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The Federal Reserve
Bank of Atlanta
Financial Statements as of and for the Years Ended
December 31, 2009 and 2008 and
Independent Auditors' Report
All table units in this document are in millions of U.S. dollars unless otherwise noted.
T H E
F E D E R A L
R E S E R V E
B A N K
O F
A T L A N T A
TABLE OF CONTENTS
MANAGEMENT'S ASSERTION
page
INDEPENDENT AUDITORS' REPORT
1
pages
2-3
FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED
D E C E M B E R 31, 2 0 0 9 A N D 2008:
Statements of Condition
page
4
Statements of Income and Comprehensive Income
Statements o f C h a n g e s in Capital
Notes to Financial Statements
page
page
pages
5
6
7-31
FEDERAL
RESERVE
BANK
of ATLANTA
April 21, 2010
To the Board of Directors of the Federal Reserve Bank of Atlanta:
1000 Peachtree Street, N.E.
Atlanta, Georgia 303094470
404.498.8500
The management of the Federal Reserve Bank of Atlanta ("FRB Atlanta") is responsible for the
preparation and fair presentation of the Statements of Condition, Statements of Income and
Comprehensive Income, and Statements of Changes in Capital as of December 31, 2009 (the "Financial
Statements"). The Financial Statements have been prepared in conformity with the accounting principles,
policies, and practices established by the Board of Governors of the Federal Reserve System as set forth
in the Financial Accounting Manual for the Federal Reserve Banks ("Manual"), and, as such, include
some amounts that are based on management judgments and estimates. To our knowledge, the Financial
Statements are, in all material respects, fairly presented in conformity with the accounting principles,
policies and practices documented in the Manual and include all disclosures necessary for such fair
presentation.
The management of the FRB Atlanta is responsible for establishing and maintaining effective internal
control over financial reporting as it relates to the Financial Statements. Such internal control is designed
to provide reasonable assurance to management and to the Board of Directors regarding the preparation of
the Financial Statements in accordance with the Manual. Internal control contains self-monitoring
mechanisms, including, but not limited to, divisions of responsibility and a code of conduct. Once
identified, any material deficiencies in internal control are reported to management and appropriate
corrective measures are implemented.
Even effective internal control, no matter how well designed, has inherent limitations, including the
possibility of human error, and therefore can provide only reasonable assurance with respect to the
preparation of reliable financial statements. 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 management of the FRB Atlanta assessed its internal control over financial reporting reflected in the
Financial Statements, based upon the criteria established in the "Internal Control ~ Integrated
Framework" issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based
on this assessment, we believe that the FRB Atlanta maintained effective internal control over financial
reporting as it relates to the Financial Statements.
Federal Reserve Bank of Atlanta
(signedby)Dennis P. Lockhart, President and Chief Executive Officer
(signedby)Patrick K. Barron, First Vice President and Chief Operating Officer
(signedby)ChristopherG.Brown,SeniorVicePresidentandChiefFinancial Officer
Deloitte.
Deloitte & Touche LLP
Suite 2000
191 Peachtree Street NE
Atlanta, GA 30303-1943
USA
Tel: +1 404 220 1500
www.deloitte.com
I N D E P E N D E N T
A U D I T O R S '
R E P O R T
To the Board of Governors of the Federal Reserve
System
and the Board of Directors of the Federal Reserve Bank of Atlanta:
We have audited the accompanying statements of condition of the Federal Reserve Bank
of Atlanta ("FRB Atlanta") as of December 31, 2009 and 2008 and the related statements of
income and comprehensive income, and changes in capital for the years then ended, which have
been prepared in conformity with accounting principles established by the Board of Governors of
the Federal Reserve System. We also have audited the internal control over financial reporting of
FRB Atlanta as of December 31, 2009, based on criteria established in Internal Control—
Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission. FRB Atlanta'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 Assertion. Our responsibility is to express an opinion on these financial
statements and an opinion on FRB Atlanta's internal control over financial reporting based on our
audits.
We conducted our audits in accordance with generally accepted auditing standards as
established by the Auditing Standards Board (United States) and in accordance with the auditing
standards of the Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement and whether effective internal control over
financial reporting was maintained in all material respects. Our audits of the financial statements
included examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. 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.
FRB Atlanta's internal control over financial reporting is a process designed by, or under
the supervision of, FRB Atlanta's principal executive and principal financial officers, or persons
performing similar functions, and effected by FRB Atlanta's board of directors, management, and
other personnel to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with the
accounting principles established by the Board of Governors of the Federal Reserve System.
FRB Atlanta's internal control over financial reporting includes those policies and procedures that
(1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect
the transactions and dispositions of the assets of FRB Atlanta; (2) provide reasonable assurance
that transactions are recorded as necessary to permit preparation of financial statements in
accordance with the accounting principles established by the Board of Governors of the Federal
Member of
Deloitte Touche Tohmatsu
Reserve System, and that receipts and expenditures of FRB Atlanta are being made only in
accordance with authorizations of management and directors of FRB Atlanta; and (3) provide
reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of FRB Atlanta's assets that could have a material effect on the financial statements.
Because of the inherent limitations of internal control over financial reporting, including
the possibility of collusion or improper management override of controls, material misstatements
due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any
evaluation of the effectiveness of the internal control over financial reporting to future periods are
subject to the risk that the controls may become inadequate because of changes in conditions, or
that the degree of compliance with the policies or procedures may deteriorate.
As described in Note 4 to the financial statements, FRB Atlanta has prepared these
financial statements in conformity with accounting principles established by the Board of
Governors of the Federal Reserve System, as set forth in the Financial Accounting Manual for
Federal Reserve Banks, which is a comprehensive basis of accounting other than accounting
principles generally accepted in the United States of America. The effects on such financial
statements of the differences between the accounting principles established by the Board of
Governors of the Federal Reserve System and accounting principles generally accepted in the
United States of America are also described in Note 4.
In our opinion, such financial statements present fairly, in all material respects, the
financial position of FRB Atlanta as of December 31, 2009 and 2008, and the results of its
operations for the years then ended, on the basis of accounting described in Note 4. Also, in our
opinion, FRB Atlanta maintained, in all material respects, effective internal control over financial
reporting as of December 31, 2009, based on the criteria established in Internal Control —
Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission.
(signed by) Deloitte and Touche LLP
April 21, 2010
FEDERAL RESERVE BANK OF ATLANTA
STATEMENTS OF CONDITION
As of December 31, 2009 and December 31, 2008
(in millions)
header
1: ASSETS
column
2: 2009:
2009
column
2: 2008 end of header row
ASSETS:row
Goldcolumn
certificates
2009:
2008:
$1,221
Special
rights
certificates
2008:
166
ASSETS:
Coin
in
process
2008:
of
213
collection
2009:
2008:
325
ASSETS: Items
Loans2009:
todrawing
depository
institutions
2009:
2008:
17,705
ASSETS:
purchased
under
agreements
to resell 2009:
2008:2008:
7,960
Treasuryagency
securities,
net
2009:
2008:
47,903
ASSETS: System
System Open
Open Market
Market Account:
Account: Securities
Government-sponsored
enterprise
debt
securities,
net 2009:
ASSETS:
System
Open
Market
Account:
Federal
and government-sponsored
enterprise
mortgage-backed
ASSETS:
System
Open
Market
Account:
Investments
denominated
in foreign
currencies
2009:
2008:
1,910 2,064securities, net 2009: 2008: Central
bank
liquidity
swaps
2009:
42,641
System
Open
Market
Account:
Other
investments
- 2008:
ASSETS:
Accrued
Interdistrict
interest
settlement
receivable
account
2009:
2009:
2008:
2008:
668
20,108
BankAND
premises
and2008:
equipment,
net 2009:
2008:
2562009: 2008:
ASSETS: Total
Other
assets
assets
2009:
2009:
2008:
$73143,213
LIABILITIES
CAPITAL
CAPITAL:
Federal
Reserve
notes
outstanding,
net
2009:
2008:
$
105,276
LIABILITIES
AND
CAPITAL:
System
Open
Market
Account:
Securities
sold under
to repurchase 2009: 2008: 8,791
LIABILITIES AND
AND CAPITAL:
CAPITAL: Deposits:
System Open
Market institutions
Account: Other
liabilities
2009:agreements
2008: LIABILITIES
Depository
2009:
2008:
LIABILITIES AND
AND CAPITAL:
CAPITAL: Interdistrict
Deposits:
Other
deposits
2009:
2008:
32008:
LIABILITIES
Deferred
interest
credit
settlement
items
on Federal
2009:
account
2008:
Reserve
158
notes
2009:
- 25,593
2008:
8
Interest
due
to depository
institutions
2009:
2008:
5
LIABILITIES AND
AND CAPITAL:
CAPITAL: Accrued
Accrued
Other
Total
liabilities
liabilities
benefit
2009:
2009:
costs
2008:
2009:
2008:
139,989
2008:
25 2009:
130
Capital
paid-in
2009:
2008:
1,612
LIABILITIES
Surplus
(including
accumulated
other
comprehensive loss of $19 million and $18 million at December 31,
2009 and 2008,AND
respectively)
2009:
2008:
16122009:
LIABILITIES
AND
CAPITAL:
Total
capital
LIABILITIES
CAPITAL:
Total
liabilities
and2008:
capital3,224
2009: 2008: $ 143,213
The accompanying notes are an integral part of these financial statements.
FEDERAL RESERVE BANK OF ATLANTA
STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
For the years ended December 31, 2009 and December 31, 2008
(in millions)
header row column
INTEREST
INCOME:
1: INTEREST
Loans toOpen
depository
INCOMEinstitutions
column
2009:
2009 column
20 2008:
3:42
2008under
end of
header row
INTEREST
Account:2:Government-sponsored
Securities
purchased
agreements
to resell 2009:
1 242
2008:
185 10
INTEREST INCOME:
INCOME: System
System Open
Open Market
Market Account
Account:
Treasury
securities
2,657
2008:
2,477
INTEREST
Market
enterprise
debt
securities
2009:
2008:
Federal bank
agency
and 2009:
government-sponsored
enterprise
mortgage-backed
securities 2009: 2,429 2008: INTEREST INCOME:
INCOME: System
System
Open income
Market Account:
Account:
Investments
denominated
in foreign
currencies
2009:
23
2008:
48
System
Open
Market
Account:
Central
liquidity
swaps
2009: 166
2008:
278
INTEREST
INCOME:
Total
interest
2009:
5,538
2008: 3,140
Interest Expense:
Expense
2009:
2008:
Interest
System
Open
Market
Account:
Securities
sold
under
agreements
to
repurchase 2009: 11 2008: 71
Depository
institution
deposits
79
2008: 20
Interest Expense:
Expense:
Total
interest
expense
2009:
902009:
2008:
91
Interest
Net
interest
income
2009:
5,448
2008:
3,049
Non-Interest
Income
Income: System
System Open
Open Market
Market Account:
Account Federal
Treasury
securities
gains
2009:
2008:
358
Non-Interest
Income:
agency
and
government-sponsored
enterprise
mortgage-backed
securities
gains, net 2009: 113 2008: Non-Interest Income:
Income: Reimbursable
System Open
Market
Account:
Foreign
currency2009:
gains,
2009:
from services
526
2008:agencies
649
Non-Interest
services
to
government
15net
2008:
14 13 2008: 101
Non-Interest
Income: Income
Other non-interest
income
2009:
172009:
2008:
82 684
Non-Interest
Income:
Total
income
2009:
2008: 193
1,204
Operating
Expenses
Operating
andexpense
other benefits
2009:
18522
2008:
Occupancy
expense
2009:
23
2008:
22
Operating Expenses:
Expenses: Salaries
Equipment
2009:
17
2008:
Operating
Expenses:
Compensation
paid
for
service
costs
incurred
2009:
295
2008:
471
Assessments
by2009:
the Board
of Governors
Operating
Expenses:
Other
expenses
136
2008:
1312008:2009:
Operating
Expenses:
Total
operating
expenses
2009:
758
937 102 2008: 98
Net income
prior tostatus
distribution
2009:
5374
2008:
plans
2009:
(1) 3,316
2008:
3
Change
in funded
of benefit
plans:
Comprehensive
prior
to 2009:
distribution
2009:
2008: 3,319
Distribution
of
income
Dividends
paid
to income
member
banks
95in2008:
94 5373
Distribution
of comprehensive
comprehensive
income:
Transferred
(from)
to surplus
andon
change
accumulated
loss 2009: (31) 2008: 187
Distribution
of
comprehensive
income:
Payments
to
Treasury
as interest
Federal
Reserve
notesother
2009:comprehensive
5,309 2008: 3,038
Total distribution
2009: 5,373 2008:
3,319
The accompanying notes are an integral part of these financial statements.
