FEDERAL HOME LOAN BANK OF NEW YORK

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED ~~JUNE 30, 2018~~MARCH 31, 2019

Table of Contents

		Page

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited):
Statements of Condition (Unaudited) as of ~~June 30, 2018~~March 31, 2019 and December 31, ~~2017~~2018		3
Statements of Income (Unaudited) for the Three ~~and Six~~ Months Ended ~~June 30,~~March 31, 2019 and 2018 ~~and 2017~~		4
Statements of Comprehensive Income (Unaudited) for the Three ~~and Six~~ Months Ended ~~June 30,~~March 31, 2019 and 2018 ~~and 2017~~		5
Statements of Capital (Unaudited) for the ~~Six~~Three Months Ended ~~June 30,~~March 31, 2019 and 2018 ~~and 2017~~		6
Statements of Cash Flows (Unaudited) for the ~~Six~~Three Months Ended ~~June 30,~~March 31, 2019 and 2018 ~~and 2017~~		7
Notes to Financial Statements (Unaudited)		9

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	58	60

Item 3. Quantitative and Qualitative Disclosures about Market Risk	~~115~~	106

Item 4. Controls and Procedures	~~119~~	110

PART II. OTHER INFORMATION	~~120~~	111

Item 1. Legal Proceedings	~~120~~	111

Item 1A. Risk Factors	~~120~~	111

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	~~120~~	111

Item 3. Defaults ~~upon~~Upon Senior Securities	~~120~~	111

Item 4. Mine Safety Disclosures	~~120~~	111

Item 5. Other Information	~~120~~	111

Item 6. Exhibits		112

~~121~~Signatures		113

Federal Home Loan Bank of New York
Statements of Condition — Unaudited (In Thousands, Except Par Value of Capital Stock)
As of ~~June 30, 2018~~March 31, 2019 and December 31, ~~2017~~2018

June 30, 2018

December 31, 2017

March 31, 2019

December 31, 2018

Assets

Cash and due from banks (Note 3)

$
158,300

$
127,403

$
82,894

$
85,406

Securities purchased under agreements to resell (Note 4)

4,945,000

2,700,000

5,590,000

4,095,000

Federal funds sold (Note 4)

14,887,000

10,326,000

9,137,000

7,640,000

Trading securities (Note 5) (Includes $239,034 pledged as collateral at June 30, 2018 and $239,064 at December 31, 2017)

3,766,579

1,641,568

Trading securities (Note 5) (Includes $220,347 pledged as collateral at March 31, 2019 and $239,813 at December 31, 2018)

7,210,635

5,810,512

Equity Investments (Note 6)

50,116

—

53,982

48,179

Available-for-sale securities, net of unrealized gains of $5,040 at June 30, 2018 and $10,178 at December 31, 2017 (Note 7)

479,954

577,269

Held-to-maturity securities (Note 8) (Includes $5,134 pledged as collateral at June 30, 2018 and $5,728 at December 31, 2017)

18,139,926

17,824,533

Advances (Note 9) (Includes $250,532 at June 30, 2018 and $2,205,624 at December 31, 2017 at fair value under the fair value option)

110,782,004

122,447,805

Mortgage loans held-for-portfolio, net of allowance for credit losses of $817 at June 30, 2018 and $992 at December 31, 2017 (Note 10)

2,887,473

2,896,976

Available-for-sale securities, net of unrealized gains of $36,142 at March 31, 2019 and $4,034 at December 31, 2018 (Note 7)

2,185,968

422,216

Held-to-maturity securities (Note 8) (Includes $4,376 pledged as collateral at March 31, 2019 and $4,548 at December 31, 2018)

15,628,971

17,474,826

Advances (Note 9) (Includes $0 at March 31, 2019 and December 31, 2018 at fair value under the fair value option)

99,132,395

105,178,833

Mortgage loans held-for-portfolio, net of allowance for credit losses of $797 at March 31, 2019 and $814 at December 31, 2018 (Note 10)

2,941,086

2,927,230

Loans to other FHLBanks (Note 20)

—

250,000

Accrued interest receivable

288,019

226,981

327,548

275,256

Premises, software, and equipment

35,232

29,697

52,640

51,572

Operating lease right-of-use assets (Note 19)

70,450

—

Derivative assets (Note 17)

130,947

112,742

154,840

113,762

Other assets

9,938

7,398

6,469

8,602

Total assets

$
156,560,488

$
158,918,372

$
142,574,878

$
144,381,394

Liabilities and capital

Liabilities

Deposits (Note 11)

Interest-bearing demand

$
1,130,636

$
1,142,056

$
1,302,893

$
1,002,587

Non-interest-bearing demand

20,903

17,999

18,085

20,050

Term

39,500

36,000

35,500

40,000

Total deposits

1,191,039

1,196,055

1,356,478

1,062,637

Consolidated obligations, net (Note 12)

Bonds (Includes $29,784 at June 30, 2018 and $1,131,074 at December 31, 2017 at fair value under the fair value option)

101,391,992

99,288,048

Discount notes (Includes $0 at June 30, 2018 and $2,312,621 at December 31, 2017 at fair value under the fair value option)

45,470,462

49,613,671

Bonds (Includes $7,367,064 at March 31, 2019 and $5,159,792 at December 31, 2018 at fair value under the fair value option)

80,149,864

84,153,776

Discount notes (Includes $994,773 at March 31, 2019 and $3,180,086 at December 31, 2018 at fair value under the fair value option)

53,035,777

50,640,238

Total consolidated obligations

146,862,454

148,901,719

133,185,641

134,794,014

Mandatorily redeemable capital stock (Note 14)

17,707

19,945

5,755

5,845

Accrued interest payable

198,701

162,176

213,581

223,570

Affordable Housing Program (Note 13)

149,304

131,654

161,129

161,718

Derivative liabilities (Note 17)

14,453

61,607

12,898

31,147

Other liabilities

204,300

204,178

181,764

355,841

Operating lease liabilities (Note 19)

83,094

—

Total liabilities

148,637,958

150,677,334

135,200,340

136,634,772

Commitments and Contingencies (Notes 14, 17 and 19)

Capital (Note 14)

Capital stock ($100 par value), putable, issued and outstanding shares: 62,762 at June 30, 2018 and 67,500 at December 31, 2017

6,276,227

6,750,005

Capital stock ($100 par value), putable, issued and outstanding shares: 56,711 at March 31, 2019 and 60,658 at December 31, 2018

5,671,075

6,065,799

Retained earnings

Unrestricted

1,089,965

1,067,097

1,109,437

1,102,801

Restricted (Note 14)

535,465

479,185

618,248

591,281

Total retained earnings

1,625,430

1,546,282

1,727,685

1,694,082

Total accumulated other comprehensive income (loss)

20,873

(55,249
)

(24,222
)
(13,259
)

Total capital

7,922,530

8,241,038

7,374,538

7,746,622

Total liabilities and capital

$
156,560,488

$
158,918,372

$
142,574,878

$
144,381,394

The accompanying notes are an integral part of these financial statements.
Federal Home Loan Bank of New York
Statements of Income — ~~Unaudited~~ (In Thousands, Except Per Share Data)
For the Three ~~and Six~~ Months Ended ~~June 30,~~March 31, 2019 and 2018 ~~and 2017~~

Three months ended
June 30,

Six months ended
June 30,

Three months ended
March 31,

2018

2017

2018

2017

2019

2018

Interest income

Advances, net (Note 9)

$
629,485

$
361,306

$
1,175,945

$
678,077

$
691,896

$
546,460

Interest-bearing deposits

90

46

154

81

383

64

Securities purchased under agreements to resell (Note 4)

19,728

5,008

29,837

8,313

29,922

10,109

Federal funds sold (Note 4)

76,338

35,872

143,856

63,473

73,889

67,518

Trading securities (Note 5)

13,221

75

22,345

214

40,873

9,124

Available-for-sale securities (Note 7)

3,082

2,447

5,927

4,698

15,183

2,845

Held-to-maturity securities (Note 8)

121,916

91,832

232,231

178,251

120,158

110,315

Mortgage loans held-for-portfolio (Note 10)

24,423

23,399

48,626

46,257

25,180

24,203

Loans to other FHLBanks (Note 20)

6

12

13

20

50

7

Total interest income

888,289

519,997

1,658,934

979,384

997,534

770,645

Interest expense

Consolidated obligation bonds (Note 12)

450,086

238,932

816,260

445,416

498,595

366,174

Consolidated obligation discount notes (Note 12)

225,376

101,581

432,756

178,754

315,316

207,380

Deposits (Note 11)

4,443

3,063

7,948

4,887

5,965

3,505

Mandatorily redeemable capital stock (Note 14)

293

239

626

643

100

333

Cash collateral held and other borrowings

386

68

620

121

342

234

Total interest expense

680,584

343,883

1,258,210

629,821

820,318

577,626

Net interest income before provision for credit losses

207,705

176,114

400,724

349,563

177,216

193,019

Provision (Reversal) for credit losses on mortgage loans

72

200

(308
)
(101
)

(17
)
(380
)

Net interest income after provision for credit losses

207,633

175,914

401,032

349,664

177,233

193,399

Other income (loss)

Service fees and other

3,973

4,111

7,694

7,363

4,642

3,721

Instruments held at fair value - Unrealized gains (losses) (Note 18)

(309
)
(3,581
)
(362
)
(1,862
)

Total OTTI losses

(398
)
—

(398
)
—

Net amount of impairment losses reclassified to (from) Accumulated other comprehensive income (loss)

257

—

257

—

Net impairment losses recognized in earnings

(141
)
—

(141
)
—

Net realized and unrealized gains (losses) on derivatives and hedging activities (Note 17)

(5,285
)
584

(24,085
)
(118
)
Net gains (losses) on Trading securities

781

(12
)
(2,420
)
(64
)
Fair value gains (losses) on Equity Investments (Note 6)

305

—

45

—

Provision for litigation settlement on derivative contracts

—

—

—

(70,000
)
Instruments held under the fair value option gains (losses) (Note 18)

(464
)
(53
)
Derivative gains (losses) (Note 17)

(12,280
)
(18,800
)
Trading securities gains (losses) (Note 5)

17,070

(3,201
)
Equity investments gains (losses) (Note 6)

4,210

(260
)

Total other income (loss)

(676
)
1,102

(19,269
)
(64,681
)

13,178

(18,593
)

Other expenses

Operating

11,393

10,698

21,350

19,176

12,850

9,957

Compensation and benefits

17,489

16,623

36,257

33,989

21,438

18,768

Finance Agency and Office of Finance

3,641

3,201

7,900

6,977

3,942

4,259

Other expenses

1,986

1,008

3,521

2,016

2,350

1,535

Total other expenses

34,509

31,530

69,028

62,158

40,580

34,519

Income before assessments

172,448

145,486

312,735

222,825

149,831

140,287

Affordable Housing Program Assessments (Note 13)

17,274

14,573

31,336

22,347

14,993

14,062

Net income

$
155,174

$
130,913

$
281,399

$
200,478

$
134,838

$
126,225

Basic earnings per share (Note 15)

$
2.53

$
2.11

$
4.46

$
3.23

$
2.41

$
1.93

Cash dividends paid per share

$
1.60

$
1.23

$
3.24

$
2.65

The accompanying notes are an integral part of these financial statements.
Federal Home Loan Bank of New York
Statements of Comprehensive Income — Unaudited (In Thousands)
For the Three ~~and Six~~ Months Ended ~~June 30,~~March 31, 2019 and 2018 ~~and 2017~~

Three months ended March 31,

Three months ended June 30,

Six months ended June 30,

2019

2018

2018

2017

2018

2017

Net Income

$
155,174

$
130,913

$
281,399

$
200,478

$
134,838

$
126,225

Other Comprehensive income (loss)

Net change in unrealized gains (losses) on available-for-sale securities

(89
)
2,176

(214
)
4,880

32,108

(125
)
Net change in non-credit portion of other-than-temporary impairment losses on held-to-maturity securities

Non-credit portion of other-than-temporary impairment gains (losses)

(257
)
—

(257
)
—

Accretion of non-credit portion of OTTI

1,464

1,274

2,339

7,138

857

875

Total net change in non-credit portion of other-than-temporary impairment losses on held-to-maturity securities

1,207

1,274

2,082

7,138

Net change in unrealized gains (losses) relating to hedging activities

Unrealized gains (losses)

23,157

(13,786
)
77,895

(3,700
)
Reclassification of (gains) losses included in net income

(68
)
294

(33
)
603

Total net change in unrealized gains (losses) relating to hedging activities

23,089

(13,492
)
77,862

(3,097
)
Net change due to hedging activities

Cash flow hedges (a)

(42,691
)
54,773

Fair value hedges (b)

(1,893
)
—

Total net change due to hedging activities

(44,584
)
54,773

Net change in pension and postretirement benefits

637

340

1,316

680

656

679

Total other comprehensive income (loss)

24,844

(9,702
)
81,046

9,601

(10,963
)
56,202

Total comprehensive income (loss)

$
180,018

$
121,211

$
362,445

$
210,079

$
123,875

$
182,427

(a)Represents changes in the fair values of derivatives in cash flow hedging programs, primarily from open contracts in the hedging of rolling issuance of CO discount notes, and open contracts in cash flow hedges of anticipatory issuance of CO bonds. Also includes losses related to closed cash flow hedges that will be reclassified in future periods to interest expense. Losses reclassified from AOCI to interest expense on closed contracts were $23 thousand and $35 thousand in the three months ended March 31, 2019 and 2018.
(b)Represents cumulative hedge valuation basis loss on fair value hedge of AFS securities under the last-of-layer hedging provisions of ASU 2017-12.

