Federal Home Loan Bank Of New York 10-Q 2019 Q2 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period ended June 30, 2019

or

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

For the transition period from                       to                     

Commission file number: 000-51397

FEDERAL HOME LOAN BANK OF NEW YORK

(Exact name of registrant as specified in its charter)

Federally chartered corporation	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)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
None	N/A	N/A

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 every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit 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,  a smaller reporting company or an emerging growth company.  See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o	Accelerated filer o
Non-accelerated filer x	Smaller reporting company o
	Emerging growth company o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

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 July 31, 2019 was 54,217,541.

FEDERAL HOME LOAN BANK OF NEW YORK

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2019

Table of Contents

	Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited):
Statements of Condition (Unaudited) as of June 30, 2019 and December 31, 2018	3
Statements of Income (Unaudited) for the Three and Six Months Ended June 30, 2019 and 2018	4
Statements of Comprehensive Income (Unaudited) for the Three and Six Months Ended June 30, 2019 and 2018	5
Statements of Capital (Unaudited) for the Three and Six Months Ended June 30, 2019 and 2018	6
Statements of Cash Flows (Unaudited) for the Six Months Ended June 30, 2019 and 2018	7
Notes to Financial Statements (Unaudited)	9
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	59
Item 3. Quantitative and Qualitative Disclosures about Market Risk	109
Item 4. Controls and Procedures	113
PART II. OTHER INFORMATION	114
Item 1. Legal Proceedings	114
Item 1A. Risk Factors	114
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	114
Item 3. Defaults Upon Senior Securities	114
Item 4. Mine Safety Disclosures	114
Item 5. Other Information	114
Item 6. Exhibits	115
Signatures	116

2

Federal Home Loan Bank of New York

Statements of Condition — Unaudited (In Thousands, Except Par Value of Capital Stock)

As of June 30, 2019 and December 31, 2018

	June 30, 2019			December 31, 2018
Assets
Cash and due from banks (Note 3)	$	49,197		$	85,406
Securities purchased under agreements to resell (Note 4)	9,285,000			4,095,000
Federal funds sold (Note 4)	9,240,000			7,640,000
Trading securities (Note 5) (Includes $251,318 pledged as collateral at June 30, 2019 and $239,813 at December 31, 2018)	7,923,280			5,810,512
Equity Investments (Note 6)	56,167			48,179
Available-for-sale securities, net of unrealized gains of $97,181 at June 30, 2019 and $4,034 at December 31, 2018 (Note 7)	2,506,228			422,216
Held-to-maturity securities (Note 8) (Includes $4,187 pledged as collateral at June 30, 2019 and $4,548 at December 31, 2018)	15,463,781			17,474,826
Advances (Note 9) (Includes $0 at June 30, 2019 and December 31, 2018 at fair value under the fair value option)	102,428,756			105,178,833
Mortgage loans held-for-portfolio, net of allowance for credit losses of $522 at June 30, 2019 and $814 at December 31, 2018 (Note 10)	2,985,768			2,927,230
Loans to other FHLBanks (Note 20)	—			250,000
Accrued interest receivable	361,290			275,256
Premises, software, and equipment	56,850			51,572
Operating lease right-of-use assets (Note 19)	74,602			—
Derivative assets (Note 17)	134,327			113,762
Other assets	8,713			8,602
Total assets	$	150,573,959		$	144,381,394
Liabilities and capital
Liabilities
Deposits (Note 11)
Interest-bearing demand	$	1,231,957		$	1,002,587
Non-interest-bearing demand	19,101			20,050
Term	5,000			40,000
Total deposits	1,256,058			1,062,637
Consolidated obligations, net (Note 12)
Bonds (Includes $3,238,857 at June 30, 2019 and $5,159,792 at December 31, 2018 at fair value under the fair value option)	78,729,376			84,153,776
Discount notes (Includes $0 at June 30, 2019 and $3,180,086 at December 31, 2018 at fair value under the fair value option)	62,379,807			50,640,238
Total consolidated obligations	141,109,183			134,794,014
Mandatorily redeemable capital stock (Note 14)	5,514			5,845
Accrued interest payable	206,802			223,570
Affordable Housing Program (Note 13)	164,262			161,718
Derivative liabilities (Note 17)	43,337			31,147
Other liabilities	153,682			355,841
Operating lease liabilities (Note 19)	87,971			—
Total liabilities	143,026,809			136,634,772
Commitments and Contingencies (Notes 14, 17 and 19)
Capital (Note 14)
Capital stock ($100 par value), putable, issued and outstanding shares: 58,412 at June 30, 2019 and 60,658 at December 31, 2018	5,841,247			6,065,799
Retained earnings
Unrestricted	1,108,387			1,102,801
Restricted (Note 14)	639,865			591,281
Total retained earnings	1,748,252			1,694,082
Total accumulated other comprehensive income (loss)	(42,349		)	(13,259		)
Total capital	7,547,150			7,746,622
Total liabilities and capital	$	150,573,959		$	144,381,394

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 and Six Months Ended June 30, 2019 and 2018

	Three months ended June 30,						Six months ended June 30,
	2019			2018			2019			2018
Interest income
Advances, net (Note 9)	$	704,936		$	629,485		$	1,396,832		$	1,175,945
Interest-bearing deposits	935			90			1,318			154
Securities purchased under agreements to resell (Note 4)	52,320			19,728			82,242			29,837
Federal funds sold (Note 4)	56,767			76,338			130,656			143,856
Trading securities (Note 5)	46,929			13,221			87,802			22,345
Available-for-sale securities (Note 7)	17,118			3,082			32,301			5,927
Held-to-maturity securities (Note 8)	118,173			121,916			238,331			232,231
Mortgage loans held-for-portfolio (Note 10)	25,274			24,423			50,454			48,626
Loans to other FHLBanks (Note 20)	104			6			154			13
Total interest income	1,022,556			888,289			2,020,090			1,658,934
Interest expense
Consolidated obligation bonds (Note 12)	495,987			450,086			994,582			816,260
Consolidated obligation discount notes (Note 12)	356,705			225,376			672,021			432,756
Deposits (Note 11)	5,976			4,443			11,941			7,948
Mandatorily redeemable capital stock (Note 14)	108			293			208			626
Cash collateral held and other borrowings	204			386			546			620
Total interest expense	858,980			680,584			1,679,298			1,258,210
Net interest income before provision for credit losses	163,576			207,705			340,792			400,724
Provision (Reversal) for credit losses on mortgage loans	(275)			72			(292		)	(308		)
Net interest income after provision for credit losses	163,851			207,633			341,084			401,032
Other income (loss)
Service fees and other	4,660			3,973			9,074			7,694
Instruments held under the fair value option gains (losses) (Note 18)	(2,360		)	(309		)	(2,824		)	(362		)
Total OTTI losses	—			(398		)	—			(398		)
Net amount of impairment losses reclassified to (from)
Accumulated other comprehensive income (loss)	(384		)	257			(384		)	257
Net impairment losses recognized in earnings	(384		)	(141		)	(384		)	(141		)
Derivative gains (losses) (Note 17)	(39,069		)	(5,285		)	(51,349		)	(24,085		)
Trading securities gains (losses) (Note 5)	33,924			781			50,994			(2,420		)
Equity investments gains (losses) (Note 6)	1,926			305			6,364			45
Total other income (loss)	(1,303		)	(676		)	11,875			(19,269		)
Other expenses
Operating	15,451			11,393			28,301			21,350
Compensation and benefits	20,462			17,489			41,900			36,257
Finance Agency and Office of Finance	4,199			3,641			8,141			7,900
Other expenses	2,333			1,986			4,683			3,521
Total other expenses	42,445			34,509			83,025			69,028
Income before assessments	120,103			172,448			269,934			312,735
Affordable Housing Program Assessments (Note 13)	12,021			17,274			27,014			31,336
Net income	$	108,082		$	155,174		$	242,920		$	281,399
Basic earnings per share (Note 15)	$	1.86		$	2.53		$	4.27		$	4.46

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 and Six Months Ended June 30, 2019 and 2018

	Three months ended June 30,						Six months ended June 30,
	2019			2018			2019			2018
Net Income	$	108,082		$	155,174		$	242,920		$	281,399
Other Comprehensive income (loss)
Net change in unrealized gains (losses) on available-for-sale securities	61,039			(89		)	93,147			(214		)
Net change in non-credit portion of other-than-temporary impairment losses on held-to-maturity securities
Non-credit portion of other-than-temporary impairment gains (losses)	—			(257		)	—			(257		)
Reclassification of non-credit portion included in net income	384			—			384			—
Accretion of non-credit portion of OTTI	935			1,464			1,792			2,339
Total net change in non-credit portion of other-than-temporary impairment losses on held-to-maturity securities	1,319			1,207			2,176			2,082
Net change due to hedging activities
Cash flow hedges (a)	(69,670		)	23,089			(112,361		)	77,862
Fair value hedges (b)	(11,469		)	—			(13,362		)	—
Total net change due to hedging activities	(81,139		)	23,089			(125,723		)	77,862
Net change in pension and postretirement benefits	654			637			1,310			1,316
Total other comprehensive income (loss)	(18,127		)	24,844			(29,090		)	81,046
Total comprehensive income (loss)	$	89,955		$	180,018		$	213,830		$	362,445

(a)Represents changes in the fair values of derivatives in cash flow hedging programs, primarily from open contracts in the hedging of rolling issuance of CO discount notes, and open contracts in cash flow hedges of anticipatory issuance of CO bonds.  Also includes unamortized gains and losses related to closed cash flow hedges that will be reclassified in future periods from AOCI to interest expense.  For more information, see table “Cash flow hedge gains and losses” in Note 17.  Derivatives and Hedging Activities.

(b)Represents cumulative hedge valuation basis loss on fair value hedges of AFS securities under the last-of-layer hedging provisions of ASU 2017-12.

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 and Six Months Ended June 30, 2019 and 2018

														Accumulated
	Capital Stock (a)													Other
	Class B					Retained Earnings								Comprehensive			Total
	Shares		Par Value			Unrestricted			Restricted		Total			Income (Loss)			Capital
Balance, March 31, 2018	63,114		$	6,311,396		$	1,070,847		$	504,430	$	1,575,277		$	(3,971	)	$	7,882,702
Proceeds from issuance of capital stock	23,013		2,301,255			—			—		—			—			2,301,255
Repurchase/redemption of capital stock	(23,365	)	(2,336,424		)	—			—		—			—			(2,336,424		)
Cash dividends ($1.60 per share) on capital stock	—		—			(105,021		)	—		(105,021		)	—			(105,021		)
Comprehensive income (loss)	—		—			124,139			31,035		155,174			24,844			180,018
Balance, June 30, 2018	62,762		$	6,276,227		$	1,089,965		$	535,465	$	1,625,430		$	20,873		$	7,922,530
Balance, March 31, 2019	56,711		$	5,671,075		$	1,109,437		$	618,248	$	1,727,685		$	(24,222	)	$	7,374,538
Proceeds from issuance of capital stock	20,227		2,022,647			—			—		—			—			2,022,647
Repurchase/redemption of capital stock	(18,486	)	(1,848,538		)	—			—		—			—			(1,848,538		)
Shares reclassified to mandatorily redeemable capital stock	(40	)	(3,937		)	—			—		—			—			(3,937		)
Cash dividends ($1.57 per share) on capital stock	—		—			(87,515		)	—		(87,515		)	—			(87,515		)
Comprehensive income (loss)	—		—			86,465			21,617		108,082			(18,127		)	89,955
Balance, June 30, 2019	58,412		$	5,841,247		$	1,108,387		$	639,865	$	1,748,252		$	(42,349	)	$	7,547,150

														Accumulated
	Capital Stock (a)													Other
	Class B					Retained Earnings								Comprehensive			Total
	Shares		Par Value			Unrestricted			Restricted		Total			Income (Loss)			Capital
Balance, December 31, 2017	67,500		$	6,750,005		$	1,067,097		$	479,185	$	1,546,282		$	(55,249	)	$	8,241,038
Adjustments to opening balances (b)	—		—			4,924			—		4,924			(4,924		)	—
Proceeds from issuance of capital stock	41,729		4,172,890			—			—		—			—			4,172,890
Repurchase/redemption of capital stock	(46,466	)	(4,646,544		)	—			—		—			—			(4,646,544		)
Shares reclassified to mandatorily redeemable capital stock	(1	)	(124		)	—			—		—			—			(124		)
Cash dividends ($3.24 per share) on capital stock	—		—			(207,175		)	—		(207,175		)	—			(207,175		)
Comprehensive income (loss)	—		—			225,119			56,280		281,399			81,046			362,445
Balance, June 30, 2018	62,762		$	6,276,227		$	1,089,965		$	535,465	$	1,625,430		$	20,873		$	7,922,530
Balance, December 31, 2018	60,658		$	6,065,799		$	1,102,801		$	591,281	$	1,694,082		$	(13,259	)	$	7,746,622
Proceeds from issuance of capital stock	36,722		3,672,176			—			—		—			—			3,672,176
Repurchase/redemption of capital stock	(38,927	)	(3,892,679		)	—			—		—			—			(3,892,679		)
Shares reclassified to mandatorily redeemable capital stock	(41	)	(4,049		)	—			—		—			—			(4,049		)
Cash dividends ($3.31 per share) on capital stock	—		—			(188,750		)	—		(188,750		)	—			(188,750		)
Comprehensive income (loss)	—		—			194,336			48,584		242,920			(29,090		)	213,830
Balance, June 30, 2019	58,412		$	5,841,247		$	1,108,387		$	639,865	$	1,748,252		$	(42,349	)	$	7,547,150

(a)Putable stock. Cash dividends paid — Dividends per share and aggregate dividends were paid on a single class of shares of capital stock.  For more information, see Note 14. Capital Stock, Mandatorily Redeemable Capital Stock and Restricted Earnings.

(b)Cumulative catch-up adjustment upon adoption of ASU 2016-01 relating to change in the designation of funds in the grantor trusts from AFS to Equity Investments.

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 Six Months Ended June 30, 2019 and 2018

	Six months ended June 30,
	2019			2018
Operating activities
Net Income	$	242,920		$	281,399
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 (a)	(48,960		)	78,275
Concessions on consolidated obligations	1,266			1,372
Premises, software, and equipment	4,113			2,535
Provision (Reversal) for credit losses on mortgage loans	(292		)	(308		)
Credit impairment losses on held-to-maturity securities	384			141
Change in net fair value adjustments on derivatives and hedging activities	(324,340		)	145,878
Net realized and unrealized (gains) losses on trading securities	(50,994		)	2,420
Change in fair value on Equity Investments	(5,877		)	(45		)
Change in fair value adjustments on financial instruments held at fair value	2,824			362
Net change in:
Accrued interest receivable	(86,362		)	(62,058		)
Derivative assets due to accrued interest	4,227			(80,562		)
Derivative liabilities due to accrued interest	35,316			76,732
Other assets	(330		)	(3,065		)
Affordable Housing Program liability	2,544			17,650
Accrued interest payable	(16,768		)	36,525
Other liabilities (a)	1,644			5,238
Total adjustments	(481,605		)	221,090
Net cash provided by (used in) operating activities	(238,685		)	502,489
Investing activities
Net change in:
Interest-bearing deposits	(205,237		)	(8,410		)
Securities purchased under agreements to resell	(5,190,000		)	(2,245,000		)
Federal funds sold	(1,600,000		)	(4,561,000		)
Deposits with other FHLBanks	(52		)	156
Premises, software, and equipment	(9,391		)	(8,071		)
Trading securities:
Purchased	(4,650,582		)	(2,355,907		)
Repayments	1,714,147			240,000
Proceeds from sales	748,301			—
Equity Investments:
Purchased	(3,072		)	(1,809		)
Proceeds from sales	960			902
Available-for-sale securities:
Purchased	(438,539		)	—
Repayments	42,830			48,651
Held-to-maturity securities:
Long-term securities
Purchased	(1,072,620		)	(1,865,365		)
Repayments (b)	1,482,781			1,541,516
Advances:
Principal collected	578,923,574			522,899,000
Made	(575,518,705		)	(511,566,922		)
Mortgage loans held-for-portfolio:
Principal collected	119,457			128,639
Purchased	(180,255		)	(122,231		)
Proceeds from sales of REO	1,468			1,038
Net change in loans to other FHLBanks	250,000			—
Net cash provided by (used in) investing activities	(5,584,935		)	2,125,187

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 Six Months Ended June 30, 2019 and 2018

	Six months ended June 30,
	2019			2018
Financing activities
Net change in:
Deposits and other borrowings	$	121,693		$	26,673
Derivative contracts with financing element	(9,746		)	(4,250		)
Consolidated obligation bonds:
Proceeds from issuance	41,556,527			65,281,661
Payments for maturing and early retirement	(47,127,264		)	(63,060,455		)
Consolidated obligation discount notes:
Proceeds from issuance	605,334,521			611,195,518
Payments for maturing	(593,674,687		)	(615,352,735		)
Capital stock:
Proceeds from issuance of capital stock	3,672,176			4,172,890
Payments for repurchase/redemption of capital stock	(3,892,679		)	(4,646,544		)
Redemption of mandatorily redeemable capital stock	(4,380		)	(2,362		)
Cash dividends paid (c)	(188,750		)	(207,175		)
Net cash provided by (used in) financing activities	5,787,411			(2,596,779		)
Net increase (decrease) in cash and due from banks	(36,209		)	30,897
Cash and due from banks at beginning of the period (d)	85,406			127,403
Cash and due from banks at end of the period (d)	$	49,197		$	158,300
Supplemental disclosures:
Interest paid	$	996,635		$	735,215
Interest paid for Discount Notes (e)	$	579,318		$	403,656
Affordable Housing Program payments (f)	$	24,470		$	13,686
Transfers of mortgage loans to real estate owned	$	366		$	227
Net amount of impairment losses reclassified to (from)
Accumulated other comprehensive income (loss)	$	(384	)	$	257
Capital stock subject to mandatory redemption reclassified from equity	$	4,049		$	124
Transfers of HTM securities to AFS that are not other-than-temporarily impaired (g)	$	1,597,207		$	—

Notes to Supplemental Disclosure:

The following non-cash transactions were not included in the Statements of Cash Flows in the six months ended June 30, 2019:

(a)The adoption of ASU 2016-02, Leases (Topic 842) resulted in the recognition of non-cash right-of-use operating assets of $71.6 million and lease liabilities of $83.9 million as of January 1, 2019.  For cash flow information on operating leases outstanding at June 30, 2019, including additions, see Operating Lease Commitments in Note 19. Commitments and Contingencies.

(b)Non-cash paydowns on HTM securities were $3.7 million.

Other Notes

(c)Does not include payments to holders of mandatorily redeemable capital stock.  Such payments are considered as interest expense and reported within operating cash flows.

(d)Cash and due from banks did not include any restricted cash or cash equivalents.  Includes pass-thru reserves at the Federal Reserve Bank of New York.  See Note 3. Cash and Due from Banks for further information.

(e)Interest paid disclosures have been supplemented for the six months ended June 30, 2019 and 2018 under the disclosure guidance provided under ASU 2016-15, Statements of Cash flows (Topic 230), “Classification of Certain Cash Receipts and Cash Payments”, which the FHLBNY adopted on January 1, 2018: the line item, Interest paid for Discount Notes, is the portion of the cash payments at settlement of zero-coupon Consolidated obligation discount notes.

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

(g)As of January 1, 2019, the FHLBNY elected (as permitted under ASU 2017-12) and transferred $1.6 billion (amortized cost basis) of fixed-rate MBS from HTM classification to AFS classification.

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

8

Federal Home Loan Bank of New York

Notes to Financial Statements — Unaudited

Background

The Federal Home Loan Bank of New York (FHLBNY or the Bank) is a federally chartered corporation, and is one of 11 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 11 FHLBanks must allocate the greater of $100 million or 10% of their regulatory defined net income for the Affordable Housing Program.

Note 1.Significant Accounting Policies and Estimates.

Basis of Presentation

The accompanying financial statements of the Federal Home Loan Bank of New York have been prepared in accordance with Generally Accepted Accounting Principles in the United States (GAAP) and with the instructions provided by the Securities and Exchange Commission (SEC).

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 FHLBNY’s securities portfolios, and estimating fair values of certain assets and liabilities.

Other than the recently adopted policies as discussed below, 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 21, 2019, which contains a summary of the Bank’s significant accounting policies and estimates.

Recently Adopted Significant Accounting Policies

Derivatives and Hedging.  The FHLBNY adopted the new hedging standards effective January 1, 2019.  The FASB issued ASU 2017-12, Targeted Improvements to Accounting for Hedging Activities (Topic 815) in August 2017, with the objective of improving the financial reporting of hedging relationships and to better portray the economic results of an entity’s risk management activities in its financial statements.  In addition to that main objective, the amendments in this ASU made certain targeted improvements to simplify the application of the hedge accounting guidance in pre-existing GAAP.  The new guidance also requires that we report the entire hedging effects of the hedging instruments in the same income statement line item as the hedged item.  While this is a change in presentation from the legacy standards, the impact for the FHLBNY was not material. The amended presentation was applied prospectively in the Statements of income and prior period comparative financial information was not reclassified to conform to current presentation.

9

Federal Home Loan Bank of New York

Notes to Financial Statements — Unaudited

ASU 2017-12 allowed a one-time transfer of fixed-rate, pre-payable debt securities from HTM to AFS.  The FHLBNY transferred $1.6 billion of HTM securities into AFS classification effective January 1, 2019 as a one-time transfer permitted under the standard.  Other than changes in disclosures as required under the ASU and a one-time election to transfer the HTM securities to AFS, adoption did not have a material effect on the FHLBNY’s financial condition, results of operations, and cash flows.

On October 25, 2018, the FASB issued ASU 2018-16, Inclusion of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes (Topic 815). The new ASU added the OIS rate based on SOFR as a U.S. benchmark rate to facilitate the LIBOR to SOFR transition.  The amendments in the ASU became effective for the FHLBNY concurrently with the adoption of ASU 2017-12 on January 1, 2019.  The FHLBNY will begin to use OIS/SOFR as another ASC 815 hedging benchmark for its interest rate risk management objectives.  The FHLBNY’s primary benchmark for hedges under ASC 815 remains LIBOR.  Beginning in the first quarter, the FHLBNY has also executed hedges under ASC 815 designating the FED funds OIS index (FF/OIS) as a benchmark rate.  For further information, see Note 17 Derivatives and Hedging Activities.

Lease Accounting.  The FHLBNY adopted the leasing standards effective January 1, 2019.  The FASB issued ASU No. 2016-02, Leases (Topic 842) in 2016. The ASU required the recognition of all leases on the balance sheet as lease assets and lease liabilities.  At January 1, 2019, we recognized lease liabilities of $83.9 million and right-of-use assets of $71.6 million, primarily related to operating premise leases.  Other than the recognition of leases on the balance sheet, adoption on January 1, 2019 did not result in material changes to the recognition of operating lease expense in the FHLBNY’s Statements of income.  For further information, see Note 19. Commitments and Contingencies.

Note 2.Recently Issued Accounting Standards and Interpretations.

Accounting for Financial Instruments — Credit Losses.  In June 2016, the FASB issued ASU 2016-13, Financial Instruments — Credit Losses (Topic 326).  The ASU introduces a new accounting model, the Current Expected Credit Losses model (CECL), which requires earlier recognition of credit losses, while also providing additional transparency about credit risk.  The FASB’s CECL model utilizes a lifetime “expected credit loss” measurement objective for the recognition of credit losses for loans, held-to-maturity securities and other receivables at the time the financial asset is originated or acquired.  The expected credit losses are adjusted each period for changes in expected lifetime credit losses.  For available-for-sale securities where fair value is less than cost, credit-related impairment, if any, will be recognized in an allowance for credit losses and adjusted each period for changes in expected credit risk.  This model replaces the multiple existing impairment models in current GAAP, which generally require that a loss be incurred before it is recognized.  We have concluded our preliminary assessment of the impact of CECL on all our business lines, including advances, investments and other financial assets.  While the CECL model represents a significant departure from existing GAAP, we do not expect adoption will have a material impact on our financial condition, results of operations, and cash flows.  This guidance is effective for interim and annual periods beginning on January 1, 2020.  The FHLBNY will adopt the ASU effective January 1, 2020.

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.  The FHLBNY is exempted from maintaining any required clearing balance at the Federal Reserve Bank of New York.

Compensating Balances

The FHLBNY has arrangements with Citibank (a member/stockholder of the FHLBNY) to maintain compensating collected cash balances in return for certain fee based safekeeping and back office operational services that the counterparty provides to the FHLBNY.  There are no restrictions on the withdrawal of funds.  There were no compensating balance at June 30, 2019 and December 31, 2018.

10

Federal Home Loan Bank of New York

Notes to Financial Statements — Unaudited

Pass-through Deposit Reserves

The FHLBNY acts as a pass-through correspondent for member institutions who are required by banking regulations to deposit reserves with the Federal Reserve Banks.  Pass-through reserves deposited with Federal Reserve Banks on behalf of the members by the FHLBNY were $45.4 million at June 30, 2019 and $86.1 million at December 31, 2018.  The liabilities offsetting the pass-through reserves were due to member institutions and were recorded in Other liabilities in the Statements of Condition.

Note 4.                                              ��          Federal Funds Sold and Securities Purchased Under Agreements to Resell.

Federal funds sold — Federal funds sold are unsecured advances to third parties.

Securities purchased under agreements to resell — As part of the FHLBNY’s banking activities, the FHLBNY may enter into secured financing transactions that mature overnight, and can be extended only at the discretion of the FHLBNY.  These transactions involve the lending of cash, against which marketable securities are taken as collateral.  The amount of cash loaned against the collateral is a function of the liquidity and quality of the collateral.  The collateral is typically in the form of securities that meet the FHLBNY’s credit quality standards, are highly-rated and readily marketable.  The FHLBNY has the ability to call for additional collateral if the value of the securities falls below a pre-defined haircut.  The FHLBNY can terminate the transaction and liquidate the collateral if the counterparty fails to post the additional margin.  Agreements generally allow the FHLBNY to repledge securities under certain conditions.  No adjustments for instrument-specific credit risk were deemed necessary as market values of collateral were in excess of principal amounts loaned.

At June 30, 2019 and December 31, 2018, the outstanding balances of Securities purchased under agreements to resell were $9.3 billion and $4.1 billion; the investments typically matured overnight, and were executed through a tri-party arrangement that involved transfer of overnight funds to a segregated safekeeping account at the Bank of New York (BONY).  BONY, acting as an independent agent on behalf of the FHLBNY and the counterparty to the transactions, assumes the responsibility of receiving eligible securities as collateral and releasing funds to the counterparty.  U.S. Treasury securities at market values of $9.5 billion and $4.2 billion were received at BONY to collateralize the overnight investments at June 30, 2019 and December 31, 2018.  Securities purchased under agreements to resell averaged $8.6 billion and $6.8 billion for the three and six months ended June 30, 2019.  For the same periods in the prior year, transaction balances averaged $4.5 billion and $3.7 billion.  Interest income from securities purchased under agreements to resell were $52.3 million and $82.2 million for the three and six months ended June 30, 2019 compared to $19.7 million and $29.8 million for the same periods in the prior year.  No overnight investments had been executed bilaterally with counterparties at June 30, 2019 and December 31, 2018.

Transactions recorded as Securities purchased under agreements to resell (reverse repos) were accounted as collateralized financing transactions.

Note 5.Trading Securities.

The carrying value of a trading security equals its fair value.  The following table provides major security types at June 30, 2019 and December 31, 2018 (in thousands):

Fair value	June 30, 2019		December 31, 2018
GSE securities	$	—	$	502,849
Corporate notes	3,403		3,334
U.S. Treasury notes	7,919,877		5,304,329
Total Trading securities	$	7,923,280	$	5,810,512

The carrying values of trading securities included net unrealized fair value gains of $53.3 million at June 30, 2019, and $2.6 million at December 31, 2018.  We have classified investments acquired for purposes of meeting short-term contingency and other liquidity needs as trading securities.  In accordance with Finance Agency guidance, we do not participate in speculative trading practices.

11

Federal Home Loan Bank of New York

Notes to Financial Statements — Unaudited

Trading Securities Pledged

The FHLBNY had pledged marketable securities at fair values of $251.3 million at June 30, 2019 and $239.8 million at December 31, 2018 to derivative clearing organizations to fulfill the FHLBNY’s initial margin requirements as mandated under margin rules of the Commodities Futures Trading Commission (CFTC).  The clearing organizations have rights to sell or repledge the collateral securities under certain conditions.

The following tables present redemption terms of the major types of trading securities (dollars in thousands):

Redemption Terms

	June 30, 2019
	Due in one year or less			Due after one year through five years			Total Fair Value
Corporate notes	$	833		$	2,570		$	3,403
U.S. Treasury notes	3,672,937			4,246,940			7,919,877
Total Trading securities	$	3,673,770		$	4,249,510		$	7,923,280
Yield on Trading securities	2.56		%	2.55		%
	December 31, 2018
	Due in one year or less			Due after one year through five years			Total Fair Value
GSE securities	$	502,849		$	—		$	502,849
Corporate notes	—			3,334			3,334
U.S. Treasury notes	3,171,130			2,133,199			5,304,329
Total Trading securities	$	3,673,979		$	2,136,533		$	5,810,512
Yield on Trading securities	2.05		%	2.14		%

Note 6.Equity Investments.

The FHLBNY has classified its grantor trusts as equity investments.  The carrying value of equity investments in the Statements of Condition, and the types of assets in the grantor trusts were as follows (in thousands):

	June 30, 2019
			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains (b)		Losses (b)			Value (c)
Cash equivalents	$	1,187	$	—	$	—		$	1,187
Equity funds	27,363		6,424		(636		)	33,151
Fixed income funds	21,636		293		(100		)	21,829
Total Equity Investments (a)	$	50,186	$	6,717	$	(736	)	$	56,167
	December 31, 2018
			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains (b)		Losses (b)			Value (c)
Cash equivalents	$	1,250	$	—	$	—		$	1,250
Equity funds	25,788		2,481		(1,674		)	26,595
Fixed income funds	21,036		7		(709		)	20,334
Total Equity Investments (a)	$	48,074	$	2,488	$	(2,383	)	$	48,179

(a)The intent of the grantor trusts is to set aside cash to meet current and future payments for supplemental unfunded pension plans.  Neither the pension plans nor employees of the FHLBNY own the trust.

(b)Changes in unrealized gains and losses are recorded through earnings, specifically in Other income in the Statements of Income.

(c)The grantor trusts invest in money market, equity and fixed income and bond funds.  Daily net asset values (NAVs) are readily available and investments are redeemable at short notice.  NAVs are the fair values of the funds in the grantor trusts.  The grantor trusts are owned by the FHLBNY.

12

Federal Home Loan Bank of New York

Notes to Financial Statements — Unaudited

In the Statements of Income unrealized gains and losses related to outstanding Equity Investments were as follows (in thousands):

	Three Months Ended June 30,					Six Months Ended June 30,
	2019			2018		2019			2018
Net gains (losses) recognized during the period	$	1,926		$	305	$	6,364		$	45
Less: Net (gains) losses recognized during the period on equity investments sold during the period	—			—		—			—
Less: Net dividend and other	(259		)	—		(487		)	—
Unrealized gains (losses) recognized during the reporting period on equity investments still held at the reporting date	$	1,667		$	305	$	5,877		$	45

Note 7.Available-for-Sale Securities.

As permitted by the new hedge accounting guidance (ASU 2017-12) adopted as of January 1, 2019, the FHLBNY made a one-time election and transferred $1.6 billion (amortized cost basis) of unimpaired fixed-rate GSE-issued commercial mortgage-backed securities from HTM to AFS effective January 1, 2019.  The securities were recorded as AFS with an unrealized fair value loss of $13.5 million at the date of the transfer.

The carrying value of an AFS security equals its fair value.  At June 30, 2019 and at December 31, 2018, no AFS security was other-than-temporarily impaired.  The following tables provide major security types (in thousands):

	June 30, 2019
			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains (a)		Losses (a)			Value
GSE and U.S. Obligations
Mortgage-backed securities
Floating
CMO	$	371,070	$	3,171	$	(61	)	$	374,180
CMBS	4,429		4		—			4,433
Total Floating	375,499		3,175		(61		)	378,613
Fixed
CMBS	2,033,548		96,315		(2,248		)	2,127,615
Total Available-for-sale securities	$	2,409,047	$	99,490	$	(2,309	)	$	2,506,228
	December 31, 2018
			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains (a)		Losses (a)			Value
GSE and U.S. Obligations
Mortgage-backed securities
CMO-Floating	$	402,540	$	4,011	$	—		$	406,551
CMBS-Floating	15,642		23		—			15,665
Total Available-for-sale securities	$	418,182	$	4,034	$	—		$	422,216

(a)Recorded in AOCI — Net unrealized fair value gains were $97.2 million at June 30, 2019 and $4.0 million at December 31, 2018.

13

Federal Home Loan Bank of New York

Notes to Financial Statements — Unaudited

Impairment Analysis of AFS Securities

The FHLBNY’s portfolio of MBS classified as AFS is comprised of GSE-issued collateralized mortgage obligations and floating rate CMBS, and U.S. Agency issued MBS.  The FHLBNY evaluates its GSE-issued securities by considering the creditworthiness and performance of the debt securities and the strength of the government-sponsored enterprises’ guarantees of the securities.

Based on credit and performance 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. At June 30, 2019 unrealized fair value losses have been aggregated by the length of time a security was in a continuous unrealized loss position.  At December 31, 2018, there was no available-for-sale debt security at a fair value below its amortized cost basis.

The following table summarizes available-for-sale securities with estimated fair values below their amortized cost basis (in thousands):

	June 30, 2019
	Less than 12 months					12 months or more					Total
	Estimated		Unrealized			Estimated		Unrealized			Estimated		Unrealized
	Fair Value		Losses			Fair Value		Losses			Fair Value		Losses
MBS Investment Securities
MBS-GSE
Fannie Mae-CMO	$	15,234	$	(60	)	$	—	$	—		$	15,234	$	(60	)
Fannie Mae-CMBS	—		—			218,977		(2,248		)	218,977		(2,248		)
Freddie Mac-CMO	1,040		(1		)	—		—			1,040		(1		)
Total	$	16,274	$	(61	)	$	218,977	$	(2,248	)	$	235,251	$	(2,309	)

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):

	June 30, 2019				December 31, 2018
	Amortized Cost (b)		Fair Value		Amortized Cost (b)		Fair Value
Mortgage-backed securities
Due after one year through five years	$	4,429	$	4,433	$	15,642	$	15,665
Due after five year through ten years	1,951,175		2,041,624		—		—
Due after ten years	453,443		460,171		402,540		406,551
Total Available-for-sale securities	$	2,409,047	$	2,506,228	$	418,182	$	422,216

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

(b)Amortized cost is after adjusting for net unamortized premiums of $28.3 million and net unamortized discounts of $1.5 million at June 30, 2019 and December 31, 2018.

14

Federal Home Loan Bank of New York

Notes to Financial Statements — Unaudited

Interest Rate Payment Terms

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

	June 30, 2019				December 31, 2018
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Mortgage-backed securities
Floating
CMO - LIBOR	$	371,070	$	374,180	$	402,540	$	406,551
CMBS - LIBOR	4,429		4,433		15,642		15,665
Total Floating	375,499		378,613		418,182		422,216
Fixed
CMBS	2,033,548		2,127,615		—		—
Total Mortgage-backed securities	$	2,409,047	$	2,506,228	$	418,182	$	422,216

Note 8.Held-to-Maturity Securities.

