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Federal Reserve Bank of Boston Financial Statements As of and for the Years Ended December 31, 2023 and 2022 and Independent Auditors' Report The Federal Reserve System is the central bank of the United States. It performs five key functions to promote the effective operation of the U.S. economy and, more generally, the public interest. The Federal Reserve ■ conducts the nation’s monetary policy to promote maximum employment, stable prices, and moderate long-term interest rates in the U.S. economy; ■ promotes the stability of the financial system and seeks to minimize and contain systemic risks through active monitoring and engagement in the U.S. and abroad; ■ promotes the safety and soundness of individual financial institutions and monitors their impact on the financial system as a whole; ■ fosters payment and settlement system safety and efficiency through services to the banking industry and U.S. government that facilitate U.S.-dollar transactions and payments; and ■ promotes consumer protection and community development through consumer-focused supervision and examination, research and analysis of emerging consumer issues and trends, community economic development activities, and administration of consumer laws and regulations. To learn more about us, visit www.federalreserve.gov/aboutthefed.htm. iii Contents Management’s Report on Internal Control over Financial Reporting ....... Independent Auditors’ Report ................................................................ Abbreviations ........................................................................................ Consolidated Financial Statements ....................................................... Consolidated Statements of Condition as of December 31, 2023 and December 31, 2022 ...................................................................................................................................... Consolidated Statements of Operations for the years ended December 31, 2023 and December 31, 2022 ..................................................................................................... Consolidated Statements of Changes in Capital for the years ended December 31, 2023 and December 31, 2022 .......................................................................................... Notes to Consolidated Financial Statements....................................................................... 1 2 4 5 5 6 7 8 Management’s Report on Internal Control over Financial Reporting March 18, 2024 To the Board of Directors: The management of the Federal Reserve Bank of Boston (Bank) is responsible for the preparation and fair presentation of the Consolidated Statements of Condition as of December 31, 2023, and 2022, and the Consolidated Statements of Operations, and Consolidated Statements of Changes in Capital, for the years then ended, including the related notes (collectively, the consolidated financial statements). The consolidated 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 Federal Reserve Banks (FAM), and, as such, include some amounts that are based on management judgments and estimates. To our knowledge, the consolidated financial statements are, in all material respects, fairly presented in conformity with the accounting principles, policies and practices documented in the FAM and include all disclosures necessary for such fair presentation. The management of the Bank is responsible for establishing and maintaining effective internal control over financial reporting as it relates to the consolidated financial statements. The Bank’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external reporting purposes in accordance with the FAM. The Bank’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the Bank’s assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with FAM, and that the Bank’s receipts and expenditures are being made only in accordance with authorizations of its management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Bank’s assets that could have a material effect on its consolidated financial statements. 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 consolidated 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 Bank assessed its internal control over financial reporting based upon the criteria established in the Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, we believe that the Bank maintained effective internal control over financial reporting. _________________________________ _____________________________________ Susan M. Collins, President Kenneth C. Montgomery, First Vice President _________________________________ Paulo J. Prazeres, Chief Financial Officer KPMG LLP 345 Park Avenue New York, NY 10154-0102 Report of Independent Registered Public Accounting Firm To the Board of Governors of the Federal Reserve System and the Board of Directors of the Federal Reserve Bank of Boston: We have audited the accompanying consolidated statements of condition of the Federal Reserve Bank of Boston and subsidiaries (“FRB Boston”) as of December 31, 2023 and 2022, and the related consolidated statements of operations and changes in capital for the years then ended, and the related notes (collectively, the financial statements). We also have audited the FRB Boston’s internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. The FRB Boston’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on these consolidated financial statements and an opinion on the FRB Boston’s internal control over financial reporting based on our audits. We conducted our audits in accordance with the auditing standards of the Public Company Accounting Oversight Board (United States) and in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits 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 consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions. The FRB Boston’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with the accounting principles established by the Board of Governors of the Federal Reserve System (the “Board”) as described in Note 3 of the consolidated financial statements and as set forth in the Financial Accounting Manual for Federal Reserve Banks (“FAM”). The FRB Boston’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 the FRB Boston; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with the FAM, and that receipts and expenditures of the FRB Boston are being made only in accordance with authorizations of management and directors of the FRB Boston; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the FRB Boston’s assets that could have a material effect on the consolidated financial statements. KPMG LLP, a Delaware limited liability partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. As described in Note 3 to the consolidated financial statements, the FRB Boston has prepared these consolidated financial statements in conformity with the accounting principles established by the Board, as set forth in the FAM, which is a basis of accounting other than U.S. generally accepted accounting principles. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the FRB Boston as of December 31, 2023 and 2022, and the results of their operations and changes in capital for the years then ended, on the basis of accounting described in Note 3. Also, in our opinion, the FRB Boston maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. New York, New York March 18, 2024 4 Abbreviations ABS ACH ASC ASU BEP BTFP Bureau CARES CECL CMBS ESF FAM Asset-Backed Securities Automated clearinghouse Accounting Standards Codification Accounting Standards Update Benefit Equalization Retirement Plan Bank Term Funding Program Bureau of Consumer Financial Protection Coronavirus Aid, Relief, and Economic Security Current Expected Credit Losses Agency commercial mortgage-backed securities Exchange Stabilization Fund Financial Accounting Manual for Federal Reserve Banks FASB FIMA Financial Accounting Standards Board Foreign and International Monetary Authorities FOMC FRA Federal Open Market Committee Federal Reserve Act FRBA FRBB Federal Reserve Bank of Atlanta Federal Reserve Bank of Boston FRBNY FRFS Federal Reserve Bank of New York Federal Reserve Financial Services GAAP GSE Accounting principles generally accepted in the United States of America Government-sponsored enterprise IMF LLC International Monetary Fund Limited Liability Company Main Street MBS MS Facilities LLC Mortgage-backed securities MSELF MSNLF Main Street Expanded Loan Facility Main Street New Loan Facility MSPLF NOELF Main Street Priority Loan Facility Non-profit Organization Expanded Loan Facility NONLF OEB Non-profit Organization New Loan Facility Office of Employee Benefits of the Federal Reserve System PPP PPPLF RMBS SBA SDR SERP SOMA TBA TIPS VIE Paycheck Protection Program Paycheck Protection Program Liquidity Facility Agency residential mortgage-backed securities Small Business Administration Special drawing rights Supplemental Retirement Plan for Select Officers of the Federal Reserve Banks System Open Market Account To be announced Treasury Inflation-Protected Securities Variable interest entity Financial Statements 5 Consolidated Statements of Condition as of December 31, 2023 and December 31, 2022 (in millions) 2023 ASSETS Gold certificates Special drawing rights certificates Coin Loans: Loans to depository institutions Other loans System Open Market Account: Treasury securities, net (of which $916 and $1,033 is lent as of December 31, 2023 and 2022, respectively) Federal agency and government-sponsored enterprise mortgage-backed securities, net Government-sponsored enterprise debt securities, net (of which $0 and $0 is lent as of December 31, 2023 and 2022, respectively) Foreign currency denominated investments, net Central bank liquidity swaps Accrued interest receivable Other assets Consolidated variable interest entity: Assets held, net (including $747 and $393 is measured at fair value as of December 31, 2023 and 2022, respectively) Other accrued interest receivable Bank premises and equipment, net Deferred asset—remittances to the Treasury Interdistrict settlement account Other assets Total assets LIABILITIES AND CAPITAL Federal Reserve notes outstanding, net System Open Market Account: Securities sold under agreements to repurchase Other liabilities Deposits: Depository institutions Other deposits Interest payable to depository institutions and others Consolidated variable interest entity: Other liabilities Accrued benefit costs Other liabilities Total liabilities Reserve Bank capital Capital paid-in Surplus (including accumulated other comprehensive income of $28 and $35 at December 31, 2023 and 2022, respectively) Total Reserve Bank capital Consolidated variable interest entity formed to administer credit and liquidity facilities: Non-controlling interest $ 361 196 48 $ 348 196 15 Note 4 144 6,162 120 — 96,374 47,939 114,699 54,005 49 52 800 58 627 1 800 18 687 — 15,839 22,910 $ 106 123 2,561 19,074 89 190,551 $ — 124 309 28,113 92 222,488 $ 79,782 $ 77,876 Note 5 Note 6 Note 7 Note 12 Note 5 Note 6 Notes 9, 10 $ Note 6 Total Reserve Bank capital and consolidated variable entity non-controlling interest Total liabilities and capital 2022 26,868 12 57,849 14 73,516 54 46 52 102 35 180,467 73,249 11 25 95 89 41 209,249 1,505 $ 283 292 1,788 8,296 1,799 11,440 10,084 $ 1,507 190,551 The accompanying notes are an integral part of these consolidated financial statements. 13,239 $ 222,488 6 Federal Reserve Bank of Boston Annual Financial Statements Consolidated Statements of Operations for the years ended December 31, 2023 and December 31, 2022 (in millions) 2023 INTEREST INCOME Loans: Loans to depository institutions Other loans System Open Market Account: Securities purchased under agreements to resell Treasury securities, net Federal agency and government-sponsored enterprise mortgage-backed securities, net Government-sponsored enterprise debt securities, net Foreign currency denominated investments, net Central bank liquidity swaps Total interest income INTEREST EXPENSE System Open Market Account: Securities sold under agreements to repurchase Depository institutions and others Total interest expense Net interest (expense) income OTHER ITEMS OF INCOME (LOSS) System Open Market Account: Treasury securities losses, net Federal agency and government-sponsored enterprise mortgage-backed securities losses, net Foreign currency translation losses, net Other Reimbursable services to government agencies Other components of net benefit costs Other Total other items of income (loss) OPERATING EXPENSES Salaries and benefits Occupancy Equipment Other Assessments: Board of Governors operating expenses and currency costs Bureau of Consumer Financial Protection Total operating expenses Reserve Bank net (loss) income from operations Consolidated variable interest entity: Income, net Consolidated variable interest entity: Non-controlling (income), net 2022 Note 4 $ 11 135 $ 2 — Note 5 4 2,077 1,113 2 11 1 3,354 — 2,220 1,034 2 — 1 3,259 $ 2,039 $ 2,942 4,981 (1,627) 838 990 1,828 1,431 $ (1) $ (1) (3) (3) 4 (3) 18 11 — (4) (78) 2 4 20 17 (39) Note 5 Note 5 Notes 9, 10 $ Note 6 Note 6 Reserve Bank and consolidated variable interest entity net (loss) income before providing remittances to the Treasury Earnings remittances to the Treasury, net Net income after providing for remittances to the Treasury Note 12 Change in prior service costs related to benefit plans Change in actuarial (losses) gains related to benefit plans Total other comprehensive (loss) income Comprehensive income Notes 10, 11 Notes 10, 11 $ 285 33 9 167 $ 265 34 8 123 94 31 619 (2,235) 914 (870) 88 32 550 842 1,615 (1,602) (2,191) 855 (2,252) 61 827 28 (3) (4) (7) 54 $ The accompanying notes are an integral part of these consolidated financial statements. (2) 28 26 54 Financial Statements 7 Consolidated Statements of Changes in Capital for the years ended December 31, 2023 and December 31, 2022 (in millions, except share data) Total surplus Total Reserve Bank capital Consolidated variable interest entity: Noncontrolling interest Total Reserve Bank capital and consolidated variable interest entity noncontrolling interest $ $ $ $ Reserve Bank Capital Surplus Balance at December 31, 2021 (29,178,456 shares of Reserve Bank capital stock) Capital paid-in Net income retained $ $ Net change in capital stock issued (961,570 shares) 1,459 283 Accumulated other comprehensive income (loss) $ 9 292 1,751 14,060 — 15,811 48 — — — 48 48 Reserve Bank net income after providing for remittances to the Treasury — 15 — 15 15 — 15 Consolidated variable interest entity: Income, net — 13 — 13 13 1,602 1,615 Other comprehensive income Comprehensive income: — — 26 26 26 — 26 Dividends on capital stock — (54) — (54) (54) — (54) Consolidated variable interest entity: Non-controlling interest—capital (distribution) — — — — — (4,222) (4,222) 48 (26) 26 — 48 (2,620) (2,572) Net change in Reserve Bank capital and noncontrolling interest Balance at December 31, 2022 (30,140,026 shares of Reserve Bank capital stock) $ Net change in capital stock (redeemed) (41,954 shares) 1,507 $ 257 $ 35 $ 292 $ 1,799 $ 11,440 $ — 13,239 (2) — — — (2) (2) Reserve Bank net income after providing for remittances to the Treasury — 17 — 17 17 — 17 Consolidated variable interest entity: Income, net — 44 — 44 44 870 914 Other comprehensive (loss) — — (7) (7) (7) — (7) Dividends on capital stock — (63) — (63) (63) — (63) Consolidated variable interest entity: Non-controlling interest—capital (distribution) — — — — — (4,014) (4,014) Net change in Reserve Bank capital and noncontrolling interest (2) (2) (7) (9) (11) (3,144) (3,155) Comprehensive income: Balance at December 31, 2023 (30,098,072 shares of Reserve Bank capital stock) $ 1,505 $ 255 $ 28 $ 283 $ 1,788 $ 8,296 The accompanying notes are an integral part of these consolidated financial statements. $ 10,084 8 Notes to Financial Statements (1) STRUCTURE The Federal Reserve Bank of Boston (Bank) is part of the Federal Reserve System (System) and is one of the 12 Federal Reserve Banks (Reserve Banks) created by Congress under the Federal Reserve Act of 1913 (FRA), 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 First Federal Reserve District, which includes Maine, Massachusetts, New Hampshire, Rhode Island, Vermont, and a portion of the state of Connecticut. In accordance with the FRA, supervision and control of the Bank is exercised by a board of directors. The FRA 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 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 director 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 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 FRA 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. Notes to Financial Statements 9 (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 payment system, including transfers of funds, automated clearinghouse (ACH) operations, check collection, and a nationwide instant payments settlement service, named the FedNow Service; 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 participants in programs or facilities with broad-based eligibility 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, savings and loan holding companies, U.S. offices of foreign banking organizations, Edge Act and agreement corporations, and certain financial market utilities that have been designated as systemically important. Certain services are provided to foreign official and international account holders, primarily by the FRBNY. The FOMC, in conducting monetary policy, establishes policy regarding domestic open market operations and oversees these operations. The FOMC has selected the FRBNY to execute open market transactions on behalf of the Reserve Banks as provided in its annual authorization. As such, the FRBNY holds the resulting securities and agreements in a portfolio known as the System Open Market Account (SOMA). 