FEDERAL RESERVE BANK OF ATLANTA
S T A T E M E N T S OF C H A N G E S IN C A P I T A L
For the years ended December 31, 2009 and December 31, 2008
(in millions, except share data)
header
row
column
1: 2008
Surplus
end ofAccumulated
header
rowCapital
Capital
paid-in
Net 1,
income
retained
other
comprehensive
loss
Total
surplus
Total
Balance
at January
(28,496,762
shares)
paid-in:
1,425187
Net
income
retained:
1,446
Accumulated
other
comprehensive
loss:
Total
surplus:
1,425
Totalsurplus:
capital:187
2,850
Net
change
in
stock
issued
(3,736,669
shares)
Capital
paid-in:
Net
income
retained:
-capital
Accumulated
other
comprehensive
loss:
- (21)
Total
surplus:
- Total
187
Transferred
to capital
surplus
and2008
change
in accumulated
other
comprehensive
loss
Capital
paid-in:
- Net
income
retained:
184
Accumulated
other
comprehensive
loss:
3capital:
Total
Total
capital: 187
Balance
at December
31,
(32,233,431
shares)
Capital
paid-in:
1,612
Net
income
retained:
Accumulated
other
comprehensive
loss:
(18)
Total
surplus:
1,612
Total
3,224capital:
Net change
in
capital
stock
redeemed
(612,
129
shares)
Capital
paid-in:
(31)
Net
income
retained:
- Accumulated
other
comprehensive
loss:
- Total
surplus:
- Total
capital:
- capital:
Transferred
from
surplus
change
in
accumulated
other
comprehensive
loss
Capital
paid-in:
-1,630
Net
income
retained:
(30)
Accumulated
other
comprehensive
loss:
- Total
surplus:
- Total
Balance
at December
31, and
2009
(31,621,302
shares)
Capital
paid-in:
1,581
Net
income
retained:
1,600
Accumulated
other
comprehensive
loss:
(19)
Total
surplus:
1,581
Total
capital:
3,162
The accompanying notes are an integral part of these financial statements.
FEDERAL RESERVE BANK OF ATLANTA
NOTES TO FINANCIAL STATEMENTS
1.
STRUCTURE
The Federal Reserve Bank of Atlanta ("Bank") is part of the Federal Reserve System ("System") and is one of the
twelve Federal Reserve Banks ("Reserve Banks") created by Congress under the Federal Reserve Act of 1913
("Federal Reserve Act"), which established the central bank of the United States. The Reserve Banks are
chartered by the federal government and possess a unique set of governmental, corporate, and central bank
characteristics. The Bank serves the Sixth Federal Reserve District, which includes Georgia, Florida,
Alabama, and portions of Louisiana, Tennessee, and Mississippi.
In accordance with the Federal Reserve Act, supervision and control of the Bank is exercised by a board of
directors. The Federal Reserve Act specifies the composition of the board of directors for each of the Reserve
Banks. Each board is composed of nine members serving three-year terms: three directors, including those
designated as chairman and deputy chairman, are appointed by the Board of Governors of the Federal Reserve
System ("Board of Governors") to represent the public, and six directors are elected by member banks. Banks
that are members of the System include all national banks and any state-chartered banks that apply and are
approved for membership. Member banks are divided into three classes according to size. Member banks in
each class elect one director representing member banks and one representing the public. In any election of
directors, each member bank receives one vote, regardless of the number of shares of Reserve Bank stock it
holds.
In addition to the 12 Reserve Banks, the System also consists, in part, of the Board of Governors and the Federal
Open Market Committee ("FOMC"). The Board of Governors, an independent federal agency, is charged by
the Federal Reserve Act with a number of specific duties, including general supervision over the Reserve
Banks. The FOMC is composed of members of the Board of Governors, the president of the Federal Reserve
Bank of New York ("FRBNY"), and, on a rotating basis, four other Reserve Bank presidents.
2.
OPERATIONS AND SERVICES
The Reserve Banks perform a variety of services and operations. These functions include participating in
formulating and conducting monetary policy; participating in the payments system, including large-dollar
transfers of funds, automated clearinghouse ("ACH") operations, and check collection; distributing coin and
currency; performing fiscal agency functions for the U.S. Department of the Treasury ("Treasury"), certain
Federal agencies, and other entities; serving as the federal government's bank; providing short-term loans to
depository institutions; providing loans to individuals, partnerships, and corporations in unusual and exigent
circumstances; serving consumers and communities by providing educational materials and information
regarding financial consumer protection rights and laws and information on community development programs
and activities; and supervising bank holding companies, state member banks, and U.S. offices of foreign
banking organizations. Certain services are provided to foreign and international monetary authorities,
primarily by the FRBNY.
The FOMC, in conducting monetary policy, establishes policy regarding domestic open market operations,
oversees these operations, and annually issues authorizations and directives to the FRBNY to execute
transactions. The FOMC authorizes and directs the FRBNY to conduct operations in domestic markets,
including the direct purchase and sale of Treasury securities, Federal agency and government-sponsored
enterprise ("GSE") debt securities, Federal agency and GSE mortgage-backed securities ("MBS"), the
purchase of these securities under agreements to resell, and the sale of these securities under agreements to
repurchase. The FRBNY executes these transactions at the direction of the FOMC and holds the resulting
securities and agreements in a portfolio known as the System Open Market Account ("SOMA"). The FRBNY
is authorized to lend the Treasury securities and Federal agency and GSE debt securities that are held in the
SOMA.
In addition to authorizing and directing operations in the domestic securities market, the FOMC authorizes the
FRBNY to execute operations in foreign markets in order to counter disorderly conditions in exchange markets
or to meet other needs specified by the FOMC to carry out the System's central bank responsibilities.
Specifically, the FOMC authorizes and directs the FRBNY to hold balances of, and to execute spot and
forward foreign exchange and securities contracts for, fourteen foreign currencies and to invest such foreign
currency holdings, while maintaining adequate liquidity. The FRBNY is authorized and directed by the
FOMC to maintain reciprocal currency arrangements ("FX swaps") with two central banks and to "warehouse"
foreign currencies for the Treasury and the Exchange Stabilization Fund ("ESF"). The FRBNY is also
authorized and directed by the FOMC to maintain U.S. dollar currency liquidity swap arrangements with
fourteen central banks. The FOMC has also authorized the FRBNY to maintain foreign currency liquidity
swap arrangements with four foreign central banks.
Although the Reserve Banks are separate legal entities, they collaborate in the delivery of certain services to
achieve greater efficiency and effectiveness. This collaboration takes the form of centralized operations and
product or function offices that have responsibility for the delivery of certain services on behalf of the Reserve
Banks. Various operational and management models are used and are supported by service agreements
between the Reserve Banks. In some cases, costs incurred by a Reserve Bank for services provided to other
Reserve Banks are not shared; in other cases, the Reserve Banks are reimbursed for costs incurred in providing
services to other Reserve Banks. Major services provided by the Bank on behalf of the System and for which
the costs were not reimbursed by the other Reserve Banks include the Retail Payments Office and accounting
related projects.
3.
FINANCIAL STABILITY ACTIVITIES
The Reserve Banks have implemented the following programs that support the liquidity of financial institutions
and foster improved conditions in financial markets.
Expanded Open Market Operations and Supportfor Mortgage Related-Securities
The Single-Tranche Open Market Operation Program allows primary dealers to initiate a series of 28-day term
repurchase transactions while pledging Treasury securities, Federal agency and GSE debt securities, and
Federal agency and GSE MBS as collateral.
The Federal Agency and GSE Debt Securities and MBS Purchase Program provides support to the mortgage and
housing markets and fosters improved conditions in financial markets. Under this program, the FRBNY
purchases housing-related GSE debt securities and Federal agency and GSE MBS. Purchases of housingrelated GSE debt securities began in November 2008 and purchases of Federal agency and GSE MBS began in
January 2009. The FRBNY is authorized to purchase up to $200 billion in fixed rate, non-callable GSE debt
securities and up to $1.25 trillion in fixed rate Federal agency and GSE MBS. The activities of both of these
programs are allocated to the other Reserve Banks.
Central Bank Liquidity Swaps
The FOMC authorized and directed the FRBNY to establish central bank liquidity swap arrangements, which may
be structured as either U.S. dollar liquidity or foreign currency liquidity swap arrangements.
U.S. dollar liquidity swap arrangements were authorized with fourteen foreign central banks to provide liquidity in
U.S. dollars to overseas markets. Such arrangements were authorized with the following central banks: the
Reserve Bank of Australia, the Banco Central do Brasil, the Bank of Canada, Danmarks Nationalbank, the
Bank of England, the European Central Bank, the Bank of Japan, the Bank of Korea, the Banco de Mexico, the
Reserve Bank of New Zealand, Norges Bank, the Monetary Authority of Singapore, the Sveriges Riksbank,
and the Swiss National Bank. The maximum amount that could be drawn under these swap arrangements
varied by central bank. The authorization for these swap arrangements expired on February 1, 2010.
Foreign currency liquidity swap arrangements provided the Reserve Banks with the capacity to offer foreign
currency liquidity to U.S. depository institutions. Such arrangements were authorized with the Bank of
England, the European Central Bank, the Bank of Japan, and the Swiss National Bank. The maximum amount
that could be drawn under the swap arrangements varied by central bank. The authorization for these swap
arrangements expired on February 1, 2010.
Lending to Depository Institutions
The Term Auction Facility ("TAF") promotes the efficient dissemination of liquidity by providing term funds to
depository institutions. Under the TAF, Reserve Banks auction term funds to depository institutions against
any collateral eligible to secure primary, secondary, and seasonal credit less a margin, which is a reduction in
the assigned collateral value that is intended to provide the Banks additional credit protection. All depository
institutions that are considered to be in generally sound financial condition by their Reserve Bank and that are
eligible to borrow under the primary credit program are eligible to participate in TAF auctions. All loans must
be collateralized to the satisfaction of the Reserve Banks.
Lending to Primary Dealers
The Term Securities Lending Facility ("TSLF") promoted liquidity in the financing markets for Treasury securities.
Under the TSLF, the FRBNY could lend up to an aggregate amount of $200 billion of Treasury securities held
in the SOMA to primary dealers secured for a term of 28 days. Securities were lent to primary dealers through
a competitive single-price auction and were collateralized, less a margin, by a pledge of other securities,
including Treasury securities, municipal securities, Federal agency and GSE MBS, non-agency AAA/Aaarated private-label residential MBS, and asset-backed securities ("ABS"). The authorization for the TSLF
expired on February 1, 2010.
The Term Securities Lending Facility Options Program ("TOP") offered primary dealers, through a competitive
single-price auction, to purchase an option to draw upon short-term, fixed-rate TSLF loans in exchange for
eligible collateral. The program enhanced the effectiveness of the TSLF by ensuring additional liquidity
during periods of heightened collateral market pressures, such as around quarter-end dates. The program was
suspended effective with the maturity of the June 2009 TOP options and the program authorization expired on
February 1, 2010.
Other Lending Facilities
The Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility ("AMLF") provided funding
to depository institutions and bank holding companies to finance the purchase of eligible high-quality assetbacked commercial paper ("ABCP") from money market mutual funds. The program assisted money market
mutual funds that hold such paper to meet the demands for investor redemptions and to foster liquidity in the
ABCP market and money markets more generally. The Federal Reserve Bank of Boston ("FRBB")
administered the AMLF and was authorized to extend these loans to eligible borrowers on behalf of the other
Reserve Banks. All loans extended under the AMLF were non-recourse and were recorded as assets by the
FRBB, and if the borrowing institution settled to a depository account in the Sixth Federal Reserve District, the
funds were credited to the depository institution account and settled between the Reserve Banks through the
interdistrict settlement account. The credit risk related to the AMLF was assumed by the FRBB. The
authorization for the AMLF expired on February 1, 2010.