Major Security Types (in thousands)

	June 30, 2019
			OTTI					Gross		Gross
	Amortized		Recognized			Carrying		Unrecognized		Unrecognized			Fair
Issued, guaranteed or insured:	Cost (d)		in AOCI			Value		Holding Gains (a)		Holding Losses (a)			Value
Pools of Mortgages
Fannie Mae	$	67,830	$	—		$	67,830	$	5,909	$	—		$	73,739
Freddie Mac	12,718		—			12,718		1,174		—			13,892
Total pools of mortgages	80,548		—			80,548		7,083		—			87,631
Collateralized Mortgage Obligations/Real Estate Mortgage Investment Conduits
Fannie Mae	1,605,881		—			1,605,881		5,719		(3,239		)	1,608,361
Freddie Mac	993,465		—			993,465		4,559		(2,314		)	995,710
Ginnie Mae	10,393		—			10,393		156		—			10,549
Total CMOs/REMICs	2,609,739		—			2,609,739		10,434		(5,553		)	2,614,620
Commercial Mortgage-Backed Securities (b)
Fannie Mae	1,913,103		—			1,913,103		17,363		(522		)	1,929,944
Freddie Mac	9,580,637		—			9,580,637		225,969		(8,770		)	9,797,836
Total commercial mortgage-backed securities	11,493,740		—			11,493,740		243,332		(9,292		)	11,727,780
Non-GSE MBS (c)
CMOs/REMICs	5,326		(349		)	4,977		210		(20		)	5,167
Asset-Backed Securities (c)
Manufactured housing (insured)	31,328		—			31,328		1,365		—			32,693
Home equity loans (insured)	65,177		(4,737		)	60,440		20,467		(7		)	80,900
Home equity loans (uninsured)	27,643		(3,799		)	23,844		5,115		(188		)	28,771
Total asset-backed securities	124,148		(8,536		)	115,612		26,947		(195		)	142,364
Total MBS	14,313,501		(8,885		)	14,304,616		288,006		(15,060		)	14,577,562
Other
State and local housing finance agency obligations	1,159,165		—			1,159,165		356		(22,030		)	1,137,491
Total Held-to-maturity securities	$	15,472,666	$	(8,885	)	$	15,463,781	$	288,362	$	(37,090	)	$	15,715,053

15

Federal Home Loan Bank of New York

Notes to Financial Statements — Unaudited

	December 31, 2018
			OTTI					Gross		Gross
	Amortized		Recognized			Carrying		Unrecognized		Unrecognized			Fair
Issued, guaranteed or insured:	Cost (d)		in AOCI			Value		Holding Gains (a)		Holding Losses (a)			Value
Pools of Mortgages
Fannie Mae	$	74,301	$	—		$	74,301	$	4,355	$	—		$	78,656
Freddie Mac	13,673		—			13,673		953		—			14,626
Total pools of mortgages	87,974		—			87,974		5,308		—			93,282
Collateralized Mortgage Obligations/Real Estate Mortgage Investment Conduits
Fannie Mae	1,752,909		—			1,752,909		5,057		(6,642		)	1,751,324
Freddie Mac	1,079,824		—			1,079,824		4,971		(3,069		)	1,081,726
Ginnie Mae	11,610		—			11,610		181		—			11,791
Total CMOs/REMICs	2,844,343		—			2,844,343		10,209		(9,711		)	2,844,841
Commercial Mortgage-Backed Securities (b)
Fannie Mae	2,596,388		—			2,596,388		888		(37,525		)	2,559,751
Freddie Mac	10,635,137		—			10,635,137		59,025		(65,374		)	10,628,788
Total commercial mortgage-backed securities	13,231,525		—			13,231,525		59,913		(102,899		)	13,188,539
Non-GSE MBS (c)
CMOs/REMICs	6,158		(380		)	5,778		327		(42		)	6,063
Asset-Backed Securities (c)
Manufactured housing (insured)	35,528		—			35,528		1,490		—			37,018
Home equity loans (insured)	69,583		(6,214		)	63,369		24,940		(14		)	88,295
Home equity loans (uninsured)	42,426		(4,467		)	37,959		5,886		(472		)	43,373
Total asset-backed securities	147,537		(10,681		)	136,856		32,316		(486		)	168,686
Total MBS	16,317,537		(11,061		)	16,306,476		108,073		(113,138		)	16,301,411
Other
State and local housing finance agency obligations	1,168,350		—			1,168,350		202		(24,207		)	1,144,345
Total Held-to-maturity securities	$	17,485,887	$	(11,061	)	$	17,474,826	$	108,275	$	(137,345	)	$	17,445,756

(a)Unrecognized gross holding gains and losses represent the difference between fair value and carrying value.

(b)Commercial mortgage-backed securities (CMBS) are Agency issued securities, collateralized by income-producing “multifamily properties”.  Eligible property types include standard conventional multifamily apartments, affordable multifamily housing, seniors housing, student housing, military housing, and rural rent housing.  As permitted by the new hedge accounting guidance, the FHLBNY elected to transfer fixed-rate GSE-issued CMBS at amortized cost basis of $1.6 billion from HTM to AFS effective as of January 1, 2019.

(c)The amounts represent non-agency private-label mortgage- and asset-backed securities.

(d)Amortized cost — For securities that were deemed to be OTTI, amortized cost represents unamortized cost less credit OTTI, net of credit OTTI reversed due to improvements in cash flows.

Securities Pledged

The FHLBNY had pledged MBS, with an amortized cost basis of $4.2 million at June 30, 2019 and $4.5 million at December 31, 2018, to the FDIC in connection with deposits maintained by the FDIC at the FHLBNY.  The FDIC does not have rights to sell or repledge the collateral unless the FHLBNY defaults under the terms of its deposit arrangements with the FDIC.

16

Federal Home Loan Bank of New York

Notes to Financial Statements — Unaudited

Unrealized Losses

The fair values and gross unrealized holding losses are aggregated by major security type and by the length of time the 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 these tables will not equal unrecognized holding losses in the Major Security Types tables.  Unrealized losses are calculated after adjusting for credit OTTI.  In the previous tables, unrecognized holding losses are adjusted for credit and non-credit OTTI.

The following tables summarize held-to-maturity securities with estimated fair values below their amortized cost basis (in thousands):

	June 30, 2019
	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	$	—	$	—		$	323,670	$	(22,030	)	$	323,670	$	(22,030		)
MBS Investment Securities
MBS-GSE
Fannie Mae	847,225		(2,171		)	475,693		(1,590		)	1,322,918		(3,761			)
Freddie Mac	2,371,936		(6,859		)	784,469		(4,225		)	3,156,405		(11,084			)
Total MBS-GSE	3,219,161		(9,030		)	1,260,162		(5,815		)	4,479,323		(14,845			)
MBS-Private-Label	2,504		(12		)	10,916		(382		)	13,420		(394			)
Total MBS	3,221,665		(9,042		)	1,271,078		(6,197		)	4,492,743		(15,239			)
Total	$	3,221,665	$	(9,042	)	$	1,594,748	$	(28,227	)	$	4,816,413	$		(37,269	)
	December 31, 2018
	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	$	304,671	$	(29	)	$	231,022	$	(24,178	)	$	535,693	$		(24,207	)
MBS Investment Securities
MBS-GSE
Fannie Mae	1,212,164		(1,787		)	2,134,166		(42,380		)	3,346,330		(44,167			)
Freddie Mac	3,999,726		(14,431		)	3,157,646		(54,012		)	7,157,372		(68,443			)
Total MBS-GSE	5,211,890		(16,218		)	5,291,812		(96,392		)	10,503,702		(112,610			)
MBS-Private-Label	4,635		(24		)	23,138		(600		)	27,773		(624			)
Total MBS	5,216,525		(16,242		)	5,314,950		(96,992		)	10,531,475		(113,234			)
Total	$	5,521,196	$	(16,271	)	$	5,545,972	$	(121,170	)	$	11,067,168	$		(137,441	)

The FHLBNY’s investments in housing finance agency bonds reported gross unrealized losses of $22.0 million and $24.2 million at June 30, 2019 and December 31, 2018.  Our analyses of the fair values of HFA bonds have concluded that the market is generally pricing the bonds to the “AA municipal sector”.  The bonds are performing to their contractual terms, and management has concluded that the gross unrealized losses on its housing finance agency bonds are temporary because the underlying collateral and credit enhancements are sufficient to protect the FHLBNY from losses based on current expectations.  The credit enhancements may include additional support from Monoline Insurance, Reserve and investment funds allocated to the securities that may be used to make principal and interest payments in the event that the underlying loans pledged for these securities are not sufficient to make the necessary payments and the general obligation of the State issuing the bond.

17

Federal Home Loan Bank of New York

Notes to Financial Statements — Unaudited

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):

	June 30, 2019				December 31, 2018
	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	$	16,080	$	16,043	$	20,300	$	20,194
Due after five years through ten years	37,425		36,930		27,670		27,228
Due after ten years	1,105,660		1,084,518		1,120,380		1,096,923
State and local housing finance agency obligations	1,159,165		1,137,491		1,168,350		1,144,345
Mortgage-backed securities
Due in one year or less	270,455		270,766		369,989		367,636
Due after one year through five years	4,087,607		4,133,758		4,587,009		4,590,849
Due after five years through ten years	6,944,583		7,130,580		8,201,200		8,157,858
Due after ten years	3,010,856		3,042,458		3,159,339		3,185,068
Mortgage-backed securities	14,313,501		14,577,562		16,317,537		16,301,411
Total Held-to-maturity securities	$	15,472,666	$	15,715,053	$	17,485,887	$	17,445,756

(a)Amortized cost is after adjusting for net unamortized premiums of $60.7 million and $63.7 million (net of unamortized discounts) at June 30, 2019 and December 31, 2018.

Interest Rate Payment Terms

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

	June 30, 2019				December 31, 2018
	Amortized		Carrying		Amortized		Carrying
	Cost		Value		Cost		Value
Mortgage-backed securities
CMO
Fixed	$	603,628	$	603,279	$	680,247	$	679,867
Floating	2,011,064		2,011,064		2,169,384		2,169,384
Total CMO	2,614,692		2,614,343		2,849,631		2,849,251
CMBS
Fixed	7,442,496		7,442,496		8,348,709		8,348,709
Floating	4,051,244		4,051,244		4,882,816		4,882,816
Total CMBS	11,493,740		11,493,740		13,231,525		13,231,525
Pass Thru (a)
Fixed	186,711		178,175		204,281		193,601
Floating	18,358		18,358		32,100		32,099
Total Pass Thru	205,069		196,533		236,381		225,700
Total MBS	14,313,501		14,304,616		16,317,537		16,306,476
State and local housing finance agency obligations
Fixed	6,150		6,150		6,770		6,770
Floating	1,153,015		1,153,015		1,161,580		1,161,580
Total State and local housing finance agency obligations	1,159,165		1,159,165		1,168,350		1,168,350
Total Held-to-maturity securities	$	15,472,666	$	15,463,781	$	17,485,887	$	17,474,826

(a)Includes MBS supported by pools of mortgages.

18

Federal Home Loan Bank of New York

Notes to Financial Statements — Unaudited

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 U.S. government agency, (collectively GSE-issued securities), by considering the creditworthiness and performance of the debt securities and the strength of the GSEs’ guarantees of the securities.  Based on analysis, GSE-issued securities are performing in accordance with their contractual agreements, and we will recover our investments in GSE- 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 its entire portfolio of PLMBS.  De minimus OTTI loss of $0.4 million was recorded in the 2019 second quarter.  OTTI recorded in the same period in 2018 was also de minimus.  Based on cash flow testing, the Bank believes no material OTTI exists for the remaining investments.  The Bank’s conclusion is also based upon multiple factors, but not limited to the expected performance of the underlying collateral, and the evaluation of the fundamentals of the issuers’ financial condition.  Management has not made a decision to sell such securities at June 30, 2019, and has concluded that it will not be required to sell such securities before recovery of the amortized cost basis of the securities.

The following table provides rollforward information about the cumulative credit losses and other components of OTTI that will be recognized in future periods as recoveries (in thousands):

	Three months ended June 30,						Six months ended June 30,
	2019			2018			2019			2018
Beginning balance	$	15,442		$	21,092		$	16,584		$	22,731
Additional credit losses for which an OTTI charge was previously recognized	384			141			384			141
Realized credit losses	—			—			—			(49		)
Increases in cash flows expected to be collected, recognized over the remaining life of the securities	(214		)	(1,938		)	(1,356		)	(3,528		)
Ending balance	$	15,612		$	19,295		$	15,612		$	19,295

Note 9Advances.

The FHLBNY 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):

	June 30, 2019						December 31, 2018
			Weighted (a)							Weighted (a)
			Average		Percentage					Average		Percentage
	Amount		Yield		of Total		Amount			Yield		of Total
Overdrawn demand deposit accounts	$	1,051	3.20	%	—	%	$	4,282		3.35	%	—	%
Due in one year or less	74,118,993		2.50		72.65		68,305,214			2.52		64.79
Due after one year through two years	8,727,729		2.33		8.55		18,019,447			2.46		17.09
Due after two years through three years	7,018,322		2.57		6.88		6,471,750			2.38		6.14
Due after three years through four years	2,665,019		2.60		2.61		3,505,420			2.61		3.32
Due after four years through five years	1,625,582		2.87		1.59		2,078,462			2.97		1.97
Thereafter	7,872,293		2.45		7.72		7,049,282			2.51		6.69
Total par value	102,028,989		2.49	%	100.00	%	105,433,857			2.51	%	100.00	%
Hedge valuation basis adjustments (b)	399,767						(255,024		)
Total	$	102,428,756					$	105,178,833

(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.

(b)Hedge valuation basis adjustments under ASC 815 hedges represent changes in the fair values of fixed-rate advances due to changes in the designated benchmark rate.  The FHLBNY’s primary benchmark rate is LIBOR; the FHLBNY may also hedge to the OIS/FF index.

19

Federal Home Loan Bank of New York

Notes to Financial Statements — Unaudited

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

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; and the 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 FHLBNY 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 FHLBNY has not provided an allowance for credit losses on advances.  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 21. 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.

Advances borrowed by insurance companies accounted for 21.3% and 21.1% of total advances at June 30, 2019 and December 31, 2018.  Lending to insurance companies poses a number of unique risks not present in lending to federally insured depository institutions.  For example, there is no single federal regulator for insurance companies.  They are supervised by state regulators and subject to state insurance codes and regulations.  There is uncertainty about whether a state insurance commissioner would try to void the FHLBNY’s claims on collateral in the event of an insurance company failure.  As with all members, insurance companies are also required to purchase the FHLBNY’s capital stock as a prerequisite to membership and borrowing activity.  The FHLBNY’s management takes a number of steps to mitigate the unique risk of lending to insurance companies.  At the time of membership, the FHLBNY requires an insurance company to be highly-rated and to meet the FHLBNY’s credit quality standards.  The FHLBNY performs quarterly credit analysis of the insurance borrower.  The FHLBNY also requires member insurance companies to pledge highly-rated readily marketable securities or mortgage collateral which are held in the FHLBNY’s custody or by our third party custodian.  Such collateral must meet the FHLBNY’s credit quality standards, with appropriate minimum margins applied.  Very high credit quality insurance companies may be allowed to retain possession of the mortgage collateral provided the mortgage collateral is held by a third-party custodian pursuant to a tri-party security agreement.  Marketable securities pledged as collateral by the insurance company must be held by the FHLBNY’s third party custodian.

Security Terms.  The FHLBNY lends to financial institutions involved in housing finance within its district.  Borrowing members are required to purchase capital stock of the FHLBNY and pledge collateral for advances.  As of June 30, 2019 and December 31, 2018, 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.

20

Federal Home Loan Bank of New York

Notes to Financial Statements — Unaudited

Beyond these provisions, Section 10(e) of the FHLBank Act affords any security interest granted by a member to the FHLBNY’s priority over the claims or rights of any other party.  The two exceptions are claims that would be entitled to priority under otherwise applicable law or perfected security interests.  All member obligations with the FHLBNY were fully collateralized throughout their entire term.  The total of collateral pledged to the FHLBNY includes excess collateral pledged above the minimum collateral requirements.  However, a “Maximum Lendable Value” is established to ensure that the FHLBNY has sufficient eligible collateral securing credit extensions.

Note 10.Mortgage Loans Held-for-Portfolio.

Mortgage Partnership Finance® program loans, or (MPF®), are the mortgage loans held-for-portfolio.  The FHLBNY participates in the MPF program by purchasing and originating conventional mortgage loans from its participating members, hereafter referred to as Participating Financial Institutions (PFI).  The FHLBNY manages the liquidity, interest rate and prepayment option risk of the MPF loans, while the PFIs retain servicing activities, and may credit-enhance the portion of the loans participated to the FHLBNY.  No intermediary trust is involved.

The FHLBNY classifies mortgage loans as held for investment, and accordingly reports them at their principal amount outstanding net of unamortized premiums, discounts, and unrealized gains and losses from loans initially classified as mortgage loan commitments.

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

	June 30, 2019					December 31, 2018
	Amount			Percentage of Total		Amount			Percentage of Total
Real Estate(a):
Fixed medium-term single-family mortgages	$	181,433		6.17	%	$	196,551		6.82	%
Fixed long-term single-family mortgages	2,759,561			93.83		2,686,866			93.18
Total par value	2,940,994			100.00	%	2,883,417			100.00	%
Unamortized premiums	45,616					45,451
Unamortized discounts	(1,636		)			(1,761		)
Basis adjustment (b)	1,316					937
Total mortgage loans held-for-portfolio	2,986,290					2,928,044
Allowance for credit losses	(522		)			(814		)
Total mortgage loans held-for-portfolio, net of allowance for credit losses	$	2,985,768				$	2,927,230

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

(b)Balances represent unamortized fair value basis of closed delivery commitments.  A basis adjustment is recorded at the settlement of the loan and it represents the difference in trade price paid for acquiring the loan and the price at the settlement date for a similar loan.  The basis adjustment is amortized as a yield adjustment to Interest income.

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 bps, but this varies with the particular MPF product.  The amount of the first layer, or First Loss Account (FLA), was estimated at $36.8 million and $35.8 million at June 30, 2019 and December 31, 2018.  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 agreed to assume at the “Master Commitment” level.  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 $0.6 million and $1.2 million for the three and six months ended June 30, 2019 and 2018.  These fees were reported as a reduction to mortgage loan interest income.

21

Federal Home Loan Bank of New York

Notes to Financial Statements — Unaudited

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:

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

(2)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.

(3)Losses that exceed the liquidation value of the real property and any PMI will be absorbed by the FHLBNY, limited to the amount of the FLA available under the Master Commitment.  For certain MPF products, the FHLBNY could recover previously absorbed losses by withholding future credit enhancement fees (CE Fees) otherwise payable to the PFI, and applying the amounts to recover losses previously absorbed.  In effect, the FHLBNY may recover losses allocated to the FLA from CE Fees.  The amount of CE Fees depends on the MPF product and the outstanding balances of loans funded in the Master Commitment.  CE Fees payable (potentially available for loss recovery) will decline as the outstanding loan balances in the Master Commitment declines.

(4)The second layer or portion of credit losses is incurred by the PFI and/or the Supplemental Mortgage Insurance (SMI) provider as follows:  The PFI absorbs losses in excess of any FLA up to the amount of the PFI’s credit obligation amount and/or to the SMI provider for MPF 125 Plus products if the PFI has selected SMI coverage.

(5)The third layer of losses is absorbed by the FHLBNY.

Allowance Methodology for Loan Losses

In June 2016, the FASB issued ASU 2016-13, Financial Instruments — Credit Losses (Topic 326).  The ASU introduces a new accounting model, the Current Expected Credit Losses model (CECL), which upon adoption on January 1, 2020, will require earlier recognition of credit losses.  The FASB’s CECL model utilizes a lifetime “expected credit loss” measurement objective for the recognition of credit losses. This guidance is effective beginning on January 1, 2020.

The FHLBNY’s existing allowance methodology is based on current GAAP, which generally requires that a loss be incurred before it is recognized.  For more information about our allowance policies, processes and methodologies, see the most recent Form 10K filed on March 21, 2019.

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 FHLBNY considers a loan to be seriously delinquent when it is past due 90 days or more.  The FHLBNY considers the occurrence of serious delinquency as a primary confirming event of a credit loss.  Bankruptcy and foreclosures are also considered as confirming events.  When a loan is seriously delinquent, or in bankruptcy or in foreclosure, the FHLBNY measures estimated credit losses on an individual loan basis by looking to the value of the real property collateral.  For such loans, the FHLBNY believes it is probable that we will be unable to collect all contractual interest and principal in accordance with the terms of the loan agreement.  For loans that have not been individually measured for estimated credit losses (i.e. they are not seriously delinquent, or in bankruptcy or in foreclosure), the FHLBNY measures estimated incurred credit losses on a collective basis and records a valuation reserve.  When a loan is delinquent 180 days or more, the FHLBNY will charge-off the excess carrying value over the net realizable value of the loan because the FHLBNY deems that foreclosure is probable at 180 days delinquency.  When the loan is foreclosed and the FHLBNY takes possession of real estate, the balance of the loan that has not been charged off is recorded as real estate owned at the lower of carrying value or net realizable value.

22

Federal Home Loan Bank of New York

Notes to Financial Statements — Unaudited

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 table provides a rollforward analysis of the allowance for credit losses (in thousands):

	Three months ended June 30,						Six months ended June 30,
	2019			2018			2019			2018
Allowance for credit losses:
Beginning balance	$	797		$	697		$	814		$	992
Charge-offs	—			(17		)	—			(81		)
Recoveries	—			65			—			214
Provision (Reversal) for credit losses on mortgage loans	(275		)	72			(292		)	(308		)
Ending balance	$	522		$	817		$	522		$	817

	June 30, 2019		December 31, 2018
Ending balance, individually evaluated for impairment	$	103	$	238
Ending balance, collectively evaluated for impairment	419		576
Total Allowance for credit losses	$	522	$	814

The FHLBNY’s total MPF loans and impaired MPF loans were as follows (in thousands):

	June 30, 2019		December 31, 2018
Total Mortgage loans, carrying values net of allowance for credit losses (a)	$	2,985,768	$	2,927,230
Non-performing mortgage loans - Conventional (a)(b)	$	7,957	$	8,453
Insured MPF loans past due 90 days or more and still accruing interest (a)(b)	$	5,309	$	5,501

(a)Includes loans classified as special mention, sub-standard, doubtful or loss under regulatory criteria, net of amounts charged-off if delinquent for 180 days or more.

(b)Data in this table represents UPB, and would not agree to data reported in other tables at “recorded investment,” which includes interest receivable.

The following summarizes the recorded investment in impaired loans (excluding insured FHA/VA loans), the unpaid principal balance, and the related allowance (individually assessed), and the average recorded investment of loans for which the related allowance was individually measured (in thousands):

							Three months ended		Six months ended
	June 30, 2019						June 30, 2019		June 30, 2019
			Unpaid				Average
	Recorded		Principal		Related		Recorded
	Investment		Balance		Allowance		Investment (d)
Conventional MPF Loans (a)(c)
No related allowance (b)	$	11,063	$	11,009	$	—	$	11,018	$	10,597
With a related allowance	906		894		103		931		1,027
Total individually measured for impairment	$	11,969	$	11,903	$	103	$	11,949	$	11,624

23

Federal Home Loan Bank of New York

Notes to Financial Statements — Unaudited

	December 31, 2018
			Unpaid				Average
	Recorded		Principal		Related		Recorded
	Investment		Balance		Allowance		Investment (d)
Conventional MPF Loans (a)(c)
No related allowance (b)	$	10,507	$	10,443	$	—	$	12,681
With a related allowance	993		974		238		1,161
Total individually measured for impairment	$	11,500	$	11,417	$	238	$	13,842

(a)Based on analysis of the nature of risks of the FHLBNY’s investments in MPF loans, including its methodologies for identifying and measuring impairment, management 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)Interest received is not recorded as Interest income if an uninsured loan is past due 90 days or more.  Cash received is recorded as a liability on the assumption that cash was remitted by the servicer to the FHLBNY that could potentially be recouped by the borrower in a foreclosure.

(d)Represents the average recorded investment for the three and six months ended June 30, 2019 and the twelve months ended December 31, 2018.

The following tables summarize the recorded investment, the unpaid principal balance, and the average recorded investment of loans for which the related allowance was collectively measured (in thousands):

							Three months ended		Six months ended
	June 30, 2019						June 30, 2019		June 30, 2019
			Unpaid				Average
	Recorded		Principal		Related		Recorded
	Investment		Balance		Allowance		Investment (a)
Collectively measured for impairment
Insured loans	$	228,048	$	222,506	$	—	$	228,876	$	229,987
Uninsured loans	2,760,913		2,706,585		419		2,744,751		2,725,752
Total loans collectively measured for impairment	$	2,988,961	$	2,929,091	$	419	$	2,973,627	$	2,955,739

	December 31, 2018
			Unpaid				Average
	Recorded		Principal		Related		Recorded
	Investment		Balance		Allowance		Investment (a)
Collectively measured for impairment
Insured loans	$	233,064	$	227,268	$	—	$	237,144
Uninsured loans	2,697,827		2,644,732		576		2,660,060
Total loans collectively measured for impairment	$	2,930,891	$	2,872,000	$	576	$	2,897,204

(a)Represents the average recorded investment for the three and six months ended June 30, 2019 and the twelve months ended December 31, 2018.

24

Federal Home Loan Bank of New York

Notes to Financial Statements — Unaudited

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

	June 30, 2019						December 31, 2018
	Conventional			Insured			Conventional			Insured
	MPF Loans			Loans			MPF Loans			Loans
Mortgage loans:
Past due 30 - 59 days	$	13,400		$	7,640		$	17,635		$	12,724
Past due 60 - 89 days	1,681			2,304			2,683			3,025
Past due 90 - 179 days	1,454			1,848			1,169			1,663
Past due 180 days or more	6,540			3,798			7,316			4,216
Total past due	23,075			15,590			28,803			21,628
Total current loans	2,749,807			212,458			2,680,524			211,436
Total mortgage loans	$	2,772,882		$	228,048		$	2,709,327		$	233,064
Other delinquency statistics:
Loans in process of foreclosure, included above	$	4,935		$	2,678		$	5,149		$	3,343
Number of foreclosures outstanding at period end	37			20			37			27
Serious delinquency rate (a)	0.30		%	2.48		%	0.31		%	2.52		%
Serious delinquent loans total used in calculation of serious delinquency rate	$	8,222		$	5,646		$	8,525		$	5,879
Past due 90 days or more and still accruing interest	$	—		$	5,646		$	—		$	5,879
Loans on non-accrual status	$	7,994		$	—		$	8,485		$	—
Troubled debt restructurings:
Loans discharged from bankruptcy (b)	$	7,339		$	655		$	7,398		$	823
Modified loans under MPF® program	$	1,415		$	—		$	1,423		$	—
Real estate owned	$	565					$	767

(a)Serious delinquency rate is defined as 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.

(b)Loans discharged from Chapter 7 bankruptcies are considered as TDRs.

Note 11.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):

	June 30, 2019		December 31, 2018
Interest-bearing deposits
Interest-bearing demand	$	1,231,957	$	1,002,587
Term (a)	5,000		40,000
Total interest-bearing deposits	1,236,957		1,042,587
Non-interest-bearing demand	19,101		20,050
Total deposits (b)	$	1,256,058	$	1,062,637

(a)Term deposits were for periods of one year or less.

(b)Specific disclosures about deposits that exceed FDIC limits have been omitted as deposits are not insured by the FDIC.  Deposits are received in the ordinary course of the FHLBNY’s business.  The FHLBNY has pledged securities to the FDIC to collateralize deposits maintained at the FHLBNY by the FDIC; for more information, see Securities Pledged in Note 8. Held-to-Maturity Securities.

25

Federal Home Loan Bank of New York

Notes to Financial Statements — Unaudited

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

	June 30, 2019				December 31, 2018
	Amount Outstanding		Weighted Average Interest Rate (b)		Amount Outstanding		Weighted Average Interest Rate (b)
Due in one year or less
Interest-bearing deposits (a)	$	1,236,957	2.31	%	$	1,042,587	1.73	%
Non-interest-bearing deposits	19,101				20,050
Total deposits	$	1,256,058			$	1,062,637

(a)Primarily adjustable rate.

(b)The weighted average interest rate is calculated based on the average balance.

Note 12.Consolidated Obligations.

The FHLBanks have joint and several liability for all the Consolidated obligations issued on their behalf (for more information, see Note 19.  Commitments and Contingencies).  Consolidated obligations 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 obligation bonds (CO bonds or 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 obligation discount notes (CO discount notes, Discount notes, or 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 following table summarizes carrying amounts of Consolidated obligations issued by the FHLBNY and outstanding at June 30, 2019 and December 31, 2018 (in thousands):

	June 30, 2019			December 31, 2018
Consolidated obligation bonds-amortized cost	$	78,185,752		$	83,764,337
Hedge valuation basis adjustments	378,056			238,150
Hedge basis adjustments on de-designated hedges	141,711			131,497
FVO - valuation adjustments and accrued interest	23,857			19,792
Total Consolidated obligation bonds	$	78,729,376		$	84,153,776
Discount notes-amortized cost	$	62,380,002		$	50,631,066
Hedge value basis adjustments	(195		)	—
FVO - valuation adjustments and remaining accretion	—			9,172
Total Consolidated obligation discount notes	$	62,379,807		$	50,640,238

26

Federal Home Loan Bank of New York

Notes to Financial Statements — Unaudited

Redemption Terms of Consolidated Obligation Bonds

The following table is a summary of carrying amounts of Consolidated obligation bonds outstanding by year of maturity (dollars in thousands):

	June 30, 2019							December 31, 2018
				Weighted							Weighted
				Average		Percentage					Average		Percentage
Maturity	Amount			Rate (a)		of Total		Amount			Rate (a)		of Total
One year or less	$	61,218,690		2.35	%	78.33	%	$	64,893,475		2.29	%	77.48	%
Over one year through two years	5,163,585			2.27		6.61		7,555,545			2.38		9.02
Over two years through three years	2,553,465			2.37		3.27		2,586,325			2.48		3.09
Over three years through four years	2,286,535			2.46		2.93		2,181,750			2.39		2.60
Over four years through five years	1,214,635			2.78		1.55		1,435,235			2.73		1.71
Thereafter	5,713,200			3.45		7.31		5,105,650			3.45		6.10
Total par value	78,150,110			2.44	%	100.00	%	83,757,980			2.39	%	100.00	%
Bond premiums (b)	62,239							42,647
Bond discounts (b)	(26,597		)					(36,290		)
Hedge valuation basis adjustments (c)	378,056							238,150
Hedge basis adjustments on de-designated hedges (d)	141,711							131,497
FVO (e) - valuation adjustments and accrued interest	23,857							19,792
Total Consolidated obligation-bonds	$	78,729,376						$	84,153,776

(a)	Weighted average rate represents the weighted average contractual coupons of bonds, unadjusted for swaps.
(b)	Amortization of CO bond premiums and discounts are recorded in interest expense as yield adjustments.
(c)	Hedge valuation basis adjustments under ASC 815 fair value hedges represent changes in the fair values of fixed-rate CO bonds due to changes in the designated benchmark rate. LIBOR is the primary benchmark index; the FHLBNY may also hedge to the FF/OIS index.
(d)	Hedge basis adjustments on de-designated hedges represent the unamortized balances of valuation basis of fixed-rate bonds that were previously in a fair value hedging relationship. Generally, when a hedging relationship is de-designated, the valuation basis is no longer adjusted for changes in the valuation of the debt for changes in the benchmark rate; instead, the basis is amortized over the debt’s remaining life, so that at maturity of the debt, the unamortized basis is reversed to zero.
(e)	Valuation adjustments represent changes in the entire fair values of bonds elected under the FVO.

Interest Rate Payment Terms

The following table summarizes par amounts of major types of Consolidated obligation bonds issued and outstanding (dollars in thousands):

	June 30, 2019				December 31, 2018
	Amount		Percentage of Total		Amount		Percentage of Total
Fixed-rate, non-callable	$	18,526,110	23.71	%	$	22,745,980	27.16	%
Fixed-rate, callable	5,570,000		7.13		4,966,000		5.93
Step Up, callable	200,000		0.26		880,000		1.05
Single-index floating rate	53,854,000		68.90		55,166,000		65.86
Total par value	$	78,150,110	100.00	%	$	83,757,980	100.00	%

27

Federal Home Loan Bank of New York

Notes to Financial Statements — Unaudited

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):

	June 30, 2019			December 31, 2018
Par value	$	62,523,129		$	50,805,481
Amortized cost	$	62,380,002		$	50,631,066
Hedge value basis adjustments (a)	(195		)	—
FVO (b) - valuation adjustments and remaining accretion	—			9,172
Total discount notes	$	62,379,807		$	50,640,238
Weighted average interest rate	2.34		%	2.34		%

(a)Hedge valuation basis adjustments under ASC 815 fair value hedges represent changes in the fair values of discount notes due to changes in the designated benchmark rate.

(b)Valuation adjustments represent changes in the entire fair values of discount notes elected under the FVO.

Note 13.Affordable Housing Program.

The FHLBNY charges the amount allocated for the Affordable Housing Program (AHP) to income and recognizes it as a liability.  The FHLBNY relieves the AHP liability as members use the subsidies.  For more information about the Affordable Housing Program and the Bank’s liability, see the Bank’s most recent Form 10-K filed on March 21, 2019.

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

	Three months ended June 30,						Six months ended June 30,
	2019			2018			2019			2018
Beginning balance	$	161,129		$	137,256		$	161,718		$	131,654
Additions from current period’s assessments	12,021			17,274			27,014			31,336
Net disbursements for grants and programs	(8,888		)	(5,226		)	(24,470		)	(13,686		)
Ending balance	$	164,262		$	149,304		$	164,262		$	149,304

Note 14.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, membership and activity-based capital stock, and members can redeem Class B stock by giving five years notice.  The FHLBNY’s Class B capital stock issued and outstanding was $5.8 billion at June 30, 2019 and $6.1 billion at December 31, 2018.

28

Federal Home Loan Bank of New York

Notes to Financial Statements — Unaudited

Membership and Activity-based Class B capital stocks have the same voting rights and dividend rates.  (See Statements of Capital):

·Membership stock is issued to meet membership stock purchase requirements.  The FHLBNY requires member institutions to maintain membership stock based on a percentage of the member’s mortgage-related assets.  Effective August 1, 2017, the FHLBNY reduced the capital stock purchase requirement for membership from 15.0 basis points to 12.5 basis points.  In addition, notwithstanding this requirement, the FHLBNY introduced a $100 million cap on membership stock per member effective January 1, 2019.

·Activity based stock is issued on a percentage of outstanding balances of advances, MPF loans and certain commitments.  The FHLBNY’s current capital plan requires a stock purchase of 4.5% of the member’s borrowed amount.  Excess activity-based capital stock is repurchased daily.

The FHLBNY is subject to risk-based capital rules of the Finance Agency, the regulator of the FHLBanks.  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 capital plan does not provide for the issuance of Class A capital stock.  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.  Second, the FHLBNY is required to maintain at least a 4.0% total capital-to-asset ratio; and third, the FHLBNY will maintain at least a 5.0% leverage ratio at all times.  The FHFA’s regulatory leverage ratio is defined as the sum of permanent capital weighted 1.5 times and non-permanent 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, and 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.  The Director of the Finance Agency has discretion to add to or modify the corrective action requirements for each capital classification other than adequately capitalized if the Director of the Finance Agency determines that such action is necessary to ensure the safe and sound operation of the FHLBank and the FHLBank’s compliance with its risk-based and minimum capital requirements.

If the FHLBNY became classified into a capital classification other than adequately capitalized, the FHLBNY could be adversely impacted by the corrective action requirements for that capital classification.

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

	June 30, 2019						December 31, 2018
	Required (d)			Actual			Required (d)			Actual
Regulatory capital requirements:
Risk-based capital (a)(e)	$	948,250		$	7,595,013		$	797,783		$	7,765,726
Total capital-to-asset ratio	4.00		%	5.04		%	4.00		%	5.38		%
Total capital (b)	$	6,022,958		$	7,595,013		$	5,775,256		$	7,765,726
Leverage ratio	5.00		%	7.57		%	5.00		%	8.07		%
Leverage capital (c )	$	7,528,698		$	11,392,519		$	7,219,070		$	11,648,589

(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)The required leverage ratio of total capital to total assets should be at least 5.0%.  For the purposes of determining the leverage ratio, total capital shall be computed by multiplying the Bank’s Permanent Capital by 1.5.

(d)Required minimum.

(e)Under regulatory guidelines issued by the Finance Agency in August 2011 that was consistent with guidance provided by other federal banking agencies with respect to capital rules, risk weights are maintained at AAA for U.S. Treasury securities and other securities issued or guaranteed by the U.S. Government, government agencies, and government-sponsored entities for purposes of calculating risk-based capital.

