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The Federal Reserve
Bank of St. Louis
Financial Statements as of and for the Years Ended
December 31, 2011 and 2010 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
1-2
3-4
5

Financial Statements:
Statements of Condition as of December 31, 2011 and December 31, 2010

6

Statements of Income and Comprehensive Income for the years ended December 31,
2011 and December 31, 2010

7

Statements of Changes in Capital for the years ended December 31, 2011 and
December 31, 2010

8

Notes to Financial Statements

9-36

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 Statements of Condition of the Federal Reserve Bank of St. Louis
(“FRBSTL”) as of December 31, 2011 and 2010, and the related Statements of Income and
Comprehensive Income, and of Changes in Capital for the years then ended, which have been prepared
in conformity with accounting principles established by the Board of Governors of the Federal Reserve
System. We also have audited the internal control over financial reporting of the FRBSTL as of
December 31, 2011, based on criteria established in Internal Control—Integrated Framework issued
by the Committee of Sponsoring Organizations of the Treadway Commission. The FRBSTL’s
management is responsible for these Financial Statements, for maintaining effective internal control
over financial reporting, and 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. Our responsibility is to express an opinion on these Financial Statements and an opinion
on the FRBSTL's internal control over financial reporting based on our audits.
We conducted our audits in accordance with generally accepted auditing standards as established by
the Auditing Standards Board (United States) and in accordance with the auditing standards of the
Public Company Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the Financial Statements are free
of material misstatement and whether effective internal control over financial reporting was
maintained in all material respects. Our audits of the Financial Statements included examining, on a
test basis, evidence supporting the amounts and disclosures in the Financial Statements, assessing the
accounting principles used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. Our audit of internal control over financial reporting included
obtaining an understanding of internal control over financial reporting, assessing the risk that a
material weakness exists, and testing and evaluating the design and operating effectiveness of internal
control based on the assessed risk. Our audits also included performing such other procedures as we
considered necessary in the circumstances. We believe that our audits provide a reasonable basis for
our opinions.
The FRBSTL’s internal control over financial reporting is a process designed by, or under the
supervision of, the FRBSTL’s principal executive and principal financial officers, or persons
performing similar functions, and effected by the FRBSTL’s board of directors, management, and
other personnel to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of Financial Statements for external purposes in accordance with the accounting principles
established by the Board of Governors of the Federal Reserve System. The FRBSTL’s internal control
over financial reporting includes those policies and procedures that (1) pertain to the maintenance of
records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the
assets of the FRBSTL; (2) provide reasonable assurance that transactions are recorded as necessary to
permit preparation of Financial Statements in accordance with the accounting principles established by
the Board of Governors of the Federal Reserve System, and that receipts and expenditures of the

Member of
Deloitte Touche Tohmatsu Limited

FRBSTL are being made only in accordance with authorizations of management and directors of the
FRBSTL; and (3) provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the FRBSTL’s assets that could have a material effect
on the Financial Statements.
Because of the inherent limitations of internal control over financial reporting, including the possibility
of collusion or improper management override of controls, material misstatements due to error or
fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the
effectiveness of the internal control over financial reporting to future periods are subject to the risk that
the controls may become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
As described in Note 4 to the Financial Statements, the FRBSTL has prepared these Financial
Statements in conformity with accounting principles established by the Board of Governors of the
Federal Reserve System, as set forth in the Financial Accounting Manual for Federal Reserve Banks,
which is a comprehensive basis of accounting other than accounting principles generally accepted in
the United States of America. The effects on such Financial Statements of the differences between the
accounting principles established by the Board of Governors of the Federal Reserve System and
accounting principles generally accepted in the United States of America are also described in Note 4.
In our opinion, such Financial Statements present fairly, in all material respects, the financial position
of the FRBSTL as of December 31, 2011 and 2010, and the results of its operations for the years then
ended, on the basis of accounting described in Note 4. Also, in our opinion, the FRBSTL maintained,
in all material respects, effective internal control over financial reporting as of December 31, 2011,
based on the criteria established in Internal Control — Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission.

March 20, 2012

FEDERAL RESERVE BANK OF ST. LOUIS
Abbreviations:

ACH
AMLF
ASU
Bureau
FAM
FASB
Fannie Mae
Freddie Mac
FOMC
FRBA
FRBNY
GAAP
GSE
IMF
MBS
OEB
OFR
SDR
SOMA
TAF
TBA
TDF
TOP
TSLF

Automated clearinghouse
Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility
Accounting Standards Update
Bureau of Consumer Financial Protection
Financial Accounting Manual for Federal Reserve Banks
Financial Accounting Standards Board
Federal National Mortgage Association
Federal Home Loan Mortgage Corporation
Federal Open Market Committee
Federal Reserve Bank of Atlanta
Federal Reserve Bank of New York
Accounting principles generally accepted in the United States of America
Government-sponsored enterprise
International Monetary Fund
Mortgage-backed securities
Office of Employee Benefits of the Federal Reserve System
Office of Financial Research
Special drawing rights
System Open Market Account
Term Auction Facility
To be announced
Term Deposit Facility
Term Securities Lending Facility Options Program
Term Securities Lending Facility

5

FEDERAL RESERVE BANK OF ST. LOUIS
STATEMENTS OF CONDITION
As of December 31, 2011 and December 31, 2010
(in millions)
2011
ASSETS
Gold certificates
Special drawing rights certificates
Coin
Loans to depository institutions
System Open Market Account:
Treasury securities, net
Government-sponsored enterprise debt securities, net
Federal agency and government-sponsored enterprise mortgage-backed securities, net
Foreign currency denominated assets, net
Central bank liquidity swaps
Accrued interest receivable
Bank premises and equipment, net
Items in process of collection
Other assets
Total assets

$

2010
319
150
34
-

$

324
150
35
2

$

27,483
3,940
25,879
244
1
367
153
12
31
58,621

$

LIABILITIES AND CAPITAL
Federal Reserve notes outstanding, net
System Open Market Account:
Securities sold under agreements to repurchase
Other liabilities
Deposits:
Depository institutions
Other deposits
Interest payable to depository institutions
Accrued benefit costs
Deferred credit items
Accrued interest on Federal Reserve notes
Interdistrict settlement account
Other liabilities
Total liabilities

$

33,128
2,041
16,055
211
814
373
150
5
35
53,315

29,899

$

27,858

1,891
26
12,012
1
1
92
36
53
8,856
8
52,875

Capital paid-in
Surplus (including accumulated other comprehensive loss of $11 million and $10 million at
December 31, 2011 and 2010, respectively)
Total capital
Total liabilities and capital

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

6

10,492
56
1
88
67
69
18,011
9
58,189

220

$

1,538
-

216

220
440
53,315

216
432
58,621

$

FEDERAL RESERVE BANK OF ST. LOUIS
STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
For the years ended December 31, 2011 and December 31, 2010
(in millions)
2011
INTEREST INCOME
System Open Market Account:
Treasury securities, net
Government-sponsored enterprise debt securities, net
Federal agency and government-sponsored enterprise mortgage-backed securities, net
Foreign currency denominated assets, net
Total interest income

2010

870
65
804
2
1,741

780
105
1,329
2
2,216

1

2

30
31
1,710

28
30
2,186

43
1
3
106
1
154

25
5
4
105
1
140

112
13
6

111
13
6

24
3
89
247

25
87
242

Net income prior to distribution

1,617

2,084

Change in prior service costs related to benefit plans
Change in actuarial losses related to benefit plans
Comprehensive income prior to distribution

(1)
1,616

(3)
4
2,085

INTEREST EXPENSE
System Open Market Account:
Securities sold under agreements to repurchase
Deposits:
Depository institutions
Total interest expense
Net interest income
NON-INTEREST INCOME
System Open Market Account:
Treasury securities gains, net
Federal agency and government-sponsored enterprise mortgage-backed securities gains, net
Foreign currency gains, net
Compensation received for service costs provided
Reimbursable services to government agencies
Other
Total non-interest income
OPERATING EXPENSES
Salaries and benefits
Occupancy
Equipment
Assessments:
Board of Governors operating expenses and currency costs
Bureau of Consumer Financial Protection and Office of Financial Research
Other
Total operating expenses

$

Distribution of comprehensive income:
Dividends paid to member banks
Transferred to (from) surplus and change in accumulated other comprehensive loss
Payments to Treasury as interest on Federal Reserve notes
Total distribution

