We carry out our statutory mission only through activities that comply with the rules, regulations, guidelines, and orders issued under the Federal Housing Enterprises Financial Safety and Soundness Act, the Housing Act and the FHLBank Act.

Our shares of Class B stock are registered with the SEC under the Exchange Act, and we are subject to the information, disclosure, insider trading restrictions and other requirements under the Exchange Act.  We are not subject to the provisions of the Securities Act as amended.

The Government Corporation Control Act provides that, before a government corporation may issue and offer obligations to the public, the Secretary of the Treasury shall prescribe the form, denomination, maturity, interest rate and conditions of the obligations; the way and time issued; and the selling price.  The U.S. Department of the Treasury receives the Finance Agency’s annual report to Congress, monthly reports reflecting securities transactions of the FHLBanks, and other reports reflecting the operations of the FHLBanks.

The FHLBNY has an internal audit department, and our Board of Directors has an Audit Committee.  An independent registered public accounting firm audits our annual financial statements.  The independent registered public accounting firm conducts these audits following auditing standards established by the Public Company Accounting Oversight Board (United States).  The FHLBanks, the Finance Agency, and Congress all receive the audit reports.  We must also submit annual management reports to Congress, the President, the Office of

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Wellness program – Fitness Reimbursement, Health Management and Budget,Employee Assistance Programs

The Comptroller General has authority under

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Culture – Culture and Activity Committees events, Diversity and Inclusion initiatives

We charge the amount allocated for the Affordable Housing Program to income and recognize the amounts allocated as a liability.  We relieve the AHP liability as members use subsidies.  In periods where our regulatory income before Affordable Housing Program is zero or less, the amount of AHP liability is equal to zero.  If the result of the aggregate 10% calculation described above is less than $100 million for all 11 FHLBanks, then the Act requires the shortfall to be allocated among the FHLBanks based on the ratio of each FHLBank’s income before Affordable Housing Program to the sum of the income before Affordable Housing Program of the 11 FHLBanks.  There were no shortfalls in 2017, 2016 and 2015.

The Bank’s Performance Management framework includes a mid-year checkpoint, as well as an annual performance review.  Overall annual ratings are calibrated and merit and incentive payments are differentiated for the Bank’s highest performers.

The Bank is committed to the health, safety and wellness of its employees. In response to the COVID-19 pandemic, the Bank has implemented significant operating environment changes, safety protocols and procedures that it determined were in the best interest of the Bank’s employees and members, and which comply with government regulations. This includes having the Bank’s employees work remotely, while implementing additional safety measures for volunteer employees on-site.

Diversity and Inclusion Program

Diversity and Inclusion (“D&I”) is a strategic business priority for the Bank.  The Bank’s Head of Corporate Services/Director of Diversity & Inclusion is a Member of the Management Committee, reporting to the President and Chief Executive Officer and serves as a liaison to the Board of Directors.  The Bank recognizes that diversity increases capacity for innovation and creativity. Additionally, inclusion allows the Bank to leverage the unique perspectives of all employees and strengthens the Bank’s retention efforts.  The Bank operationalizes its commitment through the development and execution of a three-year diversity and inclusion strategic plan that includes quantifiable metrics to measure its success and it reports regularly on its performance to management and the Board of Directors.  The Bank also offers a range of opportunities for its employees to connect and grow personally and professionally through the Office of Diversity and Inclusion Workplace Inclusion Team.  The Bank considers learning an important component of its D&I strategic plan and regularly offers educational opportunities to its employees and evaluates inclusive behaviors as part of the Bank’s annual performance management process.

Available Information

The Federal Home Loan Bank of New York maintains a website located at www.fhlbny.com where we make available our annual report on Form 10-K and quarterly reports on Form 10-Q as filed with the Securities and Exchange Commission (the SEC), and other information regarding us and our products free of charge. We are required to file with the SEC an annual report on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K. The SEC maintains a website that contains these reports and other information regarding our electronic filings located at www.sec.gov. Information on these websites, or that can be accessed through these websites, does not constitute a part of this annual report.

The following discussion sets forth the material risk factors that could affect the FHLBNY’s financial condition and results of operations.  Readers should not consider any descriptions of such factors to be a complete set of all potential risks that could affect the FHLBNY.

Market and Economic Risks

Changes to and replacement of the London Interbank Offered Rate (LIBOR) benchmark interest rate could adversely affect FHLBNY’s business, financial condition, and results of operations. In July 2017, the United Kingdom's Financial Conduct Authority (FCA), which regulates LIBOR, announced that after 2021 it will no longer persuade or compel banks to submit rates for the calculation of LIBOR. The announcement indicated that the continuation of LIBOR on the current basis cannot and will not be guaranteed after 2021. It is impossible to predict whether and to what extent banks will continue to provide LIBOR submissions to the administrator of LIBOR, whether LIBOR will cease to be published or supported before or after 2021, or whether any additional reforms to LIBOR may be enacted in the United Kingdom or elsewhere. There is no assurance that LIBOR will continue to be accepted or used by the markets generally or by any issuers, investors, or counterparties at any time, even if LIBOR continues to be available.

