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The Federal Reserve
Bank of St. Louis
Financial Statements as of and for the Years Ended
December 31, 2012 and 2011 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
Page
3-5
Page
6
Financial Statements:
Statements of Condition as of December 31, 2012 and December 31, 2011
Page
7
Statements of Income and Comprehensive Income for the years ended December 31, Page 8
2012 and December 31, 2011
Statements of Changes in Capital for the years ended December 31, 2012 and Page 9
December 31, 2011
Notes to Financial Statements
Page
10-38
FEDEF^L
rJECEPE/E Jij'-AiTK O E J T
LOUIS
P.O. Box 442
St. Louis, MO 63166-0442
www.stlouisfed.org
Management's Report on Internal Control Over Financial Reporting
March 14, 2013
To the Board of Directors
The management of the Federal Reserve Bank of St. Louis (Bank) is responsible for the
preparation and fair presentation of the Statements of Condition as of December 31, 2012 and
2011, and the Statements of Income and Comprehensive Income, and Statements of Changes in
Capital for the years then ended (the financial statements). The financial statements have been
prepared in conformity with the accounting principles, policies, and practices established by the
Board of Governors of the Federal Reserve System as set forth in the Financial Accounting
Manual for Federal Reserve Banks (FAM), and, as such, include some amounts that are based on
management judgments and estimates. To our knowledge, the financial statements are, in all
material respects, fairly presented in conformity with the accounting principles, policies and
practices documented in the FAM and include all disclosures necessary for such fair
presentation.
The management of the Bank is responsible for establishing and maintaining effective internal
control over financial reporting as it relates to the financial statements. The Bank's internal
control over financial reporting is designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external reporting
purposes in accordance with the FAM. The Bank's internal control over financial reporting
includes those policies and procedures that (i) pertain to the maintenance of records that in
reasonable detail accurately and fairly reflect the transactions and dispositions of the Bank's
assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with FAM, and that the Bank's receipts and
expenditures are being made only in accordance with authorizations of its management and
directors; and (iii) provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of the Bank's assets that could have a material effect
on its financial statements.
Even effective internal control, no matter how well designed, has inherent limitations, including
the possibility of human error, and therefore can provide only reasonable assurance with respect
FEDERAL RESERVE BANK OF ST. LOUIS
NOTES TO FINANCIAL STATEMENTS
to the preparation of reliable financial statements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.
The management of the Bank assessed its internal control over financial reporting based upon the
criteria established in the 'Internal Control - Integrated Framework" issued by the Committee
of Sponsoring Organizations of the Tread way Commission. Based on this assessment, we believe
that the Bank maintained effective internal control over financial reporting.
(Signed by)
James Bullard, President and Chief Executive Officer
(Signed by)
David A. Sapenaro, First Vice President and Chief Operating Officer
(Signed by)
Marilyn K.Corqna, Vice President and Chief Financial Officer
Deloitte & Touche LLP
Suite 300
100 South 4th Street
St. Louis, MO 63102-1821
USA
Tel: +1 314 342 4900
wwwdeloitte.com
INDEPENDENT AUDITORS' REPORT
To the Board of Governors of the Federal Reserve System
and the Board of Directors of the Federal Reserve Bank of St. Louis:
We have audited the accompanying financial statements of the Federal Reserve Bank of St. Louis
("FRB St. Louis"), which are comprised of the statements of condition as of December 31, 2012 and
2011, and the related statements of income and comprehensive income, and of changes in capital for
the years then ended, and the related notes to the financial statements. We also have audited the FRB
St. Louis' internal control over financial reporting as of December 31, 2012, based on criteria
established in Internal Control—Integrated Framework issued by the Committee of Sponsoring
Organizations of the Tread way Commission.
Management's Responsibility
The FRB St. Louis' management is responsible for the preparation and fair presentation of these
financial statements in accordance with accounting principles established by the Board of Governors
of the Federal Reserve System (the "Board") as described in Note 3 to the financial statements. The
Board has determined that this basis of accounting is an acceptable basis for the preparation of the
FRB St. Louis' financial statements in the circumstances. The FRB St. Louis' management is also
responsible for the design, implementation, and maintenance of internal control relevant to the
preparation and fair presentation of financial statements that are free from material misstatement,
whether due to fraud or error. The FRB St. Louis' management is also responsible for its assertion of
the effectiveness of internal control over financial reporting, included in the accompanying
Management's Report on Internal Control Over Financial Reporting.
Auditors' Responsibility
Our responsibility is to express an opinion on these financial statements and an opinion on the FRB
St. Louis' internal control over financial reporting based on our audits. We conducted our audits of
the financial statements in accordance with auditing standards generally accepted in the United States
of America and in accordance with the auditing standards of the Public Company Accounting
Oversight Board (United States) ("PCAOB") and we conducted our audit of internal control over
financial reporting in accordance with attestation standards established by the American Institute of
Certified Public Accountants and in accordance with the auditing standards of the PCAOB. Those
standards require that we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free from material misstatement and whether effective internal control over
financial reporting was maintained in all material respects.
An audit of the financial statements involves performing procedures to obtain audit evidence about
the amounts and disclosures in the financial statements. The procedures selected depend on the
auditor's judgment, including the assessment of the risks of material misstatement of the financial
statements, whether due to fraud or error. In making those risk assessments, the auditor considers
internal control relevant to the FRB St. Louis' preparation and fair presentation of the financial
M e m b e r of
Deloitte ToucheTohmatsu Limited
statements in order to design audit procedures that are appropriate in the circumstances. An audit of
the financial statements also includes evaluating the appropriateness of accounting policies used and
the reasonableness of significant accounting estimates made by management, as well as evaluating the
overall presentation of the financial statements. An audit of internal control over financial reporting
involves obtaining an understanding of internal control over financial reporting, assessing the risk that
a material weakness exists, testing and evaluating the design and operating effectiveness of internal
control based on the assessed risk, and performing such other procedures as we considered necessary
in the circumstances.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our audit opinions.
Definition of Internal Control Over Financial Reporting
The FRB St. Louis' internal control over financial reporting is a process designed by, or under the
supervision of, the FRB St. Louis' principal executive and principal financial officers, or persons
performing similar functions, and effected by the FRB St. Louis' board of directors, management, and
other personnel to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with the accounting principles
established by the Board. The FRB St. Louis' internal control over financial reporting includes those
policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the FRB St. Louis; (2)
provide reasonable assurance that transactions are recorded as necessary to permit preparation of
financial statements in accordance with the accounting principles established by the Board, and that
receipts and expenditures of the FRB St. Louis are being made only in accordance with authorizations
of management and directors of the FRB St. Louis; and (3) provide reasonable assurance regarding
prevention or timely detection and correction of unauthorized acquisition, use, or disposition of the
FRB St. Louis' assets that could have a material effect on the financial statements.
Inherent Limitations of Internal Control Over Financial Reporting
Because of the inherent limitations of internal control over financial reporting, including the
possibility of collusion or improper management override of controls, material misstatements due to
error or fraud may not be prevented or detected and corrected on a timely basis. Also, projections of
any evaluation of the effectiveness of the internal control over financial reporting to future periods are
subject to the risk that the controls may become inadequate because of changes in conditions, or that
the degree of compliance with the policies or procedures may deteriorate.
Opinions
In our opinion, the financial statements referred to above present fairly, in all material respects, the
financial position of the FRB St. Louis as of December 31, 2012 and 2011, and the results of its
operations for the years then ended in accordance with the basis of accounting described in Note 3 to
the financial statements. Also, in our opinion, the FRB St. Louis maintained, in all material respects,
effective internal control over financial reporting as of December 31, 2012, based on the criteria
established in Internal Control—Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission.
Basis of Accounting
We draw attention to Note 3 to the financial statements, which describes the basis of accounting. The
FRB St. Louis has prepared these financial statements in conformity with accounting principles
established by the Board, as set forth in the Financial Accounting Manual for Federal Reserve Banks,
which is a basis of accounting other than accounting principles generally accepted in the United States
of America. The effects on such financial statements of the differences between the accounting
principles established by the Board and accounting principles generally accepted in the United States
of America are also described in Note 3 to the financial statements. Our opinion is not modified with
respect to this matter.
(Signed by)
Deloitte Touche LLP
March 14, 2013
FEDERAL RESERVE BANK OF ST. LOUIS
Abbreviations:
ACH Automated clearinghouse
ASC Accounting Standards Codification
ASU Accounting Standards Update
BEP Benefit Equalization Retirement Plan
Bureau Bureau of Consumer Financial Protection
FAM Financial Accounting Manual for Federal Reserve Banks
FASB Financial Accounting Standards Board
Fannie Mae Federal National Mortgage Association
Freddie Mac Federal Home Loan Mortgage Corporation
FOMC Federal Open Market Committee
FRBNY Federal Reserve Bank of New York
GAAP Accounting principles generally accepted in the United States
GSE Government-sponsored enterprise
IMF International Monetary Fund
MBS Mortgage-backed securities
OEB Office of Employee Benefits of the Federal Reserve System
OFR Office of Financial Research
SDR Special drawing rights
SERP Supplemental Retirement Plan for Select Officers of the Fede
SOMA System Open Market Account
TBA To be announced
TDF Term Deposit Facility
F E D E R A L R E S E R V E B A N K O F ST. L O U I S
STATEMENTS OF CONDITION
As of December 31, 2012 and December 31, 2011
(in millions)
Heading row column 1 category column 2 2012 column 3 2011 end heading row
ASSETS:Gold certificates 2012 $ 313 2011 $ 319
ASSETS:Special drawing rights certificates 2012 $150 2011 $150
ASSETS:Coin 2012 $35 2011 $34
ASSETS:System Open Market Account::Treasury securities, net (of which $143 million and $286 million is l
ASSETS:System Open Market Account::Government-sponsored enterprise debt securities, net (of which $11
ASSETS:System Open Market Account::Federal agency and government-sponsored enterprise mortgage-bac
ASSETS:System Open Market Account::Foreign currency denominated assets, net 2012 $204 2011 $211
ASSETS:System Open Market Account::Central bank liquidity swaps 2012 $73 2011 $814
ASSETS:Accrued interest receivable 2012 $296 2011 $373
ASSETS:Bank premises and equipment, net 2012 $145 2011 $150
ASSETS:Items in process of collection 2012 $1 2011 $5
ASSETS:Inter district settlement account 2012 $958 2011 $0
ASSETS:Other assets 2012 $41 2011 $35
ASSETS:Total assets 2012 $46,601 2011 $53,315
LIABILITIES AND CAPITAL:Federal Reserve notes outstanding, net 2012 $33,538 2011 $29,899
LIABILITIES AND CAPITAL:System Open Market Account::Securities sold under agreements to repurchas
LIABILITIES AND CAPITAL:System Open Market Account::Other liabilities 2012 $50 2011 $26
LIABILITIES AND CAPITAL:
Deposits:Depository institutions 2012 $10,739 2011 $12,012
LIABILITIES AND CAPITAL:Deposits:Other deposits 2012 $0 2011 $1
LIABILITIES AND CAPITAL:Interest payable to depository institutions 2012 $2 2011 $1
LIABILITIES AND CAPITAL:Accrued benefit costs 2012 $104 2011 $92
LIABILITIES AND CAPITAL:Deferred credit items 2012 $0 2011 $36
LIABILITIES AND CAPITAL:Accrued interest on Federal Reserve notes 2012 $27 2011 $53
LIABILITIES AND CAPITAL:Interdistrict settlement account 2012 $0 2011 $8,856
LIABILITIES AND CAPITAL:Other liabilities 2012 $9 2011 $8
LIABILITIES AND CAPITAL:Total liabilities 2012 $46,145 2011 $52,875
LIABILITIES AND CAPITAL:Capital paid-in 2012 $228 2011 $220
LIABILITIES AND CAPITAL:Surplus (including accumulated other comprehensive loss of $19 million and
LIABILITIES AND CAPITAL:Total capital 2012 $456 2011 $440
LIABILITIES AND CAPITAL:Total liabilities and capital 2012 $46,601 2011 $53,315
The accompanying notes are an integral part of these financial statements.