29

Federal Home Loan Bank of New York

Notes to Financial Statements — Unaudited

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.  Estimated redemption periods were as follows (in thousands):

	June 30, 2019		December 31, 2018
Redemption less than one year	$	841	$	229
Redemption from one year to less than three years	384		1,068
Redemption from three years to less than five years	416		425
Redemption from five years or greater	3,873		4,123
Total	$	5,514	$	5,845

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

	Three months ended June 30,						Six months ended June 30,
	2019			2018			2019			2018
Beginning balance	$	5,755		$	18,764		$	5,845		$	19,945
Capital stock subject to mandatory redemption reclassified from equity	3,937			—			4,049			124
Redemption of mandatorily redeemable capital stock (a)	(4,178		)	(1,057		)	(4,380		)	(2,362		)
Ending balance	$	5,514		$	17,707		$	5,514		$	17,707
Accrued interest payable (b)	$	117		$	293		$	117		$	293

(a)Redemption includes repayment of excess stock.

(b)The annualized accrual rate was 6.35% for the three months ended June 30, 2019 and 6.50% for the three months ended June 30, 2018.  Accrual rates are based on estimated dividend rates.

Restricted Retained Earnings

Under the FHLBank Joint Capital Enhancement Agreement (Capital Agreement), each FHLBank is required to set aside 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.  The Capital Agreement is intended to enhance the capital position of each FHLBank.  These restricted retained earnings will not be available to pay dividends.  Retained earnings included $639.9 million and $591.3 million as restricted retained earnings in the FHLBNY’s Total Capital at June 30, 2019 and December 31, 2018.

30

Federal Home Loan Bank of New York

Notes to Financial Statements — Unaudited

Note 15.Earnings Per Share of Capital.

The FHLBNY has a single class of capital stock, and earnings per share computation is for the Class B capital stock.

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 June 30,						Six months ended June 30,
	2019			2018			2019			2018
Net income	$	108,082		$	155,174		$	242,920		$	281,399
Net income available to stockholders	$	108,082		$	155,174		$	242,920		$	281,399
Weighted average shares of capital	58,232			61,545			56,998			63,300
Less: Mandatorily redeemable capital stock	(74		)	(181		)	(66		)	(186		)
Average number of shares of capital used to calculate earnings per share	58,158			61,364			56,932			63,114
Basic earnings per share	$	1.86		$	2.53		$	4.27		$	4.46

Note 16.Employee Retirement Plans.

The FHLBNY participates in the Pentegra Defined Benefit Plan for Financial Institutions (Pentegra DB Plan), a tax-qualified, defined-benefit multiemployer pension plan that covers all FHLBNY officers and employees.  The FHLBNY also participates in the Pentegra Defined Contribution Plan for Financial Institutions, a tax-qualified defined contribution plan.  The FHLBNY offers two non-qualified Benefit Equalization Plans, which are retirement plans.  The two plans restore defined benefits for those employees who have had their qualified Defined Benefit Plan and their Defined Contribution Plan limited by IRS regulations.  The non-qualified BEP that restores benefits to participant’s Defined Contribution Plan was introduced and became effective at January 1, 2017.  The two non-qualified Benefit Equalization Plans (BEP) are unfunded.  For more information about employee retirement plans, see Note 16. Employee Retirement Plans in the financial statements included in the most recent Form 10-K filed on March 21, 2019.

Retirement Plan Expenses — Summary

The following table presents employee retirement plan expenses for the periods ended (in thousands):

	Three months ended June 30,					Six months ended June 30,
	2019		2018			2019		2018
Defined Benefit Plan	$	2,494	$	1,875		$	4,988	$	3,750
Benefit Equalization Plans (defined benefit and defined contribution)	1,838		1,699			3,770		3,398
Defined Contribution Plans	616		587			1,277		1,229
Postretirement Health Benefit Plan	84		(79		)	167		(159		)
Total retirement plan expenses	$	5,032	$	4,082		$	10,202	$	8,218

Benefit Equalization Plan (BEP)

The BEP restores defined benefits for those employees who have had their qualified defined benefits limited by IRS regulations.  The method for determining the accrual expense and liabilities of the plan is the Projected Unit Credit Accrual Method.  Under this method, the liability of the plan is composed mainly of two components, Projected Benefit Obligation (PBO) and Service Cost accruals.  The total liability is determined by projecting each person’s expected plan benefits.  These projected benefits are then discounted to the measurement date.  Finally, the liability is allocated to service already worked (PBO) and service to be worked (Service Cost).  There were no plan assets (this is an unfunded plan) that have been designated for the BEP plan.

31

Federal Home Loan Bank of New York

Notes to Financial Statements — Unaudited

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

	Three months ended June 30,				Six months ended June 30,
	2019		2018		2019		2018
Service cost	$	316	$	274	$	632	$	548
Interest cost	636		539		1,272		1,078
Amortization of unrecognized net loss	720		886		1,440		1,772
Net periodic benefit cost -Defined Benefit BEP	1,672		1,699		3,344		3,398
Benefit Equalization plans - Thrift and Deferred incentive compensation plans	166		86		426		70
Total	$	1,838	$	1,785	$	3,770	$	3,468

Postretirement Health Benefit Plan

The Retiree Medical Benefit Plan (the Plan) is for retired employees and for employees who are eligible for retirement benefits.  The Plan is unfunded.  The Plan, as amended, is offered to active employees who have completed 10 years of employment service at the FHLBNY and attained age 55 as of January 1, 2015.

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

	Three months ended June 30,						Six months ended June 30,
	2019			2018			2019			2018
Service cost (benefits attributed to service during the period)	$	21		$	27		$	42		$	54
Interest cost on accumulated postretirement health benefit obligation	127			143			254			285
Amortization of loss/(gain)	—			191			—			382
Amortization of prior service (credit)/cost	(64		)	(440		)	(129		)	(880		)
Net periodic postretirement health benefit (income) (a)	$	84		$	(79	)	$	167		$	(159	)

(a)Plan amendments in a prior year reduced plan obligations by $8.8 million, and the resulting gain is being amortized over an actuarially determined period, reducing net periodic benefit costs.

Note 17.Derivatives and Hedging Activities.

The FHLBNY, consistent with the Finance Agency’s regulations, may enter into interest-rate swaps, swaptions, and interest-rate cap and floor agreements to manage its interest rate exposure inherent in otherwise unhedged assets and funding positions.  We are not a derivatives dealer and do not trade derivatives for short-term profit.

The contractual or notional amount of derivatives reflects the involvement of the FHLBNY in the various classes of financial instruments, and serve as a basis for calculating periodic interest payments or cash flows.  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 interest-rate swaps, forward agreements, mandatory delivery contracts for mortgage loans and purchased caps and floors (derivatives) in a gain position if the counterparty defaults and the related collateral, if any, is of insufficient value to the FHLBNY.

Derivatives are instruments that derive their value from underlying asset prices, indices, reference rates and other inputs, or a combination of these factors.  The FHLBNY executes derivatives with swap dealers and financial institution swap counterparties as negotiated contracts, which are usually referred to as over-the-counter (OTC) derivatives.

32

Federal Home Loan Bank of New York

Notes to Financial Statements — Unaudited

The majority of OTC derivative contracts at June 30, 2019 and December 31, 2018 were cleared derivatives, which are contracts transacted bilaterally with executing swap counterparties, then cleared and settled through derivative clearing organizations (DCOs) as mandated under the Dodd-Frank Act.  When transacting a derivative for clearing, the FHLBNY utilizes a designated clearing agent, the Futures Clearing Merchant (FCM) that acts on behalf of the FHLBNY to clear and settle the interest rate exchange transaction through the DCO.  Once the transaction is accepted for clearing by the FCM, acting in the capacity of an intermediary between the FHLBNY and the DCO, the original transaction between the FHLBNY and the executing swap counterparty is extinguished, and is replaced by an identical transaction between the FHLBNY and the DCO.  The DCO becomes the counterparty to the FHLBNY.  However, the FCM remains as the principal operational contact and interacts with the DCO through the life cycle events of the derivative transaction on behalf of the FHLBNY.

The FHLBNY also transacts derivative contracts that are executed and settled bilaterally with counterparties, rather than settling the transaction with a DCO.  Such bilateral derivative transactions are not clearable as the structures have not yet been mandated for clearing under the Dodd-Frank Act, typically because the transactions are complex and their ongoing pricing and settlement mechanisms have not yet been operationalized by the DCOs.

The following table presents the FHLBNY’s derivative activities based on notional amounts (in thousands):

Derivative Notionals

	Hedging Instruments Under ASC 815
	June 30, 2019		December 31, 2018
Interest rate contracts
Interest rate swaps	$	100,046,487	$	105,280,821
Interest rate caps	803,000		803,000
Mortgage delivery commitments	27,958		12,682
Total interest rate contracts notionals	$	100,877,445	$	106,096,503

Credit Risk Due to Non-performance by Counterparties

Derivative transactions are customarily documented by the FHLBNY under industry standard master netting agreements, which provide that following an event of default, the non-defaulting party may promptly terminate all transactions between the parties and determine the net amount due to be paid to, or by the defaulting party.  Obligations under master netting agreements are customarily secured by collateral posted under an industry standard credit support annex to the master netting agreements.  The netting and collateral rights incorporated in the master netting agreements are considered to be legally enforceable if a supportive legal opinion has been obtained from counsel of recognized standing.  Based on the analysis of the rules, and legal analysis obtained, the FHLBNY has made a determination that it has the right of setoff that is enforceable under applicable law.

Credit risk on bilateral OTC — bilateral or uncleared derivative contracts — For derivatives that are not eligible for clearing with a DCO under the Dodd-Frank Act, the FHLBNY is subject to credit risk as a result of non-performance by swap counterparties to the derivative agreements.  The FHLBNY enters into master netting arrangements and bilateral security agreements with all active derivative counterparties that provide for delivery of collateral at specified levels to limit the net unsecured credit exposure to these counterparties.  The FHLBNY makes judgments on each counterparty’s creditworthiness, and makes estimates of the collateral values in analyzing counterparty non-performance credit risk.  Bilateral agreements consider the credit risks and the agreement specifies thresholds to post or receive collateral with changes in credit ratings.  When the FHLBNY has more than one derivative transaction outstanding with the counterparty, and a legally enforceable master netting agreement exists with the counterparty, the net exposure (less collateral held) represents the appropriate measure of credit risk.  The FHLBNY conducts all its bilaterally executed derivative transactions under ISDA master netting agreements.

Credit risk on OTC cleared derivative transactions — The FHLBNY’s derivative transactions that are eligible for clearing are subject to mandatory clearing rules under the Commodity Futures Trading Commission (CFTC) as provided under the Dodd-Frank Act.  If a derivative transaction is listed as eligible for clearing, the FHLBNY must abide by the CFTC rules to clear the transaction through a DCO.  The FHLBNY’s cleared derivatives are also initially executed bilaterally with a swap dealer (the executing swap counterparty) in the OTC market.  The clearing process requires all parties to the derivative transaction to novate the contracts to a DCO, which then becomes the counterparty to all parties, including the FHLBNY, to the transaction.

33

Federal Home Loan Bank of New York

Notes to Financial Statements — Unaudited

Information pertaining to FHLBNY’s derivative activities, based on notional amounts, is presented in the table below.  Derivative notional amounts are reference amounts from which contractual payments are derived and do not represent a complete and accurate measure of FHLBNY’s exposure to derivative transactions.  Rather, FHLBNY’s derivative exposure arises primarily from market fluctuations (i.e., market risk), counterparty failure (i.e., credit risk) and/or periods of high volatility or financial stress (i.e., liquidity risk), as well as any market valuation adjustments that may be required on the transactions.

Offsetting of Derivative Assets and Derivative Liabilities — Net Presentation

The table below presents the gross and net derivatives receivables by contract type and amount for those derivatives contracts for which netting is permissible under U.S. GAAP as Derivative instruments — Nettable.  Derivatives receivables have been netted with respect to those receivables as to which the netting requirements have been met, including obtaining a legal analysis with respect to the enforceability of the netting.  The table also presents security collateral, which are not permitted to be offset, but which would be eligible for offsetting to the extent an event of default occurred and a legal opinion supporting enforceability of the netting and collateral rights has been obtained (in thousands):

	June 30, 2019						December 31, 2018
	Derivative Assets			Derivative Liabilities			Derivative Assets			Derivative Liabilities
Derivative instruments - Nettable
Gross recognized amount
Uncleared derivatives	$	254,808		$	416,687		$	246,765		$	162,650
Cleared derivatives	325,623			316,823			296,677			305,918
Total gross recognized amount	580,431			733,510			543,442			468,568
Gross amounts of netting adjustments and cash collateral
Uncleared derivatives	(129,397		)	(373,357		)	(134,413		)	(142,097		)
Cleared derivatives	(316,823		)	(316,823		)	(295,324		)	(295,324		)
Total gross amounts of netting adjustments and cash collateral	(446,220		)	(690,180		)	(429,737		)	(437,421		)
Net amounts after offsetting adjustments and cash collateral	$	134,211		$	43,330		$	113,705		$	31,147
Uncleared derivatives	$	125,411		$	43,330		$	112,352		$	20,553
Cleared derivatives	8,800			—			1,353			10,594
Total net amounts after offsetting adjustments and cash collateral	$	134,211		$	43,330		$	113,705		$	31,147
Derivative instruments - Not Nettable
Uncleared derivatives (a)	$	116		$	7		$	57		$	—
Total derivative assets and total derivative liabilities
Uncleared derivatives	125,527			43,337			112,409			20,553
Cleared derivatives	8,800			—			1,353			10,594
Total derivative assets and total derivative liabilities presented in the Statements of Condition (b)	$	134,327		$	43,337		$	113,762		$	31,147
Non-cash collateral received or pledged (c)
Can be sold or repledged
Security pledged as initial margin to Derivative Clearing Organization (d)	$	251,318		$	—		$	239,813		$	—
Cannot be sold or repledged
Uncleared derivatives securities received	(115,065		)	—			(102,682		)	—
Total net amount of non-cash collateral received or repledged	$	136,253		$	—		$	137,131		$	—
Total net exposure cash and non-cash (e)	$	270,580		$	43,337		$	250,893		$	31,147
Net unsecured amount - Represented by:
Uncleared derivatives	$	10,462		$	43,337		$	9,727		$	20,553
Cleared derivatives	260,118			—			241,166			10,594
Total net exposure cash and non-cash (e)	$	270,580		$	43,337		$	250,893		$	31,147

(a)Not nettable derivative instruments are without legal right of offset, and were synthetic derivatives representing forward mortgage delivery commitments of 45 business days or less.  Amounts were not material, and it was operationally not practical to separate receivable from payables; net presentation was adopted.  No cash collateral was involved with the mortgage delivery commitments.

(b)Amounts represented Derivative assets and liabilities that were recorded in the Statements of Conditions.  Derivative cash balances were not netted with non-cash collateral received or pledged, since legal ownership of the non-cash collateral remains with the pledging counterparty (see footnote (c) below).

(c)Non-cash collateral received or pledged — For certain uncleared derivatives, counterparties have pledged U.S. Treasury securities to the FHLBNY as collateral.  Amounts also included non-cash mortgage collateral on derivative positions with member counterparties where we acted as an intermediary.  For certain cleared derivatives, we have pledged marketable securities to satisfy initial margin or collateral requirements.

(d)Amounts represented securities pledged to Derivative Clearing Organization to fulfill our initial margin obligations on cleared derivatives.  Securities pledged may be sold or repledged if the FHLBNY defaults on our obligations under rules established by the CFTC.

(e)Amounts represented net exposure after applying non-cash collateral pledged to and by the FHLBNY.  Since legal ownership and control over the securities are not transferred, the net exposure represented in the table above is for information only and is not reported as such in the Statements of Condition.

34

Federal Home Loan Bank of New York

Notes to Financial Statements — Unaudited

Fair Value of Derivative Instruments

The following tables represent outstanding notional balances and estimated fair values of the derivatives outstanding at June 30, 2019 and December 31, 2018 (in thousands):

	June 30, 2019
	Notional Amount of Derivatives		Derivative Assets			Derivative Liabilities
Fair value of derivative instruments (a)
Derivatives designated as hedging instruments under ASC 815
Interest rate swaps	$	56,584,487	$	436,094		$	605,023
Total derivatives in hedging relationships under ASC 815	56,584,487		436,094			605,023
Derivatives not designated as hedging instruments
Interest rate swaps	42,500,000		129,119			123,569
Interest rate caps	803,000		424			3
Mortgage delivery commitments	27,958		116			7
Other (b)	962,000		14,794			4,915
Total derivatives not designated as hedging instruments	44,292,958		144,453			128,494
Total derivatives before netting and collateral adjustments	$	100,877,445	580,547			733,517
Netting adjustments			(420,440		)	(420,440		)
Cash Collateral and related accrued interest			(25,780		)	(269,740		)
Total netting adjustments and cash collateral			(446,220		)	(690,180		)
Total derivative assets and total derivative liabilities			$	134,327		$	43,337
Security collateral pledged as initial margin to Derivative Clearing Organization (c)			$	251,318
Security collateral received from counterparty (c)			(115,065		)
Net security			136,253
Net exposure			$	270,580
	December 31, 2018
	Notional Amount of Derivatives		Derivative Assets			Derivative Liabilities
Fair value of derivative instruments (a)
Derivatives designated as hedging instruments under ASC 815
Interest rate swaps	$	60,701,776	$	390,670		$	314,448
Total derivatives in hedging relationships under ASC 815	60,701,776		390,670			314,448
Derivatives not designated as hedging instruments
Interest rate swaps	43,913,045		145,726			144,190
Interest rate caps	803,000		644			—
Mortgage delivery commitments	12,682		57			—
Other (b)	666,000		6,402			9,930
Total derivatives not designated as hedging instruments	45,394,727		152,829			154,120
Total derivatives before netting and collateral adjustments	$	106,096,503	543,499			468,568
Netting adjustments			(372,917		)	(372,917		)
Cash Collateral and related accrued interest			(56,820		)	(64,504		)
Total netting adjustments and cash collateral			(429,737		)	(437,421		)
Total derivative assets and total derivative liabilities			$	113,762		$	31,147
Security collateral pledged as initial margin to Derivative Clearing Organization (c)			$	239,813
Security collateral received from counterparty (c)			(102,682		)
Net security			137,131
Net exposure			$	250,893

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

(b)The Other category comprised of interest rate swaps intermediated for member, and notional amounts represent purchases by the FHLBNY from dealers and an offsetting purchase from us by the member.

(c)Non-cash security collateral is not permitted to be offset on the balance sheet, but would be eligible for offsetting in an event of default.  Amounts represent U.S. Treasury securities pledged to and received from counterparties as collateral at June 30, 2019 and December 31, 2018.

35

Federal Home Loan Bank of New York

Notes to Financial Statements — Unaudited

Accounting for Derivative Hedging

The FHLBNY accounts for its hedging activities in accordance with ASC 815, Derivatives and Hedging.  As a general rule, hedge accounting is permitted where the FHLBNY is exposed to a particular risk, typically interest-rate risk that causes changes in the fair value of an asset or liability or variability in the expected future cash flows of an existing asset, liability or a forecasted transaction that may affect earnings.  Derivative contracts hedging the risks associated with the changes in fair value are referred to as Fair value hedges, while contracts hedging the risks affecting the expected future cash flows are called Cash flow hedges.

In 2017, the FASB issued ASU 2017-12, Targeted Improvements to Accounting for Hedging Activities (Topic 815), with the primary objective of simplifying and improving the financial reporting of hedging relationships to better portray the economic results of an entity’s risk management activities in its financial statements.  We adopted the guidance effective January 1, 2019, and adoption primarily impacted the FHLBNY’s accounting for derivatives designated as cash flow hedges and fair value hedges.

We adopted the ASU and the reporting and disclosure requirements prospectively.  The new guidance requires that we report the entire hedging effects of the hedging instruments in the same income statement line item as the hedged item in the Statements of income.  Prior period comparative financial information was not reclassified to conform to current presentation.  Certain post-adoption quantitative tabular disclosures required under ASU 2017-12 have been expanded to include the comparative period.  We believe that the use of post-adoption tabular disclosures to include comparative information is not akin to the adoption of the ASU on a retrospective basis, since it only affects the manner in which previously recorded amounts are disclosed.

The FASB issued ASU 2018-16, Inclusion of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes (Topic 815), which adds the OIS rate based on SOFR as an approved U.S. benchmark rate to facilitate the LIBOR to SOFR transition.  The other interest rates in the United States that are eligible benchmarks under Topic 815 are interest rates on direct Treasury obligations of the U.S. government (UST), the London Interbank Offered Rate (LIBOR) swap rate, the Overnight Index Swap (OIS) Rate based on the Fed Funds Effective Rate, and the Securities Industry and Financial Markets Association (SIFMA) Municipal Swap Rate.  The FHLBNY’s primary benchmark is LIBOR, and the Fed funds indexed rate is an alternative benchmark.  The FHLBNY expects to implement the SOFR rate as another benchmark rate for interest rate hedging in the fourth quarter of 2019.

Typically, we execute derivatives under three hedging strategies — 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”).  Derivative contracts hedging the risks associated with changes in fair value are referred to as fair value hedges, while contracts hedging the variability of expected future cash flows are cash flow hedges.  To qualify as an accounting hedge under the hedge accounting rules (versus an economic hedge in which hedge accounting is not applied), a hedging relationship must be highly effective in offsetting the risk designated as being hedged. The hedging relationship must be formally documented at inception, detailing the particular risk management objective and strategy for the hedge.  The effectiveness of these hedging relationships is evaluated at hedge inception and on an ongoing basis both on a retrospective and prospective basis.

Fair Value Hedges.

Hedging of Benchmark interest Rate Risk — The FHLBNY’s fair value hedges are primarily hedges of fixed-rate Consolidated obligation bonds and fixed-rate advances, and beginning in 2019 we have executed fair value hedges of available-for-sale securities.  For qualifying fair value hedges of interest rate risk, the changes in the fair value of the derivative and the changes in the fair value of the hedged item attributable to the hedged risk, either total cash flows or benchmark only cash flows, are presented within Interest income or Interest expense based on whether the hedged item is an asset or a liability.  Prior to the adoption of ASU 2017-12, changes to the fair value of the derivative and the qualifying hedged item were presented in Other income (loss), a line item below the Net interest income line in the Statements of income.

36

Federal Home Loan Bank of New York

Notes to Financial Statements — Unaudited

The two principal fair value hedging activities are summarized below:

·Consolidated Obligations — The FHLBNY may manage the risk arising from changing market prices and volatility of a Consolidated obligation debt by matching the cash inflows on the derivative with the cash outflow on the Consolidated obligation debt and may include early termination features or options.  In general, whenever we issue a longer-term fixed-rate debt, or a fixed-rate debt with call or put or other embedded options, we will simultaneously execute a derivative transaction, generally an interest rate swap, with terms that offset the terms of the fixed-rate debt, or terms of the debt with embedded put or call options or other options.  When a fixed-rate debt is hedged, the combination of the fixed-rate debt and the derivative transaction effectively creates a variable rate liability, indexed to a benchmark interest rate.

·Advances — We offer 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.  We may use derivatives to adjust the repricing and/or options characteristics of advances to more closely match the characteristics of its funding liabilities.  In general, whenever a member executes a longer term fixed-rate advance, or a fixed-rate advance with call or put or other embedded options, we will simultaneously execute a derivative transaction, generally an interest rate swap, with terms that offset the terms of the fixed-rate advance, or terms of the advance with embedded put or call options or other options.  When a fixed-rate advance is hedged, the combination of the fixed-rate advance and the derivative transaction effectively creates a variable rate asset, indexed to a benchmark interest rate.

Fair value hedge gains and losses

Gains and Losses on Fair value hedges under ASC 815 are summarized below (in thousands):

	Gains (Losses) on Fair Value Hedges
	Three months ended June 30,
	2019					2018
	Recorded in Interest Income/Expense			Recorded in Other Income (Loss)		Recorded in Interest Income/Expense		Recorded in Other Income (Loss)
Gains (losses) on derivatives in designated and qualifying fair value hedges:
Interest rate hedges	$	(360,128	)	$	—	$	—	$	37,981
Gains (losses) on hedged item in designated and qualifying fair value hedges:
Interest rate hedges	$	359,340		$	—	$	—	$	(39,967	)

	Gains (Losses) on Fair Value Hedges
	Six months ended June 30,
	2019					2018
	Recorded in Interest Income/Expense			Recorded in Other Income (Loss)		Recorded in Interest Income/Expense		Recorded in Other Income (Loss)
Gains (losses) on derivatives in designated and qualifying fair value hedges:
Interest rate hedges	$	(521,712	)	$	—	$	—	$	226,158
Gains (losses) on hedged item in designated and qualifying fair value hedges:
Interest rate hedges	$	519,612		$	—	$	—	$	(226,536	)

Gains/(losses) represent changes in fair values of derivatives and hedged items due to changes in the designated benchmark interest rates.  Beginning in 2019, gains and losses on ASC 815 hedges are recorded in the same line in the Statements of income as the hedged assets and hedged liabilities.  Prior to the adoption of ASU 2017-12 on January 1, 2019, gains and losses on derivatives and hedged items were recorded in Other income (loss).

37

Federal Home Loan Bank of New York

Notes to Financial Statements — Unaudited

Cumulative Basis Adjustment

Upon electing to apply ASC 815 fair value hedge accounting, the carrying value of the hedged item is adjusted to reflect the cumulative impact of changes in the hedged risk.  The hedge basis adjustment, whether arising from an active or de-designated hedge relationship, remains with the hedged item until the hedged item is derecognized from the balance sheet.

The tables below present the carrying amount of FHLBNY’s assets and liabilities under active ASC 815 qualifying fair value hedges at June 30, 2019 and December 31, 2018, as well as the hedged item’s cumulative hedge basis adjustments, which were included in the carrying value of assets and liabilities in active hedges.  The tables also present unamortized cumulative basis adjustments from discontinued hedges where the previously hedged item remains on the FHLBNY’s Statement of condition (in thousands):

	June 30, 2019
			Cumulative Fair Value Hedging Adjustment Included in the Carrying Amount of Hedged Items Gains (Losses)
	Carrying Amount of Hedged Assets/Liabilities (a)		Active Hedging Relationship			Discontinued Hedging Relationship
Assets:
Hedged advances	$	42,507,616	$	399,393		$	—
Hedged AFS debt securities - (Loss) in AOCI	389,607		(13,362		)	—
De-designated advances (b)	—		—			374
	$	42,897,223	$	386,031		$	374
Liabilities:
Hedged consolidated obligation bonds	$	8,099,353	$	(378,056	)	$	—
Hedged consolidated obligation discount notes	2,741,125		195			—
De-designated consolidated obligation bonds (b)	—		—			(141,711		)
	$	10,840,478	$	(377,861	)	$	(141,711	)

	December 31, 2018
			Cumulative Fair Value Hedging Adjustment Included in the Carrying Amount of Hedged Items Gains (Losses)
	Carrying Amount of Hedged Assets/Liabilities (a)		Active Hedging Relationship			Discontinued Hedging Relationship
Assets:
Hedged advances	$	45,904,804	$	(255,426	)	$	—
De-designated advances (b)	—		—			402
	$	45,904,804	$	(255,426	)	$	402
Liabilities:
Hedged consolidated obligation bonds	$	11,664,558	$	(238,150	)	$	—
De-designated consolidated obligation bonds (b)	—		—			(131,497		)
	$	11,664,558	$	(238,150	)	$	(131,497	)

(a)Carrying amounts represent amortized cost adjusted for cumulative fair value hedging basis.

(b)The carrying amounts of de-designated hedged items were not included in the carrying amounts of hedged assets/liabilities as de-designated advances and debt are no longer hedged.  Par amounts of de-designated advances were not material; par amounts of de-designated CO bonds were approximately $1.0 billion.  Cumulative fair value hedging adjustments for active and discontinued hedging relationships will remain until the items are derecognized from the balance sheet.

38

Federal Home Loan Bank of New York

Notes to Financial Statements — Unaudited

Cash Flow Hedges

FHLBNY hedges the variability of forecasted cash flows associated primarily with forecasted transactions.  Variable cash flows from forecasted liabilities are synthetically converted to fixed-rate cash flows by entering into receive-variable, pay-fixed interest rate swaps and receive-variable, pay-fixed forward-starting interest rate swaps.  Prior to the adoption of ASU 2017-12, ASC 815 required the risk being hedged as the risk of overall variability in the hedged cash flows due to changes in the benchmark rate.  With the adoption of ASU 2017-12, the FHLBNY may hedge the variability from changes in a contractually specified rate and recognize the entire change in fair value of the cash flow hedging instruments in Accumulated other comprehensive income (loss) AOCI.  Prior to the adoption of ASU 2017-12, to the extent that these derivatives were not fully effective, changes in their fair values in excess of changes in the value of the hedged transactions were immediately included in Other income (loss). With the adoption of ASU 2017-12, such amounts are no longer required to be immediately recognized in earnings, but instead the full change in the value of the hedging instrument is required to be recorded in AOCI, and then recognized in earnings in the same period that the cash flows impact earnings.

Accordingly, for hedges of forecasted debt issuance, changes in fair value of interest rate swap will remain in AOCI and will be included in the earnings of future periods when the forecasted hedged cash flows impact earnings.  However, if it becomes probable that some or all of the hedged forecasted transactions will not occur, any amounts that remain in AOCI related to these transactions must be immediately reflected in Other income (loss).

The two principal cash flow hedging activities for the FHLBNY are summarized below:

·Cash flow hedges of “Anticipated Consolidated Bond Issuance” — The FHLBNY enters into interest-rate swaps to hedge the anticipated issuance of debt, and to “lock in” the interest to be paid for the cost of funding.  The swaps are terminated upon issuance of the debt instrument, and gains or losses upon termination are recorded in AOCI.  Gains and losses 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 executes long-term pay-fixed, receive-variable interest rate swaps as hedges of the variable quarterly interest payments on the discount note borrowing program.  In this program, we issue a series of discount notes with 91-day terms over periods typically up to 10-15 years.  We 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 fair values of the interest rate swaps are recorded in AOCI.

39

Federal Home Loan Bank of New York

Notes to Financial Statements — Unaudited

Cash flow hedge gains and losses

The following tables present derivative instruments used in cash flow hedge accounting relationships and the gains and losses recorded on such derivatives (in thousands):

	Derivative Gains (Losses) Recorded in Income and Other Comprehensive Income/Loss
	Three months ended June 30,
	2019									2018
	Amounts Reclassified from AOCI to Interest Expense (b)			Amounts Recorded in OCI (d)			Total Change in OCI for Period			Amounts Reclassified from AOCI to Interest Expense (b)		Amounts Reclassified from AOCI to Other Income (Loss) (c)		Amounts Recorded in OCI (d)		Total Change in OCI for Period
Interest rate contracts (a)	$	(116	)	$	(69,786	)	$	(69,670	)	$	68	$	125	$	23,157	$	23,089

	Derivative Gains (Losses) Recorded in Income and Other Comprehensive Income/Loss
	Six months ended June 30,
	2019									2018
	Amounts Reclassified from AOCI to Interest Expense (b)			Amounts Recorded in OCI (d)			Total Change in OCI for Period			Amounts Reclassified from AOCI to Interest Expense (b)		Amounts Reclassified from AOCI to Other Income (Loss) (c)		Amounts Recorded in OCI (d)		Total Change in OCI for Period
Interest rate contracts (a)	$	(139	)	$	(112,500	)	$	(112,361	)	$	33	$	30	$	77,895	$	77,862

(a)Primarily consists of benchmark interest rate swaps indexed to LIBOR.  For periods after January 1, 2019, the FHLBNY includes the gain and loss on the hedging derivatives in the same line in the Statements of income as the change in cash flows on the hedged item.

(b)Amounts represent amortization of gains (losses) related to closed cash flow hedges that were reclassified during the period to interest expense as a yield adjustment.  Losses reclassified represent losses in AOCI that were amortized as an expense to debt interest expense.  If debt is held to maturity, losses in AOCI will be relieved through amortization.  It is expected that over the next 12 months, $0.6 million of the unrecognized losses in AOCI will be recognized as yield adjustments to debt interest expense.

(c)Amount represents the ineffectiveness recorded in the prior year periods through Other income (loss).  Subsequent to the adoption of ASU 2017-12, hedge ineffectiveness (as defined under ASC 815) is reclassified only if the original transaction would not occur by the end of the specified time period or within a two-month period thereafter.

(d)Amounts represent changes in the fair values of open interest rate swap contracts in cash flow hedges of CO debt, primarily those hedging the rolling issuance of CO discount notes.

There were no amounts that were reclassified into earnings due to discontinuation of cash flow hedges.  Reclassification would occur if 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.

Economic Hedges

FHLBNY often uses economic hedges when hedge accounting would be too complex or operationally burdensome. End-user derivatives that are economic hedges are carried at fair value, with changes in value included in Other income (loss), a line item, which is below Net interest income.  For hedges that either do not meet the ASC 815 hedging criteria or for which management decides not to apply ASC 815 hedge accounting, the derivative is recorded at fair value on the balance sheet with the associated changes in fair value recorded in earnings, while the “hedged” instrument continues to be carried at amortized cost.  Therefore, current earnings are affected by the interest rate shifts and other factors that cause a change in the swap’s value, but for which no offsetting change in value is recorded on the hedged instrument.  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.

The FHLBNY may alternatively elect to account for instruments at fair value under the fair value option.  Once the irrevocable election is made upon issuance of the debt or asset, the full change in fair value of the instrument is reported in earnings.  If the FVO instrument is in an economic hedge, changes in fair value of the related interest rate swap are also reflected in earnings, which provides a natural offset to the FVO instrument’s fair value change.  To the extent that the two amounts differ because the full change in the fair value of the FVO instrument includes risks not offset by the interest rate swap, the difference is automatically captured in current earnings.  Economic hedges are also employed when the hedged item itself is marked-to-market through current earnings, such as hedges of commitments to originate one- to four-family mortgage loans.

40

Federal Home Loan Bank of New York

Notes to Financial Statements — Unaudited

Gains and losses on economic hedges are presented below (in thousands):

	Gains (Losses) on Economic Hedges
	Recorded in Other Income (Loss)
	Three months ended June 30,						Six months ended June 30,
	2019(a)			2018(b)			2019(a)			2018(b)
Gains (losses) on derivatives designated in economic hedges
Interest rate hedges	$	(39,497	)	$	(2,474	)	$	(51,632	)	$	(23,911	)
Caps	125			(988		)	(217		)	320
Mortgage delivery commitments	303			38			500			(146		)
Total Gains (losses) on derivatives in economic hedges	$	(39,069	)	$	(3,424	)	$	(51,349	)	$	(23,737	)

(a)In the 2019 periods, subsequent to the adoption of ASU 2017-12, derivative gains and losses arising from economic hedges are reported in Other income (loss) in the Statements of income.  Total derivative gains (losses) in the table will agree to the Statements of income.  Losses were primarily driven by interest rate swaps in economic hedges of U.S. Treasury fixed-rate securities; and, to a lesser extent, by interest rate basis swaps hedging basis risk of floating-rate CO bonds that were indexed to other than the 3-month LIBOR benchmark.

(b)In the 2018 periods, total derivative gains (losses) in the table has also reported the effects of derivatives in economic hedges.  As a result, totals in the table 2018 periods will not agree to derivatives gains (losses) reported in the 2018 Statements of income, which also includes the hedging effects of ASC 815 qualifying hedges.  As permitted under the ASU, prior year information has not been reclassified to reporting classifications under ASU 2017-12.  In the 2018 periods, derivative losses were primarily due to changes in fair values on basis swaps in economic hedges of floating-rate debt and associated swap interest accruals.

Note 18.                 Fair Values of Financial Instruments.