The accompanying notes are an integral part of these financial statements.
Federal Home Loan Bank of New York
Statements of Capital — Unaudited (In Thousands, Except Per Share Data)
For the ~~Six~~Three Months Ended ~~June 30,~~March 31, 2019 and 2018 ~~and 2017~~

Accumulated

Accumulated

Capital Stock (a)

Other

Capital Stock (a)

Other

Class B

Retained Earnings

Comprehensive

Total

Class B

Retained Earnings

Comprehensive

Total

Shares

Par Value

Unrestricted

Restricted

Total

Income (Loss)

Capital

Shares

Par Value

Unrestricted

Restricted

Total

Income (Loss)

Capital

Balance, December 31, 2016

63,077

$
6,307,766

$
1,028,674

$
383,291

$
1,411,965

$
(95,650
)
$
7,624,081

Proceeds from issuance of capital stock

29,572

2,957,216

—

—

—

—

2,957,216

Repurchase/redemption of capital stock

(25,054
)
(2,505,473
)
—

—

—

—

(2,505,473
)
Shares reclassified to mandatorily redeemable capital stock

(30
)
(3,009
)
—

—

—

—

(3,009
)
Cash dividends ($2.65 per share) on capital stock

—

—

(163,312
)
—

(163,312
)
—

(163,312
)
Comprehensive income

—

—

160,382

40,096

200,478

9,601

210,079

Balance, June 30, 2017

67,565

$
6,756,500

$
1,025,744

$
423,387

$
1,449,131

$
(86,049
)
$
8,119,582

Balance, December 31, 2017

67,500

$
6,750,005

$
1,067,097

$
479,185

$
1,546,282

$
(55,249
)
$
8,241,038

67,500

$
6,750,005

$
1,067,097

$
479,185

$
1,546,282

$
(55,249
)
$
8,241,038

Adjustments to opening balances (b)

—

—

4,924

—

4,924

(4,924
)
—

—

—

4,924

—

4,924

(4,924
)
—

Proceeds from issuance of capital stock

41,729

4,172,890

—

—

—

—

4,172,890

18,716

1,871,635

—

—

—

—

1,871,635

Repurchase/redemption of capital stock

(46,466
)
(4,646,544
)
—

—

—

—

(4,646,544
)

(23,101
)
(2,310,120
)
—

—

—

—

(2,310,120
)
Shares reclassified to mandatorily redeemable capital stock

(1
)
(124
)
—

—

—

—

(124
)

(1
)
(124
)
—

—

—

—

(124
)
Cash dividends ($3.24 per share) on capital stock

—

—

(207,175
)
—

(207,175
)
—

(207,175
)
Comprehensive income

—

—

225,119

56,280

281,399

81,046

362,445

Cash dividends ($1.64 per share) on capital stock

—

—

(102,154
)
—

(102,154
)
—

— (102,154
)
Comprehensive income (loss)

—

—

100,980

25,245

126,225

56,202

182,427

Balance, June 30, 2018

62,762

$
6,276,227

$
1,089,965

$
535,465

$
1,625,430

$
20,873

$
7,922,530

Balance, March 31, 2018

63,114

$
6,311,396

$
1,070,847

$
504,430

$
1,575,277

$
(3,971
)
$
7,882,702

Balance, December 31, 2018

60,658

$
6,065,799

$
1,102,801

$
591,281

$
1,694,082

$
(13,259
)
$
7,746,622

Proceeds from issuance of capital stock

16,495

1,649,529

—

—

—

—

1,649,529

Repurchase/redemption of capital stock

(20,441
)
(2,044,141
)
—

—

—

—

(2,044,141
)
Shares reclassified to mandatorily redeemable capital stock

(1
)
(112
)
—

—

—

—

(112
)
Cash dividends ($1.74 per share) on capital stock

—

—

(101,235
)
—

(101,235
)
—

(101,235
)
Comprehensive income (loss)

—

—

107,871

26,967

134,838

(10,963
)
123,875

Balance, March 31, 2019

56,711

$
5,671,075

$
1,109,437

$
618,248

$
1,727,685

$
(24,222
)
$
7,374,538

(a)   Putable ~~stock~~stock. Cash dividends paid — Dividends per share and aggregate dividends were paid on a single class of shares of capital stock. For more information, see Note 14. Capital Stock, Mandatorily Redeemable Capital Stock and Restricted Earnings.
(b)   Cumulative catch-up adjustment upon adoption of ASU 2016-01 relating to change in the designation of funds in the grantor trusts from AFS to Equity Investments.

The accompanying notes are an integral part of these financial statements.
Federal Home Loan Bank of New York
Statements of Cash Flows — Unaudited (In Thousands)
For the ~~Six~~Three Months Ended ~~June 30,~~March 31, 2019 and 2018 ~~and 2017~~

Six months ended June 30,

Three months ended March 31,

2018

2017

2019

2018

Operating activities

Net Income

$
281,399

$
200,478

$
134,838

$
126,225

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization:

Net premiums and discounts on consolidated obligations, investments, mortgage loans and other adjustments

78,275

(25,434
)
Net premiums and discounts on consolidated obligations, investments, mortgage loans and other adjustments (a)

(11,588
)
63,213

Concessions on consolidated obligations

1,372

2,140

643

721

Premises, software, and equipment

2,535

2,061

1,961

1,286

Provision (Reversal) for credit losses on mortgage loans

(308
)
(101
)

(17
)
(380
)
Credit impairment losses on held-to-maturity securities

141

—

Change in net fair value adjustments on derivatives and hedging activities

145,878

23,748

(114,995
)
124,780

Net realized and unrealized (gains) losses on trading securities

2,420

64

(17,070
)
3,201

Change in fair value on Equity Investments

(45
)
—

(4,210
)
260

Change in fair value adjustments on financial instruments held at fair value

362

1,925

464

53

Net change in:

Accrued interest receivable

(62,058
)
(22,751
)

(52,559
)
(24,305
)
Derivative assets due to accrued interest

(80,562
)
(12,038
)

(16,463
)
(22,499
)
Derivative liabilities due to accrued interest

76,732

4,611

6,846

31,886

Other assets

(3,065
)
(2,498
)

1,818

(770
)
Affordable Housing Program liability

17,650

(3,780
)

(589
)
5,602

Accrued interest payable

36,525

19,086

(9,989
)
(14,919
)
Other liabilities(a)

5,238

14,607

(5,166
)
5,145

Total adjustments

221,090

1,640

(220,914
)
173,274

Net cash provided by (used in) operating activities

502,489

202,118

(86,076
)
299,499

Investing activities

Net change in:

Interest-bearing deposits

(8,410
)
6,887

(69,848
)
(12,100
)
Securities purchased under agreements to resell

(2,245,000
)
1,975,000

(1,495,000
)
(1,350,000
)
Federal funds sold

(4,561,000
)
(4,017,000
)

(1,497,000
)
(974,000
)
Deposits with other FHLBanks

156

2

105

104

Premises, software, and equipment

(8,071
)
(16,083
)

(3,029
)
(2,002
)
Trading securities:

Purchased (a)

(2,355,907
)
—

Purchased

(2,895,148
)
(596,033
)
Repayments

240,000

—

1,374,130

—

Proceeds from sales

—

100,164

Equity Investments (b):

Equity Investments:

Purchased

(1,809
)
—

(1,883
)
(838
)
Proceeds from sales

902

—

518

505

Available-for-sale securities (b):

Available-for-sale securities:

Purchased

—

(1,819
)

(154,498
)
—

Repayments

48,651

70,478

19,156

24,197

Proceeds from sales

—

914

Held-to-maturity securities (c):

Held-to-maturity securities:

Long-term securities

Purchased

(1,865,365
)
(2,068,144
)

(514,268
)
(1,080,812
)
Repayments

1,541,516

988,927

761,859

742,028

Advances:

Principal collected

522,899,000

545,626,026

280,540,641

249,613,786

Made

(511,566,922
)
(554,329,189
)

(274,269,147
)
(239,644,909
)
Mortgage loans held-for-portfolio:

Principal collected

128,639

128,510

54,273

65,246

Purchased

(122,231
)
(233,491
)

(69,466
)
(49,152
)
Proceeds from sales of REO

1,038

2,507

745

316

Net change in loans to other FHLBanks

—

255,000

250,000

—

Net cash provided by (used in) investing activities

2,125,187

(11,511,311
)

2,032,140

6,736,336

The accompanying notes are an integral part of these financial statements.
Federal Home Loan Bank of New York
Statements of Cash Flows — Unaudited (In Thousands)
For the ~~Six~~Three Months Ended ~~June 30,~~March 31, 2019 and 2018 ~~and 2017~~

Six months ended June 30,

Three months ended March 31,

2018

2017

2019

2018

Financing activities

Net change in:

Deposits and other borrowings

$
26,673

$
670,238

$
265,765

$
124,512

Derivative contracts with financing element

(4,250
)
(10,423
)

(4,905
)
(2,727
)
Consolidated obligation bonds:

Proceeds from issuance

65,281,661

36,631,175

22,084,971

26,598,486

Payments for maturing and early retirement

(63,060,455
)
(33,854,358
)

(26,172,547
)
(40,136,378
)
Consolidated obligation discount notes:

Proceeds from issuance

611,195,518

565,986,743

284,041,405

288,894,082

Payments for maturing

(615,352,735
)
(558,006,883
)

(281,667,216
)
(282,012,702
)
Capital stock:

Proceeds from issuance of capital stock

4,172,890

2,957,216

1,649,529

1,871,635

Payments for repurchase/redemption of capital stock

(4,646,544
)
(2,505,473
)

(2,044,141
)
(2,310,120
)
Redemption of mandatorily redeemable capital stock

(2,362
)
(13,885
)

(202
)
(1,305
)
Cash dividends paid ~~(d)~~(b)

(207,175
)
(163,312
)

(101,235
)
(102,154
)

Net cash provided by (used in) financing activities

(2,596,779
)
11,691,038

(1,948,576
)
(7,076,671
)
Net increase (decrease) in cash and due from banks

30,897

381,845

(2,512
)
(40,836
)
Cash and due from banks at beginning of the period (e)

127,403

151,769

Cash and due from banks at end of the period (e)

$
158,300

$
533,614

Cash and due from banks at beginning of the period (c)

85,406

127,403

Cash and due from banks at end of the period (c)

$
82,894

$
86,567

Supplemental disclosures:

Interest paid

$
735,215

$
456,866

$
510,824

$
366,398

Interest paid for Discount Notes (f)

$
403,656

$
151,199

Affordable Housing Program payments (g)

$
13,686

$
26,127

Interest paid for Discount Notes (d)

$
290,942

$
183,461

Affordable Housing Program payments (e)

$
15,582

$
8,460

Transfers of mortgage loans to real estate owned

$
227

$
650

$
245

$
49

Net amount of impairment losses reclassified to (from) Accumulated other comprehensive income (loss)

$
257

$
—

Capital stock subject to mandatory redemption reclassified from equity

$
124

$
3,009

$
112

$
124

Transfers of HTM securities to AFS that are not other-than-temporarily impaired (f)

$
1,597,207

$
—

Notes to Supplemental Disclosure:

~~Non-cash~~The following non-cash transactions were not included in the Statements of Cash Flows in the ~~six~~three months ended ~~June 30, 2018:~~March 31, 2019:

(a)              ~~Ambac corporate notes at fair values~~The adoption of ~~$3.6~~ASU 2016-02, Leases (Topic 842) resulted in the recognition of non-cash right-of-use operating assets of $71.6 million and lease liabilities of $83.9 million as of January 1, 2019. Cash payments on operating leases were ~~received as non-cash considerations on mortgage-backed securities insured by~~$1.5 million in the ~~Ambac Corporation. The notes were designated as Trading Securities.~~three months ended March 31, 2019.

~~(b)~~Equity Investments at fair values of $48.6 million were recorded at January 1, 2018 as a non-cash transfer from the available-for-sale category to Equity Investments upon adoption of ASU 2016-01. The ASU requires certain equity investments to be measured at fair value through earnings, thus eliminating eligibility for the available-for-sale category. Upon implementation of the ASU, a $4.9 million~~cumulative catch-up adjustment, representing net valuation gain at December 31, 2017, was reclassified from AOCI to retained earnings at January 1, 2018.~~
~~(c)~~Non-cash $0.4 million principal pay-down on a held-to-maturity MBS; non-cash reduction of $3.3 million to the amortized cost basis of certain insured MBS. The non-cash amounts were also part of the considerations received from Ambac Corporation.
Other Notes

~~(d)~~(b)              Does not include payments to holders of mandatorily redeemable capital stock. Such payments are considered as interest expense and reported within operating cash flows.
~~(e)~~(c)               Cash and due from banks did not include any restricted cash or cash equivalents. Includes pass-thru reserves at the Federal Reserve Bank of New York. See Note 3. Cash and Due from Banks for further information.
~~(f)~~(d)              Interest paid disclosures have been supplemented for the ~~six~~three months ended ~~June 30,~~March 31, 2019 and 2018 ~~and 2017~~ under the disclosure guidance provided by ASU 2016-15, Statements of Cash flows (Topic 230), “Classification of Certain Cash Receipts and Cash Payments”, which the FHLBNY adopted on January 1, 2018: the line item, Interest paid for Discount Notes, is the portion of the cash payments at settlement of zero-coupon Consolidated obligation discount notes.
~~(g)~~(e)               AHP payments = (beginning accrual - ending accrual) + AHP assessment for the period; payments represent funds released to the Affordable Housing ~~Program.~~Program.
(f)As of January 1, 2019, the FHLBNY elected (as permitted under ASU 2017-12) and transferred $1.6 billion (amortized cost basis) offixed-rate MBS from HTM classification to AFS classification.

The accompanying notes are an integral part of these financial statements.
Federal Home Loan Bank of New York
Notes to Financial Statements — Unaudited
Background

The Federal Home Loan Bank of New York ~~(“FHLBNY”~~(FHLBNY or ~~“the Bank”)~~the Bank) is a federally chartered corporation, and is one of 11 district Federal Home Loan Banks ~~(“FHLBanks”)~~(FHLBanks). The FHLBanks are U.S. government-sponsored enterprises ~~(“GSEs”)~~(GSEs), organized under the authority of the Federal Home Loan Bank Act of 1932, as amended ~~(“FHLBank Act”)~~(FHLBank Act). Each FHLBank is a cooperative owned by member institutions located within a defined geographic district. The FHLBNY’s defined geographic district is New Jersey, New York, Puerto Rico, and the U.S. Virgin Islands.

Tax Status. The FHLBanks, including the FHLBNY, are exempt from ordinary federal, state, and local taxation except for real property taxes.

Assessments. Affordable Housing Program ~~(“AHP”)~~(AHP) Assessments — Each FHLBank, including the FHLBNY, provides subsidies in the form of direct grants and below-market interest rate advances to members, who use the funds to assist in the purchase, construction or rehabilitation of housing for very low-, low- and moderate-income households. Annually, the 11 FHLBanks must allocate the greater of $100 million or 10% of their regulatory defined net income for the Affordable Housing Program.

Note 1.                                                         Significant Accounting Policies and Estimates.