In September 2019, the FHFA issued a supervisory letter (the Supervisory Letter) to the FHLBank and the Office of Finance relating to their planning for the LIBOR phase-out. Under the Supervisory Letter, with limited exceptions, FHLBanks, including the FHLBNY, should, by December 31, 2019, stop purchasing investments that reference LIBOR and mature after December 31, 2021, and should, by June 30, 2020, no longer enter into any other new financial assets, liabilities, and derivatives that reference LIBOR and mature after December 31, 2021. As we align our business strategies to the Supervisory Letter, we may experience less flexibility in our access to funding, higher funding costs, or lower overall demand or increased costs for our advances, which may, in turn, negatively affect the future composition of our balance sheet, capital stock levels, core mission asset ratios, and net income. In addition, as we are generally not permitted to continue to use instruments that reference LIBOR for hedging and risk-mitigating purposes, we will have to alter our hedging and interest-rate risk management strategies, which may have a negative effect on our financial condition and results of operations.

On October 23, 2020, the International Swaps and Derivatives Association, Inc. (ISDA) published a Supplement to the 2006 ISDA Definitions (the Supplement) and the ISDA 2020 IBOR Fallbacks Protocol (the Protocol). Both the Supplement and the Protocol took effect on January 25, 2021. On that date, all legacy bilateral derivative transactions subject to Protocol-covered agreements (including ISDA agreements) that incorporate certain covered ISDA definitional booklets and reference a covered Interbank Offered Rate (IBOR), including U.S. Dollar LIBOR, were effectively amended to apply the new ISDA-recommended IBOR fallbacks in the event of the relevant IBOR’s cessation. Both the Bank and our counterparty must have adhered to the Protocol in order to effectively amend legacy derivatives contracts, otherwise the parties must bilaterally amend legacy covered agreements (including ISDA agreements) to address LIBOR fallbacks. The Protocol will remain open for adherence after the effective date. As of January 25, 2021, all new derivative contracts are subject to the relevant IBOR fallbacks set forth in the Supplement.

On October 21, 2020, the Finance Agency issued a Supervisory Letter to the FHLBanks that required each FHLBank to adhere to the Protocol by December 31, 2020, and to the extent necessary, to amend any bilateral agreements regarding the adoption of the Protocol by December 15, 2020. We adhered to the Protocol on October 22, 2020, and all of our counterparties have adhered to the Protocol. We also amended all outstanding bilateral over-the-counter derivative agreements referencing U.S. Dollar LIBOR with our members to adopt the Protocol.

In December 2020, ICE Benchmark Administration (IBA) published its consultation on its intention to cease the publication of: (i) one-week and two-month U.S. Dollar LIBOR settings immediately following the LIBOR publication on December 31, 2021; and (ii) the remaining U.S. Dollar LIBOR settings (i.e., overnight and 1-, 3-, 6-, and 12-month) immediately following the LIBOR publication on June 30, 2023. The IBA consultation period ended on January 25, 2021.

On March 5, 2021, the FCA announced that certain LIBOR will either cease to be provided by any administrator or no longer be representative immediately after December 31, 2021 (on, in the case of some more frequently used U.S. Dollar LIBOR settings, immediately after June 30, 2023). Although the FCA does not expect LIBOR to become unrepresentative before the applicable cessation date and intends to consult on requiring the administrator of LIBOR to continue publishing LIBOR of certain currencies and tenors on a non-representative, synthetic basis for a period after the applicable cessation date, there is no assurance that LIBOR, of any particular currency or tenor, will continue to be published or be representative through any

particular date. On the same day, the IBA also published a summary of the feedback it received on its December 2020 consultation regarding its intention to cease publication of the LIBOR tenors.

In the United States, the Federal Reserve Board and the Federal Reserve Bank of New York convened the Alternative Reference Rates Committee (“ARRC”) to identify a set of alternative reference interest rates for possible use as market benchmarks. This committee has proposed the Secured Overnight Financing Rate (SOFR) as its recommended alternative to U.S. Dollar LIBOR, and the Federal Reserve Bank of New York began publishing SOFR rates in the second quarter of 2018. SOFR is based on a broad segment of the overnight Treasury repurchase market and is intended to be a measure of the cost of borrowing cash overnight collateralized by Treasury securities. Since 2018, market activity in SOFR-linked financial instruments has continued to develop. The FHLBanks, including the FHLBNY, have offered SOFR-linked consolidated obligations on an ongoing basis and have started offering SOFR-linked advances. In March 2021, the ARRC confirmed that in its opinion the March 5, 2021 announcements by IBA and the FCA on future cessation and loss of representativeness of the LIBOR benchmarks constituted a “Benchmark Transition Event” with respect to all U.S. Dollar LIBOR settings.