Estimated Fair Values — Summary Tables — The carrying values, estimated fair values and the levels within the fair value hierarchy were as follows (in thousands):

	June 30, 2019
	Carrying		Estimated Fair Value								Netting Adjustment and
Financial Instruments	Value		Total		Level 1		Level 2		Level 3 (a)		Cash Collateral
Assets
Cash and due from banks	$	49,197	$	49,197	$	49,197	$	—	$	—	$	—
Securities purchased under agreements to resell	9,285,000		9,285,058		—		9,285,058		—		—
Federal funds sold	9,240,000		9,240,110		—		9,240,110		—		—
Trading securities	7,923,280		7,923,280		7,919,877		3,403		—		—
Equity Investments	56,167		56,167		56,167		—		—		—
Available-for-sale securities	2,506,228		2,506,228		—		2,506,228		—		—
Held-to-maturity securities	15,463,781		15,715,053		—		14,430,031		1,285,022		—
Advances	102,428,756		102,487,902		—		102,487,902		—		—
Mortgage loans held-for-portfolio, net	2,985,768		2,993,809		—		2,993,809		—		—
Accrued interest receivable	361,290		361,290		—		361,290		—		—
Derivative assets	134,327		134,327		—		580,547		—		(446,220		)
Other financial assets	565		565		—		—		565		—
Liabilities
Deposits	1,256,058		1,256,068		—		1,256,068		—		—
Consolidated obligations
Bonds	78,729,376		78,917,050		—		78,917,050		—		—
Discount notes	62,379,807		62,388,408		—		62,388,408		—		—
Mandatorily redeemable capital stock	5,514		5,514		5,514		—		—		—
Accrued interest payable	206,802		206,802		—		206,802		—		—
Derivative liabilities	43,337		43,337		—		733,517		—		(690,180		)
Other financial liabilities	45,408		45,408		45,408		—		—		—

41

Federal Home Loan Bank of New York

Notes to Financial Statements — Unaudited

	December 31, 2018
	Carrying		Estimated Fair Value								Netting Adjustment and
Financial Instruments	Value		Total		Level 1		Level 2		Level 3 (a)		Cash Collateral
Assets
Cash and due from banks	$	85,406	$	85,406	$	85,406	$	—	$	—	$	—
Securities purchased under agreements to resell	4,095,000		4,095,150		—		4,095,150		—		—
Federal funds sold	7,640,000		7,639,998		—		7,639,998		—		—
Trading securities	5,810,512		5,810,512		5,304,329		506,183		—		—
Equity Investments	48,179		48,179		48,179		—		—		—
Available-for-sale securities	422,216		422,216		—		422,216		—		—
Held-to-maturity securities	17,474,826		17,445,756		—		16,126,662		1,319,094		—
Advances	105,178,833		105,137,214		—		105,137,214		—		—
Mortgage loans held-for-portfolio, net	2,927,230		2,852,611		—		2,852,611		—		—
Loans to other FHLBanks	250,000		250,000		—		250,000		—		—
Accrued interest receivable	275,256		275,256		—		275,256		—		—
Derivative assets	113,762		113,762		—		543,499		—		(429,737		)
Other financial assets	767		767		—		—		767		—
Liabilities
Deposits	1,062,637		1,062,625		—		1,062,625		—		—
Consolidated obligations
Bonds	84,153,776		83,912,990		—		83,912,990		—		—
Discount notes	50,640,238		50,638,448		—		50,638,448		—		—
Mandatorily redeemable capital stock	5,845		5,845		5,845		—		—		—
Accrued interest payable	223,570		223,570		—		223,570		—		—
Derivative liabilities	31,147		31,147		—		468,568		—		(437,421		)
Other financial liabilities	86,095		86,095		86,095		—		—		—

The fair value amounts recorded on the Statements of Condition or presented in the table above have been determined by the FHLBNY using available market information and our reasonable judgment of appropriate valuation methods.

(a)Level 3 Instruments — The fair values of non-Agency 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; the inputs may not be market based and observable.

Fair Value Hierarchy

The FHLBNY records trading securities, equity investments, available-for-sale securities, derivative instruments, and Consolidated obligations and advances elected under the FVO at fair values on a recurring basis.  On a non-recurring basis, when held-to-maturity securities are determined to be OTTI, the securities are written down and recorded at their fair values; and, when mortgage loans held-for-portfolio are written down or are foreclosed as Other real estate owned (REO or OREO), they are recorded at the fair values of the real estate collateral supporting the mortgage loans.

The accounting standards under Fair Value Measurement defines fair value, establishes a consistent framework for measuring fair value and requires disclosures about fair value measurements.  Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.  Among other things, the standard requires the FHLBNY to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.  The standard specifies a hierarchy of inputs based on whether the inputs are observable or unobservable.  Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the FHLBNY’s market assumptions.

These two types of inputs have created the following fair value hierarchy, and 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:

·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.

42

Federal Home Loan Bank of New York

Notes to Financial Statements — Unaudited

·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 — Inputs that are unobservable and significant to the valuation of the asset or liability.

The inputs are evaluated on an overall level for the fair value measurement to be determined.  This overall level is an indication of market observability of the fair value measurement for the asset or liability.  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 the 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 purposes 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.  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.

For assets and liabilities carried at fair value, the FHLBNY measures fair value using the procedures set out below:

Mortgage-backed securities classified as available-for-sale — The fair value of such securities is estimated by the FHLBNY using pricing primarily from pricing services.  The pricing vendors typically use market multiples derived from a set of comparables, including matrix pricing, and other techniques.  The FHLBNY’s valuation technique incorporates prices from up to three designated third-party pricing services at June 30, 2019 and December 31, 2018.  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 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, typically 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.

43

Federal Home Loan Bank of New York

Notes to Financial Statements — Unaudited

In its analysis, the FHLBNY employs the concept of cluster pricing and cluster tolerances.  Once the median prices are computed from the three 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.  The cluster tolerance guidelines shall be reviewed annually and may be revised as necessary.  To be included among the cluster, each price must fall within 7 points of the median price for residential PLMBS (when PLMBS is determined to be OTTI) and within 3 points of the median price for GSE-issued MBS.  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 concluded 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.

Based on the FHLBNY’s review processes, management has concluded that inputs into the pricing models employed by pricing services for the FHLBNY’s investments in GSE securities classified as available-for-sale are market based and observable and are considered to be within Level 2 of the fair value hierarchy.

When a PLMBS is deemed to be OTTI, it is recorded at fair value.  The valuation of PLMBS may require pricing services to use significant inputs that are subjective and are considered by management 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. See Note 8. Held-to-Maturity securities for impairment information and recorded OTTI.

Trading Securities — The FHLBNY classifies trading securities as Level 1 of the fair value hierarchy when we use quoted market prices in active markets to determine the fair value of trading securities, such as U.S. government securities.  We classify trading securities as Level 2 of the fair value hierarchy when we use quoted market prices in less active markets to determine the fair value of trading securities.

Equity Investments — The FHLBNY has grantor trusts, which invest in money market, equity and fixed income and bond funds.  Daily net asset values (NAVs) are readily available and investments are redeemable at short notice.  NAVs are the fair values of the funds in the grantor trusts.  Because of the highly liquid nature of the investments at their NAVs, they are categorized as Level 1 financial instruments under the valuation hierarchy.

Advances elected under the FVO — When the FHLBNY elects the FVO designation for certain advances, the advances are recorded at their fair values in the Statements of Condition.  The fair values are computed using standard option valuation models.  The most significant inputs to the valuation model are (1) Consolidated obligation debt curve (CO Curve), published by the Office of Finance and available to the public, and (2) LIBOR swap curves and volatilities.  Both these inputs are considered to be market based and observable as they can be directly corroborated by market participants.

The CO Curve is 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.

The FHLBNY determines the fair values of advances elected under the FVO 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.

44

Federal Home Loan Bank of New York

Notes to Financial Statements — Unaudited

The inputs used to determine fair value of advances elected under the FVO 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.

Consolidated Obligations elected under the FVO — The FHLBNY estimates the fair values of Consolidated obligations elected under the FVO 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 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.

Derivative Assets and Liabilities — The FHLBNY’s derivatives (cleared derivatives and bilaterally executed derivatives) are executed in the over-the-counter market and are valued using internal valuation techniques as no quoted market prices exist for such instruments.  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 June 30, 2019 and December 31, 2018.

The FHLBNY’s valuation model utilizes a modified Black-Karasinski methodology.  Significant 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 (FF/OIS curve).

45

Federal Home Loan Bank of New York

Notes to Financial Statements — Unaudited

Mortgage delivery commitments (considered a derivative) — TBA security prices are adjusted for differences in coupon, average loan rate and seasoning.  To be announced (TBA) is the term describing forward-settling MBS trades issued by Freddie Mac, Fannie Mae, and Ginnie Mae trade in the TBA market.  The FHLBNY incorporates the overnight indexed swap (FF/OIS) curves as fair value measurement inputs for the valuation of its derivatives, as the FF/OIS curves reflect the interest rates paid on cash collateral provided against the fair value of these derivatives.  The FHLBNY believes using relevant FF/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 FF/OIS curve is an input to 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 FF/OIS calibrated 3-month LIBOR curve.  The model then discounts the cash flows by the FF/OIS curve to generate fair values.

Credit risk and credit valuation adjustments

The FHLBNY is subject to credit risk in derivatives transactions due to the potential non-performance of its derivatives counterparties or a DCO.  To mitigate this risk, the FHLBNY has entered into master netting agreements and credit support agreements with its derivative counterparties for its bilaterally executed derivative contracts that provide for the delivery of collateral at specified levels at least weekly.  The computed fair values of the 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. For derivative transactions executed as a cleared derivative, the transactions are fully collateralized in cash and for the most part exchanged and settled daily with the DCO.  The FHLBNY has also established the enforceability of offsetting rights incorporated in the agreements for the cleared derivative transactions.

As a result of these practices and agreements and the FHLBNY’s assessment of any change in its own credit spread, the FHLBNY has concluded that the impact of the credit differential between the FHLBNY and its derivative counterparties and DCO 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 June 30, 2019 and December 31, 2018.

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 non-recurring basis at June 30, 2019 and December 31, 2018, by level within the fair value hierarchy.  The FHLBNY also measures certain held-to-maturity securities at fair value on a non-recurring basis when a credit loss is recognized and the carrying value of the asset is adjusted to fair value.  Certain mortgage loans that were partially charged-off were recorded at their collateral values on a non-recurring basis.  Other real estate owned (OREO) is measured at fair value when the asset’s fair value less costs to sell is lower than its carrying amount.

46

Federal Home Loan Bank of New York

Notes to Financial Statements — Unaudited

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

	June 30, 2019
	Total			Level 1		Level 2			Level 3		Netting Adjustment and Cash Collateral
Assets
Trading securities
Corporate notes	$	3,403		$	—	$	3,403		$	—	$	—
U.S. Treasury securities	7,919,877			7,919,877		—			—		—
Equity Investments	56,167			56,167		—			—		—
Available-for-sale securities
GSE/U.S. agency issued MBS	2,506,228			—		2,506,228			—		—
Derivative assets (a)
Interest-rate derivatives	134,211			—		580,431			—		(446,220		)
Mortgage delivery commitments	116			—		116			—		—
Total recurring fair value measurement - assets	$	10,620,002		$	7,976,044	$	3,090,178		$	—	$	(446,220	)
Liabilities
Consolidated obligation:
Bonds (to the extent FVO is elected) (b)	(3,238,857		)	—		(3,238,857		)	—		—
Derivative liabilities (a)
Interest-rate derivatives	(43,330		)	—		(733,510		)	—		690,180
Mortgage delivery commitments	(7		)	—		(7		)	—		—
Total recurring fair value measurement - liabilities	$	(3,282,194	)	$	—	$	(3,972,374	)	$	—	$	690,180
	December 31, 2018
	Total			Level 1		Level 2			Level 3		Netting Adjustment and Cash Collateral
Assets
Trading securities
GSE securities	$	502,849		$	—	$	502,849		$	—	$	—
Corporate notes	3,334			—		3,334			—		—
U.S. Treasury securities	5,304,329			5,304,329		—			—		—
Equity Investments	48,179			48,179		—			—		—
Available-for-sale securities
GSE/U.S. agency issued MBS	422,216			—		422,216			—		—
Derivative assets (a)
Interest-rate derivatives	113,705			—		543,442			—		(429,737		)
Mortgage delivery commitments	57			—		57			—		—
Total recurring fair value measurement - assets	$	6,394,669		$	5,352,508	$	1,471,898		$	—	$	(429,737	)
Liabilities
Consolidated obligations:
Discount notes (to the extent FVO is elected)	(3,180,086		)	—		(3,180,086		)	—		—
Bonds (to the extent FVO is elected) (b)	(5,159,792		)	—		(5,159,792		)	—		—
Derivative liabilities (a)
Interest-rate derivatives	(31,147		)	—		(468,568		)	—		437,421
Total recurring fair value measurement - liabilities	$	(8,371,025	)	$	—	$	(8,808,446	)	$	—	$	437,421

(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.

47

Federal Home Loan Bank of New York

Notes to Financial Statements — Unaudited

Items Measured at Fair Value on a Non-recurring Basis (in thousands):

	During the period ended June 30, 2019
	Fair Value		Level 1		Level 2		Level 3
Real estate owned	$	293	$	—	$	—	$	293
	During the period ended December 31, 2018
	Fair Value		Level 1		Level 2		Level 3
Mortgage loans held-for-portfolio	$	741	$	—	$	741	$	—
Real estate owned	795		—		—		795
Total non-recurring assets at fair value	$	1,536	$	—	$	741	$	795

Mortgage loans and real estate owned (OREO or REO) — The FHLBNY measured and recorded certain impaired mortgage loans and Real estate owned (foreclosed properties) on a non-recurring basis.  These assets were subject to fair value adjustments in certain circumstances at the occurrence of the events during the periods in this report.  Impaired loans were primarily loans that were delinquent for 180 days or more, partially charged-off, with the remaining loans recorded at their collateral values at the dates the loans were charged off.  Fair value adjustments on the impaired loans and real estate owned assets were based primarily on broker price opinions.

In accordance with disclosure provisions, we have reported changes in fair values of such assets as of the date the fair value adjustments were recorded during the period ended June 30, 2019 and December 31, 2018, and reported fair values were not as of the period end dates.

Fair Value Option Disclosures

The fair value option (FVO) provides an irrevocable option to elect fair value as an alternative measurement for selected financial assets, financial liabilities, unrecognized firm commitments, and written loan commitments not previously carried at fair value.  It requires entities to display the fair value of those assets and liabilities for which the entity has chosen to use fair value on the face of the Statements of Condition.  Fair value is used for both the initial and subsequent measurement of the designated assets, liabilities and commitments, with the changes in fair value recognized in net income.  Interest income and interest expense on advances and Consolidated obligations at fair value are recognized solely on the contractual amount of interest due or unpaid.  Any transaction fees or costs are immediately recognized into non-interest income or non-interest expense.

From time to time, the FHLBNY will elect the FVO for advances and Consolidated obligations on an instrument-by-instrument basis with changes in fair value reported in earnings.  Customarily, the election is made when either the instruments do not qualify for hedge accounting or may be at risk for not meeting hedge effectiveness requirements; the objective is primarily to mitigate the potential income statement volatility that can arise from economic hedging relationships in which the carrying value of the hedged item is not adjusted for changes in fair value.  We may also elect advances under the FVO when analysis indicates that changes in the fair values of the advance would be an offset to fair value volatility of debt elected under the FVO.  The FVO election is made at inception of the contracts for advances and debt obligations.

For instruments for which the fair value option has been elected, the related contractual interest income, contractual interest expense and the discount amortization on fair value option discount notes are recorded as part of net interest income in the Statements of Income.  The remaining changes in fair value for instruments for which the fair value option has been elected are recorded as net gains (losses) on financial instruments held under fair value option in the Statements of Income.  The change in fair value does not include changes in instrument-specific credit risk.  The FHLBNY has determined that no adjustments to the fair values of its instruments recorded under the fair value option for instrument-specific credit risk were necessary at June 30, 2019 and December 31, 2018.

48

Federal Home Loan Bank of New York

Notes to Financial Statements — Unaudited

As with all advances, advances elected under the FVO are also fully collateralized through their terms to maturity.  We consider our Consolidated obligation debt as high credit-quality, highly-rated instruments, and changes in fair values are generally related to changes in interest rates and investor preference, including investor asset allocation strategies.  The FHLBNY believes the credit-quality of Consolidated obligation debt has remained stable, and changes in fair value attributable to instrument-specific credit risk, if any, were not material given that the debt elected under the FVO had been issued within the past 24 months, and no adverse changes have been observed in their credit characteristics.

No advances elected under the FVO were outstanding in the three and six months ended June 30, 2019.

The following tables summarize the activity related to financial instruments for which the FHLBNY elected the fair value option (in thousands):

	Three months ended June 30,
	2018			2019			2018			2019			2018
	Advances			Bonds						Discount Notes
Balance, beginning of the period	$	751,568		$	(7,367,064	)	$	(129,721	)	$	(994,773	)	$	(1,566,028	)
Maturities and terminations	(500,000		)	4,110,000			100,000			987,355			1,564,375
Net gains (losses) on financial instruments held under fair value option	(632		)	(2,653		)	49			293			274
Change in accrued interest/unaccreted balance	(404		)	20,860			(112		)	7,125			1,379
Balance, end of the period	$	250,532		$	(3,238,857	)	$	(29,784	)	$	—		$	—
	Six months ended June 30,
	2018			2019			2018			2019			2018
	Advances			Bonds						Discount Notes
Balance, beginning of the period	$	2,205,624		$	(5,159,792	)	$	(1,131,074	)	$	(3,180,086	)	$	(2,312,621	)
New transactions elected for fair value option	—			(3,220,000		)	(115,000		)	—			(1,564,375		)
Maturities and terminations	(1,950,000		)	5,145,000			1,215,000			3,170,915			3,873,993
Net gains (losses) on financial instruments held under fair value option	(415		)	(2,711		)	48			(113		)	5
Change in accrued interest/unaccreted balance	(4,677		)	(1,354		)	1,242			9,284			2,998
Balance, end of the period	$	250,532		$	(3,238,857	)	$	(29,784	)	$	—		$	—

49

Federal Home Loan Bank of New York

Notes to Financial Statements — Unaudited

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 June 30,
	2018
	Interest Income		Net Gains (Losses) Due to Changes in Fair Value			Total Change in Fair Value Included in Current Period Earnings
Advances	$	4,170	$	(632	)	$	3,538
	Six months ended June 30,
	2018
	Interest Income		Net Gains (Losses) Due to Changes in Fair Value			Total Change in Fair Value Included in Current Period Earnings
Advances	$	8,801	$	(415	)	$	8,386

	Three months ended June 30,
	2019									2018
	Interest Expense			Net Gains (Losses) Due to Changes in Fair Value			Total Change in Fair Value Included in Current Period Earnings			Interest Expense			Net Gains (Losses) Due to Changes in Fair Value		Total Change in Fair Value Included in Current Period Earnings
Consolidated obligation bonds	$	(33,398	)	$	(2,653	)	$	(36,051	)	$	(611	)	$	49	$	(562	)
Consolidated obligation discount notes	(5,519		)	293			(5,226		)	(5,745		)	274		(5,471		)
	$	(38,917	)	$	(2,360	)	$	(41,277	)	$	(6,356	)	$	323	$	(6,033	)
	Six months ended June 30,
	2019									2018
	Interest Expense			Net Gains (Losses) Due to Changes in Fair Value			Total Change in Fair Value Included in Current Period Earnings			Interest Expense			Net Gains (Losses) Due to Changes in Fair Value		Total Change in Fair Value Included in Current Period Earnings
Consolidated obligation bonds	$	(66,879	)	$	(2,711	)	$	(69,590	)	$	(4,169	)	$	48	$	(4,121	)
Consolidated obligation discount notes	(22,800		)	(113		)	(22,913		)	(12,332		)	5		(12,327		)
	$	(89,679	)	$	(2,824	)	$	(92,503	)	$	(16,501	)	$	53	$	(16,448	)

50

Federal Home Loan Bank of New York

Notes to Financial Statements — Unaudited

The following tables compare 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):

	June 30, 2019
	Aggregate Unpaid Principal Balance		Aggregate Fair Value		Fair Value Over/(Under) Aggregate Unpaid Principal Balance
Consolidated obligation bonds (b)	$	3,215,000	$	3,238,857	$	23,857
	December 31, 2018
	Aggregate Unpaid Principal Balance		Aggregate Fair Value		Fair Value Over/(Under) Aggregate Unpaid Principal Balance
Consolidated obligation bonds (b)	$	5,140,000	$	5,159,792	$	19,792
Consolidated obligation discount notes (c)	3,170,915		3,180,086		9,171
	$	8,310,915	$	8,339,878	$	28,963
	June 30, 2018
	Aggregate Unpaid Principal Balance		Aggregate Fair Value		Fair Value Over/(Under) Aggregate Unpaid Principal Balance
Advances (a)	$	250,000	$	250,532	$	532
Consolidated obligation bonds (b)	$	30,000	$	29,784	$	(216	)

(a)Advances — No advances elected under the FVO were outstanding at June 30, 2019 and December 31, 2018.  From time to time, the FHLBNY has elected the FVO for advances on an instrument by instrument basis on advances that were primarily short- and intermediate-term floating-rate advances.  The elections were made primarily as a natural fair value offset to debt elected under the FVO.

(b)The FHLBNY has elected the FVO for certain short-term CO bonds, primarily fixed-rate shorter-term debt, because management was not able to assert with confidence that the debt would qualify for hedge accounting as such short-term debt may not remain highly effective hedges through the maturity of the bonds.

(c)No discount notes elected under the FVO were outstanding at June 30, 2019 and June 30, 2018.  When discount notes were elected under the FVO, election was made because management was not able to assert with confidence that the debt would qualify for hedge accounting as the short-term discount note debt may not remain highly effective hedges through maturity.

51

Federal Home Loan Bank of New York

Notes to Financial Statements — Unaudited

Note 19.Commitments and Contingencies.

Consolidated obligations — 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 FHLBNY would have been required to recognize the fair value of the FHLBNY’s joint and several liability for all the Consolidated obligations, as discussed above.  However, the FHLBNY considers the joint and several liabilities as similar to a related party guarantee, which meets the scope exception 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 were par amounts of $1.0 trillion as of June 30, 2019 and December 31, 2018.

MPF Program — Under the MPF program, the FHLBNY was unconditionally obligated to purchase $28.0 million and $12.7 million of mortgage loans at June 30, 2019 and December 31, 2018.  Commitments were generally for periods not to exceed 45 business days.  Such commitments were recorded as derivatives at their fair values in compliance with the provisions of the accounting standards for derivatives and hedging.

Derivative contracts

·When the FHLBNY executes derivatives that are eligible to be cleared, the FHLBNY and the FCMs, acting as agents of Derivative Clearing Organizations or DCOs, would enter into margin agreements.  The fair values of open derivative contracts are settled on a daily basis by the exchange of variation margin, which is not considered as collateral, rather as the settlement value of the derivative contract.  The FHLBNY posts initial margin to DCOs and the initial margin is considered as collateral.

·When the FHLBNY executes derivatives that are not eligible to be cleared under the CFTC rules, the FHLBNY and the swap counterparties enter into bilateral collateral agreements.

On bilateral derivatives, the FHLBNY had posted $269.7 million and $64.5 million in cash to derivative counterparties at June 30, 2019 and December 31, 2018.  In addition, for cleared derivatives, the FHLBNY had pledged marketable securities of $251.3 million and $239.8 million to DCOs at June 30, 2019 and December 31, 2018.  Further information is provided in Note 17.  Derivatives and Hedging Activities.

Deposits — The FHLBNY had pledged mortgage-backed securities of $4.2 million and $4.5 million to the FDIC to collateralize deposits placed by the FDIC at June 30, 2019 and December 31, 2018.

Lease contracts — The FHLBNY charged to operating expenses net rental costs of approximately $1.8 million and $3.5 million for the three and six months ended June 30, 2019 and $1.9 million and $3.6 million for the same periods in the prior year.  Lease agreements for FHLBNY premises generally provide for inflationary increases in the basic rentals resulting from increases in property taxes and maintenance expenses.  Additionally, the FHLBNY has a lease agreement for a shared offsite data backup site at a cost estimated to be $3.1 million.  Components of the offsite agreement are generally renewable up to five years.

Affordable Housing Program — The 11 FHLBanks are expected to contribute $100 million in aggregate annually to the AHP. If the aggregate assessment is less than $100 million for all the FHLBanks, each FHLBank would be required to assure that the aggregate contributions of the FHLBanks equal $100 million. The proration would be made on the basis of an FHLBank’s income in relation to the income of all FHLBanks for the previous year. There have been no shortfalls in any periods in this report.

52

Federal Home Loan Bank of New York

Notes to Financial Statements — Unaudited

The following table summarizes contractual obligations and contingencies as of June 30, 2019 (in thousands):

	June 30, 2019
	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 obligation bonds at par (a)	$	61,218,690	$	7,717,050	$	3,501,170	$	5,713,200	$	78,150,110
Consolidated obligation discount notes at par	62,523,129		—		—		—		62,523,129
Mandatorily redeemable capital stock (a)	841		384		416		3,873		5,514
Premises (lease obligations) (b)	6,192		15,133		15,958		74,368		111,651
Remote backup site	724		1,257		1,133		—		3,114
Other liabilities (c)	76,615		9,819		7,922		59,326		153,682
Total contractual obligations	123,826,191		7,743,643		3,526,599		5,850,767		140,947,200
Other commitments
Standby letters of credit (d)	19,398,531		124,205		6,938		—		19,529,674
Consolidated obligation bonds/discount notes traded not settled	470,302		—		—		—		470,302
Commitments to fund additional advances	200,000		—		—		—		200,000
Commitments to fund pension	9,321		—		—		—		9,321
Open delivery commitments (MPF)	27,958		—		—		—		27,958
Total other commitments	20,106,112		124,205		6,938		—		20,237,255
Total obligations and commitments	$	143,932,303	$	7,867,848	$	3,533,537	$	5,850,767	$	161,184,455

(a)Callable bonds contain an exercise date or a series of exercise dates that may result in a shorter redemption period.  Redemption dates of mandatorily redeemable capital stock are assumed to correspond to maturity dates of member advances.  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.

(b)In the fourth quarter of 2018, a long-term lease was executed for our New Jersey operating space.  The Bank adopted ASU 2016-02, Leases (Topic 842) on January 1, 2019.  Upon adoption, all lease obligations, including legacy leases are recorded in the Statements of Condition as a Right-of-use (ROU) asset and a corresponding lease liability.  Under legacy pre-ASU GAAP, lease obligations were reported as off-balance sheet commitments.  Immaterial amounts of equipment and other leases have been excluded in the table above.

(c)Includes accounts payable and accrued expenses, liabilities recorded for future settlements of investments, Pass-through reserves due to member institutions held at the FRB, and projected payment obligations for pension plans.  Where it was not possible to estimate the exact timing of payment obligations, they were assumed to be due within one year; amounts were not material.  For more information about employee retirement plans in general, see Note 16. Employee Retirement Plans.

(d)Financial letters of credit — 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.

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

Operating Lease commitments

Effective January 1, 2019, the FHLBNY adopted new guidance under ASU 2016-02, Leases (Topic 842) that requires lessees to recognize on the balance sheet all leases with lease terms greater than twelve months as a lease liability with a corresponding right-of-use (ROU) asset.  Legacy operating lease contracts were recorded at adoption that resulted in the recognition of lease liabilities of $83.9 million and ROU assets of $71.6 million as of January 1, 2019.  The adoption of the new lease guidance did not have a material impact on the FHLBNY’s Statements of income.  The change in accounting due to the adoption of the new lease guidance did not result in a material change to the future net minimum rental payments/receivables or to the net rental expense when compared to December 31, 2018.

53

Federal Home Loan Bank of New York

Notes to Financial Statements — Unaudited

At June 30, 2019, the FHLBNY was obligated under a number of noncancelable leases, predominantly operating leases for premises.  These leases generally have terms of 15 years or less that contain escalation clauses that will increase rental payments.  Operating leases also include backup datacenters and certain office equipment.  Operating lease liabilities and ROU are recognized at the lease commencement date based on the present value of the future minimum lease payments over the lease term.  The future lease payments are discounted at a rate that represents the FHLBNY’s borrowing rate for its own debt (Consolidated obligation bonds) of a similar term.  ROU includes any lease prepayments made, plus any initial direct costs incurred, less any lease incentives received.  Rental expense associated with operating leases is recognized on a straight-line basis over the lease term.  Premise rental expense is included in occupancy expense, and datacenter and other lease expenses are included in other operating expense in the Statements of income.  ROU and lease liabilities are reported in the Statements of condition.

The following tables provide summarized information on our leases (dollars in thousands):

				June 30, 2019
Operating Leases (a)
Right-of-use assets				$	74,602
Lease Liabilities				$	87,971
				Three months ended June 30, 2019			Six months ended June 30, 2019
Operating Lease Expense				$	1,899		$	3,716
Operating cash flows - Cash Paid				$	1,658		$	3,191
Weighted Average Discount Rate				3.33		%
Weighted Average Remaining Lease Term				13.70 Years
	Remaining maturities through
Operating lease liabilities	June 30, 2019			December 31, 2018
Remainder of 2019	$	3,496		$	6,687
2020	7,361			6,927
2021	7,381			6,860
2022	7,475			6,949
2023	7,841			7,282
Thereafter	77,208			72,036
Total undiscounted lease payments	110,762			$	106,741
Imputed interest	(22,791		)
Total operating lease liabilities	$	87,971

(a)We have elected to exclude immaterial amounts of short-term operating lease liabilities in the Right-of-use assets and lease liabilities.

Note 20.Related Party Transactions.

The FHLBNY is a cooperative and the members own almost all of the stock of the FHLBNY.  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, and 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.

54

Federal Home Loan Bank of New York

Notes to Financial Statements — Unaudited

Debt Assumptions and Transfers.  When debt is transferred or assumed, the transactions would be executed in the ordinary course of the FHLBNY’s business and at negotiated market pricing.

Debt assumptions — No debt was assumed from another FHLBank in the six months ended June 30, 2019 and in the same period in the prior year.

Debt transfers — No debt was transferred to another FHLBank in the six months ended June 30, 2019 and in the same period in the prior year.

Advances Sold or Transferred

No advances were transferred or sold to the FHLBNY or from the FHLBNY to another FHLBank in any periods in this report. When an advance is transferred or assumed, the transactions would be executed in the ordinary course of the FHLBNY’s business and at negotiated market pricing.

MPF Program

In the MPF program, the FHLBNY may participate to the FHLBank of Chicago portions of its purchases of mortgage loans from its members.  Transactions are participated at market rates.  Since 2004, the FHLBNY has not shared its purchases with the FHLBank of Chicago.  From the inception of the program through 2004, the cumulative share of MPF Chicago’s participation in the FHLBNY’s MPF loans that has remained outstanding was $8.0 million and $8.6 million at June 30, 2019 and December 31, 2018.

Fees paid to the FHLBank of Chicago for providing MPF program services were approximately $0.6 million and $1.2 million for the three and six months ended June 30, 2019, compared to $0.6 million and $1.4 million for the same periods in the prior year.

Mortgage-backed Securities

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

We pay an annual fee of $6.0 thousand to the FHLBank of Chicago for the use of MBS cash flow models in connection with OTTI analysis performed by the FHLBNY for certain of our private-label MBS.

Intermediation

From time to time, the FHLBNY acts as an intermediary to purchase derivatives to accommodate its smaller members.  At June 30, 2019 and December 31, 2018, outstanding notional amounts were $481.0 million and $333.0 million and represented derivative contracts in which the FHLBNY acted as an intermediary to execute derivative contracts with members.  Separately, the contracts were offset with contracts purchased from unrelated derivatives dealers.  Net fair value exposures of these transactions at June 30, 2019 and December 31, 2018 were not significant.  The intermediated derivative transactions with members were fully collateralized.

Loans to Other Federal Home Loan Banks

In the three and six months ended June 30, 2019, overnight loans extended to other FHLBanks averaged $17.0 million and $12.7 million compared to $1.4 million and $1.8 million in the same periods in the prior year.  Generally, loans made to other FHLBanks are uncollateralized.  Interest income from such loans was immaterial in the periods in this report.

55

Federal Home Loan Bank of New York

Notes to Financial Statements — Unaudited

Borrowings from Other Federal Home Loan Banks

The FHLBNY borrows from other FHLBanks, generally for a period of one day.  In the six months ended June 30, 2019, the FHLBNY borrowed a total of $750.0 million in overnight loans from other FHLBanks.  The borrowings averaged $2.8 million for the six months ended June 30, 2019.  Interest expense was immaterial.  There were no borrowings from other FHLBanks in the six months ended June 30, 2018.

Cash and Due from Banks

During the first six months of the current year, there was no compensating cash balances held at Citibank.  Citibank is a member and stockholder of the FHLBNY.  For more information, see Note 3. Cash and Due from Banks.

The following tables summarize significant balances and transactions with related parties at June 30, 2019 and December 31, 2018 and transactions for the three and six months ended June 30, 2019 and June 30, 2018 (in thousands):

Related Party:  Outstanding Assets, Liabilities and Capital

	June 30, 2019		December 31, 2018
	Related		Related
Assets
Advances	$	102,428,756	$	105,178,833
Loans to other FHLBanks	—		250,000
Accrued interest receivable	261,876		202,404
Liabilities and capital
Deposits	$	1,256,058	$	1,062,637
Mandatorily redeemable capital stock	5,514		5,845
Accrued interest payable	229		373
Affordable Housing Program (a)	164,262		161,718
Other liabilities (b)	45,408		86,095
Capital	$	7,547,150	$	7,746,622

(a)Represents funds not yet allocated or disbursed to AHP programs.

(b)Related column includes member pass-through reserves at the Federal Reserve Bank of New York.

Related Party: Income and Expense Transactions

	Three months ended June 30,				Six months ended June 30,
	2019		2018		2019		2018
	Related		Related		Related		Related
Interest income
Advances	$	704,936	$	629,485	$	1,396,832	$	1,175,945
Interest-bearing deposits	2		1		3		2
Loans to other FHLBanks	104		6		154		13
Interest expense
Deposits	$	5,976	$	4,443	$	11,941	$	7,948
Mandatorily redeemable capital stock	108		293		208		626
Cash collateral held and other borrowings	—		—		50		—
Service fees and other	$	4,117	$	3,412	$	8,248	$	6,751

56

Federal Home Loan Bank of New York

Notes to Financial Statements — Unaudited

Note 21.                 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 the 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 FHLBNY.  Members might withdraw or reduce their business as a result of consolidating with an institution that was a member of another FHLBank, or for other reasons.  The FHLBNY has considered the impact of losing one or more large members.  In general, a withdrawing member would be required to repay all indebtedness prior to the redemption of its capital stock.  Under current conditions, the FHLBNY does not expect the loss of a large member to impair its operations, since the FHLBank Act, as amended, 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 June 30, 2019, December 31, 2018 and June 30, 2018 and associated interest income for the periods then ended are summarized as follows (dollars in thousands):

	June 30, 2019
					Percentage of
			Par		Total Par Value		Three Months				Six Months
	City	State	Advances		of Advances		Interest Income		Percentage (a)		Interest Income		Percentage (a)
Citibank, N.A.	New York	NY	$	23,150,000	22.69	%	$	172,617	34.49	%	$	306,535	31.77	%
Metropolitan Life Insurance Company	New York	NY	14,245,000		13.96		97,123		19.41		192,359		19.94
New York Community Bank (b)	Westbury	NY	11,627,661		11.40		64,027		12.79		128,552		13.33
Investors Bank (b)	Short Hills	NJ	5,635,474		5.52		31,527		6.30		59,733		6.19
Signature Bank	New York	NY	5,362,364		5.26		35,219		7.04		68,317		7.08
AXA Equitable Life Insurance Company	New York	NY	3,990,415		3.91		25,004		5.00		49,947		5.18
Sterling National Bank	Montebello	NY	3,765,000		3.69		18,677		3.73		42,937		4.45
Valley National Bank (b)	Wayne	NJ	3,530,000		3.46		21,846		4.36		41,705		4.32
New York Life Insurance Company	New York	NY	3,000,000		2.94		20,974		4.19		42,967		4.45
HSBC Bank USA, National Association (c)	New York	NY	2,000,000		1.96		13,478		2.69		31,776		3.29
Total			$	76,305,914	74.79	%	$	500,492	100.00	%	$	964,828	100.00	%

(a)Interest income percentage is the member’s interest income from advances as a percentage of the top 10 members.

(b)At June 30, 2019, an officer of this member bank also served on the Board of Directors of the FHLBNY.

(c)Effective second quarter 2019, location changed from McLean, VA to New York, NY.

