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The Federal Reserve
Bank of St. Louis
Financial Statements as of and for the Years Ended
December 31, 2013 and 2012 and
Independent Auditors' Report
THE FEDERAL RESERVE BANK OF ST. LOUIS
Table of Contents
Management's Report on Internal Control Over Financial Reporting
Independent Auditors' Report
Abbreviations
Page
1
Pages
2-4
Page
5
Financial Statements:
Statements of Condition as of December 31, 2013 and December 31, 2012
Page
6
Statements of Income and Comprehensive Income for the years ended December 31, Page 7
2013 and December 31, 2012
Statements of Changes in Capital for the years ended December 31, 2013
December 31, 2012
Notes to Financial Statements
Pages
Page
8
9-37
FEDERAL RESERVE B A N K
of
ST. L O U I S
P.O. Box 442
St. Louis, MO 63166-0442
Management's Report on Internal Control Over Financial Reporting
March 14,2014
To the Board of Directors
The management of the Federal Reserve Bank of St. Louis (Bank) is responsible for the preparation and fair
presentation of the Statements of Condition as of December 31, 2013 and 2012, and the Statements of Income and
Comprehensive Income, and Statements of Changes in Capital for the years then ended (the financial statements). The
financial statements have been prepared in conformity with the accounting principles, policies, and practices established
by the Board of Governors of the Federal Reserve System as set forth in the Financial Accounting Manual for Federal
Reserve Banks (FAM), and, as such, include some amounts that are based on management judgments and estimates. To
our knowledge, the financial statements are, in all material respects, fairly presented in conformity with the accounting
principles, policies and practices documented in the 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 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 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 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 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 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 (1992) 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.
Signed by James Bullard,
James Bullard, President and Chief Executive Officer
Signed by David A Sapenaro
David A. Sapenaro, First Vice President and Chief Operating Officer
Signed by Marilyn K. Corona
Marilyn
Corona,
Vice President and Chief Financial Officer
Deloitte.
Deloitte & Touche LLP
100 South Fourth Street
Suite 300
St. Louis, MO 63102-1821
USA
Tel: +1 314 342 4900
Fax: +1 314 840 1100
www.deloitte.com
INDEPENDENT AUDITORS' REPORT
To the Board of Governors of the Federal Reserve System
and the Board of Directors of the Federal Reserve Bank of St. Louis:
We have audited the accompanying financial statements of the Federal Reserve Bank of St. Louis
("FRB St. Louis"), which are comprised of the statements of condition as of December 31, 2013 and
2012, and the related statements of income and comprehensive income, and of changes in capital for
the years then ended, and the related notes to the financial statements. We also have audited the FRB
St. Louis' internal control over financial reporting as of December 31, 2013, based on criteria
established in Internal Control — Integrated Framework (1992) issued by the Committee of
Sponsoring Organizations of the Treadway Commission.
Management's Responsibility
The FRB St. Louis' management is responsible for the preparation and fair presentation of these
financial statements in accordance with accounting principles established by the Board of Governors
of the Federal Reserve System (the "Board") as described in Note 3 to the financial statements. The
Board has determined that this basis of accounting is an acceptable basis for the preparation of the
FRB St. Louis' financial statements in the circumstances. The FRB St. Louis' management is also
responsible for the design, implementation, and maintenance of internal control relevant to the
preparation and fair presentation of financial statements that are free from material misstatement,
whether due to fraud or error. The FRB St. Louis' management is also responsible for its assertion of
the effectiveness of internal control over financial reporting, included in the accompanying
Management's Report on Internal Control Over Financial Reporting.
Auditors' Responsibility
Our responsibility is to express an opinion on these financial statements and an opinion on the FRB
St. Louis' internal control over financial reporting based on our audits. We conducted our audits of
the financial statements in accordance with auditing standards generally accepted in the United States
of America and in accordance with the auditing standards of the Public Company Accounting
Oversight Board (United States) ("PCAOB") and we conducted our audit of internal control over
financial reporting in accordance with attestation standards established by the American Institute of
Certified Public Accountants and in accordance with the auditing standards of the PCAOB. Those
standards require that we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free from material misstatement and whether effective internal control over
financial reporting was maintained in all material respects.
An audit of the financial statements involves performing procedures to obtain audit evidence about
the amounts and disclosures in the financial statements. The procedures selected depend on the
auditor's judgment, including the assessment of the risks of material misstatement of the financial
statements, whether due to fraud or error. In making those risk assessments, the auditor considers
Member of
Deloitte T o u c h e T o h m a t s u Limited
internal control relevant to the FRB St. Louis' preparation and fair presentation of the financial
statements in order to design audit procedures that are appropriate in the circumstances. An audit of
the financial statements also includes evaluating the appropriateness of accounting policies used and
the reasonableness of significant accounting estimates made by management, as well as evaluating the
overall presentation of the financial statements. An audit of internal control over financial reporting
involves obtaining an understanding of internal control over financial reporting, assessing the risk that
a material weakness exists, testing and evaluating the design and operating effectiveness of internal
control based on the assessed risk, and performing such other procedures as we considered necessary
in the circumstances.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our audit opinions.
Definition of Internal Control Over Financial Reporting
The FRB St. Louis' internal control over financial reporting is a process designed by, or under the
supervision of, the FRB St. Louis' principal executive and principal financial officers, or persons
performing similar functions, and effected by the FRB St. Louis' board of directors, management, and
other personnel to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with the accounting principles
established by the Board. The FRB St. Louis' 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 St. Louis; (2)
provide reasonable assurance that transactions are recorded as necessary to permit preparation of
financial statements in accordance with the accounting principles established by the Board, and that
receipts and expenditures of the FRB St. Louis are being made only in accordance with authorizations
of management and directors of the FRB St. Louis; and (3) provide reasonable assurance regarding
prevention or timely detection and correction of unauthorized acquisition, use, or disposition of the
FRB St. Louis' assets that could have a material effect on the financial statements.
Inherent Limitations of Internal Control Over Financial Reporting
Because of the inherent limitations of internal control over financial reporting, including the
possibility of collusion or improper management override of controls, material misstatements due to
error or fraud may not be prevented or detected and corrected on a timely basis. Also, projections of
any evaluation of the effectiveness of the internal control over financial reporting to future periods are
subject to the risk that the controls may become inadequate because of changes in conditions, or that
the degree of compliance with the policies or procedures may deteriorate.
Opinions
In our opinion, the financial statements referred to above present fairly, in all material respects, the
financial position of the FRB St. Louis as of December 31, 2013 and 2012, and the results of its
operations for the years then ended in accordance with the basis of accounting described in Note 3 to
the financial statements. Also, in our opinion, the FRB St. Louis maintained, in all material respects,
effective internal control over financial reporting as of December 31, 2013, based on the criteria
established in Internal Control — Integrated Framework (1992) issued by the Committee of
Sponsoring Organizations of the Treadway Commission.
Basis of Accounting
We draw attention to Note 3 to the financial statements, which describes the basis of accounting. The
FRB St. Louis has prepared these financial statements in conformity with accounting principles
established by the Board, as set forth in the Financial Accounting Manual for Federal Reserve Banks,
which is a basis of accounting other than accounting principles generally accepted in the United States
of America. The effects on such financial statements of the differences between the accounting
principles established by the Board and accounting principles generally accepted in the United States
of America are also described in Note 3 to the financial statements. Our opinion is not modified with
respect to this matter.
Signed by Deloitte & Touche
March 14, 2014
FEDERAL RESERVE BANK OF ST. LOUIS
Abbreviations:
ACH
Automated clearinghouse
ASC
Accounting Standards Codification
ASU
Accounting Standards Update
BEP
Benefit Equalization Retirement Plan
Bureau
Bureau of Consumer Financial Protection
FAM
Financial Accounting Manual for Federal Reserve Banks
FASB
Financial Accounting Standards Board
FOMC
Federal Open Market Committee
FRBNY
Federal Reserve Bank of New York
GAAP
Accounting principles generally accepted in the United States of America
GSE
Government-sponsored enterprise
IMF
International Monetary Fund
MBS
Mortgage-backed securities
OFR
Office of Financial Research
SDR
Special drawing rights
SERP
Supplemental Retirement Plan for Select Officers of the Federal Reserve Banks
SOMA
System Open Market Account
TBA
To be announced
TDF
Term Deposit Facility
FEDERAL RESERVE BANK OF ST. LOUIS
STATEMENTS OF CONDITION
As of December 31, 2013 and December 31, 2012
(in millions)
header
row
col certificates
1: drawing
categoryrights
col 2:
2:certificates
3:
2012
end col
header row
Gold
$2013
310 col
colcol
3:col
$ 313
ASSETS
Special
2:
150
Coin
col
2:
19Market
colcol
3:institutions
35
ASSETS
Loans
to2:
depository
2:
3 col
3: - 3: 150
ASSETS
System
Open
Account:
securities,
net (of
which $276
and $143 isnet
lent
aswhich
of December
31,
respectively)
col
37,964
col
3:
28,285 Treasury
ASSETS
System
Open
Market
Account:
Government-sponsored
enterprise
debt securities,
(of
$18 andsecurities,
$112013
is lentand
as 2012,
of
December
31,
2013
and
2012,
respectively)
col
2:
951
col
3: 1,243
ASSETS
System
Open
Market
Account:
Federal
agency
and
government-sponsored
enterprise
mortgage-backed
net
col 2: 24,680
col 3:
14,857
ASSETS
System
Open
Market
Account:
Foreign
currency
denominated
investments,
net
col
2:
198
col
3:
203
ASSETS
System
Open
Market
Account:
Central
bank
liquidity
swaps
col
2:
2
col
3:
73
ASSETS
System
Open
Market
Account:
Accrued
interest
receivable
col
2:
377
col
3:
297
ASSETS
Bank
premises
and
equipment,
net
col
col 3: 145
ASSETS
Items
in
process
of$69
collection
- col
3:3:1 958
ASSETS
Interdistrict
settlement
account
col
- 2:
col141
Other
assets
col 2:
2:
col
3: col
41col
ASSETS
Total
assets
col
64,864
3: 2:
$2:46,601
LIABILITIES
AND
CAPITAL
Federal
Reserve
notes
outstanding,
netliabilities
colsold
2: $ under
31,298
col 3: $ 33,538
LIABILITIES
AND
CAPITAL
System
Open
Market
Account:
Securities
agreements
to repurchase col 2: 5,083 col 3: 1,676
LIABILITIES
AND
CAPITAL
System
Open
Market
Account:
Other
LIABILITIES
AND
CAPITAL
Deposits:Depository
institutions
col
2:
8,325
col
3:
10,739
LIABILITIES
AND
CAPITAL
Interest
payable
to
depository
institutions
2:3:col
-27
col2:
3:212col 3: 50
benefit
costs
col
2: 3:
93
col
3:
104
LIABILITIES
AND
CAPITAL
Accrued
remittances
to64,402
Treasury
col2:
2:19,511
62col
colcol
LIABILITIES
AND
CAPITAL
Interdistrict
settlement
account
col
3:
Other
liabilities
col
2:
9
col
9
LIABILITIES
AND
CAPITAL
Total
liabilities
col
2:
col
3:
46,145
Capital
paid-in
2:
231
228 comprehensive loss of $3 and $19 at December 31, 2013 and 2012, respectively) col 2: 231 col 3: 228
Surplus
(including
Total liabilities
capital
colcol
2: accumulated
462
colcol
3: 3:
456
Total
and
capital
col
2:other
$ 64,864 col 3: $ 46,601
The accompanying notes are an integral part of these financial statements.