As many of our assets, liabilities, and derivatives are indexed to LIBOR, the FHLBanks, including the FHLBNY and the Office of Finance have developed a LIBOR transition plan, which addresses considerations such as LIBOR exposure, fallback language, operational preparedness, and balance sheet management. However, the market transition away from LIBOR and towards SOFR or another alternate reference rate is expected to be complicated, including the development of term and credit adjustments to accommodate differences between LIBOR and SOFR or any other alternate reference rate. During the market transition away from LIBOR, LIBOR may experience increased volatility or become less representative. In addition, the overnight Treasury repurchase market underlying SOFR has experienced and may experience disruptions from time to time, which has resulted and may result in unexpected fluctuations in SOFR. Introduction of an alternate reference rate also may create challenges in hedging and asset liability management and introduce additional basis risk and increased volatility for the FHLBNY and other market participants. While market activity in SOFR-linked financial instruments has continued to develop, there can be no guarantee that SOFR will become widely accepted and used across market segments and financial products in a timely manner and any other alternative reference rate may or may not be developed. Any disruption in the market transition away from LIBOR and towards SOFR or another alternate reference rate could result in increased financial, operational, legal, reputational, or compliance risks for the FHLBNY. We are not able to predict the effect of a possible transition to SOFR or another alternate reference rate will have on our business, financial condition, and results of operations.

Changes in interest rates could significantly affect the FHLBNY’s financial condition and results of operations.  The level of interest rates and the impact on our balance sheet spreads are important factors affecting the Bank’s interest rate risk management, profitability, and returns. We earn income from capital, and the level of market interest rates as impacted by the Federal Reserve and the capital markets directly affects these earnings.

We earn income from the spread between interest earned on our outstanding advances, investments and shareholders’ capital, and interest paid on our Consolidated obligations and other interest-bearing liabilities. Although we use various methods and procedures to monitor and manage our exposure to changes in interest rates, we may experience instances when either our interest-bearing liabilities will be more sensitive to changes in interest rates than our interest-earning assets, or vice versa. In either case, interest rate movements contrary to our position could negatively affect our financial condition and results of operations. Moreover, the effect of changes in interest rates can be exacerbated by prepayment and extension risk, a risk that mortgage related assets will be refinanced by the mortgagor in low interest rate environments or will remain outstanding longer than expected at below market yields when interest rates increase. 

The possibility of negative interest rates on U.S. Treasury or other market instruments could adversely affect our results of operations by, for example, reducing asset yields or spreads, creating operating and operating system issues, or having other adverse impacts on our business.

The FHLBNY’s funding depends on its ability to access the capital markets.  Our primary source of funds is the sale of Consolidated obligations in the capital markets.  Our ability to obtain funds through the sale of Consolidated obligations depends in part on prevailing conditions in the capital markets, which are, for the most part, beyond our control. Accordingly, we may not be able to obtain funding on acceptable terms, if at all.  If we cannot access funding when needed on acceptable terms, our ability to support and continue operations could be adversely affected, which could negatively affect our financial condition and results of operations.  If additional reforms are legislated over money market funds, they may have an adverse impact on the FHLBank discount note pricing, given that the funds are significant sponsors of short-term

FHLBank debt.  Ongoing changes to the regulatory environment that affect bank counterparties and debt underwriters could adversely affect our ability to access the debt markets or the cost of that funding.

Economic downturns, macro-economic events, and changes in federal monetary policy, including those related to widespread health emergencies or similar events, could have an adverse effect on the FHLBNY’s business and its results of operations.  Our businesses and results of operations are sensitive to general business and economic conditions.  These conditions include short- and long-term interest rates, inflation, money supply, fluctuations in both debt and equity capital markets, and the strength of the United States economy and the local economies in which we conduct our business.  If any of these conditions deteriorate, our businesses and results of operations could be adversely affected.  For example, a prolonged economic downturn could result in members needing fewer advances.  In addition, our business and results of operations are significantly affected by the fiscal and monetary policies of the federal government and its agencies, including the Federal Reserve Board, which regulates the supply of money and credit in the United States.  The Federal Reserve Board’s policies directly and indirectly influence the yield on interest-earning assets and the cost of interest-bearing liabilities, and can have far reaching impacts on the U.S. economy as a whole.

We note here that the Federal Open Market Committee (FOMC) recently approved emergency reductions to the target range for the Federal Funds rate and implemented other initiatives in response to the COVID-19 coronavirus outbreak and the potential negative impact on the U.S. economy. Further or similar action in response to this or any widespread health emergency or similar event, or impacts on the economy as a result of such event, could adversely affect our financial condition and results of operations.

Regulatory Risks

Determinations regarding compensation may impede the FHLBNY’s ability to hire and retain qualified senior management.  Each Federal Home Loan Bank’s Board of Directors has the statutory authority to select, employ and fix the compensation of its officers and employees in order to help ensure the hiring and retention of qualified staff.  However, as the regulator of the Federal Home Loan Banks, the Finance Agency has the authority to determine whether compensation paid to any executive officer is in its view not reasonable and comparable with compensation for employment in other similar businesses involving similar duties and responsibilities.  Depending on how such authority is exercised, the FHLBNY’s ability to hire and retain qualified executive officers could be adversely affected. 

The FHLBanks are governed by federal laws and regulations, which could change or be applied in a manner detrimental to FHLBNY’s operations.  The FHLBanks are government-sponsored enterprises (GSEs), organized under the authority of the FHLBank Act, and, as such, are governed by federal laws and regulations of the Finance Agency, an independent agency in the executive branch of the federal government.  From time to time, Congress has amended the FHLBank Act in ways that significantly affected the FHLBanks and the manner in which the FHLBanks carry out their housing finance mission and business operations.  New or modified legislation enacted by Congress or regulations adopted by the Finance Agency could have a negative effect on our ability to conduct business or our cost of doing business. Due to recent changes in the U.S. government administration and recent executive actions, there are additional uncertainties in the legislative and regulatory environment.