F E D E R A L R E S E R V E B A N K O F ST. L O U I S
STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
For the years ended December 31, 2012 and December 31, 2011
(in millions)
Heading row column 1 category column 1 2012 column 2 2011 end heading row
INTEREST INCOME:System Open Market Account:Treasury securities, net 2012 $ 769 2011 $ 870
INTEREST INCOME:System Open Market Account:Government-sponsored enterprise debt securities, net 2
INTEREST INCOME:System Open Market Account:Federal agency and government-sponsored enterprise m
INTEREST INCOME:System Open Market Account:Foreign currency denominated assets, net 2012 $ 1 201
INTEREST INCOME:System Open Market Account:Central bank liquidity swaps 2012 $ 2 2011 $0
INTEREST INCOME:System Open Market Account:Total interest income 2012 $ 1,340 2011 $1,741
INTEREST EXPENSE:System Open Market Account:Securities sold under agreements to repurchase 2012
INTEREST EXPENSE:Deposits: Account:Depository institutions 2012 $ 33 2011 $30
INTEREST EXPENSE:Deposits:Total interest expense 2012 $ 35 2011 $31
INTEREST EXPENSE:INTEREST EXPENSE:Deposits:Net interest income 2012 $ 1,305 2011 $1,710
NON-INTEREST INCOME:System Open Market Account:Treasury securities gains, net 2012 $ 217 2011 $
NON-INTEREST INCOME:System Open Market Account:Federal agency and government-sponsored enter
NON-INTEREST INCOME:System Open Market Account:Foreign currency translation (losses) gains, net 2
NON-INTEREST INCOME:System Open Market Account:Compensation received for service costs provide
NON-INTEREST INCOME:System Open Market Account:Reimbursable services to government agencies 2
NON-INTEREST INCOME:System Open Market Account:Other 2012 $ 1 2011 $1
NON-INTEREST INCOME:System Open Market Account:Total non-interest income 2012 $ 327 2011 $154
OPERATING EXPENSES:Salaries and benefits 2012 $ 121 2011 $112
OPERATING EXPENSES:Occupancy 2012 $ 13 2011 $13
OPERATING EXPENSES:Equipment 2012 $ 6 2011 $6
OPERATING EXPENSES:Assessments:Board of Governors operating expenses and currency costs 2012 $
OPERATING EXPENSES:Assessments:Bureau of Consumer Financial Protection and Office of Financial R
OPERATING EXPENSES:Other 2012 $ 95 2011 $89
OPERATING EXPENSES:Total operating expenses 2012 $ 266 2011 $247
OPERATING EXPENSES:Net income before interest on Federal Reserve notes expense remitted to Treasur
OPERATING EXPENSES:Interest on Federal Reserve notes expense remitted to Treasury 2012 $ 1,337 201
OPERATING EXPENSES:Net income 2012 $ 29 2011 $18
OPERATING EXPENSES:Change in prior service costs and actuarial losses related to benefit plans 2012 $
OPERATING EXPENSES:Total other comprehensive loss 2012 $ (8) 2011 $1
OPERATING EXPENSES:Comprehensive income 2012 $ 21 2011 $17
The accompanying notes are an integral part of these financial statements.
F E D E R A L R E S E R V E B A N K O F ST. L O U I S
S T A T E M E N T S OF C H A N G E S IN CAPITAL
For the years ended December 31, 2012 and December 31, 2011
(in millions, except share data)
Surplus
Heading row column 1 category column 2 Capital paid-in column 3 Net income retained column 4 Accumulated other comprehensive
Balance at December 31, 2010 (4,323,320 shares) Capital paid-in $ 216 Net income retained $ 226 Accumulated other comprehensiv
Net change in capital stock issued (76,669 shares) Capital paid-in $4 Net income retained $0 Accumulated other comprehensive loss
Comprehensive income:Net income Capital paid-in $0 Net income retained $18 Accumulated other comprehensive loss $0 Total surp
Comprehensive income:Other comprehensive loss Capital paid-in $0 Net income retained $0 Accumulated other comprehensive loss
Dividends on capital stock Capital paid-in $0 Net income retained $(13) Total surplus $(13) Total capital $(13)
Net change in capital Capital paid-in $4 Net income retained $5 Accumulated other comprehensive loss $(1) Total surplus $4 Total ca
Balance at December 31, 2011(4,399,989 shares) Capital paid-in $ 220 Net income retained $231 Accumulated other comprehensive
Net change in capital stock issued(162,012 shares) Capital paid-in $8 Net income retained $0 Accumulated other comprehensive loss
Comprehensive income:Net income Capital paid-in $0 Net income retained $29 Accumulated other comprehensive loss $0 Total surp
Comprehensive income:Other comprehensive loss Capital paid-in $0 Net income retained $0 Accumulated other comprehensive loss
Dividends on capital stock Capital paid-in $0 Net income retained $(13) Accumulated other comprehensive loss $0 Total surplus $(13
Net change in capital Capital paid-in $8 Net income retained $16 Accumulated other comprehensive loss $(8) Total surplus $8 Total
Balance at December 31, 2012 (4,562,001 shares) Capital paid-in $228 Net income retained $247 Accumulated other comprehensive
The accompanying notes are an integral part of these financial statements.
1.
STRUCTURE
The Federal Reserve Bank of St. Louis (Bank) is part of the Federal Reserve System (System) and is one of the 12
Federal Reserve Banks (Reserve Banks) created by Congress under the Federal Reserve Act of 1913 (Federal
Reserve Act), which established the central bank of the United States. The Reserve Banks are chartered by the
federal government and possess a unique set of governmental, corporate, and central bank characteristics. The
Bank serves the Eighth Federal Reserve District, which includes Arkansas, and portions of Illinois, Indiana,
Kentucky, Mississippi, Missouri and Tennessee.
In accordance with the Federal Reserve Act, supervision and control of the Bank is exercised by a board of
directors. The Federal Reserve Act specifies the composition of the board of directors for each of the Reserve
Banks. Each board is composed of nine members serving three-year terms: three directors, including those
designated as chairman and deputy chairman, are appointed by the Board of Governors of the Federal Reserve
System (Board of Governors) to represent the public, and six directors are elected by member banks. Banks
that are members of the System include all national banks and any state-chartered banks that apply and are
approved for membership. Member banks are divided into three classes according to size. Member banks in
each class elect one director representing member banks and one representing the public. In any election of
directors, each member bank receives one vote, regardless of the number of shares of Reserve Bank stock it
holds.
In addition to the 12 Reserve Banks, the System also consists, in part, of the Board of Governors and the Federal
Open Market Committee (FOMC). The Board of Governors, an independent federal agency, is charged by the
Federal Reserve Act with a number of specific duties, including general supervision over the Reserve Banks.
The FOMC is composed of members of the Board of Governors, the president of the Federal Reserve Bank of
New York (FRBNY), and, on a rotating basis, four other Reserve Bank presidents.
2.
OPERATIONS AND SERVICES
The Reserve Banks perform a variety of services and operations. These functions include participating in
formulating and conducting monetary policy; participating in the payment system, including large-dollar
transfers of funds, automated clearinghouse (ACH) operations, and check collection; distributing coin and
currency; performing fiscal agency functions for the U.S. Department of the Treasury (Treasury), certain
federal agencies, and other entities; serving as the federal government's bank; providing short-term loans to
depository institutions; providing loans to participants in programs or facilities with broad-based eligibility in
unusual and exigent circumstances; serving consumers and communities by providing educational materials
and information regarding financial consumer protection rights and laws and information on community
development programs and activities; and supervising bank holding companies, state member banks, savings
and loan holding companies, U.S. offices of foreign banking organizations, and designated financial market
utilities pursuant to authority delegated by the Board of Governors. Certain services are provided to foreign
and international monetary authorities, primarily by the FRBNY.
The FOMC, in conducting monetary policy, establishes policy regarding domestic open market operations,
oversees these operations, and issues authorizations and directives to the FRBNY to execute transactions. The
FOMC authorizes and directs the FRBNY to conduct operations in domestic markets, including the direct
purchase and sale of Treasury securities, government-sponsored enterprise (GSE) debt securities, federal
agency and GSE mortgage-backed securities (MBS), the purchase of these securities under agreements to
resell, and the sale of these securities under agreements to repurchase. The FRBNY holds the resulting
securities and agreements in a portfolio known as the System Open Market Account (SOMA). The FRBNY is
authorized and directed to lend the Treasury securities and federal agency and GSE debt securities that are held
in the SOMA.
To counter disorderly conditions in foreign exchange markets or to meet other needs specified by the FOMC to
carry out the System's central bank responsibilities, the FOMC has authorized and directed the FRBNY to
execute spot and forward foreign exchange transactions in 14 foreign currencies, to hold balances in those
currencies, and to invest such foreign currency holdings, while maintaining adequate liquidity. The FOMC has
also authorized the FRBNY to maintain reciprocal currency arrangements with the Bank of Canada and the
Bank of Mexico in the maximum amounts of $2 billion and $3 billion, respectively, and to warehouse foreign
currencies for the Treasury and the Exchange Stabilization Fund.
Because of the global character of funding markets, the System has at times coordinated with other central banks to
provide temporary liquidity. In May 2010, the FOMC authorized and directed the FRBNY to establish
temporary U.S. dollar 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 through January 2011. Subsequently,
the FOMC authorized and directed the FRBNY to extend these arrangements through February 1, 2013. In
December, 2012, the FOMC authorized and directed the FRBNY to extend these arrangements through
February 1, 2014. In addition, in November 2011, as a contingency measure, the FOMC authorized the
FRBNY to establish temporary bilateral foreign currency 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 to U.S. institutions in any of their currencies if necessary. In December 2012,
the FOMC authorized the FRBNY to extend these temporary bilateral foreign currency liquidity swap
arrangements through February 1, 2014.
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.