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) residential mortgage-backed securities (RMBS), federal agency and GSE commercial mortgage-backed securities (CMBS), and GSE debt securities; the purchase of these securities under agreements to resell; the sale of these securities under agreements to repurchase; and the exchange, at market prices, of these securities that are maturing. The FRBNY is authorized and directed to lend the Treasury securities and GSE debt securities that are held in the SOMA. To be prepared to meet the needs specified by the FOMC to carry out the System’s central bank responsibilities, the FOMC authorized and directed the FRBNY to execute standalone spot and forward foreign exchange transactions in certain foreign currencies, to hold balances in those currencies, and to invest such foreign currency holdings, while maintaining adequate liquidity. The FRBNY holds these securities and agreements in the SOMA. Because of the global character of bank funding markets, the System has, at times, coordinated with other central banks to provide liquidity. The FOMC authorized and directed the FRBNY to maintain standing and temporary U.S. dollar liquidity swap arrangements and standing foreign currency liquidity swap arrangements with various foreign banks. The FRBNY holds amounts outstanding under these liquidity swap lines in the SOMA. 10 Federal Reserve Bank of Boston Annual Financial Statements The FOMC has authorized and directed the FRBNY to conduct small-value exercises periodically for the purpose of testing operational readiness. On March 12, 2023, each Federal Reserve Bank established and commenced operation of the Bank Term Funding Program (BTFP), pursuant to section 13(3) of the FRA. The BTFP was established to support American businesses and households by making additional funding available to eligible depository institutions to help assure banks have the ability to meet the needs of all their depositors. The BTFP's authority to extend new loans ended March 11, 2024, and the facility will continue to operate until all loans are paid off and operations cease. In response to the coronavirus pandemic that began in 2020, the Board of Governors authorized the operation of several lending facilities under section 13(3) of the FRA. The authority granted to these lending facilities to extend loans or purchase eligible assets has ended. On April 8, 2020, each Federal Reserve Bank established and commenced operation of the Paycheck Protection Program Liquidity Facility (PPPLF). The PPPLF offered a source of liquidity to financial institution lenders that lend to small businesses through the Small Business Administration’s (SBA) Paycheck Protection Program (PPP). The PPPLF’s authority to extend new loans ended July 30, 2021, and the facility will continue to operate until all loans are paid off and operations cease. The Board of Governors authorized the Bank to operate the following lending facility: • On April 9, 2020, the Main Street Lending Program (MSLP) was established to support lending to small and medium-sized businesses and non-profit organizations that were in sound financial condition before the onset of the coronavirus pandemic. The MSLP lending program involved the purchase of participations in loans originated by eligible lenders. The MSLP includes five facilities: Main Street New Loan Facility (MSNLF), Main Street Expanded Loan Facility (MSELF), Main Street Priority Loan Facility (MSPLF), Nonprofit Organization New Loan Facility (NONLF), and Non-profit Organization Expanded Loan Facility (NOELF). The MS Facilities LLC (Main Street) was established to administer the facilities. The Treasury, using funds appropriated to the Exchange Stabilization Fund (ESF) through the Coronavirus Aid, Relief, and Economic Security (CARES) Act, made an equity investment in Main Street. The facilities’ authority to purchase loan participations ended January 8, 2021, and the Bank will continue to manage operations until the closure of Main Street. The Board of Governors authorized the FRBNY to operate the following lending facilities: • On March 22, 2020, the Term Asset-Backed Securities Loan Facility (TALF) was established to provide loans to U.S. companies secured by certain AAA-rated asset-backed securities (ABS) backed by consumer and business loans. Term Asset-Backed Securities Loan Facility II Limited Liability Company (LLC) (TALF II) Notes to Financial Statements 11 was established to administer the facility. The Treasury, using funds appropriated to the ESF through the CARES Act, made an equity investment in TALF II. The TALF’s authority to extend loans ended December 31, 2020, and TALF II was terminated in March 2024. • On April 8, 2020, the Municipal Liquidity Facility was established to support lending to state, city, and county governments, certain multistate entities, and other issuers of municipal securities. Municipal Liquidity Facility LLC (MLF) was established to administer the facility. The Treasury, using funds appropriated to the ESF through the CARES Act, made an equity investment in MLF. The facility’s authority to purchase eligible assets ended December 31, 2020, and MLF was terminated in March 2024. Additional information related to the lending facilities that the Bank participates in is provided in Notes 4 and 6. Although the Reserve Banks are separate legal entities, they collaborate on 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 among 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 for which the costs were not reimbursed by the other Reserve Banks include the Financial Support Office and Centralized Accounting Technology Services. The Bank has led the System's initiative to develop and operate a nationwide instant payments settlement service, named the FedNow Service. (3) SIGNIFICANT ACCOUNTING POLICIES Accounting principles for entities with the unique powers and responsibilities of the 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 (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. The consolidated financial statements and associated disclosures have been prepared in accordance with the FAM. Due to the unique nature of the Bank's powers and responsibilities as part of the nation’s central bank and given the System’s unique responsibility to conduct monetary policy, the Board of Governors has adopted accounting principles and practices in the FAM that differ from accounting principles generally accepted in the United States of America (GAAP). The more significant differences are the presentation of all SOMA securities holdings at amortized cost, adjusted for credit impairment, if any, and the recording of all SOMA securities on a settlement-date basis. 12 Federal Reserve Bank of Boston Annual Financial Statements Amortized cost, rather than the fair value presentation, more appropriately reflects the financial position associated with the Bank's securities holdings given the System’s unique responsibility to conduct monetary policy. Although the application of fair value measurements to the securities holdings may result in values substantially greater or less than 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 ability of the Reserve Banks, as the central bank, to meet their financial obligations and responsibilities. Both the domestic and foreign components of the SOMA portfolio may involve transactions that result in gains or losses when holdings are sold before maturity. Decisions regarding securities and foreign currency transactions, including their purchase and sale, are primarily motivated by monetary policy and financial stability objectives rather than profit. Accordingly, fair values, earnings, and gains or losses resulting from the sale of such securities and currencies are incidental to open market operations and do not motivate decisions related to policy or open market activities. Accounting for these securities on a settlement-date basis, rather than the trade-date basis required by GAAP, better reflects the timing of the transaction’s effect on the quantity of reserves in the banking system. In addition, the Bank does not present a Consolidated Statement of Cash Flows as required by GAAP because the liquidity and cash position of the Bank are not a primary concern given the Bank's unique powers and responsibilities as a central bank. Other information regarding the Bank's activities is provided in, or may be derived from, the Consolidated Statements of Condition, Operations, and Changes in Capital, and the accompanying notes to the consolidated financial statements. Other than those described above, the accounting policies described in FAM are generally consistent with those in GAAP and the references to GAAP in the notes to the consolidated financial statements highlight those areas where FAM is consistent with GAAP. Preparing the consolidated 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 consolidated financial statements, and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates. Significant accounts and accounting policies are explained below. a. Consolidation The consolidated financial statements include the accounts and results of operations of the Bank as well as a variable interest entity (VIE), Main Street LLC. The consolidation of the VIE was assessed in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 810 (ASC 810), Consolidation, which requires the VIE to be consolidated by its controlling financial interest holder. The Bank is the managing member and the Treasury is the preferred equity member of the LLC. Intercompany balances and transactions have been eliminated in consolidation. See Note 6 for additional information on the VIE. The assets and liabilities of the LLC have been accounted for and consolidated with the assets and liabilities of the Bank. Notes to Financial Statements 13 The Bank consolidates a VIE if the Bank has a controlling financial interest, which is defined as the power to direct the significant economic activities of the entity and the obligation to absorb losses or the right to receive benefits of the entity that could potentially be significant to the VIE. To determine whether it is the controlling financial interest holder of a VIE, the Bank evaluates the VIE's design, capital structure, and relationships with the variable interest holders. The Bank reconsiders whether it has a controlling financial interest in a VIE, as required by FASB ASC 810, Consolidation, at each reporting date or if there is an event that requires consideration. The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act) established the Bureau of Consumer Financial Protection (Bureau) as an independent bureau within the System that has supervisory authority over some institutions previously supervised by the Reserve Banks in connection with those institutions’ compliance with consumer protection statutes. Section 1017 of the Dodd-Frank Act provides that the financial statements of the Bureau are not to be consolidated with those of the Board of Governors or the System. The Board of Governors funds the Bureau through assessments on the Reserve Banks as required by the Dodd-Frank Act. The Reserve Banks reviewed the law and evaluated the design of and their relationship to the Bureau and determined that it should not be consolidated in the Bank's consolidated financial statements. b. Gold and Special Drawing Rights Certificates The Secretary of the Treasury is authorized to issue gold certificates to the Reserve Banks. Upon authorization, the Reserve Banks acquire gold certificates by crediting equivalent amounts in dollars to the account established for the Treasury. The gold certificates held by the Reserve Banks are required to be backed by the gold owned by 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. Gold certificates are recorded by the Reserve Banks at original cost. The Board of Governors allocates the gold certificates among the Reserve Banks once a year based on each Reserve Bank’s average Federal Reserve notes outstanding during the preceding 12 months. Special drawing rights (SDR) are issued by the International Monetary Fund (IMF) to its members in proportion to each member’s quota in the IMF at the time of issuance. SDRs 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 certificate transactions occur, the Board of Governors allocates the SDR certificates among the Reserve Banks 14 Federal Reserve Bank of Boston Annual Financial Statements based upon each Reserve Bank’s Federal Reserve notes outstanding at the end of the preceding calendar year. SDR certificates are recorded by the Reserve Banks at original cost. c. Coin The amount reported as coin in the Consolidated Statements of Condition represents the face value of all United States coin held by the Bank. The Bank buys coin at face value from the U.S. Mint in order to fill depository institution orders. d. Loans Loans to depository institutions and other loans, consisting of loans issued by PPPLF and BTFP, are reported at their outstanding principal balances and interest income is recognized on an accrual basis. Accrued interest on loans to depository institutions and other loans is reported as a component of "Other accrued interest receivable" in the Consolidated Statements of Condition. If receipt of income on a loan becomes doubtful, the loan is reclassified to non-accrual status. The Bank would discontinue recognizing interest income on non-accrual status loans until the borrower’s repayment performance demonstrates principal and interest would be received in accordance with the terms of the loan agreement. If the Bank discontinues recording interest on a non-accrual status loan, cash payments are first applied to principal until the loan balance is reduced to zero, subsequent payments are applied as recoveries of interest income previously deemed uncollectible and then any remaining amounts as interest income. e. Securities Purchased Under Agreements to Resell, Securities Sold Under Agreements to Repurchase, and Securities Lending The FRBNY may engage in purchases of securities under agreements to resell (repurchase agreements) under the standard monetary policy repurchase agreement operations and domestic standing repurchase agreement facility with primary dealers and eligible counterparties (repo operations) and foreign official and international account holders under the Foreign and International Monetary Authorities (FIMA) Repo Facility. Repo operations transactions are settled through a tri-party arrangement, in which a commercial custodial bank manages the collateral clearing, settlement, pricing, and pledging, and provides cash and securities custodial services for and on behalf of the FRBNY and the counterparty. The collateral pledged must exceed the principal amount of the transaction by a margin determined by the FRBNY for each class and maturity of acceptable collateral. Collateral designated by the FRBNY as acceptable under repo operations primarily include Treasury securities (including Treasury Inflation-Protected Securities (TIPS), Separate Trading of Registered Interest and Principal of Securities, and Treasury Floating Rate Notes); direct obligations of several federal agencies and GSEs, including Federal National Mortgage Association, Federal Home Loan Mortgage Corporation, and Federal Home Loan Banks; and pass-through federal agency and GSE mortgage-backed securities (MBS). The FIMA Repo Facility is managed by the Notes to Financial Statements 15 FRBNY, and acceptable collateral includes Treasury securities only. The repurchase agreements are accounted for as financing transactions with the associated interest income recognized over the life of the transaction. These repurchase agreements are reported at their contractual amounts as “System Open Market Account: Securities purchased under agreements to resell” and the related accrued interest receivable is reported as a component of “System Open Market Account: Accrued interest receivable” in the Consolidated Statements of Condition. Interest income is reported as “System Open Market Account: Securities purchased