Changes in regulatory or statutory requirements, or in their application, could result in, among other things, changes in: our cost of funds; retained earnings requirements; liquidity requirements, debt issuance; dividend payments; capital redemption and repurchases; permissible business activities; the size, scope, or nature of our lending, investment, or mortgage purchase programs; our ability to appropriately compensate, recruit and retain our employees; or our compliance costs.  Changes that restrict dividend payments, the growth of our current business, or the creation of new products or services could negatively affect our results of operations and financial condition.  Further, the regulatory environment affecting members could be changed in a manner that would negatively affect their ability to acquire or own our capital stock or take advantage of our products and services.

As a result of these factors, the FHLBank System may have to pay a higher rate of interest on Consolidated obligations.  The resulting increase in the cost of issuing Consolidated obligations could cause our advances to be less profitable and reduce our net interest margins (the difference between the interest rate received on advances and the interest rate paid on Consolidated obligations).  If we change the pricing of our advances, they may no longer be attractive to members and outstanding advances may decrease.  In any case, the increased cost of issuing Consolidated obligations could negatively affect our financial condition and results of operations.

Negative information about us, the FHLBanks or housing GSEs, in general, could adversely impact our cost and availability of financing. Negative information impacting us or any other FHLBank, such as material losses or increased risk of losses, could also adversely impact our cost of funds. More broadly, negative information about housing GSEs, in general, could adversely impact us. The housing GSEs — Fannie Mae, Freddie Mac, and the FHLBanks — issue highly rated agency debt to fund their operations. From time to time, negative announcements by any of the housing GSEs concerning accounting problems, risk-management issues, and regulatory enforcement actions have created pressure on debt pricing for all GSEs, as investors have perceived such instruments as bearing increased risk. Similar announcements by the FHLBanks may contribute to this pressure on debt pricing.  One possible source of information that impacts us could come from plans for housing GSE reform.  Such plans, including those introduced by the U.S. Treasury and HUD proposed certain recommendations for the reform of the housing GSEs.  Although the focus of those recommendations is on Fannie Mae and Freddie Mac, the proposal includes certain recommendations for the FHLBanks.  The proposed reforms could affect the FHLBNY’s current business activities with its members, particularly large financial institutions.  These recommendations include reducing and altering the composition of FHLBanks investment portfolios, limiting the level of advances outstanding to individual members and restricting membership to allow each financial institution, inclusive of its affiliates, to be an active member in only a single FHLBank.  Other recommendations or other plans could result in market uncertainty regarding the status of U.S. federal government support of housing GSEs, in general, including the FHLBanks, and our cost of financing could be adversely impacted as a result.

Any such negative information or other factors could result in the FHLBanks having to pay a higher rate of interest on COs to make them attractive to investors. If we maintain our existing pricing on our advances products and other services notwithstanding increases in CO interest rates, the spreads we earn would fall and our results of operations would be adversely impacted.  If, in response to this decrease in spreads, we change the pricing of our advances, the advances may be less attractive to members and the amount of new advances and our outstanding advance balances may decrease.  In either case, the increased cost of issuing COs could adversely impact our financial condition and results of operations.

Business Risks

A loss or change of business activities with large members could adversely affect the FHLBNY’s results of operations and financial condition.  We have a high concentration of advances with three member institutions, and a loss or change of business activities with any of these institutions could adversely affect our results of operations and financial condition. Concentration risk for the FHLBNY is defined as the exposure to loss arising from a disproportionately large number of financial transactions with a limited number of individual customers, with a particular focus on members that have outstanding advances that account for more than 10% of advances by par value to the total par value of all advances outstanding as of a given date. For more information about concentration, see Note 21. Segment Information and Concentration to Financial Statements.

Withdrawal of one or more large members from our membership could result in a reduction of our total assets, capital, and net income.  If one or more of our large members were to prepay their advances or repay the advances as they came due and no other advances were made to replace them, it could also result in a reduction of our total assets, capital, and net income.  In prior years, we experienced significant prepayments of advances by large members, and prepayments due to the acquisition of a member by another bank.

Our analysis of the impact of the prepayments do not indicate a material adverse impact on our business and results of operation. However, these are the types of events that we consider to be potential negative factors that may arise from a high concentration of advances.  The timing and magnitude of the effect of a reduction in the amount of advances would depend on a number of factors, including:

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the amount and the period over which the advances were prepaid or repaid;

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the amount and timing of any corresponding decreases in activity-based capital;

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the profitability of the advances;

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the size and profitability of our short- and long-term investments; and

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the extent to which Consolidated obligations (funding) matured as the advances were prepaid or repaid.

At December 31, 2017, advances borrowed by insurance companies accounted for 17.1% of total advances (18.7% at December 31, 2016).  Lending to insurance companies poses a number of unique risks not present in lending to federally insured depository institutions.  For example, there is no single federal regulator for insurance companies.  They are supervised by state regulators and subject to state insurance codes and regulations.  There is uncertainty about whether a state insurance commissioner would try to void FHLBNY’s claims on collateral in the event of an insurance company failure.  Even if ultimately unsuccessful, such a legal challenge could result in a delay in the liquidation of collateral and a loss of market value.  Also see Note 8.  Advances to Financial Statements for more information.

