’s securities portfolios, and estimating fair values of certain assets and liabilities.  There have been no significant changes to accounting policies from those identified in Note 1. Significant Accounting Policies and Estimates in Notes to the Financial Statements in the Bank’s most recent Form 10-K filed on March 25, 2013, which contains a summary of the Bank’s significant accounting policies and estimates.

Recently Adopted Significant Accounting Policies

Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income. — In February 2013, the FASB issued ASU No. 2013-02, Comprehensive Income (Topic 220): Reporting of Amounts Reclassified out of Accumulated Other Comprehensive Income.  The ASU requires new footnote disclosures of items reclassified from accumulated OCI to net income.  The requirements became effective in the first quarter of 2013.  For the FHLBNY, the expanded disclosures include reclassifications from AOCI for previously recorded non-credit losses due to OTTI, realized gains and losses due to cash flow hedges, gains and losses due to changes in assumptions of supplemental pension and postretirement benefit plans, and reclassifications of gains and losses on available-for-sale securities.  The application of this guidance resulted in expanded disclosures and had no impact on the FHLBNY’s financial condition, results of operations or cash flows.  See Note 13.  Total Comprehensive Income.

Disclosures about Offsetting Assets and Liabilities. — In December 2011, the FASB issued ASU No. 2011-11, Balance Sheet (Topic 210):  Disclosures about Offsetting Assets and Liabilities.  The standard requires enhanced disclosures about certain financial instruments and derivative instruments that are either offset in the balance sheet (presented on a net basis) or subject to an enforceable master netting arrangement or similar arrangement.  In January 2013, the FASB clarified that the scope of this guidance is limited to derivatives, repurchase and reverse repurchase agreements, and securities borrowing and lending transactions.

The new disclosures requirements should enhance comparability between those companies that prepare their financial statements on the basis of U.S. GAAP and those financial statements in accordance with IFRS.  On adoption, this guidance will require the FHLBNY to disclose both gross and net information about certain financial instruments and derivative instruments, which are either offset on the statement of condition or subject to an enforceable master netting arrangement or similar agreement.  This guidance became effective for interim and annual periods beginning January 1, 2013 and was applied retrospectively for all comparative periods presented.  The application of this guidance resulted in additional disclosures and had no impact on the FHLBNY’s financial condition, results of operations or cash flows.  See Note 16.  Derivatives and Hedging Activities.

Note   2.Recently Issued Accounting Standards and Interpretations.

Joint and Several Liability Arrangements.  In February 2013, the FASB issued ASU No. 2013-04, Liabilities (Topic 405):  Obligations Resulting from Joint and Several Liability Arrangements for Which the Total Amount of the Obligation Is Fixed at the Reporting Date.  This guidance requires an entity to measure these obligations as the sum of (1) the amount the reporting entity agreed to pay on the basis of its arrangement among its co-obligors and (2) any additional amount the reporting entity expects to pay on behalf of its co-obligors.  In addition, this guidance requires an entity to disclose the nature and amount of the obligation as well as other information about those obligations.  We are evaluating the potential impact, if any, of this ASU on our financial statements.  This guidance is effective for interim and annual periods beginning on or after December 15, 2013 and should be applied retrospectively for obligations with joint and several liabilities existing at the beginning of an entity’s fiscal year of adoption.

Framework For Adversely Classifying Loans, Other Real Estate Owned, and Other Assets and Listing Assets for Special Mention.  On April 9, 2012, the Federal Housing Finance Agency (“FHFA”), the FHLBank’s regulator, issued Advisory Bulletin 2012-02 (“Advisory Bulletin”) that establishes adverse classification, identification of Special Mention assets and off-balance sheet credit exposures.  The guidance is expected to be applied

10

prospectively, and was effective at issuance.  However, the FHFA issued additional guidance that extends the effective date of the classification guidelines in the Advisory Bulletin to January 1, 2014.

The guidance also prescribes the timing of asset charge-offs if an asset is at 180 days or more past due, subject to certain conditions.  The FHFA has extended the effective date of the charge-off guidelines to January 1, 2015.

The FHLBNY is continuing to review the guidance, and its preliminary conclusion is that adoption of the Advisory Bulletin would change the FHLBNY’s existing charge-off policy, but would not impact the Bank’s credit classification practices or the credit loss measurement methodologies in any significant manner.  Under existing policies, the FHLBNY records a charge-off on MPF loans based upon the occurrence of a confirming event, which is typically the occurrence of an in-substance foreclosure (which occurs when the PFI takes physical possession of real estate without having to go through formal foreclosure procedures) or actual foreclosure.  Adoption of the Advisory Bulletin may accelerate the timing of charge-offs, and the FHLBNY is reviewing the operational aspects of implementing the guidance.  The FHLBNY’s current practice is to record credit loss allowance on a loan level basis on all MPF loans delinquent 90 days or more (for loans in bankruptcy status, an allowance is recorded regardless of delinquency status), and to measure the allowance based on the shortfall of the value of collateral (less estimated selling costs) to the recorded investment in the impaired loan.  Therefore, the FHLBNY does not expect an acceleration of the charge-offs to have a material impact on the results of financial condition, results of operations and cash flows.

Note   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 and due from banks.

Compensating Balances

The Federal Reserve Board of Governors modified the reserve requirements at the Federal Reserve Bank effective July 12, 2012.  These new requirements state that the FHLBNY is exempted from maintaining any required clearing balance.  Prior to the change, the FHLBNY maintained $1.0 million and utilized the balance to pay for services received from the Federal Reserve Banks.

Pass-through Deposit Reserves

The Bank acts as a pass-through correspondent for member institutions required to deposit reserves with the Federal Reserve Banks.  Pass-through reserves deposited with Federal Reserve Banks were $87.5 million and $85.1 million as of March 31, 2013 and December 31, 2012.  The Bank includes member reserve balances in Other liabilities in the Statements of Condition.

Cash Collateral Pledged to Derivative Counterparties

The FHLBNY executes derivatives with major swap dealers and financial institutions (“derivative counterparties” or “counterparties”), and enters into bilateral collateral agreements.  When derivative counterparties are exposed, the FHLBNY would typically post cash as pledged collateral to mitigate the counterparty’s credit exposure.  At March 31, 2013 and December 31, 2012, the FHLBNY had deposited $2.3 billion and $2.5 billion with counterparties and these amounts earned interest generally at the overnight Federal funds rate.  The cash posted was recorded as a deduction to Derivative liabilities, as provided under master netting agreements with derivative counterparties.

Note   4.Federal Funds Sold.

Federal funds sold were unsecured overnight advances to financial institution counterparties.  At March 31, 2013 and December 31, 2012, amounts outstanding were $10.1 billion and $4.1 billion.  The daily average Federal funds sold in the three months ended March 31, 2013 was $13.3 billion.  In the 12 months ended December 31, 2012, the daily average was $11.4 billion.

11

Note   5.Held-to-Maturity Securities.

Major Security Types (in thousands)

	March 31, 2013
			OTTI					Gross		Gross
	Amortized		Recognized			Carrying		Unrecognized		Unrecognized			Fair
Issued, guaranteed or insured:	Cost		in AOCI			Value		Holding Gains (a)		Holding Losses (a)			Value
Pools of Mortgages
Fannie Mae	$	413,384	$	—		$	413,384	$	33,894	$	—		$	447,278
Freddie Mac	121,393		—			121,393		8,573		—			129,966
Total pools of mortgages	534,777		—			534,777		42,467		—			577,244
Collateralized Mortgage Obligations/Real Estate Mortgage Investment Conduits
Fannie Mae	2,381,336		—			2,381,336		21,055		—			2,402,391
Freddie Mac	2,257,337		—			2,257,337		23,331		—			2,280,668
Ginnie Mae	58,096		—			58,096		808		—			58,904
Total CMOs/REMICs	4,696,769		—			4,696,769		45,194		—			4,741,963
Commercial Mortgage-Backed Securities
Fannie Mae	1,283,649		—			1,283,649		26,988		(308		)	1,310,329
Freddie Mac	3,431,289		—			3,431,289		237,545		—			3,668,834
Ginnie Mae	1,606		—			1,606		5		—			1,611
Total commercial mortgage-backed securities	4,716,544		—			4,716,544		264,538		(308		)	4,980,774
Non-GSE MBS (b)
CMOs/REMICs	94,883		(872		)	94,011		3,198		(388		)	96,821
Asset-Backed Securities (b)
Manufactured housing (insured) (c)	127,603		—			127,603		3,863		(1,630		)	129,836
Home equity loans (insured) (c)	197,081		(43,980		)	153,101		54,034		(1,665		)	205,470
Home equity loans (uninsured)	130,080		(16,024		)	114,056		16,438		(9,160		)	121,334
Total asset-backed securities	454,764		(60,004		)	394,760		74,335		(12,455		)	456,640
Total MBS	10,497,737		(60,876		)	10,436,861		429,732		(13,151		)	10,853,442
Other
State and local housing finance agency obligations	737,065		—			737,065		1,897		(55,181		)	683,781
Total Held-to-maturity securities	$	11,234,802	$	(60,876	)	$	11,173,926	$	431,629	$	(68,332	)	$	11,537,223

	December 31, 2012
			OTTI					Gross		Gross
	Amortized		Recognized			Carrying		Unrecognized		Unrecognized			Fair
Issued, guaranteed or insured:	Cost		in AOCI			Value		Holding Gains (a)		Holding Losses (a)			Value
Pools of Mortgages
Fannie Mae	$	459,114	$	—		$	459,114	$	37,312	$	—		$	496,426
Freddie Mac	133,347		—			133,347		9,462		—			142,809
Total pools of mortgages	592,461		—			592,461		46,774		—			639,235
Collateralized Mortgage Obligations/Real Estate Mortgage Investment Conduits
Fannie Mae	2,602,017		—			2,602,017		24,940		—			2,626,957
Freddie Mac	2,484,560		—			2,484,560		27,058		(1		)	2,511,617
Ginnie Mae	64,681		—			64,681		854		—			65,535
Total CMOs/REMICs	5,151,258		—			5,151,258		52,852		(1		)	5,204,109
Commercial Mortgage-Backed Securities
Fannie Mae	930,982		—			930,982		30,272		(593		)	960,661
Freddie Mac	3,128,561		—			3,128,561		266,562		—			3,395,123
Ginnie Mae	2,969		—			2,969		27		—			2,996
Total commercial mortgage-backed securities	4,062,512		—			4,062,512		296,861		(593		)	4,358,780
Non-GSE MBS (b)
CMOs/REMICs	106,063		(1,006		)	105,057		3,336		(537		)	107,856
Asset-Backed Securities (b)
Manufactured housing (insured) (c)	132,551		—			132,551		1,531		(1,810		)	132,272
Home equity loans (insured) (c)	204,500		(45,676		)	158,824		49,531		(944		)	207,411
Home equity loans (uninsured)	135,290		(16,789		)	118,501		15,354		(10,634		)	123,221
Total asset-backed securities	472,341		(62,465		)	409,876		66,416		(13,388		)	462,904
Total MBS	10,384,635		(63,471		)	10,321,164		466,239		(14,519		)	10,772,884
Other
State and local housing finance agency obligations	737,600		—			737,600		2,097		(56,025		)	683,672
Total Held-to-maturity securities	$	11,122,235	$	(63,471	)	$	11,058,764	$	468,336	$	(70,544	)	$	11,456,556

(a)Unrecognized gross holding gains and losses represent the difference between fair value and carrying value of a held-to-maturity security.  At March 31, 2013 and December 31, 2012, the FHLBNY had pledged MBS with an amortized cost basis of $2.6 million and $2.8 million to the FDIC in connection with deposits maintained by the FDIC at the FHLBNY.

(b)These are private-label mortgage- and asset-backed securities.

(c)Amortized cost - Manufactured housing bonds insured by AGM (formerly FSA) were $127.6 million and $132.6 million at March 31, 2013 and December 31, 2012.  Asset-backed securities (supported by home equity loans) insured by AGM were $68.9 million and $69.8 million at March 31, 2013 and December 31, 2012.  Asset-backed securities (supported by home equity loans) insured by Ambac and MBIA, together, were $128.2 million and $134.7 million at March 31, 2013 and December 31, 2012.  For the purpose of calculating OTTI, the FHLBNY has determined that it will rely on Ambac and MBIA for projected cash flow shortfalls only through June 30, 2013.

12

Unrealized Losses

The fair values and gross unrealized holding losses are aggregated by major security type and by the length of time individual securities have been in a continuous unrealized loss position.  Unrealized losses represent the difference between fair value and amortized cost.  The baseline measure of unrealized loss is amortized cost, which is not adjusted for non-credit OTTI.  Total unrealized losses in this table will not equal unrecognized losses by Major security type disclosed in the previous table.  Unrealized losses are calculated after adjusting for credit OTTI.  In the previous table, unrecognized losses are adjusted for credit and non-credit OTTI.  The following tables summarize held-to-maturity securities with fair values below their amortized cost basis.  (in thousands):

	March 31, 2013
	Less than 12 months					12 months or more					Total
	Estimated		Unrealized			Estimated		Unrealized			Estimated		Unrealized
	Fair Value		Losses			Fair Value		Losses			Fair Value		Losses
Non-MBS Investment Securities
State and local housing finance agency obligations	$	—	$	—		$	309,619	$	(55,181	)	$	309,619	$	(55,181	)
MBS Investment Securities
MBS-GSE
Fannie Mae	101,377		(308		)	—		—			101,377		(308		)
Total MBS-GSE	101,377		(308		)	—		—			101,377		(308		)
MBS-Private-Label	60,491		(1,338		)	289,969		(12,567		)	350,460		(13,905		)
Total MBS	161,868		(1,646		)	289,969		(12,567		)	451,837		(14,213		)
Total	$	161,868	$	(1,646	)	$	599,588	$	(67,748	)	$	761,456	$	(69,394	)

	December 31, 2012
	Less than 12 months					12 months or more					Total
	Estimated		Unrealized			Estimated		Unrealized			Estimated		Unrealized
	Fair Value		Losses			Fair Value		Losses			Fair Value		Losses
Non-MBS Investment Securities
State and local housing finance agency obligations	$	—	$	—		$	309,295	$	(56,025	)	$	309,295	$	(56,025	)
MBS Investment Securities
MBS-GSE
Fannie Mae	192,268		(593		)	—		—			192,268		(593		)
Freddie Mac	453		(1		)	—		—			453		(1		)
Total MBS-GSE	192,721		(594		)	—		—			192,721		(594		)
MBS-Private-Label	61,742		(595		)	297,585		(19,207		)	359,327		(19,802		)
Total MBS	254,463		(1,189		)	297,585		(19,207		)	552,048		(20,396		)
Total	$	254,463	$	(1,189	)	$	606,880	$	(75,232	)	$	861,343	$	(76,421	)

Investments in housing finance agency obligations had gross unrealized losses totaling $55.2 million and $56.0 million at March 31, 2013 and December 31, 2012 for continuous periods of 12 months or longer at those dates.  Management has analyzed the fair values of the bonds, and has concluded that the gross unrealized losses were due to an illiquid market for such securities, causing these investments to be valued at a discount to their acquisition cost.  Management has also reviewed the portfolio and has observed that the bonds are performing to their contractual terms, and has concluded that, as of March 31, 2013 and December 31, 2012, all of the gross unrealized losses on its housing finance agency bonds are temporary because the underlying collateral and credit enhancements were sufficient to protect the Bank from losses based on current expectations.  As a result, the Bank expects to recover the entire amortized cost basis of these securities.  If conditions in the housing and mortgage markets and general business and economic conditions remain stressed or deteriorate further, the fair value of the bonds may decline further and the Bank may experience OTTI in future periods.

Redemption Terms

Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment features.  The amortized cost and estimated fair value of held-to-maturity securities, arranged by contractual maturity, were as follows (in thousands):

	March 31, 2013				December 31, 2012
	Amortized		Estimated		Amortized		Estimated
	Cost (a)		Fair Value		Cost (a)		Fair Value
State and local housing finance agency obligations
Due after one year through five years	$	15,040	$	15,791	$	15,040	$	15,853
Due after five years through ten years	60,885		59,601		60,885		59,531
Due after ten years	661,140		608,389		661,675		608,288
State and local housing finance agency obligations	737,065		683,781		737,600		683,672
Mortgage-backed securities
Due in one year or less	261		263		—		—
Due after one year through five years	483,600		510,915		156,317		166,810
Due after five years through ten years	4,508,834		4,759,502		4,219,907		4,521,574
Due after ten years	5,505,042		5,582,762		6,008,411		6,084,500
Mortgage-backed securities	10,497,737		10,853,442		10,384,635		10,772,884
Total Held-to-maturity securities	$	11,234,802	$	11,537,223	$	11,122,235	$	11,456,556

(a)Amortized cost is net of unamortized discounts and premiums of $33.8 million and $28.0 million at March 31, 2013 and December 31, 2012.

13

Interest Rate Payment Terms

The following table summarizes interest rate payment terms of securities classified as held-to-maturity (in thousands):

	March 31, 2013				December 31, 2012
	Amortized		Carrying		Amortized		Carrying
	Cost		Value		Cost		Value
Mortgage-backed securities
CMO
Fixed	$	292,249	$	290,594	$	453,907	$	452,034
Floating	4,443,594		4,443,594		4,740,385		4,740,385
Total CMO	4,735,843		4,734,188		5,194,292		5,192,419
CMBS
Fixed	4,283,365		4,283,365		3,625,505		3,625,505
Floating	433,179		433,179		437,007		437,007
Total CMBS	4,716,544		4,716,544		4,062,512		4,062,512
Pass Thru (a)
Fixed	940,729		882,528		1,018,578		958,014
Floating	104,621		103,601		109,253		108,219
Total Pass Thru	1,045,350		986,129		1,127,831		1,066,233
Total MBS	10,497,737		10,436,861		10,384,635		10,321,164
State and local housing finance agency obligations
Fixed	76,360		76,360		76,375		76,375
Floating	660,705		660,705		661,225		661,225
Total HFA	737,065		737,065		737,600		737,600
Total Held-to-maturity securities	$	11,234,802	$	11,173,926	$	11,122,235	$	11,058,764

(a) Includes MBS supported by pools of mortgages.

Impairment Analysis (OTTI) of GSE-issued and Private Label Mortgage-backed Securities

The FHLBNY evaluates its individual securities issued by Fannie Mae, Freddie Mac and a U.S. government agency by considering the creditworthiness and performance of the debt securities and the strength of the GSE’s guarantees of the securities.  Based on analysis, GSE- and agency-issued securities are performing in accordance with their contractual agreements.  The FHLBNY believes that it will recover its investments in GSE- and agency-issued securities given the current levels of collateral, credit enhancements and guarantees that exist to protect the investments.

Management evaluates its investments in private-label MBS (“PLMBS”) for OTTI on a quarterly basis by performing cash flow tests on 100 percent of PLMBS.  All PLMBS are classified as held-to-maturity.  For more information about cash flow impairment assessment methodology, see Note 1. Significant Accounting Policies and Estimates in the most recent Form 10-K filed on March 25, 2013.

Monoline insurance — Certain PLMBS owned by the FHLBNY are insured by third-party bond insurers (“monoline insurers”).  The bond insurance on these investments guarantees the timely payments of principal and interest if these payments cannot be satisfied from the cash flows of the underlying mortgage pool.  The FHLBNY performs cash flow credit impairment tests on all of its private-label insured securities, and the analysis of the MBS protected by such third-party insurance looks first to the performance of the underlying security, and considers its embedded credit enhancements in the form of excess spread, overcollateralization, and credit subordination, to determine the collectability of all amounts due.  If the embedded credit enhancement protections are deemed insufficient to make timely payment of all amounts due, then the FHLBNY considers the capacity of the third-party bond insurer to cover any shortfalls.  Certain monoline insurers have been subject to adverse ratings, rating downgrades, and weakening financial performance measures.  In estimating the insurers’ capacity to provide credit protection in the future to cover any shortfall in cash flows expected to be collected for securities deemed to be OTTI, the FHLBNY has developed a methodology to analyze and assess the ability of the monoline insurers to meet future insurance obligations.  Based on analysis performed, the Bank has determined that for bond insurer Assured Guaranty Municipal Corp. insurance guarantees can be relied upon to cover projected shortfalls.  For bond insurers MBIA and Ambac, the reliance period is probable only until June 30, 2013.

There was no OTTI recorded in the first quarter of 2013.  The following tables present the key characteristics of securities determined to be OTTI at March 31, 2012 (in thousands):

	Three months ended March 31, 2012 (a)
	Insurer MBIA				Insurer Ambac				Uninsured				OTTI (b)(d)
Security			Fair				Fair				Fair		Credit			Non-credit
Classification	UPB		Value		UPB		Value		UPB		Value		Loss			Loss
HEL Subprime (c)	$	23,295	$	11,332	$	—	$	—	$	—	$	—	$	(558	)	$	263
Total OTTI Securities	$	23,295	$	11,332	$	—	$	—	$	—	$	—	$	(558	)	$	263

(a)No securities were determined to be OTTI in the first quarter of 2013.  Unpaid principal balances and fair values at March 31, 2012 were for securities impaired in the first quarter of 2012.

(b)Represent OTTI recorded in the first quarter of 2012.  If the present value of cash flows expected to be collected (discounted at the security’s initial effective yield) is less than the amortized cost basis of the security, an OTTI is considered to have occurred because the entire amortized cost basis of the security will not be recovered.  The credit-related OTTI is recognized in earnings.  The non-credit portion of OTTI, which represents fair value losses of OTTI securities (excluding the amount of credit losses), is recognized in AOCI. Positive non-credit losses represent the net amount of non-credit losses reclassified from AOCI to increase the carrying value of securities previously deemed OTTI.

(c)HEL Subprime securities are supported by home equity loans.

(d)Securities deemed to be OTTI in the first quarter of 2012 had been previously determined to be OTTI, and the additional impairment, or re-impairment, was due to further deterioration in the credit performance metrics of the securities.

14

Based on cash flow testing of 100 percent of PLMBS, the FHLBNY identified one private-label MBS with de minimis shortfall, but no OTTI was recorded at March 31, 2013, because the security’s fair value exceeded amortized cost, including the shortfall.

Management has also concluded that it will not be required to sell its held-to-maturity securities before recovery of the amortized cost basis of the securities.

The following table provides roll-forward information about the cumulative credit component of OTTI recognized as a charge to earnings for held-to-maturity securities (in thousands):

	Three months ended March 31,
	2013		2012
Beginning balance	$	36,782	$	34,731
Additional credit losses for which an OTTI charge was previously recognized	—		558
Ending balance	$	36,782	$	35,289

Key Base Assumptions

The tables below summarize the weighted average and range of Key Base Assumptions for all 51 private-label MBS at March 31, 2013 and December 31, 2012, including those deemed OTTI:

	Key Base Assumptions - All PLMBS at March 31, 2013
	CDR % (a)		CPR % (b)		Loss Severity % (c)
Security Classification	Range	Average	Range	Average	Range	Average
RMBS Prime (d)	1.0-5.2	1.6	7.7-30.8	21.8	30.0-68.9	37.0
RMBS Alt-A	1.0-1.0	1.0	2.0-18.1	3.7	30.0-30.0	30.0
HEL Subprime (e)	1.0-8.6	4.3	2.0-10.0	4.2	30.0-100.0	68.5
Manufactured Housing Loans	3.3-5.6	4.6	2.0-3.2	2.5	74.7-80.1	77.8

	Key Base Assumptions - All PLMBS at December 31, 2012
	CDR % (a)		CPR % (b)		Loss Severity % (c)
Security Classification	Range	Average	Range	Average	Range	Average
RMBS Prime (d)	1.0-6.1	2.1	4.4-33.4	23.3	30.0-63.2	35.9
RMBS Alt-A	1.0-1.1	1.0	2.0-14.0	3.7	30.0-30.0	30.0
HEL Subprime (e)	1.5-8.6	4.6	2.0-10.1	3.7	30.0-100.0	71.0
Manufactured Housing Loans	3.6-5.9	4.9	2.0-3.8	2.5	75.1-81.0	78.5

(a)Conditional Default Rate (CDR): 1— ((1-MDR)^12) where, MDR is defined as the “Monthly Default Rate (MDR)” = (Beginning Principal Balance of Liquidated Loans)/(Total Beginning Principal Balance).

(b)Conditional Prepayment Rate (CPR): 1— ((1-SMM)^12) where, SMM is defined as the “Single Monthly Mortality (SMM)” = (Voluntary Partial and Full Prepayments + Repurchases + Liquidated Balances)/(Beginning Principal Balance - Scheduled Principal). Voluntary prepayment excludes the liquidated balances mentioned above.

(c)Loss Severity (Principal and Interest in the current period) = Sum (Total Realized Loss Amount)/Sum (Beginning Principal and Interest Balance of Liquidated Loans).

(d)CMOs/REMICS private-label MBS.

(e)Residential asset-backed MBS.

Significant Inputs

For determining the fair values of all MBS, the FHLBNY has obtained pricing from four pricing services; the prices were clustered, averaged, and then assessed qualitatively before adopting the final price.

Cash flow testing of PLMBS at March 31, 2013 identified one private-label MBS with de minimis shortfall, but no OTTI was recorded because its fair value exceeded amortized cost, including the shortfall.  Accordingly, it was not necessary to record the held-to-maturity bond at its fair value on a non-recurring basis.  The table below provides the distribution of the prices, and the final price adopted for securities with cash flow shortfalls at March 31, 2013 and December 31, 2012 (dollars in thousands except for price):

	Significant Inputs
	Securities deemed OTTI at March 31, 2013
	Carrying		Fair		Fair Value Recorded on			Price		Final
	Value		Value		a Non-recurring basis		Level	Range		Price		Rating
Subprime -Home equity loan
Bond 1	$	1,813	$	2,260	$	—	3	$	52.54 - 82.23	$	56.00	D
Total OTTI PLMBS	$	1,813	$	2,260	$	—

	Significant Inputs
	Securities deemed OTTI at December 31, 2012
	Carrying		Fair		Fair Value Recorded on			Price		Final
	Value		Value		a Non-recurring basis		Level	Range		Price		Rating
Prime -RMBS
Bond 1	$	7,045	$	7,045	$	7,045	3	$	90.47 - 96.85	$	90.47	C
Total OTTI PLMBS	$	7,045	$	7,045	$	7,045

15

Note 6.Available-for-Sale Securities.

The carrying value of an AFS security equals its fair value.  No AFS security was Other-then-temporarily impaired.  There were no unrealized losses at March 31, 2013 or December 31, 2012.  The following table provides major security types (in thousands):

	March 31, 2013
			OTTI		Gross		Gross
	Amortized		Recognized		Unrealized		Unrealized		Fair
	Cost		in AOCI		Gains		Losses		Value
Cash equivalents (a)	$	153	$	—	$	—	$	—	$	153
Equity funds (a)	5,096		—		969		—		6,065
Fixed income funds (a)	3,349		—		312		—		3,661
GSE and U.S. Obligations
Mortgage-backed securities
CMO-Floating	2,018,930		—		20,229		—		2,039,159
CMBS-Floating	43,929		—		205		—		44,134
Total Available-for-sale securities	$	2,071,457	$	—	$	21,715	$	—	$	2,093,172

	December 31, 2012
			OTTI		Gross		Gross
	Amortized		Recognized		Unrealized		Unrealized		Fair
	Cost		in AOCI		Gains		Losses		Value
Cash equivalents (a)	$	215	$	—	$	—	$	—	$	215
Equity funds (a)	5,172		—		540		—		5,712
Fixed income funds (a)	3,382		—		324		—		3,706
GSE and U.S. Obligations
Mortgage-backed securities
CMO-Floating	2,230,813		—		21,448		—		2,252,261
CMBS-Floating	46,686		—		194		—		46,880
Total Available-for-sale securities	$	2,286,268	$	—	$	22,506	$	—	$	2,308,774

(a)The Bank has a grantor trust to fund current and future payments for its employee supplemental pension plan.  Investments in the trust are classified as AFS.  The grantor trust invests in money market, equity and fixed income and bond funds.  Daily net asset values are readily available and investments are redeemable at short notice.  Realized gains and losses from investments in the funds were not significant.

Impairment Analysis (OTTI) of AFS Securities

The Bank’s portfolio of MBS classified as AFS is comprised primarily of GSE-issued collateralized mortgage obligations, which are “pass through” securities.  The FHLBNY evaluates its individual securities issued by Fannie Mae, Freddie Mac and a U.S. agency by considering the creditworthiness and performance of the debt securities and the strength of the government-sponsored enterprises’ guarantees of the securities.  Based on the analysis, GSE-issued securities are performing in accordance with their contractual agreements.  The FHLBNY believes that it will recover its investments in GSE-issued securities given the current levels of collateral, credit enhancements and guarantees that exist to protect the investments.

Redemption Terms

Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment fees.  The amortized cost and estimated fair value (a) of investments classified as AFS, by contractual maturity, were as follows (in thousands):

	March 31, 2013				December 31, 2012
	Amortized Cost (c)		Fair Value		Amortized Cost (c)		Fair Value
Mortgage-backed securities
Due after five years through ten years	$	43,929	$	44,134	$	46,686	$	46,880
Due after ten years	2,018,930		2,039,159		2,230,813		2,252,261
Fixed income funds, equity funds and cash equivalents (b)	8,598		9,879		8,769		9,633
Total Available-for-sale securities	$	2,071,457	$	2,093,172	$	2,286,268	$	2,308,774

(a)  The carrying value of AFS securities equals fair value.

(b)  Determined to be redeemable at short notice.

(c)  Amortized cost is net of unamortized discounts and premiums of $7.2 million and $8.0 million at March 31, 2013 and December 31, 2012.

Interest Rate Payment Terms

The following table summarizes interest rate payment terms of investments in mortgage-backed securities classified as AFS securities (in thousands):

	March 31, 2013				December 31, 2012
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Mortgage-backed securities
CMO floating - LIBOR	$	2,018,930	$	2,039,159	$	2,230,813	$	2,252,261
CMBS floating - LIBOR	43,929		44,134		46,686		46,880
Total Mortgage-backed securities (a)	$	2,062,859	$	2,083,293	$	2,277,499	$	2,299,141

(a)Total will not agree to total AFS portfolio because bond and equity funds in a grantor trust have been excluded.

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Note 7.Advances.

The Bank offers to its members a wide range of fixed- and adjustable-rate advance loan products with different maturities, interest rates, payment characteristics, and optionality.

Redemption Terms

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

	March 31, 2013						December 31, 2012
			Weighted (a)						Weighted (a)
			Average		Percentage				Average		Percentage
	Amount		Yield		of Total		Amount		Yield		of Total
Due in one year or less	$	25,898,936	0.98	%	37.82	%	$	26,956,874	0.90	%	37.29	%
Due after one year through two years	6,236,139		1.86		9.11		7,798,776		1.96		10.79
Due after two years through three years	7,355,847		2.45		10.73		7,234,380		2.38		10.00
Due after three years through four years	8,375,184		3.73		12.23		9,658,689		3.64		13.36
Due after four years through five years	8,699,360		3.05		12.70		10,255,616		3.35		14.19
Thereafter	11,922,901		2.81		17.41		10,387,768		2.77		14.37
Total par value	68,488,367		2.13	%	100.00	%	72,292,103		2.15	%	100.00	%
Hedge value basis adjustments	3,234,252						3,595,396
Fair value option valuation adjustments and accrued interest	535						502
Total	$	71,723,154					$	75,888,001

(a)The weighted average yield is the weighted average coupon rates for advances, unadjusted for swaps. For floating-rate advances, the weighted average rate is the rate outstanding at the reporting dates.

Monitoring and Evaluating Credit Losses on Advances — Summarized below are the FHLBNY’s assessment methodologies for evaluating credit losses on advances.

The FHLBNY closely monitors the creditworthiness of the institutions to which it lends.  The FHLBNY also closely monitors the quality and value of the assets that are pledged as collateral by its members.  The FHLBNY’s members are required to pledge collateral to secure advances.  Eligible collateral includes: (1) one-to-four-family and multi-family mortgages; (2) U.S. Treasury and government-agency securities; (3) mortgage-backed securities; and (4) certain other collateral which is real estate related and has a readily ascertainable value, and in which the FHLBNY can perfect a security interest.  The FHLBNY has the right to take such steps, as it deems necessary to protect its secured position on outstanding advances, including requiring additional collateral (whether or not such additional collateral would otherwise be eligible to secure a loan.  This provision would benefit the FHLBNY in a scenario when a member defaults).  The FHLBNY also has a statutory lien under the FHLBank Act on members’ capital stock, which serves as further collateral for members’ indebtedness to the FHLBNY.

Credit Risk.  The Bank has policies and procedures in place to manage credit risk.  There were no past due advances and all advances were current for all periods in this report.  Management does not anticipate any credit losses, and accordingly, the Bank has not provided an allowance for credit losses on advances.  The Bank’s potential credit risk from advances is concentrated in commercial banks, savings institutions, and insurance companies.

Concentration of Advances Outstanding.  Advances to the FHLBNY’s top ten borrowing member institutions are reported in Note 20. Segment Information and Concentration.  The FHLBNY held sufficient collateral to cover the advances to all institutions and it does not expect to incur any credit losses.

Security Terms.  The FHLBNY lends to financial institutions involved in housing finance within its district.  Borrowing members pledge their capital stock of the FHLBNY as additional collateral for advances.  As of March 31, 2013 and December 31, 2012, 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 mortgage collateral pledged to the FHLBNY if the member executes a written security agreement, provides periodic listings and agrees to hold such collateral for the benefit of the FHLBNY; however, securities and cash collateral are always in physical possession; or

(2)Requires the member specifically to assign or place physical possession of such mortgage collateral with the FHLBNY or its custodial 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 Bank were fully collateralized throughout their entire term.  The total of collateral pledged to the Bank includes excess collateral pledged above the Bank’s minimum collateral requirements.  However, a maximum lendable value is established to ensure that the Bank has sufficient eligible collateral securing credit extensions.  There have been no significant changes to collateral policies from those existing at December 31, 2012.  For more information about collateral ratios and location of collateral held, see Item 1. Business in the Bank’s most recent Form 10-K filed on March 25, 2012.

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Note 8.Mortgage Loans Held-for-Portfolio.

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

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

	March 31, 2013					December 31, 2012
	Amount			Percentage of Total		Amount			Percentage of Total
Real Estate(a):
Fixed medium-term single-family mortgages	$	397,321		21.43	%	$	400,309		22.09	%
Fixed long-term single-family mortgages	1,456,236			78.56		1,412,061			77.90
Multi-family mortgages	142			0.01		156			0.01
Total par value	1,853,699			100.00	%	1,812,526			100.00	%
Unamortized premiums	36,909					35,760
Unamortized discounts	(2,386		)			(2,580		)
Basis adjustment (b)	3,652					4,092
Total mortgage loans held-for-portfolio	1,891,874					1,849,798
Allowance for credit losses	(6,709		)			(6,982		)
Total mortgage loans held-for-portfolio after allowance for credit losses	$	1,885,165				$	1,842,816

(a)Conventional mortgages represent the majority of mortgage loans held-for-portfolio, with the remainder invested in FHA and VA insured loans.

(b)Represents fair value basis of closed delivery commitments.

No loans were transferred to a “loan-for-sale” category.  From time to time, the Bank may request a PFI to repurchase loans if the loan failed to comply with the MPF loan standards.  In the first quarter of 2013 and 2012, PFIs repurchased $2.9 million and $0.2 million of loans.

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 this varies with the particular MPF product.  The amount of the first layer, or First Loss Account (“FLA”), was estimated at $18.0 million and $18.4 million at March 31, 2013 and December 31, 2012.  The FLA is not recorded or reported as a reserve for loan losses, as it serves as a memorandum or information account.  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 accrued were $0.4 million in the first quarter of 2013 and 2012.  These fees were reported as a reduction to mortgage loan interest income.

In terms of the credit enhancement waterfall, the MPF program structures potential credit losses on conventional MPF loans into layers on each loan pool as follows:

·The first layer of protection against loss is the liquidation value of the real property securing the loan.

·The next layer of protection comes from the primary mortgage insurance (“PMI”) that is required for loans with a loan-to-value ratio greater than 80% at origination.

·Losses that exceed the liquidation value of the real property and any PMI, up to an agreed upon amount, the FLA for each Master Commitment, will be absorbed by the FHLBNY.

·Losses in excess of the FLA, up to an agreed-upon amount, the credit enhancement amount, will be covered by the PFI’s credit enhancement obligation.

·Losses in excess of the FLA and the PFI’s remaining credit enhancement for the Master Commitment, if any, will be absorbed by the FHLBNY.

Allowance Methodology for Loan Losses

Mortgage loans are considered impaired when, based on current information and events, it is probable that the FHLBNY will be unable to collect all principal and interest amounts due according to the contractual terms of the mortgage loan agreements.  The Bank performs periodic reviews of individual impaired mortgage loans within the MPF loan portfolio to identify the potential for losses inherent in the portfolio and to determine the likelihood of collection of the principal and interest.  Conventional mortgage loans that are past due 90 days or more, or classified under regulatory criteria (Sub-standard, Doubtful or Loss), and, beginning in the third quarter of 2012, loans that are in bankruptcy regardless of their delinquency status, are evaluated separately on a loan level basis for impairment.  The FHLBNY bases its provision for credit losses on its estimate of probable credit losses inherent in the impaired MPF loan.  The FHLBNY computes the provision for credit losses without considering the private mortgage insurance and other accompanying credit enhancement features (except the “First Loss Account”) to provide credit assurance to the FHLBNY.  Conventional mortgage loans, except FHA- and VA-insured loans, are analyzed under liquidation scenarios on a loan level basis, and identified losses are fully reserved.  Management determines the liquidation value of the real property collateral supporting the impaired loan after deducting costs to liquidate.  That value is compared to the carrying value of the impaired mortgage loan, and a shortfall is recorded as an allowance for credit losses.  This methodology is applied on a loan level basis.  When a loan is foreclosed and the Bank takes

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possession of real estate, the Bank will charge any excess carrying value over the net realizable value of the foreclosed loan to the allowance for credit losses.

Only FHA- and VA-insured MPF loans are evaluated collectively.  FHA- and VA-insured mortgage loans have minimal inherent credit risk, and credit risk of such loans generally arises from servicers defaulting on their obligations.  If adversely classified, the FHLBNY will have reserves established only in the event of a default of a PFI, and reserves would be based on the estimated costs to recover any uninsured portion of the MPF loan.

Classes of the MPF loan portfolio would be subject to disaggregation to the extent that it is needed to understand the exposure to credit risk arising from these loans.  The FHLBNY has determined that no further disaggregation of portfolio segments is needed, other than the methodology discussed above.

Credit Enhancement Fees

The credit enhancement fee (“CE fees”) due to the PFI for taking on a credit enhancement obligation is accrued based on the master commitments outstanding, and for certain MPF products the CE fees are held back for 12 months and then paid monthly to the PFIs.  Under the MPF agreements with PFIs, the FHLBNY may recover credit losses from future CE fees.  The FHLBNY does not consider CE fees when computing the allowance for credit losses.  It is assumed that repayment is expected to be provided solely by the sale of the underlying property, and that there is no other available and reliable source of repayment.  Any incurred losses that would be recovered from the credit enhancements are also not reserved as part of the allowance for credit loan losses.  In such cases, the FHLBNY would withhold CE fee payments to PFIs.

Allowance for Credit Losses

Allowances for credit losses have been recorded against the uninsured MPF loans.  All other types of mortgage loans were insignificant and no allowances were necessary.  The following provides a roll-forward analysis of the allowance for credit losses (a) (in thousands):

	Three months ended March 31,
	2013			2012
Allowance for credit losses:
Beginning balance	$	6,982		$	6,786
Charge-offs	(425		)	(488		)
Recoveries	189			101
(Reversal)/Provision for credit losses on mortgage loans	(37		)	861
Ending balance	$	6,709		$	7,260
Ending balance, individually evaluated for impairment	$	6,709		$	7,260
Recorded investment, end of period:
Individually evaluated for impairment
Impaired, with or without a related allowance (b)	$	31,707		$	29,221
Not impaired, no related allowance	1,782,383			1,435,306
Total uninsured mortgage loans	$	1,814,090		$	1,464,527
Collectively evaluated for impairment (c)
Impaired, with or without a related allowance	$	440		$	217
Not impaired, no related allowance	86,574			32,537
Total insured mortgage loans	$	87,014		$	32,754

(a) The Bank assesses impairment on a loan level basis for conventional loans.  Increase in allowance for credit losses is primarily due to decline in liquidation values of real property securing impaired loans.

(b) When a conventional loan is identified as impaired, and if the impaired loan is well collateralized, no allowance may be necessary.  All loans that are discharged from bankruptcy are considered for impairment if past due 90 days or more, and an allowance for credit loss is computed on an individual loan level.  Beginning in the third quarter of 2012, loans in bankruptcy status, regardless of their delinquency status, are considered for impairment.  Prior to the third quarter of 2012, loans in bankruptcy were deemed impaired if delinquent 90 days or more.

(c) FHA- and VA loans are collectively evaluated for impairment.  Loans past due 90 days or more were considered for impairment but credit analysis indicated funds would be collected and no allowance was necessary.

Non-performing Loans

The FHLBNY’s impaired mortgage loans are reported in the table below (in thousands):

	March 31, 2013		December 31, 2012
Total Mortgage loans, net of provisions for credit losses (a)	$	1,885,165	$	1,842,816
Non-performing mortgage loans - Conventional (b)	$	29,119	$	28,458
Insured MPF loans past due 90 days or more and still accruing interest (b)	$	436	$	410

(a) Includes loans classified as sub-standard, doubtful or loss under regulatory criteria, reported at carrying value.

(b) Data in this table represents unpaid principal balance, and would not agree to data reported in table below at “recorded investment,” which includes interest receivable.  Loans in bankruptcy status and past due 90 days or more (nonaccrual status) are included.