SIGNIFICANT ACCOUNTING POLICIES
Accounting principles for entities with the unique powers and responsibilities of the nation's central bank have not
been formulated by accounting standard-setting bodies. The Board of Governors has developed specialized
accounting principles and practices that it considers to be appropriate for the nature and function of a central
bank. These accounting principles and practices are documented in the Financial Accounting Manual for
Federal Reserve Banks (FAM), which is issued by the Board of Governors. The Reserve Banks are required to
adopt and apply accounting policies and practices that are consistent with the FAM 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 all SOMA securities on a settlement-date basis. Amortized cost, rather than the fair
value presentation, more appropriately reflects the Bank's securities holdings given the System's unique
responsibility to conduct monetary policy. Although the application of fair value measurements to the
securities holdings may result in values substantially greater or less than their carrying values, these unrealized
changes in value have no direct effect on the quantity of reserves available to the banking system or on the
ability of the Reserve Banks, as the central bank, to meet their financial obligations and responsibilities. Both
the domestic and foreign components of the SOMA portfolio may involve transactions that result in gains or
losses when holdings are sold before maturity. Decisions regarding securities and foreign currency
transactions, including their purchase and sale, are motivated by monetary policy objectives rather than profit.
Accordingly, fair values, earnings, and gains or losses resulting from the sale of such securities and currencies
are incidental to open market operations and do not motivate decisions related to policy or open market
activities. Accounting for these securities on a settlement-date basis, rather than the trade-date basis required
by GAAP, better reflects the timing of the transaction's effect on the quantity of reserves in the banking
system. The cost bases of Treasury securities, GSE debt securities, and foreign government debt instruments
are adjusted for amortization of premiums or accretion of discounts on a straight-line basis, rather than using
the interest method required by GAAP. SOMA securities holdings are evaluated for credit impairment
periodically.
In addition, the Bank does not present a Statement of Cash Flows as required by GAAP because the liquidity and
cash position of the Bank are not a primary concern given the Reserve Banks' unique powers and
responsibilities as a central bank. Other information regarding the Bank's activities is provided in, or may be
derived from, the Statements of Condition, Income and Comprehensive Income, and Changes in Capital, and
the accompanying notes to the financial statements. Other than those described above, there are no significant
differences between the policies outlined in the FAM and GAAP.
Preparing the financial statements in conformity with the FAM requires management to make certain estimates and
assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and
liabilities at the date of the financial statements, and the reported amounts of income and expenses during the
reporting period. Actual results could differ from those estimates.
The presentation of "Dividends on capital stock" and "Interest on Federal Reserve notes expense remitted to
Treasury" in the Statements of Income and Comprehensive Income for the year ended December 31, 2011 has
been revised to conform to the current year presentation format. In addition, the presentation of
"Comprehensive income" and "Dividends on capital stock" in the Statements of Changes in Capital for the
year ended December 31, 2011 have been revised to conform to the current year presentation format. The
revised presentation of "Dividends on capital stock" and "Interest on Federal Reserve notes expense remitted
to Treasury" better reflects the nature of these items and results in a more consistent treatment of the amounts
presented in the Statements of Income and Comprehensive Income and the related balances presented in the
Statements of Condition. As a result of the change to report "Interest on Federal Reserve Notes expense
remitted to Treasury" as an expense, the amount reported as "Comprehensive Income" for the year ended
December 31, 2011 has been revised. Significant accounts and accounting policies are explained below.
a. Consolidation
The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act) established the
Bureau of Consumer Financial Protection (Bureau) as an independent bureau within the System that has
supervisory authority over some institutions previously supervised by the Reserve Banks in connection
with those institutions' compliance with consumer protection statutes. Section 1017 of the Dodd-Frank
Act provides that the financial statements of the Bureau are not to be consolidated with those of the Board
of Governors or the System. 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 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. Gold
certificates are recorded by the Banks at original cost. The Board of Governors allocates the gold
certificates among the Reserve Banks once a year based on each Reserve Bank's average Federal Reserve
notes outstanding during the preceding calendar year.
SDRs are issued by the International Monetary Fund (IMF) to its members in proportion to each member's
quota in the IMF at the time of issuance. SDRs serve as a supplement to international monetary reserves
and may be transferred from one national monetary authority to another. Under the law providing for U.S.
participation in the SDR system, the Secretary of the Treasury is authorized to issue SDR certificates to
the Reserve Banks. When SDR certificates are issued to the Reserve Banks, equivalent amounts in U.S.
dollars are credited to the account established for the Treasury and the Reserve Banks' SDR certificate
accounts are increased. The Reserve Banks are required to purchase SDR certificates, at the direction of
the Treasury, for the purpose of financing SDR acquisitions or for financing exchange stabilization
operations. At the time SDR certificate transactions occur, the Board of Governors allocates the SDR
certificates among the Reserve Banks based upon each Reserve Bank's Federal Reserve notes outstanding
at the end of the preceding calendar year. SDR certificates are recorded by the Banks at original cost.
There were no SDR certificate transactions during the years ended December 31, 2012 and 2011.
c. Coin
The amount reported as coin in the Statements of Condition represents the face value of all United States coin
held by the Bank. The Bank buys coin at face value from the U.S. Mint in order to fill depository
institution orders.
d. Loans
Loans to depository institutions are reported at their outstanding principal balances, and interest income is
recognized on an accrual basis.
Loans are impaired when current information and events indicate that it is probable that the Bank will not
receive the principal and interest that are due in accordance with the contractual terms of the loan
agreement. Impaired loans are evaluated to determine whether an allowance for loan loss is required. The
Bank has developed procedures for assessing the adequacy of any allowance for loan losses using all
available information to identify incurred losses. This assessment includes monitoring information
obtained from banking supervisors, borrowers, and other sources to assess the credit condition of the
borrowers and, as appropriate, evaluating collateral values. Generally, the Bank would discontinue
recognizing interest income on impaired loans until the borrower's repayment performance demonstrates
principal and interest would be received in accordance with the terms of the loan agreement. If the Bank
discontinues recording interest on an impaired loan, cash payments are first applied to principal until the
loan balance is reduced to zero; subsequent payments are applied as recoveries of amounts previously
deemed uncollectible, if any, and then as interest income.
e. Securities Purchased Under Agreements to Resell, Securities Sold Under Agreements to Repurchase, and
Securities Lending
The FRBNY may engage in purchases of securities with primary dealers under agreements to resell
(repurchase transactions). These repurchase transactions are settled through a triparty arrangement. In a
trip arty arrangement, two commercial custodial banks manage the collateral clearing, settlement, pricing,
and pledging, and provide cash and securities custodial services for and on behalf of the FRBNY and
counterparty. The collateral pledged must exceed the principal amount of the transaction by a margin
determined by the FRBNY for each class and maturity of acceptable collateral. Collateral designated by
the FRBNY as acceptable under repurchase transactions primarily includes Treasury securities (including
Treasury Inflation-Protected Securities and Separate Trading of Registered Interest and Principal of
Securities Treasury securities); direct obligations of several federal and GSE-related agencies, including
Federal National Mortgage Association (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. These transactions are reported at their
contractual amounts as "System Open Market Account: Securities purchased under agreements to resell",
if material, and the related accrued interest receivable is reported as a component of "Other assets" in the
Statements of Condition.
The FRBNY may engage in sales of securities under agreements to repurchase (reverse repurchase
transactions) with primary dealers and selected money market funds. The list of eligible counterparties
was expanded to include GSEs, effective in July 2011, and bank and savings institutions, effective in
December 2011. These reverse repurchase transactions may be executed through a trip arty 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" and "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 inter district 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 pay downs. Premiums and discounts related to federal agency
and GSE MBS are amortized or accreted over the term of the security to stated maturity, and the
amortization of premiums and accretion of discounts are accelerated when principal payments are
received. Gains and losses resulting from sales of securities are determined by specific issue based on
average cost. Treasury securities, GSE debt securities, and federal agency and GSE MBS are reported net
of premiums and discounts in the Statements of Condition and interest income on those securities is
reported net of the amortization of premiums and accretion of discounts in the Statements of Income and
Comprehensive Income.
In addition to outright purchases of federal agency and GSE MBS that are held in the SOMA, the FRBNY
enters into dollar roll transactions (dollar rolls), which primarily involve an initial transaction to purchase
or sell "to be announced" (TBA) MBS for delivery in the current month combined with a simultaneous
agreement to sell or purchase TBA MBS on a specified future date. During the years ended December 31,
2012 and 2011, the FRBNY executed dollar rolls primarily to facilitate settlement of outstanding
purchases of federal agency and GSE MBS. The FRBNY accounts for dollar roll transactions as
purchases or sales on a settlement-date basis. In addition, TBA MBS transactions may be paired off or
assigned prior to settlement. Net gains resulting from dollar roll transactions are reported as "Non-interest
income: System Open Market Account: Federal agency and government-sponsored enterprise mortgagebacked securities gains, net" in the Statements of Income and Comprehensive Income.
Foreign currency denominated assets, which can include foreign currency deposits, securities purchased under
agreements to resell, and government debt instruments, are revalued daily at current foreign currency
market exchange rates in order to report these assets in U.S. dollars. Foreign currency translation gains
and losses that result from the daily revaluation of foreign currency denominated assets are reported as
"Non-interest income: System Open Market Account: Foreign currency translation (losses) 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 inter district 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.
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 during the term of the
swap transaction is reported as "Interest income: System Open Market Account: Central bank liquidity
swaps" in the Statements of Income and Comprehensive Income.
Foreign currency liquidity swaps
The structure of foreign currency liquidity swap transactions involves the transfer by the FRBNY, at the
prevailing market exchange rate, of a specified amount of U.S. dollars to an account for the foreign central
bank in exchange for its currency. The foreign currency amount received would be reported as a liability
by the Bank.
h. Bank Premises, Equipment, and Software
Bank premises and equipment are stated at cost less accumulated depreciation. Depreciation is calculated on a
straight-line basis over the estimated useful lives of the assets, which range from 2 to 50 years. Major
alterations, renovations, and improvements are capitalized at cost as additions to the asset accounts and are
depreciated over the remaining useful life of the asset or, if appropriate, over the unique useful life of the
alteration, renovation, or improvement. Maintenance, repairs, and minor replacements are charged to
operating expense in the year incurred.
Costs incurred 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. Inter district 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 "Inter district settlement account" in the Statements of Condition.
An annual settlement of the inter district settlement account occurs in the second quarter of each year. As a
result of the annual settlement, the balance in each Bank's inter district settlement account is adjusted by
an amount equal to the average balance in the account during the previous twelve month period ended
March 31. An equal and offsetting adjustment is made to each Bank's allocated portion of SOMA assets
and liabilities.
j. Federal Reserve Notes
Federal Reserve notes are the circulating currency of the United States. These notes, which are identified as
issued to a specific Reserve Bank, must be fully collateralized. All of the Bank's assets are eligible to be
pledged as collateral. The collateral value is equal to the book value of the collateral tendered with the
exception of securities, for which the collateral value is equal to the par value of the securities tendered.
The par value of securities sold under agreements to repurchase is deducted from the eligible collateral
value.