$

$

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

7

13
4
1,599
1,616

$
$

$

14
(24)
2,095
2,085

FEDERAL RESERVE BANK OF ST. LOUIS
STATEMENTS OF CHANGES IN CAPITAL
For the years ended December 31, 2011 and December 31, 2010
(in millions, except share data)
Surplus

Capital paid-in
Balance at January 1, 2010
(4,805,613 shares)

Net income
retained

Accumulated
other
comprehensive
loss

$

$

$

240

251

(11)

Total surplus
$

240

Total capital
$

480

Net change in capital stock redeemed
(482,293 shares)

(24)

-

-

-

(24)

Transferred from surplus and change
in accumulated other comprehensive
loss

-

(25)

1

(24)

(24)

Balance at December 31, 2010
(4,323,320 shares)

$

Net change in capital stock issued
(76,669 shares)
Transferred to surplus and change in
accumulated other comprehensive
loss
Balance at December 31, 2011
(4,399,989 shares)

216

$

226

$

(10)

$

216

$

432

4

-

-

4

$

-

5

(1)

4

4

220

$

231

$

(11)

$

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

8

220

$

440

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, and U.S. offices of foreign banking organizations pursuant to authority delegated
by the Board of Governors. Certain services are provided to foreign and international monetary authorities,
primarily by the FRBNY.
The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act), which was signed
into law and became effective on July 21, 2010, changed the scope of some services performed by the Reserve
Banks. Among other things, the Dodd-Frank Act established a 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 under delegated authority from the Board of Governors in
connection with those institutions’ compliance with consumer protection statutes; limited the Reserve Banks’
authority to provide loans in unusual and exigent circumstances to lending programs or facilities with broadbased eligibility or to designated financial market utilities; and vested the Board of Governors with all
supervisory and rule-writing authority for savings and loan holding companies.
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

9

FEDERAL RESERVE BANK OF ST. LOUIS
NOTES TO FINANCIAL STATEMENTS
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, 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 to lend the Treasury securities and federal agency and GSE debt securities that are held in the
SOMA.
In addition to authorizing and directing operations in the domestic securities market, the FOMC authorizes the
FRBNY to conduct operations in foreign markets in order to counter disorderly conditions in exchange
markets or to meet other needs specified by the FOMC to carry out the System’s central bank responsibilities.
Specifically, the FOMC authorizes and directs the FRBNY to hold balances of, and to execute spot and
forward foreign exchange and securities contracts for, 14 foreign currencies and to invest such foreign
currency holdings, while maintaining adequate liquidity. The FRBNY is authorized and directed by the
FOMC to maintain reciprocal currency arrangements 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.
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 and for which
the costs were not reimbursed by the other Reserve Banks include operation of the Treasury Relations and
Support Office and the Treasury Relations and Systems 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 and accounting functions.
3.

FINANCIAL STABILITY ACTIVITIES
The Reserve Banks have implemented the following programs that support the liquidity of financial institutions
and foster improved conditions in financial markets.
Large-Scale Asset Purchase Programs and Reinvestment of Principal Payments
On March 18, 2009, the FOMC authorized and directed the FRBNY to purchase $300 billion of longer-term
Treasury securities to help improve conditions in private credit markets. The FRBNY began the purchases of
these Treasury securities in March 2009 and completed them in October 2009. On August 10, 2010, the
FOMC announced that the Federal Reserve would maintain the level of domestic securities holdings in the
SOMA portfolio by reinvesting principal payments from GSE debt securities and federal agency and GSE
MBS in longer-term Treasury securities. On November 3, 2010, the FOMC announced its intention to expand
the SOMA portfolio holdings of longer-term Treasury securities by an additional $600 billion and completed
these purchases in June 2011. On June 22, 2011, the FOMC announced that the Federal Reserve would
maintain its existing policy of reinvesting principal payments from all domestic securities in Treasury
securities. On September 21, 2011, the FOMC announced that the Federal Reserve intends to purchase, by the
end of June 2012, $400 billion par value of Treasury securities with remaining maturities of 6 years to 30 years
and to sell an equal amount of Treasury securities with remaining maturities of 3 years or less, of which $133
billion has been purchased and $134 billion sold as of December 31, 2011. In addition, the FOMC announced
that it will maintain its existing policy of rolling over maturing Treasury securities at auction and, rather than
reinvesting principal payments from GSE debt securities and federal agency and GSE MBS in Treasury
securities, such payments will be reinvested in federal agency and GSE MBS.

10

FEDERAL RESERVE BANK OF ST. LOUIS
NOTES TO FINANCIAL STATEMENTS
The FOMC authorized and directed the FRBNY to purchase GSE debt securities and federal agency and GSE
MBS, with a goal to provide support to mortgage and housing markets and to foster improved conditions in
financial markets more generally. The FRBNY was authorized to purchase up to $175 billion in fixed-rate,
non-callable GSE debt securities and $1.25 trillion in fixed-rate federal agency and GSE MBS. Purchases of
GSE debt securities began in November 2008, and purchases of federal agency and GSE MBS began in
January 2009. The FRBNY completed the purchases of GSE debt securities and federal agency and GSE MBS
in March 2010. The settlement of all federal agency and GSE MBS transactions was completed by August
2010. As discussed above, on September 21, 2011, the FOMC announced that the Federal Reserve will begin
to reinvest principal payments from its holdings of GSE debt securities and federal agency and GSE MBS in
federal agency and GSE MBS.
Central Bank Liquidity Swaps
The FOMC authorized and directed the FRBNY to establish central bank liquidity swap arrangements, which could
be structured as either U.S. dollar liquidity or foreign currency liquidity swap arrangements.
In May 2010, U.S. dollar liquidity swap arrangements were re-authorized with the Bank of Canada, the Bank of
England, the European Central Bank, the Bank of Japan, and the Swiss National Bank through January 2011.
Subsequently, these arrangements were extended through February 1, 2013. There is no specified limit to the
amount that may be drawn by the Bank of England, the European Central Bank, the Bank of Japan, and the
Swiss National Bank under these swap arrangements; the Bank of Canada may draw up to $30 billion under
the swap arrangement with the FRBNY. In addition to the central bank liquidity swap arrangements, the
FOMC has authorized reciprocal currency arrangements with the Bank of Canada and the Bank of Mexico, as
discussed in Note 2.
Foreign currency liquidity swap arrangements were authorized with 4 foreign central banks and provided the
Reserve Banks with the capacity to offer foreign currency liquidity to U.S. depository institutions. The
authorization for these swap arrangements expired on February 1, 2010. In November 2011, as a contingency
measure, the FOMC agreed to establish temporary bilateral liquidity swap arrangements with the Bank of
Canada, the Bank of England, the European Central Bank, the Bank of Japan, and the Swiss National Bank so
that liquidity can be provided in any of their currencies if necessary. The swap lines are authorized until
February 1, 2013.
Lending to Depository Institutions
The Term Auction Facility (TAF) promoted the efficient dissemination of liquidity by providing term funds to
depository institutions. The last TAF auction was conducted on March 8, 2010, and the related loans matured
on April 8, 2010.
Lending to Primary Dealers
The Term Securities Lending Facility (TSLF) promoted liquidity in the financing markets for Treasury securities.
Under the TSLF, the FRBNY could lend up to an aggregate amount of $200 billion of Treasury securities held
in the SOMA to primary dealers on a secured basis for a term of 28 days. The authorization for the TSLF
expired on February 1, 2010.
The Term Securities Lending Facility Options Program (TOP) offered primary dealers the opportunity to purchase
an option to draw upon short-term, fixed-rate TSLF loans in exchange for eligible collateral. The program was
suspended effective with the maturity of the June 2009 TOP options, and authorization for the program expired
on February 1, 2010.
Other Lending Facilities
The Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility (AMLF) provided funding to
depository institutions and bank holding companies to finance the purchase of eligible high-quality asset-

11

FEDERAL RESERVE BANK OF ST. LOUIS
NOTES TO FINANCIAL STATEMENTS
backed commercial paper from money market mutual funds. The Federal Reserve Bank of Boston
administered the AMLF and was authorized to extend these loans to eligible borrowers on behalf of the other
Reserve Banks. The authorization for the AMLF expired on February 1, 2010.
4.