header
row col
1: category
col Open
2: 2013
col 3:Account:Government-sponsored
2012 end header row
INTEREST
INCOME
System
Open
Market
Account:Treasury
securities,
net col
2: $ 824debt
colsecurities,
3: $enterprise
769 net col
INTEREST
System
Market
enterprise
INTEREST
INCOME
System
Open
Market
Account:Federal
agency
and
government-sponsored
mortgage-backed
col
2: 585 colINCOME
3:
524
INTEREST
INCOME
System
Open
Market
Account:Foreign
currency
denominated
net3:col
col 3:
12: 35 col 3: 44securities, net
INTEREST
INCOME
System
Open
Market
Account:Central
bank
liquidity
swaps
colassets,
2: to
- col
2 2: 1col
INCOME
Total
interest
income
col
2:
1,445
col
3:
1,340
INTEREST
EXPENSE
System
Open
Market
Account:
Securities
sold
under
agreements
repurchase
2:
1
col 3: 2
INTEREST
EXPENSE
Deposits:
INTEREST
EXPENSE
Deposits:
Depository
institutions
col2:
2:2928col
col3:3:3:35
33
INTEREST
EXPENSE
Deposits:Total
interest
expense
INTEREST
EXPENSE
Deposits:Net
interest
income
colcol
2:
1,416
col
1,305
NON-INTEREST
INCOME
System
Open
Market
Account:
Treasury
securities
gains,
net
col
2:
col
3:
217
NON-INTEREST
INCOME
System
Open
Market
Account:
Federal
agency
and
government-sponsored
enterprise
mortgage-backed securities
gains,
net col 2: 1 col
3: 4 System
NON-INTEREST
INCOME
Open Market
Account:
Foreign
currency
NON-INTEREST
INCOME
Compensation
received
service
costs
provided
col
2: 3 col
collosses,
3: 111
3 net col 2: (10) col 3: (9)
NON-INTEREST
INCOME
Reimbursable
services
tofor
government
agencies
coltranslation
2: 122
3:
Other
col
2:
1
col
3:
1
NON-INTEREST
INCOME
Total
non-interest
income
col
2:
117
col
3:
327
Salaries
benefits
2:6 13
136 coloperating
3: 121 expenses and currency costs col 2: 28 col 3: 28
OPERATING
EXPENSES
Occupancy
col
2:
col
3:
OPERATING
EXPENSES
Equipment
2:
5143:
col
Other
coland
2:col
99
colto
953:
OPERATING
EXPENSES
Assessments:
Board
of
Governors
Bureau
of
Consumer
OPERATING
EXPENSES
Assessments:
Total
operating
expenses
colcol
2: Protection
287
col 3: col
2662: 5 col 3: 3
Net
income
before
providing
for
remittances
Treasury
col
2: Financial
1,246
3:
1,366
Earnings
remittances
to
Treasury
col
2:
1,245
col
3:
1,337
Net
income
col
2:
1
col
3:
29
Change
in
prior
service
costs
and
actuarial
gains
(losses)
related
to benefit
plans
col 2: 16 col 3: (8)
Total
other comprehensive
Comprehensive
income colincome
2: $ 17 (loss)
col 3: col
$ 212: 16 col 3: (8)
The accompanying notes are an integral part of these financial statements.
FEDERAL RESERVE BANK OF ST. LOUIS
STATEMENTS OF CHANGES IN CAPITAL
For the years ended December 31, 2013 and December 31, 2012
(in millions, except share data)
header
row
colTotal
1: category
col
paid-in
col
3:2:Surplus
Net3:income
retained
col 4:
Surplus
Accumulated
other comprehensive loss
col
5: Surplus
surplus
col2:
6:Capital
Total
capital
end
header
rowcol
Balance
at
December
31,
2011
(4,399,989
shares)
col
$ 220
$ 231
col
4:3:$29
(11)
5:col
$3:220
col4:
6:- 6:
$ 29
440
Balance
at
December
31,
2011
Net
change
in capital
stock
issued
(162,012
shares)
col
2:col
8col
col
-col
col
col
5:5:- (8)
col col
6: 86: (8)
Balance
at
December
31,
2011
Comprehensive
income:
Net
income
col
2:
col
col
4:
5:
29
col
Balance
at
December
31,
2011
Comprehensive
income:
Other
comprehensive
loss
col
2:
3:
4:
(8)
col
Balance
at
December
31,
2011
Dividends
on
capital
stock
2:col-3:col
(13)
col4:col
4:$ -(19)
5: (13)
6:col
(13)
Balance
at
December
31,
2011
Net
change
in
capital
col
2:col
8 col
16$3:col
4:col
(8)
5:col
8 3col
col
6:3:$16col
Balance
at
December
31,
2012
(4,562,001
shares)
col
2:
$
228
3:
247
5:
228
6:
$
456
Balance
at
December
31,
2012
Net
change
in
capital
stock
issued
(62,550
shares)
col
2:
col
col
4:
col
5:
col
6:
Balance
at
December 31,
31,
2012
Comprehensive
income:
Net
income
col 3:
1 col
5: 1 col
1(14)
Balance
at
December
2012
Comprehensive
income:
Other
comprehensive
income
col6:
- colcol
3:6:
- col
4: 16 col 5: 163col 6: 16
Balance
at
31,
2012
Dividends
on
col
2:
(14)
col
5:2:5:
(14)
Net
change
in capital col
3 col
3: (13) col
4:capital
16
col
5:
6- col
Balance
at December
December
31, 2:
2013
(4,624,551
shares)
colstock
2: 3$ col
2316:
col
3: $3:234
colcol4:4:$ -(3)
col
$ 231 col
6: $ 462
The accompanying notes are an integral part of these financial statements.
FEDERAL RESERVE BANK OF ST. LOUIS
NOTES TO FINANCIAL STATEMENTS
1.
STRUCTURE
The Federal Reserve Bank of St. Louis (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 (Federal
Reserve Act), which established the central bank of the United States. The Reserve Banks are chartered by the
federal government and possess a unique set of governmental, corporate, and central bank characteristics. The
Bank serves the Eighth Federal Reserve District, which includes Arkansas, and portions of Illinois, Indiana,
Kentucky, Mississippi, Missouri and Tennessee.
In accordance with the Federal Reserve Act, supervision and control of the Bank is exercised by a board of
directors. The Federal Reserve Act specifies the composition of the board of directors for each of the Reserve
Banks. Each board is composed of nine members serving three-year terms: three directors, including those
designated as chairman and deputy chairman, are appointed by the Board of Governors of the Federal Reserve
System (Board of Governors) to represent the public, and six directors are elected by member banks. Banks
that are members of the System include all national banks and any state-chartered banks that apply and are
approved for membership. Member banks are divided into three classes according to size. Member banks in
each class elect one director representing member banks and one representing the public. In any election of
directors, each member bank receives one vote, regardless of the number of shares of Reserve Bank stock it
holds.
In addition to the 12 Reserve Banks, the System also consists, in part, of the Board of Governors and the Federal
Open Market Committee (FOMC). The Board of Governors, an independent federal agency, is charged by the
Federal Reserve Act with a number of specific duties, including general supervision over the Reserve Banks.
The FOMC is composed of members of the Board of Governors, the president of the Federal Reserve Bank of
New York (FRBNY), and, on a rotating basis, four other Reserve Bank presidents.
2.
OPERATIONS AND SERVICES
The Reserve Banks perform a variety of services and operations. These functions include participating in
formulating and conducting monetary policy; participating in the payment system, including large-dollar
transfers of funds, automated clearinghouse (ACH) operations, and check collection; distributing coin and
currency; performing fiscal agency functions for the U.S. Department of the Treasury (Treasury), certain
federal agencies, and other entities; serving as the federal government's bank; providing short-term loans to
depository institutions; providing loans to 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, and designated financial market
utilities pursuant to authority delegated by the Board of Governors. Certain services are provided to foreign
and international monetary authorities, primarily by the FRBNY.
The FOMC, in conducting monetary policy, establishes policy regarding domestic open market operations,
oversees these operations, and issues authorizations and directives to the FRBNY to execute transactions. The
FOMC authorizes and directs the FRBNY to conduct operations in domestic markets, including the direct
purchase and sale of Treasury securities, government-sponsored enterprise (GSE) debt securities, and federal
agency and GSE mortgage-backed securities (MBS); the purchase of these securities under agreements to
resell; and the sale of these securities under agreements to repurchase. The FRBNY holds the resulting
securities and agreements in a portfolio known as the System Open Market Account (SOMA). The FRBNY is
authorized and directed to lend the Treasury securities and GSE debt securities that are held in the SOMA.
To counter disorderly conditions in foreign exchange markets or to meet other needs specified by the FOMC to
carry out the System's central bank responsibilities, the FOMC has authorized and directed the FRBNY to
execute spot and forward foreign exchange transactions in 14 foreign currencies, to hold balances in those
currencies, and to invest such foreign currency holdings, while maintaining adequate liquidity. The FOMC has
also authorized the FRBNY to maintain reciprocal currency arrangements with the Bank of Canada and the
Bank of Mexico in the maximum amounts of $2 billion and $3 billion, respectively, and to warehouse foreign
currencies for the Treasury and the Exchange Stabilization Fund in the maximum amount of $5 billion.
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 establish temporary U.S. dollar
liquidity swap lines with the Bank of Canada, the Bank of England, the European Central Bank, the Bank of
Japan, and the Swiss National Bank. In addition, as a contingency measure, the FOMC authorized and
directed the FRBNY to establish temporary foreign currency liquidity swap arrangements with these five
central banks to allow for the System to access liquidity, if necessary, in any of the foreign central banks'
currencies. On October 31, 2013, the Federal Reserve and five other central banks agreed to convert their
existing temporary liquidity swap arrangements to standing agreements which will remain in effect until
further notice.
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
between the Reserve Banks. In some cases, costs incurred by a Reserve Bank for services provided to other
Reserve Banks are not shared; in other cases, the Reserve Banks are reimbursed for costs incurred in providing
services to other Reserve Banks. Major services provided by the Bank on behalf of the System for which the
costs were not reimbursed by the other Reserve Banks include operation of the Treasury Relations and Support
Office, the Treasury Financial Management Department and the Treasury Agency Support Department, which
provide services to the Treasury. These services include: relationship management, strategic consulting, and
monitoring of Federal Reserve System operations and technology support for the Treasury. In addition,
operational support is provided for the Treasury's cash management, debt management and accounting
functions.
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 financial statements
have been prepared in accordance with the FAM.
Limited differences exist between the accounting principles and practices in the FAM and accounting principles
generally accepted in the United States of America (GAAP), 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 primary 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. Amortized cost, rather than the fair value presentation, more appropriately reflects 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 motivated by monetary
policy objectives rather than profit. Accordingly, fair values, earnings, and gains or losses resulting from the
sale of such securities and currencies are incidental to 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. The cost bases of Treasury securities, GSE debt securities, and foreign
government debt instruments are adjusted for amortization of premiums or accretion of discounts on a straightline basis, rather than using the interest method required by GAAP.
In addition, the Bank does not present a Statement of Cash Flows as required by GAAP because the liquidity and
cash position of the Bank are not a primary concern given the Reserve Banks' unique powers and
responsibilities as a central bank. Other information regarding the Bank's activities is provided in, or may be
derived from, the Statements of Condition, Income and Comprehensive Income, and Changes in Capital, and
the accompanying notes to the financial statements. Other than those described above, there are no significant
differences between the policies outlined in the FAM and GAAP.
Preparing the financial statements in conformity with the FAM requires management to make certain estimates and
assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and
liabilities at the date of the financial statements, and the reported amounts of income and expenses during the
reporting period. Actual results could differ from those estimates.