The Board of Governors may, at any time, call upon a Reserve Bank for additional security to adequately
collateralize outstanding Federal Reserve notes. To satisfy the obligation to provide sufficient collateral
for outstanding Federal Reserve notes, the Reserve Banks have entered into an agreement that provides for
certain assets of the Reserve Banks to be jointly pledged as collateral for the Federal Reserve notes issued
to all Reserve Banks. In the event that this collateral is insufficient, the Federal Reserve Act provides that
Federal Reserve notes become a first and paramount lien on all the assets of the Reserve Banks. Finally,
Federal Reserve notes are obligations of the United States government.
"Federal Reserve notes outstanding, net" in the Statements of Condition represents the Bank's Federal Reserve
notes outstanding, reduced by the Bank's currency holdings of $3,779 million and $4,018 million at
December 31, 2012 and 2011, respectively.
At December 31, 2012 and 2011, all Federal Reserve notes issued to the Reserve Banks were fully
collateralized. At December 31, 2012, all gold certificates, all special drawing rights certificates, and
$1,110 billion of domestic securities held in the SOMA were pledged as collateral. At December 31,
2012, 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 a component of "Interest
payable to depository institutions" in the Statements of Condition.
The Term Deposit Facility (TDF) consists of deposits with specific maturities held by eligible institutions at
the Reserve Banks. The Reserve Banks pay interest on these deposits at interest rates determined by
auction. Interest payable is reported as a component of "Interest payable to depository institutions" in the
Statements of Condition. There were no deposits held by the Bank under the TDF at December 31, 2012
and 2011.
Other
Other deposits include the Bank's allocated portion of foreign central bank and foreign government deposits
held at the FRBNY.
l. Items in Process of Collection and Deferred Credit Items
"Items in process of collection" primarily represents amounts attributable to checks that have been deposited
for collection and that, as of the balance sheet date, have not yet been presented to the paying bank.
"Deferred credit items" 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.
m. Capital Paid-in
The Federal Reserve Act requires that each member bank subscribe to the capital stock of the Reserve Bank in
an amount equal to six percent of the capital and surplus of the member bank. These shares are nonvoting,
with a par value of $100, and may not be transferred or hypothecated. As a member bank's capital and
surplus changes, its holdings of Reserve Bank stock must be adjusted. Currently, only one-half of the
subscription is paid in and the remainder is subject to call. A member bank is liable for Reserve Bank
liabilities up to twice the par value of stock subscribed by it.
By law, each Reserve Bank is required to pay each member bank an annual dividend of six percent on the
paid-in capital stock. This cumulative dividend is paid semiannually.
n. Surplus
The Board of Governors requires the Reserve Banks to maintain a surplus equal to the amount of capital paidin. On a daily basis, surplus is adjusted to equate the balance to capital paid-in. Accumulated other
comprehensive income is reported as a component of "Surplus" in the Statements of Condition and the
Statements of Changes in Capital. Additional information regarding the classifications of accumulated
other comprehensive income is provided in Notes 9 and 10.
o. 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 "Interest on
Federal Reserve notes expense remitted to Treasury" 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. See Note 11 for additional information on interest on Federal Reserve notes.
If earnings during the year are not sufficient to provide for the costs of operations, payment of dividends, and
equating surplus and capital paid-in, remittances to the Treasury are suspended. A deferred asset is
recorded that represents the amount of net earnings a Reserve Bank will need to realize before remittances
to the Treasury resume. This deferred asset is periodically reviewed for impairment.
p. Income and Costs Related to Treasury Services
When directed by the Secretary of the Treasury, the Bank is required by the Federal Reserve Act to serve as
fiscal agent and depositary of the United States Government. By statute, the Treasury has appropriations
to pay for these services. During the years ended December 31, 2012 and 2011, the Bank was reimbursed
for all services provided to the Treasury as its fiscal agent.
q. Compensation Received for Service Costs Provided
The Federal Reserve Bank of Atlanta has overall responsibility for managing the Reserve Banks' provision of
check and ACH services to depository institutions, the FRBNY has overall responsibility for managing the
Reserve Banks' provision of Fedwire funds and securities services, and the Federal Reserve Bank of
Chicago has overall responsibility for managing the Reserve Banks' provision of electronic access
services to depository institutions. The Reserve Bank that has overall responsibility for managing these
services recognizes the related total System revenue in its Statements of Income and Comprehensive
Income. The Bank is compensated for costs incurred to provide these services and reports this
compensation as "Non-interest income: Compensation received for service costs provided" in its
Statements of Income and Comprehensive Income.
r. Assessments
The Board of Governors assesses the Reserve Banks to fund its operations, the operations of the Bureau and,
for a two-year period following the July 21, 2010 effective date of the Dodd-Frank Act, the OFR. These
assessments are allocated to each Reserve Bank based on each Reserve Bank's capital and surplus
balances. The Board of Governors also assesses each Reserve Bank for expenses related to producing,
issuing, and retiring Federal Reserve notes based on each Reserve Bank's share of the number of notes
comprising the System's net liability for Federal Reserve notes on December 31 of the prior year.
During the period before the Bureau transfer date of July 21, 2011, there was no limit on the funding provided
to the Bureau and assessed to the Reserve Banks; the Board of Governors was required to provide the
amount estimated by the Secretary of the Treasury needed to carry out the authorities granted to the
Bureau under the Dodd-Frank Act and other federal law. The Dodd-Frank Act requires that, after the
transfer date, the Board of Governors fund the Bureau in an amount not to exceed a fixed percentage of
the total operating expenses of the System as reported in the Board of Governors' 2009 annual report,
which totaled $4.98 billion. The fixed percentage of total 2009 operating expenses of the System is 10
percent ($498.0 million) for 2011, 11 percent ($547.8 million) for 2012, and 12 percent ($597.6 million)
for 2013. After 2013, the amount will be adjusted in accordance with the provisions of the Dodd-Frank
Act. The Bank's assessment for Bureau funding is reported as "Assessments: Bureau of Consumer
Financial Protection and Office of Financial Research" in the Statements of Income and Comprehensive
Income.
The Board of Governors assessed the Reserve Banks to fund the operations of the OFR for the two-year period
ended July 21, 2012, following enactment of the Dodd-Frank Act; thereafter, the OFR is funded by fees
assessed on bank holding companies and non-bank financial companies that meet the criteria specified in
the Dodd-Frank Act.
s. Taxes
The Reserve Banks are exempt from federal, state, and local taxes, except for taxes on real property. The
Bank's real property taxes were $1 million for each of the years ended December 31, 2012 and 2011, and
are reported as a component of "Operating expenses: Occupancy" in the Statements of Income and
Comprehensive Income.
t. Restructuring Charges
The Reserve Banks recognize restructuring charges for exit or disposal costs incurred as part of the closure of
business activities in a particular location, the relocation of business activities from one location to
another, or a fundamental reorganization that affects the nature of operations. Restructuring charges may
include costs associated with employee separations, contract terminations, and asset impairments.
Expenses are recognized in the period in which the Bank commits to a formalized restructuring plan or
executes the specific actions contemplated in the plan and all criteria for financial statement recognition
have been met.
Costs and liabilities associated with enhanced pension benefits in connection with the restructuring activities
for all of the Reserve Banks are recorded on the books of the FRBNY.
The Bank had no significant restructuring activities in 2012 and 2011.
u. Recently Issued Accounting Standards
In April 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (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 did not 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 did not have a material effect on 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 ending 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 deferred
the requirements of ASU 2011-05, which required an entity to report the effect of significant
reclassifications out of accumulated other comprehensive income on the respective net income line items.
Subsequently, in February 2013, the FASB issued 2013-02, Comprehensive Income (Topic 220):
Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income, which established
an effective date for the requirements of ASU 2011-05 related to reporting of significant reclassification
adjustments from accumulated other comprehensive income. These presentation requirements of ASU
2011-05 are effective for the Bank for the year ending December 31, 2013, and will be reflected in the
Bank's 2013 financial statements.
In January 2013, the FASB issued ASU 2013-01, Balance Sheet (Topic 210): Clarifying the Scope of
Disclosures about Offsetting Assets and Liabilities. This update clarifies that the scope of ASU 2011-11
applies to derivatives accounted for in accordance with Topic 815. This update is effective for the Bank
for the year ending December 31, 2013, and is not expected to have a material effect on the Bank's
financial statements.
4.
LOANS
Loans to Depository Institutions
The Bank offers primary, secondary, and seasonal loans to eligible borrowers, and each program has its own
interest rate. Interest is accrued using the applicable interest rate established at least every 14 days by the
Bank's board of directors, subject to review and determination by the Board of Governors. Primary and
secondary loans are extended on a short-term basis, typically overnight, whereas seasonal loans may be
extended for a period of up to nine months.
Primary, secondary, and seasonal loans are collateralized to the satisfaction of the Bank to reduce credit risk.
Assets eligible to collateralize these loans include consumer, business, and real estate loans; Treasury
securities; GSE debt securities; foreign sovereign debt; municipal, corporate, and state and local government
obligations; asset-backed securities; corporate bonds; commercial paper; and bank-issued assets, such as
certificates of deposit, bank notes, and deposit notes. Collateral is assigned a lending value that is deemed
appropriate by the Bank, which is typically fair value reduced by a margin. Loans to depository institutions
are monitored daily to ensure that borrowers continue to meet eligibility requirements for these programs. 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.
The Bank had no loans outstanding as of December 31, 2012. Loans to depository institutions were immaterial as
of December 31, 2011, with a remaining maturity within 15 days.
At December 31, 2012 and 2011, the Bank did not have any loans that were impaired, past due, or on non-accrual
status, and no allowance for loan losses was required. There were no impaired loans during the years ended
December 31, 2012 and 2011.
5.
SYSTEM OPEN MARKET ACCOUNT
a. Domestic Securities Holdings
The FRBNY conducts domestic open market operations and, on behalf of the Reserve Banks, holds the resulting
securities in the SOMA.
During the years ended December 31, 2012 and 2011, the FRBNY continued the purchase of Treasury securities
and federal agency and GSE MBS under the large-scale asset purchase programs authorized by the FOMC. In
August 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. In November 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. In September 2011, the FOMC announced that the
Federal Reserve would reinvest principal payments from the SOMA portfolio holdings of GSE debt securities
and federal agency and GSE MBS in federal agency and GSE MBS. In June 2012, the FOMC announced that
it would continue the existing policy of reinvesting principal payments from the SOMA portfolio holdings of
GSE debt securities and federal agency and GSE MBS in federal agency and GSE MBS, and suspended the
policy of rolling over maturing Treasury securities into new issues at auction. In September 2012, the FOMC
announced that the Federal Reserve would purchase additional federal agency and GSE MBS at a pace of $40
billion per month and maintain its existing policy of reinvesting principal payments from its holdings of
agency debt and federal agency and GSE MBS in federal agency and GSE MBS. In December 2012, the
FOMC announced that the Federal Reserve would purchase longer-term Treasury securities at a pace of $45
billion per month after its program to extend the average maturity of its holdings of Treasury securities is
completed at the end of 2012.