SIGNIFICANT ACCOUNTING POLICIES
Accounting principles for entities with the unique powers and responsibilities of a nation’s central bank have not
been formulated by accounting standard-setting bodies. The Board of Governors has developed specialized
accounting principles and practices that it considers to be appropriate for the nature and function of a central
bank. These accounting principles and practices are documented in the Financial Accounting Manual for
Federal Reserve Banks (FAM), which is issued by the Board of Governors. The Reserve Banks are required to
adopt and apply accounting policies and practices that are consistent with the FAM and the financial
statements have been prepared in accordance with the FAM.
Limited differences exist between the accounting principles and practices in the FAM and 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 and the recording of 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
prospects for future Bank earnings or capital. Both the domestic and foreign components of the SOMA
portfolio may involve transactions that result in gains or losses when holdings are sold 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 straight-line 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. There are no other significant differences, other than those
described above, 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. Unique accounts and significant accounting
policies are explained below.
a. Consolidation
The Dodd-Frank Act established the Bureau as an independent bureau within the System, and 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. Section 152 of the Dodd-Frank Act established the Office
of Financial Research (OFR) within the Treasury. The Board of Governors funds the Bureau and OFR
through assessments on the Reserve Banks as required by the Dodd-Frank Act. The Reserve Banks

12

FEDERAL RESERVE BANK OF ST. LOUIS
NOTES TO FINANCIAL STATEMENTS
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 and special drawing rights (SDR) 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. The Board
of Governors allocates the gold certificates among the Reserve Banks once a year based on the average
Federal Reserve notes outstanding at each Reserve Bank.
SDR certificates 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. SDR certificates serve as a supplement to
international monetary reserves and may be transferred from one national monetary authority to another.
Under the law providing for U.S. participation in the SDR system, the Secretary of the Treasury is
authorized to issue SDR certificates to the Reserve Banks. When SDR certificates are issued to the
Reserve Banks, equivalent amounts in U.S. dollars are credited to the account established for the Treasury
and the Reserve Banks’ SDR certificate accounts are increased. The Reserve Banks are required to
purchase SDR certificates, at the direction of the Treasury, for the purpose of financing SDR acquisitions
or for financing exchange stabilization operations. At the time SDR transactions occur, the Board of
Governors allocates SDR certificate transactions among the Reserve Banks based upon each Reserve
Bank’s Federal Reserve notes outstanding at the end of the preceding year. SDRs are recorded by the
Bank at original cost. There were no SDR transactions during the years ended December 31, 2011 and
2010.
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.

13

FEDERAL RESERVE BANK OF ST. LOUIS
NOTES TO FINANCIAL STATEMENTS
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 triparty arrangement. In a
triparty 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 Bank 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); direct obligations of several federal and GSE-related agencies, including Federal National
Mortgage Association (Fannie Mae) and Federal Home Loan Mortgage Corporation (Freddie Mac); and
pass-through MBS of Fannie Mae, Freddie Mac, and Government National Mortgage Association. The
repurchase transactions are accounted for as financing transactions with the associated interest income
recognized over the life of the transaction.
The FRBNY may engage in sales of securities under agreements to repurchase (reverse repurchase
transactions) with primary dealers and, beginning August 2010, with selected money market funds. The
list of eligible counterparties was subsequently expanded to include GSEs, effective in May 2011, and
bank and savings institutions, effective in July 2011. These reverse repurchase transactions may be
executed through a triparty arrangement as an open market operation, 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 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” or “Government-sponsored enterprise debt
securities, net,” as appropriate, in the Statements of Condition. Overnight 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
comprising the SOMA is accrued on a straight-line basis. Interest income on federal agency and GSE
MBS is accrued using the interest method and includes amortization of premiums, accretion of discounts,
and gains or losses associated with principal paydowns. Premiums and discounts related to federal agency
and GSE MBS are amortized 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

14

FEDERAL RESERVE BANK OF ST. LOUIS
NOTES TO FINANCIAL STATEMENTS
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. In 2010, the FRBNY also executed a
limited number of TBA MBS coupon swap transactions, which involve a simultaneous sale of a TBA
MBS and purchase of another TBA MBS of a different coupon rate. During the year-ended December 31,
2010, the FRBNY’s participation in the dollar roll and coupon swap markets furthered the MBS purchase
program goals of providing support to the mortgage and housing markets and of fostering improved
conditions in financial markets more generally. During the year-ended December 31, 2011, the FRBNY
executed dollar rolls primarily to facilitate settlement. The FRBNY accounts for outstanding
commitments under dollar roll and coupon swaps as purchases or sales on a settlement-date basis. Net
gains resulting from dollar roll and coupon swap 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. Realized and unrealized gains and
losses on foreign currency denominated assets are reported as “Non-interest income: System Open Market
Account: Foreign currency gains, net” in the Statements of Income and Comprehensive Income.
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 designated as
held-for-trading purposes and are valued daily at current market exchange rates. Activity related to these
agreements is allocated to each Reserve Bank based on the ratio of each Reserve Bank’s capital and
surplus to 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 liquidity 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.

15

FEDERAL RESERVE BANK OF ST. LOUIS
NOTES TO FINANCIAL STATEMENTS
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 foreign currency amounts it holds for the
FRBNY. The Bank’s allocated portion of the amount of compensation received for the years ended
December 31, 2011 and 2010 was immaterial.
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 for software during the application development stage, whether developed internally or
acquired for internal use, are capitalized based on the purchase cost and the cost of direct services and
materials associated with designing, coding, installing, and testing the software. Capitalized software
costs are amortized on a straight-line basis over the estimated useful lives of the software applications,
which 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.

16

FEDERAL RESERVE BANK OF ST. LOUIS
NOTES TO FINANCIAL STATEMENTS
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 $4,018 million and $4,381 million at
December 31, 2011 and 2010, respectively.
At December 31, 2011 and 2010, all Federal Reserve notes issued to the Reserve Banks were fully
collateralized. At December 31, 2011, all gold certificates, all special drawing right certificates, and
$1,018 billion of domestic securities held in the SOMA were pledged as collateral. At December 31,
2011, no investments denominated in foreign currencies were pledged as collateral.
k. Deposits
Depository Institutions
Depository institutions’ deposits represent the reserve and service-related balances, such as required clearing
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 FOMCestablished target range for the federal funds rate. Interest payable is reported as “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 “Interest payable to depository institutions” in the Statements of
Condition. There were no deposits held by the Bank under the TDF at December 31, 2011 and 2010.
Other
Other deposits include foreign central bank and foreign government deposits held at the FRBNY that are
allocated to the Bank.
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” is the counterpart liability to items in process of collection. The amounts in this
account arise from deferring credit for deposited items until the amounts are collected. The balances in
both accounts can vary significantly.

17

FEDERAL RESERVE BANK OF ST. LOUIS
NOTES TO FINANCIAL STATEMENTS
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 6 percent of the capital and surplus of the member bank. These shares are nonvoting,
with a par value of $100, and may not be transferred or hypothecated. As a member bank’s capital and
surplus changes, its holdings of Reserve Bank stock must be adjusted. Currently, only one-half of the
subscription is paid in and the remainder is subject to call. A member bank is liable for Reserve Bank
liabilities up to twice the par value of stock subscribed by it.
By law, each Reserve Bank is required to pay each member bank an annual dividend of 6 percent on the paidin capital stock. This cumulative dividend is paid semiannually. To meet the Federal Reserve Act
requirement that annual dividends be deducted from net earnings, dividends are presented as a distribution
of comprehensive income in the Statements of Income and Comprehensive Income.
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 12 and 13.
o. Interest on Federal Reserve Notes
The Board of Governors requires the Reserve Banks to transfer excess earnings to the Treasury as interest on
Federal Reserve notes after providing for the costs of operations, payment of dividends, and reservation of
an amount necessary to equate surplus with capital paid-in. This amount is reported as “Payments to
Treasury as interest on Federal Reserve notes” in the Statements of Income and Comprehensive Income.
The amount due to the Treasury is reported as “Accrued interest on Federal Reserve notes” in the
Statements of Condition.
If earnings during the year are not sufficient to provide for the costs of operations, payment of dividends, and
equating surplus and capital paid-in, payments 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, 2011 and 2010, 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 (FRBA) has overall responsibility for managing the Reserve Banks’
provision of check and ACH services to depository institutions and, as a result, recognizes total System
revenue for these services in its Statements of Income and Comprehensive Income. Similarly, the
FRBNY manages the Reserve Banks’ provision of Fedwire funds and securities services and recognizes
total System revenue for these services in its Consolidated Statements of Income and Comprehensive
Income. The FRBA and the FRBNY compensate the applicable Reserve Banks for the costs incurred to
provide these services. The Bank reports this compensation as “Non-interest income: Compensation
received for service costs provided” in the Statements of Income and Comprehensive Income.
r. Assessments
18