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The following table summarizes the recorded investment in impaired loans, the unpaid principal balance, and related allowance (individually assessed for impairment), and the average recorded investment of impaired loans (in thousands):

	March 31, 2013
			Unpaid				Average		Interest
	Recorded		Principal		Related		Recorded		Income
Impaired Loans	Investment		Balance		Allowance		Investment		Recognized (c)
With no related allowance:
Conventional MPF Loans (a)(b)	$	10,886	$	10,888	$	—	$	11,225	$	—
With an allowance:
Conventional MPF Loans (a)	20,821		20,843		6,709		21,043		—
Total Conventional MPF Loans (a)	$	31,707	$	31,731	$	6,709	$	32,268	$	—

	December 31, 2012
			Unpaid				Average		Interest
	Recorded		Principal		Related		Recorded		Income
Impaired Loans	Investment		Balance		Allowance		Investment		Recognized (c)
With no related allowance:
Conventional MPF Loans (a)(b)	$	8,118	$	8,134	$	—	$	6,768	$	—
With an allowance:
Conventional MPF Loans (a)	23,478		23,507		6,982		22,798		—
Total Conventional MPF Loans (a)	$	31,596	$	31,641	$	6,982	$	29,566	$	—

(a) Based on analysis of the nature of risks of the Bank’s investments in MPF loans, including its methodologies for identifying and measuring impairment, the management of the FHLBNY has determined that presenting such loans as a single class is appropriate.

(b) Collateral values, net of estimated costs to sell, exceeded the recorded investments in impaired loans and no allowances were deemed necessary.

(c) The Bank does not record interest received as Interest income if an uninsured loan is past due 90 days or more.

Loans discharged from bankruptcy are classified as a troubled debt restructuring (“TDR”), and are measured for impairment if the loan is past due 90 days or more.  Loans currently in bankruptcy status, regardless of their delinquency status, are considered impaired and measured for impairment.  The allowance for credit losses in the previous page includes allowances recorded for all impaired loans.  Prior to the third quarter of 2012, loans in bankruptcy were considered impaired if past due 90 days or more.

Mortgage Loans — Interest on Non-performing Loans

The FHLBNY’s interest contractually due and actually received for non-performing loans were as follows (in thousands):

	Three months ended March 31,
	2013		2012
Interest contractually due (a)	$	444	$	411
Interest actually received	406		392
Shortfall	$	38	$	19

(a) The Bank does not accrue interest income on conventional loans past due 90 days or more.  If cash is received as settlement of interest on loans past due 90 days or more, it is considered as an advance from the PFI or the servicer and cash received is subject to reversal if the loan goes into foreclosure.  Cash received is recorded as a liability until the impaired loan is performing again.  The table summarizes interest income that was not recognized in earnings.  It also summarizes the actual cash that was received against interest due, but not recognized.

Recorded investments in MPF loans that were past due, and real estate owned are summarized below.  Recorded investments, which includes accrued interest receivable, would not equal carrying values reported elsewhere (dollars in thousands):

	March 31, 2013									December 31, 2012
	Conventional			Insured			Other			Conventional			Insured			Other
	MPF Loans			Loans			Loans			MPF Loans			Loans			Loans
Mortgage loans:
Past due 30 - 59 days	$	20,812		$	1,519		$	—		$	22,899		$	884		$	—
Past due 60 - 89 days	6,269			378			—			6,027			407			—
Past due 90 - 179 days	4,258			69			—			4,202			184			—
Past due 180 days or more	24,832			371			—			24,221			229			—
Total past due	56,171			2,337			—			57,349			1,704			—
Total current loans	1,757,776			84,677			143			1,728,942			70,450			157
Total mortgage loans	$	1,813,947		$	87,014		$	143		$	1,786,291		$	72,154		$	157
Other delinquency statistics:
Loans in process of foreclosure, included above	$	20,731		$	185		$	—		$	21,464		$	187		$	—
Number of foreclosures outstanding at period end	137			6			—			140			6			—
Serious delinquency rate (a)	1.61		%	0.51		%	—		%	1.62		%	0.57		%	—		%
Serious delinquent loans total used in calculation of serious delinquency rate	$	29,220		$	440		$	—		$	28,947		$	413		$	—
Past due 90 days or more and still accruing interest	$	—		$	440		$	—		$	—		$	413		$	—
Loans on non-accrual status	$	29,090		$	—		$	—		$	28,423		$	—		$	—
Troubled debt restructurings:
Loans discharged from bankruptcy	$	9,479		$	634		$	—		$	8,818		$	638		$	—
Modified loans under MPF® program	$	675		$	—		$	—		$	681		$	—		$	—
Real estate owned	$	419								$	169

(a)Serious delinquency rate is recorded investments in loans that are 90 days or more past due or in the process of foreclosure expressed as a percentage of total loan class.

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Troubled Debt Restructurings (“TDRs”) and MPF modification — As described more fully in Note 1. Significant Accounting Policies and Estimates in the most recent Form 10K filed on March 25, 2013, the MPF Program introduced a temporary modification plan that is available to PFIs.  MPF restructurings primarily involve modifying the borrower’s monthly payment for a period of up to 36 months, with a cap based on a ratio of the borrower’s housing expense to monthly income.  The outstanding principal balance is re-amortized to reflect a principal and interest payment for a term not to exceed 40 years.  This would result in a balloon payment at the original maturity date of the loan as the maturity date and number of remaining monthly payments is unchanged.  If the housing expense ratio is still not met, the interest rate is reduced for up to 36 months in 0.125% increments below the original note rate, to a floor rate of 3.00%, resulting in reduced principal and interest payments until the target housing expense ratio is met.  No loans were modified in the first quarters of 2013 and 2012.  At March 31, 2013 and December 31, 2012, outstanding balances of MPF loans include four loans that had been modified in 2011.  Due to the temporary nature of the allowed modifications (up to 36 months), loans modified under the MPF plan that are past due 90 days or more or in bankruptcy are considered impaired.  One of the four modified loans was in bankruptcy status at March 31, 2013 and December 31, 2012.  The allowance for credit losses on the impaired loans were evaluated individually and an immaterial amount of credit losses were recorded at March 31, 2013, and December 31, 2012.

Beginning with the fourth quarter of 2012, the FHLBNY includes MPF loans discharged from bankruptcy as TDRs, and $9.5 million of such loans were outstanding at March 31, 2013 ($8.8 million at December 31, 2012).  The FHLBNY has determined that the discharge of mortgage debt in bankruptcy is a concession as defined under existing accounting literature for TDRs.  A loan discharged from bankruptcy is assessed individually for credit impairment if past due 90 days or more.  Of the $9.5 million of loans that were discharged from bankruptcy, $0.7 million were impaired because they were past due 90 days or more, and the recorded allowance for credit losses associated with those loans were not significant at March 31, 2013.  Prior to the fourth quarter of 2012, the FHLBNY’s policy did not consider loans discharged from bankruptcy as TDR.

Forgiveness information that would be required under the disclosure standards for loans deemed TDR has been omitted as the MPF modification program limits loan terms that can be modified for up to 36 months, after which period the borrower is required to adhere to the original terms of the loan.  Forgiveness information for loans that were discharged from bankruptcy has also been omitted because other than being released from bankruptcy, the borrowers were not allowed any other concessions.

The following table summarizes performing and non-performing troubled debt restructurings balances (in thousands):

	March 31, 2013						December 31, 2012
Recorded Investment Outstanding	Performing		Non- performing		Total TDR		Performing		Non- performing		Total TDR
Troubled debt restructurings (TDR) (a):
Loans discharged from bankruptcy	$	8,803	$	676	$	9,479	$	8,189	$	629	$	8,818
Modified loans under MPF® program	454		221		675		459		222		681
Total troubled debt restructurings	$	9,257	$	897	$	10,154	$	8,648	$	851	$	9,499
Related Allowance					$	509					$	317

(a)    Insured loans were not included in the calculation for troubled debt restructuring.

Note 9.Deposits.

The FHLBNY accepts demand, overnight and term deposits from its members.  Also, a member that services mortgage loans may deposit funds collected in connection with the mortgage loans as a pending disbursement to the owners of the mortgage loans.  The following table summarizes deposits (in thousands):

	March 31, 2013		December 31, 2012
Interest-bearing deposits
Interest-bearing demand	$	2,051,943	$	1,994,974
Term	46,000		40,000
Total interest-bearing deposits	2,097,943		2,034,974
Non-interest-bearing demand	19,591		19,537
Total deposits	$	2,117,534	$	2,054,511

Interest rate payment terms for deposits are summarized below (dollars in thousands):

	March 31, 2013				December 31, 2012
	Amount Outstanding		Weighted Average Interest Rate		Amount Outstanding		Weighted Average Interest Rate
Due in one year or less
Interest-bearing deposits - adjustable rate	$	2,097,943	0.04	%	$	2,034,974	0.03	%
Non-interest-bearing deposits	19,591				19,537
Total deposits	$	2,117,534			$	2,054,511

The aggregate amount of term deposits due in one year or less was $46.0 million and $40.0 million at March 31, 2013 and December 31, 2012.

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Note 10.Consolidated Obligations.

Consolidated obligations are the joint and several obligations of the FHLBanks, and consist of bonds and discount notes.  The FHLBanks issue consolidated obligations through the Office of Finance as their fiscal agent.  In connection with each debt issuance, a FHLBank specifies the amount of debt it wants issued on its behalf.  The Office of Finance tracks the amount of debt issued on behalf of each FHLBank.  Each FHLBank separately tracks and records as a liability for its specific portion of consolidated obligations for which it is the primary obligor.  Consolidated bonds are issued primarily to raise intermediate- and long-term funds for the FHLBanks and are not subject to any statutory or regulatory limits on maturity.  Consolidated discount notes are issued primarily to raise short-term funds.  Discount notes sell at less than their face amount and are redeemed at par value when they mature.

The Finance Agency, at its discretion, may require any FHLBank to make principal or interest payments due on any consolidated obligations.  Although it has never occurred, to the extent that a FHLBank would make a payment on a consolidated obligation on behalf of another FHLBank, the paying FHLBank would be entitled to reimbursement from the non-complying FHLBank.  However, if the Finance Agency determines that the non-complying FHLBank is unable to satisfy its obligations, then the Finance Agency may allocate the outstanding liability among the remaining FHLBanks on a pro rata basis in proportion to each FHLBank’s participation in all consolidated obligations outstanding, or on any other basis the Finance Agency may determine.  Based on management’s review, the FHLBNY has no reason to record actual or contingent liabilities with respect to the occurrence of events or circumstances that would require the FHLBNY to assume an obligation on behalf of other FHLBanks.  The par amounts of the FHLBanks’ outstanding consolidated obligations, including consolidated obligations held by other FHLBanks, were approximately $0.7 trillion as of March 31, 2013 and December 31, 2012.

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

	March 31, 2013		December 31, 2012
Percentage of unpledged qualifying assets to consolidated obligations	109	%	109	%

The following table summarizes consolidated obligations issued by the FHLBNY and outstanding at March 31, 2013 and December 31, 2012 (in thousands):

	March 31, 2013		December 31, 2012
Consolidated obligation bonds-amortized cost	$	60,262,520	$	63,903,744
Hedge value basis adjustments	679,232		804,174
Hedge basis adjustments on terminated hedges	62,785		63,520
FVO (a)-valuation adjustments and accrued interest	9,764		12,883
Total Consolidated obligation-bonds	$	61,014,301	$	64,784,321
Discount notes-amortized cost	$	32,550,997	$	29,776,704
FVO (a)-valuation adjustments and remaining accretion	3,979		3,243
Total Consolidated obligation-discount notes	$	32,554,976	$	29,779,947

(a) Accounted for under the Fair Value Option rules.

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Redemption Terms of Consolidated Obligation Bonds

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

	March 31, 2013							December 31, 2012
				Weighted							Weighted
				Average		Percentage					Average		Percentage
Maturity	Amount			Rate (a)		of Total		Amount			Rate (a)		of Total
One year or less	$	38,286,850		0.73	%	63.60	%	$	42,284,800		0.71	%	66.25	%
Over one year through two years	6,618,930			1.67		11.00		8,003,630			1.47		12.54
Over two years through three years	3,895,240			2.03		6.47		5,746,280			1.62		9.00
Over three years through four years	1,146,615			2.01		1.90		1,115,010			2.29		1.75
Over four years through five years	3,927,505			1.78		6.53		1,515,570			2.56		2.38
Thereafter	6,319,965			2.32		10.50		5,159,795			2.54		8.08
Total par value	60,195,105			1.18	%	100.00	%	63,825,085			1.11	%	100.00	%
Bond premiums (b)	89,989							102,225
Bond discounts (b)	(22,574		)					(23,566		)
Hedge value basis adjustments	679,232							804,174
Hedge basis adjustments on terminated hedges	62,785							63,520
FVO (c) - valuation adjustments and accrued interest	9,764							12,883
Total Consolidated obligation-bonds	$	61,014,301						$	64,784,321

(a)Weighted average rate represents the weighted average contractual coupons of bonds, unadjusted for swaps.

(b)Amortization of bond premiums and discounts resulted in net reduction of interest expense of $14.8 million and $14.0 million in the first quarters of 2013 and 2012.  Amortization of basis adjustments from terminated hedges was $1.1 million and $1.0 million in the first quarters of 2013 and 2012.

(c)Accounted for under the Fair Value Option rules.

Interest rate Payment Terms

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

	March 31, 2013					December 31, 2012
	Amount			Percentage of Total		Amount			Percentage of Total
Fixed-rate, non-callable	$	45,574,105		75.71	%	$	48,184,085		75.49	%
Fixed-rate, callable	4,280,000			7.11		2,685,000			4.21
Step Up, callable	1,751,000			2.91		1,221,000			1.91
Single-index floating rate	8,590,000			14.27		11,735,000			18.39
Total par value	60,195,105			100.00	%	63,825,085			100.00	%
Bond premiums	89,989					102,225
Bond discounts	(22,574		)			(23,566		)
Hedge value basis adjustments	679,232					804,174
Hedge basis adjustments on terminated hedges	62,785					63,520
Fair value option valuation adjustments and accrued interest	9,764					12,883
Total Consolidated obligation-bonds	$	61,014,301				$	64,784,321

Discount Notes

Consolidated obligation-discount notes are issued to raise short-term funds.  Discount notes are consolidated obligations with original maturities of up to one year.  These notes are issued at less than their face amount and redeemed at par when they mature.

The FHLBNY’s outstanding consolidated obligation-discount notes were as follows (dollars in thousands):

	March 31, 2013			December 31, 2012
Par value	$	32,559,872		$	29,785,543
Amortized cost	$	32,550,997		$	29,776,704
Fair value option valuation adjustments	3,979			3,243
Total discount notes	$	32,554,976		$	29,779,947
Weighted average interest rate	0.11		%	0.13		%

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Note 11.Affordable Housing Program.

For more information about the Affordable Housing Program and the Bank’s liability set aside for the AHP, see the Bank’s most recent Form 10-K filed on March 25, 2013.

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

	Three months ended March 31,
	2013			2012
Beginning balance	$	134,942		$	127,454
Additions from current period’s assessments	7,802			11,407
Net disbursements for grants and programs	(14,232		)	(8,232		)
Ending balance	$	128,512		$	130,629

Note 12.Capital Stock, Mandatorily Redeemable Capital Stock and Restricted Retained Earnings.

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

The FHLBNY’s Capital Plan offers two sub-classes of Class B capital stock, Class B1 and Class B2.  Class B1 stock is issued to meet membership stock purchase requirements.  Class B2 stock is issued to meet activity-based stock requirements.  The FHLBNY requires member institutions to maintain Class B1 stock based on a percentage of the member’s mortgage-related assets and Class B2 stock based on a percentage of advances and acquired member assets, mainly MPF loans, outstanding with the FHLBank and certain commitments outstanding with the FHLBank.  Class B1 and Class B2 stockholders have the same voting rights and dividend rates.  Members can redeem Class B stock by giving five years notice.  The Bank’s capital plan does not provide for the issuance of Class A capital stock.

The FHLBNY is subject to risk-based capital rules.  Specifically, the FHLBNY is subject to three capital requirements under its capital plan.  First, the FHLBNY must maintain at all times permanent capital in an amount at least equal to the sum of its credit risk, market risk, and operations risk capital requirements as calculated in accordance with the FHLBNY policy, and rules and regulations of the Finance Agency.  Only permanent capital, defined as Class B stock and retained earnings, satisfies this risk-based capital requirement.  The Finance Agency may require the FHLBNY to maintain an amount of permanent capital greater than what is required by the risk-based capital requirements.  In addition, the FHLBNY is required to maintain at least a 4.0% total capital-to-asset ratio and at least a 5.0% leverage ratio at all times.  The leverage ratio is defined as the sum of permanent capital weighted 1.5 times and nonpermanent capital weighted 1.0 times divided by total assets.

The FHLBNY was in compliance with the aforementioned capital rules and requirements for all periods presented.  The FHLBNY met the “adequately capitalized” classification, which is the highest rating, under the capital rule.  However, the Finance Agency has discretion to reclassify a FHLBank and to modify or add to the corrective action requirements for a particular capital classification.  For more information about the capital rules under the Finance Agency regulations and a discussion of any corrective actions, see Note 12. Capital Stock, Mandatorily Redeemable Capital Stock and Restricted Retained Earnings in the audited financial statements included in our most recent Form 10-K filed on March 25, 2013.

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

	March 31, 2013						December 31, 2012
	Required (d)			Actual			Required (d)			Actual
Regulatory capital requirements:
Risk-based capital (a) (e)	$	569,495		$	5,563,728		$	489,133		$	5,714,352
Total capital-to-asset ratio	4.00		%	5.46		%	4.00		%	5.55		%
Total capital (b)	$	4,076,932		$	5,563,728		$	4,119,552		$	5,714,352
Leverage ratio	5.00		%	8.19		%	5.00		%	8.32		%
Leverage capital (c)	$	5,096,165		$	8,345,592		$	5,149,440		$	8,571,529

(a)Actual “Risk-based capital” is capital stock and retained earnings plus mandatorily redeemable capital stock. Section 932.2 of the Finance Agency’s regulations also refers to this amount as “Permanent Capital.”

(b)Required “Total capital” is 4.0% of total assets.

(c)Actual “Leverage capital” is actual “Risk-based capital” times 1.5.

(d)Required minimum.

(e)Under regulatory guidelines issued by the Federal Housing Finance Agency (“FHFA”), the Bank’s regulator, concurrently with the rating action on August 8, 2011 by S&P lowered the rating of long-term securities issued by the U.S. government, federal agencies, and other entities, including Fannie Mae, Freddie Mac, and the Federal Home Loan Banks, from AAA to AA+. With regard to this action, consistent with guidance provided by the banking regulators with respect to capital rules, the FHFA provides the following guidance for the Federal Home Loan Banks: the risk weights for Treasury securities and other securities issued or guaranteed by the U.S. Government, government agencies, and government-sponsored entities do not change for purposes of calculating risk-based capital.

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Mandatorily Redeemable Capital Stock

Generally, the FHLBNY’s capital stock is redeemable at the option of either the member or the FHLBNY subject to certain conditions, including the provisions under the accounting guidance for certain financial instruments with characteristics of both liabilities and equity.  In accordance with the accounting guidance, the FHLBNY generally reclassifies the stock subject to redemption from equity to a liability once a member irrevocably exercises a written redemption right, gives notice of intent to withdraw from membership, or attains non-member status by merger or acquisition, charter termination, or involuntary termination from membership.  Under such circumstances, the member shares will then meet the definition of a mandatorily redeemable financial instrument and are reclassified to a liability at fair value.

Anticipated redemptions of mandatorily redeemable capital stock in the following table assume the FHLBNY will follow its current practice of daily redemption of capital in excess of the amount required to support advances and MPF loans (in thousands):

	March 31, 2013		December 31, 2012
Redemption less than one year	$	5,743	$	2,582
Redemption from one year to less than three years	694		698
Redemption from three years to less than five years	5,746		5,210
Redemption from five years or greater	13,989		14,653
Total	$	26,172	$	23,143

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

	Three months ended March 31,
	2013			2012
Beginning balance	$	23,143		$	54,827
Capital stock subject to mandatory redemption reclassified from equity	4,062			—
Redemption of mandatorily redeemable capital stock (a)	(1,033		)	(11,867		)
Ending balance	$	26,172		$	42,960
Accrued interest payable (b)	$	253		$	615

(a)Redemption includes repayment of excess stock.

(b)The annualized accrual rates were 4.50% for March 31, 2013 and 5.00% for March 31, 2012 on mandatorily redeemable capital stock.

Voluntary and Involuntary Withdrawal and Changes in Membership — Changes in membership due to mergers were not significant in any periods in this report.  When a member is acquired by a non-member, the FHLBNY reclassifies stock of the member to a liability on the day the member’s charter is dissolved.  Under existing practice, the FHLBNY repurchases Class B2 capital stock held by former members if such stock is considered “excess” and is no longer required to support outstanding advances.  Class B1 membership stock held by former members is re-calculated and repurchased annually.

The following table provides withdrawals and terminations in membership:

	Three months ended March 31,
	2013	2012
Voluntary Termination/Notices Received and Pending	1	1
Involuntary Termination (a)	1	1
Non-member due to merger	1	—

(a)The Board of Directors of FHLBank may terminate the membership of any institution that: (1) fails to comply with any requirement of the FHLBank Act, any regulation adopted by the Finance Agency, or any requirement of the Bank’s capital plan; (2) becomes insolvent or otherwise subject to the appointment of a conservator, receiver, or other legal custodian under federal or state law; or (3) would jeopardize the safety or soundness of the FHLBank if it was to remain a member.

Restricted Retained Earnings

The 12 FHLBanks have a Joint Capital Enhancement Agreement (“Capital Agreement”), which is intended to enhance the capital position of each FHLBank, by allocating that portion of each FHLBank’s earnings historically paid to satisfy its REFCORP obligation to a separate retained earnings account at that FHLBank.  Because each FHLBank had been required to contribute 20% of its earnings toward payment of the interest on REFCORP bonds until the REFCORP obligation, which was satisfied in the second quarter of 2011, the Capital Agreement provides that, with full satisfaction of the REFCORP obligation, each FHLBank will contribute 20% of its Net income each quarter to a restricted retained earnings account until the balance of that account equals at least one percent of that FHLBank’s average balance of outstanding consolidated obligations for the previous quarter.  These restricted retained earnings will not be available to pay dividends.  The FHLBNY allocates 20% of its net income to a separate restricted retained earnings account, which has grown to $110.2 million at March 31, 2013, up from $96.2 million at December 31, 2012.

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Note 13.Total Comprehensive Income (in thousands).

	Net unrealized						Net unrealized						Accumulated
	gains (losses)			Non-credit			gains (losses)			Pension and			Other
	on AFS			OTTI on HTM			relating to			postretirement			Comprehensive
	Securities			Securities			Hedging activities			benefits			Income (Loss)
Balance, December 31, 2011	$	16,419		$	(75,849	)	$	(111,985	)	$	(19,012	)	$	(190,427	)
Other comprehensive income (loss) before reclassification
Net unrealized gains	466			—			16,502			—			16,968
Non-credit OTTI loss	—			(132		)	—			—			(132		)
Accretion of non-credit loss	—			2,459			—			—			2,459
Reclassifications from OCI to net income
Non-credit OTTI to credit OTTI (a)	—			395			—			—			395
Amortization- hedging activities (b)	—			—			1,002			—			1,002
Net current period other comprehensive income	466			2,722			17,504			—			20,692
Balance, March 31, 2012	$	16,885		$	(73,127	)	$	(94,481	)	$	(19,012	)	$	(169,735	)
Balance, December 31, 2012	$	22,506		$	(63,471	)	$	(137,114	)	$	(21,301	)	$	(199,380	)
Other comprehensive income (loss) before reclassification
Net unrealized (losses) gains	(791		)	—			16,544			—			15,753
Accretion of non-credit loss	—			2,594			—			—			2,594
Reclassifications from OCI to net income
Amortization- hedging activities (b)	—			—			1,067			—			1,067
Amortization- pension and postretirement (c)	—			—			—			381			381
Net current period other comprehensive (loss) income	(791		)	2,594			17,611			381			19,795
Balance, March 31, 2013	$	21,715		$	(60,877	)	$	(119,503	)	$	(20,920	)	$	(179,585	)

(a)Recorded in Other income (loss) as a component of OTTI losses.

(b)Recorded in Interest expense on consolidated obligation bonds and discount notes.

(c)Recorded in Compensation and benefits expenses.

Note 14.Earnings Per Share of Capital.

The following table sets forth the computation of earnings per share.  Basic and diluted earnings per share of capital are the same.  The FHLBNY has no dilutive potential common shares or other common stock equivalents (dollars in thousands except per share amounts):

	Three months ended March 31,
	2013			2012
Net income	$	69,963		$	101,905
Net income available to stockholders	$	69,963		$	101,905
Weighted average shares of capital	46,936			45,041
Less: Mandatorily redeemable capital stock	(225		)	(495		)
Average number of shares of capital used to calculate earnings per share	46,711			44,546
Basic earnings per share	$	1.50		$	2.29

Note 15.Employee Retirement Plans.

The Bank participates in the Pentegra Defined Benefit Plan for Financial Institutions (Pentegra DB Plan), a tax-qualified, defined-benefit multiemployer pension plan that covers all officers and employees of the Bank.  The Bank also participates in the Pentegra Defined Contribution Plan for Financial Institutions, a tax-qualified defined contribution plan.  In addition, the Bank maintains a Benefit Equalization Plan (“BEP”) that restores defined benefits for those employees who have had their qualified defined benefits limited by IRS regulations.  The BEP is an unfunded plan.  The Bank also offers a Retiree Medical Benefit Plan, which is a postretirement health benefit plan.  There are no funded plan assets that have been designated to provide postretirement health benefits.

Retirement Plan Expenses — Summary

The following table presents employee retirement plan expenses for the first quarter of 2013 and 2012 (in thousands):

	Three months ended March 31,
	2013		2012
Defined Benefit Plan (a)	$	189	$	655
Benefit Equalization Plan (defined benefit)	989		908
Defined Contribution Plan	395		386
Postretirement Health Benefit Plan	384		374
Total retirement plan expenses	$	1,957	$	2,323

(a)In July 2012, Congress enacted a bill under the Surface Transportation Extension Act of 2012  — Moving Ahead for Progress in the 21st Century Act (“MAP-21”), which includes pension plan provisions intended to ease the negative effect of historically low interest rates.  Previously, a plan sponsor could elect to calculate future pension obligations based on either the “yield curve” of corporate investment-grade bonds for the preceding month, or three “segment rates” that are drawn from the average yield curves over the most recent 24-month period.  The primary change under the relief bill is to allow calculation of discount rates based over a 25 year period — a much longer period than the two-year period previously used to determine segment rates.  The FHLBNY’s Defined Benefit Plan participates in the Pentegra Defined Benefit Plan pension, which has adopted the relief provisions, and adoption resulted in a significant reduction in plan expenses.  The FHLBNY paid in $0.7 million for the plan period July 1, 2012 to June 30, 2013, which was the minimum amount payable under the relief provided under MAP-21.  Payments to the plan under the pre-existing methodology (prior to the relief) were $2.6 million for the plan year ended June 30, 2012.  Pentegra operates the Defined Benefit Plan with a fiscal year that ends on June 30, and expenses paid to Pentegra for the pension plan are prorated and recorded over the calendar year.

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

	Three months ended March 31,
	2013			2012
Service cost	$	216		$	191
Interest cost	338			325
Amortization of unrecognized net loss	449			405
Amortization of unrecognized prior service cost	(14		)	(13		)
Net periodic benefit cost	$	989		$	908

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

	March 31, 2013			December 31, 2012
Discount rate (a)	3.80		%	3.80		%
Salary increases	5.50		%	5.50		%
Amortization period (years)	7			7
Benefits paid during the period	$	(1,321	)(b)	$	(759	)

(a)The discount rates were based on the Citigroup Pension Liability Index at December 31, 2012 adjusted for duration.

(b)Forecast for the period ended December 31, 2013.

Postretirement Health Benefit Plan

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

	Three months ended March 31,
	2013			2012
Service cost (benefits attributed to service during the period)	$	237		$	210
Interest cost on accumulated postretirement health benefit obligation	201			212
Amortization of loss	107			134
Amortization of prior service credit	(161		)	(182		)
Net periodic postretirement health benefit cost	$	384		$	374

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

	March 31, 2013	December 31, 2012
Weighted average discount rate	3.80%	3.80%
Health care cost trend rates:
Assumed for next year
Pre 65	7.50%	7.50%
Post 65	7.50%	7.50%
Pre 65 Ultimate rate	5.00%	5.00%
Pre 65 Year that ultimate rate is reached	2018	2018
Post 65 Ultimate rate	5.50%	5.50%
Post 65 Year that ultimate rate is reached	2018	2018
Alternative amortization methods used to amortize
Prior service cost	Straight - line	Straight - line
Unrecognized net (gain) or loss	Straight - line	Straight - line

(a)The discount rates were based on the Citigroup Pension Liability Index adjusted for duration at December 31, 2012.

Note 16.   Derivatives and Hedging Activities.

General — The FHLBNY may enter into interest-rate swaps, swaptions, and interest-rate cap and floor agreements to manage its exposure to changes in interest rates.  The FHLBNY may also use callable swaps to potentially adjust the effective maturity, repricing frequency, or option characteristics of financial instruments to achieve risk management objectives.  The FHLBNY, consistent with the Finance Agency’s regulations, enters into derivatives to manage the market risk exposures inherent in otherwise unhedged assets and funding positions.  The FHLBNY is not a derivatives dealer and does not trade derivatives for short-term profit.  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 that qualifies for hedge accounting treatment; by acting as an intermediary; or by designating the derivative as an asset-liability management hedge (i.e., an “economic hedge”).  The FHLBNY may execute an interest rate swap to match the terms of an asset or liability that is elected under the FVO and the swap is also considered as an economic hedge to mitigate the volatility of the FVO designated asset or liability due to change in the full fair value of the designated asset or liability.  The FHLBNY uses derivatives in its overall interest-rate risk management to adjust the interest-rate sensitivity of consolidated obligations to approximate more closely the interest-rate sensitivity of assets (both advances and investments), and/or to adjust the interest-rate sensitivity of advances, investments or mortgage loans to approximate more closely the interest-rate sensitivity of liabilities.  In addition to using derivatives to manage mismatches of interest rates between assets and liabilities, the FHLBNY also uses derivatives: to manage embedded options in assets and liabilities; to hedge the market value of existing assets and liabilities and anticipated transactions; to hedge the duration risk of prepayable instruments; and to reduce funding costs where possible.

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The FHLBNY utilizes derivatives in the most cost efficient manner and may enter into derivatives as economic hedges that do not qualify for hedge accounting.  When entering into such non-qualified hedges, the FHLBNY recognizes only the change in fair value of these derivatives in Other income (loss) as a Net realized and unrealized gain (loss) on derivatives and hedging activities with no offsetting fair value adjustments for the hedged asset, liability, or firm commitment.  As a result, an economic hedge introduces the potential for earnings variability.  Economic hedges are an acceptable hedging strategy under the FHLBNY’s risk management program, and the strategies comply with the Finance Agency’s regulatory requirements prohibiting speculative use of derivatives.

Types of Hedging Activities and Hedged Items

Consolidated Obligations — The FHLBNY manages the risk arising from changing market prices and volatility of a consolidated obligation by matching the cash inflows on the derivative with the cash outflow on the consolidated obligation.  While consolidated obligations are the joint and several obligations of the FHLBanks, one or more FHLBanks may individually serve as counterparties to derivative agreements associated with specific debt issues.  For instance, in a typical transaction, fixed-rate consolidated obligations are issued for one or more FHLBanks, and each of those FHLBanks could simultaneously enter into a matching derivative in which the counterparty pays to the FHLBank fixed cash flows designed to mirror in timing and amount the cash outflows the FHLBank pays on the consolidated obligations.  When such transactions qualify for hedge accounting, they are treated as fair value hedges under the accounting standards for derivatives and hedging.  The FHLBNY has also elected the FVO for certain consolidated obligation bonds and discount notes.  To mitigate the volatility resulting from changes in fair values of bonds and notes designated under the FVO, the Bank may execute interest rate swaps as economic hedges.

The FHLBNY has issued variable-rate consolidated obligations bonds indexed to 1-month LIBOR, the U.S. Prime rate, or Federal funds rate and simultaneously executed interest-rate swaps (“basis swaps”) to hedge the basis risk of the variable rate debt to 3-month LIBOR, the FHLBNY’s preferred funding base.  The interest rate basis swaps were accounted as economic hedges of the floating-rate bonds because the FHLBNY deemed that the operational cost of designating the hedges under accounting standards for derivatives and hedge accounting would outweigh the accounting benefits.

Advances — The Bank offers a wide array of advances structures to meet members’ funding needs.  These advances may have maturities up to 30 years with fixed or adjustable rates and may include early termination features or options.  The Bank may use derivatives to adjust the repricing and/or options characteristics of advances to more closely match the characteristics of the Bank’s funding liabilities.  In general, whenever a member executes a fixed rate advance or a variable rate advance with embedded options, the Bank will simultaneously execute an interest rate exchange agreement with terms that offset the terms and embedded options, if any, in the advance.  The combination of the advance and the interest rate exchange agreement effectively creates a variable rate asset.  This type of hedge is treated as a fair value hedge.  With a putable advance borrowed by a member, the FHLBNY would purchase from the member a put option.  The FHLBNY may hedge a putable advance by entering into a cancelable interest rate swap in which the FHLBNY pays to the swap counterparty fixed-rate cash flows and receives variable-rate cash flows.  This type of hedge is treated as a fair value hedge under the accounting standards for derivatives and hedging.  The swap counterparty can cancel the swap on the put date, which would normally occur in a rising rate environment, and the FHLBNY can terminate the advance and extend additional credit to the member on new terms.  The FHLBNY also offers callable advances to members, which is a fixed-rate advance borrowed by a member.  With the advance, the FHLBNY sells to the member a call option that enables the member to terminate the advance at pre-determined exercise dates.  The FHLBNY hedges such advances by executing interest rate swaps with cancellable option features that would allow the FHLBNY to terminate the swaps also at pre-determined option exercise dates.

Mortgage Loans — The Bank’s investment portfolio includes fixed rate mortgage loans.  The FHLBNY manages the interest rate and prepayment risk associated with mortgages through debt issuance.  Firm commitments to purchase or “delivery commitments” are considered derivatives.  Also see “Firm Commitment Strategies” described below.

Firm Commitment Strategies — Mortgage delivery commitments are considered derivatives under the accounting standards for derivatives and hedging.  The FHLBNY accounts for them as freestanding derivatives, and records the fair values of mortgage loan delivery commitments on the balance sheet with an offset to Other income as a Net realized and unrealized gains (losses) on derivatives and hedging activities.  Fair values were not significant for all periods in this report.

The FHLBNY may also hedge a firm commitment for a forward starting advance with 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 fair value adjustments associated with the firm commitment will be added to the basis of the advance at the time the commitment is terminated and the advance is issued.  The basis adjustment will then be amortized into interest income over the life of the advance.

If a hedged firm commitment no longer qualified as a fair value hedge, the hedge would be terminated and net gains and losses would be recognized in current period earnings.  There were no material amounts of gains and losses recognized due to disqualification of firm commitment hedges in the first quarter of 2013 and 2012.

Forward Settlements — There were no forward settled securities at March 31, 2013 and December 31, 2012 that would settle outside the shortest period of time for the settlement of such securities.  When the FHLBNY purchases a security that forward settles within the shortest period of time for the settlement of such a security, the Bank records the purchase on trade date.  When a security forward settles outside the shortest period of time, a derivative is recorded in addition to the purchased security.

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Cash Flow Hedges of Anticipated Consolidated Bond Issuance — The FHLBNY enters into interest-rate swaps on the anticipated issuance of debt to “lock in” the interest to be paid for the cost of funding.  The swap is terminated upon issuance of the debt instrument, and amounts reported in AOCI 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.

Cash Flow Hedges of Rolling Issuance of Discount Notes — The FHLBNY hedges the rolling issuance of discount notes as a cash flow hedge.  In these hedges, the Bank enters into interest rate swap agreements with unrelated swap dealers and designates the swaps as hedges of the variable quarterly interest payments on the discount note borrowing program.  In this program, the Bank issues a series of discount notes with 91-day terms over periods, generally up to 15 years.  The FHLBNY will continue issuing new 91-day discount notes over the terms of the swaps as each outstanding discount note matures.  The interest rate swaps require a settlement every 91 days, and the variable rate, which is based on the 3-month LIBOR, is reset immediately following each payment.  The swaps are expected to eliminate the risk of variability of cash flows for each forecasted discount note issuance every 91 days.  The FHLBNY documents at hedge origination, and on an ongoing basis, that the forecasted issuances of discount notes are probable.  The FHLBNY performs a prospective hedge effectiveness analysis at inception of the hedges, and also performs an ongoing retrospective hedge effectiveness analysis at least every quarter to provide assurance that the hedges will remain highly effective.  The fair values of the interest rate swaps are recorded in AOCI and ineffectiveness, if any, is measured using the “hypothetical derivative method” and recorded in earnings.  The effective portion remains in AOCI.  The Bank monitors the credit standing of the derivative counterparty each quarter.

Intermediation — To meet the hedging needs of its members, the FHLBNY acts as an intermediary between the members and the other counterparties.  This intermediation allows smaller members access to the derivatives market.  The derivatives used in intermediary activities do not qualify for hedge accounting under the accounting standards for derivatives and hedging, and are separately marked-to-market through earnings.  The net impact of the accounting for these derivatives does not significantly affect the operating results of the FHLBNY.

Derivative agreements in which the FHLBNY is an intermediary may arise when the FHLBNY: (1) enters into offsetting derivatives with members and other counterparties to meet the needs of its members, and (2) enters into derivatives to offset the economic effect of other derivative agreements that are no longer designated to either advances, investments, or consolidated obligations.  The notional principal of interest rate swaps outstanding at March 31, 2013 and December 31, 2012, in which the FHLBNY was an intermediary, was $265.0 million, with offsetting purchased positions from unrelated swap dealers.  Fair values of the swaps sold to members net of the fair values of swaps purchased from derivative counterparties were not material at March 31, 2013 and December 31, 2012.  Collateral with respect to derivatives with member institutions includes collateral assigned to the FHLBNY as evidenced by a written security agreement and held by the member institution for the benefit of the FHLBNY.

Economic Hedges

Economic hedges comprised primarily of:  (1) short- and medium-term interest rate swaps that hedged the basis risk (primarily the Federal funds rate, and the 1-month LIBOR index) of variable-rate bonds issued by the FHLBNY.  The FHLBNY believes the operational cost of designating the basis hedges in a qualifying hedge would outweigh the benefits of applying hedge accounting.  (2) interest rate caps to hedge balance sheet risk, specifically interest rate risk from certain capped floating rate investment securities.  (3) interest rate swaps that had previously qualified as hedges under the accounting standards for derivatives and hedging, but had been subsequently de-designated from hedge accounting as they were assessed as being not highly effective hedges.  (4) interest rate swaps executed to offset the fair value changes of bonds and discount notes designated under the FVO.  These swaps in economic hedges were considered freestanding and changes in the fair values of the swaps were recorded through income.

Credit Risk

The contractual or notional amount of derivatives reflects the involvement of the FHLBNY in the various classes of financial instruments, and serves as a basis for calculating periodic interest payments or cash flow.  Notional amount of a derivative does not measure the credit risk exposure, and the maximum credit exposure is substantially less than the notional amount.  The maximum credit risk is the estimated cost of replacing favorable interest-rate swaps, forward agreements, mandatory delivery contracts for mortgage loans and purchased caps and floors (“derivatives”) if the counterparty defaults and the related collateral, if any, is of insufficient value to the FHLBNY.

The FHLBNY uses collateral agreements to mitigate counterparty credit risk in derivatives.  When the FHLBNY has more than one derivative transaction outstanding with a counterparty, and a legally enforceable master netting agreement exists with the counterparty, the exposure (less collateral held) represents the appropriate measure of credit risk.  For the FHLBNY, all derivative contracts are subject to master netting agreements or other right of offset arrangements.  All collateral posted to counterparties or received from counterparties were cash, and the FHLBNY has elected to net cash collateral against its exposures and those of its counterparties in the Statements of Condition at March 31, 2013 and December 31, 2012, and the FHLBNY’s credit exposure, representing derivatives in a fair value net gain position, was approximately $11.2 million and $41.9 million after the recognition of any cash collateral held by the FHLBNY.  The credit exposures at March 31, 2013 included $7.7 million of net interest receivable ($9.8 million at December 31, 2012).  Derivative counterparties are also exposed to credit losses resulting from potential nonperformance risk of the FHLBNY with respect to derivative contracts, and their exposure due to a default by the FHLBNY is measured by derivatives in a fair value loss position from the FHLBNY’s perspective (and a gain position from the counterparty’s perspective).  At March 31, 2013 and December 31, 2012, derivatives in a net unrealized loss position, which represented the counterparties’ exposure to the potential non-performance risk of the FHLBNY, were $390.9 million and $426.8 million after deducting $2.3 billion and $2.5 billion of cash collateral posted by the FHLBNY at those dates to the exposed counterparties.

The FHLBNY is also exposed to the risk of derivative counterparties defaulting on the terms of the derivative contracts and failing to return cash deposited with counterparties.  If such an event were to occur, the FHLBNY

29

would be forced to replace derivatives by executing similar derivative contracts with other counterparties.  To the extent that the FHLBNY receives cash from the replacement trades that is less than the amount of cash deposited with the defaulting counterparty, the FHLBNY’s cash pledged as a deposit is exposed to credit risk of the defaulting counterparty.  Derivative counterparties holding the FHLBNY’s cash as pledged collateral were primarily rated Triple B or better at March 31, 2013, and based on credit analyses and collateral requirements, the management of the FHLBNY does not anticipate any credit losses on its derivative agreements.