4.
SIGNIFICANT ACCOUNTING POLICIES
Accounting principles for entities with the unique powers and responsibilities of a nation's central bank have not
been formulated by accounting standard-setting bodies. The Board of Governors has developed specialized
accounting principles and practices that it considers to be appropriate for the nature and function of a central
bank. These accounting principles and practices are documented in the Financial Accounting Manual for
Federal Reserve Banks ("Financial Accounting Manual" or "FAM"), which is issued by the Board of
Governors. The Reserve Banks are required to adopt and apply accounting policies and practices that are
consistent with the FAM and the financial statements have been prepared in accordance with the FAM.
Limited differences exist between the accounting principles and practices in the FAM and generally accepted
accounting principles in the United States ("GAAP"), primarily due to the unique nature of the Bank's powers
and responsibilities as part of the nation's central bank. The primary difference is the presentation of all
SOMA securities holdings at amortized cost rather than the fair value presentation required by GAAP.
Treasury securities, GSE debt securities, Federal agency and GSE MBS, and investments denominated in
foreign currencies comprising the SOMA are recorded at cost, on a settlement-date basis rather than the tradedate basis required by GAAP. The cost basis of Treasury securities, GSE debt securities, and foreign
government debt instruments is adjusted for amortization of premiums or accretion of discounts on a straightline basis. Amortized cost more appropriately reflects the Bank's securities holdings given the System's
unique responsibility to conduct monetary policy. Accounting for these securities on a settlement-date basis
more appropriately reflects the timing of the transaction's effect on the quantity of reserves in the banking
system. Although the application of fair value measurements to the securities holdings may result in values
substantially above or below their carrying values, these unrealized changes in value have no direct effect on
the quantity of reserves available to the banking system or on the prospects for future Bank earnings or capital.
Both the domestic and foreign components of the SOMA portfolio may involve transactions that result in gains
or losses when holdings are sold prior to maturity. Decisions regarding securities and foreign currency
transactions, including their purchase and sale, are motivated by monetary policy objectives rather than profit.
Accordingly, fair values, earnings, and gains or losses resulting from the sale of such securities and currencies
are incidental to the open market operations and do not motivate decisions related to policy or open market
activities.
In addition, the Bank has elected not to present a Statement of Cash Flows because the liquidity and cash position
of the Bank are not a primary concern given the Reserve Banks' unique powers and responsibilities. Other
information regarding the Bank's activities is provided in, or may be derived from, the Statements of
Condition, Income and Comprehensive Income, and Changes in Capital. There are no other significant
differences between the policies outlined in the FAM and GAAP.
Preparing the financial statements in conformity with the FAM requires management to make certain estimates and
assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and
liabilities at the date of the financial statements, and the reported amounts of income and expenses during the
reporting period. Actual results could differ from those estimates. Certain amounts relating to the prior year
have been reclassified to conform to the current-year presentation. Unique accounts and significant accounting
policies are explained below.
a. Gold and Special Drawing Rights Certificates
The Secretary of the Treasury is authorized to issue gold and special drawing rights ("SDR") certificates to the
Reserve Banks.
Payment for the gold certificates by the Reserve Banks is made by crediting equivalent amounts in dollars into
the account established for the Treasury. The gold certificates held by the Reserve Banks are required to
be backed by the gold of the Treasury. The Treasury may reacquire the gold certificates at any time and
the Reserve Banks must deliver them to the Treasury. At such time, the Treasury's account is charged,
and the Reserve Banks' gold certificate accounts are reduced. The value of gold for purposes of backing
the gold certificates is set by law at $42 2/9 per fine troy ounce. The Board of Governors allocates the
gold certificates among the Reserve Banks once a year based on the average Federal Reserve notes
outstanding in each Reserve Bank.
SDR certificates are issued by the International Monetary Fund (the "Fund") to its members in proportion to
each member's quota in the Fund at the time of issuance. SDR certificates serve as a supplement to
international monetary reserves and may be transferred from one national monetary authority to another.
Under the law providing for U.S. participation in the SDR system, the Secretary of the Treasury is
authorized to issue SDR certificates to the Reserve Banks. When SDR certificates are issued to the
Reserve Banks, equivalent amounts in U.S. dollars are credited to the account established for the Treasury
and the Reserve Banks' SDR certificate accounts are increased. The Reserve Banks are required to
purchase SDR certificates, at the direction of the Treasury, for the purpose of financing SDR acquisitions
or for financing exchange stabilization operations. At the time SDR transactions occur, the Board of
Governors allocates SDR certificate transactions among the Reserve Banks based upon each Reserve
Bank's Federal Reserve notes outstanding at the end of the preceding year. There were no SDR
transactions in 2008, and in 2009 the Treasury issued $3 billion in SDR certificates to the Reserve Banks,
of which $488 million was allocated to the Bank.
b. Loans to Depository Institutions
Loans are reported at their outstanding principal balances and interest income is recognized on an accrual
basis.
Loans are impaired when, based on current information and events, it is probable that the Bank will not receive
the principal or interest that is due in accordance with the contractual terms of the loan agreement. Loans
are evaluated to determine whether an allowance for loan loss is required. The Bank has developed
procedures for assessing the adequacy of any allowance for loan losses using all available information to
reflect the assessment of credit risk. This assessment includes monitoring information obtained from
banking supervisors, borrowers, and other sources to assess the credit condition of the borrowers and, as
appropriate, evaluating collateral values for each program. Generally, the Bank discontinues recognizing
interest income on impaired loans until the borrower's repayment performance demonstrates principal and
interest will be received in accordance with the term of the loan agreement. If the Bank discontinues
recording interest on an impaired loan, cash payments are first applied to principal until the loan balance is
reduced to zero; subsequent payments are applied as recoveries of amounts previously deemed
uncollectible, if any, and then as interest income.
c. Securities Purchased Under Agreements to Resell, Securities Sold Under Agreements to Repurchase, and
Securities Lending
The FRBNY may engage in purchases of securities with primary dealers under agreements to resell
("repurchase transactions"). These repurchase transactions are typically executed through a tri-party
arrangement ("tri-party transactions"). Tri-party transactions are conducted with two commercial
custodial banks that manage the clearing, settlement, and pledging of collateral. The collateral pledged
must exceed the principal amount of the transaction. Acceptable collateral under tri-party repurchase
transactions primarily includes Treasury securities; pass-through mortgage securities of Fannie Mae,
Freddie Mac, and Ginnie Mae; STRIP Treasury securities; and "stripped" securities of Federal agencies.
The tri-party transactions are accounted for as financing transactions with the associated interest income
accrued over the life of the transaction. Repurchase transactions are reported at their contractual amount
as "System Open Market Account: Securities purchased under agreements to resell" in the Statements of
Condition and the related accrued interest receivable is reported as a component of "Accrued interest
receivable."
The FRBNY may engage in sales of securities with primary dealers under agreements to repurchase ("reverse
repurchase transactions"). These reverse repurchase transactions may be executed through a tri-party
arrangement, similar to repurchase transactions. Reverse repurchase transactions may also be executed
with foreign official and international accounts. Reverse repurchase transactions are accounted for as
financing transactions, and the associated interest expense is recognized over the life of the transaction.
These transactions are reported at their contractual amounts in the Statements of Condition and the related
accrued interest payable is reported as a component of "Other liabilities."
Treasury securities and GSE debt securities held in the SOMA are lent to primary dealers to facilitate the
effective functioning of the domestic securities market. Overnight securities lending transactions are fully
collateralized by other Treasury securities. TSLF transactions are fully collateralized with investmentgrade debt securities, collateral eligible for tri-party repurchase agreements arranged by the FRBNY, or
both. The collateral taken in both overnight and term securities lending transactions is in excess of the fair
value of the securities lent. The FRBNY charges the primary dealer a fee for borrowing securities, and
these fees are reported as a component of "Other income." In addition, TOP fees are reported as a
component of "Other income."
Activity related to securities purchased under agreements to resell, securities sold under agreements to
repurchase, and securities lending is allocated to each of the Reserve Banks on a percentage basis derived
from an annual settlement of the interdistrict settlement account that occurs in April each year. The
settlement also equalizes Reserve Bank gold certificate holdings to Federal Reserve notes outstanding in
each District.
d. Treasury Securities; Government-Sponsored Enterprise Debt Securities; Federal Agency and GovernmentSponsored Enterprise Mortgage-Backed Securities; Investments Denominated in Foreign Currencies; and
Warehousing Agreements
Interest income on Treasury securities, GSE debt securities, and investments denominated in foreign
currencies comprising the SOMA is accrued on a straight-line basis. Interest income on Federal agency
and GSE MBS is accrued using the interest method and includes amortization of premiums, accretion of
discounts, and paydown gains or losses. Paydown gains or losses result from scheduled payment and
prepayment of principal and represent the difference between the principal amount and the carrying value
of the related security. Gains and losses resulting from sales of securities are determined by specific issue
based on average cost.
In addition to outright purchases of Federal agency and GSE MBS that are held in the SOMA, the FRBNY
enters into dollar roll transactions ("dollar rolls"), which primarily involve an initial transaction to
purchase or sell "to be announced" ("TBA") MBS combined with an agreement to sell or purchase TBA
MBS on a specified future date. The FRBNY's participation in the dollar roll market furthers the MBS
Purchase Program goal of providing support to the mortgage and housing markets and fostering improved
conditions in financial markets. The FRBNY accounts for outstanding commitments to sell or purchase
TBA MBS on a settlement-date basis. Based on the terms of the FRBNY dollar roll transactions, transfers
of MBS upon settlement of the initial TBA MBS transactions are accounted for as purchases or sales in
accordance with FASB ASC Topic 860 (ASC 860), Accounting for Transfers of Financial Assets and
Repurchase Financing Transactions, (previously SFAS 140), and the related outstanding commitments
are accounted for as sales or purchases upon settlement.
Activity related to Treasury securities, GSE debt securities, and Federal agency and GSE MBS, including the
premiums, discounts, and realized gains and losses, is allocated to each Reserve Bank on a percentage
basis derived from an annual settlement of the interdistrict settlement account that occurs in April of each
year. The settlement also equalizes Reserve Bank gold certificate holdings to Federal Reserve notes
outstanding in each District. Activity related to investments denominated in foreign currencies, including
the premiums, discounts, and realized and unrealized gains and losses, is allocated to each Reserve Bank
based on the ratio of each Reserve Bank's capital and surplus to aggregate capital and surplus at the
preceding December 31.
Foreign-currency-denominated assets are revalued daily at current foreign currency market exchange rates in
order to report these assets in U.S. dollars. Realized and unrealized gains and losses on investments
denominated in foreign currencies are reported as "Foreign currency gains, net" in the Statements of
Income and Comprehensive Income.
Warehousing is an arrangement under which the FOMC agrees to exchange, at the request of the Treasury,
U.S. dollars for foreign currencies held by the Treasury or ESF over a limited period of time. The purpose
of the warehousing facility is to supplement the U.S. dollar resources of the Treasury and ESF for
financing purchases of foreign currencies and related international operations.
Warehousing agreements are designated as held-for-trading purposes and are valued daily at current market
exchange rates. Activity related to these agreements is allocated to each Reserve Bank based on the ratio
of each Reserve Bank's capital and surplus to aggregate capital and surplus at the preceding December 31.
e. Central Bank Liquidity Swaps
Central bank liquidity swaps, which are transacted between the FRBNY and a foreign central bank, may be
structured as either U.S. dollar liquidity or foreign currency liquidity swap arrangements.
Activity related to U.S. dollar and foreign currency swap transactions, including the related income and
expense, is allocated to each Reserve Bank based on the ratio of each Reserve Bank's capital and surplus
to aggregate capital and surplus at the preceding December 31. Similar to investments denominated in
foreign currencies, the foreign currency amounts associated with these central bank liquidity swap
arrangements are revalued at current foreign currency market exchange rates.