In 2013, the description of certain line items presented in the Statements of Income and Comprehensive Income
and the Statements of Condition have been revised to better reflect the nature of these items. Amounts related
to these line items were not changed from the prior year, only the nomenclature for the line item was revised,
as further noted below:
•
The line item, "Accrued interest on Federal Reserve notes" has been revised in the Statements of
Condition to "Accrued remittances to Treasury."
•
The line item, "Net income before interest on Federal Reserve notes expense remitted to Treasury" has
been revised in the Statements of Income and Comprehensive Income to "Net income before providing for
remittances to Treasury."
•
The line item, "Interest on Federal Reserve notes expense remitted to Treasury" has been revised in the
Statements of Income and Comprehensive Income to "Earnings remittances to Treasury."
Certain amounts relating to the prior year have been reclassified in the Statements of Condition to conform to the
current year presentation. The amount reported as "System Open Market Account: Accrued interest
receivable" for the year ended December 31, 2012 ($297 million) was previously reported as a component of
"System Open Market Account: Foreign currency denominated assets, net" ($1 million) and "Accrued interest
receivable" ($296 million).
a. Consolidation
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. Section 152 of the Dodd-Frank Act established the
Office of Financial Research (OFR) within the Treasury and required the Board of Governors to fund the
OFR for the two-year period ended July 21, 2012. The Reserve Banks reviewed the law and evaluated the
design of and their relationships to the Bureau and the OFR and determined that neither should be
consolidated in the Bank's 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 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 twelve 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 based upon each Reserve
Bank's Federal Reserve notes outstanding at the end of the preceding calendar year. SDR certificates are
recorded by the Banks at original cost. There were no SDR certificate transactions during the years ended
December 31, 2013 and 2012.
c. Coin
The amount reported as coin in the 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 are reported at their outstanding principal balances and interest income is
recognized on an accrual basis.
Loans are impaired when current information and events indicate that it is probable that the Bank will not
receive the principal and interest that are due in accordance with the contractual terms of the loan
agreement. Impaired loans are evaluated to determine whether an allowance for loan loss is required. The
Bank has developed procedures for assessing the adequacy of any allowance for loan losses using all
available information to identify incurred losses. This assessment includes monitoring information
obtained from banking supervisors, borrowers, and other sources to assess the credit condition of the
borrowers and, as appropriate, evaluating collateral values. Generally, the Bank would discontinue
recognizing interest income on impaired 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 an impaired loan, cash payments are first applied to principal until the
loan balance is reduced to zero; subsequent payments are applied as recoveries of amounts previously
deemed uncollectible, if any, and then as interest income.
e. Securities Purchased Under Agreements to Resell, Securities Sold Under Agreements to Repurchase, and
Securities Lending
The FRBNY may engage in purchases of securities with primary dealers under agreements to resell
(repurchase transactions). These repurchase transactions are settled through a tri-party arrangement. In a
tri-party arrangement, two commercial custodial banks manage the collateral clearing, settlement, pricing,
and pledging, and provide cash and securities custodial services for and on behalf of the FRBNY and
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 repurchase transactions primarily includes Treasury securities (including
Treasury Inflation-Protected Securities and Separate Trading of Registered Interest and Principal of
Securities Treasury securities); direct obligations of several federal and GSE-related agencies, including
Federal National Mortgage Association, Federal Home Loan Mortgage Corporation, and Federal Home
Loan Banks; and pass-through federal agency and GSE MBS. The repurchase transactions are accounted
for as financing transactions with the associated interest income recognized over the life of the transaction.
These transactions 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 Statements of
Condition.
The FRBNY may engage in sales of securities under agreements to repurchase (reverse repurchase
transactions) with primary dealers and with the set of expanded counterparties which includes banks,
savings associations, GSEs, and domestic money market funds. These reverse repurchase transactions,
when arranged as open market operations, are settled through a tri-party arrangement, similar to
repurchase transactions. Reverse repurchase transactions 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, GSE debt securities, and federal agency
and GSE MBS that are held in the SOMA. Reverse repurchase transactions are accounted for as financing
transactions, and the associated interest expense is recognized over the life of the transaction. These
transactions are reported at their contractual amounts as "System Open Market Account: Securities sold
under agreements to repurchase" and the related accrued interest payable is reported as a component of
"Other liabilities" in the Statements of Condition.
Treasury securities and GSE debt securities held in the SOMA may be lent to primary dealers, typically
overnight, to facilitate the effective functioning of the domestic securities markets. The amortized cost
basis of securities lent continues to be reported as "Treasury securities, net" and "Government-sponsored
enterprise debt securities, net," as appropriate, in the Statements of Condition. Securities lending
transactions are fully collateralized by Treasury securities that have fair values in excess of the securities
lent. The FRBNY charges the primary dealer a fee for borrowing securities, and these fees are reported as
a component of "Non-interest income: Other" in the Statements of Income and Comprehensive Income.
Activity related to securities purchased under agreements to resell, securities sold under agreements to
repurchase, and securities lending is allocated to each of the Reserve Banks on a percentage basis derived
from an annual settlement of the interdistrict settlement account that occurs in the second quarter of each
year.
f. Treasury Securities; Government-Sponsored Enterprise Debt Securities; Federal Agency and GovernmentSponsored Enterprise Mortgage-Backed Securities; Foreign Currency Denominated Assets; and
Warehousing Agreements
Interest income on Treasury securities, GSE debt securities, and foreign currency denominated assets included
in the SOMA is accrued on a straight-line basis. Interest income on federal agency and GSE MBS is
accrued using the interest method and includes amortization of premiums, accretion of discounts, and
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, GSE debt securities, and federal agency and GSE MBS are reported net of premiums and
discounts in the Statements of Condition and interest income on those securities is reported net of the
amortization of premiums and accretion of discounts in the Statements of Income and Comprehensive
Income.
In addition to outright purchases of federal agency and GSE MBS that are held in the SOMA, the FRBNY
enters into dollar roll transactions (dollar rolls), which primarily involve an initial transaction to purchase
or sell "to be announced" (TBA) MBS 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,
2013 and 2012, the FRBNY executed dollar rolls primarily to facilitate settlement of outstanding
purchases of federal agency and GSE MBS. The FRBNY accounts for dollar rolls as purchases or sales
on a settlement-date basis. In addition, TBA MBS transactions may be paired off or assigned prior to
settlement. Net gains resulting from these MBS transactions are reported as "Non-interest income:
System Open Market Account: Federal agency and government-sponsored enterprise mortgage-backed
securities gains, net" in the Statements of Income and Comprehensive Income.
Foreign currency denominated assets, which can include foreign currency deposits, securities purchased under
agreements to resell, and government debt instruments, are revalued daily at current foreign currency
market exchange rates in order to report these assets in U.S. dollars. Foreign currency translation gains
and losses that result from the daily revaluation of foreign currency denominated assets are reported as
"Non-interest income: System Open Market Account: Foreign currency translation losses, net" in the
Statements of Income and Comprehensive Income.
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 Statements of
Condition.
Activity related to Treasury securities, GSE debt securities, and federal agency and GSE MBS, including the
premiums, discounts, and realized gains and losses, is allocated to each Reserve Bank on a percentage
basis derived from an annual settlement of the interdistrict settlement account that occurs in the second
quarter of each year. Activity related to foreign currency denominated assets, including the premiums,
discounts, and realized and unrealized gains and losses, is allocated to each Reserve Bank based on the
ratio of each Reserve Bank's capital and surplus to the Reserve Banks' aggregate capital and surplus at the
preceding December 31.
Warehousing is an arrangement under which the FOMC has approved the exchange, at the request of the
Treasury, of U.S. dollars for foreign currencies held by the Treasury over a limited period. The purpose of
the warehousing facility is to supplement the U.S. dollar resources of the Treasury for financing purchases
of foreign currencies and related international operations. Warehousing agreements are valued daily at
current market exchange rates. Activity related to these agreements is allocated to each Reserve Bank
based on the ratio of each Reserve Bank's capital and surplus to 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 the ratio of each Reserve Bank's capital and surplus to the Reserve Banks' aggregate
capital and surplus at the preceding December 31. The foreign currency amounts associated with these
central bank liquidity swap arrangements are revalued daily at current foreign currency market exchange
rates.
U.S. dollar liquidity swaps
At the initiation of each U.S. dollar liquidity swap transaction, the foreign central bank transfers a specified
amount of its currency to a restricted account for the FRBNY in exchange for U.S. dollars at the
prevailing market exchange rate. Concurrent with this transaction, the FRBNY and the foreign central
bank agree to a second transaction that obligates the foreign central bank to return the U.S. dollars and the
FRBNY to return the foreign currency on a specified future date at the same exchange rate as the initial
transaction. The Bank's allocated portion of the foreign currency amounts that the FRBNY acquires are
reported as "System Open Market Account: Central bank liquidity swaps" in the Statements of Condition.
Because the swap transaction will be unwound at the same U.S. dollar amount and exchange rate that were
used in the initial transaction, the recorded value of the foreign currency amounts is not affected by
changes in the market exchange rate.
The foreign central bank compensates the FRBNY based on the amount outstanding and the 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 Statements of Income and Comprehensive Income.
Foreign currency liquidity swaps
The structure of foreign currency liquidity swap transactions involves 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. The foreign currency amount received would be reported as a liability
by the Bank.
h. 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 at cost as additions to the asset accounts and are
depreciated over the remaining useful life of the asset or, if appropriate, over the unique useful life of the
alteration, renovation, or improvement. Maintenance, repairs, and minor replacements are charged to
operating expense in the year incurred.
Costs incurred 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 related to software are
charged to operating expense in the year incurred.
Capitalized assets, including software, buildings, leasehold improvements, furniture, and equipment, are
impaired and an adjustment is recorded when events or changes in circumstances indicate that the carrying
amount of assets or asset groups is not recoverable and significantly exceeds the assets' fair value.
i. Interdistrict Settlement Account
At the close of business each day, each Reserve Bank aggregates the payments due to or from other Reserve
Banks. These payments result from transactions between the Reserve Banks and transactions that involve
depository institution accounts held by other Reserve Banks, such as Fedwire funds and securities
transfers and check and ACH transactions. The cumulative net amount due to or from the other Reserve
Banks is reflected in the "Interdistrict settlement account" in the Statements of Condition.
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.
j. 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 sold under agreements to repurchase 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 Federal Reserve Act provides that
Federal Reserve notes become a first and paramount lien on all the assets of the Reserve Banks. Finally,
Federal Reserve notes are obligations of the United States government.
"Federal Reserve notes outstanding, net" in the Statements of Condition represents the Bank's Federal Reserve
notes outstanding, reduced by the Bank's currency holdings of $3,161 million and $3,779 million at
December 31, 2013 and 2012, respectively.
At December 31, 2013 and 2012, all Federal Reserve notes outstanding, reduced by the Reserve Bank's
currency holdings, were fully collateralized. At December 31, 2013, all gold certificates, all special
drawing rights certificates, and $1,182 billion of domestic securities held in the SOMA were pledged as
collateral. At December 31, 2013, no investments denominated in foreign currencies were pledged as
collateral.
k. Deposits
Depository Institutions
Depository institutions' deposits represent the reserve and service-related balances in the accounts that
depository institutions hold at the Bank. The interest rates paid on required reserve balances and excess
balances are determined by the Board of Governors, based on an FOMC-established target range for the
federal funds rate. Interest payable is reported as a component of "Interest payable to depository
institutions" in the Statements of Condition.