Basis of Presentation

The accompanying financial statements of the Federal Home Loan Bank of New York have been prepared in accordance with Generally Accepted Accounting Principles in the United States ~~(“GAAP”)~~(GAAP) and with the instructions provided by the Securities and Exchange Commission ~~(“SEC”)~~(SEC).

Significant Accounting Policies and Estimates

The FHLBNY has identified certain accounting policies that it believes are significant because they require management to make subjective judgments about matters that are inherently uncertain and because of the likelihood that materially different amounts would be reported under different conditions or by using different assumptions. These policies include estimating the allowance for credit losses on the advance and mortgage loan portfolios, evaluating the impairment of the FHLBNY’s securities portfolios, and estimating fair values of certain assets and liabilities.
Other than the recently adopted policies as discussed below, there have been no significant changes to accounting policies from those identified in Note 1. Significant Accounting Policies and Estimates in Notes to the Financial Statements in the Bank’s most recent Form 10-K filed on March ~~22, 2018,~~21, 2019, which contains a summary of the Bank’s significant accounting policies and estimates.

Recently Adopted Significant Accounting ~~Policies:~~Policies
~~Recognition and Measurement of Financial Assets and Financial Liabilities~~. ~~In January 2016, the FASB issued ASU No. 2016-01,~~ ~~Recognition and Measurement of Financial Assets and Financial Liabilities,~~ ~~as an amendment to~~ ~~Financial Instruments — Overall (Subtopic 825-10).~~ ~~The amendments provide guidance on certain aspects of recognition, measurement, presentation, and disclosure of financial instruments.~~
This ASU requires entities to present separately in OCI the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments. To evaluate this provision, we have analyzed the FHLBank issued Consolidated obligation debt (“CO debt”), for which the fair value option has been elected, and have estimated the instrument-specific credit risk of CO debt as de minimis, if any, and accordingly no cumulative catch-up reclassification was necessary upon adoption at January 1, 2018.
~~Federal Home Loan Bank of New York~~
~~Notes to Financial Statements — Unaudited~~
The ASU also requires certain equity investments to be measured at fair value with changes in fair value recognized in net income, thus eliminating eligibility for the current available-for-sale category. Our analysis of this provision in the ASU identified certain mutual fund assets in grantor trusts that were designated as available-for-sale and subject to this provision of the ASU. The adoption of the guidance on January 1, 2018, resulted in an immaterial cumulative catch-up reclassification of the fair values of the trust assets from AOCI to retained earnings. Prior period financial statements would not be subject to restatement under the transition provisions of this ASU.
~~Revenue Recognition~~. ~~In May 2014, the FASB issued ASU No. 2014-09,~~ ~~(Topic 606):~~ ~~Revenue from Contracts with Customers~~. The FASB and the International Accounting Standards Board (“IASB”) initiated a joint project to clarify the principles for recognizing revenue and to develop a common revenue standard for U.S. GAAP and International Financial Reporting Standards (“IFRS”) that would remove inconsistencies and improve comparability of revenue recognition practices across entities and industries, and provide more useful information to users of financial statements through improved disclosure requirements. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance provides entities with the option of using either of the following adoption methods: a full retrospective method, retrospectively to each prior reporting period presented; or a modified retrospective method, retrospectively with the cumulative effect of initially applying this guidance recognized at the date of initial application. The FHLBNY elected to use the modified retrospective method to adopt the guidance as of January 1, 2018.
Our net income is derived principally from net interest income on financial assets and liabilities, which is explicitly excluded from the scope of this guidance. Certain other streams of non-interest revenues, which relate to fee revenues from commitments and financial letters of credit, were evaluated and we have concluded that such fees and associated expenses are out of scope of the standard and therefore will not be impacted by the adoption of this guidance. We have also analyzed the recognition of gains and losses when mortgage loans are foreclosed and transferred to real estate owned status (“OREO”), and have concluded that while such line items are in-scope of the standard, adoption resulted in an immaterial impact on our financial condition, results of operations, and cash flows.
~~For information on policies adopted in 2017, see Recently Adopted Significant Accounting Policies in Note 1 in the Bank’s most recent Form 10-K filed on March 22, 2018.~~
~~Note 2.~~~~Recently Issued Accounting Standards and Interpretations, Not Yet Adopted:~~

Derivatives and Hedging. ~~In August 2017,~~The FHLBNY adopted the new hedging standards effective January 1, 2019. The FASB issued ASU 2017-12, Targeted Improvements to Accounting for Hedging Activities ~~(Topic 815).~~ ~~The FASB has issued this ASU~~(Topic 815) in August 2017, with the objective of improving the financial reporting of hedging relationships and to better portray the economic results of an entity’s risk management activities in its financial statements. In addition to that main objective, the amendments in this ASU ~~make~~made certain targeted improvements to simplify the application of the hedge accounting guidance in ~~current~~pre-existing GAAP.   The ~~amendments~~new guidance also requires that we report the entire hedging effects of the hedging instruments in the same income statement line item as the hedged item. While this ~~guidance are~~is a change in presentation from the legacy standards, the impact for the FHLBNY was not material. The amended presentation was applied prospectively in the Statements of income and prior period comparative financial information was not reclassified to conform to current presentation.
ASU 2017-12 allowed a one-time transfer of fixed-rate, pre-payable debt securities from HTM to AFS. The FHLBNY transferred $1.6 billion of HTM securities into AFS classification effective ~~for fiscal years beginning after December 15, 2018 (January~~January 1, 2019 ~~for the FHLBNY). While early application is permitted in any interim period after issuance of the ASU, the FHLBNY has elected to not early adopt the guidances under the ASU.~~
~~We expect to realize operational benefits upon adoption, and potentially to also benefit from expanded hedging opportunities~~as a one-time transfer permitted under the ~~ASU.~~standard. Other than changes in disclosures as required under the ASU and a one-time election to transfer the ~~FHLBNY does~~HTM securities to AFS, adoption did not ~~believe adoption will~~ have a material effect on ~~its~~the FHLBNY’s financial condition, results of operations, and cash flows.
Federal Home Loan Bank of New York
Notes to Financial Statements — Unaudited
On October 25, 2018, the FASB issued ASU 2018-16, Inclusion of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes (Topic 815). The new ASU added the OIS rate based on SOFR as a U.S. benchmark rate to facilitate the LIBOR to SOFR transition. The amendments in the ASU became effective for the FHLBNY concurrently with the adoption of ASU 2017-12 on January 1, 2019. The FHLBNY will begin to use OIS/SOFR as another ASC 815 hedging benchmark for its interest rate risk management objectives. The FHLBNY’s primary benchmark for hedges under ASC 815 remains LIBOR. Beginning in the current quarter, the FHLBNY has also executed hedges under ASC 815 designating the FED funds OIS index (FF/OIS) as a benchmark rate. For further information, see Note 17 Derivatives and Hedging Activities.
Lease Accounting. The FHLBNY adopted the leasing standards effective January 1, 2019. The FASB issued ASU No. 2016-02, Leases (Topic 842) in 2016. The ASU required the recognition of all leases on the balance sheet as lease assets and lease liabilities. At January 1, 2019, we recognized lease liabilities of $83.9 million and right-of-use assets of $71.6 million, primarily related to operating premise leases. Other than the recognition of leases on the balance sheet, adoption on January 1, 2019 did not result in material changes to the recognition of operating lease expense in the FHLBNY’s Statements of income. For further information, see Note 19. Commitments and Contingencies.
Note 2.Recently Issued Accounting Standards and Interpretations.

Accounting for Financial Instruments — Credit Losses. In June 2016, the FASB issued ASU 2016-13, Financial Instruments — Credit Losses (Topic 326). The ASU introduces a new accounting model, the Current Expected Credit Losses model ~~(“CECL”)~~(CECL), which requires earlier recognition of credit losses, while also providing additional transparency about credit risk. The FASB’s CECL model utilizes a lifetime “expected credit loss” measurement objective for the recognition of credit losses for loans, held-to-maturity securities and other receivables at the time the financial asset is originated or acquired. The expected credit losses are adjusted each period for changes in expected lifetime credit losses. For available-for-sale securities where fair value is less than cost, credit-related impairment, if any, will be recognized in an allowance for credit losses and adjusted each period for changes in
~~Federal Home Loan Bank of New York~~
~~Notes to Financial Statements — Unaudited~~
expected credit risk. This model replaces the multiple existing impairment models in current GAAP, which generally require that a loss be incurred before it is recognized. We ~~are in~~have concluded our preliminary assessment of the ~~process~~impact of ~~evaluating this guidance. The~~CECL on all our business lines, including advances, investments and other financial assets. While the CECL model represents a significant departure from existing GAAP, ~~but~~ we do not expect adoption will have a material impact on our financial condition, results of operations, and cash flows. This guidance is effective for interim and annual periods beginning on January 1, 2020. ~~Early application is permitted as of the interim and annual reporting periods beginning after December 15, 2018 (January 1, 2019 for the FHLBNY). The FHLBNY does not intend to early adopt the ASU.~~
~~Lease Accounting.~~ ~~In February 2016, the FASB issued ASU No. 2016-02,~~ ~~Leases (Topic 842)~~, which is intended to increase transparency and comparability of accounting for lease transactions. The ASU will require lessees to recognize all leases on the balance sheet as lease assets and lease liabilities and will require both quantitative and qualitative disclosures regarding key information about leasing arrangements. The FHLBNY will adopt the ~~guidance on its~~ASU effective ~~date of~~ January 1, 2019. In 2017, we entered into two significant long-term lease contracts for our office premises in New York and New Jersey. Beginning January 1, 2019, all leases will be recognized on our balance sheet under ASU No. 2016-02 Leases (Topic 842). Recognition of the “right-to-use” asset and an offsetting lease liability for our operating leases under the ASU would have a minimal impact on our statements of condition and the statements of income upon adoption. The leasing standard is required to be applied to leases in existence as of the date of adoption, January 1, 2019, and under recent amendments to the ASU, entities may elect not to restate comparative periods.2020.

Note 3.                                                         Cash and Due from Banks.

Cash on hand, cash items in the process of collection, and amounts due from correspondent banks and the Federal Reserve Banks are included in Cash and due from banks. The FHLBNY is exempted from maintaining any required clearing balance at the Federal Reserve Bank of New York.

Compensating Balances

The FHLBNY has arrangements with Citibank (a member/stockholder of the FHLBNY) to maintain compensating collected cash balances in return for certain fee based safekeeping and back office operational services that the counterparty provides to the FHLBNY. There are no restrictions on the withdrawal of funds. There ~~was~~were no compensating balance at ~~June 30, 2018. At~~March 31, 2019 and December 31, ~~2017, the compensating balance at Citibank included in Cash and due from banks was $41.1 million.~~2018.
Federal Home Loan Bank of New York
Notes to Financial Statements — Unaudited

Pass-through Deposit Reserves

The FHLBNY acts as a pass-through correspondent for member institutions who are required by banking regulations to deposit reserves with the Federal Reserve Banks. Pass-through reserves deposited with Federal Reserve Banks on behalf of the members by the FHLBNY were ~~$83.5~~$80.3 million at ~~June 30, 2018~~March 31, 2019 and ~~$84.2~~$86.1 million at December 31, ~~2017.~~2018. The liabilities offsetting the pass-through reserves were due to member institutions and were recorded in Other liabilities in the Statements of Condition.

Note 4.                                                         Federal Funds Sold and Securities Purchased Under Agreements to Resell.

Federal funds sold — Federal funds sold are unsecured advances to third parties.

Securities purchased under agreements to resell — As part of the FHLBNY’s banking activities, the FHLBNY may enter into secured financing transactions that mature overnight, and can be extended only at the discretion of the FHLBNY. These transactions involve the lending of cash, against which marketable securities are taken as collateral. The amount of cash loaned against the collateral is a function of the liquidity and quality of the collateral. The collateral is typically in the form of securities that meet the FHLBNY’s credit quality standards, are highly-rated and readily marketable. The FHLBNY has the ability to call for additional collateral if the value of the securities falls below a pre-defined haircut. The FHLBNY can terminate the transaction and liquidate the collateral if the counterparty fails to post the additional margin. Agreements generally allow the FHLBNY to repledge
~~Federal Home Loan Bank of New York~~
~~Notes to Financial Statements — Unaudited~~
securities under certain conditions. No adjustments for instrument-specific credit risk were deemed necessary as market values of collateral were in excess of principal amounts loaned.

At ~~June 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, the outstanding balances of Securities purchased under agreements to resell were ~~$4.9~~$5.6 billion and ~~$2.7 billion that~~$4.1 billion; the investments typically matured overnight, and were executed through a tri-party arrangement that involved transfer of overnight funds to a segregated safekeeping account at the Bank of New York ~~(“BONY”);~~(BONY). BONY, acting as an independent agent on behalf of the FHLBNY and the counterparty to the transactions, assumes the responsibility of receiving eligible securities as collateral and releasing funds to the counterparty. U.S. Treasury securities at market values ~~$5.1~~of $5.7 billion and ~~$2.8~~$4.2 billion were received at BONY to collateralize the overnight investments at ~~June 30, 2018~~March 31, 2019 and December 31, ~~2017. No overnight investments had been executed bilaterally with counterparties.~~2018. Securities purchased under agreements to resell averaged ~~$4.5~~$4.9 billion and ~~$3.7~~$2.8 billion infor the three ~~and six~~ months ended ~~June 30, 2018. For~~March 31, 2019 and for the same ~~periods~~period in the prior ~~year, transaction balances averaged $2.4 billion. For the three and six months ended June 30, 2018, interest~~year. Interest income from securities purchased under agreements to resell were ~~$19.7~~$29.9 million and ~~$29.8 million, compared to interest income of $5.0 million and $8.3~~$10.1 million for the three months ended March 31, 2019 and the same ~~periods~~period in the prior year. No overnight investments had been executed bilaterally with counterparties at March 31, 2019 and December 31, 2018.

Transactions recorded as Securities purchased under agreements to resell (reverse repos) were accounted as collateralized financing transactions.

Note 5.                                                         Trading Securities.