under agreements to resell” in the Consolidated Statements of Operations. The FRBNY may engage in sales of securities under agreements to repurchase (reverse repurchase agreements) with primary dealers and with a set of expanded counterparties that includes banks, savings associations, GSEs, and domestic money market funds. Transactions under these reverse repurchase agreements are designed to have a margin of zero and are settled through a tri-party arrangement, similar to repo operations. Reverse repurchase agreements may also be executed with foreign official and international account holders as part of a service offering. Reverse repurchase agreements are collateralized by a pledge of an amount of Treasury securities, federal agency and GSE MBS, or GSE debt securities that are held in the SOMA. Reverse repurchase agreements are accounted for as financing transactions, and the associated interest expense is recognized over the life of the transaction. These reverse repurchase agreements are reported at their contractual amounts as “System Open Market Account: Securities sold under agreements to repurchase” and the related accrued interest payable is reported as a component of “System Open Market Account: Other liabilities” in the Consolidated Statements of Condition. Interest expense is reported as “System Open Market Account: Securities sold under agreements to repurchase” in the Consolidated Statements of Operations. Treasury securities and GSE debt securities held in the SOMA may be lent to primary dealers, typically overnight, to facilitate the effective conduct of open market operations. The amortized cost basis of securities lent continues to be reported as “System Open Market Account: Treasury securities, net” and “System Open Market Account: Government-sponsored enterprise debt securities, net,” as appropriate, in the Consolidated Statements of Condition. Securities lending transactions are fully collateralized by Treasury securities based on the fair values of the securities lent increased by a margin determined by the FRBNY. The FRBNY charges the primary dealer a fee for borrowing securities, and these fees are reported as a component of “Other items of income (loss): System Open Market Account: Other” in the Consolidated Statements of Operations. Activity related to repurchase agreements, reverse repurchase agreements, 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 the second quarter of each year. f. Treasury Securities, Federal Agency and Government-Sponsored Enterprise Residential and Commercial Mortgage-Backed Securities, Government-Sponsored Enterprise Debt Securities, and Foreign Currency Denominated Investments 16 Federal Reserve Bank of Boston Annual Financial Statements Interest income on Treasury securities, federal agency and GSE MBS, GSE debt securities, and foreign currency denominated investments included in the SOMA is recorded when earned and includes inflation compensation on TIPS and amortization of premiums and accretion of discounts using the effective interest method. Interest income on federal agency and GSE MBS also includes gains or losses associated with principal paydowns. Premiums and discounts related to federal agency and GSE MBS are amortized or accreted over the term of the security to stated maturity, and the amortization of premiums and accretion of discounts are accelerated when principal payments are received. Gains and losses resulting from sales of securities are determined by specific issue based on average cost. Treasury securities, federal agency and GSE MBS, and GSE debt securities are reported net of premiums and discounts in the Consolidated Statements of Condition and interest income on those securities is reported net of the amortization of premiums and accretion of discounts in the Consolidated Statements of Operations. In addition to outright purchases of federal agency and GSE MBS that are held in the SOMA, the FRBNY enters into RMBS dollar roll transactions (dollar rolls), which primarily involve an initial transaction to purchase or sell “to be announced” (TBA) MBS for delivery in the current month combined with a simultaneous agreement to sell or purchase TBA MBS on a specified future date. During the years ended December 31, 2023 and 2022, the FRBNY executed dollar rolls to facilitate settlement of outstanding purchases of federal agency and GSE MBS. The FRBNY accounts for dollar rolls as individual purchases and sales, on a settlement-date basis. Accounting for these transactions as purchases and sales, rather than as financing transactions, is appropriate because the purchase or sale component of the TBA MBS dollar roll is paired off or assigned prior to settlement and, as a result, there is no transfer and return of securities. Net gains (losses) resulting from MBS transactions are reported as a component of “Other items of income (loss): System Open Market Account: Federal agency and governmentsponsored enterprise mortgage-backed securities losses, net” in the Consolidated Statements of Operations. Foreign currency denominated investments, which can include foreign currency deposits, repurchase agreements, and government debt instruments, are revalued daily at current foreign currency market exchange rates in order to report these assets in U.S. dollars. Any negative interest associated with these foreign currency denominated investments is included as a component of “Interest income: System Open Market Account: Foreign currency denominated investments, net” in the Consolidated Statements of Operations. Foreign currency translation gains and losses that result from the daily revaluation of foreign currency denominated investments are reported as “Other items of income (loss): System Open Market Account: Foreign currency translation losses, net” in the Consolidated Statements of Operations. Because the FRBNY enters into commitments to buy Treasury securities, federal agency and GSE MBS, and foreign government debt instruments and records the related securities on a settlement-date basis in accordance with the FAM, the related outstanding commitments are not reflected in the Consolidated Statements of Condition. Notes to Financial Statements 17 Activity related to Treasury securities, federal agency and GSE MBS, and GSE debt securities 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 the second quarter of each year. Activity related to foreign currency denominated investments, including the premiums, discounts, and realized and unrealized gains and losses, is allocated to each Reserve Bank on a percentage basis, adjusted annually in the second quarter of each year, calculated as the ratio of each Reserve Bank’s capital and surplus to the Reserve Banks’ aggregate capital and surplus at the preceding December 31. g. Central Bank Liquidity Swaps Central bank liquidity swaps, which are transacted between the FRBNY and a foreign central bank, can be structured as either U.S. dollar or foreign currency liquidity swap arrangements. Central bank liquidity swaps activity, including the related income and expense, is allocated to each Reserve Bank based on a percentage basis, adjusted annually in the second quarter of each year, calculated as the ratio of each Reserve Bank’s capital and surplus to the Reserve Banks’ aggregate capital and surplus at the preceding December 31. 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 are reported as “System Open Market Account: Central bank liquidity swaps” in the Consolidated 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 amount outstanding and the interest rate under the swap agreement. The Bank's allocated portion of the amount of compensation received during the term of the swap transaction is reported as “Interest income: System Open Market Account: Central bank liquidity swaps” in the Consolidated Statements of Operations. Foreign currency liquidity swaps Foreign currency liquidity swap transactions involve the transfer by the FRBNY at the prevailing market exchange rate, of a specified amount of U.S. dollars to an account for the foreign central bank in exchange for its currency. 18 Federal Reserve Bank of Boston Annual Financial Statements The foreign currency liquidity swap is recorded as “System Open Market Account: Other liabilities” in the Consolidated Statements of Condition in the amount of foreign currency that the FRBNY receives. h. Consolidated Variable Interest Entity: Assets Held, Net The consolidated VIE holds assets that result from the associated purchase and lending activities and from the Treasury’s preferred equity contributions. In addition to loans and securities directly related to program activities, assets may include cash and cash equivalents, short-term investments, and short-term investments in nonmarketable securities. Cash equivalents and short-term investments are recorded at fair value in accordance with FASB ASC 825, Financial Instruments, while short-term investments in non-marketable securities are accounted for at amortized cost in accordance with FASB ASC 320, Investments – Debt Securities. Main Street holds loan participations through the various programs that are classified as held-for-investment and measured at principal amount outstanding, including capitalized interest, net of allowance, charge-offs, and recoveries and including interest receivable, in accordance with FASB ASC 310, Receivables and FASB ASC 326, Financial Instruments – Credit Losses. Additional information related to the assets held by the consolidated VIE is provided in Note 6. i. Allowance for Credit Losses FASB ASC 326, Financial Instruments – Credit Losses provides the updated methodology for measuring credit losses on loans and SOMA assets measured at amortized cost. Beginning in 2023, the Bank estimated the allowance for credit losses using the current expected credit loss (CECL) methodology. CECL uses historical loss information, adjusted to reflect current economic conditions, asset specific considerations, and forward-looking assumptions to estimate lifetime expected credit losses. Specific considerations for the Bank's assets include: • Loans include loans to depository institutions and other loans, which consist of the PPPLF and the BTFP. When evaluating the risk of credit loss, the Bank considers the term of the loan, the depository institution’s and other financial institution's commitment and ability to repay, the underlying collateral type and coverage of the loans, and any repayment guarantees. See Note 4. • SOMA assets include repurchase agreements, Treasury securities, GSE debt, federal agency and GSE MBS, and foreign currency denominated investments. When evaluating the risk of credit loss on repurchase agreements, the Bank considers collateral maintenance provisions and the short term nature of the agreements. The risk of credit loss on the remaining SOMA assets are evaluated considering historical loss experience, assessment of ongoing credit condition of the security issuer or counterparty, and the existence of third-party guarantees. See Note 5. Notes to Financial Statements • 19 MSLP holdings include loan participations. When evaluating the risk of credit loss, the Bank considers portfolio credit quality and loan participation repayment expectations, which are based on historical loss considerations, adjusted for current economic conditions. See Note 6. The recognition of an allowance for credit losses is evaluated and reviewed at least annually. When the risk of nonpayment is zero, an estimate for credit losses is not required to be recognized. Loans to depository institutions, other loans, and SOMA assets including repurchase agreements, Treasury securities, GSE debt, federal agency and GSE MBS, and foreign currency denominated investments are within the scope of the zero-loss assumption under CECL. Therefore, there was no allowance for credit losses as of December 31, 2023. An allowance for credit losses was recognized on loan participations held by MSLP. The prior methodology, applied by the Bank in 2022, required incurred losses to be probable before they were recognized. j. 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 2 to 50 years. Major alterations, renovations, and improvements are capitalized and 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. Reserve Banks may transfer assets to other Reserve Banks or may lease property of other Reserve Banks. Costs incurred to acquire software are capitalized based on the purchase price. Costs incurred during the application development stage to develop internal-use software are capitalized based on 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 generally range from two to five years. Maintenance costs and minor replacements related to software are charged to operating expense in the year incurred. Capitalized assets, including land improvements, buildings, construction, furniture and equipment, and software, 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. k. Leases Leases are identified in accordance with FASB ASC 842, Leases. The Bank’s material leases involve lessor and lessee arrangements for premises that are classified as operating leases. When the Bank is a lessee, the discount rate is based on a risk-free Treasury borrowing rate at lease commencement using a period comparable 20 Federal Reserve Bank of Boston Annual Financial Statements to the lease term. Upon adoption of ASC 842, the Bank elected the short-term lease recognition exemption and did not separate lease components from non-lease components for all leases. l. Interdistrict Settlement Account 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 Consolidated Statements of Condition. An annual settlement of the interdistrict settlement account occurs in the second quarter of each year. As a result of the annual settlement, the balance in each Bank’s interdistrict settlement account is adjusted by an amount equal to the average balance in the account during the previous twelve-month period ended March 31. An equal and offsetting adjustment is made to each Bank’s allocated portion of SOMA assets and liabilities. m. 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. All of the Bank's assets are eligible to be pledged as collateral. 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 as collateral under reverse repurchase agreements is deducted from the eligible collateral value. The Board of Governors may, at any time, call upon a Reserve Bank for additional security to adequately collateralize 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 FRA 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. “Federal Reserve notes outstanding, net” in the Consolidated Statements of Condition represents the Bank's Federal Reserve notes outstanding, reduced by the Bank's currency holdings of $10,062 million and $8,474 million at December 31, 2023 and 2022, respectively. At December 31, 2023 and 2022, all Federal Reserve notes outstanding, net, were fully collateralized. At December 31, 2023 and 2022, all gold certificates, all SDR certificates, and $2,281 billion and $2,243 billion, Notes to Financial Statements 21 respectively, of domestic securities held in the SOMA were pledged as collateral. At December 31, 2023 and 2022, no investments denominated in foreign currencies were pledged as collateral. n. Deposits Depository Institutions Depository institutions’ deposits represent balances maintained in master accounts and excess balance accounts held by the depository institutions at the Bank. Depository institutions earn interest at the interest on reserve balance (IORB) rate. The Board of Governors sets the IORB rate at a rate not to exceed the general level of short-term interest rates and has the discretion to change the IORB rate at any time. Interest on depository institutions' balances is calculated and accrued daily at the specified rate. Interest payable on deposits of depository institutions at Reserve Banks is reported as a component of “Interest payable to depository institutions and others” in the Consolidated Statements of Condition. Interest expense on deposits of depository institutions at Reserve Banks is reported as a component of “Depository institutions and others” in the Consolidated Statements of Operations. Other Deposits Other deposits include the Bank's allocated portion of foreign central bank and foreign government deposits held at the FRBNY. Other deposits also include cash collateral and GSE deposits held by the Bank. o. Reserve Bank Capital Paid-in The FRA 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 have 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. The FRA requires each Reserve Bank to pay each member bank an annual dividend based on the amount of the member bank’s paid-in capital stock and a rate determined by the member bank’s total consolidated assets. Member banks with total consolidated assets in excess of a threshold established in the FRA receive a dividend equal to the smaller of 6 percent or the rate equal to the high yield of the 