Offsetting of Derivative Assets and Derivative Liabilities

The FHLBNY has master netting agreements with all its derivatives counterparties and has right of offset for all derivative contracts (in thousands).

	March 31, 2013
	Derivative Assets			Derivative Liabilities
Derivative instruments with legal right of offset
Gross recognized amount	$	865,886		$	3,537,668
Gross amounts of netting adjustments and cash collateral	(854,707		)	(3,146,741		)
Net amounts after offsetting adjustments	11,179			390,927
Derivative instruments without legal right of offset (a)	57			8
Total derivative assets and total derivative liabilities	11,236			390,935
Net unsecured amount (b)	$	11,236		$	390,935

	December 31, 2012
	Derivative Assets			Derivative Liabilities
Derivative instruments with legal right of offset
Gross recognized amount	$	966,523		$	3,890,253
Gross amounts of netting adjustments and cash collateral	(924,638		)	(3,463,506		)
Net amounts after offsetting adjustments	41,885			426,747
Derivative instruments without legal right of offset (a)	9			41
Total derivative assets and total derivative liabilities	41,894			426,788
Net unsecured amount (b)	$	41,894		$	426,788

(a)Derivative instruments without legal right of offset were synthetic derivatives representing forward mortgage delivery commitments of 45 days or less.

(b)Unsecured amounts represent Derivative assets and liabilities recorded in the Statements of condition at March 31, 2013 and December 31, 2012.  The amounts primarily represent aggregate credit support thresholds that were waived under credit support agreements between the FHLBNY and derivative counterparties.

The gross derivative exposures as represented by derivatives in fair value gain positions before netting and offsetting cash collateral were $865.9 million and $966.5 million due from counterparties at March 31, 2013 and December 31, 2012.  Fair values amounts that were netted as a result of master netting agreements were $849.2 million and $916.9 million at those dates.  Counterparties had pledged $5.5 million and $7.7 million to the FHLBNY at those dates, also under master netting agreements and various threshold and credit support agreements.  As a result of the FHLBNY’s ability to offset the exposures under these agreements, the net derivative exposure to the FHLBNY was reduced to $11.2 million at March 31, 2013 and $41.9 million at December 31, 2012.  See Table below for more information.

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The following tables represent outstanding notional balances and estimated fair values of the derivatives outstanding at March 31, 2013 and December 31, 2012 (in thousands):

	March 31, 2013
	Notional Amount of Derivatives		Derivative Assets			Derivative Liabilities
Fair value of derivative instruments (a)
Derivatives designated in hedging relationships
Interest rate swaps-fair value hedges	$	77,839,153	$	833,503		$	3,419,635
Interest rate swaps-cash flow hedges	1,106,000		2,784			110,748
Total derivatives in hedging instruments	78,945,153		836,287			3,530,383
Derivatives not designated as hedging instruments
Interest rate swaps	14,401,850		18,023			1,184
Interest rate caps or floors	1,900,000		5,189			12
Mortgage delivery commitments	26,249		57			8
Other (b)	530,000		6,387			6,089
Total derivatives not designated as hedging instruments	16,858,099		29,656			7,293
Total derivatives before netting and collateral adjustments	$	95,803,252	865,943			3,537,676
Netting adjustments			(849,207		)	(849,207		)
Net before cash collateral			16,736			2,688,469
Cash collateral and related accrued interest			(5,500		)	(2,297,534		)
Net after cash collateral reported on the Statements of Condition			$	11,236		$	390,935

	December 31, 2012
	Notional Amount of Derivatives		Derivative Assets			Derivative Liabilities
Fair value of derivative instruments (a)
Derivatives designated in hedging relationships
Interest rate swaps-fair value hedges	$	76,844,534	$	925,635		$	3,753,684
Interest rate swaps-cash flow hedges	1,106,000		1,647			126,426
Total derivatives in hedging instruments	77,950,534		927,282			3,880,110
Derivatives not designated as hedging instruments
Interest rate swaps	23,099,757		27,486			2,939
Interest rate caps or floors	1,900,000		4,221			12
Mortgage delivery commitments	25,217		9			41
Other (b)	530,000		7,534			7,192
Total derivatives not designated as hedging instruments	25,554,974		39,250			10,184
Total derivatives before netting and collateral adjustments	$	103,505,508	966,532			3,890,294
Netting adjustments			(916,938		)	(916,938		)
Net before cash collateral			49,594			2,973,356
Cash collateral and related accrued interest			(7,700		)	(2,546,568		)
Net after cash collateral reported on the Statements of Condition			$	41,894		$	426,788

(a)All derivative assets and liabilities with swap dealers and counterparties are collateralized by cash; derivative instruments are subject to legal right of offset under master netting agreements.

(b)Other:  Comprised of swaps intermediated for members.  Notional amounts represent purchases from dealers and sales to members.

Earnings Impact of Derivatives and Hedging Activities

The FHLBNY carries all derivative instruments on the Statements of Condition at fair value as Derivative Assets and Derivative Liabilities.  If derivatives meet the hedging criteria under hedge accounting rules, including effectiveness measures, changes in fair value of the associated hedged financial instrument attributable to the risk being hedged (benchmark interest-rate risk, which is LIBOR for the FHLBNY) may also be recorded so that some or all of the unrealized fair value gains or losses recognized on the derivatives are offset by corresponding unrealized gains or losses on the associated hedged financial assets and liabilities.  The net differential between fair value changes of the derivatives and the hedged items represents hedge ineffectiveness.  Hedge ineffectiveness represents the amounts by which the changes in the fair value of the derivatives differ from the changes in the fair values of the hedged items or the variability in the cash flows of forecasted transactions.  The net ineffectiveness from hedges that qualify under hedge accounting rules are recorded as a Net realized and unrealized gain (loss) on derivatives and hedging activities in Other income (loss) in the Statements of Income.  If derivatives do not qualify for the hedging criteria under hedge accounting rules, but are executed as economic hedges of financial assets or liabilities under a FHLBNY-approved hedge strategy, only the fair value changes of the derivatives are recorded as a Net realized and unrealized gain (loss) on derivatives and hedging activities in Other income (loss) in the Statements of Income.

When the FHLBNY elects to measure certain debt under the accounting designation for FVO, the Bank will typically execute a derivative as an economic hedge of the debt.  Fair value changes of the derivatives are recorded as a Net realized and unrealized gain (loss) on derivatives and hedging activities in Other income (loss).  Fair value changes of the debt designated under the FVO are also recorded in Other income (loss) as an unrealized (loss) or gain from Instruments held at fair value.

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Components of net gains/ (losses) on derivatives and hedging activities as presented in the Statements of Income are summarized below (in thousands):

	Three months ended March 31, 2013
	Gains (Losses) on Derivative			Gains (Losses) on Hedged Item			Earnings Impact			Effect of Derivatives on Net Interest Income (a)
Derivatives designated as hedging instruments
Interest rate swaps
Advances (a)	$	296,662		$	(297,325	)	$	(663	)	$	(271,294	)
Consolidated obligations-bonds	(124,573		)	124,941			368			87,901
Net gains (losses) related to fair value hedges	172,089			(172,384		)	(295		)	$	(183,393	)
Cash flow hedges	(53		)				(53		)	$	(7,351	)
Derivatives not designated as hedging instruments
Interest rate swaps
Advances	629						629
Consolidated obligations-bonds	(3,122		)				(3,122		)
Member intermediation	(44		)				(44		)
Accrued interest-swaps (b)	2,903						2,903
Accrued interest-intermediation (b)	45						45
Caps or floors
Advances	(18		)				(18		)
Balance sheet hedges	968						968
Mortgage delivery commitments	(195		)				(195		)
Swaps economically hedging instruments designated under FVO
Consolidated obligations-bonds	(5,287		)				(5,287		)
Consolidated obligations-discount notes	(859		)				(859		)
Accrued interest-swaps (b)	6,711						6,711
Net gains related to derivatives not designated as hedging instruments	1,731						1,731
Net gains (losses) on derivatives and hedging activities	$	173,767		$	(172,384	)	$	1,383
	Three months ended March 31, 2012
	Gains (Losses) on Derivative			Gains (Losses) on Hedged Item			Earnings Impact			Effect of Derivatives on Net Interest Income (a)
Derivatives designated as hedging instruments
Interest rate swaps
Advances (a)	$	202,475		$	(200,043	)	$	2,432		$	(310,042	)
Consolidated obligations-bonds	(101,726		)	103,893			2,167			84,456
Consolidated obligations-discount notes	532			(1,495		)	(963		)	649
Net gains (losses) related to fair value hedges	101,281			(97,645		)	3,636			$	(224,937	)
Cash flow hedges	(2		)				(2		)	$	(5,986	)
Derivatives not designated as hedging instruments
Interest rate swaps
Advances	400						400
Consolidated obligations-bonds	18,979						18,979
Consolidated obligations-discount notes	23						23
Member intermediation	(44		)				(44		)
Accrued interest-swaps (b)	(4,067		)				(4,067		)
Accrued interest-intermediation (b)	46						46
Caps or floors
Advances	(19		)				(19		)
Balance sheet hedges	(576		)				(576		)
Mortgage delivery commitments	235						235
Swaps economically hedging instruments designated under FVO
Consolidated obligations-bonds	6,957						6,957
Consolidated obligations-discount notes	540						540
Accrued interest-swaps (b)	(1,882		)				(1,882		)
Net gains related to derivatives not designated as hedging instruments	20,592						20,592
Net gains (losses) on derivatives and hedging activities	$	121,871		$	(97,645	)	$	24,226

(a)

See Change in Accounting Principles in Note 1. Significant Accounting Policies and Estimates. Reported amortization expenses of fair value basis of hedged advance that were modified have been reclassified in the first quarter of 2012 to conform to the classification adopted in the first quarter of 2013. Previous to the fourth quarter of 2012, the amortization expenses were charged to Interest income from advances. The preferred reporting policy adopted is to record the expense as Net realized and unrealized gains (losses) on derivatives and hedging activities.

(b)

Represents interest expense and income generated from hedge qualifying interest-rate swaps that were recorded with interest income on the hedged advances, and interest expense on hedged Consolidated obligation bonds and discount notes. Also includes amortization as described in footnote (a) above.

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Cash Flow Hedges

The effect of interest rate swaps in cash flow hedging relationships was as follows (in thousands):

	Three months ended March 31, 2013
	AOCI
	Gains/(Losses)
	Recognized in AOCI (c)(d)			Location: Reclassified to Earnings (c)	Amount Reclassified to Earnings (c)		Ineffectiveness Recognized in Earnings
Consolidated obligations-bonds (a)	$	(271	)	Interest Expense	$	1,067	$	(53	)
Consolidated obligations-discount notes (b)	16,815			Interest Expense	—		—
	$	16,544			$	1,067	$	(53	)
	Three months ended March 31, 2012
	AOCI
	Gains/(Losses)
	Recognized in AOCI (c)(d)			Location: Reclassified to Earnings (c)	Amount Reclassified to Earnings (c)		Ineffectiveness Recognized in Earnings
Consolidated obligations-bonds (a)	$	(475	)	Interest Expense	$	1,002	$	(2	)
Consolidated obligations-discount notes (b)	16,977			Interest Expense	—		—
	$	16,502			$	1,002	$	(2	)

(a)   Hedges of anticipated issuance of debt -  The maximum period of time that the Bank typically hedges its exposure to the variability in future cash flows for forecasted transactions in this program is between three and nine months.  There were no open contracts at March 31, 2013 and December 31, 2012.  The amounts in AOCI from “closed” cash flow hedges representing net unrecognized losses were $11.5 million and $12.3 million at March 31, 2013 and December 31, 2012.  At March 31, 2013, it is expected that over the next 12 months $3.1 million of net losses (included in losses in AOCI) will be recognized as a yield adjustment (expenses) to consolidated bond interest expense.

(b)   Hedges of discount notes in rolling issuances — At March 31, 2013 and December 31, 2012, $1.1 billion of notional amounts of the interest rate swaps were outstanding under this program, $108.0 million and $124.8 million in net unrealized fair values losses were recorded in AOCI at March 31, 2013 and December 31, 2012.  The cash flow hedges mitigated exposure to the variability in future cash flows for a maximum period of 15 years.

(c)   Effective portion was recorded in AOCI.  Ineffectiveness was immaterial and was recorded within Net income.

(d)   Represents unrecognized loss from cash flow hedges recorded in AOCI.

There were no material amounts 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.

Note 17. Fair Values of Financial Instruments.

The fair value amounts recorded on the Statement of Condition or presented in the note disclosures have been determined by the FHLBNY using available market information and best judgment of appropriate valuation methods.  These values do not represent an estimate of the overall market value of the FHLBNY as a going concern, which would take into account future business opportunities and the net profitability of assets and liabilities.

Estimated Fair Values — Summary Tables

The carrying values, estimated fair values and the levels within the fair value hierarchy were as follows (in thousands):

	March 31, 2013
			Estimated Fair Value
Financial Instruments	Carrying Value		Total		Level 1		Level 2		Level 3 (a)		Netting Adjustment and Cash Collateral
Assets
Cash and due from banks	$	4,699,867	$	4,699,867	$	4,699,867	$	—	$	—	$	—
Federal funds sold	10,119,000		10,118,979		—		10,118,979		—		—
Available-for-sale-securities	2,093,172		2,093,172		9,879		2,083,293		—		—
Held-to-maturity securities	11,173,926		11,537,223		—		10,299,981		1,237,242		—
Advances	71,723,154		71,807,433		—		71,807,433		—		—
Mortgage loans held-for-portfolio, net	1,885,165		1,956,640		—		1,956,640		—		—
Accrued interest receivable	193,273		193,273		—		193,273		—		—
Derivative assets	11,236		11,236		—		865,943		—		(854,707		)
Other financial assets	667		667		—		248		419		—
Liabilities
Deposits	2,117,534		2,117,544		—		2,117,544		—		—
Consolidated obligations
Bonds	61,014,301		61,167,909		—		61,167,909		—		—
Discount notes	32,554,976		32,555,781		—		32,555,781		—		—
Mandatorily redeemable capital stock	26,172		26,172		26,172		—		—		—
Accrued interest payable	168,534		168,534		—		168,534		—		—
Derivative liabilities	390,935		390,935		—		3,537,676		—		(3,146,741		)
Other financial liabilities	87,455		87,455		87,455		—		—		—

33

	December 31, 2012
			Estimated Fair Value
Financial Instruments	Carrying Value		Total		Level 1		Level 2		Level 3 (a)		Netting Adjustment and Cash Collateral
Assets
Cash and due from banks	$	7,553,188	$	7,553,188	$	7,553,188	$	—	$	—	$	—
Federal funds sold	4,091,000		4,091,010		—		4,091,010		—		—
Available-for-sale-securities	2,308,774		2,308,774		9,633		2,299,141		—		—
Held-to-maturity securities	11,058,764		11,456,556		—		10,202,124		1,254,432		—
Advances	75,888,001		75,880,070		—		75,880,070		—		—
Mortgage loans held-for-portfolio, net	1,842,816		1,931,437		—		1,931,437		—		—
Accrued interest receivable	179,044		179,044		—		179,044		—		—
Derivative assets	41,894		41,894		—		966,532		—		(924,638		)
Other financial assets	533		533		—		364		169		—
Liabilities
Deposits	2,054,511		2,054,523		—		2,054,523		—		—
Consolidated obligations
Bonds	64,784,321		64,942,869		—		64,942,869		—		—
Discount notes	29,779,947		29,781,720		—		29,781,720		—		—
Mandatorily redeemable capital stock	23,143		23,143		23,143		—		—		—
Accrued interest payable	127,664		127,664		—		127,664		—		—
Derivative liabilities	426,788		426,788		—		3,890,295		—		(3,463,507		)
Other financial liabilities	85,079		85,079		85,079		—		—		—

(a)Level 3 Instruments — The fair values of private-label MBS and housing finance agency bonds were estimated by management based on pricing services.  Valuations may have required pricing services to use significant inputs that were subjective because of the current lack of significant market activity so that the inputs may not be market based and observable.

Fair Value Hierarchy

The FHLBNY records available-for-sale securities, derivative assets, derivative liabilities, certain consolidated obligations and advances elected under the FVO, and certain other liabilities at fair value on a recurring basis.  On a non-recurring basis, certain held-to-maturity securities determined to be OTTI are also measured and recorded at their fair values.  The fair value hierarchy requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.  The inputs are evaluated and an overall level for the fair value measurement is determined.  This overall level is an indication of market observability of the fair value measurement for the asset or liability.  An entity must disclose the level within the fair value hierarchy in which the measurements are classified for all assets and liabilities measured on a recurring or non-recurring basis.

The fair value hierarchy prioritizes the inputs used to measure fair value into three broad levels:

·Level 1 Inputs — Quoted prices (unadjusted) for identical assets or liabilities in an active market that the reporting entity can access on the measurement date.

·Level 2 Inputs — Inputs other than quoted prices within Level 1 that are observable inputs for the asset or liability, either directly or indirectly.  If the asset or liability has a specified (contractual) term, a Level 2 input must be observable for substantially the full term of the asset or liability.  Level 2 inputs include the following: (1) quoted prices for similar assets or liabilities in active markets; (2) quoted prices for identical or similar assets or liabilities in markets that are not active; (3) inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates and yield curves that are observable at commonly quoted intervals, and volatilities).

·Level 3 Inputs — Unobservable inputs for the asset or liability.

The FHLBNY reviews its fair value hierarchy classifications on a quarterly basis.  Changes in the observability of the valuation inputs may result in a reclassification of certain assets or liabilities.  These reclassifications are reported as transfers in/out as of the beginning of the quarter in which the changes occur.  There were no such transfers in any periods in this report.

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

Summary of Valuation Techniques and Primary Inputs

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

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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.  The fair values of financial assets and liabilities reported in the tables above are discussed below.

Cash and Due from Banks — The estimated fair value approximates the recorded book balance.

Interest-bearing Deposits and Federal Funds Sold — The FHLBNY determines estimated fair values of certain short-term investments by calculating the present value of expected future cash flows from the investments, a methodology also referred to as the Income approach under the Fair value measurement standards.  The discount rates used in these calculations are the current coupons of investments with similar terms.  Inputs into the cash flow models employed by the Bank are the yields on the instruments and are market based and observable and are considered to be within Level 2 of the fair value hierarchy.

Investment Securities — The fair value of investment securities is estimated by the FHLBNY using information primarily from pricing services.  This methodology is also referred to as the Market approach under the Fair value measurement standards.  Carrying value of a security is the same as its amortized cost, unless the security is determined to be OTTI.  In the period the security is determined to be OTTI, its carrying value is generally adjusted down to its fair value.

Mortgage-backed securities — The FHLBNY’s valuation technique incorporates prices from up to four designated third-party pricing services, when available.  The FHLBNY’s base investment pricing methodology establishes a median price for each security using a formula that is based on the number of prices received.  If four prices are received from the four pricing vendors, the average of the two middle prices is used; if three prices are received, the middle price is used; if two prices are received, the average of the two prices is used; and if one price is received, it is used subject to further validation.  Vendor prices that are outside of a defined tolerance threshold of the median price are identified as outliers and subject to additional review, including, but not limited to, comparison to prices provided by an additional third-party valuation service, prices for similar securities, and/or non-binding dealer estimates, or use of internal model prices, which are deemed to be reflective of all relevant facts and circumstances that a market participant would consider.  Such analysis is also applied in those limited instances where no third-party vendor price or only one third-party vendor price is available in order to arrive at an estimated fair value.  In its analysis, the FHLBNY has also introduced the concept of clustering pricing, and to predefine cluster tolerances.  Once the median prices are computed from the four pricing vendors, the second step is to determine which of the sourced prices fall within the required tolerance level interval to the median price, which forms the “cluster” of prices to be averaged.  This average will determine a “default” price for the security.  To be included among the cluster, each price must fall within 10 points of the median price for residential PLMBS and within 3 points of the median price for GSE issued MBS.  The cluster tolerance guidelines shall be reviewed annually and may be revised as necessary.  The final step is to determine the final price of the security based on the cluster average and an evaluation of any outlier prices.  If the analysis confirms that an outlier is not representative of fair value and that the average of the vendor prices within the tolerance threshold of the median price is the best estimate, then the average of the vendor prices within the tolerance threshold of the median price is used as the final price.  If, on the other hand, an outlier (or some other price identified in the analysis) is determined to be a better estimate of fair value, then the outlier (or the other price as appropriate) is used as the final price.  In all cases, the final price is used to determine the fair value of the security.

The FHLBNY has also established that the pricing vendors use methods that generally employ, but are not limited to, benchmark yields, recent trades, dealer estimates, valuation models, benchmarking of like securities, sector groupings, and/or matrix pricing.  To validate vendor prices of PLMBS, the FHLBNY has also adopted a formal process to examine yields as an additional validation method.  The FHLBNY calculates an implied yield for each of its PLMBS using estimated fair values derived from cash flows on a bond-by-bond basis.  This yield is then compared to the implied yield for comparable securities according to price information from third-party MBS “market surveillance reports”.  Significant variances or inconsistencies are evaluated in conjunction with all of the other available pricing information.  The objective is to determine whether an adjustment to the fair value estimate is appropriate.

Based on the FHLBNY’s review processes, management has concluded that inputs into the pricing models employed by pricing services for the Bank’s investments in GSE securities are market based and observable and are considered to be within Level 2 of the fair value hierarchy.  The valuation of the FHLBNY’s private-label securities, all designated as held-to-maturity, may require pricing services to use significant inputs that are subjective and are considered to be within Level 3 of the fair value hierarchy.  This determination was made based on management’s view that the private-label instruments may not have an active market because of the specific vintage of the securities as well as inherent conditions surrounding the trading of private-label MBS, so that the inputs may not be market based and observable.  Certain held-to-maturity private-label MBS were deemed OTTI at December 31, 2012 (none at March 31, 2013) and were written down to their fair values, so that their carrying values recorded in the balance sheet equaled their fair values, which were classified on a nonrecurring basis as Level 3 financial instruments under the valuation hierarchy.

Housing finance agency bonds - The fair value of housing finance agency bonds is estimated by management using information primarily from pricing services.  Because of the current lack of significant market activity, their fair values were categorized within Level 3 of the fair value hierarchy as inputs into vendor pricing models may not be market based and observable.

Advances — The fair values of advances are computed using standard option valuation models.  The most significant inputs to the valuation model are (1) consolidated obligation debt curve (the “CO Curve”), published by the Office

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of Finance and available to the public, and (2) LIBOR swap curves and volatilities.  The Bank considers both these inputs to be market based and observable as they can be directly corroborated by market participants.

The FHLBNY determines the fair values of its advances by calculating the present value of expected future cash flows from the advances, a methodology also referred to as the Income approach under the Fair value measurement standards.  The discount rates used in these calculations are equivalent to the replacement advance rates for advances with similar terms.  In accordance with the Finance Agency’s advances regulations, an advance with a maturity or repricing period greater than six months requires a prepayment fee sufficient to make a FHLBank financially indifferent to the borrower’s decision to prepay the advance.  Therefore, the fair value of an advance does not assume prepayment risk.

The inputs used to determine fair value of advances are as follows:

·CO Curve.  The FHLBNY uses the CO Curve, which represents its cost of funds, as an input to estimate the fair value of advances, and to determine current advance rates.  This input is considered market observable and therefore a Level 2 input.

·Volatility assumption.  To estimate the fair value of advances with optionality, the FHLBNY uses market-based expectations of future interest rate volatility implied from current market prices for similar options. This input is considered a Level 2 input as it is market based and market observable.

·Spread adjustment.  Adjustments represent the FHLBNY’s mark-up based on its pricing strategy.  The input is considered as unobservable, and is classified as a Level 3 input.  The spread adjustment is not a significant input to the overall fair value of an advance.

The FHLBNY creates an internal curve, which is interpolated from its advance rates.  Advance rates are calculated by applying a spread to an underlying “base curve” derived from the FHLBNY’s cost of funds, which is based on the CO Curve.  The CO Curve inputs have been determined to be market observable and classified as Level 2.  The spreads applied to the base curve, which typically represent the FHLBNY’s mark-ups over the FHLBNY’s cost of funds, are not market observable inputs, but rather are based on the FHLBNY’s advance pricing strategy, and such inputs have been classified as a Level 3.  For the FHLBNY, Level 3 inputs were considered not significant.

To determine the appropriate classification of the overall measurement in the fair value hierarchy of an advance, an analysis of the inputs to the entire fair value measurement was performed at March 31, 2013.  If the unobservable spread to the FHLBNY’s cost of funds was not significant to the overall fair value, then the measurement was classified as Level 2.  Conversely, if the unobservable spread was significant to the overall fair value, then the measurement would be classified as Level 3.  The impact of the unobservable input was calculated as the difference in the value determined by discounting an advance’s cash flows using the FHLBNY’s advance curve and the value determined by discounting an advance’s cash flows using the FHLBNY’s cost of funds curve.  Given the relatively small mark-ups over the FHLBNY’s cost of funds, the results of the FHLBNY’s quantitative analysis confirmed the FHLBNY’s expectations that the measurement of the FHLBNY’s advances was Level 2.  The unobservable mark-up spreads were not significant to the overall fair value of the instrument.  A quantitative threshold for significance factor was established at 10 percent, with additional qualitative factors to be considered if the ratio exceeded the threshold.

The FHLBNY has elected the FVO designation for certain advances and recorded their fair values in the Statements of Conditions.  The CO Curve was the primary input, which is market based and observable.  Inputs to apply spreads, which are FHLBNY specific, were not material.  Fair values were classified within Level 2 of the valuation hierarchy.

Accrued Interest Receivable and Other Assets — The estimated fair values approximate the recorded book value because of the relatively short period of time between their origination and expected realization.

Mortgage Loans (MPF Loans)

A.  Principal and/or Most Advantageous Market and Market Participants

The FHLBNY may sell mortgage loans to another FHLBank or in the secondary mortgage market.  Because transactions between FHLBanks occur infrequently, the FHLBNY has identified the secondary mortgage market as the principal market for mortgage loans under the MPF programs.  Also, based on the nature of the supporting collateral to the MPF loans held by FHLBNY, the presentation of a single class for all products within the MPF product types is considered appropriate.  As described below, the FHLBNY believe that the market participants within the secondary mortgage market for the MPF portfolio would differ primarily whether qualifying or non-qualifying loans are being sold.

Qualifying Loans — The FHLBNY believes that a market participant is an entity that would buy qualifying mortgage loans for the purpose of securitization and subsequent resale as a security.  Other government-sponsored enterprises (GSEs), specifically Federal National Mortgage Association (Fannie Mae) and Federal Home Loan Mortgage Corporation (Freddie Mac), conduct the majority of such activity in the United States, but there are other commercial banks and financial institutions that periodically conduct business in this market.  Therefore, the FHLBNY has identified market participants for qualifying loans to include (1) all GSEs, and (2) other commercial banks and financial institutions that are independent of the FHLBank System.

Non-qualifying Loans — For the FHLBNY, non-qualifying loans are primarily impaired loans.  The FHLBNY believes that it is unlikely the GSE market participants would willingly buy loans that did not meet their normal criteria or underwriting standards.  However, a market exists with commercial banks and financial institutions other

36

than GSEs where such market participants buy non-qualifying loans in order to securitize them as they become current, resell them in the secondary market, or hold them in their portfolios.  Therefore, the FHLBNY has identified the market participants for non-qualifying loans to include other commercial banks and financial institutions that are independent of the FHLBank System.

B.  Fair Value at Initial Recognition — MPF Loans

The FHLBNY believes that the transaction price (entry price) may differ from the fair value (exit price) at initial recognition because it is determined using a different method than subsequent fair value measurements.  However, because mortgage loans are not measured at fair value in the balance sheet, day one gains and losses would not be applicable.  Additionally, all mortgage loans are performing at the time of origination.

The FHLBNY receives an entry price from the FHLBank of Chicago, the MPF Provider, at the time of acquisition. This entry price is based on the TBA rates, as well as exit prices received from market participants, such as Fannie Mae and Freddie Mac.  The price is adjusted for specific MPF program characteristics and may be further adjusted by a FHLBank to accommodate changing market conditions.  Because of the adjustments, in many cases, the entry price would not equal the exit price at the time of acquisition.

C. Valuation Technique, Inputs and Hierarchy

The FHLBNY calculates the fair value of the entire mortgage loan portfolio using a valuation technique referred to as the “market approach”.  Loans are aggregated into synthetic pass-through securities based on product type, loan origination year, gross coupon and loan term.  The fair values are based on TBA rates (or agency commitment rates), as discussed above, adjusted primarily for seasonality.  The fair values of impaired MPF are also based on TBA rates and are adjusted for a haircut value on the underlying collateral value.  The FHLBNY validates the impairment adjustment made to TBA rates by “back-testing” against incurred losses.

TBA and agency commitment rates are market observable and therefore classified as Level 2 in the fair value hierarchy.  Any inputs derived from observable market data also result in a Level 2 classification.  Any inputs based on unobservable assumptions would be classified as Level 3 inputs.  Since most of the FHLBNY mortgage loans are currently performing and no credit losses are expected, any Level 3 inputs are generally insignificant to the total measurement and therefore the measurement of most loans may be classified as Level 2 in the fair value hierarchy. However, many of the credit and default risk related inputs involved with the valuation techniques described above may be considered unobservable due to variety of reasons (e.g., lack of market activity for a particular loan, inherent judgment involved in property estimates).  If unobservable inputs are considered significant, the loans would be classified as Level 3 in the fair value hierarchy.  Therefore, loans with expected credit losses may result in Level 2 or Level 3 classifications depending upon the significance of unobservable inputs used.

Consolidated Obligations — The FHLBNY estimates the fair values of consolidated obligations based on the present values of expected future cash flows due on the debt obligations.  Calculations are performed by using the FHLBNY’s industry standard option adjusted valuation models.  Inputs are based on the cost of raising comparable term debt.

The FHLBNY’s internal valuation models use standard valuation techniques and estimate fair values based on the following inputs:

·CO Curve and LIBOR Swap Curve.  The Office of Finance constructs an internal curve, referred to as the CO Curve, using the U.S. Treasury Curve as a base curve that is then adjusted by adding indicative spreads obtained from market observable sources.  These market indications are generally derived from pricing indications from dealers, historical pricing relationships, recent GSE trades and secondary market activity.  The FHLBNY considers the inputs as Level 2 inputs as they are market observable.

·Volatility assumption.  To estimate the fair values of consolidated obligations with optionality, the FHLBNY uses market-based expectations of future interest rate volatility implied from current market prices for similar options.  These inputs are also considered Level 2 as they are market based and observable.

The FHLBNY has elected the FVO designation for certain consolidated obligation debt and recorded their fair values in the Statements of Conditions.  The CO Curve and volatility assumptions (for debt with call options) were primary inputs, which are market based and observable.  Fair values were classified within Level 2 of the valuation hierarchy.

Derivative Assets and Liabilities — The FHLBNY’s derivatives are traded in the over-the-counter market.  Discounted cash flow analysis is the primary methodology employed by the FHLBNY’s valuation models to measure the fair values of interest rate swaps.  The valuation technique is considered as an “Income approach”.  Interest rate caps and floors are valued under the “Market approach”.  Interest rate swaps and interest rate caps and floors, collectively “derivatives”, were valued in industry-standard option adjusted valuation models, which generated fair values.  The valuation models employed multiple market inputs including interest rates, prices and indices to create continuous yield or pricing curves and volatility factors.  These multiple market inputs were corroborated by management to independent market data, and to relevant benchmark indices.  In addition, derivative valuations were compared by management to counterparty valuations received as part of the collateral exchange process.  These derivative positions were classified within Level 2 of the valuation hierarchy at March 31, 2013 and December 31, 2012.

The Bank’s valuation model utilizes a modified Black-Karasinski model that assumes that rates are distributed log normally.  The log-normal model precludes interest rates turning negative in the model computations.  Significant

37

market based and observable inputs into the valuation model include volatilities and interest rates.  The Bank’s valuation model employs industry standard market-observable inputs (inputs that are actively quoted and can be validated to external sources).  Inputs by class of derivative were as follows:

Interest-rate related:

·LIBOR Swap Curve.

·Volatility assumption.  Market-based expectations of future interest rate volatility implied from current market prices for similar options.

·Prepayment assumption (if applicable).

·Federal funds curve (OIS curve).

Mortgage delivery commitments (considered a derivative):

·TBA security prices are adjusted for differences in coupon, average loan rate and seasoning.

OIS adoption — Beginning with December 31, 2012 and at March 31, 2013, the FHLBNY has incorporated overnight indexed swap (“OIS”) curves as fair value measurement inputs for the valuation of its derivatives, as the OIS curves reflect the interest rates paid on cash collateral provided against the fair value of these derivatives.  The FHLBNY believes using relevant OIS curves as inputs to determine fair value measurements provides a more representative reflection of the fair values of these collateralized interest-rate related derivatives.  The OIS curve (Federal funds curve) was an additional input incorporated into the valuation model.  The input for the federal funds curve is obtained from industry standard pricing vendors and the input is available and observable over its entire term structure.  Management considers the federal funds curve to be a Level 2 input.  The FHLBNY’s valuation model utilizes industry standard OIS methodology.  The model generates forecasted cash flows using the OIS calibrated 3-month LIBOR curve.  The model then discounts the cash flows by the OIS curve to generate fair values.  Previously, the FHLBNY used the 3-month London Interbank Offered Rate (“LIBOR”) curve as the relevant benchmark curve for its derivatives and as the discounting rate for these collateralized interest-rate related derivatives.  The impact of the adoption of OIS on the FHLBNY’s financial position, results of operations and cash flows was not material.

Credit risk and credit valuation adjustments — The FHLBNY is subject to credit risk in derivatives transactions due to the potential nonperformance of its derivatives counterparties, which are generally highly rated institutions.  To mitigate this risk, the FHLBNY has entered into master netting agreements with its derivative counterparties.  To further limit the FHLBNY’s net unsecured credit exposure to those counterparties, the FHLBNY has entered into bilateral security agreements with all of its derivatives counterparties that provide for the delivery of collateral at specified levels.

The valuation of derivative assets and liabilities reflect the value of the instrument including the values associated with counterparty risk and would also take into account the FHLBNY’s own credit standing and non-performance risk.  The Bank has collateral agreements with all its derivative counterparties and enforces collateral exchanges at least weekly.  The computed fair values of the FHLBNY’s derivatives took into consideration the effects of legally enforceable master netting agreements that allow the FHLBNY to settle positive and negative positions and offset cash collateral with the same counterparty on a net basis.  The Bank and each derivative counterparty have bilateral collateral thresholds that take into account both the Bank and counterparty’s credit ratings.  As a result of these practices and agreements and the FHLBNY’s assessment of any change in its own credit spread, the Bank has concluded that the impact of the credit differential between the Bank and its derivative counterparties was sufficiently mitigated to an immaterial level that no credit adjustments were deemed necessary to the recorded fair value of Derivative assets and Derivative liabilities in the Statements of Condition at March 31, 2013 and December 31, 2012.

Control processes — The FHLBNY employs control processes to validate the fair value of its financial instruments, including those derived from valuation models.  These control processes are designed to ensure that the values used for financial reporting are based on observable inputs wherever possible.  In the event that observable inputs are not available, the control processes are designed to ensure that the valuation approach utilized is appropriate and consistently applied and that the assumptions are reasonable.  These control processes include reviews of the pricing model’s theoretical soundness and appropriateness by specialists with relevant expertise who are independent from the trading desks or personnel who were involved in the design and selection of model inputs.  Additionally, groups that are independent from the trading desk, or personnel involved in the design and selection of model inputs participate in the review and validation of the fair values generated from the valuation model.  The FHLBNY maintains an ongoing review of its valuation models and has a formal model validation policy in addition to procedures for the approval and control of data inputs.

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.

Mandatorily Redeemable Capital Stock — The fair value of capital stock subject to mandatory redemption is generally equal to its par value as indicated by contemporaneous member purchases and sales at par value.  Fair value also includes an estimated dividend earned at the time of reclassification from equity to liabilities, until such amount is paid, and any subsequently declared dividend.  FHLBank stock can only be acquired and redeemed at par value.  FHLBank stock is not traded and no market mechanism exists for the exchange of stock outside the FHLBank System’s cooperative structure.

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Accrued Interest Payable and Other Liabilities — The estimated fair values approximate the recorded book value because of the relatively short period of time between their origination and expected realization.

Fair Value Measurement

The tables below present the fair value of those assets and liabilities that are recorded at fair value on a recurring or nonrecurring basis at March 31, 2013 and December 31, 2012, by level within the fair value hierarchy.  The FHLBNY measures certain held-to-maturity securities and mortgage loans at fair value on a non-recurring basis due to the recognition of a credit loss.  Real estate owned is measured at fair value when the asset’s fair value less costs to sell is lower than its carrying amount.

Items Measured at Fair Value on a Recurring Basis (in thousands)

	March 31, 2013
	Total			Level 1		Level 2			Level 3		Netting Adjustment and Cash Collateral
Assets
Available-for-sale securities
GSE/U.S. agency issued MBS	$	2,083,293		$	—	$	2,083,293		$	—	$	—
Equity and bond funds	9,879			9,879		—			—		—
Advances (to the extent FVO is elected)	500,534			—		500,534			—		—
Derivative assets(a)
Interest-rate derivatives	11,179			—		865,886			—		(854,707		)
Mortgage delivery commitments	57			—		57			—		—
Total recurring fair value measurement - assets	$	2,604,942		$	9,879	$	3,449,770		$	—	$	(854,707	)
Liabilities
Consolidated obligations:
Discount notes (to the extent FVO is elected)	$	(1,949,723	)	$	—	$	(1,949,723	)	$	—	$	—
Bonds (to the extent FVO is elected) (b)	(10,037,764		)	—		(10,037,764		)	—		—
Derivative liabilities(a)
Interest-rate derivatives	(390,927		)	—		(3,537,668		)	—		3,146,741
Mortgage delivery commitments	(8		)	—		(8		)	—		—
Total recurring fair value measurement - liabilities	$	(12,378,422	)	$	—	$	(15,525,163	)	$	—	$	3,146,741

	December 31, 2012
	Total			Level 1		Level 2			Level 3		Netting Adjustment and Cash Collateral
Assets
Available-for-sale securities
GSE/U.S. agency issued MBS	$	2,299,141		$	—	$	2,299,141		$	—	$	—
Equity and bond funds	9,633			9,633		—			—		—
Advances (to the extent FVO is elected)	500,502			—		500,502			—		—
Derivative assets(a)
Interest-rate derivatives	41,885			—		966,523			—		(924,638		)
Mortgage delivery commitments	9			—		9			—		—
Total recurring fair value measurement - assets	$	2,851,170		$	9,633	$	3,766,175		$	—	$	(924,638	)
Liabilities
Consolidated obligations:
Discount notes (to the extent FVO is elected)	$	(1,948,987	)	$	—	$	(1,948,987	)	$	—	$	—
Bonds (to the extent FVO is elected) (b)	(12,740,883		)	—		(12,740,883		)	—		—
Derivative liabilities(a)
Interest-rate derivatives	(426,747		)	—		(3,890,254		)	—		3,463,507
Mortgage delivery commitments	(41		)	—		(41		)	—		—
Total recurring fair value measurement - liabilities	$	(15,116,658	)	$	—	$	(18,580,165	)	$	—	$	3,463,507

(a)Based on analysis of the nature of the risk, the presentation of derivatives as a single class is appropriate.

(b)Based on analysis of the nature of risks of consolidated obligation bonds measured at fair value, the FHLBNY has determined that presenting the bonds as a single class is appropriate.

Items Measured at Fair Value on a Nonrecurring Basis (in thousands)

Fair values of Held-to-Maturity Securities on a Nonrecurring Basis — Certain held-to-maturity investment securities were measured at fair value on a nonrecurring basis; that is, they are not measured at fair value on an ongoing basis but are subject to fair value adjustments when there is evidence of other-than-temporary impairment.  In accordance with the guidance on recognition and presentation of other-than-temporary impairment, held-to-maturity mortgage-backed securities that were determined to be credit impaired at December 31, 2012 (none at March 31, 2013 as no OTTI was recorded), were recorded at their fair values in the Statement of Condition at that date.  For more information, see Note 5. Held-to-Maturity Securities.

	December 31, 2012
	Fair Value (a)		Level 1		Level 2		Level 3 (b)
Held-to-maturity securities
RMBS-Prime	$	7,045	$	—	$	—	$	7,045
Total non-recurring assets at fair value	$	7,045	$	—	$	—	$	7,045

(a)Fair values were developed by pricing vendors and reviewed by the FHLBNY.

(b)Level 3 Instruments — The fair values of private-label MBS determined OTTI at December 31, 2012 (and all private-label MBS) were based on pricing services.  In management’s view, valuations may have required pricing services to use significant inputs that were subjective because of the current lack of significant market activity so that the inputs may not be market based and observable.

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Fair Value Option Disclosures

The following table summarizes the activity related to financial instruments for which the Bank elected the fair value option (in thousands):

	Advances					Bonds									Discount Notes
	March 31, 2013			December 31, 2012		March 31, 2013			December 31, 2012			March 31, 2012			March 31, 2013			December 31, 2012			March 31, 2012
Balance, beginning of the period	$	500,502		$	—	$	(12,740,883	)	$	(12,542,603	)	$	(12,542,603	)	$	(1,948,987	)	$	(4,920,855	)	$	(4,920,855	)
4New transactions elected for fair value option	—			500,000		(150,000		)	(18,793,000		)	(6,068,000		)	—			(2,145,618		)	(199,874		)
Maturities and terminations	—			—		2,850,000			18,595,000			7,150,000			—			5,117,046			4,022,558
Net gains (losses) on financial instruments held under fair value option	41			388		3,280			(133		)	6,319			358			—			879
Change in accrued interest/unaccreted balance	(9		)	114		(161		)	(147		)	2,582			(1,094		)	440			2,407
Balance, end of the period	$	500,534		$	500,502	$	(10,037,764	)	$	(12,740,883	)	$	(11,451,702	)	$	(1,949,723	)	$	(1,948,987	)	$	(1,094,885	)

The following tables present the change in fair value included in the Statements of Income for financial instruments for which the fair value option has been elected (in thousands):

	Three months ended
	March 31, 2013
	Interest Income		Net Gains Due to Changes in Fair Value		Total Change in Fair Value Included in Current Period Earnings
Advances (a)	$	682	$	41	$	723

(a)     No Advances were designated under the FVO at March 31, 2012.