revenue for these services in its Statements of Income and Comprehensive Income. Similarly, the
FRBNY manages the Reserve Banks’ provision of Fedwire funds and securities services and recognizes
total System revenue FEDERAL RESERVE BANK OF ST.Statements of Income and Comprehensive
for these services in its Consolidated LOUIS
NOTES TO FINANCIAL STATEMENTS
Income. The FRBA and the FRBNY compensate the applicable Reserve Banks for the costs incurred to
FEDERAL RESERVE BANK OF ST. LOUIS
provide these services. The Bank reports this compensation as “Non-interest income: Compensation
NOTES Reserve Banks to fund its operations,
The received for service costs provided” in the Statements of Income and Comprehensive Income. Bureau and,
Board of Governors assesses theTO FINANCIAL STATEMENTS the operations of the
for a two-year period FEDERAL RESERVE BANK OF ST. LOUIS Dodd-Frank Act, the OFR. These
following the July 21, 2010 effective date of the
NOTES Reserve Banks to based on each
r. Assessments of Governors assesses theTO Reserve Bank STATEMENTSReserve Bank’s capital Bureau and,
The assessments are allocated to each FINANCIAL fund its operations, the operations of the and surplus
Board
for a two-year December 31 of the July year for effective of of the Dodd-Frank Act, the OFR. most
balances as of period following the prior 21, 2010 the BoarddateGovernors’ operations and as of theThese
assessments are theassesses and OFR operations. basedBoard of GovernorsBank’s of the Bureau and,
The recent quarter forallocated to the Reserve Banks to fund its operations, the operationscapitaleach Reserve
Board of Governors Bureau each Reserve Bank The on each Reserve also assesses and surplus
Bank two-year period followingby the Treasury to the BoarddateGovernors’ operationsnotes as of theThese
balances as of December 31 of the prior 21, 2010 produce and retire Federal Reserve and based on most
for a for the expenses incurred the July year for effective of of the Dodd-Frank Act, the OFR. each
18
Reserve Bank’s share Bureau and OFR notes comprising on each Reserve liability capitaleach surplus
recent quarter forallocated to number of operations. basedBoard of GovernorsBank’s for Federal Reserve
assessments are the of the each Reserve Bank The the System’s net also assesses and
Bank on December 31 incurred by year. year for the Board of retire Federal Reserve notes as of the most
notes for as of December the prior the Treasury to produce and Governors’ operations and based on each
balances the expenses of 31 of the prior
Reserve Bank’s share Bureau number of operations. The Board of Governors also assesses each Reserve
recent quarter for the of the and OFR notes comprising the System’s net liability for Federal
notes for the expenses incurred by year.
During theon December to the Bureau transfer date ofto produce and retire was no limit on the funding provided
Bank period prior 31 of the prior the Treasury July 21, 2011, there Federal Reserve notes based on each
to the Bureau and assessed to the Reserve Banks; the Board of Governors liability for Federal Reserve
Reserve Bank’s share of the number of notes comprising the System’s net was required to provide the
During theon estimated by the Bureau transfer date of July 21, 2011, there was nothe authorities granted to the
amount December 31 of Secretary of
notes period prior to thethe prior year. the Treasury needed to carry out limit on the funding provided
Bureau under and assessed to Act and other federal law. The Governors Act requires that, after
to the Bureau the Dodd-Frank the Reserve Banks; the Board of Dodd-Frankwas required to provide the
transfer date, the Board Bureau transfer date of July 21, 2011, there not to limit onathe funding provided
amount estimated to the Governors the Treasury needed to carry out exceed fixed percentage of
During the period prior by theofSecretary offund the Bureau in an amountwas nothe authorities granted to the
Bureau under and assessed to Act and other federal law. the Board of Governors’ 2009 annual report,
thethe Bureau the Dodd-Frank the Reserve Banks; the Board of Dodd-Frankwas required to provide the
to total operating expenses of the System as reported in The Governors Act requires that, after
transfer date, $4.98 billion. The fixed the Treasury needed amount out expenses of the percentage 10
which totaled the Board ofSecretary offund the Bureautotal 2009 carrynot tothe authorities granted to the
amount estimated by the Governors percentage of in an to operating exceed a fixed System is of
the totalunder the Dodd-Frank Act and other federal million) for 2012, and 12 percent ($597.6 after the
percent ($498.0 million) for 2011, 11 percent ($547.8 law. the Board of Governors’ 2009 annualmillion)
Bureau operating expenses of the System as reported in The Dodd-Frank Act requires that, report,
for 2013. After 2013, the amountfixed be adjusted of total 2009 operating provisionsof the percentage 10
which totaled the Board of Governors fund the Bureauaccordance with the expenses fixed System is of
transfer date, $4.98 billion. The will percentage in in an amount not to exceed a of the Dodd-Frank
Act.total($498.0 million) for 2011, 11 percent ($547.8 million) Board of Governors’ 2009 annualmillion)
percent operating expenses of for Bureau funding is reportedfor 2012, and 12 percent ($597.6 report,
the The Bank’s assessment the System as reported in the as “Assessments: Bureau of Consumer
for 2013. Protection billion. The fixed be adjusted of totalthe Statements of Income and theSystem is 10
Financial After 2013, the amount will percentage in accordanceoperating provisionsof the Dodd-Frank
which totaled $4.98 and Office of Financial Research” in 2009 with the expenses of Comprehensive
Act. The Bank’s assessment for 11 percent ($547.8 million) for 2012, and 12 percent ($597.6 million)
Income.($498.0 million) for 2011, Bureau funding is reported as “Assessments: Bureau of Consumer
percent
Financial After 2013, the amount Financial Research” in the Statements provisions of Comprehensive
for 2013. Protection and Office of will be adjusted in accordance with theof Income and the Dodd-Frank
Income. Governors assesses the Reserve Banks to fund the operations of the OFR Bureau of Consumer
The Act. The Bank’s assessment for Bureau funding is reported as “Assessments:for the two-year period
Board of
following Protection and Office of Financial Research” thethe Statements of Income and Comprehensive
Financial enactment of the Dodd-Frank Act; thereafter, in OFR will be funded by fees assessed on bank
The holding companies and nonbank Reserve Banks to fund the meet the criteria specified the the Dodd-Frank
Board of
Income. Governors assesses the financial companies that operations of the OFR for in two-year period
Act.
following enactment of the Dodd-Frank Act; thereafter, the OFR will be funded by fees assessed on bank
The holding companies and nonbank Reserve Banks to fund the meet the criteria specified the the Dodd-Frank
Board of Governors assesses the financial companies that operations of the OFR for in two-year period
following enactment of the Dodd-Frank Act; thereafter, the OFR will be funded by fees assessed on bank
s. Taxes Act.
holding companies and nonbank financial companies that meet the criteria specified in the Dodd-Frank
s. Taxes Act.
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, 2011 and 2010, and
The Reserve Banks a exempt from “Operating expenses: Occupancy” in the Statements property. and
s. Taxes are reported as arecomponent of federal, state, and local taxes, except for taxes on real of Income The
Comprehensive Income.
Bank’s real property taxes were $1 million for each of the years ended December 31, 2011 and 2010, and
The are reported as arecomponent of federal, state, and local taxes, except for taxes on real of Income The
Reserve Banks a exempt from “Operating expenses: Occupancy” in the Statements property. and
Comprehensive Income.
Bank’s real property taxes were $1 million for each of the years ended December 31, 2011 and 2010, and
are reported as a component of “Operating expenses: Occupancy” in the Statements of Income and
Comprehensive Income.
t. Restructuring Charges
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
The another, or a fundamental restructuring charges for exit or disposal operations. Restructuring charges may
Reserve Banks recognize reorganization that affects the nature of costs incurred as part of the closure of
t. Restructuring Charges
include activities in a with employee the relocation of business activities from one location to
business costs associatedparticular location,separations, contract terminations, and asset impairments.
Expenses are recognized restructuring inthat affects the nature of costs incurred as part of charges may
The another, or a fundamental in the period charges for exit or disposaloperations. Restructuringthe closure or
Reserve Banks recognize reorganization which the Bank commits to a formalized restructuring plan of
executes the specific actions contemplated inthe relocation of business financial statement location to
the plan contract terminations, and asset impairments.
include costs associatedparticular location,separations,and all criteria foractivities from one recognition
business activities in a with employee
have been met.
Expenses are fundamentalin the period inthat affects the nature of operations. Restructuring charges may
another, or a recognized reorganization which the Bank commits to a formalized restructuring plan or
executes costs associated with employee in the plan and all criteria for financial statement recognition
include the specific actions contemplated separations, contract terminations, and asset impairments.
Notehavedescribes recognized in the period initiatives the Bank commits to a formalized restructuring plan or
14 been met.
Expenses are the Bank’s restructuring in which and provides information about the costs and liabilities
associated with employee separations and in the plan and all criteria for financial statement recognition
executes the specific actions contemplated contract terminations. Costs and liabilities associated with
Noteenhanced pension Bank’s restructuring initiatives and provides information about the costs and Banks are
14 been met.
havedescribes the benefits in connection with the restructuring activities for all of the Reserve liabilities
recorded on the employee separations
associated with books of the FRBNY. and contract terminations. Costs and liabilities associated with
Noteenhanced pension Bank’s restructuring initiatives and provides activities forabout the costs andBanks are
14 describes the benefits in connection with the restructuring information all of the Reserve liabilities
The recorded onwith books ofrestructuring activities in 2011 and 2010. Costs and liabilities associated with
Bank had
significant the FRBNY.
associatednothe employee separations and contract terminations.
enhanced pension benefits in connection with the restructuring activities for all of the Reserve Banks are
The Bank hadon the books ofrestructuring activities in 2011 and 2010.
recorded no significant the FRBNY.
The Bank had no significant restructuring activities in 2011 and 2010.
19
19
19