The carrying value of a trading security equals its fair value. The following table provides major security types at ~~June 30, 2018~~March 31, 2019 and December 31, ~~2017~~2018 (in thousands):

Fair value

June 30, 2018

December 31, 2017

GSE securities

$
773,828

$
356,899

Corporate notes

3,652

—

U.S. Treasury notes

2,989,099

1,045,605

U.S. Treasury bills

—

239,064

Total Trading securities

$
3,766,579

$
1,641,568

The FHLBNY received Ambac corporate notes from the Ambac Corporation as consideration for insurance claims on certain Ambac insured private-label mortgage-backed securities owned by the FHLBNY. The Ambac notes were designated as trading securities.
Fair value

March 31, 2019

December 31, 2018

GSE securities

$
89,941

$
502,849

Corporate notes

3,394

3,334

U.S. Treasury notes

7,117,300

5,304,329

Total Trading securities

$
7,210,635

$
5,810,512

The carrying values of trading securities included net unrealized fair value ~~losses~~gains of ~~$3.3~~$19.7 million at ~~June 30, 2018~~March 31, 2019, and ~~$1.1~~$2.6 million at December 31, ~~2017.~~2018. We have classified investments acquired for purposes of meeting short-term contingency and other liquidity needs as trading securities. In accordance with Finance Agency guidance, we do not participate in speculative trading practices.
Federal Home Loan Bank of New York
Notes to Financial Statements — Unaudited

Trading Securities Pledged

The FHLBNY had pledged marketable securities at fair values of ~~$239.0~~$220.3 million at ~~June 30, 2018~~March 31, 2019 and ~~$239.1~~$239.8 million at December 31, ~~2017~~2018 to derivative clearing organizations to fulfill the FHLBNY’s initial margin requirements as mandated under margin rules of the Commodities Futures Trading Commission ~~(“CFTC”)~~(CFTC). The clearing organizations have rights to sell or repledge the collateral securities under certain conditions.
~~Federal Home Loan Bank~~
The following tables present redemption terms of ~~New York~~
~~Notes to Financial Statements — Unaudited~~the major types of trading securities (dollars in thousands):

Redemption Terms

~~The remaining maturities and estimated fair values of investments classified as trading~~ ~~(a)~~ ~~were as follows (dollars in thousands):~~

June 30, 2018

Due in one year
or less

Due after one year
through five years

Total Fair Value

GSE securities

$
773,828

$
—

$
773,828

Corporate notes

—

3,652

3,652

U.S. Treasury notes

2,249,851

739,248

2,989,099

Total Trading securities

$
3,023,679

$
742,900

$
3,766,579

Yield on Trading securities

1.80
%
1.85
%

December 31, 2017

Due in one year
or less

Due after one year
through five years

Total Fair Value

GSE securities

$
210,390

$
146,509

$
356,899

U.S. Treasury notes

1,045,605

—

1,045,605

U.S. Treasury bills

239,064

—

239,064

Total Trading securities

$
1,495,059
(b)
$
146,509
(b)
$
1,641,568

Yield on Trading securities

1.34
%
1.28
%

~~(a)~~We have classified investments acquired for purposes of meeting short-term contingency and other liquidity needs as trading securities, which are carried at their fair values. In accordance with Finance Agency guidance, we do not participate in speculative trading practices.
~~(b)~~~~Total amounts for the redemption categories were revised for mathematical errors. It was not necessary to revise any other data.~~

March 31, 2019

Due in one
year or less

Due after one year
through five years

Total Fair Value

GSE securities

$
89,941

$
—

$
89,941

Corporate notes

—

3,394

3,394

U.S. Treasury notes

3,660,913

3,456,387

7,117,300

Total Trading securities

$
3,750,854

$
3,459,781

$
7,210,635

Yield on Trading securities

2.53
%
2.56
%

December 31, 2018

Due in one
year or less

Due after one year
through five years

Total Fair Value

GSE securities

$
502,849

$
—

$
502,849

Corporate notes

—

3,334

3,334

U.S. Treasury notes

3,171,130

2,133,199

5,304,329

Total Trading securities

$
3,673,979

$
2,136,533

$
5,810,512

Yield on Trading securities

2.05
%
2.14
%

Note 6.                                                         Equity Investments.

The FHLBNY has classified its grantor trusts as equity investments. The carrying value of ~~Equity Investments equals fair value. The following table provides~~equity investments in the Statements of Condition, and the types of ~~funds~~assets in the grantor trusts ~~owned by the FHLBNY~~were as follows (in thousands):

March 31, 2019

June 30, 2018

Gross

Gross

Gross

Gross

Amortized

Unrealized

Unrealized

Fair

Amortized

Unrealized

Unrealized

Fair

Cost

Gains (b)

Losses (b)

Value (c)

Cost

Gains (b)

Losses (b)

Value (c)

Cash equivalents

$
959

$
—

$
—

$
959

$
1,318

$
—

$
—

$
1,318

Equity funds

25,878

5,709

(84
)
31,503

26,912

4,996

(446
)
31,462

Fixed income funds

18,310

4

(660
)
17,654

21,437

30

(265
)
21,202

Total Equity Investments (a)

$
45,147

$
5,713

$
(744
)
$
50,116

$
49,667

$
5,026

$
(711
)
$
53,982

December 31, 2018

Gross

Gross

Amortized

Unrealized

Unrealized

Fair

Cost

Gains (b)

Losses (b)

Value (c)

Cash equivalents

$
1,250

$
—

$
—

$
1,250

Equity funds

25,788

2,481

(1,674
)
26,595

Fixed income funds

21,036

7

(709
)
20,334

Total Equity Investments (a)

$
48,074

$
2,488

$
(2,383
)
$
48,179

(a)        ASU 2016- 01 was adopted on January 1, 2018 and the FHLBNY made a non-cash transfer of grantor trusts to the Equity Investments category. Prior to January 1, 2018 these investments were classified as available-for-sale. The intent of the grantor trusts is to set aside cash to meet current and future payments for supplemental unfunded pension plans. Neither the pension plans nor employees of the FHLBNY own the trust.
(b)       Changes in unrealized gains and losses are recorded through earnings, specifically in Other income in the Statements of Income.
(c)        The grantor trusts invest in money market, equity and fixed income and bond funds. Daily net asset values (NAVs) are readily available and investments are redeemable at short notice. NAVs are the fair values of the funds in the grantor trusts. The grantor trusts are owned by the FHLBNY.
Federal Home Loan Bank of New York
Notes to Financial Statements — Unaudited

~~The portion~~In the Statements of Income unrealized gains and losses ~~for the period~~ related to outstanding Equity Investments ~~still held was calculated~~were as follows (in thousands):

Three Months Ended

Six Months Ended

Three Months Ended March 31,

June 30, 2018

June 30, 2018

2019

2018

Net gains (losses) recognized during the period

$
305

$
45

$
4,210

$
(260
)
Less: Net gains (losses) recognized during the period on equity investments sold during the period

—

—

Less: Net (gains) losses recognized during the period on equity investments sold during the period

—

—

Unrealized gains (losses) recognized during the reporting period on equity investments still held at the reporting date

$
305

$
45

$
4,210

$
(260
)

Note 7.                                                         Available-for-Sale Securities.
As permitted by the new hedge accounting guidance (ASU 2017-12) adopted as of January 1, 2019, the FHLBNY made a one-time election and transferred $1.6 billion (amortized cost basis) of unimpaired fixed-rate GSE-issued commercial mortgage-backed securities from HTM to AFS effective January 1, 2019. The securities were recorded as AFS with an unrealized fair value loss of $13.5 million at the date of the transfer.

The carrying value of an AFS security equals its fair value. At ~~June 30, 2018~~March 31, 2019 and at December 31, ~~2017,~~2018, no AFS security was other-than-temporarily impaired. The following tables provide major security types (in thousands):

June 30, 2018

Gross

Gross

Amortized

Unrealized

Unrealized

Fair

Cost

Gains (b)

Losses (b)

Value

GSE and U.S. Obligations

Mortgage-backed securities

CMO-Floating

$
443,424

$
4,965

$
—

$
448,389

CMBS-Floating

31,490

75

—

31,565

Total Available-for-sale securities

$
474,914

$
5,040

$
—

$
479,954

December 31, 2017

March 31, 2019

Gross

Gross

Gross

Gross

Amortized

Unrealized

Unrealized

Fair

Amortized

Unrealized

Unrealized

Fair

Cost

Gains (b)

Losses (b)

Value

Cost

Gains (a)

Losses (a)

Value

Cash equivalents (a)

$
893

$
—

$
—

$
893

Equity funds (a)

24,869

5,126

(3
)
29,992

Fixed income funds (a)

17,957

43

(243
)
17,757

GSE and U.S. Obligations

Mortgage-backed securities

Floating

CMO

$
386,741

$
3,275

$
(56
)
$
389,960

CMBS

12,354

15

—

12,369

Total Floating

399,095

3,290

(56
)
402,329

Fixed

CMBS

1,750,731

43,616

(10,708
)
1,783,639

Total Available-for-sale securities

$
2,149,826

$
46,906

$
(10,764
)
$
2,185,968

December 31, 2018

Gross

Gross

Amortized

Unrealized

Unrealized

Fair

Cost

Gains (a)

Losses (a)

Value

GSE and U.S. Obligations

Mortgage-backed securities

CMO-Floating

490,249

5,163

—

495,412

$
402,540

$
4,011

$
—

$
406,551

CMBS-Floating

33,123

92

—

33,215

15,642

23

—

15,665

Total Available-for-sale securities

$
567,091

$
10,424

$
(246
)
$
577,269

$
418,182

$
4,034

$
—

$
422,216

(a)~~At December 31, 2017~~, funds in the FHLBNY’s grantor trusts were designated as available-for-sale. Upon adoption of ASU 2016-01, the funds were designated as Equity Investments. For more information, see Note 6. Equity Investments.
~~(b)~~         Recorded in AOCI — Net unrealized fair value gains were ~~$5.0~~$36.1 million at ~~June 30, 2018~~March 31, 2019 and ~~$10.2~~$4.0 million at December 31, ~~2017.~~2018.

Impairment Analysis of AFS Securities

The FHLBNY’s portfolio of MBS classified as AFS is comprised of GSE-issued collateralized mortgage obligations and floating rate CMBS, and U.S. Agency issued MBS. The FHLBNY evaluates its GSE-issued securities by considering the creditworthiness and performance of the debt securities and the strength of the government-sponsored enterprises’ guarantees of the securities. ~~Fair values~~
Federal Home Loan Bank of mortgage-backed securities in the AFS portfolio were in excess of their amortized costs at June 30, 2018, and no security was in a loss position for 12 months or longer in the six months ended June 30, 2018. New York
Notes to Financial Statements — Unaudited
Based on ~~the~~credit and performance analysis, GSE-issued securities are performing in accordance with their contractual agreements. The FHLBNY believes that it will recover its investments in GSE-issued securities given the current levels of collateral, credit enhancements and guarantees that exist to protect the investments.
~~Federal Home Loan Bank~~ At March 31, 2019 unrealized fair value losses have been aggregated by the length of ~~New York~~time a security was in a continuous unrealized loss position. At December 31, 2018, there was no available-for-sale debt security at a fair value below its amortized cost basis.
~~Notes to Financial Statements — Unaudited~~
The following table summarizes available-for-sale securities with estimated fair values below their amortized cost basis (in thousands):

March 31, 2019

Less than 12 months

12 months or more

Total

Estimated

Unrealized

Estimated

Unrealized

Estimated

Unrealized

Fair Value

Losses

Fair Value

Losses

Fair Value

Losses

MBS Investment Securities

MBS-GSE

Fannie Mae-CMO

$
13,624

$
(55
)
$
—

$
—

$
13,624

$
(55
)
Fannie Mae-CMBS

—

—

313,926

(8,083
)
313,926

(8,083
)
Freddie Mac-CMO

1,137

(1
)
—

—

1,137

(1
)
Freddie Mac-CMBS

—

—

89,043

(2,625
)
89,043

(2,625
)
Total

$
14,761

$
(56
)
$
402,969

$
(10,708
)
$
417,730

$
(10,764
)

Redemption Terms

Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment fees. The amortized cost and estimated fair value (a) of investments classified as AFS, by contractual maturity, were as follows (in thousands):

June 30, 2018

December 31, 2017

March 31, 2019

December 31, 2018

Amortized Cost (c)

Fair Value

Amortized Cost (c)

Fair Value

Amortized Cost (b)

Fair Value

Amortized Cost (b)

Fair Value

Mortgage-backed securities

Due after one year through five years

$
31,490

$
31,565

$
33,123

$
33,215

$
12,354

$
12,369

$
15,642

$
15,665

Due after five year through ten years

1,750,731

1,783,639

—

—

Due after ten years

443,424

448,389

490,249

495,412

386,741

389,960

402,540

406,551

Fixed income/bond funds, equity funds and cash equivalents (b)

—

—

43,719

48,642

Total Available-for-sale securities

$
474,914

$
479,954

$
567,091

$
577,269

$
2,149,826

$
2,185,968

$
418,182

$
422,216

(a)         The carrying value of AFS securities equals fair value.
(b)         ~~Funds in the grantor trusts are determined to be redeemable at short notice. Fair values are the daily NAVs of the bond and equity funds. See Note 6. Equity Investments for more information.~~
~~(c)~~Amortized cost is after adjusting for net unamortized premiums of $19.4 million and net unamortized discounts of ~~$1.7 million and $1.9~~$1.5 million at ~~June 30, 2018~~March 31, 2019 and December 31, ~~2017.~~2018.

Interest Rate Payment Terms

The following table summarizes interest rate payment terms of investments in mortgage-backed securities classified as AFS securities (in thousands):

June 30, 2018

December 31, 2017

Amortized Cost

Fair Value

Amortized Cost

Fair Value

Mortgage-backed securities

CMO floating - LIBOR

$
443,424

$
448,389

$
490,249

$
495,412

CMBS floating - LIBOR

31,490

31,565

33,123

33,215

Total Mortgage-backed securities (a)

$
474,914

$
479,954

$
523,372

$
528,627

~~(a)~~~~Total will not agree to total AFS portfolio at December 31, 2017 because the grantor trusts, which primarily comprise of mutual funds, have been excluded.~~

March 31, 2019

December 31, 2018

Amortized Cost

Fair Value

Amortized Cost

Fair Value

Mortgage-backed securities

Floating

CMO - LIBOR

$
386,741

$
389,960

$
402,540

$
406,551

CMBS - LIBOR

12,354

12,369

15,642

15,665

Total Floating

399,095

402,329

418,182

422,216

Fixed

CMBS

1,750,731

1,783,639

—

—

Total Mortgage-backed securities

$
2,149,826

$
2,185,968

$
418,182

$
422,216

Federal Home Loan Bank of New York
Notes to Financial Statements — Unaudited

Note 8.                                                         Held-to-Maturity Securities.