	Three months ended March 31,
	2013								2012
	Interest Expense			Net Losses Due to Changes in Fair Value		Total Change in Fair Value Included in Current Period Earnings			Interest Expense			Net Losses Due to Changes in Fair Value		Total Change in Fair Value Included in Current Period Earnings
Consolidated obligations-bonds	$	(6,775	)	$	3,280	$	(3,495	)	$	(5,869	)	$	6,319	$	450
Consolidated obligations-discount notes	(1,092		)	358		(734		)	(979		)	879		(100		)
	$	(7,867	)	$	3,638	$	(4,229	)	$	(6,848	)	$	7,198	$	350

The following table compares the aggregate fair value and aggregate remaining contractual principal balance outstanding of financial instruments for which the fair value option has been elected (in thousands):

	March 31, 2013						December 31, 2012
	Aggregate Unpaid Principal Balance		Aggregate Fair Value		Fair Value Over/(Under) Aggregate Unpaid Principal Balance		Aggregate Unpaid Principal Balance		Aggregate Fair Value		Fair Value Over/(Under) Aggregate Unpaid Principal Balance
Advances	$	500,000	$	500,534	$	534	$	500,000	$	500,502	$	502
Consolidated obligations-bonds (a)	$	10,028,000	$	10,037,764	$	9,764	$	12,728,000	$	12,740,883	$	12,883
Consolidated obligations-discount notes (a)	1,945,744		1,949,723		3,979		1,945,744		1,948,987		3,243
	$	11,973,744	$	11,987,487	$	13,743	$	14,673,744	$	14,689,870	$	16,126

(a)We have elected not to increase the level of debt elected under the FVO.  Generally, maturing debt was not replaced by debt under the FVO election.  Fair values are declining as the debt is approaching their contractual maturities.

Note 18.                 Commitments and Contingencies.

The FHLBanks have joint and several liability for all the consolidated obligations issued on their behalf.  Accordingly, should one or more of the FHLBanks be unable to repay their participation in the consolidated obligations, each of the other FHLBanks could be called upon to repay all or part of such obligations, as determined or approved by the Finance Agency.  Neither the FHLBNY nor any other FHLBank has ever had to assume or pay the consolidated obligations of another FHLBank.  The FHLBNY does not believe that it will be called upon to pay the consolidated obligations of another FHLBank in the future.  Under the provisions of accounting standards for guarantees, the Bank would have been required to recognize the fair value of the FHLBNY’s joint and several liability for all the consolidated obligations, as discussed above.  However, the FHLBNY considers the joint and several liabilities as similar to a related party guarantee, which meets the scope exception under the accounting standard for guarantees.  Accordingly, the FHLBNY has not recognized the fair value of a liability for its joint and several obligations related to other FHLBanks’ consolidated obligations, which in aggregate was $0.7 trillion at March 31, 2013 and December 31, 2012.

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Standby letters of credit are executed for a fee on behalf of members to facilitate residential housing, community lending, and members’ asset/liability management or to provide liquidity.  A standby letter of credit is a financing arrangement between the FHLBNY and its member.  Members assume an unconditional obligation to reimburse the FHLBNY for value given by the FHLBNY to the beneficiary under the terms of the standby letter of credit.  The FHLBNY may, in its discretion, permit the member to finance repayment of their obligation by receiving a collateralized advance.  Outstanding standby letters of credit were $8.6 billion and $6.6 billion as of March 31, 2013 and December 31, 2012, and had original terms of up to 15 years, with a final expiration in 2019.  Standby letters of credit are fully collateralized.  Unearned fees on standby letters of credit are recorded in Other liabilities, and were not significant as of March 31, 2013 and December 31, 2012.

MPF Program — Under the MPF program, the Bank was unconditionally obligated to purchase $26.2 million and $25.2 million of mortgage loans at March 31, 2013 and December 31, 2012.  Commitments are generally for periods not to exceed 45 business days.  Such commitments were recorded as derivatives at their fair value under the accounting standards for derivatives and hedging.  In addition, the FHLBNY had entered into conditional agreements under “Master Commitments” with its members in the MPF program to purchase mortgage loans in aggregate of $1.2 billion and $0.9 billion as of March 31, 2013 and December 31, 2012.

Future benefit payments — The Bank expects to contribute $1.0 million over the next 12 months towards the Defined Benefit Plan, a non-contributory pension plan.

Derivative contracts — The FHLBNY executes derivatives with major financial institutions and enters into bilateral collateral agreements.  When counterparties are exposed, the Bank would typically pledge cash collateral to mitigate the counterparty’s credit exposure.  To mitigate the counterparties’ exposures, the FHLBNY deposited $2.3 billion and $2.5 billion in cash with derivative counterparties as pledged collateral at March 31, 2013 and December 31, 2012, and these amounts were reported as a deduction to Derivative liabilities.  Further information is provided in Note 16. Derivatives and Hedging Activities.

Lease contracts — Lease agreements for FHLBNY premises generally provide for inflationary increases in the basic rentals resulting from increases in property taxes and maintenance expenses, and these expenses were not material.  There has been no material change with respect to lease obligations that was previously disclosed in the Bank’s most recent Form 10-K filed on March 25, 2013.

The following table summarizes contractual obligations and contingencies as of March 31, 2013 (in thousands):

	March 31, 2013
	Payments Due or Expiration Terms by Period
			Greater Than		Greater Than
	Less Than		One Year		Three Years		Greater Than
	One Year		to Three Years		to Five Years		Five Years		Total
Contractual Obligations
Consolidated obligations-bonds at par (a)	$	38,286,850	$	10,514,170	$	5,074,120	$	6,319,965	$	60,195,105
Mandatorily redeemable capital stock (a)	5,743		694		5,746		13,989		26,172
Total contractual obligations	38,292,593		10,514,864		5,079,866		6,333,954		60,221,277
Other commitments
Standby letters of credit	8,440,500		182,942		18,684		3,861		8,645,987
Consolidated obligations-bonds traded not settled	825,600		—		—		—		825,600
Commitments to fund pension (b)	1,000		—		—		—		1,000
Open delivery commitments (MPF)	26,249		—		—		—		26,249
Total other commitments	9,293,349		182,942		18,684		3,861		9,498,836
Total obligations and commitments	$	47,585,942	$	10,697,806	$	5,098,550	$	6,337,815	$	69,720,113

(a)Callable bonds contain an exercise date or a series of exercise dates that may result in a shorter redemption period. Mandatorily redeemable capital stock is categorized by the dates at which the corresponding member obligations mature. Excess capital stock is redeemed at that time, and hence, these dates better represent the related commitments than the put dates associated with capital stock, under which stock may not be redeemed until the later of five years from the date the member becomes a nonmember or the related advance matures.

(b)This is based on the minimum expected payment under the MAP 21 relief provisions.  The Bank’s expected contribution towards the funded Defined Benefit Plan is not available beyond one year.  For projected benefits payable for the Bank’s unfunded Benefit Equalization Plan and the Bank’s Postretirement Benefit Plan, see Note 15. Employee Retirement Plans in the audited financial statements in the Bank’s most recent Form 10-K filed on March 25, 2013.

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

Impact of the bankruptcy of Lehman Brothers

From time to time, the Bank is involved in disputes or regulatory inquiries that arise in the ordinary course of business. At the present time, except as noted below, there are no pending claims against the Bank that, if established, are reasonably likely to have a material effect on the Bank’s financial condition, results of operations or cash flows.

On September 15, 2008, Lehman Brothers Holdings, Inc. (“LBHI”), the parent company of Lehman Brothers Special Financing Inc. (“LBSF”) and a guarantor of LBSF’s obligations, filed for protection under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court in the Southern District of New York. LBSF filed for protection under Chapter 11 in the same court on October 3, 2008. A Chapter 11 plan was confirmed in

41

their bankruptcy cases by order of the Bankruptcy Court dated December 6, 2011 (the “Plan”). The Plan became effective on March 6, 2012.

LBSF was a counterparty to FHLBNY on multiple derivative transactions under an International Swap Dealers Association, Inc. master agreement with a total notional amount of $16.5 billion at the time of termination of the Bank’s derivative transactions with LBSF.  The net amount that was due to the Bank after giving effect to obligations that were due LBSF was approximately $65 million.  The Bank filed timely proofs of claim in the amount of approximately $65 million as creditors of LBSF and LBHI in connection with the bankruptcy proceedings.  The Bank fully reserved the LBSF and LBHI receivables as the dispute with LBSF described below make the timing and the amount of any recoveries uncertain.

As previously reported, the Bank received a Derivatives ADR Notice from LBSF dated July 23, 2010 claiming that the Bank was liable to LBSF under the master agreement.  Subsequently, in accordance with the Alternative Dispute Resolution Procedure Order entered by the Bankruptcy Court dated September 17, 2009 (“Order”), the Bank responded to LBSF on August 23, 2010, denying LBSF’s Demand. LBSF served a reply on September 7, 2010, effectively reiterating its position.  A mediation conducted pursuant to the Order commenced on December 8, 2010 and concluded without settlement on March 17, 2011. LBSF claims that the Bank is liable to it in the principal amount of approximately $198 million plus interest on such principal amount from the Early Termination Date to December 1, 2008 at an interest rate equal to the average of the cost of funds of the Bank and LBSF on the Early Termination Date, and after December 1, 2008 at a default interest rate of LIBOR plus 13.5%. LBSF’s asserted claim as of December 6, 2010, including principal and interest, was approximately $268 million.  Pursuant to the Order, positions taken by the parties in the ADR process are confidential.

While the Bank believes that LBSF’s position is without merit, and therefore no payment to LBSF or LBHI is probable, the amount the Bank actually recovers or pays will ultimately be decided in the course of the bankruptcy proceedings.

Note 19.                 Related Party Transactions.

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

Debt Assumptions and Transfers

Debt assumptions — The Bank did not assume debt from another FHLBank in the first quarter of 2013 and 2012.

Debt transfers — In the first quarter of 2013, the Bank transferred $25.0 million to another FHLBank at negotiated market rates that exceeded amortized cost by $3.9 million, which was charged to earnings in that period.  There were no debt transfers to another FHLBank in the first quarter of 2012.  When debt is transferred, the transferring bank notifies the Office of Finance on trade date of the change in primary obligor for the transferred debt.

Advances Sold or Transferred

No advances were transferred/sold to the FHLBNY or from the FHLBNY to another FHLBank in any periods in this report.

MPF Program

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 FHLBank of Chicago, the MPF provider’s cumulative share of interest in the FHLBNY’s MPF loans at March 31, 2013 was $44.0 million from inception of the program from mid-2004.  At December 31, 2012, the comparable number was $47.5 million.  Since 2004, the FHLBNY has not shared its purchases with the FHLBank of Chicago.  Fees paid to the FHLBank of Chicago were $0.2 million for the first quarter of 2013 and 2012.

Mortgage-backed Securities

No mortgage-backed securities were acquired from other FHLBanks during the periods in this report.

Intermediation

Notional amounts of $265.0 million of interest rate swaps were outstanding at March 31, 2013 and December 31, 2012, and represented derivative contracts in which the FHLBNY acted as an intermediary to sell derivatives to members with an offsetting purchased contracts with unrelated derivatives dealers.  Net fair value exposures of these transactions at March 31, 2013 and December 31, 2012 were not significant.  The intermediated derivative transactions with members were fully collateralized.

Loans to Other Federal Home Loan Banks

In the first quarter of 2013, the FHLBNY extended overnight loans for a total of $2.4 billion.  In the first quarter of 2012, the FHLBNY extended overnight loans for a total of $0.3 billion to another FHLBank.  Generally, loans made to other FHLBanks are uncollateralized.  The impact to Net interest income from such loans was not significant in any period in this report.

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Borrowings from Other Federal Home Loan Banks

The FHLBNY borrows from other FHLBanks, generally for a period of one day.  In the first quarter of 2013, there was no borrowing from other FHLBanks.  In the first quarter of 2012, the FHLBNY borrowed one overnight loan for a total of $50.0 million from a FHLBank.

The following tables summarize outstanding balances with related parties at March 31, 2013 and December 31, 2012, and transactions for the first quarter of 2013 and 2012 (in thousands):

Related Party: Outstanding Assets, Liabilities and Capital

	March 31, 2013				December 31, 2012
	Related		Unrelated		Related		Unrelated
Assets
Cash and due from banks	$	—	$	4,699,867	$	—	$	7,553,188
Federal funds sold	—		10,119,000		—		4,091,000
Available-for-sale securities	—		2,093,172		—		2,308,774
Held-to-maturity securities	—		11,173,926		—		11,058,764
Advances	71,723,154		—		75,888,001		—
Mortgage loans (a)	—		1,885,165		—		1,842,816
Accrued interest receivable	163,360		29,913		150,907		28,137
Premises, software, and equipment	—		12,663		—		11,576
Derivative assets (b)	—		11,236		—		41,894
Other assets (c)	274		11,575		150		13,593
Total assets	$	71,886,788	$	30,036,517	$	76,039,058	$	26,949,742
Liabilities and capital
Deposits	$	2,117,534	$	—	$	2,054,511	$	—
Consolidated obligations	—		93,569,277		—		94,564,268
Mandatorily redeemable capital stock	26,172		—		23,143		—
Accrued interest payable	27		168,507		25		127,639
Affordable Housing Program (d)	128,512		—		134,942		—
Derivative liabilities (b)	—		390,935		—		426,788
Other liabilities (e)	87,455		76,916		85,079		80,576
Total liabilities	2,359,700		94,205,635		2,297,700		95,199,271
Total capital	5,357,970		—		5,491,829		—
Total liabilities and capital	$	7,717,670	$	94,205,635	$	7,789,529	$	95,199,271

(a)Includes insignificant amounts of mortgage loans purchased from members of another FHLBank.

(b)Derivative transactions with Citibank, N.A., a member that is a derivatives dealer counterparty, were at market terms and in the ordinary course of the FHLBNY’s business — At March 31, 2013, notional amounts outstanding were $4.0 billion, net fair value after posting $149.1 million cash collateral was a net derivative liability of $24.1 million.  At December 31, 2012, notional amounts outstanding were $3.5 billion; net fair value after posting $124.7 million cash collateral was a net derivative liability of $25.2 million.  The swap interest rate exchanges with Citibank, N.A., resulted in interest expense of $9.4 million and $5.9 million in the first quarters of 2013 and 2012.  Also, includes insignificant fair values due to intermediation activities on behalf of other members with derivative dealers.

(c)Includes insignificant amounts of miscellaneous assets that are considered related party.

(d)Represents funds not yet disbursed to eligible programs.

(e)Related column includes member pass-through reserves at the Federal Reserve Bank.

Related Party:  Income and Expense transactions

	Three months ended March 31,
	2013				2012
	Related		Unrelated		Related		Unrelated
Interest income
Advances	$	109,993	$	—	$	137,272	$	—
Interest-bearing deposits (a)	—		811		—		657
Federal funds sold	—		4,265		—		2,360
Available-for-sale securities	—		4,753		—		6,686
Held-to-maturity securities	—		59,741		—		69,335
Mortgage loans held-for-portfolio (b)	—		16,794		—		15,827
Loans to other FHLBanks	14		—		1		—
Total interest income	$	110,007	$	86,364	$	137,273	$	94,865
Interest expense
Consolidated obligations	$	—	$	92,930	$	—	$	109,961
Deposits	162		—		244		—
Mandatorily redeemable capital stock	253		—		761		—
Cash collateral held and other borrowings	—		2		—		17
Total interest expense	$	415	$	92,932	$	1,005	$	109,978
Service fees and other	$	2,352	$	3	$	1,797	$	123

(a) Includes insignificant amounts of interest income from MPF service provider, and Citibank, N.A.

(b) Includes immaterial amounts of mortgage interest income from loans purchased from members of another FHLBank.

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Note 20.                 Segment Information and Concentration.

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

The FHLBNY’s total assets and capital could significantly decrease if one or more large members were to withdraw from membership or decrease business with the Bank.  Members might withdraw or reduce their business as a result of consolidating with an institution that was a member of another FHLBank, or for other reasons.  The FHLBNY has considered the impact of losing one or more large members.  In general, a withdrawing member would be required to repay all indebtedness prior to the redemption of its capital stock.  Under current conditions, the FHLBNY does not expect the loss of a large member to impair its operations, since the FHLBank Act of 1999 does not allow the FHLBNY to redeem the capital of an existing member if the redemption would cause the FHLBNY to fall below its capital requirements.  Consequently, the loss of a large member should not result in an inadequate capital position for the FHLBNY.  However, such an event could reduce the amount of capital that the FHLBNY has available for continued growth.  This could have various ramifications for the FHLBNY, including a possible reduction in net income and dividends, and a lower return on capital stock for remaining members.

The top ten advance holders at March 31, 2013, December 31, 2012 and March 31, 2012 and associated interest income for the periods then ended are summarized as follows (dollars in thousands):

	March 31, 2013
					Percentage of
			Par		Total Par Value		Three Months
	City	State	Advances		of Advances		Interest Income
Metropolitan Life Insurance Company	New York	NY	$	13,370,000	19.52	%	$	69,689
Citibank, N.A.	New York	NY	10,650,000		15.55		10,094
New York Community Bank*	Westbury	NY	8,068,140		11.78		59,963
Hudson City Savings Bank, FSB*	Paramus	NJ	6,025,000		8.80		71,402
Investors Bank	Short Hills	NJ	2,687,000		3.92		14,522
First Niagara Bank, National Association	Buffalo	NY	2,400,000		3.50		2,742
The Prudential Insurance Co. of America	Newark	NJ	2,325,000		3.39		11,800
Astoria Federal Savings and Loan Assn.	Lake Success	NY	2,307,000		3.37		14,489
Valley National Bank	Wayne	NJ	2,074,500		3.03		20,039
Banco Popular de Puerto Rico	San Juan	PR	1,362,500		1.99		3,578
Total			$	51,269,140	74.85	%	$	278,318

Pending merger — In the second quarter of 2012, Hudson City Bancorp, Inc. had entered into an Agreement and Plan of Merger (“Merger Agreement”) with M&T Bank Corporation and Wilmington Trust Corporation (“WTC”), a wholly owned subsidiary of M&T Bank Corporation.  The Merger Agreement provided that FHLBNY member Hudson City Savings Bank (“Hudson City”), a wholly owned subsidiary of Hudson City Bancorp, will merge with and into FHLBNY member Manufacturers and Traders Trust Company (“M&T”), a wholly owned subsidiary of M&T Bank Corporation, with M&T Bank continuing as the surviving bank.  The Merger Agreement was subject to, among other items, shareholder and regulatory approvals.

On April 12, 2013, Hudson City Bancorp, Inc. and M&T Bank Corporation announced that they expect additional time will be required to obtain a regulatory determination on the applications necessary to complete their proposed merger.  M&T and Hudson City intend to extend the date to January 31, 2014, after which either party may elect to terminate the merger agreement, but there can be no assurances that the merger will be completed by that date.  The consideration and exchange ratio as provided in the merger agreement will remain the same.  M&T and Hudson City intend to close the merger as soon as possible following the receipt of all necessary regulatory and shareholder approvals and satisfaction of all other conditions to closing.

The parties had indicated in 2012 their intention to pay off FHLBNY advances upon the closing of the merger transactions.  We do not expect the merger to have a significant adverse impact on our financial position, cash flows or earnings.  When advances are early terminated by Hudson City, we expect to receive prepayment fees that will make us economically whole.  However, prepayments may cause a decline in our book of business if the terminated advances are not replaced by new borrowings by other members.  A lower volume of advances, which is the primary focus of our business, could result in lower net interest income and impact earnings in future periods.

* At March 31, 2013, officer of member bank also served on the Board of Directors of the FHLBNY.

`	December 31, 2012
					Percentage of
			Par		Total Par Value		Twelve Months
	City	State	Advances		of Advances		Interest Income
Metropolitan Life Insurance Company	New York	NY	$	13,512,000	18.69	%	$	290,223
Citibank, N.A.	New York	NY	12,070,000		16.70		31,422
New York Community Bank*	Westbury	NY	8,293,143		11.47		302,229
Hudson City Savings Bank, FSB*	Paramus	NJ	6,025,000		8.33		302,559
Astoria Federal Savings and Loan Assn.	Lake Success	NY	2,897,000		4.01		62,676
Investors Bank	Short Hills	NJ	2,700,500		3.74		57,780
First Niagara Bank, National Association	Buffalo	NY	2,438,500		3.37		10,851
The Prudential Insurance Co. of America	Newark	NJ	2,325,000		3.22		50,142
Valley National Bank	Wayne	NJ	2,075,500		2.87		83,143
New York Life Insurance Company	New York	NY	1,350,000		1.87		13,764
Total			$	53,686,643	74.27	%	$	1,204,789

* At December 31, 2012, officer of member bank also served on the Board of Directors of the FHLBNY.

44

	March 31, 2012
					Percentage of
			Par		Total Par Value		Three Months
	City	State	Advances		of Advances		Interest Income
Metropolitan Life Insurance Company	New York	NY	$	11,605,000	16.96	%	$	64,669
New York Community Bank*	Westbury	NY	8,968,152		13.11		75,882
Hudson City Savings Bank, FSB*	Paramus	NJ	8,025,000		11.73		77,811
First Niagara Bank, National Association	Buffalo	NY	4,492,917		6.57		4,605
MetLife Bank, N.A.	Convent Station	NJ	3,995,500		5.84		23,698
The Prudential Insurance Co. of America	Newark	NJ	2,424,000		3.54		13,151
Astoria Federal Savings and Loan Assn.	Lake Success	NY	2,355,000		3.44		15,247
Valley National Bank	Wayne	NJ	2,327,500		3.40		20,783
Investors Bank	Short Hills	NJ	2,228,679		3.26		14,344
New York Life Insurance Company	New York	NY	1,400,000		2.05		4,289
Total			$	47,821,748	69.90	%	$	314,479

* At March 31, 2012, officer of member bank also served on the Board of Directors of the FHLBNY.

The following table summarizes capital stock held by members who were beneficial owners of more than 5 percent of the FHLBNY’s outstanding capital stock as of March 31, 2013 and December 31, 2012 (shares in thousands):

		Number	Percent
	March 31, 2013	of Shares	of Total
Name of Beneficial Owner	Principal Executive Office Address	Owned	Capital Stock
Citibank, N.A.	399 Park Avenue, New York, NY 10043	8,528	18.33	%
Metropolitan Life Insurance Company	200 Park Avenue, New York, NY 10166	7,283	15.65
New York Community Bank*	615 Merrick Avenue, Westbury, NY 11590	4,235	9.10
Hudson City Savings Bank, FSB*	West 80 Century Road, Paramus, NJ 07652	3,565	7.66
		23,611	50.74	%

		Number	Percent
	December 31, 2012	of Shares	of Total
Name of Beneficial Owner	Principal Executive Office Address	Owned	Capital Stock
Citibank, N.A.	399 Park Avenue, New York, NY 10043	9,166	19.02	%
Metropolitan Life Insurance Company	200 Park Avenue, New York, NY 10166	7,347	15.24
New York Community Bank*	615 Merrick Avenue, Westbury, NY 11590	4,337	9.00
Hudson City Savings Bank, FSB*	West 80 Century Road, Paramus, NJ 07652	3,565	7.39
		24,415	50.65	%

* At March 31, 2013 and December 31, 2012, officer of member bank also served on the Board of Directors of the FHLBNY.

Note 21. Subsequent Events.

Subsequent events for the FHLBNY are events or transactions that occur after the balance sheet date but before financial statements are issued.  The FHLBNY has evaluated subsequent events through the filing date of this report and no significant subsequent events were identified.

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ITEM 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

Statements contained in this report, including statements describing the objectives, projections, estimates, or predictions of the Federal Home Loan Bank of New York (“we,” “us,” “our,”“the Bank” or the “FHLBNY”), may be “forward-looking statements.”  All statements other than statements of historical fact are statements that could potentially be forward-looking statements.  These statements may use forward-looking terminology, such as “anticipates,” “believes,” “could,” “estimates,” “may,” “should,” “will,” or other variations on these terms or their negatives, and include statements related to, among others, gains and losses on derivatives, plans to pay dividends and repurchase excess capital stock, future other-than-temporary impairment charges, future classification of securities, and housing reform legislation.  These statements may involve matters pertaining to, but not limited to: projections regarding revenue, income, earnings, capital expenditures, dividends, the capital structure and other financial items; statements of plans or objectives for future operations; expectations of future economic performance; and statements of assumptions underlying certain of the foregoing types of statements.

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

These forward-looking statements may not be realized due to a variety of risks and uncertainties including, but not limited to risks and uncertainties relating to economic, competitive, governmental, technological and marketing factors, as well as other factors identified in the Bank’s filings with the Securities and Exchange Commission. For more information about the forward-looking statements see the Bank’s most recent Form 10-K filed on March 25, 2013.

46

Organization of Management’s Discussion and Analysis (“MD&A”).

This MD&A is designed to provide information that will assist the readers in better understanding the FHLBNY’s financial statements, the changes in key items in the Bank’s financial statements from period to period and the primary factors driving those changes as well as how accounting principles affect the FHLBNY’s financial statements.  The MD&A is organized as follows:

	Page
Executive Overview	48
Financial performance of the Federal Home Loan Bank of New York	48
Business Outlook	50
Results of Operations	53
Net Income	53
Interest Income	54
Interest Expense	55
Net Interest Income	57
Earnings Impact of Derivatives and Hedging Activities	60
Operating Expense, Compensation and Benefits, and Other Expenses	61
Financial Condition	62
Advances	64
Investments	68
Mortgage Loans Held-for-Portfolio	74
Debt Financing Activity and Consolidated Obligations	76
Stockholders’ Capital, Retained Earnings, and Dividend	81
Derivative Instruments and Hedging Activities	82
Liquidity, Cash Flows, Short-Term Borrowings and Short-Term Debt	86
Legislative and Regulatory Developments	89

MD&A TABLE REFERENCE

Table(s)	Description	Page(s)
1.1 - 1.15	Result of Operations	53-61
2.1	Assessments	62
3.1 - 3.3	Financial Condition	62-64
4.1 - 4.11	Advances	64-68
5.1 - 5.12	Investments	69-73
6.1 - 6.6	Mortgage Loans	74-75
7.1 - 7.10	Consolidated Obligations	77-80
7.11	FHLBNY Rating	80
8.1 - 8.3	Capital	81
9.1 - 9.7	Derivatives	82-85
10.1 - 10.4	Liquidity	86-88
10.5	Aggregate Contractual Obligations	88

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Executive Overview

This overview of management’s discussion and analysis highlights and selected information may not contain all of the information that is important to readers of this Form 10-Q.  For a more complete understanding of events, trends and uncertainties, as well as the liquidity, capital, credit and market risks, and critical accounting estimates, affecting the Federal Home Loan Bank of New York (“FHLBNY” or “Bank”), this Form 10-Q should be read in its entirety and in conjunction with the Bank’s most recent Form 10-K filed on March 25, 2013.

Cooperative business model.  As a cooperative, we seek to maintain a balance between our public policy mission and our ability to provide adequate returns on the capital supplied by our members.  We achieve this balance by delivering low-cost financing to members to help them meet the credit needs of their communities and also by paying a dividend on members’ capital stock.  Our financial strategies are designed to enable us to expand and contract in response to member credit needs.  By investing capital in high quality, short- and medium-term financial instruments, we maintain sufficient liquidity to satisfy member demand for short- and long-term funds, repay maturing consolidated obligations, and meet other obligations.  The dividends we pay are largely the result of earnings on invested member capital, net earnings on advances to members, mortgage loans and investments, offset in part by operating expenses and assessments.  Our Board of Directors and Management determine the pricing of member credit and dividend policies based on the needs of our members and the cooperative.

Business segment.  We manage our operations as a single business segment.  Advances to members are our primary focus and the principal factor that impacts our operating results.  We are exempt from ordinary federal, state and local taxation (except for local real property tax).  We are required to set aside a percentage of our income towards an Affordable Housing Program (“AHP”).

Explanation of the use of certain non-GAAP measures of Interest Income and Expense, Net Interest income and margin.  The results of our operations are presented in accordance with U.S. generally accepted accounting principles.  We have also presented certain information regarding our spread between Interest Income and Expense, Net Interest income spread and Return on Earning assets.  This spread combines interest expense on debt with net interest exchanged with swap dealers on interest rate swaps associated with debt hedged on an economic basis.  We believe these non-GAAP financial measures are useful to investors and members seeking to understand our operational performance and business and performance trends.  Although we believe these non-GAAP financial measures enhance investor and members’ understanding of the Bank’s business and performance, they should not be considered an alternative to GAAP.  We have provided GAAP measures in parallel whenever discussing non-GAAP measures.

Financial performance of the Federal Home Loan Bank of New York

	Three months ended March 31,
(Dollars in millions, except per share data)	2013			2012			Change
Net interest income before provision for credit losses	$	103		$	121		$	(18	)
Provision for credit losses on mortgage loans	—			1			(1		)
Net OTTI impairment losses	—			(1		)	1
Other non-interest (loss) income	(1		)	19			(20		)
Total other (loss) income	(1		)	18			(19		)
Operating expenses	7			7			—
Compensation and benefits	14			14			—
Net income	$	70		$	102		$	(32	)
Earnings per share	$	1.50		$	2.29		$	(0.79	)
Dividend per share	$	1.13		$	1.26		$	(0.13	)

2013 First Quarter Highlights

Results of Operations

We reported 2013 first quarter Net income of $70.0 million, or $1.50 per share, compared with 2012 first quarter Net income of $101.9 million, or $2.29 per share.  The return on average equity, which is Net income divided by average Capital stock, Retained earnings and Accumulated other comprehensive income (loss) (“AOCI”), was 5.28% in the current year first quarter, compared with 8.17% in the same quarter in the prior year.

The following summarizes the primary changes.

·Net interest income in the current year quarter was $103.0 million, compared to $121.2 million in prior year quarter.  The decline, relative to 2012 first quarter, was in part due to tighter funding spreads in the current year quarter, and in part due to declining yields from advances and investments.  A significant amount of our fixed-rate debt is swapped to floating-rate sub-LIBOR spreads, and as LIBOR declines, as it has continued to decline through the first quarter of 2013, debt spread narrowed on a swapped out basis, causing funding costs to increase.  Advance yields were lower as higher yielding advances have been prepaid, and were not replaced or were replaced by floating-rate advances with lower coupons.  Higher yielding advances were also modified in 2012 and through the first quarter of 2013 and have driven down interest income.  Higher-yielding MBS have been paying down, and floating-rate MBS have yielded lower coupons in the declining interest rate environment.

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·Other income (loss) was a loss of $0.5 million in the 2013 first quarter, in contrast to a gain of $18.3 million in the 2012 first quarter.  Two factors contributed to the decline.  The impact of fair value gains from derivatives and hedging activities was $1.4 million in the current year first quarter, compared to $24.2 million in the prior year first quarter.  Fair value gains from financial instruments elected under the FVO were $3.7 million in the current year first quarter, compared to net gains of $7.2 million in the prior year first quarter.  These adverse changes were partly offset by lower debt retirement expenses in the current year first quarter, relative to the prior year first quarter.

·Operating expenses were $7.2 million in the 2013 first quarter, slightly lower than $7.4 million in the 2012 first quarter.

·Compensation and benefits expenses were $14.1 million in the 2013 first quarter, almost unchanged from the 2012 first quarter.

·Assessments set aside from net income towards the Affordable Housing Program (“AHP”) were $7.8 million in the 2013 first quarter, compared to $11.4 million in the 2012 first quarter.  AHP assessments are a fixed percentage of income before such assessments and the decline is due to lower net income in the current year first quarter.

Cash dividends of $1.13 per share of capital stock (annualized $4.50) were paid to stockholders in the current year quarter, compared to $1.26 per share of capital stock (annualized $5.00) in the prior year same quarter.

Financial Condition

Total assets were $101.9 billion at March 31, 2013, compared to $103.0 billion at December 31, 2012.  Our mission is to support the liquidity needs of our members.  To meet this mission, our strategy is to keep our balance sheet generally in line with the rise and fall of amounts borrowed by members in the form of advances.  At March 31, 2013, Advances to members declined to $71.7 billion, compared to $75.9 billion at December 31, 2012.

Our liquidity position remained in compliance with all regulatory requirements and we do not foresee any changes to that position.  Net cash generated from operating activities was in excess of Net income.  We also believe our cash flows from operations, available cash balances and our ability to generate cash through the issuance of consolidated obligation bonds and discount notes are sufficient to fund our operating liquidity needs.

Our capital remains strong.  At March 31, 2013, actual risk-based capital was $5.6 billion, compared to required risk-based capital of $0.6 billion.  To support $101.9 billion of total assets at March 31, 2013, the required minimum regulatory capital was $4.1 billion, or 4.0% of assets.  Our actual regulatory capital was $5.6 billion, exceeding required capital by $1.5 billion.  We are continuing to increase retained earnings.  Unrestricted Retained earnings have grown to $800.8 million as of March 31, 2013, up from $797.6 million at December 31, 2012.  In addition, Restricted retained earnings have grown to $110.2 million at March 31, 2013, up from $96.2 million at December 31, 2012.  AOCI losses, a component of shareholders’ equity, were $179.6 million at March 31, 2013, compared to losses of $199.4 million at December 31, 2012.  The losses are unrealized, and largely represent adverse changes in the fair values of interest rate swaps designated as cash flow hedges of several discount note issuance programs that create long-term fixed-rate funding.  Losses in AOCI also include amounts not recognized for unfunded employee benefit retirement plans.  For more information, see Note 13. Total Comprehensive Income.

In 2012, Advance balances had grown primarily because of one large member’s short-term borrowing.  Most of the borrowings by the large member will mature by the third quarter in 2013, and remaining advances borrowed by the large member will mature by the second quarter of 2014.  In the three months ended March 31, 2013, member demand for liquidity has been weak, and par amounts of advances have declined to $68.5 billion or $3.8 billion from the balances outstanding at December 31, 2012.

Aside from advances, our primary long-term investment portfolios, comprise primarily of GSE issued MBS, a small portfolio of private-label MBS, bonds issued by state and local government housing agencies, and the MPF portfolio of mortgage loans.  Such investments were classified as either held-to-maturity or as available-for-sale.  We had no securities designated for trading.

·Investments in the held-to-maturity portfolio at March 31, 2013 were $11.2 billion, and comprised of $9.9 billion of GSE and agency issued mortgage-backed securities, $488.8 million of private-label mortgage backed securities, and $737.1 million of bonds issued by housing finance agencies.  We have not acquired any private-label mortgage-backed security since 2006.

·Investments totaling $2.1 billion at March 31, 2013 in the available-for-sale portfolio were almost exclusively GSE issued securities.

·Market pricing of GSE-issued investment securities has continued to improve as liquidity has gradually returned to the market, and fair values generally generated unrealized gains.  Market pricing of our portfolio of private-label securities has remained stable at March 31, 2013, relative to December 31, 2012.

Mortgage loans were investments in Mortgage Partnership Finance loans (“MPF” or “MPF Program”).  We provide this product to members as another alternative for them to sell their mortgage production.  Growth has been steady and moderate.  Outstanding balances of loans under this program increased by $42.1 million to $1.9 billion during the three months ended March 31, 2013.

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We also invest in overnight and short-term federal funds with highly rated financial institutions, allowing us to warehouse and provide balance sheet liquidity to meet unexpected member borrowing demands.  During the current year quarter and throughout 2012, all investments in Federal funds sold were overnight.

Business Outlook

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

Earnings — Outlook is for lower earnings in 2013 relative to 2012.  We expect long-term asset yields to remain low, and we also do not expect yields from short-term assets to rise, given the possibility of further accommodation from the Federal Reserve Board (“FRB”) to lower interest rates.  If the forward yield curve flattens any further in 2013, opportunities to invest in high-quality assets and earn a reasonable spread will be limited, constraining earnings.  Our primary earning assets, advances and investments in MBS may yield lower interest margins in a low interest rate environment.  The FRB has decided to increase policy accommodation by purchasing additional GSE issued mortgage-backed securities until the outlook for the labor market improves.  We believe this could result in MBS pricing that may not meet our risk-reward MBS acquisition criteria, which may impact future earnings.  The swap curve, an important indicator for us, has continued to decline, and this has the potential for further tightening of the FHLBank debt spreads and weaken our interest margins.

The FRB’s pledge to keep short-term interest rates low through late 2014 and the impact of a flatter yield curve, taken together have compressed short-term asset yields, substantially reducing the opportunity cost of holding cash.  Additionally, as existing high-yielding fixed-rate MBS and some intermediate-term advances continue to pay down, mature or be prepaid, it is unlikely they will be replaced by equivalent high-yielding assets due to the prevailing low interest rates.  This will tend to lower the overall yield on total assets.  Amid a continuing weak economy and a particularly weak housing market, we do not expect advance demand from existing members to grow.  Last year, a large money-center bank with significant borrowing potential became a member, and in the 2012 second quarter, the member’s intermediate-term borrowing benefited our advance business.  We are unable to predict if that member’s borrowing will increase, or if the borrowings will be renewed at maturity in 2013 and 2014.

Advances — We are unable to predict the timing and extent of the expected recovery in the U.S. economy, particularly the recovery in the housing market, or whether to expect continued stability in the financial markets.  Against that backdrop, we believe it is also difficult to predict member demand for advances, which is the primary focus of our operations and the principal factor that impacts our operating results.

Generally, the growth or decline in advances is reflective of demand by members for both short-term liquidity and long-term funding driven by economic factors such as availability of alternative funding sources that are more attractive (e.g. consumer deposits), the interest rate environment and the outlook for the economy.  Members may choose to prepay advances, based on their expectations of interest rate changes and demand for liquidity.  Demand for advances may also be influenced by the dividend payout rate to members on their investment in our stock.  Members are required to invest in our capital stock in the form of membership stock.  Members are also required to purchase activity stock in order to borrow advances.  Advance volume is also influenced by merger activity where members are either acquired by non-members, or acquired by members of another FHLBank.  When our members are acquired by members of another FHLBank or by a non-member, the former member no longer qualifies for membership in the FHLBNY.  We cannot renew outstanding advances or provide new advances to non-members.  Subsequent to the merger, maturing advances may not be replaced, which has an immediate impact on short-term and overnight advance lending if the former member borrowed such advances.  We expect limited demand for large intermediate-term advances because many members have adequate liquidity, and other members may be reluctant to borrow intermediate and long-term advances because of the expectation of an extended period of very low interest rates.  Also, see Item 1A. Risk Factors in the most recent Form 10-K filed on March 25, 2013 for a discussion on concentration risk.

Pending merger of FHLBNY member banks.- Hudson City Savings Bank and Manufacturers and Traders Trust Company. For more information, see Note 20. Segment Information and Concentration.

Credit impairment of mortgage-backed securities — OTTI charges have been insignificant in 2012 and through the first quarter of 2013.  Certain private-label MBS held in our portfolio, which had been rated Triple A at December 31, 2011, were downgraded in the fourth quarter of 2012.  No OTTI was recorded in the first quarter of 2013.  Without continued recovery in the near term such that liquidity returns to the mortgage-backed securities market, or if the credit losses of the underlying collateral within the mortgage-backed securities perform worse than expected, we could face additional credit losses.

Demand for FHLBank debt — Our primary source of funds is the sale of consolidated obligations in the capital markets, and our ability to obtain funds through the sale of consolidated obligations depends in part on prevailing conditions in the capital markets, which are beyond our control.  If we cannot access funding when needed on acceptable terms, our ability to support and continue operations could be adversely affected, which could negatively affect financial condition and results of operations.  The pricing of our longer-term debt remains at levels that are still higher than historical levels, relative to LIBOR.  To the extent we receive sub-optimal funding, our member institutions in turn may experience higher costs for advance borrowings.  To the extent the FHLBanks may not be able to issue long-term debt at economical spreads relative to the 3-month LIBOR, borrowing choices may also be limited for our members.

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Operation Twist expired at the end of 2012, and the FRB has announced that it will undertake additional quantitative easing.  The FRB has also stated that it will link its accommodative monetary policy stance to economic targets such as the unemployment and inflation rates.  In this round of quantitative easing, the Fed will increase the amount of securities on its balance sheet by undertaking outright purchases of Treasuries.

The FRB’s most recent quantitative easing efforts include the outright purchase of $40 billion in agency MBS per month.  This is in addition to the ongoing principal reinvestments that were part of earlier policy action, resulting in total FRB purchases of agency MBS of approximately $75 billion per month.  A survey by a major international bank suggests there are currently $5.4 trillion in agency MBS outstanding with the FRB holding approximately $835 billion.  The recent quantitative easing will add approximately $500 billion to the FRB’s holdings over the next 12 months in 2013.  As the federal government is looking to shrink Fannie Mae and Freddie Mac’s housing finance footprint, the amount of new agency MBS supply may not grow, or issuances may decline.  This combined with the FRB’s quantitative easing actions, which appears to more than double its monthly MBS purchases, would lead to higher MBS prices and push spreads even tighter.

For the FHLBanks, the combination of a stable to shrinking supply of Treasuries in the short end and decreasing net supply of Treasuries in the long end, plus additional cash added to the economy could be a near-term positive for funding, as it is likely that investor demand will grow for FHLBank issued debt.