The Term Deposit Facility (TDF) consists of deposits with specific maturities held by eligible institutions at
the Reserve Banks. The Reserve Banks pay interest on these deposits at interest rates determined by
auction. Interest payable is reported as a component of "Interest payable to depository institutions" in the
Statements of Condition. There were no deposits held by the Bank under the TDF at December 31, 2013
and 2012.
Other
Other deposits include the Bank's allocated portion of foreign central bank and foreign government deposits
held at the FRBNY.
l. Items in Process of Collection and Deferred Credit Items
Items in process of collection primarily represents amounts attributable to checks that have been deposited for
collection and that, as of the balance sheet date, have not yet been presented to the paying bank. Deferred
credit items represents the counterpart liability to items in process of collection. The amounts in this
account arise from deferring credit for deposited items until the amounts are collected. The balances in
both accounts can fluctuate significantly.
m. Capital Paid-in
The Federal Reserve Act requires that each member bank subscribe to the capital stock of the Reserve Bank in
an amount equal to six percent of the capital and surplus of the member bank. These shares are nonvoting,
with a par value of $100, and may not be transferred or hypothecated. As a member bank's capital and
surplus changes, its holdings of Reserve Bank stock must be adjusted. Currently, only one-half of the
subscription is paid in, and the remainder is subject to call. A member bank is liable for Reserve Bank
liabilities up to twice the par value of stock subscribed by it.
By law, each Reserve Bank is required to pay each member bank an annual dividend of six percent on the
paid-in capital stock. This cumulative dividend is paid semiannually.
n. Surplus
The Board of Governors requires the Reserve Banks to maintain a surplus equal to the amount of capital paidin. On a daily basis, surplus is adjusted to equate the balance to capital paid-in. Accumulated other
comprehensive income is reported as a component of "Surplus" in the Statements of Condition and the
Statements of Changes in Capital. Additional information regarding the classifications of accumulated
other comprehensive income is provided in Notes 9 and 10.
o. Remittances to Treasury
The Board of Governors requires the Reserve Banks to transfer excess earnings to the Treasury as interest on
Federal Reserve notes after providing for the costs of operations, payment of dividends, and reservation of
an amount necessary to equate surplus with capital paid-in. Currently, remittances to Treasury are made
on a weekly basis. This amount is reported as "Earnings remittances to Treasury" in the Statements of
Income and Comprehensive Income. The amount due to the Treasury is reported as "Accrued remittances
to Treasury" in the Statements of Condition. See Note 12 for additional information on interest on Federal
Reserve notes.
If earnings during the year are not sufficient to provide for the costs of operations, payment of dividends, and
equating surplus and capital paid-in, remittances to the Treasury are suspended. A deferred asset is
recorded that represents the amount of net earnings a Reserve Bank will need to realize before remittances
to the Treasury resume. This deferred asset is periodically reviewed for impairment.
p. Income and Costs Related to Treasury Services
When directed by the Secretary of the Treasury, the Bank is required by the Federal Reserve Act to serve as
fiscal agent and depositary of the United States Government. By statute, the Treasury has appropriations
to pay for these services. During the years ended December 31, 2013 and 2012, the Bank was reimbursed
for all services provided to the Treasury as its fiscal agent.
q. Compensation Received for Service Costs Provided
The Federal Reserve Bank of Atlanta has overall responsibility for managing the Reserve Banks' provision of
check and ACH services to depository institutions, the FRBNY has overall responsibility for managing the
Reserve Banks' provision of Fedwire funds and securities services, and the Federal Reserve Bank of
Chicago has overall responsibility for managing the Reserve Banks' provision of electronic access
services to depository institutions. The Reserve Bank that has overall responsibility for managing these
services recognizes the related total System revenue in its Statements of Income and Comprehensive
Income. The Bank is compensated for costs incurred to provide these services by the Reserve Banks
responsible for managing these services and reports this compensation as "Non-interest income:
Compensation received for service costs provided" in its Statements of Income and Comprehensive
Income.
r. Assessments
The Board of Governors assesses the Reserve Banks to fund its operations, the operations of the Bureau and,
for a two-year period following the July 21, 2010 effective date of the Dodd-Frank Act, the OFR. 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 date of 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. The fixed percentage
of total operating expenses of the System for the years ended December 31, 2013 and 2012 was 12 percent
($597.6 million) and 11 percent ($547.8 million), respectively. After 2013, the amount will be adjusted in
accordance with the provisions of the Dodd-Frank Act. The Bank's assessment for Bureau funding is
reported as "Assessments: Bureau of Consumer Financial Protection" in the Statements of Income and
Comprehensive Income.
The Board of Governors assessed the Reserve Banks to fund the operations of the OFR for the two-year period
ended July 21, 2012, following enactment of the Dodd-Frank Act; thereafter, the OFR is funded by fees
assessed on bank holding companies and nonbank financial companies that meet the criteria specified in
the Dodd-Frank Act.
s. 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 $1 million for each of the years ended December 31, 2013 and 2012, and
are reported as a component of "Operating expenses: Occupancy" in the Statements of Income and
Comprehensive Income.
t. 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.
Costs and liabilities associated with enhanced pension benefits in connection with the restructuring activities
for all of the Reserve Banks are recorded on the books of the FRBNY.
The Bank had no significant restructuring activities in 2013 and 2012.
u. Recently Issued Accounting Standards
In December 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update
(ASU) 2011-12, Comprehensive Income (Topic 220): Deferral of the Effective Date for Amendments to
the Presentation of Reclassifications of Items out of Accumulated Other Comprehensive Income in
Accounting Standards Update No. 2011-05. This update indefinitely deferred the requirements of ASU
2011-05, which required an entity to report the effect of significant reclassifications out of accumulated
other comprehensive income on the respective net income line items. Subsequently, in February 2013, the
FASB issued ASU 2013-02, Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out
of Accumulated Other Comprehensive Income, which established an effective date for the requirements of
ASU 2011-05 related to reporting of significant reclassification adjustments from accumulated other
comprehensive income. This update improves the transparency of changes in other comprehensive
income and items reclassified out of accumulated other comprehensive income in the financial statements.
These presentation requirements of ASU 2011-05 and the required disclosures in ASU 2013-02 are
effective for the Bank for the year ending December 31, 2013, and are reflected in the Bank's 2013
financial statements and Note 10.
4.
LOANS
Loans to Depository Institutions
The Bank offers primary, secondary, and seasonal loans to eligible borrowers, and each program has its own
interest rate. 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 and
secondary loans are extended on a short-term basis, typically overnight, whereas 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.
Loans to depository institutions were $3 million as of December 31, 2013, with a remaining maturity within 15
days. The bank had no loans outstanding as of December 31, 2012.
At December 31, 2013 and 2012, the Bank did not have any loans that were impaired, restructured, past due, or on
non-accrual status, and no allowance for loan losses was required. There were no impaired loans during the
years ended December 31, 2013 and 2012.
5.
SYSTEM OPEN MARKET ACCOUNT
a.
Domestic Securities Holdings
The FRBNY conducts domestic open market operations and, on behalf of the Reserve Banks, holds the resulting
securities in the SOMA.
During the years ended December 31, 2013 and 2012, the FRBNY continued the purchase of Treasury securities
and federal agency and GSE MBS under the large-scale asset purchase programs authorized by the FOMC. In
September 2011, the FOMC announced that the Federal Reserve would reinvest principal payments from the
SOMA portfolio holdings of GSE debt securities and federal agency and GSE MBS in federal agency and GSE
MBS. In June 2012, the FOMC announced that it would continue the existing policy of reinvesting principal
payments from the SOMA portfolio holdings of GSE debt securities and federal agency and GSE MBS in
federal agency and GSE MBS. In September 2012, the FOMC announced that the Federal Reserve would
purchase additional federal agency and GSE MBS at a pace of $40 billion per month. In December 2012, the
FOMC announced that the Federal Reserve would purchase longer-term Treasury securities initially at a pace
of $45 billion per month after its program to extend the average maturity of its holdings of Treasury securities
was completed at the end of 2012. In December 2012, the FOMC announced that the Federal Reserve would
continue the policy of rolling over maturing Treasury securities into new issues at auction.
During the year ended December 31, 2012, the FRBNY also continued the purchase and sale of SOMA portfolio
holdings under the maturity extension programs authorized by the FOMC. In September 2011, the FOMC
announced that the Federal Reserve would extend the average maturity of the SOMA portfolio holdings of
securities by purchasing $400 billion par value of Treasury securities with maturities of six to thirty years and
selling or redeeming an equal par amount of Treasury securities with remaining maturities of three years or
less by the end of June 2012. In June 2012, the FOMC announced that the Federal Reserve would continue
through the end of 2012 its program to extend the average maturity of securities by purchasing $267 billion par
value of Treasury securities with maturities of six to thirty years and selling or redeeming an equal par amount
of Treasury securities with maturities of three and a quarter years or less by the end of 2012.
The Bank's allocated share of activity related to domestic open market operations was 1.609 percent and 1.563
percent at December 31, 2013 and 2012, respectively.
FEDERAL RESERVE BANK OF ST. LOUIS
NOTES TO FINANCIAL STATEMENTS
The Bank’s allocated share of Treasury securities, GSE debt securities, and federal agency and GSE MBS, net,
excluding accrued interest, held in the SOMA at December 31 was as follows (in millions):
2013
$
23,611
11,929
Unamortized
premiums
$
537
2,068
$
35,540
$
2,605
$
GSE debt securities
$
921
$
30
$
Federal agency and GSE MBS
$
23,977
$
720
$
Unamortized
premiums
$
509
1,741
$
2,250
Unaccreted
discounts
$
(11)
(2)
$
(13)
Total amortized
cost
$
17,858
10,427
$
28,285
$
1,243
$
14,857
Par
Notes
Bonds
Total Treasury securities
Unaccreted
discounts
$
(91)
(90)
Total amortized
cost
$
24,057
13,907
$
37,964
$
951
$
24,680
(181)
(17)
2012
Par
Notes
Bonds
Total Treasury securities
$
$
17,360
8,688
26,048
GSE debt securities
$
1,201
$
42
$
Federal agency and GSE MBS
$
14,487
$
381
$
(11)
The FRBNY enters into transactions for the purchase of securities under agreements to resell and transactions to
sell securities under agreements to repurchase as part of its monetary policy activities. In addition, transactions
to sell securities under agreements to repurchase are entered into as part of a service offering to foreign official
and international account holders.