During the years ended December 31, 2012 and 2011, the FRBNY also continued the purchase and sale of SOMA
portfolio holdings under the maturity extension programs authorized by the FOMC. In September 2011, the
FOMC announced that the Federal Reserve would extend the average maturity of the SOMA portfolio
holdings of securities by purchasing $400 billion par value of Treasury securities with maturities of six to
thirty years and selling or redeeming an equal par amount of Treasury securities with remaining maturities of
three years or less by the end of June 2012. In June 2012, the FOMC announced that the Federal Reserve
would continue through the end of 2012 its program to extend the average maturity of securities by purchasing
$267 billion par value of Treasury securities with maturities of six to thirty years and selling or redeeming an
equal par amount of Treasury securities with maturities of three and a quarter years or less by the end of 2012.
In September 2012, the FOMC announced it would continue its program to extend the average maturity of its
holdings of securities as announced in June 2012.
The Bank's allocated share of activity related to domestic open market operations was 1.563 percent and 1.893
percent at December 31, 2012 and 2011, respectively.
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):
2012
Heading row column 1 category column 2 Par column 3 Unamortized premiums column 4 Unaccreted discounts colum
Bills Par $ 0 Unamortized premiums $ 0 Unaccreted discounts $0 Total amortized cost $0
Notes Par $ 17,360 Unamortized premiums $ 509 Unaccreted discounts $(11) Total amortized cost $17,858
Bonds Par $8,688 Unamortized premiums $ 1,741 Unaccreted discounts $(2) Total amortized cost $10,427
Total Treasury securities Par $26,048 Unamortized premiums $ 2,250 Unaccreted discounts $(13) Total amortized cos
GSE debt securities Par $1,201 Unamortized premiums $ 42 Unaccreted discounts $0 Total amortized cost $1,243
Federal agency and GSE MBS Par $14,487 Unamortized premiums $ 381 Unaccreted discounts $(11) Total amortized
2011
Heading row column 1 category column 2 Par column 3 Unamortized premiums column 4 Unaccreted discounts colum
Bills Par $ 349 Unamortized premiums $ 0 Unaccreted discounts $0 Total amortized cost $349
Notes Par $24,346 Unamortized premiums $ 508 Unaccreted discounts $(23) Total amortized cost $24,831
Bonds Par $6,789 Unamortized premiums $ 1,161 Unaccreted discounts $(2) Total amortized cost $7,948
Total Treasury securities Par $31,484 Unamortized premiums $ 1,669 Unaccreted discounts $(25) Total amortized co
GSE debt securities Par $1,968 Unamortized premiums $ 73 Unaccreted discounts $ Total amortized cost $2,041
Federal agency and GSE MBS Par $15,855 Unamortized premiums $ 220 Unaccreted discounts $(20) Total amortize
The 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 executed to temporarily drain reserve balances from the banking system and as part of a service
offering to foreign official and international account holders.
There were no material transactions related to securities purchased under agreements to resell during the years
ended December 31, 2012 and 2011. Financial information related to securities sold under agreements to
repurchase for the years ended December 31 was as follows (in millions):
Heading row column 1 category column 2 Allocated to the Bank 2012 column 3 Allocated to the Bank 2011 column 4 Total SO
Contract amount outstanding, end of year Allocated to the Bank 2012 $ 1,676 Allocated to the Bank 2011 $ 1,891 Total SOM
Average daily amount outstanding, during the year Allocated to the Bank 2012 $1,522 Allocated to the Bank 2011 $1,480 Tot
Maximum balance outstanding, during the year Allocated to the Bank 2012 $1,916 Allocated to the Bank 2011 $2,357 Total S
Securities pledged (par value), end of year Allocated to the Bank 2012 $1,463 Allocated to the Bank 2011 $1,629 Total SOMA
Securities pledged (market value), end of year Allocated to the Bank 2012 $1,676 Allocated to the Bank 2011 $1,891 Total SO
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, 2012, and 2011 was as follows (in millions):
Heading row column 1 category column 2 Within 15 days column 3 16 days to 90 days column 4 91 days to 1 year column 5
December 31, 2012:Treasury securities (par value) Within 15 days $ 0 16 days to 90 days $ - 91 days to 1 year $ - Over 1 y
December 31, 2012:GSE debt securities (par value) Within 15 days $24 16 days to 90 days $44 91 days to 1 year $238 Ove
December 31, 2012:Federal agency and GSE MBS (par value)(footnote 1 The par amount shown for federal agency and GS
December 31, 2012:Securities sold under agreements to repurchase e (contract amount) Within 15 days $1,676 16 days to
December 31, 2011:Treasury securities (par value) Within 15 days $307 16 days to 90 days $513 91 days to 1 year $1,702
December 31, 2011:GSE debt securities (par value) Within 15 days $47 16 days to 90 days $95 91 days to 1 year $373 Ove
December 31, 2011:Federal agency and GSE MBS (par value)(footnote 1) Within 15 days $0 16 days to 90 days $0 91 day
December 31, 2011:Securities sold under agreements to repurchase e (contract amount) Within 15 days $1,891 16 days to
Federal agency and GSE MBS are reported at stated maturity in the table above. The estimated weighted average
life of these securities, which differs from the stated maturity primarily because it factors in scheduled
payments and prepayment assumptions, was approximately 3.3 and 2.4 years as of December 31, 2012, and
2011, respectively.
The amortized cost and par value of Treasury securities and GSE debt securities that were loaned from the SOMA
at December 31 was as follows (in millions):
Heading row column 1 category column 2 Allocated to the Bank 2012 column 3 Allocated to the Bank 2011 column 4 Total SO
Treasury securities (amortized cost) Allocated to the Bank 2012 $ 143 Allocated to the Bank 2011 $ 286 Total SOMA 2012 $ 9
Treasury securities (par value) Allocated to the Bank 2012 $132 Allocated to the Bank 2011 $265 Total SOMA 2012 $8,460 To
GSE debt securities (amortized cost) Allocated to the Bank 2012 $11 Allocated to the Bank 2011 $24 Total SOMA 2012 $697
GSE debt securities (par value) Allocated to the Bank 2012 $11 Allocated to the Bank 2011 $23 Total SOMA 2012 $676 Total
The FRBNY enters into commitments to buy and sell Treasury securities and records the related securities on a
settlement-date basis. As of December 31, 2012, there were no outstanding commitments.
The FRBNY enters into commitments to buy and sell federal agency and GSE MBS and records the related
securities on a settlement-date basis. As of December 31, 2012, the total purchase price of the federal agency
and GSE MBS under outstanding purchase commitments was $118,215 million, of which $10,164 million was
related to dollar roll transactions. The total purchase price of outstanding purchase commitments allocated to
the Bank was $1,848 million, of which $159 million was related to dollar roll transactions. As of December
31, 2012, there were no outstanding sales commitments for federal agency and GSE MBS. These
commitments, which had contractual settlement dates extending through February 2013, are for the purchase
of TBA MBS for which the number and identity of the pools that will be delivered to fulfill the commitment
are unknown at the time of the trade. These commitments are subject to varying degrees of off-balance-sheet
market risk and counterparty credit risk that result from their future settlement. The FRBNY requires the
posting of cash collateral for commitments as part of the risk management practices used to mitigate the
counterparty credit risk.
Other 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):
Heading row column 1 category column 2 Allocated to the Bank 2012 column 3 Allocated to the Bank 2011 column 4 Total SOMA 2012
Cash margin Allocated to the Bank 2012 $49 Allocated to the Bank 2011 $ 24 Total SOMA 2012 $ 3,092 Total SOMA 2011 $ 1,271
Obligations from MBS transaction fails Allocated to the Bank 2012 $1 Allocated to the Bank 2011 $2 Total SOMA 2012 $85 Total SOM
Total other liabilities Allocated to the Bank 2012 $50 Allocated to the Bank 2011 $26 Total SOMA 2012 $3,177 Total SOMA 2011 $1,3
Information about transactions related to Treasury securities, GSE debt securities, and federal agency and GSE
MBS during the years ended December 31, 2012 and 2011, is summarized as follows (in millions):
Allocated to the Bank
Heading row column 1 category column 2 Bills column 3 Notes column 4 Bonds column 5 Total Treasury securities column 6
Balance December 31, 2010 Bills $ 474 Notes $ 20,261 Bonds $ 6,748 Total Treasury securities$ 27,483 GSE debt securities
Purchases(footnote 1 Purchases and sales are reported on a settlement-date basis and may include payments and receipts re
Sales(footnote 1) Bills $0 Notes $(2,607) Bonds $0 Total Treasury securities(2,607) GSE debt securities $0 Federal agency a
Realized gains, net(footnote 2 Realized gains, net offset the amount of realized gains and losses included in the reported sale
Principal payments and maturities Bills $(4,993) Notes $(1,384) Bonds $0 Total Treasury securities(6,377) GSE debt securitie
Amortization of premiums and accretion of discounts, net Bills $0 Notes $(91) Bonds $(102) Total Treasury securities(193) GS
Inflation adjustment on inflation-indexed securities Bills $0 Notes $27 Bonds $22 Total Treasury securities49 GSE debt securi
Annual reallocation adjustment(footnote 4 Reflects the annual adjustment to the Bank's allocated portion of the related SOMA
Balance December 31, 2011 Bills $349 Notes $24,831 Bonds $7,948 Total Treasury securities 33,128 GSE debt securities $2
Purchases (footnote 1) Bills $2,081 Notes $6,659 Bonds $4,377 Total Treasury securities13,117 GSE debt securities $0 Fede
Sales(footnote 1) Bills $0 Notes $(8,414) Bonds $(192) Total Treasury securities(8,606) GSE debt securities $0 Federal agen
Realized gains, net(footnote 2) Bills $0 Notes $196 Bonds $20 Total Treasury securities216 GSE debt securities $0 Federal a
Principal payments and maturities Bills $(2,369) Notes $(1,144) Bonds $0 Total Treasury securities(3,513) GSE debt securitie
Amortization of premiums and accretion of discounts, net Bills $0 Notes $(91) Bonds $(124) Total Treasury securities(215) GS
Inflation adjustment on inflation-indexed securities Bills $0 Notes $10 Bonds $17 Total Treasury securities27 GSE debt securi