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SELECTED FINANCIAL DATA (UNAUDITED)

Statements of Condition	March 31,			December 31,			September 30,			June 30,			March 31,
(dollars in millions)	2013			2012			2012			2012			2012
Investments (a)	$	23,386		$	17,459		$	24,340		$	21,976		$	21,450
Advances	71,723			75,888			77,864			77,610			72,093
Mortgage loans held-for-portfolio, net of allowance for credit losses (b)	1,885			1,843			1,748			1,628			1,482
Total assets	101,923			102,989			107,130			102,394			95,704
Deposits and borrowings	2,118			2,054			1,806			1,723			3,499
Consolidated obligations, net
Bonds	61,014			64,784			65,136			72,964			61,530
Discount notes	32,555			29,780			33,718			21,331			24,514
Total consolidated obligations	93,569			94,564			98,854			94,295			86,044
Mandatorily redeemable capital stock	26			23			20			42			43
AHP liability	129			135			136			132			131
Capital
Capital stock	4,627			4,797			4,870			4,888			4,582
Retained earnings
Unrestricted	801			798			786			765			746
Restricted	110			96			79			62			45
Total retained earnings	911			894			865			827			791
Accumulated other comprehensive loss	(180		)	(199		)	(208		)	(203		)	(170		)
Total capital	5,358			5,492			5,527			5,512			5,203
Equity to asset ratio (c)	5.26		%	5.33		%	5.16		%	5.38		%	5.44		%

	Three months ended
Statements of Condition	March 31,			December 31,			September 30,			June 30,			March 31,
Averages (See note below; dollars in millions)	2013			2012			2012			2012			2012
Investments (a)	$	26,653		$	24,550		$	26,733		$	25,956		$	23,813
Advances	72,850			73,148			77,309			70,532			69,836
Mortgage loans held-for-portfolio, net of allowance for credit losses	1,864			1,802			1,690			1,566			1,434
Total assets	104,489			103,046			108,839			100,989			98,340
Interest-bearing deposits and other borrowings	1,851			1,960			1,745			2,197			3,090
Consolidated obligations, net
Bonds	64,101			65,135			68,472			66,079		��	62,678
Discount notes	29,869			26,978			29,474			24,016			23,938
Total consolidated obligations	93,970			92,113			97,946			90,095			86,616
Mandatorily redeemable capital stock	23			24			35			42			49
AHP liability	131			134			133			130			127
Capital
Capital stock	4,671			4,661			4,858			4,561			4,455
Retained earnings
Unrestricted	794			781			766			739			720
Restricted	101			85			68			49			31
Total retained earnings	895			866			834			788			751
Accumulated other comprehensive loss	(188		)	(207		)	(212		)	(191		)	(192		)
Total capital	5,378			5,320			5,480			5,158			5,014

Note — Average balance calculation. For most components of the average balances, a daily weighted average balance is calculated for the period. When daily weighted average balance information is not available, a simple monthly average balance is calculated.

Operating Results and Other Data
(dollars in millions)	Three months ended
(except earnings and dividends per	March 31,			December 31,			September 30,			June 30,			March 31,
share, and headcount)	2013			2012			2012			2012			2012
Net income	$	70		$	85		$	88		$	86		$	102
Net interest income (d)	103			108			117			121			121
Dividends paid in cash (e)	53			55			51			50			57
AHP expense	8			9			10			10			11
Return on average equity (f)(g)	5.28		%	6.27		%	6.42		%	6.75		%	8.17		%
Return on average assets (g)	0.27		%	0.32		%	0.32		%	0.34		%	0.42		%
Net OTTI impairment losses	—			—			—			(1		)	(1		)
Other non-interest (loss) income	(1		)	12			3			(1		)	19
Total other (loss) income	(1		)	12			3			(2		)	18
Operating expenses (h)	21			22			19			20			21
Finance Agency and Office of Finance expenses	3			4			3			3			4
Total other expenses	24			26			22			23			25
Operating expenses ratio (i)(g)	0.08		%	0.08		%	0.07		%	0.08		%	0.09		%
Earnings per share	$	1.50		$	1.79		$	1.81		$	1.89		$	2.29
Dividend per share	$	1.13		$	1.13		$	1.12		$	1.12		$	1.26
Headcount (Full/part time)	272			272			276			282			275

(a)Investments include held-to-maturity securities, available-for-sale securities, securities purchased under agreements to resell, Federal funds, loans to other FHLBanks, and other interest-bearing deposits.

(b)Allowances for credit losses were $6.7 million, $7.0 million, $6.9 million, $6.9 million, and $7.3 million at the periods ended March 31, 2013, December 31, 2012, September 30, 2012, June 30, 2012, and March 31, 2012.

(c)Equity to asset ratio is capital stock plus retained earnings and accumulated other comprehensive loss as a percentage of total assets.

(d)Net interest income is net interest income before the provision for credit losses on mortgage loans.

(e)Excludes dividends accrued to non-members classified as interest expense under the accounting standards for certain financial instruments with characteristics of both liabilities and equity.

(f)Return on average equity is net income as a percentage of average capital stock plus average retained earnings and average accumulated other comprehensive loss.

(g)Annualized.

(h)Operating expenses include compensation and benefits.

(i)Operating expenses as a percentage of total average assets.

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Results of Operations

The following section provides a comparative discussion of the FHLBNY’s results of operations for the three months ended March 31, 2013 and 2012.  For a discussion of the significant accounting estimates used by the FHLBNY that affect the results of operations, see Significant Accounting Policies and Estimates in Note 1 in the audited financial statements included in our most recent Form 10-K filed on March 25, 2013.

Net Income

Interest income from advances is the principal source of revenue.  The primary expense is interest paid on consolidated obligations debt.  Other expenses are Compensation and benefits and Operating expense, and Assessments on Net income.  Other significant factors affecting our Net income include the volume and timing of investments in mortgage-backed securities, prepayments of advances, charges due to debt repurchases, gains and losses from derivatives and hedging activities, and earnings from investing our shareholders’ capital.

Summarized below are the principal components of Net income (in thousands):

Table 1.1:Principal Components of Net Income

	Three months ended March 31,
	2013			2012
Total interest income	$	196,371		$	232,138
Total interest expense	93,347			110,983
Net interest income before provision for credit losses	103,024			121,155
(Reversal)/Provision for credit losses on mortgage loans	(37		)	861
Net interest income after provision for credit losses	103,061			120,294
Total other (loss) income	(514		)	18,264
Total other expenses	24,782			25,246
Income before assessments	77,765			113,312
Total assessments	7,802			11,407
Net income	$	69,963		$	101,905

Net Income — 2013 first quarter Net income was lower than the same quarter in the prior year primarily due to lower net interest income and lower fair value gains from derivatives and hedging activities.

Net interest income — Net interest income in current year quarter was $103.0 million, compared to $121.2 million in prior year quarter.  The decline, relative to 2012, was in part due to tighter funding spreads in the current year quarter, and in part due to declining yields from advances and investments.  A significant amount of fixed-rate debt is swapped to floating-rate at sub-LIBOR spreads, and as LIBOR declines, as it has continued to decline through the first quarter of 2013, the spread narrowed on a swapped out basis for our debt, causing an increase in funding cost.

Analysis of Allowance for Credit Losses

·Mortgage loans held-for-portfolio — We evaluate impaired conventional mortgage loans at least quarterly on an individual loan-by-loan basis and compare the fair values of collateral (net of liquidation costs) to recorded investment values in order to measure credit losses on impaired loans.   FHA/VA (Insured mortgage loans) guaranteed loans are evaluated collectively for impairment, and no allowance was deemed necessary.   Based on the analysis performed on impaired conventional loans, no provision was necessary in the current year quarter, compared to $0.9 million in the prior year same quarter.  Collateral values of loans deemed to be impaired have stabilized in the New York and New Jersey sectors, and the low loan loss reserves are reflective of the home price data for the Bank’s residential loan markets.

·Advances — Our credit risk from advances in all periods in this report was concentrated in commercial banks, savings institutions and insurance companies.   All advances are fully collateralized during their entire term.   In addition, borrowing members pledge their stock in the FHLBNY as additional collateral for advances.   We have not experienced any losses on credit extended to any member since the FHLBNY’s inception.   Based on the collateral held as security and prior repayment history, no allowance for losses is currently deemed necessary.

Derivative and hedging gains and losses — For the FHLBNY, hedging gains and losses are primarily from two sources.  Hedge ineffectiveness from hedges that qualify under hedge accounting rules (fair value effects of derivatives, net of the fair value effects of hedged items), and fair value changes of standalone derivatives in an economic hedge (fair value changes of derivatives without the offsetting fair value changes of the hedged items).

Generally, the largest source of gains or losses from hedging activities arise from derivatives designated as standalone derivatives, although for both categories (derivatives that are standalone; and derivatives and hedged items that qualify under hedge accounting rules), gains and losses are unrealized and sum to zero if held to maturity.  In the 2013 first quarter, the “portfolio” of standalone derivatives has declined and remaining standalone derivatives were close to their maturities so that fair values were not significant.  Notional amounts of standalone derivatives were $16.9 billion at March 31, 2013, lower than $25.6 billion at December 31, 2012, and $25.8 billion at March 31,

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2012.  Hedges designated in qualifying hedges reported immaterial amounts of ineffectiveness in the 2013 first quarter.  In aggregate, $1.4 million of fair value net gains were recorded in the 2013 first quarter.  In the prior year first quarter, standalone derivatives were the primary drivers of fair value net gains of $24.2 million.

Instruments held at fair value — For the most part, maturing debt instruments elected under the FVO have not been replaced, and those still outstanding were approaching their maturities.  Generally, fair values decline when instruments are close to their maturities.  As a result, the income effect was lower in the 2013 first quarter.  A gain of $3.7 million was recorded primarily due to reversal of previously recorded unrealized fair value losses as the debt instruments approached their maturities.  A net gain of $7.2 million was recorded in the prior year first quarter.

Debt buy back costs — The Bank has continued to implement its debt buy back strategy to protect future income.  As advances are prepaid ahead of their maturity or call dates, we re-purchase debt to re-align the Bank’s asset-liability mix.  In the current year first quarter, $53.6 million of debt were re-purchased at a cost that exceeded book value by $7.9 million.  In the prior year first quarter, $126.8 million of debt were re-purchased and a charge of $14.8 million was recorded.

OTTI charges — No OTTI was recorded in the current year first quarter.  A charge of $0.6 million was recorded in the prior year first quarter.  We believe credit trends and market pricing are continuing to improve for our investments in private-label MBS (“PLMBS”).  Our cash flow analysis in the 2013 first quarter had identified de minimis impairment of one bond, but no OTTI was recorded, as the bond’s fair value was in excess of its amortized, including the shortfall.

Compensation and benefits, and Operating Expenses — Compensation and benefits expenses were $14.1 million in the current year quarter, benefiting from a pension relief measure under the MAP 21 bill enacted in mid-2012 by Congress.  For a discussion about MAP-21, see Note 15.  Employee Retirement Plans in the audited financial statements included in our most recent Form 10-K filed on March 25, 2013.

Affordable Housing Program — Funds set aside as a charge to income for the program were $7.8 million in the current year first quarter, compared to $11.4 million in the same quarter in the prior year.  Assessments are calculated as a percentage of Net income, and the decrease was due to a decrease in Net income.  For more information about AHP assessments, see Affordable Housing Program and Other Mission Related Programs in Item 1. Business in the Bank’s most recent Form 10-K filed on March 25, 2013.

Interest Income

Interest income from advances, investments in mortgage-backed securities and MPF loans are our principal sources of income.  Changes in both rate and intermediation volume (average interest-yielding assets) explain the change in the current year periods from the prior year periods.   The principal categories of Interest Income are summarized below (dollars in thousands):

Table 1.2:Interest Income — Principal Sources

	Three months ended March 31,
					Percentage
	2013		2012		Variance
Interest Income
Advances (a)	$	109,993	$	137,272	(19.87	)%
Interest-bearing deposits (b)	811		657		23.44
Federal funds sold (c)	4,265		2,360		80.72
Available-for-sale securities	4,753		6,686		(28.91	)
Held-to-maturity securities	59,741		69,335		(13.84	)
Mortgage loans held-for-portfolio	16,794		15,827		6.11
Loans to other FHLBanks	14		1		NM	(d)
Total interest income	$	196,371	$	232,138	(15.41	)%

(a)Reported Interest income from advances was adjusted for the expense associated with interest rate exchange agreements of swaps in qualifying hedging relationships.  See Table 1.3 below for more information.  Prepayment fees of $7.0 million were recorded in interest income in the first quarter of 2013, compared to $1.0 million in the same period in 2012.

(b)Earned primarily from cash collateral deposited with swap counterparties.  Cash collateral typically earns the overnight Federal funds rate.

(c)Increase in interest income in the first quarter of 2013 due to increase in volume and yields on overnight Federal funds sold, relative to the 2012 first quarter.  See Table 1.9 Spread and Yield Analysis.

(d)NM — not meaningful.

Accounting Changes (See Significant Accounting Policies and Estimates in Note 1 in the most recent Form 10-K filed on March 25, 2013.)  Beginning with the fourth quarter of 2012, the FHLBNY has changed the method of presenting amortization of fair value hedge basis adjustments of modified advances.  Reported Interest Income from advances in the first quarter of 2012 was reclassified to conform to the classification adopted in the first quarter of 2013.  The reclassification increased Interest Income in the first quarter of 2012 by $28.9 million, with a corresponding decrease in Net realized and unrealized gains (losses) from derivatives and hedging activities in Other income for the same period.  As this was a reclassification change in accounting presentation, Net income was not impacted in any periods.

Interest income from advances — Interest income from advances was $110.0 million in the 2013 first quarter, lower by $27.3 million recorded in the same quarter in 2012.  Transaction volume as measured by average balances outstanding was $69.4 billion (par amounts) in the 2013 first quarter, higher by $3.6 billion than the average balance in the prior year first quarter.  However, yields were lower in the 2013 first quarter.  Aggregate yield, on an

54

after-swap basis was 61 basis points in the current year quarter, down from 79 basis points in the same quarter in 2012, a decline of 18 basis points.  By way of comparison, aggregate debt cost quarter-over-quarter declined by 10 basis points.  Higher yielding advances have been prepaid, and not replaced or replaced by floating-rate advances or short-term advances.  As the portfolios of floating-rate advances or shorter-tenor advances have grown, their coupons have re-priced to lower yields in parallel with declining interest rates.

Interest income is net of the impact of cash flows associated with interest rate swaps that hedge fixed-rate advances.   We recorded $271.3 million of cash outflows as an expense in the first quarter of 2013, down from $310.0 million in the same period of 2012.  Changes in interest rate exchanges between the FHLBNY and swap counterparties represent the aggregate difference between prevailing LIBOR and the fixed-rate coupons of hedged advances. See Table 1.3 below for a summary of the impact of fair value hedges on Interest income from advances.

Interest income from mortgage-backed securities — Yields earned from our investments in MBS have been declining as vintage fixed-rate MBS, with higher coupons, have paid down; they have been replaced by lower yielding fixed-rate bonds.  Floating rate MBS generally indexed to a spread over LIBOR have yielded lower interest income in parallel with declining LIBOR.  Overall yield from fixed rate MBS was 367 basis points in the 2013 first quarter, down from 458 basis points in the 2012 first quarter.  Yields from floating rate MBS have declined by 7 basis points quarter-over-quarter.  The Federal Reserve’s quantitative easing programs have pushed yields down and prices up for new acquisitions, as the FRB is committed to purchasing large quantities of agency MBS at a time when supply is stable to lower.

Interest income from mortgage loans — Interest income from MPF loans have increased due to increased volume of loans, although yields were lower in the 2013 first quarter relative to the same quarter in 2012, in parallel with a declining interest rate environment.

Interest income from Federal funds sold — Interest income from Federal funds sold have increased due to increased volume of overnight investments and improved overnight yield.

Impact of hedging advances — Reported interest income is net of the impact of cash flows associated with interest rate swaps hedging fixed rate advances that were converted to floating rate generally indexed to short-term LIBOR. We execute interest rate swaps to modify the effective interest rate terms of many of our fixed-rate advance products and typically all of our putable advances, effectively converting a fixed-rate stream of cash flows from fixed-rate advances to a floating-rate stream of cash flows, typically indexed to LIBOR.   The cash flow patterns from derivatives in the periods reported were in line with our interest rate risk management practices and achieved our goal of converting fixed-rate cash flows of hedged advances to LIBOR-indexed cash flows.   Derivative strategies are designed to protect future interest income.

Two primary factors have contributed to lower amounts of net interest expenses paid to swap counterparties in the interest rate exchange agreements that have synthetically converted fixed-rate advance interest income to floating rate.  In the low interest rate environment, the spread, which is the difference between the fixed-rate payments made to swap counterparties and the 3-month LIBOR received from swap counterparties, has narrowed, effectively driving down the net interest expense paid to swap counterparties.  In addition, when hedged advances were modified, swaps hedging fixed-rate advances were also modified to a lower rate, and the spread between the fixed-leg payment and the floating-leg receivable on swaps has also narrowed.

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

Table 1.3:Impact of Interest Rate Swaps on Interest Income Earned from Advances

	Three months ended March 31,
	2013			2012
Advance Interest Income
Advance interest income before adjustment for interest rate swaps	$	381,287		$	447,314
Net interest adjustment from interest rate swaps	(271,294		)	(310,042		)
Total Advance interest income reported	$	109,993		$	137,272

Interest Expense

Our primary source of funding is through the issuance of consolidated obligation bonds and discount notes in the global debt markets.   Consolidated obligation bonds are medium- and long-term bonds, while discount notes are short-term instruments.   To fund our assets, our management considers our interest rate risk and liquidity requirements in conjunction with consolidated obligation buyers’ preferences and capital market conditions when determining the characteristics of debt to be issued.   Typically, we have used fixed-rate callable and non-callable bonds to fund mortgage-related assets and advances.   Discount notes are issued to fund advances and investments with shorter interest rate reset characteristics.

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The principal categories of Interest expense are summarized below (dollars in thousands).   Changes in rate and intermediation volume (average interest-costing liabilities), the mix of debt issuances between bonds and discount notes, and the impact of hedging strategies explain the changes in interest expense.

Table 1.4:Interest Expenses - Principal Categories

	Three months ended March 31,
					Percentage
	2013		2012		Variance
Interest Expense
Consolidated obligations-bonds (a)	$	75,843	$	99,766	23.98	%
Consolidated obligations-discount notes (a)	17,087		10,195		(67.60	)
Deposits (b)	162		244		33.61
Mandatorily redeemable capital stock (b)	253		761		66.75
Cash collateral held and other borrowings	2		17		88.24
Total interest expense	$	93,347	$	110,983	15.89	%

(a)Reported Interest expense from consolidated obligation bonds and discount notes were adjusted for the cash flows associated with interest rate swaps in qualifying hedging relationships.

(b)The decline in interest expense on deposits was due to lower average balances in the three months ended March 31, 2013, relative to the same period in 2012.  Overnight rate paid was materially unchanged quarter-over-quarter.  Holders of mandatorily redeemable capital stock are paid dividends at the same rate as all stockholders.  The dividend payments are classified as interest payments in conformity with accounting rules.  Payments have declined due to decline in outstanding balances of such capital stock, and the dividend rate has also declined.

Interest expense on consolidated obligation debt — The funding mix changed somewhat in the 2013 first quarter, relative to the 2012 first quarter.  On average, discount notes made up 28.8% of the funding and bonds, 61.8% of the funding; in the same quarter in 2012, discount notes were 24.5% and bonds were 64.2%.  Interest expense is net of the impact of cash flows associated with interest rate swaps that hedged fixed-rate debt and certain discount notes.  See Table 1.5 below for a summary of the impact of fair value and cash flow hedges to Interest expense.

The low 3-month LIBOR has continued to compress margins for our debt and specifically for our short-term debt.   We make extensive use of derivatives to restructure fixed rates on consolidated bonds to sub-LIBOR floating rate.  The relationship between swap rates and bond and discount note yields is an important economic indicator.   The 3-month LIBOR, a key index in the intermediation between swap rates and debt yields, has been steadily declining during 2012, and the decline has continued through the 2013 first quarter.   The 3-month LIBOR was 29 basis points at March 31, 2013, compared to 47 basis points at March 31, 2012.  The low LIBOR swapped funding level has effectively driven up the cost of FHLBank consolidated obligation bonds.

Impact of hedging debt — Derivative strategies are used to manage the interest rate risk inherent in fixed-rate debt, and certain floating-rate debt that is not indexed to 3-month LIBOR rates, which is our preferred funding base.   The strategies are designed to protect future interest income.  We issue both fixed-rate callable and non-callable debt.   Typically, the callable debt is issued with the simultaneous execution of cancellable interest rate swaps to modify the effective interest rate terms and the effective durations of our fixed-rate callable debt.   A substantial percentage of non-callable fixed-rate debt is also swapped to “plain vanilla” LIBOR-indexed cash flows.   These hedging strategies benefit us in two principal ways.   First, fixed-rate callable bond, in conjunction with interest rate swap containing a call feature that mirrors the option embedded in the callable bond, enables us to meet our funding needs at yields not otherwise directly attainable through the issuance of callable debt.   Second, the issuances of fixed-rate debt and the simultaneous execution of interest rate swaps would convert the debt to an adjustable-rate instrument tied to an index, typically 3-month LIBOR, which is our preferred funding rate.   When debt is issued with coupons tied to an index other than the 3-month LIBOR (Prime, Federal funds rate, and 1-month LIBOR), we execute interest rate swaps that would convert the cash flows to the 3-month LIBOR, and the hedge would be designated as an economic hedge.

Certain discount notes were hedged in a cash flow hedging strategy that converted forecasted long-term variable-rate funding to fixed-rate funding by the use of long-term swaps.   For such discount notes, the recorded interest expense is equivalent to long-term fixed rate coupons.

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

Table 1.5:Impact of Interest Rate Swaps on Consolidated Obligation Interest Expense

	Three months ended March 31,
	2013			2012
Consolidated bonds and discount notes-Interest expense
Bonds-Interest expense before adjustment for swaps	$	163,744		$	184,222
Discount notes-Interest expense before adjustment for swaps	9,736			4,858
Net interest adjustment for interest rate swaps	(80,550		)	(79,119		)
Total Consolidated bonds and discount notes-interest expense reported	$	92,930		$	109,961

In a fair value hedge of a debt, we pay floating-rate cash flows and in return receive fixed-rate cash flows from swap counterparties.  The impact of these exchanges to the cost of debt is the aggregate difference between prevailing LIBOR and the fixed-rate coupons of hedged fixed-rate debt.

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Net Interest Income

The following table summarizes Net interest income (dollars in thousands):

Table 1.6:    ��          Net Interest Income

	Three months ended March 31,
					Percentage
	2013		2012		Variance
Total interest income	$	196,371	$	232,138	(15.41	)%
Total interest expense	93,347		110,983		15.89
Net interest income before provision for credit losses	$	103,024	$	121,155	(14.97	)%

Net interest income is impacted by a variety of factors: (1) transaction volumes, as measured by average balances of interest earning assets, and by (2) the prevailing balance sheet yields, as measured by coupons on earning assets minus yields paid on interest-costing liabilities, after including the impact of the cash flows paid or received on interest rate derivatives that qualified under hedge accounting rules.

Impact of lower interest income from investing member capital — We earn interest income from investing our members’ capital to fund interest-earning assets.   Such earnings are sensitive to the changes in short-term interest rates (Rate effects), and changes in the average outstanding capital and non-interest bearing liabilities (Volume effects).   Typically, we invest capital and net non-interest costing liabilities (“deployed capital”) to fund short-term investment assets that yield money market rates.   The most significant element of deployed capital is Capital stock, which increases or decreases in parallel with the volume of advances borrowed by members.   Capital stock has averaged around $5.0 billion over the last three years.

Impact of qualifying hedges on Net interest income — We deploy hedging strategies to protect future net interest income that may reduce income in the short-term.   Net interest accruals of derivatives designated in a fair value or cash flow hedge that qualify under hedge accounting rules are recorded as adjustments to the interest income or interest expense associated with hedged assets or liabilities.   The following table summarizes the impact of net interest adjustments from hedge qualifying interest-rate swaps (in thousands):

Table 1.7:Net Interest Adjustments from Hedge Qualifying Interest-Rate Swaps

	Three months ended March 31,
	2013			2012
Interest Income	$	467,665		$	542,180
Net interest adjustment from interest rate swaps	(271,294		)	(310,042		)
Reported interest income	196,371			232,138
Interest Expense	173,897			190,102
Net interest adjustment from interest rate swaps	(80,550		)	(79,119		)
Reported interest expense	93,347			110,983
Net interest income (Margin) (a)	$	103,024		$	121,155
Net interest adjustment - interest rate swaps	$	(190,744	)	$	(230,923	)

(a)Interest income and expense are sensitive to changes in the relationship between our fixed-rate cash instruments and LIBOR, but our margin as a percentage is stable, and we are generally indifferent to changes in the cash flow patterns, as the interest rate swap agreements achieve our overall net interest spread objective.

The following table contrasts Net interest income, Net income (a) spread and Return on earning assets between GAAP and economic basis (dollar amounts in thousands):

Table 1.8:GAAP Versus Economic Basis (b) — Contrasting Net Interest Income, Net Income Spread and Return on Earning Assets

	Three months ended March 31,
	2013						2012
	Amount		ROA		Net Spread		Amount			ROA		Net Spread
GAAP net interest income	$	103,024	0.40	%	0.38	%	$	121,155		0.50	%	0.46	%
Interest income (expense)
Swaps not designated in a hedging relationship	9,614		0.04		0.04		(5,949		)	(0.03	)	(0.03	)
Economic net interest income	$	112,638	0.44	%	0.42	%	$	115,206		0.47	%	0.43	%

(a)For the most part, economic hedges were associated with basis swaps that hedged consolidated obligation debt in a strategy that converted floating-rate debt indexed to the Federal funds rate to 3-month LIBOR cash flows, which is the FHLBNY’s preferred funding base.  The basis swaps are structured to receive Federal funds rate plus a spread and in return pay to swap counterparties the 3-month LIBOR minus a spread.  In the 2013 first quarter, the 3-month LIBOR declined, the Federal funds rate remained stable, resulting in net positive in-flow of cash.  In the 2012 first quarter, the 3-month LIBOR was higher, and in that period the net cash flows were negative.  This largely explains the change in the direction of interest accruals on economic hedges quarter-over-quarter.

(b)Explanation of the use of non-GAAP measures of Net Spread, return on assets (“ROA”) used in the table above. These are non-GAAP financial measures used by management that we believe are useful to investors and stockholders in understanding our operational performance as well as business and performance trends.  Although we believe these non-GAAP financial measures enhance investor and members’ understanding of our business and performance, these non-GAAP financial measures should not be considered an alternative to GAAP.

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Spread and Yield Analysis

Table 1.9:Spread and Yield Analysis

	Three months ended March 31,
	2013						2012
			Interest						Interest
	Average		Income/				Average		Income/
(Dollars in thousands)	Balance		Expense		Rate (a)		Balance		Expense		Rate (a)
Earning Assets:
Advances	$	72,849,910	$	109,993	0.61	%	$	69,835,911	$	137,272	0.79	%
Interest bearing deposits and others	2,306,701		811		0.14		2,590,973		657		0.10
Federal funds sold and other overnight funds	13,341,833		4,265		0.13		10,558,703		2,360		0.09
Investments	13,238,302		64,494		1.98		13,232,736		76,021		2.31
Mortgage and other loans	1,914,931		16,808		3.56		1,437,613		15,828		4.43
Total interest-earning assets	$	103,651,677	$	196,371	0.77	%	$	97,655,936	$	232,138	0.96	%
Funded By:
Consolidated obligations-bonds	$	64,101,307	$	75,843	0.48		$	62,678,553	$	99,766	0.64	%
Consolidated obligations-discount notes	29,869,014		17,087		0.23		23,937,611		10,195		0.17
Interest-bearing deposits and other borrowings	1,853,629		164		0.04		3,100,972		261		0.03
Mandatorily redeemable capital stock	22,525		253		4.56		49,479		761		6.19
Total interest-bearing liabilities	95,846,475		93,347		0.39	%	89,766,615		110,983		0.50	%
Other non-interest-bearing funds	2,363,363		—				2,803,585		—
Capital	5,441,839		—				5,085,736		—
Total Funding	$	103,651,677	$	93,347			$	97,655,936	$	110,983
Net Interest Income/Spread			$	103,024	0.38	%			$	121,155	0.46	%
Net Interest Margin
(Net interest income/Earning Assets)					0.40	%					0.50	%

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

Rate and Volume Analysis

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

Table 1.10:Rate and Volume Analysis

	For the three months ended
	March 31, 2013 vs. March 31, 2012
	Increase (Decrease)
	Volume			Rate			Total
Interest Income
Advances	$	5,709		$	(32,988	)	$	(27,279	)
Interest bearing deposits and others	(78		)	232			154
Federal funds sold and other overnight funds	724			1,181			1,905
Investments	32			(11,559		)	(11,527		)
Mortgage loans and other loans	4,593			(3,613		)	980
Total interest income	10,980			(46,747		)	(35,767		)
Interest Expense
Consolidated obligations-bonds	2,217			(26,140		)	(23,923		)
Consolidated obligations-discount notes	2,890			4,002			6,892
Deposits and borrowings	(111		)	14			(97		)
Mandatorily redeemable capital stock	(340		)	(168		)	(508		)
Total interest expense	4,656			(22,292		)	(17,636		)
Changes in Net Interest Income	$	6,324		$	(24,455	)	$	(18,131	)

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Analysis of Non-Interest Income (Loss) — The principal components of non-interest income (loss) are summarized below (in thousands):

Table 1.11:Other Income (loss)

	Three months ended March 31,
	2013			2012
Other income (loss):
Service fees and other (a)	$	2,355		$	1,920
Instruments held at fair value - Unrealized gains (b)	3,679			7,198
Total OTTI losses	—			(295		)
Net amount of impairment losses reclassified (from) to Accumulated other comprehensive loss	—			(263		)
Net impairment losses recognized in earnings (c)	—			(558		)
Net realized and unrealized gains on derivatives and hedging activities (d)	1,383			24,226
Net realized gains from sale of available-for-sale securities and redemption of held-to-maturity securities	—			256
Losses from extinguishment of debt (e)	(7,931		)	(14,778		)
Total other (loss) income	$	(514	)	$	18,264

(a)Service fees and other — Service fees are derived primarily from providing correspondent banking services to members.  The category Other includes fees earned on standby financial letters of credit.  The increase in the current year was primarily due to increase in volume of issuance of financial letters of credits.

(b)Instruments held at fair value under the Fair Value Option — Fair value gains and losses are recorded in the balance sheet at their market observable pricing, which typically moves inversely with changes in yields.  At issuance of the instruments, or as the instruments approach maturity, their fair values will generally be close to par.  The income statement impact is the change in the recorded fair values over the measurement period, between the beginning of the quarter to the end of the quarter.  Fair value changes in the three month ended March 31, 2013, resulted in net gains of $3.7 million, primarily due to reversals of valuation losses on debt instruments that were approaching their maturities.  The FVO category has declined as maturing debt elected under the FVO were generally replaced by debt that was not elected under the FVO .  In the 2012 first quarter, net gains of $7.2 million were recorded primarily because market observed pricing had improved for the FHLBank bonds during the European credit crises.  For more information about FHLBank debt and advances elected under the FVO, see Note 17. Fair Values of Financial Instruments.

(c)Net impairment losses recognized in earnings on held-to-maturity securities — Credit-related OTTI identified a de minimis cash flow shortfall in the 2013 first quarter for one bond.  The fair value of the bond was in excess of its amortized cost, including the shortfall. No OTTI was recognized.  In a period when cash flow analysis identifies credit losses that exceed fair value, our policy is to cap the loss to a floor equal to its amortized cost.  In the 2012 first quarter, OTTI was $0.6 million.  One bond had been capped, and the amount was not significant.

(d)Net realized and unrealized gains on derivatives and hedging activities — See Table 1.13 for detailed analysis.

(e)Earnings Impact of Debt extinguishment and sales of investment securities — We retire debt principally to reduce future debt costs or when the associated asset is either prepaid or terminated early, and less frequently from prepayments of mortgage-backed securities.  From time to time, we may sell investment securities classified as available-for-sale, or on an isolated basis, may be asked by the issuer of a security, which we have classified as held-to-maturity (“HTM”) to redeem the investment security.

The following table summarizes debt extinguished and its impact on earnings (in thousands):

Table 1.12:Debt Extinguishment and Sale of Investment Securities

	Three months ended March 31,
	2013					2012
	Carrying Value		Gains/(Losses)			Carrying Value		Gains/(Losses)
Redemption of Housing Finance Agency (a)	$	—	$	—		$	4,742	$	256
Extinguishment of CO Bonds	$	28,527	$	(4,023	)	$	126,794	$	(14,778	)
Transfer of CO Bonds to Other FHLBanks	$	25,035	$	(3,908	)	$	—	$	—

(a)From time to time, we may sell investment securities classified as available-for-sale, or on an isolated basis may be asked by the issuer of a security, which we have classified as held-to-maturity, to redeem the investment security.  There were insignificant gains from such redemptions in the first quarter of 2012 .

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Earnings Impact of Derivatives and Hedging Activities

The following tables summarize the impact of hedging activities on earnings (in thousands):

Table 1.13:Earnings Impact of Derivatives and Hedging Activities — By Financial Instrument Type

	Three months ended March 31, 2013
							Consolidated			Consolidated
				MPF			Obligation			Obligation			Balance		Intermediary
Earnings Impact	Advances			Loans			Bonds			Discount Notes			Sheet		Positions		Total
Amortization/accretion/interest accruals of hedging activities reported in net interest income (a)	$	(271,294	)	$	(163	)	$	87,901		$	(7,351	)	$	—	$	—	$	(190,907	)
Net realized and unrealized gains (losses) on derivatives and hedging activities
Gains (losses) on fair value hedges	(663		)	—			368			—			—		—		(295		)
Losses on cash flow hedges	—			—			(53		)	—			—		—		(53		)
Net gains derivatives-FVO	—			—			449			116			—		—		565
Gains (losses)-economic hedges	250			(195		)	142			—			968		1		1,166
Net realized and unrealized gains (losses) on derivatives and hedging activities (b)	(413		)	(195		)	906			116			968		1		1,383
Total earnings impact	$	(271,707	)	$	(358	)	$	88,807		$	(7,235	)	$	968	$	1	$	(189,524	)

	Three months ended March 31, 2012
							Consolidated			Consolidated
				MPF			Obligation			Obligation			Balance			Intermediary
Earnings Impact	Advances			Loans			Bonds			Discount Notes			Sheet			Positions		Total
Amortization/accretion/interest accruals of hedging activities reported in net interest income (a)	$	(310,042	)	$	(43	)	$	84,456		$	(5,337	)	$	—		$	—	$	(230,966	)
Net realized and unrealized gains (losses) on derivatives and hedging activities
Gains (losses) on fair value hedges	2,432			—			2,167			(963		)	—			—		3,636
Losses on cash flow hedges	—			—			(2		)	—			—			—		(2		)
Net gains derivatives-FVO	—			—			5,503			112			—			—		5,615
Gains (losses)-economic hedges	(250		)	235			15,489			77			(576		)	2		14,977
Net realized and unrealized gains (losses) on derivatives and hedging activities (b)	2,182			235			23,157			(774		)	(576		)	2		24,226
Total earnings impact	$	(307,860	)	$	192		$	107,613		$	(6,111	)	$	(576	)	$	2	$	(206,740	)

(a)Net interest accruals on interest rate swaps that qualify under the hedge accounting rules are recorded within interest income or interest expense.  Amortization of basis adjustments (typically when a qualifying hedge is terminated) is also recorded as a component of interest income or expense. In the 2013 first quarter, net interest income included net expenses of $190.9 million, compared to $231.0 million in the 2012 first quarter.  We deploy hedging strategies to protect future net interest income that may reduce income in the short-term.

(b)The impact of hedging activities that is recorded in Other income as a Net realized and unrealized gains (losses) on derivatives and hedging activities (“hedging activities”) is due to: (1) Fair value gains and losses generated from derivatives that are not eligible for hedge accounting, and (2) Fair value gains and losses generated as a result of hedge ineffectiveness from qualifying hedges.  In aggregate, hedging activities resulted in net gains of $1.4 million in the 2013 first quarter, compared to $24.2 million in the 2012 first quarter.

(1)Quarter-over-quarter variations in the amounts recorded in hedging activities are generally due to changes in the fair values of derivatives that are designated in economic hedges.  When derivatives do not qualify for hedge accounting, they are considered to be standalone derivatives and changes in fair values are recorded through Other income without the benefit of the offsetting changes in the fair values of the hedged items.  Standalone derivatives are generally the largest source of volatility of hedging activities recorded in the Income statement.  Changes in the fair values of standalone derivatives contributed net gains of $1.7 million in the 2013 first quarter, compared to $20.6 million in the 2012 quarter.  In both periods, amounts also included interest accruals on standalone derivatives because by policy the FHLBNY records swap accruals together with changes in fair values as a component of hedging gains and losses.  The impact from standalone derivatives was lower in the 2013 first quarter due to a declining “portfolio” of standalone derivatives, and the remaining standalone derivatives were close to their maturities so that fair values were not significant.  Such swaps were primarily (a) hedging debt that are structured to pay 3-month LIBOR cash flows to swap dealers, and to receive federal funds indexed cash flows, and (b) hedging short- and intermediate-term fixed-rate debt elected under the FVO.  The rise and fall of the 3-month LIBOR, relative to the Federal funds rate, or relative to a fixed-rate, are factors that determine fair value gains and losses, as is the volume of derivatives. Notional amounts of standalone derivatives were $16.9 billion at March 31, 2013, compared to $25.6 billion at December 31, 2012, and $25.8 billion at March 31, 2012.

(2)Hedges designated in qualifying hedges reported net fair value losses of $0.3 million in the 2013 first quarter, compared to net gains of $3.6 million in the 2012 first quarter.  These amounts represented hedge ineffectiveness, which is the difference between changes in the fair values of derivatives and the hedged advances and debt.

Impact of Cash flow hedging on earnings and AOCI

No amounts were reclassified from AOCI 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 in any periods in this report.  Ineffectiveness from hedges designated as cash flow hedges was not significant in any reported periods.  The two primary cash flow hedging strategies were:

Hedges of anticipated issuances of consolidated obligation bonds — From time to time, we execute interest rate swaps on the anticipated issuance of debt to lock in a spread between the earning asset and the cost of funding.  The effective portion of changes in the fair values of the swaps is recorded in AOCI.  The ineffective portion is recorded through net income.  The swap is terminated upon issuance of the debt instrument, and amounts reported in AOCI

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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 maximum period of time that we typically hedge our exposure to the variability in future cash flows for forecasted transactions to issue consolidated obligation bonds is between three and six months.  At March 31, 2013, we had no open contracts to hedge the anticipated issuances of debt.  Over the next 12 months, it is expected that $3.1 million of net losses recorded in AOCI will be recognized as an interest expense.

Hedges of discount note issuances — We have executed long-term pay-fixed, receive 3-month LIBOR-indexed interest rate swaps that are designated as cash flow hedges of a rollover financing program involving the sequential issuances of fixed-rate 3-month term discount notes over the same period as the term of the swap.  The objective of the hedge is to offset the variability of cash flows attributable to changes in benchmark interest rate (3-month LIBOR), due to the rollover of the fixed-rate 91-day discount notes issued in parallel with the cash flow payments of the swap every 91 days through the maturity of the swap.  The maximum period of time that we hedged exposure to the variability in future cash flows in this program is up to 15 years.

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

Table 1.14:Accumulated Other Comprehensive Income (Loss) to Current Period Income from Cash Flow Hedges

	Three months ended March 31,
	2013			2012
Accumulated other comprehensive loss from cash flow hedges
Beginning of period	$	(137,114	)	$	(111,985	)
Net hedging transactions	16,544			16,502
Reclassified into earnings	1,067			1,002
End of period (a)	$	(119,503	)	$	(94,481	)

(a)Losses primarily due to unrecognized losses from rollover cash flow hedge strategy.  At March 31, 2013, the fair values of interest rate swaps designated in the cash flow strategy to hedge long-term issuance of consolidated obligation discount notes in the rollover program were in an unrealized loss position of $108.0 million ($80.6 million loss at March 31, 2013, and $124.8 million at December 31, 2012), which was recorded in the balance sheet as a derivative liability, and an offset recorded in AOCI as an unrealized loss.  No ineffectiveness was identified in this program.  Losses also include the unamortized fair value basis of closed cash flow hedges that had hedged anticipatory issuances of debt, and unamortized losses were $11.5 million and $13.9 million at March 31, 2013 and December 31, 2012.  See Table 1.14 for changes in cash flow hedges in AOCI.

Fluctuation in long-term swap rates will determine future changes in such balances in AOCI.  If long-term swap rates decline, we will expect increase in losses, and a decrease in losses if long-term swaps rates rise.  We expect the long-term hedge programs to remain in place to their contractual maturities, and fair value losses will sum to zero over those periods.