10-year Treasury note auctioned at the last auction held prior to the payment of the dividend. Member banks with total consolidated assets equal to or less than the threshold receive a dividend of 6 percent. The threshold for total consolidated assets was $12.1 billion and $11.2 billion for the years ended December 31, 2023 and 2022, respectively. This threshold is 22 Federal Reserve Bank of Boston Annual Financial Statements adjusted annually based on the Gross Domestic Product Price Index, which is published by the Bureau of Economic Analysis. The dividend is paid semiannually and is cumulative. p. Consolidated Variable Interest Entity Formed to Administer Credit and Liquidity Facilities: Non-Controlling Interest The Treasury’s preferred equity contribution to the consolidated VIE is reported as a component of “Consolidated variable interest entity formed to administer credit and liquidity facilities: Non-controlling interest” in the Consolidated Statements of Condition. The reported amount also includes Treasury's allocated portion of undistributed net VIE assets, determined in accordance with LLC agreements and accounting policies adopted by the VIE. The Treasury’s non-controlling interest is reported as “Consolidated variable interest entity: Non-controlling interest” in the Consolidated Statements of Changes in Capital. Treasury’s allocated portion of undistributed net assets is determined in accordance with the hypothetical liquidation at book value methodology. A calculation is prepared to determine the amounts that would be received if the VIE liquidated all of its assets, measured as of the balance sheet date, and distributed the proceeds to the members based on the contractually defined liquidation priorities. The difference between the calculated liquidation distribution amounts at the beginning and the end of the reporting period is the Bank’s share of the earnings or losses from the VIE investment for the period. q. Surplus The FRA limits aggregate Reserve Bank surplus to $6.785 billion. Reserve Bank surplus is allocated among the Reserve Banks based on the ratio of each Bank’s capital paid-in to total Reserve Bank capital paid-in as of December 31 of each year.The amount reported as surplus by the Bank as of December 31, 2023 and 2022 represents the Bank's allocated portion of surplus. Accumulated other comprehensive income is reported as a component of “Surplus” in the Consolidated Statements of Condition and the Consolidated Statements of Changes in Capital. Additional information regarding the classifications of accumulated other comprehensive income is provided in Notes 10 and 11. r. Earnings Remittances to the Treasury The FRA requires that any amounts of the surplus funds of the Reserve Banks that exceed, or would exceed, the aggregate surplus limitation shall be transferred to the Board of Governors for transfer to the Treasury. The Bank remits excess earnings to the Treasury after providing for the cost of operations, payment of dividends, and reservation of an amount necessary to maintain surplus at the Bank's allocated portion of the aggregate surplus limitation. Remittances to the Treasury are made on a weekly basis, and prior to payment, amounts due to the Notes to Financial Statements 23 Treasury are reported as “Accrued remittances to the Treasury” in the Consolidated Statements of Condition. See Note 12 for additional information on earnings remittances to the Treasury. On a weekly basis, if earnings become less than the costs of operations, payment of dividends, and reservation of an amount necessary to maintain the Bank's allocated portion of the aggregate surplus limitation, the Bank suspends weekly remittances to the Treasury and records a deferred asset, which is reported as “Deferred asset – remittances to the Treasury” in the Consolidated Statements of Condition. A deferred asset represents the shortfall in earnings from the most recent point that remittances to the Treasury were suspended. The deferred asset is the amount of net excess earnings the Bank will need to realize in the future before remittances to the Treasury resume, and the deferred asset is reviewed for impairment periodically. The net amount of the excess earnings and costs in excess of earnings recognized for the full year is reported as “Earnings remittances to the Treasury, net” in the Consolidated Statements of Operations. s. Income and Costs Related to Treasury Services When directed by the Secretary of the Treasury, the Bank is required by the FRA to serve as fiscal agent and depositary of the United States Government. By statute, the Treasury has appropriations to pay for these services. Revenue generated by the Bank in performing fiscal agent activities is recognized when the Bank's performance obligations are satisfied. During the years ended December 31, 2023 and 2022, the Bank was reimbursed for all services provided to the Treasury as its fiscal agent. t. Services Provided to Other Reserve Banks On July 1, 2022, the Federal Reserve Financial Services (FRFS), a new organization within the System, began implementation of a service-delivery model in which the responsibility for operating the financial services provided to depository institutions is collectively managed. The financial services managed by the FRFS include check, ACH, FedNow Service, Fedwire funds and securities, National Settlement Services, and electronic access. This centralized organization supports the System’s delivery of its payments services under this new structure. On behalf of the Reserve Banks, the Bank operates the FedNow Service and, as a result, reports total System revenue for these services as "Other items of income (loss): Other" in its Consolidated Statements of Operations. Revenue generated from these services is recognized when the Reserve Banks’ performance obligations are satisfied. Because the performance obligations for these services are not for any specific term, the Bank recognizes income based on usage of the service. Transaction prices are set by fee schedules published by the System. During the year ended December 31, 2023, earned income was collected timely. The Bank reimburses the applicable Reserve Banks for the costs incurred to provide these services and reports the resulting reimbursement paid as a component of "Operating expenses: Other" in its Consolidated Statements of Operations. 24 Federal Reserve Bank of Boston Annual Financial Statements The Federal Reserve Bank of Atlanta (FRBA) operates the Reserve Banks’ provision of check and ACH services to depository institutions, the FRBNY operates the Reserve Banks' provision of Fedwire funds and securities services and National Settlement Service, and the Federal Reserve Bank of Chicago operates the Reserve Banks’ provision of electronic access services to depository institutions. The Reserve Bank that operates these services recognizes the related total System revenue in its Consolidated Statements of Operations. Revenue generated from these services is recognized when the Reserve Banks’ performance obligations are satisfied. Because the performance obligations for these services are not for any specific term, the Reserve Banks responsible for operating these services recognize income based on usage of the services. Transaction prices are set by fee schedules published by the System. During the years ended December 31, 2023 and 2022, earned income was collected timely. The Bank is reimbursed for costs incurred to provide these services by the Reserve Banks responsible for operating these services and reports this reimbursement as a component of "Operating expenses: Other" in its Consolidated Statements of Operations. u. Assessments The Board of Governors assesses the Reserve Banks to fund its operations and the operations of the Bureau. These assessments are allocated to each Reserve Bank based on each Reserve Bank’s capital and surplus balances. The Board of Governors also assesses each Reserve Bank for expenses related to producing, issuing, and retiring 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. The Dodd-Frank Act requires that, after the transfer of its responsibilities to the Bureau on July 21, 2011, the Board of Governors fund the Bureau in an amount not to exceed a fixed percentage of the total operating expenses of the System as reported in the Board of Governors' 2009 annual report, which totaled $4.98 billion. After 2013, the amount is adjusted annually in accordance with the provisions of the Dodd-Frank Act. The percentage of total operating expenses of the System for the years ended December 31, 2023 and 2022 was 15.08 percent ($750.9 million) and 14.74 percent ($734.0 million), respectively. The Bank's assessment for Bureau funding is reported as “Operating expenses: Assessments: Bureau of Consumer Financial Protection” in the Consolidated Statements of Operations. v. Fair Value Certain assets of the VIE, discussed in Note 6, are measured at fair value in accordance with FASB ASC Topic 820 (ASC 820), Fair Value Measurement. ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820 establishes a three-level fair value hierarchy that distinguishes between assumptions developed using market data obtained from independent sources (observable inputs) and the Bank’s assumptions developed using Notes to Financial Statements 25 the best information available in the circumstances (unobservable inputs). The three levels established by ASC 820 are described as follows: Level 1 – Valuation is based on quoted prices for identical instruments traded in active markets Level 2 – Valuation is based on quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market. Level 3 – Valuation is based on model-based techniques that use significant inputs and assumptions not observable in the market. These unobservable inputs and assumptions reflect the Bank’s estimates of inputs and assumptions that market participants would use in pricing the assets and liabilities. Valuation techniques include the use of option pricing models, discounted cash flow models, and similar techniques. The inputs or methodology used for valuing assets and liabilities are not necessarily an indication of the risk associated with those assets and liabilities. w. 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 $9 million and $9 million for the years ended December 31, 2023 and 2022, respectively, and are reported as a component of “Operating expenses: Occupancy” in the Consolidated Statements of Operations. x. 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. The Bank had no significant restructuring activities in 2023 and 2022. 26 Federal Reserve Bank of Boston Annual Financial Statements y. Recently Issued Accounting Standards Other than the significant differences described in Note 3, the accounting policies described in FAM are generally consistent with those in GAAP. The following items represent recent accounting standards and describe how the FAM was or will be revised to be consistent with these GAAP standards. In June 2016, the FASB issued Accounting Standards Update (ASU) 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, amended in subsequent related ASUs. ASU 2016-13 introduces the CECL methodology which replaced the previous GAAP method of calculating credit losses. While the prior methodology required incurred losses to be probable before they were recognized, ASU 2016-13 requires the use of a lifetime expected loss methodology, which requires earlier recognition of credit losses on financial assets measured at amortized cost. The Board of Governors adopted this standard using the modified retrospective method to report results under ASU 2016-13 for reporting periods after January 1, 2023. The prior balance at December 31, 2022 was reported under the previous GAAP methodology, and an immaterial amount was recorded to increase credit losses under the CECL methodology upon adoption at January 1, 2023. In April 2022, the FASB issued ASU 2022-02, Financial Instruments – Credit Losses (Topic 326) Troubled Debt Restructurings and Vintage Disclosures. This update addresses issues related to troubled debt restructurings and gross write-offs within ASU 2016-13. The Board of Governors adopted these updates using a prospective method upon implementation of ASU 2016-13 for reporting periods after January 1, 2023. The Main Street LLC did have loan modifications as a result of this new standard, but it did not have a material impact on the Bank's consolidated financial statements. In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting; and in January 2021, ASU 2021-01, Reference Rate Reform (Topic 848): Scope. This update provides optional expedients to apply to contract modifications and hedging relationships that reference the London Inter-Bank Offered Rate (LIBOR) or another reference rate expected to be discontinued. The Board of Governors decided to elect these expedients through the transition to Secure Overnight Financing Rate (SOFR) and other comparable reference rates. The Board of Governors adopted this standard and did not have a material impact on the Bank's consolidated financial statements. (4) LOANS Loans to Depository Institutions The Bank offers primary, secondary, and seasonal loans to eligible borrowers. Each program has its own interest rate and interest is accrued using the applicable interest rate established at least every 14 days by the Bank's board of directors, subject to review and determination by the Board of Governors. Primary loans provide discount Notes to Financial Statements 27 window credit for periods up to 90 days, secondary loans are extended on a short-term basis, typically overnight, and seasonal loans may be extended for a period of up to nine months. Primary, secondary, and seasonal loans are 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; asset-backed securities; 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 reduced by a margin. Loans to depository institutions are monitored daily to ensure that borrowers continue to meet eligibility requirements for these programs. If a borrower no longer qualifies for these programs, the Bank will generally request full repayment of the outstanding loan or, for primary or seasonal loans, 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. Other Loans Bank Term Funding Program The BTFP offers advances up to one year in length to banks, savings associations, credit unions, and other eligible depository institutions pledging any collateral eligible for purchase in open market operations, such as Treasuries, agency securities, and agency MBS. These assets are valued at par. Advances are limited to the value of eligible collateral pledged by the eligible borrower. The Department of the Treasury, using the ESF, made available $25 billion as credit protection to the Reserve Banks in connection with the program. Interest income on advances made under the BTFP is accrued using the applicable rate as outlined by the term sheet. At December 31, 2023, no BTFP loans were 90 days past due or on non-accrual status. Paycheck Protection Program Liquidity Facility PPPLF loans are non-recourse loans and only PPP loans guaranteed by the SBA are eligible to serve as collateral for the PPPLF. An eligible borrower may pledge SBA-guaranteed PPP loans that it has originated or purchased. Each PPPLF loan is equal to the maturity of the PPP loan pledged and has a term of five years based on the PPP loan origination date. In an event of default, PPP covered loans are guaranteed as to principal and accrued interest by the SBA. The Bank has the rights to any such loan forgiveness reimbursement by the SBA to the eligible borrower. The eligible borrower shall pay fully collected funds to the Bank. In unusual cases, the Bank may be exposed to credit risk should collateral supporting PPPLF loans become inadequate. At December 31, 2023 and 2022, no PPPLF loans were 90 days past due or on non-accrual status. 28 Federal Reserve Bank of Boston Annual Financial Statements The remaining maturity distribution of loans outstanding at December 31, 2023 and 2022 were as follows (in millions): Within 15 days December 31, 2023 Loans to depository institutions Primary, secondary, and seasonal credit BTFP Total loans December 31, 2022 Loans to depository institutions Primary, secondary, and seasonal credit Total loans 16 days to 90 days 91 days to 1 year Total $ 16 — $ 128 825 $ — 5,337 $ 144 6,162 $ 16 $ 953 $ 5,337 $ 6,306 $ $ 75 75 $ $ 45 45 $ $ — — $ $ 120 120 Interest income attributable to loans outstanding during the years ended December 31, 2023 and 2022 was as follows (in millions): 2023 Interest income Loans to depository institutions Primary, secondary, and seasonal credit Other loans BTFP Total loans $ 2022 11 $ 135 $ 146 — $ At December 31, 2023, the Bank had no loans that were past due and determined to be non-performing, or on non-accrual status. No allowance for credit losses was required. At December 31, 2022, prior to the adoption of CECL, the Bank had no loans that were impaired, restructured, past due and determined to be non-performing, or on non-accrual status. No allowance for loan losses was required. 