Annual reallocation adjustment(footnote 4) Bills $(61) Notes $(4,189) Bonds $(1,619) Total Treasury securities(5,869) GSE de
Balance December 31, 2012 Bills $0 Notes $17,858 Bonds $10,427 Total Treasury securities 28,285 GSE debt securities $1,2
Year-ended December 31, 2011 Supplemental information - par value of transactions:
Purchases (footnote 3 Includes inflation compensation end footnote) Bills $4,993 Notes $15,789 Bonds $ 2,696 Total Treasur
Sales(footnote 3) Bills $0 Notes $(2,552) - Total Treasury securities(2,552) GSE debt securities $0 Federal agency and GSE M
Year-ended December 31, 2012 Supplemental information - par value of transactions:
Purchases(footnote 3) Bills $ 2,081 Notes $ 6,403 Bonds $3,404 Total Treasury securities11,888 GSE debt securities $0 Fede
Sales(footnote 3) Bills $0 Notes $(8,165) Bonds $(149) Total Treasury securities(8,314) GSE debt securities $0 Federal agen
Total SOMA
Heading row column 1 category column 2 Bills column 3 Notes column 4 Bonds column 5 Total Treasury securities column 6 GSE debt se
Balance December 31, 2010 Bills $ 18,422 Notes $ 786,575 Bonds $ 261,955 Total Treasury securities $ 1,066,952 GSE debt securities $ 1
Purchases(footnote 1 Purchases and sales are reported on a settlement-date basis and may include payments and receipts related to principa
Sales(footnote 1) Bills $0 Notes $(137,733) Bonds $0 Total Treasury securities $(137,733) GSE debt securities $0 Federal agency and GSE
Realized gains, net(footnote 2 Realized gains, net offset the amount of realized gains and losses included in the reported sales amount end f
Principal payments and maturities Bills $(239,494) Notes $(67,273) Bonds $0 Total Treasury securities $(306,767) GSE debt securities $(4
Amortization of premiums and accretion of discounts, net Bills $8 Notes $(4,445) Bonds $(4,985) Total Treasury securities $(9,422) GSE d
Inflation adjustment on inflation-indexed securities Bills $0 Notes $1,283 Bonds $1,091 Total Treasury securities $2,374 GSE debt securiti
Balance December 31, 2011 Bills $18,423 Notes $1,311,917 Bonds $419,937 Total Treasury securities $1,750,277 GSE debt securities $10
Purchases(footnote 1) Bills $118,886 Notes $397,999 Bonds $263,991 Total Treasury securities $780,876 GSE debt securities $0 Federal a
Sales(footnote 1) Bills $0 Notes $(507,420) Bonds $(11,727) Total Treasury securities $(519,147) GSE debt securities $0 Federal agency a
Realized gains, net(footnote 2) Bills $0 Notes $12,003 Bonds $1,252 Total Treasury securities $13,255 GSE debt securities $0 Federal age
Principal payments and maturities Bills $(137,314) Notes $(67,462) Bonds $0 Total Treasury securities $(204,776) GSE debt securities $(2
Amortization of premiums and accretion of discounts, net Bills $5 Notes $(5,461) Bonds $(7,531) Total Treasury securities $(12,987) GSE
Inflation adjustment on inflation-indexed securities Bills $0 Notes $643 Bonds $1,047 Total Treasury securities $1,690 GSE debt securities
Balance December 31, 2012 Bills $0 Notes $1,142,219 Bonds $666,969 Total Treasury securities $1,809,188 GSE debt securities $79,479
Year-ended December 31, 2011:Supplemental information - par value of transactions:
Year-ended December 31, 2011:Purchases(footnote 3 Includes inflation compensation end footnote) Bills $239,494 Notes $713,878 Bonds
Year-ended December 31, 2011:Sales(footnote 3) Bills $0 Notes $(134,829) Bonds $0 Total Treasury securities $(134,829) GSE debt secu
Year-ended December 31, 2012:Supplemental information - par value of transactions:
Year-ended December 31, 2012:Purchases(footnote 3) Bills $118,892 Notes $383,106 Bonds $205,115 Total Treasury securities $707,113
Year-ended December 31, 2012:Sales(footnote 3) Bills $0 Notes $(492,234) Bonds $(9,094) Total Treasury securities $(501,328) GSE deb
1
Purchases and sales are reported on a settlement-date basis and may include payments and receipts related to principal, premiums, discounts, and inflation
compensation adjustments to the basis of inflation-indexed securities. The amount reported as sales includes the realized gains and losses on such transactions.
Purchases and sales exclude MBS TBA transactions that are settled on a net basis.
Realized gains, net offset the amount of realized gains and losses included in the reported sales amount.
Includes inflation compensation
b. Foreign Currency Denominated Assets
The FRBNY conducts foreign currency operations and, on behalf of the Reserve Banks, holds the resulting foreign
currency denominated assets in the SOMA.
The FRBNY holds foreign currency deposits with foreign central banks and the Bank for International Settlements
and invests in foreign government debt instruments of Germany, France, and Japan. These foreign
government debt instruments are guaranteed as to principal and interest by the issuing foreign governments. In
addition, the FRBNY enters into transactions to purchase Euro-denominated government debt securities under
agreements to resell for which the accepted collateral is the debt instruments issued by the governments of
Belgium, France, Germany, Italy, the Netherlands, and Spain.
The Bank's allocated share of activity related to foreign currency operations was .818 percent and .815 percent at
December 31, 2012 and 2011, respectively.
Information about 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):
Heading row column 1 category column 2 Allocated to Bank 2012 column 3 Allocated to Bank 2011 column 4 Total SOMA 2012 colum
Euro:Foreign currency deposits Allocated to Bank 2012 $ 73 Allocated to Bank 2011 $ 76 Total SOMA 2012 $ 8,925 Total SOMA 201
Euro:Securities purchased under agreements to resell Allocated to Bank 2012 $5 Allocated to Bank 2011 $0 Total SOMA 2012 $659 To
Euro:German government debt instruments Allocated to Bank 2012 $18 Allocated to Bank 2011 $15 Total SOMA 2012 $2,178 Total SO
Euro:French government debt instruments Allocated to Bank 2012 $20 Allocated to Bank 2011 $22 Total SOMA 2012 $2,470 Total SO
Japanese yen:Foreign currency deposits Allocated to Bank 2012 $29 Allocated to Bank 2011 $32 Total SOMA 2012 $3,553 Total SOM
Japanese yen:Japanese government debt instruments Allocated to Bank 2012 $59 Allocated to Bank 2011 $66 Total SOMA 2012 $7,187
Japanese yen:Total allocated to the Bank Allocated to Bank 2012 $204 Allocated to Bank 2011 $211 Total SOMA 2012 $24,972 Total S
The remaining maturity distribution of foreign currency denominated assets that were allocated to the Bank at
December 31, 2012, and 2011, was as follows (in millions):
Heading row column 1 category column 2 Within 15 days column 3 16 days to 90 days column 4 91 days to 1 year column 6 Ove
December 31, 2012:Euro Within 15 days $ 54 16 days to 90 days $ 14 91 days to 1 year $ 18 Over 1 year to 5 years $ 30 Total $ 1
December 31, 2012:Japanese yen Within 15 days $31 16 days to 90 days $4 91 days to 1 year $18 Over 1 year to 5 years $35 Tota
December 31, 2012:Total Within 15 days $85 16 days to 90 days $18 91 days to 1 year $36 Over 1 year to 5 years $65 Total $204
December 31, 2011:Euro Within 15 days $44 16 days to 90 days $24 91 days to 1 year $17 Over 1 year to 5 years $28 Total $113
December 31, 2011:Japanese yen Within 15 days $34 16 days to 90 days $5 91 days to 1 year $26 Over 1 year to 5 years $33 Tota
December 31, 2011:Total Within 15 days $78 16 days to 90 days $29 91 days to 1 year $43 Over 1 year to 5 years $61 Total $211
There were no foreign exchange contracts related to open market operations outstanding as of December 31, 2012.
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, 2012, there were no outstanding commitments to
purchase foreign government debt instruments. During 2012, there were purchases, sales, and maturities of
foreign government debt instruments of $4,959 million, $0, and $4,840 million, respectively, of which $41
million, $0, and $40 million, respectively, were 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.
At December 31, 2012 and 2011, 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, 2012 and 2011.
c. Central Bank Liquidity Swaps
U.S. Dollar Liquidity Swaps
The Bank's allocated share of U.S. dollar liquidity swaps was approximately .818 percent and .815 percent at
December 31, 2012 and 2011, respectively.
The total foreign currency held under U.S. dollar liquidity swaps in the SOMA at December 31, 2012 and 2011,
was $8,889 million and $99,823 million, respectively, of which $73 million and $814 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):
Heading row column 1 category column 2 2012 Within 15 days column 3 2012 16 days to 90 days column 4 2012 Total column 5 2011 W
Euro 2012 Within 15 days $ 14 2012 16 days to 90 days $ 59 2012 Total $ 73 2011 Within 15 days $ 280 2011 16 days to 90 days $ 417 20
Japanese yen 2012 Within 15 days $0 2012 16 days to 90 days $0 2012 Total $0 2011 Within 15 days $74 2011 16 days to 90 days $40 20
Swiss franc 2012 Within 15 days $0 2012 16 days to 90 days $0 2012 Total $0 2011 Within 15 days $2 2011 16 days to 90 days $1 2011 T
Total 2012 Within 15 days $14 2012 16 days to 90 days $59 2012 Total $ 73 2011 Within 15 days $356 2011 16 days to 90 days $458 201
Foreign Currency Liquidity Swaps
There were no transactions related to the foreign currency liquidity swaps during the years ended December 31,
2012 and 2011.
d. Fair Value of SOMA Assets
The fair value amounts presented below are solely for informational purposes. Although the fair value of SOMA
security holdings can be substantially greater than or less than the recorded value at any point in time, these
unrealized gains or losses have no effect on the ability of the Reserve Banks, as the central bank, to meet their
financial obligations and responsibilities.
The fair value of the fixed-rate Treasury securities, GSE debt securities, federal agency and GSE MBS, and foreign
government debt instruments in the SOMA's holdings is subject to market risk, arising from movements in
market variables such as interest rates and credit risk. The fair value of federal agency and GSE MBS is also
affected by the expected rate of prepayments of mortgage loans underlying the securities. The fair value of
foreign government debt instruments is affected by currency risk. Based on evaluations performed as of
December 31, 2012, there are no credit impairments of SOMA securities holdings as of that date.