57

Federal Home Loan Bank of New York

Notes to Financial Statements — Unaudited

	December 31, 2018
					Percentage of
			Par		Total Par Value		Twelve Months
	City	State	Advances		of Advances		Interest Income		Percentage (a)
Citibank, N.A.	New York	NY	$	19,995,000	18.96	%	$	644,926	37.66	%
Metropolitan Life Insurance Company	New York	NY	14,245,000		13.51		301,318		17.60
New York Community Bank (b) (c)	Westbury	NY	13,053,661		12.38		247,973		14.48
Signature Bank	New York	NY	4,970,000		4.71		92,592		5.41
Investors Bank (b)	Short Hills	NJ	4,925,681		4.67		95,921		5.60
Sterling National Bank	Montebello	NY	4,837,000		4.59		92,835		5.42
Manufacturers and Traders Trust Company	Buffalo	NY	4,774,712		4.53		13,256		0.77
AXA Equitable Life Insurance Company	New York	NY	3,990,415		3.78		72,582		4.24
New York Life Insurance Company	New York	NY	3,575,000		3.39		67,793		3.96
Valley National Bank (b)	Wayne	NJ	3,027,000		2.87		83,172		4.86
Total			$	77,393,469	73.39	%	$	1,712,368	100.00	%

(a)Interest income percentage is the member’s interest income from advances as a percentage of the top 10 members.

(b)At December 31, 2018, an officer of this member bank also served on the Board of Directors of the FHLBNY.

(c)New York Commercial Bank merged into New York Community Bank in the fourth quarter 2018.  Par advances are for New York Community Bank.  Interest income reported in the table represent interest income received from New York Commercial Bank and New York Community Bank in 2018.

	June 30, 2018
					Percentage of
			Par		Total Par Value		Three Months				Six Months
	City	State	Advances		of Advances		Interest Income		Percentage (a)		Interest Income		Percentage (a)
Citibank, N.A.	New York	NY	$	28,995,000	26.03	%	$	161,039	36.92	%	$	333,238	39.54	%
Metropolitan Life Insurance Company	New York	NY	14,245,000		12.79		68,469		15.70		130,803		15.52
New York Community Bancorp, Inc.:
New York Community Bank (b)	Westbury	NY	13,230,600		11.88		59,139		13.56		112,343		13.33
New York Commercial Bank (b)	Westbury	NY	3,900		—		12		—		845		0.10
Subtotal New York Community Bancorp, Inc.			13,234,500		11.88		59,151		13.56		113,188		13.43
Sterling National Bank	Montebello	NY	5,065,000		4.55		25,112		5.75		42,856		5.09
Signature Bank	New York	NY	4,795,000		4.31		23,941		5.49		41,988		4.99
Investors Bank (b)	Short Hills	NJ	4,644,867		4.17		24,346		5.58		45,867		5.44
Valley National Bank (b)	Wayne	NJ	4,352,000		3.91		21,199		4.86		37,365		4.43
HSBC Bank USA, National Association (c)	Mc Lean	VA	3,100,000		2.78		19,915		4.57		35,504		4.21
AXA Equitable Life Insurance Company	New York	NY	3,000,415		2.69		16,954		3.89		32,841		3.90
New York Life Insurance Company	New York	NY	2,950,000		2.65		16,050		3.68		29,069		3.45
Total			$	84,381,782	75.76	%	$	436,176	100.00	%	$	842,719	100.00	%

(a)Interest income percentage is the member’s interest income from advances as a percentage of the top 10 members.

(b)At June 30, 2018, officer of member bank also served on the Board of Directors of the FHLBNY.

(c)For Bank membership purposes, principal place of business is New York, NY.

58

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 Part I, Item 1A. Risk Factors in the Bank’s most recent Form 10-K filed on March 21, 2019, and from time to time in the Bank’s other filings with the SEC, and elsewhere in this report.

59

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	61
Business Outlook	63
Financial Condition	66
Advances	69
Investments	72
Mortgage Loans Held-for-Portfolio	77
Debt Financing Activity and Consolidated Obligations	79
Stockholders’ Capital	84
Derivative Counterparty Credit Ratings	86
Liquidity, Short-Term Borrowings and Short-Term Debt	87
Results of Operations	90
Net Income	90
Net Interest Income	92
Interest Income	98
Interest Expense	99
Analysis of Non-Interest Income (Loss)	103
Operating Expenses, Compensation and Benefits, and Other Expenses	105
Assessments	106
Legislative and Regulatory Developments	107

MD&A TABLE REFERENCE

Table(s)	Description	Page(s)
	Selected Financial Data	64 - 65
1.1	Financial Condition	66
2.1 - 2.6	Advances	69 -72
3.1 - 3.8	Investments	73 - 77
4.1 - 4.3	Mortgage Loans	78
5.1 - 5.10	Consolidated Obligations	80 - 83
6.1 - 6.4	Capital	84 - 85
7.1	Derivatives	86
8.1 - 8.3	Liquidity	87 - 88
8.4	Short-Term Debt	89
9.1 - 9.13	Results of Operations	90 - 105
10.1	Assessments	106

60

Executive Overview

This overview of management’s discussion and analysis highlights selected information and may not contain all of the information that is important to readers of this Form 10-K.  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 21, 2019.

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.

Financial Performance — 2019 Second Quarter compared to 2018 Second Quarter

Net income — In the second quarter of the current year, Net income was $108.1 million, a decrease of $47.1 million, or 30.3%, compared to the same period in the prior year. For the FHLBNY, Net income is Net interest income, minus credit losses on mortgage loans, plus Other income (loss), less Other expenses and less Affordable Housing Program assessments.

Net interest income, a key measure of our earnings declined in the current period.  In the second quarter of the current year, Net interest income was $163.9 million, a decrease of $43.8 million, or 21.1%, from the same period in the prior year, primarily due to lower net interest margin earned on advances.  Advance mix shifted to short-term fixed-rate products that typically yield lower margins.  Our liquidity portfolio of overnight federal fund sold and securities purchased under agreements to resell yield lower interest margins, as does our portfolio of highly-liquid U.S. treasury obligations that supplement our liquidity profile.  Our cost of funds, specifically the pricing of variable-rate CO bonds have been less favorable in the current year period.  The pressure on our interest margin is not unexpected, and the factors outlined above resulted in compression of the Net interest spread in the 2019 second quarter that declined year-over-year by 12 basis points to 32 basis points.

Other income (loss), which is primarily comprised of fee revenues from banking services and financial letters of credit, fair value gains/losses on debt and equity securities, and fair value gains/losses from derivatives and instruments elected under the fair value option.  Other income (loss) reported a net loss of $1.3 million in the current year quarter.  Derivatives in economic hedges, primarily hedges of U.S. Treasury securities, reported fair value losses of $39.1 million, partly offset by gains of $33.9 million recorded on Treasury securities.  In the prior year quarter, Other income (loss) reported a net loss of $0.7 million.

Other expenses, which is primarily comprised of operating expenses and expenses for compensation and benefits, were $42.4 million in the current year period, compared to $34.5 million in the prior year period.

Assessments towards our obligations for the Affordable Housing Program were $12.0 million in the current year period, compared to $17.3 million in the prior year period.

Dividend payments — A quarterly cash dividend of $1.57 per share of capital (6.35% annualized) was paid in the three months ended June 30, 2019, compared to $1.60 per share of capital stock (6.50% annualized) paid in the same period in 2018.

61

Financial Condition — June 30, 2019 compared to December 31, 2018

Total assets increased to $150.6 billion at June 30, 2019 from $144.4 billion at December 31, 2018, an increase of $6.2 billion, or 4.3%.

Capital ratios — Our capital position remains strong.  At June 30, 2019, actual risk-based capital was $7.6 billion, compared to required risk-based capital of $948.3 million.  To support $150.6 billion of total assets at June 30, 2019, the minimum required total capital was $6.0 billion or 4.0% of assets.  Our actual regulatory risk-based capital was $7.6 billion, exceeding required total capital by $1.6 billion.  These ratios have remained consistently above the required regulatory ratios through all periods in this report.

Liquidity — Our liquidity position remains strong, and in compliance with all regulatory requirements, and we do not foresee any changes to that position. In addition to the liquidity trading portfolio and liquidity reserves discussed below, liquid assets at June 30, 2019 included $46.9 million as demand cash balances at the Federal Reserve Bank of New York (FRBNY), $18.5 billion in short-term and overnight loans in the federal funds and the repo markets, and $2.5 billion of high credit quality GSE-issued available-for-sale securities that are investment quality, and readily marketable.

Among other liquidity measures, the Finance Agency requires FHLBanks to maintain sufficient liquidity through short-term investments in an amount at least equal to our anticipated cash outflows under certain stressed scenarios.  We remain in compliance with regulations under such scenarios.  We also have other liquidity measures in place, deposit liquidity and operational liquidity, and those liquidity buffers remain in excess of required reserves.

Trading securities (liquidity portfolio) — The objective of the trading portfolio is to meet short-term contingency liquidity needs.  During the periods in this report, we have invested in highly liquid U.S. Treasury notes, GSE-issued securities and Ambac corporate notes.  Trading investments are carried at fair value, with changes recorded through earnings.  At June 30, 2019, trading investments were $7.9 billion in U.S. Treasury securities and $3.4 million in corporate notes.  We will periodically evaluate our liquidity needs and may add to or dispose these liquidity investments as deemed prudent based on liquidity and market conditions.  The Finance Agency prohibits speculative trading practices but allows permitted securities to be deemed held for liquidity if invested in a trading portfolio.

Advances — Par balances decreased at June 30, 2019 to $102.0 billion, compared to $105.4 billion at December 31, 2018.  Short-term fixed-rate advances increased by 50.3% to $22.5 billion at June 30, 2019, up from $15.0 billion at December 31, 2018.  ARC advances, which are adjustable-rate borrowings, decreased by 11.9% to $20.6 billion at June 30, 2019, compared to $23.3 billion at December 31, 2018.  Overnight advances decreased by 38.0% to $4.8 billion at June 30, 2019 compared to $7.7 billion at December 31, 2018.

Long-term investment debt securities — Long-term investment debt securities are designated as available-for-sale (AFS) or held-to-maturity (HTM).  The heavy concentration of GSE and Agency issued (GSE-issued) securities, and a declining balance of private-label MBS, less than 1%, is our investment profile.

In the AFS portfolio, long-term investments of floating-rate GSE-issued mortgage-backed securities were carried on the balance sheet at fair values of $378.6 million at June 30, 2019 and $422.2 million at December 31, 2018. Long-term investments of fixed-rate GSE-issued mortgage-backed securities were carried on the balance sheet at fair values of $2.1 billion at June 30, 2019 and $0 at December 31, 2018.  As permitted under the new hedging guidance adopted effective January 1, 2019, we made a one-time transfer of $1.6 billion of fixed-rate MBS from HTM to AFS.  The transfer enhances our balance sheet management.

In the HTM portfolio, long-term investments at June 30, 2019 were predominantly GSE-issued fixed- and floating-rate mortgage-backed securities and housing finance agency bonds.  Securities in the HTM portfolio are recorded at amortized cost, adjusted for any OTTI.  Fixed- and floating-rate mortgage-backed securities (MBS), including private-label mortgage-backed securities (PLMBS), in the HTM portfolio were $14.3 billion at June 30, 2019 and $16.3 billion at December 31, 2018.  Investments in PLMBS were less than 1% of the HTM portfolio.

In the HTM portfolio, fixed- and floating-rate housing finance agency bonds, primarily New York and New Jersey, were carried at an amortized cost basis of $1.2 billion at June 30, 2019 and December 31, 2018.

62

Equity Investments — We own grantor trusts that invest in highly-liquid registered mutual funds.  The investments were carried on the balance sheet at fair values of $56.2 million at June 30, 2019 and $48.2 million at December 31, 2018.

Mortgage loans held-for-portfolio — Mortgage loans were investments in Mortgage Partnership Finance loans (MPF or MPF Program).  Unpaid principal balance of MPF loans stood at $2.9 billion at June 30, 2019, an increase of $57.6 million from the balance at December 31, 2018.  Loans are primarily fixed-rate, single-family mortgages acquired through the MPF Program.  Credit performance has been strong and delinquency low.  Loan origination by members and acceptable pricing are key factors that drive acquisitions.  Residential collateral values have remained stable in the New York and New Jersey sectors, the primary geographic concentration for our MPF portfolio, and historical loss experience remains very low.

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.

Advances — We expect that our book of advance business may decline in 2019.  The pace of balance sheet growth in the prior year was concentrated along short-term borrowing.  Additionally, the borrowing activities of a few large members have been the predominant driver of increases or decreases in our book of advance business.  In our forecasts for 2019, short-term borrowings will continue to be a significant percentage of our book of advance business.  However, we cannot predict if short-term advances will be rolled over, or if advances borrowed by our larger members will be rolled over at maturity or prepaid prior to maturity.  At June 30, 2019, three members’ advance borrowings totaled 48.1 % of total par advances — Citibank, N.A. 22.7% (19.0% at December 31, 2018), Metropolitan Life Insurance Company 14.0% (13.5% at December 31, 2018), and New York Community Bank 11.4% (12.4% at December 31, 2018).

Other Developments

Replacement of London Interbank Offered Rates (LIBOR) — Central banks and regulators in a number of major jurisdictions have convened working groups to find, and implement the transition to suitable replacements for LIBOR.  The Alternative Reference Rates Committee (ARRC) in the U.S. has settled on the establishment of the Secured Overnight Financing Rate (SOFR) as its recommended alternative to U.S. dollar LIBOR.  As noted throughout this report, much of the FHLBNY’s assets, liabilities and derivatives are indexed to LIBOR.  More information is provided under Market and Economic Risks in Item 1A. Risk Factor’s included in the FHLBNY’s most recent Form 10-K filed on March 21, 2019.

We have created a program that focuses on achieving an orderly transition from LIBOR to SOFR as the alternative risk-free reference rate for us and offer SOFR-linked advances to our members.

63

Selected Financial Data (Unaudited).

Statements of Condition	June 30,			March 31,			December 31,			September 30,			June 30,
(dollars in millions)	2019			2019			2018			2018			2018
Investments (a)	$	44,474		$	39,807		$	35,741		$	42,229		$	42,269
Advances	102,429			99,132			105,179			100,166			110,782
Mortgage loans held-for-portfolio, net of allowance for credit losses (b)	2,986			2,941			2,927			2,910			2,887
Total assets	150,574			142,575			144,381			145,857			156,560
Deposits and borrowings	1,256			1,356			1,063			936			1,191
Consolidated obligations, net
Bonds	78,729			80,150			84,154			85,910			101,392
Discount notes	62,380			53,036			50,640			50,821			45,470
Total consolidated obligations	141,109			133,186			134,794			136,731			146,862
Mandatorily redeemable capital stock	6			6			6			7			18
AHP liability	164			161			162			161			149
Capital
Capital stock	5,841			5,671			6,066			5,856			6,276
Retained earnings
Unrestricted	1,108			1,110			1,103			1,112			1,090
Restricted	640			618			591			567			535
Total retained earnings	1,748			1,728			1,694			1,679			1,625
Accumulated other comprehensive income (loss)	(42		)	(24		)	(13		)	47			21
Total capital	7,547			7,375			7,747			7,582			7,922
Equity to asset ratio (c)(j)	5.01		%	5.17		%	5.37		%	5.20		%	5.06		%

	Three months ended												Six months ended
Statements of Condition	June 30,			March 31,			December 31,		September 30,		June 30,		June 30,			June 30,
Averages (See note below; dollars in millions)	2019			2019			2018		2018		2018		2019			2018
Investments (a)	$	43,253		$	41,583		$	42,264	$	45,246	$	43,591	$	42,422		$	42,979
Advances	101,562			97,127			99,409		107,180		107,740		99,357			112,724
Mortgage loans held-for-portfolio, net of allowance for credit losses	2,963			2,933			2,919		2,903		2,884		2,948			2,886
Total assets	148,615			142,387			145,215		155,923		154,723		145,518			159,091
Interest-bearing deposits and other borrowings	1,050			1,052			881		1,076		1,078		1,051			1,087
Consolidated obligations, net
Bonds	80,528			80,694			88,424		95,245		94,746		80,611			95,253
Discount notes	58,537			52,404			47,500		50,979		50,420		55,487			54,113
Total consolidated obligations	139,065			133,098			135,924		146,224		145,166		136,098			149,366
Mandatorily redeemable capital stock	7			6			6		12		18		7			19
AHP liability	161			159			160		152		141		160			137
Capital
Capital stock	5,816			5,589			5,821		6,161		6,136		5,703			6,343
Retained earnings
Unrestricted	1,095			1,088			1,094		1,082		1,068		1,092			1,064
Restricted	626			601			576		547		515		613			502
Total retained earnings	1,721			1,689			1,670		1,629		1,583		1,705			1,566
Accumulated other comprehensive income (loss)	(30		)	(18		)	48		26		11		(24		)	(5		)
Total capital	7,507			7,260			7,539		7,816		7,730		7,384			7,904

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.

64

Operating Results and Other Data
(dollars in millions)	Three months ended															Six months ended
(except earnings and dividends per	June 30,			March 31,			December 31,			September 30,			June 30,			June 30,			June 30,
share, and headcount)	2019			2019			2018			2018			2018			2019			2018
Net income	$	108		$	135		$	122		$	157		$	155		$	243		$	281
Net interest income (d)	164			177			185			211			208			341			401
Dividends paid in cash (e)	88			101			107			103			105			189			207
AHP expense	12			15			13			18			17			27			31
Return on average equity (f)(g)(j)	5.77		%	7.53		%	6.46		%	7.94		%	8.05		%	6.63		%	7.18		%
Return on average assets (g)(j)	0.29		%	0.38		%	0.34		%	0.40		%	0.40		%	0.34		%	0.36		%
Other non-interest income (loss)	(1		)	13			(5		)	—			—			12			(19		)
Operating expenses (h)	36			34			39			31			28			70			57
Finance Agency and Office of Finance expenses	4			4			4			4			4			8			8
Total other expenses (k)	43			40			44			38			34			83			69
Operating expenses ratio (g)(i)(j)	0.10		%	0.10		%	0.11		%	0.08		%	0.07		%	0.10		%	0.07		%
Earnings per share	$	1.86		$	2.41		$	2.12		$	2.51		$	2.53		$	4.27		$	4.46
Dividends per share	$	1.57		$	1.74		$	1.74		$	1.68		$	1.60		$	3.31		$	3.24
Headcount (Full/part time)	337			322			314			308			324			337			324

(a)	Investments include trading securities, available-for-sale securities, held-to-maturity securities, equity investments in grantor trusts owned by the FHLBNY, securities purchased under agreements to resell, federal funds, loans to other FHLBanks, and other interest-bearing deposits.
(b)	Allowances for credit losses were $0.5 million, $0.8 million, $0.8 million, $0.8 million and $0.8 million for the periods ended June 30, 2019, March 31, 2019, December 31, 2018, September 30, 2018 and June 30, 2018.
(c)	Equity to asset ratio is Capital stock plus Retained earnings and Accumulated other comprehensive income (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 income (loss).
(g)	Annualized.
(h)	Operating expenses include Compensation and Benefits.
(i)	Operating expenses as a percentage of Total average assets.
(j)	All percentage calculations are performed using amounts in thousands, and may not agree if calculations are performed using amounts in millions.
(k)	Includes Operating expenses, Compensation and benefits, Finance Agency and Office of Finance expenses and Other expenses.

65

Financial Condition

Table 1.1:Statements of Condition — Period-Over-Period Comparison

						Net change in			Net change in
(Dollars in thousands)	June 30, 2019		December 31, 2018			dollar amount			percentage
Assets
Cash and due from banks	$	49,197	$	85,406		$	(36,209	)	(42.40	)%
Securities purchased under agreements to resell	9,285,000		4,095,000			5,190,000			126.74
Federal funds sold	9,240,000		7,640,000			1,600,000			20.94
Trading securities	7,923,280		5,810,512			2,112,768			36.36
Equity Investments	56,167		48,179			7,988			16.58
Available-for-sale securities	2,506,228		422,216			2,084,012			493.59
Held-to-maturity securities	15,463,781		17,474,826			(2,011,045		)	(11.51	)
Advances	102,428,756		105,178,833			(2,750,077		)	(2.61	)
Mortgage loans held-for-portfolio	2,985,768		2,927,230			58,538			2.00
Loans to other FHLBanks	—		250,000		(a)	(250,000		)	(100.00	)
Accrued interest receivable	361,290		275,256			86,034			31.26
Premises, software, and equipment	56,850		51,572			5,278			10.23
Operating lease right-of-use assets	74,602		—			74,602			NM
Derivative assets	134,327		113,762			20,565			18.08
Other assets	8,713		8,602			111			1.29
Total assets	$	150,573,959	$	144,381,394		$	6,192,565		4.29	%
Liabilities
Deposits
Interest-bearing demand	$	1,231,957	$	1,002,587		$	229,370		22.88	%
Non-interest-bearing demand	19,101		20,050			(949		)	(4.73	)
Term	5,000		40,000			(35,000		)	(87.50	)
Total deposits	1,256,058		1,062,637			193,421			18.20
Consolidated obligations
Bonds	78,729,376		84,153,776			(5,424,400		)	(6.45	)
Discount notes	62,379,807		50,640,238			11,739,569			23.18
Total consolidated obligations	141,109,183		134,794,014			6,315,169			4.69
Mandatorily redeemable capital stock	5,514		5,845			(331		)	(5.66	)
Accrued interest payable	206,802		223,570			(16,768		)	(7.50	)
Affordable Housing Program	164,262		161,718			2,544			1.57
Derivative liabilities	43,337		31,147			12,190			39.14
Other liabilities	153,682		355,841			(202,159		)	(56.81	)
Operating lease liabilities	87,971		—			87,971			NM
Total liabilities	143,026,809		136,634,772			6,392,037			4.68
Capital	7,547,150		7,746,622			(199,472		)	(2.57	)
Total liabilities and capital	$	150,573,959	$	144,381,394		$	6,192,565		4.29	%

(a)The category Loans to other FHLBanks was inadvertently omitted in the same table presented in the MD&A in the Form 10-K filed on March 21, 2019.

NM — Not meaningful.

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Balance Sheet overview June 30, 2019 and December 31, 2018

Total assets increased to $150.6 billion at June 30, 2019 from $144.4 billion at December 31, 2018, an increase of $6.2 billion, or 4.3%.

Cash at banks was $49.2 million at June 30, 2019, compared to $85.4 million at December 31, 2018.

Money market investments at June 30, 2019 were $9.2 billion in federal funds sold and $9.3 billion in overnight resale agreements.  At December 31, 2018, money market investments were $7.6 billion in federal funds sold and $4.1 billion in overnight resale agreements.

Advances — Par balances decreased at June 30, 2019 to $102.0 billion, compared to $105.4 billion at December 31, 2018.  Short-term fixed-rate advances increased by 50.3% to $22.5 billion at June 30, 2019, up from $15.0 billion at December 31, 2018.  ARC advances, which are adjustable-rate borrowings, decreased by 11.9% to $20.6 billion at June 30, 2019, compared to $23.3 billion at December 31, 2018. Overnight advances decreased by 38.0% to $4.8 billion at June 30, 2019 compared to $7.7 billion at December 31, 2018.

Long-term investment debt securities — Long-term investment debt securities are designated as available-for-sale (AFS) or held-to-maturity (HTM).  The heavy concentration of GSE and Agency issued (GSE-issued) securities, and a declining balance of private-label MBS, less than 1%, is our investment profile.

In the AFS portfolio, long-term investments for floating-rate GSE-issued mortgage-backed securities were carried on the balance sheet at fair values of $378.6 million at June 30, 2019 and $422.2 million at December 31, 2018. Long-term investments for fixed-rate GSE-issued mortgage-backed securities were carried on the balance sheet at fair values of $2.1 billion at June 30, 2019 and $0 at December 31, 2018.  As permitted under the new hedging guidance adopted effective January 1, 2019, we made a one-time transfer of $1.6 billion of fixed-rate MBS from HTM to AFS.  The transfer is expected to enhance balance sheet management.

In the HTM portfolio, long-term investments at June 30, 2019 were predominantly GSE-issued fixed- and floating-rate mortgage-backed securities and housing finance agency bonds.  Securities in the HTM portfolio are recorded at amortized cost, adjusted for any OTTI.  Fixed- and floating-rate mortgage-backed securities (MBS), including private-label mortgage-backed securities (PLMBS), in the HTM portfolio were $14.3 billion at June 30, 2019 and $16.3 billion at December 31, 2018.  Investments in PLMBS were less than 1% of the HTM portfolio.  We acquired $1.1 billion of fixed-rate GSE-issued MBS and there were no acquisitions of floating-rate GSE-issued MBS in the first half of 2019.

In the HTM portfolio, housing finance agency bonds, primarily New York and New Jersey, were carried at an amortized cost basis of $1.2 billion at June 30, 2019 and December 31, 2018.  There were no new acquisitions for the six months ended June 30, 2019 and paydowns were $9.2 million.  In 2018, there was one new acquisition for $100 million in the six months ended June 30, 2018 and paydowns were $14.8 million.

Trading securities (liquidity portfolio) — The objective of the trading portfolio is to meet short-term contingency liquidity needs.  During the periods in this report, we have invested in highly liquid U.S. Treasury notes, GSE-issued securities and Ambac corporate notes.  Trading investments are carried at fair value, with changes recorded through earnings.  At June 30, 2019, trading investments were $7.9 billion in U.S. Treasury notes and $3.4 million in Ambac corporate notes.  We acquired $4.5 billion par amounts of U.S. Treasury notes in the first six months of 2019.  At December 31, 2018, trading investments were $5.3 billion in U.S. Treasury notes, $502.8 million in GSE securities and $3.3 million in Ambac corporate notes.

We will periodically evaluate our liquidity needs and may add to or dispose these liquidity investments as deemed prudent based on liquidity and market conditions.  The Finance Agency prohibits speculative trading practices but allows permitted securities to be deemed held for liquidity if invested in a trading portfolio.

Equity Investments — We own grantor trusts that invest in highly-liquid registered mutual funds, which were reclassified as of January 1, 2018 from AFS to Equity Investments.  These investments were carried on the balance sheet at fair values of $56.2 million at June 30, 2019 and $48.2 million at December 31, 2018.

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Mortgage loans held-for-portfolio — Mortgage loans were investments in Mortgage Partnership Finance loans (MPF or MPF Program).  Unpaid principal balance of MPF loans stood at $2.9 billion at June 30, 2019, an increase of $57.6 million from the balance at December 31, 2018.  Loans are primarily fixed-rate, single-family mortgages acquired through the MPF Program.  Paydowns in the six months of 2019 were $119.5 million, compared to $128.6 million in the prior year same period.  Acquisitions in the six months of 2019 were $180.3 million, compared to $122.2 million in the prior year same period.  Credit performance has been strong and delinquency low.  Loan origination by members and acceptable pricing are key factors that drive acquisitions.  Residential collateral values have remained stable in the New York and New Jersey sectors, the primary geographic concentration for our MPF portfolio, and historical loss experience remains very low.

Capital ratios — Our capital position remains strong.  At June 30, 2019, actual risk-based capital was $7.6 billion, compared to required risk-based capital of $948.3 million.  To support $150.6 billion of total assets at June 30, 2019, the minimum required total capital was $6.0 billion or 4.0% of assets.  Our actual regulatory risk-based capital was $7.6 billion, exceeding required total capital by $1.6 billion.  These ratios have remained consistently above the required regulatory ratios through all periods in this report.  For more information, see financial statements, Note 14.  Capital Stock, Mandatorily Redeemable Capital Stock and Restricted Retained Earnings.

Leverage — At June 30, 2019, balance sheet leverage (based on U.S. GAAP) was 20.0 times shareholders’ equity.  Balance sheet leverage has generally remained steady over the last several years, although from time to time we have maintained excess liquidity in highly liquid investments, or cash balances at the Federal Reserve Bank of New York (FRBNY) 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.  Members are required to purchase activity-based capital stock to support their borrowings from us, and when activity-based 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 ratio remains relatively unchanged.

Liquidity — Our liquidity position remains strong, and in compliance with all regulatory requirements, and we do not foresee any changes to that position. In addition to the liquidity trading portfolio discussed previously, liquid assets at June 30, 2019 included $46.9 million as demand cash balances at the Federal Reserve Bank of New York (FRBNY), $18.5 billion in short-term and overnight loans in the federal funds and the repo markets, and $2.5 billion of high credit quality GSE-issued available-for-sale securities that are investment quality, and readily marketable.

The Finance Agency’s Liquidity Advisory Bulletin 2018-07 became effective April 1, 2019, and the FHFA has defined and communicated to the FHLBanks specific initial levels to be maintained within certain ranges in an accompanying supervisory letter, and may provide updated guidance in future supervisory letters.  We also have other regulatory liquidity measures in place, deposit liquidity and operational liquidity, and other liquidity buffers.  We remain in compliance with the Advisory Bulletin and all liquidity regulations.

For more information about the Advisory Bulletin and our liquidity measures, see section Liquidity, Short-Term Borrowings and Short-Term Debt, and Tables 8.1 through Table 8.3 in this MD&A.

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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.  If maturing advances are not replaced, it will have an impact on business volume.

Interest rate hedging and basis adjustments — A significant percentage of fixed-rate, longer-term advances and all putable advances were designated under an ASC 815 fair value accounting hedge.  Also, certain advances were hedged by interest rate swaps in economic hedges.  From time to time, we have also elected the fair value option (FVO) on an instrument by instrument basis for certain advances.

Carrying value of advances outstanding at June 30, 2019 was $102.4 billion, compared to $105.2 billion at December 31, 2018.  Carrying values included unrealized net fair value hedging basis adjustments recorded on hedges eligible under ASC 815.  The cumulative hedging basis adjustment were gains of $399.8 million at June 30, 2019 and losses of $255.0 million at December 31, 2018.  No advances elected under the FVO were outstanding at June 30, 2019 and December 31, 2018.  For more information about basis adjustments, see Table 2.4 Advances by Maturity and Yield Type in this MD&A.

Table 2.1:Advance Trends

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Member demand for advance products

Par amount of advances outstanding was $102.0 billion at June 30, 2019, compared to $105.4 billion at December 31, 2018.  The decrease in amounts outstanding at June 30, 2019, relative to December 31, 2018 has been largely due to run-offs of borrowed amounts that were not renewed.

Advances — Product Types

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

Table 2.2:Advances by Product Type

For more information about advance product types, see our most recent Form 10-K filed on March 21, 2019.

	June 30, 2019				December 31, 2018
			Percentage					Percentage
	Amounts		of Total		Amounts			of Total
Adjustable Rate Credit - ARCs	$	20,569,467	20.16	%	$	23,346,467		22.14	%
Fixed Rate Advances	46,719,276		45.79		51,612,602			48.96
Short-Term Advances	22,537,473		22.09		14,995,172			14.22
Mortgage Matched Advances	297,839		0.29		320,027			0.30
Overnight & Line of Credit (OLOC) Advances	4,790,427		4.70		7,723,492			7.33
All other categories	7,114,507		6.97		7,436,097			7.05
Total par value	102,028,989		100.00	%	105,433,857			100.00	%
Hedge valuation basis adjustments	399,767				(255,024		)
Total	$	102,428,756			$	105,178,833

Advances — Interest Rate Terms

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

Table 2.3:Advances by Interest-Rate Payment Terms

	June 30, 2019				December 31, 2018
			Percentage					Percentage
	Amount		of Total		Amount			of Total
Fixed-rate (a)	$	81,426,041	79.81	%	$	82,034,884		77.81	%
Variable-rate (b)	20,598,897		20.19		23,391,691			22.19
Variable-rate capped or floored (c)	3,000		—		3,000			—
Overdrawn demand deposit accounts	1,051		—		4,282			—
Total par value	102,028,989		100.00	%	105,433,857			100.00	%
Hedge valuation basis adjustments	399,767				(255,024		)
Total	$	102,428,756			$	105,178,833

(a)Fixed-rate borrowings remained the largest category of advances borrowed by members, and includes long-term and short-term fixed-rate advances.  Long-term advances remain a small segment of the portfolio at June 30, 2019, with only 7.7% of advances in the remaining maturity bucket of greater than 5 years (6.7% at December 31, 2018).  For more information, see financial statements Note 9. Advances.

(b)Variable-rate advances are ARC advances, which are typically indexed to LIBOR.  The FHLBNY’s larger members are generally borrowers of variable-rate advances.

(c)Category represents ARCs with options that “cap” increase or “floor” decrease in the LIBOR index at predetermined strikes (We have also purchased cap/floor options that mirror the terms of the options embedded in the advances sold to members, offsetting our exposure on the advance).

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

Table 2.4:Advances by Maturity and Yield Type

	June 30, 2019				December 31, 2018
			Percentage					Percentage
	Amount		of Total		Amount			of Total
Fixed-rate
Due in one year or less	$	55,481,063	54.38	%	$	52,416,990		49.72	%
Due after one year	25,944,978		25.43		29,617,894			28.09
Total Fixed-rate	81,426,041		79.81		82,034,884			77.81
Variable-rate
Due in one year or less	18,638,981		18.27		15,892,506			15.07
Due after one year	1,963,967		1.92		7,506,467			7.12
Total Variable-rate	20,602,948		20.19		23,398,973			22.19
Total par value	102,028,989		100.00	%	105,433,857			100.00	%
Hedge valuation basis adjustments (a)	399,767				(255,024		)
Total	$	102,428,756			$	105,178,833

Fair value basis and valuation adjustments — Key determinants of valuation adjustments are factors such as advance run offs and new transactions designated in hedging relationships.

(a)Hedging valuation basis adjustments — The reported carrying values of hedged advances are adjusted for changes in their fair values (fair value basis adjustments or fair value) that are attributable to changes in the benchmark risk being hedged.  LIBOR is our primary benchmark.  In 2019 we adopted FF/OIS as another benchmark.  When an advance is hedged under ASC 815, the chosen benchmark becomes the discounting basis for computing changes in the fair values of the hedged advance.  Table 2.5 Hedged Advances by Type discloses notional amounts of advances hedged.  The application of ASC 815 accounting methodology resulted in the recognition of net unrealized hedge valuation basis gains of $399.8 million at June 30, 2019 and losses of $255.0 million at December 31, 2018.  The forward benchmark yield curves, primarily LIBOR, declined at June 30, 2019.  As hedge valuation basis of fixed-rate advances move inversely with the rise and fall of the forward interest rates, the sharp decline of the swap curve reversed previously reported cumulative basis losses.  Generally, hedge valuation basis gains and losses are unrealized and will reverse to zero if the advance is held to maturity or is put or called on the early option exercise dates.

Hedge volume — We hedge putable advances and certain “bullet” fixed-rate advances under the hedge 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 feature (in thousands):

Table 2.5:Hedged Advances by Type

Par Amount	June 30, 2019		December 31, 2018
Qualifying Hedges
Fixed-rate bullets (a)	$	36,815,172	$	41,122,372
Fixed-rate putable (b)	5,644,750		4,734,750
Fixed-rate callable	16,575		16,575
Fixed-rate with embedded cap	30,000		30,000
Total Qualifying Hedges	$	42,506,497	$	45,903,697
Aggregate par amount of advances hedged (c)	$	42,509,497	$	45,919,697
Fair value basis (Hedging adjustments)	$	399,767	$	(255,024	)

(a)Generally, non-callable fixed-rate medium- and longer term advances are hedged to mitigate the risk in fixed-rate lending.

(b)Putable advances are hedged by cancellable swaps, and the paired long put and short call options mitigate the put/call option risks; additionally, fixed-rate is synthetically converted to LIBOR, mitigating the risk in fixed-rate lending for the FHLBNY.  In a rising rate environment, swap dealers would likely exercise their call option, and the FHLBNY will exercise its put option with the member and both instruments terminate at par.  Members may borrow new advances at the then prevailing rate.

(c)Represents par values of advances in ASC 815 hedge relationships.  Typically, the longer term fixed-rate advances and advances with optionality are hedged.

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

Table 2.6:Putable and Callable Advances

	Advances
Par Amount	June 30, 2019		December 31, 2018
Putable/callable (a)	$	5,661,325	$	4,751,325
No-longer putable/callable	$	640,000	$	640,000

(a)Putable advances were typically long-term advances with one or more put options exercisable by the FHLBNY. The increase primarily represents one member’s borrowing.