FEDERAL RESERVE BANK OF ST. LOUIS
NOTES TO FINANCIAL STATEMENTS
u. Recently Issued Accounting Standards
In July 2010, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU)
2010-20, Receivables (Topic 310): Disclosures about the Credit Quality of Financing Receivables and the
Allowance for Credit Losses, which requires additional disclosures about the allowance for credit losses
and the credit quality of loan portfolios. The additional disclosures include a rollforward of the allowance
for credit losses on a disaggregated basis and more information, by type of receivable, on credit quality
indicators, including the amount of certain past-due receivables and troubled debt restructurings and
significant purchases and sales. The adoption of this update is effective for the Bank for the year ended
December 31, 2011, and did not have a material effect on the Bank’s financial statements.
In April 2011, the FASB issued ASU 2011-02, Receivables (Topic 310): A Creditor’s Determination of
Whether a Restructuring Is a Troubled Debt Restructuring, which clarifies accounting for troubled debt
restructurings, specifically clarifying creditor concessions and financial difficulties experienced by
borrowers. This update is effective for the Bank for the year ended December 31, 2012, and is not
expected to have a material effect on the Bank’s financial statements.
In April 2011, the FASB issued ASU 2011-03, Transfers and Servicing (Topic 860): Reconsideration of
Effective Control for Repurchase Agreements, which reconsidered the effective control for repurchase
agreements. This update prescribes when the Bank may or may not recognize a sale upon the transfer of
financial assets subject to repurchase agreements. This determination is based, in part, on whether the
Bank has maintained effective control over the transferred financial assets. This update is effective for the
Bank for the year ended December 31, 2012, and is not expected to have a material effect on the Bank’s
financial statements.
In June 2011, the FASB issued ASU 2011-05, Comprehensive Income (Topic 220): Presentation of
Comprehensive Income, which requires a reporting entity to present the total of comprehensive income,
the components of net income and the components of other comprehensive income either in a single
continuous statement of comprehensive income or in two separate but consecutive statements. This
update eliminates the option to present the components of other comprehensive income as part of the
statement of shareholders’ equity. The update is intended to improve the comparability, consistency, and
transparency of financial reporting and to increase the prominence of items by presenting the components
reported in other comprehensive income. The Bank has adopted the update in this ASU effective for the
year ended December 31, 2011, and the required presentation is reflected in the Bank’s financial
statements.
In December 2011, the FASB issued ASU 2011-11, Balance Sheet (Topic 210): Disclosures about Offsetting
Assets and Liabilities. This update will require a reporting entity to present enhanced disclosures for
financial instruments and derivative instruments that are offset or subject to master netting agreements or
similar such agreements. This update is effective for the Bank for the year ended December 31, 2013, and
is not expected to have a material effect on the Bank’s financial statements.
In December 2011, the FASB issued 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 defers the
requirements of ASU 2011-05 related to presentation of reclassification adjustments.
5.

LOANS
Loans outstanding at December 31, 2011, and 2010, were as follows (in millions):
2011
Loans to depository institutions

$

20

2010
-

$

2

FEDERAL RESERVE BANK OF ST. LOUIS
NOTES TO FINANCIAL STATEMENTS
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. The
financial condition of borrowers is monitored by the Bank and, if a borrower no longer qualifies for these
programs, the Bank will generally request full repayment of the outstanding loan or, for primary 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.
Allowance for Loan Loss
At December 31, 2011 and 2010, the Bank did not have any impaired loans and no allowance for loan losses was
required. There were no impaired loans during the years ended December 31, 2011 and 2010.
6.

TREASURY SECURITIES; GOVERNMENT-SPONSORED ENTERPRISE DEBT SECURITIES; FEDERAL AGENCY AND
GOVERNMENT-SPONSORED ENTERPRISE MORTGAGE-BACKED SECURITIES; SECURITIES PURCHASED UNDER
AGREEMENTS TO RESELL; SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE; AND SECURITIES
LENDING
The FRBNY, on behalf of the Reserve Banks, holds securities bought outright in the SOMA.
The Bank’s allocated share of SOMA balances was approximately 1.893 percent and 2.576 percent at December
31, 2011 and 2010, respectively.

21

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):
2011
Unaccreted
discounts

Unamortized
premiums

$

349
24,346
6,789

$

508
1,161

$

(23)
(2)

Total amortized
cost
$
349
24,831
7,948

$

31,484

$

1,669

$

(25)

$

33,128

$

36,275

GSE debt securities

$

1,968

$

73

$

-

$

2,041

$

2,162

Federal agency and GSE MBS

$

15,855

$

220

$

(20)

$

16,055

$

16,949

Par
Bills
Notes
Bonds
Total Treasury securities

Par
Bills
Notes
Bonds
Total Treasury securities

$

2010
Unaccreted
discounts

Unamortized
premiums
$

$

474
19,919
5,919
26,312

GSE debt securities

$

Federal agency and GSE MBS

$

$

Total amortized
cost
$
474
20,261
6,748
$
27,483

Fair value
349
26,298
9,628

Fair value
474
20,728
7,464
$
28,666

$

$

362
843
1,205

$

(20)
(14)
(34)

$

3,798

$

143

$

(1)

$

3,940

$

4,038

25,556

$

363

$

(40)

$

25,879

$

26,428

The total of the 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):

2011
Bills
Notes
Bonds
Total Treasury securities

Amortized cost
$
18,423
1,311,917
419,937
$
1,750,277

GSE debt securities

$

Federal agency and GSE MBS

$

2010

$

Fair value
18,423
1,389,429
508,694
1,916,546

107,828

$

114,238

$

152,972

$

156,780

848,258

$

895,495

$

1,004,695

$

1,026,003

$

Amortized cost
$
18,422
786,575
261,955
$
1,066,952

$

$

Fair value
18,422
804,703
289,757
1,112,882

The fair value amounts in the above tables are presented solely for informational purposes. Although the fair value
of 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 federal agency and GSE MBS was determined
using a model-based approach that considers observable inputs for similar securities; fair value for all other
SOMA security holdings was determined by reference to quoted prices for identical securities.
The fair value of the fixed-rate Treasury securities, GSE debt securities, and federal agency and GSE MBS in the
SOMA’s holdings is subject to market risk, arising from movements in market variables, such as interest rates

22

FEDERAL RESERVE BANK OF ST. LOUIS
NOTES TO FINANCIAL STATEMENTS
and securities prices. 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 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):