There were no material transactions related to securities purchased under agreements to resell during the years
ended December 31, 2013 and 2012. Financial information related to securities sold under agreements to
repurchase for the years ended December 31 was as follows (in millions):
Allocated to the Bank
2013
2012
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 (market value), end of year
$
21
5,083
1,592
5,083
4,995
5,067
$
1,676
1,522
1,916
1,463
1,676
Total SOMA
2013
2012
$
315,924
99,681
315,924
310,452
314,901
$ 107,188
91,898
122,541
93,547
107,188
The remaining maturity distribution of Treasury securities, GSE debt securities, federal agency and GSE MBS
bought outright, and securities sold under agreements to repurchase that were allocated to the Bank at
December 31, 2013 and 2012 was as follows (in millions):
header
row
col
1:
category
col10
2:years
Withincol
158:days
colend
3: 16
days
to3:90$ days
col $4:391
days to$113,913
year col5:
Over
1 year
5 $years
col 6: Over 5
years
to
10
years
col
7: Over
Total
row
December
31,
2013:
Treasury
securities
value)
col
2:2:
$37
- col
5 col
$ 12,282
col
7:
$ 9,337
colto8:
35,540
December
31,
2013:
GSE
debt
securities
(par
value)
colheader
col
col
4:
139
col- 6:
16:col417:
38
col
8:agency
921col
December
31,
2013:
Federal
and(par
GSE
MBS
(par
value)
Footnote
14:
par
amount
shown
for
federal
and
GSEMBS
is the
remaining
principal
balance
ofagency
the
securities.
end
header
row
col
2:3:$
-122
col
3:
-The
col
4:
-584
col
5:
col
col
7:
23,936
8:
23,977
December
31,
2013:
Securities
sold
under
agreements
to
repurchase
(contract
amount)
col
2:
5,083
col
3:
col
4:
col
6:
col
7: - col
8: 5,08
December
31,
2012:
Treasury
securities
(par
value)
col
2:
$
col
3:
col
4:
$
$
5,917
col
6:
$
13,483
col
7:
$
6,648
col
8:
$
26,048
December
31,
2012:
GSE
debt
securities
(par
value)
col 2:
24col
colFootnote
3:-44
col
4:
238
826
col
6:col
326:col377:
37
col14,450
8:agency
1,201
December
31,
2012:
Federal
agency
and
GSE
MBS
(par
value)
1
The
par
amount
shown
for
federal
and
GSEMBS
is the
remaining
principal
balance
of
the
securities.
end
header
row
2:
col
3:
col
4:
col
5:
col
7:
col
8:
14,487
December
col
8: 1,67631, 2012: Securities sold under agreements to repurchase (contract amount) col 2: 1,676 col 3: - col 4: - col 5: - col 6: - col 7: -
Footnote1The par amount shown for federal agency and GSEMBS is the remaining principal balance of the securities.endheaderrow
Federal agency and GSE MBS are reported at stated maturity in the table above. The estimated weighted average life
of these securities, which differs from the stated maturity primarily because it factors in scheduled payments and
prepayment assumptions, was approximately 6.5 and 3.3 years as of December 31, 2013 and 2012, respectively.
The amortized cost and par value of Treasury securities and GSE debt securities that were loaned from the SOMA
at December 31 was as follows (in millions):
header
row
col
1: header
category
col 2:
Allocated
Bank
2013
col 4:
3: $Allocated
to the
SOMA
2012
end
row
Treasury
securities
(amortized
cost)
col
2:col
$to276
col
3:
143
17,153
col
5: $Bank
9,1392012 col 4: Total SOMA 2013 col 5: Total
Treasury
249
3:the
132
col
15,447
5: 5:
8,460
GSE
securities
(amortized
cost)
col
3:
114:$4:
col
4:col
1,099
697
GSE debt
debtsecurities
securities(par
(parvalue)
value)col
col2:2:col
17 2:
col183:
11
col
1,055
colcol
5:col
676
The FRBNY enters into commitments to buy and sell Treasury securities and records the related securities on a
settlement-date basis. As of December 31, 2013, there were no outstanding commitments.
The FRBNY enters into commitments to buy and sell federal agency and GSE MBS and records the related
securities on a settlement-date basis. As of December 31, 2013, the total purchase price of the federal agency
and GSE MBS under outstanding purchase commitments was $59,350 million, of which $479 million was
related to dollar rolls. The total purchase price of outstanding purchase commitments allocated to the Bank
was $955 million, of which $8 million was related to dollar rolls. As of December 31, 2013, there were no
outstanding sales commitments for federal agency and GSE MBS. These commitments, which had contractual
settlement dates extending through February 2014, are for the purchase of TBA MBS for which the number
and identity of the pools that will be delivered to fulfill the commitment are unknown at the time of the trade.
These commitments are subject to 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 collateral for
commitments as part of the risk management practices used to mitigate the counterparty credit risk.
Other investments consist of cash and short-term investments related to the federal agency and GSE MBS
portfolio. Other liabilities, which are related to federal agency and GSE MBS purchases and sales, includes
the FRBNY's obligation to return cash margin posted by counterparties as collateral under commitments to
purchase and sell federal agency and GSE MBS. In addition, other liabilities includes obligations that arise
from the failure of a seller to deliver securities to the FRBNY on the settlement date. Although the FRBNY
has ownership of and records its investments in the MBS as of the contractual settlement date, it is not
obligated to make payment until the securities are delivered, and the amount included in other liabilities
represents the FRBNY's obligation to pay for the securities when delivered. The amount of other liabilities
allocated to the Bank and held in the SOMA at December 31 was as follows (in millions):
header
row col
category
col
Allocated
the
Allocated
to the Bank 2012 col 4: Total SOMA 2013
col
5:margin
Total
SOMA
end
header
row
Cash
col1:2:MBS
$2012
21
col
$2:49
col
$ to
1,320
col
5:
$ 3,092
Obligations
from
2:
colBank
1 2013
col
4:col
11$3:
col
5: 85
Total
other
liabilities
coltransaction
2:
$3:21
colfails
3:
$4:col
50
col- 4:
$3:
1,331
col
5:
3,177
Accrued interest receivable on domestic securities holdings was $23,405 million and $18,924 million as of
December 31, 2013 and 2012, respectively, of which $376 million and $296 million, respectively, was
allocated to the Bank. These amounts are reported as a component of "System Open Market Account:
Accrued interest receivable" in the Statements of Condition.
Information about transactions related to Treasury securities, GSE debt securities, and federal agency and GSE
MBS during the years ended December 31, 2013 and 2012, is summarized as follows (in millions):
header
row
col
1:
category
col
2: Allocated
to
the BankcolBills
col 3: Allocated
to theGSE
Bankdebt
Notes
col 4: Allocated
to the Bank
col 5: Allocated
the Bank
Total
securities
6:col
Allocated
to the
securities
col
7:
Allocated
to theBonds
Bank Federal
agency
and
GSEtoMBS
end2011
header
row
col Treasury
2: $adjustments
349Footnote
col
3: $to
4:and
$ 7,948
col Bank
5:include
$ 33,128
col 6:
$and
2,041
colreported
7:related
$ 16,055
Balance
at and
December
31,
Purchases
124,831
Purchases
sales may
payments
receipts
toasales
principal,
premiums,
discounts,
inflation
compensation
the
basis
of
inflation-indexed
securities.
The
amount
as
includes
the
realized
gains
and
losses
on
such
transactions.
Purchases
and
sales
exclude
MBS
TBA
transactions
that
are
settled
on
net
basis.
end
footnote
col
2:
2,081
col
3:
6,659
col
4:
4,377
col
5:
13,117
col
6:
col
7:
7,084
Balance
at
December
31,
2011
Sales
Footnote
1
Purchases
and
sales
may
include
payments
and
receipts
related
to
principal,
premiums,
discounts,
and
inflation
compensation
adjustments
to
the
basis
of
inflation-indexed
securities.
The
amount
reported
as
sales
includes
the
realized
gains
and
losses
on
such
transactions.
Purchases
and
sales
exclude
MBS
TBA
transactions
that
are
settled
on
a
net
basis.
end
footnote
col
2:
col
3:
(8,414)
col
4:
(192)
col
5:
(8,606)
col
6:
col
7:
Balance
at
31,
2011
Realized
gains,
net Footnote
2: Realized
gains,
offset
the
of7:
realized
gainscol
and
losses
included
inDecember
the reported
sales
amount.
end
footnote
col maturities
2: - col
3: 196
col(2,369)
4: 20net
col
5:3:216
colamount
6:
- col
- 5: (3,513)
Balance
at
December
31,
2011
Principal
payments
and
col
2:
col
(1,144)
col
4:
col
6:
(454)
col
7:
(5,307)
Balance
at
December
of premiums
and accretion of
discounts,
net -col
- 10
colcol
3: (91)
col
col6:5:- col
(215)
col
6: (19)
7: (85) 31,
Balance
at col
December
31, 2011
2011 Amortization
Inflationreallocation
adjustment
on inflation-indexed
securities
col
col2:3:
4: 17
col4:Bank's
5:(124)
27 col
7: Balance
at
December
31,
2011
Annual
adjustment
Footnote
4:
the2:annual
adjustment
to as
the
portion
of
related
SOMA
securities
that2:results
from
the
annual
settlement
ofcol
theReflects
interdistrict
settlement
account,
discussedallocated
in Note 3i.
endthe
footnote
col
2: (61)
col
3: (4,189)
col
4:
(1,619)
col
5:
(5,869)
col
6:
(325)
col
7:
(2,890)
Balance
at
December
31,
2012
col
$
col
3:
$
17,858
col
4:
$
10,427
5:
$
28,285
col
6:
$
1,243
col
7:
$
14,857
Purchases
Footnote
1
Purchases
and
sales
may
include
payments
and
receipts
related
to
principal,
premiums,
discounts,
and
inflation
compensation
adjustments
to
the
basis
of
inflation-indexed
securities.
The
amount
reported
as
sales
includes
the
realizedcol
gains
and
losses
oncol
such
transactions.
Purchases
and
sales
exclude
MBS
TBA
transactions
thatprincipal,
are settled
on a net
basis.
endat
footnote
2:compensation
-2012
col 3:
5,723
4: 3,289
col
5:basis
9,012
col
6:may
- col
7: 13,776
Balance
December
31,
Sales
Footnote
1 Purchases
and
sales
include
payments
and
receipts
related
to
premiums,
discounts,
and
inflation
to
the
of
inflation-indexed
securities.
The
amount
reported
asasales
includes
the
realized
gains
and
and
sales
exclude
MBS
TBA
transactions
that
are
settled
on
netlosses
basis.
end
footnote
col
2:losses
- col
3:on
- such
col
4:transactions.
- coladjustments
5:gains,
-footnote
colPurchases
6: -Footnote
col
7:
-- col
Balance
at
December
31,
2012
Realized
net
2:
Realized
gains,
net
offset
the
amount
of
realized
gains
and
included
in
the
reported
sales
amount.
end
col
2:
3:
col
4:
col
5:
col
6:
col
7:
Balance
at
December
31,
2012
Principal
payments
and
maturities
col
2:
col
3:
(1)
col
4:
col
5:
(1)
col
6:
(313)
col
7:
(4,368)
Balance
at
December
of premiums
and accretion of
discounts,
net -col
- 5col
col 5:
4: 15
(151)
col
(247)
col
6: (13)
7: (112)31,
Balance
at col
December
31, 2012
2012 Amortization
Inflationreallocation
adjustment
on inflation-indexed
securities
col
col2:3:
col3:4:(96)
10tocol
colallocated
6: -5:col
7:portion
Balance
at
December
31,
2012
Annual
adjustment
Footnote
4:
the2:annual
adjustment
thediscussed
Bank's
of
the related
SOMA
securities
that
results
from
the
annual
settlement
ofcol
theReflects
interdistrict
settlement
account,
as
in Note 3i.
end
footnote
col
2:
col
3:
568
col
4:
332
col
5:
900
col
6:
34
col
7:
527
Balance
at
December
31,
2013
col
2:
$
col
3:
$
24,057
col
4:
$
13,907
5:
$
37,964
col
6:
$
951
col
7:
$
24,680
Year-ended
December
31,
2012
Supplemental
information
par
value
of
transactions:
Purchases
Footnote
3:
Includes
inflation
compensation.
end
footnote
col
2:
$
2,081
col
3:
$
6,403
col
4:
$
3,404
col
5:
$
11,888
col
6:
$
col
7:
$
6,786
Year-ended
December
31,
2012
Supplemental
information
par
value
of
transactions:
Sales
Footnote
3:
Includes
inflation
compensation.
end
footnote
col
2:
col
3:
(8,165)
col
4:
(149)
col
5:
(8,314)
col
6:
col
7:
Year-ended
31, 2013 Supplemental
information
value col
of transactions:
Purchases
Footnote 3:
Includes
compensation.
end footnote col
2: $ - col --3:par
$ 5,695
4: $ 2,952 col
5: $ Footnote
8,647
col
6: $ - inflation
colDecember
7:end
$ 13,346
Year-ended
December
31, 2013
Supplemental
par
of -transactions:
Sales
3: Includes inflation
compensation.
footnote
col 2:
- col 3: - col information
4: - col 5: - col
6:value
- col 7:
header rowcol
col6:1:Total
category
colGSE
2:
SOMA
Bills
col
3:
Total
SOMA
col col
4: Total
SOMA
Bonds
col
5: Total
SOMA
Treasury
securities
SOMA
debt
securities
col
7:1,311,917
Total
SOMA
agency
and
MBS
end6:header
rowtocol
colTotal
2:
$adjustments
18,423
col
3:
colsales
4:Federal
$Notes
419,937
5:
$ GSE
1,750,277
col
$ related
107,828
7: includes
$ Total
848,258
Balance
at and
December
31,
2011
Purchases
Footnote
1 $Purchases
may
include
payments
receipts
principal,
premiums,
discounts,
inflation
compensation
to
the
basis
ofand
inflation-indexed
securities.