U.S. dollar liquidity swaps
At the initiation of each U.S. dollar liquidity swap transaction, the foreign central bank transfers a specified
amount of its currency to a restricted account for the FRBNY in exchange for U.S. dollars at the
prevailing market exchange rate. Concurrent with this transaction, the FRBNY and the foreign central
bank agree to a second transaction that obligates the foreign central bank to return the U.S. dollars and the
FRBNY to return the foreign currency on a specified future date at the same exchange rate as the initial
transaction. The Bank's allocated portion of the foreign currency amounts that the FRBNY acquires is
reported as "Central bank liquidity swaps" on the Statements of Condition. Because the swap transaction
will be unwound at the same U.S. dollar amount and exchange rate that were used in the initial
transaction, the recorded value of the foreign currency amounts is not affected by changes in the market
exchange rate.
The foreign central bank compensates the FRBNY based on the foreign currency amounts held for the
FRBNY. The FRBNY recognizes compensation during the term of the swap transaction and reports it as
"Interest income: Central bank liquidity swaps" in the Statements of Income and Comprehensive Income.
Foreign currency liquidity swaps
At the initiation of each foreign currency liquidity swap transaction, the FRBNY will transfer, at the prevailing
market exchange rate, a specified amount of U.S. dollars to an account for the foreign central bank in
exchange for its currency. The foreign currency amount received would be reported as a liability by the
Bank. Concurrent with this transaction, the FRBNY and the foreign central bank agree to a second
transaction that obligates the FRBNY to return the foreign currency and the foreign central bank to return
the U.S. dollars on a specified future date. The FRBNY compensates the foreign central bank based on
the foreign currency transferred to the FRBNY. For each foreign currency swap transaction with a foreign
central bank it is anticipated that the FRBNY will enter into a corresponding transaction with a U.S.
depository institution in order to provide foreign currency liquidity to that institution. No foreign currency
liquidity swap transactions occurred in 2008 or 2009.
f. Interdistrict Settlement Account
At the close of business each day, each Reserve Bank aggregates the payments due to or from other Reserve
Banks. These payments result from transactions between the Reserve Banks and transactions that involve
depository institution accounts held by other Reserve Banks, such as Fedwire funds and securities
transfers and check and ACH transactions. The cumulative net amount due to or from the other Reserve
Banks is reflected in the "Interdistrict settlement account" in the Statements of Condition.
g. Bank Premises, Equipment, and Software
Bank premises and equipment are stated at cost less accumulated depreciation. Depreciation is calculated on a
straight-line basis over the estimated useful lives of the assets, which range from two to fifty years. Major
alterations, renovations, and improvements are capitalized at cost as additions to the asset accounts and are
depreciated over the remaining useful life of the asset or, if appropriate, over the unique useful life of the
alteration, renovation, or improvement. Maintenance, repairs, and minor replacements are charged to
operating expense in the year incurred.
Costs incurred for software during the application development stage, whether developed internally or
acquired for internal use, are capitalized based on the purchase cost and the cost of direct services and
materials associated with designing, coding, installing, and testing the software. Capitalized software
costs are amortized on a straight-line basis over the estimated useful lives of the software applications,
which range from two to five years. Maintenance costs related to software are charged to expense in the
year incurred.
Capitalized assets, including software, buildings, leasehold improvements, furniture, and equipment, are
impaired and an adjustment is recorded when events or changes in circumstances indicate that the carrying
amount of assets or asset groups is not recoverable and significantly exceeds the assets' fair value.
h. Federal Reserve Notes
Federal Reserve notes are the circulating currency of the United States. These notes, which are identified as
issued to a specific Reserve Bank, must be fully collateralized. Assets eligible to be pledged as collateral
security include all of the Bank's assets. The collateral value is equal to the book value of the collateral
tendered with the exception of securities, for which the collateral value is equal to the par value of the
securities tendered. The par value of securities pledged for securities sold under agreements to repurchase
is deducted.
The Board of Governors may, at any time, call upon a Reserve Bank for additional security to adequately
collateralize the outstanding Federal Reserve notes. To satisfy the obligation to provide sufficient
collateral for outstanding Federal Reserve notes, the Reserve Banks have entered into an agreement that
provides for certain assets of the Reserve Banks to be jointly pledged as collateral for the Federal Reserve
notes issued to all Reserve Banks. In the event that this collateral is insufficient, the Federal Reserve Act
provides that Federal Reserve notes become a first and paramount lien on all the assets of the Reserve
Banks. Finally, Federal Reserve notes are obligations of the United States government. At December 31,
2009 and 2008, all Federal Reserve notes issued to the Reserve Banks were fully collateralized.
"Federal Reserve notes outstanding, net" in the Statements of Condition represents the Bank's Federal Reserve
notes outstanding, reduced by the Bank's currency holdings of $32,645 million and $24,156 million at
December 31, 2009 and 2008, respectively.
i. Items in Process of Collection and Deferred Credit Items
"Items in process of collection" in the Statements of Condition primarily represents amounts attributable to
checks that have been deposited for collection and that, as of the balance sheet date, have not yet been
presented to the paying bank. "Deferred credit items" are the counterpart liability to items in process of
collection. The amounts in this account arise from deferring credit for deposited items until the amounts
are collected. The balances in both accounts can vary significantly.
j. Capital Paid-in
The Federal Reserve Act requires that each member bank subscribe to the capital stock of the Reserve Bank in
an amount equal to 6 percent of the capital and surplus of the member bank. These shares are nonvoting
with a par value of $100 and may not be transferred or hypothecated. As a member bank's capital and
surplus changes, its holdings of Reserve Bank stock must be adjusted. Currently, only one-half of the
subscription is paid-in and the remainder is subject to call. A member bank is liable for Reserve Bank
liabilities up to twice the par value of stock subscribed by it.
By law, each Reserve Bank is required to pay each member bank an annual dividend of 6 percent on the paidin capital stock. This cumulative dividend is paid semiannually. To reflect the Federal Reserve Act
requirement that annual dividends be deducted from net earnings, dividends are presented as a distribution
of comprehensive income in the Statements of Income and Comprehensive Income.
k. Surplus
The Board of Governors requires the Reserve Banks to maintain a surplus equal to the amount of capital paidin as of December 31 of each year. Accumulated other comprehensive income is reported as a component
of surplus in the Statements of Condition and the Statements of Changes in Capital. The balance of
accumulated other comprehensive income is comprised of expenses, gains, and losses related to other
postretirement benefit plans that, under GAAP, are included in other comprehensive income, but excluded
from net income.
Additional information regarding the classifications of accumulated other
comprehensive income is provided in Notes 12 and 13.
l. Interest on Federal Reserve Notes
The Board of Governors requires the Reserve Banks to transfer excess earnings to the Treasury as interest on
Federal Reserve notes after providing for the costs of operations, payment of dividends, and reservation of
an amount necessary to equate surplus with capital paid-in. This amount is reported as "Payments to U.S.
Treasury as interest on Federal Reserve notes" in the Statements of Income and Comprehensive Income.
The amount due to the Treasury is reported as "Accrued interest on Federal Reserve notes" in the
Statements of Condition. If overpaid during the year, the amount is reported as "Prepaid interest on
Federal Reserve notes" in the Statements of Condition. Payments are made weekly to the Treasury.
In the event of losses or an increase in capital paid-in at a Reserve Bank, payments to the Treasury are
suspended and earnings are retained until the surplus is equal to the capital paid-in.
In the event of a decrease in capital paid-in, the excess surplus, after equating capital paid-in and surplus at
December 31, is distributed to the Treasury in the following year.
m. Interest on Depository Institution Deposits
On October 9, 2008, the Reserve Banks began paying interest to depository institutions on qualifying balances
held at the Banks. The interest rates paid on required reserve balances and excess balances are determined
by the Board of Governors, based on an FOMC-established target range for the effective federal funds
rate.
n. Income and Costs Related to Treasury Services
The Bank is required by the Federal Reserve Act to serve as fiscal agent and depositary of the United States
Government. By statute, the Department of the Treasury has appropriations to pay for these services.
During the years ended December 31, 2009 and 2008, the Bank was reimbursed for all services provided
to the Department of the Treasury as its fiscal agent.
o. Compensation Received for Services Provided and Compensation Paid for Service Costs Incurred
The Bank has overall responsibility for managing the Reserve Banks' provision of check and ACH services to
depository institutions and, as a result, recognizes total System revenue for these services on its
Statements of Income and Comprehensive Income. The FRBNY manages the Reserve Banks' provision
of Fedwire funds and securities services and recognizes total System revenue for these services on its
Consolidated Statements of Income and Comprehensive Income. Similarly, the Federal Reserve Bank of
Chicago ("FRBC") has overall responsibility for managing the Reserve Banks' provision of electronic
access services to depository institutions and, as a result, recognizes total System revenue for these
services on its Statements of Income and Comprehensive Income. The Bank, the FRBNY, and the FRBC
compensate the applicable Reserve Banks for the costs incurred to provide these services. Compensation
received by the Bank for providing Fedwire funds, securities and electronic access services is reported as
"Other Income" in the Statements of Income and Comprehensive Income. Compensation paid by the
Bank for check and ACH services is reported as "Compensation paid for service costs incurred" in the
Statements of Income and Comprehensive Income.
p. Assessments by the Board of Governors
The Board of Governors assesses the Reserve Banks to fund its operations based on each Reserve Bank's
capital and surplus balances as of December 31 of the prior year. The Board of Governors also assesses
each Reserve Bank for the expenses incurred by the Treasury to produce and retire Federal Reserve notes
based on each Reserve Bank's share of the number of notes comprising the System's net liability for
Federal Reserve notes on December 31 of the prior year.
q.
Taxes
The Reserve Banks are exempt from federal, state, and local taxes, except for taxes on real property. The
Bank's real property taxes were $3 million for each of the years ended December 31, 2009 and 2008, and
are reported as a component of "Occupancy expense."
r.
Restructuring Charges
The Reserve Banks recognize restructuring charges for exit or disposal costs incurred as part of the closure of
business activities in a particular location, the relocation of business activities from one location to
another, or a fundamental reorganization that affects the nature of operations. Restructuring charges may
include costs associated with employee separations, contract terminations, and asset impairments.
Expenses are recognized in the period in which the Bank commits to a formalized restructuring plan or
executes the specific actions contemplated in the plan and all criteria for financial statement recognition
have been met.
Note 14 describes the Bank's restructuring initiatives and provides information about the costs and liabilities
associated with employee separations and contract terminations. The costs associated with the impairment
of certain of the Bank's assets are discussed in Note 9. Costs and liabilities associated with enhanced
pension benefits in connection with the restructuring activities for all of the Reserve Banks are recorded
on the books of the FRBNY.
s.
Recently Issued Accounting Standards
In February 2008, FASB issued FSP SFAS 140-3, Accounting for Transfers of Financial Assets and
Repurchase Financing Transactions, (codified in FASB ASC Topic 860 (ASC 860), Transfers and
Servicing). ASC 860 requires that an initial transfer of a financial asset and a repurchase financing that
was entered into contemporaneously with, or in contemplation of, the initial transfer be evaluated together
as a linked transaction unless certain criteria are met. These provisions of ASC 860 are effective for the
Bank's financial statements for the year beginning on January 1, 2009 and have not had a material effect
on the Bank's financial statements. The requirements of this standard have been reflected in the
accompanying footnotes.
In June 2009, FASB issued SFAS 166, Accounting for Transfers of Financial Assets - an amendment to FASB
Statement No. 140, (codified in ASC 860). The new guidance modifies existing guidance to eliminate the
scope exception for qualifying special purpose vehicles ("SPVs") and clarifies that the transferor must
consider all arrangements of the transfer of financial assets when determining if the transferor has
surrendered control. These provisions of ASC 860 are effective for the Bank's financial statements for the
year beginning on January 1, 2010, and earlier adoption is prohibited. The adoption of this standard is not
expected to have a material effect on the Bank's financial statements.