The FHLBNY has geographic concentrations that may adversely impact its business operations and/or financial condition.  By nature of our regulatory charter and our business operations, we are exposed to credit risk as the result of limited geographic diversity.  Our advance lending is limited by charter to operations to the four areas — New Jersey, New York, Puerto Rico and the U.S. Virgin Islands. We employ conservative credit rating and collateral policies to limit exposure, but a decline in regional economic conditions could create an exposure to us in excess of collateral held.

We have concentrations of mortgage loans in some geographic areas based on our investments in MPF loans and private-label MBS and on the receipt of collateral pledged for advances.  To the extent that any of these geographic areas experiences significant declines in the local housing markets, declining economic conditions, or a natural disaster, we could experience increased losses on our investments in the MPF loans or the related MBS or be exposed to a greater risk that the pledged collateral securing related advances would be inadequate in the event of default on such an advance.

The FHLBNY relies upon derivative instruments to reduce its interest-rate risk, and changes in our credit ratings may adversely affect our ability to enter into derivative instruments on acceptable terms.  Our financial strategies are highly dependent on our ability to enter into derivative instruments on acceptable terms to reduce our interest-rate risk.  Rating agencies may from time to time change a rating or issue negative reports, which may adversely affect our ability to enter into derivative instruments with acceptable parties on satisfactory terms in the quantities necessary to manage our interest-rate risk on Consolidated obligations or other financial instruments.  This could negatively affect our financial condition and results of operations.

Changes in regulatory requirements related to derivative instruments may adversely affect our ability to enter into derivative instruments on acceptable terms.  The ongoing implementation of derivatives regulation under the Dodd-Frank Act could adversely impact the FHLBNY’s ability to execute derivatives to hedge interest rate risk, and would increase our compliance costs and negatively impact our results of operations.  Derivatives regulations under the Dodd-Frank Act have impacted and will continue to substantially impact the derivatives

At December 31, 2020, advances borrowed by insurance companies accounted for 35.6% of total advances (24.9% at December 31, 2019).  Lending to insurance companies poses a number of unique risks not present in lending to federally insured depository institutions.  For example, there is no single federal regulator for insurance companies. They are supervised by state regulators and subject to state insurance codes and regulations.  There is uncertainty about whether a state insurance commissioner would try to void FHLBNY’s claims on collateral in the event of an insurance company failure.  Even if ultimately unsuccessful, such a legal challenge could result in a delay in the liquidation of collateral and a loss of market value.  For more information, see Financial Statements Note 9. Advances.

The FHLBNY has geographic concentrations that may adversely impact its business operations and/or financial condition.  By nature of our regulatory charter and our business operations, we are exposed to credit risk as the result of limited geographic diversity.  Our advance lending is limited by charter to operations to the four areas — New Jersey, New York, Puerto Rico and the U.S. Virgin Islands. We employ conservative credit rating and collateral policies to limit exposure, but a decline in regional economic conditions could create an exposure to us in excess of collateral held.

We have concentrations of mortgage loans in some geographic areas based on our investments in MPF loans, MAP loans, and private-label MBS and on the receipt of collateral pledged for advances.  To the extent that any of these geographic areas experiences significant declines in the local housing markets, declining economic conditions, or a natural disaster, we could experience increased losses on our investments in the MPF loans, MAP loans, or MBS, or be exposed to a greater risk that the pledged collateral securing related advances would be inadequate in the event of default on such an advance.

The FHLBNY relies upon derivative instruments to reduce its interest-rate risk, and changes in our credit ratings may adversely affect our ability to enter into derivative instruments on acceptable terms.  Our financial strategies are highly dependent on our ability to enter into derivative instruments on acceptable terms to reduce our interest-rate risk.  Rating agencies may from time to time change a rating or issue negative reports, which may adversely affect our ability to enter into derivative instruments with acceptable parties on satisfactory terms in the quantities necessary to manage our interest-rate risk on Consolidated obligations or other financial instruments. This could negatively affect our financial condition and results of operations.

Changes in regulatory requirements related to derivative instruments may adversely affect our ability to enter into derivative instruments on acceptable terms.  The ongoing implementation of derivatives and clearinghouse regulations could adversely impact the FHLBNY’s ability to execute derivatives to hedge interest rate risk, and increase our compliance costs and negatively impact our results of operations.  Such regulations have impacted, and will continue to substantially impact, the derivatives markets by, among other things: (i) requiring extensive regulatory and public reporting of derivatives transactions; (ii) requiring a wide range of over-the-counter derivatives to be cleared through recognized clearing facilities and traded on exchanges or exchange-like facilities; (iii) requiring the collection and segregation of collateral for most uncleared derivatives; and (iv) significantly broadening limits on the size of positions that may be maintained in specified derivatives.  These market structure reforms could make many derivatives products more costly to execute, may significantly reduce the liquidity of certain derivatives markets and could diminish customer demand for covered derivatives.  Those changes could negatively impact the FHLBNY’s ability to execute derivatives in a cost efficient manner, which could have an adverse impact on its results of operations.  

