UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended
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FEDERAL HOME LOAN BANK OF NEW YORK
2023 Annual Report on Form 10-K
Table of Contents
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PART I
Item 1.Business.
General
The Federal Home Loan Bank of New York (“we,” “us,” “our,” “the Bank” or the “FHLBNY”) is a federally chartered corporation exempt from federal, state and local taxes except local real property taxes. It is one of eleven 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. Each FHLBank is a cooperative owned by member institutions located within a defined geographic district. The members purchase capital stock in the FHLBank and generally receive dividends on their capital stock investment. Our defined geographic district is New Jersey, New York, Puerto Rico, and the U.S. Virgin Islands. We provide a readily available, low-cost source of funds for our member institutions.
The FHLBNY is managed to deliver balanced value to members, rather than to maximize profitability or advance volume through low pricing. Our members must purchase FHLBNY stock according to regulatory requirements as a condition of membership. For more information, see financial statements, Note 14. Capital Stock, Mandatorily Redeemable Capital Stock and Restricted Retained Earnings. The business of the cooperative is to provide liquidity for our members (primarily in the form of loans referred to as “advances”) and to provide a return on members’ investment in FHLBNY stock in the form of a dividend. Since members are both stockholders and customers, our management operates the Bank such that there is a trade-off between providing value to them via low pricing for advances with a relatively lower dividend versus higher advances pricing with a relatively higher dividend.
All federally insured depository institutions, federally insured credit unions and insurance companies engaged in residential housing finance can apply for membership in the FHLBank in their district. Community development financial institutions (CDFIs) that have been certified by the CDFI Fund of the U.S. Treasury Department, including community development loan funds, community development venture capital funds, and state-chartered credit unions without federal insurance, are also eligible to become members of a FHLBank.
A member of another FHLBank or a financial institution that is not a member of any FHLBank may also hold FHLBNY stock as a result of having acquired one of our members. Because we operate as a cooperative, we conduct business with related parties in the normal course of business and consider all members and non-member stockholders as related parties in addition to the other FHLBanks. For more information, see financial statements, Note 20. Related Party Transactions and Item 13. Certain Relationships and Related Transactions, and Director Independence in this Form 10-K.
Our primary business is making collateralized loans or advances to members and is also the principal factor that impacts our financial condition. We also serve the public through our mortgage programs, which enable our members to liquefy certain mortgage loans by selling them to the Bank. We also provide members with such correspondent services as safekeeping, wire transfers, depository, and settlement services. Non-members that have acquired members have access to these services up to the time that their advances outstanding prepay or mature.
We obtain our funds from several sources. A primary source is the issuance of FHLBank debt instruments, called Consolidated obligations, to the public. The issuance and servicing of Consolidated obligations are performed by the Office of Finance (OF), the fiscal agent for the issuance and servicing of Consolidated obligations on behalf of the 11 FHLBanks. These debt instruments represent the joint and several obligations of all the FHLBanks. Because the FHLBanks’ Consolidated obligations are rated Aaa/P-1 with a negative outlook by Moody’s Investors Service (Moody’s) and AA+/A-1+ with a stable outlook by Standard & Poor’s Rating Services (S&P or Standard & Poor’s) and because of the FHLBanks’ GSE status, the FHLBanks are generally able to raise funds at rates that are typically at a small to moderate spread above U.S. Treasury security yields. Additional sources of funding are member deposits, other borrowings, and the issuance of capital stock. Deposits may be accepted from member financial institutions and federal instrumentalities.
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We combine private capital and public sponsorship as a GSE to provide our member financial institutions with a reliable flow of credit and other services for housing and community development, and our cooperative ownership structure allows us to pass along the benefit of these low funding rates to our members. By supplying additional liquidity to our members, we enhance the availability of residential mortgages and community investment credit. Members also benefit from our affordable housing and economic development programs, which provide grants and below market-rate loans that support members’ involvement in creating affordable housing and revitalizing communities.
We do not have any wholly or partially owned subsidiaries, nor do we have an equity position in any partnerships, corporations, or off-balance sheet special purpose entities. We own the grantor trusts to fund certain non-qualified employee retirement programs, more fully described in financial statements Note 16. Employee Retirement Plans and Note 6. Equity Investments.
A Joint Capital Enhancement Agreement (Capital Agreement) among the 11 FHLBanks requires each FHLBank to enhance its capital position, and each FHLBank will contribute 20% of its Net income each quarter to its own restricted retained earnings account at the FHLBank until the balance of that account equals at least one percent of that FHLBank’s average balance of outstanding Consolidated obligations for the quarter. These restricted retained earnings will not be available to pay dividends.
The FHLBNY is supervised by the Federal Housing Finance Agency (FHFA or the Finance Agency), the independent Federal regulator of the FHLBanks, the Federal Home Loan Mortgage Corporation (Freddie Mac) and the Federal National Mortgage Association (Fannie Mae). The FHFA’s stated mission with respect to the FHLBanks is to provide effective supervision, regulation, and housing mission oversight of the FHLBanks to promote their safety and soundness, support housing finance and affordable housing, and support a stable and liquid mortgage market.
Each FHLBank carries out its statutory mission only through activities that are authorized under and consistent with the Safety and Soundness Act and the FHLBank Act; and the activities of each FHLBank and the manner in which they are operated is consistent with the public interest. The Finance Agency also ensures that the FHLBNY carries out its housing and community development mission, remains adequately capitalized and able to raise funds in the capital markets. However, while the Finance Agency establishes regulations governing the operations of the FHLBanks, the Bank functions as a separate entity with its own management, employees and Board of Directors.
Our website is www.fhlbny.com. We have adopted, and posted on our website, a Code of Business Conduct and Ethics applicable to all employees and directors.
Market Area
Our market area is the same as the membership district — New Jersey, New York, Puerto Rico, and the U.S. Virgin Islands. Institutions that are members of the FHLBNY must have their charter or principal places of business within this market area but may also operate elsewhere.
Due to the penetrated market, there are few opportunities to gain members. However, we continue to engage the member prospects who are eligible to join. In addition, foreign banks with charters based in our membership district are another potential pool of prospects. This is not a new trend as we currently have members who have parent companies outside the United States.
We actively market membership through a series of targeted, on-going sales and marketing initiatives. We compete for business by offering competitively priced products, services and programs that provide financial flexibility to the membership. The dominant reason institutions join the FHLBNY is access to a reliable source of liquidity, through products such as advances, letters of credit and our secondary market program, Mortgage Asset Program. While liquidity is provided in a variety of ways, advances are one of the most attractive sources of liquidity because they permit members to pledge relatively illiquid assets, such as 1-4 family, multifamily, home equity, and commercial real estate mortgages held in portfolio, to create liquidity. Advances are attractively priced because of our access to capital markets as a GSE and our strategy of providing balanced value to members.
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The following table summarizes our members by type of institution:
Community | ||||||||||||
Development | ||||||||||||
Commercial | Thrift | Credit | Insurance | Financial | ||||||||
| Banks |
| Institutions |
| Unions |
| Companies |
| Institution |
| Total | |
December 31, 2023 |
| 102 | 61 | 106 | 47 | 9 | 325 | |||||
December 31, 2022 |
| 103 | 62 | 107 | 46 | 9 | 327 |
Business Segments
We manage our operations as a single business segment. Management and our Board of Directors review enterprise-wide financial information in order to make operating decisions and assess performance.
Our cooperative structure permits us to expand and contract with demand for advances and changes in membership. When advances are paid down, because the member no longer needs the funds or because the member has been acquired by a non-member and the former member decides to prepay advances, the stock associated with the advances is subject to immediate redemption in our sole discretion. When advances are paid before maturity, we collect fees that make us financially indifferent to the prepayment. Our operating expenses are low. Dividend capacity, which is a function of net income and the amount of stock outstanding, is largely unaffected by the prepayment since future stock and future income are reduced more or less proportionately. We believe that we will be able to meet our financial obligations and continue to deliver balanced value to members, even if advance demand contracts or if membership declines.
Products and Services
Introduction — Advances to members are the primary focus of our operations and are also the principal factor that impacts our financial condition. Revenues from advances to members are the largest and the most significant element in our operating results. Providing advances to members, supporting the products, and associated collateral and credit operations, and funding and swapping the funds are the focus of our operations.
We offer our members several correspondent banking services as well as safekeeping services. The fee income that is generated from these services is not significant. We also issue standby letters of credit on behalf of members for a fee. The total income derived from all such sources, and other incidental income and expenses were not material in the periods in this report.
We provide our members with an alternative to originating and selling long-term, fixed-rate mortgages in the secondary market. We accomplish this by purchasing eligible conforming fixed-rate mortgages originated or purchased by our members. Purchases are at negotiated market rates. For more information, see Acquired Member Assets Programs below and in the financial statements, Note 10. Mortgage Loans Held-for-Portfolio.
Advances
We offer a wide range of credit products to help members meet local credit needs, manage interest rate and liquidity risk, and serve their communities. Our primary business is making secured loans, called advances, to members. These advances are available as short- and long-term loans with adjustable, variable, and fixed-rate features (including option-embedded and amortizing advances).
Advances to members, including former members, constituted 68.8% and 73.3% of our total assets of $158.3 billion and $157.4 billion at December 31, 2023 and 2022, respectively. In terms of revenues, interest income derived from advances were $6.0 billion, $1.9 billion, and $0.5 billion, representing 71.3%, 69.4% and 50.0% of total interest income in 2023, 2022 and 2021, respectively. Most of our critical functions are directed at supporting the borrowing needs of our members and monitoring the members’ associated collateral positions. For more information about advances, including our underwriting standards, see financial statements, Note 9. Advances; also see Tables 3.1 to 3.8 and the accompanying discussions in this MD&A.
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Members use advances as a source of funding to supplement their deposit gathering activities. Advances borrowed by members have generally increased over the last decade because many members have not been able to increase their deposits in their local markets as quickly as they have increased their assets. To close this funding gap, members have preferred to obtain reasonably priced advances rather than increasing their deposits by offering higher rates or foregoing asset growth. Because of the wide range of advance types, terms, and structures available to them, members have also used advances to enhance their asset/liability management. As a cooperative, we price advances at minimal net spreads above the cost of our funding in order to deliver more value to members.
Letters of Credit
We may issue standby financial letters of credit on behalf of members to facilitate members’ residential and community lending, provide members with liquidity, or assist members with asset/liability management. Where permitted by law, members may utilize FHLBNY letters of credit to collateralize deposits made by units of state and local governments. Our underwriting and collateral requirements for securing letters of credit are the same as our requirements for securing advances.
Derivatives
To assist members in managing their interest rate and basis risks in both rising and falling interest-rate environments, we will act as an intermediary between the member and derivatives counterparty. We do not act as a dealer and view this as an additional service to our members. Participating members must comply with our documentation requirements and meet our underwriting and collateral requirements. Volume of such requests has been insignificant.
Acquired Member Assets Programs
The FHLBanks are permitted to acquire certain assets from or through their members. These initiatives are referred to as Acquired Member Assets (AMA) programs. At the FHLBNY, the Acquired Member Assets initiatives are the Mortgage Partnership Finance (MPF) Program and Mortgage Asset Program, which provide members with an alternative to originating and selling long-term, fixed-rate mortgages in the secondary market. These programs are managed and funded in a consistent manner. We purchase conforming fixed-rate mortgages originated or purchased by our members. By selling mortgage loans to us, members can increase their balance sheet liquidity and lower interest rate and mortgage prepayment risks.
The Bank introduced the new AMA investment program, MAP in the fourth quarter of 2020. MAP purchases are investment grade, conforming one-to-four family or government insured long-term, fixed-rate home mortgages. MAP, like MPF, is structured to provide secondary mortgage market liquidity to the selling member, the participating financial institution (PFI).
MAP was fully rolled out in March 2021, at which time we stopped purchasing MPF loans. Legacy MPF loans will remain on the FHLBNY’s balance sheet and will continue to be supported by the FHLBNY and the FHLBank of Chicago as MPF Provider.
Under MAP, the PFI’s credit enhancement is created by the FHLBNY through the establishment of an individual or, in certain cases as pooled, member performance account (MPA). The FHLBNY sets aside funds in the MPA account; funds are unsecured for the PFI and serves as the selling member’s credit enhancement for future credit losses experienced on that MAP loan pool. This first loss credit enhancement provided by the member, or a group of members through pool aggregation, brings the FHLBNY purchased loans to at least investment grade at the time of sale. We offer pool aggregation under MAP to reduce the credit enhancement cost to small and mid-sized PFIs when they sell mortgages into combined pools. These credit enhancements apply after a homeowner’s equity, and if applicable, private mortgage insurance has first been exhausted. For FHA and other government insured home mortgages that we purchase under MAP, we do not establish an additional MPA credit enhancement because the credit risk is insured by the United States government.
Under the MPF Program, members are then paid a fee for assuming a portion of the credit risk of the mortgages that we acquired. Members assume credit risk by providing a credit enhancement to us or providing and paying for a supplemental mortgage insurance policy insuring us for some portion of the credit risk involved.
Income from both MPF and MAP are derived primarily from the difference, or spread, between the yield on the purchased mortgage loans and the borrowing cost of Consolidated obligations.
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We do not service the mortgage loans we purchase under MPF and MAP. PFIs may elect to retain servicing rights for the loans sold to us, or they may elect to sell servicing rights to a FHLBNY approved servicer. We do not pay a PFI any fees other than the servicing fee when the PFI retains the servicing rights. We closely monitor the servicers because we are exposed to credit and operational risk if they fail to properly perform.
It is the servicer’s responsibility to initiate claims for losses on the loans. If a loss is expected, no claims are settled until the claim has been reviewed and approved by the FHLBNY. Under MAP, the MPA first absorbs the credit loss after a homeowner’s equity, and if applicable, private mortgage insurance has first been exhausted. If the MPA has been depleted, based on our contractual arrangement, the FHLBNY takes the ultimate credit loss, and the servicer is reimbursed for an approved claim amount.
Under its current housing goals regulation, the Finance Agency establishes low-income housing goals for the FHLBNY for conventional mortgages purchased through the AMA programs. If we do not meet any affordable housing goals established by the Finance Agency, we may be required to submit a housing plan to the Finance Agency.
The Acquired Member Assets Regulation does not specifically address the disposition of Acquired Member Assets. The main intent of that regulation is the purchase of assets for investment rather than for trading purposes. The FHLBNY’s present intent for MPF and MAP is to hold these investments in portfolio. However, the FHLBanks have the legal authority to sell MPF and MAP loans pursuant to the granting of incidental powers in Section 12 of the FHLBank Act. Section 12(a) of the FHLBank Act specifically provides that each FHLBank shall have all such incidental powers, not inconsistent with the provisions of this chapter, as are customary and usual in corporations generally. General corporate law principles permit the sale of investments.
For additional discussion on our mortgage loans and their related credit risk, see financial statements, Note 10. Mortgage Loans Held-for-Portfolio. Also see Tables 5.1 to 5.3 and accompanying discussions in this MD&A.
Correspondent Banking Services
We offer our members an array of correspondent banking services, including depository services, wire transfers, settlement services, and safekeeping services. Depository services include processing of customer transactions in “Overnight Investment Accounts,” the interest-bearing demand deposit account each customer has with us. All customer-related transactions (e.g. deposits, Federal Reserve Bank settlements, advances, securities transactions, and wires) are posted to these accounts each business day. Wire transfers include processing of incoming and outgoing domestic wire transfers, including third-party transfers. Settlement services include automated clearinghouse and other transactions received through our accounts at the Federal Reserve Bank as correspondent for members and passed through to our customers’ Overnight Investment Accounts with us. Through a third party, we offer customers a range of securities custodial services, such as settlement of book entry (electronically held) and physical securities. We encourage members to access these products through 1Linksm, an Internet-based delivery system we developed as a proprietary service. Members access the 1Link system to obtain account activity information or process wire transfers, book transfers, security safekeeping and advance transactions.
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Affordable Housing Program and Other Mission Related Programs
Federal Housing Finance Agency regulation 12 CFR Part 1292.5 (Community Investment Cash Advance Programs) states in general that each FHLBank shall establish an Affordable Housing Program (AHP) in accordance with Part 1291, and a Community Investment Program. The 11 FHLBanks together must annually allocate for the AHP the greater of $100 million or 10 percent of regulatory defined net earnings. The FHLBank may also offer a Rural Development Advance program, an Urban Development Advance program, and other Community Investment Cash Advance programs.
| ● | Affordable Housing Program. We meet this requirement by allocating 10 percent of regulatory defined net income to our AHP to finance homeownership and support the creation and preservation of housing for lower income families and individuals. The program is offered in two forms: a competitive program and a homeownership program. In the competitive program, AHP funds are awarded through a competitive process to members who submit applications on behalf of project sponsors who are planning to purchase, rehabilitate, or construct affordable homes or apartments. In the homeownership program, households are required to have income at or below 80% of the area median income, and we may set aside annually, in aggregate, up to the greater of $4.5 million or 35% of the Bank’s annual required AHP contributions. See financial statements, Note 13. Affordable Housing Program for assessments allocated from earnings for the periods in this report. |
| ● | Other Mission — Related Activities. The FHLBNY offers four distinct Community Lending Programs (CLP) that support our members’ community-oriented lending, which were established under the Community Investment Cash Advance Programs. The Bank provides reduced interest rate advances to members for lending activity that meets the CLP requirements, under the following individual programs: Community Investment Program (CIP), Rural Development Advance (RDA), Urban Development Advance (UDA) and Disaster Relief Funding (DRF). The CLP provides additional assistance to members in their affordable housing and economic development lending activities within low- and moderate-income neighborhoods as well as other activities which benefit low- and moderate-income households. The Bank also provides letters of credit in support of projects that meet the CLP requirements and are offered at reduced fees. Economic development is further supported by the FHLBNY’s suite of offerings under the Zero Percent Development Advance (ZDA) Program. The ZDA program provides members with subsidized funding in the form of interest rate credits to assist in originating loans or purchasing loans/investments that meet one of the eligibility criteria under the Business Development Advance, Climate Development Advance, Infrastructure Development Advance, or Tribal Development Advance. In addition, the Small Business Recovery Grant (SBRG) Program provides flexible funds to benefit small-businesses and non-profits located in FHLBNY members’ communities. This program supports the financial security of qualifying organizations that face economic challenges due to the rate environment, inflation, supply-chain constraints, and/or rising energy costs. Lastly, we typically make charitable contributions to organizations deemed to be highly reputable and who provide vital services. The ZDA, SBRG and charitable contributions are in excess of the required statutory annual income contribution to the AHP offered under the Community Investment Cash Advance Programs. |
Investments
We maintain portfolios of investments to provide additional earnings and for liquidity purposes. Investment income also bolsters our capacity to fund Affordable Housing Program projects, and to cover operating expenditures. To help ensure the availability of funds to meet member credit needs, we maintain interest-bearing deposits and portfolios of short-term investments issued by highly-rated, high credit quality financial institutions. The investments may include overnight Federal funds, term Federal funds, securities purchased under agreements to resell, and we are a major lender in this market, particularly in the overnight market. We further enhance our interest income by holding long-term investments classified as either held-to-maturity or as available-for-sale. These portfolios primarily consist of mortgage-backed securities issued by government-sponsored mortgage enterprises. Our long-term investments also include a small portfolio of privately issued mortgage-backed and residential asset-backed securities that were primarily acquired prior to 2006, bonds issued by housing finance agencies, and grantor trusts owned by the FHLBNY that invests in mutual funds to help support the Bank’s nonqualified plans. We have a liquidity trading portfolio invested primarily in highly-liquid U.S. Treasury securities to enhance our short-term liquidity positions and is not used for speculative purposes.
For more information, see financial statements, Note 4. Interest-bearing Deposits, Federal Funds Sold and Securities Purchased Under Agreements to Resell, Note 5. Trading Securities, Note 6. Equity Investments, Note 7. Available-for-Sale Securities and Note 8. Held-to-Maturity Securities. Also see Tables 4.1 through 4.9 and accompanying discussions in this MD&A.
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Debt Financing — Consolidated Obligations
Our primary source of funds is the sale of debt securities, known as Consolidated obligations, in the U.S. and global capital markets. Consolidated obligations are the joint and several obligations of the FHLBanks, backed only by the financial resources of the 11 FHLBanks. Consolidated obligations are not obligations of the United States, and the United States does not guarantee them. The issuance and servicing of Consolidated obligations debt are performed by the Office of Finance, a joint office of the FHLBanks established by the Finance Agency. The Office of Finance has authority to issue joint and several debt on behalf of the FHLBanks. At December 31, 2023 and December 31, 2022, the par amounts of Consolidated obligations outstanding, bonds and discount notes for all 11 FHLBanks was $1.2 trillion, including $147.3 billion and $149.8 billion issued for the FHLBNY and outstanding at those dates. For more information, see financial statements, Note 12. Consolidated Obligations. Also see Tables 6.1 to 6.11 and accompanying discussions in this MD&A.
Finance Agency regulations state that the FHLBanks must maintain, free from any lien or pledge, qualifying assets at least equal to the face amount of Consolidated obligations outstanding. Qualifying assets are defined as cash; secured advances; assets with an assessment or rating at least equivalent to the current assessment or rating of the Consolidated obligations; obligations of or fully guaranteed by the United States, obligations, participations, or other instruments of or issued by Federal National Mortgage Association or the Government National Mortgage Association (Ginnie Mae); mortgages, obligations, or other securities which are or ever have been sold by the Federal Home Loan Mortgage Corporation under the FHLBank Act; and such securities as fiduciary and trust funds may invest in under the laws of the state in which the FHLBank is located. Any assets subject to a lien or pledge for the benefit of holders of any issue of Consolidated obligations are treated as if they were free from lien or pledge for purposes of compliance with these regulations.
Consolidated obligations are distributed through dealers selected by the Office of Finance using various methods including competitive auction and negotiations with individual or syndicates of underwriters. Some debt issuance is in response to specific inquiries from underwriters. Many Consolidated obligations are issued with the FHLBank concurrently entering into derivatives agreements, such as interest rate swaps. To facilitate issuance, the Office of Finance may coordinate communication between underwriters, individual FHLBanks, and financial institutions executing derivative agreements with the FHLBanks. Issuance volume is not concentrated with any particular underwriter.
The Office of Finance is mandated by the Finance Agency to ensure that Consolidated obligations are issued efficiently and at the lowest all-in cost of funds over time. If the Office of Finance determines that its action is consistent with its Finance Agency’s mandated policies, it may reject our issuance request, and the requests of other FHLBanks, to raise funds through the issuance of Consolidated obligations on particular terms and conditions. We have never been denied access under this policy for all periods reported. The Office of Finance serves as a source of information for the FHLBanks on capital market developments and manages the FHLBanks’ relationship with the rating agencies with respect to the Consolidated obligations.
Consolidated Obligation Liabilities
Each FHLBank independently determines its participation in each issuance of Consolidated obligations based on (among other factors) its own funding and operating requirements, maturities, interest rates, and other terms available for Consolidated obligations in the market. The FHLBanks have emphasized diversification of funding sources and channels as the need for funding from the capital markets has grown.
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Consolidated Obligation Bonds. Consolidated bonds (COs or CO bonds) are issued primarily to raise intermediate- and long-term funds for the FHLBanks. They can be issued and distributed through negotiated or competitive bidding transactions with approved underwriters or bidding group members. Consolidated bonds generally carry fixed- or variable-rate payment terms and have maturities ranging from one month to 30 years.
| ● | The Global Debt Program — The FHLBanks issue global bullet Consolidated bonds. The FHLBanks and the Office of Finance maintain a debt issuance process for scheduled issuance of global bullet Consolidated bonds. As part of this process, management from each FHLBank will determine and communicate a firm commitment to the Office of Finance for an amount of scheduled global bullet debt to be issued on its behalf. If the FHLBanks’ orders do not meet the minimum debt issue size, each FHLBank receives an allocation of proceeds equal to either the larger of the FHLBank’s commitment or the ratio of the individual FHLBank’s regulatory capital to total regulatory capital of all of the FHLBanks. If the FHLBanks’ commitments exceed the minimum debt issue size, then the proceeds are allocated based on relative regulatory capital of the FHLBanks, with the allocation limited to either the lesser of the allocation amount or the actual commitment amount. The FHLBanks can, however, pass on any scheduled calendar slot and decline to issue any global bullet Consolidated bonds upon agreement of at least eight of the FHLBanks. |
| ● | TAP Issue Program — The FHLBanks use the TAP Issue Program to issue fixed-rate, non-callable (bullet) bonds. This program uses specific maturities that may be reopened daily through competitive auctions. The goal of the TAP Issue Program is to aggregate frequent smaller fixed-rate funding needs into a larger bond issue that may have greater market liquidity. |
Consolidated Obligation Discount Notes. Discount notes may be offered into the market through the “discount note window”, or through regularly scheduled competitive auctions. These CO discount notes have a maturity range of one day to one year, are generally issued at or below par, and mature at par.
| ● | Discount notes issued through the discount note window are priced daily and distributed through FHLBank authorized dealers. FHLBanks may request that specific amounts of Consolidated discount notes (CO discount notes or discount notes) with specific maturity dates be offered by the Office of Finance for sale through authorized securities dealers. The Office of Finance commits to issue CO discount notes on behalf of the requesting FHLBanks after dealers submit orders for the specific CO discount notes offered for sale. The FHLBanks receive funding based on the time of their request, the rate requested for issuance, the trade date, the settlement date, and the maturity date. However, a FHLBank may receive less than requested (or may not receive any funding) because of investor demand and competing FHLBank requests for the particular funding that the FHLBank is requesting. |
| ● | Twice weekly, one or more of the FHLBanks may also request that specific amounts of CO discount notes with fixed maturities of 4, 8, 13, and 26 weeks be offered by the Office of Finance through single-price (Dutch) auctions conducted with securities dealers in the discount note selling group. Issuance is contingent on FHLBank demand for funding with these terms. Auction sizes and maturity categories are announced to dealers during the auction process on Reuters and other major wire services. The discount notes offered for sale through Dutch auctions are not subject to a limit on the maximum costs the FHLBanks are willing to pay. Bids will be accepted from the lowest bid rate until the auction size is met, and all winning bids will be awarded at the highest bid rate accepted, so that the FHLBanks receive funding based on their requests at the highest bid rate accepted. If the bids submitted are less than the total of the FHLBanks’ requests, the FHLBank receives funding based on that FHLBank’s regulatory capital relative to the regulatory capital of other FHLBanks offering CO discount notes. |
Deposits
The FHLBank Act allows us to accept deposits from its members, other FHLBanks and government instrumentalities. For us, member deposits are also a source of funding, but we do not rely on member deposits to meet our funding requirements. For members, deposits are a low risk earning asset that may satisfy their regulatory liquidity requirements. We offer several types of deposit programs to our members, including demand and term deposits.
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Capital
From its enactment in 1932, the FHLBank Act provided for a subscription-based capital structure for the FHLBanks. The amount of capital stock that each FHLBank issued was determined by a statutory formula establishing how much FHLBank capital stock each member was required to purchase. With the enactment of the Gramm-Leach-Bliley Act of 1999, Congress replaced the statutory subscription-based member capital stock purchase formula with requirements for total capital, leverage capital, and risk-based capital for the FHLBanks and required the FHLBanks to develop new capital plans to replace the previous statutory structure.
The FHLBNY’s capital plan bases the stock purchase requirement on the level of activity a member has with the Bank, subject to a minimum membership requirement that is intended to reflect the value to the member of having access to the Bank as a funding source. With the approval of the Board of Directors, we may adjust these requirements from time to time within the ranges established in the capital plan. Any changes to our capital plan must be approved by our Board of Directors and the Finance Agency.
Bank capital stock cannot be publicly traded, and under the capital plan, may be issued, transferred, redeemed, and repurchased only at its par value of $100 per share, subject to certain regulatory and statutory limits. Under the capital plan, a member’s capital stock will be redeemed by the Bank upon five years notice from the member, subject to certain conditions. In addition, we have the discretion to repurchase excess capital stock from members. Our current practice is to acquire excess activity-based capital stock daily.
For more information, see Table 7.1 Stockholders’ Capital in this MD&A, and Note 14. Capital Stock, Mandatorily Redeemable Capital Stock and Restricted Retained Earnings in the notes to the audited financial statements.
Retained Earnings and Dividends
The Bank’s Retained Earnings and Dividends policy (the Policy) is a Board approved policy, the objectives of which are to preserve the value of our members’ investment with us, and to provide members with a reasonable dividend. The Policy also states that we want to provide returns on the investment in the Bank’s stock that are sufficient to attract and retain members, and that do not discourage member borrowing. The Bank’s minimum level of retained earnings provides management with a high degree of confidence that estimable losses under simulated stressful conditions and scenarios will not impair paid-in capital, thereby preserving the par value of the stock. Additionally, Unrestricted Retained Earnings should be available to supplement dividends when earnings are low, or losses occur. Our ability to pay dividends and any other distributions may be affected by standards under the Policy.
The Policy establishes (1) a minimum level of Retained Earnings equal to the Bank’s “Retained Earnings Sufficiency”, which is the FHLBNY’s measure of estimating the Bank’s risk exposures; it is estimated under simulated stressful conditions and scenarios, within a defined confidence interval, on market, credit and operational risks, as well as accounting exposures related to the fair values of certain financial instruments; (2) the priority of contributions to retained earnings relative to other distributions of income; (3) the target level of Retained Earnings, based on the Retained Earnings Sufficiency level; (4) a timeline to achieve the targets and to ensure maintenance of appropriate levels of Retained Earnings.
The Bank may pay dividends from Unrestricted Retained Earnings and current net income. Per Finance Agency regulations, our Board of Directors may declare and pay dividends in either cash or capital stock; our practice has been to pay dividends in cash. Our dividends and our dividend policy are subject to Federal Housing Finance Agency regulations and policies. Any dividend payments declared by our Board are a function of these policies, and our financial condition and performance.
To achieve the Bank’s strategic plans and business objectives within the Bank’s risk appetite, the Board-approved Retained Earnings target was $1,926 million for 2023 and $1,791 million for 2022. For more information about Restricted retained earnings, see Table 7.1 Stockholder’s Capital in this MD&A.
Unrestricted Retained Earnings was $1,276.6 million and $1,185.1 million at December 31, 2023 and 2022, respectively. Restricted Retained Earnings was $1,061.1 million and $910.9 million at December 31, 2023 and 2022, respectively. The balance in Accumulated Other Comprehensive Income (AOCI), a component of stockholder’s equity, were losses of $142.5 million and losses of $136.3 million at December 31, 2023 and 2022, respectively. At December 31, 2023 and 2022, our actual retained earning balances exceeded the required Bank’s Retained Earnings Sufficiency level and was in compliance with the Retained Earnings and Dividend Policy.
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The following table summarizes the impact of dividends on our retained earnings for the years ended December 31, 2023, 2022 and 2021 (in thousands):
December 31, | |||||||||
| 2023 |
| 2022 |
| 2021 | ||||
Retained earnings, beginning of year | $ | 2,095,967 | $ | 1,930,965 | $ | 1,909,616 | |||
Net Income for the year |
| 751,131 |
| 417,376 |
| 265,521 | |||
| 2,847,098 |
| 2,348,341 |
| 2,175,137 | ||||
Dividends paid in the year (a) |
| (509,434) |
| (252,374) |
| (244,172) | |||
Retained earnings, end of year | $ | 2,337,664 | $ | 2,095,967 | $ | 1,930,965 | |||
| (a) | Dividends are paid quarterly in arrears in the second month after quarter-end. Dividends are accrued in the period they are declared and therefore not accrued at quarter-end. |
Competition
Demand for advances is affected by many factors including, but not exclusive to the availability and cost to members of alternate sources of liquidity, including retail deposits and wholesale funding options such as brokered deposits, repurchase agreements, Federal Funds lines of credit, Federal Reserve Bank liquidity facilities, wholesale CD programs, and deposits through listing services. Historically, members have grown their assets at a faster pace than retail deposits and capital resulting in the creation of a funding gap. We compete with both secured and unsecured suppliers of wholesale funding to fill these potential funding gaps. Such other suppliers of funding may include Wall Street dealers, commercial banks, regional broker-dealers, and firms capitalizing on wholesale funding platforms. Of these wholesale funding sources, the brokered CD market is our main threat as members continue to increase their usage and counterparties extend available maturities.
Demand for advances is also affected by Federal Reserve actions in managing interest rates and the size and composition of its balance sheet, as those actions affect economic and capital markets conditions, the supply of liquidity in the financial system, the behavior of depositors and other factors.
An emerging competitor is Deposits through Listing Services, which are financial institutions that charge a subscription fee to help banks gather deposits. We have seen gradual growth in the use of these wholesale deposit vehicles. The Federal Reserve funding programs have emerged as competition for our short-term advances. Repo and Federal Funds usage has been stable, though demand for certain members has both increased and decreased as a result of the various changes in regulatory liquidity requirements. We expect that brokered CDs will continue to pressure market share. Our larger members may also have access to the national and global credit markets. The availability of alternative funding sources can vary as a result of market conditions, member creditworthiness, availability of collateral and suppliers’ appetite for the business, as well as other factors. However, we believe the competitive landscape will continue and will be reflected in the balances and market share.
We compete for funds in the national and global debt markets. Competitors include corporations, sovereigns, the U.S. Treasury, supranational entities, and Government Sponsored Enterprises including Fannie Mae, Freddie Mac, and the Federal Farm Credit Banks (FFCB). Increases in the supply of competing debt products could, in the absence of increases in demand, result in higher debt costs or lesser amounts of debt issued at the same cost than would otherwise be the case. In addition, the availability and cost of funds can be adversely affected by regulatory initiatives that could reduce demand for Federal Home Loan Bank System debt. Although the available supply of funds has historically kept pace with the liquidity needs of our members, there can be no assurance this will continue to be the case.
In certain market conditions, such as the ones beginning in early 2021, there is considerable competition among high credit quality issuers in the markets for callable debt. The issuance of callable debt and the simultaneous execution of callable derivatives that mirror the debt have been a valuable source of competitively priced funding for the FHLBNY. Since Money Market Fund Reform, the dominant System issuance has been in simple floating-rate debt as money market funds migrated assets from Prime to Government Funds; thereby creating demand for eligible assets such as FHLBank debt. Floaters have been one of the main determinants of our relative cost of funds. There can be no assurance that the current breadth and depth of these markets will be sustained as it is heavily influenced by investor sentiment concerning rates and yields and availability of alternative investments, particularly in the Repo sector.
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Since November 2018, the FHLBank System has been a major participant in the issuance of floaters using the Secured Overnight Financing Rate (SOFR). SOFR floaters are a major source of funding for the System.
We compete for the purchase of mortgage loans in the secondary mortgage market. For single-family products, competition is primarily with Fannie Mae and Freddie Mac, principally on the basis of price, products, structures, and services offered.
Competition for certain aspects of the FHLBank business model among the 11 FHLBanks is limited, although a bank holding company with multiple banking charters may operate in more than one FHLBank’s district. A limited number of our member institutions are subsidiaries of financial holding companies with multiple charters and FHLBank memberships. The amount of advances borrowed by these entities and the amount of capital stock held, could be material to the business. Certain large member financial institutions operating in our district may borrow unsecured Federal funds or source deposits from other FHLBanks. We are permitted by regulation to purchase short-term investments from our members, though we choose to not permit members to borrow unsecured funds from us.
Oversight, Audits, and Examinations
Our business is subject to extensive regulation and supervision. The laws and regulations to which we are subject cover all key aspects of our business, and directly and indirectly affect our product and service offerings, pricing, competitive position and strategic plan, relationship with members and third parties, capital structure, cash needs and uses, and information security. As a result, such laws and regulations have a significant effect on key drivers of our results of operations, including, for example, our capital and liquidity, product and service offerings, risk management, and costs of compliance. An overview of our regulatory environment is discussed below.
The Federal Housing Finance Agency, an independent agency in the executive branch of the U.S. government, supervises and regulates the FHLBanks. The Housing Act created the FHFA with regulatory authority over FHLBank matters such as: Board of Director composition, executive compensation, risk-based capital standards and prompt corrective action enforcement provisions, membership eligibility, and low-income housing goals. The FHFA’s mission, with respect to the FHLBanks, is to ensure that the FHLBanks operate in a safe and sound manner so that the FHLBanks serve as a reliable source of liquidity and funding for housing finance and community investment.
We carry out our statutory mission only through activities that comply with the rules, regulations, guidelines, and orders issued under the Federal Housing Enterprises Financial Safety and Soundness Act, the Housing Act and the FHLBank Act.
Our shares of Class B stock are registered with the SEC under the Exchange Act, and we are subject to the information, disclosure, insider trading restrictions and other requirements under the Exchange Act. We are not subject to the provisions of the Securities Act.
The Government Corporation Control Act provides that, before a government corporation may issue and offer obligations to the public, the Secretary of the Treasury shall prescribe the form, denomination, maturity, interest rate and conditions of the obligations; the way and time issued; and the selling price. The U.S. Department of the Treasury receives the Finance Agency’s annual report to Congress, monthly reports reflecting securities transactions of the FHLBanks, and other reports reflecting the operations of the FHLBanks. The FHLBNY has an internal audit department, and our Board of Directors has an Audit Committee. An independent registered public accounting firm audits our annual financial statements. The independent registered public accounting firm conducts these audits following auditing standards established by the Public Company Accounting Oversight Board (PCAOB). The FHLBanks, the Finance Agency, and Congress all receive the audit reports. We must also submit annual management reports to Congress, the President, the Office of Management and Budget, and the Comptroller General. These reports include: Statements of financial condition, operations, and cash flows; a Statement of internal accounting and administrative control systems; and the Report of the independent registered public accounting firm on the financial statements and internal controls over financial reporting.
The Comptroller General has authority under the FHLBank Act to audit or examine the Finance Agency and the FHLBanks, including the FHLBNY, and to decide the extent to which they fairly and effectively fulfill the purpose of the FHLBank Act. Furthermore, the Government Corporation Control Act provides that the Comptroller General may review any audit of our financial statements conducted by a registered independent public accounting firm. If the Comptroller General conducts such a review, then he or she must report the results and provide his or her recommendations to Congress, the Office of Management and Budget and the Bank. The Comptroller General may also conduct his or her own audit of any of our financial statements.
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For a discussion regarding the risks related to our regulatory environment, see the description of “Risk Factors — Legislative and Regulatory Risks” in Part I, Section 1A of this Form 10-K, and for a discussion of recent regulatory developments that may impact the Bank, see “Management’s Discussion and Analysis — Legislative and Regulatory Developments” in Part II, Item 7 of this Form 10-K.
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 Assessments. — Section 10(j) of the FHLBank Act requires each FHLBank to establish an Affordable Housing Program. Each FHLBank provides subsidies in the form of direct grants and below-market interest rate advances to members who use the funds to assist in the purchase, construction, or rehabilitation of housing for very low-, low-, and moderate-income households. Annually, the FHLBanks must allocate for the AHP the greater of $100 million or 10% of regulatory net income. Regulatory net income is defined as GAAP net income before interest expense related to mandatorily redeemable capital stock and the assessment for Affordable Housing Program. The exclusion of interest expense related to mandatorily redeemable capital stock is a regulatory interpretation of the Finance Agency. We accrue the AHP expense monthly.
We charge the amount allocated for the Affordable Housing Program to income and recognize the amounts allocated as a liability. We relieve the AHP liability as members use subsidies. In periods where our regulatory income before Affordable Housing Program is zero or less, the amount of AHP liability is equal to zero. If the result of the aggregate 10% calculation described above is less than $100 million for all 11 FHLBanks, then the Act requires the shortfall to be allocated among the FHLBanks based on the ratio of each FHLBank’s income before Affordable Housing Program to the sum of the income before Affordable Housing Program of the 11 FHLBanks. There were no shortfalls in 2023, 2022 and 2021.
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Human Capital Resources
The Bank’s human capital is a significant contributor to the success of the Bank’s strategic business objectives. In managing the Bank’s human capital, the Bank focuses on its workforce profile and the various programs and philosophies described below.
Workforce Profile
The Bank’s workforce is primarily comprised of corporate employees, with the Bank’s principal operations in three locations. As of December 31, 2023, the Bank had 345 full-time and no part-time employees. As of December 31, 2023, approximately 61% of the Bank’s workforce were men, 39% women, 42% non-minority and 58% minority. Given the size of assets under management, the Bank’s workforce is lean, and historically has included a number of longer-tenured employees. The Bank strives to both develop talent from within the organization and supplement with external hires. The Bank believes that developing talent internally results in institutional strength and continuity and promotes loyalty and commitment in the Bank’s employee base, which furthers its success, while adding new employees contributes to new ideas, continuous improvement, and the Bank’s goals of a diverse and inclusive workforce. As of December 31, 2023, the average tenure of the Bank’s employees was 10.25 years. There are no collective bargaining agreements with the Bank’s employees.
Total Rewards
The Bank seeks to attract, develop, engage and retain talented employees to achieve its strategic business initiatives, enhance business performance and increase shareholder value. The Bank effects this objective through a combination of inclusion and development programs, benefits and employee wellness programs and recognizing and rewarding performance. Specifically, the Bank’s programs include:
| ● | Cash compensation (i.e., base salary, and “variable” or “at risk” short-term incentive compensation) |
| ● | Health Benefits – Healthcare insurance, Life and Accidental Death & Dismemberment insurance, Short-Term and Long-Term Disability benefits |
| ● | Retirement Benefits – 401(k) retirement savings plans with employer match, and pension benefits |
| ● | Wellness program – Fitness Reimbursement, Health Management and Employee Assistance Programs |
| ● | Time away from work – including time off for vacation, personal, holiday, and volunteer opportunities |
| ● | Culture – Culture, Wellness and Activity Committees events, Diversity and Inclusion initiatives |
| ● | Work/Life balance – parental leave, bereavement, jury duty and hybrid remote work |
| ● | Development programs and training – Tuition Reimbursement Program, Corporate Toastmasters Club, Online Training Platform, Internal Educational and Development program, and Management Development Program |
| ● | Management succession planning – the Bank’s board and leadership actively engage in management succession planning |
The Bank’s Performance Management framework includes a mid-year checkpoint, as well as an annual performance review. Overall annual ratings are calibrated, and merit and incentive payments are differentiated for the Bank’s highest performers.
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Diversity and Inclusion Program
Diversity and Inclusion (“D&I”) is a strategic business priority for the Bank. The Bank’s Chief Administrative Officer/Director of Diversity & Inclusion is a Member of the Management Committee, reporting to the President and Chief Executive Officer and serves as a liaison to the Board of Directors. The Bank recognizes that diversity increases capacity for innovation and creativity. Additionally, inclusion allows the Bank to leverage the unique perspectives of all employees and strengthens the Bank’s retention efforts. The Bank operationalizes its commitment through the development and execution of a three-year diversity and inclusion strategic plan that includes quantifiable metrics to measure its success and it reports regularly on its performance to management and the Board of Directors. The Bank also offers a range of opportunities for its employees to connect and grow personally and professionally through the Office of Diversity and Inclusion Workplace Inclusion Team. The Bank considers learning an important component of its D&I strategic plan and regularly offers educational opportunities to its employees and evaluates inclusive behaviors as part of the Bank’s annual performance management process.
Culture Management
The Bank considers culture as a strategic lever that acts to help support the future performance of the Bank and enhance employee engagement and inclusion, and further develop our people. The Bank has defined its culture state priorities as: obtaining results, operating safely, fostering agility and caring about employees. These culture state priorities align with the mission, vision and core values of the Bank. As part of our culture management efforts, we actively provide employees across the Bank with growth opportunities, access and exposure so that they can learn and develop their capabilities. To further this effort, in 2022, the Bank launched its ‘Distributed Leadership’ framework, through which managers provide their direct reports with targeted opportunities to take on “stretch” assignments, including roles in connection with Bank initiatives and projects. In 2023, the framework was extended to empower decision-making at all levels, through Distributed Leadership and other opportunities that increase an employee’s responsibilities.
Available Information
The Federal Home Loan Bank of New York maintains a website located at www.fhlbny.com where we make available our annual report on Form 10-K and quarterly reports on Form 10-Q as filed with the Securities and Exchange Commission (the SEC), and other information regarding us and our products free of charge. We are required to file with the SEC an annual report on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K. The SEC maintains a website that contains these reports and other information regarding our electronic filings located at www.sec.gov. Information on these websites, or that can be accessed through these websites, does not constitute a part of this annual report.
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Item 1A.Risk Factors.
The following discussion sets forth the material risk factors that could affect the FHLBNY’s financial condition and results of operations. Readers should not consider any descriptions of such factors to be a complete set of all potential risks that could affect the FHLBNY.
Market and Economic Risks
A prolonged downturn in the economy, including the U.S. housing market, and related U.S. government monetary policies, could adversely affect the FHLBNY’s business activities and results of operations.
The FHLBNY’s business and results of operations are sensitive to the U.S. economy and the U.S. housing market. A prolonged period of slow growth in the U.S. economy, deterioration in general economic conditions, or a downturn in the housing markets could adversely affect our borrowers, particularly those whose businesses are concentrated in the mortgage industry. For example, if home prices decline or the unemployment rate increases, the value of collateral securing member credit may decline, which could in turn increase the possibility of under-collateralization and the risk of loss if a member defaults. Deterioration in the residential mortgage markets could also affect the value of collateral supporting our mortgage loan portfolio, increasing the risk of loss due to credit impairment, as well as possible realized losses if we are forced to liquidate our assets.
Unfavorable economic and market conditions can be caused by many factors. Volatility and uncertainty in global economic and political conditions can significantly affect U.S. economic conditions and financial markets. Negative trends in the global economy and political climate could influence, among other business activities, member borrowing activity and the Bank’s lending and investment patterns. Additionally, investors’ negative perceptions of the state of the U.S. economy could lead to a decline in investor demand for consolidated obligations. Furthermore, natural disasters, pandemics or other widespread health emergencies, terrorist attacks, cyber-attacks, civil unrest, geopolitical instability or conflicts , trade disruptions, economic or other sanctions, or other unanticipated or catastrophic events could create economic and financial disruptions and uncertainties, which may lead to an increased risk of credit losses for the Bank and may adversely affect their cost of funding or access to funding. These events may also lead to operational difficulties that could adversely affect the ability of the Bank to conduct and manage their businesses. Any of these factors could adversely affect our business activities and results of operations.
In addition, the Banks businesses and results of operations are significantly affected by the monetary policies of the U.S. government and its agencies, including the Federal Reserve. The Federal Reserve Board’s policies directly and indirectly influence interest rates on our assets and liabilities and could adversely affect the demand for advances and for consolidated obligations as well as the financial condition and results of operations of the Bank. For example, efforts of the Federal Reserve Board to ease inflation, such as increases in policy interest rates during 2022 and 2023, contributed to significant volatility in the financial markets and uncertainties about the economic outlook, including concerns about a possible recession. In addition, the Bank currently plays a predominant role as a lender in the federal funds market; therefore, any disruption in the federal funds market or any related regulatory or policy change may adversely affect our cash management activities, results of operations, and reputation.
Changes in interest rates or an inability to successfully manage interest-rate risk could have a material adverse effect on FHLBNY’s net interest income.
The FHLBNY realizes net interest income primarily from the spread between interest earned on our outstanding advances and investments less the interest paid on our consolidated obligations and other liabilities. Our business and results of operations are significantly affected by the monetary policies of the U.S. government and our agencies. Our ability to prepare for changes regarding the direction and speed of interest-rate changes or to use derivatives to hedge related exposures, such as basis risk, significantly affects the success of our asset and liability management activities and level of net interest income. If we are unable to enter into derivative instruments on acceptable terms, we may be unable to effectively manage our interest-rate and other risks, which could adversely affect our financial condition and results of operations.
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We use a number of measures to monitor and manage interest-rate risk, including income simulations, value at risk, and duration or market value sensitivity analyses. Given the unpredictability of the financial markets, capturing all potential outcomes in these analyses is extremely difficult. Key assumptions include, but are not limited to, loan volumes and pricing, market conditions for consolidated obligations, interest-rate spreads and prepayment speeds, implied volatility of interest rates and options contracts, cash flows on mortgage-related assets, and other model and model related assumptions. These assumptions are inherently uncertain, and we cannot precisely estimate net interest income and the market value of equity. Actual results may differ from simulated results due to the timing, magnitude, and frequency of interest-rate changes and changes in market conditions and management strategies, among other factors. In addition, volatility and disruption in the capital markets may result in a higher level of volatility in our interest-rate risk profile and could negatively affect our ability to manage interest-rate risk effectively.
Interest-rate changes can exacerbate prepayment and extension risks. Increases in interest rates may create extension risk, which is the risk that the mortgage-related investments will remain outstanding longer than expected at below-market yields. Therefore, any changes in interest rates could adversely affect our net interest income.
Changes to the credit ratings of consolidated obligations could adversely affect the FHLBNY’s ability to access the capital markets, our primary source of funding, on acceptable terms, which could adversely affect the financial condition and results of operations of the Bank.
The FHLBanks’ consolidated obligations are rated AA+/A-1+ with a stable outlook by S&P and Aaa/P-1 with a negative outlook by Moody’s. Rating agencies may from time to time change a rating or outlook or issue negative reports. Investors should not take the FHLBanks’ historical or current ratings as an indication of future ratings for the FHLBanks’ consolidated obligations. Because the FHLBanks are jointly and severally liable for consolidated obligations, negative developments at any FHLBank may affect these credit ratings or result in the issuance of a negative report regardless of the financial condition and results of operations of the other FHLBanks. In addition, because of the FHLBanks’ GSE status, the credit ratings of the FHLBank System, the FHLBanks, and consolidated obligations are directly influenced by the sovereign credit rating of the United States. For example, downgrades to the U.S. sovereign credit rating or outlook have occurred and may occur again if the U.S. government fails to adequately address, based on the credit rating agencies’ criteria, its fiscal budget deficit or statutory debt limit (which was most recently reached in January 2023). In August 2023, Fitch Ratings downgraded the ratings of the United States and, in November 2023, Moody’s changed the outlook on the ratings of the United States to negative from stable, which also caused the respective rating agencies to take similar actions with respect to certain GSEs such as the FHLBanks. As a result, if the U.S. sovereign credit ratings or outlook were further downgraded, similar downgrades in the credit ratings or outlook of the FHLBanks and consolidated obligations would most likely occur, even though the consolidated obligations are not obligations of, or guaranteed by, the United States.
Future downgrades in credit ratings or outlook may result in higher funding costs, higher volatilities, or other disruptions in the FHLBanks’ access to capital markets, including additional collateral posting requirements under certain derivative instrument arrangements. Furthermore, member demand for certain FHLBank products could weaken. To the extent that we cannot access funding when needed on acceptable terms to effectively manage our cost of funds, our financial condition and results of operations and the FHLBanks on a combined basis and the value of our membership could be negatively affected.
Legislative and Regulatory Risks
Changes in the legislative and regulatory environment could negatively affect the FHLBNY business operations, results of operations, the reputation and the value of the Bank’s membership.
As a GSE, the FHLBNY is organized under the authority of the FHLBank Act and governed by U.S. federal laws and regulations as adopted and applied by the FHFA. Congress could amend the FHLBank Act or other statutes in ways that significantly affect the rights and obligations of the FHLBanks or the manner in which the FHLBanks carry out their mission and business operations. New or modified legislation enacted by Congress or changes in the statutory or regulatory requirements applied or imposed by the FHFA or other financial services regulators could result in, among other things: an increase in our cost of funding and regulatory compliance; a change in membership or permissible business activities; additional capital and liquidity requirements; additional contributions under Affordable Housing Programs or Community Investment Cash Advance Programs; reduced demand for advances or limitations on advances made to our members (including whether a member meets required tangible capital levels to access advances); or a change in the size, scope, or nature of our lending, investment, or mortgage financing activities.
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Following a comprehensive review that began in the fall of 2022, the Finance Agency issued the “FHLBank System at 100: Focusing on the Future” report on November 7, 2023, presenting its review and analysis of the FHLBank System and the actions and recommendations that it plans to pursue over a multi-year effort, in service of its vision for the FHLBank System. The report focused on four broad themes: (1) the mission of the FHLBank System; (2) the FHLBank System as a stable and reliable source of liquidity; (3) housing and community development; and (4) FHLBank System operational efficiency, structure, and governance. Many of the recommendations from the report may be implemented by the Finance Agency through ongoing supervision, guidance, or rulemaking within its existing statutory authority, while other recommendations may require legislative action or further study.
We are not able to predict what actions will ultimately result from the Finance Agency’s recommendations, the timing of any actions, the extent of any changes to the Bank or the FHLBank System, or the ultimate effect on the Bank or the FHLBank System in the future. Potential changes resulting from the Finance Agency’s recommendations (including changes relating to the FHLBanks’ mission, liquidity role, membership and lending requirements, affordable housing contributions and support for community investment, or operations, structure, and governance) could increase our operational costs and expenses, result in heightened scrutiny of the FHLBanks and their mission and activities, and impact our business, which may affect our financial condition, or results of operations, or the value of membership in the FHLBanks. The extent to which the report ultimately results in changes to regulatory requirements or supervisory expectations that impact or limit the use of our advances by members or our ability to lend to members may have a significant negative impact on our financial condition or results of operations.
For more details on this Finance Agency report, see “Part II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Recent Developments - Finance Agency’s Review and Analysis of the Federal Home Loan Bank System “FHLBank System at 100: Focusing on the Future.”
Furthermore, increased focus on climate change and other environmental, social, and governance matters has led to heightened legislative and regulatory attention in these areas, including the potential for new requirements on climate change-related risk assessment, risk management, and disclosure. New or modified laws and regulations, along with increased stakeholder expectations, related to these matters may increase the costs of compliance for the Bank and its members and alter the environment in which they conduct their businesses, which could adversely affect the Bank’s business activities, results of operations, and reputation.
Additionally, potential legislative and regulatory changes governing or affecting the Bank’s members, investors, and dealers of consolidated obligations could adversely affect the business activities, financial condition, and results of operations of the Bank.
Changes in the perception, regulation, or status of the GSEs and the related effect on debt issuance could reduce demand for, or increase the cost of, the FHLBNY’s debt and adversely affect the Bank’s financial condition and results of operations.
The FHLBanks are GSEs organized under the authority of the FHLBank Act and are authorized to issue debt securities to finance housing and community investments. Negative announcements by any of the housing GSEs, concerning topics such as accounting problems, risk-management issues, or regulatory enforcement actions, have historically created, and may in the future create pressure on debt pricing for all GSEs, as investors perceive such instruments as bearing increased risk. Any such negative information or other factors could result in the Bank having to pay a higher rate of interest on consolidated obligations to make them attractive to investors, which could negatively affect our results of operations, and our access to funding.
Given our shared status as GSEs, the scope, timing, and effect of any regulatory reform affecting the GSEs, including the ultimate resolution to the conservatorship of Fannie Mae and Freddie Mac and resulting changes in the regulation or status of the GSEs, could have a significant effect on the FHLBank System. While there are significant differences between the FHLBank System and Fannie Mae and Freddie Mac, including the FHLBanks’ focus on secured lending in the form of advances as opposed to guaranteeing mortgages and their distinctive cooperative business model, legislation or other regulatory reform affecting the GSEs could inadequately account for these differences, which could negatively change the perception of the risks associated with the GSEs and their debt securities. This change in the perception of risk could adversely affect our funding costs, access to funding, competitive position, and our financial condition and results of operations.
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A failure to meet minimum regulatory capital requirements could affect the FHLBNY’s ability to pay dividends or repurchase or redeem members’ capital stock, which may cause a decrease in members’ demand for advances or difficulties in retaining existing members and attracting new members.
The FHLBNY is subject to minimum capital requirements under the FHLBank Act and FHFA rules and regulations, including total capital, leverage capital, and risk-based capital requirements. If we are unable to satisfy our minimum capital requirements, we would be subject to capital restoration requirements. Until the minimum capital levels have been restored, we would also be prohibited from paying dividends and redeeming or repurchasing capital stock without the prior approval of the FHFA, which could adversely affect our members’ investment in our capital stock. Furthermore, to the extent that current and prospective members determine that our dividend is insufficient or our ability to pay future dividends or repurchase excess capital stock becomes limited, we may be unable to expand our membership and may experience decreased member demand for advances or increased member requests for withdrawals. These factors may cause a decline in the value of our membership and make it difficult to retain existing members or to attract new members.
Business Risks
Increased competition or reduced demand could adversely affect the FHLBNY’s financial condition, results of operations, and primary business activity, which is to provide financial products and services to members and housing associates.
The FHLBNY’s primary business is to provide our members and housing associates with financial products and services, including but not limited to, secured loans known as advances. We compete with other suppliers of wholesale funding, including, but not limited to, investment banks, commercial banks, the Federal Reserve, and, in certain circumstances, other FHLBanks. Changes to legislation or regulations affecting our members, or the availability of alternative funding sources to members, could significantly decrease the demand for advances, tighten net interest margin, and negatively affect our financial condition and results of operations.
We may be required by new legislation or regulations or other factors to change policies, programs, and agreements affecting members’ access to advances, mortgage purchase programs, affordable housing programs, and other credit programs that could cause members to obtain financing from alternative sources. New or modified legislation or regulations could also create alternative funding sources for our members. Some competitors may not be subject to the regulations that apply to us, which may enable those competitors to offer products and terms that are more favorable than those we offer. Additionally, we compete with Fannie Mae and Freddie Mac, as well as other FHLBanks, to purchase mortgage loans from members or affiliates of members. This competition may reduce the amount of available mortgage loans that we can purchase.
We also compete with the U.S. Treasury, Fannie Mae, Freddie Mac, and other GSEs, as well as corporate, state, local, sovereign, sub-sovereign, and supranational entities, for funds raised through the issuance of unsecured debt in the U.S. and global capital markets. Increases in the supply of competing debt products, such as an increase in the supply of Treasury securities, could negatively affect the demand for consolidated obligations and result in higher debt costs. Any of these factors could adversely affect the financial condition and results of operations of the Bank, as well as the value of FHLBank membership.
A loss or change of business activities with large members, consolidation of membership, or regulatory changes in membership rules could adversely affect the FHLBNY’s financial condition and results of operations.
Due to the nature of the FHLBNY’s charters, membership is generally limited to federally-insured depository institutions, insurance companies, and community development financial institutions in our district. Given this limitation in membership eligibility, a loss of members or decreased business activities with large members due to withdrawal from membership, acquisition by a non-member, or failure could result in a reduction of our total assets, capital, and net income. Additionally, regulatory changes in our membership eligibility or requirements could affect the business activities, as well as our financial condition and results of operations.
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We have a high concentration of advances and capital with large members. As the financial industry continues to consolidate into a smaller number of institutions, this could lead to further concentration of large members in other districts and a related decrease in membership and significant loss of business for us. If advances are concentrated in a smaller number of members, our risk of loss resulting from a single event could become greater. Industry consolidation could also cause us to lose members whose business and stock investments are substantial. Moreover, as nonbank financial institutions that are currently ineligible for our membership continue to play an increasing role in mortgage origination, we could experience a decrease in demand for advances or a decrease in volume of mortgage loans available for purchase from our members, which could negatively affect our financial condition and results of operations.
Natural disasters, including those resulting from significant climate change, could adversely affect the members and business of the FHLBNY.
Regions in which the FHLBNY operate are subject to natural disasters, including risks from hurricanes, tornadoes, floods, wildfires, drought and other natural disasters. Climate change is increasing the frequency, intensity, and duration of these weather events. These natural disasters, including those resulting from significant climate change, could destroy or damage our facilities or other properties, such as collateral that members have pledged to secure advances or mortgages, disrupt the business of our members, increase the probability of power or other outages, negatively affect the livelihood of borrowers of our members, or otherwise cause significant economic dislocation in the affected regions. Any of these situations may adversely affect our financial condition and results of operations.
Credit Risks
An increase in credit risk exposure from advances, mortgage loans, or other credit products or FHLBank member failures could adversely affect the FHLBNY’s financial condition, results of operations, and reputation.
The FHLBNY is exposed to credit risk as part of our normal business operations through funding advances, purchasing mortgage loans, and extending other credit products, such as lines of credit, standby letters of credit, and other commitments. We require advances and other extensions of credit to be fully secured with collateral and require borrowers to pledge additional collateral when deemed necessary. We evaluate the types of collateral pledged by the member and assign a borrowing capacity to the collateral, based on the risk associated with that type of collateral. If borrowers are unable to pledge additional collateral to fully secure their obligations with us, whether due to significant financial stress, market volatilities, or otherwise, it could cause the advance levels to decrease or credit risk to increase. If we have insufficient collateral before or after an event of default or failure of the member or we are unable to liquidate the collateral, or transfer the collateral to an acquirer or receiver, for the value assigned to it in the event of a default or failure of a member, we could experience a credit loss.
During economic downturns or periods of significant economic and financial disruptions and uncertainties, the number of members exhibiting significant financial stress may increase, which may expose us to additional member credit risk. Changes in market perception of the financial strength of a financial institution can occur very rapidly and can be difficult to predict, as reflected in the failures of several FHLBank members in March and May 2023. There are continued challenges associated with the commercial real estate sector due to weak leasing demand, lower occupancy rates and higher interest rates, and policy or legal actions in certain jurisdictions which may lead to continued declines in the value of commercial real estate loan related collateral held by the Bank and could contribute to additional financial stress of our members, in particular smaller regional and community banks with significant exposure to commercial real estate and high reliance on uninsured deposits may be more severely impacted. If a member defaults on its obligations or, in the case of a failed institution, the Federal Deposit Insurance Corporation (FDIC), or other receiver, fails to either promptly repay all of that failed institution’s obligations or assume the outstanding advances, then we may be required to liquidate the collateral pledged by the troubled or failed institution. If the proceeds realized from the liquidation of pledged collateral are not sufficient to fully satisfy the amount of the troubled or failed institution’s obligations and the operational cost of liquidating the collateral, we could incur losses. In addition, a default by a member with significant unsecured obligations could result in significant losses. We could also experience losses if a receiver were to be successful in claiming that the Bank did not liquidate its collateral in an orderly and commercially reasonable manner.
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We are also exposed to credit risk from our mortgage loans held in portfolios. While our mortgage loan assets are collateralized by the underlying real estate and are generally credit-enhanced to further mitigate credit risk, natural disasters or a deterioration in economic conditions could result in decline in residential real estate values or increase in unemployment rate. These factors could lead to an escalation of borrower defaults and cause us to incur credit losses on our mortgage loans.
Defaults by one or more institutional counterparties on their obligations to the FHLBNY could adversely affect our financial condition and results of operations.
The FHLBNY faces the risk that our institutional counterparties may fail to fulfill their contractual obligations. The primary exposures to institutional counterparty credit risk are with:
| ● | Unsecured money market transactions, including federal funds sold, or short-term investments with domestic and foreign counterparties; |
| ● | Derivative counterparties, including Derivative Clearing Organizations and Futures Commission Merchants; |
| ● | Mortgage servicers that service loans purchased under the MAP and MPF Program. |
A counterparty default could result in losses if our credit exposure to that counterparty was unsecured or under-collateralized, or if a credit obligation associated with derivative positions were overcollateralized. The insolvency or other inability of a significant counterparty to perform its obligations under these transactions or other agreements could have an adverse effect on our financial condition and results of operations.
We have both direct and indirect exposure to foreign credit risk through our various counterparties. Adverse economic, political, or other trends that may occur within, across, or among various regions or countries could have direct adverse effects on our institutional counterparties and on the U.S. economy. In turn, we could also experience adverse effects on our ability to meet our obligations given our relationship with these counterparties. In addition, our ability to engage in routine derivatives, funding, and other transactions could be adversely affected by the actions and commercial soundness of other financial institutions. Financial services institutions are inter-related as a result of trading, clearing, counterparty, and other relationships. As a result, actual and potential defaults of one or more financial services institutions could lead to market-wide disruptions, making it difficult for us to source eligible counterparties for transactions.
Financial difficulties at one FHLBank could require the other FHLBanks to make payment of principal and interest on the consolidated obligations issued on that FHLBank’s behalf, which could adversely affect the FHLBNY’s financial condition and results of operations.
Under the FHLBank Act and FHFA regulations, each FHLBank is jointly and severally liable with the other FHLBanks for the consolidated obligations issued by the FHLBanks through the Office of Finance. As such, while each FHLBank is primarily liable for its portion of consolidated obligations (i.e., those issued on its behalf), each FHLBank is also jointly and severally liable with the other FHLBanks for the payment of principal and interest on all consolidated obligations issued by the FHLBanks. Although it has never occurred, the FHFA, at its discretion, may require any FHLBank to make principal or interest payments due on any consolidated obligation whether or not the consolidated obligation represents a primary liability of that FHLBank. Additionally, if a FHLBank were to default on its obligation to pay principal or interest on any consolidated obligations, the FHFA may allocate the outstanding liabilities of that FHLBank among the remaining FHLBanks on a pro rata basis or on any other basis determined by the FHFA. Accordingly, we could incur significant liability beyond our primary obligations due to the failure of a FHLBank to meet its obligations. This could adversely affect our financial condition and results of operations.
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Liquidity Risks
Disruptions in the short-term capital markets or changes to the regulatory environment could have an adverse effect on the FHLBNY’s ability to refinance our consolidated obligations or to manage our liquidity positions to meet members’ needs on acceptable terms.
Our ability to operate our business, meet our obligations, and generate net interest income depends primarily on our ability to issue debt continuously to meet member demand and to refinance existing outstanding debt at attractive rates, maturities, and call features when needed. Our source of funds is the sale of consolidated obligations in the capital markets through the Office of Finance. Our ability to obtain funds through the sale of consolidated obligations generally depends on prevailing conditions in the capital markets, and, in particular, our ability to access the short-term capital markets due to our preference for short-term funding.
Access to short-term debt markets has been supported by continued demand as investors, driven by increased liquidity preferences and risk aversion, have sought our short-term debt as an asset of choice. This has led to advantageous funding opportunities and significant utilization of debt maturing in one year or less. There are inherent risks in utilizing short-term funding to support longer-dated assets and we may be exposed to refinancing risk. Refinancing risk includes the risk that we could have difficulty rolling over short-term obligations when market conditions change or investor demand for short-term consolidated obligations declines. In managing and monitoring the amounts of financial assets that require refinancing, we consider our contractual maturities, as well as certain assumptions regarding expected cash flows (i.e., estimated prepayments, embedded call optionality, and scheduled amortizations), taking into account our liquidity position.
The Bank is also exposed to liquidity risk if there is any significant disruption in the short-term debt markets. Without access to the short-term debt markets on acceptable terms, the alternative longer-term funding, if available, would increase funding costs and interest-rate risk exposure and could cause us to increase advance rates, potentially affecting demand for advances. If this disruption is prolonged, we may not be able to obtain funding on acceptable terms and this could adversely affect our ability to support and continue our operations. As a result, our inability to manage our liquidity position or our contingency liquidity plan to meet our obligations, as well as the credit and liquidity needs of our members, could adversely affect our financial condition and results of operations as well as the value of our membership.
Additionally, changes to the regulatory environment that affect FHLBanks’ investors and dealers of consolidated obligations, particularly changes related to capital and liquidity requirements and money market fund reforms, have affected, and will continue to affect, the FHLBanks’ ability to access the capital markets on acceptable terms. For example, the SEC’s implementation of money market fund reforms from 2010 to 2016 resulted in a significant increase in demand for U.S. government and agency debt, including the FHLBanks’ short-term consolidated obligations. The holding of the FHLBanks’ consolidated obligations by money market funds, as a percentage of the total outstanding consolidated obligations, generally increased as a result of these reforms as compared to the periods before their implementation. While demand from this investor class benefited the FHLBanks’ ability to access short-term funding at attractive costs, this demand could change if money market investor risk and return preferences and money market regulatory requirements shift over time. A decrease in this demand could, due to the FHLBanks’ concentration in money market investors, lead to significant investor outflows and unfavorable market conditions. Policymakers and regulators in the U.S. have been examining potential policy measures intended to improve the resilience of money market funds and broader short-term funding markets in recent years, including in response to the market stress experienced by short-term funding markets in March 2020, amid the COVID-19 pandemic, and the SEC adopted additional money market fund reforms in July 2023, designed to improve the resilience and transparency of money market funds. As such, changes in regulatory requirements governing money market funds, including any reversal of prior money market fund reforms, could have a negative effect on FHLBank short term funding costs and adversely affect the financial condition and results of operations of the FHLBNY.
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Operational Risks
Failure, breach, or cyber-attack of the information systems of the FHLBNY could disrupt the FHLBNY’s business or result in significant losses or reputational damage.
The FHLBNY relies heavily on our information systems and technology to conduct and manage our business. A failure, breach, or cyber-attack of these systems or technologies could disrupt and prevent us from conducting and managing our business effectively. Moreover, such failure or breach could result in significant losses, including a loss of data, intellectual property, or confidential information, reputational damage, or other harm.
Like many financial institutions, the Bank has seen an increase in cyber-attack attempts. These attempts have predominantly occurred through phishing and social engineering scams. The Bank’s operations rely on the availability and functioning of its main office and off-site backup facilities. Cyber-attacks, in particular those on financial institutions and financial market infrastructures, have also become more frequent, sophisticated, and increasingly difficult to detect or prevent, including as a result of the increased capabilities of artificial intelligence and other emerging technologies that may be used maliciously. The threat of cyber-attacks may also increase as a result of geopolitical conflicts. The Bank devotes substantial resources and deploys detective and preventative measures to secure the Bank’s systems, including firewalls, email security, and end-point solutions. These measures and other business continuity measures may be ineffective or insufficient for all eventualities. A failure or interruption in our business continuity, disaster recovery or certain information systems, or a cybersecurity event could significantly harm the Bank’s reputation, its customer relations, risk management and profitability, and could result in financial losses, legal and regulatory sanctions, increased costs, or other harm. As cyber threats continue to evolve, the Bank may be required to expend significant additional resources to continue to modify or enhance its layers of defense to investigate and remediate any information security vulnerabilities, or to comply with regulatory requirements.
A failure of the FHLBNY’s business and financial models to produce reliable results could adversely affect the Bank’s business, financial condition, results of operations, and risk management.
The FHLBNY makes significant use of business and financial models for managing, measuring, and monitoring different risks, including interest rate, prepayment, and other market risks, as well as credit risk. We also use models in determining the fair value of financial instruments when independent price quotations are not available or reliable. The information provided by these models is also used in making business decisions relating to strategies, initiatives, risk management, transactions and products, and for financial reporting. Models use assumptions to project future trends and performance, including assumptions that historical data or experience can be relied upon as a basis for forecasting future events, and are inherently imperfect predictors of actual results.
Changes in business or financial models or in our underlying assumptions, judgments, or estimates may cause the results generated by the models to be materially different. If the models are not reliable, we could make poor business decisions, including poor asset and liability management decisions, which could result in an adverse financial effect on our business. Furthermore, strategies that we employ to manage the risks associated with the use of models may not be effective. The models used by us to determine the fair values of our assets and liabilities, including derivatives, may differ from the models used by the others. The use of different models or assumptions, as well as changes in market conditions, could result in materially different valuation estimates or other estimates even when similar or identical assets and liabilities are being measured, and could have materially different effects on our net income and retained earnings.
Failures of critical vendors and other third parties could disrupt the FHLBNY’s ability to conduct and manage our business.
The FHLBNY relies on vendors and other third parties, including cloud-based providers to perform certain critical services. The Bank owns some of these systems and technology, and third parties own and provide to the Bank, either directly or through fourth-party vendors, some of these systems and technology. A failure or interruption of one or more of those services, including as a result of breaches, cyber-attacks, system malfunctions or failures, or other technological risks, could negatively affect our business operations. If one or more of these key external parties were not able to perform their functions for a period of time, at an acceptable service level, or for increased volumes, we could be constrained, disrupted, or otherwise negatively affected.
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Failures at the Office of Finance could disrupt the FHLBNY’s ability to conduct and manage their businesses.
The Office of Finance is a joint office of the FHLBanks established to facilitate, among other things, the issuance and servicing of consolidated obligations. Pursuant to FHFA regulations, the Office of Finance, in conjunction with the FHLBanks, has adopted policies and procedures for the purposes of facilitating and approving the issuance and servicing of consolidated obligations.
The Office of Finance relies heavily on its information systems and technology for its operations. A failure or interruption of the Office of Finance’s services, including as a result of breaches, cyber-attacks, natural disasters, system malfunctions, disruptions or failures, or other technological risks, could negatively affect the business operations of the FHLBNY, including disruptions to our access to funding through the sale of consolidated obligations. Although the Office of Finance has business continuity and security incident response plans in place, our funding and business operations could be constrained, disrupted, or otherwise negatively affected if the Office of Finance were not able to perform its functions for any period of time. Additionally, operational failures at the Office of Finance could also expose the Bank to the risk of a loss of data or confidential information or other harm, including reputational damage.
The inability to attract and retain skilled key personnel could adversely affect the business and operations of the FHLBNY.
The FHLBNY relies on all its employees to manage our business and conduct our operations. Competition for employees from within the financial services industry and from businesses outside the financial services industry, including the technology industry, continues to be a recruiting and retention challenge for certain positions. Another retention challenge is the limited number of career paths available due to the relatively low number of employee headcount and our flat organizational structure.
For succession planning purposes, the FHLBNY has designated certain limited positions as “Key Positions” – positions which, in the judgment of senior management and the Board of Directors, have critical operational or strategic responsibilities. The FHLBNY’s Succession Plan is intended to help identify potential temporary replacements for employees who occupy Key Positions in the event of an unplanned vacancy. The Plan is also intended to help identify potential permanent replacements for those employees who occupy Key Positions and provide the Bank with long-term advance notice of their expected retirement. The failure to maintain an effective Succession Plan could adversely affect our business and operations.
Item 1B.Unresolved Staff Comments.
None.
Item 1C.Cybersecurity.
Cybersecurity Risk Management and Strategy
The Bank is subject to cybersecurity incident and threat risk. A cybersecurity incident is an unauthorized occurrence, or a series of related unauthorized occurrences, through information systems that jeopardizes the confidentiality, integrity, or availability of the Bank’s information systems or any information residing therein. Cybersecurity threats are potential unauthorized occurrences on or conducted through information systems that may result in adverse effects on the confidentiality, integrity, or availability of information systems or any information residing therein. Information systems are any electronic information resources, owned or used by the Bank, including physical or virtual infrastructure controlled by such information resources, or their components, organized for the collection, processing, maintenance, use, sharing, dissemination, or disposition of the Bank’s information to maintain or support the Bank’s operations. Please refer to Item 1A. Risk Factors for a description of cybersecurity incident and threat risk. The Bank has implemented processes for assessing, identifying, and managing material risks from cybersecurity threats or incidents that may directly or indirectly impact the Bank’s business strategy, results of operations, or financial condition.