Major Security Types (in thousands)

June 30, 2018

March 31, 2019

OTTI

Gross

Gross

OTTI

Gross

Gross

Amortized

Recognized

Carrying

Unrecognized

Unrecognized

Fair

Amortized

Recognized

Carrying

Unrecognized

Unrecognized

Fair

Issued, guaranteed or insured:

Cost (d)

in AOCI

Value

Holding Gains (a)

Holding Losses (a)

Value

Cost (d)

in AOCI

Value

Holding Gains (a)

Holding Losses (a)

Value

Pools of Mortgages

Fannie Mae

$
84,699

$
—

$
84,699

$
5,884

$
—

$
90,583

$
71,552

$
—

$
71,552

$
5,432

$
—

$
76,984

Freddie Mac

16,035

—

16,035

1,102

—

17,137

13,094

—

13,094

1,051

—

14,145

Total pools of mortgages

100,734

—

100,734

6,986

—

107,720

84,646

—

84,646

6,483

—

91,129

Collateralized Mortgage Obligations/Real Estate Mortgage Investment Conduits

Fannie Mae

1,930,553

—

1,930,553

8,824

(9,053
)
1,930,324

1,686,999

—

1,686,999

3,360

(5,694
)
1,684,665

Freddie Mac

1,183,357

—

1,183,357

7,408

(2,771
)
1,187,994

1,040,232

—

1,040,232

3,948

(2,782
)
1,041,398

Ginnie Mae

12,928

—

12,928

162

—

13,090

10,985

—

10,985

167

—

11,152

Total CMOs/REMICs

3,126,838

—

3,126,838

16,394

(11,824
)
3,131,408

2,738,216

—

2,738,216

7,475

(8,476
)
2,737,215

Commercial Mortgage-Backed Securities (b)

Fannie Mae

2,799,752

—

2,799,752

1,981

(57,379
)
2,744,354

1,971,448

—

1,971,448

2,866

(5,236
)
1,969,078

Freddie Mac

10,720,573

—

10,720,573

35,630

(85,055
)
10,671,148

9,540,431

—

9,540,431

102,739

(13,926
)
9,629,244

Total commercial mortgage-backed securities

13,520,325

—

13,520,325

37,611

(142,434
)
13,415,502

11,511,879

—

11,511,879

105,605

(19,162
)
11,598,322

Non-GSE MBS (c)

CMOs/REMICs

7,381

(413
)
6,968

75

(35
)
7,008

5,785

(364
)
5,421

268

(27
)
5,662

Asset-Backed Securities (c)

Manufactured housing (insured)

41,332

—

41,332

2,193

—

43,525

32,939

—

32,939

1,405

—

34,344

Home equity loans (insured)

75,832

(7,140
)
68,692

29,254

(156
)
97,790

68,317

(5,712
)
62,605

23,356

(15
)
85,946

Home equity loans (uninsured)

47,445

(5,168
)
42,277

7,080

(566
)
48,791

29,393

(4,128
)
25,265

5,485

(172
)
30,578

Total asset-backed securities

164,609

(12,308
)
152,301

38,527

(722
)
190,106

130,649

(9,840
)
120,809

30,246

(187
)
150,868

Total MBS

16,919,887

(12,721
)
16,907,166

99,593

(155,015
)
16,851,744

14,471,175

(10,204
)
14,460,971

150,077

(27,852
)
14,583,196

Other

State and local housing finance agency obligations

1,232,760

—

1,232,760

537

(26,371
)
1,206,926

1,168,000

—

1,168,000

392

(22,869
)
1,145,523

Total Held-to-maturity securities

$
18,152,647

$
(12,721
)
$
18,139,926

$
100,130

$
(181,386
)
$
18,058,670

$
15,639,175

$
(10,204
)
$
15,628,971

$
150,469

$
(50,721
)
$
15,728,719

Federal Home Loan Bank of New York
Notes to Financial Statements — Unaudited

December 31, 2017

December 31, 2018

OTTI

Gross

Gross

OTTI

Gross

Gross

Amortized

Recognized

Carrying

Unrecognized

Unrecognized

Fair

Amortized

Recognized

Carrying

Unrecognized

Unrecognized

Fair

Issued, guaranteed or insured:

Cost (d)

in AOCI

Value

Holding Gains (a)

Holding Losses (a)

Value

Cost (d)

in AOCI

Value

Holding Gains (a)

Holding Losses (a)

Value

Pools of Mortgages

Fannie Mae

$
97,579

$
—

$
97,579

$
7,978

$
—

$
105,557

$
74,301

$
—

$
74,301

$
4,355

$
—

$
78,656

Freddie Mac

20,160

—

20,160

1,512

—

21,672

13,673

—

13,673

953

—

14,626

Total pools of mortgages

117,739

—

117,739

9,490

—

127,229

87,974

—

87,974

5,308

—

93,282

Collateralized Mortgage Obligations/Real Estate Mortgage Investment Conduits

Fannie Mae

1,612,543

—

1,612,543

10,716

(662
)
1,622,597

1,752,909

—

1,752,909

5,057

(6,642
)
1,751,324

Freddie Mac

960,374

—

960,374

7,485

(404
)
967,455

1,079,824

—

1,079,824

4,971

(3,069
)
1,081,726

Ginnie Mae

14,513

—

14,513

175

—

14,688

11,610

—

11,610

181

—

11,791

Total CMOs/REMICs

2,587,430

—

2,587,430

18,376

(1,066
)
2,604,740

2,844,343

—

2,844,343

10,209

(9,711
)
2,844,841

Commercial Mortgage-Backed Securities (b)

Fannie Mae

2,955,640

—

2,955,640

8,497

(15,639
)
2,948,498

2,596,388

—

2,596,388

888

(37,525
)
2,559,751

Freddie Mac

10,834,852

—

10,834,852

76,196

(16,272
)
10,894,776

10,635,137

—

10,635,137

59,025

(65,374
)
10,628,788

Total commercial mortgage-backed securities

13,790,492

—

13,790,492

84,693

(31,911
)
13,843,274

13,231,525

—

13,231,525

59,913

(102,899
)
13,188,539

Non-GSE MBS (c)

CMOs/REMICs

9,159

(172
)
8,987

85

(385
)
8,687

6,158

(380
)
5,778

327

(42
)
6,063

Asset-Backed Securities (c)

Manufactured housing (insured)

47,660

—

47,660

2,439

(40
)
50,059

35,528

—

35,528

1,490

—

37,018

Home equity loans (insured)

86,606

(8,746
)
77,860

26,479

(21
)
104,318

69,583

(6,214
)
63,369

24,940

(14
)
88,295

Home equity loans (uninsured)

52,740

(5,885
)
46,855

7,847

(973
)
53,729

42,426

(4,467
)
37,959

5,886

(472
)
43,373

Total asset-backed securities

187,006

(14,631
)
172,375

36,765

(1,034
)
208,106

147,537

(10,681
)
136,856

32,316

(486
)
168,686

Total MBS

16,691,826

(14,803
)
16,677,023

149,409

(34,396
)
16,792,036

16,317,537

(11,061
)
16,306,476

108,073

(113,138
)
16,301,411

Other

State and local housing finance agency obligations

1,147,510

—

1,147,510

204

(32,977
)
1,114,737

1,168,350

—

1,168,350

202

(24,207
)
1,144,345

Total Held-to-maturity securities

$
17,839,336

$
(14,803
)
$
17,824,533

$
149,613

$
(67,373
)
$
17,906,773

$
17,485,887

$
(11,061
)
$
17,474,826

$
108,275

$
(137,345
)
$
17,445,756

(a)         Unrecognized gross holding gains and losses represent the difference between fair value and carrying value.
(b)         Commercial mortgage-backed securities ~~(“CMBS”)~~(CMBS) are Agency issued securities, collateralized by income-producing “multifamily properties”. Eligible property types include standard conventional multifamily apartments, affordable multifamily housing, seniors housing, student housing, military housing, and rural rent housing.As permitted by the new hedge accounting guidance, the FHLBNY elected to transfer fixed-rate GSE-issued CMBS at amortized cost basis of $1.6 billion from HTM to AFS effective as of January 1, 2019.
(c)          The amounts represent non-agency private-label mortgage- and asset-backed securities.
(d)         Amortized cost — For securities that were deemed to be OTTI, amortized cost represents unamortized cost less credit OTTI, net of credit OTTI reversed due to improvements in cash flows.

Certain non-Agency Private-label MBS are insured by Ambac Assurance Corp (“Ambac”), MBIA Insurance Corp (“MBIA”) and Assured Guarantee Municipal Corp., (“AGM”). Assumptions on the extent of expected reliance by the FHLBNY on insurance support by Ambac, AGM and MBIA to make whole expected cash shortfalls are ~~noted under “Monoline insurance” within this Note 8. Held-to-Maturity Securities.~~
Securities Pledged

The FHLBNY had pledged MBS, with an amortized cost basis of ~~$5.1~~$4.4 million at ~~June 30, 2018~~March 31, 2019 and ~~$5.7~~$4.5 million at December 31, ~~2017,~~2018, to the FDIC in connection with deposits maintained by the FDIC at the FHLBNY. The FDIC does not have rights to sell or repledge the collateral unless the FHLBNY defaults under the terms of its deposit arrangements with the FDIC.
~~Federal Home Loan Bank of New York~~
~~Notes to Financial Statements — Unaudited~~

Unrealized Losses

The fair values and gross unrealized holding losses are aggregated by major security type and by the length of time the individual securities have been in a continuous unrealized loss position. Unrealized losses represent the difference between fair value and amortized cost. The baseline measure of an unrealized loss is amortized cost, which is not adjusted for non-credit OTTI. Total unrealized losses in these tables will not equal unrecognized holding losses in the Major Security Types tables. Unrealized losses are calculated after adjusting for credit OTTI. In the previous tables, unrecognized holding losses are adjusted for credit and non-credit OTTI.
Federal Home Loan Bank of New York
Notes to Financial Statements — Unaudited

The following tables summarize held-to-maturity securities with estimated fair values below their amortized cost basis (in thousands):

June 30, 2018

March 31, 2019

Less than 12 months

12 months or more

Total

Less than 12 months

12 months or more

Total

Estimated

Unrealized

Estimated

Unrealized

Estimated

Unrealized

Estimated

Unrealized

Estimated

Unrealized

Estimated

Unrealized

Fair Value

Losses

Fair Value

Losses

Fair Value

Losses

Fair Value

Losses

Fair Value

Losses

Fair Value

Losses

Non-MBS Investment Securities

State and local housing finance agency obligations

$
117,739

$
(1
)
$
233,560

$
(26,370
)
$
351,299

$
(26,371
)

$
97,199

$
(2
)
$
232,003

$
(22,867
)
$
329,202

$
(22,869
)
MBS Investment Securities

MBS-GSE

Fannie Mae

2,666,448

(49,909
)
292,911

(16,523
)
2,959,359

(66,432
)

949,274

(3,006
)
1,536,615

(7,924
)
2,485,889

(10,930
)
Freddie Mac

4,637,399

(78,905
)
400,480

(8,921
)
5,037,879

(87,826
)

2,766,937

(9,498
)
1,522,234

(7,210
)
4,289,171

(16,708
)
Total MBS-GSE

7,303,847

(128,814
)
693,391

(25,444
)
7,997,238

(154,258
)

3,716,211

(12,504
)
3,058,849

(15,134
)
6,775,060

(27,638
)
MBS-Private-Label

703

(4
)
29,069

(1,164
)
29,772

(1,168
)

2,701

(21
)
11,249

(330
)
13,950

(351
)
Total MBS

7,304,550

(128,818
)
722,460

(26,608
)
8,027,010

(155,426
)

3,718,912

(12,525
)
3,070,098

(15,464
)
6,789,010

(27,989
)
Total

$
7,422,289

$
(128,819
)
$
956,020

$
(52,978
)
$
8,378,309

$
(181,797
)

$
3,816,111

$
(12,527
)
$
3,302,101

$
(38,331
)
$
7,118,212

$
(50,858
)

December 31, 2017

December 31, 2018

Less than 12 months

12 months or more

Total

Less than 12 months

12 months or more

Total

Estimated

Unrealized

Estimated

Unrealized

Estimated

Unrealized

Estimated

Unrealized

Estimated

Unrealized

Estimated

Unrealized

Fair Value

Losses

Fair Value

Losses

Fair Value

Losses

Fair Value

Losses

Fair Value

Losses

Fair Value

Losses

Non-MBS Investment Securities

State and local housing finance agency obligations

$
191,872

$
(73
)
$
343,791

$
(32,904
)
$
535,663

$
(32,977
)

$
304,671

$
(29
)
$
231,022

$
(24,178
)
$
535,693

$
(24,207
)
MBS Investment Securities

MBS-GSE

Fannie Mae

1,181,936

(7,047
)
331,845

(9,254
)
1,513,781

(16,301
)

1,212,164

(1,787
)
2,134,166

(42,380
)
3,346,330

(44,167
)
Freddie Mac

2,051,154

(8,968
)
781,211

(7,708
)
2,832,365

(16,676
)

3,999,726

(14,431
)
3,157,646

(54,012
)
7,157,372

(68,443
)
Total MBS-GSE

3,233,090

(16,015
)
1,113,056

(16,962
)
4,346,146

(32,977
)

5,211,890

(16,218
)
5,291,812

(96,392
)
10,503,702

(112,610
)
MBS-Private-Label

10,674

(41
)
31,527

(1,545
)
42,201

(1,586
)

4,635

(24
)
23,138

(600
)
27,773

(624
)
Total MBS

3,243,764

(16,056
)
1,144,583

(18,507
)
4,388,347

(34,563
)

5,216,525

(16,242
)
5,314,950

(96,992
)
10,531,475

(113,234
)
Total

$
3,435,636

$
(16,129
)
$
1,488,374

$
(51,411
)
$
4,924,010

$
(67,540
)

$
5,521,196

$
(16,271
)
$
5,545,972

$
(121,170
)
$
11,067,168

$
(137,441
)