The FHLBNY faces competition for advances, loan purchases, and access to funding, which could adversely affect its businesses and the FHLBNY’s efforts to make advance pricing attractive to its members as well as it may adversely affect earnings.  Our primary business is making advances to our members, and we compete with other suppliers of wholesale funding, both secured and unsecured, including investment banks, commercial banks and, in certain circumstances, other FHLBanks.  Our members have access to alternative funding sources, which may offer more favorable terms than the ones we offer on our advances, including more flexible credit or collateral standards.  We may make changes in policies, programs, and agreements affecting members from time to time, including, affecting the availability of and conditions for access to advances and other credit products, the MPF Program, MAP, the AHP, and other programs, products, and services, which could cause members to obtain financing from alternative sources.  In addition, many of our competitors are not subject to the same regulations, which may enable those competitors to offer products and terms that we are not able to offer.

The availability of alternative funding sources that are more attractive to our members may significantly decrease the demand for our advances.  Lowering the price of the advances to compete with these alternative funding sources may decrease the profitability of advances.  A decrease in the demand for our advances or a decrease in our profitability on advances could adversely affect our financial condition and results of operations. In addition, changes to regulations governing our members’ businesses that reduce liquidity or capital requirements could serve to reduce demand for advances from the FHLBNY.

Certain FHLBanks, including the FHLBNY, also compete (primarily with Fannie Mae and Freddie Mac) for the purchase of mortgage loans from members.  Some FHLBanks may also compete with other FHLBanks with which their members have a relationship through affiliates.  We offer the MPF Program and MAP to our members.  Competition among FHLBanks for MPF and MAP business may be affected by the requirement that a member and its affiliates can sell loans into the MPF Program through only one FHLBank relationship at a time.  Increased competition can result in a reduction in the amount of mortgage loans we are able to purchase and adversely impact income from this part of its business.

The FHLBanks, including the FHLBNY, also compete with the U.S. Department of the Treasury, Fannie Mae, Freddie Mac, and other GSEs, as well as corporate, sovereign, and supranational entities, for funds raised through the issuance of debt in the national and global debt markets.  Increases in the supply of competing debt products may, in the absence of increases in demand, result in higher debt costs or lower amounts of debt issued at the same cost than otherwise would be the case.  Increased competition could adversely affect our ability to have access to funding, reduce the amount of funding available to us, or increase the cost of funding available to us.  Any of these effects could adversely affect our financial condition and results of operations.

Credit Risks

Changes in the credit ratings on FHLBank System Consolidated obligations may adversely affect the cost of Consolidated obligations, which could adversely affect FHLBNY’s financial condition and results of operations.  FHLBank System Consolidated obligations have been assigned Aaa/P-1 and AA+/A-1+ ratings by Moody’s and S&P.  The outlook for the FHLBank debt by both S&P and Moody’s is stable.  Rating agencies may from time to time change a rating or issue negative reports, which may adversely affect the cost of funds of one or more FHLBanks, including the FHLBNY, and the ability to issue Consolidated obligations on acceptable terms.  A higher cost of funds or the impairment of the ability to issue Consolidated obligations on acceptable terms could also adversely affect our financial condition and results of operations.  Rating agency downgrades of the debt of the United States could also cause a downgrade in the rating of the FHLBanks.

The FHLBNY’s financial condition and results of operations could be adversely affected by FHLBNY’s exposure to credit risk.  We have exposure to credit risk in that the market value of an obligation may decline as a result of deterioration in the creditworthiness of the obligor or the credit quality of a security instrument.  In addition, we assume secured and unsecured credit risk exposure associated with the risk that a borrower or counterparty or a derivative clearing organization could default and we could suffer a loss if we could not fully recover amounts owed to us on a timely basis.  A credit loss, if material, will have an adverse effect on the FHLBNY’s financial condition and results of operations.

We are subject to credit-risk exposures related to the loans that back our investments. Increased delinquency rates and credit losses beyond those currently expected could adversely impact the yield on or value of those investments. We have invested in securities issued by Housing Finance Agencies (HFA) as held-to-maturity investments. The cash flows on these securities are based on the performance of the underlying loans, although these securities generally do include additional credit enhancements.  At the time of purchase, the HFA securities were rated double-A (or its equivalent rating), some have since been downgraded. The portfolio of HFA securities (carrying value was $1.1 billion at December 31, 2020 and 2019) reported gross unrealized losses of $21.6 million at December 31, 2020 and $23.2 million at December 31, 2019. Although we have determined that none of the securities is other-than-temporarily impaired, we could realize credit losses from these securities should the underlying loans underperform our projections.

A rise in delinquency rates on our investments in MPF and MAP loans or related adverse trends could adversely impact our results of operation and financial condition. As discussed in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Financial Condition, our methodology for determining our allowance for loan losses is determined based on our investments in MPF and MAP loans and considers factors relevant to those investments. Important factors in determining this allowance are the collateral values supporting our investments in conventional mortgage loans. The credit loss allowance may prove insufficient if macroeconomic factors worsen, housing prices fall and collateral values decline. While we have recorded reserves for credit exposures, such reserves are subject to judgments and estimates that could be incorrect or differ from actual future events. Under the new CECL accounting standard, which became effective January 1, 2020, the allowance for credit losses would reflect expected losses, rather than incurred losses, which could lead to more volatility in the allowance and the provision for credit losses as forecasts of economic conditions change.