Distribution of MBS
holdings by coupon rate
Allocated to the Bank:
3.0%
3.5%
4.0%
4.5%
5.0%
5.5%
6.0%
6.5%
Total
Total SOMA:
3.0%
3.5%
4.0%
4.5%
5.0%
5.5%
6.0%
6.5%
Total

2011

2010

Amortized cost
$

$

$

$

25
368
3,056
7,693
3,454
1,264
173
22
16,055

1,313
19,415
161,481
406,465
182,497
66,795
9,152
1,140
848,258

Fair value
$

$

$

$

Amortized cost

25
372
3,213
8,161
3,647
1,326
182
23
16,949

$

1,336
19,660
169,763
431,171
192,664
70,064
9,616
1,221
895,495

$

9
4,319
12,819
5,961
2,398
333
40
25,879

$

341
167,675
497,672
231,420
93,119
12,910
1,558
1,004,695

$

$

$

Fair value
9
4,338
13,106
6,119
2,469
344
43
26,428

$

352
168,403
508,798
237,545
95,873
13,376
1,656
1,026,003

$

There were no transactions related to securities purchased under agreements to resell during the years ended
December 31, 2011 and 2010. Financial information related to securities sold under agreements to repurchase
for the years ended December 31 was as follows (in millions):

2011
Allocated to the Bank:
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

2010

$

1,891
1,480
2,357
1,629
1,891

$

1,538
1,730
3,045
1,124
1,538

$

99,900
72,227
124,512
86,089
99,900

$

59,703
58,476
77,732
43,642
59,703

Total SOMA:
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

The contract amounts for securities sold under agreements to repurchase approximate fair value. FRBNY executes
transactions for the purchase of securities under agreements to resell primarily to temporarily add reserve
balances to the banking system. Conversely, transactions to sell securities under agreements to repurchase are

23

FEDERAL RESERVE BANK OF ST. LOUIS
NOTES TO FINANCIAL STATEMENTS
executed to temporarily drain reserve balances from the banking system and as part of a service offering to
foreign official and international account holders.
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, 2011, was as follows (in millions):
Within 15
days
Treasury securities
(par value)
GSE debt securities
(par value)
Federal agency and GSE

16 days to
90 days

91 days to 1
year

Over 1 year
to 5 years

Over 5 years
to 10 years

$

$

$

$

$

MBS (par value)1
Securities sold under
agreements to repurchase
(contract amount)
1

307

513

1,702

12,297

Over 10
years

12,301

$

Total

4,364

$

31,484

47

95

373

1,147

262

44

1,968

-

-

-

-

1

15,854

15,855

1,891

-

-

-

-

-

1,891

The par amount shown for Federal agency and GSE MBS is the remaining principal balance of the underlying mortgages.

Federal agency and GSE MBS are reported at stated maturity in the table above. The estimated weighted average
life of these securities at December 31, 2011, which differs from the stated maturity primarily because it
factors in scheduled payments and prepayment assumptions, is approximately 2.4 years.
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):
Allocated to the Bank
Amortized cost
Par value
2011
2010
2011
2010
Treasury securities $
286
$
583
$
265
$
569
GSE debt securities
24
43
23
41
Total SOMA
Amortized cost
2011
Treasury securities
GSE debt securities

$

15,121
1,276

Par value

2010
$

22,627
1,686

2011
$

13,978
1,216

2010
$

22,081
1,610

The FRBNY enters into commitments to buy Treasury and GSE debt securities and records the related securities on
a settlement-date basis. As of December 31, 2011, the total purchase price of the Treasury securities under
outstanding commitments was $3,200 million. The total purchase price of outstanding commitments allocated
to the Bank was $61 million. These commitments had contractual settlement dates extending through January
3, 2012. As of December 31, 2011, the fair value of Treasury securities under outstanding purchase
commitments was $3,208 million, of which $61 million was allocated to the Bank.
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, 2011, the total purchase price of the federal agency

24

FEDERAL RESERVE BANK OF ST. LOUIS
NOTES TO FINANCIAL STATEMENTS
and GSE MBS under outstanding purchase commitments was $41,503 million, of which $513 million was
related to dollar roll transactions. The total purchase price of outstanding purchase commitments allocated to
the Bank was $786 million, of which $10 million was related to dollar roll transactions. As of December 31,
2011, the total sales price of the federal agency and GSE MBS under outstanding sales commitments was
$4,430 million, all of which was related to dollar roll transactions. The total sales price of outstanding sales
commitments allocated to the Bank was $84 million, all of which was related to dollar roll transactions. These
commitments, which had contractual settlement dates extending through February 2012, are for the purchase
and sale 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. As of December 31, 2011, the fair value of federal agency
and GSE MBS purchases and sales, net under outstanding commitments was $41,873 million and $4,473
million, respectively, of which $793 million and $85 million, respectively, was allocated to the Bank. 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 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):

Allocated to the Bank
2011
Cash margin
Obligations from MBS transaction fails
Total

$
$

Total SOMA

2010
24
2
26

$

-

2011
$
1,271
97
$
1,368

2010
$
$

-

During the years ended December 31, 2011 and 2010, the Reserve Banks recorded net gains from federal agency
and GSE MBS transactions of $10 million and $782 million, respectively, of which $.2 million and $25
million, respectively, were allocated to the Bank. These net gains are reported as “Non-interest income:
Federal agency and government-sponsored enterprise mortgage-backed securities gains, net” in the Statements
of Income and Comprehensive Income.

25

FEDERAL RESERVE BANK OF ST. LOUIS
NOTES TO FINANCIAL STATEMENTS
Information about transactions related to Treasury securities, GSE debt securities, and federal agency and GSE
MBS during the year ended December 31, 2011, is summarized as follows (in millions):
Allocated to the Bank

Bills
Balance December 31, 2010

$

Purchases1

474

$

$

6,748

$

4,993
-

$

(7,559)
24,831

15,789
(2,552)

$

(2,120)
7,948

2,696
-

$

3,940

$

25,879

-

798

(2,607)

(102)
22
$

27,483

Federal
agency and
GSE MBS

GSE debt
securities

24,534

-

43
(1,384)
(91)
27

(125)
349

$

3,400

(2,607)

(4,993)
$

20,261

Bonds

16,141

-

Realized gains, net2
Principal payments and maturities
Amortization of premiums and discounts
Inflation adjustment on inflation-indexed securities

Supplemental information - par value of transactions:
Purchases
Proceeds from sales

$

4,993

Sales1

Annual reallocation adjustment3
Balance December 31, 2011

Notes

Total Treasury
securities

-

-

43
(6,377)
(193)
49
$

$

(9,804)
33,128

23,478
(2,552)

(936)
(36)
$

(927)
2,041

$

-

(4,074)
(67)
(6,481)
16,055

$

$

775
-

Total SOMA

Bills
Balance December 31, 2010

$

Purchases1

Supplemental information - par value of transactions:
Purchases
Proceeds from sales

18,422

$

239,487

Sales1
Realized gains, net2
Principal payments and maturities
Amortization of premiums and discounts
Inflation adjustment on inflation-indexed securities
Balance December 31, 2011

Notes

$

Bonds
$

731,252

-

$

786,575

$

239,494
-

$

2,258
(67,273)
(4,445)
1,283
1,311,917

713,878
(134,829)

261,955

$

161,876

(137,733)

(239,494)
8
18,423

Total Treasury
securities

$

$

127,802
-

$

$

$

2,258
(306,767)
(9,422)
2,374
1,750,277

1,081,174
(134,829)

$

$

$ 1,004,695
42,145

-

(137,733)

152,972
-

1,132,615

(4,985)
1,091
419,937

1,066,952

Federal
agency and
GSE MBS

GSE debt
securities

-

(43,466)
(1,678)
107,828

-

$

(195,413)
(3,169)
848,258

$

40,955
-

1

Purchases and sales are reported on a settlement-date basis and include payments and receipts related to principal, premiums, discounts, and inflation
compensation included in the basis of inflation-indexed securities. The amount reported as sales also includes realized gains, net.
2

Adjustments for realized gains, net is required because these amounts do not affect the reported amount of the related securities. Excludes gains and losses
that result from net settled MBS TBA transactions.
3

Reflects the annual adjustment to the Bank's allocated portion of the related SOMA securities that results from the annual settlement of the interdistrict
settlement account, as discussed in Note 4f.