Investments

We maintain long-term investment portfolios of debt securities, which are principally mortgage-backed securities issued by GSEs and U.S. Agency (GSE-issued).  Investments include a small portfolio of MBS issued by private enterprises, and bonds issued by state or local housing finance agencies.  We also maintain short-term investments for our liquidity resources, for funding daily stock repurchases and redemptions, for ensuring the availability of funds to meet the credit needs of our members, and to provide additional earnings.  We also invest in a liquidity trading portfolio, the purpose of which is to augment our liquidity needs.  Investments in the trading portfolio were U.S Treasury securities and GSE-issued securities, all carried at their fair values.  The Finance Agency prohibits speculative investments, but allows the designation of a trading portfolio for liquidity purposes.  We may dispose such investments if liquidity needs are met and market conditions deem the sale as advantageous.

We are subject to credit risk on our investments, generally transacted with GSEs and large financial institutions that are considered to be investment quality.  The Finance Agency defines investment quality as a security with adequate financial backing so that full and timely payment of principal and interest on such security is expected and there is minimal risk that the timely payment of principal and interest would not occur because of adverse changes in economic and financial conditions during the projected life of the security.  For more information about investment policies, restrictions and practices, see the most recent Form 10-K filed on March 21, 2019.

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The following table summarizes changes in investments by categories: Money market investments, Trading securities, Equity investments in Grantor trusts, Available-for-sale securities and Held-to-maturity securities (Carrying values, dollars in thousands):

Table 3.1:Investments by Categories

	June 30		December 31,		Dollar			Percentage
	2019		2018		Variance			Variance
State and local housing finance agency obligations (a)	$	1,159,165	$	1,168,350	$	(9,185	)	(0.79	)%
Trading securities (b)	7,923,280		5,810,512		2,112,768			36.36
Mortgage-backed securities
Available-for-sale securities, at fair value (c)	2,506,228		422,216		2,084,012			493.59
Held-to-maturity securities, at carrying value (c)	14,304,616		16,306,476		(2,001,860		)	(12.28	)
Total securities	25,893,289		23,707,554		2,185,735			9.22
Equity investments in Grantor trusts (d)	56,167		48,179		7,988			16.58
Securities purchased under agreements to resell	9,285,000		4,095,000		5,190,000			126.74
Federal funds sold	9,240,000		7,640,000		1,600,000			20.94
Total Investments	$	44,474,456	$	35,490,733	$	8,983,723		25.31	%

(a)State and local housing finance agency bonds were designated as HTM and were carried at amortized cost.  There were no new acquisitions in the first six months of 2019 and paydowns were $9.2 million.

(b)Trading securities were U.S. Treasury securities, GSE securities and corporate notes.  Trading portfolio is for liquidity and not for speculative purposes.  We acquired par amounts of $4.5 billion of U.S. Treasury notes in the first six months of 2019.

(c)Mortgage-backed securities classified as AFS includes $1.6 billion of Fixed-rate CMBS transferred at January 1, 2019 from the HTM category.  AFS securities outstanding are all GSE and U.S. Agency issued MBS and carried at fair value.  MBS in the HTM portfolio are predominantly GSE-issued, and less than 1% are PLMBS (private-label MBS).

(d)Funds in the grantor trusts were designated as equity investments at January 1, 2018.  Trust fund balances represent investments in registered mutual funds and other fixed-income and equity funds.  Funds are highly liquid and readily redeemable at their NAVs, which are the fair values of the investments.  The funds are owned by the FHLBNY, and the intent is to utilize investments to fund current and potential future payment obligations of the non-qualified Benefit Equalization Pension plans.  For more information about the pension plans, see financial statements, Note 16. Employee Retirement Plans in the Bank’s most recent Form 10-K filed on March 21, 2019.

Mortgage-Backed Securities — By Issuer

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

Table 3.2:Investment Debt Securities Issuer Concentration

	June 30, 2019						December 31, 2018
					Carrying value as a						Carrying value as a
	Carrying (a)				Percentage		Carrying (a)				Percentage
Long Term Investment (c)	Value		Fair Value		of Capital		Value		Fair Value		of Capital
MBS
Fannie Mae	$	4,326,684	$	4,351,914	57.33	%	$	4,692,639	$	4,658,771	60.58	%
Freddie Mac	12,342,801		12,563,419		163.54		11,870,521		11,867,028		153.23
Ginnie Mae	20,770		20,926		0.28		22,898		23,079		0.30
All Others - PLMBS	120,589		147,531		1.60		142,634		174,749		1.84
Non-MBS (b)	1,159,165		1,137,491		15.36		1,168,350		1,144,345		15.08
Total Investment Debt Securities	$	17,970,009	$	18,221,281	238.10	%	$	17,897,042	$	17,867,972	231.03	%
Categorized as:
Available-for-Sale Securities	$	2,506,228	$	2,506,228			$	422,216	$	422,216
Held-to-Maturity Securities	$	15,463,781	$	15,715,053			$	17,474,826	$	17,445,756

(a)Carrying values include fair values for AFS securities.

(b)Non-MBS — Includes Housing finance agency bonds.

(c)Excludes Trading portfolio.

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

Table 3.3:External Rating of the Held-to-Maturity Portfolio

	June 30, 2019
									Below
									Investment
	AAA-rated (a)		AA-rated (b)		A-rated		BBB-rated		Grade		Total
Mortgage-backed securities	$	587	$	14,185,343	$	77,870	$	8,464	$	32,352	$	14,304,616
State and local housing finance agency obligations	25,000		1,116,665		5,405		12,095		—		1,159,165
Total Long-term securities	$	25,587	$	15,302,008	$	83,275	$	20,559	$	32,352	$	15,463,781

	December 31, 2018
									Below
									Investment
	AAA-rated (a)		AA-rated (b)		A-rated		BBB-rated		Grade		Total
Mortgage-backed securities	$	2,543	$	16,165,160	$	95,760	$	9,117	$	33,896	$	16,306,476
State and local housing finance agency obligations	25,000		1,122,060		5,575		15,715		—		1,168,350
Total Long-term securities	$	27,543	$	17,287,220	$	101,335	$	24,832	$	33,896	$	17,474,826

See footnotes (a) and (b) under Table 3.4.

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

Table 3.4:External Rating of the Available-for-Sale Portfolio

	June 30, 2019						December 31, 2018
	AA-rated (b)		Unrated		Total		AA-rated (b)		Unrated		Total
Available-for-sale securities
Mortgage-backed securities	$	2,506,228	$	—	$	2,506,228	$	422,216	$	—	$	422,216

Footnotes to Table 3.3 and Table 3.4.

(a)Certain PLMBS and housing finance bonds have been assigned AAA, based on the ratings by S&P and Moody’s.

(b)We have assigned GSE-issued MBS a rating of AA+ based on the credit rating assigned to long-term senior debt issued by Fannie Mae, Freddie Mac and U.S. Agency.  The debt ratings are based on S&P’s rating of AA+ for the GSE Senior long-term debt and AA+ for the debt issued by the U.S. government; Moody’s debt rating is Aaa for the GSE Senior long-term debt and the U.S. government.

External credit rating information has been provided in Table 3.3 and Table 3.4 as the information is used as another data point to supplement our credit quality indicators, and they serve as a useful indicator when analyzing the degree of credit risk to which we are exposed.  Significant changes in credit ratings classifications of our investment debt securities portfolio could indicate increased credit risk for us that could be accompanied by a reduction in the fair values of our investment debt securities portfolio.

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Fair Value Levels of Investment Debt Securities, and Unrecognized and Unrealized Holding Losses

To compute fair values, multiple vendor prices were received for substantially all of our MBS holdings, and substantially all of those prices fell within specified thresholds.  The relative proximity of the prices received from the multiple vendors supported our conclusion that the final computed prices were reasonable estimates of fair values.  GSE securities priced under such a valuation technique using the market approach are typically classified within Level 2 of the valuation hierarchy.  For a comparison of carrying values and fair values of investment debt securities, see financial statements, Note 5. Trading securities, Note 7. Available-for-Sale Securities and Note 8. Held-to-Maturity Securities.  For more information about the corroboration and other analytical procedures performed, see Note 18. Fair Values of Financial Instruments.

Weighted average rates — Mortgage-backed securities (HTM and AFS) — The following table summarizes weighted average rates (yields) and amortized cost by contractual maturities (dollars in thousands):

Table 3.5:Mortgage-Backed Securities Weighted Average Rates by Contractual Maturities

	June 30, 2019				December 31, 2018
	Amortized		Weighted		Amortized		Weighted
	Cost		Average Rate		Cost		Average Rate
Mortgage-backed securities
Due in one year or less	$	270,455	3.37	%	$	369,989	2.03	%
Due after one year through five years	4,092,036		3.14		4,602,651		3.16
Due after five years through ten years	8,895,758		3.17		8,201,200		3.07
Due after ten years	3,464,299		3.06		3,561,879		3.11
Total mortgage-backed securities	$	16,722,548	3.14	%	$	16,735,719	3.08	%

A significant portion of the MBS portfolio consists of floating-rate securities and the weighted average rates will change in parallel with changes in the LIBOR rate.

Fair Value Hedges of Fixed-rate Available-for-sale Mortgage-backed Securities

The adoption of ASU 2017-12 provided a new approach, called the last-of-layer method for hedging prepayable assets in a closed portfolio of prepayable fixed-rate instruments.  The approach incorporates new measurement elections by using benchmark rate components of contractual coupon cash flows in a partial-term hedge of a prepayable asset.  The following table summarizes key data in last-of-layer fair value hedges under the ASU (in thousands):

Table 3.6:Fair Value Hedges of Fixed-Rate Prepayable CMBS

	Fair Value Hedges of Fixed-Rate Prepayable CMBS
	June 30, 2019
Current face value of hedged CMBS	$	414,000
Last-of-layer face value of hedged CMBS	$	377,000
Cumulative basis adjustment (loss)	$	(13,362	)
Interest rate swap contracts (par)	$	377,000

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Short-term investments

We typically maintain substantial investments in high quality short- and intermediate-term financial instruments such as secured overnight transactions collateralized by securities, and unsecured overnight and term federal funds sold to highly-rated financial institutions who also satisfy other credit quality factors.  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 adjust liquidity.  We also invest in a liquidity trading portfolio with the objective of expanding our choice of investing for liquidity.

Monitoring — 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, and actively limit or suspend existing exposures, as appropriate.  In addition, we are required to manage our unsecured portfolio subject to regulatory limits prescribed by our regulator, the Finance Agency.  The Finance Agency 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 Finance Agency regulations.

The Finance Agency regulations also permit us to extend additional unsecured credit, which could be comprised of overnight extensions and sales of federal funds subject to continuing contract.  Our total unsecured overnight exposure to a single counterparty may not exceed twice the regulatory limit for term exposures.  We are prohibited by Finance Agency 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, and we did not own any financial instruments issued by foreign sovereign governments, including those countries that are members of the European Union in any periods in this report.  For more information about our policies and practices, see the most recent Form 10-K filed on March 21, 2019.

Securities purchased under agreements to resell — As part of our banking activities with counterparties, we have entered into secured financing transactions that mature overnight, and can be extended only at our discretion.  These transactions involve the lending of cash against securities, which are accepted as collateral.  The balance outstanding under such agreements was $9.3 billion at June 30, 2019 and $4.1 billion at December 31, 2018.  For more information, see financial statements, Note 4.  Federal Funds Sold and Securities Purchased under Agreements to Resell.

Federal funds sold — Federal funds sold was $9.2 billion at June 30, 2019 and $7.6 billion at December 31, 2018, representing unsecured lending to major banks and financial institutions.  We are a major lender in this market, particularly in the overnight market.  The amount of unsecured credit risk that may be extended to individual counterparties is commensurate with the counterparty’s credit quality as assessed by our management, and the assessment would include reviews of credit ratings of counterparty’s debt securities or deposits as reported by NRSROs.  Overnight and short-term federal funds allow us to warehouse funds and provide balance sheet liquidity to meet unexpected member borrowing demands.

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The following table summarizes par value, amortized cost and the carrying value (fair value) of the trading portfolio (in thousands):

Table 3.7:Trading Securities

	Trading Securities
	June 30, 2019		December 31, 2018
Par value	$	7,908,116	$	5,692,263
Amortized cost	$	7,869,973	$	5,807,889
Carrying/Fair value	$	7,923,280	$	5,810,512

The Finance Agency prohibits speculative investments but allows permitted securities to be deemed held for liquidity if invested in a trading portfolio.  We may dispose such investments if liquidity needs are met and market conditions deem the sale as advantageous.  For more information about fair values of securities in the trading portfolio, see Note 5. Trading Securities in the Notes to the Financial Statements.

The following table summarizes economic hedges of fixed-rate trading securities held for liquidity (in thousands):

Table 3.8:Economic Hedges of Fixed-rate Liquidity Trading Securities

	Economic Hedges of Fixed-Rate Trading Securities
	June 30, 2019		December 31, 2018
Par amount of securities hedged	$	7,905,000	$	5,839,130
Par amount of interest rate swaps	$	7,905,000	$	5,839,130

Mortgage Loans Held-for-Portfolio

Mortgage loans are carried in the Statements of Condition at amortized cost, less allowance for credit losses.  The outstanding unpaid principal balance was $2.9 billion at June 30, 2019, an increase of $57.6 million (net of acquisitions and paydowns) from the balance at December 31, 2018.  Mortgage loans were investments in Mortgage Partnership Finance loans (MPF or MPF Program).

Mortgage Partnership Finance Program —- We invest in mortgage loans through the MPF Program, which is a secondary mortgage market structure under which eligible mortgage loans are purchased or funded from or through members who are Participating Financial Institutions (PFI).  We may also acquire MPF loans through participations with other FHLBanks, although our current acquisition strategy is to limit acquisitions through our PFIs.  MPF loans are conforming conventional and Government i.e., insured or guaranteed by the Federal Housing Administration (FHA), the Department of Veterans Affairs (VA) or the Rural Housing Service of the Department of Agriculture (RHS), fixed-rate mortgage loans secured primarily by single-family residential properties with maturities ranging from five to 30 years or participations in such mortgage loans.  The FHLBank of Chicago (MPF Provider) developed the MPF Program in order to help fulfill the housing mission and to provide an additional source of liquidity to FHLBank members that choose to sell mortgage loans into the secondary market rather than holding them in their own portfolios.  Finance Agency regulations define the acquisition of Acquired Member Assets (AMA) as a core mission activity of the FHLBanks.  In order for MPF loans to meet the AMA requirements, the purchase and funding are structured so that the credit risk associated with MPF loans is shared with PFIs.  For more information about the MPF program, see Mortgage Loans Held-for-Portfolio in the MD&A in the Bank’s most recent Form 10-K filed on March 21, 2019.

We provide this product to members as another alternative for them to sell their mortgage production.  Loan origination by members and acceptable pricing are key factors that drive growth.

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Mortgage loans — Conventional and Insured Loans — The following table classifies mortgage loans between conventional loans and loans insured by FHA/VA (in thousands):

Table 4.1:MPF by Conventional and Insured Loans

	June 30, 2019		December 31, 2018
Federal Housing Administration and Veteran Administration insured loans	$	222,506	$	227,268
Conventional loans	2,718,488		2,656,149
Total par MPF loans	$	2,940,994	$	2,883,417

Mortgage Loans — Loss Sharing and the Credit Enhancement Waterfall — For all loans acquired prior to June 1, 2017, the credit enhancement was computed as the amount that would bring an uninsured loan to “Double A” credit risk.  For loans acquired after June 1, 2017, the credit enhancement is computed to a “Single A” credit risk.  In the credit enhancement waterfall, we are responsible for the first loss layer.  The second loss layer is the credit obligation of the PFI.  We assume all residual risk.  Also, see financial statements, Note 10.  Mortgage Loans Held-for-Portfolio.

Loan and PFI Concentration — Loan concentration was in New York State, which is to be expected since the largest PFIs are located in New York.  The tables below summarize concentrations — Geographic and PFI:

Table 4.2:Geographic Concentration of MPF Loans

	June 30, 2019				December 31, 2018
	Number of loans %		Amounts outstanding %		Number of loans %		Amounts outstanding %
New York State	68.7	%	60.9	%	68.8	%	60.4	%

Table 4.3:Top Five Participating Financial Institutions — Concentration (par value, dollars in thousands)

	June 30, 2019
	Mortgage		Percent of Total
	Loans		Mortgage Loans
Bethpage Federal Credit Union	$	290,106	9.86	%
Investors Bank	254,692		8.66
New York Community Bank	245,318		8.34
Sterling National Bank	229,065		7.79
Teachers Federal Credit Union	186,706		6.35
All Others	1,735,107		59.00
Total	$	2,940,994	100.00	%

	December 31, 2018
	Mortgage		Percent of Total
	Loans		Mortgage Loans
Bethpage Federal Credit Union	$	260,593	9.04	%
New York Community Bank	256,992		8.91
Investors Bank	242,164		8.40
Sterling National Bank	238,840		8.28
Teachers Federal Credit Union	183,052		6.35
All Others	1,701,776		59.02
Total	$	2,883,417	100.00	%

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Accrued interest receivable

Other assets

Accrued interest receivable was $361.3 million at June 30, 2019 and $275.3 million at December 31, 2018, and represented interest receivable primarily from advances and investments.  Changes in balances would represent the timing of coupons receivable from advances and investments at the balance sheet dates.

Other assets, including prepayments and miscellaneous receivables, were $8.7 million and $8.6 million at June 30, 2019 and December 31, 2018.

Debt Financing Activity and Consolidated Obligations

Our primary source of funds continues to be the issuance of Consolidated obligation bonds and discount notes.

Consolidated obligation bonds — The carrying value of Consolidated obligation bonds (CO bonds or Consolidated obligation bonds) was $78.7 billion (par, $78.2 billion) at June 30, 2019, compared to $84.2 billion (par, $83.8 billion) at December 31, 2018.  The carrying value of Consolidated obligation discount notes outstanding was $62.4 billion at June 30, 2019 and $50.6 billion at December 31, 2018.

Interest rate hedging — Significant amounts of CO bonds have been designated under an ASC 815 fair value accounting hedge.  Also, certain CO bonds were hedged by interest rate swaps in economic hedges.  From time-to-time, we have also hedged the anticipatory issuance of fixed-rate CO bonds in a cash flow hedge under ASC 815. Certain CO bonds were elected under the FVO.  As a result of hedging elections under ASC 815 and the elections under the FVO, carrying values of CO bonds included valuation basis adjustments.  For more information about valuation basis adjustments on CO bonds, see Table 5.1.

Certain discount notes were hedged under an ASC 815 fair value accounting hedge at June 30, 2019; additionally, certain discount notes were also hedged under an ASC 815 cash flow accounting hedge.  For more information, see financial statements, Note 17. Derivatives and Hedging Activities.  Certain discount notes were elected under the FVO.  As a result of accounting elections, carrying values of discount notes included valuation basis adjustments. For more information about valuation basis adjustments on discount notes, see Table 5.7 Discount Notes Outstanding.

Debt Ratings — A FHLBank’s ability to access the capital markets to issue debt, as well as our cost of funds, is dependent on credit ratings from Nationally Recognized Statistical Rating Organizations.  Consolidated obligations of FHLBanks are rated Aaa/P-1 by Moody’s, and AA+/A-1+ by S& P.  Any rating actions on the US Government would likely result in all individual FHLBanks’ long-term deposit ratings and the FHLBank System long-term bond rating moving in lock step with any US sovereign rating action.

Joint and Several Liability — 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.  For more information, see financial statements, Note 19.  Commitments and Contingencies.

Performance of the FHLBank System issued consolidated obligation debt (CO bonds and CO discount notes) — Market demand for FHLBank CO debt has remained strong, with good market access for its entire breadth of CO debt funding programs.  Generally, funding was guided by the FHLBanks’ needs for refunding and for asset/liability management strategies, by investor preferences, and by the interest rate environment and market liquidity.  CO bonds issued by the FHLBanks in June 2019 was $16.5 billion, and CO floating debt outstanding were up by $4.0 billion from the previous month.  CO obligations outstanding rose by $5 billion during June 2019 from the previous month, with increases in both bonds and discount notes.  Total debt outstanding was $1.05 trillion at June 30, 2019.  CO discount notes outstanding was just under $428.0 billion.  Floating-rate CO bonds have remained attractive to money funds for a number of reasons.  In a rising interest rate environment, periodic resets remove much of the interest rate risk for investors as the floaters reset to higher yields.  In an anticipated falling interest rate environment, the demand for CO floating-rate bonds may decline.  The CO floating-rate receives favorable liquidity treatment under the SEC’s Rule 2(a)-7 for money market funds, which deem the security’s weighted average maturity to be the next rate reset date. CO discount notes have also remained an attractive investment asset for

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investors, specifically within the money market fund industry, who need high quality liquid securities with specific maturity dates.

While demand for the FHLBank System debt has remained strong, pricing has become competitive.  In June 2019, the weighted average FHLBank System bond funding costs relative to theoretical 3-month Libor increased to the highest level in almost three years.  For vanilla LIBOR-indexed floating-rate FHLBank System CO bonds, the overall funding costs averaged 3-month LIBOR minus 1.8 basis points in June 2019, the highest monthly average since June 2016.  The FHLBank System discount note costing yields were stable relative to the theoretical 3-month LIBOR during the current year quarter, but the spreads were tighter to 3-month LIBOR when compared to the same period in the prior year.

The SOFR market is developing rapidly, and successful issuances of FHLBank System SOFR-linked floaters have been an important development for the FHLBank debt and its support for SOFR.  We expect the trend to accelerate as we position our debt to meet bond investor appetite for LIBOR alternative benchmark debt, and to provide liquidity in the SOFR debt market.  FHLBank System issued seven SOFR-linked bonds for a total issuance of $17.3 billion, or 57%, of floaters issued in June 2019.  Two of these issues had a maturity of 6-months and totaled $6.05 billion.  In addition, FHLBank System priced and issued a $1.5 billion 7-month SOFR floater, a $1.6 billion 9-month SOFR floater, a $3.0 billion 1-year SOFR floater, a $2.25 billion 15-month SOFR floater, and a $2.9 billion 2-year SOFR floater.  Total outstanding FHLBank System SOFR-linked bonds was $61.5 billion at June 30, 2019.

The FHLBNY’s outstanding balance of SOFR-linked bonds was $6.0 billion at June 30, 2019, up from $950.0 million at December 31, 2018.

Consolidated obligation bonds

The following table summarizes types of Consolidated obligation bonds (CO Bonds) issued and outstanding (dollars in thousands):

Table 5.1:CO Bonds by Type

	June 30, 2019					December 31, 2018
	Amount			Percentage of Total		Amount			Percentage of Total
Fixed-rate, non-callable	$	18,526,110		23.71	%	$	22,745,980		27.16	%
Fixed-rate, callable	5,570,000			7.13		4,966,000			5.93
Step Up, callable	200,000			0.26		880,000			1.05
Single-index floating rate	53,854,000			68.90		55,166,000			65.86
Total par value	78,150,110			100.00	%	83,757,980			100.00	%
Bond premiums	62,239					42,647
Bond discounts	(26,597		)			(36,290		)
Hedge valuation basis adjustments (a)	378,056					238,150
Hedge basis adjustments on de-designated hedges (b)	141,711					131,497
FVO (c) - valuation adjustments and accrued interest	23,857					19,792
Total Consolidated obligation-bonds	$	78,729,376				$	84,153,776

Fair value basis and valuation adjustments — Key determinants are factors such as run offs and new transactions designated under an ASC 815 hedge or elected under the FVO, the forward swap curve, the volatility of the swap rates, the remaining duration to maturity, and for bonds elected under the FVO, the changes in the spread between the swap rate and the Consolidated obligation debt yields, and changes in interest payable, which is a component of the entire fair value of FVO bonds.

(a)Hedging valuation basis adjustments — The reported carrying values of hedged CO bonds are adjusted for changes in their fair values (fair value basis adjustments or fair value) that are attributable to changes in the benchmark risk being hedged.  LIBOR is our primary benchmark.  In 2019 we adopted FF/OIS as another benchmark.  The chosen benchmark becomes the discounting basis under ASC 815 for computing changes in fair values for hedged CO bonds.  Table 5.2 CO Bonds Hedged under Qualifying Fair Value Hedges discloses notional amounts of CO bonds hedged.  The application of ASC 815 accounting methodology resulted in the recognition of net unrealized hedge valuation basis losses of $378.1 million and $238.2 million at June 30, 2019 and December 31, 2018.  The benchmark curves, specifically the forward LIBOR yield curve, declined steeply at June 30, 2019.  As hedge valuation basis of fixed-rate CO liabilities move with the rise and fall of the forward LIBOR curve, the sharp decline of the swap curve caused valuation losses to increase.  Generally, hedge valuation basis gains and losses are unrealized and will reverse to zero if the CO bonds are held to maturity or are called on the early option exercise dates.

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(b)Valuation basis of terminated hedges — Represents unamortized cumulative valuation basis of certain CO bonds that were no longer in fair value hedge relationships.  When hedging relationships for the debt were de-designated, the net unrealized cumulative losses at the hedge termination dates were no longer adjusted for changes in the benchmark rate.  Instead, the valuation basis are being amortized on a level yield method, and the net amortization is recorded as a reduction of Interest expense.  If the CO bonds are held to maturity, the basis losses will be fully amortized as interest expense.

(c)FVO valuation adjustments — Valuation basis adjustments and accrued interest payable are recorded to recognize changes in the entire fair value (the full fair value) of CO bonds elected under the FVO.  Table 5.3 CO Bonds Elected under the Fair Value Option (FVO) discloses par amounts of CO bonds elected under the FVO.  Valuation adjustments at June 30, 2019 and December 31, 2018 were largely the accumulation of semi-annual accrued unpaid interest included in the full fair value of the debt.

The discounting basis for computing the change in fair value basis of bonds elected under the FVO is the observable (FHLBank) CO bond yield curve.  All FVO bonds were short- and medium-term, and fluctuations in their “clean prices” (without accumulated unpaid interest) valuations were not significant as the bonds re-priced relatively frequently to market indices, keeping valuations near to par, although inter-period valuation volatility is likely.

We have elected the FVO on an instrument-by-instrument basis.  For bonds elected under the FVO, it was not necessary to estimate changes attributable to instrument-specific credit risk, as we consider the credit worthiness of the FHLBanks to be secure and credit related adjustments unnecessary.  More information about debt elected under the FVO is provided in financial statements, Note 18.  Fair Values of Financial Instruments (See Fair Value Option Disclosures).

Hedge volume — Tables 5.2 - 5.4 provide information with respect to par amounts of CO bonds based on accounting designation: (1) under hedge qualifying rules, (2) under the FVO, and (3) as an economic hedge (in thousands):

Table 5.2:CO Bonds Hedged under Qualifying Fair Value Hedges

Qualifying hedges — Generally, fixed-rate (bullet and callable) medium and long-term Consolidated obligation bonds are hedged in a Fair value ASC 815 qualifying hedge.

	Consolidated Obligation Bonds
Par Amount	June 30, 2019		December 31, 2018
Qualifying Hedges
Fixed-rate bullet bonds	$	6,043,885	$	8,300,080
Fixed-rate callable bonds	2,063,000		3,373,000
	$	8,106,885	$	11,673,080

Table 5.3:CO Bonds Elected under the Fair Value Option (FVO)

CO bonds elected under the FVO — If at inception of a hedge we do not believe that a 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.  We would record fair value changes of the FVO debt through earnings, and to the extent the debt is economically hedged, record changes of the fair values of the interest rate swap 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 full fair value.

	Consolidated Obligation Bonds
Par Amount	June 30, 2019		December 31, 2018
Bonds designated under FVO	$	3,215,000	$	5,140,000

CO bonds elected under the FVO were generally in economic hedges by the execution of interest rate swaps that converted the fixed-rate bonds to a variable-rate instrument.  We elected to account for the bonds under the FVO when we were generally unable to assert with confidence that the short- and intermediate-term bonds, or callable bonds, with short lock-out periods to the exercise of call options, would remain effective hedges as required under hedge accounting rules.  Designation of CO bonds under the FVO is an asset-liability management decision.  For more information, see financial statements, Fair Value Option Disclosures in Note 18.  Fair Values of Financial Instruments.

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Table 5.4:Economic Hedges of CO Bonds (Excludes CO Bonds Elected under the FVO and Designated in Economic Hedges)

Economic hedges of CO bonds — We also issue variable-rate debt with coupons that are not indexed to the 3-month LIBOR, our preferred funding base.  During the periods in this report, we issued variable-rate bonds indexed to the 1-month LIBOR.  To mitigate the economic risk of a change in the variable-rate basis between the 3-month LIBOR and the 1-month LIBOR, we have executed basis rate swaps that have synthetically created 3-month LIBOR debt.  The operational cost of designating the debt instruments in an ASC 815 qualifying hedge outweighed the accounting benefits of marking the debt and the swap to fair values.  We opted instead to designate the hedging basis swaps as standalone derivatives, and recorded changes in their fair values through earnings.  The carrying value of the debt would not include fair value basis since the debt is recorded at amortized cost.

	Consolidated Obligation Bonds
Par Amount	June 30, 2019		December 31, 2018
Bonds designated as economically hedged
Floating-rate bonds (a)	$	31,345,000	$	29,735,000
Fixed-rate bonds (b)	35,000		15,000
	$	31,380,000	$	29,750,000

(a)Floating-rate debt — Floating-rate bonds were typically indexed to 1-month LIBOR.  With the execution of basis hedges, certain floating-rate bonds were swapped in economic hedges to 3-month LIBOR, mitigating the basis risk between the 1-month LIBOR and the 3-month LIBOR, which is our primary benchmark rate.

(b)Fixed-rate debt — Bonds that were previously hedged and have fallen out of effectiveness.

CO Bonds — Maturity or Next Call Date (a)

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

Table 5.5:CO Bonds — Maturity or Next Call Date

	June 30, 2019				December 31, 2018
	Amount		Percentage of Total		Amount		Percentage of Total
Year of maturity or next call date
Due or callable in one year or less	$	64,469,690	82.49	%	$	69,699,475	83.22	%
Due or callable after one year through two years	3,783,585		4.84		5,700,545		6.81
Due or callable after two years through three years	2,406,465		3.09		1,661,325		1.98
Due or callable after three years through four years	1,488,535		1.90		1,383,750		1.65
Due or callable after four years through five years	980,635		1.25		955,235		1.14
Thereafter	5,021,200		6.43		4,357,650		5.20
Total par value	$	78,150,110	100.00	%	$	83,757,980	100.00	%

(a)Contrasting Consolidated obligation bonds by contractual maturity dates (see financial statements, Note 12. Consolidated Obligations — Redemption Terms of Consolidated Obligation Bonds) with potential call dates (as reported in table above) 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.  The call options are exercisable as either a one-time option or 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 bonds versus non-callable CO bonds outstanding (par amounts, in thousands):

Table 5.6:Outstanding Callable CO Bonds versus Non-callable CO bonds

	June 30, 2019		December 31, 2018
Callable	$	5,770,000	$	5,846,000
Non-Callable	$	72,380,110	$	77,911,980

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CO Discount Notes

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

Table 5.7:Discount Notes Outstanding

	June 30, 2019			December 31, 2018
Par value	$	62,523,129		$	50,805,481
Amortized cost	$	62,380,002		$	50,631,066
Hedge value basis adjustments (a)	(195		)	—
FVO (b) - valuation adjustments and remaining accretion	—			9,172
Total discount notes	$	62,379,807		$	50,640,238
Weighted average interest rate	2.34		%	2.34		%

(a)Hedge valuation basis adjustments are due to changes in the benchmark rate chosen as the hedged risk in ASC 815 fair value hedges. There were no discount notes that were in ASC 815 hedges at December 31, 2018.

(b)Valuation basis adjustment losses are recorded to recognize changes in the entire or full fair values of CO discount notes elected under the FVO.  The full fair values include unaccreted discounts.  The discounting basis for computing changes in fair values of discount notes elected under the FVO is the observable FHLBank discount note yield curve.  Valuation losses were largely liability balances representing unaccreted discounts.  Other than unaccreted discount, changes in the valuation adjustments represent fair value changes due to changes in the term structure of interest rates, the shape of the yield curve at the measurement dates, and the growth or decline in volume of hedged discount notes.  When held to maturity, unaccreted discounts will be fully accreted to par, and unrealized fair value gains and losses will sum to zero over the term to maturity. There were no FVO discount notes outstanding at June 30, 2019.

Table 5.8:Discount Notes Hedged under Qualifying Fair Value Hedges

	Consolidated Obligation Discount Notes
Principal Amount	June 30, 2019		December 31, 2018
Discount notes hedged under qualifying hedge	$	2,740,105	$	—

The following table summarizes discount notes elected under the FVO and outstanding (in thousands):

Table 5.9:Discount Notes under the Fair Value Option (FVO)

	Consolidated Obligation Discount Notes
Par Amount	June 30, 2019		December 31, 2018
Discount notes designated under FVO (a)	$	—	$	3,170,915

(a)No FVO discount notes were outstanding at June 30, 2019.  When we have elected discount notes under the FVO, it has not been necessary to estimate changes attributable to instrument-specific credit risk, as we consider the credit worthiness of the FHLBanks to be secured and credit related adjustments unnecessary.

CO Discount notes elected under the FVO were generally in economic hedges with the execution of interest rate swaps that converted the fixed-rate notes to a variable-rate instrument.  We elected to account for the discount notes under the FVO when we were generally unable to assert with confidence that the discount notes would remain effective hedges as required under hedge accounting rules.  See financial statements, Fair Value Option Disclosures in Note 18.  Fair Values of Financial Instruments.

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

Table 5.10:Cash Flow Hedges of Discount Notes

	Consolidated Obligation Discount Notes
Principal Amount	June 30, 2019		December 31, 2018
Discount notes hedged under qualifying hedge (a)	$	2,664,000	$	2,664,000

(a)Amounts represent discounts notes issued in cash flow “rollover” hedge strategies that hedged the variability of 91-day discount notes issued in sequence.  The original maturities of the interest rate swaps typically ranged from 10-15 years.  In this strategy, the discount note expense, which resets every 91 days, is synthetically converted to fixed cash flows over the hedge periods, thereby achieving hedge objectives.  For more information, see financial statements, Cash Flow Hedges in Note 17. Derivatives and Hedging Activities.

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Accrued interest payable

Accrued interest payable — Amounts outstanding were $206.8 million at June 30, 2019 and $223.6 million at December 31, 2018.  Accrued interest payable was comprised primarily of interest due and unpaid on CO bonds, which are generally payable on a semi-annual basis.  Fluctuations in unpaid interest balances on bonds are due to the timing of semi-annual coupon accruals and payments at the balance sheet dates.

Other Liabilities

Other liabilities — Amounts outstanding were $153.7 million at June 30, 2019 and $355.8 million at December 31, 2018.  Other liabilities comprised of unfunded pension liabilities, Federal Reserve pass-through reserves held on behalf of members, and miscellaneous payables.

Stockholders’ Capital

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

Table 6.1:Stockholders’ Capital

	June 30, 2019			December 31, 2018
Capital Stock (a)	$	5,841,247		$	6,065,799
Unrestricted retained earnings (b)	1,108,387			1,102,801
Restricted retained earnings (c)	639,865			591,281
Accumulated Other Comprehensive Income (Loss)	(42,349		)	(13,259		)
Total Capital	$	7,547,150		$	7,746,622

(a)Stockholders’ Capital — Capital stock decreased in line with the decrease in advances borrowed.  When an advance matures or is prepaid, the excess capital stock is repurchased by the FHLBNY.  When an advance is borrowed or a member joins the FHLBNY’s membership, the member is required to purchase capital stock.  For more information about activity and membership stock, see Note 14. Capital Stock, Mandatorily Redeemable Capital Stock and Restricted Retained Earnings in the FHLBNY’s most recent Form 10-K filed on March 21, 2019.

(b)Unrestricted retained earnings — Net income is added to this balance.  Dividends are paid out of this balance.  Funds are transferred to Restricted retained earnings balances that are determined in line with the approved provisions of the conduct of restricted retained earnings account.

(c)Restricted retained earnings — Restricted retained earnings balance at June 30, 2019 has grown to $639.9 million from the time the provisions were implemented in the third quarter of 2011 when the FHLBanks, including the FHLBNY agreed to set up a restricted retained earnings account.  The FHLBNY will allocate at least 20% of its net income to the FHLBNY’s Restricted retained earnings account until the balance of the account equals at least 1% of FHLBNY’s average balance of outstanding Consolidated Obligations for the previous quarter.