The Bank’s cybersecurity risk management framework for assessing, identifying, and managing material risks from cybersecurity threats is designed to protect the confidentiality, integrity, and availability of the Bank’s information technology assets and data under the Bank’s control.
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Cybersecurity risk management is part of the Bank’s Enterprise Risk Management program which includes specific controls for the mitigation, monitoring and reporting associated with those risks. The program is supported by a robust set of policies and procedures, skilled staff, layered technical defenses, employee training, and oversight of third parties.
The Technology Committee of the Board of Directors (“Board”) also annually reviews and approves the Bank’s Information Security Policy.
The Bank’s Information Security Policy establishes administrative, technical, and physical safeguards designed to protect the security, confidentiality, and integrity of Bank information in accordance with the Gramm-Leach-Bliley Act and the interagency guidelines issued thereunder, and applicable laws.
The Bank’s cyber incident response plan determines how cybersecurity threats and incidents are identified, classified, and escalated, including for the purposes of reporting, and providing relevant information to the Board. The cyber incident response plan also stipulates management assessment materiality of the threat or incident for the purposes of public disclosure.
The Bank’s business continuity program is designed to ensure that necessary resources are in place to protect the Bank from potential loss during a disruption, which includes the unavailability of information technology assets due to unintentional events like weather-related events, fire, power loss, and other technical incidents such as hardware failures. The business continuity program is overseen by the Technology Committee of the Board and includes, among other items, business impact analysis for developing effective plans and a disaster recovery plan to respond, recover, resume, and restore technology assets critical for us to operate. Elements of this plan may be leveraged in support of the recovery from a cyber incident that disables critical infrastructure.
The Bank leverages audits and external reviews to strengthen its program. Those reviews include internal audits and reviews by the Bank’s Risk Management function, SOX audits, penetration tests, and external benchmarking reviews based on the National Institute of Standards and Technology (“NIST”) and the International Organization for Standardization (“ISO”) standards. Those reviews assist the Bank in assessing, identifying, and managing cybersecurity incident and threat risk.
The Bank’s cyber incident response plan includes third party cybersecurity incidents and threats. The Bank undertakes due diligence of third-party systems with whom the Bank will interact with, in addition to requiring data protection covenants in its vendor agreements. The Bank’s vendor risk management program includes regular reviews and oversight of these service providers, including performance and technological reviews and escalation of any unsatisfactory reviews.
During the period covered by this report, risks from cybersecurity threats did not have a material impact on the Bank’s strategy, results of operations, or financial condition. The Bank has experienced minor cybersecurity incidents in the past though none that have had a material effect on the Bank’s financial condition or results of operations.
It is inevitable that additional cybersecurity incidents will occur in the future and any such cybersecurity incident could result in significantly harmful consequences to the Bank, the Bank’s members, and their customers. We assess the materiality of any such cybersecurity incident from several perspectives including, but not limited to, the Bank’s ability to continue to service the Bank’s members and protect the privacy of the data their customers have entrusted to us, lost revenue, disruption of business operation, increased operating costs, litigation, and reputational harm.
Cybersecurity Governance
The Bank’s Board devotes significant time and attention to data and systems protection, including cybersecurity and information security risk. The Bank’s Board oversees the Bank’s information security program through setting of policies and principles including the Bank’s Information Security Policy and Enterprise Risk Management program. The Board oversees management’s approach to staffing, policies, processes, and practices to gauge and address cybersecurity and information security risk.
The Risk Committee of the Board has oversight of the Bank’s Risk Management Program which includes risks from cybersecurity threats within cybersecurity risk management. The Technology Committee of the Board has responsibility for the strategic design, direction and oversight of the Bank’s information and cybersecurity program.
The Bank’s Information Security Department is led by the Bank’s Chief Information Security Officer (“CISO”). The CISO reports to the Chief Information Officer (“CIO”), with an open line of communication to the Bank President. The Bank also has an internal cross functional committee – the internal Technology and Operations Committee –which is responsible for, among other activities, overseeing Information and cyber security risks and the steps taken by management to understand and mitigate such risk. This Committee reports to the Bank’s Management Committee.
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The Bank’s Technology and Operations Committee is responsible for approving the Bank’s cyber incident response plan and other technical processes and standards to implement the policies and procedures defined in the Cybersecurity risk management program. The Risk Management function is responsible for management of operational risk and implementation of the cybersecurity risk management framework within the Risk Management Program as approved by the Board.
The Bank’s Technology and Operations Committee membership consists of members of the Bank’s leadership including the Bank’s CIO, CISO, other information technology and information security leadership, and leadership representatives from the Bank’s operational risk, information security, information technology, operations, and other departments throughout the Bank.
The Bank has an Information Security Department comprised of specialized professionals that is responsible for the day-to-day, hands-on management of the cybersecurity risk and that handles the processes and procedures to mitigate and implement protective, proactive and reactive measures to protect the Bank against those risks. The Bank’s Information Security Department is responsible for developing, documenting, and approving the Bank’s technical information security control standards, guidelines, and procedures designed to preserve the confidentiality, integrity, and availability of the Bank’s information technology assets and data under the Bank’s control.
The Bank’s CIO has over 35 years of experience in Financial IT and has overseen Information Security programs in large financial institutions since 2003.
The Bank’s CISO has held that position at the Bank since 2020 and has 30 years of experience in IT, including 18 years of experience in building and overseeing Information Security and Cybersecurity programs.
The Technology and Operations Committee receives regular and prompt information from the Information Security Department as reported by the CISO which in turn provides periodic, regular and prompt reporting to the Management Committee on topics such as threat intelligence, major cybersecurity risk areas, technologies and best practices, and any cybersecurity incidents that may have impacted the Bank, as applicable and needed.
The Board receives prompt and timely information from the Bank’s CISO on any cybersecurity or information security incident that may pose significant risk to the Bank and continues to receive regular reports on the incident until its conclusion. The Bank’s Board receives regular presentations and reports throughout the year on cybersecurity and information security risk. These presentations and reports address a broad range of topics, including updates on technology trends, regulatory developments, legal issues, policies and practices, information security resources and organization, the threat environment and vulnerability assessments, and specific and ongoing efforts to prevent, detect, and respond to internal and external incidents and critical threats. At least quarterly, the Board discusses cybersecurity and information security risks with the Bank’s CIO and the Bank’s CISO.
Item 2.Properties.
At December 31, 2023, we occupied approximately 73,294 square feet of leased office space at 101 Park Avenue, New York, New York as the Bank’s headquarters, 52,041 square feet of leased office space in Jersey City, New Jersey, principally as an operations center, and 2,521 square feet of leased office space in Washington, D.C.
Item 3.Legal Proceedings.
From time to time, the FHLBNY is involved in disputes or regulatory inquiries that arise in the ordinary course of business. At the present time, there are no pending claims against the FHLBNY that are reasonably likely to have a material effect on the FHLBNY’s financial condition, results of operations or cash flows or that are otherwise reasonably likely to be material to the FHLBNY.
Item 4.Mine Safety Disclosures.
Not applicable.
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PART II
Item 5.Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
All of the capital stock of the FHLBNY, which is issued only at a par value of $100 per share, is owned by our members. Stock may also be held by former members as a result of having been acquired by a non-member institution. We conduct our business in advances and mortgages exclusively with stockholder members and housing associates (1). There is no established marketplace for FHLBNY stock as FHLBNY stock is not publicly traded. It may be redeemed at par value upon request, subject to regulatory limits. These shares of stock in the FHLBNY are registered under the Securities Exchange Act of 1934, as amended. At February 29, 2024, we had 327 members who held 61,864,456 shares of capital stock between them and former members held 65,904 shares. At February 28, 2023, we had 327 members who held 61,290,314 shares of capital stock between them and former members held 56,602 shares. Capital stock held by former members is classified as a liability, and deemed to be mandatorily redeemable under the accounting guidance for certain financial instruments with characteristics of both liabilities and equity.
Our recent quarterly cash dividends are outlined in the table below. No dividends were paid in the form of stock. Dividend payments and earnings retention are subject to be determined by our Board of Directors, at its discretion, and within the regulatory framework promulgated by the Finance Agency. Our Retained Earnings and Dividends Policy outlined in the section titled Retained Earnings and Dividends under Part I, Item 1 of this Annual Report on Form 10-K provides additional information.
Dividends from a calendar quarter’s earnings are paid (a) subsequent to the end of that calendar quarter as summarized below. Dividend payments reported below are on Class B Stock, which includes payments to non-members on capital stock reported as mandatorily redeemable capital stock in the Statements of Condition (dollars in thousands):
2023 | 2022 | 2021 |
| |||||||||||||
Month Paid |
| Amount |
| Dividend Rate |
| Amount |
| Dividend Rate |
| Amount |
| Dividend Rate |
| |||
November | $ | 138,545 |
| 9.50 | % | $ | 87,272 |
| 6.75 | % | $ | 51,793 |
| 4.40 | % | |
August | 143,433 |
| 8.50 |
| 64,649 |
| 5.50 |
| 59,496 |
| 4.60 | |||||
May | 122,225 |
| 7.75 |
| 52,852 |
| 4.75 |
| 62,154 |
| 4.75 | |||||
February | 105,796 |
| 7.50 |
| 48,820 |
| 4.36 |
| 70,856 |
| 5.00 | |||||
$ | 509,999 | (b) | $ | 253,593 | (b) | $ | 244,299 | (b) | ||||||||
| (a) | The table above reports dividend on a paid basis and includes payments to former members as well as members. Dividends paid to former members were $0.6 million, $1.2 million and $0.1 million for the years ended December 31, 2023, 2022 and 2021. |
| (b) | Includes dividends paid to non-members; payments to non-members are classified as interest expense for accounting purposes. Dividends are accrued for former members and recorded as interest expense on mandatorily redeemable capital stock held by former members and is a charge to Net income. Dividends on capital stock held by members are accrued in the period they are declared and therefore not accrued at quarter-end. Dividends are paid in arrears typically in the second month after the quarter end in which the dividend is earned and is a direct charge to retained earnings. |
Issuer Purchases of Equity Securities
We are exempt from disclosures of unregistered sales of common equity securities or securities issued through the Office of Finance that otherwise would have been required under Item 701 of the SEC’s Regulation S-K. By the same no-action letter, we are also exempt from disclosure of securities repurchases by the issuer that otherwise would have been required under Item 703 of Regulation S-K.
(1)Housing associates are defined as non-stockholder entities that (i) are approved mortgagees under Title II of the National Housing Act, (ii) are chartered under law and have succession, (iii) are subject to inspection and supervision by a governmental agency, (iv) lend their own funds as their principal activity in the mortgage field, and (v) have a financial condition such that advances may be safely made to that entity. At December 31, 2023, we had 9 housing associates as customers. Advances made to housing associates totaled $4.5 million, and the mortgage loans acquired from housing associates were immaterial in any periods in this report.
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Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Forward-Looking Statements
Statements contained in this Annual Report on Form 10-K, 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” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. 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. The Bank cautions that, by their nature, forward-looking statements are subject to a number of risks or uncertainties, including the Risk Factors set forth in Part 1, Item 1A and the risks set forth below, and that actual results could differ materially from those expressed or implied in these forward-looking statements. As a result, you are cautioned not to place undue reliance on such statements. These forward-looking statements speak only as of the date they were made, and the Bank does not undertake to update any forward-looking statement herein. Forward-looking statements include, among others, the following:
| ● | the Bank’s projections regarding income, retained earnings, dividend payouts, and the repurchase of excess capital stock; |
| ● | the Bank’s statements related to gains and losses on derivatives, future credit and impairment charges, and future classification of securities; |
| ● | the Bank’s expectations relating to future balance sheet growth; |
| ● | the Bank’s targets under the Bank’s retained earnings plan; |
| ● | the Bank’s expectations regarding the size of its mortgage loan portfolio, particularly as compared to prior periods; and |
| ● | the Bank’s statements related to reform legislation, including, without limitation, housing or government-sponsored enterprise legislation. |
| ● | political events, including legislative, regulatory, judicial, or other developments that affect the Bank, its members, counterparties, or investors in the consolidated obligations of the Federal Home Loan Banks (FHLBanks), such as any government-sponsored enterprise (GSE) reforms, any changes resulting from the Finance Agency’s review and analysis of the FHLBank System, including recommendations published in its “FHLBank System at 100: Focusing on the Future” report, changes in the Federal Home Loan Bank Act of 1932, as amended (FHLBank Act), changes in applicable sections of the Federal Housing Enterprises Financial Safety and Soundness Act of 1992, or changes in other statutes or regulations applicable to the FHLBanks; |
Actual results may differ from forward-looking statements for many reasons, including, but not limited to, the risk factors set forth in Part I, Item 1A - Risk Factors and the risks set forth below:
| ● | changes in economic and market conditions, including the evolving risks relating to the March 2023 U.S. banking sector liquidity crisis; |
| ● | changes in demand for Bank advances and other products resulting from changes in members’ and FDIC deposit flows and members’ credit demands or otherwise; |
| ● | an increase in advance prepayments as a result of changes in interest rates (including negative interest rates) or other factors; |
| ● | the volatility of market prices, rates, and indices that could affect the value of collateral held by the Bank as security for obligations of Bank members and counterparties to interest rate exchange agreements and similar agreements; |
| ● | political events, including legislative developments that affect the Bank, its members, counterparties, and/or investors in the Consolidated obligations (COs) of the FHLBanks; |
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| ● | competitive forces including, without limitation, other sources of funding available to Bank members, other entities borrowing funds in the capital markets, and the ability to attract and retain skilled employees; |
| ● | the pace of technological change and the ability of the Bank to develop and support technology and information systems, including the internet, sufficient to manage the risks of the Bank’s business effectively; |
| ● | changes in investor demand for COs and/or the terms of interest rate exchange agreements and similar agreements; |
| ● | timing and volume of market activity; |
| ● | ability to introduce new or adequately adapt current Bank products and services and successfully manage the risks associated with those products and services, including new types of collateral used to secure advances; |
| ● | risk of loss arising from litigation filed against one or more of the FHLBanks; |
| ● | realization of losses arising from the Bank’s joint and several liability on COs; |
| ● | risk of loss due to fluctuations in the housing market; |
| ● | inflation or deflation; |
| ● | issues and events within the FHLBank System and in the political arena that may lead to legislative, regulatory, judicial, or other developments that may affect the marketability of the COs, the Bank’s financial obligations with respect to COs, and the Bank’s ability to access the capital markets; |
| ● | the availability of derivative financial instruments of the types and in the quantities needed for risk management purposes from acceptable counterparties; |
| ● | significant business disruptions resulting from natural or other disasters (including, but not limited to, health emergencies such as pandemics or epidemics), acts of war (including, but not limited to, the war between Ukraine and Russia or the conflicts in the Middle East) or terrorism; |
| ● | the effect of new accounting standards, including the development of supporting systems; |
| ● | membership changes, including changes resulting from mergers or changes in the principal place of business of Bank members; |
| ● | the soundness of other financial institutions, including Bank members, nonmember borrowers, other counterparties, and the other FHLBanks; and |
| ● | the willingness of the Bank’s members to do business with the Bank whether or not the Bank is paying dividends or repurchasing excess capital stock. |
Risks and other factors could cause actual results of the Bank to differ materially from those implied by any forward-looking statements. These risk factors are not exhaustive. The Bank operates in changing economic, legislative and regulatory environments, and new risk factors will emerge from time to time. Management cannot predict such new risk factors nor can it assess the impact, if any, of such new risk factors on the business of the Bank or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those implied by any forward-looking statements.
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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 our financial statements, the changes in key items in our financial statements from year to year, the primary factors driving those changes as well as how accounting principles affect our financial statements. The MD&A is organized as follows:
MD&A TABLE REFERENCE
Table(s) |
| Description |
| Page(s) |
37-38 | ||||
1.1 | 39 | |||
2.1 | 44 | |||
3.1 - 3.8 | 47-52 | |||
4.1 - 4.9 | 53-58 | |||
5.1 - 5.3 | 58-62 | |||
6.1 - 6.10 | 62-66 | |||
6.11 | 66 | |||
7.1 - 7.4 | 67-69 | |||
8.1 - 8.8 | 69-73 | |||
9.1 - 9.3 | 74-77 | |||
9.4 - 9.5 | 77 | |||
10.1 - 10.11 | 78-90 | |||
11.1 | 90 |
32
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-K should be read in its entirety.
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 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 (CO bonds and CO discount notes), 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 as well as current and forecasted conditions in the marketplace.
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.
The Bank’s performance is based on our ability to provide reliable liquidity to our members in both turbulent operating environments and as part of their everyday funding needs to serve the needs of their customers. Our members also continued to partner with us on our numerous community support activities throughout 2023, accessing our housing and community development grant programs and products to drive millions of dollars into the communities we all serve. Our ability to execute on our foundational liquidity mission supports our work in these communities, and that our strong earnings in 2023 also means that we will make strong contributions through our Affordable Housing Program in 2024, again joining with our members and housing partners to get this key source of funding support to where it matters most.
Finance Agency’s Review and Analysis of the Federal Home Loan Bank System. Commencing in the fall of 2022, and over a period of several months, the Finance Agency undertook a review and analysis of the FHLBank System, in part through a series of public listening sessions, regional roundtable discussions, and receipt of comments from stakeholders and the public. This review covered such areas as the FHLBanks’ mission and purpose in a changing marketplace; their organization, operational efficiency, and effectiveness; their role in promoting affordable, sustainable, equitable, and resilient housing and community investment; their role in addressing the unique needs of rural and financially vulnerable communities; member products, services, collateral requirements; and membership eligibility and requirements.
The Bank is continuing to evaluate the report and is not able to predict what actions will ultimately result from the Finance Agency’s recommendations in the report, the timing of these actions, the extent of any changes to the Bank or the FHLBank System, or the ultimate effect on the Bank or the FHLBank System in the future. We plan to continue to engage with the Finance Agency and other stakeholders to ensure that the FHLBank System remains well positioned to serve our members and their communities.
On March 12, 2023, Bank member Signature Bank was closed by the New York State Department of Financial Services, which appointed the Federal Deposit Insurance Corporation (“FDIC”) as receiver. The FDIC transferred all the deposits and substantially all of the assets of Signature Bank to Signature Bridge Bank, N.A., an entity that was operated and managed by the FDIC. As of June 30, 2023 Signature Bridge Bank, N.A had $4.7 billion in advances outstanding and no letters of credit outstanding. As of July 20, 2023, all remaining advances balances were fully paid.
33
2023 Financial Results
Net income — Net income for 2023 was $751.1 million, an increase of $333.7 million, or 80.0%, from net income of $417.4 million for 2022. Our Net income is primarily driven by Net interest income, which is the spread between yields earned on advances, mortgage-backed securities, and other investments and the cost of debt.
Net Interest Income — Net interest income for 2023 was $995.3 million, an increase of $361.6 million, or 57.1%, from $633.7 million for 2022. This increase was primarily attributed to an increase in interest rate yields of 289 basis points in interest - earning assets and in average earning assets balances by $40.6 billion in 2023 compared with 2022. Average advances balances increased $27.5 billion to $110.2 billion in 2023, up from $82.7 billion in 2022. In 2023, overnight and short-term investments in federal funds and overnight repurchase agreements benefited from rising yields for money market investments. While funding costs were also higher in line with the rising rate environment, cost of funding continued to benefit from favorable investor demand for Consolidated obligation short-term and floating-rate bonds. Net interest spread decreased to 33 basis points in 2023 compared to 39 basis points in 2022.
Return on average equity (ROE) for 2023 was 9.11%, compared to ROE of 6.12% for 2022.
Other income (loss) — Other income (loss) increased by $48.1 million, resulting from a larger gain of $77.1 million in 2023 compared to a gain of $29.0 million in 2022. Primary components are summarized below:
| ● | Financial instruments carried at fair values — In 2023, FVO instruments reported valuation losses of $99.2 million. In 2022, FVO instruments reported fair value gains of $207.0 million. |
| ● | Derivative activities reported gains in Other income of $30.9 million in 2023 and $182.0 million in 2022, respectively. They were primarily from Interest rate swaps designated as economic hedges of fixed-rate treasury securities. The fair value on Interest rate swaps in economic hedges largely offset the marked-to-market valuation of the portfolio of U.S. Treasury securities held for liquidity. |
| ● | U.S. Treasury Securities held for liquidity (classified as trading) reported marked-to-market gains of $110.5 million in 2023 and losses of $364.0 million in 2022. The marked-to-market gains were largely offset by fair value changes on the standalone interest rate swaps in economic hedges of the fixed-rate treasury securities. |
| ● | Equity Investments held to finance payments to retirees in a non-qualified pension plan, reported net gains of $12.1 million compared to net losses of $15.4 million in 2022. |
Other expenses were $236.1 million in 2023 compared to $199.1 million in 2022. 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. Non-interest expense increased by $37.0 million, driven by an increase in voluntary contributions to the FHLBNY’s housing and community development support activities. The Bank made $23.2 million in voluntary housing and community development grants and contributions in 2023, including an additional voluntary contribution to the Affordable Housing Program of $12.7 million to support its housing programs for 2024.
Affordable Housing Program Assessments (AHP) allocated from Net income were $83.5 million in 2023 compared to $46.5 million in 2022. Assessments are calculated as a percentage of Net income, and changes in allocations were relative with changes in Net income.
Dividend payments — Four quarterly cash dividend were paid in 2023 for a total of $8.31 per share of capital, compared to a total of $5.34 per share of capital in 2022.
Financial Condition — December 31, 2023 compared to December 31, 2022
Our financial condition is characterized by a solid balance sheet and ample liquidity readily available for our member institutions.
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Total assets increased to $158.3 billion at December 31, 2023 from $157.4 billion at December 31, 2022, an increase of $941.7 million, or 0.6%. As of December 31, 2023, advances were $108.9 billion, a decrease of $6.4 billion, or 5.6%, from $115.3 billion at December 31, 2022.
Cash at banks was $48.2 million at December 31, 2023, compared to $27.4 million at December 31, 2022.
Liquidity investments — Money market investments at December 31, 2023 were $9.6 billion in federal funds sold and $7.8 billion in overnight resale agreements. At December 31, 2022, money market investments were $9.5 billion in federal funds sold and $4.2 billion in overnight resale agreements. Balances increased, as we continue to ensure an ample supply of funds to meet liquidity demands. Money market investments also included interest-bearing deposits at highly-rated financial institutions. Balances were $1.9 billion and $1.8 billion at December 31, 2023 and December 31, 2022, respectively.
For liquidity, we maintain a portfolio of U.S. Treasury securities designated as trading to meet short-term contingency liquidity needs. Balances were $5.9 billion and $7.1 billion at December 31, 2023 and December 31, 2022, respectively.
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 assets discussed above, liquid assets included $7.9 billion at December 31, 2023 and $6.0 billion at December 31, 2022 of high credit quality GSE-issued available-for-sale securities that are investment quality and readily marketable. The Finance Agency issued a Liquidity Advisory Bulletin in 2018 that defined liquidity levels to be maintained within certain ranges. We also have other liquidity measures in place such as deposit liquidity and operational liquidity, and other liquidity buffers.
For more information about the Advisory Bulletin and our liquidity measures, see section Liquidity, Cash Flows, Short-Term Borrowings and Short-Term Debt, and Table 9.1 through Table 9.5 in this MD&A.
Advances — Par balances decreased at December 31, 2023 to $109.8 billion, compared to $116.9 billion at December 31, 2022. Short-term fixed-rate advances decreased by 47.1% to $13.0 billion at December 31, 2023, down from $24.7 billion at December 31, 2022. ARC advances, which are adjustable-rate borrowings, increased by 42.3% to $35.7 billion at December 31, 2023, compared to $25.1 billion at December 31, 2022. Given that advances are always well collateralized, a provision for credit losses was not necessary. We have no history of credit losses on advances.
Long-term investment debt securities — Long-term investment debt securities are designated as available-for-sale (AFS) or held-to-maturity (HTM). Our investment profile consists almost exclusively of GSE and Agency-issued (GSE-issued) securities.
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 $396.1 million and $462.1 million at December 31, 2023 and December 31, 2022, respectively. Fixed-rate long-term investments in the AFS portfolio, comprised of fixed-rate GSE-issued mortgage-backed securities, were carried on the balance sheet at fair values of $7.5 billion and $5.5 billion at December 31, 2023 and December 31, 2022, respectively.
State and local housing finance agency obligations, primarily New York and New Jersey, were carried as AFS securities at $1.2 billion at December 31, 2023 and $1.1 billion at December 31, 2022.
In the HTM portfolio, long-term investments were predominantly GSE-issued fixed- and floating-rate mortgage-backed securities and a portfolio of housing finance agency bonds. Fixed- and floating-rate mortgage-backed securities in the HTM portfolio were $11.7 billion and $9.2 billion at December 31, 2023 and December 31, 2022, respectively. No allowance for credit losses were deemed necessary for GSE-issued investments. Allowance for credit losses was $0.5 million on private-label MBS at December 31, 2023 versus $0.2 million at December 31, 2022.
In the HTM portfolio, State and local housing finance agency obligations were $0.2 billion at December 31, 2023 and December 31, 2022. Allowance for credit losses on State and local housing finance agency obligations in HTM portfolio was $0.1 million at December 31, 2023 and December 31, 2022.
Equity Investments — We own grantor trusts that invest in highly-liquid registered mutual funds. Funds are classified as Equity Investments and were carried on the balance sheet at fair values of $91.9 million at December 31, 2023 and $81.8 million at December 31, 2022.
35
Mortgage loans held-for-portfolio — Mortgage loans are investments in Mortgage Partnership Finance (MPF) loans and Mortgage Asset Program (MAP) loans. As of March 31, 2021, the MAP mortgage loan program became our only active mortgage loan purchase program as we ceased to acquire mortgage loans through MPF.
Unpaid principal balance of MPF loans stood at $1.7 billion at December 31, 2023, a decrease of $146.9 million from the balance at December 31, 2022. Unpaid principal balance of MAP loans stood at $442.1 million at December 31, 2023 compared to $221.1 million at December 31, 2022.
Historically, credit performance has been strong in the MPF and MAP portfolio and delinquencies have been low. Residential collateral values have remained stable in the New York and New Jersey sectors, the primary geographic concentration for our MPF and MAP portfolio, and historical loss experience remains very low. Serious delinquencies (typically 90 days or more) at December 31, 2023, were lower than December 31, 2022. Allowance for credit losses increased to $3.3 million at December 31, 2023 compared to $1.9 million at December 31, 2022. The Bank transitioned models in June of 2023 and the newly adopted model assumptions are different than the prior model.
Capital ratios — Our capital position remains strong. At December 31, 2023, actual risk-based capital was $8.4 billion compared to $8.5 billion at December 31, 2022. Required risk-based capital was $1.4 billion at December 31, 2023 compared to $749.5 million at December 31, 2022. To support $158.3 billion of total assets at December 31, 2023, the minimum required total capital was $6.3 billion or 4.0% of assets. Our actual regulatory risk-based capital was $8.4 billion, exceeding required total capital by $2.1 billion. These ratios have remained consistently above the required regulatory ratios through all periods in this report.
Leverage — At December 31, 2023 balance sheet leverage (based on U.S. GAAP) was 19.2 times shareholders’ equity compared to 18.9 times at December 31, 2022. 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.
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Selected Financial Data.
Statements of Condition | Years ended December 31, | |||||||||||||||
(dollars in millions) |
| 2023 |
| 2022 |
| 2021 |
| 2020 |
| 2019 | ||||||
Investments (a) | $ | 46,359 | $ | 39,103 | $ | 30,898 | $ | 39,748 | $ | 56,892 | ||||||
Advances | 108,890 | 115,293 | 71,536 | 92,067 | 100,695 | |||||||||||
Mortgage loans held-for-portfolio, net of allowance for credit losses (b) | 2,180 | 2,107 | 2,320 | 2,900 | 3,173 | |||||||||||
Total assets | 158,333 | 157,391 | 105,358 | 136,996 | 162,062 | |||||||||||
Deposits and borrowings | 3,482 | 1,027 | 1,321 | 1,753 | 1,194 | |||||||||||
Consolidated obligations, net | ||||||||||||||||
Bonds | 97,569 | 85,498 | 54,829 | 69,716 | 78,764 | |||||||||||
Discount notes | 47,907 | 61,793 | 42,197 | 57,659 | 73,959 | |||||||||||
Total consolidated obligations | 145,476 | 147,291 | 97,026 | 127,375 | 152,723 | |||||||||||
Mandatorily redeemable capital stock | 7 | 5 | 2 | 3 | 5 | |||||||||||
AHP liability | 187 | 131 | 138 | 149 | 154 | |||||||||||
Capital | ||||||||||||||||
Capital stock | 6,050 | 6,387 | 4,501 | 5,367 | 5,779 | |||||||||||
Retained earnings | ||||||||||||||||
Unrestricted | 1,277 | 1,185 | 1,104 | 1,135 | 1,116 | |||||||||||
Restricted | 1,061 | 911 | 827 | 774 | 685 | |||||||||||
Total retained earnings | 2,338 | 2,096 | 1,931 | 1,909 | 1,801 | |||||||||||
Accumulated other comprehensive income (loss) | (143) | (136) | 14 | (20) | (48) | |||||||||||
Total capital | 8,245 | 8,347 | 6,446 | 7,256 | 7,532 | |||||||||||
Equity to asset ratio (c) | 5.21 | % | 5.30 | % | 6.12 | % | 5.30 | % | 4.65 | % | ||||||
Statements of Condition | Years ended December 31, | ||||||||||||||
Averages (See note below; dollars in millions) |
| 2023 |
| 2022 |
| 2021 |
| 2020 |
| 2019 | |||||
Investments (a) | $ | 49,682 | $ | 36,531 | $ | 35,959 | $ | 45,150 | $ | 45,725 | |||||
Advances | 110,230 | 82,747 | 80,795 | 109,117 | 95,838 | ||||||||||
Mortgage loans held-for-portfolio, net of allowance for credit losses | 2,136 | 2,188 | 2,562 | 3,123 | 3,008 | ||||||||||
Total assets | 164,728 | 123,207 | 120,488 | 158,811 | 145,506 | ||||||||||
Interest-bearing deposits and other borrowings | 3,061 | 1,038 | 1,427 | 1,442 | 1,131 | ||||||||||
Consolidated obligations, net | |||||||||||||||
Bonds | 101,180 | 64,763 | 65,402 | 73,097 | 77,671 | ||||||||||
Discount notes | 49,699 | 48,685 | 45,425 | 74,759 | 58,318 | ||||||||||
Total consolidated obligations | 150,879 | 113,448 | 110,827 | 147,856 | 135,989 | ||||||||||
Mandatorily redeemable capital stock | 7 | 23 | 2 | 4 | 6 | ||||||||||
AHP liability | 154 | 131 | 148 | 155 | 159 | ||||||||||
Capital | |||||||||||||||
Capital stock | 6,185 | 4,969 | 4,896 | 6,129 | 5,545 | ||||||||||
Retained earnings | |||||||||||||||
Unrestricted | 1,240 | 1,113 | 1,114 | 1,119 | 1,091 | ||||||||||
Restricted | 985 | 858 | 801 | 728 | 636 | ||||||||||
Total retained earnings | 2,225 | 1,971 | 1,915 | 1,847 | 1,727 | ||||||||||
Accumulated other comprehensive income (loss) | (162) | (118) | 20 | (67) | (36) | ||||||||||
Total capital | 8,248 | 6,822 | 6,831 | 7,909 | 7,236 | ||||||||||
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.
37
Operating Results and Other Data | ||||||||||||||||
(dollars in millions) | ||||||||||||||||
(except earnings and dividends per | Years ended December 31, | |||||||||||||||
share, and headcount) |
| 2023 |
| 2022 |
| 2021 |
| 2020 |
| 2019 | ||||||
Net income | $ | 751 | $ | 417 | $ | 266 | $ | 442 | $ | 473 | ||||||
Net interest income (d) | 995 | 634 | 541 | 753 | 667 | |||||||||||
Dividends paid in cash (e) | 509 | 252 | 244 | 348 | 366 | |||||||||||
AHP expense | 83 | 46 | 29 | 49 | 52 | |||||||||||
Return on average equity (f)(i) | 9.11 | % | 6.12 | % | 3.89 | % | 5.59 | % | 6.53 | % | ||||||
Return on average assets (i) | 0.46 | % | 0.34 | % | 0.22 | % | 0.28 | % | 0.32 | % | ||||||
Net OTTI impairment losses | — | — | — | — | (1) | |||||||||||
Other non-interest income (loss) | 77 | 29 | (48) | (51) | 35 | |||||||||||
Total other income (loss) | 77 | 29 | (48) | (51) | 34 | |||||||||||
Operating expenses (g) | 188 | 169 | 166 | 170 | 151 | |||||||||||
Finance Agency and Office of Finance expenses | 20 | 21 | 22 | 19 | 17 | |||||||||||
Total other expenses (j) | 236 | 200 | 204 | 207 | 176 | |||||||||||
Operating expenses ratio (h)(i) | 0.11 | % | 0.14 | % | 0.14 | % | 0.11 | % | 0.10 | % | ||||||
Earnings per share | $ | 12.15 | $ | 8.40 | $ | 5.42 | $ | 7.22 | $ | 8.52 | ||||||
Dividends per share | $ | 8.31 | $ | 5.34 | $ | 4.69 | $ | 5.74 | $ | 6.49 | ||||||
Headcount (Full/part time) | 345 | 327 | 340 | 354 | 342 | |||||||||||
| (a) | Investments include trading securities, available-for-sale securities, held-to-maturity securities, 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 $3.3 million, $1.9 million, $2.1 million, $7.1 million and $0.7 million for the years ended December 31, 2023, 2022, 2021, 2020 and 2019, respectively. |
| (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 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) | Operating expenses include Compensation and Benefits. |
| (h) | Operating expenses as a percentage of Total average assets. |
| (i) | All percentage calculations are performed using amounts in thousands and may not agree if calculations are performed using amounts in millions. |
| (j) | Includes Operating expenses, Compensation and benefits, Finance Agency and Office of Finance expenses and Other expenses. |
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Trends in the Financial Markets
Conditions in Financial Markets. The primary external factors that affect net interest income are market interest rates and the general state of the economy. The following table presents changes in key rates over the course of 2023 and 2022 (rates in percent):
Table 1.1Market Interest Rates
December 31, |
| ||||||||
| 2023 |
| 2022 |
| 2023 |
| 2022 |
| |
Average | Average | Ending Rate | Ending Rate |
| |||||
Federal Funds Target Rate |
| 5.20 | % | 1.88 | % | 5.50 | % | 4.50 | % |
Federal Funds Effective Rate (a) |
| 5.03 |
| 1.68 |
| 5.33 |
| 4.33 | |
SOFR(a) | 5.01 | N/A | 5.38 | N/A | |||||
1-Month LIBOR |
| N/A |
| 1.92 |
| N/A |
| 4.39 | |
3-Month LIBOR |
| N/A |
| 2.40 |
| N/A |
| 4.77 | |
2-Year U.S.Treasury |
| 4.60 |
| 2.99 |
| 4.25 |
| 4.43 | |
5-Year U.S.Treasury |
| 4.06 |
| 3.00 |
| 3.85 |
| 4.00 | |
10-Year U.S.Treasury |
| 3.96 |
| 2.95 |
| 3.88 |
| 3.87 | |
15-Year Residential Mortgage Note Rate |
| 6.48 |
| 4.85 |
| 6.31 |
| 5.98 | |
30-Year Residential Mortgage Note Rate |
| 7.19 |
| 5.59 |
| 6.99 |
| 6.66 | |
(a)Source: Board of Governors Federal Reserve System; all other sources are Bloomberg L.P.
During the year, the market rates continued to rise as the Federal Reserve initiated multiple rate hikes in an effort to combat inflation. In addition, the Federal Reserve decreased its holding of Treasuries and MBS securities in 2023.
Impact of general level of interest rates on the FHLBNY. The level of interest rates impacts our profitability, due primarily to the relatively shorter-term structure of earning assets and the impact of interest rates on invested capital. We invest in Federal funds sold and repurchase agreements that typically are overnight investments. We also use derivatives to effectively change the repricing characteristics of a significant proportion of our advances and Consolidated obligation debt to match shorter-term benchmark interest rates or overnight indices (SOFR and Federal funds effective rate, LIBOR previously) that reprice at intervals of three month or as frequently as daily. Consequently, the current level of short-term interest rates, as represented by the overnight Federal funds target rate, the overnight SOFR, and the 3-month LIBOR rate previously, has an impact on profitability.
The level of interest rates also directly affects our earnings on invested capital. Compared to other banking institutions, we operate at comparatively low net spreads between the yield we earn on assets and the cost of our liabilities. Therefore, we generate a relatively higher proportion of our income from the investment of member-supplied capital at the average asset yield. As a result, changes in asset yields tend to have a greater effect on our profitability than they do on the profitability of other banking institutions.
In summary, our average asset yields and the returns on capital invested in these assets largely reflect the short-term interest rate environment because the maturities of our assets are generally short-term in nature, have rate resets that reference short-term rates, or have been hedged with derivatives in which a short-term or overnight rate is received. Changes in rates paid on Consolidated obligations and the spread of these rates relative to LIBOR previously, SOFR, and the Federal funds rate or to U.S. Treasury securities may also impact profitability. The rates and prices at which we are able to issue Consolidated obligations, and their relationship to other products such as Treasury securities, change frequently and are affected by a multitude of factors including: overall economic conditions; volatility of market prices, rates, and indices; the level of interest rates and shape of the Treasury curve; the level of asset swap rates and shape of the swap curve; supply from other issuers (including GSEs such as Fannie Mae and Freddie Mac, supra/sovereigns, and other highly-rated borrowers); the rate and price of other products in the market such as mortgage-backed securities, repurchase agreements, and commercial paper; investor preferences; the total volume, timing, and characteristics of issuance by the FHLBanks; the amount and type of advance demand from our members; political events, including legislation and regulatory action; press interpretations of market conditions and issuer news; the presence of inflation or deflation; and actions by the Federal Reserve.
39
Recently Issued Accounting Standards and Interpretations and Critical Accounting Policies and Estimates
For a discussion of recently issued accounting standards and interpretations, see financial statements, Note 2. Financial Accounting Standards Board (FASB) Standards Issued.
Critical Accounting Policies and Estimates
We have identified certain accounting policies that we believe are critical because they require management to make subjective judgments about matters that are inherently uncertain and because of the likelihood that materially different amounts would be reported under different conditions or by using different assumptions. These policies include estimating fair values of certain assets and liabilities, evaluating the impairment of our securities portfolios, estimating the allowance for credit losses on the advance and mortgage loan portfolios, and accounting for derivatives and hedging activities. We have discussed each of these critical accounting policies, the related estimates, and its judgment with the Audit Committee of the Board of Directors. Refer to Note 1. Summary of Significant Accounting Policies in this Form 10-K.
Fair Value Measurements
The accounting standards on fair value measurements discuss how entities should measure fair value based on whether the inputs to those valuation techniques are observable or unobservable. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction in the principal or most advantageous market for the asset or liability between market participants at the measurement date. This definition is based on an exit price rather than transaction or entry price.
The FHLBNY complied with the accounting guidance on fair value measurements and has established a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability and would be based on market data obtained from independent sources. Unobservable inputs are inputs that reflect our assumptions about the parameters market participants would use in pricing the asset or liability and would be based on the best information available in the circumstances. Our pricing models are subject to periodic validations, and we periodically review and refine, as appropriate, our assumptions and valuation methodologies to reflect market indications as closely as possible. We have the appropriate personnel, technology, and policies and procedures in place to value financial instruments in a reasonable and consistent manner and in accordance with established accounting policies.
Valuation of Financial Instruments — The following assets and liabilities, including those for which the FHLBNY has elected the fair value option, were carried at fair value on the Statements of Condition as of December 31, 2023:
| ● | Fair values of derivative instruments — Derivatives are valued using internal valuation techniques as no quoted market prices exist for such instruments, and we employ industry standard option adjusted valuation models that generate fair values of interest rate derivatives. We have classified derivatives as Level 2. |
| ● | Fair values of instruments elected under the Fair Value Option — When the FHLBNY elects the FVO, the election is made on an instrument-by-instrument basis on Consolidated obligation debt and advances, which are fair valued using the Bank’s industry standard option adjusted models. We have classified instruments elected under the FVO as Level 2. |
| ● | Fair values of available-for-sale mortgage-backed securities — We request prices for all mortgage-backed securities from third-party vendors. Typically, fair values are classified as Level 2. |
| ● | Fair values of available-for-sale Housing finance agency bonds — We request pricing information from pricing services. Due to the current lack of significant market activity, their fair values are classified as Level 3. |
| ● | 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 and GSE 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. |
40
Equity Investments — The FHLBNY has grantor trusts to support the Bank’s retirement plans, which invests 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. Because of the highly liquid nature of the investments at their NAVs, they are categorized as Level 1 financial instruments under the valuation hierarchy.
Derivatives and Hedging Activities
Generally, we enter into derivatives primarily to manage our exposure to changes in interest rates. Through the use of derivatives, we may adjust the effective maturity, repricing frequency, or option characteristics of financial instruments to achieve our risk management objectives. The accounting guidance related to derivatives and hedging activities is complex and contains prescriptive documentation requirements. At the inception of each hedge transaction, we formally document the hedge relationship, its risk management objective, and strategy for undertaking the hedge.
In compliance with accounting standards, primarily ASC 815, the accounting for derivatives requires us to make the following assumptions and estimates: (i) assessing whether the hedging relationship qualifies for hedge accounting, (ii) assessing whether an embedded derivative should be bifurcated, (iii) calculating the effectiveness of the hedging relationship, (iv) evaluating exposure associated with counterparty credit risk, and (v) estimating the fair value of the derivatives. Our assumptions and judgments include subjective estimates based on information available as of the date of the financial statements and could be materially different based on different assumptions, calculations, and estimates.
We record and report our hedging activities in accordance with ASC 815. All derivatives are recorded on the statements of condition at their fair values. Changes in the fair value of all derivatives, excluding those designated as cash flow hedges, are recorded in current period earnings, while changes in the fair value of derivatives that are designated and qualify as cash flow hedges are recorded in other comprehensive income (OCI) until earnings are affected by the variability of the cash flows of the hedged transaction. If our hedges do not qualify for hedge accounting, also known as economic hedges, then the changes in the fair value of the derivatives in the economic hedge would be recorded in earnings, without an offsetting change in the fair value of the hedged item. As a result, economic hedges have the potential to cause significant volatility on our results of operations. If hedges qualify under a qualifying ASC 815 hedge, we may use two approaches to hedge accounting: short-cut hedge accounting and long-haul hedge accounting.
A short-cut hedging relationship assumes no ineffectiveness and implies that the hedge between an interest-rate swap and an interest-bearing financial instrument is perfectly correlated. Therefore, it is assumed that changes in the fair value of the interest-rate swap and the interest-bearing financial instrument will perfectly offset one another; therefore, no ineffectiveness is recorded in earnings or OCI. To qualify for short-cut accounting treatment, a number of restrictive conditions must be met.
A long-haul hedging relationship requires us to assess, retrospectively and prospectively, on at least a quarterly basis, whether the derivative and hedged item have been and are expected to be highly effective in offsetting changes in fair value or cash flows attributable to the hedged risk. We perform a prospective analysis based on a quantitative method at the inception of the hedge, and subsequently each quarter, we also perform retrospective hedge effectiveness analysis using regression to support our assertion that a hedge was and will remain effective. If the hedge fails the effectiveness test any time during its life, the hedge relationship no longer qualifies for hedge accounting and the derivative is marked to fair value through current period earnings without any offsetting changes in fair value related to the hedged item.
For more information about policies for our derivatives and hedging activities, see financial statements, Note 1. Summary of Significant Accounting Policies and Note 17. Derivatives and Hedging Activities.
41
Legislative and Regulatory Developments
Finance Agency’s Review and Analysis of the Federal Home Loan Bank System. Commencing in the fall of 2022, and over a period of several months, the Finance Agency undertook a review and analysis of the FHLBank System, in part through a series of public listening sessions, regional roundtable discussions, and receipt of comments from stakeholders and the public. This review covered such areas as the FHLBanks’ mission and purpose in a changing marketplace; their organization, operational efficiency, and effectiveness; their role in promoting affordable, sustainable, equitable, and resilient housing and community investment; their role in addressing the unique needs of rural and financially vulnerable communities; member products, services and collateral requirements; and membership eligibility and requirements.
On November 7, 2023, the Finance Agency issued a written report titled “FHLBank System at 100: Focusing on the Future,” presenting its review and analysis of the FHLBank System and the actions and recommendations that it plans to pursue in service of its vision for the future of the FHLBank System. The report focused on four broad themes: (1) the mission of the FHLBank System; (2) the FHLBank System as a stable and reliable source of liquidity; (3) housing and community development; and (4) FHLBank System operational efficiency, structure, and governance. The Finance Agency expects its initiative to continue as a multi-year, collaborative effort with the FHLBanks, their member institutions, and other stakeholders to address the recommended actions in the report and has stated that it can implement some of the recommendations from the report through ongoing supervision, guidance, or rulemaking, as well as through statutory changes by proposing specific requests for Congressional action.
Among other things, the Finance Agency has indicated that it plans to:
| ● | Update and clarify its regulatory statement of the FHLBanks’ mission to explicitly incorporate its view of the core objectives of the FHLBanks’ mission, which are (1) providing stable and reliable liquidity to members, and (2) supporting housing and community development; |
| ● | Clarify the FHLBanks’ liquidity role and take steps that the Finance Agency believes will better position the FHLBanks to perform their liquidity function, including enhancing Finance Agency oversight of FHLBank credit risk evaluation of their members and establishing protocols for large depository members to borrow from the Federal Reserve discount window; |
| ● | Expand the FHLBanks’ housing and community development focus by requiring the establishment of mission-oriented collateral programs, re-evaluating the definition of long-term advances, exploring revisions to the Community Support Requirements, and reviewing the Affordable Housing Programs (AHP), Community Investment Programs, and Community Investment Cash Advance Programs to encourage greater use in a safe and sound manner. The Finance Agency will also recommend that Congress consider amending the FHLBank Act to at least double the statutory minimum required annual AHP contributions by the FHLBanks; and |
| ● | Review the FHLBanks’ operational efficiencies through encouraging collaboration among the FHLBanks, evaluating the size and structure of FHLBank boards, considering the structure of FHLBank districts and composition of their membership, and studying whether realignment or consolidation are necessary for the efficiency of the FHLBank System. |
The Bank is continuing to evaluate the report and is not able to predict what actions will ultimately result from the Finance Agency’s recommendations in the report, the timing of these actions, the extent of any changes to the Bank or the FHLBank System, or the ultimate effect on the Bank or the FHLBank System in the future. We plan to continue to engage with the Finance Agency and other stakeholders to ensure that the FHLBank System remains well positioned to serve our members and their communities. [For a further discussion of the potential impact, see “Part I. Item 1A. Risk Factors” and MD&A section on advances.]
Federal Reserve Bank Term Funding Program. On March 12, 2023, in response to prevailing concerns about the ability of banks to meet the needs of all their depositors, the Federal Reserve announced the implementation of a Bank Term Funding Program (BTFP), as an additional source of liquidity for eligible borrowers, including any U.S. federally insured depository institution or U.S. branch or agency of a foreign bank that is eligible for primary credit with the Federal Reserve. The BTFP offers up to one-year term loans to be secured by eligible collateral owned by eligible borrowers as of March 12, 2023. Such loans can be requested until March 11, 2024. The BTFP is subject to $25 billion in credit protection by the U.S. Department of Treasury. On January 24, 2024, the Federal Reserve announced that the BTFP will cease making new loans as scheduled on March 11, 2024.
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Consumer Financial Protection Bureau (CFPB) Final Rule. On March 30, 2023, the CFPB issued a final rule requiring certain covered financial institutions to collect and report small business lending data. Small businesses are businesses with $5 million or less in gross annual revenue in the preceding fiscal year. A FHLBank will be subject to data collection and reporting obligations if the FHLBank has originated a minimum of 100 “covered credit transactions” to small businesses in each of the two preceding calendar years. The final rule implements phased-in compliance dates, beginning on October 1, 2024, based on the number of originations the covered financial institution makes to small businesses within a specified timeframe. The Bank is assessing to which extent the obligations will be triggered for the Bank and what operational changes will be necessary for compliance. While the Bank is still analyzing the impact of the final rule, it does not believe these changes will have a material effect on its financial condition or results of operations. Under a federal court order in a related litigation, the CFPB has been enjoined from implementing and enforcing the final rule against covered financial institutions nationwide and all deadlines for compliance with the final rule have been stayed.
Finance Agency Proposed Rule on Fair Lending, Fair Housing, and Equitable Housing Finance Plans. On April 26, 2023, the Finance Agency published a proposed rule that specifies requirements related to FHLBank compliance with fair housing and fair lending laws and prohibitions on unfair or deceptive acts or practices. The fair housing and fair lending laws would be the Fair Housing Act, the Equal Credit Opportunity Act, and those acts’ implementing regulations. Further, the proposed rule would outline the Finance Agency’s enforcement authority. The Bank is evaluating the potential impact of the proposed rule on the Bank and its operations.
Office of the Comptroller of the Currency, Federal Reserve, and Federal Deposit Insurance Corporation Joint Proposed Rule to Revise Capital Requirements for Certain Large Banking Organizations. On September 18, 2023, the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve, and the Federal Deposit Insurance Corporation published a joint notice of proposed rulemaking that would substantially revise the regulatory capital requirements applicable to certain large banking organizations and banking organizations with significant trading activity (Covered Banks), generally consistent with changes to international capital standards issued by the Basel Committee on Banking Supervision, known as Basel III. The proposed rulemaking will amend the calculation of risk-based capital requirements in an attempt to better reflect the risks of these banking organizations’ exposures, reduce the complexity of the framework, enhance the consistency of requirements across these banking organizations, and facilitate more effective supervisory and market assessments of capital adequacy. For certain collateralized transactions under existing capital requirements, debt securities issued by a government-sponsored enterprise (GSE) such as the FHLBanks are afforded a lower market price volatility haircut than higher risk non-GSE investment-grade securities. The proposed rules would increase the market price volatility haircuts applicable to debt securities of the GSEs (including the FHLBanks) by applying to these debt securities the same haircuts as non-GSE investment-grade securities. The Bank continues to evaluate the potential impact of the proposed rulemaking on its financial condition and results of operation. The proposed change to market price volatility haircuts applicable to debt securities of the FHLBanks may harm liquidity for FHLBank debt securities in the market, impact general demand for FHLBank debt securities, and increase the FHLBanks’ cost of funding due to potential higher interest rates as a result of the foregoing. The proposal was open for public comment through January 16, 2024, and the FHLBank System submitted a comment letter.
SEC Final Rule on the Enhancement and Standardization of Climate-Related Disclosures for Investors. On March 6, 2024, the SEC adopted a final rule that will require registrants to disclose certain climate-related information in annual reports. The final rule requires disclosure of, among other things: material climate-related risks and their material impacts; activities to mitigate or adapt to such risks; information about a registrant’s board of directors’ oversight of climate-related risks and management’s role in managing material climate-related risks; and information on any climate-related targets or goals that are material to the registrant’s business, results of operations, or financial condition. In addition, certain disclosures related to severe weather events and other natural conditions will be required in a registrant’s audited financial statements. We will be subject to the applicable requirements of the rule in our annual reports for fiscal years beginning in 2027. We continue to review the final rule and evaluate its impact on us or our financial condition or results of operations, including the effect on costs and complexities associated with our SEC reporting.
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Financial Condition
Table 2.1Statements of Condition — Period-Over-Period Comparison
|
|
| Net change in |
| Net change in |
| ||||||
(Dollars in thousands) |
| December 31, 2023 |
| December 31, 2022 |
| dollar amount |
| percentage |
| |||
Assets | ||||||||||||
Cash and due from banks | $ | 48,198 | $ | 27,420 | $ | 20,778 |
| 75.78 | % | |||
Interest-bearing deposits |
| 1,945,000 |
| 1,750,000 |
| 195,000 |
| 11.14 | ||||
Securities purchased under agreements to resell |
| 7,820,000 |
| 4,245,000 |
| 3,575,000 |
| 84.22 | ||||
Federal funds sold |
| 9,640,000 |
| 9,470,000 |
| 170,000 |
| 1.80 | ||||
Trading securities |
| 5,886,421 |
| 7,113,419 |
| (1,226,998) |
| (17.25) | ||||
Equity Investments |
| 91,879 |
| 81,754 |
| 10,125 |
| 12.38 | ||||
Available-for-sale securities |
| 9,106,743 |
| 7,088,870 |
| 2,017,873 |
| 28.47 | ||||
Held-to-maturity securities |
| 11,869,328 |
| 9,354,048 |
| 2,515,280 |
| 26.89 | ||||
Advances |
| 108,890,128 |
| 115,292,876 |
| (6,402,748) |
| (5.55) | ||||
Mortgage loans held-for-portfolio |
| 2,179,766 |
| 2,106,969 |
| 72,797 |
| 3.46 | ||||
Accrued interest receivable |
| 581,608 |
| 437,823 |
| 143,785 |
| 32.84 | ||||
Premises, software, and equipment |
| 74,043 |
| 77,710 |
| (3,667) |
| (4.72) | ||||
Operating lease right-of-use assets |
| 54,862 |
| 60,338 |
| (5,476) |
| (9.08) | ||||
Financing lease right-of-use assets | 2,317 | — | 2,317 | NM | ||||||||
Derivative assets |
| 125,202 |
| 163,921 |
| (38,719) |
| (23.62) | ||||
Other assets |
| 17,704 |
| 121,341 |
| (103,637) |
| (85.41) | ||||
Total assets | $ | 158,333,199 | $ | 157,391,489 | $ | 941,710 |
| 0.60 | % | |||
Liabilities |
|
|
|
|
|
|
|
| ||||
Deposits |
|
|
|
|
|
|
|
| ||||
Interest-bearing demand | $ | 3,472,477 | $ | 1,015,991 | $ | 2,456,486 |
| 241.78 | % | |||
Non-interest-bearing demand |
| 9,376 |
| 10,946 |
| (1,570) |
| (14.34) | ||||
Total deposits |
| 3,481,853 |
| 1,026,937 |
| 2,454,916 |
| 239.05 | ||||
Consolidated obligations |
|
|
|
|
|
|
|
| ||||
Bonds |
| 97,569,062 |
| 85,497,755 |
| 12,071,307 |
| 14.12 | ||||
Discount notes |
| 47,906,908 |
| 61,792,989 |
| (13,886,081) |
| (22.47) | ||||
Total consolidated obligations |
| 145,475,970 |
| 147,290,744 |
| (1,814,774) |
| (1.23) | ||||
Mandatorily redeemable capital stock |
| 7,219 |
| 4,578 |
| 2,641 |
| 57.69 | ||||
Accrued interest payable |
| 716,021 |
| 370,456 |
| 345,565 |
| 93.28 | ||||
Affordable Housing Program |
| 187,027 |
| 131,394 |
| 55,633 |
| 42.34 | ||||
Derivative liabilities |
| 12,409 |
| 15,333 |
| (2,924) |
| (19.07) | ||||
Other liabilities |
| 138,658 |
| 131,360 |
| 7,298 |
| 5.56 | ||||
Operating lease liabilities |
| 67,021 |
| 73,304 |
| (6,283) |
| (8.57) | ||||
Financing lease liabilities | 2,320 | — | 2,320 | NM | ||||||||
Total liabilities |
| 150,088,498 |
| 149,044,106 |
| 1,044,392 |
| 0.70 | ||||
Capital |
| 8,244,701 |
| 8,347,383 |
| (102,682) |
| (1.23) | ||||
Total liabilities and capital | $ | 158,333,199 | $ | 157,391,489 | $ | 941,710 |
| 0.60 | % | |||
NM— Not meaningful.
Balance Sheet overview December 31, 2023 and December 31, 2022
Total assets increased to $158.3 billion at December 31, 2023 from $157.4 billion at December 31, 2022, an increase of $941.7 million, or 0.6%.
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Cash at banks was $48.2 million at December 31, 2023, compared to $27.4 million at December 31, 2022.
Money market investments at December 31, 2023 were $9.6 billion in federal funds sold and $7.8 billion in overnight resale agreements. At December 31, 2022, money market investments were $9.5 billion in federal funds sold and $4.2 billion in overnight resale agreements. Balances increased as we continue to ensure an ample supply of funds to meet liquidity demands. Federal funds sold averaged $17.3 billion and $11.6 billion in 2023 and 2022, respectively. Resale agreements averaged $4.9 billion and $74.0 million in 2023 and 2022, respectively. Money market investments also included interest-bearing deposits at highly-rated financial institutions. Balances were $1.9 billion and $1.8 billion at December 31, 2023 and December 31, 2022, respectively.
Advances — Par balances decreased at December 31, 2023 to $109.8 billion, compared to $116.9 billion at December 31, 2022. Short-term fixed-rate advances decreased by 47.1% to $13.0 billion at December 31, 2023, down from $24.7 billion at December 31, 2022. ARC advances, which are adjustable-rate borrowings, increased by 42.3% to $35.7 billion at December 31, 2023, compared to $25.1 billion at December 31, 2022.
Long-term investment debt securities — Long-term investment debt securities are designated as available-for-sale (AFS) or held-to-maturity (HTM). Our investment profile consists almost exclusively of GSE and Agency issued (GSE-issued) securities.
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 $396.1 million at December 31, 2023 and $462.1 million at December 31, 2022. Fixed-rate long-term investments in the AFS portfolio, comprised of fixed-rate GSE-issued mortgage-backed securities, were carried on the balance sheet at fair values of $7.5 billion at December 31, 2023 and $5.5 billion at December 31, 2022. We acquired $1.9 billion (par) of fixed-rate GSE-issued MBS in 2023.
State and local housing finance agency obligations, primarily New York and New Jersey, were carried as AFS securities at $1.2 billion at December 31, 2023 and $1.1 billion at December 31, 2022.
In the HTM portfolio, long-term investments were predominantly GSE-issued fixed- and floating-rate mortgage-backed securities and a small portfolio of housing finance agency bonds. Fixed- and floating-rate mortgage-backed securities in the HTM portfolio were $11.7 billion at December 31, 2023 and $9.2 billion at December 31, 2022. We acquired $3.2 billion (par) of floating-rate and $0.1 billion (par) of fixed-rate GSE-issued MBS in 2023.
State and local housing finance agency obligations, primarily New York and New Jersey, were carried as HTM securities at $0.2 billion at December 31, 2023 and at December 31, 2022.
Trading securities (liquidity portfolio) — The objective of the trading portfolio is to meet short-term contingency liquidity needs. During the current year period, we continued to invest in highly liquid U.S. Treasury securities. Trading investments are carried at fair value, with changes recorded through earnings. At December 31, 2023, trading investments were $5.9 billion in U.S. Treasury securities. At December 31, 2022, trading investments were $7.1 billion in U.S. Treasury securities.
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. Funds are classified as Equity Investments and were carried on the balance sheet at fair values of $91.9 million at December 31, 2023 and $81.8 million at December 31, 2022.
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Mortgage loans held-for-portfolio — Mortgage loans are investments in Mortgage Partnership Finance loans (MPF or MPF Program) and Mortgage Asset Program (MAP). Unpaid principal balance of MPF loans stood at $1.7 billion at December 31, 2023, a decrease of $146.9 million from the balance at December 31, 2022. Loans are primarily fixed-rate, single-family mortgages acquired through the MPF Program. Unpaid principal balance of MAP loans stood at $442.1 million at December 31, 2023, an increase of $221.0 million from the balance at December 31, 2022. Paydowns for the total portfolio for twelve months ended December 31, 2023 were $165.7 million compared to $285.2 million for the same period in 2022. Acquisitions for the twelve months ended December 31, 2023 were $245.8 million compared to $79.2 million for the same period in 2022. Historically, credit performance has been strong and delinquency low. Loan origination by members and acceptable pricing are key factors that drive acquisitions. With increasing interest rates, refinancing and home sales are declining, fewer MAP eligible loans are available for purchases from the members. 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. Serious delinquencies (typically 90 days or more) at December 31, 2023 were lower than December 31, 2022. Allowance for credit losses increased to $3.3 million at December 31, 2023 compared to $1.9 million at December 31, 2022.
Capital ratios — Our capital position remains strong. At December 31, 2023, actual risk-based capital was $8.4 billion compared to $8.5 billion at December 31, 2022. Required risk-based capital was $1.4 billion at December 31, 2023 compared to $749.5 million at December 31, 2022. To support $158.3 billion of total assets at December 31, 2023, the minimum required total capital was $6.3 billion or 4.0% of assets. Our actual regulatory risk-based capital was $8.4 billion, exceeding required total capital by $2.1 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 December 31, 2023 balance sheet leverage (based on U.S. GAAP) was 19.2 times shareholders’ equity compared to 18.9 times at December 31, 2022. 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 December 31, 2023 included $32.8 million as demand cash balances at the FRBNY, $17.5 billion in short-term and overnight investments in the federal funds and resale agreements, and $7.9 billion of high credit quality GSE-issued available-for-sale securities that are investment quality and readily marketable.
We also have other regulatory liquidity measures in place, including deposit liquidity and operational liquidity, and other liquidity buffers.
For more information about the Advisory Bulletin and our liquidity measures, see section Liquidity, Cash Flows, Short-Term Borrowings and Short-Term Debt, and Table 9.1 through Table 9.5 in this MD&A.
Replacement of London Interbank Offered Rates (LIBOR) — The FHLBNY has transitioned all LIBOR-indexed instruments, and has no LIBOR exposure at December 31, 2023.
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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 may 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 advances.
Carrying values of advances outstanding were $108.9 billion at December 31, 2023 and $115.3 billion at December 31, 2022. Carrying values included cumulative hedging basis adjustment losses of $0.9 billion at December 31, 2023 and $1.6 billion at December 31, 2022.
Table 3.1Advance Trends
Member demand for advance products
Future demand from our members for advances is difficult to forecast as it is uncertain what the impact will be on our members’ businesses from multiple uncertainties, including supply of deposits and other funding to members’ businesses, risk of credit losses, and other potential disruptions to our members’ businesses.
47
Our regulator, the Federal Housing Finance Agency (FHFA), has a tangible capital requirement for members that differs from their primary regulators’ definition. If a member has negative tangible capital, primarily as a result of negative fair value marks on investment securities held as ‘Available for Sale’ due to a rise in interest rates, the Bank is not permitted to extend a new advance, unless the member’s appropriate federal banking agency or state insurance regulator requests in writing that the Bank make such advance. Further, advance renewals to this member would be limited to a maximum term of 30 days; the 30 day renewals may continue unless we are directed in writing by the member’s primary regulator to stop. At this time, only a few of our members may not be meeting the FHFA’s tangible capital requirements. While this issue is not viewed as a material risk to the Bank, it is possible that the Bank may lose some advance business to other liquidity providers in cases where FHFA tangible capital violations occur or appear imminent. The Bank’s business reputation with its members and our reputation as a reliable provider of liquidity with our members’ primary regulators may also be harmed. The Bank continues to monitor this situation, including the impact of rising interest rates on our members’ tangible capital and any future actions that the regulators may take.
The FHFA in its ‘FHLBank System at 100: Focusing on the Future’ report (“System 100 Report”) released in November 2023 stated that the FHFA has communicated its expectation that the FHLBanks revisit their policies, procedures, and systems for evaluating the financial condition of members. The System 100 Report also stated that the FHLBanks must evaluate members’ financial condition and ability to repay advances, and noted that while pledged collateral may protect an FHLBank against risk of loss, it only serves as a backup source of repayment if the member cannot repay the advance. The report further stated that the FHFA is initiating multiple actions to strengthen member risk management by the FHLBanks. The System 100 Report emphasized that the FHLBanks are not “lenders of last resort” and need to coordinate with members’ primary regulators and the Federal Reserve Banks to facilitate the transition of troubled members to the Federal Reserve’s discount window. These comments from the FHFA and potential related actions by policy makers or member regulators may cause financially healthy members to reduce their advances, and make it more difficult for the Bank to provide liquidity in support of members that are experiencing temporary liquidity difficulties.
Advances — Product Types
The following table summarizes par values of advances by product type (dollars in thousands):
Table 3.2Advances by Product Type
December 31, 2023 | December 31, 2022 |
| |||||||||
Percentage | Percentage |
| |||||||||
| Amounts |
| of Total |
| Amounts |
| of Total |
| |||
Adjustable Rate Credit - ARCs | $ | 35,663,390 | 32.49 | % | $ | 25,063,390 | 21.43 | % | |||
Fixed Rate Advances |
| 53,024,265 |
| 48.29 |
| 54,523,869 |
| 46.64 | |||
Short-Term Advances |
| 13,049,894 |
| 11.89 |
| 24,674,722 |
| 21.10 | |||
Mortgage Matched Advances |
| 421,544 |
| 0.38 |
| 78,639 |
| 0.07 | |||
Overnight & Line of Credit (OLOC) Advances |
| 4,516,962 |
| 4.11 |
| 9,231,475 |
| 7.89 | |||
All other categories |
| 3,119,096 |
| 2.84 |
| 3,357,759 |
| 2.87 | |||
Total par value |
| 109,795,151 |
| 100.00 | % |
| 116,929,854 |
| 100.00 | % | |
Advance discounts | (7,878) | (2,083) | |||||||||
Hedge valuation basis adjustments | (897,145) |
|
|
| (1,634,895) |
|
| ||||
Total | $ | 108,890,128 |
|
| $ | 115,292,876 |
|
| |||
48
Member Pledged Collateral
Member borrowers are required to maintain an amount of eligible collateral that adequately secures their outstanding obligations with the FHLBNY. Eligible collateral includes: (1) one-to-four-family mortgages; (2) multi-family & commercial real estate mortgages; (3) Treasury and U.S. government agency securities; (4) private-label commercial mortgage-backed securities; and (5) certain other collateral that is real estate-related, provided that such collateral has a readily ascertainable value, can be liquidated in due course, and the Bank has the ability to perfect its security interest. The FHLBNY also has a statutory lien priority with respect to certain member assets under the FHLBank Act as well as a claim on FHLBNY capital stock held by our members. The FHLBNY’s loan and collateral agreements give the Bank security interest in assets held by borrowers that is sufficient to cover their obligations to the FHLBNY. FHLBNY may supplement this security interest by imposing additional collateral delivery requirements on our member borrowers based on the overall financial strength of the member. To ensure that the FHLBNY has sufficient collateral to cover credit extensions, the FHLBNY has established a Collateral Lendable Value methodology. This methodology ensures that the FHLBNY remains fully collateralized by establishing risk-based lendable values for each pledged collateral type. These lendable values are periodically reassessed to ensure that they are reflective of current market conditions.
The following table summarizes pledged collateral (in thousands):
Table 3.3Collateral Supporting Indebtedness to Members
Indebtedness | Collateral (a) | |||||||||||||||||
Other | Total | Securities and | ||||||||||||||||
| Advances (b) |
| Obligations (c) |
| Indebtedness |
| Loans (d) |
| Deposits (d) |
| Total (d) | |||||||
December 31, 2023 | $ | 109,795,151 | $ | 20,939,733 | $ | 130,734,884 | $ | 358,853,921 | $ | 70,552,994 | $ | 429,406,915 | ||||||
December 31, 2022 | $ | 116,929,854 | $ | 22,790,754 | $ | 139,720,608 | $ | 338,641,587 | $ | 81,962,704 | $ | 420,604,291 | ||||||
| (a) | The level of over-collateralization is on an aggregate basis and may not necessarily be indicative of a similar level of over-collateralization on an individual member basis. At a minimum, each member pledged sufficient collateral to adequately secure the member’s outstanding obligation with the FHLBNY. In addition, most members maintain an excess amount of pledged collateral with the FHLBNY to secure future liquidity needs. |
| (b) | Par value. |
| (c) | Standby financial letters of credit, derivatives, and members’ credit enhancement guarantee amount (MPFCE). |
| (d) | Estimated market value. |
The following table shows the breakdown of collateral pledged by members between those in the physical possession of the FHLBNY or its safekeeping agent, and those that were specifically listed (in thousands):
Table 3.4Location of Collateral Held
Estimated Market Values | |||||||||
| Collateral in |
|
| Total | |||||
Physical | Collateral | Collateral | |||||||
Possession | Specifically Listed | Received | |||||||
December 31, 2023 | $ | 71,812,944 |
| $ | 357,593,971 | $ | 429,406,915 | ||
December 31, 2022 | $ | 82,658,830 |
| $ | 337,945,461 | $ | 420,604,291 | ||
49
Advances — Interest Rate Terms
The following table summarizes interest-rate payment terms for advances (dollars in thousands):
Table 3.5Advances by Interest-Rate Payment Terms
December 31, 2023 | December 31, 2022 | ||||||||||||
|
| Percentage |
|
|
| Percentage |
| ||||||
Amount | of Total | Amount | of Total | ||||||||||
Fixed-rate (a) | $ | 73,209,674 |
|
| 66.68 | % | $ | 90,424,460 |
| 77.33 | % | ||
Variable-rate (b) |
| 36,585,390 |
|
| 33.32 |
|
| 26,505,390 |
| 22.67 | |||
Variable-rate capped or floored (c) |
| — |
|
| — |
|
| — |
| — |
| ||
Overdrawn demand deposit accounts |
| 87 |
|
| — |
|
| 4 |
| — |
| ||
Total par value |
| 109,795,151 |
|
| 100.00 | % |
| 116,929,854 |
| 100.00 | % | ||
Advance discounts | (7,878) | (2,083) | |||||||||||
Hedge valuation basis adjustments |
| (897,145) |
|
|
|
|
| (1,634,895) |
|
| |||
Total | $ | 108,890,128 |
|
|
|
| $ | 115,292,876 |
|
| |||
| (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 December 31, 2023, with only 6.4% of advances in the remaining maturity bucket of greater than 5 years (6.5% at December 31, 2022). For more information, see financial statements Note 9. Advances. |
| (b) | Variable-rate advances are ARC advances, which historically have been indexed to LIBOR and now are indexed to SOFR-OIS, Federal Funds-OIS or other benchmark indices. 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 benchmark 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). |
50
The following table summarizes Redemption Term of advances (dollars in thousands):
Table 3.6Advances by Redemption Term
| December 31, 2023 |
| December 31, 2022 |
| Change | ||||||||||||||
Redemption Term (dollars in thousands) |
| Amount |
| Percentage |
| Amount |
| Percentage |
| Amount |
| Percentage | |||||||
Fixed-rate |
|
|
|
|
|
|
|
|
|
|
| ||||||||
Due in 1 year or less | $ | 42,366,512 |
|
| 38.59 | % | $ | 61,444,708 |
|
| 52.55 | % | $ | (19,078,196) | (31.05) | % | |||
Due after 1 year through 3 years |
| 13,976,570 |
|
| 12.72 |
| 14,399,676 |
|
| 12.31 |
| (423,106) | (2.94) | ||||||
Due after 3 years through 5 years |
| 9,536,618 |
|
| 8.69 |
| 6,405,303 |
|
| 5.48 |
| 3,131,315 | 48.89 | ||||||
Due after 5 years through 15 years |
| 4,386,479 |
|
| 4.00 |
| 4,085,973 |
|
| 3.49 |
| 300,506 | 7.35 | ||||||
Thereafter |
| — |
|
| — |
| 161 |
|
| — |
| (161) | (100.00) | ||||||
Total principal amount | 70,266,179 |
|
| 64.00 | 86,335,821 |
|
| 73.83 | (16,069,642) | (18.61) | |||||||||
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Fixed-rate, putable |
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Due in 1 year or less |
| — |
|
| — |
| — |
|
| — | — | NM | |||||||
Due after 1 year through 3 years | 181,450 |
|
| 0.17 | — |
|
| — |
| 181,450 | NM | ||||||||
Due after 3 years through 5 years | 738,000 | 0.67 | 1,505,000 | 1.29 | (767,000) | (50.96) | |||||||||||||
Due after 5 years through 15 years | 1,602,500 | 1.46 | 2,505,000 | 2.14 | (902,500) | (36.03) | |||||||||||||
Thereafter | — | — | — | — | — | NM | |||||||||||||
Total principal amount | 2,521,950 | 2.30 | 4,010,000 | 3.43 | (1,488,050) | (37.11) | |||||||||||||
Variable-rate | |||||||||||||||||||
Due in 1 year or less | 22,845,390 | 20.81 | 21,493,000 | 18.38 | 1,352,390 | 6.29 | |||||||||||||
Due after 1 year through 3 years | 8,727,000 | 7.95 | 3,792,390 | 3.24 | 4,934,610 | NM | |||||||||||||
Due after 3 years through 5 years | 4,013,000 | 3.65 | 220,000 | 0.19 | 3,793,000 | NM | |||||||||||||
Due after 5 years through 15 years | 1,000,000 | 0.91 | 1,000,000 | 0.86 | — | — | |||||||||||||
Thereafter | — | — | — | — | — | NM | |||||||||||||
Total principal amount | 36,585,390 | 33.32 | 26,505,390 | 22.67 | 10,080,000 | 38.03 | |||||||||||||
Variable-rate, callable or prepayable (a) | |||||||||||||||||||
Due in 1 year or less | — | — | — | — | — | NM | |||||||||||||
Due after 1 year through 3 years | — | — | — | — | — | NM | |||||||||||||
Due after 3 years through 5 years | — | — | — | — | — | NM | |||||||||||||
Due after 5 years through 15 years | — | — | — | — | — | NM | |||||||||||||
Thereafter | — | — | — | — | — | NM | |||||||||||||
Total principal amount | — | — | — | — | — | NM | |||||||||||||
Other (b) | |||||||||||||||||||
Due in 1 year or less | 76,940 | 0.07 | 33,362 | 0.03 | 43,578 | NM | |||||||||||||
Due after 1 year through 3 years | 145,209 | 0.13 | 28,356 | 0.02 | 116,853 | NM | |||||||||||||
Due after 3 years through 5 years | 195,459 | 0.18 | 11,459 | 0.01 | 184,000 | NM | |||||||||||||
Due after 5 years through 15 years | 3,731 | — | 4,985 | 0.01 | (1,254) | (25.16) | |||||||||||||
Thereafter | 206 | — | 477 | — | (271) | (56.81) | |||||||||||||
Total principal amount | 421,545 | 0.38 | 78,639 | 0.07 | 342,906 | NM | |||||||||||||
Overdrawn and overnight deposit accounts | 87 | — | 4 | — | 83 | NM | |||||||||||||
Total principal amount advances | 109,795,151 | 100.00 | % | 116,929,854 | 100.00 | % | (7,134,703) | (6.10) | % | ||||||||||
Other adjustments, net (c) | (905,023) | (1,636,978) | 731,955 | ||||||||||||||||
Total advances | $ | 108,890,128 | $ | 115,292,876 | $ | (6,402,748) | |||||||||||||
| (a) | Prepayable advances are those advances that may be contractually prepaid by the borrower on specified dates without incurring prepayment or termination fees. |
| (b) | Includes hybrid, fixed-rate amortizing/mortgage matched, convertible, fixed-rate callable or prepayable, and other advances. |
| (c) | Consists of hedging and fair value option valuation adjustments and unamortized premiums, discounts, and commitment fees. |
NM— Not meaningful.