7.

FOREIGN CURRENCY DENOMINATED ASSETS
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.

26

FEDERAL RESERVE BANK OF ST. LOUIS
NOTES TO FINANCIAL STATEMENTS
The Bank’s allocated share of foreign currency denominated assets was approximately .815 percent and .937
percent at December 31, 2011 and 2010, respectively.
The Bank’s allocated share of foreign currency denominated assets, including accrued interest, valued at amortized
cost and foreign currency market exchange rates at December 31 was as follows (in millions):

2011
Euro:
Foreign currency deposits
Securities purchased under agreements to resell
German government debt instruments
French government debt instruments
Japanese yen:
Foreign currency deposits
Japanese government debt instruments
Total allocated to the Bank

$

$

2010
76
15
22

32
66
211

$

66
23
17
26
37
75
244

$

At December 31, 2011 and 2010, the fair value of foreign currency denominated assets, including accrued interest,
allocated to the Bank was $213 million and $246 million, respectively. The fair value of government debt
instruments was determined by reference to quoted prices for identical securities. The cost basis of foreign
currency deposits and securities purchased under agreements to resell, adjusted for accrued interest,
approximates fair value. Similar to Treasury securities, GSE debt securities, and federal agency and GSE
MBS discussed in Note 6, unrealized gains or losses have no effect on the ability of a Reserve Bank, as the
central bank, to meet its financial obligations and responsibilities. The fair value is presented solely for
informational purposes.
Total Reserve Bank foreign currency denominated assets were $25,950 million and $26,049 million at December
31, 2011 and 2010, respectively. At December 31, 2011 and 2010, the fair value of the total Reserve Bank
foreign currency denominated assets, including accrued interest, was $26,116 million and $26,213 million,
respectively.

The remaining maturity distribution of foreign currency denominated assets that were allocated to the Bank at
December 31, 2011, was as follows (in millions):

Euro
Japanese yen
Total

Within 15
days
$
44
34
$
78

16 days to
90 days
$
24
5
$
29

91 days to 1
year
$
17
26
$
43

Over 1 year
to 5 years
$
28
33
$
61

Total
$
$

113
98
211

At December 31, 2011 and 2010, the authorized warehousing facility was $5 billion, with no balance outstanding.
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, 2011 and 2010.
There were no foreign exchange contracts related to open market operations outstanding as of December 31, 2011.

27

FEDERAL RESERVE BANK OF ST. LOUIS
NOTES TO FINANCIAL STATEMENTS
The FRBNY enters into commitments to buy foreign government debt instruments and records the related
securities on a settlement-date basis. As of December 31, 2011, there were $216 million of outstanding
commitments to purchase Euro-denominated government debt instruments, of which $2 million was allocated
to the Bank. These securities settled on January 4, 2012, and replaced Euro-denominated government debt
instruments held in the SOMA that matured on that date. As of December 31, 2011, the fair value of Eurodenominated government debt instruments under outstanding commitments was $216 million, of which $2
million was allocated to the Bank.
In connection with its foreign currency activities, the FRBNY may enter into transactions that are subject to
varying degrees of off-balance-sheet market risk and counterparty credit risk that result from their future
settlement. The FRBNY controls these risks by obtaining credit approvals, establishing transaction limits,
receiving collateral in some cases, and performing daily monitoring procedures.
8.

CENTRAL BANK LIQUIDITY SWAPS
U.S. Dollar Liquidity Swaps
The Bank’s allocated share of U.S. dollar liquidity swaps was approximately .815 percent and .937 percent at
December 31, 2011 and 2010, respectively.
The total foreign currency held under U.S. dollar liquidity swaps in the SOMA at December 31, 2011 and 2010,
was $99,823 million and $75 million, respectively, of which $814 million and $1 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):

Within 15
days
Euro

2011
16 days to
90 days

$

$

Japanese yen

417

Total
$

697

$

1

Total
$

1

74
$

40

114

-

-

2

Swiss franc
Total

280

2010
Within 15
days

1

3

-

-

356

$

458

$

814

$

1

$

1

Foreign Currency Liquidity Swaps
There were no transactions related to the foreign currency liquidity swaps during the years ended December 31,
2011 and 2010.

28

FEDERAL RESERVE BANK OF ST. LOUIS
NOTES TO FINANCIAL STATEMENTS
9.

BANK PREMISES, EQUIPMENT, AND SOFTWARE
Bank premises and equipment at December 31 were as follows (in millions):
2011
Bank premises and equipment:
Land and land improvements
Buildings
Building machinery and equipment
Construction in progress
Furniture and equipment
Subtotal

$

Accumulated depreciation

2010
12
153
20
1
36
222

$

(72)

12
149
21
2
37
221
(68)

Bank premises and equipment, net

$

150

$

153

Depreciation expense, for the years ended December 31

$

11

$

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, 2011 and 2010. Future minimum lease
payments that the Bank will receive under noncancelable lease agreements in existence at December 31, 2011,
were immaterial.
The Bank had capitalized software assets, net of amortization, of $5 million and $2 million at December 31, 2011
and 2010, respectively. Amortization expense was $1 million for each of the years ended December 31, 2011
and 2010. 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.
10. COMMITMENTS AND CONTINGENCIES
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, 2011, the Bank was obligated under noncancelable leases for premises and equipment with
remaining terms ranging from one to approximately four years. These leases provide for increased rental
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, 2011 and 2010. Certain of the Bank’s leases have options to
renew.

29

FEDERAL RESERVE BANK OF ST. LOUIS
NOTES TO FINANCIAL STATEMENTS
Future minimum rental payments under noncancelable operating leases, net of sublease rentals, with remaining
terms of one year or more, at December 31, 2011, are as follows (in thousands):

2012
2013
2014
2015
Future minimum rental payments

Operating leases
$
496
500
469
61
$
1,526

At December 31, 2011, 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 per
incident 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, 2011 and
2010.
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.
11. RETIREMENT AND THRIFT PLANS
Retirement Plans
The Bank currently offers three defined benefit retirement plans to its employees, based on length of service and
level of compensation. Substantially all of the employees of the Reserve Banks, Board of Governors, and
Office of Employee Benefits of the Federal Reserve System (OEB) participate in the Retirement Plan for
Employees of the Federal Reserve System (System Plan). Under the Dodd-Frank Act, newly hired Bureau
employees are eligible to participate in the System Plan and transferees from other governmental organizations
can elect to participate in the System Plan. In addition, employees at certain compensation levels participate in
the Benefit Equalization Retirement Plan and certain Reserve Bank officers participate in the Supplemental
Retirement Plan for Select Officers of the Federal Reserve Banks.
The System Plan provides retirement benefits to employees of the Reserve Banks, Board of Governors, OEB, and
certain employees of the Bureau. 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 year
ended December 31, 2011, certain costs associated with the System Plan were reimbursed by the Bureau.
During the year ended December 31, 2010, costs associated with the System Plan were not reimbursed by
other participating employers.
The Bank’s projected benefit obligation, funded status, and net pension expenses for the BEP and the SERP at
December 31, 2011 and 2010, and for the years then ended, were not material.

30

FEDERAL RESERVE BANK OF ST. LOUIS
NOTES TO FINANCIAL STATEMENTS
Thrift Plan
Employees of the Bank participate in the defined contribution Thrift Plan for Employees of the Federal Reserve
System (Thrift Plan). The Bank matches 100 percent of the first 6 percent of employee contributions from the
date of hire and provides an automatic employer contribution of 1 percent of eligible pay. The Bank’s Thrift
Plan contributions totaled $5 million for each of the years ended December 31, 2011 and 2010, and are
reported as a component of “Operating expenses: Salaries and benefits” in the Statements of Income and
Comprehensive Income.
12. POSTRETIREMENT BENEFITS OTHER THAN RETIREMENT PLANS AND POSTEMPLOYMENT BENEFITS
Postretirement Benefits Other Than Retirement Plans
In addition to the Bank’s retirement plans, employees who have met certain age and length-of-service requirements
are eligible for both medical benefits and life insurance coverage during retirement.
The Bank funds benefits payable under the medical and life insurance plans as due and, accordingly, has no plan
assets.
Following is a reconciliation of the beginning and ending balances of the benefit obligation (in millions):
2011
Accumulated postretirement benefit obligation at January 1
Service cost benefits earned during the period
Interest cost on accumulated benefit obligation
Net actuarial loss (gain)
Contributions by plan participants
Benefits paid
Medicare Part D subsidies
Accumulated postretirement benefit obligation at December 31

$

$

2010
76.4
2.3
3.8
0.2
1.3
(4.3)
0.4
80.1

$

$

75.5
2.6
4.3
(3.2)
1.2
(4.4)
0.4
76.4

At December 31, 2011 and 2010, the weighted-average discount rate assumptions used in developing the
postretirement benefit obligation were 4.50 percent and 5.25 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.