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

Table 6.2:Accumulated Other Comprehensive Income (Loss) (AOCI)

	June 30, 2019			December 31, 2018
Accumulated other comprehensive income (loss)
Non-credit portion of OTTI on held-to-maturity securities, net of accretion (a)	$	(8,885	)	$	(11,061	)
Net unrealized gains (losses) on available-for-sale securities (b)	97,181			4,034
Net unrealized gains (losses) on hedging activities (c)	(108,964		)	16,759
Employee supplemental retirement plans (d)	(21,681		)	(22,991		)
Total Accumulated other comprehensive income (loss)	$	(42,349	)	$	(13,259	)

(a)OTTI — Non-credit OTTI losses in AOCI have declined at June 30, 2019, primarily due to accretion recorded as a reduction in AOCI (and a corresponding increase in the balance sheet carrying values of the OTTI securities).

(b)Fair values of available-for-sale securities — balance represents net unrealized fair value basis gains of MBS securities.  Effective January 1, 2019, we transferred $1.6 billion fixed-rate CMBS to the AFS category from HTM.  Increase in unrealized gains represents increase in the portfolio due to the transfer and increase in market pricing of the fixed-rate AFS securities.

(c)Hedging activity losses in AOCI were primarily on cash flow hedges of discount notes and fair value last-of-layer hedges of closed portfolios of AFS mortgage-backed securities.  See Table 6.3: AOCI Rollforward due to ASC 815 Hedging Programs.

(d)Employee supplemental plans — Balances represent actuarially determined supplemental pension and postretirement health benefit liabilities that were not recognized through earnings.  Amounts are amortized as an expense through Compensation and benefits over an actuarially determined period.  For more information, see financial statements, Note 16.  Employee Retirement Plans in the FHLBNY’s most recent Form 10-K filed on March 21, 2019.

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Table 6.3:AOCI Rollforward due to ASC 815 Hedging Programs

The following table presents amounts recognized in and reclassified out of AOCI due to cash flow and fair value hedges (in thousands):  Gains/(losses) are recorded in AOCI.

	June 30, 2019
	Cash Flow Hedges						Fair Value Hedges
	Rollover Hedge Program			Anticipatory Hedge Program			Last-of-layer AFS Hedge
Beginning balance	$	17,412		$	(653	)	$	—
Changes in fair values (a)	(108,101		)	2,937			(13,362		)
Amount reclassified	—			139			—
Fair Value - closed contract	—			(7,336		)	—
Ending balance	$	(90,689	)	$	(4,913	)	$	(13,362	)
Notional amount of swaps outstanding	$	2,664,000		$	190,000		$	377,000

	December 31, 2018
	Cash Flow Hedges
	Rollover Hedge Program			Anticipatory Hedge Program
Beginning balance	$	(23,342	)	$	3,465
Changes in fair values (a)	40,754			(4,377		)
Amount reclassified	—			(180		)
Fair Value - closed contract	—			439
Ending balance	$	17,412		$	(653	)
Notional amount of swaps outstanding	$	2,664,000		$	461,000

	June 30, 2018
	Cash Flow Hedges
	Rollover Hedge Program			Anticipatory Hedge Program
Beginning balance	$	(23,342	)	$	3,465
Changes in fair values (a)	77,061			(8		)
Amount reclassified	—			(33		)
Fair Value - closed contract	—			842
Ending balance	$	53,719		$	4,266
Notional amount of swaps outstanding	$	2,559,000		$	20,000

(a)Represents fair value changes of open swap contracts in cash flow hedges. For more information see, Note 17 Derivatives and Hedging Activities.

Dividends — By Finance Agency regulation, dividends may be paid out of current earnings or if certain conditions are met, may be paid out of previously retained earnings.  We may be restricted from paying dividends if we do not comply with any of the Finance Agency’s minimum capital requirements or if payment would cause us to fail to meet any of the 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.

The following table summarizes dividends paid and payout ratios:

Table 6.4:Dividends Paid and Payout Ratios

	Six months ended
	June 30, 2019			June 30, 2018
Cash dividends paid per share	$	3.31		$	3.24
Dividends paid (a) (c)	$	188,750		$	207,175
Pay-out ratio (b)	77.70		%	73.62		%

(a)In thousands.

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

(c)Does not include dividends paid to non-members; for accounting purposes, such dividends are recorded as interest expense.

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Derivatives Counterparty Credit Ratings

For information, and an analysis of our exposure due to non-performance of swap counterparties, see Table “Offsetting of Derivative Assets and Derivative Liabilities — Net Presentation” in Note 17. Derivatives and Hedging Activities to financial statements.  For information about the methodologies adopted for the fair value measurement of derivatives, see financial statements, Note 18.  Fair Values of Financial Instruments.

The following tables summarize notional amounts and fair values for the FHLBNY’s derivative exposures as represented by derivatives in fair value gain positions (in thousands):

Table 7.1:Derivatives Counterparty Credit Ratings

	June 30, 2019
Credit Rating	Notional Amount		Net Derivatives Fair Value Before Collateral			Cash Collateral Pledged To (From) Counterparties (a)			Balance Sheet Net Credit Exposure		Non-Cash Collateral Pledged To (From) Counterparties (b)			Net Credit Exposure to Counterparties
Non-member counterparties
Asset positions with credit exposure
Uncleared derivatives
Double A Asset (c)	$	130,000	$	540		$	(300	)	$	240	$	—		$	240
Single A asset (c)	2,770,000		112,628			2,750			115,378		(105,288		)	10,090
Cleared derivatives assets (d)	84,720,557		8,800			—			8,800		251,318			260,118
	87,620,557		121,968			2,450			124,418		146,030			270,448
Liability positions with credit exposure
Single A liability (c)	353,000		(2,518		)	2,650			132		—			132
	353,000		(2,518		)	2,650			132		—			132
Total derivative positions with non-member counterparties to which the Bank had credit exposure	87,973,557		119,450			5,100			124,550		146,030			270,580
Member institutions
Derivative positions with member counterparties to which the Bank had credit exposure	481,000		9,668			—			9,668		(9,668		)	—
Delivery Commitments
Derivative position with delivery commitments	27,958		109			—			109		(109		)	—
Total derivative position with members	508,958		9,777			—			9,777		(9,777		)	—
Total	$	88,482,515	$	129,227		$	5,100		$	134,327	$	136,253		$	270,580
Derivative positions without credit exposure	12,394,930
Total notional	$	100,877,445

	December 31, 2018
Credit Rating	Notional Amount		Net Derivatives Fair Value Before Collateral			Cash Collateral Pledged To (From) Counterparties (a)			Balance Sheet Net Credit Exposure		Non-Cash Collateral Pledged To (From) Counterparties (b)			Net Credit Exposure to Counterparties
Non-member counterparties
Asset positions with credit exposure
Uncleared derivatives
Single A asset (c)	$	3,125,000	$	155,264		$	(44,970	)	$	110,294	$	(102,262	)	$	8,032
Cleared derivatives assets (d)	20,448,476		1,353			—			1,353		—			1,353
	23,573,476		156,617			(44,970		)	111,647		(102,262		)	9,385
Liability positions with credit exposure
Uncleared derivatives
Single A liability (c)	3,414,264		(7,469		)	9,164			1,695		—			1,695
Cleared derivatives liability (d)	70,236,929		—			—			—		239,813			239,813
	73,651,193		(7,469		)	9,164			1,695		239,813			241,508
Total derivative positions with non-member counterparties to which the Bank had credit exposure	97,224,669		149,148			(35,806		)	113,342		137,551			250,893
Member institutions
Derivative positions with member counterparties to which the Bank had credit exposure	28,000		363			—			363		(363		)	—
Delivery Commitments
Derivative position with delivery commitments	12,682		57			—			57		(57		)	—
Total derivative position with members	40,682		420			—			420		(420		)	—
Total	$	97,265,351	$	149,568		$	(35,806	)	$	113,762	$	137,131		$	250,893
Derivative positions without credit exposure	8,831,152
Total notional	$	106,096,503

(a)When collateral is posted to counterparties in excess of fair value liabilities that are due to counterparties, the excess collateral is classified as a component of derivative assets, as the excess represents a receivable and an exposure for the FHLBNY.

(b)Non-cash collateral securities.  Non-cash collateral was not deducted from net derivative assets on the balance sheet as control over the securities was not transferred.

(c)NRSRO Ratings.

(d)On cleared derivatives, we are required to pledge initial margin (collateral) to Derivative Clearing Organizations (DCOs) in cash or securities.  At June 30, 2019 and December 31, 2018, we had pledged $251.3 million and $239.8 million in marketable securities to fulfill our obligation to pledge initial margin as collateral.

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Liquidity, 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 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 932, 1239 and 1270 of the Finance Agency regulations and Advisory Bulletin 2018-07.  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 remaining maturity not to exceed five years that are made to members in conformity with part 1266. (4) Required to hold positive cash flow assuming no access to capital markets and assuming renewal of all maturing advances for a period of between ten to thirty calendar days; (5) Maintain liquidity limits to reduce the risks associated with a mismatch in asset and liability maturities, including an undue reliance on short-term debt funding.

In addition, each FHLBank shall provide for Contingency Liquidity, which is defined as the sources of cash a FHLBank may use to meet its operational requirements when its access to the capital markets is impeded.  We met our Contingency Liquidity requirements during all periods in this report.  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. Advisory Bulletin 2018-07 was partially implemented on December 31, 2018, with further implementation to take place on March 31, 2019 and full implementation on December 31, 2019.

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 United States; (2) Deposits in banks or trust companies; or (3) Advances with a remaining maturity not to exceed five years that are made to members in conformity with part 1266.  In addition to accepting deposits from our members, we may accept deposits from other FHLBanks or from any other governmental instrumentality.  We met these requirements at all times.  Quarterly average reserves and actual reserves are summarized below (in millions):

Table 8.1:Deposit Liquidity

	Average Deposit		Average Actual
For the Quarters Ended	Reserve Required		Deposit Liquidity		Excess
June 30, 2019	$	1,075	$	93,965	$	92,890
March 31, 2019	1,065		90,100		89,035
December 31, 2018	904		93,526		92,622

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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 and investment 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 8.2:Operational Liquidity

	Average Balance Sheet		Average Actual
For the Quarters Ended	Liquidity Requirement		Operational Liquidity		Excess
June 30, 2019	$	16,184	$	33,661	$	17,477
March 31, 2019	10,912		33,899		22,987
December 31, 2018	10,091		36,478		26,387

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 NRSRO.  We consistently exceeded the regulatory minimum requirements for contingency liquidity.  Contingency liquidity is measured daily.  We met these requirements at all times.

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

Table 8.3:Contingency Liquidity

	Average Five Day		Average Actual
For the Quarters Ended	Requirement		Contingency Liquidity		Excess
June 30, 2019	$	3,984	$	29,181	$	25,197
March 31, 2019	3,169		29,509		26,340
December 31, 2018	3,649		32,494		28,845

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.

The Finance Agency’s Liquidity Advisory Bulletin 2018-07 became effective April 1, 2019.  Under the new guidance, the Bank is required to maintain between 10 and 30 business days of positive cash flow assuming all advances renew.  The Advisory Bulletin also requires us to hold liquidity in a range between 1% and 20% of the notional of our outstanding standby financial letters of credit.  In addition, the Advisory Bulletin provides guidance on maintaining appropriate funding gaps for three-month (-10% to -20% of total assets) and one-year (-25% to -35% of total assets) maturity horizons.  The FHFA has defined and communicated to the FHLBanks specific initial levels to be maintained within these ranges in an accompanying supervisory letter, and may provide updated guidance in future supervisory letters.  We remain in compliance with the Advisory Bulletin and all Liquidity regulations.

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Other Liquidity Contingencies.  As discussed more fully under the section Debt Financing Activity and Consolidated Obligations, we are primarily liable for Consolidated obligations 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.  If the principal or interest on any Consolidated obligation issued on our behalf is not paid in full when due, we may not pay dividends, redeem or repurchase shares of stock of any member or non-member stockholder until the Finance Agency approves our Consolidated obligation payment plan or other remedy and until we pay all the interest or principal currently due on all our Consolidated obligations.  The Finance Agency, at its discretion, may require any FHLBank to make principal or interest payments due on any Consolidated obligations.

Finance Agency regulations also state that the FHLBanks must maintain, free from any lien or pledge, the following types of assets in an amount at least equal to the amount of Consolidated obligations outstanding: Cash; Obligations of, or fully guaranteed by, the United States; Secured advances; Mortgages that have any guaranty, insurance, or commitment from the United States or any agency of the United States; and investments described in section 16(a) of the FHLBank Act, including securities that a fiduciary or trust fund may purchase under the laws of the state in which the FHLBank is located.

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 historically insignificant.

The following table summarizes short-term debt and their key characteristics (dollars in thousands):

Table 8.4:Short-term Debt

	Consolidated Obligations-Discount Notes						Consolidated Obligations-Bonds With Original Maturities of One Year or Less
	June 30, 2019			December 31, 2018			June 30, 2019			December 31, 2018
Outstanding at end of the period (a)	$	62,380,002		$	50,640,238		$	47,452,700		$	53,593,000
Weighted-average rate at end of the period (b)	2.34		%	2.34		%	2.37		%	2.37		%
Average outstanding for the period (a)	$	55,487,338		$	51,656,594		$	50,958,925		$	59,411,703
Weighted-average rate for the period	2.39		%	1.79		%	2.43		%	1.86		%
Highest outstanding at any month-end (a)	$	64,453,180		$	59,769,950		$	51,728,000		$	70,377,100

(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)Weighted-average rate is calculated on outstanding balances at period-end.

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 sections 11(a) and 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.

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 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 more information about contractual obligations and commitments, see financial statements, Note 19. Commitments and Contingencies.

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Results of Operations

The following section provides a comparative discussion of the FHLBNY’s results of operations for the three and six months ended June 30, 2019 and the same periods in the prior year.  For a discussion of the significant accounting estimates used by the FHLBNY that affect the results of operations, see financial statements, Note 1. Significant Accounting Policies and Estimates in the most recent Form 10-K filed on March 21, 2019.

Net Income

Interest income from advances is the principal source of revenue.  Other sources of revenue are interest income from investment debt securities, trading securities, mortgage loans in the MPF portfolio, securities purchased under agreements to resell and federal funds sold.  The primary expense is interest paid on Consolidated obligation debt.  Other expenses are Compensation and benefits, Operating expenses, our share of operating expenses of the Office of Finance and the FHFA, and affordable housing program 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 repurchased, 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 9.1:Principal Components of Net Income

	Three months ended June 30,						Six months ended June 30,
	2019			2018			2019			2018
Total interest income	$	1,022,556		$	888,289		$	2,020,090		$	1,658,934
Total interest expense	858,980			680,584			1,679,298			1,258,210
Net interest income before provision for credit losses	163,576			207,705			340,792			400,724
Provision (Reversal) for credit losses on mortgage loans	(275		)	72			(292		)	(308		)
Net interest income after provision for credit losses	163,851			207,633			341,084			401,032
Total other income (loss)	(1,303		)	(676		)	11,875			(19,269		)
Total other expenses	42,445			34,509			83,025			69,028
Income before assessments	120,103			172,448			269,934			312,735
Affordable Housing Program Assessments	12,021			17,274			27,014			31,336
Net income	$	108,082		$	155,174		$	242,920		$	281,399

Net Income — 2019 Second Quarter Compared to 2018 Second Quarter

Net income — For the FHLBNY, Net income is Net interest income, minus credit losses on mortgage loans, plus Other income (loss), less Other expenses and less Affordable Housing Program assessments.

In the second quarter of the current year, Net income was $108.1 million, a decrease of $47.1 million, or 30.3%, compared to the same period in the prior year.  Summarized below are the primary components of our Net income:

Net interest income — Net interest income is typically driven by the volume of earning assets, as measured by average balances of earning assets, and by the net interest spread earned in the period.  Reported Net interest income is net of provisions/reversals for credit losses.  Other significant drivers would be prepayment fees earned when advances are early terminated by our borrowing members, and the impact on interest income and expense by the execution of swaps that hedge our assets and liabilities.  Swap interest accruals are a significant component of Net interest income.  Fair values changes of derivatives and hedged items in hedges under ASC 815 are also recorded in Net interest income beginning in 2019 with the adoption of ASU 2017-12.  The impact of adoption was not material.

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In the second quarter of the current year, Net interest income was $163.9 million, a decrease of $43.8 million, or 21.1%, from the same period in the prior year, primarily due to lower net interest margin earned on advances.  Advance volume was also lower. Advance mix shifted to shorter-term fixed-rate advances, yielding relatively lower margins. Investments in highly-liquid U.S. Treasury securities have grown, also yielding relatively lower margins.  To enhance our liquidity position under FHFA guidelines, we have invested in a significant portfolio of U.S. treasury obligations, which has supplemented overnight lending in the federal funds and repurchase markets also maintained for liquidity.  The margins earned on overnight money market investments have been typically lower relative to longer-term earning assets.  Mortgage-backed securities indexed to LIBOR that paid down were not replaced to help reduce LIBOR exposure and that too contributed to lower earnings.  While funding costs remain attractive for the FHLBank issued CO debt, costing yields were not as favorable in the current year period relative to the prior year period.  Because of these conditions, net interest spread declined to 32 basis points in the second quarter of the current year, compared to 44 basis points in the same period in the prior year.

Other income (loss) — In the second quarter of the current year, Other income (loss) reported a loss of $1.3 million, compared to a loss of $0.7 million.  Primary components are noted below:

·Service fees and other are primarily correspondent banking fees and fee revenues from financial letters of credit.  Such revenues were $4.7 million in the second quarter of the current year, compared to $4.0 million in the same period in the prior year.

·Derivative and hedging activities on hedges that were not eligible under ASC 815 reported a net loss of $39.1 million in the second quarter of the current year, compared to a net loss of $5.3 million in the same period in the prior year.  In the quarter, we increased our swap portfolio in line with the increase in the liquidity portfolio of fixed-rate U.S. Treasury securities, and although the securities were generally swapped, the hedging was designated as economic hedges, not eligible under ASC 815, and fair values were reported in Other income (loss).

·Securities held for liquidity (classified as trading) reported net gains of $33.9 million in the second quarter of the current year, compared to a gain of $0.8 million in the same period in the prior year.  We increased our holdings of U.S Treasury securities in line with our liquidity objectives.

·Equity Investments, held to fund payments to retirees in non-qualified pension plans, reported net gains of $1.9 million in the second quarter of the current year, compared to net gains of $0.3 million in the same period in the prior year.

Other expenses were $42.4 million in the second quarter of the current year, compared to $34.5 million in the same period in the prior year.  Other expenses are primarily Operating expenses, Compensation and benefits, and our share of expenses of the Office of Finance and the Federal Housing Finance Agency.

·Operating expenses were $15.5 million in the second quarter of the current year, up from $11.4 million in the same period in the prior year. The increase was primarily due to professional and consulting expenses incurred as part of a multi-year technology initiative.

·Compensation and benefits expenses were $20.5 million in the second quarter of the current year, up from $17.5 million in the same period in the prior year.  Increases in technology-related headcount contributed to the increase in this expense.

·The expenses allocated for our share of the costs to operate the Office of Finance and the Federal Housing Finance Agency were $4.2 million in the second quarter of the current year, compared to $3.6 million in the same period in the prior year.

·Other expenses were $2.3 million in the second quarter of current year, up from $2.0 million in the same period in the prior year.  Expense increase was primarily due to contributions towards multi-year disaster relief programs and the non-service costs of employer sponsored pension programs.

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AHP assessments allocated from Net income were $12.0 million in the second quarter of the current year, compared to $17.3 million in the same period in the prior year.  Assessments are calculated as a percentage of Net income, and changes in allocations were in parallel with changes in Net income.

Net Income — Year-to-Date Period Ended June 30, 2019 Compared to June 30, 2018

Net income — Net income in the year-to-date period in the current year was $242.9 million, a decrease of $38.5 million, or 13.7%, compared to the same period in the prior year.  The decline is attributed to lower earnings in the second quarter of the current year, driven down by lower interest margins and lower Net interest income.

Net interest income in the year-to-date period in the current year was $341.1 million, a decrease of $59.9 million, or 14.9%, from the same period in the prior year.  Interest margin earned was lower, declining to 35 basis points, compared to 42 basis points in the prior year period. Balance sheet earning-assets were lower as measured by average balances, which declined to $144.7 billion, compared to $158.5 billion in the prior year period.  Lower balance sheet was driven by successive declines in advances borrowed in the two quarters in the current year. Average stockholder’s capital, which provides interest-free funding declined to $7.4 billion, compared to $7.9 billion in the prior year period. The decline was in parallel with the decline in advances borrowed by member/stockholders since capital stock is repurchased by the FHLBNY when advances mature or are prepaid.

Other income (loss) — Other income (loss) in the year-to-date period in the current year reported a gain of $11.9 million, compared to a loss of $19.3 million in the same period in the prior year.  Favorable year-over-year change was driven by fair value gains on U.S. Treasury securities held for liquidity, and gains on Equity investments held to fund certain non-qualified pension liabilities.  Gains were partly offset by increase in fair value losses on derivatives and hedging activities as we expanded our hedging of fixed-rate Treasury securities in parallel with the increase in the securities portfolio.

Other expenses were $83.0 million in the year-to-date period in the current year, compared to $69.0 million in the same period in the prior year.  Other expenses are primarily Operating expenses, Compensation and benefits, and our share of expenses of the Office of Finance and the Federal Housing Finance Agency.  Operating expenses were $28.3 million, up from $21.4 million in the prior year period due to professional and consulting expenses for several multi-year technology initiatives.  Compensation and benefits were $41.9 million, up from $36.3 million in the prior year period, dues to increase primarily in technology headcount.

AHP assessments allocated from Net income were $27.0 million in the year-to-date period in the current year, compared to $31.3 million in the prior year.  Assessments are calculated as a percentage of Net income, and changes in allocations were in parallel with changes in Net income.

Net Interest Income, Margin and Interest Rate Spreads — 2019 Periods Compared to 2018 Periods

Net interest income is our principal source of Net income.  It represents the difference between income on interest-earning assets and expense on interest-bearing liabilities.

Period-over-period changes in Net interest income are typically driven by changes in the volume of earning assets, as measured by average balances of earning assets, and the impact of market interest rates on earning-assets and funding costs.  Interest income and expense accruals on interest rate swaps that qualified under the ASC 815 hedge accounting rules may impact period-over-period changes, as would fair value hedging effects.  Shareholders’ capital stock and retained earnings are also factors that impact net interest income as they provide interest free funding.  In a period when members prepay advances, the prepayment fees, which we receive may cause period-over-period fluctuations in income.  For more information about factors that impact Interest income and Interest expense, see Table 9.3 Net Interest Adjustments from Hedge Qualifying Interest Rate Swaps and discussions thereto.  Also, see Table 9.4 Spread and Yield Analysis, and Table 9.5 Rate and Volume Analysis.

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

Table 9.2:Net Interest Income

	Three months ended June 30,						Six months ended June 30,
					Percentage						Percentage
	2019		2018		Change		2019		2018		Change
Total interest income (a)	$	1,022,556	$	888,289	15.12	%	$	2,020,090	$	1,658,934	21.77	%
Total interest expense (a)	858,980		680,584		(26.21	)	1,679,298		1,258,210		(33.47	)
Net interest income before provision for credit losses	$	163,576	$	207,705	(21.25	)%	$	340,792	$	400,724	(14.96	)%

(a)Total Interest Income and Total Interest Expense — See Tables 9.6 and 9.8 and accompanying discussions

2019 Second Quarter vs. 2018 Second Quarter — In the second quarter of the current year, Net interest income was $163.9 million, a decrease of $43.8 million, or 21.1%, from the same period in the prior year.  As noted in discussions under Table 9.1, the decline was primarily due to lower net interest yields earned on advances, a lower volume of Advances, and a less favorable funding environment.  Net interest spread declined to 32 basis points in the second quarter of the current year, compared to 44 basis points in the same period in the prior year.

The net interest accrual impact on Net interest income from hedging under ASC 815 has been favorable and was a significant component of Net interest income.  Hedging effects, primarily cash flows from interest rate swaps in fair value and cash flows hedges made a favorable contribution of $51.2 million to interest accruals in the second quarter of the current year, compared to $43.3 million in the prior year period.  Certain fixed-rate advances and fixed-rate debt are designated in qualifying hedges by the execution of interest rate swaps.  The rising benchmark rate, primarily LIBOR, has driven up the benchmark-indexed cash flows we received on swaps hedging fixed-rate advances, such that the cash flows we received exceeded the fixed-rate cash flows paid.  While the rising LIBOR had an adverse cash flow impact on ASC 815 qualifying hedges of CO debt, the negative impact was not as significant.

The fair value impact, representing the change in fair values of the hedging derivative and the hedged asset or liability did not materially impact Net interest income, as the ASC 815 hedging is highly effective, with fair value changes in hedged instruments matching offsetting changes in the hedging instrument (interest rate swap).

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 to fund short-term investment assets that yield money market rates.  In the periods in this report, market yields for investments in the federal funds and repo markets have improved and the potential contribution to interest margin of funding with member capital has also improved.  Member capital is retained earnings and capital stock, which increases or decreases in parallel with the volume of advances borrowed by members.  Average capital was $7.5 billion in the current year period, compared to $7.7 billion in the prior year period.

2019 Year-to-Date Period vs. 2018 Year-to-Date Period — Net interest income in the year-to-date period in the current year was $341.1 million, a decrease of $59.9 million, or 14.9%, from the same period in the prior year.  Interest margin earned was lower, declined to 35 basis points, compared to 42 basis points in the prior year period.  See discussions under Table 9.1.

Hedging effects, primarily cash flows from interest rate swaps in fair value and cash flows hedges made a favorable contribution of $113.9 million to interest accruals in the year-to-date period in the current year, compared to $46.5 million in the prior year period.

Declining capital contributed to lower earnings, as we earn interest income from investing our members’ capital to fund interest-earning assets. Average capital was $7.4 billion in the current year period, compared to $7.9 billion in the prior year period.

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Impact of Qualifying Hedges on Net Interest Income — 2019 Periods Compared to 2018 Periods

The following table summarizes the impact of net interest adjustments from hedge qualifying interest-rate swaps (in thousands):

Table 9.3:Net Interest Adjustments from Hedge Qualifying Interest Rate Swaps

	Three months ended June 30,						Six months ended June 30,
	2019			2018			2019			2018
Interest Income	$	967,781		$	831,347		$	1,893,997		$	1,590,981
Fair value hedging effects	(36		)	—			723			—
Amortization of basis	(14		)	(33		)	(28		)	(64		)
Interest rate swap accruals	54,825			56,975			125,398			68,017
Reported interest income	1,022,556			888,289			2,020,090			1,658,934
Interest Expense	855,452			666,897			1,667,104			1,236,764
Fair value hedging effects	751			—			2,822			—
Amortization of basis	(1,455		)	(1,477		)	(2,899		)	(2,822		)
Interest rate swap accruals	4,232			15,164			12,271			24,268
Reported interest expense	858,980			680,584			1,679,298			1,258,210
Net interest income	$	163,576		$	207,705		$	340,792		$	400,724
Net interest adjustment - interest rate swaps	$	51,247		$	43,255		$	113,899		$	46,507

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Spread and Yield Analysis — 2019 Periods Compared to 2018 Periods

Table 9.4:Spread and Yield Analysis

	Three months ended June 30,
	2019						2018
			Interest						Interest
	Average		Income/				Average		Income/
(Dollars in thousands)	Balance		Expense		Rate (a)		Balance		Expense		Rate (a)
Earning Assets:
Advances	$	101,561,849	$	704,936	2.78	%	$	107,739,858	$	629,485	2.34	%
Interest bearing deposits and others	150,551		935		2.49		20,002		90		1.80
Federal funds sold and other overnight funds	17,926,538		109,087		2.44		21,905,099		96,066		1.76
Investments
Trading securities	7,366,065		46,929		2.56		2,798,617		13,221		1.89
Mortgage-backed securities
Fixed	9,770,120		75,874		3.11		8,636,250		64,110		2.98
Floating	6,832,714		50,340		2.96		8,905,678		52,875		2.38
State and local housing finance agency obligations	1,160,744		9,077		3.14		1,217,688		8,013		2.64
Mortgage loans held-for-portfolio	2,963,463		25,274		3.42		2,884,332		24,423		3.40
Loans to other FHLBanks	17,033		104		2.45		1,374		6		1.71
Total interest-earning assets	$	147,749,077	$	1,022,556	2.78	%	$	154,108,898	$	888,289	2.31	%
Funded By:
Consolidated obligation bonds
Fixed	$	27,306,121	$	171,933	2.53	%	$	26,157,786	$	135,750	2.08	%
Floating	53,221,666		324,054		2.44		68,587,743		314,336		1.84
Consolidated obligation discount notes	58,537,131		356,705		2.44		50,420,015		225,376		1.79
Interest-bearing deposits and other borrowings	1,051,782		6,180		2.36		1,083,689		4,829		1.79
Mandatorily redeemable capital stock	7,361		108		5.86		18,057		293		6.50
Total interest-bearing liabilities	140,124,061		858,980		2.46	%	146,267,290		680,584		1.87	%
Other non-interest-bearing funds	87,762		—				122,271		—
Capital	7,537,254		—				7,719,337		—
Total Funding	$	147,749,077	$	858,980			$	154,108,898	$	680,584
Net Interest Income/Spread			$	163,576	0.32	%			$	207,705	0.44	%
Net Interest Margin
(Net interest income/Earning Assets)					0.44	%					0.54	%

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	Six months ended June 30,
	2019						2018
			Interest						Interest
	Average		Income/				Average		Income/
(Dollars in thousands)	Balance		Expense		Rate (a)		Balance		Expense		Rate (a)
Earning Assets:
Advances	$	99,356,503	$	1,396,832	2.84	%	$	112,724,479	$	1,175,945	2.10
Interest bearing deposits and others	106,697		1,318		2.49		18,557		154		1.67
Federal funds sold and other overnight funds	17,533,873		212,898		2.45		21,724,028		173,693		1.61
Investments
Trading securities	6,949,993		87,802		2.55		2,482,032		22,345		1.82
Mortgage-backed securities
Fixed	9,537,115		148,462		3.14		8,499,374		125,439		2.98
Floating	7,058,227		103,978		2.97		8,948,180		98,689		2.22
State and local housing finance agency obligations	1,164,414		18,192		3.15		1,182,688		14,030		2.39
Mortgage loans held-for-portfolio	2,948,288		50,454		3.45		2,886,161		48,626		3.40
Loans to other FHLBanks	12,707		154		2.45		1,796		13		1.49
Total interest-earning assets	$	144,667,817	$	2,020,090	2.82	%	$	158,467,295	$	1,658,934	2.11
Funded By:
Consolidated obligation bonds
Fixed	$	27,997,753	$	353,998	2.55	%	$	27,210,740	$	258,334	1.91
Floating	52,612,979		640,584		2.46		68,041,681		557,926		1.65
Consolidated obligation discount notes	55,487,338		672,021		2.44		54,113,390		432,756		1.61
Interest-bearing deposits and other borrowings	1,054,359		12,487		2.39		1,088,593		8,568		1.59
Mandatorily redeemable capital stock	6,608		208		6.35		18,624		626		6.78
Total interest-bearing liabilities	137,159,037		1,679,298		2.47	%	150,473,028		1,258,210		1.69
Other non-interest-bearing funds	100,161		—				85,527		—
Capital	7,408,619		—				7,908,740		—
Total Funding	$	144,667,817	$	1,679,298			$	158,467,295	$	1,258,210
Net Interest Income/Spread			$	340,792	0.35	%			$	400,724	0.42
Net Interest Margin
(Net interest income/Earning Assets)					0.48	%					0.51

(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 spreads are annualized.

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Rate and Volume Analysis — 2019 Periods Compared to 2018 Periods

The Rate and Volume Analysis presents changes in interest income, interest expense and net interest income that are due to changes in both interest rates and the volume of interest-earning assets and interest-bearing liabilities, and their impact on interest income and interest expense (in thousands):

Table 9.5:Rate and Volume Analysis

	For the three months ended
	June 30, 2019 vs. June 30, 2018
	Increase (Decrease)
	Volume			Rate			Total
Interest Income
Advances	$	(37,682	)	$	113,133		$	75,451
Interest bearing deposits and others	798			47			845
Federal funds sold and other overnight funds	(19,606		)	32,627			13,021
Investments							—
Trading securities	27,775			5,933			33,708
Mortgage-backed securities							—
Fixed	8,705			3,059			11,764
Floating	(13,764		)	11,229			(2,535		)
State and local housing finance agency obligations	(389		)	1,453			1,064
Mortgage loans held-for-portfolio	674			177			851
Loans to other FHLBanks	94			4			98
Total interest income	(33,395		)	167,662			134,267
Interest Expense
Consolidated obligation bonds
Fixed	6,176			30,007			36,183
Floating	(79,803		)	89,521			9,718
Consolidated obligation discount notes	40,331			90,998			131,329
Deposits and borrowings	(146		)	1,497			1,351
Mandatorily redeemable capital stock	(159		)	(26		)	(185		)
Total interest expense	(33,601		)	211,997			178,396
Changes in Net Interest Income	$	206		$	(44,335	)	$	(44,129	)

	For the six months ended
	June 30, 2019 vs. June 30, 2018
	Increase (Decrease)
	Volume			Rate			Total
Interest Income
Advances	$	(151,787	)	$	372,674		$	220,887
Interest bearing deposits and others	1,055			109			1,164
Federal funds sold and other overnight funds	(38,212		)	77,417			39,205
Investments
Trading securities	53,477			11,980			65,457
Mortgage-backed securities
Fixed	15,895			7,128			23,023
Floating	(23,547		)	28,836			5,289
State and local housing finance agency obligations	(220		)	4,382			4,162
Mortgage loans held-for-portfolio	1,056			772			1,828
Loans to other FHLBanks	128			13			141
Total interest income	(142,155		)	503,311			361,156
Interest Expense
Consolidated obligation bonds
Fixed	7,671			87,993			95,664
Floating	(146,058		)	228,716			82,658
Consolidated obligation discount notes	11,254			228,011			239,265
Deposits and borrowings	(277		)	4,196			3,919
Mandatorily redeemable capital stock	(381		)	(37		)	(418		)
Total interest expense	(127,791		)	548,879			421,088
Changes in Net Interest Income	$	(14,364	)	$	(45,568	)	$	(59,932	)

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Interest Income — 2019 Periods Compared to 2018 Periods

Interest income from advances, investments in mortgage-backed securities and MPF loans, federal funds and repurchase agreements are our principal sources of income.  Changes in both rate and intermediation volume (average interest-yielding assets) explain the change in the current year period from the prior year period.  Reported interest income is net of the impact of cash flows associated with interest rate swaps hedging certain fixed-rate advances that were converted to floating-rate generally indexed to short-term LIBOR.

The principal categories of Interest Income are summarized below (dollars in thousands):

Table 9.6:Interest Income — Principal Sources

	Three months ended June 30,						Six months ended June 30,
					Percentage						Percentage
	2019		2018		Change		2019		2018		Change
Interest Income
Advances	$	704,936	$	629,485	11.99	%	$	1,396,832	$	1,175,945	18.78	%
Interest-bearing deposits	935		90		938.89		1,318		154		755.84
Securities purchased under agreements to resell	52,320		19,728		165.21		82,242		29,837		175.64
Federal funds sold	56,767		76,338		(25.64	)	130,656		143,856		(9.18	)
Trading securities	46,929		13,221		254.96		87,802		22,345		292.94
Mortgage-backed securities
Fixed	75,874		64,110		18.35		148,462		125,439		18.35
Floating	50,340		52,875		(4.79	)	103,978		98,689		5.36
State and local housing finance agency obligations	9,077		8,013		13.28		18,192		14,030		29.67
Mortgage loans held-for-portfolio	25,274		24,423		3.48		50,454		48,626		3.76
Loans to other FHLBanks	104		6		1,633.33		154		13		1,084.62
Total interest income	$	1,022,556	$	888,289	15.12	%	$	2,020,090	$	1,658,934	21.77	%

Interest income in the second quarter of the current year period grew to $1,022.6 million, yielding 278 basis points, compared to $888.3 million, yielding 231 basis points in the prior year period.  In a rising rate environment, short-term and overnight assets repriced to higher rates when interest-yielding assets were rolled over.