51
Hedge volume — We hedge putable advances and certain “vanilla” fixed-rate advances under the hedge accounting provisions when they qualify under those standards and as economic hedges when hedge effectiveness accounting provisions cannot be established.
The following table summarizes advances hedged under ASC 815 qualifying hedge by type of structure (in thousands):
Table 3.7Hedged Advances by Type
Par Amount |
| December 31, 2023 |
| December 31, 2022 | ||
Qualifying hedges |
|
| ||||
Fixed-rate bullets (a) | $ | 49,092,527 | $ | 39,392,241 | ||
Fixed-rate putable (b) |
| 2,521,950 |
| 4,010,000 | ||
Fixed-rate with embedded cap |
| — |
| 350,000 | ||
Total qualifying hedges | $ | 51,614,477 | $ | 43,752,241 | ||
Aggregate par amount of advances hedged (c) | $ | 53,922,377 | $ | 44,070,441 | ||
Fair value basis (hedging adjustments) | $ | (897,145) | $ | (1,634,895) | ||
| (a) | Generally, 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 option mitigate the put option risks; in the hedge, fixed-rate cash flows are also synthetically converted to benchmark floating-rate. |
| (c) | Represents par values of advances in ASC 815 hedge relationships. Amounts do not include advances that were in ASC 815 hedges but have since been de-designated or advances that are in economic hedges (not qualifying as ASC 815 accounting hedge). |
Economic hedges of floating-rate advances — We issue floating-rate advances indexed to benchmark rates (Federal Funds-OIS and SOFR-OIS) and may then execute interest rate basis swaps that would synthetically convert the cash flows to the desired floating-rate cash flows indexed to another benchmark to meet our asset/liability funding strategies. At December 31, 2023 and December 31, 2022, there was no basis swaps outstanding. The carrying value of the advances in the economic hedge would not include fair value basis since the advance is recorded at amortized cost.
Putable Advances — 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 3.8Putable and Callable Advances
Advances | ||||||
Par Amount |
| December 31, 2023 |
| December 31, 2022 | ||
Putable (a) | $ | 2,521,950 | $ | 4,010,000 | ||
No-longer putable/callable | $ | — | $ | — | ||
| (a) | Putable advances were typically long-term advances with one or more put options exercisable by the FHLBNY. Putable advances are hedged in an ASC 815 qualifying fair value hedge with mirror image terms, including mirror image put option terms. |
52
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 are typically U.S. Treasury securities, and from time to time we have also invested in 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 of 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.
The following table summarizes changes in investments by categories: Interest-bearing deposits, 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 4.1Investments by Categories
| December 31, |
| December 31, |
| Dollar |
| Percentage |
| ||||
2023 | 2022 | Variance | Variance |
| ||||||||
State and local housing finance agency obligations, net (a) |
| |||||||||||
Available-for-sale securities, at fair value | $ | 1,228,238 | $ | 1,109,029 | $ | 119,209 | 10.75 | % | ||||
Held-to-maturity securities, at carrying value, net | 166,062 | 177,117 | (11,055) | (6.24) | ||||||||
Total HFA securities | 1,394,300 | 1,286,146 | 108,154 | 8.41 | ||||||||
Trading securities (b) |
| 5,886,421 |
| 7,113,419 |
| (1,226,998) |
| (17.25) | ||||
Mortgage-backed securities |
|
|
|
| ||||||||
Available-for-sale securities, at fair value (c) |
| 7,878,505 |
| 5,979,841 |
| 1,898,664 |
| 31.75 | ||||
Held-to-maturity securities, at carrying value, net (c) |
| 11,703,266 |
| 9,176,931 |
| 2,526,335 |
| 27.53 | ||||
Total MBS securities |
| 19,581,771 |
| 15,156,772 |
| 4,424,999 |
| 29.19 | ||||
Equity investments in Grantor trusts (d) |
| 91,879 |
| 81,754 |
| 10,125 |
| 12.38 | ||||
Interest-bearing deposits |
| 1,945,000 |
| 1,750,000 |
| 195,000 |
| 11.14 | ||||
Securities purchased under agreements to resell |
| 7,820,000 |
| 4,245,000 |
| 3,575,000 |
| 84.22 | ||||
Federal funds sold |
| 9,640,000 |
| 9,470,000 |
| 170,000 |
| 1.80 | ||||
Total Investments | $ | 46,359,371 | $ | 39,103,091 | $ | 7,256,280 |
| 18.56 | % | |||
| (a) | State and local housing finance agency bonds are designated as both AFS, carried at fair values and HTM, carried at carrying value. There were purchases of $125.0 million of AFS State and local housing finance agency bonds for the twelve months ending December 31, 2023. Payments from HTM portfolio were $11.1 million and payments from the AFS portfolio were $5.4 million. |
| (b) | Trading securities comprised of U.S. Treasury securities at December 31, 2023 and are carried at fair value. Trading portfolio is for liquidity and not for speculative purposes. We purchased $1.6 billion par of U.S. Treasury notes in 2023. |
| (c) | AFS securities outstanding were GSE and U.S. Agency issued MBS and carried at fair values. MBS in the HTM portfolio were predominantly GSE-issued. |
| (d) | Funds in the grantor trusts are designated as equity investments and are carried at fair value. Trust fund balances represent investments in registered fixed-income and equity mutual funds and money market 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 employee retirement plans. |
53
The following table summarizes our investment debt securities issuer concentration (dollars in thousands):
Table 4.2Investment Debt Securities Issuer Concentration
December 31, 2023 | December 31, 2022 | ||||||||||||||||
|
|
| Carrying value as |
|
|
| Carrying value as | ||||||||||
Carrying (a) | a Percentage | Carrying (a) | a Percentage | ||||||||||||||
Long Term Investment (c) | Value | Fair Value | of Capital | Value | Fair Value | of Capital | |||||||||||
MBS | |||||||||||||||||
Fannie Mae | $ | 2,261,695 | $ | 2,242,039 | 27.43 | % | $ | 2,099,507 | $ | 2,071,390 | 25.15 | % | |||||
Freddie Mac |
| 17,276,218 |
| 16,967,872 | 209.54 |
| 13,001,618 |
| 12,604,915 | 155.76 | |||||||
Ginnie Mae |
| 6,563 |
| 6,563 | 0.08 |
| 7,477 |
| 7,477 | 0.09 | |||||||
All Others - PLMBS |
| 37,295 |
| 40,199 | 0.45 |
| 48,170 |
| 52,016 | 0.58 | |||||||
Non-MBS, net (b) |
| 1,394,300 |
| 1,381,971 | 16.91 |
| 1,286,146 |
| 1,272,277 | 15.41 | |||||||
Total Investment Debt Securities | $ | 20,976,071 | $ | 20,638,644 | 254.41 | % | $ | 16,442,918 | $ | 16,008,075 | 196.98 | % | |||||
Categorized as: | |||||||||||||||||
Available-for-Sale Securities | $ | 9,106,743 | $ | 9,106,743 | $ | 7,088,870 | $ | 7,088,870 | |||||||||
Held-to-Maturity Securities, net | $ | 11,869,328 | $ | 11,531,901 | $ | 9,354,048 | $ | 8,919,205 | |||||||||
(a)Carrying values include fair values for AFS securities.
(b)Non-MBS — Includes Housing finance agency bonds.
(c)Excludes Trading portfolio.
The following tables summarize external rating information of the held-to-maturity portfolio (carrying values in thousands):
Table 4.3External Rating of the Held-to-Maturity Portfolio
December 31, 2023 | ||||||||||||||||||
Below | ||||||||||||||||||
|
|
|
|
| Investment |
| ||||||||||||
AAA-rated (a) | AA-rated (b) | A-rated | BBB-rated | Grade | Total | |||||||||||||
Mortgage-backed securities | $ | 114 | $ | 11,666,992 | $ | 25,831 | $ | 224 | $ | 10,105 | $ | 11,703,266 | ||||||
State and local housing finance agency obligations | — | 166,062 | — | — | — | 166,062 | ||||||||||||
Total Long-term securities | $ | 114 | $ | 11,833,054 | $ | 25,831 | $ | 224 | $ | 10,105 | $ | 11,869,328 | ||||||
December 31, 2022 | ||||||||||||||||||
Below |
| |||||||||||||||||
|
|
|
|
| Investment |
| ||||||||||||
AAA-rated (a) | AA-rated (b) | A-rated | BBB-rated | Grade | Total | |||||||||||||
Mortgage-backed securities | $ | 140 | $ | 9,128,951 | $ | 35,898 | $ | 382 | $ | 11,560 | $ | 9,176,931 | ||||||
State and local housing finance agency obligations | — | 175,974 | 1,143 | — | — | 177,117 | ||||||||||||
Total Long-term securities | $ | 140 | $ | 9,304,925 | $ | 37,041 | $ | 382 | $ | 11,560 | $ | 9,354,048 | ||||||
See footnotes (a) and (b) under Table 4.4.
54
The following tables summarize external rating information of the AFS portfolio (the carrying values of AFS investments are at fair values; in thousands):
Table 4.4External Rating of the Available-for-Sale Portfolio
| December 31, 2023 | |||||||||||||||||
Below | ||||||||||||||||||
Investment | ||||||||||||||||||
| AAA-rated (a) |
| AA-rated (b) |
| A-rated |
| BBB-rated |
| Grade |
| Total | |||||||
Mortgage-backed securities | $ | — | $ | 7,878,505 | $ | — | $ | — | $ | — | $ | 7,878,505 | ||||||
State and local housing finance agency obligations |
| 168,025 |
| 1,060,213 |
| — |
| — |
| — |
| 1,228,238 | ||||||
Total Long-term securities | $ | 168,025 | $ | 8,938,718 | $ | — |
| $ | — | $ | — |
| $ | 9,106,743 | ||||
| December 31, 2022 | |||||||||||||||||
Below | ||||||||||||||||||
Investment | ||||||||||||||||||
| AAA-rated (a) |
| AA-rated (b) |
| A-rated |
| BBB-rated |
| Grade |
| Total | |||||||
Mortgage-backed securities | $ | — | $ | 5,979,841 | $ | — | $ | — | $ | — | $ | 5,979,841 | ||||||
State and local housing finance agency obligations | 14,622 | 1,093,657 | — | 750 | — | 1,109,029 | ||||||||||||
Total Long-term securities | $ | 14,622 | $ | 7,073,498 | $ | — | $ | 750 | $ | — | $ | 7,088,870 | ||||||
Footnotes to Table 4.3 and Table 4.4.
| (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 4.3 and Table 4.4 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.
Fair Value Levels of Investment Debt Securities
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.
The fair value of State and local housing finance agency obligations is estimated by management using information primarily from pricing services. Due to the current lack of significant market activity, their fair values were categorized as Level 3 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. Also see Note 7. Available-for-sale securities for an explanation of amortized cost for securities hedged under ASC 815 fair value hedges.
55
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 4.5Mortgage-Backed Securities Weighted Average Rates by Contractual Maturities
| December 31, 2023 | December 31, 2022 |
| ||||||||
| Amortized |
| Weighted | Amortized | Weighted |
| |||||
Cost | Average Rate (a) |
| Cost |
| Average Rate (a) |
| |||||
Mortgage-backed securities |
|
|
|
|
|
|
| ||||
Due in one year or less | $ | 536,177 |
| 3.32 | % | $ | 375,711 |
| 3.04 | % | |
Due after one year through five years |
| 6,791,088 |
| 3.71 |
| 5,610,679 |
| 3.36 | |||
Due after five years through ten years |
| 9,144,239 |
| 3.39 |
| 7,654,366 |
| 2.83 | |||
Due after ten years |
| 3,318,297 |
| 5.35 |
| 1,750,120 |
| 3.80 | |||
Total Mortgage-backed securities | $ | 19,789,801 |
| 3.83 | % | $ | 15,390,876 |
| 3.14 | % | |
(a)Average yields are derived by dividing interest income by the average amortized cost balances of the related maturity bucket.
A significant portion of the MBS portfolio consists of floating-rate securities and the weighted average rates will change in tandem with changes in the SOFR-OIS.
Fair Value Hedges of Fixed-rate Available-for-sale Mortgage-backed Securities
The adoption of ASU 2017-12 provided an alternative guidance in the application of partial-term hedging. The ASU also provided a new approach that allows entities to hedge only the benchmark rate instead of the entire coupon of a fixed-rate instrument in a fair value hedge. We have adopted the guidance in the ASU to hedge designated available-for-sale fixed-rate CMBS. The following table summarizes key data (in thousands):
Table 4.6Fair Value Hedges of Fixed-Rate Prepayable CMBS
| Fair Value Hedges of Fixed-Rate Prepayable CMBS | |||||
December 31, 2023 |
| December 31, 2022 | ||||
Current face value of hedged CMBS | $ | 6,720,604 | $ | 4,787,741 | ||
Partial-term hedge face value of hedged CMBS | $ | 6,040,000 | $ | 4,263,000 | ||
Cumulative basis adjustment gains (losses) | $ | (505,344) | $ | (575,104) | ||
Interest rate swap contracts (par) | $ | 6,040,000 | $ | 4,263,000 | ||
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, including unsecured overnight and term deposits and 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, consisting of U.S. Treasury securities, with the objective of satisfying our liquidity requirements and 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.
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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.
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 were $7.8 billion at December 31, 2023 and $4.2 billion at December 31, 2022. Resale agreements averaged $4.9 billion and $74.0 million in 2023 and 2022, respectively. For more information, see financial statements, Note 4. Interest-bearing Deposits, Federal Funds Sold and Securities Purchased under Agreements to Resell.
Federal funds sold — Federal funds sold was $9.6 billion at December 31, 2023, and $9.5 billion at December 31, 2022, and averaged $17.3 billion and $11.6 billion in 2023 and 2022, respectively. Investments represent 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.
The table below presents federal funds sold, the counterparty credit ratings, and the domicile of the counterparty or the domicile of the counterparty’s parent for U.S. branches and agency offices of foreign commercial banks in the U.S. (in thousands):
Table 4.7Federal Funds Sold by Domicile of the Counterparty (a)
| December 31, 2023 |
| December 31, 2022 |
| Year ended December 31, 2023 | Year ended December 31, 2022 | ||||||||||||||
Foreign | S&P | Moody’s | S&P | Moody’s | Daily Average | Balance at | Daily Average | Balance at | ||||||||||||
Counterparties |
| Rating |
| Rating |
| Rating |
| Rating |
| Balance |
| period end |
| Balance |
| period end | ||||
Australia | AA- | AA3 to AA2 | AA- | AA3 | $ | 2,178,384 | $ | 2,120,000 | $ | 1,803,178 | $ | 2,045,000 | ||||||||
Austria |
| A+ |
| A1 | A+ | A2 |
| 1,266,712 | — | 918,162 | — | |||||||||
Canada |
| A to AA- |
| A3 to AA2 |
| A to AA- | A3 to AA2 |
| 4,674,477 | 4,420,000 |
| 3,841,452 | 4,255,000 | |||||||
Finland |
| AA- |
| AA3 |
| AA- | AA3 |
| 1,638,699 | 1,250,000 |
| 1,483,137 | 2,045,000 | |||||||
France |
| A to A+ |
| A1 to AA3 |
| A to A+ | A1 to AA3 |
| 1,851,110 | 1,350,000 |
| 497,855 | 500,000 | |||||||
Germany | A | A1 | A- | A1 | 32,794 | — | 114,205 | — | ||||||||||||
Netherlands |
| A+ |
| AA2 |
| A+ | AA2 |
| 897,630 | 500,000 |
| 894,247 | 625,000 | |||||||
Norway |
| AA- |
| AA2 |
| AA- | AA2 |
| 733,562 | — |
| 141,699 | — | |||||||
Sweden |
| A+ to AA- |
| AA3 to AA2 |
| A+ to AA- | AA3 to AA2 |
| 1,384,027 | — |
| 236,959 | — | |||||||
Switzerland |
| N/A |
| N/A |
| A- | A3 |
| — | — |
| 217,109 | — | |||||||
UK |
| A+ |
| A1 |
| A | A1 |
| 1,283,712 | — |
| 1,049,658 | — | |||||||
Subtotal |
|
|
|
| 15,941,107 | 9,640,000 |
| 11,197,661 | 9,470,000 | |||||||||||
USA |
| BBB+ to AA- |
| BAA1 to AA2 |
| A to AA- | A3 to AA2 |
| 1,341,871 | — |
| 448,110 | — | |||||||
Total | $ | 17,282,978 | $ | 9,640,000 |
| $ | 11,645,771 | $ | 9,470,000 | |||||||||||
| (a) | Average investment in federal funds sold has typically been greater than the period-end balance as counterparties have less demand at year-end than during the year. |
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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 4.8Trading Securities
Trading Securities | ||||||
| December 31, 2023 |
| December 31, 2022 | |||
Par value | $ | 6,325,925 | $ | 7,675,925 | ||
Amortized cost | $ | 6,148,424 | $ | 7,486,397 | ||
Carrying/Fair value | $ | 5,886,421 | $ | 7,113,419 | ||
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 of 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 4.9Economic Hedges of Fixed-rate Liquidity Trading Securities
| Economic Hedges of Fixed-Rate Trading Securities | |||||
| December 31, 2023 |
| December 31, 2022 | |||
Par/Face amounts of portfolio of U.S. Treasury fixed-rate securities (a) | $ | 6,325,925 | $ | 7,675,925 | ||
Par amounts of interest rate swaps | $ | 6,325,925 | $ | 7,775,925 | ||
(a)Balances represent outstanding amounts of U.S. Treasury securities.
Mortgage Loans Held-for-Portfolio, Net
Mortgage loans are carried in the Statements of Condition at amortized cost, less allowance for credit losses. The outstanding unpaid principal balance was $2.2 billion at December 31, 2023, an increase of $74.2 million (net of acquisitions and paydowns) from the balance at December 31, 2022. Mortgage loan balances increased due to an increase in acquisitions. During 2023, the Bank purchased $245.8 million of mortgage loans from members and paydowns were $165.7 million. Mortgage loans were investments in Mortgage Partnership Finance loans (MPF or MPF Program) and Mortgage Asset Program (MAP). Serious delinquencies at December 31, 2023 were lower than December 31, 2022. Allowance for credit losses was $3.3 million at December 31, 2023, and $1.9 million at December 31, 2022. This increase was primarily due to the implementation of a new vendor model as our existing vendor exited this service.
Mortgage Asset Program — The MAP program is a residential housing finance program in which the FHLBNY funds or purchases loans originated by members or affiliates. The FHLBNY offers the MAP as a secondary market outlet for its Participating Financial Institution (PFI) members to fund mortgages and be competitive in offering fixed-rate mortgage loan products.
Mortgage Partnership Finance Program — We invested 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 Institution (PFI). We may also acquire MPF loans through participations with other FHLBanks. 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.
58
The FHLBNY was notified on November 3, 2023 by our MAP Master Servicer, Mr. Cooper, that it experienced a cyber incident involving an unauthorized third party accessing certain internal systems of Mr. Cooper. At this time, we do not believe any FHLBNY accounting data or MAP consumer privacy data has been affected. However, as part of its response protocols, Mr. Cooper has deployed containment measures to protect its systems and data, including locking down certain systems as a precautionary measure. As a result of these protocols, PFI may be delayed in uploading their monthly MAP servicing remittance reports to the Mr. Cooper website, until the situation is resolved, or other alternative reporting protocols are established. We do not believe that this incident will be material to our operations, and we will continue to work with Mr. Cooper and our MAP PFIs to obtain these accounting reports using alternative data transmission methods.
Mortgage loans — Conventional and Insured Loans — The following table classifies mortgage loans between conventional loans and loans insured by FHA/VA (in thousands):
Table 5.1Mortgage Loans by Conventional and Insured Loans
| December 31, 2023 |
| December 31, 2022 | |||
Federal Housing Administration and Veteran Administration insured loans |
| $ | 127,147 | $ | 139,249 | |
Conventional loans | 2,055,920 | 1,969,631 | ||||
Allowance for credit losses on mortgage loans | (3,301) | (1,911) | ||||
Mortgage loans held-for-portfolio, net (a) |
| $ | 2,179,766 | $ | 2,106,969 | |
| (a) | Includes MAP portfolio balance of $449.2 million as of December 31, 2023 and $226.0 million as of December 31, 2022 which were not included in this table previously. |
Loan and PFI Concentration — Loan concentration was in New York State, which is to be expected since many of the largest PFIs are located in New York. The tables below summarize concentrations — Geographic and PFI.
Table 5.2Geographic Concentration of Mortgage Loans
December 31, 2023 | December 31, 2022 |
| ||||||||
| Number of loans % |
| Amounts outstanding % |
| Number of loans % |
| Amounts outstanding % |
| ||
New York State | 72.7 | % | 67.1 | % | 74.6 | % | 69.9 | % | ||
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Table 5.3Top Five Participating Financial Institutions — Concentration (par value, dollars in thousands):
| December 31, 2023 |
| ||||
Mortgage |
| Percent of Total |
| |||
Loans | Mortgage Loans |
| ||||
Bethpage Federal Credit Union | $ | 174,018 | 8.09 | % | ||
Teachers Federal Credit Union | 168,031 | 7.81 | ||||
Watertown Savings Bank | 127,205 | 5.92 | ||||
Citizens Bank, N.A. (a) | 119,874 | 5.57 | ||||
Manasquan Bank | 115,181 | 5.36 | ||||
All Others | 1,446,071 | 67.25 | ||||
Total (c) | $ | 2,150,380 | 100.00 | % | ||
December 31, 2022 |
| |||||
| Mortgage |
| Percent of Total |
| ||
Loans | Mortgage Loans |
| ||||
Teachers Federal Credit Union | $ | 179,424 | 8.64 | % | ||
Bethpage Federal Credit Union |
| 161,314 |
| 7.77 | ||
Watertown Savings Bank |
| 134,416 |
| 6.47 | ||
Citizens Bank, N.A.(a) |
| 132,105 |
| 6.36 | ||
Webster Bank, N.A. (b) |
| 124,915 |
| 6.02 | ||
All Others |
| 1,344,037 |
| 64.74 | ||
Total(c) | $ | 2,076,211 |
| 100.00 | % | |
| (a) | FHLBNY member Investors Bank merged into a non-member institution, Citizens Bank, N.A., on April 7, 2022. As a result, Investors Bank is no longer a member of the FHLBNY. |
| (b) | FHLBNY member Sterling National Bank merged into a non-member institution, Webster Bank, N.A., on February 1, 2022. As a result, Sterling National Bank is no longer a member of the FHLBNY. |
| (c) | Includes MPF unpaid principal balances of $1.7 billion as of December 31, 2023 and $1.9 billion as of December 31, 2022, and MAP unpaid principal balances of $0.4 billion as of December 31, 2023 and $0.2 billion as of December 31, 2022. |
Debt Financing Activity and Consolidated Obligations
Our primary source of funds continues to be the issuance of Consolidated obligation bonds and discount notes. In aggregate, carrying balances of CO bonds and CO discount notes were $145.5 billion and $147.3 billion at December 31, 2023 and December 31, 2022, respectively.
CO bonds and CO discount notes — The carrying value of Consolidated obligation bonds (CO bonds or Consolidated obligation bonds) was $97.6 billion (par, $98.6 billion) at December 31, 2023, compared to $85.5 billion (par, $87.5 billion) at December 31, 2022. The carrying value of Consolidated obligation discount notes outstanding was $47.9 billion at December 31, 2023 and $61.8 billion at December 31, 2022.
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 6.1 CO Bonds by Type.
From time to time, we hedge CO discount notes (discount notes) under ASC 815 fair value accounting; additionally, certain discount notes are also hedged under ASC 815 cash flow accounting hedge. Certain discount notes were elected under the FVO. As a result of accounting elections, carrying values of discount notes may include valuation basis adjustments. For more information about valuation basis adjustments on discount notes, see Table 6.7 Discount Notes Outstanding. Also, see financial statements, Note 17. Derivatives and Hedging Activities.
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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 U.S. 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 U.S. 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.
SOFR CO Bonds —The SOFR market continues to develop, and successful issuances of FHLBank System SOFR-linked floaters (Floating-rate notes or FRNs) have been an important development for the FHLBank debt and its support for SOFR.
The FHLBNY is an active participant in the issuance of SOFR-linked CO bonds. Outstanding balances were $26.3 billion at December 31, 2023 and $33.0 billion at December 31, 2022.
61
Consolidated obligation bonds
The following table summarizes types of Consolidated obligation bonds (CO Bonds) issued and outstanding (dollars in thousands):
Table 6.1CO Bonds by Type
| December 31, 2023 |
| December 31, 2022 |
| |||||||
Percentage | Percentage | ||||||||||
Amount |
| of Total | Amount |
| of Total |
| |||||
Fixed-rate, non-callable | $ | 33,066,960 | 33.52 | % | $ | 30,482,290 | 34.83 | % | |||
Fixed-rate, callable |
| 35,735,130 |
| 36.23 |
| 18,676,130 |
| 21.34 | |||
Step Up, callable |
| 3,473,000 |
| 3.52 |
| 5,374,000 |
| 6.14 | |||
Step Down, callable | 52,000 | 0.05 | — | — | |||||||
Floating rate, callable |
| 200,000 |
| 0.20 |
| 250,000 |
| 0.29 | |||
Single-index floating rate | 26,118,500 | 26.48 | 32,733,000 | 37.40 | |||||||
Total par value |
| 98,645,590 |
| 100.00 | % | 87,515,420 |
| 100.00 | % | ||
Bond premiums |
| 81,218 |
|
| 123,477 |
|
| ||||
Bond discounts |
| (24,665) |
|
| (26,341) |
|
| ||||
Hedge valuation basis adjustments (a) |
| (1,126,343) |
|
| (2,015,128) |
|
| ||||
Hedge basis adjustments on de-designated hedges (b) |
| 106,686 |
|
| 114,430 |
|
| ||||
FVO (c) - valuation adjustments and accrued interest |
| (113,424) |
|
| (214,103) |
|
| ||||
Total Consolidated obligation bonds | $ | 97,569,062 |
| $ | 85,497,755 |
|
| ||||
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. Our primary benchmarks are SOFR-OIS and Federal Funds-OIS. In the hedging relationships, a benchmark is elected on an instrument-by-instrument basis and becomes the discounting basis under ASC 815 for computing changes in fair values for hedged CO bonds. Table 6.2 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 cumulative hedge valuation basis gains of $1.1 billion at December 31, 2023 and $2.0 billion at December 31, 2022. Generally, hedge valuation basis gains and losses are unrealized and are expected to reverse to zero if the CO bonds are held to maturity or are called on the early option exercise dates. |
| (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 is 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 6.3 CO Bonds Elected under the Fair Value Option (FVO) discloses par amounts of CO bonds elected under the FVO. |
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 6.2 – 6.4 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.
62
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.
The following table provides information on CO bonds in an ASC 815 qualifying hedge relationship (in thousands):
Table 6.2CO Bonds Hedged under Qualifying Fair Value Hedges
| Consolidated Obligation Bonds | |||||
Par Amount | December 31, 2023 |
| December 31, 2022 | |||
Qualifying hedges |
|
|
|
| ||
Fixed-rate bullet bonds | $ | 19,960,020 | $ | 16,995,505 | ||
Fixed-rate callable bonds |
| 37,173,130 |
| 22,614,130 | ||
$ | 57,133,150 | $ | 39,609,635 | |||
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. We would record fair value changes of the FVO debt through earnings, and to the extent the debt is economically hedged, record changes in 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.
The following table provides information on CO bonds elected under the fair value option (in thousands):
Table 6.3CO Bonds Elected under the Fair Value Option (FVO)
| Consolidated Obligation Bonds | |||||
Par Amount | December 31, 2023 |
| December 31, 2022 | |||
Bonds designated under FVO | $ | 3,893,965 | $ | 4,373,965 | ||
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. We may also elect the FVO to achieve asset liability objectives. 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.
Economic hedges of CO bonds — We issue floating-rate debt indexed to a benchmark rate (Federal Funds-OIS or SOFR-OIS and LIBOR previously) and may then execute interest rate swaps that would synthetically convert the cash flows to the desired floating-rate funding indexed to another benchmark to meet our asset/liability funding strategies. The carrying value of the debt would not include fair value basis since the debt is recorded at amortized cost.
The following table provides information on CO bonds in an economic hedge relationship (in thousands):
Table 6.4Economic Hedges of CO Bonds (data in table excludes CO bonds elected under the FVO)
| Consolidated Obligation Bonds | |||||
Par Amount | December 31, 2023 |
| December 31, 2022 | |||
Bonds designated as economically hedged |
|
|
|
| ||
Fixed-rate bonds (a) | $ | 1,460,000 | $ | 15,000 | ||
| (a) | Fixed-rate debt — Bonds that were previously hedged and have fallen out of effectiveness. |
63
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 6.5CO Bonds — Maturity or Next Call Date
| December 31, 2023 |
| December 31, 2022 |
| |||||||
| Percentage of |
|
| Percentage of | |||||||
Amount | Total | Amount | Total |
| |||||||
Year of maturity or next call date |
|
|
|
|
| ||||||
Due or callable in one year or less | $ | 77,561,045 |
| 78.63 | % | $ | 63,600,290 |
| 72.67 | % | |
Due or callable after one year through two years |
| 9,312,850 |
| 9.44 |
| 11,586,805 |
| 13.24 | |||
Due or callable after two years through three years |
| 5,131,155 |
| 5.20 |
| 3,061,985 |
| 3.50 | |||
Due or callable after three years through four years |
| 1,676,385 |
| 1.70 |
| 3,164,905 |
| 3.62 | |||
Due or callable after four years through five years |
| 2,450,705 |
| 2.48 |
| 1,487,435 |
| 1.70 | |||
Thereafter |
| 2,513,450 |
| 2.55 |
| 4,614,000 |
| 5.27 | |||
Total par value | $ | 98,645,590 |
| 100.00 | % | $ | 87,515,420 |
| 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 6.6Outstanding Callable CO Bonds versus Non-callable CO bonds
| December 31, 2023 |
| December 31, 2022 | |||
Callable | $ | 39,460,130 | $ | 24,300,130 | ||
Non-Callable | $ | 59,185,460 | $ | 63,215,290 | ||
64
CO Discount Notes
The following table summarizes discount notes issued and outstanding (dollars in thousands):
Table 6.7Discount Notes Outstanding
| December 31, 2023 |
| December 31, 2022 |
| |||
Par value | $ | 48,657,920 | $ | 62,295,735 | |||
Amortized cost | $ | 47,914,413 | $ | 61,832,418 | |||
Hedge value basis adjustments (a) |
| (7,363) |
| (39,088) | |||
Hedge basis adjustments on de-designated hedges (b) | (142) | (341) | |||||
FVO (c) - valuation adjustments and remaining accretion |
| — |
| — | |||
Total Consolidated obligation discount notes | $ | 47,906,908 | $ | 61,792,989 | |||
Weighted average interest rate |
| 5.17 | % |
| 3.97 | % | |
| (a) | Hedge value basis adjustments — The reported carrying values of hedged CO discount notes 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. In the hedging relationships, a specific benchmark is elected on an instrument-by-instrument basis and becomes the discounting basis under ASC 815 for computing changes in fair values for the hedged CO discount notes. Notional amounts of $43.4 billion and $34.6 billion were hedged under ASC 815 qualifying fair value hedges at December 31, 2023 and December 31, 2022, respectively. The application of ASC 815 accounting methodology resulted in immaterial amounts of net cumulative hedge valuation adjustments as noted in the table above. Generally, hedge valuation basis gains and losses are unrealized and are expected to reverse to zero if the CO discount notes are held to maturity. |
| (b) | Hedge basis adjustments on de-designated hedges — Represents the unamortized balances of valuation basis of CO discount notes 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. |
| (c) | FVO valuation adjustments — Valuation basis adjustments are recorded to recognize changes in the entire or full fair values including unaccreted discounts on CO discount notes elected under the FVO. Changes in benchmark interest rates, notional amounts of CO discount notes elected under FVO and remaining terms to maturity are factors that impact hedge valuation adjustments. No CO discount notes were elected under the FVO at December 31, 2023 and December 31, 2022. |
The following table summarizes Fair Value hedges of discount notes (in thousands):
Table 6.8Fair Value Hedges of Discount Notes
Consolidated Obligation Discount Notes | ||||||
Principal Amount |
| December 31, 2023 |
| December 31, 2022 | ||
Discount notes hedged under qualifying hedge | $ | 43,431,306 | $ | 34,626,552 | ||
The following table summarizes economic hedges of discount notes (in thousands):
Table 6.9Economic Hedges of Discount Notes
Consolidated Obligation Discount Notes | ||||||
Par Amount |
| December 31, 2023 |
| December 31, 2022 | ||
Discount notes designated as economic hedges (a) | $ | 886,789 | $ | 13,940,198 | ||
| (a) | Represents CO discount notes that were de-designated; unamortized hedge basis adjustments. |
65
The following table summarizes Cash flow hedges of discount notes (in thousands):
Table 6.10Cash Flow Hedges of Discount Notes
Consolidated Obligation Discount Notes | ||||||
Principal Amount |
| December 31, 2023 |
| December 31, 2022 | ||
Discount notes hedged under qualifying hedge (a) | $ | 1,608,000 | $ | 1,608,000 | ||
| (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 maximum length of time over which we are hedging this exposure is 9 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 hedge gains and losses in Note 17. Derivatives and Hedging Activities. |
Discount Notes under the Fair Value Option (FVO)
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 variable-rate instruments. 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 Fair Value Option Disclosures in Note 18. Fair Values of Financial Instruments. No CO discount notes were elected under the FVO at December 31, 2023 and December 31, 2022.
Recent Rating Actions
Table 6.11 below presents FHLBank’s long-term credit rating, short-term credit rating and outlook at February 29, 2024.
Table 6.11FHLBNY Ratings
S&P | Moody’s | |||||||||||
Long-Term/ Short-Term | Long-Term/ Short-Term | |||||||||||
Year |
|
| Rating |
| Outlook |
|
| Rating |
| Outlook | ||
2023 | February 29, 2024 | AA+/A-1+ | Stable/Affirmed | February 29, 2024 | AAA/P-1 | Negative/Affirmed | ||||||
2022 | February 28, 2023 |
| AA+/A-1+ |
| Stable/Affirmed | February 28, 2023 |
| AAA/P-1 |
| Stable/Affirmed | ||
2021 | December 10, 2021 |
| AA+/A-1+ |
| Stable/Affirmed | December 27, 2021 |
| AAA/P-1 |
| Stable/Affirmed | ||
Accrued interest payable
Accrued interest payable — Amounts outstanding were $716.0 million at December 31, 2023 and $370.5 million at December 31, 2022. 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 $138.7 million at December 31, 2023 and $131.4 million at December 31, 2022. Other liabilities comprised of unfunded pension liabilities, Federal Reserve pass-through reserves held on behalf of members, and miscellaneous payables.
66
Stockholders’ Capital
The following table summarizes the components of Stockholders’ capital (in thousands):
Table 7.1Stockholders’ Capital
| December 31, 2023 |
| December 31, 2022 | |||
Capital Stock (a) | $ | 6,049,570 | $ | 6,387,701 | ||
Unrestricted retained earnings (b) |
| 1,276,583 |
| 1,185,112 | ||
Restricted retained earnings (c) |
| 1,061,081 |
| 910,855 | ||
Accumulated Other Comprehensive Income (Loss) |
| (142,533) |
| (136,285) | ||
Total Capital | $ | 8,244,701 | $ | 8,347,383 | ||
| (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. |
| (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 as mandated by the FHLBank Joint Capital Enhancement Agreement (Capital Agreement). |
| (c) | Restricted retained earnings — Restricted retained earnings balance at December 31, 2023 has grown to $1.1 billion from the time the provisions were implemented in 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 current calendar quarter. By way of reference, the Restricted retained earnings target calculated at December 31, 2023 was $1.4 billion based on the FHLBNY’s average consolidated obligations outstanding during the current calendar quarter, as compared to actual Restricted retained earnings of $1.1 billion at December 31, 2023. Also see Note 14. Capital Stock, Mandatorily Redeemable Capital Stock and Restricted Retained Earnings. |
The following table summarizes the components of AOCI (in thousands):
Table 7.2Accumulated Other Comprehensive Income (Loss) (AOCI)
| December 31, 2023 |
| December 31, 2022 | |||
Accumulated other comprehensive income (loss) | ||||||
Non-credit portion on held-to-maturity securities, net (a) | $ | (763) | $ | (998) | ||
Net market value unrealized gains (losses) on available-for-sale securities (b) |
| (713,284) |
| (808,772) | ||
Net Fair value hedging gains (losses) on available-for-sale securities (b) |
| 505,344 |
| 575,104 | ||
Net Cash flow hedging gains (losses) (c) |
| 75,201 |
| 102,200 | ||
Employee supplemental retirement plans (d) |
| (9,031) |
| (3,819) | ||
Total Accumulated other comprehensive income (loss) | $ | (142,533) | $ | (136,285) | ||
| (a) | Represents cumulative unamortized non-credit losses. Balances in AOCI have declined due to accretion recorded as a reduction in AOCI and a corresponding increase in the balance sheet carrying values of the impaired securities. |
| (b) | Net unrealized losses of $713.3 million at December 31, 2023 and net unrealized losses of $808.8 million at December 31, 2022, represented third-party pricing vendors’ market-based unrealized gains/losses of securities designated as AFS. Net unrealized gains of $505.3 million and $575.1 million at December 31, 2023 and December 31, 2022, represent changes in the benchmark rate (the risk being hedged) calculated by the Bank’s internal models for AFS designated in ASC 815 hedging relationships. Hedging gains and losses are recorded through earnings with an offset to the carrying values of hedged AFS securities. Hedging basis will reverse to zero as hedges mature. |
| (c) | Cash flow hedging gains (losses) recorded in AOCI were primarily the result of cash flow hedges of sequential issuance of discount notes; also included immaterial valuation basis of cash flow hedges of anticipatory issuance of CO bonds. See Table 7.3 AOCI Roll forward 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. |
67
The following table presents amounts recognized in and reclassified out of AOCI due to cash flow and fair value hedges (in thousands):
Table 7.3AOCI Roll forward due to ASC 815 Hedging Programs
December 31, 2023 | |||||||||
| Cash Flow Hedges |
| Fair Value Hedges | ||||||
Rollover Hedge | Anticipatory Hedge | ||||||||
Program |
| Program |
| AFS Securities | |||||
Beginning balance | $ | 103,468 | $ | (1,268) | $ | 575,104 | |||
Changes in fair values (a) |
| (26,995) |
| 805 |
| (69,760) | |||
Amount reclassified |
| — |
| 1,248 |
| — | |||
Fair Value - closed contract |
| — |
| (2,057) |
| — | |||
Ending balance | $ | 76,473 | $ | (1,272) | $ | 505,344 | |||
Notional amount of swaps outstanding | $ | 1,608,000 | $ | — | $ | 6,040,000 | |||
| December 31, 2022 | ||||||||
| Cash Flow Hedges |
| Fair Value Hedges | ||||||
Rollover Hedge | Anticipatory Hedge | ||||||||
| Program |
| Program |
| AFS Securities | ||||
Beginning balance | $ | (94,601) | $ | (6,898) | $ | 30,667 | |||
Changes in fair values (a) |
| 198,069 |
| (805) |
| 544,437 | |||
Amount reclassified |
| — |
| 1,190 |
| — | |||
Fair Value - closed contract |
| — |
| 5,245 |
| — | |||
Ending balance | $ | 103,468 | $ | (1,268) | $ | 575,104 | |||
Notional amount of swaps outstanding | $ | 1,608,000 | $ | 54,005 | $ | 4,263,000 | |||
| December 31, 2021 | ||||||||
| Cash Flow Hedges |
| Fair Value Hedges | ||||||
Rollover Hedge | Anticipatory Hedge | ||||||||
| Program |
| Program |
| AFS Securities | ||||
Beginning balance | $ | (198,494) | $ | (8,710) | $ | (44,052) | |||
Changes in fair values (a) |
| 103,893 |
| — |
| 74,719 | |||
Amount reclassified |
| — |
| 1,511 |
| — | |||
Fair Value - closed contract |
| — |
| 301 |
| — | |||
Ending balance | $ | (94,601) | $ | (6,898) | $ | 30,667 | |||
Notional amount of swaps outstanding | $ | 1,693,000 | $ | — | $ | 2,859,000 | |||
| (a) | Represents fair value changes of open swap contracts in cash flow hedges. For more information, see Financial Statements, 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 previous 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.
68
The following table summarizes dividends paid and payout ratios:
Table 7.4Dividends Paid and Payout Ratios
| Twelve months ended |
| |||||
December 31, | December 31, |
| |||||
2023 |
| 2022 |
| ||||
Cash dividends paid per share | $ | 8.31 | $ | 5.34 |
| ||
Dividends paid (a)(c) | $ | 509,434 | $ | 252,374 | |||
Pay-out ratio (b) |
| 67.82 | % |
| 60.47 | % | |
| (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. |
Derivative Instruments and Hedging Activities
Interest rate swaps, swaptions, cap and floor agreements (collectively, derivatives) enable us to manage our exposure to changes in interest rates by adjusting the effective maturity, repricing frequency, or option characteristics of financial instruments. To a limited extent, we also use interest rate swaps to hedge changes in interest rates prior to debt issuance and essentially lock in funding costs. Finance Agency regulations prohibit the speculative use of derivatives. For additional 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 the principal derivatives hedging strategies outstanding as of December 31, 2023 and December 31, 2022:
Table 8.1Derivative Hedging Strategies — Advances
December 31, 2023 | December 31, 2022 | |||||||||
Hedge | Notional Amount | Notional Amount | ||||||||
Hedged Item / Hedging Instrument |
| Hedging Objective |
| Designation |
| (in millions) |
| (in millions) | ||
Pay-fixed, receive float interest rate swap (without options) | Converts the advance’s fixed rate to a variable-rate index. | Fair Value | $ | 49,092 | $ | 39,392 | ||||
Economic | $ | 2,308 | $ | 318 | ||||||
Pay-fixed, receive float interest rate swap (with options) |
| Converts the advance’s fixed rate to a variable-rate index and offsets option risk in the advance. |
| Fair Value | $ | 2,522 | $ | 4,010 | ||
Pay-fixed with embedded features, receive-float interest-rate swap (non-callable) |
| Reduces interest-rate sensitivity and repricing gaps by converting the advance’s fixed rate to a variable-rate index and/or offsets embedded option risk in the advance. |
| Fair Value | $ | — | $ | 350 | ||
Table 8.2Derivative Hedging Strategies — Investments
December 31, 2023 | December 31, 2022 | |||||||||
| Hedge | Notional Amount | Notional Amount | |||||||
Hedged Item / Hedging Instrument | Hedging Objective |
| Designation |
| (in millions) |
| (in millions) | |||
Pay-fixed, receive float interest-rate swap | Converts the investment’s fixed rate to a variable-rate index. | Fair Value | $ | 6,040 | $ | 4,263 | ||||
| Economic | $ | 6,326 | $ | 7,776 | |||||
69
Table 8.3Derivative Hedging Strategies — Consolidated Obligation Bonds
| December 31, 2023 | December 31, 2022 | ||||||||
| Hedge |
| Notional Amount |
| Notional Amount | |||||
Hedged Item / Hedging Instrument | Hedging Objective | Designation | (in millions) | (in millions) | ||||||
Receive-fixed or -structured, pay float interest rate swap (without options) |
| Converts the bond’s fixed or structured rate to a variable-rate index. |
| Fair Value | $ | 19,960 | $ | 16,996 | ||
| Economic | $ | 4,579 | $ | 4,374 | |||||
Receive-fixed or -structured, pay float interest rate swap (with options) |
| Converts the bond’s fixed- or structured-rate to a variable-rate index and offsets option risk in the bond. | Fair Value | $ | 37,173 | $ | 22,614 | |||
| Economic | $ | 775 | $ | 15 | |||||
Forward-starting interest rate swap |
| Locks in the cost of funding on anticipated issuance of debt. | Cash Flow | $ | — | $ | 54 | |||
Table 8.4Derivative Hedging Strategies — Consolidated Obligation Discount Notes
December 31, 2023 | December 31, 2022 | |||||||||
|
| Hedge |
| Notional Amount |
| Notional Amount | ||||
Hedged Item / Hedging Instrument | Hedging Objective | Designation | (in millions) | (in millions) | ||||||
Receive-fixed, pay float interest-rate swap |
| Converts the discount note’s fixed rate to a variable-rate index. |
| Fair Value | $ | 43,431 | $ | 34,627 | ||
| Economic | $ | 887 | $ | 13,940 | |||||
Pay-fixed, receive float interest-rate swap |
| Hedging sequential issuance of discount notes to reduce interest-rate sensitivity. | Cash Flow | $ | 1,608 | $ | 1,608 | |||
Table 8.5Derivative Hedging Strategies — Balance Sheet
December 31, 2023 | December 31, 2022 | |||||||||
|
| Hedge |
| Notional Amount |
| Notional Amount | ||||
Hedged Item / Hedging Instrument | Hedging Objective | Designation | (in millions) | (in millions) | ||||||
Pay-float, receive-fixed interest-rate swap | Interest-rate swap not linked to specific assets, liabilities or forecasted transactions. | Economic | $ | 9,760 | $ | 11,415 | ||||
Pay-fixed, receive-float interest-rate swap | Interest-rate swap not linked to specific assets, liabilities or forecasted transactions. | Economic | $ | 9,760 | $ | 11,415 | ||||
Interest-rate cap or floor |
| Protects against changes in income of certain assets due to changes in interest rates. |
| Economic | $ | 150 | $ | 800 | ||
Table 8.6Derivative Hedging Strategies — Intermediation
December 31, 2023 | December 31, 2022 | |||||||||
|
| Hedge |
| Notional Amount |
| Notional Amount | ||||
Hedged Item / Hedging Instrument | Hedging Objective | Designation | (in millions) | (in millions) | ||||||
Pay-fixed, receive-float interest rate swap, and receive-fixed, pay-float interest rate swap |
| To offset interest-rate swaps executed with members by executing interest rate swaps with derivatives counterparties. |
| Economic | $ | 36 | $ | 66 | ||
Table 8.7Derivative Hedging Strategies — Stand-Alone
December 31, 2023 | December 31, 2022 | |||||||||
|
| Hedge |
| Notional Amount |
| Notional Amount | ||||
Hedged Item / Hedging Instrument | Hedging Objective | Designation | (in millions) | (in millions) | ||||||
Mortgage delivery commitment |
| Exposed to fair-value risk associated with fixed-rate mortgage purchase commitments. |
| Economic | $ | 19 | $ | 10 | ||
70
Derivative Credit Risk Exposure and Concentration
In addition to market risk, we are subject to credit risk in derivative transactions because of the potential for non-performance by the counterparties, which could result in the FHLBNY having to acquire a replacement derivative from a different counterparty at a cost that may exceed its recorded fair values. We are also subject to operational risks in the execution and servicing of derivative transactions. The degree of counterparty credit risk may depend on, among other factors, the extent to which netting procedures and/or the provision of collateral are used to mitigate the risk. Summarized below are our risk measurement and mitigation processes:
Risk measurement — We estimate exposure to credit loss on derivative instruments by calculating the replacement cost, on a present value basis, to settle at current market prices all outstanding derivative contracts in a gain position, net of collateral pledged by the counterparty. All derivative contracts with non-members are also subject to master netting agreements or other right of offset arrangements.
Exposure — In determining credit risk, we consider accrued interest receivable and payable, and the legal right to offset assets and liabilities by counterparty. We attempt to mitigate exposure by requiring derivative counterparties to pledge cash collateral if the amount of exposure is above the collateral threshold agreements. When we post excess cash collateral, we consider the excess collateral as our derivative exposure.
Our credit exposures (derivatives in a net gain position) were to highly rated counterparties and Derivative Clearing Organizations (DCO) that met our credit quality standards. Our exposures also included open derivative contracts executed on behalf of member institutions, and the exposures were collateralized under standard advance collateral agreements with our members. For such transactions, acting as an intermediary, we offset the transaction by purchasing equivalent notional amounts of derivatives from unrelated derivative counterparties.
Risk mitigation — We attempt to mitigate derivative counterparty credit risk by contracting only with experienced counterparties with investment-quality credit ratings that meet our credit quality standards. Annually, our management and Board of Directors review and approve all non-member derivative counterparties. We monitor counterparties on an ongoing basis for significant business events, including ratings actions taken by a Nationally Recognized Statistical Rating Organization (NRSRO). All approved derivatives counterparties must enter into a master ISDA agreement with us before we execute a trade through that counterparty. In addition, for all bilateral OTC derivatives, we have executed the Credit Support Annex to the ISDA agreement that provides for collateral support at predetermined thresholds. For Cleared-OTC derivatives, margin requirements are mandated under the Dodd-Frank Act. We believe that such arrangements — margin requirements, the selection of experienced, highly-rated counterparties and ongoing monitoring — have sufficiently mitigated our exposures, and we do not anticipate any credit losses on derivative contracts.
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.
71
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 8.8Derivatives Counterparty Credit Ratings
| December 31, 2023 | |||||||||||||||||
Net Derivatives | ||||||||||||||||||
| Fair Value |
| Cash Collateral |
|
| Non-Cash Collateral |
| Net Credit | ||||||||||
Before | Pledged To (From) | Balance Sheet Net | Pledged To (From) | Exposure to | ||||||||||||||
Credit Rating | Notional Amount | Collateral | Counterparties (a) | Credit Exposure | Counterparties (b) | Counterparties | ||||||||||||
Non-member counterparties |
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Asset positions with credit exposure |
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Uncleared derivatives |
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Single A asset (c) | $ | 154,557 | $ | 7,954 | $ | (7,910) | $ | 44 | $ | — | $ | 44 | ||||||
Cleared derivatives assets (d) |
| 135,237,220 |
| 15,183 |
| — |
| 15,183 |
| 768,486 |
| 783,669 | ||||||
| 135,391,777 |
| 23,137 |
| (7,910) |
| 15,227 |
| 768,486 |
| 783,713 | |||||||
Liability positions with credit exposure |
|
|
|
|
|
| ||||||||||||
Uncleared derivatives |
|
|
|
|
|
| ||||||||||||
Single A liability (c) |
| 12,902,000 |
| (57,380) |
| 167,200 |
| 109,820 |
| (96,036) |
| 13,784 | ||||||
Cleared derivatives liability (d) |
| 820,145 |
| — |
| — |
| — |
| 26,362 |
| 26,362 | ||||||
| 13,722,145 |
| (57,380) |
| 167,200 |
| 109,820 |
| (69,674) |
| 40,146 | |||||||
|
|
|
|
|
| |||||||||||||
Total derivative positions with non-member counterparties to which the Bank had credit exposure |
| 149,113,922 |
| (34,243) |
| 159,290 |
| 125,047 |
| 698,812 |
| 823,859 | ||||||
Delivery commitments |
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Derivative position with delivery commitments |
| 19,277 |
| 155 |
| — |
| 155 |
| (155) |
| — | ||||||
Total derivative position with members |
| 19,277 |
| 155 |
| — |
| 155 |
| (155) |
| — | ||||||
Total | $ | 149,133,199 | $ | (34,088) | $ | 159,290 | $ | 125,202 | $ | 698,657 | $ | 823,859 | ||||||
Derivative positions without credit exposure |
| 45,293,590 |
|
|
|
|
|
|
|
|
|
| ||||||
Total notional | $ | 194,426,789 |
|
|
|
|
|
|
|
|
|
| ||||||
72
| December 31, 2022 | |||||||||||||||||
Net Derivatives | ||||||||||||||||||
|
| Fair Value |
| Cash Collateral |
|
| Non-Cash Collateral |
| Net Credit | |||||||||
Before | Pledged To (From) | Balance Sheet Net | Pledged To (From) | Exposure to | ||||||||||||||
Credit Rating | Notional Amount | Collateral | Counterparties (a) | Credit Exposure | Counterparties (b) | Counterparties | ||||||||||||
Non-member counterparties |
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Asset positions with credit exposure |
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Uncleared derivatives | ||||||||||||||||||
Single A asset (c) |
| $ | 699,583 | $ | 10,718 | $ | (10,120) | $ | 598 | $ | — | $ | 598 | |||||
Cleared derivatives assets (d) |
| 129,067,443 |
| 31,373 |
| — |
| 31,373 |
| 549,089 |
| 580,462 | ||||||
| 129,767,026 |
| 42,091 |
| (10,120) |
| 31,971 |
| 549,089 |
| 581,060 | |||||||
Liability positions with credit exposure | ||||||||||||||||||
Uncleared derivatives |
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Single A liability (c) |
| 9,654,020 |
| (246,420) |
| 376,180 |
| 129,760 |
| (108,760) |
| 21,000 | ||||||
Triple B liability (c) |
| 6,035,000 |
| (187,781) |
| 189,970 |
| 2,189 |
| — |
| 2,189 | ||||||
Cleared derivatives liability (d) |
| 839,545 |
| — |
| — |
| — |
| 27,667 |
| 27,667 | ||||||
| 16,528,565 |
| (434,201) |
| 566,150 |
| 131,949 |
| (81,093) |
| 50,856 | |||||||
Total derivative positions with non-member counterparties to which the Bank had credit exposure |
| 146,295,591 |
| (392,110) |
| 556,030 |
| 163,920 |
| 467,996 |
| 631,916 | ||||||
Delivery commitments |
|
|
|
|
|
|
|
|
|
|
| |||||||
Derivative position with delivery commitments |
| 9,837 |
| 1 |
| — |
| 1 |
| (1) |
| — | ||||||
Total derivative position with members |
| 9,837 |
| 1 |
| — |
| 1 |
| (1) |
| — | ||||||
Total | $ | 146,305,428 | $ | (392,109) | $ | 556,030 | $ | 163,921 | $ | 467,995 | $ | 631,916 | ||||||
Derivative positions without credit exposure |
| 27,737,130 |
|
|
|
|
|
|
|
|
| |||||||
Total notional | $ | 174,042,558 |
|
|
|
|
|
|
|
|
|
| ||||||
| (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 (considered as collateral) to Derivative Clearing Organizations (DCOs) in cash or securities. We had pledged $794.8 million and $576.8 million in marketable securities as collateral at December 31, 2023 and December 31, 2022, respectively. At December 31, 2023 and December 31, 2022 we did not pledge cash as collateral. |
Liquidity, Cash Flows, Short-Term Borrowings and Short-Term Debt
Our primary source of liquidity is the issuance of Consolidated obligation bonds and discount notes. To refinance maturing Consolidated obligations, we rely on the willingness of our investors to purchase new issuances. We have access to the discount note market, and the efficiency of issuing discount notes is an important 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 also sources of funds. Short-term unsecured borrowings from other FHLBanks and in the federal funds market, as well as secured borrowings in the repo 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.
73
Finance Agency Regulations — Liquidity
Regulatory requirements are specified in Parts 1239, 1270 and 1277 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; and (3) Advances with a remaining maturity not to exceed five years that are made to members in conformity with part 1266. We are 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 and to 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, the Bank provides for Contingency Liquidity, which is defined as the sources of cash the Bank 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.
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 ready liquidity to our members. In managing liquidity risk, we are required to maintain certain liquidity measures in accordance with the FHLBank Act, an Advisory Bulletin 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 12 CFR 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 9.1Deposit Liquidity
| Average Deposit |
| Average Actual |
|
| ||||
For the Quarters Ended | Reserve Required | Deposit Liquidity | Excess | ||||||
December 31, 2023 | $ | 3,325 | $ | 97,683 | $ | 94,358 | |||
September 30, 2023 |
| 3,058 |
| 93,912 |
| 90,854 | |||
June 30, 2023 |
| 2,821 |
| 115,971 |
| 113,150 | |||
March 31, 2023 |
| 2,899 |
| 109,181 |
| 106,282 | |||
December 31, 2022 |
| 887 |
| 90,794 |
| 89,907 | |||
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.
74
The following table summarizes excess operational liquidity (in millions):
Table 9.2Operational Liquidity
| Average Balance Sheet |
| Average Actual |
|
| ||||
For the Quarters Ended | Liquidity Requirement | Operational Liquidity | Excess | ||||||
December 31, 2023 | $ | 17,595 | $ | 44,202 | $ | 26,607 | |||
September 30, 2023 |
| 34,167 |
| 41,218 |
| 7,051 | |||
June 30, 2023 |
| 31,863 |
| 53,127 |
| 21,264 | |||
March 31, 2023 |
| 19,411 |
| 44,351 |
| 24,940 | |||
December 31, 2022 |
| 6,990 |
| 32,666 |
| 25,676 | |||
Contingency Liquidity. The Bank holds “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 exceed the 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 9.3Contingency Liquidity
| Average Five Day |
| Average Actual |
|
| ||||
For the Quarters Ended | Requirement | Contingency Liquidity | Excess | ||||||
December 31, 2023 | $ | 1,560 | $ | 43,257 | $ | 41,697 | |||
September 30, 2023 |
| 2,749 |
| 40,528 |
| 37,779 | |||
June 30, 2023 |
| 4,127 |
| 51,590 |
| 47,463 | |||
March 31, 2023 |
| 3,137 |
| 42,038 |
| 38,901 | |||
December 31, 2022 |
| 2,269 |
| 29,280 |
| 27,011 | |||
The Liquidity 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 requires the Bank to maintain between 10 and 30 calendar days (“the Range”) of positive cash flow assuming all advances renew and to hold liquidity in a specified range of the notional of our outstanding standby financial letters of credit. The FHFA has periodically issued non-public supervisory letters that establish base case guidance within the Range. For three days during March 2023, we were in the lower part of the Range, temporarily below the FHFA’s base case guidance, in order to meet significant member demand for advances resulting from the banking crisis, as permitted by the Advisory Bulletin. The Advisory Bulletin also provides guidance on maintaining appropriate funding gaps for three-month and one-year maturity horizons. We remained in compliance with the funding gaps provision and all Liquidity regulations.
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.
75
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.
Cash flows
Cash and due from Banks was $48.2 million at December 31, 2023 and $27.4 million at December 31, 2022. Cash and cash equivalents exclude short-term interest-bearing deposits, federal funds sold, and securities purchased under agreements to resell. The following discussion highlights the major activities and transactions that affected our cash flows.
Cash flows provided by/(used in) operating activities — Operating assets and liabilities support our lending activities to members, and can vary significantly in the normal course of business due to the amount and timing of cash flows, which are affected by member-driven borrowing, our investment strategies, and market conditions. Management believes cash flows from operations, available cash balances and our ability to generate cash through the issuance of Consolidated obligation bonds and discount notes are sufficient to fund our operating liquidity needs.
Operating activities resulted in $0.6 billion in net cash inflows in the twelve months ended December 31, 2023, compared to net cash inflows of $2.3 billion in 2022. Period changes in cash flows provided by or used in operating activities were largely driven by: (a) Net income was $751.1 million in the twelve months ended December 31, 2023 and $417.4 million in 2022; (b) Net cash outflows from Derivatives and hedging activities were $425.9 million in the twelve months ended December 31, 2023, compared to net cash inflows of $1.3 billion in 2022; and (c) Negative adjustments to operating cash flows of $110.5 million to recognize unrealized valuation gains on U.S. Treasury securities at December 31, 2023, compared to positive adjustments of $364.0 million to recognize unrealized valuation losses on U.S. Treasury securities in 2022.
Cash flows provided by/(used in) investing activities — Investing activities resulted in $0.9 billion in net cash inflows in the twelve months ended December 31, 2023 compared to $55.9 billion in net cash outflows in 2022. In the twelve months ended December 31, 2023, we acquired $1.5 billion of Treasury securities compared to $4.8 billion in 2022. Repayments from Treasury securities were $2.6 billion in the twelve months ended December 31, 2023 compared to $2.3 billion in 2022. Net cash outflows from Securities purchased under agreements to resell were $3.6 billion in the twelve months ended December 31, 2023 compared to net cash outflows of $3.0 billion in 2022.
Cash flows provided by/(used in) financing activities — Our primary source of funding is the issuance of Consolidated obligation debt. Issuance of capital stock is another source. Financing activities reported net cash outflows of $1.5 billion in the twelve months ended December 31, 2023 compared to net cash inflows of $53.6 billion in 2022.
For more information, see Statements of Cash Flows in the financial statements.
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.
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 regulations 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.
76
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 mortgage 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.
Purchases of MBS. Finance Agency investment regulations limit the purchase of mortgage-backed securities to 300% of capital. We were in compliance with the regulation at all times.
Table 9.4FHFA MBS Limits
December 31, 2023 | December 31, 2022 |
| |||||||
| Actual |
| Limits |
| Actual |
| Limits |
| |
Mortgage securities investment authority | 242 | % | 300 | % | 188 | % | 300 | % | |
The Finance Agency has established a ratio by which the Finance Agency will assess each FHLBank’s core mission achievement. Core mission achievement is determined using a ratio of primary mission assets, which include advances and acquired member assets (mortgage loans acquired from members), to Consolidated obligations. The ratio will be determined at each year-end and will be calculated using annual average par values.
Table 9.5Core Mission Achievement
| December 31, 2023 |
| December 31, 2022 |
| |||
Par Values (dollars in thousands) | Annual Average | Annual Average |
| ||||
Advances | $ | 111,727,623 | $ | 83,643,225 | |||
Mortgage Loans |
| 2,106,517 |
| 2,155,287 | |||
Total Primary Mission Assets | $ | 113,834,140 | $ | 85,798,512 | |||
Total Consolidated Obligations | $ | 153,201,022 | $ | 114,722,063 | |||
U.S. Treasury obligations qualifying as HQLA under AB 2018-07 (a) | $ | 5,191,477 | $ | 7,210,995 | |||
Core Mission Achievement Ratio |
| 77 | % |
| 80 | % | |
Target Ratio |
| 70 | % |
| 70 | % | |
| (a) | The annual average par value of the U.S. Treasury Securities that are held as Trading securities is deducted from the denominator of the Primary Core Mission Asset ratio, as allowed under the FHFA guidelines. |
Operational Risk Management
Operational risk is the risk of loss resulting from inadequate or failed internal processes, systems, or human factors, or from external events. Operational risk is inherent in our business activities and, as with other risk types, is managed through an overall framework designed to balance strong management oversight with well-defined independent risk management. This framework includes: policies and procedures for managing operational risks; recognized ownership of the risk by the business; a compliance group that evaluates compliance with board and regulatory policies, including the evaluation and reporting of operational risk incidents, which are regularly reported directly to the Audit Committee of the Bank’s Board of Directors regarding compliance with policies and procedures, including those related to managing operational risks.
77
Information Security and Business Continuity. The Bank has an Information Security Department that is responsible for the policy, procedures, reviews, education, and management of the information security program. The Bank also has a department that is responsible for the overall business continuity program, which includes training, testing, coordination, and continual updates. Information security and the protection of confidential customer data, and business continuity are priorities for the FHLBNY, and we have implemented processes that will help secure confidential data and continuity of operations. The information security program is reviewed and enhanced periodically to address emerging threats to data integrity and cyber-attacks. The business continuity program includes annual testing of our capabilities. Results of business continuity testing and information security are routinely presented to senior management of the FHLBNY and its Board of Directors.
The FHLBNY’s Information Technology group maintains and regularly reviews controls to ensure that technology assets are well managed and secure from unauthorized access and in accordance with approved policies and procedures.
Results of Operations
The following section provides a comparative discussion of the FHLBNY’s results of operations for the three years ended December 31, 2023, 2022 and 2021. For a discussion of the critical accounting estimates used by the FHLBNY that affect the results of operations, see financial statements, Note 1. Summary of Significant Accounting Policies.
Net Income
Interest income from advances is the principal source of revenue. Other sources of revenue are interest income from investment debt securities, liquidity trading securities, mortgage loans in the MPF and MAP portfolio, securities purchased under agreements to resell and federal funds sold. Fair value gains and losses on liquidity trading securities and equity investments also impact Net income. 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 10.1Principal Components of Net Income
Years ended December 31, | |||||||||
| 2023 |
| 2022 |
| 2021 | ||||
Total interest income | $ | 8,400,387 | $ | 2,758,182 | $ | 965,578 | |||
Total interest expense |
| 7,405,050 | 2,124,455 | 424,981 | |||||
Net interest income before provision for credit losses |
| 995,337 | 633,727 | 540,597 | |||||
Provision (Reversal) for credit losses |
| 1,695 | (226) | (5,528) | |||||
Net interest income after provision for credit losses |
| 993,642 | 633,953 | 546,125 | |||||
Total other income (loss) |
| 77,079 | 29,049 | (47,422) | |||||
Total other expenses |
| 236,059 | 199,109 | 203,668 | |||||
Income before assessments |
| 834,662 | 463,893 | 295,035 | |||||
Affordable Housing Program Assessments |
| 83,531 | 46,517 | 29,514 | |||||
Net income | $ | 751,131 | $ | 417,376 | $ | 265,521 | |||
Net Income — 2023 Compared to 2022
Net income — For the FHLBNY, Net income is Net interest income, minus Provision (Reversal) for credit losses, plus Other income (loss), less Other expenses and Assessments set aside for the FHLBNY’s Affordable Housing Program.
Net income for 2023 was $751.1 million, an increase of $333.7 million, or 80.0% compared to 2022. Summarized below are the primary components of our Net income:
78
Net interest income —Net interest income was $995.3 million in 2023, an increase of $361.6 million, or 57.1% compared to 2022. Net interest spread was 33 basis points for 2023 compared to 39 basis points for 2022. For more information, see Table 10.2 Net Interest Income and accompanying discussions in this MD&A.
| ● | Provision (Reversal) for credit losses for 2023 was a provision of $1.7 million compared to a recovery of $0.2 million for 2022. The Bank transitioned models in June of 2023 and the newly adopted model assumptions are different than the prior model. |
Other income (loss) — Other income (loss) reported a gain of $77.1 million in 2023 compared to a gain of $29.0 million in 2022.
| ● | Service fees and other were $21.2 million in 2023 compared to $17.3 million reported in 2022. Service fees and other are primarily fee revenues from financial letters of credit. |
| ● | Financial instruments carried at fair values reported net valuation losses of $99.2 million in 2023 compared to net gains of $207.0 million in 2022. For more information, see financial statements, Fair Value Option Disclosures in Note 18. Fair Values of Financial Instruments. Also see Table 10.8 Other Income (Loss) and accompanying discussions in this MD&A. |
| ● | Derivative activities reported net gains of $30.9 million in Other income in 2023, compared to net gains of $182.0 million in 2022. For more information, see Table 10.10 Other Income (Loss) — Impact of Derivative Gains and Losses and accompanying discussions in this MD&A. |
| ● | U.S. Treasury Securities held for liquidity (classified as trading) reported net fair value gains of $110.5 million in 2023 compared to net fair value losses of $364.0 million in 2022. |
| ● | Equity Investments, held to finance payments to retirees in a non-qualified pension plan, reported net fair value gains of $12.1 million in 2023 compared to net losses of $15.4 million in 2022. |
Other expenses were $236.1 million in 2023 compared to $199.1 million in 2022. 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 $85.1 million in 2023, up from $74.0 million in 2022. |
| ● | Compensation and benefits expenses were $102.6 million in 2023 compared to $94.3 million in 2022. |
| ● | The expenses allocated for our share of the costs to operate the Office of Finance and the Federal Housing Finance Agency were $20.4 million in 2023 compared to $21.1 million in 2022. |
| ● | Other expenses were $28.0 million in 2023 compared to $9.7 million in 2022, driven by $23.2 million in voluntary housing and community development grants and contributions in 2023, including an additional voluntary contribution to the Affordable Housing Program of $12.7 million to support its housing programs for 2024. |
Affordable Housing Program Assessments (AHP) allocated from Net income were $83.5 million in 2023 compared to $46.5 million in 2022. Assessments are calculated as a percentage of Net income, and changes in allocations were in tandem with changes in Net income.
Net Income — 2022 Compared to 2021
Net income in 2022 was $417.4 million, an increase of $151.9 million, or 57.2% compared to 2021.
Net interest income in 2022 was $633.7 million, an increase of $93.1 million, or 17.2% compared to 2021. Net interest spread was 39 basis points for 2022 compared to 43 basis points for 2021. For more information, see Table 10.2 Net Interest Income and accompanying discussions in this MD&A.
79
Other income (loss) — Other income (loss) reported was a gain of $29.0 million in 2022 compared to a loss of $47.4 million in 2021.
Other expenses were $199.1 million in 2022, compared to $203.7 million in 2021. Operating expenses were $74.0 million in 2022, up from $69.9 million in 2021. Compensation and benefits were $94.3 million in 2022 compared to $96.1 million in 2021. The expenses allocated for our share of the costs to operate the Office of Finance and the Federal Housing Finance Agency were $21.1 million in 2022 compared to $22.0 million in 2021. Other expenses were $9.7 million in 2022 and $15.7 million in 2021. Other expenses included non-service elements of Net periodic pension benefit costs, derivative clearing fees, and voluntary contributions.
AHP assessments allocated from Net income were $46.5 million in 2022 compared to $29.5 million in 2021.
Net Interest Income, Interest Rate Margins and Interest Rate Spreads
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.
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 earnings assets and funding costs. Interest income and expense accruals on interest rate swaps that qualified under the ASC 815 hedge accounting rules may impact year-over-year changes. Shareholders’ capital stock and retained earnings are also factors that impact net interest income as they provide interest free funding. Earnings on capital typically move directly with changes in short-term market interest rates. In a period when members prepay advances, the prepayment fees, which we receive may cause fluctuations in net interest income. For more information about factors that impact Interest income and Interest expense, see Table 10.3 Net Interest Adjustments from Qualifying Hedge Interest Rate Swaps and discussions thereto. Also, see Table 10.4 Spread and Yield Analysis, and Table 10.5 Rate and Volume Analysis.
The following table summarizes Net interest income (dollars in thousands):
Table 10.2Net Interest Income
Percentage | Percentage |
| ||||||||||||
Years ended December 31, | Change | Change |
| |||||||||||
| 2023 |
| 2022 |
| 2021 |
| 2023 |
| 2022 |
| ||||
Total interest income (a) | $ | 8,400,387 | $ | 2,758,182 | $ | 965,578 | 204.56 | % | 185.65 | % | ||||
Total interest expense (a) |
| 7,405,050 |
| 2,124,455 |
| 424,981 |
| 248.56 |
| 399.89 | ||||
Net interest income before provision for credit losses | $ | 995,337 | $ | 633,727 | $ | 540,597 |
| 57.06 | % | 17.23 | % | |||
(a)Total Interest Income and Total Interest Expense — See Tables 10.6 and 10.7 and accompanying discussions
2023 Net interest income, before loan loss provisions, was $995.3 million, an increase of $361.6 million, or 57.1% from 2022. Primary driver was increase in the average balances of interest earning assets, principally advances. Additionally, $2.2 million of prepayment fees were recorded in Net interest income in 2023 compared to $3.4 million in 2022. Interest rates continued to increase during the year, impacting our interest revenues and opportunities for acquiring investments during most of the year.
Members’ demand for advances increased with the market volatility of 2023 as they experienced heightened deposit volatility, strong loan growth, and the need to enhance liquidity positions. Interest earning assets have been positively impacted by the Fed’s acquisition program in the agency-issued mortgage-backed securities market that has driven down pricing and increased the opportunities for acquiring investments during the latter part of the year that would meet our risk/reward targets. Spreads increased on our investments in overnight Federal funds markets and repurchase programs, two principal investment vehicles for our balance sheet liquidity programs.
80
In 2023, margins between yields on assets, specifically overnight, short-term, and floating-rate investments and short-term and floating-rate advances, and the corresponding yields paid on funding those assets were higher than 2022. Net interest margin, a measure of margin efficiency, which is calculated as Net interest income divided by average earning assets, was 61 basis points in 2023, compared to 52 basis points in 2022. Net interest spread, representing the yield from earning assets minus interest paid on costing liabilities was 33 basis points for 2023 compared to 39 basis points for 2022.
Stockholders’ capital (as measured by average outstanding balance in the period), which is typically deployed to fund short-term interest-earning assets, increased to $8.4 billion in 2023, up from $6.9 billion in 2022. Increase in Capital stock was in line with increase in advances in 2023 as borrowing members are required to purchase capital stock in proportion to amounts borrowed.
Swap interest settlement designated in ASC 815 hedging of assets and liabilities recorded a net income of $60.7 million in 2023 compared to a net expense of $146.2 million in 2022. Interest settlements are impacted by the net differential between fixed-rates associated with hedging swaps and the benchmark variable-rates associated with the swap’s floating-leg. Net interest settlements on swaps hedging assets and liabilities under ASC 815 fluctuated as expected in line with changes in the benchmark rates; the hedging transactions achieved our interest rate risk management objectives.