Operating Expenses, Compensation and Benefits, and Other Expenses

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

Table 1.15:Operating Expenses, and Compensation and Benefits

	Three months ended March 31,
	2013		Percentage of Total		2012		Percentage of Total
Temporary workers	$	14	0.19	%	$	7	0.09	%
Occupancy	1,138		15.75		1,042		14.08
Depreciation and leasehold amortization	983		13.61		1,143		15.45
Computer service agreements and contractual services	2,811		38.91		2,774		37.49
Professional and legal fees	506		7.00		702		9.49
Other (a)	1,773		24.54		1,731		23.40
Total operating expenses (b)	$	7,225	100.00	%	$	7,399	100.00	%
Employee compensation	$	7,998	56.70	%	$	7,986	56.12	%
Employee benefits	6,108		43.30		6,244		43.88
Total Compensation and Benefits (c)	$	14,106	100.00	%	$	14,230	100.00	%
Finance Agency and Office of Finance (d)	$	3,451			$	3,617

(a)	Other Expense — included audit fees, director fees and expenses, insurance and telecommunications.
(b)	Operating expenses included the administrative and overhead costs of operating the Bank, as well as the operating costs of providing advances and managing collateral associated with the advances, managing the investment portfolios, and providing correspondent banking services to members.
(c)	Employee compensation costs were almost unchanged quarter-over-quarter.  Employees benefit program costs were slightly lower in the 2013 first quarter, primarily due to lower costs of the Defined benefit pension plan, benefiting from a pension relief measure under a bill enacted in mid-2012 by Congress.
(d)	We are also assessed for our share of the operating expenses for the Finance Agency and the Office of Finance.  The 12 FHLBanks and two other GSEs share the entire cost of the Finance Agency.

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Assessments

Each FHLBank is required to set aside a portion of earnings to fund its Affordable Housing Program (“AHP”).  For more information, see “Affordable Housing Program and Other Mission Related Programs” and “Assessments” under ITEM 1 BUSINESS in the most recent Form 10-K filed on March 25, 2013.  We fulfill our AHP obligations primarily through direct grants to members, who use the funds to assist in the purchase, construction, or rehabilitation of housing for very low-, low- and moderate-income households.  Ten percent of our annual pre-assessment regulatory net income is set aside for the AHP.  The amounts set aside are considered our liability towards our AHP obligations.  AHP grants and subsidies are provided to members out of this liability.

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

Table 2.1:Affordable Housing Program Liabilities

	Three months ended March 31,
	2013			2012
Beginning balance	$	134,942		$	127,454
Additions from current period’s assessments	7,802			11,407
Net disbursements for grants and programs	(14,232		)	(8,232		)
Ending balance	$	128,512		$	130,629

Financial Condition (dollars in thousands):

Table 3.1:Statements of Condition — Period-Over-Period Comparison

					Net change in			Net change in
(Dollars in thousands)	March 31, 2013		December 31, 2012		dollar amount			percentage
Assets
Cash and due from banks	$	4,699,867	$	7,553,188	$	(2,853,321	)	(37.78	)%
Federal funds sold	10,119,000		4,091,000		6,028,000			NM	(a)
Available-for-sale securities	2,093,172		2,308,774		(215,602		)	(9.34	)
Held-to-maturity securities	11,173,926		11,058,764		115,162			1.04
Advances	71,723,154		75,888,001		(4,164,847		)	(5.49	)
Mortgage loans held-for-portfolio	1,885,165		1,842,816		42,349			2.30
Derivative assets	11,236		41,894		(30,658		)	(73.18	)
Other assets	217,785		204,363		13,422			6.57
Total assets	$	101,923,305	$	102,988,800	$	(1,065,495	)	(1.03	)%
Liabilities
Deposits
Interest-bearing demand	$	2,051,943	$	1,994,974	$	56,969		2.86	%
Non-interest-bearing demand	19,591		19,537		54			0.28
Term	46,000		40,000		6,000			15.00
Total deposits	2,117,534		2,054,511		63,023			3.07
Consolidated obligations
Bonds	61,014,301		64,784,321		(3,770,020		)	(5.82	)
Discount notes	32,554,976		29,779,947		2,775,029			9.32
Total consolidated obligations	93,569,277		94,564,268		(994,991		)	(1.05	)
Mandatorily redeemable capital stock	26,172		23,143		3,029			13.09
Derivative liabilities	390,935		426,788		(35,853		)	(8.40	)
Other liabilities	461,417		428,261		33,156			7.74
Total liabilities	96,565,335		97,496,971		(931,636		)	(0.96	)
Capital	5,357,970		5,491,829		(133,859		)	(2.44	)
Total liabilities and capital	$	101,923,305	$	102,988,800	$	(1,065,495	)	(1.03	)%

(a)Not meaningful

Balance sheet overview March 31, 2013 compared to December 31, 2012

Our mission is to support the liquidity needs of our members.  To meet this mission, our balance sheet strategy is to keep our balance sheet in line with the rise and fall of amounts borrowed by members in the form of advances.  Total assets were $101.9 billion at March 31, 2013, compared to $103.0 billion at December 31, 2012.  Advances declined to $71.7 billion at March 31, 2013, compared to $75.9 billion at December 31, 2012.  Aside from advances, our primary earning assets were investment portfolios, comprising primarily of GSE-issued mortgage-backed securities, mortgage loans in the MPF program, and overnight Federal funds sold.  We also hold small portfolios of private-label MBS, and bonds issued by state and local government housing agencies.

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Advances — Compared to December 31, 2012, Advances declined by $4.2 billion at March 31, 2013, or 5.5%, to $71.7 billion as borrowing demand from members weakened.

Table 3.2:Advance Trends

Investments — Long-term investments were primarily in GSE issued mortgage-backed securities (“MBS”), which were $12.0 billion or 90.7% of total investments at March 31, 2013, almost unchanged from $12.1 billion, or 90.6% at December 31, 2012.   Pricing of GSE issued MBS were substantially in net unrealized fair value gain positions at March 31, 2013 and December 31, 2012.  Fair values had improved in 2012 and that trend has continued through the first quarter in 2013, even as the U.S. and government-related organizations, including Fannie Mae and Freddie Mac were downgraded in 2011.  Future downgrades could alter the perceived creditworthiness of instruments issued, insured or guaranteed by institutions, agencies or instrumentalities directly linked to the U.S. government, and securities issued by the institutions could also be correspondingly affected by such a downgrade.   Instruments of this nature are key assets on our balance sheet, and credit downgrades may also adversely affect the market value of such instruments.  Acquisitions of MBS in the 2013 first quarter were restricted to purchase of GSE issued securities.

Investments in private-label MBS (“PLMBS”) were $488.8 million, or 3.7% of total investments, a little lower than $514.9 million, or 3.9% of total investments at December 31, 2012.  We have not acquired a PLMBS since 2006.  A significant percentage of PLMBS were in net unrealized fair value gain positions at March 31, 2013 and December 31, 2012.  Unrealized holding losses have also remained stable through March 31, 2013.  Cash flow testing for OTTI at March 31, 2013 identified a de minimis amount of shortfall on one security.  However, its fair value exceeded the shortfall, and no OTTI was recognized.  All PLMBS are held-to-maturity investments, and their fair values are not recorded on the balance sheet on a recurring basis.

For more information about fair values of AFS and HTM securities, see Note 17.  Fair Values of Financial Instruments.

Leverage — At March 31, 2013, balance sheet leverage was 19.0 times shareholders’ equity, a little higher than 18.8 at December 31, 2012.   Our balance sheet management strategy is to keep the balance sheet change in line with the changes in member demand for advances, although from time to time, we may maintain excess liquidity in highly liquid investments or cash balances at the FRB to meet unexpected member demand for funds.  Increases or decreases in investments have a direct impact on leverage, but generally growth in or shrinkage of advances does not significantly impact balance sheet leverage under existing capital stock management practices.   This is because changes in shareholders’ capital are in line with changes in advances, and the ratio of assets to capital generally remains unchanged.   Under our existing capital management practices, members are required to purchase capital stock to support their borrowings from us, and when capital stock is in excess of the amount that is required to support advance borrowings, we redeem the excess capital stock immediately.   Therefore, stockholders’ capital increases and decreases with members’ advance borrowings, and the capital to asset ratios remain relatively unchanged.

Debt — Our primary source of funds continued to be through the issuance of consolidated obligation bonds and discount notes.   Discount notes are consolidated obligations with maturities up to one year, and consolidated bonds have maturities of one year or longer.

Our ability to access the capital markets and other sources of funding, which has a direct impact on our cost of funds, are dependent to a degree on our credit ratings from the major ratings organizations.   In 2011, S&P lowered the long-term rating of the senior unsecured debt issues of the Federal Home Loan Bank System to “AA+” from “AAA”, and also revised the rating outlook of the debt to negative.   A rating being placed on negative outlook indicates a substantial likelihood of a risk of further downgrades within two years.   Although the FHLBank debt

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performance has withstood the impact of the rating downgrade, and investor preference for the high quality of our debt has in fact grown stronger, we cannot say with certainty the long-term impact of such actions on our liquidity position, which could be adversely affected by many causes both internal and external to our business.   For more information, see Business Outlook in the MD&A in this report.

Liquidity and Short-term Debt — The following table summarizes our short-term debt (in thousands).   Also see Tables 10.1 — 10.4 for additional information.

Table 3.3:   Short—term Debt

	March 31, 2013		December 31, 2012
Consolidated obligations-discount notes (a)	$	32,554,976	$	29,779,947
Consolidated obligations-bonds with original maturities of one year or less (b)	$	16,000,000	$	15,600,000

(a) Outstanding at end of the period - carrying value

(b) Outstanding at end of the period - par value

Our liquid assets included cash at the FRB, Federal funds sold, and a portfolio of highly-rated GSE securities that are available-for-sale.   Our GSE status enables the FHLBanks to fund our consolidated obligation debt at tight margins to U.S. Treasury.   These are discussed in more detail under “Debt Financing Activity and Consolidated Obligations” in this MD&A.   Our liquidity position remains strong and in compliance with all regulatory requirements, and we do not foresee any changes to that position.

Among other liquidity measures, we are required to maintain sufficient liquidity through short-term investments in an amount at least equal to our anticipated cash outflows under two different scenarios.   The first scenario assumes that we cannot access capital markets for 15 days and that during that period; members do not renew their maturing, prepaid and called advances.  The second scenario assumes that we cannot access the capital markets for five days, and during that period, members renew maturing and “put” advances.  We were in compliance with regulations under both scenarios.

We also have other liquidity measures in place — Deposit Liquidity and Operational Liquidity, both of which indicated that our liquidity buffers were in excess of required reserves.  For more information about our liquidity measures, please see section “Liquidity, Cash Flows, Short-Term Borrowings and Short-Term Debt” in this MD&A.

Advances

Our primary business is making collateralized loans to members, referred to as advances.   Generally, the growth or decline in advances is reflective of demand by members for both short-term liquidity and term funding.   This demand is driven by economic factors such as availability of alternative funding sources that are more attractive, or by the interest rate environment and the outlook for the economy.   Members may choose to prepay advances (which may generate prepayment penalty fees) based on their expectations of interest rate changes and demand for liquidity.   Advance volume is also influenced by merger activity, where members are either acquired by non-members or acquired by members of another FHLBank.   When our members are acquired by members of another FHLBank or by non-members, these former members no longer qualify for membership and we may not offer renewals or additional advances to the former members.   Subsequent to the merger, maturing advances will not be replaced, which has an immediate impact on short-term and overnight lending if the former member borrowed short-term and overnight advances.

In 2012, Advance balances had grown primarily because of one large member’s short-term borrowing.  Most of the borrowings by the large member will mature by the third quarter in 2013, and remaining advances borrowed by the large member will mature by the second quarter of 2014.  In the three months ended March 31, 2013, member demand for liquidity has been weak, and par amounts of advances have declined to $68.5 billion or $3.8 billion from the balances outstanding at December 31, 2012.

Advances — Product Types

The following table summarizes par values of advances by product type (dollars in thousands):

Table 4.1:   Advances by Product Type

	March 31, 2013				December 31, 2012
			Percentage				Percentage
	Amounts		of Total		Amounts		of Total
Adjustable Rate Credit - ARCs	$	14,540,800	21.23	%	$	14,960,800	20.69	%
Fixed Rate Advances	45,385,583		66.27		47,067,640		65.11
Short-Term Advances	5,188,500		7.58		6,062,000		8.39
Mortgage Matched Advances	371,609		0.54		369,925		0.51
Overnight & Line of Credit (OLOC) Advances	1,286,160		1.88		2,332,740		3.23
All other categories	1,715,715		2.50		1,498,998		2.07
Total par value	68,488,367		100.00	%	72,292,103		100.00	%
Hedge value basis adjustments	3,234,252				3,595,396
Fair value option valuation adjustments and accrued interest	535				502
Total	$	71,723,154			$	75,888,001

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Member demand for advance products

The majority of members are staying short with their borrowing preference primarily because of interest-rate uncertainties.   Other members appear to be taking advantage of prevailing low interest rates and borrowing advances with longer maturities.

Adjustable Rate Advances (“ARC Advances”) — ARC advances have remained relatively stable, with members renewing maturing advances.  One large member’s borrowing in 2012 will mature primarily in the third quarter of 2013, unless modified earlier.

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

Fixed-rate Advances — Fixed-rate advances, comprising putable and non-putable advances, remain the largest category of advances. Member demand for fixed-rate advances has continued to be weak in the three months ended March 31, 2013, a trend through most of 2012.  On aggregate, when maturing and prepaid fixed-rate advances have been replaced, members have borrowed short- and medium-term advances, as members remain uncertain about locking into long-term advances, perhaps because of unfavorable pricing of longer-term advances, an uncertain outlook on the direction and timing of interest rate changes, or lukewarm demand from members’ customer base for longer-term fixed-rate loans.

Fixed-rate advances are flexible funding tools that can be used by members to meet short- to long-term liquidity needs.  Terms vary from two days to 30 years.  A significant composition of Fixed-rate advances consists of advances with a “put” option feature (“putable advance”).  Historically, Fixed-rate putable advances have been more competitively priced relative to fixed-rate “bullet” advances (without put option) because of the “put” feature that we have purchased from the member, driving down the coupon on the advance.  The price advantage of a putable advance increases with the numbers of puts sold and the length of the term of a putable advance.  With a putable advance, we have the right to exercise the put option and terminate the advance at predetermined exercise date(s).  We would normally exercise this option when interest rates rise, and the borrower may then apply for a new advance at the then-prevailing coupon and terms.  In the present interest rate environment, the price advantage has not been significant because of constraints in offering longer-term advances.  Maturing and prepaid putable advances were either not replaced or replaced by bullet advances (without the put feature), and outstanding balances have declined steadily to $15.4 billion at March 31, 2013, a continuing trend from 2012.  Putable advances stood at $16.2 billion at December 31, 2012, compared to $18.3 billion at December 31, 2011.

Short-term Advances — Borrowing activity was weak in the three months ended March 31, 2013, and borrowed amounts declined to $5.2 billion at March 31, 2013, compared to $6.1 billion at December 31, 2012.

Overnight advances — Demand for overnight borrowings have been weak as members are flush with liquidity, and is a continuing trend from 2012.  Member demand for the overnight Advances reflects the seasonal needs of certain member banks for their short-term liquidity requirements.  Some large members also use overnight advances to adjust their balance sheet in line with their own leverage targets.  The overnight advances program gives members a short-term, flexible, readily accessible revolving line of credit for immediate liquidity needs.  Overnight Advances mature on the next business day, at which time the advance is repaid.

Merger Activity

Merger activity is an important factor and, if significant, would contribute to an uneven pattern in advance balances.  Merger activity may result in the loss of new business if a member is acquired by a non-member.  The FHLBank Act does not permit new advances to replace maturing advances to former members.  Advances held by members who are acquired by non-members may remain outstanding until their contractual maturities.  Merger activity may also result in a decline in the advance book if the acquired member decides to prepay existing advances partially or in full depending on the post-merger liquidity needs.  Hudson City, a large member, was expected to merge with M&T, another member, in mid-2013, and Hudson City was expected to prepay advances in mid-2013.  However, the proposed merger has been postponed.  For more information, see Business Outlook in the Executive summary section in this MD&A.

The following table summarizes merger activity, including the impact of voluntary terminations (dollars in thousands):

Table 4.2:Merger Activity/Voluntary terminations

	March 31, 2013		December 31, 2012
Number of Non-Members (a)	2		2
Total number of Non-Members at period end	7		5
Total Advances outstanding to Non-Members at period end	$	407,310	$	427,334

(a) Members who became Non-Members because of mergers and voluntary/involuntary terminations within the periods then ended.

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Prepayment of Advances

Prepayment initiated by members or former members is another important factor that impacts advances.  We charge a prepayment fee when the member or a former member prepays certain advances before the original maturity.

The following table summarizes prepayment activity (in thousands):

Table 4.3:   Prepayment Activity

	Three months ended March 31,
	2013		2012
Advances pre-paid at par	$	969,089	$	195,185
Prepayment fees (a)	$	7,047	$	973

(a) Amount represents fees received from members minus the fair value basis of hedged advances at the prepayment dates.  For hedged that are prepaid,  we generally terminate the hedging relationship upon prepayment and adjust the prepayment fees received for the fair value basis of the hedged prepaid advance.

Advances — Interest Rate Terms

The following table summarizes interest-rate payment terms for advances (dollars in thousands):

Table 4.4:   Advances by Interest-Rate Payment Terms

	March 31, 2013				December 31, 2012
			Percentage				Percentage
	Amount		of Total		Amount		of Total
Fixed-rate (a)	$	53,947,567	78.77	%	$	57,331,303	79.31	%
Variable-rate (b)	14,532,800		21.22		14,952,800		20.68
Variable-rate capped (c)	8,000		0.01		8,000		0.01
Total par value	68,488,367		100.00	%	72,292,103		100.00	%
Hedge value basis adjustments	3,234,252				3,595,396
Fair value option valuation adjustments and accrued interest	535				502
Total	$	71,723,154			$	75,888,001

(a)Fixed-rate borrowings remained popular with members.  The overall category declined at March 31, 2013 relative to December 31, 2012, as members appeared to be reluctant to lock-in fixed-rate long-term borrowings in view of the continued low interest rate environment for short-term borrowings.

(b)Adjustable-rate LIBOR-based advances had increased primarily due to the borrowing by one large member in 2012.  Since then, member demand has remained weak despite the low prevailing rates.  The FHLBNY’s larger members are generally borrowers of variable-rate advances, and except for the one large member’s borrowing activity in 2012, other members have remained on the side-lines in a weak economy, and have sufficient liquidity in the form of customer deposits.

(c)Typically, capped ARCs are in demand by members in a rising rate environment, as members would purchase cap options to limit their interest rate exposure.   With a capped variable rate advance, we purchase cap options that mirror the terms of the caps sold to members, offsetting our exposure on the advance.

The following table summarizes variable-rate advances by reference-index type (in thousands):

Table 4.5:   Variable-Rate Advances

	March 31, 2013		December 31, 2012
LIBOR indexed (a)	$	14,540,800	$	14,960,800

(a) LIBOR indexed advances are typically ARC advances.

The following table summarizes maturity and yield characteristics of par amounts of advances (dollars in thousands):

Table 4.6:Advances by Maturity and Yield Type

	March 31, 2013				December 31, 2012
			Percentage				Percentage
	Amount		of Total		Amount		of Total
Fixed-rate
Due in one year or less	$	15,561,936	22.72	%	$	17,057,874	23.60	%
Due after one year	38,385,631		56.05		40,273,429		55.71
Total Fixed-rate	53,947,567		78.77		57,331,303		79.31
Variable-rate
Due in one year or less	10,337,000		15.09		9,899,000		13.69
Due after one year	4,203,800		6.14		5,061,800		7.00
Total Variable-rate	14,540,800		21.23		14,960,800		20.69
Total par value	68,488,367		100.00	%	72,292,103		100.00	%
Hedge value basis adjustments	3,234,252				3,595,396
Fair value option valuation adjustments and accrued interest	535				502
Total	$	71,723,154			$	75,888,001

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Impact of Derivatives and hedging activities to the balance sheet carrying values of Advances

The carrying values of Advances include hedging basis adjustments (“LIBOR benchmark hedging adjustments”) for those advances recorded under hedge accounting provisions, or at fair value for those advances elected under the FVO.   Fair value basis adjustments, as measured under the hedging rules, are impacted by hedge volume, the interest rate environment, and the volatility of the interest rates.

When medium- and long-term interest rates rise or fall, the fair values of fixed-rate advances move in the opposite direction, and valuation basis adjustments decline or rise.  Such basis adjustments were $3.2 billion and $3.6 billion at March 31, 2013 and December 31, 2012.  The unrealized fair value basis gains were consistent with the higher contractual coupons of long- and medium-term fixed-rate hedged advances at the two balance sheet dates, compared to current advance pricing at the two measurement dates.  The hedged advances had been issued in prior years at the then-prevailing higher interest rate environment.   In the current lower interest rate environment, fixed-rate advances will exhibit net unrealized fair value basis gains.   Decline in outstanding hedged advances resulted in a decline in fair value basis (volume effect).   The forward swap curve steepened slightly at March 31, 2013, relative to December 31, 2012, causing fair values of advances to increase (interest rate effect) and partly offset the volume effects.   Taken together, the fair value basis adjustment to the carrying value of hedged advances remained materially unchanged.

The following graph compares the swap curves at March 31, 2013 and December 31, 2012.

Table 4.7:   LIBOR Swap Curve - Graph

Hedge volume — We primarily hedge putable advances and certain “bullet” fixed-rate advances under the hedging accounting provisions when they qualify under those standards and as economic hedges when the hedge accounting provisions are operationally difficult to establish or a high degree of hedge effectiveness cannot be asserted.

The following table summarizes hedged advances by type of option features (in thousands):

Table 4.8:Hedged Advances by Type

Par Amount	March 31, 2013		December 31, 2012
Qualifying Hedges
Fixed-rate bullets (a)	$	28,394,791	$	29,406,073
Fixed-rate putable (b)	14,791,312		15,605,412
Total Qualifying Hedges	$	43,186,103	$	45,011,485
Aggregate par amount of advances hedged (c)	$	43,207,210	$	45,190,497
Fair value basis (Qualifying hedging adjustments)	$	3,234,252	$	3,595,396

(a)     Generally non-callable fixed-rate medium and longer term advances are hedged to mitigate the risk in fixed-rate lending. The hedges effectively convert the fixed-rate exposure of the bonds to a variable-rate exposure, indexed to 3-month LIBOR. As the longer tenored advances are maturing and not renewed, or renewed by non-callable shorter term fixed-rate advances, the Bank has elected not to hedge such advances. As a result, the volume of hedged advances in this category has declined.

(b)    Members have generally not replaced maturing putable advances, and outstanding balances have declined, and since almost all advances with put or call features are hedged, the decline in hedged advances was consistent with the contraction of fixed-rate putable advances.

(c)     Except for an insignificant amount of derivatives that were designated as economic hedges of advances, hedged advances were in a qualifying hedging relationship.  (See Tables 9.1 — 9.7).

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Advances elected under the FVO — In the fourth quarter of 2012, we elected the FVO designation of a floating-rate advance indexed to LIBOR.  By electing the FVO for an asset instrument, the objective was to offset some of the volatility in earnings due to the designation of debt (liability) under the FVO.  We recorded changes in the full fair values of the advance through earnings, and the fair value basis adjustment was recorded on the balance sheet so that the advance’s carrying value was its fair value.  The following table summarizes par amounts of advances elected under the FVO (in thousands):

Table 4.9:Advances under the Fair Value Option (FVO)

	Advances
Par Amount	March 31, 2013		December 31, 2012
Advances designated under FVO	$	500,000	$	500,000

Advances — Call Dates and Exercise Options

The table below offers a view of the advance portfolio with the possibility of the exercise of the put option that we control.  Put dates are organized by date of first put (dollars in thousands):

Table 4.10:    Advances by Put Date/Call Date (a)

	March 31, 2013				December 31, 2012
	Amount		Percentage of Total		Amount		Percentage of Total
Due or putable in one year or less	$	34,383,186	50.20	%	$	38,332,536	53.03	%
Due or putable after one year through two years	6,450,639		9.42		7,836,276		10.84
Due or putable after two years through three years	9,021,097		13.17		7,944,130		10.99
Due or putable after three years through four years	9,170,496		13.39		9,061,189		12.53
Due or putable after four years through five years	5,244,310		7.66		4,659,154		6.44
Thereafter	4,218,639		6.16		4,458,818		6.17
Total par value	68,488,367		100.00	%	72,292,103		100.00	%
Hedge value basis adjustments	3,234,252				3,595,396
Fair value option valuation adjustments and accrued interest	535				502
Total	$	71,723,154			$	75,888,001

(a) Contrasting advances by contractual maturity dates (See Note 7.  Advances) with potential put dates illustrates the impact of hedging on the effective duration of our advances.   Advances borrowed by members included a significant amount of putable advances in which we purchased from members the option to terminate advances at agreed-upon dates.   Typically, almost all putable advances are hedged by cancellable interest rate swaps in which the derivative counterparty has the right to exercise and terminate the swap at par at agreed upon dates.   When the swap counterparty exercises its right to call the cancellable swap, we would typically also exercise our right to put the advance at par.   Under this hedging practice, on a put option basis, the potential exercised maturity is significantly accelerated, and is an important factor in our current hedge strategy.   This is best illustrated by the fact that on a contractual maturity basis, 17.4% of advances would mature after five years, while on a put basis, the percentage declined to 6.2% at March 31, 2013.

The following table summarizes notional amounts of advances that were still putable (one or more pre-determined option exercise dates remaining) (in thousands):

Table 4.11:Putable and Callable Advances

	March 31, 2013 (a)		December 31, 2012 (a)
Putable	$	15,350,312	$	16,175,412
No-longer putable	$	2,123,500	$	2,072,500

(a) Par value

Member borrowings have been weak for putable advances, which are typically medium- and long-term.   Maturing advances with put features have been replaced by non-callable advances.

Investments

We maintain investments for our liquidity purpose, to fund stock repurchases and redemptions, provide additional earnings, and to ensure the availability of funds to meet the credit needs of our members.   We also maintain longer-term investment portfolios, which are principally mortgage-backed securities issued by GSEs, a smaller portfolio of MBS issued by private enterprises, and securities issued by state or local housing finance agencies.

Investments —Policies and Practices

The Finance Agency issued a final rule, effective June 20, 2011, that incorporates the existing 300 percent of capital and other policy limitations on the FHLBanks’ purchase of mortgage-backed securities and their use of derivatives. In addition, the rule clarifies that a FHLBank is not required to divest securities solely to bring the level of its holdings into compliance with the 300 percent limit, provided that the original purchase of the securities complied with the limits. We were in compliance with these rules at all times.

It is our practice not to lend unsecured funds to members, including overnight Federal funds and certificates of deposit.   Unsecured lending to members is not prohibited by Finance Agency regulations or Board of Directors’ policy.   We are prohibited from purchasing a consolidated obligation issued directly from another FHLBank, but

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may acquire consolidated obligations for investment in the secondary market after the bond settles.   We made no investments in consolidated obligations during the periods in this report.

The following table summarizes changes in investments by categories (including held-to-maturity securities, available-for-sale securities, and Federal funds sold) (dollars in thousands):

Table 5.1:Investments by Categories

	March 31,		December 31,		Dollar			Percentage
	2013		2012		Variance			Variance
State and local housing finance agency obligations (a)	$	737,065	$	737,600	$	(535	)	(0.07	)%
Mortgage-backed securities
Available-for-sale securities, at fair value (b)	2,083,293		2,299,141		(215,848		)	(9.39	)
Held-to-maturity securities, at carrying value	10,436,861		10,321,164		115,697			1.12
Total securities	13,257,219		13,357,905		(100,686		)	(0.75	)
Grantor trust (c)	9,879		9,633		246			2.55
Federal funds sold	10,119,000		4,091,000		6,028,000			NM
Total investments	$	23,386,098	$	17,458,538	$	5,927,560		33.95	%

(a)No acquisitions were made in the 2013 first quarter.  Bonds are classified as HTM securities, at carrying value, which for an HTM security is amortized cost.

(b)No acquisitions were made in the 2013 first quarter.  AFS securities were GSE issued floating-rate securities, and are recorded at fair value.

(c)Grantor Trust is classified as available-for-sale securities, and recorded at fair value.  Trust funds represent investments in registered mutual funds and other fixed-income and equity funds maintained under the grantor trust.

Long-Term Investments

Investments with original long-term contractual maturities were comprised of mortgage- and asset-backed securities, and investment in securities issued by state and local housing agencies.   We own a grantor trust to fund current and potential future payments to retirees for supplemental pension plan obligations.

Mortgage-Backed Securities — By Issuer

The following table summarizes our investment securities issuer concentration (dollars in thousands):

Table 5.2:Investment Securities Issuer Concentration

	March 31, 2013						December 31, 2012
					Carrying value as a						Carrying value as a
	Carrying (a)				Percentage		Carrying (a)				Percentage
Long Term Investment	Value		Fair Value		of Capital		Value		Fair Value		of Capital
MBS
Fannie Mae	$	5,376,405	$	5,458,034	100.34	%	$	5,428,870	$	5,520,801	98.85	%
Freddie Mac	6,546,570		6,816,019		122.18		6,556,194		6,859,275		119.38
Ginnie Mae	108,408		109,221		2.02		120,308		121,189		2.19
All Others - PLMBS	488,771		553,461		9.12		514,933		570,760		9.38
Non-MBS (b)	746,944		693,660		13.94		747,233		693,305		13.61
Total Investment Securities	$	13,267,098	$	13,630,395	247.60	%	$	13,367,538	$	13,765,330	243.41	%
Categorized as:
Available-for-Sale Securities	$	2,093,172	$	2,093,172			$	2,308,774	$	2,308,774
Held-to-Maturity Securities	$	11,173,926	$	11,537,223			$	11,058,764	$	11,456,556

(a)Carrying value includes fair value for AFS securities.

(b)Non-MBS consist of HFA and Grantor Trust.

External rating information of the held-to-maturity portfolio was as follows (carrying values; in thousands):

Table 5.3:External Rating of the Held-to-Maturity Portfolio

	March 31, 2013
	AAA-rated (a)		AA-rated (b)		A-rated		BBB-rated		Below Investment Grade		Total
Mortgage-backed securities	$	3,551	$	9,981,761	$	270,482	$	55,004	$	126,063	$	10,436,861
State and local housing finance agency obligations	65,000		576,540		50,195		45,330		—		737,065
Total Long-term securities	$	68,551	$	10,558,301	$	320,677	$	100,334	$	126,063	$	11,173,926

	December 31, 2012
	AAA-rated (a)		AA-rated (b)		A-rated		BBB-rated		Below Investment Grade		Total
Mortgage-backed securities	$	6,687	$	10,045,933	$	78,709	$	57,346	$	132,489	$	10,321,164
State and local housing finance agency obligations	65,000		627,270		—		45,330		—		737,600
Total Long-term securities	$	71,687	$	10,673,203	$	78,709	$	102,676	$	132,489	$	11,058,764

(a) Certain PLMBS and housing finance bonds are rated triple-A by S&P and Moody’s.

(b) GSE issued MBS have been classified in the table above as double-A, the credit rating assigned to the GSEs.  Fannie Mae, Freddie Mac and U.S. Agency issued MBS held by us are rated double-A (Based on S&P’s rating of AA+/Negative for the GSEs and Double-A for the U.S sovereign; Moody’s affirmed the triple-A status of the two GSEs and the U.S. sovereign rating).

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External rating information of the available-for-sale portfolio was as follows (the carrying values of AFS investments are at fair values; in thousands):

Table 5.4:External Rating of the Available-for-Sale Portfolio

	March 31, 2013
	AA-rated(a)		Unrated		Total
Available-for-sale securities
Mortgage-backed securities	$	2,083,293	$	—	$	2,083,293
Other - Grantor trust	—		9,879		9,879
Total Available-for-sale securities	$	2,083,293	$	9,879	$	2,093,172

	December 31, 2012
	AA-rated(a)		Unrated		Total
Available-for-sale securities
Mortgage-backed securities	$	2,299,141	$	—	$	2,299,141
Other - Grantor trust	—		9,633		9,633
Total Available-for-sale securities	$	2,299,141	$	9,633	$	2,308,774

(a) All MBS are GSE/U.S. Agency issued securities and the ratings are based on issuer credit ratings.   Fannie Mae, Freddie Mac and U.S. Agency issued MBS held by us are rated double-A (Based on S&P’s rating of AA+/Negative for the GSEs and Double-A for the U.S sovereign; Moody’s affirmed the triple-A status of the two GSEs and the U.S. sovereign rating).

Weighted average rates — Mortgage-backed securities (HTM and AFS)

The following table summarizes weighted average rates and amounts by contractual maturities.  A significant portion of the MBS portfolio consisted of floating-rate securities and the weighted average rates will change in parallel with changes in the LIBOR rate (dollars in thousands):

Table 5.5:Mortgage-Backed Securities Weighted Average Rates by Contractual Maturities

	March 31, 2013				December 31, 2012
	Amortized		Weighted		Amortized		Weighted
	Cost		Average Rate		Cost		Average Rate
Mortgage-backed securities
Due in one year or less	$	261	6.25	%	$	—	—	%
Due after one year through five years	483,600		2.61		156,317		2.81
Due after five years through ten years	4,552,763		2.92		4,266,593		2.99
Due after ten years	7,523,972		1.39		8,239,224		1.46
Total mortgage-backed securities	$	12,560,596	1.99	%	$	12,662,134	1.99	%

OTTI - Adverse Case Scenario

There was no OTTI recognized at March 31, 2013.  We evaluate our OTTI private-label MBS under a base case (or best estimate) scenario, and also perform a cash flow analysis for each security deemed OTTI under assumptions that forecast increased credit default rates or loss severities, or both.   The stress test scenario and associated results do not represent our current expectations and therefore should not be construed as a prediction of future results, market conditions or the actual performance of these securities.   The results of the adverse case scenario are presented below alongside our expected outcome for the credit impaired securities (the base case) at the OTTI measurement dates (in thousands):

Table 5.6:     Base and Adverse Case Stress Scenarios (a)

	As of March 31, 2012
	Actual Results - Base Case Scenario					Adverse Case Scenario
	UPB		OTTI Related to Credit Loss (b)			UPB		OTTI Related to Credit Loss
HEL Subprime	$	23,295	$	(558	)	$	23,295	$	(580	)

(a) Generally, the Adverse Case is computed by stressing Credit Default Rate and Loss Severity.

(b) Represents credit OTTI recognized in the first quarter of 2012.

In instances where forecasted credit OTTI exceeded fair values, we have capped the recognition of credit OTTI in the base case and in the adverse case to the bond’s amortized cost.   Amounts capped in the determination of OTTI charges were not significant in any periods in this report.

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Non-Agency Private label mortgage — and asset-backed securities

Our investments in privately-issued MBS are summarized below.  All private-label MBS were classified as held-to-maturity (unpaid principal balance (a); in thousands):

Table 5.7:Non-Agency Private Label Mortgage — and Asset-Backed Securities

	March 31, 2013						December 31, 2012
Private-label MBS	Fixed Rate		Variable Rate		Total		Fixed Rate		Variable Rate		Total
Private-label RMBS
Prime	$	86,807	$	3,280	$	90,087	$	97,668	$	3,420	$	101,088
Alt-A	3,981		2,490		6,471		4,133		2,582		6,715
Total private-label RMBS	90,788		5,770		96,558		101,801		6,002		107,803
Home Equity Loans Subprime	303,988		59,030		363,018		314,998		60,648		375,646
Manufactured Housing Loans Subprime	127,617		—		127,617		132,566		—		132,566
Total UPB of private-label MBS (b)	$	522,393	$	64,800	$	587,193	$	549,365	$	66,650	$	616,015

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

(b) Paydowns of PLMBS have reduced outstanding unpaid principal balances.  No acquisitions of PLMBS have been made since 2007.

The following tables present additional information of the fair values and gross unrealized losses of PLMBS by year of securitization and external rating (in thousands):

Table 5.8:PLMBS by Year of Securitization and External Rating

	March 31, 2013
	Unpaid Principal Balance
Private-label MBS	Ratings Subtotal		Triple-A		Double-A		Single-A		Triple-B		Below Investment Grade		Amortized Cost		Gross Unrealized (Losses)			Fair Value		Credit and Non-Credit OTTI Losses (a)
RMBS
Prime
2006	$	15,397	$	—	$	—	$	—	$	—	$	15,397	$	14,646	$	—		$	14,910	$	—
2005	18,681		—		—		—		—		18,681		17,905		—			18,826		—
2004 and earlier	56,009		—		19,021		19,061		17,927		—		55,861		(116		)	56,856		—
Total RMBS Prime	90,087		—		19,021		19,061		17,927		34,078		88,412		(116		)	90,592		—
Alt-A
2004 and earlier	6,471		3,401		261		—		1,343		1,466		6,471		(272		)	6,229		—
Total RMBS	96,558		3,401		19,282		19,061		19,270		35,544		94,883		(388		)	96,821		—
HEL
Subprime
2004 and earlier	363,018		150		14,488		131,768		48,962		167,650		327,161		(11,887		)	326,804		—
Manufactured Housing Loans
Subprime
2004 and earlier	127,617		—		—		127,617		—		—		127,603		(1,630		)	129,836		—
Total PLMBS	$	587,193	$	3,551	$	33,770	$	278,446	$	68,232	$	203,194	$	549,647	$	(13,905	)	$	553,461	$	—
	December 31, 2012
	Unpaid Principal Balance
Private-label MBS	Ratings Subtotal		Triple-A		Double-A		Single-A		Triple-B		Below Investment Grade		Amortized Cost		Gross Unrealized (Losses)			Fair Value		Credit and Non-Credit OTTI Losses (a)
RMBS
Prime
2006	$	16,927	$	—	$	—	$	—	$	—	$	16,927	$	16,175	$	(123	)	$	16,210	$	(281	)
2005	20,611		—		—		—		—		20,611		19,800		—			20,770		—
2004 and earlier	63,550		—		21,473		21,695		20,382		—		63,373		(174		)	64,465		—
Total RMBS Prime	101,088		—		21,473		21,695		20,382		37,538		99,348		(297		)	101,445		(281		)
Alt-A
2004 and earlier	6,715		6,329		386		—		—		—		6,715		(363		)	6,411		—
Total RMBS	107,803		6,329		21,859		21,695		20,382		37,538		106,063		(660		)	107,856		(281		)
HEL
Subprime
2004 and earlier	375,646		358		85,421		65,340		50,793		173,734		339,790		(17,332		)	330,632		(370		)
Manufactured Housing Loans
Subprime
2004 and earlier	132,566		—		132,566		—		—		—		132,551		(1,810		)	132,272		—
Total PLMBS	$	616,015	$	6,687	$	239,846	$	87,035	$	71,175	$	211,272	$	578,404	$	(19,802	)	$	570,760	$	(651	)

(a)  Credit-related OTTI was offset by reclassification of non-credit OTTI to Net income.

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Table 5.9:Weighted-Average Market Price Percentage Analysis of MBS

	March 31, 2013						December 31, 2012
Private-label MBS	Original Weighted-Average Credit Support % (a)		Weighted- Average Credit Support % (b)		Weighted-Average Collateral Delinquency % (c)		Original Weighted- Average Credit Support % (a)		Weighted- Average Credit Support % (b)		Weighted-Average Collateral Delinquency % (c)
RMBS
Prime
2006	4.24	%	4.11	%	16.54	%	4.11	%	4.07	%	15.60	%
2005	2.36		5.87		6.36		2.34		5.61		5.14
2004 and earlier	1.70		5.59		2.74		1.67		5.27		2.62
Total RMBS Prime	2.27		5.40		5.85		2.22		5.14		5.31
Alt-A
2004 and earlier	12.97		36.53		9.53		12.71		36.21		8.97
Total RMBS	2.99		7.48		6.09		2.87		7.07		5.54
HEL
Subprime
2004 and earlier	58.11		32.13		19.35		58.22		31.92		16.96
Manufactured Housing Loans
Subprime
2004 and earlier	100.00		28.93		3.26		100.00		28.55		3.34
Total Private-label MBS	58.15	%	27.38	%	13.67	%	57.53	%	26.85	%	12.03	%

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

Definitions:

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

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

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

Short-term investments

We typically maintain substantial investments in high quality short- and intermediate-term financial instruments such as certificates of deposit, unsecured overnight and term Federal funds sold to highly rated financial institutions, and secured overnight transactions, under securities purchased with agreement to resell.   These investments provide the liquidity necessary to meet members’ credit needs.   Short-term investments also provide a flexible means of implementing the asset/liability management decisions to increase liquidity.   We may also invest in certificates of deposit with maturities not exceeding 270 days, issued by major financial institutions, and would be designated as held-to-maturity and recorded at amortized cost.  There were no investments in certificates of deposit in 2012 or during the first quarter of 2013.

Federal funds sold — Federal funds sold represents short-term, unsecured lending to major banks and financial institutions.  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 management based on the credit ratings of counterparty’s debt securities or deposits as reported by Nationally Recognized Statistical Rating Organizations.

Overnight and short-term federal funds allow us to warehouse and provide balance sheet liquidity to meet unexpected member borrowing demands.   All investments in Federal funds sold were overnight.

We actively monitor our credit exposures and the credit quality of our counterparties, including an assessment of each counterparty’s financial performance, capital adequacy, and sovereign support as well as related market signals.   As a result of these monitoring activities, we limit or suspend existing exposures, as appropriate.   In addition, we are required to manage our unsecured portfolio subject to regulatory limits, prescribed by the FHFA, our regulator.   The FHFA regulations include limits on the amount of unsecured credit that may be extended to a counterparty or a group of affiliated counterparties, based upon a percentage of eligible regulatory capital and the counterparty’s overall credit rating.   Under these regulations, the level of eligible regulatory capital is determined as the lesser of our regulatory capital or the eligible amount of regulatory capital of the counterparty determined in accordance with FHFA regulation.   The eligible amount of regulatory capital is then multiplied by a stated percentage.  The stated percentage that we may offer for term extensions, which are comprised of on- and off-balance sheet and derivative transactions, of unsecured credit ranges from 1% to 15% based on the counterparty’s credit rating.