In May 2009, FASB issued SFAS No. 165, Subsequent Events, (codified in FASB ASC Topic 855 (ASC 855),
Subsequent Events), which establishes general standards of accounting for and disclosing events that occur
after the balance sheet date but before financial statements are issued or are available to be issued. ASC
855 sets forth (i) the period after the balance sheet date during which management of a reporting entity
should evaluate events or transactions that may occur for potential recognition or disclosure in the
financial statements; (ii) the circumstances under which an entity should recognize events or transactions
occurring after the balance sheet date in its financial statements; and (iii) the disclosures that an entity
should make about events or transactions that occurred after the balance sheet date, including disclosure of
the date through which an entity has evaluated subsequent events and whether that represents the date the
financial statements were issued or were available to be issued. The Bank adopted ASC 855 for the period
ended December 31, 2009 and the required disclosures are reflected in Note 15.
In June 2009, the FASB issued SFAS No. 168, The Statement of Financial Accounting Standards Codification
and the Hierarchy of Generally Accepted Accounting Principles, a replacement of SFAS No. 162, The
Hierarchy of Generally Accepted Accounting Principles (SFAS 168). SFAS 168 establishes the FASB
ASC as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with GAAP. The ASC does
not change current GAAP, but it introduces a new structure that organizes the authoritative standards by
topic. SFAS 168 is effective for financial statements issued for periods ending after September 15, 2009.
As a result, both the ASC and the legacy standard are referenced in the Bank's financial statements and
footnotes.
5.
LOANS
header
1:
header
row column
2: 2009
header
row
Loans:
Primary,
secondary,
seasonal
credit
2009:
175
2008:
483 column 3: 2008 end header row
TAFcolumn
2009:
362
008: and
17,222
Loans: row
TAF:
Loans
to Loans
depository
institutions
2009:
537
008:
17,705
The loan amounts outstandi
Loans to Depository Institutions
The Bank offers primary, secondary, and seasonal credit to eligible borrowers. Each program has its own interest
rate. Interest is accrued using the applicable interest rate established at least every fourteen days by the board
of directors of the Bank, subject to review and determination by the Board of Governors. Primary and
secondary credit are extended on a short-term basis, typically overnight, whereas seasonal credit may be
extended for a period of up to nine months.
Primary, secondary, and seasonal credit lending is collateralized to the satisfaction of the Bank to reduce credit
risk. Assets eligible to collateralize these loans include consumer, business, and real estate loans; Treasury
securities; GSE debt securities; foreign sovereign debt; municipal, corporate, and state and local government
obligations; ABS; corporate bonds; commercial paper; and bank-issued assets, such as certificates of deposit,
bank notes, and deposit notes. Collateral is assigned a lending value that is deemed appropriate by the Bank,
which is typically fair value or face value reduced by a margin.
Depository institutions that are eligible to borrow under the Bank's primary credit program are also eligible to
participate in the TAF program. Under the TAF program, the Reserve Banks conduct auctions for a fixed
amount of funds, with the interest rate determined by the auction process, subject to a minimum bid rate. TAF
loans are extended on a short-term basis, with terms ranging from 28 to 84 days. All advances under the TAF
program must be collateralized to the satisfaction of the Bank. Assets eligible to collateralize TAF loans
include the complete list noted above for loans to depository institutions. Similar to the process used for
primary, secondary, and seasonal credit, a lending value is assigned to each asset that is accepted as collateral
for TAF loans reduced by a margin.
Loans to depository institutions are monitored on a daily basis to ensure that borrowers continue to meet eligibility
requirements for these programs. The financial condition of borrowers is monitored by the Bank and, if a
borrower no longer qualifies for these programs, the Bank will generally request full repayment of the
outstanding loan or, for primary and seasonal credit lending, may convert the loan to a secondary credit loan.
Collateral levels are reviewed daily against outstanding obligations and borrowers that no longer have sufficient
collateral to support outstanding loans are required to provide additional collateral or to make partial or full
repayment.
The remaining maturity distributions of loans outstanding at December 3 lwere as follows (in millions):
For
thePrimary,
years ended
December
31,
2009 credit
and2009
December
31,
20083:(in2009
millions)
header
column
1:
period
header
column
2:
header
column
end2009:
header column
2009:
secondary,
andPrimary,
seasonal
2009:
TAF
period:
Within
15
days
2009:
secondary,
and
seasonal
credit:
171
period:
16 days
to Primary,
90 days
2009;
Primary,
secondary,
and
seasonal
credit:
4 2009362
2009:TAF:
TAF:362
Total
loans
2009:
secondary,
and
seasonal
credit:
175 2009:
TAF:
2008
2008:
2008
Primary,
secondary,
and
seasonal
credit
2008:
TAF
period:
Within
15
days
2008:
Primary,
secondary,
and
seasonal
credit:
333
2008:
TAF:
9,386
period:loans
16 days
to Primary,
90 days 2008:
Primary,
and seasonal
credit:
2008:
TAF:
7,836
Total
2008:
secondary,
and secondary,
seasonal credit:
483 2008:
TAF:150
17,222
At December 31, 2009 and 2008, the Bank did not have any impaired loans and no allowance for loan losses was
required.
6.
TREASURY SECURITIES; GOVERNMENT-SPONSORED ENTERPRISE DEBT SECURITIES; FEDERAL AGENCY AND
GOVERNMENT-SPONSORED ENTERPRISE MORTGAGE-BACKED SECURITIES; SECURITIES PURCHASED UNDER
AGREEMENTS TO RESELL; SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE; AND SECURITIES
LENDING
The FRBNY, on behalf of the Reserve Banks, holds securities bought outright in the SOMA. The Bank's allocated
share of SOMA balances was approximately 12.049 percent and 9.950 percent at December 31, 2009 and
2008, respectively.
The
Bank's
allocated
share
of
Treasury
securities,
GSE
debt
securities,
and
Federal
excluding accrued interest, held in the S O M A at D e c e m b e r 31 w a s as follows (in
agency
and
GSE
MBS,
millions):
header
column
1: 2009
Treasury
securities
header
column
2: Bills
header
column
3:row
Notes
header 93,568
columnGSE
4: Bonds
header
column
5: Total
Treasury
securities
header
column 6:
GSE debt
securities
header
column
7:
Federal
agency
and
GSE
MBS
endTotal
of header
2009
Treasury
securities:
Par
Bills:
2,220
Notes:
68,475
22,873
Treasury
securities:
debt
securities:
19,263
Federal
agency
and and
GSE
MBS:
109,446
2009
Treasury
securities:
Unamortized
premiums
Bills:
-Bonds:
Notes:
788
Bonds:
2,947
Total
Treasury
securities:
3,735
GSE
debt
securities:
905
Federal
agency
and
GSE
MBS:
1,459
2009
discounts
Bills:
- Notes:
(119)
Bonds:
(76)
Total
Treasury
securities:
(195)
GSE
debt
securities:
(3)
Federal
agency
GSE
MBS:
(187)
Total
amortized
cost
Bills:
2,220
Notes:
69,144
Bonds:
25,744
Total securities:
Treasury
securities:
97,108
debt securities:
20,165
Federal
agency
and
GSE
MBS: 110,718
2009 Treasury
Treasury securities:
securities: Unaccreted
Fair Value
Bills:
2,220
Notes:
70,248
Bonds:
27,798
Total
Treasury
100,266
GSE
debtGSE
securities:
20,175
Federal
agency
and
GSE
MBS:
110,159
header
column
1: 2008
Treasury
securities
header
column
2: Bills
header
column
3:row
Notes
header 47,353
columnGSE
4: Bonds
header
column
Total Treasury
securities
header- column 6:
GSE
securities
header
column
7:
Federal
agency
and
GSE
MBS
endTotal
of668
header
2008 debt
Treasury
securities:
Par
Bills:
1,833
Notes:
33,310
12,210
Treasury
securities:
debt
securities:
1,9615:
Federal
agency
and
GSE
MBS:
Unamortized
premiums
Bills:
-Bonds:
Notes:
2733,254
Bonds:
695 GSE
debt
securities:
Federal
agency
and
GSE
MBS:
-- GSE MBS: 2008
Treasury
securities:
Unaccreted
discounts
Bills:
- Notes:
(83)
Bonds:
(62)
Total
Treasury
securities:securities:
(145)
GSE
debt
(3)
Federal
agency
and
GSE
MBS:
2008
Treasury
securities:
Total
amortized
cost
Bills:
1,833
Notes:
Bonds:
12,816
Total securities:
Treasury
47,903
GSE
debt106
securities:
2,064
Federal
agency
and
Fair Value
Bills:
1,833
Notes:
35,591
Bonds:
16,858
Total
Treasury
54,283
GSE
debtsecurities:
securities:
2,076
Federal
agency
and
GSE
MBS:
-
T h e total of the T r e a s u r y securities, G S E d e b t securities, a n d F e d e r a l a g e n c y a n d G S E M B S , net, e x c l u d i n g
accrued
interest held in the S O M A at D e c e m b e r 31 w a s as follows (in millions):
header
column
1: 2009
Treasury
securities
header
column
2: Bills
header
column
3:row
Notes header
column
4: Bonds805,972
header column
5: securities:
Total Treasury
securities
header
column
6:
GSE
debt
securities
header
column
Federal
agency
and
GSE
MBS
end
of
header
2009
Treasury
securities:
Amortized
Cost
Bills:
18,423
Notes:
573,877
Bonds:
213,672
Treasury
securities:
debt
167,362
Federal
agency
and GSE
918,927
Fair
Value7:Bills:
18,423
Notes:
583,040
Bonds:
230,717
TotalTotal
Treasury
securities:
832,180 GSE GSE
debt securities:
167,444
Federal
agency
and GSE
MBS:MBS:
914,290
header
column
1: 2008
Treasury
securities
header
column
2: Bills
header
column
3:row
Notes header
column
4: Bonds481,449
header column
5: securities:
Total Treasury
securities
header
column
6:
GSE
debt
securities
header
column
Federal
agency
and
GSE
MBS
end
of
header
2008
Treasury
securities:
Amortized
Cost
Bills:
18,422
Notes:
334,217
Bonds:
128,810
Treasury
securities:
debt
20,740
Federal
agency
and GSE
Fair
Value7:Bills:
18,422
Notes:
357,709
Bonds:
169,433
TotalTotal
Treasury
securities:
545,564 GSE GSE
debt securities:
20,863
Federal
agency
and GSE
MBS:MBS:
-
T h e fair value a m o u n t s in the above tables are presented solely for informational purposes.
A l t h o u g h the fair value
of security holdings c a n b e substantially greater than or less than the recorded value at any point in time,
these
unrealized gains or losses have no effect o n the ability of the Reserve B a n k s , as the central bank, to m e e t
their
financial obligations and responsibilities.
F a i r value w a s d e t e r m i n e d b y r e f e r e n c e to q u o t e d m a r k e t v a l u e s
for
identical securities, except for Federal agency and GSE MBS for which fair values were determined using a
model-based approach based on observable inputs for similar securities.
The fair value of the fixed-rate Treasury securities, GSE debt securities, and Federal agency and GSE MBS in the
SOMA's holdings is subject to market risk, arising from movements in market variables, such as interest rates
and securities prices. The fair value of Federal agency and GSE MBS is also affected by the rate of
prepayments of mortgage loans underlying the securities.