Impact of Qualifying Hedges on Net Interest Income
The following table summarizes the impact of net interest adjustments from qualifying hedge interest-rate swaps (in thousands):
Table 10.3Net Interest Adjustments from Qualifying Hedge Interest Rate Swaps
Years ended December 31, | |||||||||
| 2023 |
| 2022 |
| 2021 | ||||
Interest income | $ | 7,185,271 | $ | 2,605,537 | $ | 1,391,403 | |||
Fair value hedging effects |
| (1,915) |
| 18,073 |
| 2,473 | |||
Amortization of basis adjustment |
| (21) |
| (321) |
| (1,335) | |||
Interest rate swap accruals |
| 1,217,052 |
| 134,893 |
| (426,963) | |||
Reported interest income |
| 8,400,387 |
| 2,758,182 |
| 965,578 | |||
Interest expense |
| 6,257,159 |
| 1,868,771 |
| 545,486 | |||
Fair value hedging effects |
| (6,196) |
| (18,747) |
| (4,489) | |||
Amortization of basis adjustment |
| (2,245) |
| (6,667) |
| (5,349) | |||
Interest rate swap accruals |
| 1,156,332 |
| 281,098 |
| (110,667) | |||
Reported interest expense |
| 7,405,050 |
| 2,124,455 |
| 424,981 | |||
Net interest income | $ | 995,337 | $ | 633,727 | $ | 540,597 | |||
Net interest adjustment - interest rate swaps | $ | 67,225 | $ | (103,039) | $ | (305,320) | |||
81
Spread and Yield Analysis — 2023, 2022 and 2021
Table 10.4Spread and Yield Analysis
Years ended December 31, |
| ||||||||||||||||||||||||
2023 | 2022 | 2021 |
| ||||||||||||||||||||||
|
| Interest |
|
|
| Interest |
|
|
| Interest |
|
| |||||||||||||
Average | Income/ | Average | Income/ | Average | Income/ |
| |||||||||||||||||||
(Dollars in thousands) | Balance | Expense | Yield/Rate (a) | Balance | Expense | Yield/Rate (a) | Balance | Expense | Yield/Rate (a) |
| |||||||||||||||
Earning Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Advances | $ | 110,230,082 | $ | 5,988,659 |
| 5.43 | % | $ | 82,747,277 | $ | 1,915,358 |
| 2.31 | % | $ | 80,794,903 | $ | 483,216 |
| 0.60 | % | ||||
Interest bearing deposits and others |
| 3,926,579 |
| 202,359 |
| 5.15 |
| 2,364,070 |
| 51,848 |
| 2.19 |
| 1,377,228 |
| 1,202 |
| 0.09 | |||||||
Federal funds sold and other overnight funds |
| 22,218,378 |
| 1,131,164 |
| 5.09 |
| 11,719,786 |
| 203,090 |
| 1.73 |
| 11,856,627 |
| 9,736 |
| 0.08 | |||||||
Investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Trading securities |
| 5,538,693 |
| 134,753 |
| 2.43 |
| 7,430,460 |
| 93,581 |
| 1.26 |
| 7,521,868 |
| 96,911 |
| 1.29 | |||||||
Mortgage-backed securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Fixed |
| 14,010,157 |
| 574,067 |
| 4.10 |
| 12,459,354 |
| 346,307 |
| 2.78 |
| 10,852,929 |
| 274,601 |
| 2.53 | |||||||
Floating |
| 3,920,919 |
| 224,383 |
| 5.72 |
| 2,559,997 |
| 52,741 |
| 2.06 |
| 3,567,081 |
| 20,672 |
| 0.58 | |||||||
State and local housing finance agency obligations |
| 1,302,094 |
| 75,022 |
| 5.76 |
| 1,235,338 |
| 29,197 |
| 2.36 |
| 1,086,109 |
| 7,805 |
| 0.72 | |||||||
Mortgage loans held-for-portfolio |
| 2,136,356 |
| 69,908 |
| 3.27 |
| 2,187,999 |
| 65,832 |
| 3.01 |
| 2,562,159 |
| 71,434 |
| 2.79 | |||||||
Loans to other FHLBanks |
| 1,397 |
| 72 |
| 5.15 |
| 13,712 |
| 228 |
| 1.67 |
| 822 |
| 1 |
| 0.12 | |||||||
Total interest-earning assets | $ | 163,284,655 | $ | 8,400,387 |
| 5.14 | % | $ | 122,717,993 | $ | 2,758,182 |
| 2.25 | % | $ | 119,619,726 | $ | 965,578 |
| 0.81 | % | ||||
Funded By: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Consolidated obligation bonds |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Fixed | $ | 61,981,421 | $ | 2,861,730 |
| 4.62 | % | $ | 51,312,595 | $ | 963,681 |
| 1.88 | $ | 59,124,808 | $ | 339,436 |
| 0.57 | % | |||||
Floating |
| 39,198,805 |
| 1,997,282 |
| 5.10 |
| 13,450,285 |
| 332,023 |
| 2.47 |
| 6,276,962 |
| 9,729 |
| 0.15 | |||||||
Consolidated obligation discount notes |
| 49,698,715 |
| 2,414,738 |
| 4.86 |
| 48,685,391 |
| 812,455 |
| 1.67 |
| 45,425,040 |
| 75,283 |
| 0.17 | |||||||
Interest-bearing deposits and other borrowings |
| 3,059,900 |
| 130,647 |
| 4.27 |
| 1,033,065 |
| 15,018 |
| 1.45 |
| 1,427,510 |
| 424 |
| 0.03 | |||||||
Mandatorily redeemable capital stock |
| 7,210 |
| 653 |
| 9.06 |
| 22,738 |
| 1,278 |
| 5.62 |
| 2,406 |
| 109 |
| 4.53 | |||||||
Total interest-bearing liabilities |
| 153,946,051 |
| 7,405,050 |
| 4.81 | % |
| 114,504,074 |
| 2,124,455 |
| 1.86 | % |
| 112,256,726 |
| 424,981 |
| 0.38 | % | ||||
Other non-interest-bearing funds |
| 928,803 |
| — |
|
|
| 1,274,126 |
| — |
|
|
| 551,887 |
| — |
|
| |||||||
Capital |
| 8,409,801 |
| — |
|
|
| 6,939,793 |
| — |
|
|
| 6,811,113 |
| — |
|
| |||||||
Total Funding | $ | 163,284,655 | $ | 7,405,050 |
|
| $ | 122,717,993 | $ | 2,124,455 |
|
| $ | 119,619,726 | $ | 424,981 |
|
| |||||||
Net Interest Income/Spread |
|
| $ | 995,337 |
| 0.33 | % |
|
| $ | 633,727 |
| 0.39 | % |
|
| $ | 540,597 |
| 0.43 | % | ||||
Net Interest Margin |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
(Net interest income/Earning Assets) |
|
|
|
|
| 0.61 | % |
|
|
|
|
| 0.52 | % |
|
|
|
|
| 0.45 | % | ||||
| (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 the designated benchmark rate (Federal Funds-OIS or SOFR-OIS) in the hedging relationship. 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. |
82
Rate and Volume Analysis — 2023, 2022 and 2021
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 10.5Rate and Volume Analysis
For the years ended | |||||||||
December 31, 2023 vs. December 31, 2022 | |||||||||
Increase (Decrease) | |||||||||
| Volume |
| Rate |
| Total | ||||
Interest Income |
|
|
| ||||||
Advances | $ | 805,641 | $ | 3,267,660 | $ | 4,073,301 | |||
Interest bearing deposits and others |
| 49,473 |
| 101,038 |
| 150,511 | |||
Federal funds sold and other overnight funds |
| 293,381 |
| 634,693 |
| 928,074 | |||
Investments |
|
|
| ||||||
Trading securities |
| (28,589) |
| 69,761 |
| 41,172 | |||
Mortgage-backed securities |
|
|
| ||||||
Fixed |
| 47,354 |
| 180,406 |
| 227,760 | |||
Floating |
| 39,511 |
| 132,131 |
| 171,642 | |||
State and local housing finance agency obligations |
| 1,660 |
| 44,165 |
| 45,825 | |||
Mortgage loans held-for-portfolio |
| (1,583) |
| 5,659 |
| 4,076 | |||
Loans to other FHLBanks |
| (334) |
| 178 |
| (156) | |||
Total interest income |
| 1,206,514 |
| 4,435,691 |
| 5,642,205 | |||
Interest Expense |
|
|
| ||||||
Consolidated obligation bonds |
|
|
| ||||||
Fixed |
| 236,829 |
| 1,661,220 |
| 1,898,049 | |||
Floating |
| 1,070,321 |
| 594,938 |
| 1,665,259 | |||
Consolidated obligation discount notes |
| 17,258 |
| 1,585,025 |
| 1,602,283 | |||
Deposits and borrowings |
| 58,185 |
| 57,444 |
| 115,629 | |||
Mandatorily redeemable capital stock |
| (1,154) |
| 529 |
| (625) | |||
Total interest expense |
| 1,381,439 |
| 3,899,156 |
| 5,280,595 | |||
Changes in Net Interest Income | $ | (174,925) | $ | 536,535 | $ | 361,610 | |||
83
For the years ended | |||||||||
December 31, 2022 vs. December 31, 2021 | |||||||||
Increase (Decrease) | |||||||||
| Volume |
| Rate |
| Total | ||||
Interest Income |
|
|
| ||||||
Advances | $ | 11,957 | $ | 1,420,185 | $ | 1,432,142 | |||
Interest bearing deposits and others |
| 1,462 |
| 49,184 |
| 50,646 | |||
Federal funds sold and other overnight funds |
| (114) |
| 193,468 |
| 193,354 | |||
Investments |
|
|
|
|
|
| |||
Trading securities |
| (1,168) |
| (2,162) |
| (3,330) | |||
Mortgage-backed securities |
|
|
|
|
|
| |||
Fixed |
| 43,051 |
| 28,655 |
| 71,706 | |||
Floating |
| (7,320) |
| 39,389 |
| 32,069 | |||
State and local housing finance agency obligations |
| 1,211 |
| 20,181 |
| 21,392 | |||
Mortgage loans held-for-portfolio |
| (10,966) |
| 5,364 |
| (5,602) | |||
Loans to other FHLBanks |
| 126 |
| 101 |
| 227 | |||
Total interest income |
| 38,239 |
| 1,754,365 |
| 1,792,604 | |||
Interest Expense |
|
|
|
|
|
| |||
Consolidated obligation bonds |
|
|
|
|
|
| |||
Fixed |
| (50,450) |
| 674,695 |
| 624,245 | |||
Floating |
| 22,921 |
| 299,373 |
| 322,294 | |||
Consolidated obligation discount notes |
| 5,788 |
| 731,384 |
| 737,172 | |||
Deposits and borrowings |
| (149) |
| 14,743 |
| 14,594 | |||
Mandatorily redeemable capital stock |
| 1,137 |
| 32 |
| 1,169 | |||
Total interest expense |
| (20,753) |
| 1,720,227 |
| 1,699,474 | |||
Changes in Net Interest Income | $ | 58,992 | $ | 34,138 | $ | 93,130 | |||
Interest Income
Interest income from advances is our principal source of interest income. We also earn interest income from an asset mix of long-term assets, such as fixed-rate advances, long-term fixed- and floating-rate investments, long-term 15-year and 30-year mortgage loans, and revenues generated from portfolios of overnight and short-term assets and U.S. Treasury securities held for liquidity.
Reported interest income also includes prepayments fees, primarily fees recorded when advances are prepaid ahead of their contractual maturities.
84
The principal categories of Interest Income are summarized below (dollars in thousands):
Table 10.6Interest Income — Principal Sources
Percentage | Percentage |
| ||||||||||||
Years ended December 31, | Change | Change |
| |||||||||||
| 2023 |
| 2022 |
| 2021 |
| 2023 |
| 2022 |
| ||||
Interest Income |
|
|
|
|
|
|
|
|
|
| ||||
Advances | $ | 5,988,659 | $ | 1,915,358 | $ | 483,216 |
| 212.67 | % | 296.38 | % | |||
Interest-bearing deposits |
| 202,359 |
| 51,848 |
| 1,202 |
| 290.29 |
| NM | ||||
Securities purchased under agreements to resell |
| 248,042 |
| 2,542 |
| 487 |
| NM |
| 421.97 | ||||
Federal funds sold |
| 883,122 |
| 200,548 |
| 9,249 |
| 340.35 |
| NM | ||||
Trading securities |
| 134,753 |
| 93,581 |
| 96,911 |
| 44.00 |
| (3.44) | ||||
Mortgage-backed securities |
|
|
|
|
|
|
|
| ||||||
Fixed |
| 574,067 |
| 346,307 |
| 274,601 |
| 65.77 |
| 26.11 | ||||
Floating |
| 224,383 |
| 52,741 |
| 20,672 |
| 325.44 |
| 155.13 | ||||
State and local housing finance agency obligations |
| 75,022 |
| 29,197 |
| 7,805 |
| 156.95 |
| 274.08 | ||||
Mortgage loans held-for-portfolio |
| 69,908 |
| 65,832 |
| 71,434 |
| 6.19 |
| (7.84) | ||||
Loans to other FHLBanks |
| 72 |
| 228 |
| 1 |
| (68.42) |
| NM | ||||
Total interest income | $ | 8,400,387 | $ | 2,758,182 | $ | 965,578 |
| 204.56 | % | 185.65 | % | |||
NM — Not meaningful.
Interest Income
Interest income in 2023 was $8.4 billion, an increase of $5.6 billion, or 204.6% compared to 2022. To provide context, interest expense increased by 248.6% compared to 2022.
Interest revenues from higher balance sheet earning assets (primarily the increase in volume of advance business) made a favorable revenue increase of $1.2 billion and yield (rate) related revenue increase of $4.4 billion. In successive 2023 quarters, we have reported increased interest revenues: first quarter revenue was $1.9 billion; second quarter was $2.4 billion; third and fourth quarter revenues were $2.0 billion and $2.1 billion, respectively.
Aggregate yield on earning assets in 2023 was 514 basis points, compared to 225 basis points in 2022, illustrating the impact to our yields due to the dramatic and rapid increase in rates triggered by Federal Reserve’s accommodative fiscal relief measures in 2021.
The more significant revenue categories are discussed below. For information about the effects of changes in rates and business volume, see Table 10.4 Spread and Yield Analysis and Table 10.5 Rate and Volume analysis.
Advance — Interest income from advances increased by 212.7% in 2023, compared to 2022.
Advances average balances were $110.2 billion in 2023, compared to $82.7 billion in 2022. Total advance to members decreased $6.4 billion or 5.6% to $108.9 billion at December 31, 2023. We ended the year of 2023 with par advances at $109.8 billion.
As compared to 2022, higher average advances balances in 2023 resulted in a favorable impact of $805.6 million on interest income from advances, and higher market rates resulted in a favorable impact of $3.3 billion, for a total increase year-over-year of $4.1 billion in advances interest income. In summary, increasing market interest rates positively impacted yields from advances, primarily on overnight and short-term advances and variable-rate advances that reset to higher rates. Advances yielded 543 basis points in 2023, up from 231 basis points in 2022. Prepayment fee recorded in Interest income from advances were $2.2 million in 2023, down from $2.4 million in 2022.
85
Liquidity Investments — Money Market Investments and U.S. Treasury Securities — We derive interest income from maintaining highly-liquid portfolios of investments to meet liquidity regulatory requirements. Higher interest income from overnight invested funds, specifically federal funds sold and repurchase agreements was due to increase in market yields in 2023 compared to 2022. Investments in federal funds and repurchase agreements yielded 509 basis points in aggregate in 2023, compared to 173 basis points in 2022. Interest income from fixed-rate U.S. Treasury securities was $134.8 million in 2023, up from $93.6 million in 2022 due to inclining interest rates; yields increased to 243 basis points, compared to 126 basis points in 2022. The liquidity trading portfolio is comprised primarily of medium-term, highly liquid fixed-rate U.S. Treasury securities that are available to enhance and meet our liquidity objectives. Securities are not acquired for speculative purposes.
The earnings impact due to changes in market values of the securities outstanding (unrealized gains and losses) and realized gains and losses on securities sold are recorded in Other income (below the margin) and are noted in Table 10.9 Net Gains (Losses) on Trading Securities Recorded in the Statements of Income, and discussions thereto. Fixed-rate treasury securities are hedged under economic hedges utilizing swap contracts to synthetically convert fixed cash flows to variable cash flows. The interest settlements on the swaps and changes in the fair values of the swap contracts are recorded in Other income (below the margin); our accounting policies require us to record in Other income the cash flows and fair values on hedging that do not qualify under ASC 815 hedging (economic hedges).
Mortgage-backed-securities
Interest income from floating-rate MBS increased by 325.4% year-over-year in line with higher interest rates. By policy, no floating-rate LIBOR-indexed MBS were acquired, a decision driven by our goal to reduce our inventory of LIBOR-indexed instruments. We will seek to purchase GSE-issued floating-rate SOFR-indexed MBS at appropriate risk-return levels.
Interest income from fixed-rate MBS increased in 2023 relative to 2022 due to an increase in invested balances and higher aggregate yield, which was 410 basis points in 2023, up from 278 basis points in 2022. Transaction volume of fixed-rate MBS, as measured by average outstanding balance was $14.0 billion in 2023, compared to $12.5 billion in 2022.
In 2023, our acquisitions were fixed-rate commercial-mortgage backed securities (CMBS) and floating-rate residential mortgage backed securities (RMBS). We utilized the swap market to synthetically create variable-rate cash flows indexed to SOFR and Federal funds applying ASC 815 fair value accounting hedge treatment. The impact to interest income from changes in the ASC 815 hedging recorded a net gain of $140.0 million in 2023, compared to a net gain of $8.0 million in 2022.
Mortgage loans held-for-portfolio — Interest income from mortgage loans was $69.9 million in 2023, compared to $65.8 million in 2022. Investment volume has declined, with paydowns exceeding acquisitions. MPF loans are primarily 15 and 30-year conventional loans. The portfolio averaged $2.1 billion, yielding 327 basis points in 2023, compared to 301 basis points in 2022. We continue to see prepayments although the pace of which has slowed, causing accelerated amortization of premiums, specifically on 20-year and 30-year high-balance mortgage loans. Net amortization expense was $3.6 million in 2023, compared to net amortization of $5.3 million in 2022. The Bank’s portfolio is largely at a premium price and amortization is sensitive to changes in prepayment speeds particularly in a volatile interest rate environment. The Bank does not hedge mortgage loans in an ASC 815 hedge or an economic hedge.
As noted in the audited financial statements under Note 1. Summary of Significant Accounting Policies, we implemented a new mortgage program, the Mortgage Asset Program (MAP) in late March 2021. At December 31, 2023, mortgage loans under MAP were $442.1 million (par amounts). Effective March 31, 2021, we ceased to accept mortgage commitments to purchase loans under the MPF program; the MAP became our alternative to MPF. The outstanding MPF portfolio will continue to be serviced, managed under its existing contractual agreements.
Interest Expense
Our primary source of funding is the issuance of Consolidated obligation bonds and discount notes to investors in the global debt markets issued through the Office of Finance, the FHLBank’s fiscal agent. Consolidated obligation bonds are generally medium- and long-term bonds, while Consolidated obligation 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.
86
Changes in bond market rates, changes in intermediation volume (average interest-costing liabilities and interest-earning assets), the mix of debt issuances between CO bonds and CO discount notes, and the impact of hedging strategies are the primary factors that drive period-over-period changes in interest expense.
Derivative strategies are used to manage the interest rate risk inherent in fixed-rate debt. We execute our strategies by converting the fixed-rate funding to floating-rate debt using swap contracts indexed to a risk-free benchmark interest rate. Our adopted hedging benchmarks are SOFR-OIS and Federal Funds-OIS. For ASC 815 qualifying hedges of debt, swap interest settlements and fair value gains and losses are recorded in interest expense together with the interest expense accrued on the hedged CO debt.
The principal categories of Interest expense are summarized below (dollars in thousands):
Table 10.7Interest Expenses — Principal Categories
Percentage | Percentage |
| ||||||||||||
Years ended December 31, | Change | Change |
| |||||||||||
| 2023 |
| 2022 |
| 2021 |
| 2023 |
| 2022 |
| ||||
Interest Expense |
|
|
|
|
|
|
|
|
|
| ||||
Consolidated obligations bonds |
|
|
|
|
|
|
|
|
|
| ||||
Fixed | $ | 2,861,730 | $ | 963,681 | $ | 339,436 |
| 196.96 | % | 183.91 | % | |||
Floating |
| 1,997,282 |
| 332,023 |
| 9,729 |
| 501.55 |
| NM | ||||
Consolidated obligations discount notes |
| 2,414,738 |
| 812,455 |
| 75,283 |
| 197.21 |
| 979.20 | ||||
Deposits |
| 128,252 |
| 13,765 |
| 380 |
| 831.73 |
| NM | ||||
Mandatorily redeemable capital stock |
| 653 |
| 1,278 |
| 109 |
| (48.90) |
| NM | ||||
Cash collateral held and other borrowings |
| 2,395 |
| 1,253 |
| 44 |
| 91.14 |
| NM | ||||
Total interest expense | $ | 7,405,050 | $ | 2,124,455 | $ | 424,981 |
| 248.56 | % | 399.89 | % | |||
NM — Not meaningful.
Interest expense in 2023 was $7.4 billion, an increase of 248.6% compared to 2022 (As noted elsewhere in this document, interest income increased by 204.6% compared to 2022).
The increase in interest expense was driven by higher market interest rates in 2023 as compared with 2022, and also by higher average balances of short-term Consolidated obligations outstanding.
Rate-related increase in funding expense was $3.9 billion, in line with the dramatic increase in rates in the bond markets; volume-related increase in funding expense was $1.4 billion in 2023 compared to 2022. Aggregate yield paid on total funding in 2023 was 481 basis points, compared to 186 basis points in 2022.
We continue to make changes to our liability composition as compared to 2022. In 2023, 38.0% of average earning assets were funded by fixed-rate CO bonds and 24.0% were funded by floating-rate CO bonds. In 2022, fixed-rate CO bonds funded 41.8% of earning assets and floating-rate CO bonds funded 11.0% of earning assets. The usage of CO discount notes has decreased to 30.4% in 2023 from 39.7% in 2022.
Hedging strategies under ASC 815 have remained effective and are operating as designed, although in preparation for the market transition away from LIBOR, we have increased the use of SOFR-OIS as the alternative hedging benchmarks. For more information, see Table 10.3 Net Interest Adjustments from Qualifying Hedge Interest Rate Swaps.
87
Allowance for Credit Losses — 2023, 2022 and 2021
Allowance for credit losses recorded on mortgage-loans in the Statements of Condition was $3.3 million at December 31, 2023, $1.9 million at December 31, 2022, and $2.1 million at December 31, 2021. Allowance for credit losses recorded on investments was $0.6 million, $0.3 million at December 31, 2022, and $0.3 million at December 31, 2021. No allowance was necessary on advances, other assets, and commitments.
Analysis of Non-Interest Income (Loss) — 2023, 2022 and 2021
The principal components of Non-interest income (loss) are summarized below (in thousands):
Table 10.8Other Income (Loss)
Years ended December 31, | |||||||||
| 2023 |
| 2022 |
| 2021 | ||||
Other income (loss): |
|
|
|
|
|
| |||
Service fees and other (a) | $ | 21,182 | $ | 17,336 | $ | 17,304 | |||
Instruments held under the fair value option gains (losses) (b) |
| (99,223) |
| 206,998 |
| 22,471 | |||
Derivative gains (losses) (c) |
| 30,852 |
| 181,959 |
| 4,424 | |||
Trading securities gains (losses) (d) |
| 110,501 |
| (363,973) |
| (101,423) | |||
Equity investments gains (losses) (e) |
| 12,143 |
| (15,374) |
| 9,769 | |||
Litigation settlement |
| 1,624 |
| 2,202 |
| 33 | |||
Losses from extinguishment of debt | — | (99) | — | ||||||
Total other income (loss) | $ | 77,079 | $ | 29,049 | $ | (47,422) | |||
| (a) | Service fees and other, net — Service fees are from providing correspondent banking services to members, primarily fees earned on standby financial letters of credit. Letters of credit are generally issued on behalf of members to units of state and local governments to collateralize their deposits at member banks. Fee income earned on financial letters of credit were $17.3 million in 2023 compared to $15.8 million in 2022 and $17.6 million in 2021. Immaterial amounts of fees paid, and other expenses were included in reported revenues. |
| (b) | FVO Instruments — Net fair value gains and losses represented changes in fair values of CO bonds and discount notes elected under the FVO. For more information, see Fair Value Option Disclosures in Note 18. Fair Values of Financial Instruments in this Form 10-K. |
| (c) | See Table 10.10 Other Income (Loss) — Impact of Derivative Gains and Losses. |
| (d) | See Table 10.9 Net Gains (Losses) on Trading Securities Recorded in the Statements of Income. |
| (e) | Fair value gains (losses) on Equity investments — The grantor trusts invest in money market, equity and fixed income and bond funds, and funds are classified as equity investments. 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. Gains and losses are typically unrealized, and primarily represent changes in portfolio valuations. The grantor trusts are owned by the FHLBNY with the objective of providing liquidity to pay for pension benefits to retirees vested in retirement plans. |
The following table summarizes unrealized and realized gains (losses) in the trading portfolio (in thousands):
Table 10.9Net Gains (Losses) on Trading Securities Recorded in the Statements of Income
Years ended December 31, | |||||||||
| 2023 |
| 2022 |
| 2021 | ||||
Net unrealized gains (losses) on trading securities held at period-end | $ | 110,974 | $ | (359,146) | $ | (101,423) | |||
Net gains (losses) on trading securities sold/matured during the period |
| (473) |
| (4,827) |
| — | |||
Net gains (losses) on trading securities | $ | 110,501 | $ | (363,973) | $ | (101,423) | |||
88
We have invested in short- and medium-term fixed-rate U.S. Treasury securities. The securities are not held for speculative trading, rather held to satisfy liquidity requirements. Fluctuations in valuations are a factor of market demand and market yields of fixed-rate U.S. Treasury securities. Securities classified as trading are carried at fair values. Changes in unrealized fair values and realized gains (losses) are recorded in the Statements of Income as Other income. FHFA regulations prohibit trading in or the speculative use of financial instruments. Par amounts of securities outstanding were lower in the current year, $6.3 billion at December 31, 2023, compared to $7.7 billion at December 31, 2022.
Other income (loss) — Derivatives and Hedging Activities — 2023, 2022 and 2021
For derivatives that are not designated in qualifying hedge 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 valuation 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):
Table 10.10Other Income (Loss) — Impact of Derivative Gains and Losses (in thousands)
Impact on Other Income (Loss) | |||||||||
Years ended December 31, | |||||||||
| 2023 |
| 2022 |
| 2021 | ||||
Derivatives not designated as hedging instruments |
|
|
|
|
|
| |||
Interest rate swaps (a) | $ | (109,594) | $ | 356,638 | $ | 85,283 | |||
Caps or floors |
| (804) |
| 294 |
| 93 | |||
Mortgage delivery commitments | (1,552) |
| (1,404) |
| (424) | ||||
Swaps economically hedging instruments designated under FVO (b) |
| 94,311 |
| (203,226) |
| (19,541) | |||
Accrued interest on derivatives in economic hedging relationships (c) |
| 43,475 |
| 29,737 |
| (61,013) | |||
Net gains (losses) related to derivatives not designated as hedging instruments | $ | 25,836 | $ | 182,039 | $ | 4,398 | |||
Price alignment interest paid on variation margin |
| 5,016 |
| (80) |
| 26 | |||
Net gains (losses) on derivatives and hedging activities | $ | 30,852 | $ | 181,959 | $ | 4,424 | |||
Derivative gains and losses in the table above include both realized and unrealized fair value net gains and losses. Also includes swap interest settlements on derivatives designated as standalone hedging instruments.
| (a) | Represents fair value changes recorded in Other income, primarily interest rate swaps in economic hedges of U.S. Treasury fixed-rate securities recorded fair value losses of $116.3 million in 2023, compared to fair value gains of $366.8 million and $98.7 million in 2022 and 2021. The swaps are structured to mitigate the volatility of price changes of the liquidity portfolio of fixed-rate U.S. Treasury notes. |
| (b) | Represents fair value changes recorded in Other income on interest rate swaps hedging CO debt elected under the FVO. |
| (c) | Represents impact to Other income due to net interest settlements on standalone swap contracts. Net interest settlements are the interest accruals on swaps primarily in economic hedges of U.S. Treasury securities, debt and advances, and economic hedges of instruments elected under the FVO. |
89
Operating Expenses, Compensation and Benefits, and Other Expenses — 2023, 2022 and 2021
The following table sets forth the major categories of operating expenses (dollars in thousands):
Table 10.11Operating Expenses, and Compensation and Benefits
Years ended December 31, |
| ||||||||||||||||
|
| Percentage of |
|
| Percentage of |
|
| Percentage of | |||||||||
2023 | Total | 2022 | Total | 2021 | Total |
| |||||||||||
Operating Expenses (a) |
|
|
|
|
|
|
| ||||||||||
Occupancy | $ | 9,286 | 10.91 | % | $ | 8,765 | 11.84 | % | $ | 8,760 | 12.53 | % | |||||
Depreciation and leasehold amortization |
| 18,262 | 21.46 |
| 17,559 | 23.72 |
| 13,117 | 18.76 | ||||||||
All others (b) |
| 57,542 | 67.63 |
| 47,700 | 64.44 |
| 48,036 | 68.71 | ||||||||
Total Operating Expenses | $ | 85,090 | 100.00 | % | $ | 74,024 | 100.00 | % | $ | 69,913 | 100.00 | % | |||||
Total Compensation and Benefits | $ | 102,578 |
| $ | 94,282 |
| $ | 96,100 | |||||||||
Finance Agency and Office of Finance (c) | $ | 20,352 |
| $ | 21,068 |
| $ | 21,979 | |||||||||
Other expenses (d) | $ | 28,039 |
| $ | 9,735 |
| $ | 15,676 | |||||||||
| (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. |
| (c) | 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. |
| (d) | The category Other expenses included the non-service elements of Net periodic pension benefit costs, derivative clearing fees and voluntary contribution. |
We made $23.2 million voluntary housing and community development grants and contributions in 2023, including an additional voluntary contribution to the Affordable Housing Program of $12.7 million to support its housing programs for 2024.
Assessments — 2023, 2022 and 2021
For more information about assessments, see Affordable Housing Program and Other Mission Related Programs and Assessments under Part I Item 1 Business in this Form 10-K.
The following table provides roll forward information with respect to changes in Affordable Housing Program liabilities (in thousands):
Table 11.1Affordable Housing Program Liabilities
| Years ended December 31, | ||||||||
2023 |
| 2022 |
| 2021 | |||||
Beginning balance | $ | 131,394 | $ | 137,638 | $ | 148,827 | |||
Additions from current period’s assessments | 83,531 |
| 46,517 |
| 29,514 | ||||
Voluntary Contribution | 12,663 | — | — | ||||||
Net disbursements for grants and programs | (40,561) |
| (52,761) |
| (40,703) | ||||
Ending balance | $ | 187,027 | $ | 131,394 | $ | 137,638 | |||
AHP assessments allocated from net income totaled $83.5 million in 2023, $46.5 million in 2022 and $29.5 million in 2021. Assessments are calculated as a percentage of Net income, and the changes in allocations were in tandem with changes in Net income.
90
Item 7A.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, the balance sheet consists of predominantly short-term instruments and assets and liabilities synthetically swapped to floating-rate indices. A conservative and limited maturity gap profile of asset and liability positions protect our capital from changes in value arising from a volatile interest rate environment.
The desired risk profile is primarily affected by the use of interest rate exchange agreements (Swaps) which the Bank uses to match asset and liability index exposure. Historically the index concentration was 1- or 3-month LIBOR driven; however, with LIBOR cessation, SOFR has become the dominant index utilized by the Bank. Index matching allows for 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 including: embedded prepayment rights, basis risk on asset and liability positions, yield curve risk, liquidity risk and funding risk. These varied risks are controlled by monitoring IRR measures including repricing gaps, duration of equity (DOE), value at risk (VaR), net interest income (NII) at risk, key rate durations (KRD) and forecasted dividend rate sensitivities.
Risk Measurements. Our Risk Management Policy assigns comprehensive risk limits which we calculate on a regular basis. The below limits were established in 2022 based on an anticipated market conditions and business strategy for 2023. The current risk limits are as follows:
| ● | The option-adjusted DOE is limited to a range of +4.0 years to -5.0 years in the rates unchanged case, and to a range of +/-5.0 years in the +/-200bps shock cases. |
| ● | The one-year cumulative repricing 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 -17.5 percent change under the +200bps shock compared to the rates in the forward rate scenario. The sensitivity of expected net interest income over a one-year period is limited to a -30 percent change under the -200bps shock compared to the rates in the forward rate scenario. This metric measures the Bank’s sensitivity of earnings to changes in the level of rates along the yield curve and allowed for negative rates. |
| ● | The potential decline in the market value of equity (MVE) 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 +/-20 months through the 3-year term point and a cumulative limit of +/-30 months from the 5-year through 30-year term points specific to the investment portfolio. Both of these quarterly observations are well within their limits. |
Our portfolio, including derivatives, is tracked and the overall mismatch net of derivatives 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 | |
December 31, 2023 |
| 0.19 | (0.10) | 0.01 | 0.88 | |||
September 30, 2023 |
| 0.37 |
| (0.06) |
| 0.14 |
| 1.03 |
June 30, 2023 |
| 0.08 |
| (0.27) |
| (0.15) |
| 0.57 |
March 31, 2023 |
| (0.47) |
| (0.89) |
| (0.73) |
| 0.20 |
December 31, 2022 |
| (0.20) |
| (0.77) |
| (0.49) |
| 0.35 |
91
Duration indicates any cumulative repricing/maturity imbalance in the portfolio’s financial assets and liabilities. Duration of Equity (DOE) is the Market Value of Equity’s (MVE) sensitivity to a change in the level of interest rates expressed in years. MVE is calculated as market value of assets minus market value of liabilities. A positive DOE indicates a decrease to MVE if interest rates go higher, a negative DOE indicates a decrease to MVE if interest rates go lower. We measure DOE using software that generates a full revaluation incorporating optionality within our portfolio using well-known and tested financial pricing theoretical models. The DOE calculation also incorporates non-interest-bearing financial assets and liabilities.
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 repricing/maturing liabilities from repricing/maturing assets over time. We observe the differences over various horizons and have set a 10 percent limit on asset on cumulative repricings at the one-year point. This quarterly observation of the one-year cumulative repricing 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 | |||
December 31, 2023 | $ | 7.212 Billion | |
September 30, 2023 | $ | 7.505 Billion | |
June 30, 2023 | $ | 7.280 Billion | |
March 31, 2023 | $ | 7.597 Billion | |
December 31, 2022 | $ | 7.026 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 generated to measure the Bank’s net interest income sensitivity over the coming 12-month period. To measure the effect, a parallel shift of +200bps is calculated and compared against the forward rate scenario and subjected to a -17.5 percent limit. The sensitivity of expected net interest income over a one-year period is limited to a -30 percent change under the -200bps shock compared to the rates in the forward rate scenario. Given the rising rate environment, the Bank will be generating income sensitivity to larger down rate scenarios.
| Sensitivity in |
| Sensitivity in |
| Sensitivity in | ||
the -200bps | the -100bps | the +200bps |
| ||||
Shock | Shock | Shock |
| ||||
December 31, 2023 |
| (0.07) | % | 0.24 | % | 0.78 | % |
September 30, 2023 |
| 2.14 | % | 1.12 | % | (5.50) | % |
June 30, 2023 |
| (0.88) | % | (1.10) | % | (2.63) | % |
March 31, 2023 |
| (1.22) | % | (0.37) | % | (0.82) | % |
December 31, 2022 |
| 0.25 | % | 0.36 | % | (1.81) | % |
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 MVE under these 200bps shocks is provided below:
| -200bps Change |
| -100bps Change |
| +200bps Change | ||
in MVE | in MVE | in MVE |
| ||||
December 31, 2023 |
| (0.14) | % | 0.00 | % | (0.86) | % |
September 30, 2023 |
| 0.14 | % | 0.17 | % | (1.35) | % |
June 30, 2023 |
| (0.30) | % | (0.07) | % | (0.63) | % |
March 31, 2023 |
| (1.54) | % | (0.67) | % | 0.39 | % |
December 31, 2022 |
| (1.18) | % | (0.45) | % | 0.01 | % |
As noted, the potential declines under these shocks are within our limits of a maximum 10 percent.
92
The following tables display the portfolio’s maturity/repricing gaps (in millions):
| Interest Rate Sensitivity | ||||||||||||||
December 31, 2023 | |||||||||||||||
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 | $ | 20,941 | $ | 124 | $ | 423 | $ | 323 | $ | 1,208 | |||||
MBS investments | 5,429 | 663 | 2,399 | 3,436 | 8,373 | ||||||||||
Swaps hedging MBS | 6,040 |
| — |
| (50) |
| (610) | (5,380) | |||||||
Adjustable-rate loans and advances | 36,586 |
| — |
| — |
| — |
| — | ||||||
Net investments, adjustable rate loans and advances | 68,996 |
| 787 |
| 2,772 |
| 3,149 |
| 4,201 | ||||||
Liquidity trading portfolio |
| — | 247 | 3,253 | 2,409 | 240 | |||||||||
Swaps hedging investments |
| 6,326 | (250) | (3,355) | (2,471) | (250) | |||||||||
Net liquidity trading portfolio |
| 6,326 | (3) | (102) |
| (62) |
| (10) | |||||||
Fixed-rate loans and advances |
| 35,468 | 6,923 | 14,208 | 10,617 | 5,993 | |||||||||
Swaps hedging fixed-rate advances |
| 36,137 | (6,112) | (13,689) | (10,351) | (5,985) | |||||||||
Net fixed-rate loans and advances |
| 71,605 | 811 | 519 | 266 | 8 | |||||||||
Total interest-earning assets | $ | 146,927 | $ | 1,595 | $ | 3,189 | $ | 3,353 | $ | 4,199 | |||||
Interest-bearing liabilities: |
|
|
|
|
| ||||||||||
Deposits | $ | 3,472 | $ | — | $ | — | $ | — | $ | — | |||||
Discount notes |
| 40,281 | 7,634 |
| — |
| — |
| — | ||||||
Swaps hedging discount notes |
| 5,470 | (6,988) | 550 |
| 801 |
| 167 | |||||||
Net discount notes |
| 45,751 |
| 646 |
| 550 |
| 801 |
| 167 | |||||
Consolidated Obligation Bonds |
|
|
|
|
| ||||||||||
FHLBank bonds |
| 44,716 | 18,298 | 23,340 | 8,744 | 3,718 | |||||||||
Swaps hedging bonds |
| 45,844 | (17,417) | (21,094) | (5,441) | (1,892) | |||||||||
Net FHLBank bonds |
| 90,560 | 881 | 2,246 | 3,303 | 1,826 | |||||||||
Total interest-bearing liabilities | $ | 139,783 | $ | 1,527 | $ | 2,796 | $ | 4,104 | $ | 1,993 | |||||
Post hedge gaps (a): |
|
|
|
|
| ||||||||||
Periodic gap | $ | 7,144 | $ | 68 | $ | 393 | $ | (751) | $ | 2,206 | |||||
Cumulative gaps | $ | 7,144 | $ | 7,212 | $ | 7,605 | $ | 6,854 | $ | 9,060 | |||||
93
| Interest Rate Sensitivity | ||||||||||||||
December 31, 2022 | |||||||||||||||
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 | $ | 16,871 | $ | 104 | $ | 377 | $ | 305 | $ | 1,227 | |||||
MBS investments | 2,697 | 261 | 1,867 | 2,775 | 8,374 | ||||||||||
Swaps hedging MBS | 4,263 |
| — |
| — |
| (50) | (4,213) | |||||||
Adjustable-rate loans and advances | 26,505 |
| — |
| — |
| — |
| — | ||||||
Net investments, adjustable rate loans and advances | 50,336 |
| 365 |
| 2,244 |
| 3,030 |
| 5,388 | ||||||
Liquidity trading portfolio |
| 2,526 | 400 | 495 | 2,189 | 1,877 | |||||||||
Swaps hedging investments |
| 5,151 | (400) | (500) | (2,351) | (1,900) | |||||||||
Net liquidity trading portfolio |
| 7,677 | — | (5) |
| (162) |
| (23) | |||||||
Fixed-rate loans and advances |
| 56,062 | 5,400 | 14,411 | 7,954 | 6,597 | |||||||||
Swaps hedging fixed-rate advances |
| 32,878 | (4,662) | (13,797) | (7,842) | (6,577) | |||||||||
Net fixed-rate loans and advances |
| 88,940 | 738 | 614 | 112 | 20 | |||||||||
Total interest-earning assets | $ | 146,953 | $ | 1,103 | $ | 2,853 | $ | 2,980 | $ | 5,385 | |||||
Interest-bearing liabilities: |
|
|
|
|
|
|
|
|
|
| |||||
Deposits | $ | 1,016 | $ | — | $ | — | $ | — | $ | — | |||||
Discount notes |
| 58,832 | 3,000 |
| — |
| — |
| — | ||||||
Swaps hedging discount notes |
| 785 | (2,393) | 241 |
| 782 |
| 585 | |||||||
Net discount notes |
| 59,617 |
| 607 |
| 241 |
| 782 |
| 585 | |||||
Consolidated Obligation Bonds |
|
|
|
|
|
|
|
| |||||||
FHLBank bonds |
| 38,992 | 5,987 | 21,578 | 14,896 | 6,282 | |||||||||
Swaps hedging bonds |
| 39,779 | (4,968) | (19,426) | (13,000) | (2,385) | |||||||||
Net FHLBank bonds |
| 78,771 | 1,019 | 2,152 | 1,896 | 3,897 | |||||||||
Total interest-bearing liabilities | $ | 139,404 | $ | 1,626 | $ | 2,393 | $ | 2,678 | $ | 4,482 | |||||
Post hedge gaps (a): |
|
|
|
|
| ||||||||||
Periodic gap | $ | 7,549 | $ | (523) | $ | 460 | $ | 302 | $ | 903 | |||||
Cumulative gaps | $ | 7,549 | $ | 7,026 | $ | 7,486 | $ | 7,788 | $ | 8,691 | |||||
| (a) | Repricing gaps are estimated at the scheduled rate reset dates for floating rate instruments, and at maturity for fixed rate instruments. For callable instruments, the repricing period is estimated by the earlier of the estimated call date under the current interest rate environment or the instrument’s contractual maturity. |
94
Item 8.Financial Statements.
95
Federal Home Loan Bank of New York
Management’s Report on Internal Control over Financial Reporting
The management of the Federal Home Loan Bank of New York (the “Bank”) is responsible for establishing and maintaining adequate internal control over financial reporting. The Bank’s internal control over financial reporting is designed by, or under the supervision of, the Principal Executive Officer and the Principal Financial Officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with accounting principles generally accepted in the United States of America.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate. The Bank’s management assessed the effectiveness of the Bank’s internal control over financial reporting as of December 31, 2023. In making this assessment, it used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework (2013). Based on its assessment, management of the Bank determined that as of December 31, 2023, the Bank’s internal control over financial reporting was effective based on those criteria.
PricewaterhouseCoopers LLP, the Bank’s independent registered public accounting firm that audited the accompanying Financial Statements has also issued an audit report on the effectiveness of internal control over financial reporting. Their report appears on the following page.
96
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of the Federal Home Loan Bank of New York
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying statements of condition of the Federal Home Loan Bank of New York (the “Company”) as of December 31, 2023 and 2022, and the related statements of income, of comprehensive income, of capital and of cash flows for each of the three years in the period ended December 31, 2023, including the related notes (collectively referred to as the “financial statements”). We also have audited the Company's internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.
Basis for Opinions
The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express opinions on the Company’s financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the financial statements included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
T: (646) 471 3000, www.pwc.com/us
97
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Valuation of Interest-Rate Derivatives and Hedged Items
As described in Notes 17 and 18 to the financial statements, the Company uses derivatives to manage its interest rate exposure. The total notional amount of derivatives as of December 31, 2023 was $194 billion, of which 82% were designated as hedging instruments, and the fair value of derivative assets and liabilities as of December 31, 2023 was $125 million and $12 million, respectively. The fair values of interest-rate derivatives and hedged items are primarily estimated using a discounted cash-flow model. The discounted cash-flow model uses market observable inputs such as interest rate curves, volatility, and, if applicable, prepayment assumptions.
The principal considerations for our determination that performing procedures relating to the valuation of interest-rate derivatives and hedged items is a critical audit matter are the significant audit effort in evaluating the interest rate curves, volatility, and, if applicable, prepayment assumptions used to fair value these derivatives and hedged items, and the audit effort involved the use of professionals with specialized skill and knowledge.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the financial statements. These procedures included testing the effectiveness of controls relating to the valuation of interest-rate derivatives and hedged items, including controls over the model, data and assumptions. These procedures also included, among others, the involvement of professionals with specialized skill and knowledge to assist in developing an independent range of prices for a sample of interest-rate derivatives and hedged items and comparison of management’s estimate to the independently developed ranges. Developing the independent range of prices involved testing the completeness and accuracy of data provided by management and independently developing the interest rate curves, volatility, and, if applicable, prepayment assumptions.
March 21, 2024
We have served as the Company’s auditor since 1990.
98
Federal Home Loan Bank of New York
Statements of Condition — (In Thousands, Except Par Value of Capital Stock)
As of December 31, 2023 and December 31, 2022
| December 31, 2023 |
| December 31, 2022 | |||
Assets | ||||||
Cash and due from banks (Note 3) | $ | | $ | | ||
Interest-bearing deposits (Note 4) | | | ||||
Securities purchased under agreements to resell (Note 4) |
| |
| | ||
Federal funds sold (Note 4) |
| |
| | ||
| | |||||
Equity Investments (Note 6) | | | ||||
Available-for-sale securities, amortized cost of $ |
| |
| | ||
| | |||||
Advances (Note 9) (Includes $ |
| |
| | ||
Mortgage loans held-for-portfolio, net of allowance for credit losses of $ |
| |
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Accrued interest receivable |
| |
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Premises, software, and equipment |
| |
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Operating lease right-of-use assets (Note 19) | | | ||||
Finance lease right-of-use asset (Note 19) | | — | ||||
Derivative assets (Note 17) |
| |
| | ||
Other assets |
| |
| | ||
Total assets | $ | | $ | | ||
Liabilities and capital | ||||||
Liabilities | ||||||
Deposits (Note 11) | ||||||
Interest-bearing demand | $ | | $ | | ||
Non-interest-bearing demand |
| |
| | ||
Total deposits |
| |
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Consolidated obligations, net (Note 12) | ||||||
Bonds (Includes $ |
| |
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Discount notes (Includes $ |
| |
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Total consolidated obligations |
| |
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Mandatorily redeemable capital stock (Note 14) |
| |
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Accrued interest payable |
| |
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Affordable Housing Program (Note 13) |
| |
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Derivative liabilities (Note 17) |
| |
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Other liabilities |
| |
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Operating lease liabilities (Note 19) | | | ||||
Finance lease liabilities (Note 19) | | — | ||||
Total liabilities |
| |
| | ||
Commitments and Contingencies (Notes 14, 17 and 19) | ||||||
Capital (Note 14) | ||||||
Capital stock ($ | ||||||
| |
| | |||
Retained earnings | ||||||
Unrestricted |
| |
| | ||
Restricted (Note 14) | | | ||||
Total retained earnings | | | ||||
Total accumulated other comprehensive income (loss) | ( | ( | ||||
Total capital |
| |
| | ||
Total liabilities and capital | $ | | $ | | ||
The accompanying notes are an integral part of these financial statements.
99
Federal Home Loan Bank of New York
Statements of Income — (In Thousands, Except Per Share Data)
Years Ended December 31, 2023, 2022 and 2021
Years ended December 31, | |||||||||
| 2023 |
| 2022 |
| 2021 | ||||
Interest income | |||||||||
Advances, net (Note 9) | $ | | $ | | $ | | |||
Interest-bearing deposits (Note 4) |
| |
| | | ||||
Securities purchased under agreements to resell (Note 4) |
| |
| | | ||||
Federal funds sold (Note 4) |
| |
| | | ||||
Trading securities (Note 5) | | | | ||||||
Available-for-sale securities (Note 7) |
| |
| | | ||||
Held-to-maturity securities (Note 8) |
| |
| | | ||||
Mortgage loans held-for-portfolio (Note 10) |
| |
| | | ||||
Loans to other FHLBanks (Note 20) |
| |
| | | ||||
Total interest income |
| |
| | | ||||
Interest expense | |||||||||
Consolidated obligation bonds (Note 12) |
| |
| | | ||||
Consolidated obligation discount notes (Note 12) |
| |
| | | ||||
Deposits (Note 11) |
| |
| | | ||||
Mandatorily redeemable capital stock (Note 14) |
| |
| | | ||||
Cash collateral held and other borrowings |
| |
| | | ||||
Total interest expense |
| |
| | | ||||
Net interest income before provision for credit losses |
| |
| | | ||||
Provision (Reversal) for credit losses |
| |
| ( | ( | ||||
Net interest income after provision for credit losses |
| |
| | | ||||
Other income (loss) | |||||||||
Service fees and other |
| |
| | | ||||
Instruments held under the fair value option gains (losses) (Note 18) |
| ( |
| | | ||||
Derivative gains (losses) (Note 17) |
| |
| | | ||||
Trading securities gains (losses) (Note 5) | | ( | ( | ||||||
Equity investments gains (losses) (Note 6) | | ( | | ||||||
Litigation settlement | | | | ||||||
Losses from extinguishment of debt |
| — |
| ( | — | ||||
Total other income (loss) |
| |
| | ( | ||||
Other expenses | |||||||||
Operating |
| |
| | | ||||
Compensation and benefits |
| |
| | | ||||
Finance Agency and Office of Finance |
| |
| | | ||||
Other expenses | | | | ||||||
Total other expenses |
| |
| | | ||||
Income before assessments |
| |
| | | ||||
Affordable Housing Program Assessments (Note 13) |
| |
| | | ||||
Net income | $ | | $ | | $ | | |||
Basic earnings per share (Note 15) | $ | | $ | | $ | | |||
The accompanying notes are an integral part of these financial statements.
100
Federal Home Loan Bank of New York
Statements of Comprehensive Income — (In Thousands)
Years Ended December 31, 2023, 2022 and 2021
Years ended December 31, | |||||||||
| 2023 |
| 2022 |
| 2021 | ||||
Net Income | $ | | $ | | $ | | |||
Other Comprehensive income (loss) | |||||||||
Net change in unrealized gains (losses) on available-for-sale securities | | ( | ( | ||||||
Net change in non-credit accretion portion of held-to-maturity securities | |||||||||
Accretion of non-credit portion |
| |
| | | ||||
Total net change in non-credit portion of other-than-temporary impairment losses on held-to-maturity securities | | | | ||||||
Net change due to hedging activities | |||||||||
Cash flow hedges (a) |
| ( |
| | | ||||
Fair value hedges (b) |
| ( |
| | | ||||
Total net change due to hedging activities |
| ( |
| | | ||||
Net change in pension and postretirement benefits |
| ( |
| | | ||||
Total other comprehensive income (loss) |
| ( |
| ( | | ||||
Total comprehensive income (loss) | $ | | $ | | $ | | |||
| (a) |
| (b) |
The accompanying notes are an integral part of these financial statements.
101
Federal Home Loan Bank of New York
Statements of Capital — (In Thousands, Except Per Share Data)
Years Ended December 31, 2023, 2022 and 2021
Accumulated | ||||||||||||||||||||
Capital Stock(a) | Other | |||||||||||||||||||
Class B | Retained Earnings | Comprehensive | Total | |||||||||||||||||
| Shares |
| Par Value |
| Unrestricted |
| Restricted |
| Total |
| Income (Loss) |
| Capital | |||||||
Balance, December 31, 2020 |
| | $ | | $ | | $ | | $ | | $ | ( | $ | | ||||||
Proceeds from issuance of capital stock | | | — | — | — | — | | |||||||||||||
Repurchase/redemption of capital stock |
| ( | ( | — | — | — | — | ( | ||||||||||||
Shares reclassified to mandatorily redeemable capital stock |
| ( | ( | — | — | — | — | ( | ||||||||||||
Cash dividends ($ | — | — | ( | — | ( | — | ( | |||||||||||||
Comprehensive income (loss) |
| — | — | | | | | | ||||||||||||
Balance, December 31, 2021 | | $ | | $ | | $ | | $ | | $ | | $ | | |||||||
Proceeds from issuance of capital stock |
| | | — | — | — | — | | ||||||||||||
Repurchase/redemption of capital stock |
| ( | ( | — | — | — | — | ( | ||||||||||||
Shares reclassified to mandatorily redeemable capital stock | ( | ( | — | — | — | — | ( | |||||||||||||
Cash dividends ($ |
| — | — | ( | — | ( | — | ( | ||||||||||||
Comprehensive income (loss) | — | — | | | | ( | | |||||||||||||
Balance, December 31, 2022 |
| $ | $ | | $ | | $ | | $ | ( | $ | | ||||||||
Proceeds from issuance of capital stock | | | — | — | — | — | | |||||||||||||
Repurchase/redemption of capital stock | ( | ( | — | — | — | — | ( | |||||||||||||
Shares reclassified to mandatorily redeemable capital stock | ( | ( | — | — | — | — | ( | |||||||||||||
Cash dividends ($ | — | — | ( | — | ( | — | ( | |||||||||||||
Comprehensive income (loss) | — | — | | | | ( | | |||||||||||||
Balance, December 31, 2023 | $ | $ | | $ | | $ | | $ | ( | $ | | |||||||||
| (a) |
The accompanying notes are an integral part of these financial statements.
102
Federal Home Loan Bank of New York
Statements of Cash Flows — (In Thousands)
Years Ended December 31, 2023, 2022 and 2021
Twelve months ended December 31, | |||||||||
| 2023 |
| 2022 |
| 2021 | ||||
Operating activities | |||||||||
Net Income | $ | | $ | | $ | | |||
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 |
| |
| | | ||||
Concessions on consolidated obligations |
| |
| | | ||||
Premises, software, and equipment |
| |
| | | ||||
Provision (Reversal) for credit losses | | ( | ( | ||||||
Change in net fair value adjustments on derivatives and hedging activities (a) | ( | | | ||||||
Net realized and unrealized (gains) losses on trading securities | ( | | | ||||||
Change in fair value on Equity Investments | ( | | ( | ||||||
Change in fair value adjustments on financial instruments held at fair value |
| |
| ( | ( | ||||
Losses from extinguishment of debt |
| — |
| | — | ||||
Net change in: | |||||||||
Accrued interest receivable |
| ( |
| ( | | ||||
Derivative assets due to accrued interest |
| ( |
| ( | | ||||
Derivative liabilities due to accrued interest |
| |
| | ( | ||||
Other assets |
| |
| | ( | ||||
Affordable Housing Program liability |
| |
| ( | ( | ||||
Accrued interest payable |
| |
| | | ||||
Other liabilities |
| |
| ( | ( | ||||
Total adjustments |
| ( |
| | | ||||
Net cash provided by (used in) operating activities | $ | | $ | | $ | | |||
Investing activities | |||||||||
Net change in: | |||||||||
Interest-bearing deposits | $ | | $ | ( | $ | ( | |||
Securities purchased under agreements to resell |
| ( |
| ( | | ||||
Federal funds sold |
| ( |
| ( | ( | ||||
Deposits with other FHLBanks |
| ( |
| ( | | ||||
Premises, software, and equipment |
| ( |
| ( | ( | ||||
Trading securities: | |||||||||
Purchased | ( | ( | ( | ||||||
Repayments | | | | ||||||
Proceeds from sales | | | — | ||||||
Equity Investments: | |||||||||
Purchased | ( | ( | ( | ||||||
Proceeds from sales | | | | ||||||
Available-for-sale securities: | |||||||||
Purchased | ( | ( | ( | ||||||
Repayments |
| |
| | | ||||
Held-to-maturity securities: | |||||||||
Purchased | ( | ( | ( | ||||||
Repayments | | | | ||||||
Advances: | |||||||||
Principal collected |
| |
| | | ||||
Made |
| ( |
| ( | ( | ||||
Mortgage loans held-for-portfolio: | |||||||||
Principal collected |
| |
| | | ||||
Purchased |
| ( |
| ( | ( | ||||
Proceeds from sales of REO |
| |
| | | ||||
Net cash provided by (used in) investing activities | $ | | $ | ( | $ | | |||
The accompanying notes are an integral part of these financial statements.
103
Federal Home Loan Bank of New York
Statements of Cash Flows — (In Thousands)
Years Ended December 31, 2023, 2022 and 2021
Twelve months ended December 31, | |||||||||
| 2023 |
| 2022 |
| 2021 | ||||
Financing activities | |||||||||
Net change in: | |||||||||
Deposits and other borrowings | $ | | $ | ( | $ | ( | |||
Derivative contracts with financing element |
| ( |
| |
| ( | |||
Payments on principal portion of finance lease obligation | ( | — | — | ||||||
Consolidated obligation bonds: | |||||||||
Proceeds from issuance |
| |
| |
| | |||
Payments for maturing and early retirement |
| ( |
| ( |
| ( | |||
Payments on bonds (transferred to) or assumed from other FHLBanks (b) | — | — | | ||||||
Consolidated obligation discount notes: | |||||||||
Proceeds from issuance |
| |
| |
| | |||
Payments for maturing |
| ( |
| ( |
| ( | |||
Proceeds on Discount Notes assumed from other FHLBanks (c) | | — | — | ||||||
Capital stock: | |||||||||
Proceeds from issuance of capital stock |
| |
| |
| | |||
Payments for repurchase/redemption of capital stock |
| ( |
| ( |
| ( | |||
Redemption of mandatorily redeemable capital stock |
| ( | ( |
| ( | ||||
Cash dividends paid (d) |
| ( |
| ( |
| ( | |||
Net cash provided by (used in) financing activities | $ | ( | $ | | $ | ( | |||
Net increase (decrease) in cash and due from banks |
| |
| | ( | ||||
Cash and due from banks at beginning of the period (e) |
| |
| |
| | |||
Cash and due from banks at end of the period (e) | $ | | $ | | $ | | |||
Supplemental disclosures: | |||||||||
Interest paid | $ | | $ | | $ | | |||
Interest paid for Discount Notes (f) | $ | | $ | | $ | | |||
Affordable Housing Program payments (g) | $ | | $ | | $ | | |||
Transfers of mortgage loans to real estate owned | $ | | $ | | $ | | |||
Capital stock subject to mandatory redemption reclassified from equity | $ | | $ | | $ | | |||
Transfers of HTM securities to AFS that are not other-than-temporarily impaired (h) | $ | — | $ | — | $ | | |||
AFS HFA bonds were tendered and re-issued from LIBOR to SOFR index (i) | $ | — | $ | — | $ | | |||
Interest paid for financing lease | $ | | $ | — | $ | — | |||
Noncash recognition of new lease | $ | | $ | — | $ | — | |||
Notes to Supplemental Disclosure:
| (a) |
| (b) |
| (c) |
| (d) |
| (e) |
| (f) |
| (g) |
| (h) |
| (i) |
The accompanying notes are an integral part of these financial statements.
104
Background
The Federal Home Loan Bank of New York (FHLBNY or the Bank) is a federally chartered corporation and is
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
Note 1. Summary of Significant Accounting Policies.
Basis of Presentation
The accompanying financial statements of the FHLBNY 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).
The FHLBNY has identified certain accounting policies that it believes are critical because they require management to make subjective judgments about matters that are inherently uncertain and because of the likelihood that materially different amounts would be reported under different conditions or by using different assumptions. The most significant of these critical policies include derivatives and hedging relationships, estimating the fair values of assets and liabilities, estimating the allowance for credit losses on the advances, mortgage loan portfolios and our portfolios of investment securities.
Financial Instruments with Legal Right of Offset
The FHLBNY has derivative instruments, and securities purchased under agreements to resell that are subject to enforceable master netting agreements. The FHLBNY has elected to offset its derivative asset and liability positions, as well as cash collateral received or pledged, when it has the legal right of offset under these master agreements. The FHLBNY did not have any offsetting liabilities related to its securities purchased under agreements to resell for the periods presented.
The net exposure for these financial instruments can change on a daily basis; therefore, there may be a delay between the time this exposure change is identified and additional collateral is requested, and the time when this collateral is received or pledged. Likewise, there may be a delay for excess collateral to be returned. For derivative instruments, any excess cash collateral received or pledged is recognized as a derivative liability or as a derivative asset based on the terms of the individual master agreement between the FHLBNY and its derivative counterparty. For securities purchased under agreements to resell, the FHLBNY did not have any unsecured amounts based on the fair value of the related collateral held at the end of the periods presented. Additional information about the FHLBNY’s investments in securities purchased under agreements to resell is disclosed in Note 4. Interest-bearing Deposits, Federal Funds Sold and Securities Purchased Under Agreements to Resell.
105
Fair Value Measurements
The accounting standards on fair value measurements discuss how entities should measure fair value based on whether the inputs to those valuation techniques are observable or unobservable. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction in the principal or most advantageous market for the asset or liability between market participants at the measurement date. This definition is based on an exit price rather than transaction or entry price.
The FHLBNY complied with the accounting guidance on fair value measurements and has established a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability and would be based on market data obtained from independent sources. Unobservable inputs are inputs that reflect our assumptions about the parameters market participants would use in pricing the asset or liability and would be based on the best information available in the circumstances. Our pricing models are subject to periodic validations, and we periodically review and refine, as appropriate, our assumptions and valuation methodologies to reflect market indications as closely as possible. We have the appropriate personnel, technology, and policies and procedures in place to value financial instruments in a reasonable and consistent manner and in accordance with established accounting policies.
Valuation Techniques — Three valuation techniques are prescribed under the fair value measurement standards — Market approach, Income approach and Cost approach. Valuation techniques for which sufficient data is available and that are appropriate under the circumstances should be used.
In determining fair value, the FHLBNY uses various valuation methods, including both the market and income approaches.
| ● | Market approach — This technique uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities. |
| ● | Income approach — This technique uses valuation techniques to convert future amounts (for example, cash flows or earnings) to a single present amount (discounted), based on assumptions used by market participants. When the income approach is used, the fair value measurement reflects current market expectations about those future amounts. The present value technique used to measure fair value depends on the facts and circumstances specific to the asset or liability being measured and the availability of data. |
| ● | Cost approach — This approach is based on the amount that currently would be required to replace the service capacity of an asset (often referred to as current replacement cost). |
The FHLBNY has complied with the accounting standards under Fair Value Measurement that defines fair value, establishes a consistent framework for measuring fair value, and requires disclosure about fair value measurement on assets and liabilities recorded at fair value on the balance sheet.
For more information about the fair value hierarchy, and the hierarchy levels of the FHLBNY’s financial instruments, see Note 18. Fair Values of Financial Instruments.
On a recurring basis, fair values were measured and recorded in the Statements of Condition for derivatives, available-for-sale securities (AFS or AFS securities), securities designated as trading, equity investments, and financial instruments elected under the Fair Value Option (FVO).
On a non-recurring basis, credit impaired (formerly OTTI) held-to-maturity securities were measured and recorded at their fair values in the Statements of Condition. When credit impaired mortgage loans held-for-portfolio were partially charged off, the loans were written down to their collateral values on a non-recurring basis.
106
Fair values of derivative positions — The FHLBNY is an end-user of over-the-counter (OTC) derivatives to hedge assets, liabilities, and certain firm commitments to mitigate fair value risks. Valuations of derivative assets and liabilities reflect the value of the instrument including the value associated with counterparty risk. Derivative values also take into account the FHLBNY’s own credit standing. The computed fair values of the FHLBNY’s OTC derivatives take into consideration the effects of legally enforceable master netting agreements that allow the FHLBNY to settle positive and negative positions and offset cash collateral with the same counterparty on a net basis. The agreements include collateral thresholds that reflect the net credit differential between the FHLBNY and its derivative counterparties. On a contract-by-contract basis, the collateral and netting arrangements sufficiently mitigated the impact of the credit differential between the FHLBNY and its derivative counterparties to an immaterial level such that an adjustment for nonperformance risk was not deemed necessary.
Fair values of investments classified as AFS securities — The FHLBNY’s investments classified as AFS are primarily GSE-issued mortgage-backed securities (MBS), which are recorded at fair values. The MBS fair values are estimated by management using specialized pricing services that employ pricing models or quoted prices of securities with similar characteristics. The FHLBNY has established that the pricing vendors use methods that generally employ, but are not limited to, benchmark yields, recent trades, dealer estimates, valuation models, benchmarking of like securities, sector groupings, and/or matrix pricing.
For more information about methodologies used by the FHLBNY to validate vendor pricing, and fair value “Levels” associated with assets and liabilities recorded on the FHLBNY’s Statements of Condition at December 31, 2023 and 2022, see financial statements, Note 18. Fair Values of Financial Instruments.
Derivatives and Hedging Activities
Generally, we enter into derivatives primarily to manage our exposure to changes in interest rates. Through the use of derivatives, we may adjust the effective maturity, repricing frequency, or option characteristics of financial instruments to achieve our risk management objectives. The accounting guidance related to derivatives and hedging activities is complex and contains prescriptive documentation requirements. At the inception of each hedge transaction, we formally document the hedge relationship, its risk management objective, and strategy for undertaking the hedge.
To qualify as an accounting hedge under the hedge accounting rules (versus an economic hedge where hedge accounting is not sought), a derivative must be highly effective in offsetting the risk designated as being hedged. The hedge relationship must be formally documented at inception, detailing the particular risk management objective and strategy for the hedge, which includes the item and risk that is being hedged and the derivative that is being used, as well as how effectiveness will be assessed and measured. The effectiveness of these hedging relationships is evaluated on a retrospective and prospective basis, typically using quantitative measures of correlation. For hedges that are highly effective, changes in the fair values of the hedging instrument and the offsetting changes in the fair values of the hedged item are recorded in current earnings. If a hedge relationship is found to be not highly effective, it will no longer qualify as an accounting hedge and hedge accounting would be prospectively withdrawn. When hedge accounting is discontinued, the offsetting changes of fair values of the hedged item are also no longer recorded.
The FHLBNY records derivatives on trade date, and hedge accounting commences on trade date, at which time subsequent changes to the derivative’s fair value are recorded along with the offsetting changes in the fair value of the hedged item attributable to the risk being hedged. On settlement date, the basis adjustments to the hedged item’s carrying amount are combined with the principal amounts and the basis becomes part of the total carrying amount of the hedged item. The FHLBNY has defined its market settlement conventions for hedged items to be five business days or less for advances and thirty calendar days or less, using a next business day convention, for Consolidated obligations bonds and discount notes. These market settlement conventions are the shortest period possible for each type of advance and Consolidated obligations from the time the instruments are committed to the time they settle.
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The FHLBNY reports derivative assets and derivative liabilities in its Statements of Condition after giving effect to legally enforceable master netting, or when an agreement is not available as with OTC cleared derivatives, enforceability is based on a legal analysis or legal opinion. Reported Derivative assets and liabilities include interest receivable and payable on derivative contracts and the fair values of the derivative contracts. The Bank records cash collateral received and posted in the Statements of Condition as an adjustment to Derivative assets and liabilities in the following manner - Cash collateral posted by the FHLBNY is reported as a deduction to Derivative liabilities; cash collateral received from derivative counterparties is reported as a deduction to Derivative assets. Cash posted by the FHLBNY in excess of margin requirements is recorded as a receivable in Derivative assets. Variation margin exchanged with Derivative Clearing Organizations on cleared derivatives is treated as a settlement of the derivative itself, a reduction of the fair value of the derivative, and not as collateral.
When derivative counterparties pledge marketable securities, they typically retain title and the securities are treated as non-cash collateral. When the FHLBNY pledges securities to counterparties, we also retain title to the securities and treat the securities as collateral. Securities pledged or received are not netted against the derivative exposures on the Statements of Condition.
The FHLBNY routinely issues debt to investors and makes advances to members. In certain such instruments, the FHLBNY may embed a derivative. Typically, such derivatives are call and put options to early terminate the instruments at par on pre-determined dates. The FHLBNY may also embed interest rate caps and floors, or step-up or step-down interest rate features within the instruments. The FHLBNY also routinely structures interest rate swaps to hedge the FHLBank debt and advances, and the FHLBNY may also embed derivative instruments, such as those identified in the previous discussion, in the swaps. When such instruments are conceived, designed and structured, our control procedures require the identification and evaluation of embedded derivatives, as defined under accounting standards for derivatives and hedging activities. This evaluation will consider whether the economic characteristics of the embedded derivative are clearly and closely related to the economic characteristics of the remaining component of the advance or debt (the host contract) and whether a separate, non-embedded instrument with the same terms as the embedded instrument would meet the definition of a derivative instrument.
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. Other than to elect the amendments under ASU 2017-12, which expanded the strategies that qualify for hedge accounting and simplified the application of hedge accounting, no other changes were made to hedge accounting strategies.
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.
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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.
The partial-term hedging strategy makes it possible to hedge selected fixed-rate payments in a fair value hedge of interest rate risk. While U.S. GAAP has long permitted entities to designate one or more contractual cash flows in a financial instrument, the hedge strategy could result in hedge ineffectiveness. This is because the fair value of the hedging instrument and the hedged item would react differently to changes in interest rates because the principal repayment of the debt occurs on a different date than the swap’s maturity. ASU 2017-12 addressed this issue by allowing entities to calculate the change in the fair value of the hedged item in a partial-term hedge of a fixed-rate financial instrument using an assumed term that begins when the first hedged cash flow begins to accrue and ends when the last hedged cash flow is due and payable. Similar to other fair value hedges, where the hedged item is an asset, the fair value of the hedged item attributable to interest rate risk is recorded in P&L and presented in Interest income from investments along with the change in the fair value of the hedging instrument. The new strategy has been utilized by the FHLBNY for hedging certain AFS designated mortgage-backed securities.
Benchmark rate component hedging is permitted under the ASU, which addressed the issue that measuring changes in the fair value of the hedged item using the total coupon cash flows misrepresents the true effectiveness of these hedging relationships. Additionally, these hedging relationships are not meant to manage credit risk, and that using the total contractual cash flows to determine the change in the fair value of the hedged item attributable to the change in the benchmark interest rate creates an earnings mismatch that reflects the portion of the financial instrument that the entity does not intend to hedge. The new guidance addresses these issues by allowing entities to use either (1) the full contractual coupon cash flows or (2) the benchmark rate component of the contractual coupon cash flows to calculate the change in the fair value of the hedged item attributable to changes in the benchmark interest rate in a fair value hedge of interest rate risk. We have used the concept selectively.
Discontinuation of Hedge Accounting. When hedge accounting is discontinued because the FHLBNY determines that the derivative no longer qualifies as an effective Fair value hedge of an existing hedged item, the FHLBNY continues to carry the derivative on the balance sheet at its fair value, ceases to adjust the hedged asset or liability for changes in fair value, and amortizes the cumulative basis adjustment on the hedged item into earnings over the remaining life of the hedged item (for callable as well as non-callable previously hedged debt and advances) using the level-yield methodology. When the hedged item is a firm commitment, and hedge accounting is discontinued because the hedged item no longer meets the definition of a firm commitment, the FHLBNY would continue to carry the derivative on the balance sheet at its fair value, removing from the balance sheet any asset or liability that was recorded to recognize the firm commitment and recording it as a gain or loss in current period earnings.
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When hedge accounting is discontinued because the FHLBNY determines that the derivative no longer qualifies as an effective Cash flow hedge of an existing hedged item, the FHLBNY continues to carry the derivative on the balance sheet at its fair value; fair value marks previously recorded as basis adjustment in AOCI are reclassified to earnings when earnings are affected by the existing hedge item, which is the original forecasted transaction. Fair value changes on derivatives that are no longer in a hedge relationship are charged directly to earnings. Under limited circumstances, when the FHLBNY discontinues cash flow hedge accounting because it is no longer probable that the forecasted transaction will occur in the originally expected period plus the following two months, but it is probable the transaction will still occur in the future, the gain or loss on the derivative remains in AOCI and is recognized into earnings when the forecasted transaction affects earnings. However, if it is probable that a forecasted transaction will not occur by the end of the originally specified time period or within two months after that, the gains and losses that were included in AOCI are recognized immediately in earnings.
The FHLBNY treats modifications of hedged items (e.g. reduction in par amounts, change in maturity date, and change in strike rates) that are other than minor as a termination of a hedge relationship, and previously recorded hedge basis adjustments of the hedged items are amortized over the life of the hedged item.
Credit Losses under ASU 2016-13
The FASB issued ASU 2016-13, Financial Instruments — Credit Losses (Topic 326), which became effective for the Bank as of January 1, 2020. The adoption of this guidance established a single allowance framework for all financial assets carried at amortized cost, including advances, loans, held-to-maturity securities, other receivables and certain off-balance sheet credit exposures. We have elected to evaluate expected credit losses on interest receivable separately. 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 framework requires that management’s estimate reflects credit losses over the full remaining expected life and considers expected future changes in macroeconomic conditions.
Summarized information of expected losses are provided in notes to financial statements:
Note 4. Interest-bearing Deposits, Federal Funds Sold and Securities Purchased Under Agreements to Resell.
Note 7. Available-for-Sale Securities.
Note 8. Held-to-Maturity Securities.
Note 9. Advances.
Note 10. Mortgage Loans Held-for-Portfolio.
Note 19. Commitments and Contingencies (for off-balance sheet).
Classification of Investment Securities
The FHLBNY classifies a debt security at the date of acquisition as trading, held-to-maturity or available-for-sale. Investments designated as held-to-maturity and available-for-sale are primarily GSE-issued mortgage-backed securities, and a small portfolio of bonds issued by housing finance agencies. Investments designated as trading are primarily U.S. Treasury securities. Purchases and sales of securities are recorded on a trade date basis. Prepayments are estimated for purposes of amortizing premiums and accreting discounts on investment securities in accordance with accounting standards for investments in debt securities, which requires premiums and discounts to be recognized in income at a constant effective yield over the life of the instrument. Because actual prepayments often deviate from the estimates, the effective yield is recalculated periodically to reflect actual prepayments to date. Adjustments of the effective yields for mortgage-backed securities are recorded on a retrospective basis, as if the new estimated life of the security had been known at its original acquisition date.
The Bank’s trading portfolio is to enhance the FHLBNY’s liquidity position, and is invested typically in U.S. Treasury securities and GSE-issued bonds. The securities are carried at fair value with changes in the fair value of these investments recorded in Other income. The Bank does not participate in speculative trading practices and holds these investments indefinitely as the FHLBNY periodically evaluates its liquidity needs.
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Held-to-Maturity Securities — The FHLBNY classifies debt securities for which it has both the ability and intent to hold to maturity as held-to-maturity investments. Such investments are recorded at amortized cost basis, which includes adjustments made to the cost of an investment for accretion and amortization of discounts and premiums, collection of cash and, if hedged, the fair value hedge accounting adjustments. If a held-to-maturity security is determined to be credit impaired or other-than-temporarily impaired (formerly OTTI), the amortized cost basis of the security is adjusted for credit losses. Amortized cost basis of a held-to-maturity OTTI security is further adjusted for impairment related to all other factors (also referred as the non-credit component of OTTI) and recognized in AOCI; the adjusted amortized cost basis is the carrying value of the OTTI security as reported in the Statements of Condition. Carrying value of a held-to-maturity security that is not OTTI is its amortized cost basis. Interest earned on such securities is included in Interest income.