Insufficient collateral protection could adversely affect the FHLBNY’s financial condition and results of operations.  We require that all outstanding advances be fully collateralized. In addition, for mortgage loans that we purchased under the MPF Program and MAP, we require that members fully collateralize the outstanding credit enhancement obligations not covered through the purchase of supplemental mortgage insurance. We evaluate the types of collateral pledged by our members and assign borrowing capacities to the collateral based on the risks associated with that type of collateral.  If we have insufficient collateral before or after an event of payment default by the member, or we are unable to liquidate the collateral for the value assigned to it in the event of a payment default by a member, we could experience a credit loss on advances, which could adversely affect our financial condition and results of operations.

The FHLBNY may become liable for all or a portion of the Consolidated obligations of the FHLBanks, which could negatively impact the FHLBNY’s financial condition and results of operations.  We are jointly and severally liable along with the other FHLBanks for the Consolidated obligations issued through the Office of Finance.  Dividends on, redemption of, or repurchase of shares of our capital stock are not permitted unless the principal and interest due on all Consolidated obligations have been paid in full.  If another Federal Home Loan Bank were to default on its obligation to pay principal or interest on any Consolidated obligations, the Finance Agency may allocate the outstanding liability among one or more of the remaining FHLBanks on a pro rata basis or on any other basis the Finance Agency may determine.  As a result, our ability to pay dividends on, to redeem, or to repurchase shares of capital stock could be affected by the financial condition of one or more of the other FHLBanks. However, no FHLBank has ever defaulted on its debt and no FHLBank has ever been asked to assume the debt payments of another FHLBank since the FHLB System was established in 1932.

Liquidity Risks

The FHLBNY may not be able to meet its obligations as they come due or meet the credit and liquidity needs of its members in a timely and cost-effective manner.  We seek to be in a position to meet our members’ credit and liquidity needs and pay our obligations without maintaining excessive holdings of low-yielding liquid investments or being forced to incur unnecessarily high borrowing costs.  In addition, we maintain a contingent liquidity plan designed to enable us to meet our obligations and the liquidity needs of members in the event of operational disruptions or short-term disruptions in the capital markets. Liquidity Regulations addressing liquidity requirements are in place for the Federal Home Loan Banks, and compliance with these regulations are closely monitored by our management and Board of Directors. However, our ability to manage our liquidity position or our contingent liquidity plan may not enable us to meet our obligations and the credit and liquidity needs of our members, which could have an adverse effect on our financial condition and results of operations.

Operational Risks

Deteriorating market conditions increase the risk that the FHLBNY’s models may produce unreliable results.  We use market-based information as inputs to our financial models, which are used in making operational decisions and to derive estimates for use in our financial reporting processes. The downturn in the housing and mortgage markets created additional risk regarding the reliability of the models, particularly since the models are regularly adjusted in response to rapid changes in the actions of consumers and mortgagees to changes in economic conditions.  This may increase the risk that our models could produce unreliable results or estimates that vary widely or prove to be inaccurate.

A natural disaster or similar events in the Bank’s region, or with widespread impacts, such as the ongoing COVID-19 pandemic, could adversely affect the Bank’s profitability and financial condition.  The frequency and severity of natural disasters has increased in recent years, possibly due to the effects of climate change. A severe natural disaster could damage the Bank’s physical infrastructure and have an adverse effect on the FHLBNY’s business.  Furthermore, portions of the Bank’s region are subject to risks from hurricanes, tornadoes, floods or other natural disasters.  These natural disasters could damage or dislocate the facilities of the Bank’s members, may damage or destroy collateral that members have pledged to secure advances, may adversely affect the viability of the Bank’s mortgage purchase programs or the livelihood of borrowers of the Bank’s members, or otherwise could cause significant economic dislocation in the affected areas of the Bank’s region.

Additionally, the impact of widespread health emergencies, such as the recent outbreak of the COVID-19 coronavirus, which has now spread to many countries around the world, including the United States, could adversely impact the FHLBNY’s financial condition and results of operations. If a widespread health emergency leads to a situation that impacts the FHLBNY’s employees or vendors, the FHLBNY’s members, the borrowers of the FHLBNY’s members, and/or economic growth generally, the Bank’s financial condition and results of operations could be adversely affected.

The Bank notes here in particular that, as of the date of the filing of this Annual Report on Form 10-K, the full effects of the COVID-19 coronavirus are evolving and unknowable. The rapid and diffuse spread of COVID-19 has had severe negative impacts on, among other things, financial markets, liquidity, economic conditions and trade and could continue to do so or could worsen for an unknown period of time, which could in turn have a material adverse impact on our results of operations or financial condition. The timeliness and effectiveness of actions taken or not taken to contain and mitigate the effects of COVID-19 both in the U.S. and internationally by governments, central banks, healthcare providers, health system participants, other businesses and individuals could greatly affect outcomes. There are many current and potential issues, and we cannot predict them all or the extent to which they will affect the Bank and its business. Since March 16, 2020, most of our employees have been working remotely, and the long-term ramifications of this, including negative effects on our operations and our employees, may not yet be fully understood.