The following table provides additional information on the amortized cost and fair values of the Federal agency and
GSE MBS portfolio at December 31, 2009 (in millions):
header column
Distribution
of MBS
holdings
by coupon
rateBank:
header4.0%
column
2: Amortized
cost header
column
3: Fair value end of header row
Distribution
of 1:
MBS
holdings by
by
coupon
rate: Allocated
Allocated
to the
the
Bank:
Amortized
cost:52,334
20,497
Fairvalue:
value:
19,969
Distribution
of
MBS
holdings
coupon
rate:
to
Bank:4.5%
Amortized
cost:
Fair
52,007
Bank:5.0%
23,545
23,665
Distribution
of
MBS
holdings
by
coupon
rate:
Allocated
to
the
Bank:5.5%
Amortized
cost:
12,456
Fairvalue:
value:363
12,601
Distribution
to
Amortized
cost:
1,531
Fair
value:
1,554
Distribution of
of MBS
MBS holdings
holdings by
by coupon
coupon rate:
rate: Allocated
Allocated
to the
the Bank:6.0%
Bank:Other1
Amortized
cost:
355 Fair
Total
Amortized
cost:
110,718
Fair value:
110,159
Distribution
total:
Distribution of
of MBS
MBS holdings
holdings by
by coupon
coupon rate:
rate: System
System
total: 5.0%
4.0%
Amortized
cost:
170,119
Fair value:
value: 196,411
165,740
Distribution
of
MBS
holdings
by
coupon
rate:
System
total:
4.5%
Amortized
cost:
434,352
Fair
431,646
195,418
Distribution
of
MBS
holdings
by
coupon
rate:
System
total:
5.5%
Amortized
cost:
103,379
Fair
value:
104,583
Distribution of
of MBS
MBS holdings
holdings by
by coupon
coupon rate:
rate: System total:
total: Total
6.0% Amortized
Other1
Amortizedcost:
cost:12,710
2,949 Fair
Fair
value:
3,009
Distribution
Amortized
cost:
918,927
Fairvalue:
value:12,901
914,290
1 - Represents less
than one percent
of the totalSystem
portfolio
Financial information related to securities purchased under agreements to resell and securities sold under
agreements to repurchase for the years ended December 31, 2009 and 2008, was as follows (in millions):
header column
1: Securities
headerContract
column
2: Securities
purchased
under
agreements
topurchased
resellto
header
column
3: Securities
under
agreements
to repurchase
end
of headertosold
row
Securities
agreements
to resell:
2009
Securities
purchased
under
agreements
resell:
2008
Securities
soldsold
under
agreements
topurchased
repurchase:
2009
Securities
under
agreements
to repurchase: 2008
Securities:
Allocated
to
the
Bank:
amount
outstanding,
end
ofduring
year
Securities
under
agreements
to resell:
2009:
- Securities
under
agreements
resell:
2008:
7,960 2008:
Securities purchased
sold
under under
agreements
toAverage
repurchase:
2009:
9,366
Securities
sold
under
agreements
topurchased
repurchase:
2008:
8,791
Securities:
Allocated
to
the
daily
amount
outstanding,
the
year
Securities
under
agreements
to resell:
Securities
purchased
underunder
agreements
to resell:
8,474
Securities
sold
under
agreements
repurchase:
2009:
7,733
Securities
sold
under
agreements
to
repurchase:
2008:
5,410
Securities:
Allocated
to
the Bank:
Bank:
Maximum
month-end
balance
during
the
yearto
Securities
purchased
under
to2009:
resell:360
2009:
Securities
purchased
ecurities
under
agreements
toto
repurchase:
2009:
sold
agreements
repurchase:
9,806
Securities:
Allocated
to
the
Bank:
Securities
pledged,
end
ofSecurities
yearoutstanding,
Securities
purchased
under
agreements
to 2008:
resell:
2009:
-agreements
Securities purchased
under- agreements
to resell: 2008:
-agreements to resell: 2008: 11,840 S
Securitiessold
sold
under
agreements
to
repurchase:
2009:9,366
9,381
Securities
soldunder
under
agreements
to
repurchase:
2008:
7,850
Securities:
System
total:
Contract
amount
outstanding,
end
of
year
Securities
purchased
under
agreements
to
resell:
2009:
Securities
purchased
under
agreements
to
resell:
2008:
80,000
Securities
sold
under
agreements
to
repurchase:
2009:
77,732
Securities
sold
under
agreements
to
repurchase:
2008:
88,352
Securities:sold
System
total:
Average to
daily
amount balance
outstanding,
during
the
year
Securities
purchased
under
agreements
to55,169
resell:to2009:
3,616
Securities
purchased
under
agreements
to resell:
2008:
86,227
Securities
under
agreements
repurchase:
2009:
67,837
Securities
sold
under
agreements
to
repurchase:
2008:
Securities:
System
total:
Maximum
month-end
outstanding,
during
the
year
Securities
purchased
under
agreements
resell:
2009:
Securities
purchased
under
agreements
to
resell:
2008:
119,000
Securities sold
sold
under
agreements
topledged,
repurchase:
2009:
77,732
Securities
sold under
under
agreements
to
repurchase:
2008:
98,559purchased under agreements to resell: 2008: Securities:
System
total:
Securitiesto
end 2009:
of year77,860
Securities
purchased
under agreements
agreements to
to repurchase:
resell: 2009:2008:
- Securities
Securities
under
agreements
repurchase:
Securities
sold
78,896
The Bank has revised its disclosure of securities purchased under agreements to resell and securities sold under
agreements to repurchase from a weighted average calculation, disclosed in 2008, to the simple daily average
calculation, disclosed above. The previously reported System total 2008 weighted average amount outstanding
for securities purchased under agreements to resell was $97,037 million, of which $9,655 million was allocated
to the Bank. The previously reported System total 2008 weighted average amount outstanding for securities
sold under agreements to repurchase was $65,461 million, of which $6,513 million was allocated to the Bank.
The contract amounts for securities purchased under agreements to resell and securities sold under agreements to
repurchase approximate fair value.
The remaining maturity distribution of Treasury securities, GSE debt securities, Federal agency and GSE MBS
bought outright, securities purchased under agreements to resell, and securities sold under agreements to
repurchase that were allocated to the Bank at December 31, 2009 was as follows (in millions):
1: Securities
period
header
column
2: Treasury
securities
(Par(Contract
value)
header
column
3: GSE
debt6:securities
(Par
value)
header
4:
Federal agency
andamount)
GSE
value)
header
column
5:
purchased
under
agreements
to
resell
amount)
column
Securities
sold
under
agreements
to repurchase
(Contract
end(Par
of header
column
period:
Within
15
days
Treasury
securities
(Par
value):
1,400
GSE
debt
securities
(Parheader
value):
8 Federal
agencyagency
and
GSE
MBS
(Parcolumn
value):
- Securities
purchased
underMBS
agreements
to resell
(Contract
amount)Securities
sold
under
agreements
to repurchase
repurchase
(Contract
amount):
period:
days
to
days
Treasury
securities
(Par
value):
3,476
GSE
debt
securities
(Par
value):
367 Federal
MBS
value):
purchased
under
to
(Contract
amount)Securities
under
agreements
to
(Contract
amount):
-9,366
period: 16
91 sold
days
to 90
1 year
Treasury
securities
(Par
value):
6,117
GSE
securities
(Par
value):
2,594
Federal
agency and
and GSE
GSE
MBS (Par
(Par
value): -value):
- Securities
Securities
purchased
under agreements
agreements
to resell
resellto
(Contract
amount)-amount)Securities
sold
under
agreements
to
(Contract
amount):
-- debt
period:
Over
15 year
510
years
Treasury
securities
(Par
value):
39,384
GSE
debt
securities
(Par
value):
11,976
Federal
agency
and
MBS
22Securities
purchased
under
agreements
(Contract
Securities
sold
undertoto
agreements
to repurchase
repurchase
(Contract
amount):
period:
Over
years
years
Treasury
securities
(Par
value):
25,750
GSE
debt
securities
(Par
value):
4,071
Federal
agency
andGSE
GSEvalue):
MBS(Par
(Par
value):
Securities
purchased
under
agreements
toresell
resell
(Contract
amount)Securities
sold
under
agreements
to
repurchase
(Contract
amount):
period:
Over
10
years
Treasury
securities
(Par
value):
17,441
GSE
debt
securities
(Par
value):
247
Federal
agency
and
GSE
MBS
(Par
109,442
Securities
purchased
under
agreements
to
resell
(Contract
amount)Securities
soldallocated
under under
agreements
repurchase
(Contract
amount):
-Securities
period:
Total
to the
BanktoTreasury
securities
(Par
value): 93,568
GSEsold
debtunder
securities
(Par value):
19,263 Federal
agency
and GSE
Securities
purchased
agreements
to resell
(Contract
amount)agreements
to repurchase
(Contract
amount):
9,366MBS (Par value): 109,446
Federal agency and GSE MBS are reported at stated maturity in the table above. The estimated weighted average
life of these securities at December 31, 2009, which differs from the stated maturity primarily because it
factors in prepayment assumptions, is approximately 6.4 years.
At December 31, 2009 and 2008, Treasury securities and GSE debt securities with par values of $21,610 million
and $180,765 million, respectively, were loaned from the SOMA, of which $2,604 million and $17,986
million, respectively, were allocated to the Bank.
At December 31, 2009, the total of other investments was $5 million, of which $1 million was allocated to the
Bank. Other investments consist of cash and short-term investments related to the Federal agency and GSE
MBS portfolio.
At December 31, 2009, the total of other liabilities was $601 million, of which $72 million was allocated to the
Bank. These other liabilities, which are related to purchases of Federal agency and GSE MBS, arise from the
failure of a seller to deliver securities to the FRBNY on the settlement date. Although the Bank has ownership
of and records its investments in the MBS as of the contractual settlement date, it is not obligated to make
payment until the securities are delivered, and the amount reported as other liabilities represents the Bank's
obligation to pay for the securities when delivered.
The FRBNY enters into commitments to buy Federal agency and GSE MBS and records the related MBS on a
settlement-date basis. As of December 31, 2009, the total purchase price of the Federal agency and GSE MBS
under outstanding commitments was $160,099 million, of which $32,838 million was related to dollar roll
transactions. The amount of outstanding commitments allocated to the Bank was $19,290 million, of which
$3,957 million was related to dollar roll transactions. These commitments, which had contractual settlement
dates extending through March 2010, are primarily for the purchase of TBA MBS for which the number and
identity of the pools that will be delivered to fulfill the commitment are unknown at the time of the trade.
These commitments are subject to market and counterparty risks that result from their future settlement. As of
December 31, 2009, the fair value of Federal agency and GSE MBS under outstanding commitments was
$158,868 million, of which $19,141 million was allocated to the Bank. During the year ended December 31,
2009, the Reserve Banks recorded net gains from dollar roll related sales of $879 million, of which $113
million was allocated to the Bank. These net gains are reported as "Non-Interest Income: Federal agency and
government-sponsored enterprise mortgage-backed securities gains, net" in the Statements of Income and
Comprehensive Income.
7.
INVESTMENTS DENOMINATED IN FOREIGN CURRENCIES
The FRBNY, on behalf of the Reserve Banks, holds foreign currency deposits with foreign central banks and with
the Bank for International Settlements and invests in foreign government debt instruments. These investments
are guaranteed as to principal and interest by the issuing foreign governments. In addition, the FRBNY enters
into transactions to purchase foreign-currency-denominated government-debt securities under agreements to
resell for which the accepted collateral is the debt instruments issued by the governments of Belgium, France,
Germany, Italy, the Netherlands, and Spain.
The Bank's allocated share of investments denominated in foreign currencies was approximately 7.647 percent and
7.701 percent at December 31, 2009 and 2008, respectively.
The Bank's allocated share of investments denominated in foreign currencies, including accrued interest, valued at
amortized cost and foreign currency market exchange rates at December 31, was as follows (in millions):
header
column
1:Foreign
Currency
headerdeposits
column 2:
2009566
header
column
3: 2008 end of header row
Currency:
Euro:
Currency:
Euro:
currency
2008:
428355
Currency:
Euro:
Securities
purchased
under2009:
agreements
to2008:
resell
2009: 198 2008: 314
Currency:
Euro:
Government
debtcurrency
instruments
2009:2009:
378
Currency:
Japanese
yen:
Currency:
Japanese
yen:
Foreign
deposits
260
2008:
268545
Currency: Total
Japanese
yen: Government
Currency:
allocated
to the Bank debt
2009:instruments
1,933 2008:2009:
1,910531 2008:
At December 31, 2009 and 2008, the fair value of investments denominated in foreign currencies, including
accrued interest, allocated to the Bank was $1,948 million and $1,927 million, respectively. The fair value of
government debt instruments was determined by reference to quoted prices for identical securities. The cost
basis of foreign currency deposits and securities purchased under agreements to resell, adjusted for accrued
interest, approximates fair value. Similar to the Treasury securities, GSE debt securities, and Federal agency
and GSE MBS discussed in Note 6, unrealized gains or losses have no effect on the ability of a Reserve Bank,
as the central bank, to meet its financial obligations and responsibilities. The fair value is presented solely for
informational purposes.