The FHLBNY’s investments in housing finance agency bonds reported gross unrealized losses of ~~$26.4~~$22.9 million and $24.2 million at ~~June 30, 2018~~March 31, 2019 and ~~$33.0 million at~~ December 31, ~~2017. Management has reviewed~~2018. Our analyses of the ~~portfolio and has observed~~fair values of HFA bonds have concluded that the market is generally pricing the bonds to the “AA municipal sector”. The bonds are performing to their contractual terms, and management has concluded that ~~as of June 30, 2018 all of~~ the gross unrealized losses on its housing finance agency bonds are temporary because the underlying collateral and credit enhancements are sufficient to protect the FHLBNY from losses based on current expectations.
~~Federal Home Loan Bank of New York~~
~~Notes to Financial Statements — Unaudited~~
The credit enhancements may include additional support ~~from:~~
·from Monoline Insurance,
· Reserve and investment funds allocated to the securities that may be used to make principal and interest payments in the event that the underlying loans pledged for these securities are not sufficient to make the necessary payments
·                  ~~General~~ and the general obligation of the State issuing the bond.
Federal Home Loan Bank of New York
~~Our analyses of the fair values of HFA bonds have concluded that the market is generally pricing the bonds~~Notes to ~~the “AA municipal sector”. Based on our review, the FHLBNY expects to recover the entire amortized cost basis of these securities.~~Financial Statements — Unaudited

Redemption Terms

Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment features. The amortized cost and estimated fair value of held-to-maturity securities, arranged by contractual maturity, were as follows (in thousands):

June 30, 2018

December 31, 2017

March 31, 2019

December 31, 2018

Amortized

Estimated

Amortized

Estimated

Amortized

Estimated

Amortized

Estimated

Cost (a)

Fair Value

Cost (a)

Fair Value

Cost (a)

Fair Value

Cost (a)

Fair Value

State and local housing finance agency obligations

Due in one year or less

$
5,700

$
5,700

$
11,400

$
11,388

$
—

$
—

$
—

$
—

Due after one year through five years

22,515

22,356

5,785

5,855

20,300

20,215

20,300

20,194

Due after five years through ten years

27,835

26,693

47,830

45,602

27,670

27,294

27,670

27,228

Due after ten years

1,176,710

1,152,177

1,082,495

1,051,892

1,120,030

1,098,014

1,120,380

1,096,923

State and local housing finance agency obligations

1,232,760

1,206,926

1,147,510

1,114,737

1,168,000

1,145,523

1,168,350

1,144,345

Mortgage-backed securities

Due in one year or less

803,315

800,744

880,774

880,780

318,755

318,707

369,989

367,636

Due after one year through five years

4,807,315

4,803,750

4,617,456

4,670,742

4,391,104

4,412,559

4,587,009

4,590,849

Due after five years through ten years

7,837,405

7,739,391

8,225,685

8,225,011

6,726,746

6,792,335

8,201,200

8,157,858

Due after ten years

3,471,852

3,507,859

2,967,911

3,015,503

3,034,570

3,059,595

3,159,339

3,185,068

Mortgage-backed securities

16,919,887

16,851,744

16,691,826

16,792,036

14,471,175

14,583,196

16,317,537

16,301,411

Total Held-to-maturity securities

$
18,152,647

$
18,058,670

$
17,839,336

$
17,906,773

$
15,639,175

$
15,728,719

$
17,485,887

$
17,445,756

(a)         Amortized cost is after adjusting for net unamortized premiums of ~~$51.7~~$53.0 million and ~~$51.8~~$63.7 million (net of unamortized discounts) at ~~June 30, 2018~~March 31, 2019 and December 31, ~~2017.~~2018.
~~Federal Home Loan Bank of New York~~
~~Notes to Financial Statements — Unaudited~~

Interest Rate Payment Terms

The following table summarizes interest rate payment terms of securities classified as held-to-maturity (in thousands):

June 30, 2018

December 31, 2017

March 31, 2019

December 31, 2018

Amortized

Carrying

Amortized

Carrying

Amortized

Carrying

Amortized

Carrying

Cost

Value

Cost

Value

Cost

Value

Cost

Value

Mortgage-backed securities

CMO

Fixed

$
779,155

$
778,742

$
880,842

$
880,671

$
646,245

$
645,881

$
680,247

$
679,867

Floating

2,353,953

2,353,953

1,714,068

1,714,068

2,097,134

2,097,134

2,169,384

2,169,384

Total CMO

3,133,108

3,132,695

2,594,910

2,594,739

2,743,379

2,743,015

2,849,631

2,849,251

CMBS

Fixed

7,739,166

7,739,166

7,310,487

7,310,487

6,990,686

6,990,686

8,348,709

8,348,709

Floating

5,781,159

5,781,159

6,480,005

6,480,005

4,521,193

4,521,193

4,882,816

4,882,816

Total CMBS

13,520,325

13,520,325

13,790,492

13,790,492

11,511,879

11,511,879

13,231,525

13,231,525

Pass Thru (a)

Fixed

229,360

217,052

262,569

248,499

196,344

186,504

204,281

193,601

Floating

37,094

37,094

43,855

43,293

19,573

19,573

32,100

32,099

Total Pass Thru

266,454

254,146

306,424

291,792

215,917

206,077

236,381

225,700

Total MBS

16,919,887

16,907,166

16,691,826

16,677,023

14,471,175

14,460,971

16,317,537

16,306,476

State and local housing finance agency obligations

Fixed

7,390

7,390

8,010

8,010

6,750

6,750

6,770

6,770

Floating

1,225,370

1,225,370

1,139,500

1,139,500

1,161,250

1,161,250

1,161,580

1,161,580

Total State and local housing finance agency obligations

1,232,760

1,232,760

1,147,510

1,147,510

1,168,000

1,168,000

1,168,350

1,168,350

Total Held-to-maturity securities

$
18,152,647

$
18,139,926

$
17,839,336

$
17,824,533

$
15,639,175

$
15,628,971

$
17,485,887

$
17,474,826

(a)         Includes MBS supported by pools of mortgages.
Federal Home Loan Bank of New York
Notes to Financial Statements — Unaudited

Impairment Analysis (OTTI) of GSE-issued and Private Label Mortgage-backed Securities

The FHLBNY evaluates its individual securities issued by Fannie Mae, Freddie Mac and U.S. government agency, (collectively GSE-issued securities), by considering the creditworthiness and performance of the debt securities and the strength of the GSEs’ guarantees of the securities. Based on analysis, GSE-issued securities are performing in accordance with their contractual agreements. The FHLBNY believes that it will recover its investments in GSE- issued securities given the current levels of collateral, credit enhancements and guarantees that exist to protect the investments. Management evaluates its investments in private-label MBS ~~(“PLMBS”)~~(PLMBS) for OTTI on a quarterly basis by performing cash flow tests on its entire portfolio of PLMBS.
~~OTTI~~ ~~— One PLMBS, which had been previously determined to be OTTI,~~ No mortgage-backed security was ~~re-impaired. Credit-related OTTI of $141 thousand was recorded in the second quarter of~~impaired at March 31, 2019 or at December 31, 2018. ~~No impairment was recorded in the prior year periods.~~ Based on cash flow testing, the Bank believes no ~~additional~~ material OTTI exists for the remaining ~~investments at June 30, 2018.~~investments. The Bank’s conclusion is also based upon multiple factors, but not limited to the expected performance of the underlying collateral, and the evaluation of the fundamentals of the issuers’ financial condition. Management has not made a decision to sell such securities at ~~June 30, 2018,~~March 31, 2019, and has concluded that it will not be required to sell such securities before recovery of the amortized cost basis of the securities.
~~Federal Home Loan Bank of New York~~
~~Notes to Financial Statements — Unaudited~~

The following table provides rollforward information about the cumulative credit losses and other components of OTTI that will be recognized in future periods as recoveries (in thousands):

Three months ended June 30,

Six months ended June 30,

2018

2017

2018

2017

Beginning balance

$
21,092

$
26,822

$
22,731

$
29,117

Additional credit losses for which an OTTI charge was previously recognized

141

—

141

—

Realized credit losses

—

(269
)
(49
)
(269
)
Increases in cash flows expected to be collected, recognized over the remaining life of the securities

(1,938
)
(736
)
(3,528
)
(3,031
)
Ending balance

$
19,295

$
25,817

$
19,295

$
25,817

~~Monoline insurance~~ — Certain PLMBS owned by the FHLBNY are insured by third-party bond insurers (“monoline insurers”). The bond insurance on these investments guarantees the timely payments of principal and interest if these payments cannot be satisfied from the cash flows of the underlying mortgage pool. The FHLBNY performs cash flow credit impairment tests on all of its PLMBS, and the analysis of the securities protected by such third-party insurance looks first to the performance of the underlying security, and considers its embedded credit enhancements in the form of excess spread, overcollateralization, and credit subordination, to determine the collectability of all amounts due. If the embedded credit enhancement protections are deemed insufficient to make timely payment of all amounts due, then the FHLBNY considers the capacity of the third-party bond insurer to cover any shortfalls. Certain monoline insurers have been subject to adverse ratings, rating downgrades, and weakening financial performance measures. In estimating the insurers’ capacity to provide credit protection in the future to cover any shortfall in cash flows expected to be collected for securities deemed OTTI, the FHLBNY has developed a methodology to analyze and assess the ability of the monoline insurers to meet future insurance obligations. Based on analysis performed, the FHLBNY has determined that for bond insurer AGM, insurance guarantees can be relied upon to cover projected shortfalls. For bond insurer MBIA, financial guarantee is at risk and no financial guarantees are assumed in 2018. For bond insurer Ambac, our analysis has determined improvements in the insurer’s financial position, and we have expanded the reliance basis from 45% at December 31, 2017 to 100% at March 31, 2018 for all periods through June 30, 2024.
~~Federal Home Loan Bank of New York~~
~~Notes to Financial Statements — Unaudited~~

Three months ended March 31,

2019

2018

Beginning balance

$
16,584

$
22,731

Realized credit losses

—

(49
)
Increases in cash flows expected to be collected, recognized over the remaining life of the securities

(1,142
)
(1,590
)
Ending balance

$
15,442

$
21,092

Note 9.                   Advances.

The FHLBNY offers to its members a wide range of fixed- and adjustable-rate advance loan products with different maturities, interest rates, payment characteristics, and optionality.

Redemption Terms

Contractual redemption terms and yields of advances were as follows (dollars in thousands):

June 30, 2018

December 31, 2017

March 31, 2019

December 31, 2018

Weighted (a)

Weighted (a)

Weighted (a)

Weighted (a)

Average

Percentage

Average

Percentage

Average

Percentage

Average

Percentage

Amount

Yield

of Total

Amount

Yield

of Total

Amount

Yield

of Total

Amount

Yield

of Total

Overdrawn demand deposit accounts

$
128

3.41
%
—
%
$
4,282

3.35
%
—
%
Due in one year or less

$
72,501,884

2.12
%
65.10
%
$
85,291,491

1.62
%
69.51
%

69,910,023

2.57

70.50

68,305,214

2.52

64.79

Due after one year through two years

20,024,033

2.17

17.98

16,866,935

1.78

13.74

11,020,108

2.40

11.11

18,019,447

2.46

17.09

Due after two years through three years

6,415,167

2.19

5.76

9,513,504

1.97

7.75

6,021,224

2.46

6.07

6,471,750

2.38

6.14

Due after three years through four years

4,516,435

2.54

4.05

5,173,778

2.18

4.22

3,189,307

2.67

3.22

3,505,420

2.61

3.32

Due after four years through five years

1,877,971

2.45

1.69

2,757,648

2.42

2.25

1,855,828

2.97

1.87

2,078,462

2.97

1.97

Thereafter

6,039,872

2.47

5.42

3,104,085

2.27

2.53

7,165,745

2.55

7.23

7,049,282

2.51

6.69

Total par value

111,375,362

2.18
%
100.00
%
122,707,441

1.72
%
100.00
%

99,162,363

2.55
%
100.00
%
105,433,857

2.51
%
100.00
%

Hedge valuation basis adjustments (b)

(593,890
)

(265,260
)

(29,968
)

(255,024
)

Fair value option valuation adjustments and accrued interest (c)