In the 2019 second quarter, increase in yields earned on advances were lower than the increase in funding costs due to price reduction implemented at January 1, 2019 for new advances, and less favorable conditions for funding costs.  Advance volume was also lower, primarily due to lower balances of variable-rate advances (“ARC”) indexed to LIBOR.  Advance mix shifted to shorter-term fixed-rate advances, which typically yield lower coupons.  Fluctuations in demand for such advances are determined by the borrowing needs of our largest members.  We have continued to benefit from favorable interest income accruals as a result of applying ASC 815 fair value hedges of advances.  Certain fixed-rate advances are hedged by the execution of interest rate swaps that create synthetic floaters.  The interest rate swaps are structured to pay out fixed-rate cash flows and receive variable-rate benchmark indexed cash flows.  Interest income from advances benefited in a rising LIBOR environment in successive periods in this report as the cash interest accruals received exceeded fixed-rate payments to swap dealers.  These market conditions resulted in net accrual income of $54.7 million in the 2019 second quarter, compared to $57.0 million in the prior year period.  Fair value hedging impact of changes in fair values of hedged advances minus fair values of hedging instruments was not material.  For more information, see Table 9.7 Impact of Interest Rate Swaps on Interest Income Earned from Advances.

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While our liquidity portfolio of overnight federal fund sold and securities purchased under agreements to resell was a little lower, yields from investments reset to higher coupons in a higher rate environment for overnight lending.  Interest income from securities designated as trading has grown in line with increased acquisition of highly-liquid U.S. treasury obligations to supplement our liquidity profile.  Variable-rate mortgage-backed securities indexed to LIBOR declined in parallel with paydowns and were not replaced to reduce our LIBOR exposure.  As a result, interest income from floating-rate MBS declined in the 2019 second quarter.  Active acquisition of fixed-rate mortgage-backed securities increased our fixed-rate MBS portfolio and had a favorable impact on interest income.  Interest income from our portfolio of mortgage loans was up a little in a competitive pricing environment for high credit-quality mortgage loans acquired from member banks.

Interest income in the year-to-date period in the current year was $2,020.1 million, yielding 282 basis points, compared to $1,658.9 million, yielding 211 basis points in the prior year period.  As noted in the discussions above, yields from advances were lower than the typical spread to funding costs.  Advance volume was down by about $13.4 billion, with declining balances in successive quarters thus far in the current year, adversely impacting interest income in the year-to-date period in the current year.  Swap interest accruals from the application of ASC 815 fair value hedges of fixed-rate advances remained favorable. Interest income from advances included swap accruals of $125.2 million in the current year period, compared to $68.0 million in the prior year period.  Fair value hedging impact of changes in fair values of hedged advances minus fair values of hedging instruments was not material.

Impact of hedging on Interest income from advances — 2019 Periods Compared to 2018 Periods

We have executed 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 achieved our interest rate risk management practices of synthetically converting much of our fixed-rate interest exposures to a LIBOR exposure.

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

Table 9.7:Impact of Interest Rate Swaps on Interest Income Earned from Advances

	Three months ended June 30,						Six months ended June 30,
	2019			2018			2019			2018
Advance Interest Income
Advance interest income before adjustment for interest rate swaps	$	650,278		$	572,543		$	1,270,851		$	1,107,992
Fair value hedging effects (a)	(7		)	—			770			—
Amortization of basis	(14		)	(33		)	(28		)	(64		)
Interest rate swap accruals	54,679			56,975			125,239			68,017
Total advance interest income reported	$	704,936		$	629,485		$	1,396,832		$	1,175,945

(a)  In the periods prior to the adoption of ASU 2017-12 on January 1, 2019, fair value hedging effects were recorded in Other income (loss) and not in Advance interest income.

Interest Expense — 2019 Periods Compared to 2018 Periods

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 generally 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 CO bonds to fund mortgage-related assets and advances.  CO discount notes are generally issued to fund advances and investments with shorter interest rate reset characteristics.

99

Changes in rate and intermediation volume (average interest-costing liabilities), the mix of debt issuances between CO bonds and CO discount notes, and the impact of hedging strategies explain the changes in interest expense.  Reported Interest expense is net of the impact of ASC 815 hedge strategies.  The primary hedging strategy is the Fair value hedge that creates LIBOR-indexed funding, the primary benchmark rate for the FHLBNY.  We also use the Cash Flow hedge strategy that creates long-term fixed-rate funding to lock in future net interest margin.  In a Fair value hedge strategy of a bond or discount note, we generally pay variable-rate LIBOR-indexed cash flows to swap counterparties.  In exchange, we receive fixed-rate cash flows, which typically mirror the fixed-rate coupon payments to investors holding the FHLBank debt.  This exchange effectively converts fixed-rate coupons to floating-rate coupons indexed to the 3-month LIBOR.  The primary cash flow hedge strategy is designed to eliminate the variability of cash flows attributable to changes in the primary benchmark interest rate (3-month LIBOR), hedging long-term issuances of consolidated obligation discount notes and create long-term fixed-rate funding.

Certain floating-rate CO bonds were designated in economic hedges, primarily basis hedges that converted a contractual variable index to a preferred funding variable index, typically the 3-month LIBOR.  Interest rate swaps designated in an economic hedge do not qualify as an ASC 815 hedge, and interest accrual is not recorded as an adjustment to debt interest expense (as would a swap that qualified); swap accruals together with changes in the fair values of the swaps in economic hedges are reported in Other income (below net interest income) as an impact of derivative and hedging activities in the Statements of income.

The principal categories of Interest expense are summarized below (dollars in thousands):

Table 9.8:Interest Expenses — Principal Categories

	Three months ended June 30,						Six months ended June 30,
					Percentage						Percentage
	2019		2018		Change		2019		2018		Change
Interest Expense
Consolidated obligations bonds
Fixed	$	171,933	$	135,750	(26.65	)%	$	353,998	$	258,334	(37.03	)%
Floating	324,054		314,336		(3.09	)	640,584		557,926		(14.82	)
Consolidated obligations discount notes	356,705		225,376		(58.27	)	672,021		432,756		(55.29	)
Deposits	5,976		4,443		(34.50	)	11,941		7,948		(50.24	)
Mandatorily redeemable capital stock	108		293		63.14		208		626		66.77
Cash collateral held and other borrowings	204		386		47.15		546		620		11.94
Total interest expense	$	858,980	$	680,584	(26.21	)%	$	1,679,298	$	1,258,210	(33.47	)%

Note — Negative “percentage change” represents increase in Interest expense.

Interest expense in the second quarter of the current year grew to $859.0 million, at a costing yield of 246 basis points, compared to $680.6 million at a costing yield of 187 basis points in the prior year period.  Our funding portfolios included floating-rate CO debt, primarily indexed to the 1-month LIBOR and some linked to SOFR, CO discount notes (primarily overnight and short-maturity discount notes), callable fixed-rate CO bonds, and short- and medium-term fixed-rate CO bonds.  In a rising interest rate environment, funding costs were higher in the current year period for almost all categories of debt, including swapped fixed-rate debt as we attempt to swap many of our fixed and fixed callable debt to the LIBOR or OIS index, effectively converting fixed-rate debt to floating-rate.

Our cost of funds, specifically the pricing of variable-rate CO bonds, have been less favorable in the current year period.  In response to the changing pricing environment, we changed the funding-mix in the current year period with the increased usage of discount notes in place of floating-rate CO bonds.  Discount note spreads to comparable 3-month LIBOR have remained relatively stable in the second quarter, but the favorable wider sub-LIBOR spreads in the prior year period have narrowed unfavorably in the current year period.  Floating-rate CO spreads to comparable 3-month LIBOR have also narrowed in the current year period and at the quarter-end, spreads were the narrowest over the past 12-months.

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Fair value hedges have been executed to convert fixed-rate bullet and callable CO bonds to benchmark-indexed floating-rate.  Cash flow hedges have also been executed to hedge rolling-issuances of discount notes to long-term fixed-rate interest expense.  The cash flows exchanged in the two hedging strategies resulted in net interest adjustments that impacted interest expense.  In the periods in this report, the higher LIBOR-indexed cash flows paid to swap dealers resulted in interest expenses of $3.9 million in the current year period and $12.4 million in the prior year period.  ASC 815 fair value hedging impact on CO bond expense due to changes in fair values of hedged items minus hedging instruments was not material.

Cash flow hedges under ASC 815 have been designated to hedge future issuances of designated CO discount notes.  In this strategy, long-term interest rate swaps have been executed that have created synthetic fixed-rate cash flows.  The swaps are structured to pay fixed-rate cash flows and receive LIBOR-indexed variable rate cash flows.  The cash flows exchanged in the hedging strategy resulted in net interest expenses of $0.3 million in the current year period and $2.7 million in the prior year period.  Fair value hedging impact under ASC 815 on CO discount notes was also recorded in net interest expense, although the impact was not material as changes in fair values of hedged discount notes were effectively offset by changes in the fair values of the hedging interest rate swaps.

On a year-to-date basis, interest expense in the current year was $1,679.3 million, at a costing yield of 247 basis points, compared to $1,258.2 million, at a costing yield of 169 basis points in the prior year period.  Increase in expense was primarily due to the general increase in the interest rate environment year-over-year and worsening of debt spreads to comparable LIBOR tenors.  Decline in funding volume in parallel with lower balance sheet assets partly offset the rate-related increases in interest expense.  The funding mix between the usage of floating-rate CO bonds and CO discount notes has changed year-over-year, as run offs of floating-rate CO bonds were generally replaced by CO discount notes.  Swap interest accruals as a result of ASC 815 hedging increased interest expense by $12.3 million in the current year period and $24.3 million in the prior year period.  ASC 815 fair value hedging impact on CO debt expense due to changes in fair values of hedged CO bonds and CO discount notes minus hedging instruments was a loss of $2.8 million in the current year period.

Impact of Hedging on Interest Expense on Debt — 2019 Periods Compared to 2018 Periods

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

Table 9.9:Impact of Interest Rate Swaps on Consolidated Obligations Interest Expense

	Three months ended June 30,						Six months ended June 30,
	2019			2018			2019			2018
Bonds and discount notes-Interest expense
Bonds-Interest expense before adjustment for swaps	$	492,564		$	439,131		$	982,010		$	803,042
Discount notes-Interest expense before adjustment for swaps	356,600			222,644			672,399			424,528
Fair value hedging effect on CO bonds (a)	973			—			3,044			—
Fair value hedging effect on discount notes	(222		)	—			(222		)	—
Amortization of basis adjustments on discount notes	(1,455		)	(1,477		)	(2,899		)	(2,822		)
Net interest adjustment for swaps hedging CO bonds	3,905			12,431			12,428			16,039
Net interest adjustment for swaps hedging discount notes	327			2,733			(157		)	8,229
Total bonds and discount notes-Interest expense	$	852,692		$	675,462		$	1,666,603		$	1,249,016

(a)In the period prior to the adoption of ASU 2017-12 on January 1, 2019, fair value hedging effects were recorded in Other income (loss) and not in CO debt interest expense.

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Allowance for Credit Losses — 2019 Periods Compared to 2018 Periods

·Mortgage loans held-for-portfolio — Credit quality continues to be strong, delinquencies low, and allowance for credit losses have remained insignificant.

We recorded a net reversal of $0.3 million in the current year quarter, compared to a net provision of $72 thousand in the same period in the prior year.

On a year-to-date basis, we recorded a net reversal of $0.3 million in the current year period, and in the same period in the prior year.

We evaluate impaired conventional mortgage loans 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 calculate/measure credit losses on impaired loans.  Loans are considered impaired when they are seriously delinquent (typically 90 days or more) or in bankruptcy or foreclosure, and loan loss allowances are computed at that point.  When a loan is seriously delinquent, we believe it is probable that we will be unable to collect all contractual interest and principal in accordance with the terms of the loan agreement.  We also perform a loss migration analysis to collectively measure impairment of loans that have not already been individually evaluated for impairment.  FHA/VA (Insured mortgage loans) guaranteed loans are also evaluated collectively for impairment based on the credit worthiness of the PFI.

The immaterial amounts of reserves for credit losses are consistent with our historical experience with foreclosures or losses.  Additionally, collateral values of impaired loans have continued to remain steady and have improved in the New York and New Jersey sectors, and the low loan loss reserves were reflective of the stability in home prices in our residential loan markets.  For more information, see financial statements Note 10. Mortgage Loans Held-for-Portfolio.

·Advances — Based on the collateral held as security and prior repayment history, no allowance for losses was currently deemed necessary.  Our credit risk from advances was concentrated in commercial banks, savings institutions and insurance companies.  All advances were fully collateralized during their entire term.  In addition, borrowing members pledged their stock in the FHLBNY as additional collateral for advances.

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Analysis of Non-Interest Income (Loss) — 2019 Periods Compared to 2018 Periods

The principal components of non-interest income (loss) are summarized below (in thousands):

Table 9.10:Other Income (Loss)

	Three months ended June 30,						Six months ended June 30,
	2019			2018			2019			2018
Other income (loss):
Service fees and other (a)	$	4,660		$	3,973		$	9,074		$	7,694
Instruments held under the fair value option gains (losses) (b)	(2,360		)	(309		)	(2,824		)	(362		)
Total OTTI losses	—			(398		)	—			(398		)
Net amount of impairment losses reclassified to (from)
Accumulated other comprehensive income (loss)	(384		)	257			(384		)	257
Net impairment losses recognized in earnings	(384		)	(141		)	(384		)	(141		)
Derivative gains (losses) (c)	(39,069		)	(5,285		)	(51,349		)	(24,085		)
Trading securities gains (losses) (d)	33,924			781			50,994			(2,420		)
Equity investments gains (losses) (e)	1,926			305			6,364			45
Total other income (loss)	$	(1,303	)	$	(676	)	$	11,875		$	(19,269	)

(a)Service fees and other — Service fees are derived primarily from providing correspondent banking services to members, typically fees earned on standby financial letters of credit issued by the FHLBNY.  Fee income earned on financial letters of credit were $4.3 million in the second quarter of the current year and $3.5 million in the same period in the prior year.  Letters of credit are primarily issued on behalf of members to units of state and local governments to collateralize their deposits at member banks.

On a year-to-date basis through June 30, Service fees earned on financial letters of credit were $8.7 million in the current year, compared to $7.0 million in the same period in the prior year.

(b)FVO fair value losses in the second quarter of the current year were primarily on CO bonds and to a lesser extent on CO discount notes elected under the FVO.  The CO funding rate, which is the fair value pricing basis for the FVO bonds, declined over the quarter driving up valuation losses of outstanding bonds.  Fair value changes in the prior year period on instruments elected under the FVO were not material.  On a year-to-date basis in the current year, fair value losses were driven by valuation changes on debt elected under FVO.

(c)Derivatives losses in the current and prior year periods primarily represented the impact on earnings on swaps in economic hedges of the liquidity trading portfolio of fixed-rate U.S Treasury securities and swaps hedging the basis risk of floating-rate CO bonds.  See Table 9.12 Other Income (Loss) — Impact of Derivative Gains and Losses.

(d)    Net gains (losses) on Trading securities — We have invested in short- and medium-term fixed-rate U.S Treasury securities.  Gains and losses are primarily unrealized fair value gains.  The securities are not held for speculative trading and are held for liquidity in compliance with FHFA regulatory requirements.

(e)    Fair value gains (losses) on Equity Investments — Our investments in grantor trusts are classified as equity investments, and are invested in equity and bond funds.  Gains were primarily unrealized and were recorded in a rising equity market.  The grantor trusts are owned by the FHLBNY with the objective of providing liquidity to pay for pension benefits to retirees vested in non-qualified pension plans.

The following table summarizes unrealized and realized gains (losses) in the trading portfolio (in thousands):

Table 9.11:Net Gains (Losses) on Trading Securities recorded in the Statements of Income (a)

	Three months ended June 30,				Six months ended June 30,
	2019		2018		2019		2018
Net unrealized gains (losses) on Trading securities held at period-end	$	33,669	$	739	$	48,975	$	(2,535	)
Net unrealized and realized gains (losses) on Trading securities sold/matured during the period	255		42		2,019		115
Net gains (losses) on Trading securities	$	33,924	$	781	$	50,994	$	(2,420	)

(a)Securities classified as trading are held for liquidity objectives and carried at fair values.  We record changes in the fair value and realized gains (losses) of the investments through Other income.  FHFA regulations prohibit trading in or the speculative use of financial instruments.

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Other income (loss) — Derivatives and Hedging Activities — 2019 Periods Compared to 2018 Periods

With the adoption of ASU 2017-12 effective January 1, 2019, we report the fair value hedging effects in qualifying hedges within interest income and interest expense together with the hedged item.  Prior to the adoption of the ASU, fair value impact of qualifying hedges and standalone derivatives were both reported in Other income (loss).  Comparative information for the prior year periods has not been reclassified to conform to post-adoption standards as the adoption of ASU 2017-12 permitted prospective adoption.  For derivatives that are not designated in a hedging relationship (i.e. in an economic hedge), the derivatives are considered as a “standalone” instrument and fair value changes are recorded in Other income (loss), without the offset of a hedged item.  Gains and losses recorded in Other income (loss) on standalone derivatives include net interest accruals.

The table presents fair value changes of derivatives in economic hedges (i.e. not in an ASC 815 qualifying hedge) in Other income (loss) in the three and six months ended June 30, 2019 (post ASU 2017-12).   As noted previously, prior period comparatives have not been recast to conform to the post ASU presentation.  We also believe the disclosure benefits of reclassification would not outweigh significant operational costs.  As a result, for the periods in 2018, prior to the adoption of the ASU, the table presents the aggregate impact of all derivatives and hedging activities, including hedges that qualified under ASC 815.

Table 9.12:Other Income (Loss) — Impact of Derivative Gains and Losses (in thousands)

	Impact on Other Income (Loss)
	Three months ended June 30,						Six months ended June 30,
	2019			2018			2019			2018
Derivatives designated as hedging instruments under ASC 815
Interest rate swaps
Advances				$	1,435					$	665
Consolidated obligation bonds				(3,421		)				(1,043		)
Net gains (losses) related to fair value hedges				(1,986		)				(378		)
Cash flow hedges				125						30
ASC 815 Hedging impact				$	(1,861	)				$	(348	)
Derivatives not designated as hedging instruments
Interest rate swaps (a)	$	(42,516	)	$	14,299		$	(53,406	)	$	(5,524	)
Caps or floors	125			(988		)	(220		)	320
Mortgage delivery commitments	303			38			500			(146		)
Swaps economically hedging instruments designated under FVO	1,940			253			2,687			317
Accrued interest on swaps in economic hedging relationships	1,079			(14,040		)	(910		)	(13,598		)
Net gains (losses) related to derivatives not designated as hedging instruments	$	(39,069	)	$	(438	)	$	(51,349	)	$	(18,631	)
Price alignment interest paid on variation margin	—			(2,986		)	—			(5,106		)
Net gains (losses) on derivatives and hedging activities	$	(39,069	)	$	(3,424	)	$	(51,349	)	$	(23,737	)

(a)Derivative losses in the second quarter and year-to-date period of the current year primarily represented fair value losses on interest rate swaps in economic hedges of fixed-rate U.S. Treasury securities.  The swaps are structured to offset earnings volatility from potential fluctuations in the fair values of fixed-rate trading securities.  To a lesser extent, reported losses in the current year periods included fair value losses on interest rate basis swaps in economic hedges of floating-rate CO bond.  The basis swaps are structured to offset the basis risk of floating-rate CO bonds, synthetically converting CO bonds indexed to the 1-month LIBOR to 3-month LIBOR.

In the prior year second quarter, derivative gains primarily represented changes in fair values of basis swaps hedging floating-rate bonds.  In the year-to-date period in the prior year, derivative losses were recorded on basis swaps, partly offset by gains on swaps hedging U.S. Treasury securities.

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Operating Expenses, Compensation and Benefits, and Other Expenses — 2019 Periods Compared to 2018 Periods

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

Table 9.13:Operating Expenses, and Compensation and Benefits

	Three months ended June 30,
	2019		Percentage of Total		2018		Percentage of Total
Operating Expenses (a)
Occupancy	$	2,102	13.60	%	$	2,229	19.56	%
Depreciation and leasehold amortization	2,153		13.93		1,249		10.96
All others (b)	11,196		72.47		7,915		69.48
Total Operating Expenses	$	15,451	100.00	%	$	11,393	100.00	%
Total Compensation and Benefits (c)	$	20,462			$	17,489
Finance Agency and Office of Finance (d)	$	4,199			$	3,641
Other expenses (e)	$	2,333			$	1,986

	Six months ended June 30,
	2019		Percentage of Total		2018		Percentage of Total
Operating Expenses (a)
Occupancy	$	3,945	13.94	%	$	4,079	19.11	%
Depreciation and leasehold amortization	4,114		14.54		2,535		11.87
All others (b)	20,242		71.52		14,736		69.02
Total Operating Expenses	$	28,301	100.00	%	$	21,350	100.00	%
Total Compensation and Benefits (c)	$	41,900			$	36,257
Finance Agency and Office of Finance (d)	$	8,141			$	7,900
Other expenses (e)	$	4,683			$	3,521

(a)Operating expenses included the administrative and overhead costs of operating the FHLBNY, 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.

(b)The category “All others” included temporary workers, computer service agreements, contractual services, professional and legal fees, audit fees, director fees and expenses, insurance and telecommunications.  Expenses increased in the current year periods primarily due to consulting expenses to implement several multi-year technology enhancement initiatives.

(c)Compensation expense increased driven by additions to staff.

(d)We are also assessed for our share of the operating expenses for the Finance Agency and the Office of Finance.  The FHLBanks and two other GSEs share the entire cost of the Finance Agency.  Expenses are allocated by the Finance Agency and the Office of Finance.

(e)The category Other expenses included contributions to homeowners and small businesses under a newly established multi-year hurricane relief grant program, the non-service elements of Net periodic pension benefit costs, and derivative clearing fees.

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Assessments — 2019 Periods Compared to 2018 Periods

For more information about assessments, see Affordable Housing Program and Other Mission Related Programs and Assessments under Part I Item 1 Business in the most recent Form 10-K filed on March 21, 2019.

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

Table 10.1:Affordable Housing Program Liabilities

	Three months ended June 30,						Six months ended June 30,
	2019			2018			2019			2018
Beginning balance	$	161,129		$	137,256		$	161,718		$	131,654
Additions from current period’s assessments	12,021			17,274			27,014			31,336
Net disbursements for grants and programs	(8,888		)	(5,226		)	(24,470		)	(13,686		)
Ending balance	$	164,262		$	149,304		$	164,262		$	149,304

AHP assessments allocated from net income totaled $12.0 million in the second quarter of the current year, compared to $17.3 million for the same period in the prior year.  On a year-to-date basis, AHP assessments allocated from net income totaled $27.0 million for the current period, compared to $31.3 million for the prior year period. Assessments are calculated as a percentage of Net income, and the changes in allocations were in parallel with changes in Net income.

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Legislative and Regulatory Developments

Significant regulatory actions and developments are summarized below:

FHFA Advisory Bulletin 2019 Business Resiliency Management.  On May 7, 2019, the Federal Housing Finance Agency (“FHFA”) issued an Advisory Bulletin on Business Resiliency Management for FHLBanks and other entities regulated by the FHFA (the “Business Resiliency AB”) that communicates the FHFA’s expectations with respect to minimizing the impact of disruptions in service from uncontrolled events and the maintenance of business operations at predefined levels.  The Business Resiliency AB rescinds the FHFA’s 2002 disaster recovery guidance.  The guidance states that a business resiliency program should guide the regulated entity to respond appropriately to disruptions affecting business operations, personnel, equipment, facilities, IT systems, and information assets.  The Business Resiliency AB provides guidance on the elements of a safe and sound business resiliency program, which include governance, risk assessment and business impact analysis, risk mitigation and plan development, testing and analysis, and risk monitoring and program sustainability.

We do not expect the Business Resiliency AB to have a material effect on our financial condition or results of operations.

CFTC Advisory on Initial Margin Documentation Requirements.  On July 9, 2019, the U.S. Commodity Futures Trading Commission issued an advisory (the “Advisory”) on its Margin Requirements for Uncleared Swaps for Swap Dealers and Major Swap Participants (the “Margin Rules”), to clarify that documentation governing the posting, collection, and custody of initial margin is not required to be completed until such time as the initial margin amount exceeds a threshold of $50 million.  The Margin Rules provide that covered swap entities under the Margin Rules, or non-prudentially regulated swap dealers, are required to post and collect initial margin with counterparties that are swap dealers or financial end users with material swap exposure, as defined under the rule.  The Margin Rules contain, however, an initial margin threshold amount of $50 million between a covered swap entity (and its margin affiliates), and its counterparty (and its margin affiliates). The Advisory clarifies that no initial margin documentation is required until the amount of initial margin exchangeable between a covered swap entity (and its margin affiliates) and its counterparty (and its margin affiliates) exceeds the initial margin threshold amount of $50 million.  The Advisory does, however, instruct covered swap entities to closely monitor initial margin amounts if they are approaching the $50 million initial margin threshold with a counterparty and to take appropriate steps to ensure that the required documentation is in place at such time as the threshold is reached.  The Bank is closely monitoring its initial margin thresholds on a counterparty-by-counterparty basis and is evaluating the potential impact of the Advisory on its documentation requirements.

SEC Final Rule on Auditor Independence with Respect to Certain Loans or Debtor-Creditor Relationships.  On July 5, 2019, the U.S. Securities and Exchange Commission (“SEC”) published a final rule, effective October 3, 2019 (the “Final Rule”), that adopts amendments to its auditor independence rules to modify the analysis that must be conducted by the Bank to determine whether an auditor is independent when the auditor has a lending relationship with certain shareholders of an audit client at any time during an audit or professional engagement period.  The Final Rule, among other things, focuses the analysis on beneficial ownership rather than on both record and beneficial ownership; replaces the existing ten percent bright-line shareholder ownership test with a “significant influence” test; and adds a “known through reasonable inquiry” standard with respect to identifying beneficial owners of the audit client’s equity securities.

Under the existing rule on debtor-creditor relationships, the independence of an accounting firm generally could be called into question by the Bank if the firm or a covered person in the accounting firm receives a loan from a lender that is a “record or beneficial owner of more than ten percent of the audit client’s equity securities.”  A covered person in the firm includes personnel on the audit engagement team, personnel in the chain of command, partners and managers who provide ten or more hours of non-audit services to the audit client, and partners in the office where the lead engagement partner practices in connection with the client.  The Final Rule replaces the existing ten percent bright-line test with a significant influence test similar to that referenced in other SEC rules and based on concepts applied in the Financial Accounting Standards Board ASC Topic 323.

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Under the Final Rule, with certain exceptions, the receipt of loans from the beneficial owners of an audit client’s equity securities where such beneficial owner has significant influence over the audit client would impair the independence of the auditor.  The analysis, which would be based on the facts and circumstances, would focus on whether the beneficial owners of an audit client’s equity securities have the ability to exercise significant influence over the operating and financial policies of an audit client.

We continue to analyze the potential impact of the Final Rule but currently expect the rule to resolve the matters we discussed in Item 9B — Other Information in the Bank’s 2018 Annual Report on Form 10-K.

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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 change to market value or future earnings due to a change in the interest rate environment.  IRR arises from the Banks operation due to maturity mismatches between interest rate sensitive cash-flows of assets and liabilities.  As the maturity mismatch increases so does the level of IRR.  The Bank has opted to retain a modest level of IRR which allows for the preservation of capital value while generating steady and predictable income.  Accordingly, 90% of the balance sheet consists of predominantly short-term and LIBOR-based assets and liabilities.  A conservative and limited maturity gap profile of asset and liability positions protect our capital from changes in value arising from interest and rate volatility environment.

The desired risk profile is primarily affected by the use of interest rate exchange agreements (Swaps).  All the LIBOR-based advances and long-term advances are swapped to 1- or 3-month LIBOR.  Advances with adjustable rates are tailored to reset to a LIBOR index while long-term consolidated obligations are swapped to 1- or 3-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.

Although the Bank maintains a conservative IRR profile, income variability does arise from structural aspects in our portfolio.  These include: embedded prepayment rights, basis risk on asset and liability positions, yield curve risk, and liquidity and funding needs.  These varied risks are controlled by monitoring 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 assigns comprehensive risk limits which 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 +/-5.0 years in the +/-200bps shock cases.

·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 the +200bps shock compared to the rates in the unchanged case.  The sensitivity of expected net interest income over a one-year period is limited to a -40 percent change under the -200bps shock compared to the rates in the unchanged case. This limit was re-established and made consistent with current market conditions and reflective of updated modelling assumptions.

·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:

	Base Case DOE	-200bps DOE	-100bps DOE	+200bps DOE
June 30, 2019	-0.28	0.82	-1.09	0.44
March 31, 2019	-0.19	0.72	-1.04	0.42
December 31, 2018	-0.05	-0.76	-0.79	0.31
September 30, 2018	0.10	-1.58	-0.46	0.43
June 30, 2018	0.00	-1.99	-0.62	0.44

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 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 analyze open key rate duration exposure across maturity buckets while also performing a 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
June 30, 2019	$	5.818 Billion
March 31, 2019	$	6.053 Billion
December 31, 2018	$	6.418 Billion
September 30, 2018	$	6.363 Billion
June 30, 2018	$	6.527 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, a parallel shift of +200bps is calculated and compared against the base case and subjected to a -15 percent limit.  The sensitivity of expected net interest income over a one-year period is limited to a -40 percent change under the -200bps shock compared to the rates in the unchanged case.  This limit was re-established and made consistent with current market conditions and reflective of updated modelling assumptions.

	Sensitivity in the -200bps Shock		Sensitivity in the -100bps Shock		Sensitivity in the +200bps Shock
June 30, 2019	-14.30	%	-7.37	%	11.10	%
March 31, 2019	-12.91	%	-6.44	%	9.61	%
December 31, 2018	N/A		-5.86	%	12.26	%
September 30, 2018	N/A		-6.56	%	13.14	%
June 30, 2018	N/A		-3.16	%	5.53	%

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:

	-200bps Change in MVE		-100bps Change in MVE		+200bps Change in MVE
June 30, 2019	-1.51	%	-0.81	%	-0.34	%
March 31, 2019	-1.61	%	-0.51	%	-0.81	%
December 31, 2018	-1.63	%	-0.41	%	-0.50	%
September 30, 2018	-1.12	%	-0.20	%	-0.58	%
June 30, 2018	-1.13	%	-0.24	%	-0.57	%

As noted, the potential declines under these shocks are within our limits of a maximum 10 percent.

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The following tables display the portfolio’s maturity/re-pricing gaps as of June 30, 2019 and December 31, 2018 (in millions):

	Interest Rate Sensitivity
	June 30, 2019
				More Than			More Than			More Than
	Six Months			Six Months to			One Year to			Three Years to			More Than
	or Less			One Year			Three Years			Five Years			Five Years
Interest-earning assets:
Non-MBS investments	$	19,926		$	202		$	630		$	441		$	1,517
MBS investments	6,873			322			2,422			1,375			5,746
Swaps hedging MBS	377			—			—			—			(377		)
Adjustable-rate loans and advances	20,602			—			—			—			—
Net unswapped	47,778			524			3,052			1,816			6,886
Liquidity trading portfolio	1,222			2,435			4,210			3			—
Swaps hedging investments	6,680			(2,450		)	(4,230		)	—			—
Net liquidity trading portfolio	7,902			(15		)	(20		)	3			—
Fixed-rate loans and advances	45,220			10,243			14,910			4,239			6,814
Swaps hedging advances	32,926			(9,682		)	(13,424		)	(3,041		)	(6,779		)
Net fixed-rate loans and advances	78,146			561			1,486			1,198			35
Total interest-earning assets	$	133,826		$	1,070		$	4,518		$	3,017		$	6,921
Interest-bearing liabilities:
Deposits	$	1,237		$	—		$	—		$	—		$	—
Discount notes	62,364			16			—			—			—
Swapped discount notes	(2,664		)	—			1,056			—			1,608
Net discount notes	59,700			16			1,056			—			1,608
Consolidated Obligation Bonds
FHLBank bonds	56,635			6,526			7,066			3,011			5,095
Swaps hedging bonds	10,348			(5,384		)	(3,691		)	(548		)	(725		)
Net FHLBank bonds	66,983			1,142			3,375			2,463			4,370
Total interest-bearing liabilities	$	127,920		$	1,158		$	4,431		$	2,463		$	5,978
Post hedge gaps (a):
Periodic gap	$	5,906		$	(88	)	$	87		$	554		$	943
Cumulative gaps	$	5,906		$	5,818		$	5,905		$	6,459		$	7,402

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	Interest Rate Sensitivity
	December 31, 2018
				More Than			More Than			More Than
	Six Months			Six Months to			One Year to			Three Years to			More Than
	or Less			One Year			Three Years			Five Years			Five Years
Interest-earning assets:
Non-MBS investments	$	12,881		$	143		$	514		$	424		$	1,952
MBS investments	7,900			536			2,546			1,343			4,431
Adjustable-rate loans and advances	23,395			—			—			—			—
Net unswapped	44,176			679			3,060			1,767			6,383
Liquidity trading portfolio	1,712			1,963			1,980			3			—
Swaps hedging investments	3,975			(1,975		)	(2,000		)	—			—
Net liquidity trading portfolio	5,687			(12		)	(20		)	3			—
Fixed-rate loans and advances	42,055			10,332			18,246			5,416			5,991
Swaps hedging advances	36,400			(9,276		)	(16,931		)	(4,255		)	(5,938		)
Net fixed-rate loans and advances	78,455			1,056			1,315			1,161			53
Loans to other FHLBanks	250			—			—			—			—
Total interest-earning assets	$	128,568		$	1,723		$	4,355		$	2,931		$	6,436
Interest-bearing liabilities:
Deposits	$	1,038		$	5		$	—		$	—		$	—
Discount notes	50,230			410			—			—			—
Swapped discount notes	(2,664		)	—			971			85			1,608
Net discount notes	47,566			410			971			85			1,608
Consolidated Obligation Bonds
FHLBank bonds	50,615			16,007			9,579			3,296			4,406
Swaps hedging bonds	23,556			(15,324		)	(6,490		)	(992		)	(750		)
Net FHLBank bonds	74,171			683			3,089			2,304			3,656
Total interest-bearing liabilities	$	122,775		$	1,098		$	4,060		$	2,389		$	5,264
Post hedge gaps (a):
Periodic gap	$	5,793		$	625		$	295		$	542		$	1,172
Cumulative gaps	$	5,793		$	6,418		$	6,713		$	7,255		$	8,427

(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.

112

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, José R. González, and Senior Vice President and Chief Financial Officer, Kevin M. Neylan, as of June 30, 2019.  Based on this evaluation, they concluded that as of June 30, 2019, 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.

113

Part II.Other Information.

Item 1.  Legal Proceedings

The Bank is not aware of any legal proceedings that are expected to have a material effect on its financial condition or results of operations or that are otherwise material to the Bank.

Item 1A.  Risk Factors

There have been no material changes from the risk factors previously disclosed in Part I, Item 1A of the FHLBNY’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018.

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

There were no material changes to the disclosures relating to Rule 2-01(c)(1)(ii)(A) of Regulation S-X included in Part II, Item 9B of the FHLBNY’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018 filed on March 21, 2019.

114

Item 6.Exhibits

No.	Exhibit Description	Filed with this Form 10-Q	Form*	Date Filed
3.1	Restated Organization Certificate of the Federal Home Loan Bank of New York (“Bank”)		8-K	12/1/2005
3.2	Amended and Restated Bylaws of the Bank		8-K	3/21/2019
4.1	Amended and Restated Capital Plan of the Bank		8-K	1/8/2018
10.1	Retention Agreement executed as of June 20, 2019 between Mr. Gaetano R. Fusco and the Federal Home Loan Bank of New York		8-K	6/21/2019
10.2	General Release Agreement executed as of June 20, 2019 between Mr. Gaetano R. Fusco and the Federal Home Loan Bank of New York		8-K	6/21/2019
31.1	Certification of the President and Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	X
31.2	Certification of the Senior Vice President and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	X
32.1	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
32.2	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.INS	XBRL Instance Document	X
101.SCH	XBRL Taxonomy Extension Schema Document	X
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document	X
101.LAB	XBRL Taxonomy Extension Label Linkbase Document	X
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document	X
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document	X

Notes:

* Means that this exhibit is incorporated by reference from the named Form; the filing date of such named Form is listed in the next column.

115

SIGNATURES

Pursuant to the requirements 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: August 8, 2019

116