31

FEDERAL RESERVE BANK OF ST. LOUIS
NOTES TO FINANCIAL STATEMENTS
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):

2011
Fair value of plan assets at January 1
Contributions by the employer
Contributions by plan participants
Benefits paid
Medicare Part D subsidies
Fair value of plan assets at December 31

$

Unfunded obligation and accrued postretirement benefit cost

2010
$

$

2.6
1.3
(4.3)
0.4
-

$

2.8
1.2
(4.4)
0.4
-

$

80.1

$

76.4

$

1.4
(11.7)
(10.3)

Amounts included in accumulated other comprehensive loss are shown below:
Prior service cost
Net actuarial loss
Total accumulated other comprehensive loss

$
$

0.4
(11.9)
(11.5)

$

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:
2011
7.50%

2010
8.00%

5.00%
2017

Health-care cost trend rate assumed for next year
Rate to which the cost trend rate is assumed to decline (the
ultimate trend rate)
Year that the rate reaches the ultimate trend rate

5.00%
2017

Assumed health-care cost trend rates have a significant effect on the amounts reported for health-care plans. A 1
percentage point change in assumed health-care cost trend rates would have the following effects for the year
ended December 31, 2011 (in millions):

1 percentage
point increase
Effect on aggregate of service and interest cost components
of net periodic postretirement benefit costs
Effect on accumulated postretirement benefit obligation

32

1 percentage
point decrease

$

$

1.0
11.3

(0.8)
(9.3)

FEDERAL RESERVE BANK OF ST. LOUIS
NOTES TO FINANCIAL STATEMENTS
The following is a summary of the components of net periodic postretirement benefit expense for the years ended
December 31 (in millions):

2011
Service cost-benefits earned during the period
Interest cost on accumulated benefit obligation
Amortization of prior service cost
Amortization of net actuarial loss
Total periodic expense
Curtailment gain
Net periodic postretirement benefit expense

$

2010
2.3
3.8
(1.0)
5.1
5.1

$

$

$

2.6
4.3
(3.1)
1.2
5.0
(0.2)
4.8

Estimated amounts that will be amortized from accumulated other comprehensive loss into net periodic
postretirement benefit expense in 2012 are shown below:

Prior service cost
Net actuarial loss
Total

$
$

(0.1)
0.5
0.4

Net postretirement benefit costs are actuarially determined using a January 1 measurement date. At January 1,
2011 and 2010, the weighted-average discount rate assumptions used to determine net periodic postretirement
benefit costs were 5.25 percent and 5.75 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.
A deferred curtailment gain was recorded in 2007 as a component of accumulated other comprehensive loss; the
gain was recognized in 2010 when the related employees terminated employment.
The Medicare Prescription Drug, Improvement and Modernization Act of 2003 established a prescription drug
benefit under Medicare (Medicare Part D) and a federal subsidy to sponsors of retiree health-care benefit plans
that provide benefits that are at least actuarially equivalent to Medicare Part D. The benefits provided under
the Bank’s plan to certain participants are at least actuarially equivalent to the Medicare Part D prescription
drug benefit. The estimated effects of the subsidy are reflected in actuarial loss in the accumulated
postretirement benefit obligation and net periodic postretirement benefit expense.
Federal Medicare Part D subsidy receipts were $.3 million in each of the years ended December 31, 2011 and 2010.
Expected receipts in 2012, related to benefits paid in the years ended December 31, 2011 and 2010, are $.2
million.

33

FEDERAL RESERVE BANK OF ST. LOUIS
NOTES TO FINANCIAL STATEMENTS
Following is a summary of expected postretirement benefit payments (in millions):
Without subsidy
With subsidy
2012
$
4.1
$
3.8
2013
4.4
4.0
2014
4.6
4.1
2015
4.8
4.3
2016
4.9
4.4
2017 - 2021
27.2
23.7
Total

$

50.0

$

44.3

Postemployment Benefits
The Bank offers benefits to former or inactive employees. Postemployment benefit costs are actuarially
determined using a December 31 measurement date and include the cost of medical and dental insurance,
survivor income, and disability benefits. The accrued postemployment benefit costs recognized by the Bank at
December 31, 2011 and 2010, were $8 million and $7 million, respectively. This cost is included as a
component of “Accrued benefit costs” in the Statements of Condition. Net periodic postemployment benefit
expense included in 2011 and 2010 operating expenses were $2 million and $1 million, respectively, and are
recorded as a component of “Operating expenses: Salaries and benefits” in the Statements of Income and
Comprehensive Income.

34

FEDERAL RESERVE BANK OF ST. LOUIS
NOTES TO FINANCIAL STATEMENTS
13. ACCUMULATED OTHER COMPREHENSIVE INCOME AND OTHER COMPREHENSIVE INCOME
Following is a reconciliation of beginning and ending balances of accumulated other comprehensive loss (in
millions):

Amount related to
postretirement
benefits other than
retirement plans
Balance at January 1, 2010

$

(11.4)

Change in funded status of benefit plans:
Amortization of prior service cost
Change in prior service costs related to benefit plans

$
$

(3.1)
(3.1)

$
$
$
$

3.2
(0.2)
1.2
4.2

Change in funded status of benefit plans - other
comprehensive income

$

1.1

Balance at December 31, 2010

$

(10.3)

Change in funded status of benefit plans:
Amortization of prior service cost

$

(1.0)

$

(1.0)

$
$

(0.2)
(0.2)

Change in funded status of benefit plans - other
comprehensive loss

$

(1.2)

Balance at December 31, 2011

$

(11.5)

Net actuarial gain arising during the year
Amortization of deferred curtailment gain
Amortization of net actuarial loss
Change in actuarial gain related to benefit plans

Change in prior service costs related to benefit plans
Net actuarial loss arising during the year
Change in actuarial loss related to benefit plans

Additional detail regarding the classification of accumulated other comprehensive loss is included in Note 12.

35

FEDERAL RESERVE BANK OF ST. LOUIS
NOTES TO FINANCIAL STATEMENTS
14. BUSINESS RESTRUCTURING CHARGES
Before 2010, announcements included restructuring plans associated with the U.S. Treasury’s Collections and Cash
Management Modernization initiative.
Following is a summary of financial information related to the restructuring plans (in millions):
2009 and
prior
restructuring
plans
Information related to restructuring plans as of
December 31, 2011:
Total expected costs related to restructuring activity
Estimated future costs related to restructuring activity
Expected completion date

$

$

Reconciliation of liability balances:
Balance at January 1, 2010
Employee separation costs
Adjustments
Payments
Balance at December 31, 2010
Employee separation costs
Contract termination costs
Adjustments
Payments
Balance at December 31, 2011

0.9
2012

1.2
0.1
(0.1)
1.2
0.1
(0.6)
(0.2)
0.5

$

$

Employee separation costs are primarily severance costs for identified staff reductions associated with the
announced restructuring plans. Separation costs that are provided under terms of ongoing benefit
arrangements are recorded based on the accumulated benefit earned by the employee. Separation costs that
are provided under the terms of one-time benefit arrangements are generally measured based on the expected
benefit as of the termination date and recorded ratably over the period to termination. Restructuring costs
related to employee separations are reported as a component of “Operating expenses: Salaries and benefits” in
the Statements of Income and Comprehensive Income.
Adjustments to the accrued liability are primarily due to changes in the estimated restructuring costs and are shown
as a component of the appropriate expense category in the Statements of Income and Comprehensive Income.
Costs associated with enhanced pension benefits for all Reserve Banks are recorded on the books of the FRBNY as
discussed in Note 11.
15. SUBSEQUENT EVENTS
There were no subsequent events that require adjustments to or disclosures in the financial statements as of
December 31, 2011. Subsequent events were evaluated through March 20, 2012, which is the date that the
Bank issued the financial statements.

36