532

5,624

Total

$
110,782,004

$
122,447,805

$
99,132,395

$
105,178,833

(a)         The weighted average yield is the weighted average coupon rates for advances, unadjusted for swaps. For floating-rate advances, the weighted average rate is the rate outstanding at the reporting dates.
(b)         Hedge valuation basis adjustments represent changes in the fair values of fixed-rate advances due to changes in ~~LIBOR,~~a designated benchmark rate. The FHLBNY’s primary benchmark rate is LIBOR; beginning in the current year quarter, certain ASC 815 qualifying hedges were executed designating the FF/OIS index as a benchmark rate.
Federal Home Loan Bank of New York
Notes to Financial Statements — Unaudited
Monitoring and Evaluating Credit Losses on Advances — Summarized below are the FHLBNY’s assessment methodologies for evaluating advances for credit losses.
The FHLBNY closely monitors the creditworthiness of the institutions to which it lends. The FHLBNY also closely monitors the quality and value of the assets that are pledged as collateral by its members. The FHLBNY’s members are required to pledge collateral to secure advances. Eligible collateral includes: (1) one-to-four-family and multi-family mortgages; (2) U.S. Treasury and government-agency securities; (3) mortgage-backed securities; and (4) certain other collateral which is real estate related and has a readily ascertainable value, and in which the FHLBNY can perfect a security interest. The FHLBNY has the right to take such steps, as it deems necessary to protect its secured position on outstanding advances, including requiring additional collateral (whether or not such additional collateral would otherwise be eligible to secure a loan; and the provision would benefit the FHLBNY in a scenario when a member defaults). The FHLBNY also has a statutory lien under the FHLBank Act on members’ capital stock, which serves as further collateral for members’ indebtedness to the FHLBNY.
Credit Risk. The FHLBNY has policies and procedures in place to manage credit risk. There were no past due advances and all advances were current for all periods in this report. Management does not anticipate any credit losses, and accordingly, the FHLBNY has not provided an allowance for credit losses on advances. Potential credit risk from advances is concentrated in commercial banks, savings institutions, and insurance companies.
Concentration of Advances Outstanding. Advances to the FHLBNY’s ~~benchmark rate~~top ten borrowing member institutions are reported in Note 21. Segment Information and Concentration. The FHLBNY held sufficient collateral to cover the advances to all institutions and it does not expect to incur any credit losses. Advances borrowed by insurance companies accounted for 23.1% and 21.1% of total advances at March 31, 2019 and December 31, 2018. Lending to insurance companies poses a ~~Fair value hedge.~~
~~(c)~~~~Valuation adjustments represent changes~~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 the FHLBNY’s claims on collateral in the event of an insurance company failure. As with all members, insurance companies are also required to purchase the FHLBNY’s capital stock as a prerequisite to membership and borrowing activity. The FHLBNY’s management takes a number of steps to mitigate the unique risk of lending to insurance companies. At the time of membership, the FHLBNY requires an insurance company to be highly-rated and to meet the FHLBNY’s credit quality standards. The FHLBNY performs quarterly credit analysis of the insurance borrower.
The FHLBNY also requires member insurance companies to pledge highly-rated readily marketable securities or mortgage collateral which are held in the FHLBNY’s custody or by our third party custodian. Such collateral must meet the FHLBNY’s credit quality standards, with appropriate minimum margins applied. Very high credit quality insurance companies may be allowed to retain possession of the mortgage collateral provided the mortgage collateral is held by a third-party custodian pursuant to a tri-party security agreement. Marketable securities pledged as collateral by the insurance company must be held by the FHLBNY’s third party custodian.
Security Terms. The FHLBNY lends to financial institutions involved in housing finance within its district. Borrowing members are required to purchase capital stock of the FHLBNY and pledge collateral for advances. As of March 31, 2019 and December 31, 2018, the FHLBNY had rights to collateral with an estimated value greater than outstanding advances. Based upon the financial condition of the member, the FHLBNY:
(1)               Allows a member to retain possession of the mortgage collateral pledged to the FHLBNY if the member executes a written security agreement, provides periodic listings and agrees to hold such collateral for the benefit of the FHLBNY; however, securities and cash collateral are always in physical possession; or
(2)               Requires the member specifically to assign or place physical possession of such mortgage collateral with the FHLBNY or its custodial agent.
Federal Home Loan Bank of New York
Notes to Financial Statements — Unaudited
Beyond these provisions, Section 10(e) of the FHLBank Act affords any security interest granted by a member to the FHLBNY’s priority over the claims or rights of any other party. The two exceptions are claims that would be entitled to priority under otherwise applicable law or perfected security interests. All member obligations with the FHLBNY were fully collateralized throughout their entire ~~fair values~~term. The total of ~~advances elected under~~collateral pledged to the ~~FVO.~~FHLBNY includes excess collateral pledged above the minimum collateral requirements. However, a “Maximum Lendable Value” is established to ensure that the FHLBNY has sufficient eligible collateral securing credit extensions.

Note 10.                 Mortgage Loans Held-for-Portfolio.

Mortgage Partnership Finance® program loans, or (MPF®), are the mortgage loans held-for-portfolio. The FHLBNY participates in the MPF program by purchasing and originating conventional mortgage loans from its participating members, hereafter referred to as Participating Financial Institutions ~~(“PFI”)~~(PFI). The FHLBNY manages the liquidity, interest rate and prepayment option risk of the MPF loans, while the PFIs retain servicing activities, and may credit-enhance the portion of the loans participated to the FHLBNY. No intermediary trust is involved.

The FHLBNY classifies mortgage loans as held for investment, and accordingly reports them at their principal amount outstanding net of unamortized premiums, discounts, and unrealized gains and losses from loans initially classified as mortgage loan commitments.
~~Federal Home Loan Bank of New York~~
~~Notes to Financial Statements — Unaudited~~

The following table presents information on mortgage loans held-for-portfolio (dollars in thousands):

June 30, 2018

December 31, 2017

March 31, 2019

December 31, 2018

Amount

Percentage
of Total

Amount

Percentage
of Total

Amount

Percentage
of Total

Amount

Percentage
of Total

Real Estate(a):

Fixed medium-term single-family mortgages

$
215,606

7.58
%
$
238,057

8.35
%

$
189,802

6.55
%
$
196,551

6.82
%
Fixed long-term single-family mortgages

2,627,285

92.42

2,612,315

91.65

2,707,324

93.45

2,686,866

93.18

Total par value

2,842,891

100.00
%
2,850,372

100.00
%

2,897,126

100.00
%
2,883,417

100.00
%

Unamortized premiums

46,204

48,011

45,399

45,451

Unamortized discounts

(1,827
)

(1,833
)

(1,704
)

(1,761
)

Basis adjustment (b)

1,022

1,418

1,062

937

Total mortgage loans held-for-portfolio

2,888,290

2,897,968

2,941,883

2,928,044

Allowance for credit losses

(817
)

(992
)

(797
)

(814
)

Total mortgage loans held-for-portfolio, net of allowance for credit losses

$
2,887,473

$
2,896,976

$
2,941,086

$
2,927,230

(a)Conventional mortgages represent the majority of mortgage loans held-for-portfolio, with the remainder invested in FHA and VA insured loans (also referred to as government loans).
(b)Balances represent unamortized fair value basis of closed delivery commitments. A basis adjustment is recorded at the settlement of the loan and it represents the difference in trade price paid for acquiring the loan and the price at the settlement date for a similar loan. The basis adjustment is amortized as a yield adjustment to Interest income.

The FHLBNY and its members share the credit risk of MPF loans by structuring potential credit losses into layers. The first layer is typically 100 bps, but this varies with the particular MPF product. The amount of the first layer, or First Loss Account ~~(“FLA”)~~(FLA), was estimated at ~~$34.3~~$35.9 million and ~~$33.3~~$35.8 million at ~~June 30, 2018~~March 31, 2019 and December 31, ~~2017.~~2018. The FLA is not recorded or reported as a reserve for loan losses, as it serves as a memorandum or information account. The FHLBNY is responsible for absorbing the first layer. The second layer is that amount of credit obligations that the PFI has agreed to assume at the “Master Commitment” level. The FHLBNY pays a credit enhancement fee to the PFI for taking on this obligation. The FHLBNY assumes all residual risk. Credit enhancement fees accrued were $0.6 million ~~and $1.2 million~~ for the three ~~and six~~ months ended ~~June 30, 2018~~March 31, 2019 and ~~for the same periods in the prior year.~~2018. These fees were reported as a reduction to mortgage loan interest income.
Federal Home Loan Bank of New York
Notes to Financial Statements — Unaudited

In terms of the credit enhancement waterfall, the MPF program structures potential credit losses on conventional MPF loans into layers on each loan pool as follows:

(1)         The first layer of protection against loss is the liquidation value of the real property securing the loan.
(2)         The next layer of protection comes from the primary mortgage insurance ~~(“PMI”)~~(PMI) that is required for loans with a loan-to-value ratio greater than 80% at origination.
(3)         Losses that exceed the liquidation value of the real property and any PMI will be absorbed by the FHLBNY, limited to the amount of the FLA available under the Master Commitment. For certain MPF products, the FHLBNY could recover previously absorbed losses by withholding future credit enhancement fees ~~(“CE Fees”)~~(CE Fees) otherwise payable to the PFI, and applying the amounts to recover losses previously absorbed. In effect, the FHLBNY may recover losses allocated to the FLA from CE Fees. The amount of CE Fees depends on the MPF product and the outstanding balances of loans funded in the Master Commitment. CE Fees payable ~~(and potentially~~(potentially available for loss recovery) will decline as the outstanding loan balances in the Master Commitment declines.
(4)         The second layer or portion of credit losses is incurred by the PFI and/or the Supplemental Mortgage Insurance ~~(“SMI”)~~(SMI) provider as follows: The PFI absorbs losses in excess of any FLA up to the amount of the PFI’s credit obligation amount and/or to the SMI provider for MPF 125 Plus products if the PFI has selected SMI coverage.
(5)         The third layer of losses is absorbed by the FHLBNY.
~~Federal Home Loan Bank of New York~~
~~Notes to Financial Statements — Unaudited~~

Allowance Methodology for Loan Losses

In June 2016, the FASB issued ASU 2016-13, Financial Instruments — Credit Losses ~~Allowance policy~~(Topic 326). — The ASU introduces a new accounting model, the Current Expected Credit Losses model (CECL), which upon adoption on January 1, 2020, will require earlier recognition of credit losses. The FASB’s CECL model utilizes a lifetime “expected credit loss” measurement objective for the recognition of credit losses. This guidance is effective beginning on January 1, 2020.
The FHLBNY’s existing allowance methodology is based on current GAAP, which generally requires that a loss be incurred before it is recognized. For more information about our allowance policies, processes and methodologies, see the most recent Form 10K filed on March 21, 2019.
Mortgage loans are considered impaired when, based on current information and events, it is probable that the FHLBNY will be unable to collect all principal and interest amounts due according to the contractual terms of the mortgage loan agreements. The FHLBNY considers a loan to be seriously delinquent when it is past due 90 days or more. The FHLBNY considers the occurrence of serious delinquency as a primary confirming event of a credit loss. Bankruptcy and foreclosures are also considered as confirming events. When a loan is seriously delinquent, or in bankruptcy or in foreclosure, the FHLBNY measures estimated credit losses on an individual loan basis by looking to the value of the real property collateral. For such loans, the FHLBNY believes it is probable that we will be unable to collect all contractual interest and principal in accordance with the terms of the loan agreement. For loans that have not been individually measured for estimated credit losses (i.e. they are not seriously delinquent, or in bankruptcy or in foreclosure), the FHLBNY measures estimated incurred credit losses on a collective basis and records a valuation reserve.
When a loan is delinquent 180 days or more, the FHLBNY will charge-off the excess carrying value over the net realizable value of the loan because the FHLBNY deems that foreclosure is probable at 180 days delinquency. When the loan is foreclosed and the FHLBNY takes possession of real estate, the balance of the loan that has not been charged off is recorded as real estate owned at the lower of carrying value or net realizable value.
~~Periodic review~~ — The FHLBNY performs periodic reviews of impaired mortgage loans within the MPF loan portfolio to identify the potential for credit losses inherent in the impaired loan to determine the likelihood of collection of the principal and interest. We utilize an allowance for credit losses to reserve for estimated losses in our conventional mortgage loan portfolio (uninsured MPF loans). The measurement of our allowance for credit losses is determined by (i) reviewing certain conventional mortgage loans for impairment on an individual basis, (ii) reviewing remaining conventional mortgage loans (not individually assessed) on a collective basis, and (iii) reviewing government insured loans (FHA- and VA-insured MPF loans) on a collective basis.
~~We compute the provision for credit losses without considering the private mortgage insurance and other accompanying credit enhancement features that provide credit assurance to the FHLBNY.~~
·~~Individually evaluated conventional mortgage loans~~ — We evaluate impaired conventional mortgage loans for impairment individually. A conventional mortgage loan is considered impaired when, based on current information and events, it is probable that we will be unable to collect all amounts due according to the contractual terms of the loan agreement. The primary credit quality indicator that we use in evaluating impairment on mortgage loans includes a serious delinquency rate — MPF loans that are 90 days or more past due, in bankruptcy, or in the process of foreclosure. We also individually measure credit losses on loans that are restructured in a troubled debt restructuring involving a modification of terms. Loans discharged under Chapter 7 bankruptcy are considered TDR, and are individually measured for credit losses when seriously delinquent. We measure estimated credit impairment based on the estimated fair value of the underlying collateral, which is determined using property values, less selling costs.
·~~Collectively evaluated conventional mortgage loans~~ — We collectively evaluate the majority of our conventional mortgage loan portfolio for impairment (excluding those individually evaluated), and estimate an allowance for credit losses based primarily upon the following factors: (i) loan delinquencies, and (ii) actual historical loss severities. We utilize a roll-rate methodology when estimating allowance for credit losses. This methodology projects loans migrating to charge off status (180 days delinquency) based on historical average rates of delinquency. We then apply a loss severity factor to calculate an estimate of credit losses.
·~~Collectively evaluated government insured loans~~ — The FHLBNY invests in government-insured mortgage loans that are insured or guaranteed by the Federal Housing Administration, the Department of Veterans Affairs, and/or the Rural Housing Service of the Department of Agriculture. The servicer or PFI obtains and maintains insurance or a guaranty from the applicable government agency. The servicer or PFI is responsible for compliance with all government agency requirements and for obtaining the benefit of the applicable guarantee or insurance with respect to defaulted government-insured mortgage loans. Any losses incurred on these loans that are not recovered from the insurer/guarantor are absorbed by the
Federal Home Loan Bank of New York
Notes to Financial Statements — Unaudited
servicers. The FHLBNY’s credit risk for these loans is if the servicer or PFI fails to pay for losses not covered by the guarantee or insurance. We evaluate the credit worthiness of our member, the PFI.
Classes of the MPF loan portfolio would be subject to disaggregation to the extent that it is needed to understand the exposure to credit risk arising from these loans. The FHLBNY has determined that no further disaggregation of portfolio segments is needed other than the methodology discussed above.
~~Credit Enhancement Fees~~
The credit enhancement fee (“CE fees”) due to the PFI for taking on a credit enhancement obligation is accrued based on the master commitments outstanding. For certain MPF products, the CE fees are held back for 12 months and then paid monthly to the PFIs. Under the MPF agreements with PFIs, the FHLBNY may recover credit losses from future CE fees. The FHLBNY does not consider CE fees when computing the allowance for credit losses. It is assumed that repayment is expected to be provided solely by the sale of the underlying property, and there is no other available and reliable source of repayment. If losses were incurred, the FHLBNY would withhold CE fee payments to the PFI associated with the loan that is in a loss position. The amount withheld would be commensurate with the credit loss and the loss layer for which the PFI has assumed the credit enhancement responsibility. The FHLBNY’s loss experience has been insignificant and amounts of CE fees withheld have been insignificant in all periods in this report.