The following table presents the amortized cost and fair value of the Treasury securities, GSE debt securities,
federal agency and GSE MBS, and foreign currency denominated assets, net, held in the SOMA at December
31 (in millions):
Allocated to the Bank
Heading row column 1 category column 2 2012 Amortized cost column 3 2012 Fair value column 4 2012 Fair value greater than
Treasury securities:Bills 2012 Amortized cost $0 2012 Fair value $0 2012 Fair value greater than amortized cost $0 2011 Amor
Treasury securities:Notes 2012 Amortized cost $17,858 2012 Fair value $18,967 2012 Fair value greater than amortized cost $
Treasury securities:Bonds 2012 Amortized cost $10,427 2012 Fair value $11,900 2012 Fair value greater than amortized cost $
Treasury securities:GSE debt securities 2012 Amortized cost $1,243 2012 Fair value $1,329 2012 Fair value greater than amor
Treasury securities:Federal agency and GSE MBS 2012 Amortized cost $14,857 2012 Fair value $15,540 2012 Fair value grea
Treasury securities:Foreign currency denominated assets 2012 Amortized cost $204 2012 Fair value $205 2012 Fair value grea
Treasury securities:Total SOMA portfolio securities holdings 2012 Amortized cost $44,589 2012 Fair value $47,941 2012 Fair v
Memorandum - Commitments for:Purchases of Treasury securities 2012 Amortized cost $0 2012 Fair value $0 2012 Fair value
Memorandum - Commitments for:Purchases of Federal agency and GSE MBS 2012 Amortized cost $1,848 2012 Fair value $1
Memorandum - Commitments for:Sales of Federal agency and GSE MBS 2012 Amortized cost $0 2012 Fair value $0 2012 Fai
Memorandum - Commitments for:Purchases of foreign government debt instruments 2012 Amortized cost $0 2012 Fair value $
Total SOMA
Heading row column 1 category column 2 2012 Amortized cost column 3 2012 Fair value column 4 2012 Fair value greater tha
Treasury securities:Bills 2012 Amortized cost $0 2012 Fair value $0 2012 Fair value greater than amortized cost $0 2011 Amo
Treasury securities:Notes 2012 Amortized cost $1,142,219 2012 Fair value $1,213,177 2012 Fair value greater than amortized
Treasury securities:Bonds 2012 Amortized cost $666,969 2012 Fair value $761,138 2012 Fair value greater than amortized co
Treasury securities:GSE debt securities 2012 Amortized cost $79,479 2012 Fair value $85,004 2012 Fair value greater than a
Treasury securities:Federal agency and GSE MBS 2012 Amortized cost $950,321 2012 Fair value $993,990 2012 Fair value g
Treasury securities:Foreign currency denominated assets 2012 Amortized cost $24,972 2012 Fair value $25,141 2012 Fair va
Treasury securities:Total SOMA portfolio securities holdings 2012 Amortized cost $2,863,960 2012 Fair value $3,078,450 201
Memorandum - Commitments for:Purchases of Treasury securities 2012 Amortized cost $ 2012 Fair value $0 2012 Fair value
Memorandum - Commitments for:Purchases of Federal agency and GSE MBS 2012 Amortized cost $118,215 2012 Fair value
Memorandum - Commitments for:Sales of Federal agency and GSE MBS 2012 Amortized cost $0 2012 Fair value $0 2012 Fa
Memorandum - Commitments for:Purchases of foreign government debt instruments 2012 Amortized cost $0 2012 Fair value
The fair value of Treasury securities, GSE debt securities, and foreign government debt instruments was
determined using pricing services that provide market consensus prices based on indicative quotes from
various market participants. The fair value of federal agency and GSE MBS was determined using a pricing
service that utilizes a model-based approach that considers observable inputs for similar securities. The cost
basis of foreign currency deposits adjusted for accrued interest approximates fair value. The contract amount
for euro-denominated securities sold under agreements to repurchase approximates fair value.
The cost basis of securities purchased under agreements to resell, securities sold under agreements to repurchase,
and other investments held in the SOMA approximate fair value.
Because the FRBNY enters into commitments to buy Treasury securities, federal agency and GSE MBS, and
foreign government debt instruments and records the related securities on a settlement-date basis in accordance
with the FAM, the related outstanding commitments are not reflected in the Statements of Condition.
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):
Heading row column 1 category column 2 2012 Amortized cost column 3 2012 Fair value column 4 2011 Amortized cost co
Distribution of MBS holdings by coupon rate Allocated to the Bank::
Distribution of MBS holdings by coupon rate Allocated to the Bank::2.0% 2012 Amortized cost $ 13 2012 Fair value $13 20
Distribution of MBS holdings by coupon rate Allocated to the Bank::2.5% 2012 Amortized cost $587 2012 Fair value $2012
Distribution of MBS holdings by coupon rate Allocated to the Bank::3.0% 2012 Amortized cost $2,511 2012 Fair value $2,5
Distribution of MBS holdings by coupon rate Allocated to the Bank::3.5% 2012 Amortized cost $2,807 2012 Fair value $2,8
Distribution of MBS holdings by coupon rate Allocated to the Bank::4.0% 2012 Amortized cost $2,154 2012 Fair value $2,2
Distribution of MBS holdings by coupon rate Allocated to the Bank::4.5% 2012 Amortized cost $4,104 2012 Fair value $4,4
Distribution of MBS holdings by coupon rate Allocated to the Bank::5.0% 2012 Amortized cost $1,956 2012 Fair value $2,0
Distribution of MBS holdings by coupon rate Allocated to the Bank::5.5% 2012 Amortized cost $625 2012 Fair value $654 2
Distribution of MBS holdings by coupon rate Allocated to the Bank::6.0% 2012 Amortized cost $88 2012 Fair value $92 201
Distribution of MBS holdings by coupon rate Allocated to the Bank::6.5% 2012 Amortized cost $12 2012 Fair value $13 201
Distribution of MBS holdings by coupon rate Allocated to the Bank::Total 2012 Amortized cost $14,857 2012 Fair value $15
Distribution of MBS holdings by coupon rate Total SOMA:2.0% 2012 Amortized cost $845 2012 Fair value $846 2011 Amo
Distribution of MBS holdings by coupon rate Total SOMA:2.5% 2012 Amortized cost $37,562 2012 Fair value $37,766 201
Distribution of MBS holdings by coupon rate Total SOMA:3.0% 2012 Amortized cost $160,613 2012 Fair value $161,757 2
Distribution of MBS holdings by coupon rate Total SOMA:3.5% 2012 Amortized cost $179,587 2012 Fair value $184,752 2
Distribution of MBS holdings by coupon rate Total SOMA:4.0% 2012 Amortized cost $137,758 2012 Fair value $145,955 2
Distribution of MBS holdings by coupon rate Total SOMA:4.5% 2012 Amortized cost $262,484 2012 Fair value $282,181 2
Distribution of MBS holdings by coupon rate Total SOMA:5.0% 2012 Amortized cost $125,107 2012 Fair value $132,214 2
Distribution of MBS holdings by coupon rate Total SOMA:5.5% 2012 Amortized cost $39,970 2012 Fair value $41,819 201
Distribution of MBS holdings by coupon rate Total SOMA:6.0% 2012 Amortized cost $5,642 2012 Fair value $5,888 2011 A
Distribution of MBS holdings by coupon rate Total SOMA:6.5% 2012 Amortized cost $753 2012 Fair value $812 2011 Amo
Distribution of MBS holdings by coupon rate Total SOMA:Total 2012 Amortized cost $950,321 2012 Fair value $993,990 20
The following tables present the realized gains and the change in the unrealized gain position of the domestic
securities holdings during the years ended December 31, 2012 (in millions):
Heading row column 1 category column 2 Allocated to Bank:Total portfolio holdings realized gains(footnote 1Total portfolio h
Treasury securities Allocated to Bank:Total portfolio holdings realized gains $ 217 Allocated to Bank:Fair value changes in u
GSE debt securities Allocated to Bank:Total portfolio holdings realized gains $0 Allocated to Bank:Fair value changes in unre
Federal agency and GSE MBS Allocated to Bank:Total portfolio holdings realized gains $4 Allocated to Bank:Fair value chan
Total Allocated to Bank:Total portfolio holdings realized gains $221 Allocated to Bank:Fair value changes in unrealized gains
The amount of change in unrealized gains, net, related to foreign currency denominated assets was an increase of
$3 million for the year ended December 31, 2012, of which $21 thousand was allocated to the Bank.
Accounting Standards Codification (ASC) Topic 820 (ASC 820) defines fair value as the price that would be
received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at
the measurement date. ASC 820 establishes a three-level fair value hierarchy that distinguishes between
assumptions developed using market data obtained from independent sources (observable inputs) and the
Bank's assumptions developed using the best information available in the circumstances (unobservable
inputs). The three levels established by ASC 820 are described as follows:
•
Level 1 - Valuation is based on quoted prices for identical instruments traded in active markets.
•
Level 2 - Valuation is based on quoted prices for similar instruments in active markets, quoted
prices for identical or similar instruments in markets that are not active, and model-based valuation
techniques for which all significant assumptions are observable in the market.
•
Level 3 - Valuation is based on model-based techniques that use significant inputs and
assumptions not observable in the market. These unobservable inputs and assumptions reflect the
Bank's estimates of inputs and assumptions that market participants would use in pricing the assets
and liabilities. Valuation techniques include the use of option pricing models, discounted cash flow
models, and similar techniques.
The following tables present the classification of SOMA financial assets at fair value as of December 31 by ASC
820 hierarchy (in millions):
Heading row column 1 category column 2 2012 Level 2 column 3 2011 Level 2 end heading row
Assets:Treasury securities 2012 Level 2 $ 1,974,315 2011 Level 2 $ 1,916,546
Assets:GSE debt securities 2012 Level 2 $85,004 2011 Level 2 $2011 Level 2 $114,238
Assets:Federal agency and GSE MBS 2012 Level 2 $993,990 895,495
Assets:Foreign government debt instruments 2012 Level 2 $12,003 2011 Level 2 $12,762
Assets:Total assets 2012 Level 2 $3,065,312 2011 Level 2 $2,939,041
The SOMA financial assets are classified as Level 2 in the table above because the fair values are based on
indicative quotes and other observable inputs obtained from independent pricing services that, in accordance
with ASC 820, are consistent with the criteria for Level 2 inputs. Although information consistent with the
criteria for Level 1 classification may exist for some portion of the SOMA assets, all securities in each asset
class were valued using the inputs that are most applicable to the securities in the asset class. The inputs used
for valuing the SOMA financial assets are not necessarily an indication of the risk associated with those assets.
6.
BANK PREMISES, EQUIPMENT, AND SOFTWARE
Bank premises and equipment at December 31 were as follows (in millions):
Heading row column 1 category column 2 2012 column 3 2011 end heading row
Bank premises and equipment:Land and land improvements 2012 $ 12 2011 $ 12
Bank premises and equipment:Buildings 2012 $ 153 2011 $153
Bank premises and equipment:Building machinery and equipment 2012 $ 21 2011 $20
Bank premises and equipment:Construction in progress 2012 $ 2 2011 $1
Bank premises and equipment:Furniture and equipment 2012 $ 37 2011 $36
Bank premises and equipment:Subtotal 2012 $ 225 2011 $222
Bank premises and equipment:Accumulated depreciation 2012 $ (80) 2011 $(72)
Bank premises and equipment:Bank premises and equipment, net 2012 $ 145 2011 $150
Bank premises and equipment:Depreciation expense, for the years ended December 31 2012 $ 10 2011 $11
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, 2012 and 2011, and is reported as a component
of "Non-interest income: Other" in the Statements of Income and Comprehensive Income. Future minimum
payments under agreements in existence at December 31, 2012 were immaterial.
The Bank had capitalized software assets, net of amortization, of $9 million and $5 million at December 31, 2012
and 2011, respectively. Amortization expense was $1 million for each of the years ended December 31, 2012
and 2011. Capitalized software assets are reported as a component of "Other assets" in the Statements of
Condition and the related amortization is reported as a component of "Operating expenses: Other' in the
Statements of Income and Comprehensive Income.
7.
COMMITMENTS AND CONTINGENCIES
In conducting its operations, the Bank enters into contractual commitments, normally with fixed expiration dates or
termination provisions, at specific rates and for specific purposes.
At December 31, 2012, the Bank was obligated under Non-Cancelable leases for premises and equipment with
remaining terms ranging from one to approximately three years. These leases provide for increased rental
payments based upon increases in real estate taxes, 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, 2012 and 2011. Certain of the Bank's leases have options to
renew.