2 2 Notes to Financial Statements 29 (5) SYSTEM OPEN MARKET ACCOUNT a. Domestic Securities Holdings The FRBNY executes domestic open market operations and, on behalf of the Reserve Banks, holds the resulting securities in the SOMA. In response to the continued risks to economic activity posed by the coronavirus, effective December 2020, the FOMC directed the FRBNY to increase the SOMA portfolio by purchasing Treasury securities at a pace of $80 billion per month and RMBS at a pace of $40 billion per month and to increase the SOMA portfolio by purchasing Treasury securities, RMBS, and CMBS as needed to sustain smooth functioning of markets for these securities. Pursuant to the FOMC directives, the FRBNY reduced the monthly pace of its net asset purchases for Treasury securities and RMBS as follows: • Effective November 4, 2021, began reducing net asset purchases for Treasury securities to $70 billion per month and began reducing net asset purchases for agency MBS to $35 billion per month. The FRBNY ceased purchases of CMBS. • Effective December 16, 2021, further reduced net asset purchases for Treasury securities to $60 billion per month and further reduced net asset purchases for RMBS to $30 billion per month. • Effective mid-January 2022, reduced net asset purchases for Treasury securities to $40 billion per month and reduced net asset purchases for RMBS to $20 billion per month. • Effective mid-February 2022, further reduced net asset purchases for Treasury securities to $20 billion per month and further reduced net asset purchases for RMBS to $10 billion per month. The FOMC directed the FRBNY, effective March 17, 2022, to roll over all principal payments of Treasury securities and to reinvest payments of agency debt and RMBS into RMBS. Pursuant to the FOMC directives, the FRBNY reinvested principal payments from Treasury securities and RMBS to the extent that they exceed monthly caps as follows: • Effective June 2022 through August 2022, rolled over at auction Treasury securities maturing in the calendar month that exceed a cap of $30 billion and reinvested agency MBS maturities in the calendar month that exceed a cap of $17.5 billion. 30 Federal Reserve Bank of Boston Annual Financial Statements • Effective September 2022 through December 2023, rolled over at auction Treasury securities maturing in the calendar month that exceed a cap of $60 billion and reinvested agency MBS maturities in the calendar month that exceed a cap of $35 billion. The Bank's allocated share of activity related to domestic open market operations was 1.932 percent and 2.002 percent at December 31, 2023 and 2022, respectively. The Bank's allocated share of Treasury securities, federal agency and GSE MBS, and GSE debt securities, net, excluding accrued interest, held in the SOMA at December 31, 2023 and 2022 was as follows (in millions): Allocated to the Bank 2023 Par Treasury securities Bills Notes Bonds Total Treasury securities Federal agency and GSE MBS Residential Commercial Total federal agency and GSE MBS GSE debt securities 2022 Unamortized premiums Unaccreted discounts Total amortized cost Par Unamortized premiums Unaccreted discounts Total amortized cost $ 4,192 55,328 32,928 92,448 $ — 643 3,729 4,372 $ (53) $ (111) (282) (446) 4,139 55,860 36,375 96,374 $ 5,796 70,508 33,792 110,096 $ — 992 4,093 5,085 $ (59) $ (132) (291) (482) 5,737 71,368 37,594 114,699 $ 46,822 159 46,981 $ 999 13 1,012 $ (54) $ — (54) 47,767 172 47,939 $ 52,711 170 52,881 $ 1,178 16 1,194 $ (70) $ — (70) 53,819 186 54,005 $ 45 $ 4 $ 49 $ 47 $ 5 $ — $ — $ 52 Total SOMA 2023 Unamortized premiums Unaccreted discounts 216,969 2,863,795 1,704,374 4,785,138 $ — 33,304 192,963 226,267 $ (2,738) $ 214,231 (5,762) 2,891,337 (14,578) 1,882,759 (23,078) 4,988,327 $ 2,423,545 8,228 2,431,773 $ 51,694 691 52,385 $ (2,820) $ 2,472,419 (2) 8,917 (2,822) 2,481,336 $ $ 210 $ Par Treasury securities Bills Notes Bonds Total Treasury securities Federal agency and GSE MBS Residential Commercial Total federal agency and GSE MBS GSE debt securities 2022 Total amortized cost $ 2,347 — $ 2,557 Total amortized cost Unamortized premiums Unaccreted discounts 289,525 3,521,904 1,687,925 5,499,354 $ — 49,573 204,431 254,004 $ (2,940) $ 286,585 (6,614) 3,564,863 (14,557) 1,877,799 (24,111) 5,729,247 $ 2,632,909 8,494 2,641,403 $ 58,862 812 59,674 $ (3,491) $ 2,688,280 (3) 9,303 (3,494) 2,697,583 $ $ 237 $ Par $ 2,347 — $ 2,584 Notes to Financial Statements 31 During the years ended December 31, 2023 and 2022, the FRBNY entered into repurchase agreements and reverse repurchase agreements as part of its monetary policy activities. These operations have been undertaken as necessary to maintain the federal funds rate in a target range. In addition, reverse repurchase agreements are entered into as part of a service offering to foreign official and international account holders. The FIMA Repo Facility allows FIMA account holders to temporarily exchange their U.S. Treasury securities for U.S. dollars, which can then be available to institutions in their jurisdictions. Financial information related to repurchase agreements allocated to the Bank and held in the SOMA for the years ended December 31, 2023 and 2022 was as follows (in millions): Allocated to the Bank 2023 Repo operations: Contract amount outstanding, end of year Average daily amount outstanding, during the year Maximum balance outstanding, during the year FIMA Repo Facility: Contract amount outstanding, end of year Average daily amount outstanding, during the year Maximum balance outstanding, during the year Total repurchase agreement contract amount outstanding, end of year Supplemental information—interest income: Repo operations FIMA Repo Facility Total interest income—securities purchased under agreements to resell Total SOMA 2022 2023 2022 $ — — 4 $ — — 1 $ — 3 203 $ — 1 61 $ — 78 1,401 $ — — — $ — 3,922 70,000 $ — — 2 $ — $ — $ — $ — $ — 4 $ — — $ — 195 $ — — $ 4 $ — $ 195 $ — There were no outstanding repurchase agreement contracts that were transacted with primary dealers, eligible counterparties, and foreign official and international account holders as of December 31, 2023. 32 Federal Reserve Bank of Boston Annual Financial Statements Financial information related to reverse repurchase agreements allocated to the Bank and held in the SOMA for the years ended December 31, 2023 and 2022 was as follows (in millions): Allocated to the Bank 2023 Primary dealers and expanded counterparties: Contract amount outstanding, end of year Average daily amount outstanding, during the year Maximum balance outstanding, during the year Securities pledged (par value), end of year Securities pledged (fair value), end of year Foreign official and international accounts: Contract amount outstanding, end of year Average daily amount outstanding, during the year Maximum balance outstanding, during the year Securities pledged (par value), end of year Securities pledged (fair value), end of year Total reverse repurchase agreement contract amount outstanding, end of year Supplemental information—interest expense: Primary dealers and expanded counterparties Foreign official and international accounts Total interest expense—securities sold under agreements to repurchase Total SOMA 2022 2023 2022 $ 19,677 34,189 51,126 21,229 19,481 $ 51,126 38,450 51,126 55,050 50,214 $ 1,018,483 1,747,804 2,553,716 1,098,844 1,008,344 $ 2,553,716 1,997,187 2,553,716 2,749,747 2,508,194 $ 7,191 6,579 $ 6,723 5,568 $ 372,188 336,897 $ 335,839 290,552 7,814 8,714 7,192 7,619 7,818 6,724 399,588 451,042 372,278 380,593 390,529 335,886 $ 26,868 $ 57,849 $ 1,390,671 $ 2,889,555 $ 1,707 332 $ 732 106 $ 87,341 17,000 $ 36,655 5,312 $ 2,039 $ 838 $ 104,341 $ 41,967 Securities pledged as collateral, at December 31, 2023 and 2022, consisted solely of Treasury securities. The contract amount outstanding as of December 31, 2023 of reverse repurchase agreements that were transacted with primary dealers and expanded counterparties had a remaining term of one business day and matured on January 2, 2024. The contract amount outstanding as of December 31, 2023 of reverse repurchase agreements that were transacted with foreign official and international account holders had a remaining term of one business day and matured on January 2, 2024. The remaining maturity distribution of Treasury securities, federal agency and GSE MBS, GSE debt securities, repurchase agreements, and reverse repurchase agreements that were allocated to the Bank at December 31, 2023 and 2022 was as follows (in millions): Notes to Financial Statements Within 15 days December 31, 2023: Treasury securities (par value) Federal agency and GSE residential MBS (par value) 1 Federal agency and GSE commercial MBS (par value) 1 GSE debt securities (par value) Securities sold under agreements to repurchase (contract amount) December 31, 2022: Treasury securities (par value) Federal agency and GSE residential MBS (par value) 1 Federal agency and GSE commercial MBS (par value) 1 GSE debt securities (par value) Securities sold under agreements to repurchase (contract amount) 1 $ 1,533 — — — 16 days to 90 days $ 4,241 — — — 26,868 $ 1,827 — — — 91 days to 1 year $ 11,484 — — — — $ 7,396 — — — 57,849 Over 1 year to 5 years $ 31,201 56 38 — — $ 14,440 1 — — — Over 5 years to 10 years $ 14,910 559 67 45 — $ 38,348 71 9 — — Over 10 years $ Total 29,079 46,207 54 — — $ 18,763 907 94 47 — 33 $ 92,448 46,822 159 45 — $ 29,322 51,732 67 — — 26,868 $ 110,096 52,711 170 47 — 57,849 The par amount shown for federal agency and GSE residential MBS and commercial MBS is the remaining principal balance of the securities. Federal agency and GSE MBS are reported at stated maturity in the table above. The estimated weighted-average life of these securities differs from the stated maturity primarily because it factors in scheduled payments and prepayment assumptions. The estimated weighted-average lives of RMBS and CMBS as of December 31, 2023 and 2022 were as follows (in years): 2023 Estimated weighted-average life of RMBS CMBS 2022 8.7 6.6 9.0 7.4 The amortized cost and par value of Treasury securities and GSE debt securities that were loaned from the SOMA under securities lending agreements allocated to the Bank and held in the SOMA at December 31, 2023 and 2022 were as follows (in millions): Allocated to the Bank 2023 Treasury securities (amortized cost) Treasury securities (par value) GSE debt securities (amortized cost) GSE debt securities (par value) $ Total SOMA 2022 916 903 — — $ 2023 1,033 1,028 — $ — 2022 47,388 46,744 — $ — Securities pledged as collateral by the counterparties in the securities lending arrangements at December 31, 2023 and 2022 consisted solely of Treasury securities. The securities lending agreements outstanding as of December 31, 2023 had a term of one business day and matured on January 2, 2024. 51,590 51,366 23 21 34 Federal Reserve Bank of Boston Annual Financial Statements The FRBNY enters into commitments to buy and sell Treasury securities and federal agency and GSE MBS and records the related securities on a settlement-date basis. As of December 31, 2023, the portions allocated to the Bank and total purchases and sales under outstanding commitments were as follows (in millions): Allocated to the Bank Purchases under outstanding commitments Treasury securities TBA RMBS CMBS Sales under outstanding commitments RMBS CMBS Contractual settlement dates through Total SOMA $ 21 — — $ 1,109 — — $ — — $ — — January 2, 2024 RMBS and CMBS commitments are subject to varying degrees of off-balance-sheet market risk and counterparty credit risk that result from their future settlement. The FRBNY requires the posting of cash margin for RMBS commitments as part of its risk management practices used to mitigate the counterparty credit risk. Other assets held in the SOMA consist primarily of cash and short-term investments related to the federal agency and GSE MBS portfolio and were immaterial at December 31, 2023 and 2022. Other liabilities include the FRBNY’s accrued interest payable related to repurchase agreements transactions, obligations to return cash margin posted by counterparties as collateral under commitments to purchase and sell RMBS, and obligations that arise from the failure of a seller to deliver Treasury securities and RMBS and CMBS to the FRBNY on the settlement date and were immaterial at December 31, 2023 and 2022. Although the FRBNY has ownership of and records its investments in Treasury securities and RMBS and CMBS as of the contractual settlement date, it is not obligated to make payment until the securities are delivered, and the amount included in other liabilities represents the FRBNY’s obligation to pay for the securities when delivered. Accrued interest receivable on domestic securities held in the SOMA was $32,275 million and $34,228 million as of December 31, 2023 and 2022, respectively, of which $624 million and $685 million, respectively, was allocated to the Bank. These amounts are reported as a component of “System Open Market Account: Accrued interest receivable” in the Consolidated Statements of Condition. Information about transactions related to Treasury securities, federal agency and GSE MBS, and GSE debt securities allocated to the Bank and held in the SOMA during the years ended December 31, 2023 and 2022, is summarized as follows (in millions): Notes to Financial Statements 35 Allocated to the Bank Bills Balance at December 31, 2021 Purchases 1 Sales 1 Realized gains (losses), net 2 Principal payments and maturities Amortization of premiums and accretion of discounts, net Inflation adjustment on inflation-indexed securities Annual reallocation adjustment 3 Subtotal of activity Balance at December 31, 2022 Purchases 1 Sales 1 Realized gains (losses), net 2 Principal payments and maturities Amortization of premiums and accretion of discounts, net Inflation adjustment on inflation-indexed securities Annual reallocation adjustment 3 Subtotal of activity Balance at December 31, 2023 Year-ended December 31, 2022 Supplemental information—par value of transactions: Purchases 4 Sales Year-ended December 31, 2023 Supplemental information—par value of transactions: Purchases 4 Sales 4 1 $ $ $ Notes 5,447 $ 18,267 — — (19,140) 85 — 1,078 290 5,737 $ 12,589 — — (14,236) 244 — (195) (1,598) 4,139 $ Total Treasury securities Bonds 63,710 $ 9,469 — — (14,606) (360) 378 12,777 7,658 71,368 $ 3,272 (3) — (16,306) (287) 160 (2,344) (15,508) 55,860 $ 29,728 $ 1,938 — — (229) (194) 291 6,060 7,866 37,594 $ 703 (1) — (528) (213) 136 (1,316) (1,219) 36,375 $ 98,885 29,674 — — (33,975) (469) 669 19,915 15,814 114,699 16,564 (4) — (31,070) (256) 296 (3,855) (18,325) 96,374 $ 18,408 — $ 9,499 — $ 1,969 $ (1) 29,876 (1) $ 12,828 — $ 3,286 $ (4) 714 $ (2) 16,828 (6) Purchases and sales may include payments and receipts related to principal, premiums, discounts, and inflation compensation adjustments to the basis of inflationindexed securities. The amount reported as sales includes the realized gains and losses on such transactions. 2 Realized gains (losses), net is the offset of the amount of realized gains and losses included in the reported sales amount. 3 Reflects the annual adjustment to the Bank’s allocated portion of the related SOMA securities that results from the annual settlement of the interdistrict settlement account, as discussed in Note 3l. 4 Includes inflation compensation. 36 Federal Reserve Bank of Boston Annual Financial Statements Total SOMA Bills Balance at December 31, 2021 Purchases 1 Sales 1 Realized gains (losses), net 2 Principal payments and maturities Amortization of premiums and accretion of discounts, net Inflation adjustment on inflation-indexed securities Subtotal of activity Balance at December 31, 2022 Purchases 1 Sales 1 Realized gains (losses), net 2 Principal payments and maturities Amortization of premiums and accretion of discounts, net Inflation adjustment on inflation-indexed securities Subtotal of activity Balance at December 31, 2023 Year-ended December 31, 2022 Supplemental information—par value of transactions: Purchases 3 Sales Year-ended December 31, 2023 Supplemental information—par value of transactions: Purchases 3 Sales 3 1 $ $ $ Notes Total Treasury securities Bonds 325,956 $ 958,843 — — (1,002,507) 4,293 — 3,812,476 $ 514,065 — — (762,463) (18,981) 19,766 1,778,994 $ 105,271 (21) (5) (11,460) (10,156) 15,176 5,917,426 1,578,179 (21) (5) (1,776,430) (24,844) 34,942 (39,371) 286,585 $ 644,351 — — (729,215) 12,510 — (247,613) 3,564,863 $ 167,315 (175) (9) (834,160) (14,708) 8,211 98,805 1,877,799 $ 35,904 (76) (22) (26,907) (10,907) 6,968 (188,179) 5,729,247 847,570 (251) (31) (1,590,282) (13,105) 15,179 (72,354) 214,231 $ (673,526) 2,891,337 $ 4,960 1,882,759 $ (740,920) 4,988,327 $ 965,988 — $ 515,609 — $ 106,728 $ (25) 1,588,325 (25) $ 656,660 — $ 168,024 $ (184) 36,482 $ (94) 861,166 (278) Purchases and sales may include payments and receipts related to principal, premiums, discounts, and inflation compensation adjustments to the basis of inflationindexed securities. The amount reported as sales includes the realized gains and losses on such transactions. 