General Risk Factors

Failures of critical vendors and other third parties, including but not limited to, the Federal Reserve Banks, could disrupt the Banks’ ability to conduct and manage its businesses.  We rely on vendors and other third parties to perform certain critical services.  A failure in, or an interruption to, one of more of those services could adversely affect the business operations of the Bank.  The use of vendors and other third parties also exposes the Bank to the risk of loss of confidential information or other harm.  To the extent that vendors do not conduct their activities under appropriate standards, the Bank could also be exposed to reputational risk.

The departure of key personnel could adversely impact the Bank’s operations.  We rely on key personnel for many of our functions. Our success in retaining such personnel is important to our ability to conduct our operations and measure and maintain risk and financial controls. The ability to retain key personnel could be challenged as the U.S. employment market improves.  We maintain a succession planning program in which we attempt to identify and develop employees who can potentially replace key personnel in the event of their departure, whether due to resignation or normal retirement.

The FHLBNY relies heavily on information systems and other technology.  We rely heavily on information systems and other technology to conduct and manage our business.  We have implemented a business continuity plan that includes the maintenance of alternate sites for data processing and office functions.  All critical systems are tested annually for recovery readiness and all business units update and test their respective disaster recovery plans annually. If we were to experience a failure or interruption in any of these systems or other technology and our disaster recovery capabilities were also impacted, it would affect our ability to conduct and manage our business effectively, including advance and hedging activities.  This may adversely affect member relations, risk management, and negatively affect our financial condition and results of operations.

Continually evolving cybersecurity or other technological risks could result in the disclosure of confidential client or customer information, damage to the FHLBNY’s reputation, additional costs to the FHLBNY, regulatory penalties and financial losses.  A significant portion of FHLBNY’s operations relies heavily on the secure processing, storage and transmission of financial and other information.  The FHLBNY’s computer systems, software and networks are subject to similar vulnerabilities as other companies highly reliant on technology for operational processing. These risks include unauthorized access, loss or destruction of data, unavailability of service, computer viruses or other malicious code, cyber-attacks and other events.  These threats may derive from human error, fraud or malice on the part of employees or third parties, or may result from accidental technological failure.  If one or more of these events occurs, it could result in the disclosure of confidential information, damage to FHLBNY’s reputation with its customers, additional costs to the FHLBNY (such as repairing systems or adding new personnel or protection technologies), regulatory penalties and financial losses to the FHLBNY. Such events could also cause interruptions or malfunctions in the operations of the FHLBNY data systems (such as the lack of availability of FHLBNY’s online advance transaction system with members).

Not applicable.

Item 2.

Properties.

At December 31, 2020, we occupied approximately 73,294 square feet of leased office space at 101 Park Avenue, New York, New York as the Bank’s headquarters, 52,041 square feet of leased office space in Jersey City, New Jersey, principally as an operations center, and 2,521 square feet of leased office space in Washington, D.C.

At December 31, 2017, we occupied approximately 66,000 square feet of leased office space at 101 Park Avenue, New York, New York.  We also maintain 30,000 square feet of leased office space at 30 Montgomery Street, Jersey City, New Jersey, principally as an operations center.

Item 3.

Legal Proceedings.

From time to time, the FHLBNY is involved in disputes or regulatory inquiries that arise in the ordinary course of business. At the present time, there are no pending claims against the FHLBNY that, if established, are reasonably likely to have a material effect on the FHLBNY’s financial condition, results of operations or cash flows or that are otherwise reasonably likely to be material to the FHLBNY.

Item 4.

Mine Safety Disclosures.

Not applicable.

PART II

Not applicable.

All of the capital stock of the FHLBNY, which is issued only at a par value of $100 per share, is owned by our members.  Stock may also be held by former members as a result of having been acquired by a non-member institution.  We conduct our business in advances and mortgages exclusively with stockholder members and housing associates ⁽¹⁾.  There is no established marketplace for FHLBNY stock as FHLBNY stock is not publicly traded.  It may be redeemed at par value upon request, subject to regulatory limits.  These shares of stock in the FHLBNY are registered under the Securities Exchange Act of 1934, as amended.  At December 31, 2020, we had 330 members who held 53,668,298 shares of capital stock between them.  At December 31, 2020, former members held 29,915 shares.  At December 31, 2019, we had 328 members who held 57,786,659 shares of capital stock between them.  At December 31, 2019, former members held 51,295 shares.  Capital stock held by former members is classified as a liability, and deemed to be mandatorily redeemable under the accounting guidance for certain financial instruments with characteristics of both liabilities and equity.

Our recent quarterly cash dividends are outlined in the table below.  No dividends were paid in the form of stock.  Dividend payments and earnings retention are subject to be determined by our Board of Directors, at its discretion, and within the regulatory framework promulgated by the Finance Agency.  Our Retained Earnings and Dividends Policy outlined in the section titled Retained Earnings and Dividends under Part I, Item 1 of this Annual Report on Form 10-K provides additional information.

Dividends from a calendar quarter’s earnings are paid ^(a) subsequent to the end of that calendar quarter as summarized below. Dividend payments reported below are on Class B Stock, which includes payments to non-members on capital stock reported as mandatorily redeemable capital stock in the Statements of Condition (dollars in thousands):