In accordance with accounting standards for investments in debt securities, sales of debt securities that meet either of the following two conditions may be considered as maturities for purposes of the classification of securities: (1) the sale occurs near enough to its maturity date (or call date if exercise of the call is probable) such that interest rate risk is substantially eliminated as a pricing factor and the changes in market interest rates would not have a significant effect on the security’s fair value, or (2) the sale of a security occurs after the FHLBNY has already collected a substantial portion (at least 85%) of the principal outstanding at acquisition. As a one-time election in accordance with ASC 848 Reference Rate Reform, we reclassified $
Available-for-Sale Securities — The FHLBNY classifies debt securities that it may sell before maturity as AFS and carries them at fair value. Until AFS securities are sold, changes in fair values are recorded in AOCI as Net unrealized gain or (loss) on AFS securities. The FHLBNY computes gains and losses on sales of debt securities using the specific identification method and includes these gains and losses in Other income (loss).
Trading Securities — Debt securities classified as trading are held for liquidity purposes and carried at fair value. We record changes in the fair value of these investments through Other income as net realized and unrealized gains or losses on trading securities. The Finance Agency prohibits speculative trading practices but allows permitted securities to be deemed held for liquidity if invested in a trading portfolio. We periodically evaluate our liquidity needs and may dispose these investments as deemed prudent by liquidity and market conditions.
Equity Securities — The FHLBNY measures its equity investments at fair value with changes in fair value recognized in net income, thus eliminating eligibility for the available-for-sale category. The FHLBNY’s equity investments comprise of mutual fund assets in grantor trusts owned by the FHLBNY. The intent of the grantor trusts are to set aside cash to meet current and future payments for supplemental unfunded retirement plans.
Federal Funds Sold. Federal funds sold are recorded at cost on settlement date and interest is accrued using contractual rates.
Securities Purchased under Agreements to Resell. As part of the FHLBNY’s banking activities with counterparties, 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 securities are taken as collateral. The FHLBNY does not have the right to repledge the securities received. Securities purchased under agreements to resell generally do not constitute a transfer of the underlying securities. The FHLBNY treats securities purchased under agreements to resell as collateralized financings because the counterparty retains control of the securities. Interest from such securities is included in Interest income. The FHLBNY did not have any offsetting liabilities related to its securities purchased under agreements to resell for the periods presented.
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Advances
Accounting for Advances. The FHLBNY reports advances at amortized cost, net of any discounts and premiums (discounts are generally associated with advances for the Affordable Housing Program). If the advance is hedged in an ASC 815 qualifying hedge, its carrying value will include hedging valuation adjustments, which will typically be the result of changes in designated benchmark index. If an advance is accounted under the Fair Value Option, the carrying value of the advances elected will be its full fair value.
The FHLBNY records interest on advances to income as earned, and amortizes the premium and accretes the discounts on a contractual basis to interest income using a level-yield methodology. Typically, advances are issued at par.
Impairment Analysis of Advances. An advance will be considered impaired when, based on current information and events, it is probable that the FHLBNY will be unable to collect all amounts due according to the contractual terms of the advance agreement. The FHLBNY has established asset classification and reserve policies for adversely classified assets. All adversely classified assets of the FHLBNY will have a reserve established for probable losses. Following the requirements of the Federal Home Loan Bank Act of 1932 (FHLBank Act), as amended, the FHLBNY obtains sufficient collateral on advances to protect it from losses. The FHLBank Act limits eligible collateral to certain investment securities, residential mortgage loans, cash or deposits with the FHLBNY, and other eligible real estate related assets. Borrowing members pledge their capital stock of the FHLBNY as additional collateral for advances.
The FHLBNY has not incurred any credit losses on advances since its inception. Based upon the financial condition of its borrowers, the collateral held as security on the advances and repayment history, management of the FHLBNY believes that an allowance for credit losses on advances is unnecessary.
Advance Modifications. From time to time, the FHLBNY will enter into an agreement with a member to modify the terms of an existing advance. The FHLBNY evaluates whether the modified advance meets the accounting criteria under ASC 310-20 to qualify as a modification of an existing advance or as a new advance in accordance with provisions under creditor’s accounting for a modification or exchange of debt instruments. The evaluation includes analysis of (i) whether the effective yield on the new advance is at least equal to the effective yield for a comparable advance to a similar member that is not refinancing or restructuring, and (ii) whether the modification of the original advance is more than minor. If the FHLBNY determines that the modification is more than minor, the transaction is treated as an advance termination and the subsequent funding of a new advance, with gains or losses recognized in earnings for the period. If the advance is in a hedging relationship, and the modification is more than minor, the FHLBNY will consider the hedge relationship as terminated and previously recorded hedge basis adjustments are amortized over the life of the hedged advance through interest income as a yield adjustment. If the modification of the hedged item and the derivative instrument is considered minor, and if the hedge relationship is de-designated and contemporaneously re-designated, the FHLBNY would not require amortization of previously recorded hedge basis adjustments, although the assumption of no ineffectiveness is removed if the hedge was previously designated as a short-cut hedge.
The FHLBNY performs a “test of a modification” under the guidance provided in ASC 310-20-35-11 each time a new advance is borrowed within a short-period of time, typically
Prepayment Fees on Advances. Generally, advances are prepaid by members at their fair values. The FHLBNY also charges the member a prepayment fee to make the FHLBNY financially indifferent to the early termination of the advance.
For a prepaid advance that had been hedged under a qualifying fair value hedge, the FHLBNY would terminate the hedging relationship. Typically, the FHLBNY would terminate the interest rate swap, and would record the fair value exchanged with the swap counterparty as its settlement value. Prepayment fees received from the prepaying member to make the FHLBNY financially indifferent is recognized in earnings as interest income from advances.
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For prepaid advances that are not hedged or that are economically hedged, the FHLBNY would also charge the member the fair value of the advance, in addition to a prepayment fee that would make the FHLBNY financially indifferent to the early termination.
The FHLBNY offers a rebate, which is typically a portion of the prepayment fee. The rebate is contingent upon the prepaying member borrowing new advances within a
Mortgage Loans Held-for-Portfolio
The FHLBNY purchases and originates conventional mortgage loans from our participating members (Participating Financial Institutions or PFIs) through MAP and, prior to March 31, 2021, through our legacy MPF program.
Accounting for Mortgage Loans. The FHLBNY has the intent and ability to hold these mortgage loans for the foreseeable future or until maturity or payoff and classifies mortgage loans as held-for-portfolio. Loans are reported at their principal amount outstanding, net of premiums and discounts, which is the fair value of the mortgage loan on settlement date. The FHLBNY defers premiums and discounts, and uses the contractual method to amortize premiums and accrete discounts on mortgage loans. The contractual method recognizes the income effects of premiums and discounts in a manner that is reflective of the actual behavior of the mortgage loans during the period in which the behavior occurs while also reflecting the contractual terms of the assets without regard to changes in estimated prepayments based upon assumptions about future borrower behavior.
Mortgage loans are written down to their fair values either at foreclosure or to their collateral values when collectability is doubtful, typically when delinquent 180 days or greater and the loan is not well collateralized. When a loan is partially charged off, the remaining loan balance is typically written down and recorded at its collateral value on a non-recurring basis (see Note 18. Fair Values of Financial Instruments).
The FHLBNY records credit enhancement fees as a reduction to mortgage loan interest income. Other non-origination fees, such as delivery commitment extension fees and pair-off fees, are considered as derivative income and recorded over the life of the commitment; all such fees were insignificant for all periods reported.
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Non-Accrual Mortgage Loans. The FHLBNY places a mortgage loan on non-accrual status when the collection of the contractual principal or interest is doubtful, which for the FHLBNY is typically
Impairment Methodology and Portfolio Segmentation and Disaggregation — Except for VA and FHA insured mortgage loans, all mortgage loans are measured for impairment and analyzed for credit losses. Measurement of credit losses is based on current information and events and when it is probable that the FHLBNY will be unable to collect all amounts due according to the contractual terms of the loan agreement. Credit losses are measured for impairment based on the fair value of the underlying property less estimated selling costs. It is assumed that repayment is expected to be provided solely by the sale of the underlying property, that is, there is no other available and reliable source of repayment. To the extent that the net fair value of the property (collateral) is less than the amortized cost in the loan, a loan loss allowance is recorded. FHA and VA are insured loans, and are excluded from the loan-by-loan analysis. FHA and VA insured mortgage loans have minimal inherent credit risk; risk generally arises mainly from the servicers defaulting on their obligations. FHA and VA insured mortgage loans, if adversely classified, would have reserves established only in the event of a default of a PFI, and reserves would be based on aging, collateral value and estimated costs to recover any uninsured portion of the mortgage loan.
Aside from separating conventional mortgage loans from FHA and VA insured loans, the FHLBNY has determined that no further disaggregation or portfolio segmentation is needed as the credit risk is measured at the individual loan level.
Charge-Off Policy — The FHLBNY complies with the guidance provided by the FHFA to perform a charge-off analysis when a loan is on non-accrual status for 180 days or more and the loan is not well collateralized. The charge-off is calculated as the amount of the shortfall of the fair value of the underlying collateral, less estimated selling costs, compared to the amortized cost in the loan.
Real Estate Owned (REO) — REO includes assets that have been received in satisfaction of mortgage loans through foreclosure. REO is recorded at the lower of cost or fair value less estimated selling costs of the REO. At the date of transfer, from mortgage loan to REO, the FHLBNY recognizes a charge-off to allowance for credit losses if the fair value of the REO is less than the amortized cost in the loan. Any subsequent realized gains, realized or unrealized losses and carrying costs are included in Other income (non-interest) in the Statements of Income. REO is recorded in Other assets, in the Statements of Condition.
Mandatorily Redeemable Capital Stock
Generally, the FHLBNY’s capital stock is redeemable at the option of both the member and the FHLBNY, subject to certain conditions. The FHLBNY’s capital stock is accounted for under the guidance for financial instruments with characteristics of both liabilities and equity. Dividends paid on capital stock classified as mandatorily redeemable stock are accrued at an estimated dividend rate and reported as interest expense in the Statements of Income.
Mandatorily redeemable capital stock at December 31, 2023 and 2022 represented capital stocks held by former members.
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Accounting Considerations under the Capital Plan — There are
| ● | a member requests redemption of excess membership stock; |
| ● | a member delivers notice of its intent to withdraw from membership; or |
| ● | a member attains non-member status (through merger into or acquisition by a non-member, charter termination, or involuntary termination from membership). |
The member’s request to redeem excess Membership Stock will be considered to be revocable until the stock is repurchased. Since the member’s request to redeem excess Membership Stock can be withdrawn by the member without penalty, the FHLBNY considers the member’s intent regarding such request to not be substantive in nature; therefore, no reclassification to a liability will be made at the time the request is delivered.
Under the Capital Plan, when a member delivers a notification of its intent to withdraw from membership, the reclassification from equity to a liability will become effective upon receipt of the notification. The FHLBNY considers the member’s intent regarding such notification to be substantive in nature; therefore, reclassification to a liability will be made at the time the notification of the intent to withdraw is delivered. When a member is acquired by a non-member, the FHLBNY reclassifies stock of former members to a liability on the day the member’s charter is dissolved. Unpaid dividends related to capital stock reclassified as a liability are accrued at an estimated dividend rate and reported as interest expense in the Statements of Income. The repurchase of these mandatorily redeemable financial instruments is reflected as a cash outflow in the financing activities section of the Statements of Cash Flows.
The FHLBNY’s capital stock can only be acquired and redeemed at par value; and are not traded and no market mechanism exists for the exchange of stock outside the cooperative structure.
Affordable Housing Program
The FHLBank Act requires each FHLBank to establish and fund an AHP (see Note 13. Affordable Housing Program). The FHLBNY charges the required funding for AHP to earnings and establishes a liability. The AHP funds provide subsidies to members to assist in the purchase, construction, or rehabilitation of housing for very low-, low-, and moderate-income households. The AHP assessment is based on a fixed percentage of income before adjustment for dividends associated with mandatorily redeemable capital stock. Dividend payments are reported as interest expense in accordance with the accounting guidance for certain financial instruments with characteristics of both liabilities and equity. If the FHLBNY incurs a loss for the entire year, no AHP assessment or assessment credit is due or accrued, as explained more fully in Note 13. Affordable Housing Program.
From time to time, the FHLBNY may also issue AHP advances at interest rates below the customary interest rates for non-subsidized advances. When the FHLBNY makes an AHP advance, the present value of the variation in the cash flow caused by the difference between the AHP advance interest rate and the FHLBNY’s related cost of funds for comparable maturity funding is charged against the AHP liability. The amounts are then recorded as a discount on the AHP advance. As an alternative, the FHLBNY has the authority to make the AHP subsidy available to members as a grant.
Commitment Fees
The FHLBNY records the present value of fees receivable from standby letters of credit as an asset and an offsetting liability for the obligation. Fees, which are generally received for
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Premises, Software and Equipment
The Bank computes depreciation using the straight-line method over the estimated useful lives of assets ranging from to
Lease Accounting
The FHLBNY adopted ASU 2016-02, Leases (Topic 842) effective January 1, 2019. Leases are recognized on the balance sheet as a lease liability with a right-of-use asset as an offset. See Operating and Finance lease commitment disclosures in Note 19. Commitments and Contingencies.
Consolidated Obligations
Accounting for Consolidated obligation debt. The FHLBNY reports Consolidated obligation bonds and discount notes at amortized cost, net of discounts and premiums. If the consolidated obligation debt is hedged in a benchmark hedge, its carrying value will include hedging valuation adjustments, which will typically be the changes in the SOFR or Federal funds effective index, LIBOR index previously. The carrying value of Consolidated obligation debt elected under the FVO will be its fair value. The FHLBNY records interest paid on Consolidated obligation bonds in interest expense. The FHLBNY expenses the discounts on Consolidated obligation discount notes, using the level-yield method, over the term of the related notes and amortizes the discounts and premiums on callable and non-callable Consolidated bonds, also using the contractual level-yield method, over the term to maturity of the Consolidated obligation bonds.
Concessions on Consolidated Obligations. Concessions are paid to dealers in connection with the issuance of certain Consolidated obligation bonds. The Office of Finance prorates the amount of the concession to the FHLBNY based upon the percentage of the debt issued that is assumed by the FHLBNY. Concessions paid on Consolidated obligation bonds elected under the FVO are expensed as incurred. Concessions paid on Consolidated obligation bonds not designated under the FVO are deferred and amortized, using the contractual level-yield method, over the term to maturity of the Consolidated obligation bond. Unamortized debt issuance costs are recorded in Consolidated obligation bond liabilities in the Statements of Condition. The FHLBNY charges to expense, as incurred, the concessions applicable to the sale of Consolidated obligation discount notes because of their short maturities; amounts are recorded in Consolidated obligations interest expense.
Finance Agency and Office of Finance Expenses
The FHLBNY is assessed for its proportionate share of the costs of operating the Finance Agency and the Office of Finance. The Finance Agency is authorized to impose assessments on the FHLBanks and
The Office of Finance is also authorized to impose assessments on the FHLBanks, including the FHLBNY, in amounts sufficient to pay the Office of Finance’s annual operating and capital expenditures. Each FHLBank is assessed a prorated — (1) -thirds based upon each FHLBank’s share of total Consolidated obligations outstanding (calculated as an average of the prior twelve month-end consolidated obligation balances) and (2) -third based upon an equal pro-rata allocation.
Earnings per Share of Capital
Basic earnings per share is computed by dividing income available to stockholders by the weighted average number of shares outstanding for the period. Capital stock classified as mandatorily redeemable capital stock is excluded from this calculation. Basic and diluted earnings per share are the same, as the FHLBNY has
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Cash Flows
In the Statements of Cash Flows, the FHLBNY considers Cash and due from banks to be cash. Interest-bearing deposits, Federal funds sold, and securities purchased under agreements to resell are reported in the Statements of Cash Flows as investing activities.
Federal funds sold, securities purchased under agreements to resell, and deposits with other FHLBanks are deemed short-term under ASC 320 and therefore, net presentation is appropriate.
Derivative instruments — Cash flows from a derivative instrument that is accounted for as a fair value or cash flow hedge, including those designated as economic hedges, are reflected as cash flows from operating activities if the derivative instrument did not include “an other-than-insignificant” financing element at inception. When the FHLBNY executes an off-market derivative, which would typically require an up-front cash exchange, the FHLBNY will analyze the transaction and would deem it to contain a financing element if the cash exchange is more than insignificant. Financing elements are recorded as a financing activity in the Statements of Cash Flows.
Losses on debt extinguishment — Losses from debt retirement and transfers (debt retirement) are considered financing activities in the Statements of Cash Flows. Losses are added back as an adjustment to Net cash provided by operating activities, with an offsetting increase in payments on maturing Consolidated obligation bonds as a financing activity.
Note 2. Financial Accounting Standards Board (FASB) Standards Issued.
Recently Issued Accounting Standards
Standard |
| Summary of Guidance |
| Effective Date |
| Effects on the Financial Statements |
Improvements to Reportable Segment Disclosures ASU 2023-07, Issued November 2023 | This guidance improves disclosures about a public entity’s reportable segments and addresses requests from investors and other allocators of capital for additional, more detailed information about a reportable segment’s expenses. | This guidance is effective for fiscal years beginning after December 15, 2023. Early adoption is permitted. | We are in the process of evaluating the guidance and its effect on the financial statement disclosures. |
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 recorded as cash and cash equivalent in the Statements of Cash Flows. The FHLBNY is exempt 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. There are
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. There were
117
Note 4. Interest-bearing Deposits, Federal Funds Sold and Securities Purchased Under Agreements to Resell.
The Bank invests in interest-bearing deposits, securities purchased under agreements to resell, and federal funds sold to provide short-term liquidity. These investments are generally transacted with counterparties that have received a credit rating of triple-B or higher (investment grade) by a nationally recognized statistical rating organization.
Interest-bearing deposits — Investments are typically short-term deposits placed with highly-rated large financial institutions and are recorded at amortized cost. Deposits placed were $
Federal funds sold — Federal funds sold are unsecured advances to highly-rated large financial institutions. Federal funds sold are unsecured loans that are generally transacted on an overnight term and recorded at amortized cost. FHFA regulations include a limit on the amount of unsecured credit an individual Bank may extend to a counterparty. Federal funds sold were $
Securities purchased under agreements to resell — The outstanding balances of Securities purchased under agreements to resell were recorded on an amortized cost basis of $
U.S. Treasury securities at market values of $
118
Note 5. Trading Securities.
The carrying value of a trading security equals its fair value. The following table provides major security types at December 31, 2023 and December 31, 2022 (in thousands):
Fair value |
| December 31, 2023 |
| December 31, 2022 | ||
U.S. Treasury notes | $ | | $ | | ||
Total trading securities | $ | | $ | | ||
The carrying values of trading securities included net unrealized fair value losses of $
Trading Securities Pledged
The FHLBNY had pledged marketable securities at fair values of $
The following tables present redemption terms of the major types of trading securities (dollars in thousands):
Redemption Terms
| December 31, 2023 | |||||||||||
Due in one year | Due after one year | Due after five years | ||||||||||
| or less |
| through five years |
| through ten years |
| Total Fair Value | |||||
U.S. Treasury notes | $ | | $ | | $ | | $ | | ||||
Total trading securities | $ | | $ | | $ | | $ | | ||||
Yield on trading securities | | % | | % | | % | ||||||
| December 31, 2022 | |||||||||||
Due in one year | Due after one year | Due after five years | ||||||||||
| or less |
| through five years |
| through ten years |
| Total Fair Value | |||||
U.S. Treasury notes | $ | | $ | | $ | | $ | | ||||
Total trading securities | $ | | $ | | $ | | $ | | ||||
Yield on trading securities | | % | | % | | % | ||||||
119
Note 6. Equity Investments.
The FHLBNY has classified its grantor trusts as equity investments.
| December 31, 2023 | |||||||||||
Gross | Gross | |||||||||||
Amortized | Unrealized | Unrealized | Fair | |||||||||
| Cost |
| Gains (b) |
| Losses (b) |
| Value (c) | |||||
Cash equivalents | $ | | $ | — | $ | — | $ | | ||||
Equity funds |
| |
| |
| ( |
| | ||||
Fixed income funds |
| |
| |
| ( |
| | ||||
Total Equity Investments (a) | $ | | $ | | $ | ( | $ | | ||||
| December 31, 2022 | |||||||||||
Gross | Gross | |||||||||||
Amortized | Unrealized | Unrealized | Fair | |||||||||
| Cost |
| Gains (b) |
| Losses (b) |
| Value (c) | |||||
Cash equivalents | $ | | $ | — | $ | — | $ | | ||||
Equity funds |
| |
| |
| ( |
| | ||||
Fixed income funds |
| |
| |
| ( |
| | ||||
Total Equity Investments (a) | $ | | $ | | $ | ( | $ | | ||||
| (a) | The intent of the grantor trusts are to set aside cash to meet current and future payments for a supplemental unfunded pension plan. Neither the pension plans nor the 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. |
In the Statements of Income, gains and losses related to outstanding Equity Investments were as follows (in thousands):
| Years ended December 31, | |||||
| 2023 |
| 2022 | |||
Unrealized gains (losses) recognized during the reporting period on equity investments still held at the reporting date | $ | | $ | ( | ||
Net gains (losses) recognized during the period on equity investments sold during the period | ( | ( | ||||
Net dividend and other |
| |
| | ||
Net gains (losses) recognized during the period | $ | | $ | ( | ||
120
Note 7. Available-for-Sale Securities.
The following tables provide major security types (in thousands):
December 31, 2023 | ||||||||||||
|
|
| Gross |
| Gross |
|
| |||||
Amortized | Unrealized | Unrealized | Fair | |||||||||
| Cost |
| Gains |
| Losses |
| Value | |||||
GSE and U.S. Obligations | ||||||||||||
State and local housing finance agency obligations | $ | | $ | | $ | ( | $ | | ||||
Mortgage-backed securities | ||||||||||||
Floating | ||||||||||||
CMO | | | ( | | ||||||||
Pass Thru | | | — | |||||||||
Total Floating | | | ( | | ||||||||
Fixed | ||||||||||||
CMBS | | | ( | | ||||||||
Total Fixed | | | ( | | ||||||||
MBS AFS Before Hedging Adjustments | | | (a) | ( | (a) | | ||||||
Hedging Basis Adjustments in AOCI (b) |
| ( |
| |
| — |
| — | ||||
Total Available-for-sale securities (MBS) | | | ( | | ||||||||
Total Available-for-sale securities | $ | | $ | | $ | ( | $ | | ||||
December 31, 2022 | ||||||||||||
|
|
| Gross |
| Gross |
|
| |||||
Amortized | Unrealized | Unrealized | Fair | |||||||||
| Cost |
| Gains |
| Losses |
| Value | |||||
GSE and U.S. Obligations | ||||||||||||
State and local housing finance agency obligations | $ | | $ | | $ | ( | $ | | ||||
Mortgage-backed securities | ||||||||||||
Floating | ||||||||||||
CMO | | | ( | | ||||||||
Pass Thru | | | ( | | ||||||||
Total Floating | | | ( | | ||||||||
Fixed | ||||||||||||
CMBS | | | ( | | ||||||||
Total Fixed | | | ( | | ||||||||
MBS AFS Before Hedging Adjustments | | | (a) | ( | (a) | | ||||||
Hedging Basis Adjustments in AOCI (b) |
| ( |
| |
| — |
| — | ||||
Total Available-for-sale securities (MBS) | | | ( | | ||||||||
Total Available-for-sale securities | $ | | $ | | $ | ( | $ | | ||||
| (a) | Amounts represent specialized third party pricing vendors’ estimates of gains/losses of AFS securities; market pricing is based on historical amortized cost adjusted for pay downs and amortization of premiums and discounts; fair value unrealized gains and losses are before adjusting book values for hedge basis adjustments and will equal market values of AFS securities recorded in AOCI. Fair value hedges were executed to mitigate the interest rate risk of the hedged fixed-rate securities due to changes in the designated benchmark rate. |
| (b) | Amounts represent fair value hedging basis due to changes in the benchmark rate and were recorded as an adjustment to the carrying values of hedged securities; the adjustments impacted the unrealized market value gains and losses. Securities in a fair value hedging relationship at December 31, 2023 recorded $ |
121
Credit Loss Analysis of AFS Securities
The FHLBNY’s portfolio of MBS classified as AFS is comprised primarily of GSE-issued collateralized mortgage obligations and CMBS. A portfolio of State and local housing finance agency obligations is also classified as AFS. 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 December 31, 2023 and December 31, 2022, unrealized fair value losses have been aggregated in the table below by the length of time a security was in a continuous unrealized loss position based on market-based pricing and excluding the effects of hedge basis adjustments.
The Bank evaluates its individual AFS securities for impairment by comparing the security’s fair value to its amortized cost. Impairment may exist when the fair value of the investment is less than its amortized cost (i.e. in an unrealized loss position). We have not experienced any payment defaults on the instruments. As noted previously, substantially all of these securities are GSE-issued and carry an implicit or explicit U.S. government guarantee. Based on the analysis,
The following table summarizes available-for-sale securities with estimated fair values below their amortized cost basis (in thousands):
December 31, 2023 | ||||||||||||||||||
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 and State and local housing finance agency obligations |
|
|
|
|
|
|
|
|
|
|
|
| ||||||
MBS-Other US Obligations | $ | | $ | ( | $ | | $ | ( | $ | | $ | ( | ||||||
MBS-GSE |
| |
| ( |
| |
| ( |
| |
| ( | ||||||
Total MBS Temporarily Impaired | $ | | $ | ( | $ | | $ | ( | $ | | $ | ( | ||||||
State and local housing finance agency obligations | | ( | | ( | | ( | ||||||||||||
Total Temporarily Impaired | $ | | $ | ( | $ | | $ | ( | $ | | $ | ( | ||||||
December 31, 2022 | ||||||||||||||||||
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 and State and local housing finance agency obligations | ||||||||||||||||||
MBS-Other US Obligations | $ | |
| $ | ( |
| $ | — |
| $ | — |
| $ | |
| $ | ( | |
MBS-GSE | |
| ( |
| |
| ( |
| |
| ( | |||||||
Total MBS Temporarily Impaired | $ | | $ | ( | $ | | $ | ( | $ | | $ | ( | ||||||
State and local housing finance agency obligations | | ( | | ( | | ( | ||||||||||||
Total Temporarily Impaired | $ | | $ | ( | $ | | $ | ( | $ | | $ | ( | ||||||
122
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.
December 31, 2023 | December 31, 2022 | |||||||||||
| Amortized |
| Estimated |
| Amortized |
| Estimated | |||||
| Cost (b) |
| Fair Value |
| Cost (b) |
| Fair Value | |||||
State and local housing finance agency obligations | ||||||||||||
Due in one year or less | $ | — | $ | — | $ | | $ | | ||||
Due after one year through five years | | | | | ||||||||
Due after ten years |
| |
| |
| |
| | ||||
State and local housing finance agency obligations | $ | | $ | | $ | | $ | | ||||
Mortgage-backed securities | ||||||||||||
Due in one year or less | $ | — | $ | — | $ | | $ | | ||||
Due after one year through five years |
| |
| |
| |
| | ||||
Due after five year through ten years |
| |
| |
| |
| | ||||
Due after ten years |
| |
| |
| |
| | ||||
Mortgage-backed securities | $ | | $ | | $ | | $ | | ||||
Total Available-for-Sale securities | $ | | $ | | $ | | $ | | ||||
(a) | The carrying value of AFS securities equals fair value. |
(b) | Amortized cost is UPB after adjusting for net unamortized discounts of $ |
Interest Rate Payment Terms
The following table summarizes interest rate payment terms of investments in Mortgage-backed securities and State and local housing finance agency obligations classified as AFS securities (in thousands):
| December 31, 2023 |
| December 31, 2022 | |||||||||
| Amortized Cost |
| Fair Value |
| Amortized Cost |
| Fair Value | |||||
Mortgage-backed securities | ||||||||||||
Floating | ||||||||||||
CMO | $ | | $ | | $ | | $ | | ||||
Pass Thru | | | | | ||||||||
Total Floating | | | | | ||||||||
Fixed | ||||||||||||
CMBS | | | | | ||||||||
Total Fixed | | | | | ||||||||
Total Mortgage-backed securities | | | | | ||||||||
State and local housing finance agency obligations | ||||||||||||
Floating | | | | | ||||||||
Total Available-for-Sale securities | $ | | $ | | $ | | $ | | ||||
123
Note 8. Held-to-Maturity Securities.
The following tables provide major security types (in thousands):
December 31, 2023 | |||||||||||||||||||||
|
| Allowance | OTTI |
|
|
| Gross |
| Gross |
|
| ||||||||||
Amortized | for Credit | Recognized | Carrying | Unrecognized | Unrecognized | Fair | |||||||||||||||
Issued, guaranteed or insured: |
| Cost (d) |
| Loss (ACL) |
| in AOCI |
| Value |
| Holding Gains (a) |
| Holding Losses (a) |
| Value | |||||||
Pools of Mortgages | $ | | $ | — | $ | — | $ | | $ | | $ | — | $ | | |||||||
Collateralized Mortgage Obligations/Real Estate Mortgage Investment Conduits |
| | — |
| — |
| |
| |
| ( |
| | ||||||||
Commercial Mortgage-Backed Securities (b) |
| | — |
| — |
| |
| |
| ( |
| | ||||||||
Non-GSE MBS (c) |
| | ( |
| ( |
| |
| |
| ( |
| | ||||||||
Total MBS |
| | ( |
| ( |
| |
| |
| ( |
| | ||||||||
Other | |||||||||||||||||||||
State and local housing finance agency obligations |
| | ( |
| — |
| |
| — |
| ( |
| | ||||||||
Total Held-to-Maturity securities | $ | | $ | ( | $ | ( | $ | | $ | | $ | ( | $ | | |||||||
December 31, 2022 | |||||||||||||||||||||
|
|
| Allowance | OTTI |
|
|
| Gross |
| Gross |
|
| |||||||||
Amortized | for Credit | Recognized | Carrying | Unrecognized | Unrecognized | Fair | |||||||||||||||
Issued, guaranteed or insured: |
| Cost (d) |
| Loss (ACL) |
| in AOCI |
| Value |
| Holding Gains (a) |
| Holding Losses (a) |
| Value | |||||||
Pools of Mortgages | $ | | $ | — | $ | — | $ | | $ | | $ | ( | $ | | |||||||
Collateralized Mortgage Obligations/Real Estate Mortgage Investment Conduits |
| | — |
| — |
| |
| — |
| ( |
| | ||||||||
Commercial Mortgage-Backed Securities (b) |
| | — |
| — |
| |
| |
| ( |
| | ||||||||
Non-GSE MBS (c) |
| | ( |
| ( |
| |
| |
| ( |
| | ||||||||
Total MBS |
| | ( |
| ( |
| |
| |
| ( |
| | ||||||||
Other | |||||||||||||||||||||
State and local housing finance agency obligations |
| | ( |
| — |
| |
| — |
| ( |
| | ||||||||
Total Held-to-Maturity securities | $ | | $ | ( | $ | ( | $ | | $ | | $ | ( | $ | | |||||||
| (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 “multi-family properties”. Eligible property types include standard conventional multi-family apartments, affordable multi-family housing, seniors housing, student housing, military housing, and rural rent housing. |
| (c) | The amounts represent non-agency private-label mortgage- and asset-backed securities. |
| (d) | Amortized cost — For securities that were deemed impaired, amortized cost represents unamortized cost less credit losses, net of credit recoveries (reversals) due to improvements in cash flows. |
Securities Pledged
The FHLBNY had pledged MBS, with an amortized cost basis of $
Credit Loss Allowances on Held-to-Maturity Securities
GSE-issued 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. The number of investment positions that were in an unrealized loss position was
124
Housing finance agency bonds — The FHLBNY’s investments in Held-to-Maturity (HTM) Housing finance agency (HFA) bonds reported gross unrecognized losses of $
Our investments 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 companies, 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.
Private-label mortgage-backed securities — Management evaluates its investments in private-label MBS (PLMBS) for credit losses on a quarterly basis by performing cash flow tests on its entire portfolio of PLMBS. Allowance for credit loss of $
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.
| December 31, 2023 |
| December 31, 2022 | |||||||||
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 | $ | — | $ | — | $ | | $ | | ||||
Due after five years through ten years | | | | | ||||||||
Due after ten years | | | | | ||||||||
State and local housing finance agency obligations | $ | | $ | | $ | | $ | | ||||
Mortgage-backed securities | ||||||||||||
Due in one year or less | $ | | $ | | $ | | $ | | ||||
Due after one year through five years |
| |
| |
| |
| | ||||
Due after five years through ten years | | | | | ||||||||
Due after ten years |
| |
| |
| |
| | ||||
Mortgage-backed securities | $ | | $ | | $ | | $ | | ||||
Total Held-to-Maturity Securities | $ | | $ | | $ | | $ | | ||||
| (a) | Amortized cost is UPB after adjusting for net unamortized discounts of $ |
125
Note 9. Advances.
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):
| December 31, 2023 |
| December 31, 2022 | ||||||||||||
|
| Weighted (a) |
|
|
|
| Weighted (a) |
|
| ||||||
Average | Percentage | Average | Percentage | ||||||||||||
Amount | Yield | of Total | Amount | Yield | of Total | ||||||||||
Overdrawn demand deposit accounts | $ | | | % | — | % | $ | | | % | — | % | |||
Due in one year or less | | | | | | | |||||||||
Due after one year through two years |
| | | |
| | | | |||||||
Due after two years through three years |
| | | |
| | | | |||||||
Due after three years through four years |
| | | |
| | | | |||||||
Due after four years through five years |
| | | |
| | | | |||||||
Thereafter |
| | | |
| | | | |||||||
Total par value |
| |
| | % | | % |
| |
| | % | | % | |
Advance discounts | ( | ( | |||||||||||||
Hedge valuation basis adjustments (b) |
| ( |
| ( | |||||||||||
Total | $ | | $ | | |||||||||||
| (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 designated benchmark interest rates, the remaining terms to maturity or to next call and the notional amounts of advances in a hedging relationship. The FHLBNY’s primary benchmark rates are Federal Funds-OIS index and SOFR-OIS index. |
Monitoring and Evaluating Credit Losses on Advances
The Bank manages its credit exposure to advances through an integrated approach that includes establishing a credit limit for each borrower. This approach includes an ongoing review of each borrower’s financial condition, in conjunction with the Bank’s collateral and lending policies to limit risk of loss, while balancing borrowers’ needs for a reliable source of funding.
In addition, the Bank lends to eligible borrowers in accordance with federal law and FHFA regulations. Specifically, the Bank is required to obtain sufficient collateral to fully secure credit products up to the counterparty’s total credit limit. Collateral eligible to secure new or renewed advances includes:
| ● | one-to-four family and multi-family mortgage loans (delinquent for no more than 90 days) and securities representing such mortgages; |
| ● | securities issued, insured, or guaranteed by the U.S. government or any U.S. government agency (for example, mortgage-backed securities issued or guaranteed by Fannie Mae, Freddie Mac, Gennie Mae, and FHLBanks Consolidated Obligations); |
| ● | cash or deposits in the Bank; |
126
| ● | certain other collateral that is real estate-related, provided that the collateral has a readily ascertainable value, can be liquidated in due course, and that the Bank can perfect a security interest in it; and |
| ● | qualifying securities. |
Residential mortgage loans are the principal form of collateral for advances. The estimated value of the collateral required to secure each member’s credit products is calculated by applying collateral discounts, or haircuts, to the market value or unpaid principal balance of the collateral, as applicable. In addition, community financial institutions are eligible to use expanded statutory collateral provisions for small business, agriculture loans, and community development loans. The Bank’s capital stock owned by each borrower is also pledged as collateral. Collateral arrangements may vary depending upon borrower credit quality, financial condition, and performance; borrowing capacity; and overall credit exposure to the borrower. The Bank can also require additional or substitute collateral to protect its security interest. The Bank also has policies and procedures for validating the reasonableness of our collateral valuations.
Summarized below are the FHLBNY’s credit loss allowance methodologies:
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, can be liquidated in due course, 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.
Allowance for Credit Risk. The FHLBNY has policies and procedures in place to manage credit risk. The FHLBNY has a continuous process of evaluating collateral supporting advances and to make changes to its collateral guidelines, as necessary, based on current market conditions.
As of December 31, 2023, the FHLBNY had collateral on a borrower-by-borrower basis with a value equal to, or greater than, its outstanding advances. Based on the collateral held as security, the FHLBNY’s management’s credit extension and collateral policies, and repayment history on advances, the FHLBNY did not expect any losses on its advances at any point in 2023 and through the filing date on this report; therefore,
Concentration of Advances Outstanding. Advances to the FHLBNY’s top
127
Advances borrowed by insurance companies accounted for
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. During all periods in this report and as of December 31, 2023, 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 in custodian control; or |
| (2) | Requires the member specifically to assign or place physical possession of such mortgage collateral with the FHLBNY or its custodial agent. |
Beyond these provisions, Section 10(e) of the FHLBank Act affords any security interest granted by a member to the FHLBNY’s priority over the claims or rights of any other party. The
Note 10. Mortgage Loans Held-for-Portfolio.
The mortgage loans held-for-portfolio consists of MAP and MPF loans. The FHLBNY participates in these programs 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 usually retain servicing activities, and provide credit-enhancement for conventional loans sold into the program. No intermediary trust is involved.
In March 2021, the FHLBNY ceased to acquire loans under the MPF program. Future mortgage loan purchases will be made only through our new mortgage asset loan program — MAP. Legacy loans under the MPF programs will continue to be supported and serviced under the MPF loan agreements. At December 31, 2023, mortgage loans under the MPF program were at carrying value of $
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.
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The following table presents information on mortgage loans held-for-portfolio (dollars in thousands):
| December 31, 2023 |
| December 31, 2022 | ||||||||
| Carrying |
| Percentage of |
| Carrying |
| Percentage of | ||||
Amount | Total | Amount | Total | ||||||||
Real Estate(a): | |||||||||||
Fixed medium-term single-family mortgages | $ | |
| | % | $ | |
| | % | |
Fixed long-term single-family mortgages |
| |
| |
| |
| | |||
Total unpaid principal balance | $ | |
| | % | $ | |
| | % | |
Unamortized premiums |
| |
| | |||||||
Unamortized discounts |
| ( |
| ( | |||||||
Basis adjustment (b) |
| ( |
| | |||||||
Total mortgage loans amortized cost | $ | | $ | | |||||||
Allowance for credit losses |
| ( |
| ( | |||||||
Total mortgage loans held-for-portfolio at carrying value | $ | | $ | | |||||||
| (a) | Conventional mortgage loans 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 following table presents the fixed-rate mortgage loans held-for-portfolio by redemption terms (in thousands):
Redemption Term |
| December 31, 2023 |
| December 31, 2022 | ||
Due in one year or less | $ | | $ | | ||
Due after one year through five years | | | ||||
Due after five years through fifteen years | | | ||||
Thereafter | | | ||||
Total unpaid principal balance | $ | | $ | | ||
Other adjustments, net (a) | | | ||||
Total mortgage loans held for portfolio | $ | | $ | | ||
Allowance for credit losses on mortgage loans | ( | ( | ||||
Mortgage loans held for portfolio, net | $ | | $ | | ||
| (a) | Consists of premiums, discounts, and hedging adjustments. |
The FHLBNY and its members share the credit risk of MPF loans by structuring potential credit losses into layers. The first layer is typically
129
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 |
| (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. |
The MAP program operates on the simplified credit risk sharing structure. MAP credit risk sharing structure rewards PFIs for originating high quality, well-performing loans. At the time of purchase, FHLBNY will set aside a standard credit enhancement of
Allowance Methodology for Mortgage Loan Losses
Our allowance for credit losses of $
Evaluation of Credit Losses under CECL — Mortgage loans are evaluated for credit losses using the practical expedient for collateral dependent assets. We consider a conventional mortgage loan as a collateral dependent loan because we expect repayment to be provided by the sale of the underlying property, that is, if it is considered likely that the borrower will default. We may estimate the applicable fair value of this collateral by applying an appropriate loss severity rate or using third party estimates or property valuation model. The expected credit loss of a collateral dependent mortgage loan is equal to the difference between the amortized cost of the loan and the estimated fair value of the collateral, less estimated selling costs. We will either reserve for these estimated losses or record a direct charge-off of the loan balance, if certain triggering criteria are exceeded. Expected recoveries of prior charge-offs would be included in the allowance for credit loss.
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The Bank’s credit risk model (“model”) estimates the probabilities of prepayment and default concurrently. Prepayment represents the probability that an individual loan will voluntarily prepay while a default represents the probability that an individual loan will involuntarily pay off. The Bank’s third-party credit loss model applies a hazard rate approach to model loan prepayment and default at each month. In the Hazard Rate approach, a loan may stay as active (survived) or is terminated (due to default or prepayment) at the end of each period (month). The two statuses will compete over each period to calculate the probability of default of each individual mortgage loan. The model is composed of a series of loan-level econometric models that are related through common dependence on macroeconomic as well as loan-specific factors (i.e., collateral types, borrower characteristics). The macro factors used in the loan-level models are inputs at the national-level, state-level and MSA-level using econometric models developed for these factors. The model loan characteristics along with economic assumptions including applicable housing prices and interest rates as inputs to generate projected cash flows over the life of the mortgage. It then estimates the loss given default (LGD) for each loan and aggregates projected cash flows for each loan in the portfolio. A loan in 90+ day delinquent, foreclosure or real estate owned (REO) sale is considered to be in default.
Accrued interest receivable was $
Government mortgages, which carry FHA, VA or USDA guarantees present a minimal risk of loss. Additionally, as part of the service agreement between FHLBNY and the members that sold us government loans, those members will buy back delinquent government loans.
Credit enhancements under the MPF Program may include primary mortgage insurance, supplemental mortgage insurance, in addition to recoverable performance-based credit enhancement fees. Potential recoveries from credit enhancements for conventional loans are evaluated at the individual master commitment level to determine the credit enhancements available to recover losses on loans under each individual master commitment. However, expected recoveries from credit enhancements are not factored into the calculation of expected credit losses. The MPF program’s actual loss experience has been immaterial and inclusion of recoveries in the allowance calculations would result in an immaterial change.
There were
Roll forward Analysis of Allowance for Credit Losses
The following table provides a roll forward analysis of the allowance for credit losses (in thousands):
| Years ended December 31, | ||||||||
| 2023 |
| 2022 |
| 2021 | ||||
Allowance for credit losses: | |||||||||
Beginning balance | $ | | $ | | $ | | |||
Adjustment for cumulative effect of accounting change | — | — | — | ||||||
Charge-offs | — |
| ( |
| ( | ||||
Recoveries | — | — | — | ||||||
Provision (Reversal) for credit losses on mortgage loans | |
| ( |
| ( | ||||
Balance, at end of period | $ | | $ | | $ | | |||
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The following table presents risk elements and credit losses (dollars in thousands):
| December 31, 2023 |
| December 31, 2022 | ||||
Average loans outstanding during the period (a) | $ | | $ | | |||
Mortgage loans held for portfolio (b) | | | |||||
Non-accrual loans (b) | | | |||||
Allowance for credit losses on mortgage loans held for portfolio | | | |||||
Net charge-offs | — | | |||||
Ratio of net charge-offs to average loans outstanding during the period | — | % | | % | |||
Ratio of allowance for credit losses to mortgage loans held for portfolio | | % | | % | |||
Ratio of non-accrual loans to mortgage loans held for portfolio | | % | | % | |||
Ratio of allowance for credit losses to non-accrual loans | | % | | % | |||
| (a) | Represents the average unpaid principal balance for the twelve months ended December 31, 2023 and for the same period ended December 31, 2022. |
| (b) | Balances represent unpaid principal balance. |
The FHLBNY’s total MPF loans and impaired MPF loans were as follows (in thousands):
| December 31, 2023 |
| December 31, 2022 | |||
Total MPF Mortgage loans, carrying values net (a) | $ | | $ | | ||
Non-performing MPF mortgage loans - Conventional (a)(b) | $ | | $ | | ||
Insured MPF loans past due 90 days or more and still accruing interest (a)(b) | $ | | $ | | ||
| (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. There were |
| (b) | Data in this table represents unpaid principal balance and would not agree to data reported in other tables at “amortized cost”. |
Under the framework, the FHLBNY evaluates all loans, including non-performing conventional loans, on an individual basis for lifetime credit losses.
FHA and VA loans are considered as insured MPF or MAP loans, and while the loans are evaluated on an individual basis, we have deemed that FHA and VA loans as collectively insured. Additionally, based on the Bank’s assessment of its servicers and the collateral backing the insured loans, the risk of loss was deemed immaterial. The Bank has not recorded an allowance for credit losses for government-guaranteed or -insured mortgage loans in any periods in 2023 or 2022. Furthermore, none of these mortgage loans has been placed on non-accrual status because of the U.S. government guarantee or insurance on these loans and the contractual obligation of the loan servicer to repurchase the loans when certain criteria are met.
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The following tables present unpaid principal balances with and without related loan loss allowances for conventional loans (excluding insured FHA/VA MPF loans) in the MPF program (in thousands):
| December 31, 2023 | |||||||||||
| Unpaid |
|
|
| Average | |||||||
Principal | Related | Amortized Cost | Amortized Cost | |||||||||
| Balance |
| Allowance |
| After Allowance |
| After Allowance(d) | |||||
Conventional Loans - MPF (a)(c) | ||||||||||||
No related allowance (b) | $ | | $ | — | $ | | $ | | ||||
With a related allowance | | ( | | | ||||||||
Total measured for impairment (e) | $ | | $ | ( | $ | | $ | | ||||
| December 31, 2022 | |||||||||||
| Unpaid |
|
|
|
| Average | ||||||
Principal | Related | Amortized Cost | Amortized Cost | |||||||||
| Balance |
| Allowance |
| After Allowance |
| After Allowance (d) | |||||
Conventional Loans - MPF (a)(c) | ||||||||||||
No related allowance (b) | $ | | $ | — | $ | | $ | | ||||
With a related allowance | | ( | | | ||||||||
Total measured for impairment (e) | $ | | $ | ( | $ | | $ | | ||||
| (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 amortized cost in impaired loans and |
| (c) | Interest received is not recorded as Interest income if an uninsured loan is past due |
| (d) | Represents the average amortized cost after allowance for the twelve months ended December 31, 2023 and for the same period ended December 31, 2022. |
| (e) | There were |
The following table summarizes MPF mortgage loans held-for-portfolio by collateral/guarantee type (in thousands):
| December 31, 2023 |
| December 31, 2022 | |||
Mortgage Loans Held for Portfolio by Collateral/Guarantee Type : |
|
| ||||
Conventional mortgage loans - MPF | $ | | $ | | ||
MPF Government-guaranteed or - insured mortgage loans |
| |
| | ||
Total MPF loans - unpaid principal balance | $ | | $ | | ||
Payment Status of Mortgage Loans
Payment status is the key credit quality indicator for conventional mortgage loans and allows the Bank to monitor the migration of past due loans. Past due loans are those where the borrower has failed to make timely payments of principal and/or interest in accordance with the terms of the loan. Other delinquency statistics include non-accrual loans and loans in process of foreclosure.
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The following tables present the payment status for conventional mortgage loans and other delinquency statistics for the Bank’s mortgage loans at December 31, 2023 and December 31, 2022.
Credit Quality Indicator for Conventional Mortgage Loans (in thousands):
December 31, 2023 | |||||||||
Conventional Loans | |||||||||
Origination Year | |||||||||
| Prior to 2019 |
| 2019 to 2023 |
| Total | ||||
Payment Status, at Amortized Cost: |
|
|
|
|
|
| |||
Conventional MPF/MAP |
|
|
|
|
|
| |||
Past due 30 - 59 days | $ | | $ | | $ | | |||
Past due 60 - 89 days |
| |
| |
| | |||
Past due 90 days or more |
| |
| |
| | |||
Total past due mortgage loans |
| |
| |
| | |||
Current MPF mortgage loans |
| |
| |
| | |||
Current MAP mortgage loans | | | | ||||||
Total conventional mortgage loans | $ | | $ | | $ | | |||
December 31, 2022 | |||||||||
Conventional Loans | |||||||||
Origination Year | |||||||||
| Prior to 2018 |
| 2018 to 2022 |
| Total | ||||
Payment Status, at Amortized Cost: |
|
|
|
|
|
| |||
Conventional MPF/MAP |
|
|
|
|
|
| |||
Past due 30 - 59 days | $ | | $ | | $ | | |||
Past due 60 - 89 days |
| |
| |
| | |||
Past due 90 days or more |
| |
| |
| | |||
Total past due mortgage loans |
| |
| |
| | |||
Current MPF mortgage loans |
| |
| |
| | |||
Current MAP mortgage loans | — | | | ||||||
Total conventional mortgage loans | $ | | $ | | $ | | |||
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Other Delinquency Statistics (dollars in thousands):
December 31, 2023 |
| |||||||||
Conventional | MPF Government-Guaranteed |
| ||||||||
| MPF Loans |
| or -Insured Loans |
| Total MPF Loans |
| ||||
Amortized Cost (a): |
|
|
|
|
|
| ||||
In process of foreclosure (b) | $ | | $ | | $ | | ||||
Serious delinquency rate (c) |
| | % |
| | % |
| | % | |
Past due 90 days or more and still accruing interest | $ | — | $ | | $ | | ||||
Loans on non-accrual status | $ | | $ | — | $ | | ||||
December 31, 2022 |
| |||||||||
Conventional | MPF Government-Guaranteed |
| ||||||||
| MPF Loans |
| or -Insured Loans |
| Total MPF Loans |
| ||||
Amortized Cost (a): |
|
|
|
|
|
| ||||
In process of foreclosure (b) | $ | | $ | | $ | | ||||
Serious delinquency rate (c) | | % |
| | % |
| | % | ||
Past due 90 days or more and still accruing interest | $ | — | $ | | $ | | ||||
Loans on non-accrual status | $ | | $ | — | $ | | ||||
| (a) | There were |
| (b) | Includes loans where the decision of foreclosure or a similar alternative, such as pursuit of deed-in-lieu, has been reported. |
| (c) | Represents seriously delinquent loans as a percentage of total mortgage loans in MPF program. Seriously delinquent loans are comprised of all loans past due |
Note 11. Deposits.
The FHLBNY accepts demand, overnight and term deposits from its members and government instrumentalities, including the FDIC. 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.
Deposits represent a relatively small portion of the FHLBNY’s funding, totaling $
Interest-bearing demand and overnight deposits pay interest based on a daily interest rate. The year-to-date average balances of demand and overnight deposits were $
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The following table summarizes deposits (in thousands):
| December 31, 2023 |
| December 31, 2022 | |||
Interest-bearing deposits | ||||||
Interest-bearing demand | $ | | $ | | ||
Term (a) |
| — |
| — | ||
Total interest-bearing deposits |
| |
| | ||
Non-interest-bearing demand | |
| | |||
Total deposits (b) | $ | | $ | | ||
| (a) | Term deposits were for periods of |
| (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. |
Interest rate payment terms for deposits are summarized below (dollars in thousands):
Average |
| Average | |||||||||
Deposits |
| December 31, 2023 |
| Interest Rate (b) |
| December 31, 2022 |
| Interest Rate (b) | |||
Term deposits | $ | — | — | % | $ | — | | % | |||
Interest-bearing demand (a) | | | | | |||||||
Total interest-bearing deposits | $ | | | % | $ | | | % | |||
Non-interest-bearing demand | | | |||||||||
Total deposits | $ | | $ | | |||||||
| (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.
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The following table summarizes carrying amounts of Consolidated obligations outstanding (in thousands):
| December 31, 2023 |
| December 31, 2022 | |||
Consolidated obligation bonds-amortized cost | $ | | $ | | ||
Hedge valuation basis adjustments |
| ( |
| ( | ||
Hedge basis adjustments on de-designated hedges |
| |
| | ||
FVO - valuation adjustments and accrued interest |
| ( |
| ( | ||
Total Consolidated obligation bonds | $ | | $ | | ||
Discount notes-amortized cost | $ | | $ | | ||
Hedge value basis adjustments | ( | ( | ||||
Hedge basis adjustments on de-designated hedges | ( | ( | ||||
FVO - valuation adjustments and remaining accretion |
| — |
| — | ||
Total Consolidated obligation discount notes | $ | | $ | | ||
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):
December 31, 2023 | December 31, 2022 | ||||||||||||||
|
|
| Weighted |
|
|
|
|
| Weighted |
|
| ||||
Average | Percentage | Average | Percentage | ||||||||||||
Maturity |
| Amount |
| Rate (a) |
| of Total |
| Amount |
| Rate (a) |
| of Total | |||
One year or less | $ | |
| | % | | % | $ | |
| | % | | % | |
Over one year through two years |
| |
| | |
| |
| | | |||||
Over two years through three years |
| |
| | |
| |
| | | |||||
Over three years through four years |
| |
| | |
| |
| | | |||||
Over four years through five years |
| |
| | |
| |
| | | |||||
Thereafter |
| |
| | |
| |
| | | |||||
Total par value |
| |
| | % | | % |
| |
| | % | | % | |
Bond premiums (b) |
| |
| | |||||||||||
Bond discounts (b) |
| ( |
| ( | |||||||||||
Hedge valuation basis adjustments (c) |
| ( |
| ( | |||||||||||
Hedge basis adjustments on de-designated hedges (d) |
| |
| | |||||||||||
FVO (e) - valuation adjustments and accrued interest |
| ( |
| ( | |||||||||||
Total Consolidated obligation bonds | $ | | $ | | |||||||||||
| (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 interest rate, remaining terms to maturity or next call, and the notional amounts of CO bonds designated in hedge relationship. Our primary interest rate benchmarks are Federal Funds-OIS index and SOFR-OIS index. |
| (d) | Hedge basis adjustments on de-designated hedges represent the unamortized balances of valuation basis of fixed-rate CO 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 the unamortized basis is reversed to |
| (e) | Valuation adjustments on FVO designated bonds represent changes in the entire fair values of CO bonds elected under the FVO plus accrued unpaid interest. Changes in the timing of coupon payments impact outstanding accrued interest. Changes in benchmark interest rates, notional amounts of CO bonds elected under FVO and remaining terms to maturity or next call will impact hedge valuation adjustments. |
137
Interest Rate Payment Terms
The following table summarizes par amounts of major types of Consolidated obligation bonds issued and outstanding (dollars in thousands):
December 31, 2023 | December 31, 2022 | ||||||||||
Percentage | Percentage | ||||||||||
| Amount |
| of Total |
| Amount |
| of Total | ||||
Fixed-rate, non-callable | $ | |
| | % | $ | |
| | % | |
Fixed-rate, callable |
| | |
| | | |||||
Step Up, callable |
| | |
| | | |||||
Step Down, callable |
| |
| |
| — |
| — | |||
Floating rate, callable | | | | | |||||||
Single-index floating rate |
| |
| |
| |
| | |||
Total par value | $ | |
| | % | $ | |
| | % | |
Discount Notes
Consolidated obligation discount notes are issued to raise short-term funds. Discount notes are Consolidated obligations with original maturities of up to
| December 31, 2023 |
| December 31, 2022 | ||||
Par value | $ | | $ | | |||
Amortized cost | $ | | $ | | |||
Hedge value basis adjustments (a) | ( | ( | |||||
Hedge basis adjustments on de-designated hedges (b) | ( | ( | |||||
FVO (c) - valuation adjustments and remaining accretion |
| — |
| — | |||
Total Consolidated obligation discount notes | $ | | $ | | |||
Weighted average interest rate |
| | % |
| | % | |
| (a) | Hedging valuation basis adjustments — The reported carrying values of hedged CO discount notes 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. Changes in the designated benchmark interest rate, notional amounts of CO discount notes in hedging relationships and remaining terms to maturity are factors that impact hedge valuation adjustments. |
| (b) | Hedge basis adjustments on de-designated hedges — Represents the unamortized balances of valuation basis of CO discount notes 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 the unamortized basis is reversed to |
| (c) | FVO valuation adjustments — Valuation basis adjustments are recorded to recognize changes in the entire or full fair values including unaccreted discounts on CO discount notes elected under the FVO. Changes in benchmark interest rates, notional amounts of CO discount notes elected under FVO and remaining terms to maturity are factors that impact hedge valuation adjustments. |
138
Note 13. Affordable Housing Program.
The FHLBNY charges the amount allocated for the Affordable Housing Program (AHP) to expense and recognizes it as a liability. The FHLBNY relieves the AHP liability as members use the subsidies.
The Board approved an additional voluntary contribution of $
The following table provides roll forward information with respect to changes in Affordable Housing Program liabilities (in thousands):
Years ended December 31, | |||||||||
| 2023 |
| 2022 |
| 2021 | ||||
Beginning balance | $ | | $ | | $ | | |||
Additions from current period’s assessments |
| |
| |
| | |||
Voluntary Contribution | | — | — | ||||||
Net disbursements for grants and programs |
| ( |
| ( |
| ( | |||
Ending balance | $ | | $ | | $ | | |||
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 $
Shares of both Membership and Activity-based Class B capital stock have the same voting rights and receive the same dividend (See Statements of Capital):
| ● | Membership capital 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 (such percentage is currently set at |
| ● | Activity-based capital stock is issued based on a percentage of outstanding balances of advances, MPF and MAP loans and financial letters of credit. The FHLBNY’s current capital plan requires a stock purchase equal to (i) |
139
The FHLBNY is subject to risk-based capital rules of the Finance Agency, the regulator of the FHLBanks. Specifically, the FHLBNY is subject to
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. 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.
Risk-based Capital — The following table summarizes the FHLBNY’s risk-based capital ratios (dollars in thousands):
December 31, 2023 | December 31, 2022 | ||||||||||||
| Required (d) |
| Actual |
| Required (d) |
| Actual | ||||||
Regulatory capital requirements: | |||||||||||||
Risk-based capital (a)(e) | $ | | $ | | $ | | $ | | |||||
Total capital-to-asset ratio |
| | % |
| | % |
| | % |
| | % | |
Total capital (b) | $ | | $ | | $ | | $ | | |||||
Leverage ratio |
| | % |
| | % |
| | % |
| | % | |
Leverage capital (c) | $ | | $ | | $ | | $ | | |||||
| (a) | Actual “Risk-based capital” is capital stock and retained earnings plus mandatorily redeemable capital stock. Section 1277.3 of the Finance Agency’s regulations also refers to this amount as “Permanent Capital.” |
| (b) | Required “Total capital” is |
| (c) | The required leverage ratio of total capital to total assets should be at least |
| (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. |
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.
140
Estimated redemption periods were as follows (in thousands):
| December 31, 2023 |
| December 31, 2022 | |||
Redemption less than one year | $ | | $ | | ||
Redemption from one year to less than three years |
| |
| | ||
Redemption from three years to less than five years |
| |
| | ||
Redemption from five years or greater |
| |
| | ||
Total | $ | | $ | | ||
The following table provides roll forward information with respect to changes in mandatorily redeemable capital stock liabilities (in thousands):
| Years ended December 31, | ||||||||
| 2023 |
| 2022 |
| 2021 | ||||
Beginning balance | $ | | $ | | $ | | |||
Capital stock subject to mandatory redemption reclassified from equity |
| |
| |
| | |||
Redemption of mandatorily redeemable capital stock (a) |
| ( |
| ( |
| ( | |||
Ending balance | $ | | $ | | $ | | |||
Accrued interest payable (b) | $ | | $ | | $ | | |||
| (a) | Redemption includes repayment of excess stock. |
| (b) | The annualized accrual rates were |
Restricted Retained Earnings
Under the FHLBank Joint Capital Enhancement Agreement (Capital Agreement), each FHLBank is required to set aside
141
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.
Years ended December 31, | |||||||||
| 2023 |
| 2022 |
| 2021 | ||||
Net income | $ | | $ | | $ | | |||
Net income available to stockholders | $ | | $ | | $ | | |||
Weighted average shares of capital |
| |
| |
| | |||
Less: Mandatorily redeemable capital stock |
| ( |
| ( |
| ( | |||
Average number of shares of capital used to calculate earnings per share |
| |
| |
| | |||
Basic earnings per share | $ | | $ | | $ | | |||
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
Retirement Plan Expenses — Summary
The following table presents employee retirement plan expenses for the periods ended (in thousands):
Years ended December 31, | |||||||||
| 2023 |
| 2022 |
| 2021 | ||||
Defined Benefit Plan | $ | | $ | | $ | | |||
Benefit Equalization Plans (defined benefit and defined contribution) |
| |
| |
| | |||
Defined Contribution Plans |
| |
| |
| | |||
Postretirement Health Benefit Plan |
| |
| |
| | |||
Total retirement plan expenses | $ | | $ | | $ | | |||
142
Pentegra DB Plan Net Pension Cost and Funded Status
The Pentegra DB Plan operates as a multiemployer plan for accounting purposes and as a multiple-employer plan under the Employee Retirement Income Security Act of 1974 (ERISA) and the Internal Revenue Code. As a result, certain multiemployer plan disclosures, including the certified zone status, are not applicable to the Pentegra DB Plan. Typically, multiemployer plans contain provisions for collective bargaining arrangements. There are no collective bargaining agreements in place at any of the FHLBanks (including the FHLBNY) that participate in the plan. Under the Pentegra DB Plan, contributions made by a participating employer may be used to provide benefits to employees of other participating employers because assets contributed by an employer are not segregated in a separate account or restricted to provide benefits only to employees of that employer. Our contributions to the Pentegra DB Plan for the fiscal year ending December 31, 2023 were more than
The Pentegra DB Plan operates on a fiscal year from July 1 through June 30, and files one Form 5500 on behalf of all employers who participate in the plan. The Employer Identification Number is
The Pentegra DB Plan’s annual valuation process includes calculating the plan’s funded status, and separately calculating the funded status of each participating employer. The funded status is defined as the market value of assets divided by the funding target (
The following table presents multi-employer plan disclosure for the three years ended December 31, (dollars in thousands):
| 2023 |
| 2022 |
| 2021 |
| ||||
Net pension cost charged to compensation and benefit expense for the year ended December 31 | $ | | $ | | $ | | ||||
Contributions allocated to plan year ended June 30 | $ | | $ | | $ | | ||||
Pentegra DB Plan funded status as of July 1 (a) |
| | % |
| | % |
| | % | |
FHLBNY’s funded status as of July 1 (b) |
| | % |
| | % |
| | % | |
| (a) | Funded status is based on actuarial valuation of the Pentegra DB Plan, and includes all participants allocated to plan years and known at the time of the preparation of the actuarial valuation. The funded status may increase because the plan’s participants are permitted to make contributions through March 15 of the following year. Funded status remains preliminary until the Form 5500 is filed no later than April 15, 2024 for the plan year ended June 30, 2023. For information with respect to contributions expensed by the FHLBNY, see previous Table — Retirement Plan Expenses Summary. Contributions include minimum required under ERISA that are prepaid for the fiscal plan year that ends at June 30 in the following year, and as a result contributions may not equal amounts expensed. |
| (b) | Based on cash contributions made through December 31, 2023 and allocated to the DB Plan year(s). The funded status may increase because the FHLBNY is permitted to make contributions through March 15 of the following year. |
143
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, as this is an unfunded plan that has been designated for the BEP plan.
The accrued pension costs for the BEP plan were as follows (in thousands):
| December 31, | |||||
| 2023 |
| 2022 | |||
Accumulated benefit obligation |
| $ | |
| $ | |
Effect of future salary increases |
| |
| | ||
Projected benefit obligation |
| |
| | ||
Unrecognized prior service (cost)/credit | ( | ( | ||||
Unrecognized net (loss)/gain |
| ( |
| ( | ||
Accrued pension cost | $ | | $ | | ||
Components of the projected benefit obligation for the BEP plan were as follows (in thousands):
| December 31, | |||||
| 2023 |
| 2022 | |||
Projected benefit obligation at the beginning of the year | $ | | $ | | ||
Service cost |
| |
| | ||
Interest cost |
| |
| | ||
Benefits paid |
| ( |
| ( | ||
Actuarial loss/(gain) (a) |
| |
| ( | ||
Settlements | — | ( | ||||
Plan amendments | — | — | ||||
Projected benefit obligation at the end of the year | $ | | $ | | ||
The measurement date used to determine projected benefit obligation for the BEP plan was December 31 in each of the two years.
| (a) | Actuarial loss of $ |
Amounts recognized in AOCI for the BEP plan were as follows (in thousands):
| December 31, | |||||
| 2023 |
| 2022 | |||
Net loss/(gain) | $ | |
| $ | | |
Prior service cost/(credit) | | | ||||
Accumulated other comprehensive loss/(gain) | $ | |
| $ | | |
144
Changes in the BEP plan assets were as follows (in thousands):
| December 31, | |||||
| 2023 |
| 2022 | |||
Fair value of the plan assets at the beginning of the year | $ | — | $ | — | ||
Employer contributions |
| |
| | ||
Settlements | — | ( | ||||
Benefits paid |
| ( |
| ( | ||
Fair value of the plan assets at the end of the year | $ | — | $ | — | ||
Components of the net periodic pension cost for the defined benefit component of the BEP were as follows (in thousands):
Years ended December 31, | |||||||||
| 2023 |
| 2022 |
| 2021 | ||||
Service cost | $ | | $ | | $ | | |||
| |
| |
| | ||||
| — |
| |
| | ||||
| | | |||||||
Net periodic benefit cost - Defined Benefit BEP | | | | ||||||
Benefit Equalization plans - Thrift and Deferred incentive compensation plans | | | | ||||||
Total | $ | | $ | | $ | | |||
Other changes in benefit obligations recognized in AOCI were as follows (in thousands):
December 31, | ||||||
| 2023 |
| 2022 | |||
New (gain)/loss during the year | $ | | $ | ( | ||
Recognized prior service credit/(cost) | ( | ( | ||||
New past service (credit)/cost | — | — | ||||
Recognized gain/(loss) |
| — |
| ( | ||
Total recognized in other comprehensive loss/(income) | $ | | $ | ( | ||
Total recognized in net periodic benefit cost and other comprehensive income | $ | | $ | ( | ||
The net transition obligation (asset), prior service cost (credit), and the estimated net loss (gain) for the BEP plan that are expected to be amortized from AOCI into net periodic benefit cost over the next fiscal year are shown in the table below (in thousands):
| December 31, 2024 | ||
Expected amortization of net loss/(gain) | $ | | |
Expected amortization of past service cost/(credit) | $ | | |
145
Key assumptions and other information for the actuarial calculations to determine benefit obligations for the BEP plan were as follows (dollars in thousands):
| December 31, 2023 |
| December 31, 2022 |
| December 31, 2021 |
| ||||
Discount rate (a) |
| | % | | % | | % | |||
Salary increases |
| | % | | % | | % | |||
Amortization period (years) |
|
|
| |||||||
Benefits paid during the period | $ | ( | $ | ( | $ | ( | ||||
| (a) | The discount rates were based on the Citigroup Pension Liability Index at December 31, adjusted for duration in each of the three years. |
Future BEP plan benefits to be paid were estimated to be as follows (in thousands):
Years |
| Payments | |
2024 | $ | | |
2025 |
| | |
2026 |
| | |
2027 |
| | |
2028 |
| | |
2029-2033 |
| | |
Total | $ | | |
The net periodic benefit cost for 2024 is expected to be $
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
Assumptions used in determining the accumulated postretirement benefit obligation (APBO) included a discount rate assumption of
Components of the accumulated postretirement benefit obligation for the postretirement health benefits plan for the years ended December 31, 2023 and 2022 (in thousands):
December 31, | ||||||
| 2023 |
| 2022 | |||
Accumulated postretirement benefit obligation at the beginning of the year | $ | | $ | | ||
Service cost |
| |
| | ||
Interest cost |
| |
| | ||
Actuarial loss/(gain) |
| ( |
| ( | ||
Plan participant contributions |
| |
| | ||
Actual benefits paid |
| ( |
| ( | ||
Retiree drug subsidy reimbursement |
| |
| | ||
Accumulated postretirement benefit obligation at the end of the year | $ | | $ | | ||
146
Changes in postretirement health benefit plan assets (in thousands):
December 31, | ||||||
| 2023 |
| 2022 | |||
Fair value of plan assets at the beginning of the year | $ | — | $ | — | ||
Employer contributions |
| |
| | ||
Plan participant contributions |
| |
| | ||
Actual benefits paid |
| ( |
| ( | ||
Fair value of plan assets at the end of the year | $ | — | $ | — | ||
Amounts recognized in AOCI for the postretirement benefit obligation (in thousands):
December 31, | ||||||
| 2023 |
| 2022 | |||
Net (gain)/loss | $ | ( | $ | ( | ||
Accumulated other comprehensive (gain)/loss | $ | ( | $ | ( | ||
Components of the net periodic benefit cost for the postretirement health benefit plan were as follows (in thousands):
Years ended December 31, | |||||||||
| 2023 |
| 2022 |
| 2021 | ||||
Service cost (benefits attributed to service during the period) | $ | | $ | | $ | | |||
| |
| |
| | ||||
| ( |
| — |
| — | ||||
Net periodic postretirement health benefit expense/(income) | $ | | $ | | $ | | |||
Other changes in benefit obligations recognized in AOCI were as follows (in thousands):
December 31, | ||||||
| 2023 |
| 2022 | |||
Net loss/(gain) | $ | ( | $ | ( | ||
Amortization of net gain/(loss) | $ | |
| — | ||
Total recognized in other comprehensive income | $ | ( | $ | ( | ||
Total recognized in net periodic benefit cost and other comprehensive income | $ | ( | $ | ( | ||
The measurement date used to determine benefit obligations was December 31 in each of the two years.
147
Key assumptions and other information to determine current year’s obligation for the postretirement health benefit plan were as follows:
| Years ended December 31, | |||||
2023 |
| 2022 |
| 2021 | ||
Weighted average discount rate (a) |
| |||||
Health care cost trend rates: | ||||||
Assumed for next year | ||||||
Pre 65 | ||||||
Post 65 | ||||||
Pre 65 Ultimate rate | ||||||
Pre 65 Year that ultimate rate is reached |
| |||||
Post 65 Ultimate rate | ||||||
Post 65 Year that ultimate rate is reached |
| |||||
Alternative amortization methods used to amortize | ||||||
Prior service cost |
| Straight - line | Straight - line | Straight - line | ||
Unrecognized net (gain) or loss |
| Straight - line | Straight - line | Straight - line | ||
| (a) | The discount rates were based on the Citigroup Pension Liability Index adjusted for duration in each of the periods in this report. |
Future postretirement health benefit plan expenses to be paid were estimated to be as follows (in thousands):
Years |
| Payments | |
2024 | $ | | |
2025 |
| | |
2026 |
| | |
2027 |
| | |
2028 |
| | |
2029-2033 |
| | |
Total | $ | | |
The postretirement health benefit plan accrual for 2024 is expected to be a cost of $
148
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.
The following table presents the FHLBNY’s derivative activities based on notional amounts (in thousands):
Derivative Notionals
Hedging Instruments Under ASC 815 | ||||||
| December 31, 2023 |
| December 31, 2022 | |||
Interest rate contracts |
|
|
|
| ||
Interest rate swaps | $ | | $ | | ||
Interest rate caps |
| |
| | ||
Mortgage delivery commitments |
| |
| | ||
Total interest rate contracts notionals | $ | | $ | | ||
149
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 (in thousands):
December 31, 2023 | December 31, 2022 | |||||||||||
Derivative | Derivative | Derivative | Derivative | |||||||||
| Assets |
| Liabilities |
| Assets |
| Liabilities | |||||
Derivative instruments - nettable | ||||||||||||
Gross recognized amount | ||||||||||||
Uncleared derivatives | $ | | $ | | $ | | $ | | ||||
Cleared derivatives |
| |
| |
| |
| | ||||
Total gross recognized amount | | | | | ||||||||
Gross amounts of netting adjustments and cash collateral | ||||||||||||
Uncleared derivatives |
| ( |
| ( |
| ( |
| ( | ||||
Cleared derivatives |
| ( |
| ( |
| ( |
| ( | ||||
Total gross amounts of netting adjustments and cash collateral | ( | ( | ( | ( | ||||||||
Net amounts after offsetting adjustments and cash collateral | $ | | $ | | $ | | $ | | ||||
Uncleared derivatives | $ | | $ | | $ | | $ | | ||||
Cleared derivatives |
| |
| |
| |
| | ||||
Total net amounts after offsetting adjustments and cash collateral | $ | | $ | | $ | | $ | | ||||
Derivative instruments - not nettable | ||||||||||||
Uncleared derivatives (a) | $ | | $ | | $ | | $ | | ||||
Total derivative assets and total derivative liabilities | ||||||||||||
Uncleared derivatives | $ | | $ | | $ | | $ | | ||||
Cleared derivatives |
| |
| |
| |
| | ||||
Total derivative assets and total derivative liabilities presented in the Statements of Condition (b) | $ | | $ | | $ | | $ | | ||||
Non-cash collateral received or pledged (c) | ||||||||||||
Can be sold or repledged | ||||||||||||
Security collateral pledged as initial margin to Derivative Clearing Organization (d) | $ | | $ | — | $ | | $ | — | ||||
Cannot be sold or repledged | ||||||||||||
Uncleared derivatives securities received as Variation Margin | ( | — | ( | — | ||||||||
Total net amount of non-cash collateral received or repledged | $ | | $ | — | $ | | $ | — | ||||
Total net exposure cash and non-cash (e) | $ | | $ | | $ | | $ | | ||||
Net unsecured amount - Represented by: | ||||||||||||
Uncleared derivatives | $ | | $ | | $ | | $ | | ||||
Cleared derivatives |
| |
| |
| |
| | ||||
Total net exposure cash and non-cash (e) | $ | | $ | | $ | | $ | | ||||
| (a) | Not nettable derivative instruments are without legal right of offset, and were synthetic derivatives representing forward mortgage delivery commitments of |
| (b) | Amounts represented Derivative assets and liabilities that were recorded in the Statements of Condition. 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, from time to time 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 collateral pledged to Derivative Clearing Organization (DCO) to fulfill our initial margin obligations on cleared derivatives. Securities pledged may be sold or repledged if the FHLBNY defaults on its 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. |
150
Fair Value of Derivative Instruments
The following tables represent outstanding notional balances and estimated fair values of the derivatives outstanding (in thousands):
December 31, 2023 | |||||||||
Notional Amount | Derivative | Derivative | |||||||
| of Derivatives |
| Assets |
| Liabilities | ||||
Fair value of derivative instruments (a) | |||||||||
Derivatives designated as hedging instruments under ASC 815 Interest rate swaps | $ | | $ | | $ | | |||
Total derivatives in hedging relationships under ASC 815 |
| | |
| | ||||
Derivatives not designated as hedging instruments | |||||||||
Interest rate swaps (b) |
| |
| |
| | |||
Interest rate caps |
| |
| |
| — | |||
Mortgage delivery commitments |
| |
| |
| | |||
Other |
| — |
| — |
| — | |||
Total derivatives not designated as hedging instruments |
| |
| |
| | |||
Total derivatives before netting and collateral adjustments | $ | | $ | | $ | | |||
Netting adjustments | $ | ( | $ | ( | |||||
Cash collateral and related accrued interest | ( | ( | |||||||
Total netting adjustments and cash collateral |
| ( |
| ( | |||||
Total derivative assets and total derivative liabilities | $ | | $ | | |||||
Security collateral pledged as initial margin to Derivative Clearing Organization (c) | $ | | |||||||
Security collateral received from counterparty (c) | ( | ||||||||
Net security | | ||||||||
Net exposure | $ | | |||||||
151
December 31, 2022 | |||||||||
| Notional Amount |
| Derivative |
| Derivative | ||||
| of Derivatives |
| Assets |
| Liabilities | ||||
Fair value of derivative instruments (a) | |||||||||
Derivatives designated as hedging instruments under ASC 815 Interest rate swaps | $ | | $ | | $ | | |||
Total derivatives in hedging relationships under ASC 815 |
| | |
| | ||||
Derivatives not designated as hedging instruments | |||||||||
Interest rate swaps (b) |
| |
| |
| | |||
Interest rate caps |
| |
| |
| — | |||
Mortgage delivery commitments |
| |
| |
| | |||
Other |
| — |
| — |
| — | |||
Total derivatives not designated as hedging instruments |
| |
| |
| | |||
Total derivatives before netting and collateral adjustments | $ | | $ | | $ | | |||
Netting adjustments | $ | ( | $ | ( | |||||
Cash collateral and related accrued interest | ( | ( | |||||||
Total netting adjustments and cash collateral | ( |
| ( | ||||||
Total derivative assets and total derivative liabilities | $ | | $ | | |||||
Security collateral pledged as initial margin to Derivative Clearing Organization (c) | $ | | |||||||
Security collateral received from counterparty (c) | ( | ||||||||
Net security | | ||||||||
Net exposure | $ | | |||||||
| (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) | Interest rate swaps also includes the Other category comprised of interest rate swaps intermediated for members, and notional amounts represent purchases by the FHLBNY from dealers and an offsetting purchase from us by the members. |
| (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 non-cash collateral and or U.S. Treasury securities pledged to and received from counterparties as collateral at December 31, 2023 and December 31, 2022. |
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. Derivatives not designated under a qualifying ASC 815 hedge relationship and designated as an asset/liability management hedge are classified as an economic hedge. For more information, see financial statements, Note 1. Summary of Significant Accounting Policies in this Form 10-K.