2 Realized gains (losses), net is the offset of the amount of realized gains and losses included in the reported sales amount. 3 Includes inflation compensation. Notes to Financial Statements 37 Allocated to the Bank Residential MBS Balance at December 31, 2021 Purchases 1 Sales 1 Realized gains (losses), net 2 Principal payments and maturities Amortization of premiums and accretion of discounts, net Annual reallocation adjustment 3 Subtotal of activity Balance at December 31, 2022 Purchases 1 Sales 1 Realized gains (losses), net 2 Principal payments and maturities Amortization of premiums and accretion of discounts, net Annual reallocation adjustment 3 Subtotal of activity Balance at December 31, 2023 Year-ended December 31, 2022 Supplemental information—par value of transactions: Purchases Sales Year-ended December 31, 2023 Supplemental information—par value of transactions: Purchases Sales 1 $ $ $ 44,702 $ 7,211 (7) (1) (7,106) (232) 9,252 9,117 53,819 $ 12 (7) (1) (4,084) (124) (1,848) (6,052) 47,767 $ Commercial MBS Total federal agency and GSE MBS 171 $ — — — (14) (3) 32 15 186 $ — — — (6) (2) (6) (14) 172 $ GSE debt securities 44,873 $ 7,211 (7) (1) (7,120) (235) 9,284 9,132 54,005 $ 12 (7) (1) (4,090) (126) (1,854) (6,066) 47,939 $ 44 — — — — — 8 8 52 — — — — (1) (2) (3) 49 $ 7,232 $ (7) — — $ 7,232 $ (7) — — $ 12 $ (5) — — $ 12 $ (5) — — Purchases and sales may include payments and receipts related to principal, premiums, and discounts. The amount reported as sales includes the realized gains and losses on such transactions. Purchases and sales exclude TBA MBS transactions that are settled on a net basis. 2 Realized gains (losses), net is the offset of the amount of realized gains and losses included in the reported sales amount. 3 Reflects the annual adjustment to the Bank’s allocated portion of the related SOMA securities that results from the annual settlement of the interdistrict settlement account, as discussed in Note 3l. 38 Federal Reserve Bank of Boston Annual Financial Statements Total SOMA Residential MBS Balance at December 31, 2021 Purchases 1 Sales 1 Realized gains (losses), net 2 Principal payments and maturities Amortization of premiums and accretion of discounts, net Subtotal of activity Balance at December 31, 2022 Purchases 1 Sales 1 Realized gains (losses), net 2 Principal payments and maturities Amortization of premiums and accretion of discounts, net Subtotal of activity Balance at December 31, 2023 Year-ended December 31, 2022 Supplemental information—par value of transactions: Purchases Sales Year-ended December 31, 2023 Supplemental information—par value of transactions: Purchases Sales $ $ $ 2,675,057 $ 402,649 (345) (28) (376,705) (12,348) 13,223 2,688,280 $ 600 (359) (56) (209,687) (6,359) (215,861) 2,472,419 $ Commercial MBS Total federal agency and GSE MBS 10,211 $ — — — (744) (164) (908) 9,303 $ — — — (266) (120) (386) 8,917 $ GSE debt securities 2,685,268 $ 402,649 (345) (28) (377,449) (12,512) 12,315 2,697,583 $ 600 (359) (56) (209,953) (6,479) (216,247) 2,481,336 $ 2,610 — — — — (26) (26) 2,584 — — — — (27) (27) 2,557 $ 403,669 $ (365) — — $ 403,669 $ (365) — — $ 600 $ (276) — — $ 600 $ (276) — — 1 Purchases and sales may include payments and receipts related to principal, premiums, and discounts. The amount reported as sales includes the realized gains and losses on such transactions. Purchases and sales exclude TBA MBS transactions that are settled on a net basis. 2 Realized gains (losses), net is the offset of the amount of realized gains and losses included in the reported sales amount. b. Foreign Currency Denominated Investments The FRBNY conducts foreign currency operations and, on behalf of the Reserve Banks, holds the resulting three types of foreign currency denominated investments in the SOMA. The FRBNY holds foreign currency deposits with foreign central banks and with the Bank for International Settlements (BIS). The FRBNY also invests in foreign government debt instruments of France, Germany, the Netherlands, and Japan. These foreign government debt instruments are backed by the full faith and credit of the issuing foreign governments. In addition, the FRBNY enters into repurchase agreements to purchase government debt securities for which the accepted collateral is the debt instruments issued by a foreign government. The Bank's allocated share of activity related to foreign currency denominated investments was 4.304 percent and 4.307 percent at December 31, 2023 and 2022, respectively. Notes to Financial Statements 39 Information about foreign currency denominated investments recorded at amortized cost and valued at foreign currency market exchange rates allocated to the Bank and held in the SOMA at December 31, 2023 and 2022 was as follows (in millions): Allocated to the Bank 2023 Euro: Foreign currency deposits Dutch government debt instruments French government debt instruments German government debt instruments Japanese yen: Foreign currency deposits Japanese government debt instruments Total Total SOMA 2022 2023 2022 $ 360 46 79 29 $ 305 48 112 30 $ 8,388 1,070 1,829 668 $ 7,092 1,103 2,591 688 $ 273 13 $ 305 — $ 6,333 299 $ 7,088 3 $ 800 $ 800 $ 18,587 $ 18,565 At December 31, 2023 and 2022, there were no repurchase agreements outstanding and, consequently, no related foreign securities held as collateral. As of December 31, 2023 and 2022, total net interest income earned on foreign currency denominated investments allocated to the Bank and held in the SOMA were as follows (in millions): Allocated to the Bank 2023 Net interest income: 1 Euro Japanese yen Total $ $ Total SOMA 2022 11 — 11 $ $ 2023 — — — $ $ 2022 247 $ (1) 246 $ (2) (1) (3) 1 As a result of negative interest rates in certain foreign currency denominated investments held in the SOMA, interest income on foreign currency denominated investments, net contains negative interest of $8 million and $34 million for the years ended December 31, 2023 and 2022, respectively, of which $0 million and $1 million, respectively, were allocated to the Bank. Accrued interest receivable on foreign currency denominated investments, net was $80 million and $48 million as of December 31, 2023 and 2022, respectively, of which $3 million and $2 million, respectively, was allocated to the Bank. These amounts are reported as a component of “System Open Market Account: Accrued interest receivable” in the Consolidated Statements of Condition. The remaining maturity distribution of foreign currency denominated investments that were allocated to the Bank at December 31, 2023 and 2022 was as follows (in millions): 40 Federal Reserve Bank of Boston Annual Financial Statements Within 15 days December 31, 2023: Euro Japanese yen Total December 31, 2022: Euro Japanese yen Total $ $ $ $ 16 days to 90 days 370 273 643 $ 309 305 614 $ $ $ 91 days to 1 year 5 — 5 $ — — — $ $ $ Over 1 year to 5 years 3 13 16 $ 8 — 8 $ $ $ Over 5 years to 10 years 126 — 126 $ 128 — 128 $ $ $ Total 10 — 10 $ 50 — 50 $ $ $ 514 286 800 495 305 800 There were no foreign exchange contracts related to foreign currency operations outstanding as of December 31, 2023. The FRBNY enters into commitments to buy foreign government debt instruments and records the related securities on a settlement-date basis. As of December 31, 2023, there were no outstanding commitments to purchase foreign government debt instruments. During 2023, there were purchases, sales, and maturities of foreign government debt instruments of $889 million, $561 million, and $779 million, respectively, of which $38 million, $24 million, and $34 million, respectively, were allocated to the Bank. Sales of $561 million includes realized losses of $125 million, of which a portion is allocated to the Bank. In connection with its foreign currency activities, the FRBNY may enter into transactions that are subject to varying degrees of off-balance-sheet market risk and counterparty credit risk that result from their future settlement. The FRBNY controls these risks by obtaining credit approvals, establishing transaction limits, receiving collateral in some cases, and performing monitoring procedures. c. Central Bank Liquidity Swaps U.S. Dollar Liquidity Swaps The FOMC authorized and directed the FRBNY to maintain standing U.S. dollar liquidity swap arrangements with the Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, and the Swiss National Bank. The Bank's allocated share of U.S. dollar liquidity swaps was 4.304 percent and 4.307 percent at December 31, 2023 and 2022, respectively. Euros held in the SOMA under U.S. dollar liquidity swaps at December 31, 2023 and 2022 was $1,357 million and $412 million, respectively, of which $58 million and $18 million, respectively, was allocated to the Bank, and Notes to Financial Statements 41 matured within 15 days of year-end. Accrued interest receivable on U.S. dollar liquidity swaps held in the SOMA and allocated to the Bank was immaterial as of December 31, 2023 and 2022. Net income earned on U.S. dollar liquidity swaps is reported as “System Open Market Account: Central bank liquidity swaps” in the Consolidated Statements of Operations. Foreign Currency Liquidity Swaps At December 31, 2023 and 2022, there was no balance outstanding related to foreign currency liquidity swaps. d. Fair Value of SOMA Assets and Liabilities The fair value amounts below are presented solely for informational purposes and are not intended to comply with the fair value disclosures required by FASB ASC 820, Fair Value Measurement. Although the fair value of SOMA security holdings can be substantially greater than or less than the recorded value at any point in time, these unrealized gains or losses have no effect on the ability of the Reserve Banks, as the central bank, to meet their financial obligations and responsibilities. Because SOMA securities are recorded at amortized cost, cumulative unrealized gains (losses) are not recognized in the Consolidated Statements of Condition and the changes in cumulative unrealized gains (losses) are not recognized in the Consolidated Statements of Operations. The fair value of the Treasury securities, federal agency and GSE MBS, GSE debt securities, and foreign government debt instruments held in the SOMA is subject to market risk, arising from movements in market variables such as interest rates and credit risk. The fair value of federal agency and GSE MBS is also affected by the expected rate of prepayments of mortgage loans underlying the securities. The fair value of foreign government debt instruments is also affected by currency risk. Based on evaluations performed as of December 31, 2023 and 2022, there are no credit impairments of SOMA securities holdings. The following table presents the amortized cost, fair value, and cumulative unrealized gains (losses) on the Treasury securities, federal agency and GSE MBS, and GSE debt securities allocated to the Bank and held in the SOMA at December 31, 2023 and 2022 (in millions): 42 Federal Reserve Bank of Boston Annual Financial Statements Allocated to the Bank 2023 Amortized cost Treasury securities Bills Notes Bonds Total Treasury securities Federal agency and GSE MBS Residential Commercial Total federal agency and GSE MBS GSE debt securities Total domestic SOMA portfolio securities holdings 1 2 2022 Cumulative unrealized gains (losses), net Fair value Amortized cost Cumulative unrealized gains (losses), net Fair value $ 4,139 55,860 36,375 96,374 $ 4,141 52,076 28,849 85,066 $ 2 $ (3,784) (7,526) (11,308) 5,737 71,368 37,594 114,699 $ 5,733 65,771 29,725 101,229 $ (4) (5,597) (7,869) (13,470) $ 47,767 172 47,939 49 $ 40,773 146 40,919 52 $ (6,994) $ (26) (7,020) 3 53,819 186 54,005 52 $ 45,690 154 45,844 55 $ (8,129) (32) (8,161) 3 $ 144,362 $ 126,037 $ (18,325) $ 168,756 $ 147,128 $ (21,628) Memorandum—Commitments for purchases of: Treasury securities 1 Federal agency and GSE MBS 1 $ 21 — $ 21 — $ — — $ 51 — $ 51 — $ — — Memorandum—Commitments for sales of: Treasury securities 2 Federal agency and GSE MBS 2 $ — — $ — — $ — — $ — — $ — — $ — — The amortized cost column presents unsettled purchase costs. The amortized cost column presents unsettled sales proceeds. Notes to Financial Statements 43 Total SOMA 2023 Amortized cost Treasury securities Bills Notes Bonds Total Treasury securities Federal agency and GSE MBS Residential Commercial Total federal agency and GSE MBS GSE debt securities Total domestic SOMA portfolio securities holdings 1 2 2022 Cumulative unrealized gains (losses), net Fair value Amortized cost Cumulative unrealized gains (losses), net Fair value $ 214,231 2,891,337 1,882,759 4,988,327 $ 214,361 2,695,476 1,493,246 4,403,083 $ 130 $ (195,861) (389,513) (585,244) 286,585 3,564,863 1,877,799 5,729,247 $ 286,373 3,285,274 1,484,758 5,056,405 $ (212) (279,589) (393,041) (672,842) $ 2,472,419 8,917 2,481,336 2,557 $ 2,110,439 7,552 2,117,991 2,703 $ (361,980) $ (1,365) (363,345) 146 2,688,280 9,303 2,697,583 2,584 $ 2,282,190 7,729 2,289,919 2,736 $ (406,090) (1,574) (407,664) 152 $ 7,472,220 $ 6,523,777 $ (948,443) $ 8,429,414 $ 7,349,060 $ (1,080,354) Memorandum—Commitments for purchases of: Treasury securities 1 Federal agency and GSE MBS 1 $ 1,109 — $ 1,109 — $ — — $ 2,560 — $ 2,560 — $ — — Memorandum—Commitments for sales of: Treasury securities 2 Federal agency and GSE MBS 2 $ — — $ — — $ — — $ — — $ — — $ — — The amortized cost column presents unsettled purchase costs. The amortized cost column presents unsettled sales proceeds. The fair value of Treasury securities and GSE debt securities was determined using pricing services that provide market consensus prices based on indicative quotes from various market participants. The fair value of federal agency and GSE MBS were determined using pricing services that utilize a model-based approach that considers observable inputs for similar securities. The cost bases of repurchase agreements, reverse repurchase agreements, central bank liquidity swaps, and other investments held in the SOMA portfolio approximate fair value. Due to the short-term nature of these agreements and the defined amount that will be received upon settlement, the cost basis approximates fair value. At December 31, 2023 and 2022, the fair value of foreign currency denominated investments held in the SOMA was $18,389 million and $18,112 million, respectively, of which $791 million and $780 million, respectively, was allocated to the Bank. The fair value of foreign government debt instruments was determined using pricing services that provide market consensus prices based on indicative quotes from various market participants. Due to the short-term nature of foreign currency deposits, the cost basis is estimated to approximate fair value. The following tables provide additional information on the amortized cost and fair value of the federal agency and GSE MBS portfolios allocated to the Bank and held in the SOMA at December 31, 2023 and 2022 (in millions): 44 Federal Reserve Bank of Boston Annual Financial Statements Allocated to the Bank 2023 Distribution of MBS holdings by coupon rate Residential 1.5% 2.0% 2.5% 3.0% 3.5% 4.0% 4.5% 5.0% 5.5% 6.0% 6.5% Total Commercial 1.00%-1.50% 1.51%-2.00% 2.01%-2.50% 2.51%-3.00% 3.01%-3.50% 3.51%-4.00% 4.01%-4.50% Total Total MBS Amortized cost $ 2,991 18,588 13,324 5,603 3,678 2,291 960 285 38 7 2 47,767 $ $ $ 2 8 19 26 55 57 5 172 $ 47,939 $ $ 2022 Fair value Amortized cost 2,488 15,269 11,209 4,998 3,384 2,162 934 281 39 7 2 40,773 $ $ $ 1 7 16 22 47 49 4 146 $ 40,919 $ Fair value 3,379 20,704 15,031 6,432 4,210 2,608 1,085 323 40 6 1 53,819 $ $ $ 2 9 21 28 59 62 5 186 $ 1 7 17 23 49 53 4 154 $ 54,005 $ 45,844 $ $ 2,795 16,942 12,591 5,673 3,840 2,436 1,048 318 40 6 1 45,690 Notes to Financial Statements 45 Total SOMA 2023 Distribution of MBS holdings by coupon rate Residential 1.5% 2.0% 2.5% 3.0% 3.5% 4.0% 4.5% 5.0% 5.5% 6.0% 6.5% Total Commercial 1.00%-1.50% 1.51%-2.00% 2.01%-2.50% 2.51%-3.00% 3.01%-3.50% 3.51%-4.00% 4.01%-4.50% Total Total MBS Amortized cost $ 154,792 962,071 689,649 290,035 190,382 118,593 49,673 14,741 1,990 372 121 2,472,419 $ $ $ 91 432 995 1,350 2,842 2,953 254 8,917 $ 2,481,336 $ $ 2022 Fair value Amortized cost 128,765 790,360 580,166 258,706 175,155 111,917 48,326 14,552 1,994 375 123 2,110,439 $ $ $ 72 340 814 1,135 2,412 2,564 215 7,552 $ 2,117,991 $ Fair value 168,762 1,034,220 750,796 321,270 210,290 130,284 54,176 16,143 2,007 290 42 2,688,280 $ $ $ 91 445 1,027 1,413 2,928 3,127 272 9,303 $ 71 346 838 1,171 2,428 2,651 224 7,729 $ 2,697,583 $ 2,289,919 $ $ 139,602 846,233 628,922 283,344 191,813 121,691 52,350 15,883 2,020 290 42 2,282,190 46 Federal Reserve Bank of Boston Annual Financial Statements The following tables present the realized gains (losses) and the change in the cumulative unrealized gains (losses) related to SOMA domestic securities holdings allocated to the Bank and held in the SOMA during the years ended December 31, 2023 and 2022 (in millions): Allocated to the Bank 2023 Realized gains (losses), net 1, 2 Treasury securities Federal agency and GSE MBS Residential Commercial Total federal agency and GSE MBS GSE debt securities Total 2022 Change in cumulative unrealized gains (losses) 3, 4 $ (1) $ 1,801 $ (1) — (1) — (2) $ 888 4 892 — 2,693 Change in cumulative unrealized gains (losses) 3, 4 Realized gains (losses), net 1, 2 $ — $ (14,769) $ (4) — (4) — (4) $ (7,315) (26) (7,341) (10) (22,120) 1 Realized gains (losses), net for Treasury securities are reported in “Other items of income (loss): System Open Market Account: Treasury securities losses, net” in the Consolidated Statements of Operations. 