Theand
amount
reported
asasales
the
realized
gains
and
losses
on
such
transactions.
Purchases
and
sales
exclude
MBS
TBA
transactions
that
are
settled
on
net basis.
end
footnote
col
2:
118,886
col
3:
397,999
col
4:
263,991
col
5:
780,876
col
6:
col
7:
431,487
Balance
at
December
31,
2011
Sales
Footnote
1
Purchases
and
sales
may
include
payments
and
receipts
related
to
principal,
premiums,
discounts,
and
inflation
compensation
adjustments
to5:the
basis
of col
inflation-indexed
securities.
The amount
asasales
includes
realized
gains
and
losses
on
such
transactions.
Purchases
and2sales
exclude
MBS
TBA
transactions
that
arereported
settled
on
net
basis.
endthe
footnote
col
2:
col
3:
(507,420)
col
4:
(11,727)
col
(519,147)
6:
col
7:
Balance
at
December
31,
2011
Realized
gains,
net
Footnote
Realized
gains,
net
offset
the
amount
of
realized
gains
and
losses
included
in
the
reported
sales amount.
end
footnotepayments
col 2: - col
12,003 colcol
4:2:
1,252
col 5: col
13,255
col 6: - col
7:
-- col 5: (204,776) col 6: (27,211)
Balance
at
December
31,
2011
Principal
and3:maturities
(137,314)
3: (67,462)
col 3:
4: (5,461)
col
7:
Balance
at
31,
of premiums
and accretion
of
discounts,
net
col
2:3:5643
col
col 4:5:
(7,531)
col
5: (324,181)
(12,987)
col 6: (1,138)
7:2:(5,243)
Balance
at December
December
31, 2011
2011colAmortization
Inflation
adjustment
on
inflation-indexed
securities
col
2:
col
col
4: 1,047
1,690 col 6: - col 7: Balance
at
December
31,
2012
col
$
col
3:
$
1,142,219
col
4:
$
666,969
col
5:
$
1,809,188
col
6:
$
79,479
colcol
7: to
$reported
950,321
Purchases
Footnote
1 Purchases
and
may
include
payments
andtransactions
receipts
principal,
premiums,
discounts,
and
inflation
compensation
adjustments
to564,864
the sales
basis
of
inflation-indexed
securities.
The related
amount
as
includes
the
realized
gains
and
losses
on
such
transactions.
Purchases
and
sales
exclude
MBS
TBA
that
are
settled
onsales
a net
basis.
end
footnote
col
2:
col
3:
358,656
col
4:
206,208
col
5:
col
6:
col
7:
864,538
Balance
at
December
31,
2012
Sales
Footnote
1
Purchases
and
sales
may
include
payments
and
receipts
related
to
principal,
premiums,
discounts,
and
inflation
compensation
adjustments
to
the
basis
of
inflation-indexed
securities.
The
amount
reported
as
sales
includes
the
realized
gains
and
losses
on
such
transactions.
Purchases
and
sales
exclude
MBS
TBA
transactions
that
are
settled
on
a
net
basis.
end
footnote
col
2:
col
3:
col
4:
col
5:
col
6:
col
7:
Balance
at
December
31,
2012
Realized
gains,
net
Footnote
2
Realized
gains,
net
offset
the
amount
of
realized
gains
and
losses
included
in
the
reported
sales
amount.
end
footnote
col
2:
col
3:
col
4:
col
5:
col
6:
col
7:
Balance
at
December
31,
2012
Principal
payments
and
maturities
col
2:
col
3:
(21)
col
4:
col
5:
(21)
col
6:
(19,562)
col
7:
(273,991)
Balance
at
31,
2012
Amortization
of premiums
and accretion of
discounts,
net
- 285
col 3:
(6,024)
col
(9,503)
(15,527)
col
6: (795)
col 7: (7,008)
Balance
at December
December
31,
2012
Inflation
on inflation-indexed
securities
2: -col
col2:3:col
4:3645
col7:4:
5:$inflation
930
colcol
6:
-5:col
7: Balance
at
December
31,
2013
col
$383,106
- adjustment
col 3: information
$ 1,495,115
4:
$ 5:
864,319
col 5:
$col
2,359,434
6: col
$ 59,122
col
1,533,860
Year-ended
December
31,
2012
Supplemental
--col
par
value
transactions:
Purchases
Includes
compensation.
end
footnote
col
2:
$- col
118,892
col
3:2:$col
col
4:col
$ 205,115
col
$of
707,113
col
6:
$ - colFootnote
7: $Footnote
413,160
Year-ended
December
31,
2012
Supplemental
information
par
value
of
transactions:
Sales
3
Includes
inflation
compensation.
end
footnote
col
2:
3:
(492,234)
4:
(9,094)
5:
(501,328)
col
6:
col
7:
Year-ended
December
31,
2013
Supplemental
information
par
value
of
transactions:
Purchases
Footnote
3
Includes
inflation
compensation.
end
footnote
col
2:
$
col
3:
$
356,766
col
4:
$
184,956
col
5:
$
541,722
col
6:
$
col
7:
$
837,490
Year-ended
Supplemental
end
footnoteDecember
col 2: - col31,
3: 2013
- col 4:
- col 5: - colinformation
6: - col 7: - - par value of transactions: Sales Footnote 3 Includes inflation compensation.
b.
Foreign Currency Denominated Investments
The FRBNY conducts foreign currency operations and, on behalf of the Reserve Banks, holds the resulting foreign
currency denominated assets in the SOMA.
The FRBNY holds foreign currency deposits with foreign central banks and the Bank for International Settlements
and invests in foreign government debt instruments of Germany, France, and Japan. These foreign
government debt instruments are guaranteed as to principal and interest by the issuing foreign governments. In
addition, the FRBNY enters into transactions to purchase Euro-denominated government debt securities under
agreements to resell for which the accepted collateral is the debt instruments issued by the governments of
Belgium, France, Germany, Italy, the Netherlands, and Spain.
The Bank's allocated share of activity related to foreign currency operations was .834 percent and .818 percent at
December 31, 2013 and 2012, respectively.
Information about foreign currency denominated investments valued at amortized cost and foreign currency market
exchange rates at December 31 was as follows (in millions):
header
row
colcurrency
1:purchased
category
col
2:col
Allocated
2013
col
Allocated
Bank
2012
col659
4: Total SOMA 2013 col 5: Total SOMA
2012
end
header
row
Euro:
Foreign
deposits
2: $ 63 to
col
3:
$2073
col3:
$3:7,530
5:to4:
$col
8,925
Euro:
Securities
under
agreements
toBank
resell
col
2:4:17
21
col
3: col
5 col
2,549
col 5:
Euro:
German
government
debt
instruments
col
2:20
col
col
4:
2,397
5:2,421
2,133
Euro:
French
government
debt
instruments
col
2:
3:
Japanese
Foreign
deposits
col
2:col
24
col$col
3:
29
col
4: 4:
2,926
5:
3,553
Japanese
yen:
Japanese
government
instruments
col
2:20
50col
col
3:2,397
59 col
colcol
4: 5:
5,925
col 5: 7,182
Total
col yen:
2: $ 198
col 3:currency
$ 203 col
4:debt
$ 23,724
5:
24,873
Accrued interest receivable on foreign currency denominated assets was $88 million and $99 million as of
December 31, 2013 and 2012, respectively, of which $1 million for each year, was allocated to the Bank.
These amounts are reported as a component of "System Open Market Account: Accrued interest receivable" in
the Statements of Condition.
The remaining maturity distribution of foreign currency denominated investments that were allocated to the Bank
at December 31, 2013 and 2012, was as follows (in millions):
header
rowheader
col2013:
1:row
category
col yen
2: Within
15
days
col
3: 161816
days
to5:$9029
col
4:6:9174
to 1 year col 5: Over 1 year to 5 col 6:
Total end
Euro
col
3:
col
4:
col
32
col
$$days
124
December
31,
Japanese
col
2: 26
3 col
col5:
2013:
Total
col 2:
2: $$$ 59
85 col
col
3: $$col
$ 15
183:
col
4: $$$4:
34
col
5:5:$$35
61col
col6:
6:88
198
December
col
3:
4:
col
6:
Japanese
yen
col
2: 31
4 col
18col
col5:
December 31,
31, 2012:
2012: Euro
Total
col 2:
2: $ 54
85 col
col
3: col
$ 14
183:col
col
4: $4:17
35
col
5: $ 30
65col
col6:
6: $$ 115
203
There were no foreign exchange contracts related to open market operations outstanding as of December 31, 2013.
As of December 31, 2013, there were no outstanding commitments to purchase foreign government debt
instruments. During 2013, there were purchases and maturities of foreign government debt instruments of
$3,539 million and $3,431 million, respectively, of which $30 million and $29 million, respectively, were
allocated to the Bank. There were no sales of foreign government debt instruments in 2013.
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 daily monitoring procedures.
At December 31, 2013 and 2012, there was no balance outstanding under the authorized warehousing facility.
There were no transactions related to the authorized reciprocal currency arrangements with the Bank of Canada and
the Bank of Mexico during the years ended December 31, 2013 and 2012.
c.
Central Bank Liquidity Swaps
U.S. Dollar Liquidity Swaps
The Bank's allocated share of U.S. dollar liquidity swaps was approximately .834 percent and .818 percent at
December 31, 2013 and 2012, respectively.
The total foreign currency held under U.S. dollar liquidity swaps in the SOMA at December 31, 2013 and 2012,
was $272 million and $8,889 million, respectively, of which $2 million and $73 million, respectively, was
allocated to the Bank.
The remaining maturity distribution of U.S. dollar liquidity swaps that were allocated to the Bank at December 31
was as follows (in millions):
header
row
coldays
1:$category
col
2: $2013
col
3:row
2013
16col
days
to 90 $days
col7:4:$2013
col 6 col
2012
90 3:
days
col
7:1 2012
header
Euro
2:16
2013
1tocol
2013
colWithin
4:Total
201315end
$days
2 col
5: 2012
$ 14
6 2012
59 col
73 Total col 5: 2012 Within 15 days
Foreign Currency Liquidity Swaps
There were no transactions related to the foreign currency liquidity swaps during the years ended December 31,
2013 and 2012.
d.
Fair Value of SOMA Assets
The fair value amounts below are presented solely for informational purposes. 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.