152
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 | |||||||||
Recorded in Interest Income/Expense | |||||||||
Years ended December 31, | |||||||||
| 2023 |
| 2022 |
| 2021 | ||||
Gains (losses) on derivatives in designated and qualifying fair value hedges: | |||||||||
$ | | $ | | $ | | ||||
Gains (losses) on hedged item in designated and qualifying fair value hedges: | |||||||||
Interest rate hedges | $ | ( | $ | ( | $ | ( | |||
Gains (losses) represent changes in fair values of derivatives and changes in the fair value of hedged items due to changes in the designated benchmark interest rates, the risk being hedged. 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.
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 December 31, 2023 and December 31, 2022, 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.
December 31, 2023 | |||||||||
Cumulative Fair Value Hedging Adjustment | |||||||||
Included in the Carrying Amount of Hedged | |||||||||
Items Gains (Losses) | |||||||||
Carrying Amount of | Discontinued | ||||||||
Hedged | Active Hedging | Hedging | |||||||
| Assets/Liabilities (a) |
| Relationship |
| Relationship | ||||
Assets: | |||||||||
Hedged advances | $ | | $ | ( | $ | — | |||
Hedged AFS debt securities (a) | | ( | — | ||||||
De-designated advances (b) | — | — | | ||||||
$ | | $ | ( | $ | | ||||
Liabilities: | |||||||||
Hedged consolidated obligation bonds | $ | | $ | | $ | — | |||
Hedged consolidated obligation discount notes | | | — | ||||||
De-designated consolidated obligation bonds (b) | — | — | ( | ||||||
De-designated consolidated obligation discount notes (b) | — | — | | ||||||
$ | | $ | | $ | ( | ||||
153
December 31, 2022 | |||||||||
Cumulative Fair Value Hedging Adjustment | |||||||||
Included in the Carrying Amount of Hedged | |||||||||
Items Gains (Losses) | |||||||||
Carrying Amount of | Discontinued | ||||||||
Hedged | Active Hedging | Hedging | |||||||
| Assets/Liabilities (a) |
| Relationship |
| Relationship | ||||
Assets: | |||||||||
Hedged advances | $ | | $ | ( | $ | — | |||
Hedged AFS debt securities (a) | | ( | — | ||||||
De-designated advances (b) | — | — | | ||||||
$ | | $ | ( | $ | | ||||
Liabilities: | |||||||||
Hedged consolidated obligation bonds | $ | | $ | | $ | — | |||
Hedged consolidated obligation discount notes | | | — | ||||||
De-designated consolidated obligation bonds (b) | — | — | ( | ||||||
De-designated consolidated obligation discount notes (b) | — | — | | ||||||
$ | | $ | | $ | ( | ||||
| (a) | Carrying amounts represent amortized cost adjusted for cumulative fair value hedging basis. For AFS securities in a fair value partial-term hedge, changes in the fair values due to changes in the benchmark rate were recorded as an adjustment to amortized cost and an offset to interest income from the hedged AFS securities. |
| (b) | At December 31, 2023, par amounts of de-designated advances were $ |
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 | ||||||||||||
December 31, 2023 | ||||||||||||
Amounts | ||||||||||||
| Amounts Reclassified |
| Reclassified from |
| Amounts |
| Total Change | |||||
from AOCI to | AOCI to Other | Recorded in | in OCI for | |||||||||
| Interest Expense (b) |
| Income (Loss) (c) |
| OCI (d) |
| Period | |||||
Interest rate contracts (a) | $ | ( | $ | — | $ | ( | $ | ( | ||||
Derivative Gains (Losses) Recorded in Income and Other | ||||||||||||
Comprehensive Income/Loss | ||||||||||||
December 31, 2022 | ||||||||||||
Amounts | ||||||||||||
| Amounts Reclassified |
| Reclassified from |
| Amounts |
| Total Change | |||||
from AOCI to | AOCI to Other | Recorded in | in OCI for | |||||||||
| Interest Expense (b) |
| Income (Loss) (c) |
| OCI (d) |
| Period | |||||
Interest rate contracts (a) | $ | ( | $ | — | $ | | $ | | ||||
154
Derivative Gains (Losses) Recorded in Income and Other | ||||||||||||
Comprehensive Income/Loss | ||||||||||||
December 31, 2021 | ||||||||||||
Amounts | ||||||||||||
| Amounts Reclassified |
| Reclassified from |
| Amounts |
| Total Change | |||||
from AOCI to | AOCI to Other | Recorded in | in OCI for | |||||||||
| Interest Expense (b) |
| Income (Loss) (c) |
| OCI (d) |
| Period | |||||
Interest rate contracts (a) | $ | ( | $ | — | $ | | $ | | ||||
Amounts represent cash flow hedges of CO debt hedged with benchmark interest rate swaps indexed to a benchmark rate. Under guidance provided by ASU 2017-12, 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.
| (a) | Amounts represent cash flow hedges of CO debt hedged with benchmark interest rate swaps indexed to a benchmark rate. Under guidance provided by ASU 2017-12, 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 of anticipated issuance of CO bonds 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, $ |
| (c) | Under guidance provided by 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. There were |
| (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. |
Economic Hedges
FHLBNY often uses economic hedges when hedge accounting would be too complex or operationally burdensome. 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.
Gains and losses on economic hedges are presented below (in thousands):
Gains (Losses) on Economic Hedges | |||||||||
Recorded in Other Income (Loss) | |||||||||
Years ended December 31, | |||||||||
| 2023 |
| 2022 |
| 2021 | ||||
Gains (losses) on derivatives designated in economic hedges |
|
|
|
| |||||
$ | $ | $ | |||||||
| ( |
| |
| | ||||
| ( |
| ( |
| ( | ||||
$ | | $ | | $ | | ||||
155
Note 18. Fair Values of Financial Instruments.
Estimated Fair Values — Summary Tables - Carrying values, the estimated fair values and the levels within the fair value hierarchy were as follows (in thousands):
December 31, 2023 | ||||||||||||||||||
Estimated Fair Value | ||||||||||||||||||
Netting | ||||||||||||||||||
Carrying |
|
|
|
|
|
| Adjustment and | |||||||||||
Financial Instruments |
| Value |
| Total |
| Level 1 |
| Level 2 |
| Level 3 (a) |
| Cash Collateral | ||||||
Assets | ||||||||||||||||||
Cash and due from banks | $ | | $ | | $ | | $ | — | $ | — | $ | — | ||||||
Interest-bearing deposits | | | — | | — | — | ||||||||||||
Securities purchased under agreements to resell |
| |
| |
| — |
| |
| — | — | |||||||
Federal funds sold |
| |
| |
| — |
| |
| — | — | |||||||
Trading securities | | | | — | — | — | ||||||||||||
Equity Investments | | | | — | — | — | ||||||||||||
Available-for-sale securities |
| |
| |
| — |
| |
| | — | |||||||
Held-to-maturity securities |
| |
| |
| — |
| |
| |
| — | ||||||
Advances |
| |
| |
| — |
| |
| — |
| — | ||||||
Mortgage loans held-for-portfolio, net |
| |
| |
| — |
| |
| — |
| — | ||||||
Accrued interest receivable |
| |
| |
| — |
| |
| — |
| — | ||||||
Derivative assets |
| |
| |
| — |
| |
| — |
| ( | ||||||
Other financial assets |
| |
| |
| — |
| — |
| |
| — | ||||||
Liabilities | ||||||||||||||||||
Deposits |
| |
| |
| — |
| |
| — |
| — | ||||||
Consolidated obligations | ||||||||||||||||||
Bonds |
| |
| |
| — |
| |
| — |
| — | ||||||
Discount notes |
| |
| |
| — |
| |
| — |
| — | ||||||
Mandatorily redeemable capital stock |
| |
| |
| |
| — |
| — |
| — | ||||||
Accrued interest payable |
| |
| |
| — |
| |
| — |
| — | ||||||
Derivative liabilities |
| |
| |
| — |
| |
| — |
| ( | ||||||
Other financial liabilities |
| — |
| — |
| — |
| — |
| — |
| — | ||||||
156
December 31, 2022 | ||||||||||||||||||
Estimated Fair Value | ||||||||||||||||||
|
|
|
|
| Netting | |||||||||||||
Carrying |
|
|
|
|
|
| Adjustment and | |||||||||||
Financial Instruments |
| Value |
| Total |
| Level 1 |
| Level 2 |
| Level 3 (a) |
| Cash Collateral | ||||||
Assets | ||||||||||||||||||
Cash and due from banks | $ | | $ | | $ | | $ | — | $ | — | $ | — | ||||||
Interest-bearing deposits | | | — | | — | — | ||||||||||||
Securities purchased under agreements to resell |
| |
| |
| — |
| |
| — | — | |||||||
Federal funds sold |
| |
| |
| — |
| |
| — | — | |||||||
Trading securities | | | | — | — | — | ||||||||||||
Equity Investments | | | | — | — | — | ||||||||||||
Available-for-sale securities |
| |
| |
| — |
| |
| | — | |||||||
Held-to-maturity securities |
| |
| |
| — |
| |
| |
| — | ||||||
Advances |
| |
| |
| — |
| |
| — |
| — | ||||||
Mortgage loans held-for-portfolio, net |
| |
| |
| — |
| |
| — |
| — | ||||||
Accrued interest receivable |
| |
| |
| — |
| |
| — |
| — | ||||||
Derivative assets |
| |
| |
| — |
| |
| — |
| ( | ||||||
Other financial assets |
| — |
| — |
| — |
| — |
| — |
| — | ||||||
Liabilities | ||||||||||||||||||
Deposits |
| |
| |
| — |
| |
| — |
| — | ||||||
Consolidated obligations | ||||||||||||||||||
Bonds |
| |
| |
| — |
| |
| — |
| — | ||||||
Discount notes |
| |
| |
| — |
| |
| — |
| — | ||||||
Mandatorily redeemable capital stock |
| |
| |
| |
| — |
| — |
| — | ||||||
Accrued interest payable |
| |
| |
| — |
| |
| — |
| — | ||||||
Derivative liabilities |
| |
| |
| — |
| |
| — |
| ( | ||||||
Other financial liabilities |
| — |
| — |
| — |
| — |
| — |
| — | ||||||
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 for the FHLBNY, 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. |
157
| ● | 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
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 were 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, including housing finance obligations, classified as available-for-sale — The fair value of such securities is estimated by the FHLBNY using pricing primarily from specialized 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
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.
158
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.
Housing finance agency bonds — The fair value of housing finance agency bonds is estimated by management using information primarily from pricing services. Because of the current lack of significant market activity, their fair values were categorized within Level 3 of the fair value hierarchy as inputs into vendor pricing models may not be market-based and observable.
Fair values of Mortgage-backed securities deemed impaired — When a PLMBS is deemed to be impaired, 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. Historically, impairments have been de minimis. The portfolio of PLMBS has declined as the FHLBNY has ceased acquiring PLMBS.
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) Benchmark 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
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. |
159
| ● | 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. The FHLBNY’s internal valuation models use the following inputs:
| ● | CO Curve and Benchmark Swap Curves. 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 assumptions. 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. No CO debt elected under the FVO were structured with options in any periods in this report. |
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 December 31, 2023 and December 31, 2022.
Starting in mid-October 2020, interest rate swaps cleared by Central Clearing Houses, LCH and the CME, are valued by discounting forward cash flows by the SOFR index, consistent with the change to SOFR in the interest accrual calculation of margins.
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:
| ● | SOFR curve (SOFR/OIS). |
| ● | Federal funds curve (FF/OIS curve). |
| ● | LIBOR Swap Curve. |
| ● | Volatility assumption. Market-based expectations of future interest rate volatility implied from current market prices for similar options. |
160
| ● | Prepayment assumption (if applicable). |
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 SOFR and the overnight indexed swap (FF/OIS) curves as fair value measurement inputs for the valuation of its derivatives as the curves reflect the interest rates paid on cash collateral provided against the fair value of these derivatives. The FHLBNY believes using relevant SOFR and the 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. SOFR and the FF/OIS curves are inputs to the valuation model and are obtained from industry standard pricing vendors; the inputs are available and observable over the entire terms of the interest rate swaps.
Management considers the SOFR and the Federal funds curve to be Level 2 inputs. The FHLBNY’s valuation model utilizes industry standard OIS methodology. The model generates forecasted cash flows using the contractual cash flows, then discounts the cash flows by SOFR and 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 Derivatives Clearing Organizations (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
For uncleared derivatives transactions executed on or after September 1, 2022, we are subject to two-way initial margin obligations as required by the Wall Street Reform and Consumer Protection Act. For such uncleared derivatives transactions, a party whose initial margin requirement exceeds the $50 million threshold would be required to deliver collateral in the amount by which the initial margin requirement exceeds such specified threshold. Initial margin is required to be held at a third-party custodian for the benefit of the secured party, which can only assert ownership of such collateral upon the occurrence of certain events, which may include an event of default due to bankruptcy, insolvency, or similar proceeding. As of December 31, 2023, the Bank did not exceed the threshold with any of the uncleared derivatives counterparty and did not have to post initial margin or have the counterparty post initial margin to the Bank.
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 December 31, 2023 and December 31, 2022, by level within the fair value hierarchy. Certain mortgage loans that were partially charged-off were recorded at their collateral values on a non-recurring basis. REO is measured at fair value when the asset’s fair value less costs to sell is lower than its carrying amount.
161
Items Measured at Fair Value on a Recurring Basis (in thousands):
December 31, 2023 | |||||||||||||||
|
|
|
|
| Netting | ||||||||||
Adjustment and | |||||||||||||||
| Total |
| Level 1 |
| Level 2 |
| Level 3 |
| Cash Collateral | ||||||
Assets | |||||||||||||||
Trading securities | |||||||||||||||
U.S. Treasury securities | $ | | $ | | $ | — | $ | — | $ | — | |||||
Equity Investments |
| | | — | — | — | |||||||||
Available-for-sale securities | |||||||||||||||
GSE/U.S. agency issued MBS | | — | | — | — | ||||||||||
State and local housing finance agency obligations | | — | — | | — | ||||||||||
Derivative assets (a) | |||||||||||||||
Interest-rate derivatives |
| |
| — |
| |
| — |
| ( | |||||
Mortgage delivery commitments |
| |
| — |
| |
| — |
| — | |||||
Total recurring fair value measurement - Assets | $ | | $ | | $ | | $ | | $ | ( | |||||
Liabilities | |||||||||||||||
Consolidated obligation: | |||||||||||||||
Bonds (to the extent FVO is elected) (b) | $ | ( | $ | — | $ | ( | $ | — | $ | — | |||||
Derivative liabilities (a) | |||||||||||||||
Interest-rate derivatives |
| ( |
| — |
| ( |
| — |
| | |||||
Mortgage delivery commitments | ( |
| — |
| ( |
| — |
| — | ||||||
Total recurring fair value measurement - Liabilities | $ | ( | $ | — | $ | ( | $ | — | $ | | |||||
162
December 31, 2022 | |||||||||||||||
Netting | |||||||||||||||
Adjustment and | |||||||||||||||
| Total |
| Level 1 |
| Level 2 |
| Level 3 |
| Cash Collateral | ||||||
Assets | |||||||||||||||
Trading securities | |||||||||||||||
U.S. Treasury securities | $ | | $ | | $ | — | $ | — | $ | — | |||||
Equity Investments | | | — | — | — | ||||||||||
Available-for-sale securities | |||||||||||||||
GSE/U.S. agency issued MBS | | — | | — | — | ||||||||||
State and local housing finance agency obligations | | — | — | | — | ||||||||||
Derivative assets (a) | |||||||||||||||
Interest-rate derivatives |
| |
| — |
| |
| — |
| ( | |||||
Mortgage delivery commitments |
| |
| — |
| |
| — |
| — | |||||
Total recurring fair value measurement - Assets | $ | | $ | | $ | | $ | | $ | ( | |||||
Liabilities | |||||||||||||||
Consolidated obligation: | |||||||||||||||
Bonds (to the extent FVO is elected) (b) | $ | ( | $ | — | $ | ( | $ | — | $ | — | |||||
Derivative liabilities (a) | |||||||||||||||
Interest-rate derivatives |
| ( |
| — |
| ( |
| — |
| | |||||
Mortgage delivery commitments |
| ( |
| — |
| ( |
| — |
| — | |||||
Total recurring fair value measurement - Liabilities | $ | ( | $ | — | $ | ( | $ | — | $ | | |||||
| (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. |
Roll Forward of Level 3 Available-for-Sale Securities (in thousands):
State and Local Housing Finance | |||||||||
Agency Obligations | |||||||||
| Years ended December 31, | ||||||||
2023 |
| 2022 |
| 2021 | |||||
Balance, beginning of the period | $ | | $ | | $ | — | |||
Transfer of securities from held-to-maturity to available-for-sale | — | — | | ||||||
Provision for credit losses | — | — | | ||||||
Total gains (losses) included in other comprehensive income | |||||||||
( | ( | | |||||||
Purchases | | | | ||||||
Settlements | ( | ( | ( | ||||||
Balance, end of the period | $ | | $ | | $ | | |||
163
Items Measured at Fair Value on a Non-recurring Basis (a) (in thousands):
During the period ended December 31, 2023 | ||||||||||||
| Fair Value |
| Level 1 |
| Level 2 |
| Level 3 | |||||
Mortgage loans held-for-portfolio | $ | — | $ | — | $ | — | $ | — | ||||
Real estate owned | | — | — | | ||||||||
Total non-recurring assets at fair value | $ | | $ | — | $ | — | $ | | ||||
Mortgage loans and REO — The FHLBNY measures and records certain impaired mortgage loans and REO (foreclosed properties) on a non-recurring basis. These assets are subject to fair value adjustments in certain circumstances at the occurrence of the events during the periods in this report. Impaired loans are primarily loans that are delinquent for 180 days or more, partially charged-off, with the remaining loans recorded at their collateral values at the dates the loans are charged off. Fair value adjustments on the impaired loans and real estate owned assets are based primarily on broker price opinions.
In accordance with disclosure provisions, changes in fair value are reported the date the fair value adjustments are recorded, which is during the period and not as of the period end date. There were
Fair Value Option Disclosures
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. We may also elect CO bonds under the FVO to achieve asset liability objectives. 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, the discount amortization on fair value option consolidated obligation discount notes and the premium/discount amortization on fair value option consolidated obligation bonds 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
As with all advances, when advances are elected under the FVO, they 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 recent past periods, and no adverse changes have been observed in their credit characteristics.
164
The following tables summarize the activity related to financial instruments for which the FHLBNY elected the fair value option (a) (in thousands):
Year ended December 31, 2023 | ||||||
| Bonds |
| Discount Notes (b) | |||
Balance, beginning of the period | $ | ( | $ | — | ||
New transactions elected for fair value option |
| — |
| — | ||
Maturities and terminations |
| |
| — | ||
Net gains (losses) on financial instruments held under fair value option |
| ( |
| — | ||
Change in accrued interest/unaccreted balance |
| ( |
| — | ||
Balance, end of the period | $ | ( | $ | — | ||
Year ended December 31, 2022 | ||||||
| Bonds |
| Discount Notes (b) | |||
Balance, beginning of the period | $ | ( | $ | — | ||
New transactions elected for fair value option |
| ( |
| — | ||
Maturities and terminations |
| |
| — | ||
Net gains (losses) on financial instruments held under fair value option |
| |
| — | ||
Change in accrued interest/unaccreted balance |
| ( |
| — | ||
Balance, end of the period | $ | ( | $ | — | ||
Year ended December 31, 2021 | ||||||
| Bonds |
| Discount Notes (b) | |||
Balance, beginning of the period | $ | ( | $ | ( | ||
New transactions elected for fair value option |
| ( |
| ( | ||
Maturities and terminations |
| |
| | ||
Net gains (losses) on financial instruments held under fair value option |
| |
| | ||
Change in accrued interest/unaccreted balance |
| |
| | ||
Balance, end of the period | $ | ( | $ | — | ||
| (a) |
| (b) |
165
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 (a) (in thousands):
December 31, 2023 | |||||||||
|
| Net Gains (Losses) |
| Total Change in Fair | |||||
Interest | Due to Changes in | Value Included in Current | |||||||
| Expense |
| Fair Value |
| Period Earnings | ||||
Consolidated obligation bonds | $ | ( | $ | ( | $ | ( | |||
Consolidated obligation discount notes (b) |
| — |
| — |
| — | |||
$ | ( | $ | ( | $ | ( | ||||
December 31, 2022 | |||||||||
|
| Net Gains (Losses) |
| Total Change in Fair | |||||
Interest | Due to Changes in | Value Included in Current | |||||||
| Expense |
| Fair Value |
| Period Earnings | ||||
Consolidated obligation bonds | $ | ( | $ | | $ | | |||
Consolidated obligation discount notes (b) |
| — |
| — |
| — | |||
$ | ( | $ | | $ | | ||||
December 31, 2021 | |||||||||
|
| Net Gains (Losses) |
| Total Change in Fair | |||||
Interest | Due to Changes in | Value Included in Current | |||||||
Expense | Fair Value | Period Earnings | |||||||
Consolidated obligation bonds | $ | ( | $ | | $ | | |||
Consolidated obligation discount notes (b) |
| ( |
| |
| ( | |||
$ | ( | $ | | $ | | ||||
| (a) |
| (b) |
166
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 (a) (c) (in thousands):
December 31, 2023 | |||||||||
|
|
| Fair Value Over/(Under) | ||||||
Aggregate Unpaid | Aggregate Fair | Aggregate Unpaid | |||||||
| Principal Balance |
| Value |
| Principal Balance | ||||
Consolidated obligation bonds (b) | $ | | $ | | $ | ( | |||
December 31, 2022 | |||||||||
|
| Fair Value Over/(Under) | |||||||
Aggregate Unpaid | Aggregate Fair | Aggregate Unpaid | |||||||
| Principal Balance |
| Value |
| Principal Balance | ||||
Consolidated obligation bonds (b) | $ | | $ | | $ | ( | |||
December 31, 2021 | |||||||||
|
| Fair Value Over/(Under) | |||||||
Aggregate Unpaid | Aggregate Fair | Aggregate Unpaid | |||||||
| Principal Balance |
| Value |
| Principal Balance | ||||
Consolidated obligation bonds (b) | $ | | $ | | $ | ( | |||
| (a) | Advances – |
| (b) | CO bonds – The FHLBNY has elected the FVO on an instrument-by-instrument basis for CO bonds, primarily fixed-rate, intermediate- and short-term debt; management elects the FVO for such CO bonds when management is 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. Management may also elect the FVO of certain other CO bonds to achieve asset liability objectives. |
| (c) | Discount notes - |
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
Affordable Housing Program - The
167
The following table summarizes contractual obligations and contingencies (in thousands):
December 31, 2023 | |||
Contractual Obligations | |||
Consolidated obligation bonds at par (a) | $ | | |
Consolidated obligation discount notes at par | | ||
Mandatorily redeemable capital stock (a) |
| | |
Financing lease (b) | | ||
Premises (Operating Lease) (b) | | ||
Remote backup site | | ||
Other liabilities (c) |
| | |
Total contractual obligations | $ | | |
Other commitments | |||
Standby letters of credit (d) | $ | | |
Consolidated obligation bonds/discount notes traded not settled |
| | |
Commitments to fund pension | | ||
Open delivery commitments (MAP) |
| | |
Total other commitments | $ | | |
Total obligations and commitments | $ | | |
| (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. While interest payments on CO bonds and discount notes are contractual obligations, they are deemed to be not material and, therefore, amounts were omitted from the table. |
| (b) | Amounts represent undiscounted obligations. Lease obligations are recorded in the Statements of Condition as a Right-of-use (ROU) asset and a corresponding lease liability. 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. |
| (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 Bank did not record credit losses on off-balance sheet arrangements for any periods in this report.
Lease Commitments
Operating Leases:
In compliance with the guidance under ASU 2016-02, Leases (Topic 842), we recognize in our Statements of Condition all leases with lease terms greater than twelve months as a lease liability with a corresponding right-of-use (ROU) asset.
168
At December 31, 2023 and December 31, 2022, the FHLBNY was obligated under a number of noncancelable leases, predominantly operating leases for premises. These leases generally have terms of
The following tables provide summarized information on our operating leases (dollars in thousands):
| December 31, 2023 |
| December 31, 2022 | |||
Operating Leases (a) | ||||||
Right-of-use assets | $ | | $ | | ||
Lease Liabilities | $ | | $ | | ||
| (a) | We have elected to exclude immaterial amounts of short-term operating lease liabilities in the Right-of-use assets and lease liabilities. |
Twelve months ended December 31, | |||||||
| 2023 |
| 2022 | ||||
Operating Lease Expense | $ | | $ | | |||
Operating cash flows - Cash Paid | $ | | $ | | |||
December 31, 2023 | December 31, 2022 | ||||||
Weighted Average Discount Rate | | % | | % | |||
Weighted Average Remaining Lease Term | Years | Years | |||||
Remaining maturities through | ||||||
Operating lease liabilities |
| December 31, 2023 |
| December 31, 2022 | ||
2023 | $ | — | $ | | ||
2024 | | | ||||
2025 | | | ||||
2026 | | | ||||
2027 | | | ||||
2028 | | | ||||
Thereafter | | | ||||
Total undiscounted lease payments | | | ||||
Imputed interest | ( | ( | ||||
Total operating lease liabilities | $ | | $ | | ||
Finance Lease:
In December 2023, the Bank entered into a
169
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.
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 — The FHLBNY assumed CO discount notes in par amount of $
Debt transfers —
Advances Sold or Transferred
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 $
Fees paid to the FHLBank of Chicago for providing MPF program services were approximately $
Mortgage-backed Securities
Intermediation
From time to time, the FHLBNY acts as an intermediary to purchase derivatives to accommodate its smaller members. At December 31, 2023 and December 31, 2022, outstanding notional amounts were $
170
Loans to Other Federal Home Loan Banks
In the twelve months ended December 31, 2023, and 2022, overnight loans extended to other FHLBanks averaged $
Borrowings from Other Federal Home Loan Banks
The FHLBNY borrows from other FHLBanks, generally for a period of
Sub-lease of Office Space to Another Federal Home Loan Bank
The FHLBNY is a lessor of shared office space to another FHLBank for a term through August 2028 at an estimated $
Cash and Due from Banks
The compensating cash balances held at Citibank was $
The following tables summarize significant balances and transactions with related parties and transactions (in thousands):
Related Party: Outstanding Assets, Liabilities and Capital
December 31, 2023 | December 31, 2022 | |||||
| Related |
| Related | |||
Assets | ||||||
Advances | $ | | $ | | ||
Accrued interest receivable |
| |
| | ||
Liabilities and capital | ||||||
Deposits | $ | | $ | | ||
Mandatorily redeemable capital stock |
| |
| | ||
Accrued interest payable |
| |
| | ||
Affordable Housing Program (a) |
| |
| | ||
Capital | $ | | $ | | ||
| (a) | Represents funds not yet allocated or disbursed to AHP programs. |
171
Related Party: Income and Expense Transactions
Years ended December 31, | |||||||||
2023 | 2022 | 2021 | |||||||
| Related |
| Related |
| Related | ||||
Interest income | |||||||||
Advances | $ | | $ | | $ | | |||
Interest-bearing deposits | | | — | ||||||
Loans to other FHLBanks |
| |
| |
| | |||
Interest expense | |||||||||
Deposits | $ | | $ | | $ | | |||
Mandatorily redeemable capital stock |
| |
| |
| | |||
Cash collateral held and other borrowings |
| |
| |
| — | |||
Service fees and other | $ | | $ | | $ | | |||
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
172
The top
December 31, 2023 | ||||||||||||||||
|
|
|
|
|
|
| Percentage of |
|
| |||||||
Par | Total Par Value | Twelve Months | ||||||||||||||
| City |
| State |
| Advances |
| of Advances |
| Interest Income |
| Percentage (a) | |||||
Citibank, N.A. |
| New York |
| NY | $ | |
| | % | $ | | | % | |||
Flagstar Bank, N.A. (b) | Hicksville | NY | | | | | ||||||||||
MetLife, Inc.: | ||||||||||||||||
Metropolitan Life Insurance Company |
| New York |
| NY | |
| | | | |||||||
Metropolitan Tower Life Insurance Company | New York | NY | | | | | ||||||||||
Subtotal MetLife, Inc. | | | | | ||||||||||||
Equitable Financial Life Insurance Co. |
| New York |
| NY |
| |
| |
| | | |||||
Teachers Ins. & Annuity Assoc of America | New York | NY | | | | | ||||||||||
Manufacturers and Traders Trust Company | Buffalo | NY | | | | | ||||||||||
New York Life Insurance Company | New York | NY | | | | | ||||||||||
Prudential Insurance Company of America | Newark | NJ | | | | | ||||||||||
Valley National Bank (b) | Wayne | NJ | | | | | ||||||||||
Kearny Bank | Fairfield | NJ | | | | | ||||||||||
Total | $ | |
| | % | $ | | | % | |||||||
| (a) | Interest income percentage is the member’s interest income from advances as a percentage of the top 10 members. |
| (b) | An officer of these members served on the Board of Directors of the FHLBNY as a Member Director. |
December 31, 2022 | ||||||||||||||||
|
|
|
|
|
|
| Percentage of |
|
|
| ||||||
Par | Total Par Value | Twelve Months | ||||||||||||||
| City |
| State |
| Advances |
| of Advances |
| Interest Income |
| Percentage (a) | |||||
Citibank, N.A. |
| New York | NY | $ | |
| | % | $ | | | % | ||||
Flagstar Bank, N.A. (b)(c) |
| Hicksville |
| NY | | | | | ||||||||
MetLife, Inc.: |
|
| ||||||||||||||
Metropolitan Life Insurance Company | New York | NY | |
| |
| | | ||||||||
Metropolitan Tower Life Insurance Company |
| New York |
| NY |
| | | | | |||||||
Subtotal MetLife, Inc. | | | | | ||||||||||||
Signature Bank | New York | NY | | | | | ||||||||||
Equitable Financial Life Insurance Company | New York | NY | |
| | | | |||||||||
Teachers Ins. & Annuity Assoc. of America | New York | NY | | | | | ||||||||||
New York Life Insurance Company | New York |
| NY |
| | |
| | | |||||||
Manufacturers and Traders Trust Company | Buffalo |
| NY |
| | |
| | | |||||||
Prudential Insurance Company of America | Newark | NJ | | | | | ||||||||||
ESL Federal Credit Union | Rochester | NY | | | | | ||||||||||
Total | $ | |
| | % | $ | | | % | |||||||
(a) | Interest income percentage is the member’s interest income from advances as a percentage of the top 10 members. |
(b) | An officer of this member bank served on the Board of Directors of the FHLBNY as a Member Director. |
| (c) | Non-Member institution Flagstar Bank, FSB merged into FHLBNY member New York Community Bank, on December 1, 2022. Surviving entity renamed Flagstar Bank, N.A. as a member of the FHLBNY. |
173
December 31, 2021 | ||||||||||||||||
|
|
|
|
|
|
| Percentage of |
|
| |||||||
Par | Total Par Value | Twelve Months | ||||||||||||||
City | State | Advances | of Advances | Interest Income |
| Percentage (a) | ||||||||||
MetLife, Inc.: |
| |||||||||||||||
Metropolitan Life Insurance Company | New York |
| NY | $ | |
| % | $ | | | % | |||||
Metropolitan Tower Life Insurance Company |
| New York |
| NY |
| |
|
| | | ||||||
Subtotal MetLife, Inc. |
|
| | | | |||||||||||
New York Community Bank | Hicksville | NY | |
|
| | | |||||||||
Equitable Financial Life Insurance Company | New York | NY | | | | |||||||||||
Citibank, N.A. |
| New York | NY | | | | | |||||||||
Investors Bank (b) |
| Short Hills | NJ | | | | ||||||||||
Signature Bank |
| New York |
| NY |
| | | | ||||||||
New York Life Insurance Company | New York | NY | |
|
| | | |||||||||
ESL Federal Credit Union | Rochester | NY | |
|
| | | |||||||||
Teachers Ins. & Annuity Assoc. of America | New York | NY | | | | |||||||||||
Valley National Bank (b) | Wayne | NJ | | | | |||||||||||
Total | $ | | % | $ | | | % | |||||||||
(a) | Interest income percentage is the member’s interest income from advances as a percentage of the top 10 members. |
(b) | An officer of these members served on the Board of Directors of the FHLBNY as a Member Director. |
The following tables summarize capital stock held by members who were beneficial owners of more than 5 percent of the FHLBNY’s outstanding capital stock as of February 29, 2024 and December 31, 2023 (shares in thousands):
|
| Number |
| Percent |
| ||
February 29, 2024 | of Shares | of Total |
| ||||
Name of Beneficial Owner |
| Principal Executive Office Address |
| Owned |
| Capital Stock |
|
Flagstar Bank, N.A. | 102 Duffy Avenue, Hicksville, NY, 11801 |
| |
| | % | |
Citibank, N.A. | 399 Park Avenue, New York, NY, 10043 | | | ||||
MetLife, Inc.: | |||||||
Metropolitan Life Insurance Company | 200 Park Avenue, New York, NY, 10166 | | | ||||
Metropolitan Tower Life Insurance Company | 200 Park Avenue, New York, NY, 10166 | | | ||||
Subtotal MetLife, Inc. | | | |||||
Manufacturers and Traders Trust Company | One M & T Plaza, Buffalo, NY, 14203 | | | ||||
Teachers Ins. & Annuity Assoc. of America | 730 Third Avenue, New York, NY, 10017 | | | ||||
Equitable Financial Life Insurance Co. | 1290 Avenue of the Americas, New York, NY, 10104 | | | ||||
| | % |
|
| Number |
| Percent |
| ||
December 31, 2023 | of Shares | of Total |
| ||||
Name of Beneficial Owner | Principal Executive Office Address | Owned | Capital Stock |
| |||
Citibank, N.A. |
| 399 Park Avenue, New York, NY, 10043 |
| |
| | % |
Flagstar Bank, N.A. | 102 Duffy Avenue, Hicksville, NY, 11801 | | | ||||
MetLife, Inc.: |
|
| |||||
Metropolitan Life Insurance Company | 200 Park Avenue, New York, NY, 10166 | | | ||||
Metropolitan Tower Life Insurance Company | 200 Park Avenue, New York, NY, 10166 | | | ||||
Subtotal MetLife, Inc. | | | |||||
Teachers Ins. & Annuity Assoc. of America | 730 Third Avenue, New York, NY, 10017 | | | ||||
Equitable Financial Life Insurance Company | 1290 Avenue of the Americas, New York, NY, 10104 | | | ||||
| | % |
174
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.
Item 9A.Controls and Procedures.
| (a) | Evaluation of Disclosure Controls and Procedures: An evaluation of the Bank’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Act”)) was carried out under the supervision and with the participation of the Bank’s President and Chief Executive Officer, José R. González, and Senior Vice President and Chief Financial Officer, Kevin M. Neylan, at December 31, 2023. Based on this evaluation, they concluded that as of December 31, 2023, the Bank’s disclosure controls and procedures were effective at a reasonable level of assurance in ensuring that the information required to be disclosed by the Bank in the reports it files or submits under the Act is (i) accumulated and communicated to the Bank’s management (including the President and Chief Executive Officer and Senior Vice President and Chief Financial Officer) in a timely manner, and (ii) recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. |
| (b) | Changes in Internal Control Over Financial Reporting: There were no changes in the Bank’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Act) during the Bank’s fourth quarter that have materially affected, or are reasonably likely to materially affect, the Bank’s internal control over financial reporting. |
Management’s Report on Internal Control over Financial Reporting and the Report of Independent Registered Public Accounting Firm thereon are set forth in Part II, Item 8 of the Annual Report on this Form 10-K and incorporated herein by reference.
Item 9B.Other Information.
Item 9C.Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.
Not applicable.
175
PART III
Item 10.Directors, Executive Officers and Corporate Governance.
2023 and 2024 Board of Directors
The FHLBank Act, as amended by the Housing and Economic Recovery Act of 2008 (“HERA”), provides that a FHLBank’s Board of Directors is to comprise thirteen Directors, or such other number as the Director of the Federal Housing Finance Agency (“Finance Agency” or “FHFA”) determines appropriate. For both 2023 and 2024, the FHFA Director designated nineteen directorships for us, eleven of which were Member Directorships and eight of which were Independent Directorships. One New York Member Director seat remained vacant from June 12, 2023 through and until December 31, 2023 due to the death of a Director, and another New York Member Director seat became vacant on January 1, 2024 due to the resignation of a Director from the Board (whose term was set to expire at the end of 2024) effective as of the end of 2023.
All individuals serving as Bank Directors must be United States citizens. A majority of the directors serving on the Board must be Member Directors and at least two-fifths must be Independent Directors.
A Member Directorship may be held only by an officer or director of a member institution that is located within our district and that meets all minimum regulatory capital requirements. There are no other qualification requirements for Member Directors apart from the foregoing.
Member Directors are, generally speaking, elected by our stockholders in, respectively, New York, New Jersey, Puerto Rico and the U.S. Virgin Islands. Our Board of Directors is ordinarily not permitted to nominate or elect Member Directors; however, the Board may appoint a director to fill a vacant Member Directorship in the event that no nominations are received from members in the course of the Member Director election process. In the event that only one nomination is received from members for an open Member Directorship, that nominee will automatically be declared elected by the Bank. (The Board may also take action to fill Member Directorship vacancies that arise for other reasons.) Each member institution that is required to hold stock as of the record date, which is December 31 of the year prior to the year in which the election is held, may nominate and/or vote for representatives from member institutions in its respective state to fill open Member Directorships. The Finance Agency’s election regulation provides that none of our directors, officers, employees, attorneys or agents, other than in a personal capacity, may support the nomination or election of a particular individual for a Member Directorship.
Because of the process described above pertaining to how Member Directors are nominated and elected, we do not know what particular factors our member institutions may consider in nominating particular candidates for Member Directorships or in voting to elect Member Directors. However, if the Board takes action to fill a vacant Member Directorship, we can know what was considered in electing such Director. In general, such considerations may include satisfaction of the regulatory qualification requirements for the Directorship, the nature of the person’s experience in the financial industry and at a member institution, knowledge of the person by various members of the Board, and previous service on the Board, if any.
In contrast to the requirements pertaining to Member Directorships, an Independent Directorship may, per FHFA regulations, be held, generally speaking, only by an individual who is a bona fide resident of our district, who is not a director, officer, or employee of a member institution or of any person that receives advances from us, and who is not an officer of any FHLBank. At least two of the Independent Directors must be “Public Interest” Independent Directors. Public Interest Independent Directors, as defined by Finance Agency regulations, are Independent Directors who have at least four years of experience representing consumer or community interests in banking services, credit needs, housing or consumer financial protection. Pursuant to Finance Agency regulations, each Independent Director must either satisfy the aforementioned requirements to be a Public Interest Independent Director, or have knowledge or experience in one or more of the following areas: auditing and accounting, derivatives, financial management, organizational management, project development, risk management practices, and the law.
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Any individual meeting the basic qualifications may submit an Independent Director application form and request to be considered by us for inclusion on the Independent Director nominee slate. Our Board of Directors is then required by Finance Agency regulations to consult with our Affordable Housing Advisory Council (“Advisory Council”) in establishing the nominee slate. (The Advisory Council is an advisory body consisting of fifteen persons residing in our district appointed by our Board, the members of which are drawn from community and not-for-profit organizations that are actively involved in providing or promoting low and moderate income housing or community lending. The Advisory Council provides advice on ways in which we can better carry out our housing finance and community lending mission.) After the nominee slate is approved by the Board, the slate is then presented to our membership for a district-wide vote. The election regulation permits our directors, officers, attorneys, employees, agents, and Advisory Council to support the candidacy of the board of director’s nominees for Independent Directorships. (As is the case with Member Directorships, the Board may also take action to fill a vacancy of an Independent Directorship.)
The Bank encourages diversity on its Board of Directors and encourages everyone, including minorities and women, to consider service as Bank Directors.
Voting rights and processes with regard to the election of Member and Independent Directors are set forth in the FHLBank Act and FHFA regulations. For the election of both Member Directors and Independent Directors, each eligible member institution is entitled to cast one vote for each share of capital stock that it was required to hold as of the record date (which is December 31st). However, the number of votes that each institution may cast for each Directorship cannot exceed the average number of shares of capital stock that were required to be held by all member institutions located in the voting member’s state on the record date. The Board does not solicit proxies, nor are member institutions permitted to solicit or use proxies in order to cast their votes in an election.
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The following table sets forth information regarding each of the directors who served on our Board during the period from January 1, 2023 through the date of this annual report on Form 10-K. Footnotes are used to specifically identify (i) one incumbent Independent Director whose term expired at the end of 2023 and who could not run again due to term limits; (ii) one new Independent Director who was elected by the Bank’s membership to begin service on the Board commencing on January 1, 2024; (iii) one incumbent Independent Director whose term expired at the end of 2023 and who was re-elected by the Bank’s membership to serve again on the Board commencing on January 1, 2024; (iv) one incumbent New York Member Director whose term expired at the end of 2023 and who could not run again due to term limits; (v) one incumbent New York Member Director whose term was set to expire at the end of 2023 but who passed away on June 11, 2023; (vi) two new York Member Directors who were each elected by the Bank’s membership to begin service on the Board commencing on January 1, 2024; (vii) one incumbent New York Member Director whose term was set to expire at the end of 2024 but who resigned from the Board effective as of the end of 2023; (viii) one incumbent New York Member Director whose term was set to expire at the end of 2025 but who became ineligible to serve on the Board effective as of March 11, 2024; and (ix) three Independent Directors who also served or serve as Public Interest Independent Directors.
Following the table is biographical information for each Director.
No Director has any family relationship with any other FHLBNY Directors or executive officers. In addition, no Director or executive officer has an involvement in any legal proceeding required to be disclosed pursuant to Item 401(f) of Regulation S-K.
Start of | Expiration | |||||||||||
Bank | Most | of Most | Represents |
| ||||||||
Age as of | Director | Recent | Recent | Bank |
| |||||||
Director Name |
| 3/21/24 |
| Since |
| Term |
| Term |
| Members in |
| Director Type |
John R. Buran (a) (2023 Chair) |
| 74 |
| 12/2010 |
| 1/1/20 |
| 12/31/23 |
| NY |
| Member |
Larry E. Thompson (2024 Chair & 2023 Vice Chair) |
| 73 |
| 1/2014 |
| 1/1/22 |
| 12/31/25 |
| Districtwide |
| Independent |
David J. Nasca (2024 Vice Chair) | 66 | 1/2015 | 1/1/23 | 12/31/26 | NY | Member | ||||||
Melba I. Acosta |
| 57 |
| 1/2023 |
| 1/1/23 |
| 12/31/26 |
| Districtwide |
| Independent |
Danelle M. Barrett | 56 | 1/2021 | 1/1/21 | 12/31/24 | Districtwide | Independent | ||||||
Thomas R. Cangemi (b) |
| 55 |
| 1/2022 |
| 1/1/22 |
| 3/11/24 |
| NY |
| Member |
Robert M. Fisher (c) |
| 56 |
| 1/2024 |
| 1/1/24 |
| 12/31/27 |
| NY |
| Member |
Thomas L. Hoy (d) |
| — |
| 1/2012 |
| 1/1/20 |
| 6/11/23 |
| NY |
| Member |
David R. Huber |
| 60 |
| 1/2019 |
| 1/1/23 |
| 12/31/26 |
| Districtwide |
| Independent |
Thomas J. Kemly |
| 66 |
| 1/2021 |
| 1/1/21 |
| 12/31/24 |
| NJ |
| Member |
Charles E. Kilbourne, III |
| 51 |
| 1/2019 |
| 1/1/21 |
| 12/31/24 |
| Districtwide |
| Independent* |
Kenneth J. Mahon (e) |
| 73 |
| 1/2017 |
| 1/1/21 |
| 12/31/23 |
| NY |
| Member |
Carolyn B. Maloney (f) |
| 78 |
| 1/2024 |
| 1/1/24 |
| 12/31/27 |
| Districtwide |
| Independent* |
Christopher P. Martin |
| 67 |
| 1/2015 |
| 1/1/23 |
| 12/31/26 |
| NJ |
| Member |
Gerald L. Reeves |
| 69 |
| 1/2022 |
| 1/1/22 |
| 12/31/25 |
| NJ |
| Member |
Ira Robbins |
| 49 |
| 1/2023 |
| 1/1/23 |
| 12/31/26 |
| NJ |
| Member |
Stephen S. Romaine |
| 59 |
| 1/2019 |
| 1/1/21 |
| 12/31/24 |
| NY |
| Member |
DeForest B. Soaries, Jr. (g) |
| 72 |
| 1/2009 |
| 1/1/20 |
| 12/31/23 |
| Districtwide |
| Independent* |
Josie J. Thomas | 65 | 1/2022 | 1/1/22 | 12/31/25 | Districtwide | Independent | ||||||
Anders M. Tomson (c) |
| 57 |
| 1/2024 |
| 1/1/24 |
| 12/31/27 |
| NY |
| Member |
Carlos J. Vázquez | 65 | 11/2013 | 1/1/22 | 12/31/25 | PR & USVI | Member | ||||||
Ángela Weyne (h) |
| 80 |
| 9/2017 |
| 1/1/24 |
| 12/31/27 |
| Districtwide |
| Independent |
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*These Independent Directors serve or have served as Public Interest Independent Directors. Directors Kilbourne & Maloney have both served as Public Interest Independent Directors throughout the entire course of their service covered by this table. Director Soaries’ service as a Public Interest Independent Director commenced effective October 3, 2018 and ended when his service on the Board ended on December 31, 2023.
Mr. Buran (2023 Chair) is Director, President and Chief Executive Officer of both Flushing Financial Corporation, the holding company for FHLBNY member Flushing Bank (formerly Flushing Savings Bank), and of Flushing Bank. He joined the holding company and the bank in 2001 as Chief Operating Officer and he became a Director of these entities in 2003. In 2005, he was named President and Chief Executive Officer of both entities. Mr. Buran’s career in the banking industry began with Citibank in 1977. There, he held a variety of management positions including Business Manager of its retail distribution in Westchester, Long Island and Manhattan and Vice President in charge of its Investment Sales Division. Mr. Buran left Citibank to become Senior Vice President, Division Head for Retail Services of NatWest Bank and later Executive Vice President of Fleet Bank’s (now Bank of America) retail branch system in New York City, Long Island, Westchester and Southern Connecticut. He also spent time as a consultant and Assistant to the President of Carver Bank. Mr. Buran is past Chairman and current Board member of the New York Bankers Association. From 2011 to 2017 he served on the Community Depository Institutions Advisory Council of The Federal Reserve Bank of New York. John is also a former member of the Nassau County Interim Finance Authority where he served for eight years. Mr. Buran has devoted his time to a variety of charitable and not-for-profit organizations. He has been a Board member of the Long Island Association, both the Nassau and Suffolk County Boy Scouts, EAC, Long Island University, the Long Island Philharmonic and Channel 21. He was the fundraising Chairman for the Suffolk County Vietnam Veteran’s War Memorial in Farmingville, New York and has been recipient of the Boy Scouts’ Chief Scout Citizen Award. His work in the community has been recognized by Family and Children’s Association, and Gurwin Jewish Geriatric Center. He was also a recipient of the Long Island Association’s SBA Small Business Advocate Award. Mr. Buran was honored twice with St. Joseph’s College’s Distinguished Service Award. Mr. Buran also serves on the Advisory Board and is a former Board President of Neighborhood Housing Services of New York City. He is a Board member of The Korean American Youth Foundation. Mr. Buran also serves on the Board of the Long Island Conservatory. He was recently presented with an honorary Doctorate of Humane Letters from St. Francis College of Brooklyn and was the recipient of the Catholic Charities Gold Medal Award in 2019. He holds a B.S. in Management and an M.B.A., both from New York University. Mr. Buran left the FHLBNY’s Board at the end of 2023.
Mr. Thompson (2024 Chair; 2023 Vice Chair) was Vice Chairman of The Depository Trust & Clearing Corporation (DTCC) through the end of 2018, and previously served as the Chief Legal Officer/General Counsel of the firm since 2005. He has more than 30 years of experience as a senior executive in corporate law, risk management and regulatory affairs. In his role as DTCC Vice Chairman, Mr. Thompson served as a senior advisor to DTCC and was responsible for all legal and regulatory activities of the company and its subsidiaries. He regularly interfaced with government and regulatory agencies on issues impacting the company. Mr. Thompson was Chairman of the Board of DTCC Deriv/SERV LLC and former Chairman of the DTCC Operating Committee. He was a member of the DTCC Management Committee, which is comprised of the company’s executive leadership. In addition, Mr. Thompson was a member of the DTCC Management Risk Committee, where he helped oversee and assess a broad range of issues related to market, capital and operational risks facing the corporation. Mr. Thompson previously served as Chair of a DTCC Board subcommittee charged with reviewing the potential risk impacts of high frequency trading and algorithmic trading as a result of the Knight Capital market event of 2012. Mr. Thompson is the former Co-Chair of the DTCC Internal Risk Management Committee and former Chairman of The Depository Trust Company (DTC) Internal Risk Management Committee. Mr. Thompson began his legal career with DTC as Associate Counsel in 1981 and was elected Vice President and Deputy General Counsel in 1991, Senior Vice President in 1993, General Counsel of DTC in 1999 and Managing Director and First Deputy General Counsel of DTCC in 2004. Previously, he was a partner in the New York law firm of Lake, Bogan, Lenoir, Jones & Thompson. Mr. Thompson began his legal career at Davis Polk & Wardwell. Mr. Thompson previously served on the Board of Directors of New York Portfolio Clearing (NYPC), a former joint venture derivatives clearinghouse owned by NYSE Euronext and DTCC. He is currently on the Board of Directors of LedgerX LLC, a digital currency futures and options exchange and clearinghouse. He also serves on the Board of Professional Advisors of the firm
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Risk Toolbox, Inc. In addition, he also served as former Chairman of the Securities Clearing Group and former Co-Chairman of the Unified Clearing Group. His memberships include the New York State Bar Association; the New York County Lawyers’ Association; Association of the Bar of the City of New York; Business Executives for National Security; and the Global Association of Risk Professionals. He is a former director of the Legal Aid Society of New York and a former director of The Studio Museum of Harlem. Mr. Thompson received his B.A. from Yale University and his J.D. from the University of California at Berkeley. Mr. Thompson’s legal and regulatory and risk management experience, as indicated by his background described above, supports his qualifications to serve on our Board as an Independent Director.
Mr. Nasca (2024 Vice Chair) has, since 2006, served as Director and President and Chief Executive Officer of Evans Bancorp, Inc. and FHLBNY member Evans Bank, N.A., a $2.2 billion nationally chartered community focused commercial bank. Prior to joining Evans, Mr. Nasca spent 11 years at First Niagara Financial Group with increasing executive responsibilities including; Senior Vice President and Treasurer; President and CEO of its commercial banking subsidiary, Cayuga Bank, shortly after it was acquired by First Niagara, as well as Regional President in Central New York; and Executive Vice President of Strategic Initiatives, where he was integrally involved in the development of strategic plans, implementation of First Niagara’s merger and acquisition efforts, and management of its enterprise-wide risk management program. In addition, Mr. Nasca’s experience includes executive positions with Chemical Bank, Goldome FSB, and Goldome Realty Corp. He earned his MBA in Finance from the State University of New York at Buffalo and a BS in Management/Marketing from Canisius College. Mr. Nasca is a member and past President of the Board of the Independent Bankers Association of New York State, a member of the New York Bankers Association and past Chair of the New York Bankers Association Service Corporation, and a former member of the Board of Directors of the New York Business Development Corporation. He is also involved in his community on several boards, including serving as a member of the Canisius College Business Advisory Council of its Richard J. Wehle School of Business; serving as a Governing Board Member of Lifetime Healthcare, Inc. and of its subsidiaries Excellus Health Plan, Inc. (a member of the FHLBNY), MedAmerica, Inc., and Univera Healthcare; and serving as a board member of the Buffalo Urban Development Corporation, The Buffalo Niagara Partnership, and Brothers of Mercy, Inc., a Continuing Care Community.
Ms. Acosta has been, since 2017, Counsel in the law firm of McConnell Valdes, LLC, where her main areas of practice include corporate law, banking and financial institutions, commercial financing, M&As, reorganizations, governance, and public financing. She regularly advises national and local banks, broker-dealers, mortgage institutions and other financial institutions on a wide range of complex corporate and financial transactions and regulatory matters. Ms. Acosta’s public experience includes serving as President of the Government Development Bank for Puerto Rico (GDB), as Secretary of the Department of the Treasury and Chief Public Finance Officer for the Commonwealth of Puerto Rico, from 2013 to 2016. During her tenure, she spearheaded the efforts to restructure approximately $68 billion public debt of the Commonwealth. She provided testimony to Congress on several occasions regarding Puerto Rico’s fiscal situation, this as part of the efforts for the approval of the federal law known as PROMESA that allowed Puerto Rico to restructure its public debt. She was also Chair of various Boards and committees, including the GDB and its subsidiaries, Economic Development Bank, the Corporation for the Revitalization of the PR Electric Power Authority, the Puerto Rico Teacher’s Retirement System and the 2014 Tax Reform Committee. From 2001 to 2004 she served as Director of the Office of Management and Budget and Chief Information Officer (CIO) of the Commonwealth. As CIO, she spearheaded the development of the first e-government transactions. She was also the Government Authorized Representative before FEMA. Prior to that, she served as Chief of Staff to the Mayor of the city of San Juan, Puerto Rico, overseeing the city’s operations, including finances, public works, housing, social services and economic development, among others. Ms. Acosta, who is a certified public accountant, attorney and notary public, has held executive roles in both banking, finance and operations (including EVP, CFO, CAO/COO and Corporate Risk Manager) of a financial holding company of commercial banking, mortgage, insurance and investment entities, where she dealt with banking and securities regulatory issues, including among others, anti-money laundering, privacy, information security, regulatory examinations, asset quality, risk management and complex accounting issues, such as restatement of financials. As such, she was member of ALCO, Investment, Risk Management and Executive Committees. She started her career as a tax consultant with Price Waterhouse. For over 15 years she has been a member of the Board of Trustees of the Museum of Art of Puerto Rico, having served as Chair and Treasurer. She is member of the Board of Directors of the Fundación Luis Muñoz Marín, of the Board of Hospital La Concepcion, a past member of the Board of United Ways of Puerto Rico, where she also served as President of the Audit Committee and an Academic Numerary of the Academia Puertorriqueña de Jurisprudencia y Legislación de Puerto Rico. Ms. Acosta holds a Bachelor of Business Administration, with an accounting major, and a Juris Doctor degree, both magna cum laude, from the University of Puerto Rico, Rio Piedras. She also holds a Masters in Business Administration from Harvard University’s Graduate School of Business, Boston, Massachusetts. Ms. Acosta’s experience in law, as well as in auditing & accounting, financial management, organizational management, project management and risk management, as indicated by her background described above, support her qualifications to serve on our Board as an Independent Director.
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Rear Admiral Barrett, USN (Ret.) was born in Buffalo, New York and is a 1989 graduate of Boston University with a Bachelor of Arts in History where she received her commission as an officer from the U. S. Naval Reserve Officer Training Corps in a ceremony aboard the USS Constitution. She holds Masters of Arts in Management from Webster University, National Security Strategic Studies from the U.S. Naval War College, and Human Resources Development from Webster University. She also earned a Master of Science in Information Management from Syracuse University. As an admiral, Danelle served as Director of Current Operations at U.S. Cyber Command, and assumed duties in 2017 as the Navy Cyber Security Division Director and Deputy Chief Information Officer on the Chief of Naval Operations staff. In her last position in the U.S. Navy, she led the Navy’s strategic development and execution of digital and cyber security efforts, enterprise information technology improvements and cloud policy and governance for 700,000 personnel across a global network. An innovator, she implemented visionary digital transformation to modernize with unprecedented speed, significantly improving Navy Information Warfare capabilities. Ms. Barrett’s other tours of duty include assignments as Commanding Officer, Naval Computer and Telecommunications Area Master Station Atlantic where she directly led the largest telecommunications station in the Navy with responsibility for 2,700 people in 15 subordinate organizations worldwide; Chief of Staff, Navy Information Forces Command, U.S. Naval Forces Central Command/U.S. 5th Fleet and 2nd Fleet, Carrier Strike Group 2 and Carrier Strike Group 12 which included deployments in support of Operations Enduring Freedom in Afghanistan and Unified Response in Haiti, Multi-National Forces Iraq; Naval Computer and Telecommunications Stations in Jacksonville and Puerto Rico and Standing Joint Force Headquarters United States Pacific Command. She currently executes a portfolio of work that includes consulting through her firm “Cyber Secure at Sea LLC”, public speaking, and writing. She is an independent director on the boards of Progressive Insurance, Protego Trust Company and ShoulderUp Technology Acquisition Corp., and is on several advisory boards for other organizations. Her personal awards include Defense Superior Service Medal and other military decorations, Federal 100 winner 2010; Armed Forces Communications and Electronics Association Women in Leadership Award 2014; Women in Technology Leadership Award 2017 and the Executive Women’s Forum Women of Influence Award 2019. Ms. Barrett earned the National Defense University Chief Information Officer and Information Security certifications and has published 35 articles. She is the author of the recent book “Rock The Boat: Embrace Change, Encourage Innovation and Be a Successful Leader”. Rear Admiral Barrett’s organizational management, project development and risk management experience, as well as her experience in cybersecurity and digital transformation, as indicated by her background described above, support her qualifications to serve on our Board as an Independent Director.
Mr. Cangemi served through March 11, 2024 as a Director of New York Community Bancorp, Inc. (“NYCB”) and of its subsidiary and FHLBNY member Flagstar Bank, N.A. (formerly known prior to a corporate merger that became effective on December 1, 2022, as New York Community Bank). Mr. Cangemi’s end of service as a Director of Flagstar Bank, N.A., meant that he was no longer eligible to serve as a Member Director of the FHLBNY. Effective February 29, 2024, Mr. Cangemi no longer served as the President and Chief Executive Officer of Flagstar Bank, N.A. and NYCB. Previously, Mr. Cangemi was appointed President and CEO as well as Director of NYCB and New York Community Bank effective December 31, 2020, and served as Chairman of NYCB and New York Community Bank from March 26, 2021, to November 30, 2022. Prior to this, Mr. Cangemi served as Senior Executive Vice President and Chief Financial Officer of NYCB and New York Community Bank since April 5, 2005. He joined NYCB and New York Community Bank on July 31, 2001, as Executive Vice President and Director of the Capital Markets Group, and was named Senior Executive Vice President of NYCB and New York Community Bank on October 31, 2003. Prior to joining NYCB and New York Community Bank, Mr. Cangemi was Executive Vice President, Chief Financial Officer, and Treasurer of both Richmond County Financial Corp. and Richmond County Savings Bank. Before joining Richmond County in 1997, Mr. Cangemi served as Senior Vice President, Chief Financial Officer, and Corporate Secretary of Continental Bank, a commercial bank based in Garden City, New York and, previously, as Director of Corporate SEC Reporting for an electronics corporation in Boca Raton, Florida. From 1993 to 1996, Mr. Cangemi was Vice President and Chief Financial Officer of Sunrise Bancorp, a publicly traded thrift headquartered on Long Island. Previously, Mr. Cangemi was a member of the SEC Professional Practice Group of KPMG Peat Marwick serving financial institutions. Mr. Cangemi serves as Treasurer and a member of the Board of Directors of the Richmond County Savings Foundation and a member of the Board of Directors of the New York Community Bank Foundation. In addition, Mr. Cangemi is a member of the Board of Trustees of The Whaling Museum & Education Center of Cold Spring Harbor. Previously, Mr. Cangemi was a member of the Board of Directors of Peter B. Cannell & Co., Inc., a New York City-based investment management firm, a Board member and a member of the Development Committee of the Long Island Children’s Museum, on the Board of Directors of Friends of the Arts, a member of the Council of Overseers of the Tilles Center for the Performing Arts; and a member of the Board of Trustees of the East Woods School. Mr. Cangemi is a former recipient of the Crain’s New York Business “40 Under 40” list of the top executives under the age of 40. Mr. Cangemi holds a B.B.A. from the School of Professional Accountancy at Dowling College.
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Mr. Fisher is Chairman, President and Chief Executive Officer of Tioga State Bank, N.A., an FHLBNY member, and its holding company, TSB Services, Inc. A fifth-generation community banker, Mr. Fisher began working at Tioga State Bank during the summers of high school and college. He has worked in the bank full time in various positions since 1992, after returning from service in the United States Air Force as a navigator, and became President and CEO in 2003. In addition to his work at the bank, Mr. Fisher has committed himself to advocacy on behalf of the community banking industry as an engine of local prosperity. He served as chairman of the Independent Community Bankers of America (ICBA) in 2021 and 2022 and continues to serve the organization in numerous leadership roles. He is a member of the Executive Committee, Board of Directors, and Federal Delegate Board. He serves on a number of other committees, including the Nominating, Policy Development, ThinkTECH Selection, and Consumer Financial Services committees. Mr. Fisher testified before Congress on behalf of ICBA on three occasions between 2017 and 2021 on issues of importance to the industry, including regulatory relief and the Paycheck Protection Program. As a member of ICBA’s FHLB Task Force, Mr. Fisher was active in developing and articulating the group’s policy toward the Federal Home Loan Banks. In addition to ICBA, Mr. Fisher has been active at the state level as a current board member and past chairman of the Independent Bankers Association of New York State. He has served on the New York Bankers Association Board of Directors and chaired committees, including the Retail and Small Business Committee and New York Bankers Service Corporation. Mr. Fisher also served on the New York State Banking Board from 2007 to 2011. In addition to his banking affiliations, Fisher is a current board member and recent chairman of the Lourdes Ascension Hospital in Binghamton, NY. He sits on the board and audit committee of Pursuit, formerly known as the New York Business Development Corporation. Mr. Fisher also founded and serves as President of the TSB Foundation, a charitable foundation dedicated to supporting organizations that improve quality of life in the communities of the Southern Tier of New York and northern Pennsylvania. Mr. Fisher holds a BS in Finance from the University of Notre Dame and is a graduate of the Stonier Graduate School of Banking.
Mr. Hoy served as Chairman of FHLBNY member Glens Falls National Bank and Trust Company (“Glens Falls”) beginning on April 28, 2004. Mr. Hoy joined Glens Falls in 1974 as a management trainee and served as President of Glens Falls from January 1, 1996, through December 31, 2012. He also served as CEO of Glens Falls from 1997 through December 31, 2012. Mr. Hoy further served as a director of FHLBNY member Saratoga National Bank and Trust Company (“Saratoga”) since April 27, 2022. He also served as Chairman of Arrow Financial Corporation (“Arrow”), the holding company for Glens Falls and Saratoga, since April 28, 2004. He became President of Arrow in 1996 and CEO in 1997 and served as President of Arrow through June 30, 2012, and as CEO of the company through December 31, 2012. He also served as a director of North Country Mutual Funds since 2015. Mr. Hoy was a graduate of Cornell University and was active in various banking organizations, including serving as past President of the Independent Bankers Association of New York, past Chairman of the New York Bankers Association, and past member of the American Bankers Association Board of Directors. Mr. Hoy served four years on active duty in the U.S. Navy as a Surface Warfare Officer on various destroyers, and retired after twenty years as a Commander in the U.S. Naval Reserve. He was extremely active in his community, serving on numerous boards and leading several community fundraising efforts. He was recognized for his community service with the J. Walter Juckett Award from the Adirondack Regional Chambers of Commerce, the Twin Rivers Council’s Good Scout Award, the C.R. Wood Theater’s Charles R. Wood Award, the Warren County Bar Association Liberty Bell Award, and the Henry Crandall Award from the Crandall Public Library. Mr. Hoy passed away on June 11, 2023.
Mr. Huber is the President of Huber Advisory Services, which provides consulting services to clients in the healthcare and insurance industries. He served through the end of 2018 as Senior Vice President and Chief Financial Officer of Horizon Blue Cross Blue Shield of New Jersey (Horizon), which is New Jersey’s largest health insurer. He had been with Horizon since 2002 and served as Vice President of Finance before being promoted to CFO in 2012. Mr. Huber was formerly an audit partner in Arthur Andersen’s Financial Services practice in Metro New York, where he served clients in the insurance and banking industries. Mr. Huber has a Bachelor’s degree in Accounting from Lehigh University and is a CPA. Mr. Huber serves on the Board of Trustees of the New Jersey Symphony Orchestra. He served on the board of the New Jersey Economic Development Authority and was Chair of the Loan Committee and the Audit Committee. Mr. Huber’s auditing and accounting and financial management experience support his qualifications to serve on our Board as an Independent Director.
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Mr. Kemly was appointed President and Chief Executive Officer of FHLBNY member Columbia Bank, effective December 31, 2011. Prior to his appointment, he held various positions at the bank including Controller, Senior Vice President, Chief Financial Officer, Senior Executive Vice President, Chief Administrative Officer and Senior Executive Vice President, Chief Operating Officer. Mr. Kemly joined Columbia Bank’s Board of Directors in 2006 and the Columbia Bank Foundation’s (“Foundation”) Board of Directors upon inception in 2004; he was named Chairman of the Foundation in 2012. Mr. Kemly has also served since 2006 as a director, and since 2012 as the president, of Columbia Financial, Inc., Columbia Bank’s mid-tier stock holding company. Columbia Financial, Inc. is in turn a majority-owned subsidiary of Columbia Bank MHC; Mr. Kemly has served as a director of this entity since 2006. Mr. Kemly was also named to the Board of FHLBNY member Freehold Bank in 2021. With over 40 years of experience, Mr. Kemly has served as an active member of the banking industry. He has held several leadership positions including Chairman and Board Member of the New Jersey Bankers Association, President of Northern New Jersey Community Bankers, Board Member for the Commerce and Industry Association of New Jersey, Board Member of the Bankers Cooperative Group, Board Member of the New Jersey Bankers Charitable Foundation, President of the Financial Managers Society for the New York and New Jersey Chapter, and was a member of the OCC Mutual Savings Association Advisory Committee. As an active member of the local community, Mr. Kemly has expanded Columbia Bank’s volunteering initiative “Team Columbia”, which encourages employees to volunteer their time and give back to those in need. In conjunction with Columbia Bank’s IPO in 2018, he grew the Columbia Bank Foundation to one of the largest private giving Foundations in the state of New Jersey. Mr. Kemly has been formally recognized for his continued support by organizations including New Bridge Services, the Boys and Girls Club of Paterson, and the Passaic Community College Foundation. He previously served on the Board of Directors for New Bridge Services. Mr. Kemly holds Bachelor’s degrees in Business Administration and Psychology from Trenton State College and an MBA in Finance from Fordham University.
Mr. Kilbourne is a Managing Director of the Financial Services Volunteer Corps (FSVC), a not-for-profit, private-public partnership that helps to build sound financial systems in transition and emerging market countries. As a member of FSVC’s executive management team, he has extensive experience working to strengthen central banking capabilities, and to develop commercial banking systems and securities markets. Mr. Kilbourne is an officer of FSVC serving as Secretary of the Corporation. Mr. Kilbourne previously served in various positions in New York State Government focused on affordable housing and urban policy, and later as Vice President of the Financial Services Forum, a public-policy organization composed of CEOs from the largest, most diversified financial services institutions based in the United States. Mr. Kilbourne is a Trustee of the Wright Family Foundation in Schenectady, New York, and serves on the Board of Directors of the Boys and Girls Clubs of Schenectady. He is the President of the Board of Directors of Better Community Neighborhoods, Inc. based in Schenectady. He is a member of the Council on Foreign Relations. Mr. Kilbourne holds a Bachelor’s degree in Political Science from Tufts University, and a Master’s degree in International Affairs from Georgetown University. Mr. Kilbourne’s project development and financial management experience, as indicated by his background described above, supports his qualifications to serve on our Board as an Independent Director and a public interest director.
Mr. Mahon joined FHLBNY member Dime Community Bank (“the Bank”) in 1980. Mr. Mahon most recently served as the Bank’s Senior Executive Vice President and Chief Operating Officer from February 2014 to December 2016, prior to being elevated to the Bank’s President and CEO in January 2017 (a title he held through the end of January, 2021). In February 2021 he became Executive Chairman of the Bank’s Board. Mr. Mahon has served as a Director of the Bank since 1988. Mr. Mahon was also the CEO of the Bank’s holding company, Dime Community Bancshares (the “Company”) from January 1, 2017, through the end of January, 2021. Mr. Mahon became Executive Chairman of the Company’s Board on February 1, 2021. He has served as a director of the Company since 2002. He was formerly a board member of the Committee for Hispanic Children and Families (“CHCF”), and a former director of Southside United HDFC (“Los Sures”), a community support organization in Williamsburg, Brooklyn, and of Brooklyn Legal Services Corporation A, a non-profit which provides legal services for low income families in Brooklyn. Mr. Mahon is a member of the National Association of Corporate Directors. Mr. Mahon voluntarily resigned and retired from the FHLBNY’s Board at the end of 2023.
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Ms. Maloney served for over three decades as a member of the U.S. House of Representatives (1993-2023). During that time, she rose to become a nationally recognized leader in the fields of financial services, national security, the economy, and women’s issues. Ms. Maloney was the first woman to Chair the powerful House Committee on Oversight and Reform and previously was the first woman to chair the Joint Economic Committee. She was a senior member of the House Financial Services Committee and chaired the Subcommittee on Financial Institutions and Consumer Credit (110th Congress). She was also the Ranking Member (the title given to the highest-ranking Democrat when Republicans control Congress) of the Subcommittee on Financial Institutions and Consumer Credit (112th Congress), the Subcommittee on Capital Markets, Securities and Investment (115th Congress), the Subcommittee on Capital Markets and Government Sponsored Enterprises (113th and 114th Congresses), and the Subcommittee on Domestic Monetary Policy, Technology, and Economic Growth (107th, 108th and 109th Congresses). She served on the conference committee for the historic Dodd-Frank financial reforms, where she led the effort to pass numerous amendments. Throughout her time in Congress, Ms. Maloney served on the Subcommittee on Housing, Community Development and Insurance. She authored and passed more than 81 measures, either as stand-alone bills or as measures incorporated into larger legislation packages, 14 of which were signed into law at formal Presidential Signing Ceremonies that are generally reserved for the most significant bills. Her many legislative achievements included landmark legislation such as (i) the James Zadroga 9/11 Health and Compensation Act (and reauthorizations thereof) that ensured all those suffering health ailments resulting from the toxic chemicals released when the towers were destroyed by terrorists on 9/11 receive the medical care and compensation they need and deserve, (ii) the Postal Service Reform Act and (iii) the Credit CARD Act, which has saved consumers roughly $10 billion a year. Ms. Maloney was the first woman to represent the Upper East Side on the New York City Council (1983-1993), where she created and chaired the City Council Contracts Committee. She was a vigilant watchdog examining the city budget for waste, fraud, and abuse, and she authored the law that created the city’s widely hailed VENDEX system that made city contracts more transparent. She wrote legislation for campaign finance reform and fought to establish inclusive family leave policies. Ms. Maloney graduated from Greensboro College in 1968 and now holds four honorary doctorates. Her work has received numerous awards and honors including the Chamber of Commerce Outstanding Service Award, the Business and Professional Women’s Club of New York State Outstanding Legislator Award and the Thought Leaders in Business Award. Ms. Maloney is currently the Eleanor Roosevelt Distinguished Leader in Residence at Hunter College’s Roosevelt House Public Policy Institute and a Managing Director of the Metropolitan Opera and a member of the Board of Directors of several non-profit organizations. She is a member of Women’s Forum Inc., the Council on Foreign Relations, the Financial Women’s Association, and the National Association of Business and Professional Women. Ms. Maloney’s substantial Congressional (including Committee and Subcommittee) service over the years, as indicated by her background described above, supports her qualifications to serve on our Board as an Independent Director and a public interest director.