FHFA regulation also permits us to extend additional unsecured credit, which could be comprised of overnight extensions and sales of Federal funds subject to continuing contract (we have no continuing arrangements).   Our

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total unsecured overnight exposure to a counterparty may not exceed twice the regulatory limit for term exposures, resulting in a total exposure limit to a counterparty of 2% to 30% of the eligible amount of regulatory capital based on the counterparty’s credit rating.   We remain in compliance with the regulatory limits established for unsecured credit in all reported periods.

We are prohibited by FHFA regulation from investing in financial instruments issued by non-U.S. entities other than those issued by U.S. branches and agency offices of foreign commercial banks.   Our unsecured credit exposures to domestic counterparties and U.S. subsidiaries of foreign commercial banks, includes the risk that these counterparties have extended credit to non-U.S. counterparties and foreign sovereign governments.   Our unsecured credit exposures to U.S. branches and agency offices of foreign commercial banks includes the risk that, as a result of political or economic conditions in a country, the counterparty may be unable to meet their contractual repayment obligations.   The FHLBNY did not own any financial instruments issued by foreign sovereign governments, including those countries that are members of the European Union.

The table below presents Federal funds sold, the counterparty credit ratings, and the domicile of the counterparty or the domicile of the counterparty’s parent for U.S. branches and agency offices of foreign commercial banks in the U.S. (in thousands):

Table 5.10:Federal Funds Sold by Domicile of the Counterparty

	March 31, 2013		December 31, 2012		Three months ended March 31, 2013				Year ended December 31, 2012
Foreign Counterparties	S&P Rating	Moody’s Rating	S&P Rating	Moody’s Rating	Daily Average Balance		Balance at period end		Daily Average Balance		Balance at period end
Australia	AA-	AA2	AA-	AA2	$	1,898,511	$	1,700,000	$	1,645,254	$	1,548,000
Canada	A to AA-	AA3 to AA2	A to AA-	A1 to AA1	2,937,655		2,394,000		3,270,126		995,000
Finland	AA-	AA3	AA-	AA3	1,330,267		1,551,000		664,962		—
Germany	BBB+	A2	A+	A2	834,911		—		653,128		—
Netherlands	AA-	AA2	AA-	AA2	1,485,600		1,551,000		1,305,486		1,548,000
Norway	A+	A1	A+	A1	1,002,244		997,000		935,484		—
Sweden	AA-	AA3	AA-	AA3	1,552,256		1,551,000		1,330,456		—
UK	A	A3	A	A3	215,000		—		—		—
Subtotal					11,256,444		9,744,000		9,804,896		4,091,000
USA	A to AA-	A2 to AA1	A to AA-	A2 to AA1	2,085,389		375,000		1,559,522		—
Total					$	13,341,833	$	10,119,000	$	11,364,418	$	4,091,000

Table 5.11:Federal Funds Sold Quarterly Balances

The following table summarizes average balances and outstanding balances of Federal funds sold in the first quarters of 2013 and 2012 (in millions):

	2013				2012
	First Quarter				First Quarter
	Daily Average Balance		Balance at period end		Daily Average Balance		Balance at period end
Federal Funds Sold	$	13,342	$	10,119	$	10,559	$	7,575

Table 5.12:Cash Balances at the Federal Reserve Banks

In addition, we maintained liquidity at the Federal Reserve Banks (“FRB”). The following table summarizes average balances and outstanding balances at the FRB in the first quarters of 2013 and 2012 (in millions):

	2013				2012
	First Quarter				First Quarter
	Daily Average Balance		Balance at period end		Daily Average Balance		Balance at period end
Cash Balances with Federal Reserve Banks	$	586	$	4,694	$	374	$	389

Cash collateral pledged — All cash posted as pledged collateral to derivative counterparties is reported as a deduction to Derivative liabilities in the Statements of Condition.   Cash posted in excess of required collateral is reported as a component of Derivative assets.  We generally execute derivatives with major financial institutions and enter into bilateral collateral agreements.   When our derivatives are in a net unrealized loss position, as a liability from our perspective, counterparties are exposed and we are required to post cash collateral to mitigate the counterparties’ credit exposure.   Collateral agreements include certain thresholds and pledge requirements that are generally triggered if exposures exceed the agreed-upon thresholds.   Typically, such cash deposit pledges earn interest at the overnight Federal funds rate.   At March 31, 2013 and December 31, 2012, we had deposited $2.3 billion and $2.5 billion in interest-earning cash as pledged collateral to derivative counterparties.   For more information, see Tables 9.1 — 9.7.

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Mortgage Loans Held-for-Portfolio

The portfolio of mortgage loans was primarily comprised of investments in Mortgage Partnership Finance loans (“MPF” or “MPF Program”).   We provide this product to members as another alternative for them to sell their mortgage production, and do not expect the MPF loans to increase substantially.  Growth has been steady and moderate.

The following table summarizes MPF loan by product types (par values, in thousands):

Table 6.1:MPF by Loss Layers

	March 31, 2013		December 31, 2012
Original MPF (a)	$	450,208	$	444,339
MPF 100 (b)	10,115		11,237
MPF 125 (c)	1,031,326		988,061
MPF 125 Plus (d)	278,256		299,431
Other	83,794		69,458
Total Par MPF Loans	$	1,853,699	$	1,812,526

(a)       Original MPF — The first layer of losses is applied to the First Loss Account. We are responsible for the first layer of losses. The member then provides a credit enhancement up to “AA” rating equivalent. We would absorb any credit losses beyond the first two layers, though the possibility of any such losses is remote.

(b)       MPF 100 — The first layer of losses is applied to the First Loss Account. We are responsible for the first layer of losses. Losses incurred in the First Loss Account are deducted from credit enhancement fees payable to the member after the third year. The member then provides a credit enhancement up to “AA” rating equivalent less the amount placed in the FLA. We absorb any losses incurred in the FLA that are not recovered through credit enhancement fees (should the pool liquidate prior to repayment of losses). We would absorb any credit losses beyond the first two layers.

(c)       MPF 125 — The first layer of losses is applied to the First Loss Account. We are responsible for the first layer of losses. Losses incurred in the First Loss Account are deducted from the credit enhancement fees payable to the member. The member then provides a credit enhancement up to “AA” rating equivalent less the amount placed in the FLA. We absorb any losses incurred in the FLA that are not recovered through credit enhancement fees (should the pool liquidate prior to repayment of losses). We would absorb any credit losses beyond the first two layers.

(d)       MPF 125 Plus —The first layer of losses is applied to the First Loss Account (“FLA”) in an amount equal to a specified percentage of loans in the pool as of the sale date. Losses incurred in the First Loss Account are deducted from the credit enhancement fees payable to the member. We absorb any losses incurred in the FLA that are not recovered through credit enhancement fees (should the pool liquidate prior to repayment of losses). The member acquires an additional Credit Enhancement (“CE”) coverage through a supplemental mortgage insurance policy (“SMI”) to cover second-layer losses that exceed the deductible (“FLA”) of the Supplemental Mortgage Insurance policy. Losses not covered by the First Loss Account or Supplemental Mortgage Insurance coverage will be paid by the member’s Credit Enhancement obligation up to “AA” rating equivalent. We would absorb losses that exceeded the Credit Enhancement obligation, though such losses are a remote possibility.

Mortgage loans — Conventional and Insured Loans

The following table classifies mortgage loans between conventional loans and loans insured by FHA/VA (in thousands):

Table 6.2:Mortgage Loans — Conventional and Insured Loans

	March 31, 2013		December 31, 2012
Federal Housing Administration and Veteran Administration insured loans	$	83,652	$	69,302
Conventional loans	1,769,905		1,743,068
Others	142		156
Total par value	$	1,853,699	$	1,812,526

Mortgage Loans - Credit Enhancement

In the credit enhancement waterfall, we are responsible for the first loss layer.   The second loss layer is that amount of credit obligation that the PFI has taken on, which will equate the loan to a double-A rating.   We assume all residual risk.

The amount of the credit enhancement is computed with the use of S&P’s model for determining 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, we pay to the PFI a credit enhancement fee.   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 after being deferred for 12 months.

The portion of the credit enhancement that is an obligation of the PFI must be fully secured with pledged collateral.  A portion of the credit enhancement may also be covered by insurance, subject to limitations specified in the Acquired Member Assets regulation.   Each PFI/member or housing associate (at this time, we have no housing associates as a PFI) that participates in the MPF program must meet our established financial performance criteria.  In addition, we perform financial reviews of each approved PFI annually.   Housing Associate are entities that (i) are approved mortgagees under Title II of the National Housing Act, (ii) chartered under law and have succession, (iii) subject to inspection and supervision by a governmental agency, and (iv) lend their own funds as their principal activity in the mortgage field.

The FHLBNY computes the provision for credit losses without considering the credit enhancement features (except the “First Loss Account”) accompanying the MPF loans to provide credit assurance to the FHLBNY.  CE Fees are

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paid on a pool level, and if the pool runs down, the amount of future CE fees would shrink in line.   For more information, see Note 8. Mortgage Loans Held-for-Portfolio.

Loan concentration was in New York State, which is to be expected since the largest PFIs are located in New York.  Below is our MPF loan concentration:

Table 6.3:Concentration of MPF Loans

	March 31, 2013				December 31, 2012
	Number of loans %		Amounts outstanding %		Number of loans %		Amounts outstanding %
New York State	69.8	%	59.8	%	69.7	%	59.4	%

Table 6.4:Top Five Participating Financial Institutions — Concentration (par values, dollars in thousands)

	March 31, 2013
	Mortgage		Percent of Total
	Loans		Mortgage Loans
Astoria Federal Savings and Loan Association	$	303,754	16.39	%
Manufacturers and Traders Trust Company	278,964		15.05
Investors Bank	169,267		9.13
Elmira Savings Bank	98,640		5.32
First Choice Bank	85,405		4.61
All Others	917,527		49.50
Total (a)	$	1,853,557	100.00	%

	December 31, 2012
	Mortgage		Percent of Total
	Loans		Mortgage Loans
Manufacturers and Traders Trust Company	$	300,153	16.56	%
Astoria Federal Savings and Loan Association	289,318		15.96
Investors Bank	168,881		9.32
Elmira Savings Bank	88,845		4.90
First Choice Bank	85,344		4.71
All Others	879,829		48.55
Total (a)	$	1,812,370	100.00	%

(a) Totals do not include de minimis amounts of non-MPF loans.

Table 6.5:Roll-Forward First Loss Account (in thousands)

	Three months ended March 31,
	2013			2012
Beginning balance	$	18,436		$	13,622
Additions	911			1,136
Resets(a)	(1,226		)	—
Charge-offs	(100		)	(162		)
Ending balance	$	18,021		$	14,596

(a) For the Original MPF, MPF 100, MPF 125 and MPF Plus products, the Credit Enhancement is periodically recalculated.  If the recalculated Credit Enhancement would result in a PFI Credit Enhancement obligation lower than the remaining obligation, the PFI’s Credit Enhancement obligation will be reset to the new, lower level.

Table 6.6:Second Losses and SMI Coverage (in thousands)

	March 31, 2013		December 31, 2012
Second Loss Position (a)	$	61,512	$	56,449
SMI Coverage - NY share only (b)	$	17,593	$	17,593
SMI Coverage - portfolio (b)	$	17,958	$	17,958

(a) Increase due to increase in overall outstanding of MPF.

(b) SMI coverage has reminded unchanged because no new master commitments have been added under the MPF Plus Program.

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Troubled Debt Restructurings (“TDRs”) and MPF modification — The MPF program’s temporary loan payment modification plan for participating PFIs was initially available until December 31, 2011 and has been extended through December 31, 2013.   This modification plan is available to homeowners currently in default or imminent danger of default.   The modification plan states specific eligibility requirements that have to be met and procedures the PFIs have to follow to participate in the modification plan.   As of March 31, 2013, only 4 MPF loans had been modified under this plan.  No loans were modified in the first quarters of 2013 and 2012.

Beginning with the fourth quarter of 2012, we consider loans discharged from bankruptcy as TDR, and the amount outstanding was $9.5 million and $8.8 million at March 31, 2013 and December 31, 2012.  If the TDR loan discharged from bankruptcy was past due 90 days or more, the loan was assessed for impairment on an individual basis, and a credit allowance was recorded based on the recoverable collateral values, net of costs, compared to recorded investment in such a loan.  The aggregate amount of loans that was past due 90 days or more was $0.7 million and $0.6 million at March 31, 2013 and December 31, 2012.  Credit losses associated with these past-due loans were not material.

For more information about TDR loans, see Note 8. Mortgage Loans Held-for-portfolio in the audited financial statements included in our most recent Form 10-K filed on March 25, 2013.

Accrued interest receivable

Other assets

Accrued interest receivable was $193.3 million at March 31, 2013, compared to $179.0 million at December 31, 2012.  Accrued interest receivable was comprised primarily from advances and investments.   Other assets included prepayments and miscellaneous receivables, and were $11.8 million and $13.7 million at March 31, 2013 and December 31, 2012.

Deposit Liabilities and Other Borrowings

Deposit liabilities consisted of member deposits, and from time to time may also include deposits from governmental institutions.   Member deposits do not represent a significant source of liquidity.

Member deposits — We operate deposit programs for the benefit of our members.   Deposits are primarily short-term in nature, with the majority maintained in demand accounts that reprice daily based upon rates prevailing in the overnight Federal funds market.   Members’ liquidity preferences are the primary determinant of the level of deposits.   Total deposits were $2.1 billion at March 31, 2013 and December 31, 2012.

Borrowings from other FHLBanks — We may borrow from other FHLBanks, generally for a period of one day and at market terms.   There were no significant borrowings in any periods in this report.

Debt Financing Activity and Consolidated Obligations

Consolidated obligations, which consist of consolidated bonds and consolidated discount notes, are the joint and several obligations of the FHLBanks and the principal funding source for our operations.   Discount notes are consolidated obligations with maturities of up to 365 days, and consolidated bonds have maturities of one year or longer.   Member deposits, capital and, to a lesser extent, borrowings from other FHLBanks are also funding sources.  A FHLBank’s ability to access the capital markets to issue debt, as well as our cost of funds, is dependent on our credit ratings from major ratings organizations.   Please see Table 7.11 for our credit ratings.

Consolidated Obligation Liabilities — Bonds and Discount notes

Our primary source of funds continued to be the issuance of consolidated bonds and discount notes.   Consolidated obligation debt outstanding at March 31, 2013 has declined, relative to December 31, 2012, in parallel with lower balance sheet assets.

The issuance and servicing of consolidated obligations debt are performed by the Office of Finance, a joint office of the FHLBanks established by the Finance Agency.  Each FHLBank independently determines its participation in each issuance of consolidated obligations based on, among other factors, its own funding and operating requirements, maturities, interest rates and other terms available for consolidated obligations in the market place.  Although we are primarily liable for our portion of consolidated obligations (i.e. those issued on our behalf), we are also jointly and severally liable with the other FHLBanks for the payment of principal and interest on the consolidated obligations of all the FHLBanks.  The two major debt programs offered by the Office of Finance are the Global Debt Program and the TAP issue programs.  We participate in both programs.  For more information about these programs, see Item 1. Business in our most recent Form 10-K filed on March 25, 2013.

Highlights — Performance of FHLBank debt

The FHLBank debt remained in demand by investors at reasonable pricing, and has withstood the general concerns about the debt ceiling in the U.S., the rating agency downgrades and the generally fragile conditions in the bond markets.   In general, swap spreads to our consolidated bonds remained tight through the three months ended March 31, 2013, resulting in increased cost of funding in the current year first quarter.   Similar to bonds, funding costs of discount notes were also higher. The lower 3-month LIBOR has compressed margins for our debt and specifically for our short-term debt.   Typically, we execute interest rate swaps to convert fixed-rate debt to a sub-LIBOR spread, but when the LIBOR rate is low, there is very little room for achieving a sub-LIBOR spread that would be ascribed to the high-quality FHLBank issued debt.

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·FHLBank consolidated obligation bonds.   As we make extensive use of derivatives to restructure fixed rates on consolidated bonds to sub-LIBOR floating rate, the relationship between swaps rates and bond and discount note yields is an important economic indicator.   The 3-month LIBOR, a key index in the intermediation between swap rates and debt yields, has been steadily declining during 2012, and continuing into the first quarter of 2013.   The 3-month LIBOR was 29 basis points at March 31, 2013, compared to 47 basis points at March 31, 2012.  As a result, on a LIBOR swapped funding level, the low LIBOR rate has effectively driven up the cost of FHLBank consolidated obligation bonds.   Longer-term bond pricing remained prohibitively expensive, as investors were reluctant to take the risk of locking in long-term investments without a step-up option, which would protect their investment yields when rates eventually rise.

·Consolidated obligation discount notes.  Over the course of 2012 and continuing into the first quarter of 2013, discount note spreads to LIBOR have exhibited a fairly consistent narrowing trend across the money market curve.   Treasury bill issuance and Repo rate patterns are a major factor in pricing and thus have had a strong impact on investor demand for FHLB discount notes.   Dealers use Repo as a financing vehicle, so they are less likely to underwrite securities, like discount notes, that would create a negative carrying cost to the dealer.   In addition, as FHLBank discount notes compete with Repo for investor dollars, the low yields from FHLBank issued discount notes make it harder to attract investor participation.

Consolidated obligation bonds

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

Table 7.1:Consolidated Obligation Bonds by Type

	March 31, 2013					December 31, 2012
	Amount			Percentage of Total		Amount			Percentage of Total
Fixed-rate, non-callable	$	45,574,105		75.71	%	$	48,184,085		75.49	%
Fixed-rate, callable	4,280,000			7.11		2,685,000			4.21
Step Up, callable	1,751,000			2.91		1,221,000			1.91
Single-index floating rate	8,590,000			14.27		11,735,000			18.39
Total par value	60,195,105			100.00	%	63,825,085			100.00	%
Bond premiums	89,989					102,225
Bond discounts	(22,574		)			(23,566		)
Hedge value basis adjustments	679,232					804,174
Hedge basis adjustments on terminated hedges	62,785					63,520
Fair value option valuation adjustments and accrued interest	9,764					12,883
Total Consolidated obligation-bonds	$	61,014,301				$	64,784,321

Impact of hedging fixed-rates consolidated obligation bonds

The most significant element that impacts balance sheet reporting of debt is the recording of fair value basis and valuation adjustments.   We adjust the reported carrying value of hedged consolidated bonds for changes in their fair value (“fair value basis adjustments” or “fair value”) that are attributable to the risk being hedged in accordance with hedge accounting rules.   The discounting basis for computing changes in fair values basis for hedges of debt in a fair value hedge is LIBOR for the FHLBNY.   When a hedge is terminated before its stated maturity, we compute the fair values of the debt at the hedge termination date, and we amortize the basis on a level yield method to Interest expense.   Carrying values of bonds elected under the FVO include valuation adjustments to recognize changes in fair values.   The discounting basis for computing changes in fair values of bonds elected under the FVO is the observed FHLBank bond yield curve.

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

Fair value basis and valuation adjustments — The carrying values of our consolidated obligation bonds included $679.2 million and $804.2 million fair value hedging basis losses at March 31, 2013 and December 31, 2012.  In 2012, we partially terminated a hedge of a long-term bond, and the valuation basis adjustment of $63.5 million is being amortized over the contractual maturity of the debt.  Valuation adjustments for bonds elected under the FVO were also exhibiting fair value losses due to declining yields of equivalent maturity consolidated bonds offered in the bond markets.  Most of our existing hedged bonds were fixed-rate, and had been issued in prior years at the then prevailing higher interest rate environment.   In a lower interest rate environment at March 31, 2013 and December 31, 2012, these fixed-rate bonds exhibited unrealized fair value basis losses.   Fair value basis losses were not significant, relative to their par values, because the terms to maturity of the hedged bonds were, on average, short- and medium-term.   The period-over-period net fair value basis losses of hedged bonds have declined somewhat because the valuation adjustments, in a low interest rate environment, have been relatively less sensitive, and maturing and called short-term and medium-term hedged bonds have been replaced with equivalent term bonds.

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Hedge volume — Tables 7.2 - 7.4 provide information with respect to par amounts of bonds based on accounting designation: (1) under hedge qualifying rules, (2) under the FVO, and (3) as an economic hedge (in thousands):

Table 7.2:Bonds Hedged under Qualifying Hedges (in thousands)

	Consolidated Obligation Bonds
Par Amount	March 31, 2013		December 31, 2012
Qualifying Hedges (a)
Fixed-rate bullet bonds (b)	$	29,022,050	$	28,587,050
Fixed-rate callable bonds (c)	5,631,000		3,246,000
	$	34,653,050	$	31,833,050

(a)Qualified under hedge accounting rules.  The hedges effectively convert the fixed-rate exposure of the bonds to a variable-rate exposure, generally indexed to 3-month LIBOR.

(b)At March 31, 2013, the volume of hedges qualifying for hedge accounting increased, in part due to the relative stability of interest rates that allowed the bank to hedge medium- and shorter term debt with the expectation that the hedges would remain highly effective through their terms to maturity.

(c)Callable bonds designated as eligible for hedge accounting increased as we opted to reduce the election under the FVO for new issuances, and also reduce electing to apply economic hedges, on the basis that hedge accounting provides the least impact to earnings volatility.

Bonds elected under the FVO — If, at inception of a hedge, we do not believe that the hedge would be highly effective in offsetting fair value changes between the derivative and the debt (hedged item), we may designate the debt under the FVO if operationally practical, and record changes to the full fair values of both the derivative and debt through earnings.  The recorded balance sheet value of debt under the FVO would include the fair value basis adjustments so that the debt’s balance sheet carrying values would be its fair value.

Table 7.3:Bonds under the Fair Value Option (FVO) (in thousands):

	Consolidated Obligation Bonds
Par Amount	March 31, 2013		December 31, 2012
Bonds designated under FVO	$	10,028,000	$	12,728,000

Bonds designated under the FVO were generally economically hedged by interest rate swaps.  We have elected not to increase the level of consolidated obligation bonds elected under the FVO in order to reduce potential fair value volatility caused by disproportionate changes between the consolidated obligation debt yield curve and the swap yield curve (basis risk).  The swap curve is the basis for valuing the swap in a hedging relationship, while the debt curve is the basis for valuing the debt.  The hedge is classified as an economic hedge.

Economically hedged bonds — We may also decide that the operational cost of designating debt under the FVO (or qualifying fair value hedge accounting) outweighs the accounting benefits.  To mitigate the economic risk, we would then opt to hedge the debt on an economic basis.  In that scenario, the balance sheet carrying value of the debt would not include fair value basis since the debt would then be recorded at amortized cost.

Table 7.4:Economically Hedged Bonds (in thousands)

	Consolidated Obligation Bonds
Par Amount	March 31, 2013		December 31, 2012
Bonds designated as economically hedged
Floating-rate bonds (a)	$	2,250,000	$	7,345,000
Fixed-rate bonds (b)	165,000		910,000
	$	2,415,000	$	8,255,000	��

(a)Floating-rate debt — We have allowed the portfolio of floating-rate bonds to decline.  Maturing floaters were replaced by fixed-rate bonds or discount notes.  Floating rate bonds were generally indexed to the Federal funds effective rate and the 1-month LIBOR.   The bonds were economically hedged to 3-month LIBOR by the execution of swap agreements with derivative counterparties that synthetically converted the floating rate debt cash flows to 3-month LIBOR.   The hedge objective was to reduce the basis risk from any asymmetrical changes between 3-month LIBOR and the Federal funds rate, or the 1-month LIBOR.   The swaps were designated as stand-alone derivatives because the operational cost of designating the swaps in a hedge qualifying relationship outweighed the accounting benefits.

(b)Fixed-rate debt — These primarily represent debt that have fallen out of effectiveness.  We do not consider this to be significant and the fair values were also not significant.

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Consolidated obligation bonds — maturity or next call date (a)

Swapped, callable bonds contain an exercise date or a series of exercise dates that may result in a shorter redemption period.  The following table summarizes consolidated bonds outstanding by years to maturity or next call date (dollars in thousands):

Table 7.5:Consolidated Obligation Bonds — Maturity or Next Call Date

	March 31, 2013					December 31, 2012
	Amount			Percentage of Total		Amount			Percentage of Total
Year of maturity or next call date
Due or callable in one year or less	$	43,857,850		72.86	%	$	45,720,800		71.63	%
Due or callable after one year through two years	6,778,930			11.26		8,358,630			13.10
Due or callable after two years through three years	3,835,240			6.37		4,441,280			6.96
Due or callable after three years through four years	991,615			1.65		1,010,010			1.58
Due or callable after four years through five years	1,442,505			2.40		1,315,570			2.06
Thereafter	3,288,965			5.46		2,978,795			4.67
Total par value	60,195,105			100.00	%	63,825,085			100.00	%
Bond premiums	89,989					102,225
Bond discounts	(22,574		)			(23,566		)
Hedge value basis adjustments	679,232					804,174
Hedge basis adjustments on terminated hedges	62,785					63,520
Fair value option valuation adjustments and accrued interest	9,764					12,883
Total bonds	$	61,014,301				$	64,784,321

(a)Contrasting consolidated obligation bonds by contractual maturity dates with potential put dates illustrates the impact of hedging on the effective duration of the bond.   With a callable bond, we have purchased the option to terminate debt at agreed upon dates from investors.  Call options are exercisable either as a one-time option or as quarterly.   Our current practice is to exercise our option to call a bond when the swap counterparty exercises its option to call the cancellable swap hedging the callable bond.   Thus, issuance of a callable bond with an associated callable swap significantly alters the contractual maturity characteristics of the original bond and introduces the possibility of an exercise call date that is significantly shorter than the contractual maturity.

The following table summarizes callable and non-callable bonds outstanding (in thousands):

Table 7.6:     Outstanding Callable and non-callable Bonds

	March 31, 2013 (a)		December 31, 2012 (a)
Callable	$	6,031,000	$	3,906,000
Non-Callable	$	54,164,105	$	59,919,085

(a)  Par Value.

Debt extinguishment — The following table summarizes debt transferred to or from another FHLBank and debt retired by the FHLBNY (carrying values, in thousands):

Table 7.7:Transferred and Retired Debt

	Three months ended March 31,
	2013		2012
Debt transferred to another FHLBank	$	25,035	$	—
Debt extinguished	$	28,527	$	126,794

Debt extinguished and transferred (“debt retired”) resulted in a charge of $7.9 million to earnings in 2013 first quarter, compared to $14.8 million in 2012 first quarter.  The FHLBNY typically retires debt to reduce future debt costs when the associated asset is either prepaid or terminated early, and less frequently from unscheduled prepayments of mortgage-backed securities.   When assets are prepaid ahead of their expected or contractual maturities, the FHLBNY also attempts to extinguish debt (consolidated obligation bonds) in order to realign asset and liability cash flow patterns.   Bond retirement typically requires a payment of a premium resulting in a loss. The FHLBNY typically receives prepayment fees when assets are prepaid, making us economically whole.   When debt is retired by transferring to another FHLBank, the re-purchases are also at negotiated market rates.   Debt extinguished other than through a transfer (to another FHLBank) is re-purchased from investors through bond dealers.

Discount Notes

Consolidated obligation discount notes provide us with short-term and overnight funds.   Discount notes have maturities of up to one year and are offered daily through a dealer-selling group; the notes are sold at a discount from their face amount and mature at par.   Additionally, through a 16-member selling group, the Office of Finance, acting on behalf of the 12 Federal Home Loan Banks, issues discount notes in four standard maturities in two auctions each week.

79

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

Table 7.8:Discount Notes Outstanding

	March 31, 2013			December 31, 2012
Par value	$	32,559,872		$	29,785,543
Amortized cost	$	32,550,997		$	29,776,704
Fair value option valuation adjustments	3,979			3,243
Total discount notes	$	32,554,976		$	29,779,947
Weighted average interest rate	0.11		%	0.13		%

The following table summarizes par amounts of discount notes under the FVO (in thousands):

Table 7.9:Discount Notes under the Fair Value Option (FVO)

Par Amount	March 31, 2013		December 31, 2012
Discount Notes designated under FVO (a)	$	1,945,744	$	1,945,744

(a)In 2013 we have not elected the FVO on new issuances of discount notes.  We hedged discount notes that were elected under the FVO as economic hedges to convert the fixed-rate exposure of the discount notes to a variable-rate exposure, generally indexed to LIBOR.

The following table summarizes hedges of discount notes (in thousands):

Table 7.10:Hedges of Discount Notes

	Consolidated Obligation Discount Notes
Principal Amount	March 31, 2013		December 31, 2012
Discount notes hedged under qualifying hedge (a)	$	1,106,000	$	1,106,000

(a)Discount note issuances have largely been concentrated at the short-end of their maturities, with a significant percentage issued to mature within 3 months; we have determined that it was not necessary to designate discount notes with short-term maturities in a qualifying fair value hedge.

FHLBNY Ratings

Table 7.11:FHLBNY Ratings

		S&P			Moody’s
		Long-Term/ Short-Term			Long-Term/ Short-Term
Year		Rating	Outlook		Rating	Outlook
				April 13, 2013	Aaa/P-1	Negative/Affirmed
2012	August 15, 2012	AA+/A-1+	Negative/Affirmed	August 15, 2012	Aaa/P-1	Negative/Affirmed
2011	August 8, 2011	AA+/A-1+	Negative/Affirmed	August 2, 2011	Aaa/P-1	Negative/Affirmed
	July 19, 2011	AAA/A-1+		July 13, 2011	Aaa/P-1	Negative Watch/Affirmed
	April 20, 2011	AAA/A-1+	Negative Watch/Affirmed
			Negative/Affirmed

Accrued interest payable

Other liabilities

Accrued interest payable — Accrued interest payable was comprised primarily of interest due and unpaid on consolidated obligation bonds, which are generally payable on a semi-annual basis.  Amounts outstanding at March 31, 2013 and December 31, 2012 were $168.5 million and $127.7 million.  Fluctuations in unpaid interest balance on bonds are due to the timing of accruals outstanding at the balance sheet dates, relative to the semi-annual coupon period.

Other liabilities — Other liabilities comprised of unfunded pension liabilities, pass through reserves held at the FRB on behalf of our members, commitments and miscellaneous payables.  Amount outstanding was $164.4 million and $165.7 million at March 31, 2013 and December 31, 2012.

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Stockholders’ Capital, Retained Earnings, AOCI, and Dividend

The following table summarizes the components of Stockholders’ capital (in thousands):

Table 8.1:Stockholders’ Capital

	March 31, 2013			December 31, 2012
Capital Stock (a)	$	4,626,559		$	4,797,457
Unrestricted retained earnings (b)	800,818			797,567
Restricted retained earnings (c)	110,178			96,185
Accumulated Other Comprehensive Loss	(179,585		)	(199,380		)
Total Capital	$	5,357,970		$	5,491,829

(a)Stockholders’ Capital — Capital stock has declined consistent with the decrease in advances borrowed by members.  Since members are generally required to purchase stock as a percentage of advances borrowed from us, a decrease in advances will typically result in decrease in capital stock.   In addition, under our present practice, we generally redeem any stock in excess of the amount necessary to support advance activity.   Therefore, the amount of capital stock outstanding varies directly with members’ outstanding borrowings.

(b)Unrestricted retained earnings — Net Income in the first quarter of 2013 was $70.0 million.   One dividend paid totaled $52.7 million during the quarter, and $14.0 million was set aside towards Restricted retained earnings.  The remaining amount, $3.3 million was added to Unrestricted retained earnings, which grew to $800.8 million at March 31, 2013, up from $797.6 million at December 31, 2012.

(c)Restricted retained earnings — Restricted retained earnings was established in the third quarter of 2011, and has grown to $110.2 million at March 31, 2013.   On February 28, 2011, the Federal Home Loan Bank of New York entered into a Joint Capital Enhancement Agreement (the “Agreement”) with the other 11 Federal Home Loan Banks (“FHLBanks”).   The Agreement provides that each FHLBank will, on a quarterly basis, allocate at least 20% of its net income to a separate restricted retained earnings account to be established at each FHLBank until the balance of the account equals at least 1% of its average balance of outstanding Consolidated Obligations for the previous quarter.   If the ultimate Restricted retained earnings target was to be calculated at March 31, 2013, it would have amounted to $910.8 million based on the FHLBNY’s average consolidated obligations outstanding during the previous quarter as per provisions under the Capital Agreement.

The following table summarizes the components of AOCI (in thousands):

Table 8.2:Accumulated Other Comprehensive Income (Loss) (“AOCI”)

	March 31, 2013			December 31, 2012
Accumulated other comprehensive loss
Non-credit portion of OTTI on held-to-maturity securities, net of accretion (a)	$	(60,877	)	$	(63,471	)
Net unrealized gains on available-for-sale securities (b)	21,715			22,506
Net unrealized losses on hedging activities (c)	(119,503		)	(137,114		)
Employee supplemental retirement plans (d)	(20,920		)	(21,301		)
Total Accumulated other comprehensive loss	$	(179,585	)	$	(199,380	)

(a)OTTI — Non-credit OTTI losses recorded in AOCI declined at March 31, 2013, primarily due to accretion recorded as a reduction in AOCI and a corresponding increase in the balance sheet carrying values of the OTTI securities.   No OTTI was recorded in the 2013 first quarter.

(b)Fair values of available-for-sale securities — Balance represents net unrealized fair value gains of MBS securities and a grantor trust fund.   Fair values declined due to decline of AFS securities.

(c)Cash flow hedge losses — Net loss represents unrealized valuation losses on interest rate swaps in cash flow “rollover” hedge strategies that hedged the variability of 91-day discount notes issued in sequence for periods up to 15 years.   Fair values of the swaps were in unrealized loss position primarily due to the adverse change in fair values of $1.1 billion of long-term swaps designated as a hedge of discount notes at March 31, 2013 and December 31, 2012.   Fair value changes will be recorded through AOCI over the life of the hedges for the effective portion of the cash flow hedge strategy.   Ineffectiveness, if any, was recorded through earnings.   Discount note expense, which resets every 91 days, is synthetically changed to fixed cash flows over the hedge periods, thereby achieving hedge objectives.

The AOCI also included $11.5 million due to realized losses from terminated swaps in cash flow hedge strategy associated with hedges of anticipated issuance of debt.  Amounts recorded in AOCL are being reclassified as an interest expense over the terms of the issued debt.  The expense is considered as a yield adjustment to the fixed coupons of the debt.

(d)Employee supplemental plans — Represent minimum additional actuarially determined pension and post-retirement health benefit liabilities that were not recognized through earnings.  Amounts will be amortized as an expense through earnings over an actuarially determined period.

Dividend - By Finance Agency regulation, dividends may be paid out of current earnings or previously retained earnings.   We may be restricted from paying dividends if we do not comply with any of its minimum capital requirements or if payment would cause us to fail to meet any of its minimum capital requirements, including our Retained earnings target as established by the Board of Directors of the FHLBNY.   In addition, we may not pay dividends if any principal or interest due on any consolidated obligations has not been paid in full, or if we fail to satisfy certain liquidity requirements under applicable Finance Agency regulations.   None of these restrictions applied for any period presented.  Dividends are computed based on the weighted average stock outstanding during a quarter, and are declared and paid in the following quarter.  The following table summarizes dividends paid and payout ratios (on all Class B stocks held by members; excludes capital stock held by non-members):

Table 8.3:Dividends Paid and Payout Ratios

	Three months ended
	March 31, 2013			March 31, 2012
Cash dividends paid per share	$	1.13		$	1.26
Dividends paid (a) (c)	$	52,985		$	58,124
Pay-out ratio (b)	75.73		%	57.04		%

(a)In thousands.

(b)Dividend paid in the period divided by net income for that period.

(c)The amounts paid represent total dividends, including dividend paid to non-member; for accounting purposes, such dividends paid to non-members are recorded as interest expense.

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Derivative Instruments and Hedging Activities

Interest rate swaps, swaptions, cap and floor agreements (collectively, derivatives) enable us to manage our exposure to changes in interest rates by adjusting the effective maturity, repricing frequency, or option characteristics of financial instruments.  To a limited extent, we also use interest rate swaps to hedge changes in interest rates prior to debt issuance and essentially lock in funding costs.

The following table summarizes the principal derivatives hedging strategies outstanding as of March 31, 2013 and December 31, 2012:

Table 9.1:Derivative Hedging Strategies - Advances

Derivatives/Terms	Hedging Strategy	Accounting Designation	March 31, 2013 Notional Amount (in millions)		December 31, 2012 Notional Amount (in millions)
Pay fixed, receive floating interest rate swap no longer cancellable by counterparty	To convert fixed rate on a fixed rate advance to a LIBOR floating rate non-putable advance	Economic Hedge of Fair Value Risk	$	—	$	25
Pay fixed, receive floating interest rate swap non-cancellable	To convert fixed rate on a fixed rate advance to a LIBOR floating rate non-putable advance	Economic Hedge of Fair Value Risk	$	13	$	146
Pay fixed, receive floating interest rate swap cancellable by counterparty	To convert fixed rate on a fixed rate advance to a LIBOR floating rate putable advance	Fair Value Hedge	$	14,791	$	15,605
Pay fixed, receive floating interest rate swap no longer cancellable by counterparty	To convert fixed rate on a fixed rate advance to a LIBOR floating rate no-longer putable advance	Fair Value Hedge	$	2,196	$	2,098
Pay fixed, receive floating interest rate swap non-cancellable	To convert fixed rate on a fixed rate advance to a LIBOR floating rate non-putable advance	Fair Value Hedge	$	26,199	$	27,308
Purchased interest rate cap	To offset the cap embedded in the variable rate advance	Economic Hedge of Fair Value Risk	$	8	$	8

Table 9.2:Derivative Hedging Strategies – Consolidated Obligation Liabilities

Derivatives/Terms	Hedging Strategy	Accounting Designation	March 31, 2013 Notional Amount (in millions)		December 31, 2012 Notional Amount (in millions)
Receive fixed, pay floating interest rate swap cancellable by counterparty	To convert fixed rate consolidated obligation bond debt to a LIBOR floating rate callable bond	Economic Hedge of Fair Value Risk	$	165	$	285
Receive fixed, pay floating interest rate swap non-cancellable	To convert fixed rate consolidated obligation bond debt to a LIBOR floating rate non-callable	Economic Hedge of Fair Value Risk	$	—	$	625
Receive fixed, pay floating interest rate swap cancellable by counterparty	To convert fixed rate consolidated obligation bond debt to a LIBOR floating rate callable bond	Fair Value Hedge	$	5,631	$	3,246
Receive fixed, pay floating interest rate swap non-cancellable	To convert fixed rate consolidated obligation bond debt to a LIBOR floating rate non-callable	Fair Value Hedge	$	29,022	$	28,587
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 discount note debt.	Cash flow hedge	$	1,106	$	1,106
Basis swap	To convert non-LIBOR index to LIBOR to reduce interest rate sensitivity and repricing gaps	Economic Hedge of Cash Flows	$	2,250	$	7,345
Receive fixed, pay floating interest rate swap cancellable by counterparty	Fixed rate callable bond converted to a LIBOR floating rate; matched to callable bond accounted for under fair value option	Fair Value Option	$	150	$	—
Receive fixed, pay floating interest rate swap non-cancellable	Fixed rate non-callable bond converted to a LIBOR floating rate; matched to non-callable bond accounted for under fair value option	Fair Value Option	$	9,878	$	12,728
Receive fixed, pay floating interest rate swap non-cancellable	Fixed rate consolidated obligation discount note converted to a LIBOR floating rate; matched to discount note accounted for under fair value option	Fair Value Option	$	1,946	$	1,946

Table 9.3:Derivative Hedging Strategies – Balance Sheet and Intermediation

Derivatives/Terms	Hedging Strategy	Accounting Designation	March 31, 2013 Notional Amount (in millions)		December 31, 2012 Notional Amount (in millions)
Purchased interest rate cap	Economic hedge on the Balance Sheet	Economic Hedge	$	1,892	$	1,892
Intermediary positions- interest rate swaps and caps	To offset interest rate swaps and caps executed with members by executing offsetting derivatives with counterparties	Economic Hedge of Fair Value Risk	$	530	$	530

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Derivatives Financial Instruments by Product

The following table summarizes the notional amounts and estimated fair values of derivative financial instruments (excluding accrued interest) by product and type of accounting treatment.  The table also provides a reconciliation of fair value basis gains and (losses) of derivatives to the Statements of Condition (in thousands):

Table 9.4:Derivatives Financial Instruments by Product

	March 31, 2013					December 31, 2012
			Total Estimated					Total Estimated
			Fair Value					Fair Value
			(Excluding					(Excluding
	Total Notional		Accrued			Total Notional		Accrued
	Amount		Interest)			Amount		Interest)
Derivatives designated as hedging instruments (a)
Advances-fair value hedges	$	43,186,103	$	(3,249,321	)	$	45,011,484	$	(3,610,238	)
Consolidated obligations-fair value hedges	34,653,050		678,450			31,833,050		803,389
Cash Flow-anticipated transactions	1,106,000		(107,964		)	1,106,000		(124,779		)
Derivatives not designated as hedging instruments (b)
Advances hedges	21,106		(184		)	179,013		(788		)
Consolidated obligations hedges	2,415,000		404			8,255,000		3,526
Mortgage delivery commitments	26,249		49			25,217		(32		)
Balance sheet	1,892,000		5,189			1,892,000		4,221
Intermediary positions hedges	530,000		280			530,000		325
Derivatives matching COs designated under FVO (c)
Interest rate swaps-consolidated obligations-bonds	10,028,000		4,843			12,728,000		10,130
Interest rate swaps-consolidated obligations-discount notes	1,945,744		814			1,945,744		1,674
Total notional and fair value	$	95,803,252	$	(2,667,440	)	$	103,505,508	$	(2,912,572	)
Total derivatives, excluding accrued interest			$	(2,667,440	)			$	(2,912,572	)
Cash collateral pledged to counterparties			2,297,534					2,546,568
Cash collateral received from counterparties			(5,500		)			(7,700		)
Accrued interest			(4,293		)			(11,190		)
Net derivative balance			$	(379,699	)			$	(384,894	)
Net derivative asset balance			$	11,236				$	41,894
Net derivative liability balance			(390,935		)			(426,788		)
Net derivative balance			$	(379,699	)			$	(384,894	)

(a)Qualifying under hedge accounting rules.