2 Realized gains (losses), net for federal agency and GSE MBS are reported in “Other items of income (loss): System Open Market Account: Federal agency and government-sponsored enterprise mortgage-backed securities losses, net” in the Consolidated Statements of Operations. 3 Because SOMA securities are recorded at amortized cost, the change in the cumulative unrealized gains (losses) is not reported in the Consolidated Statements of Operations. 4 The amount reported as change in cumulative unrealized gains (losses) allocated to the Bank is affected by the annual adjustment to the Bank's allocated portion of the related SOMA securities, as discussed in Note 3f. Total SOMA 2023 Realized gains (losses), net 1, 2 Treasury securities Federal agency and GSE MBS Residential Commercial Total federal agency and GSE MBS GSE debt securities Total $ (32) $ $ (56) — (56) — (88) $ 2022 Change in cumulative unrealized gains (losses) 3 87,598 Change in cumulative unrealized gains (losses) 3 Realized gains (losses), net 1, 2 $ (5) $ (807,471) 44,110 209 44,319 (6) 131,911 $ (234) — (234) — (239) $ (398,785) (1,431) (400,216) (536) (1,208,223) 1 Realized gains (losses), net for Treasury securities are reported in “Other items of income (loss): System Open Market Account: Treasury securities losses, net" in the Consolidated Statements of Operations. 2 Realized gains (losses), net for federal agency and GSE MBS are reported in “Other items of income (loss): System Open Market Account: Federal agency and government-sponsored enterprise mortgage-backed securities losses, net” in the Consolidated Statements of Operations. 3 Because SOMA securities are recorded at amortized cost, the change in the cumulative unrealized gains (losses) is not reported in the Consolidated Statements of Operations. The amount of change in cumulative unrealized gains (losses) position, net related to foreign currency denominated investments was a gain of $254 million and a loss of $520 million for the years ended December 31, 2023 and 2022, respectively, of which $11 million and $23 million, respectively, were allocated to the Bank. Realized losses, net related to foreign currency denominated investments were $125 million for the year ended December 31, 2023 and were immaterial for the year ended December 31, 2022, of which $5 million was allocated to the Bank for the year ended December 31, 2023. Treasury securities, federal agency and GSE MBS, Notes to Financial Statements 47 GSE debt securities, and foreign government debt instruments are classified as Level 2 within the ASC 820 hierarchy because the fair values are based on indicative quotes and other observable inputs obtained from independent pricing services. The fair value hierarchy level of SOMA financial assets is not necessarily an indication of the risk associated with those assets. (6) CONSOLIDATED VARIABLE INTEREST ENTITY a. Summary Information for Consolidated Variable Interest Entity The consolidated financial statements include the accounts and results of operations of Main Street. Extensions of loan participations by the LLC are extended by the Bank. Intercompany balances and transactions are eliminated in consolidation. The assets and liabilities held by the LLC are reported as "Consolidated variable interest entity: Assets held, net" and "Consolidated variable interest entity: Other liabilities," respectively, in the Consolidated Statements of Condition. The classification of assets and liabilities of the consolidated VIE as of December 31, 2023 and 2022 are as follows (in millions): 2023 2022 Assets Cash and cash equivalents 1 $ $ 2,241 6,791 9,906 Loan participations 3 7,067 10,763 Total assets, net $ 15,839 $ 15,787 Liabilities Net assets and liabilities 1 1,981 Short-term investments in non-marketable securities 2 $ 22,910 $ 22,815 52 95 Of the $1,981 million and $2,241 million as of December 31, 2023 and 2022, respectively, cash comprised $48 million and $107 million, Treasury’s preferred equity contribution held as restricted cash comprised $1,186 million and $1,741 million, and cash equivalents comprised $747 million and $393 million, respectively. 2 Represents the portion of the Treasury preferred equity contribution to the credit facilities, which are held as short-term investments in non-marketable securities at amortized cost and the related earnings on those investments. 3 Reported at principal amount outstanding, net of allowance, charge-offs, recoveries, and including interest receivable. 48 Federal Reserve Bank of Boston Annual Financial Statements The following table presents Main Street's loan participations activities for the years ended December 31, 2023 and 2022 (in millions): MSELF Principal amount outstanding, beginning of period $ Loan participations purchased $ MSPLF 2,205 $ NONLF 11,605 $ Total 17 $ 15,393 — — — — — (387) (540) (2,659) (5) (3,591) Charge-offs — (23) (56) — (79) Capitalized interest 2 2 8 — 12 1,181 1,644 8,898 12 11,735 Loan participations principal paydowns Loan participations, principal amount outstanding Principal and interest receivable Allowance for loan losses Loan participations, net of allowance, December 31, 2022 ¹ $ Loan participations purchased (sold) 9 9 76 — 94 (87) (128) (850) (1) (1,066) 1,103 $ 1,525 $ 8,124 $ 11 $ 10,763 — — (33) — (33) (250) (550) (2,711) (8) (3,519) Charge-offs — (38) (400) — (438) Capitalized interest 1 7 25 — 33 932 1,063 5,779 4 7,778 Loan participations principal paydowns Loan participations, principal amount outstanding Principal and interest receivable Allowance for credit losses Loan participations, net of allowance and recoveries, December 31, 2023 ¹ 1 MSNLF 1,566 $ 9 46 75 — 130 (27) (110) (704) — (841) 914 $ 999 $ 5,150 $ 4 $ 7,067 Reported at principal amount outstanding, net of allowance, charge-offs, and recoveries and including interest receivable The following tables present the components of the Main Street's net operating income (loss) recorded for the years ended December 31, 2023 and 2022 (in millions): 2023 Interest income $ 2022 1,167 $ 731 Other items of income (loss): Fees Provision for credit losses Realized loss on sale of loan participations Total other items of (loss) income Less: expenses 1 Net income attributable to consolidated VIE 1 2 38 53 (218) 885 (25) — (205) 938 48 54 $ 914 $ 1,615 Allocated to non-controlling Treasury interest $ 870 $ 1,602 Allocated to Reserve Bank $ 44 $ 13 Memorandum—Earnings distribution: 2 $ — $ — Non-controlling Treasury interest — — Reserve Bank — — Includes fees, loan participations servicing costs, and other expenses. Represents distribution of cumulative earnings upon dissolution in accordance with the LLC's legal agreements. Notes to Financial Statements 49 At December 31, 2023 and 2022, the maturity distribution of the Main Street's holdings are as follows (in millions): 16 days to 90 days Within 15 days 91 days to 1 year Over 1 year to 5 years Total December 31, 2023 Cash equivalents $ Short-term investments in non-marketable securities 747 $ 6,791 Loan participations Total — $ — — $ 7,538 $ 393 $ — $ — — — $ — $ — $ — 7,067 — $ — $ 747 6,791 7,067 7,067 $ — $ 14,605 December 31, 2022 Cash equivalents $ Short-term investments in non-marketable securities 9,906 Loan participations Total — — $ 10,299 — — $ — — — $ — 10,763 $ 10,763 393 9,906 10,763 $ 21,062 Allowance for Credit Losses and Charge-Offs The allowance for credit losses is established in accordance with the LLC’s credit loss policies and the adequacy of the allowance is reviewed at least annually. When the lifetime expected loss methodology was adopted January 1, 2023, an immaterial adjustment was recorded to increase credit losses under CECL. Under the lifetime expected credit loss methodology, loan participations with similar risks are collectively assessed for expected credit losses whereas loan participations with different risks are individually assessed. To estimate an expected credit loss on an individual loan participation, the LLC considers credit indicators and the size of the loan participation. The LLC’s allowance for credit loss evaluation includes both quantitative and qualitative components. To calculate expected credit loss for the remaining life of the loan participations, the allowance considers relevant estimates of probability of default (PD) and loss given default (LGD) factors in light of credit ratings, and other loan characteristics (e.g., collateral positions), which are applied to exposure at default (principal amount outstanding). This formula-based credit evaluation approach is applied primarily by loss factors, which includes estimates of expected losses over the remaining life of the loan participations assigned to each risk rating segment. Qualitative factors (including changes in economic and business conditions over the remaining life of the loan participations) are assessed so that loss rates (product of PD and LGD) appropriately reflect risks within the then-current environment. The evaluation of the adequacy of the allowance is primarily based upon internal risk rating models that assess probability of default, loss given default and exposure at default for each loan. The models are primarily driven by individual borrower financial characteristics, such as measures of profitability, leverage, and interest coverage. The 50 Federal Reserve Bank of Boston Annual Financial Statements models are validated against historical industry experience. Participations were grouped using North American Industry Classification System (NAICS) codes into Services and Non-services segments for rating purposes. The Services segment includes and is not limited to industries such as accommodation and food services, retail, health care, information, and professional scientific and technical services. The Non-services segment includes and is not limited to manufacturing, construction, and agriculture, forestry, fishing, and hunting. Given significant differences in historical and expected performance, models differ for service and non-service industry loans. Loan participations are segmented into internal risk categories. In 2022, prior to the adoption of the CECL accounting guidance, the LLC's allowance for loan losses represented management's estimate of probable losses inherent in Main Street's loan participation portfolio. The principal exposure of loan participations on non-accrual status as of December 31, 2023 and 2022, was $1.3 billion and $2.0 billion, respectively. The evaluation of loan participations purchased by Main Street resulted in recording a credit loss allowance of $0.8 billion as of December 31, 2023 and a loan loss allowance of $1.1 billion as of December 31, 2022. When a loan participation is charged off, any accrued but uncollected interest from both current and prior periods are charged against the allowance for credit losses as remaining interest receivable is specifically considered in the determination of the allowance for credit loss. The LLC realized principal and interest losses of $452.5 million and $79.9 million for charge-offs during the years ended December 31, 2023 and 2022, respectively. The following table shows the breakout of the allowance for credit losses at December 31, 2023 and for loan losses at December 31, 2022 (in millions): Allowance Service industry Individually evaluated $ Collectively evaluated Nonaccrual interest allowance Total allowance Total loan participations, individually evaluated $ $ Total loan participations, collectively evaluated 146 Total $ Service industry 614 $ 420 $ 160 Total $ 580 76 208 332 141 473 11 8 19 9 4 13 611 $ 601 $ 5,536 289 230 $ 203 $ 2,136 2,372 149 $ 804 $ 7,908 438 $ 518 $ 8,476 66 $ 228 $ 3,353 13 746 94 $ 9.1 % $ 1,066 10,989 32 $ 9.0 % $ 305 3,093 62 $ 10.6 % $ 761 7,896 130 $ 9.7 % $ 841 6,974 33 $ 11.0 % $ 2022 Non-service industry 132 97 $ Allowance (percentage of evaluated balance) Loan charge-offs from principal $ 4,838 Total principal and interest receivable Total evaluated balance 468 2023 Non-service industry 11,829 9.0 % $ 79 Notes to Financial Statements 51 Loan Modifications In certain cases, when a borrower experiences significant financial difficulties and is unable to meet its financial obligations, modifications to contractual terms may be approved. Modifications may include changes in payment structure and timing such as principal or interest payment deferral and other actions intended to minimize economic loss and avoid foreclosure or repossession of collateral. Previously, in 2022, modifications to contractual terms that would not otherwise have been approved if the loan were performing were classified and accounted for as a troubled debt restructuring loan. With the adoption of the CECL accounting guidance in 2023, loan modifications are evaluated to determine whether a modification made to the borrower results in a new loan or a continuation of the existing loan. Loan participations are evaluated based on the revised contractual terms after a modification and performance against the new contractual terms when determining credit loss allowance. Loan participations totaling $460 million and $80 million were modified as of December 31, 2023 and 2022, respectively. Main Street evaluated all loan modifications for impairment on an individual basis. The following table presents the outstanding principal balances for loan participations that were modified at December 31, 2023, by type of modification (in millions): December 31, 2023 Services Principal balance Loan participations modifications Interest payment deferral $ Principal payment deferral % of segment $ % of segment Number of loan participations Deferral period 5 —% — —% 1 12 months 310 6% 78 3% 26 3 to 24 months Principal and interest payment deferral 28 1% 27 1% 2 7 to 27 months Maturity extension and principal payment deferral 1 12 —% — —% 1 24 to 36 months Total loan participations modified 1 Non-services Principal balance $ 355 $ 105 30 The loan participations maturity was extended by one year. The following table presents the changes in modified loan participation balances for the years ended December 31, 2023 and 2022 (in millions): 2023 Balance at beginning of year 2022 80 $ — Additions 1 434 80 Net charge-offs (25) — Repayments (29) Balance at end of year 1 $ Based on principal amount outstanding as beginning of year, plus capitalization during the year. $ 460 — $ 80 52 Federal Reserve Bank of Boston Annual Financial Statements b. Fair Value There was no material difference between the cost and fair value of $747 million of cash equivalents and $6,791 million of short-term investments in non-marketable securities at December 31, 2023, and $393 million of cash equivalents and $9,906 million of short-term investments in non-marketable securities at December 31, 2022. The following table presents the financial instruments recorded at fair value as of December 31, 2023 and 2022 by the FASB ASC 820, Fair Value Measurement, hierarchy (in millions): Level 1 Level 2 Total 1 Level 3 December 31, 2023 Cash equivalents $ 747 $ — $ — $ 747 $ 393 $ — $ — $ 393 December 31, 2022 Cash equivalents 1 There were no transfers between levels during the years ended December 31, 2023 and 2022. Main Street's cash equivalents are valued at closing net asset value and are not rated. Short-term investments in non-marketable securities are classified as Government/agency and represent balances invested with the Treasury's Bureau of Fiscal Services, which are valued at amortized cost. The estimated fair value for loan participations, which are recorded at the cost of purchase, plus capitalized interest, less any principal paydowns, is approximately $7.4 billion and $10.8 billion at December 31, 2023 and 2022, respectively. Because external observable pricing information is not available, a market based discounted cash flow model is used to value loan participations classified within level 3. Key inputs to the model include market spread data for each credit rating, collateral type, and other relevant contractual features. c. Risk Profile Main Street’s interest income earned on the invested portion of preferred equity member contributions are subject to interest rate risk as these are