Mr. Martin is, as of January 1, 2022, Executive Chairman of Provident Financial Services, Inc. and of its subsidiary and FHLBNY member Provident Bank, New Jersey’s oldest state-chartered bank. He was first elected as Chairman in 2010, served as Chief Executive Officer from 2009 until December 31, 2021, and served as President from 2004 through mid-2020. He has been in the banking industry for over 35 years. Mr. Martin previously served as president and chief executive officer of First Sentinel Bancorp, Inc., which was acquired by Provident Financial Services, Inc. in July 2004. Prior to his banking career, Mr. Martin worked for Johnson & Johnson in inventory control and as a financial analyst. Mr. Martin is the New Jersey representative for the Independent Community Bankers Association. Mr. Martin previously served on the board of directors of the New Jersey Bankers Association. In addition, he served on the Federal Reserve Community Depository Institutions Advisory Council. He was a member of the Government Relations Council of the American Bankers Association. He also dedicates much of his spare time helping to improve the community. Mr. Martin is a vice president of The 200 Club of Middlesex County, which provides financial assistance and scholarships to families of law enforcement, fire and public safety officials. He serves on the board of trustees and the executive and investment committees of Elon University, and is a past president of the alumni board. Mr. Martin volunteers at local food pantries and Habitat for Humanity build sites. He also spends time teaching financial literacy to high school students at inner city schools. Mr. Martin is president of The Provident Bank Foundation, which, since its founding in 2003, has provided more than $30 million in grants for programs focusing on community enrichment, education, and health, youth and families in New Jersey and Pennsylvania. Mr. Martin has been honored for his philanthropic endeavors as a recipient of the New Jersey State Governor’s Jefferson Awards for Public Service, has been honored by the National MS Society, the American Jewish Committee, The Scholarship Fund for Inner-City Children, Habitat for Humanity, Boys and Girls Club of America, and Project Live. Mr. Martin received a bachelor’s degree in accounting and business from Elon University and holds a MBA from Monmouth University.
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Mr. Reeves retired January 9, 2023, as President and CEO of Sturdy Savings Bank, a FHLBNY Member. He continues to serve as a Director of Sturdy Savings Bank. Prior to his appointment to the position of President in 2008 he held various positions since joining the bank in 1991, including Chief Operating Officer, Executive Vice President, Senior Loan Officer, Director of Commercial Lending and Senior Vice President. He has worked in the banking industry for 42 years in Southern New Jersey. Prior to joining Sturdy Savings Bank, he served as a regional vice president of Commercial Lending for Chemical Bank, NJ. He served the New Jersey Bankers Association in many capacities including as a Committee Chairperson, a Member of the Board of Directors, a Member of the Executive Committee, as well as serving two one-year terms as the Chairman of the Board. Mr. Reeves served one term as a member of the CDIAC Committee of the Federal Reserve Bank of Philadelphia. His community service includes 27 years on the Board of Education of the West Cape May Elementary School district, 42 years as a member of the Kiwanis Club of Cape May, 12 years as a member of the Cape Regional Hospital Foundation Board and 25 years as a member of the Cape May County Fishing Loan Council. He is a graduate of the University of Delaware, with a Bachelor’s of Science Degree in Financial Management, and he earned an MBA from Monmouth University.
Mr. Robbins is the Chairman and Chief Executive Officer of FHLBNY member Valley National Bank (NASDAQ: VLY). He joined Valley in 1996 as part of the Bank’s Management Associate Program and has grown along with the company in a number of leadership positions before being appointed to Chairman and CEO in 2018. As CEO, he has led Valley into the future while keeping true to the company’s roots as a local bank. Ira’s vision for success is building a purpose-driven organization which includes embracing innovation, being customer-centric, promoting social responsibility, and empowering Valley’s associates. Ira earned his bachelor’s degree from Susquehanna University, his MBA from Pace University and is a graduate of Stonier Graduate School of Banking. He is a Certified Public Accountant in New Jersey and a member of both the New Jersey Society of Certified Public Accountants and the American Institute of Public Accountants. He serves on the board of the Jewish Vocational Service of MetroWest NJ (JVS), is on the Morris Habitat for Humanity Leadership Council and takes great pride in community outreach as an active supporter of several other philanthropic organizations in his community. Ira also serves on the boards of the New Jersey Bankers Association and the New York Bankers Association.
Mr. Romaine, effective January 1, 2022, serves as Chief Executive Officer and a director of FHLBNY member Tompkins Community Bank (“TCB”) (formerly Tompkins Trust Company); he formerly served as Chairman of TCB from May 2014 through December 2021. He has also served as a Director, President and Chief Executive Officer of TCB’s holding company, Tompkins Financial Corporation, since January 1, 2007. Mr. Romaine also served as a director on the boards of former FHLBNY members Tompkins Mahopac Bank from January 2003 and Tompkins Bank of Castile from January 2007 until these entities merged into TCB effective January 1, 2022. Mr. Romaine currently serves on the Board of the New York Bankers Association, and served as its Chairman from March 2016 through March 2017. His civic involvement includes recent service as a member of the Board of Directors of the Legacy Foundation of Tompkins County.
Dr. Soaries is the President and CEO of Corporate Community Connections, Inc., a company that assists corporations expand and improve their Corporate Social Responsibility efforts. He served as the Senior Pastor of First Baptist Church of Lincoln Gardens (“FBCLG”) in Somerset, New Jersey from November 1990 to July 2021. His pastoral ministry focused on spiritual growth, educational excellence, economic empowerment, and faith-based community development. As a pioneer of faith-based community development, Dr. Soaries’ impact on FBCLG and the community was tremendous. In 1992, he founded the Central Jersey Community Development Corporation (“CJCDC”), a 501(c)(3) non-profit organization that specializes in helping vulnerable neighborhoods. In 1996, the CJCDC launched Harvest of Hope Family Services Network, Inc. This organization developed permanent solutions for hundreds of foster children and parents. From 1999 to 2002, Dr. Soaries served as New Jersey’s Secretary of State, making him the first African-American male to serve in that office. He also served as the former chairperson of the United States Election Assistance Commission, which was established by Congress to implement the “Help America Vote Act” of 2002. In 2005, Dr. Soaries launched the dfree® Financial Freedom Movement. The dfree® strategy teaches people how to become financially self-sufficient. In 2011, Dr. Soaries wrote his first book: “dfree®: Breaking Free from Financial Slavery” (Zondervan), which offers a 12-step curriculum for financial wellness. Dr. Soaries currently serves as an Independent Director at Independence Realty Trust and Ocwen Financial Corporation. In July 2020, he became a Director of Uncommon Giving, a company formed to help increase charitable giving by connecting people and nonprofits. Dr. Soaries earned a Bachelor of Arts Degree from Fordham University, a Master of Divinity Degree from Princeton Theological Seminary, and a Doctor of Ministry Degree from United Theological Seminary. Dr. Soaries resides in Monmouth Junction, New Jersey with his wife, Donna, and twin sons. Dr. Soaries’ project development experience, as indicated by his background described above, supported his qualifications to serve on our Board as an Independent Director and a public interest director. Dr. Soaries left the FHLBNY’s Board at the end of 2023.
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Ms. Thomas was Executive Vice President, Chief Diversity and Inclusion Officer at CBS Corporation (later CBS) beginning in 2014 through February 2020 and served on CBS’s senior leadership team for more than 20 years. She was also an advisor to senior management at ViacomCBS Inc. prior to her retirement in August 2020. As the architect of CBS’s enterprise diversity function, Ms. Thomas identified new markets to expand brand outreach, loyalty and viewership with new revenue opportunities. She also developed innovative programs, from the CBS Diversity Institute to internal and external outreach, as well as a cost-effective supplier diversity initiative and engagement with CBS’s Government Affairs office. Ms. Thomas managed budgets across functions and worked closely with business units with a focus on efficiencies across the enterprise. As a member of the CBS Executive Sustainability Council, Ms. Thomas reviewed business unit operations to formalize processes, data collection and analytics for ESG opportunities. Previously, Ms. Thomas served as head of Business Affairs for CBS News where, as an attorney, she was the principal negotiator of content expansion and talent contracts. Ms. Thomas also transformed the CBS News archives into a profit center. Ms. Thomas is a graduate of Harvard University with honors and received a J.D. degree from the University of California, Berkeley, School of Law. Ms. Thomas has been a member of the New York State Bar since 1984 and began her legal career specializing in litigation and intellectual property law before joining CBS as Broadcast Counsel in 1986. Her leadership at nonprofit organizations is wide ranging and included positions as Treasurer and National Board Executive Committee member of the Alliance for Women in Media, with audit, risk assessment and governance responsibilities, where she currently serves on its Foundation board ending in 2024. She was Chair of the Grants, Education and Policy Committee of Komen NYC Race for the Cure and Chair of the NAACP Spingarn Award committee in 2010 and again in 2018. She was also Board Chair of the Institute for Advanced Journalism Studies at North Carolina A&T, and served on the Board of Visitors of Howard University’s School of Communications from 2005 to 2022. Ms. Thomas has received numerous awards and honors including the Congressionally recognized Ellis Island Medal of Honor, a 20th Anniversary Multichannel News “Wonder Woman” Award, and recognized by the Financial Times in its 2021 Agenda Diversity 100 as well as multiple recognitions by Black Enterprise magazine. She was also inducted into the Disability Mentoring Hall of Fame. Ms. Thomas’ legal and regulatory and organizational management experience, and her experience with diversity, supports her qualifications to serve on our Board as an Independent Director.
Mr. Tomson has been President and Chief Executive Officer of FHLBNY member Chemung Canal Trust Company (CCTC) and its holding company Chemung Financial Corporation (CFC) since December, 2016. From July 2015 to December 2016, Anders held the title of President and Chief Operating Officer of the bank. From 2010 to November 2016, he also served in the role of President of Capital Bank, and was instrumental in facilitating the 2011 merger and integration of Capital Bank by CCTC and its market penetration into the Capital Region of the State. Anders leads the CCTC Executive Management Team and is a Director on the boards of CCTC and Chemung Financial Corporation, the bank’s parent holding company. CCTC, headquartered in Elmira, is New York State’s oldest locally-owned and managed community bank. Founded in 1833, CCTC is a full-service financial institution, with over 330 employees working from 31 offices in 14 New York counties and Bradford County, PA. At December 31, 2022, the bank reported $2.6 billion in assets. CCTC also provides a full-service Wealth Management division, which at December 31, 2022, included $2.1 billion in assets under management or administration. CCTC is the wholly owned subsidiary of Chemung Financial Corporation, a publicly traded corporation (Nasdaq: CHMG). CFC is also the parent of both CFS Group, Inc., a financial services subsidiary offering non-traditional services including mutual funds, annuities, brokerage services, tax preparation services and insurance, and CCTC Funding Corp., a real estate investment trust, where Mr. Tomson also holds seats as President and CEO. Chemung Risk Management, Inc., a captive insurance company based in the State of Nevada, also falls under the CFC umbrella. Prior to joining CCTC and Capital Bank, Anders was the Division Executive for commercial real estate in New York State for RBS Citizens Bank. Anders began his commercial real estate lending career for the Community Preservation Corporation (CPC) where he last served as Senior Vice President and Regional Director. A certified Community Development Financial Institution (CDFI), CPC is a New York City based not-for profit affordable housing and community revitalization finance company. CPC delivers mortgage capital, invests equity and provides technical assistance for the development and preservation of low-, moderate- and middle-income housing primarily in New York State, New Jersey, and Connecticut, but also throughout the country utilizing its Mortgage Company platform. Throughout his career, Anders has been very involved in healthcare, economic and community development initiatives throughout New York State. Currently, Anders is involved in board or advisory capacities with Southern Tier Economic Growth, Independent Bankers Association of New York State, New York Bankers Association, Arnot Ogden Medical Center, Capitalize Albany Corporation, Community Preservation Corporation, Albany Medical Center, the Albany Medical Center Foundation, and the Corning Community College President’s Advisory Council. Anders graduated from Cornell University with a Bachelor of Arts in 1989.
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Mr. Vázquez has since April 2004 served as Senior Executive Vice President of Banco Popular de Puerto Rico (BPPR), Puerto Rico’s largest bank and a member of the FHLBNY. He served as director of BPPR from October 2011 to July 2021. From September 2010 until September 2014, he was President of Popular Bank (PB), a New-York chartered bank and member of the FHLBNY; since October 2010 he has served as a director of PB. In 2013, Mr. Vázquez was named Executive Vice President and Chief Financial Officer of Popular, Inc., the bank holding company of BPPR and PB. Popular, Inc. is a NASDAQ listed and SEC registered company (ticker: BPOP) which is presently the 40st largest financial holding company in the United States with assets approximately $70 billion and is principally supervised by the Federal Reserve Bank of NY. Mr. Vázquez is a member of Popular, Inc.’s Senior Management Team, heads Popular’s Asset & Liability Management Committee and serves as a member of Popular’s Credit Strategy Committee. He is also a member of the board of directors of certain subsidiaries of Popular, Inc., including Popular Securities Inc. and Popular Auto LLC, and is Vice Chairman of the Banco Popular Foundation. Mr. Vázquez joined Popular, Inc. as Executive Vice President in March 1997 to establish and head Popular’s Risk Management Group, which included the Credit Risk Management, Audit, Corporate Compliance, Operational Risk Management, and the Risk Management MIS Divisions. From 2004 through 2010 he headed Popular, Inc.’s Consumer Lending Group for Puerto Rico, responsible for personal loans, credit cards, overdraft lines-of-credit, the mortgage origination and servicing business via Popular Mortgage; as well as the auto, marine and equipment financing business via Popular Auto. Before joining Popular, Inc., Mr. Vázquez spent fifteen years in a variety of corporate finance, capital markets and banking positions with JP Morgan & Co. Inc. In the two years prior to his joining Popular, Inc., he was Senior Banker and Region Manager for JP Morgan’s business in Colombia, Venezuela, Central America and the Caribbean. Mr. Vázquez also serves on the national Advisory Board of Directors of Operation Hope, a national non-for-profit focusing on financial literacy. Finally, he is a member of the Advisory Committee to the Dean of the School of Engineering at his alma matter, the Rensselaer Polytechnic Institute. Previously, Mr. Vázquez served as a member of the board of directors for the Puerto Rico Community Foundation, the largest community foundation in the Caribbean; where he headed the Audit and Investment Committees. He was a director of Teatro de la Opera, a non-for-profit entity dedicated to the promotion of opera. He also contributed to various educational institutions in Puerto Rico, serving as a member of the board of trustees of the Saint John’s School and a member of the Development Committee for Colegio San Ignacio de Loyola. Mr. Vázquez holds a Bachelor of Science in Civil Engineering, with an economics minor, from the Rensselaer Polytechnic Institute, Troy, New York; from which he graduated on the Dean’s List and as a member and officer of Chi Epsilon, the National Civil Engineering Honor Society. He also holds a Masters in Business Administration from Harvard University’s Graduate School of Business, Boston, Massachusetts.
Ms. Weyne was the Commissioner of lnsurance for the Commonwealth of Puerto Rico from January 2013 through December 2016, appointed by former Governor Alejandro Garcia Padilla. While Commissioner, Ms. Weyne served as Vice President of the board of the Puerto Rico State Insurance Fund Corporation and of the Puerto Rico Health Insurance Administration, and she presided over the board of the Puerto Rico Automobile Accident Compensation Administration. She was also a member of various committees of the National Association of Insurance Commissioners and also a member of the Association of Latin American Insurance Superintendents Association. Ms. Weyne’s accomplishments during her over 50 years of experience in the insurance sector, which started as an actuary in the Office of the Commissioner of Insurance, have included presiding a premium finance company, a claims adjusting firm, a managing general agent of which she later became owner, and presidencies of both life and disability and property and casualty companies and the presidency of the largest bank owned insurance agency in Puerto Rico. She was also president of the first reinsurance company incorporated in Puerto Rico and served as president of two health maintenance organizations. Ms. Weyne received her bachelor’s degree in mathematics from the University of Puerto Rico, where she also taught mathematics. Among the entities where she has served as a board member are the Puerto Rico Chamber of Commerce, the Puerto Rico Association of Insurance Companies, the Universidad Central del Caribe, the Trust of the Supreme Court of Puerto Rico, the Puerto Rico Chapter of the World Presidents Organization as well as the Tourism Scholarship Foundation and the School of Architecture of the University of Puerto Rico, and the MMM Foundation, where she served as the Board Chair in 2022). She has also received numerous awards and recognitions such as the Top Management Award from the Sales and Marketing Association of Puerto Rico, Outstanding Woman in Business Award from the Puerto Rico Chamber of Commerce, Outstanding Woman Award from the Girl Scouts of America, and Successful Woman of the Year Award from El Nuevo Dia Newspaper. She was also named National Judge for the Ernst & Young Entrepreneur of the Year Award program. Presently, Ms. Weyne is a consultant and serves as a member of the advisory board of Rafael J. Nido, Inc. Ms. Weyne’s many skills, including in particular, her organizational and financial management experience, as indicated by her background described above, support her qualifications to serve on our Board as an Independent Director.
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Information about our Executive Officers
The following sets forth the executive officers of the FHLBNY who, unless otherwise specifically noted in the below footnotes, served during the period from January 1, 2023 through the date of this annual report on Form 10-K. We have determined that our executive officers are those officers who are members of our internal Management Committee. All officers are “at will” employees and do not serve for a fixed term.
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| Management | |
Age as of | Employee of | Committee | ||||||
Executive Officer | Position held as of 3/21/24 | 3/21/2024 | Bank Since | Member Since | ||||
José R. González |
| President & Chief Executive Officer |
| 69 |
| 10/15/13 |
| 10/15/13 |
Stephen C. Angelo |
| Senior Vice President, Chief Audit Officer |
| 56 |
| 09/22/08 |
| 07/12/16 |
Edwin Artuz |
| Senior Vice President, Chief Administrative Officer and Director of Diversity and Inclusion |
| 62 |
| 03/01/89 |
| 01/01/13 |
Melody J. Feinberg* | Senior Vice President, Chief Risk Officer | 61 | 10/17/11 | 01/01/15 | ||||
Vikram S. Dongre | Senior Vice President, Chief Capital Markets Officer | 48 | 02/22/16 | 07/15/23 | ||||
Adam S. Goldstein |
| Senior Vice President, Chief Business Officer |
| 50 |
| 07/14/97 |
| 03/20/08 |
Kevin M. Neylan |
| Senior Vice President, Chief Financial Officer |
| 66 |
| 04/30/01 |
| 03/31/04 |
Shatayu P. Pandya |
| First Vice President, Acting Chief Risk Officer |
| 48 |
| 02/27/17 |
| 12/15/23 |
Michael L. Radziemski | Senior Vice President, Chief Information Officer | 62 | 07/15/19 | 01/01/20 | ||||
Philip A. Scott** |
| Senior Vice President, Chief Capital Markets Officer |
| 65 |
| 08/28/06 |
| 09/03/14 |
Michael A. Volpe*** |
| Senior Vice President, Head of Bank Operations |
| 56 |
| 12/22/86 |
| 10/01/19 |
Jonathan R. West |
| Senior Vice President, Chief Legal Officer |
| 67 |
| 05/01/15 |
| 05/01/15 |
*Left employment 12/15/23.
**Retired from position 7/15/23.
***Left employment 7/25/98; rehired 10/23/06.
Mr. González was appointed President and Chief Executive Officer of the Federal Home Loan Bank of New York on April 2, 2014. Mr. González joined the FHLBNY on October 15, 2013, as Executive Vice President and Chief Operating Officer. Mr. González served as Vice Chairman of the Board of Directors of the FHLBNY from 2008 through 2013, and as an elected industry director from 2004 through 2013. Prior to joining the FHLBNY, he served as Senior Executive Vice President, Banking & Corporate Development for OFG Bancorp (formerly Oriental Financial Group, Inc.). Mr. González has also been a member of the Board of Directors of the Pentegra Defined Benefit Plan for Financial Institutions since July of 2014. He has also been a member of the Board of Directors of the Office of Finance of the Federal Home Loan Banks since April of 2014 and Vice Chair since May of 2021. Mr. González has also been a member of the Resolution Funding Corporation Directorate since September of 2022. From August of 2016 to August of 2020, Mr. González served as a member of the Oversight Board created by the Puerto Rico Oversight, Management, and Economic Stability Act (“PROMESA”) of 2016. Mr. González was a member of the Board of Directors of Santander BanCorp (“Santander”), a bank holding company, from 2000 to 2010. From 2002 to 2008, he was Vice Chairman of the Board, President and CEO of Santander. After joining Santander in 1996 as President and CEO of its securities broker dealer, Mr. González was named Senior Executive Vice President and Chief Financial Officer of the holding company in 2001. Mr. González began his career in banking in the early 1980s as Vice President, Investment Banking, for Credit Suisse First Boston (“CSFB”) and, from 1989 through 1995, served as President and CEO of CSFB’s Puerto Rico operations. He served as President and CEO of the Government Development Bank for Puerto Rico, a government instrumentality that acts as the Commonwealth’s fiscal agent, from 1986 to 1989. He is a past President of both the Puerto Rico Bankers Association and the Securities Industry Association of Puerto Rico. Mr. González holds a B.A. in Economics from Yale University and M.B.A. and Juris Doctor degrees from Harvard University.
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Mr. Angelo joined the Bank as Chief Audit Officer in September 2008. In this role, he manages the activities of the Internal Audit Department, which provides independent, objective assurance and consulting services designed to add value and improve the Bank’s operations. He is also responsible for providing support to the Audit Committee of the Bank’s Board of Directors, in connection with matters related to internal controls. Mr. Angelo was appointed as a non-voting member to the Management Committee in July 2016. Mr. Angelo holds an M.B.A. in Finance and a B.S. in Accounting, both from New York University’s Stern School of Business. He is a Certified Public Accountant (“CPA”) and is a member of the American Institute of CPAs and the New York State Society of CPAs as well as the Institute of Internal Auditors. Mr. Angelo began his career as an associate auditor with Coopers & Lybrand, and then held positions of increasing responsibilities in internal audit roles at Bankers Trust Company and Bear, Stearns & Co.
Mr. Artuz has served as Chief Administrative Officer and Director of Diversity & Inclusion since January 1, 2022. Mr. Artuz previously served as the Head of Corporate Services and Director of Diversity & Inclusion beginning on July 1, 2014. Mr. Artuz directs the management of the Bank’s Office of Minority and Women Inclusion to ensure that regulatory requirements are met and exceeded. Mr. Artuz also provides overall leadership, strategic direction, and oversight for all of the Bank’s human resources activities and operations. These activities and operations include the areas of employment, compensation, benefits, employee relations, employee and organizational training and development, performance management, succession planning, employee communications, and external and internal Human Resources information systems services. Mr. Artuz has the significant responsibility of providing support to the Compensation & Human Resources Committee of the Bank’s Board of Directors in connection with matters related to executive compensation and benefits and succession planning. Mr. Artuz also provides strategic direction and leadership to the organization’s Corporate Real Estate departments to ensure efficient and effective management of the firm’s physical resources. Mr. Artuz holds a graduate degree from New York University in Human Resources Management and an undergraduate degree in History from the College of Staten Island. Prior to joining the Bank in 1989, Mr. Artuz held positions at Skadden, Arps, Slate, Meagher & Flom; Dillon, Read & Co.; and the Dime Savings Bank of New York.
Mr. Dongre assumed the role of Chief Capital Markets Officer (CCMO) in July 2023. In this capacity, he oversees the comprehensive management of the Bank’s balance sheet, encompassing the investments portfolio, advances position, liquidity, and debt issuance. A voting member in various internal committees, Mr. Dongre also contributed significantly to the Bank’s strategic Technology Transformation Management Team between 2018 and 2021, focusing on optimizing enterprise IT service capabilities. Mr. Dongre joined the Bank’s Capital Markets division as VP/Director, Trading in February 2016 from RBS (Natwest) Singapore, where he led the South Asian FX trading desk. He was promoted to First VP/ Director, Trading in January 2019. That title was later expanded to First VP/Director, Trading and Strategy in January 2020, a role he held prior to his appointment as CCMO. His prior roles spanned diverse responsibilities in trading, portfolio management, and leadership, with a specific focus on Interest Rates, MBS, and Agency Debentures at Napier Park Global Capital, Countrywide Securities, and HSBC Bank USA. Notably, he commenced his career in the Information Technology sector as a software engineer and architect. Mr. Dongre holds a Bachelor’s Degree in Electrical Engineering from Visvesvaraya National Institute of Technology, India, and an MBA in Finance from the Stern School of Business, NYU.
Ms. Feinberg served as Senior Vice President and Chief Risk Officer from March 1, 2017 until she left the Bank on December 15, 2023. In that role, Ms. Feinberg oversaw the Bank’s Enterprise-wide Risk Management practice and serves as the Bank’s Compliance Officer. This role encompassed Financial Risk Management and Credit Risk Analytics; Credit and Collateral Risk; Model Risk; Operational Risk; Technology Risk, including cybersecurity risk; Climate Risk; and Compliance. She was a member of the Bank’s Management Committee and served on many of the FHLBNY’s internal committees, including chairing the Enterprise Risk Committee. She also served as the primary contact for the Bank’s regulator, the Federal Housing Financing Agency. Ms. Feinberg joined the Bank in October 2011 as the Director of Finance. In that capacity, she was responsible for all aspects of the Bank’s finance functions, including business initiatives, funding and investment decisions, capital planning, and tax and regulatory issues. Ms. Feinberg began her career as a CPA with Ernst & Young, and then held positions of increasing responsibilities in accounting and finance roles at three investment banks, namely, JP Morgan Chase, HSBC and Goldman Sachs over the course of 18 years. She earned an M.B.A. in Finance from Drexel University and a B.S. in Accounting from The College of New Jersey, both Magna Cum Laude.
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Mr. Goldstein was named Chief Business Officer in December of 2015. In this role, he leads the Sales, Marketing, Membership and Research activities for all business lines. In addition, he manages the FHLBNY’s Mortgage Asset Programs and Member Service Desk. Mr. Goldstein previously served as the Head of Sales, Business Development and Marketing. Mr. Goldstein joined us in June 1997 and has held a number of key positions in other areas. He has been a member of the FHLBNY’s Management Committee since 2008. He serves on many of the FHLB System Committees and is the Chairman of the GSIB Task Force and the In-District Regulatory Outreach Task Force. He also serves on many of the FHLBNY’s internal Committees and created the Products, Services and Membership Committee and created the FHLBNY’s Leadership Framework. He is a co-sponsor leading the FHLBNY’s Strategic Planning process, where he assists with the development and execution of the strategic plan and new initiatives. He speaks at a variety of trade conventions and conferences, engages bond investors and provides training for regulatory agencies as the Bank’s member regulatory and trade organization leader. Mr. Goldstein is a member of the American FinTech Council and a member of their Community Advisory Board. In addition to an undergraduate degree from the State University of New York at Oneonta and an M.B.A. in Financial Marketing from SUNY Binghamton University, Mr. Goldstein has received post-graduate program certifications in Management Excellence from the Harvard University School of Business, in Business Excellence from Columbia University, in Management Development from Cornell University, in Management Practices from New York University and in Finance from The New York Institute of Finance. He is also a trustee on the Board of the Kennedy Child Study Center and Chairman of their Finance Committee and former Chairman of their Audit Committee.
Mr. Neylan became Chief Financial Officer on March 30, 2012. Mr. Neylan is responsible for overseeing the Bank’s Accounting, Management Reporting and Strategic Planning functions. He has held several positions with strategic planning, finance and administrative responsibilities since joining us in April 2001. Immediately prior to becoming the CFO, Mr. Neylan was the Head of Strategy and Finance, and served as the Head of Strategy and Business Development from January 2009 through December 2011. Mr. Neylan had approximately twenty years of experience in the financial services industry prior to joining the Bank, and was previously a partner in the financial services consulting group of one of the Big Four accounting firms. He holds a M.S. in corporate strategy from the MIT Sloan School of Management and a B.S. in management from St. John’s University (NY).
Mr. Pandya formally assumed the role of Acting Chief Risk Officer in December of 2023. In this capacity, he oversees Bank-wide management of Financial, Credit, Collateral, Model, Operational, Compliance, Technology, and Climate Risk. Mr. Pandya joined the Bank in February 2017 as VP/Director of Financial Risk Management and was promoted to First VP/Director of Financial Risk Management and Credit Risk Analytics in January of 2020, overseeing interest, liquidity, asset/liability, investment portfolio risk management earnings simulations, capital and risk budgeting, limit structure, governance, and credit modelling of FHLBNY’s mortgage program, membership, and counterparty risk exposures. Before joining the Bank, he had over 20 years of experience in prior roles at Barclays, Deutsche Bank, JP Morgan and Citibank covering trading floor market/credit risks and governance of G10 and emerging markets across complex rate, credit and structured products as well as corporate treasury capital/liquidity management. Mr. Pandya holds a BS with a double major in Finance and Information Systems from NYU’s Stern School of Business and a CFA Charter.
Mr. Radziemski was named Senior Vice President and Chief Information Officer on January 1, 2020. In this role, he directs and oversees several functions including Information Technology, Information Security, Business Continuity Planning, Vendor Management, and Records Management. Mr. Radziemski joined the FHLBNY in July 2019 as Deputy Chief Information Officer. Prior to joining the FHLBNY, he spent over 30 years working in information technology in the financial services industry, including senior technology leadership roles at Bankers Trust, MetLife, CitiGroup, and Lord, Abbett & Co., LLC (Lord Abbett). His last full-time role before joining the FHLBNY was as Chief Information Officer at Lord Abbett, from March 2003 until July 2016. After Lord Abbett, he did management consulting work as a Partner for Fortium Partners from July of 2017 until joining the FHLBNY. He received a B.Sc. in Operations Research and Industrial Engineering from Cornell University, and a M.S. in Industrial Engineering from Stanford University.
Mr. Scott was named Chief Capital Markets Officer (“CCMO”) in September 2014, after serving as Director of Trading in the Capital Markets department. As CCMO, he was responsible for all facets of balance sheet management including the Bank’s investments portfolio, advances position, liquidity and debt issuance. He also served as the FHLBank representative to the Federal Reserve-sponsored committee on Libor replacement, the Alternative Reference Rates Committee, also known as “ARRC”, since 2017. Mr. Scott joined the Bank’s Capital Markets department in August of 2006, following 23 years of experience in the markets and on Wall Street where he was a trader and desk manager for interest rate products at Citibank, Deutsche Bank, and Credit Lyonnais. He received a Bachelor’s Degree in Economics from Tufts University and holds a Master’s degree in Finance and Economics from the Kellogg School of Management at Northwestern University. Mr. Scott retired from the Bank on June 30, 2023.
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Mr. Volpe was named Senior Vice President and Chief Bank Operations Officer in April 2022. In this role, he directs and oversees several functions, including Community Investment, and Bank Operations comprised of Credit and Collateral Operations, Correspondent Services, Custody and Pledging Services, Business Process and Project Support, and Electronic Payments. Additionally, he served as Interim Community Investment Officer effective December 1, 2022 through and until December 31, 2023. Mr. Volpe previously served as Senior Vice President and Head of Bank Operations from October 2019 through March 2022. Prior to that, he served as First Vice President and Director of Bank Operations from January 2019 through September 2019 and was named Vice President beginning in October 2006, holding several functional titles during that time, including Director of Bank Operations (December 2018); Director of Member Services Operations (April 2015 – November 2018); Director of Collateral and Correspondent Services (February 2012 – April 2015); and Director of Collateral Operations (October 2006 – January 2012). He joined the FHLBNY in December 1986 and later took an eight year hiatus, from 1998 to 2006, where he held various positions at The Bank of New York. He received a B.S. in Finance and M.B.A. in International Finance from St. John’s University (NY), and is also a graduate of the ABA Stonier Graduate School of Banking.
Mr. West assumed the role of Senior Vice President, Chief Legal Officer for the Bank on May 1, 2015. Mr. West left the Federal Home Loan Bank of Indianapolis (FHLBI) on December 31, 2014 having served as its Executive Vice President - Chief Operating Officer - Business Operations since July 30, 2010. He was appointed by the FHLBI’s Board to serve as Acting Co-President - CEO from April through July 2013. From 1994 to 2010, Mr. West served as Senior Vice President - Administration, General Counsel, Corporate Secretary & Ethics Officer, having started with the FHLBI in July 1985 as Associate Legal Counsel. From 1983 to 1985, Mr. West was an Associate with the Indianapolis, Indiana law firm of White & Raub and practiced in the areas of insurance and corporate law. Mr. West is a Phi Beta Kappa, B.A. with Distinction graduate in political science and psychology from Indiana University’s College of Arts and Sciences, and earned an M.B.A from Indiana University Kelley School of Business and a J.D. from Indiana University School of Law - Indianapolis. Mr. West is licensed to practice law in the state of Indiana and is registered to serve as In-House Counsel in the state of New York. Mr. West serves on the New York Insurance Association’s Legal Committee.
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Section 16 (a) Beneficial Ownership Reporting Compliance
In accordance with correspondence from the Office of Chief Counsel of the Division of Corporation Finance of the U.S. Securities and Exchange Commission dated August 26, 2005, Directors, officers and 10% stockholders of the Bank are exempted from Section 16 of the Securities Exchange Act of 1934 with respect to transactions in or ownership of Bank capital stock.
Audit Committee
The Audit Committee of our Board of Directors is primarily responsible for overseeing the services performed by our independent registered public accounting firm and internal audit department, evaluating our accounting policies and its system of internal controls and reviewing significant financial transactions. For the period from January 1, 2023 through the date of the filing of this annual report on Form 10-K, the members of the Audit Committee included: David R. Huber (Chair), Thomas J. Kemly (Vice Chair), Melba I. Acosta, Robert M. Fisher, Thomas L. Hoy, Charles E. Kilbourne III, Christopher P. Martin, Gerald L. Reeves, Larry E. Thompson, and Anders M. Tomson.
Audit Committee Financial Expert
Our Board of Directors has determined that David R. Huber of the FHLBNY’s Audit Committee qualifies as an “audit committee financial expert” under Item 407 (d) of Regulation S-K.
Code of Ethics
It is the duty of the Board of Directors to oversee the Chief Executive Officer and other senior management in the competent and ethical operation of the FHLBNY on a day-to-day basis and to assure that the long-term interests of the shareholders are being served. To satisfy this duty, the directors take a proactive, focused approach to their position, and set standards to ensure that we are committed to business success through maintenance of the highest standards of responsibility and ethics. In this regard, the Board has adopted a Code of Business Conduct and Ethics (Code) that applies to all employees as well as the Board. The Code is posted on the Corporate Governance Section of the FHLBNY’s website at https://www.fhlbny.com. We intend to disclose changes to or waivers from the Code by filing a Form 8-K and/or by posting such information on our website.
Insider Trading
The Bank is a cooperative, owned by its member institutions. Membership in the Bank is limited to federally insured depository institutions and credit unions, insurance companies engaged in residential housing finance and certified CDFIs approved for membership by the Bank. Our members must purchase (or hold) FHLBNY stock as a condition of membership. Stock ownership requirements are based on statutory requirements reflected into the Bank’s capital plan, which must be approved by its Board of Directors and the Finance Agency. Because we operate as a cooperative, we consider all members and non-member stockholders to be related parties.
By law, the Bank’s capital stock cannot be held by individuals, including officers, directors or employees of the Bank. In addition, under its capital plan, the Bank’s capital stock may be issued, transferred, redeemed, and repurchased only at its par value of $100 per share, subject to certain regulatory and statutory limits.
The Bank’s structure and regulatory posture ensure that its directors, officers and employees are not able to own or trade in the Bank’s capital stock, and the Bank itself is permitted to issue or repurchase such stock only to or from its members in defined and limited circumstances. Therefore, the Bank has determined that it is not necessary, or even possible, to adopt insider trading policies and procedures governing the purchase, sale and/or other dispositions of its stock by it or its officers, directors or employees in order to promote compliance with insider trading laws, rules and regulations.
The Bank’s aforementioned Code of Business Conduct and Ethics, which applies to all directors, officers and employees of the Bank, contains provisions designed to protect the confidentiality, and prevent improper use, of confidential, nonpublic information regarding members and members’ customers, as well as confidential, nonpublic information regarding the Bank itself. The Code prohibits, among other things, directors of the Bank who are affiliated with a member of the Bank, from sharing any confidential information about the Bank or about other members with such member.
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ITEM 11.EXECUTIVE COMPENSATION.
Compensation Discussion and Analysis
I. | Introduction |
This section describes and analyzes the Bank’s 2023 compensation program for our “named executive officers” (“NEOs”). Our NEOs include our chief executive officer, chief financial officer and our other most highly compensated executive officers who were serving as executive officers on December 31, 2023. The Bank’s named executive officers during 2023 are identified as: 1) José R. González (President and Chief Executive Officer); 2) Kevin M. Neylan (Senior Vice President and Chief Financial Officer); 3) Edwin Artuz (Senior Vice President and Chief Administrative Officer and Director of Diversity & Inclusion); 4) Adam S. Goldstein (Senior Vice President and Chief Business Officer); 5) Michael L Radziemski (Senior Vice President and Chief Information Officer); and 6) Melody Feinberg (Former Senior Vice President and Chief Risk Officer).
a)Compensation & Human Resources Committee Oversight of Compensation
The Bank’s compensation philosophy and objectives are to attract, motivate, and retain high caliber of diverse financial services executives capable of achieving strategic business initiatives, enhancing business performance and increasing shareholder value. In this regard, it is the role of the Compensation & Human Resources Committee (“C&HR Committee”) of the Board of Directors (“Board”) to:
1. | Review and recommend to the Board changes regarding our compensation and benefits programs for employees and retirees; |
2. | Review and approve individual performance ratings and related merit increases for our Chief Executive Officer and for the other Management Committee members (which Committee includes all the NEOs) of the Bank; |
3. | Review salary adjustments and benefits for our Chief Executive Officer and for the other Management Committee members; |
4. | Review and approve annually the Bank’s Incentive Compensation Plan (“Incentive Plan”), year-end Incentive Plan results and Incentive Plan award payouts for Management Committee members; |
5. | Advise the Board on compensation, benefits and human resources matters affecting Bank employees; |
6. | Review and discuss with Bank management the Compensation Discussion and Analysis (“CD&A”) to be included in our Form 10-K and determine whether to recommend to the Board that the CD&A be included in the Form 10-K; and |
7. | Review and monitor compensation arrangements for our executives so that we continue to retain, attract, motivate and align quality management consistent with the investment rationale and performance objectives contained in our annual business plan and budget, subject to the direction of the Board. |
The Board has delegated to the C&HR Committee the authority to approve fees and other retention terms for: i) any compensation and benefits consultant to be used to assist in the evaluation of the Chief Executive Officer’s compensation; and ii) any other advisors that it shall deem necessary to assist in fulfilling its duties. The Charter of the C&HR Committee is available in the Corporate Governance section of our web site located at www.fhlbny.com.
The role of Bank management (including Executive Officers) with respect to compensation is limited to administering Board-approved programs and providing proposals for the consideration of the C&HR Committee. No member of management serves on the Board or any Board committee.
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Regulatory Oversight of Executive Compensation
The Federal Housing Finance Agency (“Finance Agency”) has oversight authority over FHLBank executive officer compensation. Section 1113 of the Housing and Economic Recovery Act of 2008 requires that the Director of the Finance Agency prohibit a FHLBank from paying compensation to its executive officers that is not reasonable and comparable to that paid for employment in similar businesses involving similar duties and responsibilities. Pursuant to the foregoing, the Finance Agency requires the FHLBanks to provide information to the Finance Agency for review and non-objection concerning all compensation actions relating to the respective FHLBanks’ executive officers. This information, including studies of comparable compensation, must be provided to the Finance Agency at least 30 days in advance of any planned FHLBank action with respect to the payment of compensation to executive officers. In addition, the FHLBanks are required to provide at least 60 days’ advance notice to the Finance Agency of any arrangement that provides for incentive awards to executive officers. Under the supervision of our Board of Directors, we provide this information to the Finance Agency as required.
In addition to these rules, the Finance Agency previously issued Advisory Bulletin 2009-AB-02 regarding principles for FHLBank executive compensation as to which the FHLBanks and the Office of Finance are expected to adhere in setting executive compensation policies and practices. These principles consist of the following:
| ● | Executive compensation must be reasonable and comparable to that offered to executives in similar positions at other comparable financial institutions; |
| ● | Executive incentive compensation should be consistent with sound risk management and preservation of the par value of the FHLBank’s capital stock; |
| ● | A significant percentage of an executive’s incentive-based compensation should be tied to longer-term performance and outcome indicators; |
| ● | A significant percentage of an executive’s incentive-based compensation should be deferred and made contingent upon performance over several years; and |
| ● | The FHLBank’s Board of Directors should promote accountability and transparency in the process of setting compensation. |
In evaluating a FHLBank’s compensation, the FHFA Director will consider the extent to which an executive’s compensation is consistent with these advisory bulletin principles. Our Board is of the view that the Bank has incorporated these principles into the development, implementation, and review of compensation policies and practices for executive officers as described below, including appropriately considering the Bank’s competitive compensation requirements within its region in accordance with advice from the Bank’s compensation consultants. However, in light of the Finance Agency’s authority, the Bank’s compensation practices and policies described in this Item 11 are, regardless of the Board’s view, ultimately subject to adjustment as a result of regulatory guidance and directives.
We are prohibited by regulations from offering equity-based compensation. Our total compensation program takes into account the existence of these other types of compensation by offering a defined benefit and defined contribution plan to help effectively compete for and retain talent.
The Bank is exempt from SEC proxy rules and as such does not provide shareholder advisory “say on pay” votes regarding executive compensation. However, sixty percent of the Board is comprised of Member Directors, elected by these shareholders to represent their interests.
b)About the Bank’s Mission
The mission of the Bank is to provide members with reliable liquidity in support of housing and local community development. We meet our mission by providing our members with access to economical wholesale credit and technical assistance through our credit products, mortgage finance programs, housing and community lending programs and correspondent services to increase the availability of home financing to families of all income levels.
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We operate in a very competitive market for talent. Without the capability to attract, motivate and retain talented diverse employees, the ability to fulfill our mission would be in jeopardy. All employees, and particularly senior and middle management, are frequently required to perform multiple tasks requiring a variety of skills. Our employees not only have the appropriate talent and experience to execute our mission, but they also possess skill sets that are difficult to find in the marketplace.
c)Our Compensation Policy
The Board-approved Compensation Policy acknowledges and takes into account our compensation philosophy, business environment and factors to remain competitive in the labor market. In September 2018, the Board approved an updated Compensation Policy as a result of the 2018 Total Rewards Study discussed in Section II below, which was in effect for all compensation decisions effective January 2023 through December 2023 include the following:
| ● | The Bank will focus on Regional/Commercial Banks $20B+ in assets within the Metro New York Market (where available) as the “Primary Peer Group” for benchmarking at the 50th percentile of the market total compensation (base pay + short term incentive compensation) for establishing competitive pay levels. |
| ● | Bank Management Committee members and all Bank Officers will be matched against ‘level-for-level’ jobs and the publicly available proxy data. Other FHLBanks will be used as a “Secondary Peer Group” and benchmarking will be targeted at the 75th percentile of total compensation for establishing competitive pay levels. |
| ● | Use publicly available data from Regional/Commercial Banks $20B-$65B in assets for the Bank Management Committee members (including NEOs) at the 50th percentile of market total compensation (base pay + short term incentive compensation) for establishing competitive pay levels. |
| ● | For jobs within Risk Management and Capital Markets and other specialty areas not in ready supply within the Regional Banks, the Bank will use a customized peer group of Banks with $50B+ in assets including Bulge Bracket banks (i.e. large and global financial firms) at the 25th and 50th percentile to reflect realistic recruiting pressures in the Metro New York market. |
| ● | A commitment to conduct detailed cash compensation benchmarking for approximately one-third of officer positions each year. |
| ● | A commitment to review the value of total compensation delivered to employees including base pay, incentive compensation, retirement and health and welfare benefits (“Total Rewards Study”) in determining market competitiveness every third year. |
Additional factors that we take into account to remain competitive in our labor market include, but are not limited to:
| ● | Geographical area — The New York metropolitan area is a highly-competitive market for talent in the financial disciplines; |
| ● | Cost of living — The New York metropolitan area has a high cost of living that may require compensation premiums for some positions, particularly at more junior levels; and |
| ● | Availability of/demand for talent — Recruiting critical positions with high market demand typically requires a recruiting premium to entice an individual to change firms. |
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II. | The Total Compensation Program |
In response to the challenging economic environment in which we operate, compensation and benefits consist of the following components: (a) cash compensation (i.e., base salary, and, for exempt employees, “variable” or “at risk” short-term incentive compensation opportunities available under the Bank’s Incentive Compensation Plan (“IC Plan”); (b) retirement-related benefits (i.e., the Qualified Defined Benefit Plan (“DB Plan”); the Qualified Defined Contribution Plan (“DC Plan”); the Nonqualified Defined Benefit Component of the Amended and Restated Supplemental Executive Retirement Defined Benefit and Defined Contribution Benefit Equalization Plan (“DB BEP”), the Nonqualified Defined Contribution Component of the Amended and Restated Supplemental Executive Retirement Defined Benefit and Defined Contribution Benefit Equalization Plan (“DC BEP”), and the Nonqualified Deferred Incentive Compensation Plan (“NDICP”); and (c) health and life and disability insurance programs available to all employees.
The objectives of the total compensation program are to help motivate employees to achieve consistent and superior results, taking into account prudent risk management, over a long period of time. We also provide a program that allows us to compete for and retain talent.
a)2023 Compensation Benchmarking
For the year 2023, McLagan used for compensation benchmarking analysis purposes the Bank’s Compensation Policy (approved by the Board in September 2018) for all NEO compensation decisions in effect beginning January 2023 (details of which are provided above).
The Bank received a “non-objection” letter from the Finance Agency with respect to the payment of merit increases (effective January 1, 2023) for the NEOs, which letter was based upon the results of compensation benchmarking analysis by Towers.
A representative list of the peer group that was used in the compensation benchmarking analysis, excluding all healthcare and welfare benefits analysis, is set forth in the table below.
b)Market Data Participants — Commercial Banks used for 2023 market pay analysis:
Ameris Bank | First Citizens Bank – NC | Sallie Mae |
Arvest Bank | Pacific Premier Bank | Pinnacle Financial Partners, Inc. |
Associated Bank | PacWest Bancorp | Simmons First national Corporation |
Atlantic Union Bank | People’s United Financial, Inc. | South State Bank |
Bank of Hawaii | First Hawaiian Bank | Sterling National Bank |
Bank of OZK | First National Bank (Pennsylvania) | Sumitomo Mitsui Banking Corporation |
BOK Financial Corporation | First National Bank of Omaha | Synovus Financial Corporation |
Brown Brothers Harriman | FirstBank Holding Company | Texas Capital Bank |
Cadence Bank | Frost Bank | UMB Financial Corporation |
Cathey General Bancorp | Fulton Financial Corporation | Umpqua Bank |
CIBC World Markets | Glacier Bank | United Bankshares, Inc |
City National Bank of Florida | Hancock Whitney Bank | United Community Banks |
Commerce Bank | MidFirst Bank | Valley National Bancorp |
East West Bancorp, Inc. | Mizuho Bank | Webster Bank |
Eastern Bank | Old National Bank | Wintrust Financial Corporation |
First BanCorp - PR | OneMain Financial |
In addition, the FHLBanks were included in the 2023 compensation benchmarking analysis.
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2023 Total Rewards Study
In March 2023, after conducting a competitive bid process with top compensation and benefits consulting firms, the C&HR Committee engaged Willis Towers Watson (“Towers”), to perform a broad and comprehensive review of the Bank’s Compensation Policy and Total Rewards program for all employees including NEOs, and present recommendations to the C&HR Committee.
The compensation and benefits consultant was instructed by the C&HR Committee to: (i) determine how the current compensation and benefit programs and level of rewards were compared to and aligned with the market; (ii) determine the optimal mix of compensation and benefits; and (iii) review the current Board-approved Compensation Policy to determine if modifications are needed. The compensation and benefits consultant was informed of our continued desire to attract, motivate and retain talented employees.
During the review process the compensation and benefits consultant was asked to identify peer groups for “benchmarking” purposes to conduct the Total Rewards study (that is, for purposes of comparing levels of benefits and compensation). Representatives from the compensation and benefits consulting firm met with the Chief Executive Officer, Chair and Co-Chair of the C&HR Committee to solicit feedback on the Bank’s current Compensation Policy. The compensation and benefits consultant weighed a number of factors in order to arrive at the selection of a peer group. Among the factors considered were firms that were either business competitors or labor market competitors (focusing attention on firms either headquartered or having major offices in the same or similar geographic markets), and firms similar in size (assets, revenues and employee population). Through the compensation and benefits consultant’s experience working with other Federal Home Loan Banks and through direct interviews with senior management, the compensation and benefits consultant identified the current and future skill sets needed to meet the business objectives and also noted the firms that we tend to hire employees from and lose employees to.
For the compensation component, the compensation and benefits consultant used job-level market data from proprietary Financial Services surveys and jobs from five designated tiers, including NEOs and Management Committee members. Specific Bank peer groups were included in the Total Rewards Study based on their available data and alignment with the September 2018 Board-approved Compensation Policy, as described above.
2023 Total Rewards Study Results
The compensation and benefits consultant’s review of the Bank’s Compensation Policy was presented to the Board in June 2023. The results of the review indicated that:
· | Targeting base salaries above the 50th percentile may be necessary to close the compensation gap for Management Committee executives (including NEOs); |
· | The Regional/Commercial Banks $20B-$65B asset size for the Bank Management Committee members (including NEOs) at the 50th percentile of market total compensation (base pay + short term incentive compensation) remains applicable for establishing competitive pay levels; |
· | Certain roles or skillsets may require more flexibility to benchmark above the 50th percentile; and |
· | Additional benchmarking data for organizations with $100B or less in assets will provide additional industry perspective on the market. |
As a result, the Board approved changes to the Bank’s Compensation Policy effective June 2023. Changes to the Compensation Policy include: 1) A commitment to conduct detailed cash compensation benchmarking of all positions (excluding NEOs and Management Committee and Directors) every three years, and 2) the reservation to benchmark certain positions on an out of cycle basis determined by business needs and judgement of Human Resources. The methodology will be applied when benchmarking positions in 2024 for proposed adjustments to salaries effective January 1, 2025.
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A representative list of the primary peer group that was used in Towers’ Total Rewards study in 2023 with respect to compensation (excluding healthcare and welfare benefits) is set forth in the table below.
AgFirst | Deutsche Bank | M&T Bank |
Ally Financial | East West Bank | Morgan Stanley |
Associated Banc-Corp | Fifth Third | State Street |
Bank of America | First Citizens Bank | Synovus |
Barclays | First Financial Bancorp* | UBS |
BNP Paribas | First Midwest Bancorp | Valley National Bank |
Capital One Financial | First National of Nebraska | Webster Bank |
CIBC Bank USA* | Goldman Sachs | Wells Fargo |
Citigroup | HSBC | Western Alliance Bancorp |
City National Bank | Huntington | Wintrust |
Comerica | JPMorgan | Wintrust Financial |
Cullen Frost Bankers | KeyCorp | Zion’s Bancorporation |
c)Services Provided by Compensation and Benefits Consultant
Compensation in the aggregate paid to compensation and benefits consultants Towers and McLagan Partners, Inc. (“McLagan”) in the year 2023 was $99,000. Regarding compensation consulting, payments made to Towers were in the amount of $51,000. Towers also provided services for the Board of Director benchmarking in the amount of $28,965. McLagan also provided services for 2023 NEO compensation benchmarking services in the amount of $48,000. With respect to matters unrelated to compensation consulting, the Bank separately engaged Towers for insurance placement services in the amount of $118,000 in 2023. The Board reviewed Towers’ compensation and benchmarking data and recommendations during the course of 2023. While the C&HR Committee has concluded that no conflict of interest was created by management’s engagement of Towers or McLagan for the referenced additional services, any potential conflicts of interest were mitigated through multiple safeguards and constraints, including Board oversight of the Bank’s compensation and benefits consultants; and comprehensive Finance Agency regulations and monitoring of our compensation, corporate governance, and safety and soundness.
III. IC Plan
a)Overview of the 2023 IC Plan
The objective of the Bank’s 2023 IC Plan is to motivate employees to take actions that support the Bank’s strategies and lead to the attainment of the Bank’s business plan and fulfillment of its mission. The 2023 IC Plan is also intended to help retain employees by affording them the opportunity to share in the Bank’s performance results. The 2023 IC Plan seeks to accomplish these objectives by linking annual cash payout award opportunities to Bank performance. All salaried exempt and non-exempt employees hired on or before October 31, 2023 were eligible to participate in the 2023 IC Plan. Awards under the 2023 IC Plan were calculated based upon performance during 2023 and paid to participants on March 15, 2024.
When employees are individually evaluated, they receive one of four performance ratings: “Outstanding”; “Exceeds Requirements”; “Meets Requirements”; or “Below Requirements”. Incentive Compensation Plan awards are only paid to participants who have attained at least a “Meets Requirements” rating on their individual performance evaluations and do not have any unresolved disciplinary matters.
b)Bankwide Performance Goals
Bankwide performance goals, which are approved by the Board of Directors, are established to address the Bank’s business operations, mission and to help management focus on what it needs to succeed. Actual results of each goal are compared against the three benchmarks (threshold, target and maximum) that were established for the Incentive Plan year. The Incentive Compensation Plan participant receives a payout based on the benchmark level that is met for each goal.
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We believe that employees at higher ranks have a greater impact on the achievement of Bankwide goals than employees at lower ranks. Therefore, employees at higher ranks have a greater weighting of their Incentive Plan award opportunities.
The actual results for each goal may fall between two benchmark levels. When this happens, the payout figures are interpolated for results that fall between the two applicable ranges either threshold and target, or target and maximum. For example, if the actual results fall between target and maximum, the Incentive Plan participant will receive the payout for achieving target plus an additional amount for the excess over target. This calculation is performed for each Bankwide goal. For each goal, there is no payout if the actual result does not reach the threshold, and the payout is capped at maximum.
The 2023 Incentive Compensation Opportunity is summarized as follows:
Rank |
| Incentive Compensation Opportunity | |
President – Chief Executive Officer |
| 50% (Threshold) | |
| 80% (Target) | ||
| 100% (Maximum) | ||
Other NEOs |
| 30% (Threshold) | |
50% (Target) | |||
75% (Maximum) |
The 2023 Bankwide goals are organized into four broad categories and are presented in the charts below. These charts contain:
| ● | A description of each of the goals and their respective weightings as a percentage of the Bankwide goals; |
| ● | An explanation of each Bankwide goal measure and how each goal meets its stated purpose; and |
| ● | Actual results of each goal along with the Bankwide goal benchmarks (threshold, target and maximum) that were established. |
1.Financial/Return Goal
Bankwide Goals |
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(Measure and calculation of |
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measure) |
| How Goal Meets Stated Purpose |
| Weighting |
| Threshold |
| Target |
| Maximum |
| Results |
|
| |||||||||||||
Return Component- Dividend Capacity as forecasted in the 2023 business plan. Dividend Capacity is calculated as net income, divided by average capital stock. The Bank’s goal is to reward management for financial results that are generally controllable by management. Therefore, we adjust net income to eliminate the impact of items such as unrealized fair value changes on derivatives and associated hedged instruments. In addition, the target is adjusted due to changes in market interest rates during the year. |
| Earnings provide value for shareholders through the ability to add to retained earnings and to pay a dividend. |
| 35 | % | 6.40 | % | 7.10 | % | 7.80 | % | 9.61 | % |
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2.Risk Goal
Bankwide Goals | ||||||||||||
(Measure and calculation of | ||||||||||||
measure) |
| How Goal Meets Stated Purpose |
| Weighting |
| Threshold |
| Target |
| Maximum |
| Results |
Risk Component -The 2023 Bank-wide Risk goal consists of three metrics, each with a unique complementary factor. Each metric will be evaluated on PASS/FAIL basis and must meet a Threshold (a specified minimum number of PASS rated metrics) to qualify for incentive compensation. |
| Lowering the Bank’s risk profile provides a level of assurance that unexpected losses will not impair members’ investment in the Bank and serves to preserve the par value of membership stock. |
| 25 | % | 1 |
| 2 |
| 3 |
| 2 |
The three metrics are: |
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|
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1) Capital Protection: This measure seeks to ensure members paid in capital stock are protected from potential and plausible losses. Measured as the MVE/TS ratio, this measure is defined as the quotient from dividing the Market Value of Equity (MVE) by the amount of Total Capital (TS) outstanding and is measured monthly (last business day); |
| Each metric will be evaluated individually based on the proposed threshold, target, and maximum level determined by the average of the results of the 3 goals via a point system. |
|
| 1 |
| 2 |
| 3 |
| 2 | |
2) Earnings Stability: The goal measures the change in the projected earnings represented as the dividend rate over a four-quarter horizon measured by the worst of 16 scenario shocks. The metric seeks to ensure earnings stability by limiting downside risk to base forward rate forecasts from the 16 scenarios; and | 1 | 2 | 3 | 2 | ||||||||
3) Operational Exceptions: The health of the Bank’s operational control environment is represented by the aggregate number of risk events and the economic losses (i.e., an out-of-pocket loss without consideration of any insurance recoveries). | 1 | 2 | 3 | 2 |
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3.Mission and Membership Goal
Bankwide Goals |
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(Measure and calculation of |
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measure) |
| How Goal Meets Stated Purpose |
| Weighting |
| Threshold |
| Target |
| Maximum |
| Results |
| ||||
| |||||||||||||||||
Advances and Letters of Credit Productions |
| Supports the provision of liquidity to members for housing and community development activities. |
| 20 | % | $ | 100B |
| $ | 115B |
| $ | 140B |
| $ | 125.78B | |
Market Share |
| Helps the Bank gauge its competitive position against a variety of wholesale funding alternative used by members. Strengthens the franchise as an “advances bank”. |
| 37 | % | 41 | % | 45 | % | 41.58 | % | ||||||
Mortgage Asset Program |
| Purchase mortgage loans from members through MAP, in addition to MPF for Q1, provides a well-performing asset, adheres to the Bank’s mission, fulfills a member need in the marketplace, and allows the Bank to continue to provide liquidity in diverse ways. | $ | 210MM | $ | 300MM | $ | 345MM | $ | 240.4MM | |||||||
New PFIs | Promotes growth of approved member enrollments in MAP to build the business. | 8 | 10 | 12 | 9 | ||||||||||||
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4.Organizational Effectiveness Goal
Bankwide Goals |
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(Measure and calculation of |
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measure) |
| How Goal Meets Stated Purpose |
| Weighting |
| Threshold |
| Target |
| Maximum |
| Results |
|
| |||||||||||||
The Organizational Effectiveness Goal will focus on two key tenets that are related to the success of the Bank’s approved Strategy: |
| ||||||||||||
(1) Technology Strategy |
| Achievement of 12 identified milestones and corresponding criteria across the total # of work efforts which have meaningful contribution to each work effort. | 10 | % | 6 |
| 8 |
| 10 |
| 9 | ||
(2)Culture – Enhancing Diversity & Inclusion: Distributed Leadership (DL) |
| Allow for four opportunities per year for managers to encourage decision making at all levels per the Distributed Leadership principles. | 10 | % | 72 | 96 | 120 | 158 |
The weighted average of all group results for Bankwide goals, including Risk Management, (and excluding Internal Audit) for 2023 was 51.2% above target. The weighted result for Risk Management was 46.2%. Payments are interpolated between the target and maximum amounts.
c)Clawback Provision of the Incentive Compensation Plan
A clawback provision in the Incentive Plan provides as follows:
If, within 3 years after an incentive has been paid or calculated as owed to a Participant who is a member of the Bank’s Management Committee, it is discovered that such amount was based on the achievement of financial or operational goals within this Plan that subsequently are deemed by the Bank to be inaccurate, misstated or misleading, the Board shall review such incentive amounts paid or owed. Inaccurate, misstated and/or misleading achievement of financial or operational goals shall include, but not be limited to, overstatements of revenue, income, capital, return measures and/or understatements of credit risk, market risk, operational risk or expenses.
If the Board determines that an incentive amount paid or considered owed to the Participant (the “Awarded Amount”) would have been a lower amount when calculated barring the inaccurate, misstated and/or misleading achievement of financial or operational goals (the “Adjusted Amount”), the Board shall, except as provided below, seek to recover to the fullest extent possible the difference between the Awarded Amount and the Adjusted Amount (the “Undue Incentive Amount”).
The Board may decide to not seek recovery of the Undue Incentive Amount if the Board determines that to do so would be unreasonable or contrary to the interests of the Bank. In making such determination, the Board may take into account such considerations as it deems appropriate including, but not limited to: (a) whether the Undue Incentive Amount is immaterial in impact to the Bank; (b) whether the Participant engaged in any intentional or unlawful misconduct that contributed to the inaccurate, misstated and/or misleading information; (c) whether the change in the applicable achievement level was a result of circumstances beyond the control of management; (d) the likelihood of success to recover the claimed Undue Incentive Amount under governing law versus the cost and effort involved; and (e) whether seeking recovery could prejudice the interests of the Bank. The decision by the Board to seek recovery of an Undue Incentive Amount need not be uniform among Participants. Authority of the Board under this IC Plan may be delegated to the Committee but may not be delegated to the President.
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If the Board determines to seek recovery of any or all of the Undue Incentive Amount (the “Recovery Amount”), it will make a written demand from the Participant for the repayment of the Recovery Amount. Subject to the IC Plan provisions regarding the forfeiture of unpaid amounts, if the Participant does not within a reasonable period, after receiving the written demand, provide repayment of the Recovery Amount, and the Board determines that he or she is unlikely to do so, the Board may seek a court order against the Participant for repayment of the Recovery Amount.
d)Required Deferral of IC Plan Awards
A required deferral portion of the IC Plan (“DICP”) applies to members of the Bank’s Management Committee including all NEOs. Such deferred compensation plan provides that the payments made to Management Committee members under the IC Plan are deferred and will be made as described below.
The DICP provides that 50% of the Total Communicated Award (as defined below), if any, under the Plan year communicated to Management Committee participants (which includes the NEOs) will ordinarily be paid by the middle of March following the Plan year.
The remaining 50% will be deferred (the “Deferred Incentive Award”), subject to certain additional conditions specified in the Plan, such that 33 1/3% of the Deferred Incentive Award will ordinarily be paid by the middle of March of the following three years. Deferred Incentive Awards will be paid if the Bank’s ratio of market value of equity to par value of capital stock is equal to, or greater than 100%. To compensate employees for the lost time value of money, the Bank will pay an interest rate on the deferred amount equal to the Bank’s return on equity over the deferral period, subject to a floor of zero.
An executive who terminates employment with the Bank other than for “good reason” or who is terminated by the Bank for “cause” will forfeit any portion of the Deferred Incentive Award that has not yet been paid. In addition, the Deferred Incentive Award will be paid, if otherwise earned, in full in the event of the executive’s death or disability, or a “change in control” (as defined in the DICP).
In the chart below, the following terms have the following definitions:
“Total Communicated Award” means the total amount of the incentive award (if any) under the Plan communicated to Management Committee Participants;
“Current Communicated Incentive Award” means 50 percent of the Total Communicated Award and shall not exceed 100 percent of the participant’s base salary; and
“Deferred Incentive Award” means the remaining 50 percent of the Total Communicated Award.
Payment |
| Description |
| Payment Year |
Current Communicated Incentive Award |
| 50% of the Total Communicated Award |
| Base year* |
Deferred Incentive Award installment |
| Up to 33 1/3% of the Deferred Incentive Award |
| Year 1** |
Deferred Incentive Award installment |
| Up to 33 1/3% of the Deferred Incentive Award |
| Year 2** |
Deferred Incentive Award installment |
| Up to 33 1/3% of the Deferred Incentive Award |
| Year 3** |
* Payment shall ordinarily be made within the first two and a half weeks of March.
** Payment shall ordinarily be made within the first two and a half weeks of March in the year indicated.
IV. | Retirement Benefits |
Introduction
We maintain comprehensive qualified and non-qualified defined benefit and defined contribution savings plans for our employees, including our NEOs. The benefits provided by these plans are components of the total compensation opportunity for employees. The Board and C&HR Committee believe these plans serve as valuable retention tools and provide significant tax deferral opportunities and resources for the participants’ long-term financial planning.
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These plans are discussed below.
a) Profit Sharing Plan
In 2010, the Board approved the establishment of a Profit-Sharing Plan for employees who were not grandfathered in the Bank’s retirement plan and who were participants in the DB BEP. A provision of an amount equal to 8% of the prior year’s base pay and total communicated incentive award to the extent the requirements under the Bank’s IC Plan have been achieved. The 8% payment will not be included as income for calculating the benefits for the Qualified Defined Benefit Plan. There are two NEOs who qualify for this benefit: A. Goldstein and E. Artuz.
b) DB Plan
The DB Plan is an IRS-qualified defined benefit plan which covers all employees who have achieved four months of service. The DB Plan is part of a multiple-employer defined benefit program administered by Pentegra Retirement Services.
Participants who, as of July 1, 2008, had five years of DB Plan service and were age 50 years or older, are provided with a benefit of 2.50% of a participant’s highest consecutive 3-year average earnings, multiplied by the participant’s years of benefit service, not to exceed 30 years. Earnings are defined as base salary plus short-term incentive compensation opportunities available under the Bank’s IC Plan, and overtime, subject to the annual Internal Revenue Code limit; short-term incentives for participants of the deferred incentive compensation plan is defined as the Total Communicated Award. The Normal Form of Payment is a lump sum distribution or life annuity with a guaranteed 12-year payout. A 1% simple interest cost of living adjustment (“COLA”) is provided annually to participants beginning at age 66. These participants are identified herein as “DB Plan A.”
For participants who, as of July 1, 2008, did not have five years of DB Plan service and attained age 50 years or older, identified herein as “DB Plan B”, the DB Plan provides a benefit of 2.0% of a participant’s highest consecutive 5-year average earnings (as opposed to consecutive 3-year average earnings as provided to Grandfathered participants), multiplied by the participant’s years of benefit service, not to exceed 30 years. The Normal Form of Payment for participants hired on or after July 1, 2008 is a lump sum distribution or life annuity (i.e., an annuity paid until the death of the participant). The guaranteed 12-year payout option under a life annuity, as previously provided to Grandfathered participants, was terminated effective July 1, 2008. In addition, for the Non-Grandfathered participants, COLAs are no longer provided on future accruals.
For participants who were hired on or after July 1, 2014, the DB Plan provides a benefit of 1.50% of a participant’s highest consecutive 5-year average earnings, multiplied by the participant’s years of benefit service, not to exceed 30 years. Earnings for participants who were hired on or after July 1, 2014 are defined as base salary only, excluding short-term incentive compensation opportunities available under the Bank’s IC Plan, subject to the annual Internal Revenue Code limit. These participants are identified herein as “DB Plan C.”
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The table below summarizes the DB Plan changes affecting the Non-Grandfathered employees that went into effect on July 1, 2008 and July 1, 2014:
DEFINED BENEFIT PLAN |
| ||||||
(DB PLAN) |
| ||||||
PROVISIONS |
| DB PLAN A** |
| DB PLAN B*** |
| DB PLAN C**** |
|
Benefit Multiplier |
| 2.5 | % | 2.0 | % | 1.5 | % |
Final Average Pay Period |
| High 3-Year |
| High 5-Year |
| High 5-Year | |
Normal Form of Payment |
| Lump sum distribution or Life Annuity with Guaranteed 12 Year Payout |
| Lump sum distribution or Straight Life Annuity |
| Lump sum distribution or Straight Life Annuity | |
Cost of Living Adjustments |
| 1% Per Year Cumulative Commencing at Age 66 |
| None |
| None | |
Early Retirement Subsidy<65: | |||||||
a) Rule of 70 |
| 1.5% Per Year |
| 3% Per Year |
| 3% Per Year | |
b) Rule of 70 Not Met |
| 3% Per Year |
| Actuarial Equivalent |
| Actuarial Equivalent | |
*Vesting |
| 20% Per Year Commencing Second Year of Employment |
| 5-Year Cliff |
| 5-Year Cliff |
* Greater of DB Plan Vesting or New Plan Vesting applied to employees participating in the DB Plan prior to July 1, 2008.
** This includes the following NEO: K. Neylan.
*** This includes the following NEOs: A. Goldstein; J. González; and E. Artuz.
**** This includes the following NEO: M. Radziemski effective October 2024.
For purposes of the above table, please note the following definitions:
Benefit Multiplier — The annuity paid from the DB Plan is calculated on an employee’s years of service, up to a maximum of 30 years, multiplied by the appropriate Benefit Multiplier for each participant, as described above.
Final Average Pay Period —The period that an employee’s earnings is used in the calculation of that employee’s benefit.
Normal Form of Payment — The DB Plan must state the form of the annuity to be paid to the retiring employee.
Cost of Living Adjustments (“COLAs”) — Once a DB Plan A retiree reaches age 65, in each succeeding year he/she will receive an extra payment annually equal to one percent of the original benefit amount multiplied by the number of years in pay status after age 65. As of July 1, 2008, this adjustment is no longer offered to DB Plan B and C Employees on benefits accruing after that date.
Early Retirement Subsidy — Early retirement under the plan is available after age 45.
Vesting — DB Plan A Employees are entitled, starting with the second year of employment service, to 20% of his/her accumulated benefit per year. As a result, after the sixth year of employment service, an employee will be entitled to 100% of his/her accumulated benefit. DB Plan B Employees who entered the DB Plan on or after July 1, 2008 will not receive such benefit until such employee has completed five years of employment service. At that point, the employee will be entitled to 100% of his/her accumulated benefit. The term “5-Year Cliff” is a reference to the foregoing provision. DB Plan A and DB Plan B Employees already participating in the DB Plan prior to July 1, 2008 will vest at 20% per year starting with the second year through the fourth year of employment service and will be accelerated to 100% vesting after the fifth year.
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Earnings under the DB Plan for DB Plan A and DB Plan B Employees continue to be defined as base salary plus short-term incentives, and overtime, subject to the annual Internal Revenue Code (“IRC”) limit.
The DB Plan pays monthly annuities, or a lump sum amount available at or after age 59-1/2, calculated on an actuarial basis, to vested participants or the beneficiaries of deceased vested participants. Annual benefits provided under the DB Plan also are subject to IRC limits, which vary by age and benefit payment option selected.
The Bank’s practice regarding contributions to the DB Plan is to make contributions to the DB Plan in amounts greater than the minimum required contribution as determined actuarially under current pension rules established under current Federal law.
In order to help ensure that the Bank’s qualified pension plan continues to pass IRS Safe Harbor tests, commencing on July 1, 2022, the qualified retirement benefits for certain NEOs will no longer accrue under the DB Plan; rather, these benefits will be provided under the DB BEP described below.
c) DB BEP
Employees at the rank of Vice President and above (including the NEOs) who exceed income limitations established by the IRC for three out of five consecutive years and who are also approved for inclusion by the Bank’s Nonqualified Plan Committee are eligible to participate in the DB BEP, a non-qualified retirement plan that in many respects mirrors the DB Plan with the exception of the benefit multiplier reduction to 1.5% implemented effective July 1, 2014 under DB Plan C.
Effective January 1, 2023, employees must be at the rank of First Vice President and above to qualify for the DB BEP, and Vice Presidents already participating in the DB BEP are grandfathered.
The primary objective of the DB BEP is to ensure that participants receive the full benefit to which they would have been entitled under the DB Plan in the absence of limits on maximum benefit levels imposed by the IRC. In the event that the benefits payable from the DB Plan have been reduced or otherwise limited by government regulations, the employee’s “lost” benefits are payable under the terms of the DB BEP. The DB BEP also enhances benefits for certain NEOs as follows:
NON-QUALIFIED |
| ||||
DEFINED BENEFIT |
| ||||
(DB BEP PLAN) |
| ||||
PROVISIONS |
| DB BEP PLAN A* |
| DB BEP PLAN B** | |
Benefit Multiplier |
| 2.5 | % | 2.0 | % |
Final Average Pay Period |
| High 3-Year |
| High 5-Year | |
Normal Form of Payment |
| Lump Sum Distribution or Life Annuity with Guaranteed 12 Year Payout |
| Lump Sum Distribution or Straight Life Annuity | |
Cost of Living Adjustments |
| 1% Per Year Cumulative Commencing at Age 66 |
| None |
* This includes the following NEOs: J. González and K. Neylan.
** This includes the following NEOs: A. Goldstein and E. Artuz.
The DB BEP is an unfunded arrangement. However, the Bank has established a grantor trust to assist in financing the payment of benefits under this plan. The Bank’s policy is to maintain assets in the grantor trust at a level up to the Accumulated Benefit Obligation for the DB BEP. The financing level for the DB BEP is reviewed annually.
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The Nonqualified Plan Committee administers various oversight responsibilities pertaining to the DB BEP. These matters include, but are not limited to, approving employees as participants of the DB BEP and adopting any amendment or taking any other action which may be appropriate to facilitate the DB BEP. The Nonqualified Plan Committee is chaired by the Chair of the C&HR Committee; other members include a Board Director who is a member of the C&HR Committee, our Chief Financial Officer, and the Director of Human Resources. The Nonqualified Plan Committee reports its actions to the C&HR Committee.
On September 24, 2021, the Bank’s Board of Directors approved a revision to the DB BEP to include a lump sum distribution option, as currently provided under the DB Plan. The DB BEP lump sum distribution option is available to current and future members of the DB BEP.
d) DC Plan
NEOs may contribute to the DC Plan, a retirement savings plan qualified under the IRC. All employees are eligible for membership in the DC Plan on the first day of the month following three full calendar months of employment.
An employee may contribute 1% to 100% of base salary into the DC Plan, up to IRC limitations.
If an employee contributes at least 4% of base salary, the Bank provides the maximum employer match of 6% of elective contributions upon plan entry. If an employee contributes less than 4% of base salary, the Bank will match at a rate of 150% of elective contributions. Contributions of less than 2% of base salary receive a match of up to 1.5% of the employee’s base salary.
e) DC BEP
Employees at the rank of Vice President and above (including the NEOs) who exceed income limitations established by the IRC, and who contribute to their qualified DC Plan up to the IRC Limits, are eligible to participate in the DC BEP. Participating employees are allowed to defer up to 19% of the employee’s base salary (less the amount of salary deferrals allowed under the DC Plan pursuant to the IRS Limits).