The fair value of the Treasury securities, GSE debt securities, federal agency and GSE MBS, and foreign
government debt instruments in the SOMA's holdings 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, 2013, there are no credit impairments of SOMA securities holdings.
FEDERAL RESERVE BANK OF ST. LOUIS
NOTES TO FINANCIAL STATEMENTS
The following table presents the amortized cost and fair value of and cumulative unrealized gains (losses) on the
Treasury securities, GSE debt securities, and federal agency and GSE MBS, net held in the SOMA at
December 31 (in millions):
Allocated to the Bank
2013
Amortized cost
2012
Fair value
Cumulative
unrealized gains
(losses)
Amortized cost
$
$
Fair value
Cumulative
unrealized gains
(losses)
Treasury securities:
Notes
$
Bonds
Total Treasury securities
$
GSE debt securities
Federal agency and GSE MBS
Total domestic SOMA portfolio securities holdings
24,057
$
24,119
13,907
$
37,964
13,554
$
37,673
62
(353)
$
(291)
17,858
$
10,427
$
28,285
18,967
$
1,109
$
2,582
11,900
$
30,867
1,473
951
1,001
50
1,243
1,329
86
24,680
24,064
(616)
14,857
15,540
683
63,595
$
62,738
$
(857)
$
$
-
$
44,385
$
47,736
$
3,351
$
-
Memorandum - Commitments for:
Purchases of Treasury securities
$
-
$
-
Purchases of Federal agency and GSE MBS
955
951
Sales of Federal agency and GSE MBS
-
-
(4)
-
-
$
-
1,848
1,851
-
-
3
-
Total SOMA
2013
Amortized cost
2012
Fair value
Cumulative
unrealized gains
(losses)
Amortized cost
$
$
Fair value
Cumulative
unrealized gains
(losses)
Treasury securities:
Notes
$
Bonds
Total Treasury securities
$
864,319
$
GSE debt securities
Federal agency and GSE MBS
Total domestic SOMA portfolio securities holdings
1,495,115
$
2,359,434
1,499,000
842,336
$
2,341,336
59,122
62,236
1,533,860
1,495,572
3,952,416
$
3,899,144
3,885
(21,983)
$
$
(18,098)
1,142,219
$
666,969
$
1,809,188
1,213,177
$
70,958
$
165,127
761,138
$
1,974,315
94,169
3,114
79,479
85,004
5,525
(38,288)
950,321
993,990
43,669
(53,272)
$
2,838,988
$
3,053,309
$
214,321
Memorandum - Commitments for:
Purchases of Treasury securities
Purchases of Federal agency and GSE MBS
Sales of Federal agency and GSE MBS
$
-
$
-
59,350
59,129
-
-
$
(221)
-
$
118,215
-
$
-
$
118,397
-
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 was determined using a pricing service that utilizes a model-based approach that
considers observable inputs for similar securities.
At December 31, 2013 and 2012, the fair value of foreign currency denominated investments was $23,802 million
and $25,042 million, respectively, of which $198 million and $205 million, respectively, was allocated to the
Bank. The fair value of government debt instruments was determined using pricing services that provide
market consensus prices based on indicative quotes from various market participants. The fair value of foreign
currency deposits and securities purchased under agreements to resell was determined by reference to market
interest rates.
The cost basis of securities purchased under agreements to resell, securities sold under agreements to repurchase,
and other investments held in the SOMA approximate fair value.
28
182
-
The following table provides additional information on the amortized cost and fair values of the federal agency and
GSE MBS portfolio at December 31 (in millions):
header
col
1:Fair
Distribution
of
MBS
holdings
by
coupon
rate
2:
2013
cost
colrow
5:to
2012
value
header
row
Allocated
the
Bank:
2.0%
col
2:
$5,627
228
col
3:
$5,444
218
col
4:
$2,807
13col
col
5:5:
$2,529
13Amortized cost col 3: 2013 Fair value col 4: 2012 Amortized
2.5%end
1,992
1,906
587
col
5:
590
3.0%
8,396
7,792
2,511
Allocated
to
the
Bank:
3.5%
col
2:
col
3:
col
4:
col
4.0%
3,705
3,719
2,154
2,282
Allocated
to
the
Bank:
4.5%
col
2:
2,990
col
3:
3,145
col
4:
4,104
col
5: 2,888
4,412
5.0%
1,340
1,415
1,956
2,067
5.5%
346
col
3:
366
col
4:
625
col
5:
654
6.0%
49
col
3:
52
col
4:
88
col
5:
92
6.5%
col
2:
7
col
3:
7
col
4:
12
col
5:
13
Allocated
to
the
Bank:
Total
$
24,680
col
3:
$
24,064
col
4:
$
14,857
2.0%
$521,809
14,191col
col3:
3:118,458
$ 13,529col
col4:4:37,562
$ 845 col
$161,757
846col 5: $ 15,540
Total SOMA: 2.5%
2: 123,832
3.0% col
484,275
160,613
col5:5:
5:37,766
3.5%
349,689
338,357
179,587
184,752
Total
col
2:
230,256
col3:3:87,968
231,113
col
4:
137,758
col
145,955
4.5%
185,825
195,481
262,484
282,181
Total SOMA:
SOMA: 4.0%
5.0%
col
2:
83,290
col
col
4:
125,107
col
5:
132,214
5.5%
21,496
22,718
col
41,819col 5: $ 993,990
6.0%
3,051
3,225
col
4: 5,642
Total SOMA: 6.5%
colcol3:3:448
col
753
col39,970
5:col
8125:
Total col 2: 421
$ 1,533,860
col
3: 4:
$ 1,495,572
4: 5,888
$5:950,321
Because SOMA securities are recorded at amortized cost, the change in the cumulative unrealized losses is not
reported in the Statements of Income and Comprehensive Income. The following tables present the realized
gains and the change in the cumulative unrealized losses, presented as "Fair value changes unrealized losses,"
of the domestic securities holdings during the years ended December 31, 2013 and 2012 (in millions):
header
row
col1:
col"Non-interest
2: Allocated to
Bank 2013
Total
portfolio
holdings
realized
gains
Footnote
1 Total and
portfolio
holdings
realized
gains
arecategory
reported
income:
System
Open
Market
Account"
in thecol
Statements
of Income
Comprehensive
Income
end
footnote
colFootnote
3: in
Allocated
to Bank
2013holdings
Fair
value
changes
unrealized
losses
4: Allocated
to Bank
2012
Total
portfolio
holdings
realized
gains
1 Total
portfolio
realized
gains
are reported
in
"Non-interest
income:
System
Open
Market
Account"
in
the
Statements
of
Income
and
Comprehensive
Income
end
footnote
col
5:
Allocated
to
Bank
2012
Fair
value
changes
unrealized
losses
end
header
row
Treasury
securities
col
2:
$
col
3:
$
(2,951)
col
4:
$
217
col
5:
$
(60)
GSE
debt
securities
col
2:
col
3:
(39)
col
4:
col
5:
(15)
Federal
agency
and
GSE
MBS
col
2:
1
col
3:
(1,316)
col
4:
4
col
5:
(51)
Total col 2: $ 1 col 3: $ (4,306) col 4: $ 221 col 5: $ (126)
header
row
col 1: category
col 2: Total
SOMA
2013Open
TotalMarket
portfolio
holdingsinrealized
gains Footnote
1 Total
portfolio holdings
realized
gains
are
reported
inTotal
"Non-interest
income:
System
Account"
Statements
of2012
Income
and Comprehensive
end footnote
col1 3:
SOMAholdings
2013
Fairrealized
value
changes
losses
colthe
4: Total
SOMA
Total
holdingsIncome
realized
gains
Footnote
Total
portfolio
gains
areunrealized
reported
in
"Non-interest
income:
System
Openportfolio
Market
Account"
in
theheader row
Statements
of
Income
and
Comprehensive
Income
end
footnote
col
5:
Total
SOMA
2012
Fair
value
changes
unrealized
losses
end
Treasury
securities
col
2:2:$- -col
col3:3:(2,411)
$ (183,225)
col
4: 5:
$ 13,255
GSE
debt
securities
col
col5:4:(3,568)
- col
(885) col 5: $ (1,142)
Federal
agency
and
GSE
MBS
col
2:
51
col
3:
(81,957)
col
4:
241
col
Total col 2: $ 51 col 3: $ (267,593) col 4: $ 13,496 col 5: $ (5,595)
The amount of change in unrealized gains position, net, related to foreign currency denominated assets was a
decrease of $90 million and an increase of $3 million for the years ended December 31, 2013 and 2012,
respectively, of which $742 thousand and $21 thousand, respectively, were allocated to the Bank.
Accounting Standards Codification (ASC) Topic 820 (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 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.
Treasury securities, GSE debt securities, Federal agency and GSE MBS, 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.
BANK PREMISES, EQUIPMENT, AND SOFTWARE
Bank premises and equipment at December 31 were as follows (in millions):
header
row col and
1: category
col 2:
2013and
colland
3: 2012
row
Bank
premises
and
equipment:
Land
col
2: col
$ 12 col 3: $ 12
Bank
premises
equipment:
Buildings
col
2:improvements
156end
colheader
3:
153
Bank
premises
and
equipment:
Building
machinery
and
equipment
Bank
premises
and
equipment:
Construction
in
progress
col
2:
135col
Bank
premises
and
equipment:
Furniture
and
equipment
col
2:
col3:3:22:3721 col 3: 21
Bank
premises
and
equipment:
Subtotal
col
2:
225
col
3:
225
Accumulated
depreciation
col
2:
(84)
col
3:
(80)
Bank
premises
and
equipment,
net
col
2:
$
141
col
3:
$
145
Depreciation expense, for the years ended December 31 col 2: $ 10 col 3: $ 10
The Bank leases space to outside tenants with remaining lease terms of less than one year. Rental income from
such leases was immaterial for the years ended December 31, 2013 and 2012, and is reported as a component
of "Non-interest income: Other" in the Statements of Income and Comprehensive Income.
The Bank had capitalized software assets, net of amortization, of $29 million and $9 million at December 31, 2013
and 2012, respectively. Amortization expense was $2 million and $1 million for the years ended December
31, 2013 and 2012, respectively. Capitalized software assets are reported as a component of "Other assets" in
the Statements of Condition and the related amortization is reported as a component of "Operating expenses:
Other" in the Statements of Income and Comprehensive Income.
7.
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, 2013, the Bank was obligated under noncancelable leases for premises and equipment with
remaining terms of approximately two years. These leases provide for increased lease payments based upon
increases in real estate taxes, operating costs, or selected price indexes.
Rental expense under operating leases for certain operating facilities, warehouses, and data processing and office
equipment (including taxes, insurance, and maintenance when included in rent), net of sublease rentals, was $1
million for each of the years ended December 31, 2013 and 2012. Certain of the Bank's leases have options to
renew.
Future minimum lease payments under noncancelable operating leases, net of sublease rentals, with remaining
terms of one year or more, at December 31, 2013, are as follows (in thousands):
2014
Operating leases
$
651
2015
166
Future minimum lease payments
$
817
At December 31, 2013, there were no material unrecorded unconditional purchase commitments or obligations in
excess of one year.
Under the 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, 2013 and
2012.
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.
8.
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 participate in the Retirement Plan for Employees
of the Federal Reserve System (System Plan). Under the Dodd-Frank Act, newly hired Bureau employees are
eligible to participate in the System Plan. In addition, employees at certain compensation levels participate in
the Benefit Equalization Retirement Plan (BEP) and certain Reserve Bank officers participate in the
Supplemental Retirement Plan for Select Officers of the Federal Reserve Banks (SERP).