Total Reserve Bank investments denominated in foreign currencies were $25,272 million and $24,804 million at
December 31, 2009 and 2008, respectively. At December 31, 2009 and 2008, the fair value of the total
Reserve Bank investments denominated in foreign currencies, including accrued interest, was $25,480 million
and $25,021 million, respectively.
The remaining maturity distribution of investments denominated in foreign currencies that were allocated to the
Bank at December 31, 2009 was as follows (in millions):
header
column
1:
header
column
2: Euro
header
column
3: Japanese yen
header
column
4:
Total
end
of464
header
row
period:
Within
15
days
Euro:
Japanese
yen:
277
Total:
741
period:
16
days
toperiod
days
Euro:
192
Japanese
yen:
35
Total:
227
period:
days
to
190to
year
Euro:
184
Japanese
yen:
181
Total:
365
period: 91
Over
1allocated
year
5toyears
Euro:
302
Japanese
yen:
298
Total:
period:
Total
the Bank
Euro:
1,142
Japanese
yen:
791 600
Total: 1,933
At December 31, 2009 and 2008, the authorized warehousing facility was $5 billion, with no balance outstanding.
In connection with its foreign currency activities, the FRBNY may enter into transactions that contain varying
degrees of off-balance-sheet market risk that result from their future settlement and counterparty credit risk.
The FRBNY controls these risks by obtaining credit approvals, establishing transaction limits, receiving
collateral in some cases, and performing daily monitoring procedures.
8.
CENTRAL BANK LIQUIDITY SWAPS
U.S. Dollar Liquidity Swaps
The Bank's allocated share of U.S. dollar liquidity swaps was approximately 7.647 percent and 7.701 percent at
December 31, 2009 and 2008, respectively.
At December 31, 2009 and 2008, the total Reserve Bank amount of foreign currency held under U.S. dollar
liquidity swaps was $10,272 million and $553,728 million, respectively, of which $785 million and $42,641
million, respectively, was allocated to the Bank.
The remaining maturity distribution of U.S. dollar liquidity swaps that were allocated to the Bank at December 31
was as follows (in millions):
header
column
1:2009:
Currency
header
column
2:
2009
header
column
3:
2008
end
of toheader
row
2009:
15
days
2009:
1616- 2009:
days
to
90
days
Total
2008:
15
days
2008:
16
days
to 22,436
90 days 2008: Total
Currency: Within
Australian
dollar
Within
152009:
days:
1690
days
to days:
days:
-2009:
2009:
- 2008:
Within
15Within
days:
770
2008:
days:
988 2008:
Total:
Danish
krone
2009:
Within
15
- 2009:
16 to
days
to
90
- 2009:
Total:
- 2008:
Within
days:
- 2008:
16
days
todays
90
1,155
2008:
Total:
1,1551,758
Currency:
Euro
2009:
Within
15
days:
497days:
days
days:
-902009:
Total:
497Total:
2008:
Within
15 15
days:
11,626
2008:
16 16
days
to days:
90 90
days:
10,810
2008:
Total:
Currency: Japanese
yen2009:
2009:
Within
15
days:-42
2009:
days
days:
- 2009:
Total:
42246
2008:
Within
15 days:
3,688
2008:
16days
days
to 90
days:
5,762
2008:
Total:
9,450
Korean won
Within
15
days:
2009:
1616
days
to to
9090
days:
- 2009:
Total:
- 2008:
Within
15 days:
- 2008:
days16
to
90
days:
797
2008:
Total:
797
Mexican
peso
2009:
Within
15
246
days
90
days:
--2009:
Total:
2008:
Within
15
days:
-16
2008:
to
days:
-464
2008:
Total:
- 1,925
Currency: Norwegian
krone
2009:
Within
15
days:
-2009:
2009:
16
days
to
90
days:
2009:
Total:
- 2008:
Within
days:
2008:
days
to90
90
days:
2008:
Total:
634
Swedish
krona
2009:
Within
15days:
days:
- 2009:
1616
days
to to
90
days:
- 2009:
Total:
- 2008:
Within
15 15
days:
770170
2008:
16 16
days
to
90
days:
1,155
2008:
Total:
Swiss
franc
2009:
15 785
days:
- 2009:
16 days
to
90
days:
- 2009:
Total:
2008:
Within
15 days:
days:
1,480
2008:
16
90
459
2008:
Total:
1,939
Currency: U.K.
9 2008:
16 days
to
90toto
days:
2,538
2008:
Total:
2,547
Total pound
2009:
WithinWithin
15 days:
2009:
16 days
to 90
days:
- 2009:
Total:
785- 2008:
Within
15
18,513
2008:
16days
days
90days:
days:
24,128
2008:
Total:
42,641
Foreign Currency Liquidity Swaps
There were no transactions related to the foreign currency liquidity swaps during the years ended December 31,
2008 and 2009.
9.
BANK PREMISES, EQUIPMENT, AND SOFTWARE
Bank premises and equipment at December 31 were as follows (in millions):
header
column 1:
Equipment
and
Software
header
column
2: 2009 header column 3: 2008 end of header column row
Bank
premises
and
equipment:
Bank
premises
and
equipment:
Land
2009:
39 2008:
39 equipment
Bank
premises
and
equipment:
Buildings
2009:
226 and
2008:
224 3 2008:
Bank
premises
and
equipment:
Building
machinery
2009:
37 2008: 37
Bank
premises
and
equipment:
Construction
in
progress
2009:
1 101
Bank
premises
and
equipment:
Furniture
and
equipment
2009:
90 2008:
Bank
premises
and
equipment:
Subtotal
2009:
395
2008:
402
Accumulated
depreciation
2009:
(146)
2008:
(146)
Bank premisesexpense,
and equipment,
net 2009:
2008: 256
Depreciation
for the years
ended249
December
31 2009: 16 2008: 18
The Bank leases space to outside tenants with remaining lease terms ranging from one to nine years. Rental
income from such leases was $4 million for each of the years ended December 31, 2009 and 2008, and is
reported as a component of "Other income" in the Statements of Income and Comprehensive Income. Future
minimum lease payments that the Bank will receive under noncancelable lease agreements in existence at
December 31, 2009 are as follows (in millions):
header
column
2010 0.2
2.9
2011
1.2
2012
0.5
2013
2014
Thereafter
0.4 1: year header column 2: value end of header row
Total
5.4
The Bank had capitalized software assets, net of amortization, of $6 million and $218 thousand at December 31,
2009 and 2008, respectively. Amortization expense was $3 million and $283 thousand for the years ended
December 31, 2009 and 2008, respectively. Capitalized software assets are reported as a component of "Other
assets" in the Statements of Condition and the related amortization is reported as a component of "Other
expenses" in the Statements of Income and Comprehensive Income.
Assets impaired as a result of the Bank's restructuring plan, as discussed in Note 14, include equipment and
software. Asset impairment losses of $2 million for the period ended December 31, 2008 were determined
using fair values based on quoted fair values or other valuation techniques and are reported as a component of
"Other expenses" in the Statements of Income and Comprehensive Income. The Bank had no impairment
losses in 2009.
Additionally, asset write offs of $9 million occurred due to discontinued development of a check application for the
period ending December 31, 2008.
10. COMMITMENTS AND CONTINGENCIES
In the normal course of its operations the Bank enters into contractual commitments, normally with fixed expiration
dates or termination provisions, at specific rates and for specific purposes.
At December 31, 2009, the Bank was obligated under noncancelable leases for premises and equipment with
remaining terms ranging from one to approximately three years. These leases provide for increased rental
payments based upon increases in real estate taxes.
Rental expense under operating leases for certain operating facilities, warehouses, and office equipment (including
taxes, insurance, and maintenance when included in rent), net of sublease rentals, was $1 million for each of
the years ended December 31, 2009 and 2008.
Future minimum rental payments under noncancelable operating leases with terms of one year or more, at
December 31, 2009 were not material.
At December 31, 2009, there were no material unrecorded unconditional purchase commitments or obligations in
excess of one year.
Under the Insurance Agreement of the Federal Reserve Banks, each of the Reserve Banks has agreed to bear, on a
per incident basis, a pro rata share of losses in excess of one percent of the capital paid-in of the claiming
Reserve Bank, up to 50 percent of the total capital paid-in of all Reserve Banks. Losses are borne in the ratio
of a Reserve Bank's capital paid-in to the total capital paid-in of all Reserve Banks at the beginning of the
calendar year in which the loss is shared. No claims were outstanding under the agreement at December 31,
2009 or 2008.
The Bank is involved in certain legal actions and claims arising in the ordinary course of business. Although it is
difficult to predict the ultimate outcome of these actions, in management's opinion, based on discussions with
counsel, the aforementioned litigation and claims will be resolved without material adverse effect on the
financial position or results of operations of the Bank.
11. RETIREMENT AND THRIFT PLANS
Retirement Plans
The Bank currently offers three defined benefit retirement plans to its employees, based on length of service and
level of compensation. Substantially all of the employees of the Reserve Banks, Board of Governors, and
Office of Employee Benefits of the Federal Reserve System ("OEB") participate in the Retirement Plan for
Employees of the Federal Reserve System ("System Plan"). In addition, employees at certain compensation
levels participate in the Benefit Equalization Retirement Plan ("BEP") and certain Reserve Bank officers
participate in the Supplemental Retirement Plan for Select Officers of the Federal Reserve Bank ("SERP").
The System Plan provides retirement benefits to employees of the Federal Reserve Banks, the Board of Governors,
and OEB. The FRBNY, on behalf of the System, recognizes the net asset or net liability and costs associated
with the System Plan in its financial statements. Costs associated with the System Plan are not reimbursed by
other participating employers.
The Bank's projected benefit obligation, funded status, and net pension expenses for the BEP and the SERP at
December 31, 2009 and 2008, and for the years then ended, were not material.
Thrift Plan
Employees of the Bank participate in the defined contribution Thrift Plan for Employees of the Federal Reserve
System ("Thrift Plan"). The Bank matches employee contributions based on a specified formula. For the year
ended December 31, 2008 and for the first three months of the year ended December 31, 2009, the Bank
matched 80 percent of the first 6 percent of employee contributions for employees with less than five years of
service and 100 percent of the first 6 percent of employee contributions for employees with five or more years
of service. Effective April 1, 2009, the Bank matches 100 percent of the first 6 percent of employee
contributions from the date of hire and provides an automatic employer contribution of one percent of eligible
pay. The Bank's Thrift Plan contributions totaled $7 million and $6 million for the years ended December 31,
2009 and 2008, respectively, and are reported as a component of "Salaries and other benefits" in the
Statements of Income and Comprehensive Income.
12. POSTRETIREMENT BENEFITS OTHER THAN RETIREMENT PLANS AND POSTEMPLOYMENT BENEFITS
Postretirement Benefits Other Than Retirement Plans
In addition to the Bank's retirement plans, employees who have met certain age and length-of-service requirements
are eligible for both medical benefits and life insurance coverage during retirement.
The Bank funds benefits payable under the medical and life insurance plans as due and, accordingly, has no plan
assets.
Following is a reconciliation of the beginning and ending balances of the benefit obligation (in millions):
header
column
1: category
header
column
2: 2009
header
column
3: 2008 end of header row
Accumulated
postretirement
benefit
obligation
at
January
1 2009:
Service
cost gain
benefits
earned
during
the
period
2009:
3.9
4.4
Interest
cost
on
accumulated
benefit
obligation
2009:
7.12008:
2008:
7.0115.6 2008: 109.3
Net
actuarial
loss
2009:
2008:
1.4
Curtailment
2009:
-1.2
2008:
(2.9)
Contributions
by
plan
participants
2009:
1.5
2008:
1.3
Benefits
paid
2009:
(6.8)
2008:
(5.2)
Medicare Partpostretirement
D subsidies 2009:
0.4 obligation
2008: 0.3 at December 31 2009: 122.9 2008: 115.6
Accumulated
benefit
At December 31, 2009 and 2008, the weighted-average discount rate assumptions used in developing the
postretirement benefit obligation were 5.75 percent and 6.00 percent, respectively.