As a continuation of the qualified DC Plan, the Bank will make a matching contribution each plan year of up to 6% of base salary on the elective deferrals made under the DC BEP. If an employee elects to defer less than 4% of base salary, the Bank will match at a rate of 150% of elective deferred contributions. For deferrals beginning January 1, 2020, the Bank will make a matching contribution of up to 9% of base salary for NEO elective deferrals (in excess of the DC Plan contribution limits). All deferred monies will be the property of the Bank until distribution to the employee and thus subject to claims of Bank creditors until distribution.
Amounts deferred and contributed as matching contributions under the DC BEP shall be credited to the participant’s DC BEP account. Participants may choose to invest their DC BEP funds within a menu of investment options.
f) NDICP
The NDICP allows employees serving at the rank of a Vice President or above (including the NEOs) to elect to defer all or a portion of the employee’s annual incentive compensation that is paid to the employee under the terms of any Board-approved IC Plan or deferred portion of such IC Plan. The Bank does not provide a match on these deferrals. All deferred monies will be the property of the Bank until distribution to the employee and thus subject to claims of Bank creditors until distribution.
Amounts deferred and contributed under the NDICP shall be credited to the participant’s NDICP account. Participants may choose to invest their NDICP funds within a menu of investment options. Participants may elect to receive their funds in a lump sum or in at least two annual installments (not to exceed ten annual installments).
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V. | Health and Welfare Programs and Other Benefits |
a)Perquisites and Benefits
We offer the following additional perquisites and other benefits to all employees, including the NEOs, under the same general terms and conditions:
| ● | Medical, dental, and vision insurance (subject to employee expense sharing); |
| ● | Vacation leave, which increases based upon officer title and years of service; |
| ● | Life and long-term disability insurance (NEOs are eligible for enhanced monthly benefits under our disability insurance program); |
| ● | Travel and accident insurance which include life insurance benefits; |
| ● | Educational assistance; and |
| ● | Employee relocation assistance, where appropriate, for new hires. |
b)Retiree Medical
We offer eligible employees, including certain NEOs, medical coverage when they retire. Employees are eligible to participate in the Retiree Medical Benefits Plan if they were at least 55 years old as of January 1, 2015 with 10 years of service when they retire from active service.
Retirees who retire before age 62 pay the full premium for the coverage they had as employees until they attain age 62. The premium paid by retirees upon becoming Medicare-eligible (either at age 65 or prior thereto as a result of disability) is a premium reduced to take into account the status of Medicare as the primary payer of the medical benefits of Medicare-eligible retirees.
Under the Plan as in effect from May 1, 1995 until December 31, 2007, herein identified as “Grandfathered,” retirees beginning at age 62, we contributed a percentage of the premium based on their total completed years of service (no adjustment is made for partial years of service) on a “Defined Benefit” basis. There are no NEOs who qualify for this benefit.
Effective January 1, 2008, for employees who, as of December 31, 2007, did not have 5 years of service and were age 60 or older, herein identified as “Non-Grandfathered,” we contributed $45 per month toward the premium of a Non-Grandfathered retiree multiplied by the number of years of service earned by the retiree after age 45. The total cost of medical coverage elected by the employee (determined by the number of individuals including the retiree, the retiree’s spouse, and each other dependent of the retiree) under the Plan is then reduced by the Bank contribution from age 62 until the retiree or a covered dependent of the retiree becomes Medicare-eligible (usually at age 65 or earlier, if disabled). There are no NEOs who qualify for this benefit.
For all covered employees as of January 1, 2015, including the NEOs, from age 62 until the retiree or a covered dependent of the retiree becomes Medicare-eligible (usually at age 65 or earlier, if disabled), we contribute $26.87 per month toward the premium of a Non-Grandfathered retiree multiplied by the number of years of service earned by the retiree after age 45. The total cost of medical coverage elected by the employee (determined by the number of individuals including the retiree, the retiree’s spouse, and each other dependent of the retiree) under the Plan is then reduced by the Bank contribution.
After the retiree or a covered dependent of the retiree becomes Medicare-eligible, our contribution toward the premium for the coverage of the Medicare-eligible individual will be reduced to $14.93 per month multiplied by the number of years of service earned by the retiree after age 45. The total cost of medical coverage elected by the employee (determined by the number of individuals including the retiree, the retiree’s spouse, and each other dependent of the retiree) under the Plan is then reduced by the Bank contribution. The $26.87 and $14.93 amounts are fixed and not cost-of-living adjusted.
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Below is a summary of the Retiree Medical Benefits Plan:
Retiree Medical Benefit Plan |
| Provisions for Retirees January 1, 2015 and after* |
Plan Type | Defined Dollar Plan: A medical plan in which medical coverage is provided to a retired employee up to a fixed cost for the coverage elected by the employee and the retiree assumes all costs above the stated contribution. | |
Eligibility | Active employee who has completed 10 years of employment at FHLBNY and attained age 55 as of January 1, 2015. | |
| ||
Medical Plan Formula | 1) Retiree (and covered individual), is eligible for $26.87/month x years of service after age 45 and has attained the age of 62. The Cost of Living Adjustment is excluded. | |
| ||
2) Retiree (and covered individual) is eligible for $14.93/month x years of service after age 45 and after age 65. The Cost of Living Adjustment is excluded. | ||
| ||
$0 for Pre-62 Pre-65/Post-65 | ||
Employer Cost Share Examples: | ||
| ||
10 years of service after age 45 | $3,224/$1,792/Annually | |
| ||
15 years of service after age 45 | $4,837/$2,687/Annually | |
| ||
20 years of service after age 45 | $6,449/$3,583/Annually |
* This includes the following NEOs: K. Neylan.
VI. | Severance Plan, Executive Change in Control Agreements and Golden Parachute Rule |
a)Severance Plan
Other than as described below, all Bank employees are employed under an “at will” arrangement. Accordingly, an employee may resign employment at any time and the Bank may terminate the employee’s employment at any time for any reason with or without cause.
Severance benefits to an employee in the event of termination of his or her employment may be paid in accordance with the Bank’s formal Board-approved Severance Pay Plan (“Severance Plan”) available to all Bank employees who work twenty or more hours a week and have completed at least two “periods of service” (the number of six (6) month periods, in the aggregate, for which an employee is employed by the Bank).
Severance benefits may be paid to employees who:
(i) are part of a reduction in force;
(ii) have resigned from the Bank following a reduction in salary grade, level, or rank;
(iii) refuse a transfer of fifty miles or more;
(iv) have their position eliminated;
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(v) are unable to perform his/her duties in a satisfactory manner and is warranted that the employee would not be discharged for cause; or
(vi) had their employment terminated as a result of a change in control (however, in the event of a change in control that affects the Bank President, the other Bank NEOs, and the Chief Audit Officer, provisions contained in separate Executive Change in Control Agreements shall govern: see below for more information).
An officer shall be eligible for two weeks of severance benefits for each six-month period of service with the Bank (even if the employment has been less than six months), but not less than eight weeks of severance benefits nor more than thirty-six weeks of such benefits; in the event of a change in control, the ‘floor’ and ‘cap’ shall be twelve weeks and fifty-two weeks, respectively. Non-officers are eligible for severance benefits in accordance with different formulas.
If the terminated employee is enrolled in the Bank’s medical benefits plan at the time of termination and elects to purchase health insurance continuation coverage, the Bank may provide a lump sum payment in an amount to be determined by the Bank intended to be used in connection with payments by terminated employees related to health insurance. The Bank may also in its discretion arrange for outplacement services.
Payment of severance benefits under the Severance Plan is contingent on an employee executing a severance agreement which includes a release of any claim the employee may have against the Bank and any present and former director, officer and employee.
Severance benefits payable under the Severance Plan shall be paid on a lump sum basis.
b)Executive Change in Control Agreements
Executive Change in Control Agreements (“CIC Agreements”) were initially executed in January 2016 and have been renewed every three years, most recently in January 2022, between the FHLBNY and the NEOs, which provide the executive with certain severance payments and benefits in the event employment is terminated in connection with a “change in control” of FHLBNY.
Under the terms of the CIC Agreement, if the executive’s employment with FHLBNY is terminated by FHLBNY without “cause” or by the executive for “good reason” (as defined in the CIC Agreement) during the period beginning on the earliest of (a) twelve (12) months prior to the execution by FHLBNY of a definitive agreement regarding a Change in Control, (b) twelve (12) months prior to Change in Control mandated by federal statute, rule or directive, and (c) twelve (12) months prior to the adoption of a plan or proposal for the liquidation or dissolution of FHLBNY, and ending, in all cases, twenty-four (24) months following the effective date of the Change in Control, the executive becomes entitled to certain severance payments and benefits.
The payments and benefits include: (i) an amount equal to the product of the executive’s average gross base salary for the three years prior to his employment termination date (with any partial years being annualized), multiplied by 2.99 for the Chief Executive Officer, and 1.5 for other CIC Agreement participants; (ii) if the executive is a participant in FHLBNY’s Incentive Compensation Plan (the “Annual Plan”), an amount equal to the product of the executive’s full target incentive payout estimate, or the actual amount of the payment to the executive under the Annual Plan, if lower, in either case, in respect of the year prior to the year of the employment termination date, multiplied by 2.99 for the Chief Executive Officer, and 1.5 for other CIC Agreement participants; (iii) an amount equal to the cost of health, dental and vision care benefits that FHLBNY actually incurred by FHLBNY on behalf of the Executive and his dependents, if any, during the twelve (12) months prior to the executive’s employment termination date; (iv) $15,000, which the executive may put toward outplacement services; (v) $15,000, which the executive may put toward accounting, actuarial, financial, legal or tax services; (vi) additional age and service credits under the FHLBNY non-qualified Benefit Equalization Plan of three (3) years for the Chief Executive Officer and one and one-half (1.5) years for other CIC Agreement participants; and (vii) an amount equal to 2.99 times the Chief Executive Officer’s annual matching contribution under the DC Plan and 1.5 times the match for other CIC Agreement participants.
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The payments described above are payable in a lump sum within sixty (60) days following the executive’s employment termination date, with the benefits under the BEP being distributed in accordance with the terms of the BEP. All payments and benefits are conditioned on the executive having delivered an irrevocable general release of claims against FHLBNY before payment occurs. In addition, notwithstanding anything to the contrary, all payments and benefits remain subject to FHLBNY’s compliance with any applicable statutory and regulatory requirements relating to the payment of amounts under the CIC Agreements and in the event that a governmental authority or a court with competent jurisdiction directs that any portion or all of the payments may not be paid to the executive, the executive shall not be eligible to receive, or shall return, such payments.
c)Golden Parachute Rule
The Finance Agency issued final rules on executive compensation and golden parachute payments relating to the regulator’s oversight of such compensation and payments located at 12 CFR Parts 1230 and 1231 the (“Golden Parachute Rule”). This sets forth the standards that the Finance Agency will take into consideration when limiting or prohibiting golden parachute payments by an FHLBank, the Office of Finance, Fannie Mae or Freddie Mac. The Golden Parachute Rule generally prohibits golden parachute payments except in limited circumstances with Finance Agency approval. Golden parachute payments may include compensation paid to a director, officer or employee following the termination of such person’s employment by a regulated entity that is insolvent, is in conservatorship or receivership, is required by the Director to improve its financial condition or has been assigned a composite examination rating of 4 or 5 by the Finance Agency. Golden parachute payments generally do not include payments made pursuant to a qualified pension or retirement plan, an employee welfare benefit plan, a bona fide deferred compensation plan, a nondiscriminatory severance pay plan, or payments made by reason of the death or disability of the individual. Our benefit plans comply with the Golden Parachute Rule and the Bank has not had a payment in 2023 restricted by the Finance Agency.
d)Ms. Feinberg’s Consulting Agreement
Ms. Feinberg, who was a Senior Vice President and the Bank’s Chief Risk Officer, left the Bank on December 15, 2023. In connection with her departure, she agreed to enter into a consulting agreement. The agreement is attached to this Form 10-K as an exhibit.
VII. | Explanation of how we determine the amount and, where applicable, the formula for each element of compensation |
Please see Section II directly above for an explanation of the mechanisms used to determine employee compensation.
VIII. Explanation of how each element of compensation and the decisions regarding that element fit into the overall compensation objectives and affect decisions regarding other elements of compensation
The Committee believes it has developed a unified, coherent system of compensation. Please refer to Section II under the heading “The Total Compensation Program” for an explanation of the components that make up our total compensation program. Together, these components comprised the total compensation program for 2023 and they are established in accordance with our Compensation Philosophy and the regulated environment that we operate in as discussed in Section I above.
Our overall objectives with regard to our compensation and benefits program are to motivate employees to achieve consistent and superior results over a long period of time, and to provide a program that allows us to compete for and retain talent.
As we make changes to one element of the compensation and benefits program mix, the C&HR Committee considers the impact on the other elements of the mix. In this regard, the C&HR Committee strives to maintain programs that keep the Bank within the parameters of its compensation philosophy as set forth in the Bank’s Compensation Policy and Compensation Benchmarking.
COMPENSATION COMMITTEE REPORT
The C&HR Committee of the Board of Directors has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management and based on such review and discussions, the C&HR Committee recommended to the Board that the Compensation Discussion and Analysis be included in the annual report on Form 10-K for the year 2023.
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THE COMPENSATION AND HUMAN RESOURCES COMMITTEE
David J. Nasca, Chair Josie J. Thomas, Vice Chair |
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David R. Huber Thomas J. Kemly Christopher P. Martin |
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Ángela Weyne |
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RISKS ARISING FROM COMPENSATION PRACTICES
We do not believe that risks arising from the compensation policies with respect to its employees are reasonably likely to have a material adverse effect on the Bank. We do not structure any of our compensation plans in a way that inappropriately encourages risk taking to achieve payment.
Our business model operates on a low return/low risk basis. One of the important characteristics of our culture is appropriate attention to risk management. We have established procedures with respect to risk which are reviewed frequently by entities such as our regulator, external audit firm, Risk Management Group, and Internal Audit Department.
In addition, we have a Board and associated Committees that provide governance. The compensation programs are reviewed annually by the C&HR Committee and the structure of our compensation programs provides evidence of the balanced approach to risk and reward in our culture. The rationale behind the structure of the Incentive Plan and its goals is to motivate management to take a balanced approach to managing risks and returns in the course of managing the business, while at the same time ensuring that we fulfill our mission. The Incentive Plan design is intended to motivate management to act in ways that are aligned with the Board’s wishes to have us achieve forecasted returns while managing risks within prescribed risk parameters. In addition, the goals in the IC Plan will not motivate management to increase returns if they require imprudently increasing risk.
In addition, we are prohibited by regulations from offering equity-based compensation, and we do not currently offer long-term incentives. However, many of the firms in our peer group do offer these types of compensation. The total compensation program takes into account the existence of these other types of compensation by offering defined benefit and defined contribution plans to help effectively compete for talent. The defined benefit and defined contribution plans are designed to reward employees for continued strong performance over the course of their careers — that is, the longer an employee works at the Bank, the greater the benefit the employee is likely to accumulate. Senior and mid-level employees are generally long-tenured, and we believe that these employees would not want to endanger their pension benefits by inappropriately stretching rules to achieve a short-term financial gain. By definition, these programs are reflective of the low-risk culture.
The Finance Agency also has issued certain compensation principles, one of which is that executive compensation should be consistent with sound risk management and preservation of the Market value of Equity to Capital Stock Ratio Value of membership stock. Also, the Finance Agency reviews all executive compensation plans relative to these principles and such other factors as the Finance Agency determines to be appropriate, including the Bank’s annual Incentive Plan, prior to their becoming effective.
Thus, the Bank’s low risk culture, which is reflected in the compensation policy, leads us to believe that any risks arising from the compensation policies with respect to our employees are not reasonably likely to have a material adverse effect.
Compensation Committee Interlocks and Insider Participation
The following persons served on the C&HR Committee during all or some of the period from January 1, 2023, through the date of this annual report on Form 10-K: DeForest B. Soaries, Jr., David R. Huber, Thomas J. Kemly, Kenneth J. Mahon, Christopher P. Martin, David J. Nasca, Josie J. Thomas and Ángela Weyne. During this period, no interlocking relationships existed between any member of the Bank’s Board of Directors or the C&HR Committee and any member of the Board of Directors or compensation committee of any other company, nor did any such interlocking relationship exist in the past. Further, no member of the C&HR Committee listed above was an officer or our employee during the course of their service as a member of the Committee or was formerly an officer or our employee before becoming a member of the Committee.
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Executive Compensation
The table below summarizes the total compensation earned by each of the Named Executive Officers (“NEOs”) for the years 2023, 2022 and 2021 (in dollars):
Summary Compensation Table for Calendar Years 2023, 2022 and 2021
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Non-Equity | Pension Value | |||||||||||||||||||||||||
Incentive | and Nonqualified | |||||||||||||||||||||||||
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Name and Principal Position | Year | Salary | Bonus | Awards | Awards | Compensation (a)(1) | Compensation (b)(2) | Compensation (c)(3) | Total (d) | |||||||||||||||||
José R. González |
| 2023 | $ | 1,166,610 | $ | — | $ | — | $ | — | $ | 1,088,875 | $ | 1,034,000 | $ | 114,729 | $ | 3,404,214 | ||||||||
President & |
| 2022 | $ | 1,110,000 | $ | — | $ | — | $ | — | $ | 1,104,371 | $ | — | $ | 107,056 | $ | 2,321,427 | ||||||||
Chief Executive Officer (PEO) |
| 2021 | $ | 996,000 | $ | — | $ | — | $ | — | $ | 894,201 | $ | 741,000 | $ | 105,311 | $ | 2,736,512 | ||||||||
Kevin M. Neylan |
| 2023 | $ | 616,227 | $ | — | $ | — | $ | — | $ | 415,828 | $ | 937,000 | $ | 66,325 | $ | 2,035,380 | ||||||||
Senior Vice President, |
| 2022 | $ | 586,324 | $ | — | $ | — | $ | — | $ | 437,364 | $ | — | $ | 61,366 | $ | 1,085,054 | ||||||||
Chief Financial Officer (PFO) |
| 2021 | $ | 565,950 | $ | — | $ | — | $ | — | $ | 364,841 | $ | 633,000 | $ | 60,021 | $ | 1,623,812 | ||||||||
Edwin Artuz* | 2023 | $ | 415,330 | $ | — | $ | — | $ | — | $ | 280,459 | $ | 582,000 | $ | 103,011 | $ | 1,380,800 | |||||||||
Senior Vice President, | ||||||||||||||||||||||||||
Chief Administrative Officer and Director of Diversity and Inclusion | ||||||||||||||||||||||||||
Melody J. Feinberg** |
| 2023 | $ | 521,465 | $ | — | $ | — | $ | — | $ | 24,909 | $ | 422,000 | $ | 596,080 | $ | 1,564,454 | ||||||||
Senior Vice President, |
| 2022 | $ | 506,371 | $ | — | $ | — | $ | — | $ | 377,470 | $ | — | $ | 57,092 | $ | 940,933 | ||||||||
Chief Risk Officer |
| 2021 | $ | 488,775 | $ | — | $ | — | $ | — | $ | 316,997 | $ | 318,000 | $ | 55,403 | $ | 1,179,175 | ||||||||
Adam S. Goldstein*** | 2023 | $ | 451,214 | $ | — | $ | — | $ | — | $ | 296,891 | $ | 456,000 | $ | 106,893 | $ | 1,310,998 | |||||||||
Senior Vice President, | ||||||||||||||||||||||||||
Chief Business Officer | ||||||||||||||||||||||||||
Michael L. Radziemski | 2023 | $ | 503,159 | $ | — | $ | — | $ | — | $ | 339,767 | $ | 67,000 | $ | 57,872 | $ | 967,798 | |||||||||
Senior Vice President, |
| 2022 | $ | 481,031 | $ | — | $ | — | $ | — | $ | 351,206 | $ | 20,000 | $ | 54,546 | $ | 906,783 | ||||||||
Chief Information Officer | 2021 | $ | 467,475 | $ | — | $ | — | $ | — | $ | 288,463 | $ | 59,000 | $ | 51,620 | $ | 866,558 | |||||||||
Footnotes for Summary Compensation Table for the Year Ending December 31, 2023
| (1) | The amounts in column (g) reflect the dollar value of all earnings for services performed during the fiscal years ended December 31, 2023, 2022, and 2021 pursuant to awards under the ICP, even though fifty percent of the ICP awards for each year were subject to mandatory deferral and distribution over three years. As discussed in the Compensation Discussion and Analysis, the 2023 non-equity incentive compensation awards were subject to a 30-day review period and receipt of non-objection by the Finance Agency. The Bank received written non-objection from the Finance Agency on February 13, 2023. The amounts in column (g) also include the dollar value of all interest during each year earned on Deferred Incentive related to ICP awards for prior fiscal years, in the following amounts for 2023: $70,879 for J. González, $28,768 for K. Neylan, $19,585 for E. Artuz, $24,909 for M. Feinberg, $20,998 for A. Goldstein, and $23,727 for M. Radziemski. |
| (2) | The amounts in column (h) reflects the sum of the actuarial change in pension value for (i) the Pentegra Defined Benefit Plan for Financial Institutions and (ii) the Nonqualified Defined Benefit Portion of the Benefit Equalization Plan. These values are based on actuarial calculations and depend on the level of market interest rates in addition to other factors. These plans are described in greater detail below under “Pension Benefits.” During 2023, total pension values for J. González, K. Neylan, E. Artuz, M. Feinberg, A. Goldstein and M. Radziemski increased by $1,034,000, $937,000, $582,000, $422,000, $456,000 and $67,000, respectively. |
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| (3) | The amounts in column (c) for 2023 consist of the components in the following table which presents in dollars: |
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contributions under | ||||||||||||||||||
the Bank’s non- | ||||||||||||||||||
Bank Contributions | qualified Defined | |||||||||||||||||
under the 401(k) | Contribution Benefit | |||||||||||||||||
Name | Plan (1) | Equalization Plan (2) | Perquisite (3) | Tax Gross-ups (4) | Other(5) | Total | ||||||||||||
José R. González | $ | 18,780 | $ | 86,117 | $ | 9,278 | $ | 554 | $ | — | $ | 114,729 | ||||||
Kevin M. Neylan | $ | 9,920 | $ | 45,489 | $ | 10,916 | $ | — | $ | — | $ | 66,325 | ||||||
Edwin Artuz* | $ | 9,563 | $ | 27,785 | $ | 11,265 | $ | — | $ | 54,398 | $ | 103,011 | ||||||
Melody J. Feinberg** | $ | 18,392 | $ | 28,540 | $ | 11,546 | $ | — | $ | 537,602 | $ | 596,080 | ||||||
Adam S. Goldstein*** | $ | 19,800 | $ | 20,771 | $ | 7,152 | $ | 353 | $ | 58,817 | $ | 106,893 | ||||||
Michael L. Radziemski | $ | 18,553 | $ | 26,693 | $ | 12,626 | $ | — | $ | — | $ | 57,872 | ||||||
| (1) | Includes amount of funds matched in connection with the Pentegra Defined Contribution Plan for Financial Institutions. |
| (2) | Includes amount of funds matched in connection with the Pentegra Nonqualified Defined Contribution Portion of the BEP. |
| (3) | Perquisites are valued at the actual amounts paid by the Bank and are benefits not available to all employees on equal terms. The Bank paid premiums for each named executive officer for group term life and long-term disability insurance. |
| (4) | The Bank paid a tax gross-up amount for A. Goldstein for a fitness reimbursement. The Bank paid a tax gross-up amount for J. González for an anniversary award. This amount is included in column (c) of the Summary Compensation Table. |
| (5) | The Bank provided payment to M. Feinberg for consulting services and accrued, unused vacation. The Bank made a Profit-Sharing Plan payment to E. Artuz and A. Goldstein who were not grandfathered in the Bank’s retirement plan. |
*E. Artuz is a new NEO in 2023.
**M. Feinberg, who held the Chief Risk Officer (“CRO”) position, left the Bank on December 15, 2023. Her Board-approved annual salary was $532,196; the salary actually paid was $521,465.
***A. Goldstein was not an NEO in 2021 and 2022. Therefore, information regarding 2021 and 2022 compensation are not included in this year’s report.
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The following table sets forth information regarding all incentive plan award opportunities made available to NEOs for the calendar year 2023 (in whole dollars).
Grants of Plan-Based Awards for Calendar Year 2023
All Other | All Other | Exercise | Grant | |||||||||||||||||||||||||||
Stock | Option | or | Date | |||||||||||||||||||||||||||
Awards: | Awards: | Base | Fair Value | |||||||||||||||||||||||||||
Estimated Future Payouts | Estimated Future Payouts | Number of | Number of | Price of | of Stock | |||||||||||||||||||||||||
Under Non-Equity Incentive | Under Equity Incentive | Shares of | Securities | Option | and Option | |||||||||||||||||||||||||
Grant | Plan Awards (2) (3) | Plan Awards | Stock | Underlying | Awards | Awards | ||||||||||||||||||||||||
Name |
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| or Units |
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José R. González | 2/14/2023 | $ | 583,305 | $ | 933,288 | $ | 1,166,610 | $ | — | $ | — | $ | — | — | — | $ | — | $ | — | |||||||||||
Kevin M. Neylan |
| 2/14/2023 | $ | 184,868 | $ | 308,113 | $ | 462,170 | $ | — | $ | — | $ | — |
| — |
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Edwin Artuz |
| 2/14/2023 | $ | 124,599 | $ | 207,665 | $ | 311,498 | $ | — | $ | — | $ | — |
| — |
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Melody J. Feinberg |
| 2/14/2023 | $ | 156,439 | $ | 260,732 | $ | 391,099 | $ | — | $ | — | $ | — |
| — |
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Adam S. Goldstein | 2/14/2023 | $ | 135,364 | $ | 225,607 | $ | 338,410 | $ | — | $ | — | $ | — | — | — | $ | — | $ | — | |||||||||||
Michael L. Radziemski |
| 2/14/2023 | $ | 150,948 | $ | 251,579 | $ | 377,369 | $ | — | $ | — | $ | — |
| — |
| — | $ | — | $ | — | ||||||||
(1) | On this date, the Board of Directors’ C&HR Committee approved the 2023 Incentive Plan. Approval of the ICP does not mean a payout is guaranteed. |
(2) | Figures represent an assumed rating attained by the NEO of at least a specified threshold rating within the “Meets Requirements” category for the NEO with respect to their individual performance. |
(3) | Amounts represent potential awards under the 2023 Incentive Plan. |
Incentive Compensation Plan Opportunity Table for Calendar Year 2023
The table below provides information regarding the total incentive compensation amount awarded to NEOs based on Bank-wide goal results (in dollars):
Bankwide Component | |||||||||||||||||||||
2023 | (100% of Opportunity) | ||||||||||||||||||||
Annual Salary |
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| Maximum | Actual Result (1) | ||||||||||||||
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Bankwide | Communicated | Communicated | |||||||||||||||||||
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President |
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José R. González* | $ | 1,166,610 | $ | 583,305 | $ | 933,288 | $ | 1,166,610 | $ | 1,017,996 | $ | 1,017,996 | $ | 508,998 | |||||||
President & Chief Executive Officer | |||||||||||||||||||||
Other NEOs |
| 30% | 50% | 75% |
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Kevin M. Neylan | $ | 616,227 | $ | 184,868 | $ | 308,113 | $ | 462,170 | $ | 387,060 | $ | 387,060 | $ | 193,530 | |||||||
Senior Vice President, Chief Financial Officer | |||||||||||||||||||||
Edwin Artuz | $ | 415,330 | $ | 124,599 | $ | 207,665 | $ | 311,498 | $ | 260,874 | $ | 260,874 | $ | 130,437 | |||||||
Senior Vice President, Chief Administrative Officer and Director of Diversity and Inclusion | |||||||||||||||||||||
Melody J. Feinberg** | $ | 521,465 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||
Senior Vice President, Chief Risk Officer | |||||||||||||||||||||
Adam S. Goldstein* | $ | 451,214 | $ | 135,364 | $ | 225,607 | $ | 338,410 | $ | 275,893 | $ | 275,893 | $ | 137,946 | |||||||
Senior Vice President, Chief Business Officer | |||||||||||||||||||||
Michael L. Radziemski | $ | 503,159 | $ | 150,948 | $ | 251,579 | $ | 377,369 | $ | 316,041 | $ | 316,041 | $ | 158,020 | |||||||
Senior Vice President, Chief Information Officer | |||||||||||||||||||||
(1) | The weighted average of all employees’ results for Bankwide goals, including Risk Management, was 51.2% above target. The weighted result for Risk Management employees was 46.2%. Payments are interpolated between the target and maximum amounts. |
(2) | Incentive Compensation is calculated as follows: |
a. | The portion of the award for achieving target equals: Annual Salary multiplied by Target percentage, plus |
b. | The portion of the award for exceeding target equals: Annual Salary multiplied by the “Maximum minus Target percentage,” multiplied by the percentage above target of the participant group. |
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(3) | There may be small differences in the calculated payout amounts due to rounding. The amount represented here is the Current Communicated Award of Incentive Compensation. The Current Communicated Incentive Award is the actual payout awarded to the NEO in 2024 for performance in 2023. [Refer to Section III d (Required Deferral of IC Plan Awards) of this Compensation Discussion and Analysis for further details]. |
*The C&HR Committee exercised discretion to reduce awards based on judgment about the execution of certain Bank objectives.
**M. Feinberg, who held the CRO position, left the Bank on December 15, 2023.
Employment Arrangements
We are an “at will” employer and do not provide written employment agreements to any of our employees, except that we do provide Executive Change in Control Agreements to the NEOs (refer to Section VI. b. of the Compensation Discussion and Analysis, “Executive Change in Control Agreements”, for further details). However, employees, including NEOs, receive: (a) cash compensation (i.e., base salary, and, for exempt employees, “variable” or “at risk” short-term incentive compensation); (b) retirement-related benefits (i.e., the Qualified Defined Benefit Plan; the Qualified Defined Contribution Plan; and the Nonqualified Defined Benefit Portion of the Benefit Equalization Plan (“DB BEP”)) and (c) health and welfare programs and other benefits. Other benefits, which are available to all regular employees, include medical, dental, vision care, life, business travel accident, and short- and long-term disability insurance, flexible spending accounts, an employee assistance program, educational development assistance, voluntary life insurance, long term care insurance, fitness club reimbursement and severance pay.
An additional benefit offered to all officers who are at Vice President rank or above (including the NEOs) is a physical examination every 18 months.
The annual base salaries for the NEOs are as follows (in whole dollars):
| 2024 |
| 2023 |
| % Increase |
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José R. González | $ | 1,201,608 | $ | 1,166,610 | 3.00 | % | |||
Kevin M. Neylan | $ | 634,714 | $ | 616,227 |
| 3.00 | % | ||
Edwin Artuz | $ | 440,000 | $ | 415,330 | 5.94 | % | |||
Melody J. Feinberg* | $ | — | $ | 521,465 |
| — | % | ||
Adam S. Goldstein | $ | 469,262 | $ | 451,214 |
| 4.00 | % | ||
Michael L. Radziemski | $ | 518,254 | $ | 503,159 |
| 3.00 | % | ||
Note: Figures represent salaries approved by our Board of Directors for each year.
*M. Feinberg, who held the CRO position, left the Bank on December 15, 2023.
A performance-based merit increase program exists for all employees, including NEOs that have a direct impact on base pay. Generally, employees receive merit increases on an annual basis. Such merit increases are based upon the attainment of a performance rating of “Outstanding,” “Exceeds Requirements,” or “Meets Requirements” achieved on individual performance evaluations. Annual merit increases may also contain a market adjustment based on market compensation job benchmarking. Refer to Section II of the Compensation Discussion and Analysis, “The Total Compensation Program” for further details.
Short-Term Incentive Compensation Plan (“IC Plan”)
Refer to Section III of the Compensation Discussion and Analysis IC Plan for further details.
Qualified Defined Contribution Plan
Employees who have met the eligibility requirements contained in the Pentegra Qualified Defined Contribution Plan for Financial Institutions (“DC Plan”) can choose to contribute to the DC Plan, a retirement savings plan qualified under the IRC. Employees are eligible for membership in the DC Plan on the first day of the month following three full calendar months of employment. Refer to Section IV (DC Plan) of this Compensation Discussion and Analysis for further details.
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OUTSTANDING EQUITY AWARDS AT CALENDAR YEAR-END
AND OPTION EXERCISES AND STOCK VESTED
The tables disclosing (i) outstanding option and stock awards and (ii) exercises of stock options and vesting of restricted stock for NEOs are omitted because all employees are prohibited by law from holding capital stock issued by a Federal Home Loan Bank. As such, these tables are not applicable.
PENSION BENEFITS
The table below shows the present value of accumulated benefits payable to each of the NEO, the number of years of service credited to each such person, and payments during the last Calendar year (if any) to each such person, under the Pentegra Defined Benefit Plan for Financial Institutions and the Nonqualified Defined Benefit Portion of the Benefit Equalization Plan (amounts in whole dollars) (refer to Sections IV of the Compensation Discussion and Analysis for further details about these plans):
Pension Benefits | ||||||||||
Number of | Present Value | Payment During | ||||||||
Years Credited | of Accumulated | Last | ||||||||
Name |
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| Service (1) |
| Benefit (2) |
| Fiscal Year | ||
José R. González | Pentegra Defined Benefit Plan for Financial Institutions Qualified Plan | 9.83 | $ | 682,000 | $ | — | ||||
| Nonqualified Defined Benefit Portion of the Benefit Equalization Plan | 9.83 | $ | 6,406,000 | $ | — | ||||
Kevin M. Neylan |
| Pentegra Defined Benefit Plan for Financial Institutions Qualified Plan |
| 22.33 | $ | 2,351,000 | $ | — | ||
| Nonqualified Defined Benefit Portion of the Benefit Equalization Plan | 22.33 | $ | 6,010,000 | $ | — | ||||
Edwin Artuz |
| Pentegra Defined Benefit Plan for Financial Institutions Qualified Plan |
| 30.00 | $ | 2,616,000 | $ | — | ||
| Nonqualified Defined Benefit Portion of the Benefit Equalization Plan | 30.00 | $ | 2,889,000 | $ | — | ||||
Melody J. Feinberg* |
| Pentegra Defined Benefit Plan for Financial Institutions Qualified Plan |
| 11.83 | $ | 802,000 | $ | — | ||
| Nonqualified Defined Benefit Portion of the Benefit Equalization Plan | 11.83 | $ | 1,411,000 | $ | — | ||||
Adam S. Goldstein | Pentegra Defined Benefit Plan for Financial Institutions Qualified Plan | 26.08 | $ | 1,180,000 | $ | — | ||||
Nonqualified Defined Benefit Portion of the Benefit Equalization Plan | 26.08 | $ | 1,508,000 | $ | — | |||||
Michael L. Radziemski |
| Pentegra Defined Benefit Plan for Financial Institutions Qualified Plan |
| 4.08 | $ | 211,000 | $ | — | ||
| Nonqualified Defined Benefit Portion of the Benefit Equalization Plan | 4.08 | $ | — | $ | — | ||||
(1) | Number of years of credited service pertains to eligibility/participation in the qualified plan. Assuming the NEO is eligible for the Nonqualified Defined Benefit Portion of the Benefit Equalization Plan, years of credited service are the same as for the Pentegra Defined Benefit Plan for Financial Institutions Qualified Plan. |
(2) | As of 12/31/2023. |
*M. Feinberg, who held the CRO position, left the Bank on December 15, 2023.
217
NONQUALIFIED DEFERRED COMPENSATION PLAN
The following table discloses contributions to Nonqualified Deferred Compensation plans, each Named Executive Officer’s withdrawals (if any), aggregate earnings and year-end balances in such plans (whole dollars):
Nonqualified Deferred Compensation for Fiscal Year 2023 | |||||||||||||||
Executive | Registrant | Aggregate | Aggregate | Aggregate | |||||||||||
Contributions in | Contributions in | Earnings in | Withdrawals/ | Balance at | |||||||||||
Name |
| Last FY (1) |
| Last FY (2) |
| Last FY |
| Distributions |
| Last FYE | |||||
José R. González |
|
|
|
|
| ||||||||||
DC BEP | $ | 142,310 | $ | 86,117 | $ | 136,929 | $ | — | $ | 1,067,180 | |||||
NDICP | $ | — | $ | — | $ | — | $ | — | $ | — | |||||
Kevin M. Neylan |
|
|
|
|
| ||||||||||
DC BEP | $ | 116,323 | $ | 45,489 | $ | 70,474 | $ | — | $ | 960,517 | |||||
NDICP | $ | 367,993 | $ | — | $ | 61,924 | $ | — | $ | 1,420,666 | |||||
Edwin Artuz | |||||||||||||||
DC BEP | $ | 71,093 | $ | 27,785 | $ | 64,146 | $ | — | $ | 524,976 | |||||
NDICP | $ | — | $ | — | $ | — | $ | — | $ | — | |||||
Melody J. Feinberg* |
|
|
|
|
| ||||||||||
DC BEP | $ | 49,937 | $ | 28,540 | $ | 22,886 | $ | — | $ | 393,678 | |||||
NDICP | $ | — | $ | — | $ | 63,146 | $ | — | $ | 1,150,027 | |||||
Adam S. Goldstein |
|
|
|
|
| ||||||||||
DC BEP | $ | 28,135 | $ | 20,771 | $ | 16,038 | $ | — | $ | 132,447 | |||||
NDICP | $ | — | $ | — | $ | — | $ | — | $ | — | |||||
Michael L. Radziemski |
|
|
|
|
| ||||||||||
DC BEP | $ | 44,455 | $ | 26,693 | $ | 16,275 | $ | — | $ | 146,314 | |||||
NDICP | $ | — | $ | — | $ | — | $ | — | $ | — | |||||
(1) These amounts as they pertain to the DC BEP and NDICP are also included in the “Salary” and “Non-Equity Incentive Compensation” columns of the Summary Compensation Table, respectively, for if an executive is an NEO in a particular year; these amounts would have been paid as salary or incentive compensation but for deferral into the nonqualified plans (described above as our DC BEP and NDICP).
(2) These totals as they pertain to the DC BEP are also included in the “All Other Compensation” column of the Summary Compensation Table. There are no registrant contributions in connection with the NDICP.
*M. Feinberg, who held the CRO position, left the Bank on December 15, 2023.
Refer to Section IV of the Compensation and Discussion Analysis for more information concerning the DC BEP and NDICP.
218
DISCLOSURE REGARDING TERMINATION AND CHANGE IN CONTROL PROVISIONS
Severance Plan
The Bank has a formal Board-approved Severance Plan available to all Bank employees who work twenty or more hours a week and have at least one year of employment. (Refer to Section VI of the Compensation Discussion and Analysis, “Severance Plan”, for further details.)
The following table describes estimated severance payout information under the Severance Plan for each NEO assuming that severance would have occurred on December 31, 2023 for reasons other than a change in control (for example, a reduction in force) (amounts in whole dollars):
Number of Weeks Used to | 2023 Annual | Severance Amount | ||||||
| Calculate Severance Amount |
| Base Salary |
| Based on Years of Service* | |||
José R. González | 36 | $ | 1,166,610 | $ | 807,653 | |||
Kevin M. Neylan | 36 | $ | 616,227 | $ | 426,619 | |||
Edwin Artuz | 36 | $ | 415,330 | $ | 287,536 | |||
Melody J. Feinberg** | — | $ | — | $ | — | |||
Adam S. Goldstein | 36 | $ | 451,214 | $ | 312,379 | |||
Michael L. Radziemski | 16 | $ | 503,159 | $ | 154,818 | |||
*Additionally, under the Bank’s Severance Plan, the Bank, in its discretion, may provide a payment to be used in connection with health insurance replacement costs.
**M. Feinberg, who held the CRO position, left the Bank on December 15, 2023 and did not receive severance.
219
Executive Change in Control Agreements
Executive Change in Control Agreements (“CIC Agreements”) were executed in January 2016 between the FHLBNY and each of the members of the Management Committee, including the CEO and the other Named Executive Officers, which, as more fully described below, would provide the executive with certain severance payments and benefits in the event employment is terminated in connection with a Bank “change in control”. The CIC Agreements were renewed in January 2022 for an additional three-year period.
The following table describes estimated severance and benefit payout information under the CIC Agreements for each NEO assuming that a “change in control” merger or acquisition would have occurred on December 31, 2023 (amounts in whole dollars). (Refer to Section VI of the Compensation Discussion and Analysis, “Executive Change in Control Agreements”, for further details).
Sample CIC Agreement Contract Pay-Outs Assuming December 31, 2023 Bank Merger or Acquisition
| Jose |
| Kevin |
| Edwin | Melody |
| Adam |
| Michael | ||||||||
Provision | González | Neylan | Artuz |
| Feinberg | Goldstein | Radziemski | |||||||||||
Amount equal to the executive’s average gross base salary for the three years prior to his employment termination date (with any partial years being annualized), multiplied by 2.99 for Mr. Gonzàlez, and 1.5 for Messrs. Neylan, Artuz, Goldstein, Radziemski, and Ms. Feinberg | $ | 3,261,701 | $ | 884,250 | $ | 599,135 | $ | 758,305 | $ | 647,466 | $ | 725,833 | ||||||
Amount equal to the executive’s full target incentive payout estimate, or the actual amount of the payment to the executive under the FHLBNY’s Incentive Compensation Plan, if lower, in either case, in respect of the year prior to the year of the employment termination date, multiplied by 2.99 for Mr. Gonzàlez, and 1.5 for Messrs. Neylan, Artuz, Goldstein, Radziemski, and Ms. Feinberg | $ | 2,382,432 | $ | 424,463 | $ | 289,406 | $ | 366,581 | $ | 310,800 | $ | 350,606 | ||||||
Amount equal to the cost of health, dental and vision care benefits that FHLBNY actually incurred by FHLBNY on behalf of the Executive and his dependents, if any, during the twelve (12) months prior to the executive’s employment termination date | $ | 24,219 | $ | 30,551 | $ | 33,819 | $ | 2,000 | $ | 33,657 | $ | 35,032 | ||||||
A payment in the amount of $15,000 which may be used by the Executive for job search-related expenses | $ | 15,000 | $ | 15,000 | $ | 15,000 | $ | 15,000 | $ | 15,000 | $ | 15,000 | ||||||
A payment in the amount of $15,000 which may be used by the Executive for accounting, actuarial, financial, legal and/or tax services | $ | 15,000 | $ | 15,000 | $ | 15,000 | $ | 15,000 | $ | 15,000 | $ | 15,000 | ||||||
Additional age and service credits under the FHLBNY non-qualified Benefit Equalization Plan (“Nonqualified DB BEP”) of three (3) years for Mr. Gonzàlez and one and one-half (1.5) years for Messrs. Neylan, Artuz, Goldstein, Radziemski, and Ms. Feinberg | $ | 2,256,561 | $ | 714,551 | $ | 181,212 | $ | 359,361 | $ | 227,280 | $ | 251,930 | ||||||
Additional age and service credits under the FHLBNY qualified & non-qualified defined contribution plan of three (3) years for Mr. Gonzàlez and one and one-half (1.5) years for Messrs. Neylan, Artuz, Goldstein, Radziemski, and Ms. Feinberg | $ | 314,985 | $ | 83,191 | $ | 56,070 | $ | 70,398 | $ | 60,914 | $ | 67,926 | ||||||
Total value of contract | $ | 8,269,898 | $ | 2,167,006 | $ | 1,189,642 | $ | 1,586,645 | $ | 1,310,117 | $ | 1,461,327 | ||||||
Additionally, in the event of a change in control, the executive will be paid deferred incentive compensation otherwise owed under the terms of the deferred portion of the Bank’s Incentive Compensation Plan (as described at Section III of this Compensation Discussion and Analysis, “Required Deferral of IC Plan Award”).
220
CEO Pay Ratio
For the year ended December 31, 2023, the ratio of our CEO’s Total Compensation to the FHLBNY’s median of the annual Total Compensation of all our employees, except the CEO (“Median Employee”) is (15.4:1). Total Compensation of the Median Employee for 2023 is calculated in the same manner. “Total Compensation” for 2023 is shown for our CEO in the Summary Compensation Table, which includes, among other things, amounts attributable to the change in pension value, which will vary among employees based upon their tenure at the FHLBNY. During 2023, the total pension values for the Median Employee was $32,000. For 2023, the Total Compensation of the Median Employee was $212,190 and the Total Compensation of the CEO, as reported in the Summary Compensation Table, was $3,404,214.
We identified the Median Employee using the date of October 1, 2023, by compiling the amount of base salary and incentive awards as reflected in our payroll records for each of the employees who were employed by the FHLBNY in 2023 regardless of current employment status and ranking the annualized cash compensation for all such employees (a list of 363 employees) from lowest to highest, excluding the CEO, and which was applied consistently to all our employees included in the calculation. We believe this compensation measure reasonably reflects the annual compensation of all the FHLBNY employees and was prepared under applicable SEC rules. The FHLBNY included all full-time employees in the calculation of the Median Employee and annualized all such employees who were not employed by us for all of 2023.
DIRECTOR COMPENSATION
The following table summarizes the compensation paid by us to each of our Directors for the year ended December 31, 2023 (whole dollars):
Change in | ||||||||||||||||||||||
Pension Value | ||||||||||||||||||||||
and Nonqualified | ||||||||||||||||||||||
Fees | Non-Equity | Deferred | ||||||||||||||||||||
Earned or | Stock | Option | Incentive Plan | Compensation | All Other | |||||||||||||||||
Name |
| Paid in Cash |
| Awards |
| Awards |
| Compensation |
| Earnings |
| Compensation |
| Total | ||||||||
John R. Buran (2023 Chair) | $ | 152,500 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 152,500 | ||||||||
Larry E. Thompson* (2023 Vice Chair) |
| 142,500 |
| — |
| — |
| — |
| — |
| — |
| 142,500 | ||||||||
Melba I. Acosta | 120,000 | — | — | — | — | — | 120,000 | |||||||||||||||
Danelle M. Barrett | 130,000 | — | — | — | — | — | 130,000 | |||||||||||||||
Thomas R. Cangemi |
| 120,000 |
| — |
| — |
| — |
| — |
| — |
| 120,000 | ||||||||
Thomas L. Hoy** |
| 65,000 |
| — |
| — |
| — |
| — |
| — |
| 65,000 | ||||||||
David R. Huber |
| 130,000 |
| — |
| — |
| — |
| — |
| — |
| 130,000 | ||||||||
Thomas J. Kemly |
| 120,000 |
| — |
| — |
| — |
| — |
| — |
| 120,000 | ||||||||
Charles E. Kilbourne, III |
| 130,000 |
| — |
| — |
| — |
| — |
| — |
| 130,000 | ||||||||
Kenneth J. Mahon** |
| 125,000 |
| — |
| — |
| — |
| — |
| — |
| 125,000 | ||||||||
Christopher P. Martin | 130,000 | — | — | — | — | — | 130,000 | |||||||||||||||
David J. Nasca |
| 130,000 |
| — |
| — |
| — |
| — |
| — |
| 130,000 | ||||||||
Gerald L. Reeves |
| 120,000 |
| — |
| — |
| — |
| — |
| — |
| 120,000 | ||||||||
Ira Robbins |
| 120,000 |
| — |
| — |
| — |
| — |
| — |
| 120,000 | ||||||||
Stephen S. Romaine** |
| 105,000 |
| — |
| — |
| — |
| — |
| — |
| 105,000 | ||||||||
DeForest B. Soaries, Jr. |
| 120,000 |
| — |
| — |
| — |
| — |
| — |
| 120,000 | ||||||||
Josie J. Thomas |
| 120,000 |
| — |
| — |
| — |
| — |
| — |
| 120,000 | ||||||||
Carlos J. Vázquez | 120,000 | — | — | — | — | — | 120,000 | |||||||||||||||
Ángela Weyne |
| 120,000 |
| — |
| — |
| — |
| — |
| — |
| 120,000 | ||||||||
Total Fees | $ | 2,320,000 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 2,320,000 | ||||||||
* Director Thompson received, in accordance with the Director Compensation Policy discussed below, an additional $10,000 for his service as Chair of the Bank Directors Committee of the Council of Federal Home Loan Banks in 2023.
** All Directors received their maximum potential compensation in 2023 except for Director Hoy, who passed away on June 11, 2023, and Director Romaine, who missed two Board meetings and therefore could not receive his full director compensation opportunity for 2023. Director Mahon became Chair of the Board’s Strategy & Business Committee in June 2023 after the death of Director Hoy. This increased Director Mahon’s fee opportunity for the remainder of the year.
221
Director Compensation Policy: Director Fee Opportunities
The Board establishes on an annual basis a Director Compensation Policy governing compensation for Board meeting attendance. This policy is established in accordance with the provisions of the Federal Home Loan Bank Act (Bank Act) and related Federal Housing Finance Agency. In sum, the applicable statutes and regulations allow each FHLBank to pay its Directors reasonable compensation and expenses, subject to the authority of the Director of the Finance Agency to object to, and to prohibit prospectively, compensation and/or expenses that the Director of the Finance Agency determines are not reasonable. The Director Compensation Policy provides that directors shall be paid a meeting fee for their attendance at meetings of the Board of Directors up to a maximum annual compensation amount as set forth in the Director Compensation Policy.
In determining appropriate and reasonable fee opportunities available to FHLBNY Directors, the Board takes into consideration the following factors:
| ● | the desire to attract and retain highly qualified and skilled individuals in order to help guide a complex and highly-regulated financial institution that is subject to a variety of financial, reputational and other risks; |
| ● | the highly competitive environment for talent in the New York City metropolitan area — a center of world finance in which stock exchanges, securities companies and other sophisticated financial institutions are located (and in this regard, we note that Directors are required to be sourced from within the District and the pay rate should reflect the local market); |
| ● | the demands of the Director position, including the time and effort that Directors must devote to FHLBNY and Board business as the Board meets more frequently than many public company boards; |
| ● | the FHLBNY must pay competitive director compensation in order to attract and retain diverse board members who often have several opportunities to join other boards; |
| ● | the overall performance of the FHLBNY, an institution that is a Federal Home Loan Bank System leader, a strong financial performer, a reliable source of liquidity for its customers, and a provider of a consistent dividend — and an institution which wishes to maintain this performance; and |
| ● | Director compensation surveys performed over time by outside compensation consultants, most recently in 2023 — surveys which have provided the Directors with the ability to compare Director compensation opportunities with compensation opportunities available at other institutions. |
The Board reviews the issue of appropriate and reasonable Director fee opportunities on an annual basis.
222
Below are tables summarizing the Director fees and the annual compensation limits that were set by the Board for 2023. Following these tables are additional tables summarizing the Director fees and the annual compensation limits set by the Board for 2024.
Director Fee Opportunities — 2023 (in whole dollars)
Fees For Each Board | |||
Meeting Attended | |||
Position |
| (Paid Quarterly in Arrears) (b) | |
Chairman | $ | 19,062 | |
Vice Chairman | $ | 16,562 | |
Committee Chairs (a) | $ | 16,250 | |
All Other Directors | $ | 15,000 | |
Director Annual Compensation Limits — 2023 (in whole dollars)
Position |
| Annual Limit | |
Chairman | $ | 152,500 | |
Vice Chairman | $ | 132,500 | |
Committee Chairs (a) | $ | 130,000 | |
All Other Directors | $ | 120,000 | |
(a) | A Committee Chair does not receive any additional payment if he or she serves as the Chair of more than one Board Committee. In addition, the Board Chair and Board Vice Chair do not receive any additional compensation if they serve as a Chair of one or more Board Committees. |
(b) | The numbers in this column represent payments for each of eight meetings attended by the Committee Chairs and all other Directors other than the Board Chair and Board Vice Chair. The numbers in this column also represent payments for each of seven meetings attended by the Board Chair and the Board Vice Chair. If an eighth meeting is attended by the Board Chair, they will receive $19,066 for that meeting. If an eighth meeting is attended by the Board Vice Chair, they will receive $16,566 for that meeting. |
Director Fee Opportunities — 2024 (in whole dollars)
Fees For Each Board | |||
Meeting Attended | |||
Position |
| (Paid Quarterly in Arrears) (b) | |
Chairman | $ | 19,512 | |
Vice Chairman | $ | 17,325 | |
Committee Chairs (a) | $ | 16,250 | |
All Other Directors | $ | 15,375 | |
Director Annual Compensation Limits — 2024 (in whole dollars)
Position |
| Annual Limit | |
Chairman | $ | 156,100 | |
Vice Chairman | $ | 138,600 | |
Committee Chairs (a) | $ | 130,000 | |
All Other Directors | $ | 123,000 | |
| (a) | A Committee Chair does not receive any additional payment if he or she serves as the Chair of more than one Board Committee. In addition, the Board Chair and Board Vice Chair do not receive any additional compensation if they serve as a Chair of one or more Board Committees. |
| (b) | The numbers in this column represent payments for each of eight meetings attended by the Board Vice Chair, the Committee Chairs and all other Directors. The numbers in this column also represent payments for each of seven meetings attended by the Board Chair. If an eighth meeting is attended by the Board Chair, they will receive $19,516 for that meeting. |
223
Director Compensation Policy: Director Expenses
The Director Compensation Policy also authorizes us to reimburse Directors for necessary and reasonable travel, subsistence, and other related expenses incurred in connection with the performance of their official duties. For expense reimbursement purposes, Directors’ official duties can include:
| ● | Meetings of the Board and Board Committees |
| ● | Meetings requested by the Federal Housing Finance Agency |
| ● | Meetings of Federal Home Loan Bank System committees |
| ● | Federal Home Loan Bank System director orientation meetings |
| ● | Meetings of the Council of Federal Home Loan Banks and Council committees |
| ● | Attendance at other events on behalf of the Bank with prior approval |
224
Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
FHLBNY stock can only be held by member financial institutions. No person, including directors and executive officers of the FHLBNY, may own our capital stock. As such, we do not offer any compensation plan to any individuals under which equity securities of the Bank are authorized for issuance. The following tables provide information about those members who were beneficial owners of more than 5% of our outstanding capital stock (shares in thousands) as of February 29, 2024 and December 31, 2023:
|
|
| Number |
| Percent |
| |
February 29, 2024 | of Shares | of Total |
| ||||
Name of Beneficial Owner | Principal Executive Office Address | Owned | Capital Stock |
| |||
Flagstar Bank, N.A. | 102 Duffy Avenue, Hicksville, NY, 11801 |
| 10,182 | 16.46 | % | ||
Citibank, N.A. | 399 Park Avenue, New York, NY, 10043 | 8,383 | 13.55 | ||||
MetLife, Inc.: | |||||||
Metropolitan Life Insurance Company | 200 Park Avenue, New York, NY, 10166 | 6,366 | 10.29 | ||||
Metropolitan Tower Life Insurance Company | 200 Park Avenue, New York, NY, 10166 | 776 | 1.25 | ||||
Subtotal MetLife, Inc. | 7,142 | 11.54 | |||||
Manufacturers and Traders Trust Company | One M & T Plaza, Buffalo, NY, 14203 | 4,376 | 7.07 | ||||
Teachers Ins. & Annuity Assoc. of America | 730 Third Avenue, New York, NY, 10017 | 4,143 | 6.70 | ||||
Equitable Financial Life Insurance Co. |
| 1290 Avenue of the Americas, New York, NY, 10104 |
| 3,453 |
| 5.58 | |
|
| 37,679 |
| 60.90 | % |
|
|
| Number |
| Percent |
| |
December 31, 2023 | of Shares | of Total |
| ||||
Name of Beneficial Owner | Principal Executive Office Address | Owned | Capital Stock |
| |||
Citibank, N.A. | 399 Park Avenue, New York, NY, 10043 | 9,282 | 15.33 | % | |||
Flagstar Bank, N.A. | 102 Duffy Avenue, Hicksville, NY, 11801 | 8,606 | 14.21 | ||||
MetLife, Inc.: |
|
|
|
| |||
Metropolitan Life Insurance Company | 200 Park Avenue, New York, NY, 10166 | 6,366 | 10.51 | ||||
Metropolitan Tower Life Insurance Company | 200 Park Avenue, New York, NY, 10166 | 776 | 1.28 | ||||
Subtotal MetLife, Inc. | 7,142 | 11.79 | |||||
Teachers Ins. & Annuity Assoc. of America | 730 Third Avenue, New York, NY, 10017 | 3,666 | 6.05 | ||||
Equitable Financial Life Insurance Company | 1290 Avenue of the Americas, New York, NY, 10104 | 3,566 | 5.89 | ||||
|
|
| 32,262 |
| 53.27 | % |
All capital stock held by each member of the FHLBNY is by law automatically pledged to the FHLBNY as additional collateral for all indebtedness of each such member to the FHLBNY.
|
|
|
|
|
|
| December 31, 2023 |
| |||
Number |
| Percent | |||||||||
of Shares | of Total |
| |||||||||
Name | Director | City | State | Owned | Capital Stock |
| |||||
Flagstar Bank, N.A |
| Thomas R Cangemi (a) |
| Hicksville |
| NY |
| 8,606 |
| 14.21 | % |
Valley National Bank |
| Ira Robbins |
| Wayne |
| NJ |
| 1,603 |
| 2.65 | |
Provident Bank |
| Christopher P. Martin |
| Iselin |
| NJ |
| 791 |
| 1.31 | |
Columbia Bank |
| Thomas J. Kemly |
| Fair Lawn |
| NJ |
| 780 |
| 1.29 | |
Dime Community Bank |
| Kenneth J. Mahon (b) |
| New York |
| NY |
| 735 |
| 1.21 | |
Tompkins Trust Company | Stephen S. Romaine | Ithaca | NY | 336 | 0.56 | ||||||
Flushing Bank | John R. Buran (c) | Uniondale | NY | 311 | 0.51 | ||||||
Banco Popular de Puerto Rico | Carlos J. Vazquez | San Juan | PR | 263 | 0.43 | ||||||
Banco Popular North America |
| Carlos J. Vazquez |
| San Juan |
| PR |
| 233 |
| 0.38 | |
Evans Bank, N.A |
| David J. Nasca |
| Williamsville |
| NY |
| 49 |
| 0.08 | |
| 13,707 |
| 22.63 | % | |||||||
| (a) | Director Cangemi left the Board as of March 11, 2024. |
| (b) | Director Mahon left the Board as of December 31, 2023. |
| (c) | Director Buran left the Board as of December 31, 2023. |
225
Item 13.Certain Relationships and Related Transactions, and Director Independence.
We have a cooperative structure and our customers own the entity’s capital stock. Capital stock ownership is a prerequisite to the transaction by members of any business with us. The majority of the members of our Board of Directors are Member Directors (i.e., directors elected by our members who are officers or directors of our members). The remaining members of the Board are Independent Directors (i.e., directors elected by our members who are not officers or directors of our members). We conduct our advances and mortgage loan business almost exclusively with members. Grants under the AHP and AHP advances are also made in partnership or in connection with our members. Therefore, in the normal course of business, we may extend credit to members whose officers or directors may serve as our directors. In addition, we may also extend credit and offer services and AHP benefits to members who own more than 5% of our stock. All products, services and AHP benefits extended by us to such members are provided at market terms and conditions that are no more favorable to them than the terms and conditions of comparable transactions with other members. Under the provisions of Section 7(j) of the FHLBank Act (12 U.S.C. § 1427(j)), our Board is required to administer our business with our members without discrimination in favor of or against any member. For more information about transactions with stockholders, see Note 20. Related Party Transactions, in the audited financial statements in this Form 10-K.
The review and approval of transactions with related persons is governed by the Bank’s written Code of Ethics and Business Conduct (Code), which is posted on the Corporate Governance Section of the FHLBNY’s website at https://www.fhlbny.com. Under the Code, each director is required to disclose to the Board of Directors all actual or apparent conflicts of interest, including any personal financial interest that he or she has, as well as such interests of any immediate family member or business associate of the director known to the director, in any matter to be considered by the Board of Directors or in which another person does, or proposes to do, business with the Bank. Following such disclosure, the Board of Directors is empowered to determine whether an actual conflict exists. In the event the Board of Directors determines the existence of a conflict with respect to any matter, the affected director must recuse himself or herself from all further considerations relating to that matter. Issues under the Code regarding conflicts of interests involving directors are administered by the Board or, in the Board’s discretion, the Board’s Corporate Governance Committee.
The Code also provides that, subject to certain limited exceptions for, among other items, interests arising through ownership of mutual funds and certain financial interests acquired prior to employment by the Bank, no Bank employee may have a financial interest in any Bank member. Extensions of credit from members to employees are acceptable that are entered into or established in the ordinary, normal course 1of business, so long as the terms are no more favorable than would be available in like circumstances to persons who are not employees of the Bank. Employees provide disclosures regarding financial interests and financial relationships on a periodic basis. These disclosures are provided to and reviewed by the Director of Human Resources and Corporate Real Estate, who is (along with the Chief Audit Officer) one of the Bank’s two Ethics Officers; the Ethics Officers have responsibility for enforcing the Code of Ethics with respect to employees on a day-to-day basis.
Director Independence
In General
During the period from January 1, 2023 through and including the date of this annual report on Form 10-K, the Bank had a total of 21 directors serving on its Board, 13 of whom were Member Directors (i.e., directors elected by the Bank’s members who are officers or directors of Bank members) and 9 of whom were Independent Directors (i.e., directors elected by the Bank’s members who are not officers or directors of Bank members). All of the Bank’s directors were independent of management from the standpoint that they were not, and could not serve as, Bank employees or officers. Also, all individuals, including the Bank’s directors, are prohibited by law from personally owning stock or stock options in the Bank. In addition, the Bank is required to determine whether at least some of its directors are independent under two distinct director independence standards. First, Federal Housing Finance Agency (Finance Agency) regulations establish independence criteria for directors who serve as members of the Audit Committee of the Board of Directors. Second, for disclosure purposes, the Securities and Exchange Commission’s (SEC) regulations require that the Bank disclose whether the members of its Board of Directors are independent under the independence criteria of a national securities exchange or an inter-dealer quotation system in assessing the independence of its directors. In addition, Rule 10A-3 promulgated under the Exchange Act sets forth the independence requirements of directors serving on the Audit Committee of an SEC reporting company.
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Finance Agency Regulations Regarding Independence
The Finance Agency director independence standards prohibit individuals from serving as members of the Bank’s Audit Committee if they have one or more disqualifying relationships with the Bank or its management that would interfere with the exercise of that individual’s independent judgment. Under Finance Agency regulations, disqualifying relationships can include, but are not limited to: employment with the Bank at any time during the last five years; acceptance of compensation from the Bank other than for service as a director; being a consultant, advisor, promoter, underwriter or legal counsel for the Bank at any time within the last five years; and being an immediate family member of an individual who is or who has been within the past five years, a Bank executive officer. The Board of Directors has assessed the independence of all directors under the Finance Agency’s independence standards, regardless of whether they serve on the Audit Committee. From January 1, 2023 through and including the date of this Annual Report on Form 10-K, the Board has determined that all of the persons who served as a director of the Bank, including all directors who served as members of the Audit Committee, were independent under these criteria.
Exchange Act and NYSE Rules Regarding Independence
In addition, pursuant to SEC regulations, for disclosure purposes, the Board applies the independence standards of the New York Stock Exchange (NYSE) to determine which of its directors and committee members are independent. The Board also applies Rule 10A-3 to determine the independence of the directors serving on its Audit Committee.
After applying the NYSE independence standards, the Board has determined that all of the Bank’s Independent Directors who served at any time during the period from January 1, 2023 through and including the date of this annual report on Form 10-K (i.e., Melba I. Acosta, Danelle M. Barrett, David R. Huber, Charles E. Kilbourne, III, Carolyn B. Maloney, DeForest B. Soaries, Jr., Josie J. Thomas, Larry E. Thompson and Ángela Weyne) were independent.
Separately, the Board was unable to affirmatively determine that there were no material relationships (as defined in the NYSE rules) between the Bank and its Member Directors, and has therefore concluded that none of the Bank’s Member Directors who served at any time during the aforementioned period (i.e., John R. Buran, Thomas R. Cangemi, Robert M. Fisher, Thomas L. Hoy, Thomas J. Kemly, Kenneth J. Mahon, Christopher P. Martin, David J. Nasca, Gerald L. Reeves, Ira Robbins, Stephen S. Romaine, Anders M. Tomson, and Carlos J. Vázquez) were independent under the NYSE independence standards.
In making this determination, the Board considered the cooperative relationship between the Bank and its members. Specifically, the Board considered the fact that each of the Bank’s Member Directors are officers of a Bank member institution, and that each member institution has access to, and is encouraged to use, the Bank’s products and services.
Furthermore, the Board acknowledges that under NYSE rules, there are certain objective tests that, if not passed, would preclude a finding of independence. One such test pertains to the amount of business conducted with the Bank by the Member Director’s institution. It is possible that a Member Director could satisfy this test on a particular day. However, because the amount of business conducted by a Member Director’s institution may change frequently, and because the Bank generally desires to increase the amount of business it conducts with each member, the directors deemed it inappropriate to draw distinctions among the Member Directors based solely upon the amount of business conducted with the Bank by any director’s institution at a specific time.
Notwithstanding the foregoing, the Board believes that it functions as a governing body that can and does act with good judgment with respect to the corporate governance and business affairs of the Bank. The Board is aware of its statutory responsibilities under Section 7(j) of the Federal Home Loan Bank Act, which specifically provides that the Board of Directors of a Federal Home Loan Bank must administer the affairs of the Home Loan Bank fairly and impartially and without discrimination in favor of or against any member borrower.
The Board has a standing Audit Committee. For the reasons noted above, the Board has determined that none of the Member Directors who served at any time as members of the Board’s Audit Committee during the period from January 1, 2023 through and including the date of this annual report on Form 10-K (Robert M. Fisher, Thomas L. Hoy, Thomas J. Kemly, Christopher P. Martin, Gerald L. Reeves, and Anders M. Tomson) were independent under the NYSE standards for such committee members. The Board also determined that the Independent Directors who served as members of the Board’s Audit Committee during the period from January 1, 2023 through and including the date of this annual report on Form 10-K (Melba I. Acosta, David R. Huber, Charles E. Kilbourne, III
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and Larry E. Thompson) were independent under the NYSE independence standards for such committee members. The Board also applied Rule 10A-3 to assess the independence of the members of its Audit Committee.
Under Rule 10A-3, in order to be considered independent, a member of the Audit Committee may not, other than in his or her capacity as a member of the Board or any other Board Committee (i) accept any consulting, advisory, or other compensation from us or (ii) be an affiliated person of the Bank. During the period from January 1, 2023 through and including the date of this annual report on Form 10-K, all of our directors, including all members of our Audit Committee, were independent under these criteria.
The Board also has a standing Compensation & Human Resources Committee (C&HRC). For the reasons noted above, the Board has determined that none of the Member Directors who served at any time as members of the Bank’s C&HRC during the period from January 1, 2023 through and including the date of this annual report on Form 10-K (Thomas J. Kemly, Kenneth J. Mahon, Christopher P. Martin, and David J. Nasca) were independent under the NYSE standards for such committee members. The Board also determined that the Independent Directors who served as members of the Board’s C&HRC during the period from January 1, 2023 through and including the date of this annual report on Form 10-K (David R. Huber, DeForest B. Soaries, Jr., Josie J. Thomas and Ángela Weyne) were independent under the NYSE independence standards for such committee members.
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Item 14.Principal Accounting Fees and Services.
The following table sets forth the fees paid to our independent registered public accounting firm, PricewaterhouseCoopers, LLP (PwC), during years ended December 31, 2023, 2022 and 2021 (in thousands):
Years ended December 31, | |||||||||
| 2023 (a) |
| 2022 (a) |
| 2021 (a) | ||||
Audit Fees and Expenses | $ | 1,051 | $ | 1,068 | $ | 995 | |||
Audit-related Fees |
| 69 |
| 66 |
| 61 | |||
Tax Fees |
| 20 |
| — |
| 20 | |||
All Other Fees |
| 3 |
| 3 |
| 4 | |||
Total | $ | 1,143 | $ | 1,137 | $ | 1,080 | |||
(a) | The amounts in the table do not include the assessment from the Office of Finance (OF) for the Bank’s share of the audit fees of approximately $72 thousand, $69 thousand and $74 thousand for 2023, 2022 and 2021, incurred in connection with the audit of the combined financial statements published by the OF. |
AUDIT FEES
Audit fees relate to professional services rendered in connection with the audit of the FHLBNY’s annual financial statements, and review of interim financial statements included in quarterly reports on Form 10-Q.
AUDIT-RELATED FEES
Audit-related fees primarily relate to consultation services provided in connection with respect to certain accounting and reporting standards.
TAX FEES
Tax fees relate to consultation services provided primarily with respect to tax withholding matters.
ALL OTHER FEES
These other fees are primarily related to review of various accounting matters and consultation services.
Policy on Audit Committee Pre-approval of Audit and Non-Audit Services Performed by the Independent Registered Public Accounting Firm.
We have adopted a policy that prohibits our independent registered public accounting firm from performing non-financial consulting services, such as information technology consulting and internal audit services. This policy also mandates that the audit and non-audit services and related budget be approved by the full Audit Committee or Audit Committee Chair in advance, and that the Audit Committee be provided with periodic reporting on actual spending. In accordance with this policy, all services to be performed by PwC were pre-approved by either the full Audit Committee or the Audit Committee Chair.
Subsequent to the enactment of the Sarbanes-Oxley Act of 2002 (the “Act”), the Audit Committee has met with PwC to further understand the provisions of that Act as it relates to independence. PwC will rotate the lead audit partner and other partners as appropriate in compliance with the Act. The Audit Committee will continue to monitor the activities undertaken by PwC to comply with the Act.
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PART IV
Item 15.Exhibits, Financial Statement Schedules.
| (a) | 1. Financial Statements |
The financial statements included as part of this Form 10-K are identified in the index to the Financial Statements appearing in Item 8 of this Form 10-K, which index is incorporated in this Item 15 by reference.
2. Financial Statement Schedules
Financial statement schedules have been omitted because they are not applicable or the required information is shown in the financial statements or notes, under Item 8, “Financial Statements and Supplementary Data.”
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3. Exhibits
No. |
| Exhibit Description |
| Filed with |
| Form* |
| Date Filed |
3.01 | Restated Organization Certificate of the Federal Home Loan Bank of New York (“Bank”) | 8-K | 12/1/2005 | |||||
3.02 | 8-K | 8/18/2023 | ||||||
4.01 | 8-K | 6/24/2022 | ||||||
4.02 | X | |||||||
10.01 | 8-K | 4/6/2020 | ||||||
10.02 | 8-K | 5/7/2021 | ||||||
10.03 | 8-K | 3/30/2022 | ||||||
10.04 | 8-K | 10/3/2023 | ||||||
10.05 | X | |||||||
10.06 | 10-K | 3/17/2023 | ||||||
10.07 | X | |||||||
10.08 | Bank Amended and Restated Nonqualified Deferred Incentive Compensation Plan(a) | 10-K | 3/17/2023 | |||||
10.09 | 10-K | 3/25/2013 | ||||||
10.10 | Amended and Restated Federal Home Loan Banks P&I Funding and Contingency Agreement (2017) | 10-K | 3/22/2017 | |||||
10.11 | 10-K | 3/22/2022 | ||||||
10.12 | Amended Joint Capital Enhancement Agreement among the Federal Home Loan Banks | 8-K | 8/5/2011 | |||||
10.13 | X | |||||||
31.01 | X | |||||||
31.02 | X | |||||||
32.01 | X | |||||||
32.02 | X | |||||||
99.01 | X | |||||||
99.02 | X | |||||||
101.INS | XBRL Instance Document - The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document. | X | ||||||
101.SCH | XBRL Taxonomy Extension Schema Document | X | ||||||
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document | X | ||||||
101.DEF | XBRL Taxonomy Extension Definition 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 | ||||||
104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101 | 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.
(a) This exhibit includes a management contract, compensatory plan or arrangement required to be noted herein.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Federal Home Loan Bank of New York | ||
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| By: | /s/ José R. González |
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| José R. González |
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| President and Chief Executive Officer |
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Date: March 21, 2024
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated below:
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/s/ José R. González |
| President and Chief Executive Officer |
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José R. González |
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(Principal Executive Officer) |
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/s/ Kevin M. Neylan |
| Senior Vice President and Chief Financial Officer |
| March 21, 2024 |
Kevin M. Neylan |
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(Principal Financial Officer) |
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/s/ Scott Kay |
| Vice President, Chief Accounting Officer and Controller |
| March 21, 2024 |
Scott Kay |
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(Principal Accounting Officer) |
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/s/ Larry E. Thompson |
| Chairman of the Board of Directors |
| March 21, 2024 |
Larry E. Thompson |
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/s/ David J. Nasca |
| Vice Chairman of the Board of Directors |
| March 21, 2024 |
David J. Nasca |
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/s/ Melba I. Acosta | Director | March 21, 2024 | ||
Melba I. Acosta | ||||
/s/ Danelle M. Barrett |
| Director |
| March 21, 2024 |
Danelle M. Barrett |
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/s/ Robert M. Fisher |
| Director |
| March 21, 2024 |
Robert M. Fisher |
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/s/ David R. Huber |
| Director |
| March 21, 2024 |
David R. Huber |
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/s/ Thomas J. Kemly |
| Director |
| March 21, 2024 |
Thomas J. Kemly |
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Signature |
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/s/ Charles E. Kilbourne, III |
| Director |
| March 21, 2024 |
Charles E. Kilbourne, III |
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/s/ Carolyn B. Maloney |
| Director |
| March 21, 2024 |
Carolyn B. Maloney |
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/s/ Christopher P. Martin |
| Director |
| March 21, 2024 |
Christopher P. Martin |
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/s/ Gerald L. Reeves |
| Director |
| March 21, 2024 |
Gerald L. Reeves |
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/s/ Ira Robbins | Director | March 21, 2024 | ||
Ira Robbins | ||||
/s/ Stephen S. Romaine |
| Director |
| March 21, 2024 |
Stephen S. Romaine |
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/s/ Josie J. Thomas |
| Director |
| March 21, 2024 |
Josie J. Thomas |
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/s/ Anders M. Tomson |
| Director |
| March 21, 2024 |
Anders M. Tomson |
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/s/ Carlos J. Vázquez |
| Director |
| March 21, 2024 |
Carlos J. Vázquez |
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/s/ Ángela Weyne |
| Director |
| March 21, 2024 |
Ángela Weyne |
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