Future minimum rental payments underNon-Cancelableoperating leases, net of sublease rentals, with remaining
terms of one year or more, at December 31, 2012, are as follows (in thousands):
Operating leases:2013 $574
Operating leases:2014 $651
Operating leases:2015 $166
Future minimum rental payments: $1,391
At December 31, 2012, 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 one percent of the capital paid-in of the claiming Reserve
Bank, up to 50 percent of the total capital paid-in of all Reserve Banks. Losses are borne in the ratio of a
Reserve Bank's capital paid-in to the total capital paid-in of all Reserve Banks at the beginning of the calendar
year in which the loss is shared. No claims were outstanding under the agreement at December 31, 2012 and
2011.
The Bank is involved in certain legal actions and claims arising in the ordinary course of business. Although it is
difficult to predict the ultimate outcome of these actions, in management's opinion, based on discussions with
counsel, the legal actions and claims will be resolved without material adverse effect on the financial position
or results of operations of the Bank.
8.
RETIREMENT AND THRIFT PLANS
Retirement Plans
The Bank currently offers three defined benefit retirement plans to its employees, based on length of service and
level of compensation. Substantially all of the employees of the Reserve Banks, Board of Governors, and
Office of Employee Benefits of the Federal Reserve System (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 (BEP) and certain Reserve Bank officers participate in the
Supplemental Retirement Plan for Select Officers of the Federal Reserve Banks (SERP).
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 years
ended December 31, 2012 and 2011, certain costs associated with the System Plan were reimbursed by the
Bureau.
The Bank's projected benefit obligation, funded status, and net pension expenses for the BEP and the SERP at
December 31, 2012 and 2011, and for the years then ended, were not material.
Thrift Plan
Employees of the Bank participate in the defined contribution Thrift Plan for Employees of the Federal Reserve
System (Thrift Plan). The Bank matches 100 percent of the first six percent of employee contributions from
the date of hire and provides an automatic employer contribution of one percent of eligible pay. The Bank's
Thrift Plan contributions totaled $5 million for each of the years ended December 31, 2012 and 2011, and are
reported as a component of "Operating expenses: Salaries and benefits" in the Statements of Income and
Comprehensive Income.
9.
Post
retirement
BENEFITS OTHER THAN RETIREMENT PLANS AND
Post
employment
BENEFITS
Post retirement Benefits Other Than Retirement Plans
In addition to the Bank's retirement plans, employees who have met certain age and length-of-service requirements
are eligible for both medical and life insurance benefits during retirement.
The Bank funds benefits payable under the medical and life insurance plans as due and, accordingly, has no plan
assets.
Following is a reconciliation of the beginning and ending balances of the benefit obligation (in millions):
Heading row column 1 category column 2 2012 column 3 2011 end heading row
Accumulated post retirement benefit obligation at January 1 2012 $ 80.1 2011 $ 76.4
Service cost benefits earned during the period 2012 $2.8 2011 $2.3
Interest cost on accumulated benefit obligation 2012 $3.6 2011 $3.8
Net actuarial loss 2012 $8.1 2011 $0.2
Contributions by plan participants 2012 $1.4 2011 $1.3
Benefits paid 2012 $(4.7) 2011 $(4.3)
Medicare Part D subsidies 2012 $0.4 2011 $0.4
Plan amendments 2012 $(0.1) 2011 $0
Accumulated post retirement benefit obligation at December 31 2012 $91.6 2011 $80.1
At December 31, 2012 and 2011, the weighted-average discount rate assumptions used in developing the
post retirement benefit obligation were 3.75 percent and 4.50 percent, respectively.
Discount rates reflect yields available on high-quality corporate bonds that would generate the cash flows necessary
to pay the plan's benefits when due.
Following is a reconciliation of the beginning and ending balance of the plan assets, the unfundedpostretirement
benefit obligation, and the accrued post retirement benefit costs (in millions):
Heading row column 1 category column 1 2012 column 2 2011 end heading row
Fair value of plan assets at January 1 2012 $ 2011 $0
Contributions by the employer 2012 $ 2.9 2011 $2.6
Contributions by plan participants 2012 $ 1.4 2011 $1.3
Benefits paid 2012 $ (4.7) 2011 $(4.3)
Medicare Part D subsidies 2012 $ 0.4 2011 $0.4
Fair value of plan assets at December 31 2012 $ 0 2011 $0
Unfunded obligation and accrued post retirement benefit cost 2012 $ 91.6 2011 $80.1
Amounts included in accumulated other comprehensive loss are shown below:Prior service cost 2012 $ 0.3 2011 $0.4
Amounts included in accumulated other comprehensive loss are shown below:Net actuarial loss 2012 $ (19.6) 2011 $(11.9)
Amounts included in accumulated other comprehensive loss are shown below:Total accumulated other comprehensive loss 2012 $ (19.3) 2
Accrued post retirement 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:
Heading row column 1 category column 2 2012 column 3 2011 end heading row
Health-care cost trend rate assumed for next year 2012 7.00% 2011 7.50%
Rate to which the cost trend rate is assumed to decline (the
ultimate trend rate) 2012 5.00% 2011 5.00%
Year that the rate reaches the ultimate trend rate 2012 2018 2011 2017
Assumed health-care cost trend rates have a significant effect on the amounts reported for health-care plans. A one
percentage point change in assumed health-care cost trend rates would have the following effects for the year
ended December 31, 2012 (in millions):
Heading row column 1 category column 2 One percentage point increase column 3 One percentage point decrease end heading row
Effect on aggregate of service and interest cost components of net periodic post retirement benefit costs One percentage point increase $ 1.2
Effect on accumulated post retirement benefit obligation One percentage point increase $14.6 One percentage point decrease $(11.9)
The following is a summary of the components of net periodic post retirement benefit expense for the years ended
December 31 (in millions):
Heading row column 1 category column 2 2012 column 3 2011
Service cost-benefits earned during the period 2012 $ 2.8 2011 $ 2.3
Interest cost on accumulated benefit obligation 2012 $3.6 2011 $3.8
Amortization of prior service cost 2012 $(0.2) 2011 $(1.0)
Amortization of net actuarial loss 2012 $0.4 2011 $0
Total periodic expense 2012 $6.6 2011 $5.1
Net periodic post retirement benefit expense 2012 $ 6.6 2011 $ 5.1
Estimated amounts that will be amortized from accumulated other comprehensive loss into net periodic
post retirement benefit expense in 2013 are shown below:
Prior service cost $(0.2);Net actuarial loss $1.4;Total $1.2
Net post retirement benefit costs are actuarially determined using a January 1 measurement date. At January 1,
2012 and 2011, the weighted-average discount rate assumptions used to determine net periodicpostretirement
benefit costs were 4.50 percent and 5.25 percent, respectively.
Net periodic post retirement benefit expense is reported as a component of "Operating expenses: Salaries and
benefits" in the Statements of Income and Comprehensive Income.
The Medicare Prescription Drug, Improvement and Modernization Act of 2003 established a prescription drug
benefit under Medicare (Medicare Part D) and a federal subsidy to sponsors of retiree health-care benefit plans
that provide benefits that are at least actuarially equivalent to Medicare Part D. The benefits provided under
the Bank's plan to certain participants are at least actuarially equivalent to the Medicare Part D prescription
drug benefit. The estimated effects of the subsidy are reflected in actuarial loss in the accumulated
post retirement benefit obligation and net periodic post retirement benefit expense.
Federal Medicare Part D subsidy receipts were $.3 million for each of the years ended December 31, 2012 and
2011. Expected receipts in 2013, related to benefits paid in the years ended December 31, 2012 and 2011, are
$.3 million.
Following is a summary of expected post retirement benefit payments (in millions):
Heading row column 1 category column 2 Without subsidy column 3 With subsidy end heading row
2013 Without subsidy $ 4.3 With subsidy $ 4.0
2014 Without subsidy $4.5 With subsidy $4.1
2015 Without subsidy $4.7 With subsidy $4.3
2016 Without subsidy $4.9 With subsidy $4.4
2017 Without subsidy $5.0 With subsidy $4.5
2018 - 2022 Without subsidy $28.0 With subsidy $24.8
Total Without subsidy $51.4 With subsidy $46.1
PostemploymentBenefits
The Bank offers benefits to former or inactive employees. Post employment benefit costs are actuarially
determined using a December 31 measurement date and include the cost of providing disability, medical,
dental, and vision insurance, and survivor income benefits. The accrued post employment benefit costs
recognized by the Bank at December 31, 2012 and 2011 were $8 million for each year. This cost is included
as a component of "Accrued benefit costs" in the Statements of Condition. Net periodicpostemployment
benefit expense included in 2012 and 2011 operating expenses were $1 million and $2 million, respectively,
and are recorded as a component of "Operating expenses: Salaries and benefits" in the Statements of Income
and Comprehensive Income.
1 0 . ACCUMULATED OTHER COMPREHENSIVE INCOME A N D OTHER COMPREHENSIVE INCOME
Following is a reconciliation of beginning and ending balances of accumulated other comprehensive loss as of
December 31 (in millions):
Heading row column 1 category column 2 2012 Amount related to post retirement benefits other than retirement plans column 3
Balance at January 1: 2012 Amount related to post retirement benefits other than retirement plans $ (11.5) 2011 Amount related
Change in funded status of benefit plans:Prior service costs arising during the year 2012 Amount related to post retirement bene
Change in funded status of benefit plans:Amortization of prior service cost 2012 Amount related to post retirement benefits other
Change in funded status of benefit plans:Change in prior service costs related to benefit plans 2012 Amount related to post retire
Change in funded status of benefit plans:Net actuarial loss arising during the year 2012 Amount related to post retirement benef
Change in funded status of benefit plans:Amortization of net actuarial loss 2012 Amount related to post retirement benefits other
Change in funded status of benefit plans:Change in actuarial loss related to benefit plans 2012 Amount related to post retiremen
Change in funded status of benefit plans:Change in funded status of benefit plans - other comprehensive loss 2012 Amount rela
Balance at December 31 2012 Amount related to post retirement benefits other than retirement plans $(19.3) 2011 Amount relat
Additional detail regarding the classification of accumulated other comprehensive loss is included in Note 9.
11. DISTRIBUTION OF COMPREHENSIVE INCOME
In accordance with Board policy, Reserve Banks remit excess earnings, after providing for dividends and the
amount necessary to equate surplus with capital paid-in, to the U.S. Treasury as interest on Federal Reserve
notes. The following table presents the distribution of the Bank's comprehensive income in accordance with
the Board's policy for the years ended December 31 (in millions):
Heading row column 1 category column 2 2012 column 3 2011
Dividends on capital stock 2012 $ 13 2011 $ 13
Transfer to surplus - amount required to equate surplus with capital paid-in 2012 $8 2011 $4
Interest on Federal Reserve notes expense remitted to Treasury 2012 $1,337 2011 $1,599
Total distribution 2012 $1,358 2011 $1,616
12. SUBSEQUENT EVENTS
There were no subsequent events that require adjustments to or disclosures in the financial statements as of
December 31, 2012. Subsequent events were evaluated through March 14, 2013, which is the date that the
Bank issued the financial statements.
@FedFRASER