principally short-term government-guaranteed investments. The average internal risk rating for loan participations at principal amount outstanding held as of December 31, 2023 and 2022 was equivalent to a Moody’s rating of B2. The following table shows rating distribution using internally derived risk ratings on a scale comparable to a Moody’s rating scale as of December 31, 2023 and 2022: Percentage of loan participations Rating 2023 2022 Ba or higher 37 % 37 % B 33 % 38 % Caa 17 % 14 % Ca 13 % 11 % 100 % 100 % Total Notes to Financial Statements 53 d. Contributions and Distributions of Treasury Equity The following table presents the Treasury’s contributions and distributions of capital, distributions of LLC earnings, and current year undistributed LLC earnings as of December 31, 2023 and 2022 (in millions), which are reported as “Consolidated variable interest entity: Non-controlling interest—capital (distribution),” “Consolidated variable interest entity: Non-controlling interest—(earnings distribution),” and “Consolidated variable interest entity: Income (loss), net,” respectively, in the Consolidated Statements of Changes in Capital. Main Street Treasury's equity, January 1, 2022 $ 14,060 Capital (distribution) (4,222) Current year undistributed LLC earnings 1,602 Earnings distribution Treasury's equity, December 31, 2022 — $ 11,440 Capital (distribution) (4,014) Current year undistributed LLC earnings 870 Earnings distribution 1 Treasury's equity, December 31, 2023 1 — $ 8,296 Represents distribution of cumulative earnings upon dissolution in accordance with the LLC’s legal agreements. The following tables present the Treasury’s cumulative capital contributions and undistributed LLC earnings (loss) as of December 31, 2023 and 2022 (in millions): Main Street Capital contributions $ 11,452 Treasury's equity, December 31, 2022 $ 11,440 Capital contributions $ 7,438 $ 8,296 Undistributed LLC loss (12) Undistributed LLC earnings Treasury's equity, December 31, 2023 858 The assets of Main Street and the amounts provided by the Treasury as credit protection are used to secure the loans from the Bank. Funds provided by the Treasury’s preferred equity contribution are invested as mutually agreed upon by Main Street and Treasury and consented to by the Bank. Additionally, the managing member has been deemed to have contributed a nominal amount to Main Street. e. Short-Term Investments in Non-Marketable Securities In accordance with the terms of the Preferred Equity Investment Agreements for Main Street, approximately 85 percent of the Treasury’s initial equity contribution was invested in overnight non-marketable securities issued by 54 Federal Reserve Bank of Boston Annual Financial Statements the Treasury to the LLC. These investments are reported as restricted cash and cash equivalents as there are contractual limitations and restrictions on the use of the funds and ability to withdraw the funds. The remaining equity contribution of approximately 15 percent of the initial equity contribution was held in cash on deposit at FRBNY to support the liquidity needs of the LLC. Due to the short-term nature of cash equivalents and nonmarketable securities, the cost basis is estimated to approximate fair value. (7) BANK PREMISES, EQUIPMENT, AND SOFTWARE Bank premises and equipment at December 31, 2023 and 2022 were as follows (in millions): 2023 Bank premises and equipment: Land and land improvements Buildings Construction Furniture and equipment Subtotal $ Accumulated depreciation 2022 27 241 — 96 364 $ (241) 27 221 14 93 355 (231) Bank premises and equipment, net $ 123 $ 124 Depreciation expense, for the years ended December 31 $ 15 $ 14 The Bank leases space to outside tenants with remaining lease terms ranging from 1 to 7 years, which reflect any renewal options the lessee is reasonably certain to exercise or termination options not reasonably certain to exercise. Rental income from such leases was $16 million and $16 million for the years ended December 31, 2023 and 2022, respectively, and is reported as a component of “Other items of income (loss): Other” in the Consolidated Statements of Operations. Future minimum lease payments that the Bank will receive under noncancelable lease agreements in existence at December 31, 2023 are as follows (in millions): 2024 2025 2026 2027 2028 Thereafter Total $ $ 15 12 11 11 9 17 75 The Bank had capitalized software assets, net of amortization, of $59 million and $55 million at December 31, 2023 and 2022, respectively. Amortization expense was $14 million and $4 million for the years ended December 31, 2023 and 2022, respectively. Capitalized software assets are reported as a component of “Other assets” in the Consolidated Statements of Condition and the related amortization is reported as a component of “Operating expenses: Other” in the Consolidated Statements of Operations. Notes to Financial Statements 55 Asset impairment losses for the years ended December 31, 2023 and 2022 were immaterial. (8) COMMITMENTS AND CONTINGENCIES In conducting 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, 2023, the Bank was obligated under non-cancelable lease for premises with a remaining term of approximately 1 year. The lease term and the recorded amount of right-of-use assets and lease liabilities include any renewal options reasonably certain to be exercised or termination options not reasonably certain to be exercised. These leases provide for increased lease payments based upon increases in Real estate taxes and operating costs. Certain of the Bank's leases have options to renew. Lease right-of-use assets, future minimum lease payments, and lease liabilities under non-cancelable operating leases at December 31, 2023, were immaterial. At December 31, 2023, there were no material unrecorded unconditional purchase commitments or obligations in excess of one year. Under an insurance agreement of the Reserve Banks, each of the Reserve Banks has agreed to bear, on a perincident basis, a share of certain losses in excess of 1 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, 2023 and 2022. 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 legal actions and claims will be resolved without material adverse effect on the financial position or results of operations of the Bank. (9) 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). Under the Dodd-Frank Act, eligible Bureau employees may participate in 56 Federal Reserve Bank of Boston Annual Financial Statements the System Plan and, during the years ended December 31, 2023 and 2022, certain costs associated with the System Plan were reimbursed by the Bureau. 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 Banks (SERP). On behalf of the System, the FRBNY recognized the net asset or net liability and costs associated with the System Plan in its consolidated financial statements during 2022 and January 1, 2023, through July 31, 2023. Previously, the OEB was a separate legal entity that administered the selected System benefit plans, and on August 1, 2023, was integrated into the operations of the FRBA. Beginning August 1, 2023, the FRBA began recognizing the net asset or net liability and costs associated with the System Plan in its financial statements. The Bank reports the service cost related to the BEP and SERP as a component of "Operating expenses: Salaries and benefits" in its Consolidated Statements of Operations, the net cost related to the BEP and SERP as "Other items of income (loss): Other components of net benefit costs" in its Consolidated Statements of Operations, and the net liability as a component of "Accrued benefit costs" in its Consolidated Statements of Condition. The Bank's projected benefit obligation, funded status, and net pension expenses for the BEP and the SERP at December 31, 2023 and 2022, and for the years then ended, were immaterial. 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 100 percent of the first 6 percent of employee contributions from the date of hire and provides an automatic employer contribution of 1 percent of eligible pay. The Bank's Thrift Plan contributions totaled $13 million and $12 million for the years ended December 31, 2023 and 2022, respectively, and are reported as a component of “Operating expenses: Salaries and benefits” in the Consolidated Statements of Operations. (10) 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 and life insurance benefits during retirement. The Bank and plan participants fund benefits payable under the medical and life insurance plans as due and the plans have no assets. Notes to Financial Statements 57 Following is a reconciliation of the beginning and ending balances of the benefit obligation for the years ended December 31, 2023 and 2022 (in millions): 2023 Accumulated postretirement benefit obligation at January 1 Service cost—benefits earned during the period Interest cost on accumulated benefit obligation Net actuarial loss (gain) Contributions by plan participants Benefits paid Accumulated postretirement benefit obligation at December 31 $ 2022 51 $ 2 3 2 2 (5) 55 $ $ 76 4 2 (28) 2 (5) 51 At December 31, 2023 and 2022, the weighted-average discount rate assumptions used in developing the postretirement benefit obligation were 5.11 percent and 5.43 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. The System Plan discount rate assumption setting convention uses an unrounded rate. Following is a reconciliation of the beginning and ending balance of the plan assets, and the unfunded postretirement benefit obligation and accrued postretirement benefit costs for the years ended December 31, 2023 and 2022 (in millions): 2023 Fair value of plan assets at January 1 Contributions by the employer Contributions by plan participants Benefits paid Fair value of plan assets at December 31 $ Unfunded obligation and accrued postretirement benefit costs 2022 $ — $ 3 2 (5) — $ — 3 2 (5) — $ 55 $ 51 $ 5 23 28 $ 7 28 35 Amounts included in accumulated other comprehensive income are shown below: Prior service cost Net actuarial gain Total accumulated other comprehensive income $ $ 58 Federal Reserve Bank of Boston Annual Financial Statements Accrued postretirement benefit costs are reported as a component of “Accrued benefit costs” in the Consolidated Statements of Condition. For measurement purposes, the assumed health-care cost trend rates at December 31, 2023 and 2022 are provided in the table below: 2023 Health-care cost trend rate assumed for next year Rate to which the cost trend rate is assumed to decline (the ultimate trend rate) Year that the rate reaches the ultimate trend rate 2022 6.25 % 4.75 % 2030 6.50 % 4.75 % 2030 The following is a summary of the components of net periodic postretirement benefit expense for the years ended December 31, 2023 and 2022 (in millions): 2023 Service cost—benefits earned during the period Other components of periodic postretirement benefit expense: Interest cost on accumulated benefit obligation Amortization of prior service credit Amortization of net actuarial gain Other components of periodic postretirement benefit expense Total periodic postretirement benefit expense 2022 $ 2 $ 4 $ 3 $ (3) (2) $ (2) — $ 2 (2) — — 4 $ $ The service cost component of periodic postretirement benefit expense is reported as a component of “Operating expenses: Salaries and benefits” in the Consolidated Statements of Operations and the other components of periodic postretirement benefit expense are reported as a component of “Other items of income (loss): Other components of net benefit costs” in the Consolidated Statements of Operations. Net postretirement benefit costs are actuarially determined using a January 1 measurement date. At January 1, 2023 and 2022, the weighted-average discount rate assumptions used to determine net periodic postretirement benefit costs were 5.43 percent and 2.91 percent, respectively. 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 the actuarial gain in the accumulated postretirement benefit obligation and net periodic postretirement benefit expense. Notes to Financial Statements 59 Federal Medicare Part D subsidy receipts were immaterial in the years ended 2023 and 2022. Expected receipts in 2023, related to benefits paid in the years ended 2023 and 2022, are immaterial. Following is a summary of expected postretirement benefit payments (in millions): Without subsidy 2024 2025 2026 2027 2028 2029-2033 Total $ $ 4 3 4 4 4 22 41 With subsidy $ $ 4 3 4 4 4 22 41 Postemployment Benefits The Bank offers benefits to former qualifying or inactive employees. Postemployment benefit costs are actuarially determined using a December 31 measurement date and include the cost of providing disability; medical, dental, and vision insurance; survivor income benefits, and certain workers' compensation expenses. The accrued postemployment benefit costs recognized by the Bank at December 31, 2023 and 2022 were $3 million and $2 million, respectively. This cost is included as a component of “Accrued benefit costs” in the Consolidated Statements of Condition. Net periodic postemployment benefit expense (credit) included in 2023 and 2022 operating expenses were $1 million and $(1) million, respectively, and are recorded as a component of “Operating expenses: Salaries and benefits” in the Consolidated Statements of Operations. 60 Federal Reserve Bank of Boston Annual Financial Statements (11) ACCUMULATED OTHER COMPREHENSIVE INCOME AND OTHER COMPREHENSIVE INCOME Following is a reconciliation of beginning and ending balances of accumulated other comprehensive income (loss) as of December 31, 2023 and 2022 (in millions): Balance at January 1 2023 2022 Amount related to postretirement benefits other than retirement plans $ 35 Amount related to postretirement benefits other than retirement plans $ 9 (3) (2) (3) (2) (2) (2) 28 — (4) 28 (7) 28 $ 26 35 Change in funded status of benefit plans: Amortization of prior service cost (credit) 1 Change in prior service costs related to benefit plans Net actuarial (loss) gain arising during the year Amortization of net actuarial gain ¹ Change in actuarial gain (loss) related to benefit plans Change in funded status of benefit plans—other comprehensive (loss) income Balance at December 31 1 $ Reclassification is reported as a component of "Other items of income (loss): Other components of net benefit costs" in the Consolidated Statements of Operations. Additional detail regarding the classification of accumulated other comprehensive income is included in Note 10. Notes to Financial Statements 61 (12) RECONCILIATION OF TOTAL DISTRIBUTION OF COMPREHENSIVE INCOME AND TREASURY REMITTANCES In accordance with the FRA, the Bank remits excess earnings to the Treasury after providing for the cost of operations, payment of dividends, and reservation of an amount necessary to maintain the Bank's allocated portion of the aggregate surplus limitation (see Note 3r). The Bank remitted excess earnings to the Treasury on a weekly basis during most of 2022. In the fall of 2022, the Bank first suspended weekly remittances to the Treasury because earnings shifted from excess to less than the costs of operations, payment of dividends, and reservation of surplus. The Bank's deferred asset represents the net accumulation of costs in excess of earnings, and is reported as “Deferred asset – remittances to the Treasury” in the Consolidated Statements of Condition. The deferred asset represents the amount of net excess earnings the Bank will need to realize in the future before remittances to the Treasury resume. No impairment existed as of December 31, 2023, because net excess earnings of the Bank in future periods are expected to exceed the balance of the deferred asset. The following table presents the distribution of the Bank's and System's total comprehensive income for the years ended December 31, 2023 and 2022 (in millions): Bank's portion 2023 Reserve Bank and consolidated variable interest entity net (loss) income before providing for remittances to the Treasury Other comprehensive (loss) income Total comprehensive (loss) income—available for distribution Distribution of comprehensive income (loss): Transfer from surplus Dividends Remittances transferred to the Treasury 1 $ $ $ Deferred asset increase Earnings remittances to the Treasury, net Total distribution of comprehensive (loss) income 1 $ System total 2022 2023 (2,191) $ (7) (2,198) $ 855 26 881 $ (9) $ 63 — — 54 1,136 $ $ 2022 (114,300) $ (276) (114,576) $ 58,836 1,819 60,655 — 1,487 670 — 1,209 76,031 $ (2,252) (309) (116,733) (16,585) (2,252) (2,198) $ 827 881 (116,063) (114,576) $ 59,446 60,655 $ Represents cumulative excess earnings remittances transferred to the Treasury. (13) SUBSEQUENT EVENTS There were no subsequent events that required adjustments to or disclosures in the consolidated financial statements as of December 31, 2023. Subsequent events were evaluated through March 18, 2024, which is the date that the consolidated financial statements were available to be issued. www.federalreserve.gov 0324