(b)Not qualifying under hedge accounting rules but used as an economic hedge (“standalone”).

(c)Economic hedge of debt designated under the FVO.

The categories of “Fair value,” “Commitment,” and “Cash flow” hedges represented derivative transactions accounted for as hedges. The category of “Economic” hedges represented derivative transactions under hedge strategies that did not qualify for hedge accounting treatment but were an approved risk management strategy.

Derivative Credit Risk Exposure and Concentration

In addition to market risk, we are subject to credit risk in derivative transactions because of the potential for non-performance by the counterparties, which could result in the FHLBNY having to acquire a replacement derivative from a different counterparty at a cost.  We are also subject to operational risks in the execution and servicing of derivative transactions.  The degree of counterparty credit risk may depend on, among other factors, the extent to which netting procedures and/or the provision of collateral are used to mitigate the risk.  See Table 9.5 for summarized information.  Summarized below are our risk evaluation and measurement processes:

Risk measurement — We estimate exposure to credit loss on derivative instruments by calculating the replacement cost, on a present value basis, to settle at current market prices all outstanding derivative contracts in a gain position, net of collateral pledged by the counterparty.  All derivative contracts with non-members are also subject to master netting agreements or other right of offset arrangements.

Exposure — In determining credit risk, we consider accrued interest receivable and payable, and the legal right to offset assets and liabilities by counterparty.  We attempt to mitigate exposure by requiring derivative counterparties to pledge cash collateral if the amount of exposure is above the collateral threshold agreements.

Derivative counterparty ratings — Our credit exposures (derivatives in a net gain position) were to counterparties rated Single A or better, and to member institutions on whose behalf we acted as an intermediary.  The exposures were collateralized under standard advance collateral agreements with our members.  Acting as an intermediary, we had also purchased equivalent notional amounts of derivatives from unrelated derivative counterparties.

Risk mitigation — We attempt to mitigate derivative counterparty credit risk by contracting only with experienced counterparties with investment-grade credit ratings.  Annually, our management and Board of Directors review and approve all non-member derivative counterparties.  We monitor counterparties on an ongoing basis for significant business events, including ratings actions taken by Nationally Recognized Statistical Rating Organizations.  All approved derivatives counterparties must enter into a master ISDA agreement with our bank and, in addition, execute the Credit Support Annex to the ISDA agreement that provides for collateral support at predetermined thresholds.

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Derivatives Counterparty Credit Ratings

The following table summarizes our derivative counterparty credit rating and their notional and fair value exposure (in thousands, except number of counterparties):

Table 9.5:Derivatives Counterparty Notional Balance by Credit Ratings

	March 31, 2013
				Total Net		Credit Exposure		Other		Net
	Number of	Notional		Exposure at		Net of		Collateral		Credit
Credit Rating	Counterparties	Balance		Fair Value		Cash Collateral (a)(c)		Held (b)		Exposure
AA	4	$	9,002,544	$	—	$	—	$	—	$	—
A	12	75,369,604		10,503		5,003		—		5,003
BBB	2	11,139,855		—		—		—		—
Members (a)(b)	2	265,000		6,184		6,184		6,184		—
Delivery Commitments	—	26,249		49		49		49		—
	20	$	95,803,252	$	16,736	$	11,236	$	6,233	$	5,003

	December 31, 2012
				Total Net		Credit Exposure		Other		Net
	Number of	Notional		Exposure at		Net of		Collateral		Credit
Credit Rating	Counterparties	Balance		Fair Value		Cash Collateral (a)(c)		Held (b)		Exposure
AA	4	$	10,218,677	$	—	$	—	$	—	$	—
A	12	79,689,143		42,226		34,526		—		34,526
BBB	2	13,307,471		—		—		—		—
Members (a)(b)	2	265,000		7,368		7,368		7,368		—
Delivery Commitments	—	25,217		—		—		—		—
	20	$	103,505,508	$	49,594	$	41,894	$	7,368	$	34,526

(a)Net credit exposure of $11.2 million at March 31, 2013 comprised of: (1) Derivatives in unrealized fair value gains of $5.0 million, representing the estimated cost of replacing derivatives if counterparties defaulted.  (2) $6.2 million in potential exposures if members defaulted at March 31, 2013, before considering collateralization provisions that apply to all members.  See Note (b) below.  The FHLBNY acts as an intermediary when we are requested by a member to execute derivative contracts on its behalf. (3) Cash collateral posted by the Bank is typically netted against the counterparty exposure, unless it is in excess of the counterparty’s exposure.

(b)Members are required to pledge collateral to secure our exposure to the derivatives sold to members.  As a result of the collateral agreements with our members, we believe that our maximum credit exposure due to the intermediated transactions was $0 at March 31, 2013 and December 31, 2012.

(c)As reported in the Statements of Condition.  The table above does not report fair values of counterparties in a net liability position, as only derivatives in a fair value gain position represent the FHLBNY’s credit exposures.

Many of the Credit Support Amount (“CSA”) agreements with swap dealers stipulate that so long as we retain our GSE status, ratings downgrades would not result in the posting of additional collateral.  Other CSA agreements would require us to post additional collateral based solely on an adverse change in our credit rating by S&P and Moody’s.  In the event of a split rating, the lower rating will apply.  On August 8, 2011, S&P downgraded the credit rating of the FHLBank long-term debt from AAA to AA+/Negative and lowered one notch the credit ratings of those FHLBanks rated AAA (including the Federal Home Loan Bank of New York) to AA+/Negative.  On August 2, 2011, Moody’s affirmed the AAA status of the FHLBank’s long-term debt and the AAA credit rating of the FHLBNY.

On the assumption we will retain our status as a GSE, we estimate that a one notch downgrade of our credit rating by S&P would have permitted swap dealers and counterparties to make additional collateral calls of up to $82.8 million at March 31, 2013.  Additional collateral postings upon an assumed downgrade were estimated based on the factors in the individual collateral posting provisions of the CSA with each counterparty and the exposures as of March 31, 2013.  The aggregate fair value of our derivative instruments that were in a net liability position at March 31, 2013 was approximately $390.9 million.

84

Derivative Counterparty Country Concentration Risk

The following table summarizes derivative notional exposures by significant counterparty by country of incorporation.  The table also summarizes the FHLBNY’s exposure (i.e. when derivative contracts are in a gain position) (dollars in thousands):

Table 9.6:FHLBNY Exposure Concentration (a)

		March 31, 2013
	Ultimate Country	Notional		Percentage		Fair Value		Percentage
Counterparties (Asset position)	of Incorporation (b)	Amount (c)		of Total		Exposure		of Total
Counterparty	France	$	6,219,631	6.49	%	$	5,003	44.53	%
Members and Delivery Commitments		291,249		0.30		6,233		55.47
Total Credit Exposure		6,510,880		6.79		$	11,236	100.00	%
Counterparties (Liability position)
Counterparty	Germany	13,561,690		14.16
Counterparty	U.S.A.	11,687,685		12.20
Counterparty	U.S.A.	9,935,455		10.37
Counterparties below 10% aggregate by country
	U.S.A.	29,075,906		30.35
	United Kingdom	12,921,773		13.49
	Switzerland	11,833,863		12.35
	Canada	261,000		0.27
	France	15,000		0.02
		89,292,372		93.21
		$	95,803,252	100.00	%
		December 31, 2012
	Ultimate Country	Notional		Percentage		Fair Value		Percentage
Counterparties (Asset position)	of Incorporation (b)	Amount (c)		of Total		Exposure		of Total
Counterparty	Switzerland	$	8,870,698	8.57	%	$	24,127	57.59	%
Counterparty	France	8,814,631		8.52		4,201		10.03
Counterparty	U.S.A.	6,791,620		6.56		6,198		14.79
Members and Delivery Commitments		290,217		0.28		7,368		17.59
Total Credit Exposure		24,767,166		23.93		$	41,894	100.00	%
Counterparties (Liability position)
Counterparty	Germany	14,143,314		13.66
Counterparty	U.S.A.	12,529,188		12.10
Counterparty	U.S.A.	12,007,071		11.60
Counterparties below 10% aggregate by country
	U.S.A.	23,873,304		23.07
	United Kingdom	11,711,684		11.32
	Switzerland	4,097,781		3.96
	Canada	361,000		0.35
	France	15,000		0.01
		78,738,342		76.07
		$	103,505,508	100.00	%

(a)Notional concentration –We measure concentration by fair value exposure and not by notional.  At March 31, 2013, concentration as measured by fair values in a gain position was with one counterparty.  Derivative contracts with remaining counterparties were in a liability position, and the FHLBNY’s exposure with such contracts would be measured by the FHLBNY’s inability to replace the contracts at a value that was equal to or greater than the cash posted to the defaulting counterparty.

(b)Country of incorporation is based on domicile of the ultimate parent company.

(c)Total notional for all counterparties.  Fair values are reported only when the FHLBNY has an exposure.  Fair values in a liability position represent our exposure to counterparties, and this information is not reported in the above tables.

Table 9.7:Notional and Fair Value by Contractual Maturity (in thousands):

	March 31, 2013					December 31, 2012
	Notional		Fair Value			Notional		Fair Value
Maturity less than one year	$	39,633,130	$	22,251		$	46,503,770	$	66,329
Maturity from one year to less than three years	20,161,462		(262,208		)	22,957,351		(247,655		)
Maturity from three years to less than five years	18,781,527		(1,640,220		)	19,184,088		(2,104,432		)
Maturity from five years or greater	17,200,884		(787,312		)	14,835,082		(626,782		)
Delivery Commitments	26,249		49			25,217		(32		)
	$	95,803,252	$	(2,667,440	)	$	103,505,508	$	(2,912,572	)

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Liquidity, Cash Flows, Short-Term Borrowings and Short-Term Debt

Our primary source of liquidity is the issuance of consolidated obligation bonds and discount notes.  To refinance maturing consolidated obligations, we rely on the willingness of our investors to purchase new issuances.  We have access to the discount note market, and the efficiency of issuing discount notes is an important factor as a source of liquidity, since discount notes can be issued any time and in a variety of amounts and maturities.  Member deposits and capital stock purchased by members are another source of funds.  Short-term unsecured borrowings from other FHLBanks and in the Federal funds market provide additional sources of liquidity.  In addition, the Secretary of the Treasury is authorized to purchase up to $4.0 billion of consolidated obligations from the FHLBanks.  Our liquidity position remains in compliance with all regulatory requirements and management does not foresee any changes to that position.

Finance Agency Regulations - Liquidity

Regulatory requirements are specified in Parts 917, 932 and 1270 of Finance Agency regulations and are summarized below.  Each FHLBank shall at all times have at least an amount of liquidity equal to the current deposits received from its members that may be invested in: (1) Obligations of the United States; (2) Deposits in banks or trust companies; or (3) Advances with a maturity not to exceed five years.

In addition, each FHLBank shall provide for contingency liquidity, which is defined as the sources of cash an FHLBank may use to meet its operational requirements when its access to the capital markets is impeded.  We met our contingency liquidity requirements.  Liquidity in excess of requirements is summarized in the table titled Contingency Liquidity.  Violations of the liquidity requirements would result in non-compliance penalties under discretionary powers given to the Finance Agency under applicable regulations, which include other corrective actions.

Liquidity Management

We actively manage our liquidity position to maintain stable, reliable, and cost-effective sources of funds while taking into account market conditions, member demand and the maturity profile of our assets and liabilities.  We recognize that managing liquidity is critical to achieving our statutory mission of providing low-cost funding to our members.  In managing liquidity risk, we are required to maintain certain liquidity measures in accordance with the FHLBank Act and policies developed by management and approved by our Board of Directors.  The applicable liquidity requirements are described in the next four sections.

Deposit Liquidity.  We are required to invest an aggregate amount at least equal to the amount of current deposits received from members in: (1) Obligations of the U.S. government; (2) Deposits in banks or trust companies; or (3) Advances to members with maturities not exceeding five years.  In addition to accepting deposits from our members, we may accept deposits from other FHLBanks or from any other governmental instrumentality.  Deposit liquidity is calculated daily.

Quarterly average reserve requirements and actual reserves are summarized below (in millions).  We met these requirements at all times.

Table 10.1:Deposit Liquidity

	Average Deposit		Average Actual
For the Quarters Ended	Reserve Required		Deposit Liquidity		Excess
March 31, 2013	$	1,867	$	57,676	$	55,809
December 31, 2012	1,979		61,032		59,053

Operational Liquidity.  We must be able to fund our activities as our balance sheet changes from day to day.  We maintain the capacity to fund balance sheet growth through regular money market and capital market funding activities.  We monitor our operational liquidity needs by regularly comparing our demonstrated funding capacity with potential balance sheet growth.  We take such actions as may be necessary to maintain adequate sources of funding for such growth.  Operational liquidity is measured daily.  We met these requirements at all times.

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

Table 10.2:Operational Liquidity

	Average Balance Sheet		Average Actual
For the Quarters Ended	Liquidity Requirement		Operational Liquidity		Excess
March 31, 2013	$	7,033	$	25,763	$	18,730
December 31, 2012	6,077		23,434		17,357

Contingency Liquidity.  We are required by Finance Agency regulations to hold “contingency liquidity” in an amount sufficient to meet our liquidity needs if we are unable to access the consolidated obligation debt markets for at least five business days.  Contingency liquidity includes (1) marketable assets with a maturity of one year or less; (2) self-liquidating assets with a maturity of one year or less; (3) assets that are generally acceptable as collateral in the repurchase market; and (4) irrevocable lines of credit from financial institutions receiving not less than the second-highest credit rating from a Nationally Recognized Statistical Rating Organization.  We consistently exceeded the regulatory minimum requirements for contingency liquidity.  Contingency liquidity is reported daily.  We met these requirements at all times.

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

Table 10.3:Contingency Liquidity

	Average Five Day		Average Actual
For the Quarters Ended	Requirement		Contingency Liquidity		Excess
March 31, 2013	$	2,135	$	25,559	$	23,424
December 31, 2012	1,753		23,412		21,659

The standards in our risk management policy address our day-to-day operational and contingency liquidity needs.  These standards enumerate the specific types of investments to be held to satisfy such liquidity needs and are outlined above.  These standards also establish the methodology to be used in determining our operational and contingency needs.  We continually monitor and project our cash needs, daily debt issuance capacity, and the amount and value of investments available for use in the market for repurchase agreements.  We use this information to determine our liquidity needs and to develop appropriate liquidity plans.

Advance “Roll-Off” and “Roll-Over” Liquidity Guidelines.  The Finance Agency’s Minimum Liquidity Requirement Guidelines expanded the existing liquidity requirements to include additional cash flow requirements under two scenarios:  Advance “Roll-Over” and “Roll-Off” scenarios.  Each FHLBank, including the FHLBNY, must have positive cash balances to be able to maintain positive cash flows for 15 days under the Roll-Off scenario, and for five days under the Roll-Over scenario.  The Roll-Off scenario assumes that advances maturing under their contractual terms would mature, and in that scenario we would maintain positive cash flows for a minimum of 15 days on a daily basis.  The Roll-Over scenario assumes that our maturing advances would be rolled over, and in that scenario we would maintain positive cash flows for a minimum of 5 days on a daily basis.  We calculate the amount of cash flows under each scenario on a daily basis and have been in compliance with these guidelines.

Cash flows

Cash and due from banks was $4.7 billion at March 31, 2013, compared to $7.6 billion at December 31, 2012.  Large cash balances were at the Federal Reserve Bank (“FRB”) at year-end, and throughout the year, to avoid potential credit issues that may arise if invested in unsecured overnight deposits at other financial institutions.  Generally, we maintain funds at the FRB for liquidity purposes for our members.

The following discussion highlights the major activities and transactions that affected our cash flows.  See Table 5.12 for a fuller understanding of cash held at the FRB.  Also see Statements of Cash Flows.

Cash flows from operating activities – Our operating assets and liabilities support our lending activities to members.  Operating assets and liabilities can vary significantly in the normal course of business due to the amount and timing of cash flows, which are affected by member-driven borrowing, investment strategies and market conditions.  Management believes cash flows from operations, available cash balances and our ability to generate cash through the issuance of consolidated obligation bonds and discount notes are sufficient to fund our operating liquidity needs.

Net cash provided by operating activities was $140.6 million in the three months ended March 31, 2013, compared to $172.0 million in the three months ended March 31, 2012.  Net cash generated from operating activities was higher than Net income largely as a result of adjustments for noncash items such as the amounts set aside from Net income for the Affordable Housing Program, provisions for mortgage credit losses, depreciation and amortization, net changes in accrued interest receivable, and by derivative financing elements, which are associated with cash flows with off-market terms.

For cash flow reporting, cash outflows (expenses) associated with swaps with off-market terms are considered to be principal repayments of certain off-market swap transactions, although they are reported as an expense to Net income in the Statements of Income.  Certain interest rate swaps had been executed, which at inception of the contracts included off-market terms, and required up-front cash exchanges, and were largely outstanding in the periods in this report.  We view these swaps to contain “financing elements”, as defined under hedge accounting rules.  The amounts reclassified within the Statements of Cash Flows from Operating expenses to Financing activities were $56.6 million in the three months ended March 31, 2013 and $70.3 million in the three months ended March 31, 2012, and represented interest payments to certain swap counterparties for the off-market swaps.

Cash flows from investing activities – Our investing activities predominantly were the advances originated to be held for portfolio, the MBS investment portfolios, mortgage loans (MPF) held for portfolio, and other short-term interest-earning assets.  In three months ended March 31, 2013, investing activities were a net user of cash of $1.9 billion.  This resulted primarily from net increase in overnight investments in Federal funds sold, and investment securities purchased.  Cashflows from Advance were a net “provider”, as cash collected from maturing advances exceeded advances made in the period.  In the same period in 2012, investing activities were a net user of $8.6 billion in cash, primarily due to overnight investments in Federal funds sold, investment securities purchased and increase in advances made to members.

Short-term Borrowings and Short-term Debt – Our primary source of funds is the issuance of FHLBank debt.  Consolidated obligation discount notes are issued with maturities up to one year and provide us with short-term funds.  Discount notes are principally used in funding short-term advances, some long-term advances, as well as money market instruments.  We also issue short-term consolidated obligation bonds as part of our asset-liability management strategy.  We may also borrow from another FHLBank, generally for a period of one day.  Such borrowings have been insignificant historically.

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The following table summarizes short-term debt and their key characteristics (dollars in thousands):

Table 10.4:Short-term Debt

							Consolidated Obligations-Bonds With Original
	Consolidated Obligations-Discount Notes						Maturities of One Year or Less
	March 31, 2013			December 31, 2012			March 31, 2013			December 31, 2012
Outstanding at end of the period (a)	$	32,554,976		$	29,779,947		$	16,000,000		$	15,600,000
Weighted-average rate at end of the period	0.11		%	0.13		%	0.18		%	0.19		%
Average outstanding for the period (a)	$	29,869,014		$	26,112,900		$	16,298,889	(b)	$	15,337,500	(b)
Weighted-average rate for the period	0.12		%	0.11		%	0.19		%	0.20		%
Highest outstanding at any month-end (a)	$	32,554,975		$	33,717,806		$	17,600,000		$	17,675,000

(a)Outstanding balances represent the carrying value of discount notes and par value of bonds (one year or less) issued and outstanding at the reported dates.

(b)The amount represents the monthly average par value outstanding balance at the reported dates.

Off-Balance Sheet Arrangements and Aggregate Contractual Obligations

Off-Balance Sheet Arrangements, Guarantees, and Other Commitments — In accordance with regulations governing the operations of the FHLBanks, each FHLBank, including the FHLBNY, is jointly and severally liable for the FHLBank System’s consolidated obligations issued under Section 11(a) of the FHLBank Act, and in accordance with the FHLBank Act, each FHLBank, including the FHLBNY, is jointly and severally liable for consolidated obligations issued under Section 11(c) of the FHLBank Act.  The joint and several liability regulation authorizes the Finance Agency to require any FHLBank to repay all or a portion of the principal or interest on consolidated obligations for which another FHLBank is the primary obligor.

The FHLBNY’s joint and several contingent liability is a guarantee, but is excluded from initial recognition and measurement provisions because the joint and several obligations are mandated by the FHLBank Act or Finance Agency regulation and are not the result of arms-length transactions among the FHLBanks.  The FHLBNY has no control over the amount of the guarantee or the determination of how each FHLBank would perform under the joint and several obligations.  The valuation of this contingent liability is therefore not recorded on the balance sheet of the FHLBNY.  The par amount of the outstanding consolidated obligations of all 12 FHLBanks was $0.7 trillion at March 31, 2013 and December 31, 2012.  The par value of the FHLBNY’s participation in consolidated obligations, for which we are the primary obligor, was $92.8 billion and $93.6 billion at March 31, 2013 and December 31, 2012.  At March 31, 2013 and December 31, 2012, the FHLBNY had committed to the issuance of $1.1 billion in consolidated obligation discount notes as part of cash flow hedging strategy, described as “Cash flow hedges of rolling issuances of discount notes” in Note 16.  Derivatives and Hedging Strategies.

In addition, in the ordinary course of business, the FHLBNY engages in financial transactions that, in accordance with U.S. GAAP, are not recorded on the FHLBNY’s balance sheet or may be recorded on the FHLBNY’s balance sheet in amounts that are different from the full contract or notional amount of the transactions.  For example, the Bank routinely enters into commitments to purchase MPF loans from PFIs, and to issues standby letters of credit.  These commitments may represent future cash requirements of the Bank, although the standby letters of credit usually expire without being drawn upon.

For additional information on the FHLBNY’s joint and several liability and off-balance sheet arrangements, see Note 18. Commitments and Contingencies.

Contractual Obligations – In the ordinary course of operations, the Bank enters into certain contractual obligations. Such obligations primarily consist of consolidated obligations for which we are the primary obligor.  We have contractual obligations under our pension and retirement plans.  We have entered into derivative financial instruments, as part of the Bank’s interest rate risk management, and which have created contractual obligations.

The following table summarizes the Bank’s significant contractual obligations as of March 31, 2013 (in thousands):

Table 10.5:Contractual Obligations

	March 31, 2013
	Contractual Obligations by Year
			Greater Than		Greater Than
	Less Than		One Year		Three Years		Greater Than
In thousands	One Year		to Three Years		to Five Years		Five Years		Total
Long-term debt obligations - principal	$	38,286,850	$	10,514,170	$	5,074,120	$	6,319,965	$	60,195,105
Long-term debt obligations - interest payments (a)	280,352		189,295		93,157		146,812		709,616
Other liabilities (b)	105,887		4,235		4,727		49,522		164,371
Total	$	38,673,089	$	10,707,700	$	5,172,004	$	6,516,299	$	61,069,092

(a)Contractual obligations related to interest payments on long-term debt are calculated by applying the weighted average interest rate on the FHLBNY’s outstanding long-term debt as of March 31, 2013 to the contractual payment obligations on long-term debt for each of the periods disclosed in the table.  At March 31, 2013, the FHLBNY’s overall weighted average contractual interest rate for long-term debt was 1.18%.

(b)Includes accounts payable and accrued expenses, Pass-through reserves at the FRB on behalf of certain members of the FHLBNY recorded in Other liabilities on the Statement of Condition.  Also includes projected payment obligations for the Postretirement Health Benefit Plan and Benefit Equalization Plan.  For more information about these employee retirement plans, see Note 15.  Employee Retirement Plans.

There has been no material change with respect to lease obligations that was previously disclosed in the Bank’s most recent Form 10-K filed on March 25, 2013.

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Legislative and Regulatory Developments

Final Rule and Guidance on the Supervision and Regulation of Certain Nonbank Financial Companies.

The Financial Stability Oversight Council (the Oversight Council) issued a final rule and guidance effective May 11, 2012 on the standards and procedures the Oversight Council employs in determining whether to designate a nonbank financial company for supervision by the Federal Reserve Board and to be subject to certain prudential standards. The guidance issued with this final rule provides that the Oversight Council expects generally to follow a three-stage process in making its determinations consisting of:

·A first stage that will identify those nonbank financial companies that have $50 billion or more of total consolidated assets and exceed any one of five threshold indicators of interconnectedness or susceptibility to material financial distress, including whether a company has $20 billion or more in total debt outstanding;

·A second stage involving a robust analysis of the potential threat that the subject nonbank financial company could pose to U.S. financial stability based on additional quantitative and qualitative factors that are both industry and company specific; and

·A third stage analyzing the subject nonbank financial company using information collected directly from it. The final rule provides that, in making its determinations, the Oversight Council will consider as one factor whether the nonbank financial company is subject to oversight by a primary financial regulatory agency (for the FHLBanks, the FHFA). A nonbank financial company that the Oversight Council proposes to designate for additional supervision (for example, periodic stress testing) and prudential standards (such as heightened liquidity or capital requirements) under this rule has the opportunity to contest the designation. If an FHLBank is designated by the Oversight Council for supervision by the Federal Reserve and subject to additional Federal Reserve prudential standards, then its operations and business could be adversely impacted by any resulting additional costs, liquidity or capital requirements, and/or restrictions on business activities.

On April 5, 2013, the Federal Reserve System published a final rule that establishes the requirements for determining when a company is “predominately engaged in financial activities.” The final rule provides that a company is “predominantly engaged in financial activities” and thus a “nonbank financial company” if:

·as determined in accordance with applicable accounting standards, (i) the consolidated annual gross financial revenues of the company in either of its two most recently completed fiscal years represent 85% or more of the company’s consolidated annual gross revenues in that fiscal year, or (ii) the company’s consolidated total financial assets as of the end of either of its two most recently completed fiscal years represent 85% or more of the company’s consolidated total assets as of the end that fiscal year; or

·based on all the facts and circumstances, it is determined by the Oversight Council, with respect to the definition of a “nonbank financial company,” or the Federal Reserve Board, with respect to the definition of a “significant nonbank financial company,” that (i) the consolidated annual gross financial revenues of the company represent 85 % or more of the company’s consolidated annual gross revenues, or (ii) the consolidated total financial assets of the company represent 85% or more of the company’s consolidated total assets.

Under the final rule, the FHLBanks would likely be a nonbank financial company.

The final rule also defines the terms “significant nonbank financial company” to mean (i) any nonbank financial company supervised by the Board; and (ii) any other nonbank financial company that had $50 billion or more in total consolidated assets as of the end of its most recently completed fiscal year; and “significant bank holding company” as ‘‘any bank holding company or company that is, or is treated in the United States as, a bank holding company, that had $50 billion or more in total consolidated assets as of the end of the most recently completed calendar year.’’

If an FHLBank is designated for supervision by the Board (and therefore a significant nonbank financial company), the designated FHLBank would be subject to increased supervision and oversight as described above.

Oversight Council Recommendations Regarding Money Market Mutual Fund (MMF) Reform.

The Oversight Council requested comments on certain proposed recommendations for structural reforms of MMFs. The comment deadline was February 15, 2013. The Oversight Council stated that such reforms are intended to address the structural vulnerabilities of MMFs. The demand for FHLBank System consolidated obligations may be impacted by the structural reform ultimately adopted. Accordingly, these reforms could cause the FHLBanks’ funding costs to rise or otherwise adversely impact market access and, in turn, adversely impact the FHLBanks’ results of operations.

Consumer Financial Protection Bureau (CFPB) Final Qualified Mortgage Rule.

In January 2013, the CFPB issued a final rule with an effective date of January 10, 2014, that establishes new standards for mortgage lenders to follow during the loan approval process to determine whether a borrower can afford to repay certain types of loans, including mortgages and other loans secured by a dwelling. The final rule provides for a rebuttable “safe harbor” from consumer claims that a lender did not adequately consider whether a consumer can afford to repay the lender’s mortgage, provided that the mortgage meets the requirements of a Qualified Mortgage loan (QM). QMs are home loans that are either eligible for purchase by Fannie Mae or Freddie Mac or otherwise satisfy certain underwriting standards. On May 6, 2013, the FHFA announced that Fannie Mae and Freddie Mac will no longer purchase a loan that is not a “QM” under those underwriting standards starting January 10, 2014. The underwrting standards require lenders to consider, among other factors, the borrower’s current income, current employment status, credit history, monthly payment for mortgage, monthly payment for other loan obligations and the borrower’s total debt-to-income ratio. Further, the QM underwriting standards generally prohibit loans with excessive points and fees, interest-only or negative-amortization features (subject to limited exceptions), or terms greater than 30 years. On the same date as it issued the final Ability to Repay/final QM standards, the CFPB also issued a proposal that would allow small creditors

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(generally those with assets under $2 billion) in rural or underserved areas to treat first lien balloon mortgage loans that they offer as QM mortgages. Comments were due by February 25, 2013. The QM liability safe harbor could provide incentives to lenders, including the FHLBanks’ members, to limit their mortgage lending to QMs or otherwise reduce their origination of mortgage loans that are not QMs. This approach could reduce the overall level of members’ mortgage loan lending and, in turn, reduce demand for FHLBank advances. Additionally, the value and marketability of mortgage loans that are not QMs, including those pledged as collateral to secure member advances, may be adversely affected.

Basel Committee on Banking Supervision - Liquidity Framework.

On January 6, 2013, the Basel Committee on Banking Supervision (the Basel Committee) announced amendments to the Basel liquidity standards, including the Liquidity Coverage Ratio (LCR). The amendments include the following: (1) revisions to the definition of high quality liquid assets (HQLA) and net cash outflows; (2) a timetable for phase-in of the standard; (3) a reaffirmation of the usability of the stock of liquid assets in periods of stress, including during the transition period; and (4) an agreement for the Basel Committee to conduct further work on the interaction between the LCR and the provision of central bank facilities. Under the amendment, the LCR buffer would be set at 60% of outflows over a 30-day period when the rule becomes effective in 2015, and then increase steadily until reaching 100% four years later. The definition of HQLA has been amended to expand the eligible assets, including residential mortgage assets. In late February, it was reported that the U.S. banking regulators expect to customize the Basel III liquidity rules and expect to issue their final rules later in 2013.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market Risk Management.  Market risk or interest rate risk (“IRR”) is the risk of loss to market value or future earnings that may result from changes in the interest rate environment.  Embedded in IRR is a tradeoff of risk versus reward. We could earn higher income by having higher IRR through greater mismatches between our assets and liabilities at the cost of potentially significant declines in market value and future income if the interest rate environment turned against our expectations.  We have opted to retain a modest level of IRR which allows us to preserve our capital value while generating steady and predictable income.  In keeping with that philosophy, our balance sheet consists of predominantly short-term and LIBOR-based assets and liabilities.  More than 85 percent of our financial assets are either short-term or LIBOR-based, and a similar percentage of our liabilities are also either short-term or LIBOR-based.  These positions protect our capital from large changes in value arising from interest rate or volatility changes.

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

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

Risk Measurements.  Our Risk Management Policy sets up a series of risk limits that we calculate on a regular basis.  The risk limits are as follows:

·The option-adjusted DOE is limited to a range of +2.0 years to -3.5 years in the rates unchanged case, and to a range of +/-6.0 years in the +/-200bps shock cases.  Due to the low interest rate environment beginning in early 2008, the March 2012, June 2012, September 2012, December 2012 and March 2013 rates were too low for a meaningful parallel down-shock measurement.

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

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

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

·KRD exposure at any of nine term points (3-month, 1-year, 2-year, 3-year, 5-year, 7-year, 10-year, 15-year, and 30-year) is limited to between +/-12 months through the 3-year term point and a cumulative limit of +/-30 months from the 5-year through 30-year term points.

Our portfolio, including derivatives, is tracked and the overall mismatch between assets and liabilities is summarized by using a DOE measure.  Our last five quarterly DOE results are shown in years in the table below (due to the on-going low interest rate environment, there was no down-shock measurement performed between the first quarter of 2012 and the first quarter of 2013):

	Base Case DOE	-200bps DOE	+200bps DOE
March 31, 2013	-0.05	N/A	2.55
December 31, 2012	-1.46	N/A	2.02
September 30, 2012	-0.96	N/A	2.43
June 30, 2012	-0.36	N/A	3.06
March 31, 2012	0.72	N/A	3.74

The DOE has remained within policy limits.  Duration indicates any cumulative re-pricing/maturity imbalance in the portfolio’s financial assets and liabilities.  A positive DOE indicates that, on average, the liabilities will re-price or mature sooner than the assets, while a negative DOE indicates that, on average, the assets will re-price or mature earlier than the liabilities.  We measure DOE using software that incorporates any optionality within our portfolio using well-known and tested financial pricing theoretical models.

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We do not solely rely on the DOE measure as a mismatch measure between assets and liabilities.  We also perform the more traditional gap measure that subtracts re-pricing/maturing liabilities from re-pricing/maturing assets over time.  We observe the differences over various horizons, but have set a 10 percent of assets limit on cumulative re-pricings at the one-year point.  This quarterly observation of the one-year cumulative re-pricing gap is provided in the table below and all values are below 10 percent of assets, well within the limit:

	One Year Re-pricing Gap
March 31, 2013	$	5.595 Billion
December 31, 2012	$	6.259 Billion
September 30, 2012	$	6.155 Billion
June 30, 2012	$	5.762 Billion
March 31, 2012	$	5.354 Billion

Our review of potential interest rate risk issues also includes the effect of changes in interest rates on expected net income.  We project asset and liability volumes and spreads over a one-year horizon and then simulate expected income and expenses from those volumes and other inputs.  The effects of changes in interest rates are measured to test whether the portfolio has too much exposure in its net interest income over the coming 12-month period.  To measure the effect, the change to the spread in the shocks is calculated and compared against the base case and subjected to a -15 percent limit.  The quarterly sensitivity of our expected net interest income under both +/-200bps shocks over the next 12 months is provided in the table below (due to the ongoing low interest rate environment, the down-shock measurement was not performed between the first quarter of 2012 and the first quarter of 2013):

	Sensitivity in the -200bps Shock	Sensitivity in the +200bps Shock
March 31, 2013	N/A	16.17	%
December 31, 2012	N/A	14.21	%
September 30, 2012	N/A	17.94	%
June 30, 2012	N/A	8.16	%
March 31, 2012	N/A	8.87	%

Aside from net interest income, the other significant impact on changes in the interest rate environment is the potential impact on the value of the portfolio.  These calculated and quoted market values are estimated based upon their financial attributes (including optionality) and then re-estimated under the assumption that interest rates suddenly rise or fall by 200bps.  The worst effect, whether it is the up or the down shock, is compared to the internal limit of 10 percent.  The quarterly potential maximum decline in the market value of equity under these 200bps shocks is provided below (due to the ongoing low interest rate environment, the down-shock measurement was not performed between the first quarter of 2012 and the first quarter of 2013):

	Down- shock Change in MVE	+200bps Change in MVE
March 31, 2013	N/A	-3.01	%
December 31, 2012	N/A	-1.18	%
September 30, 2012	N/A	-1.58	%
June 30, 2012	N/A	-3.01	%
March 31, 2012	N/A	-4.72	%

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

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The following table displays the portfolio’s maturity/re-pricing gaps as of March 31, 2013 and December 31, 2012 (in millions):

	Interest Rate Sensitivity March 31, 2013
	Six Months or Less			More Than Six Months to One Year			More Than One Year to Three Years		��	More Than Three Years to Five Years			More Than Five Years
Interest-earning assets:
Non-MBS Investments	$	17,957		$	172		$	556		$	359		$	692
MBS Investments	7,362			194			554			611			3,876
Adjustable-rate loans and advances	14,541			—			—			—			—
Net unswapped	39,860			366			1,110			970			4,568
Fixed-rate loans and advances	12,797			2,792			11,810			15,887			10,661
Swaps hedging advances	39,520			(2,452		)	(11,084		)	(15,447		)	(10,537		)
Net fixed-rate loans and advances	52,317			340			726			440			124
Total interest-earning assets	$	92,177		$	706		$	1,836		$	1,410		$	4,692
Interest-bearing liabilities:
Deposits	$	2,087		$	16		$	—		$	—		$	—
Discount notes	32,405			150			—			—			—
Swapped discount notes	(1,106		)	—			—			—			1,106
Net discount notes	31,299			150			—			—			1,106
Consolidated Obligation Bonds
FHLB bonds	30,487			8,166			10,770			5,058			5,842
Swaps hedging bonds	22,886			(7,803		)	(8,612		)	(3,070		)	(3,401		)
Net FHLB bonds	53,373			363			2,158			1,988			2,441
Total interest-bearing liabilities	$	86,759		$	529		$	2,158		$	1,988		$	3,547
Post hedge gaps (a):
Periodic gap	$	5,418		$	177		$	(322	)	$	(578	)	$	1,145
Cumulative gaps	$	5,418		$	5,595		$	5,273		$	4,695		$	5,840

	Interest Rate Sensitivity December 31, 2012
	Six Months or Less			More Than Six Months to One Year			More Than One Year to Three Years			More Than Three Years to Five Years			More Than Five Years
Interest-earning assets:
Non-MBS Investments	$	15,280		$	259		$	529		$	256		$	449
MBS Investments	8,173			220			367			346			3,592
Adjustable-rate loans and advances	14,961			—			—			—			—
Net unswapped	38,414			479			896			602			4,041
Fixed-rate loans and advances	14,845			2,232			12,489			18,645			9,120
Swaps hedging advances	40,889			(1,746		)	(11,802		)	(18,421		)	(8,919		)
Net fixed-rate loans and advances	55,734			486			687			224			201
Total interest-earning assets	$	94,148		$	965		$	1,583		$	826		$	4,242
Interest-bearing liabilities:
Deposits	$	2,043		$	—		$	—		$	—		$	—
Discount notes	29,315			464			—			—			—
Swapped discount notes	(1,106		)	—			—			—			1,106
Net discount notes	28,209			464			—			—			1,106
Consolidated Obligation Bonds
FHLB bonds	29,201			14,454			12,881			2,635			4,794
Swaps hedging bonds	28,481			(13,998		)	(10,897		)	(915		)	(2,671		)
Net FHLB bonds	57,682			456			1,984			1,720			2,123
Total interest-bearing liabilities	$	87,934		$	920		$	1,984		$	1,720		$	3,229
Post hedge gaps (a):
Periodic gap	$	6,214		$	45		$	(401	)	$	(894	)	$	1,013
Cumulative gaps	$	6,214		$	6,259		$	5,858		$	4,964		$	5,977

(a) Re-pricing gaps are estimated at the scheduled rate reset dates for floating rate instruments, and at maturity for fixed rate instruments.  For callable instruments, the re-pricing period is estimated by the earlier of the estimated call date under the current interest rate environment or the instrument’s contractual maturity.

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ITEM 4.   CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures: An evaluation of the Bank’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Act”)) was carried out under the supervision and with the participation of the Bank’s President and Chief Executive Officer, Alfred A. DelliBovi, and Senior Vice President and Chief Financial Officer, Kevin M. Neylan, at March 31, 2013.  Based on this evaluation, they concluded that as of March 31, 2013, the Bank’s disclosure controls and procedures were effective, at a reasonable level of assurance, in ensuring that the information required to be disclosed by the Bank in the reports it files or submits under the Act is (i) accumulated and communicated to the Bank’s management (including the President and Chief Executive Officer and Senior Vice President and Chief Financial Officer) in a timely manner, and (ii) recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.

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

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PART II OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

From time to time, the Federal Home Loan Bank of New York is involved in disputes or regulatory inquiries that arise in the ordinary course of business.  There has been no material change with respect to a continuing legal proceeding involving the FHLBNY that was previously disclosed in Part 1, Item 3 of the FHLBNY’s 2012 Annual Report on Form 10-K filed on March 25, 2013.

ITEM 1A.  RISK FACTORS

There have been no material changes from the risk factors previously disclosed in the “Part I — Item 1A - Risk Factors” section of the FHLBNY’s Form 10-K for the fiscal year ended December 31, 2012.

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

Not applicable.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.  MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5.  OTHER INFORMATION

None.

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ITEM 6. EXHIBITS

No.	Exhibit Description	Filed with this Form 10-Q	Form	Date Filed
10.01	Bank Amended and Restated Severance Pay Plan (a)		10-K	3/25/2013
10.02	Qualified Defined Contribution Plan (a)		10-K	3/25/2013
10.03	Bank Amended and Restated Profit Sharing Plan (a)		10-K	3/25/2013
31.01	Certification of the President and Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	X
31.02	Certification of the Senior Vice President and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	X
32.01	Certification of the President and Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	X
32.02	Certification of the Senior Vice President and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	X
101.01	Pursuant to Rule 405 of Regulation S-T, the following financial information from the Bank’s quarterly report on Form 10-Q for the period ended March 31, 2013, is formatted in XBRL interactive data files: (i) Statements of Condition (Unaudited) at March 31, 2013, and December 31, 2012; (ii) Statements of Income (Unaudited) for the Three Months ended March 31, 2013 and 2012; (iii) Statements of Comprehensive Income (Unaudited) for the Three Months ended March 31, 2013 and 2012 (iv) Statements of Capital (Unaudited) for the Three Months ended March 31, 2013 and 2012; (v) Statements of Cash Flows (Unaudited) for the Three Months ended March 31, 2013 and 2012; and (vi) Notes to Financial Statements. Pursuant to Rule 406T of Regulation S-T, the interactive data files contained in Exhibit 101.01 is deemed not “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and otherwise not subject to the liability of that section.	X

(a)This exhibit includes a management contract, compensatory plan or arrangement required to be noted herein.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	Federal Home Loan Bank of New York
	(Registrant)
	/s/ Kevin M. Neylan
	Kevin M. Neylan
	Senior Vice President and Chief Financial Officer
	Federal Home Loan Bank of New York (on behalf of the registrant and as the Principal Financial Officer)
Date: May 10, 2013

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