The FRBNY, on behalf of the System, recognizes the net asset or net liability and costs associated with the System
Plan in its consolidated financial statements. During the years ended December 31, 2013 and 2012, certain
costs associated with the System Plan were reimbursed by the Bureau.
The Bank's projected benefit obligation, funded status, and net pension expenses for the BEP and the SERP at
December 31, 2013 and 2012, and for the years then ended, were not material.
Thrift Plan
Employees of the Bank participate in the defined contribution Thrift Plan for Employees of the Federal Reserve
System (Thrift Plan). The Bank matches 100 percent of the first six percent of employee contributions from
the date of hire and provides an automatic employer contribution of one percent of eligible pay. The Bank's
Thrift Plan contributions totaled $5 million for each of the years ended December 31, 2013 and 2012, and are
reported as a component of "Operating expenses: Salaries and benefits" in the Statements of Income and
Comprehensive Income.
9.
POSTRETIREMENT BENEFITS OTHER THAN RETIREMENT PLANS AND POSTEMPLOYMENT BENEFITS
Postretirement Benefits Other Than Retirement Plans
In addition to the Bank's retirement plans, employees who have met certain age and length-of-service requirements
are eligible for both medical and life insurance benefits during retirement.
The Bank funds benefits payable under the medical and life insurance plans as due and, accordingly, has no plan
assets.
Following is a reconciliation of the beginning and ending balances of the benefit obligation (in millions):
header
row
col
1: category
col
2: 2013
col
3: 2012
header
Accumulated
postretirement
benefit
obligation
at
January
1 col
2:
Service
cost on
benefits
earned
during
the
period
col
2:end
3:3:row
2.8
Interest
cost
accumulated
benefit
obligation
col
2:3.6
3.5col
col
3.6$ 91.6 col 3: $ 80.1
Net
actuarial
(gain)
loss
col
2:
(14.4)
col
3: 8.1
Contributions
by
plan
participants
col
2:
1.5
col
3:
1.4
Benefits
paid
col
2:
(5.4)
col
3:
(4.7)
Medicare
Part
D
subsidies
col
2:
0.3
col
3:
0.4
Plan amendments
col 2: (0.3)benefit
col 3: (0.1)
Accumulated
postretirement
obligation at December 31 col 2: $ 80.4 col 3: $ 91.6
At December 31, 2013 and 2012, the weighted-average discount rate assumptions used in developing the
postretirement benefit obligation were 4.79 percent and 3.75 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. Beginning in 2013, the System Plan discount rate assumption setting
convention changed from rounding the rate to the nearest 25 basis points to using an unrounded rate.
Following is a reconciliation of the beginning and ending balance of the plan assets, the unfunded postretirement
benefit obligation, and the accrued postretirement benefit costs (in millions):
header
rowofcol
1:the
category
2: 2013
col
end
row
Fair
value
plan
assets
at col
January
col
2:3:col
$2012
-2.9
col1.4
3: $ header
Contributions
by
employer
col
2: 13.6
col
3:
Contributions
by
plan
participants
col
2:
1.5
3:
Benefits
paid
col
2:assets
(5.4)
col
3: 2:
(4.7)
Medicare
Part
D
subsidies
col
0.3
col
3:
0.4
Fair
value
of
plan
at
December
31
col
2:
$
col
3:
$
Unfunded
obligation
and
accrued
postretirement
benefit
cost
col
$ 80.4
col 3: $ 91.6
Amounts
included
incol
accumulated
other
loss are 2:
shown
below:
Prior
service
cost
2:2:$comprehensive
0.4 col
$(19.6)
0.3comprehensive
Net actuarial
(loss)col
(4.0)
col3:3:
Total
accumulated
other
loss col 2: $ (3.6) col 3: $ (19.3)
Accrued postretirement benefit costs are reported as a component of "Accrued benefit costs" in the Statements of
Condition.
For measurement purposes, the assumed health-care cost trend rates at December 31 are as follows:
header
colthe
1: category
col
2: is
2013
3: 2012
end2:header
row 3:trend
Health-care
rate
assumed
forcol
next
year
col
7.00%
7.00%
Rate that
to row
which
cost
trend
rate
assumed
to
decline
(the
ultimate
rate) col 2: 5.00% col 3: 5.00%
Year
thecost
ratetrend
reaches
the
ultimate
trend
rate
col
2: 2019
colcol
3: 2018
Assumed health-care cost trend rates have a significant effect on the amounts reported for health-care plans. A one
percentage point change in assumed health-care cost trend rates would have the following effects for the year
ended December 31, 2013 (in millions):
header
row
col 1: category
col and
2: One
percentage
point increase
colcol
3: 3:
One
percentage point
decrease
header
Effect on
on
aggregate
of service
interest
cost
components
net
periodic
postretirement
benefit
costsend
col 2:
$ 1.4 row
col 3: $ (1.1)
Effect
accumulated
postretirement
benefit
obligation
col 2:of10.9
(9.0)
The following is a summary of the components of net periodic postretirement benefit expense for the years ended
December 31 (in millions):
header
row
col
1:
category
col
2: 2013
col 3: 2012
header
row
Service
cost-benefits
earned
during
the
col
2:end
3.6
col3:3:
$ 2.8
Interest
cost
on
accumulated
benefit
obligation
col
2:$3.5
col
3.6
Amortization
of
prioractuarial
service
costcol
col
2:period
(0.3)
Amortization
of
net
loss
col
1.3
col
3:
0.4
Totalperiodic
periodic
expense
col 2:benefit
8.1
3:2:
6.6
Net
postretirement
expense
colcol
2:3:
$ (0.2)
8.1 col 3: $ 6.6
Estimated amounts that will be amortized from accumulated other comprehensive loss into net periodic
postretirement benefit expense in 2014 are shown below:
Prior service cost
Net actuarial loss
Total
$
$
(0.2)
(0.2)
Net postretirement benefit costs are actuarially determined using a January 1 measurement date. At January 1,
2013 and 2012, the weighted-average discount rate assumptions used to determine net periodic postretirement
benefit costs were 3.75 percent and 4.50 percent, respectively.
Net periodic postretirement benefit expense is reported as a component of "Operating expenses: Salaries and
benefits" in the Statements of Income and Comprehensive Income.
The Medicare Prescription Drug, Improvement and Modernization Act of 2003 established a prescription drug
benefit under Medicare (Medicare Part D) and a federal subsidy to sponsors of retiree health-care benefit plans
that provide benefits that are at least actuarially equivalent to Medicare Part D. The benefits provided under
the Bank's plan to certain participants are at least actuarially equivalent to the Medicare Part D prescription
drug benefit. The estimated effects of the subsidy are reflected in actuarial loss in the accumulated
postretirement benefit obligation and net periodic postretirement benefit expense.
Federal Medicare Part D subsidy receipts were $0.2 million and $0.3 million in the years ended December 31, 2013
and 2012, respectively. Expected receipts in 2014, related to benefits paid in the years ended December 31,
2013 and 2012, are $.3 million.
Following is a summary of expected postretirement benefit payments (in millions):
header
row
1:
category
col
2: Without subsidy col 3: With subsidy end header row
2014
$col
4.4
2015
4.6
2016
4.7
4.3
2017
4.9
4.4
2018
2: $
5.0
col
3:3:
4.5
2019
-col
2023
col
2:col
29.0
3: 26.1
Total col
2:
52.6
col
3:$col
$4.1
47.7
Postemployment Benefits
The Bank offers benefits to former or inactive employees. Postemployment benefit costs are actuarially
determined using a December 31 measurement date and include the cost of medical, dental, and vision
insurance; survivor income; disability benefits; and self-insured workers' compensation expenses. The
accrued postemployment benefit costs recognized by the Bank at December 31, 2013 and 2012, were $8
million for each year. This cost is included as a component of "Accrued benefit costs" in the Statements of
Condition. Net periodic postemployment benefit expense included in 2013 and 2012 operating expenses were
$1 million for each year, and are recorded as a component of "Operating expenses: Salaries and benefits" in
the Statements of Income and Comprehensive Income.
1 0 . ACCUMULATED OTHER COMPREHENSIVE INCOME A N D OTHER COMPREHENSIVE INCOME
Following is a reconciliation of beginning and ending balances of accumulated other comprehensive loss as of
December 31 (in millions):
header
row
col 1:
2: 2013
related
to postretirement
Amount
related
to category
postretirement
benefits
other
than retirement
plans endbenefits
headerother
row than retirement plans col 3: 2012
Balance
at funded
January
1 col of
2:col
$ (19.3)
colAmount
3:Prior
$ (11.5)
Change
in
status
benefit
plans:
Change
in
funded
status
of
benefit
plans:
service
costs
during
the
year
col
2: 0.3 and
col1:3:
0.1
Change
in
funded
status
of
benefit
plans:
Amortization
of
priorarising
service
cost
col 2:
(0.3)
Footnote
declassification
is reported
as
a
component
of
"Operating
Expenses:
Salaries
and
benefits"
in
the
Statements
Income
Comprehensive
end
footnote
colStatements
3: (0.2) Footnote
1: declassification
is reported
as aend
component
of of
"Operating
Expenses:
Salaries Income.
and
benefits"
in
the
of
Income
and
Comprehensive
Income.
footnote
Change
in
of
plans:
in prior
service
costsloss
related
tothe
benefit
plans
col
2:col
- col
(0.1)is reported
Change
in funded
fundedofstatus
status
of benefit
benefit
plans: Change
Net
actuarial
gain
(loss)
during
col 2:
14.4
3: 3:
(8.1)
Change
in
funded
status
of
benefit
plans:
Amortization
of
net
actuarial
col 2:
1.3
Footnote
1:
declassification
as
a footnote
component
"Operating
Expenses:
Salaries
and
benefits"
inaarising
the
Statements
ofyear
Income
and
Comprehensive
Income.
end
col
3:
0.4
Footnote
1:
declassification
is
reported
as
component
of
"Operating
Expenses:
Salaries
and
benefits"
infunded
the Statements
of
Income
andChange
Comprehensive
Income.
end footnote
Change
in
status
of
benefit
plans:
in
actuarial
gain
(losses)
related
to
benefit
plans
col
2:
15.7
col
3:
(7.7)
Change
status
plans
other
comprehensive income (loss) col 2: 15.7 col 3: (7.8)
Balance in
at funded
December
31 of
colbenefit
2: $ (3.6)
col- 3:
$ (19.3)
Additional detail regarding the classification of accumulated other comprehensive loss is included in Note 9.
11. BUSINESS RESTRUCTURING CHARGES
The Bank had no restructuring charges in 2013 and 2012.
12. DISTRIBUTION OF COMPREHENSIVE INCOME
In accordance with Board policy, Reserve Banks remit excess earnings, after providing for dividends and the
amount necessary to equate surplus with capital paid-in, to the U.S. Treasury as earnings remittances to
Treasury. The following table presents the distribution of the Bank's comprehensive income in accordance
with the Board's policy for the years ended December 31 (in millions):
header
row
colcapital
1: category
colrequired
2: $2013
col
end header
row paid-in col 2: 3 col 3: 8
Dividends
on
stock
col
2:
142:
col
3:3:$2012
13
Transfer
to
surplus
- amount
equate
surplus
with capital
Earnings
remittances
to
col
col
3: 1,337
Total
distribution
col
2: Treasury
$ 1,262
col
3:to
$1,245
1,358
13. SUBSEQUENT EVENTS
There were no subsequent events that require adjustments to or disclosures in the financial statements as of
December 31, 2013. Subsequent events were evaluated through March 14, 2014, which is the date that the
financial statements were available to be issued.
@FedFRASER