Discount rates reflect yields available on high-quality corporate bonds that would generate the cash flows necessary
to pay the plan's benefits when due.
Following is a reconciliation of the beginning and ending balance of the plan assets, the unfunded postretirement
benefit obligation, and the accrued postretirement benefit costs (in millions):
header
column
1: the
category
column
2:- 2009
column 3: 2008 end of header row
Fair
value
of plan
assets
at header
January
1 2009:
2008:
Contributions
by
employer
2009:
4.9 1.5
2008:
3.6header
Contributions
by
plan
participants
2009:
2008:
1.3
Benefits
paid
2009:
(6.8)
2008:
(5.2)
Medicare
Part
D
subsidies
2009:
0.4
2008:
0.3
Fair
value
of
plan
assets
at
December
31
2009:
2008:
Unfunded
obligation
and
accrued
postretirement
benefit
cost
2009:
122.9
2008: 115.6
Amounts
included
in gain
accumulated
other
comprehensive loss are
shown
below:
Prior
service
cost
1.8
2008:
2.8
Net
actuarial
loss 2009:
2008:
(21.6)
Deferred
curtailment
2009:
- 2008:
0.5
Total
accumulated
other(21.1)
comprehensive
loss 2009: (19.3) 2008: (18.3)
Accrued postretirement benefit costs are reported as a component of "Accrued benefit costs" in the Statements of
Condition.
For measurement purposes, the assumed health care cost trend rates at December 31 are as follows:
header
column
1:trend
rate
column
2009rate
header
column
3: 2008trend
end of
header
row
Health
care
rate
assumed
for2:trend
next
year
7.50%
7.50%
Rate
which
the
cost header
trend
rate
is assumed
to
decline
(the
ultimate
rate)
5.00%
5.00%
Year to
that
thecost
rate
reaches
the
ultimate
2015
2014
Assumed health care cost trend rates have a significant effect on the amounts reported for health care plans. A one
percentage point change in assumed health care cost trend rates would have the following effects for the year
ended December 31, 2009 (in millions):
header
column 1:point
effect
headerand
column
2:
One
percentage
point
increase
header
column 3:benefit
One percentage
point decrease end of header row
Effect
on
ofincrease:
service
interest
costobligation
components
ofpercentage
net
periodic
postretirement
costs
One percentage
1.8
Onebenefit
percentage
pointOne
decrease:
(1.5) point
Effect
on aggregate
accumulated
postretirement
increase: 15.4
One percentage
point decrease: (12.8)
The following is a summary of the components of net periodic postretirement benefit expense for the years ended
December 31 (in millions):
header
column
1:
category
header
column
2:
2009
header
column
Service
cost
benefits
earned
during
the
period
2009:
2008:
4.42008 end of header row
Interest
cost for
on
accumulated
obligation
2009:
7.13.9
2008:
7.03:
Amortization
of
prioractuarial
service
cost
2009:
(1.1)
2008:
Amortization
Total
periodic
of
expense
net
2009:benefit
loss
11.6
2009:
2008:
1.7
12.32008:
2.1(1.2)
Curtailment
(gain)
loss
2009:
(0.4)
2008:
0.1
Net
periodic
postretirement
expense
2009:
11.2 2008:other
12.4 comprehensive loss into net periodic postretirement benefit expense in 2010 are shown below:
Estimated
amounts
thatcost
will benefit
be2009:
amortized
from
accumulated
Prior
service
(1.1)
Net
actuarial
loss
2009:
1.3
Total
2009:
0.2
Net postretirement benefit costs are actuarially determined using a January 1 measurement date. At January 1,
2009 and 2008, the weighted-average discount rate assumptions used to determine net periodic postretirement
benefit costs were 6.00 percent and 6.25 percent, respectively.
Net periodic postretirement benefit expense is reported as a component of "Salaries and other benefits" in the
Statements of Income and Comprehensive Income.
A deferred curtailment gain was recorded in 2008 as a component of accumulated other comprehensive loss; the
gain will be recognized in net income in future years when the related employees terminate employment.
The Medicare Prescription Drug, Improvement and Modernization Act of 2003 established a prescription drug
benefit under Medicare ("Medicare Part D") and a federal subsidy to sponsors of retiree health care benefit
plans that provide benefits that are at least actuarially equivalent to Medicare Part D. The benefits provided
under the Bank's plan to certain participants are at least actuarially equivalent to the Medicare Part D
prescription drug benefit. The estimated effects of the subsidy are reflected in actuarial loss in the
accumulated postretirement benefit obligation and net periodic postretirement benefit expense.
Federal Medicare Part D subsidy receipts were $0.5 million and $0.3 million in the years ended December 31, 2009
and 2008, respectively. Expected receipts in 2010, related to benefits paid in the years ended December 31,
2009, are $0.1 million.
Following is a summary of expected postretirement benefit payments (in millions):
header
columnsubsidy:
1: year header
column
2: Without
subsidy header column 3: With subsidy end of header row
2010
Without
subsidy:
6.4
With
subsidy:
6.0
2011
Without
7.0
With
subsidy:
6.6
2012
Without
subsidy:
7.5
With
subsidy:
6.9
2013
Without
subsidy:
8.0
With
subsidy:
7.4
2014
Without
subsidy:
8.5
With
subsidy:
7.7
2015 -Without
2019 Without
subsidy:
48.7subsidy:
With subsidy:
Total
subsidy:
86.1 With
78.3 43.7
Postemployment Benefits
The Bank offers benefits to former or inactive employees. Postemployment benefit costs are actuarially
determined using a December 31 measurement date and include the cost of medical and dental insurance,
survivor income, disability benefits, and self-insured workers' compensation expenses. The accrued
postemployment benefit costs recognized by the Bank at December 31, 2009 and 2008, were $11 million and
$10 million, respectively. This cost is included as a component of "Accrued benefit costs" in the Statements of
Condition. Net periodic postemployment benefit expense included in 2009 and 2008 operating expenses were
$3 million and $0.1 million, respectively, and are recorded as a component of "Salaries and other benefits" in
the Statements of Income and Comprehensive Income.
FEDERAL RESERVE BANK OF ATLANTA
NOTES TO FINANCIAL STATEMENTS
13. ACCUMULATED OTHER COMPREHENSIVE INCOME AND OTHER COMPREHENSIVE INCOME
Following is a reconciliation of beginning and ending balances of accumulated other comprehensive loss (in
millions):
header
column
1: category
header
column
2:toAmount
related to
postretirement
benefits
otherplans:
than (21)
retirement plans end of header row
Balance
at funded
January
1, 2008
Amount
relatedNet
postretirement
benefits
other the
thanyear
retirement
Change
in
status
of
benefit
plans:
Change
in
funded
status
of
benefit
plans:
actuarial
gain
arising
during
Amount
related
tobenefits
postretirement
benefits
other
than retirement
Change
in
funded
status
of
benefit
plans:
Deferred
curtailment
gain
Amount
related
torelated
postretirement
other
than
retirement
plans:
1 plans:
Change
in
funded
status
of
benefit
plans:
Amortization
of
prior
service
cost Amount
Amount
related
to postretirement
postretirement
benefits
other
than
retirement
plans: 2(p
Change
in
funded
status
of
benefit
plans:
Amortization
of
net
actuarial
loss
to
benefits
other
than
retirement
Change
in
funded
status
of
benefit
plans
other
comprehensive
loss
Amount
related
to
postretirement
benefits
other
than
retirement
plans:
3
Balance
at
December
31,
2008
Amount
related
to
postretirement
benefits
other
than
retirement
plans:
(18)
Change
funded
status
of
benefit
plans:
Change
in
funded
status
of
benefit
plans:
Net
actuarial loss
arising
during
the
year Amount
to postretirement
other
than retirement
in
funded
status
of
benefit
plans:
Amortization
of
prior
service
cost
Amount
relatedrelated
to
postretirement
benefitsbenefits
other than
than
retirement
plans: 2(p
Change in
Change
in
funded
status
of
benefit
plans:
of
actuarial
Amount
related
to
postretirement
benefits
other
retirement
plans:
Change
in
funded
status
of
benefit
plans:related
Amortization
of net
deferred
curtailment
gain retirement
Amount
related
postretirement
benefits
other
than retirement
Change
status
benefit
plans
- Amortization
other to
comprehensive
loss
(1) loss
Balance in
at funded
December
31,of
2009
Amount
postretirement
benefits
other than
plans:to
(19)
Additional detail regarding the classification of accumulated other comprehensive loss is included in Note 12.
14. BUSINESS RESTRUCTURING CHARGES
2007 and Prior Restructuring Plans
The Bank incurred various restructuring charges prior to 2008 related to the restructuring of check and cash
processing.
2008 Restructuring Plans
In 2008, the Reserve Banks announced the acceleration of their check restructuring initiatives to align the check
processing infrastructure and operations with declining check processing volumes. The new infrastructure
consolidates operations into two regional Reserve Bank processing sites; in Cleveland, for paper check
processing, and Atlanta, for electronic check processing. Additional announcements in 2008 included
restructuring plans associated with the closure of the Retail Product Office's Check Contingency Center in
Birmingham and the consolidation of Check Adjustments to FRB Cleveland.
Following is a summary of financial information related to the restructuring plans (in millions):
header
column
1: category
header column
2:of2007
and prior
restructuring
plans
header
column
3:to2008
restructuring
plans
header
Information
related
to
restructuring
plans
as
December
31,
2009:
Information
related
to
plans
as
December
31,
2009:
Total
expected
costs
related
restructuring
activity
2007
andc2p
2008
restructuring
plans:
6.1
Total 14.0
Information
related
to restructuring
restructuring
plans
as of
of
December
31,
2009:
Expected
completion
date
2007
and2008
priorrestructuring
restructuring
plans:
Reconciliation
of
liability
balances:
Reconciliation
of
liability
balances:
Balance
at
January
1,
2008
2007
and
prior
restructuring
plans:
2.7
plans:
Reconciliation
of
liability
balances:
Balance
at
January
1,
2008:
Employee
separation
costs
2007
and prior
restructuring
plans:
- -20T
Reconciliation
liability
balances:
Balance
at
January
1,
2008:
Adjustments
2007
and
prior
restructuring
plans:
0.32008
2008
restructu
Reconciliation of
of
liability
balances:
Balance
at
January
1, 31,
2008:
Payments
2007
and
prior
restructuring
plans:
(2.8)
restructuri
of
liability
balances:
Balance
at
December
2008
2007
and
prior
restructuring
plans:
0.2
2008
restructuring
plans:
Reconciliation
Reconciliation
of
liability
balances:
Balance
at
December
31,
2008:
Adjustments
2007
and
prior
restructuring
plans:
2008
restruct
Reconciliation
of
liability
balances:
Balance
at
December
31,
2008:
Payments
2007
and
prior
restructuring
plans:
(0.2)
2008
restruc
Reconciliation of liability balances: Balance at December 31, 2009 2007 and prior restructuring plans: - 2008 restructuring plans: 4
Employee separation costs are primarily severance costs for identified staff reductions associated with the
announced restructuring plans. Separation costs that are provided under terms of ongoing benefit
arrangements are recorded based on the accumulated benefit earned by the employee. Separation costs that are
provided under the terms of one-time benefit arrangements are generally measured based on the expected
benefit as of the termination date and recorded ratably over the period to termination. Restructuring costs
related to employee separations are reported as a component of "Salaries and other benefits" in the Statements
of Income and Comprehensive Income.
Adjustments to the accrued liability are primarily due to changes in the estimated restructuring costs and are shown
as a component of the appropriate expense category in the Statements of Income and Comprehensive Income.
Restructuring costs associated with the impairment of certain Bank assets, including software and equipment, are
discussed in Note 9. Costs associated with enhanced pension benefits for all Reserve Banks are recorded on
the books of the FRBNY as discussed in Note 11.
15. SUBSEQUENT EVENTS
There were no subsequent events that require adjustments to or disclosures in the financial statements as of
December 31, 2009. Subsequent events were evaluated through April 21, 2010, which is the date that the
Bank issued the financial statements.
@FedFRASER