Allowance for Credit Losses

Allowances for credit losses have been recorded against the uninsured MPF loans. All other types of mortgage loans were insignificant and no allowances were necessary. The following table provides a rollforward analysis of the allowance for credit losses (in thousands):

Three months ended June 30,

Six months ended June 30,

2018

2017

2018

2017

Allowance for credit losses:

Beginning balance

$
697

$
1,145

$
992

$
1,554

Charge-offs

(17
)
(341
)
(81
)
(449
)
Recoveries

65

—

214

—

Provision (Reversal) for credit losses on mortgage loans

72

200

(308
)
(101
)
Ending balance

$
817

$
1,004

$
817

$
1,004

June 30, 2018

December 31, 2017

Ending balance, individually evaluated for impairment

$
280

$
210

Ending balance, collectively evaluated for impairment

537

782

Total Allowance for credit losses

$
817

$
992

~~Federal Home Loan Bank of New York~~
~~Notes to Financial Statements — Unaudited~~

Three months ended March 31,

2019

2018

Allowance for credit losses:

Beginning balance

$
814

$
992

Charge-offs

—

(64
)
Recoveries

—

149

Provision (Reversal) for credit losses on mortgage loans

(17
)
(380
)
Ending balance

$
797

$
697

March 31, 2019

December 31, 2018

Ending balance, individually evaluated for impairment

$
331

$
238

Ending balance, collectively evaluated for impairment

466

576

Total Allowance for credit losses

$
797

$
814

The FHLBNY’s total MPF loans and impaired MPF loans were as follows (in thousands):

June 30, 2018

December 31, 2017

March 31, 2019

December 31, 2018

Total Mortgage loans, carrying values net of allowance for credit losses (a)

$
2,887,473

$
2,896,976

$
2,941,086

$
2,927,230

Non-performing mortgage loans - Conventional (a)(b)

$
11,102

$
13,272

$
8,195

$
8,453

Insured MPF loans past due 90 days or more and still accruing interest (a)(b)

$
5,382

$
5,582

$
6,343

$
5,501

(a)         Includes loans classified as special mention, sub-standard, doubtful or loss under regulatory criteria, net of amounts charged-off if delinquent for 180 days or more.
(b)         Data in this table represents UPB, and would not agree to data reported in other tables at “recorded investment,” which includes interest receivable.

The following summarizes the recorded investment in impaired loans (excluding insured FHA/VA loans), the unpaid principal balance, and the related allowance (individually assessed), and the average recorded investment of loans for which the related allowance was individually measured (in thousands):

Three months ended

Six months ended

June 30, 2018

June 30, 2018

June 30, 2018

March 31, 2019

Unpaid

Average

Unpaid

Average

Recorded

Principal

Related

Recorded

Recorded

Principal

Related

Recorded

Investment

Balance

Allowance

Investment (d)

Investment

Balance

Allowance

Investment (d)

Conventional MPF Loans (a)(c)

No related allowance (b)

$
12,825

$
12,737

$
—

$
12,955

$
13,332

$
10,055

$
10,025

$
—

$
10,175

With a related allowance

1,139

1,119

280

1,155

1,242

1,424

1,403

331

1,123

Total individually measured for impairment

$
13,964

$
13,856

$
280

$
14,110

$
14,574

$
11,479

$
11,428

$
331

$
11,298

December 31, 2017

December 31, 2018

Unpaid

Average

Unpaid

Average

Recorded

Principal

Related

Recorded

Recorded

Principal

Related

Recorded

Investment

Balance

Allowance

Investment (d)

Investment

Balance

Allowance

Investment (d)

Conventional MPF Loans (a)(c)

No related allowance (b)

$
14,343

$
14,222

$
—

$
14,386

$
10,507

$
10,443

$
—

$
12,681

With a related allowance

1,509

1,494

210

1,393

993

974

238

1,161

Total individually measured for impairment

$
15,852

$
15,716

$
210

$
15,779

$
11,500

$
11,417

$
238

$
13,842

(a)         Based on analysis of the nature of risks of the FHLBNY’s investments in MPF loans, including its methodologies for identifying and measuring impairment, management has determined that presenting such loans as a single class is appropriate.
(b)         Collateral values, net of estimated costs to sell, exceeded the recorded investments in impaired loans and no allowances were deemed necessary.
(c)          Interest received is not recorded as Interest income if an uninsured loan is past due 90 days or more. Cash received is recorded as a liability on the assumption that cash was remitted by the servicer to the FHLBNY that could potentially be recouped by the borrower in a foreclosure.
(d)         Represents the average recorded investment for the three ~~and six~~ months ended ~~June 30, 2018~~March 31, 2019 and the twelve months ended December 31, ~~2017.~~2018.
Federal Home Loan Bank of New York
Notes to Financial Statements — Unaudited

The following tables summarize the recorded investment, the unpaid principal balance, and the average recorded investment of loans for which the related allowance was collectively measured (in thousands):

Three months ended

Six months ended

June 30, 2018

June 30, 2018

June 30, 2018

March 31, 2019

Unpaid

Average

Unpaid

Average

Recorded

Principal

Related

Recorded

Recorded

Principal

Related

Recorded

Investment

Balance

Allowance

Investment (a)

Investment

Balance

Allowance

Investment (a)

Collectively measured for impairment

Insured loans

$
237,412

$
231,343

$
—

$
238,109

$
239,441

$
229,693

$
223,921

$
—

$
231,099

Uninsured loans

2,651,162

2,597,692

537

2,646,961

2,645,164

2,715,800

2,661,777

466

2,706,753

Total loans collectively measured for impairment

$
2,888,574

$
2,829,035

$
537

$
2,885,070

$
2,884,605

$
2,945,493

$
2,885,698

$
466

$
2,937,852

December 31, 2017

December 31, 2018

Unpaid

Average

Unpaid

Average

Recorded

Principal

Related

Recorded

Recorded

Principal

Related

Recorded

Investment

Balance

Allowance

Investment (a)

Investment

Balance

Allowance

Investment (a)

Collectively measured for impairment

Insured loans

$
241,575

$
235,232

$
—

$
238,661

$
233,064

$
227,268

$
—

$
237,144

Uninsured loans

2,654,882

2,599,424

782

2,602,298

2,697,827

2,644,732

576

2,660,060

Total loans collectively measured for impairment

$
2,896,457

$
2,834,656

$
782

$
2,840,959

$
2,930,891

$
2,872,000

$
576

$
2,897,204

(a)         Represents the average recorded investment for the three ~~and six~~ months ended ~~June 30, 2018~~March 31, 2019 and the twelve months ended December 31, ~~2017.~~2018.

Recorded investments in MPF loans that were past due, and real estate owned are summarized below. Recorded investment, which includes accrued interest receivable, would not equal carrying values reported elsewhere (dollars in thousands):

June 30, 2018

December 31, 2017

March 31, 2019

December 31, 2018

Conventional

Insured

Conventional

Insured

Conventional

Insured

Conventional

Insured

MPF Loans

Loans

MPF Loans

Loans

MPF Loans

Loans

MPF Loans

Loans

Mortgage loans:

Past due 30 - 59 days

$
12,170

$
10,186

$
18,216

$
12,561

$
19,981

$
10,475

$
17,635

$
12,724

Past due 60 - 89 days

2,770

2,154

3,914

2,712

2,451

2,634

2,683

3,025

Past due 90 - 179 days

2,930

1,574

3,860

2,545

1,890

2,155

1,169

1,663

Past due 180 days or more

8,207

4,169

9,464

3,378

6,345

4,605

7,316

4,216

Total past due

26,077

18,083

35,454

21,196

30,667

19,869

28,803

21,628

Total current loans

2,639,049

219,329

2,635,280

220,379

2,696,612

209,824

2,680,524

211,436

Total mortgage loans

$
2,665,126

$
237,412

$
2,670,734

$
241,575

$
2,727,279

$
229,693

$
2,709,327

$
233,064

Other delinquency statistics:

Loans in process of foreclosure, included above

$
6,997

$
2,879

$
6,191

$
2,524

$
4,736

$
3,614

$
5,149

$
3,343

Number of foreclosures outstanding at period end

52

23

48

23

35

29

37

27

Serious delinquency rate (a)

0.42
%
2.42
%
0.50
%
2.45
%

0.31
%
2.94
%
0.31
%
2.52
%
Serious delinquent loans total used in calculation of serious delinquency rate

$
11,179

$
5,743

$
13,324

$
5,923

$
8,464

$
6,760

$
8,525

$
5,879

Past due 90 days or more and still accruing interest

$
—

$
5,743

$
—

$
5,923

$
—

$
6,760

$
—

$
5,879

Loans on non-accrual status

$
11,137

$
—

$
13,324

$
—

$
8,235

$
—

$
8,485

$
—

Troubled debt restructurings:

Loans discharged from bankruptcy (b)

$
7,824

$
862

$
8,772

$
648

$
7,061

$
669

$
7,398

$
823

Modified loans under MPF® program

$
1,510

$
—

$
1,144

$
—

$
1,585

$
—

$
1,423

$
—

Real estate owned

$
309

$
682

$
670

$
767

(a)         Serious delinquency rate is defined as recorded investments in loans that are 90 days or more past due or in the process of foreclosure expressed as a percentage of total loan class.
(b)         Loans discharged from Chapter 7 bankruptcies are considered as TDRs.
Federal Home Loan Bank of New York
Notes to Financial Statements — Unaudited

Note 11.Deposits.

The FHLBNY accepts demand, overnight and term deposits from its members. Also, a member that services mortgage loans may deposit funds collected in connection with the mortgage loans as a pending disbursement to the owners of the mortgage loans. The following table summarizes deposits (in thousands):

June 30, 2018

December 31, 2017

March 31, 2019

December 31, 2018

Interest-bearing deposits

Interest-bearing demand

$
1,130,636

$
1,142,056

$
1,302,893

$
1,002,587

Term (a)

39,500

36,000

35,500

40,000

Total interest-bearing deposits

1,170,136

1,178,056

1,338,393

1,042,587

Non-interest-bearing demand

20,903

17,999

18,085

20,050

Total deposits (b)

$
1,191,039

$
1,196,055

$
1,356,478

$
1,062,637

(a)         Term deposits were for periods of one year or less.
(b)         Specific disclosures about deposits that exceed FDIC limits have been omitted as deposits are not insured by the FDIC. Deposits are received in the ordinary course of the FHLBNY’s business. The FHLBNY has pledged securities to the FDIC to collateralize deposits maintained at the FHLBNY by the FDIC; for more information, see Securities Pledged in Note 8. Held-to-Maturity Securities.

Interest rate payment terms for deposits are summarized below (dollars in thousands):

June 30, 2018

December 31, 2017

March 31, 2019

December 31, 2018

Amount
Outstanding

Weighted
Average Interest
Rate (b)

Amount
Outstanding

Weighted
Average Interest
Rate (b)

Amount
Outstanding

Weighted Average
Interest Rate (b)

Amount
Outstanding

Weighted Average
Interest Rate (b)

Due in one year or less

Interest-bearing deposits (a)

$
1,170,136

1.47
%
$
1,178,056

0.85
%

$
1,338,393

2.31
%
$
1,042,587

1.73
%
Non-interest-bearing deposits

20,903

17,999

18,085

20,050

Total deposits

$
1,191,039

$
1,196,055

$
1,356,478

$
1,062,637

(a)         Primarily adjustable rate.
(b)         The weighted average interest rate is calculated based on the average balance.

Note 12.                                                  Consolidated Obligations.

~~Consolidated obligations are the~~The FHLBanks have joint and several liability for all the Consolidated obligations ~~of the FHLBanks,~~issued on their behalf (for more information, see Note 19. Commitments and Contingencies). Consolidated obligations consist of bonds and discount notes. The FHLBanks issue Consolidated obligations through the Office of Finance as their fiscal agent. In connection with each debt issuance, a FHLBank specifies the amount of debt it wants issued on its behalf. The Office of Finance tracks the amount of debt issued on behalf of each FHLBank. Each FHLBank separately tracks and records as a liability for its specific portion of Consolidated obligations for which it is the primary obligor. Consolidated obligation bonds ~~(“CO bonds”~~(CO bonds or ~~“Consolidated bonds”)~~Consolidated bonds) are issued primarily to raise intermediate- and long-term funds for the FHLBanks and are not subject to any statutory or regulatory limits on maturity.

Consolidated obligation discount notes ~~(“CO~~(CO discount ~~notes”, “Discount notes”,~~notes, Discount notes, or ~~“Consolidated~~Consolidated discount ~~notes”)~~notes) are issued primarily to raise short-term funds. Discount notes sell at less than their face amount and are redeemed at par value when they mature.
Federal Home Loan Bank of New York
Notes to Financial Statements — Unaudited

The following table summarizes carrying amounts of Consolidated obligations issued by the FHLBNY and outstanding at ~~June 30, 2018~~March 31, 2019 and December 31, ~~2017~~2018 (in thousands):

June 30, 2018

December 31, 2017

Consolidated obligation bonds-amortized cost

$
101,088,522

$
98,878,469

Hedge valuation basis adjustments (a)

171,573

273,585

Hedge basis adjustments on terminated hedges (b)

132,113

134,920

FVO (c) - valuation adjustments and accrued interest

(216
)
1,074

Total Consolidated obligation bonds

$
101,391,992

$
99,288,048

Discount notes-amortized cost

$
45,470,462

$
49,610,668

FVO (c) - valuation adjustments and remaining accretion

—

3,003

Total Consolidated obligation discount notes

$
45,470,462

$
49,613,671

~~(a)~~~~Hedge valuation basis adjustments represent changes in the fair values due to changes in LIBOR on fixed-rate bonds in a Fair value hedge.~~
~~(b)~~Hedge basis adjustments on terminated hedges represent the unamortized balances of valuation basis of fixed-rate bonds that were previously in a qualifying hedge relationship. The valuation basis at the time of hedge termination is amortized as a yield adjustment through Interest expense.
~~(c)~~~~Valuation adjustments represent changes in the entire fair values of bonds and discount notes elected under the FVO.~~

March 31, 2019

December 31, 2018

Consolidated obligation bonds-amortized cost

$
79,673,186

$
83,764,337

Hedge valuation basis adjustments

304,540

238,150

Hedge basis adjustments on de-designated hedges

130,074

131,497

FVO - valuation adjustments and accrued interest

42,064

19,792

Total Consolidated obligation bonds

$
80,149,864

$
84,153,776

Discount notes-amortized cost

$
53,028,359

$
50,631,066

FVO - valuation adjustments and remaining accretion

7,418

9,172

Total Consolidated obligation discount notes

$
53,035,777

$
50,640,238

Redemption Terms of Consolidated Obligation Bonds

The following table is a summary of carrying amounts of Consolidated obligation bonds outstanding by year of maturity (dollars in thousands):

June 30, 2018

December 31, 2017

March 31, 2019

December 31, 2018

Weighted

Weighted

Weighted

Weighted

Average

Percentage

Average

Percentage

Average

Percentage

Average

Percentage

Maturity

Amount

Rate (a)

of Total

Amount

Rate (a)

of Total

Amount

Rate (a)

of Total

Amount

Rate (a)

of Total

One year or less

$
84,095,950

1.89
%
83.21
%
$
82,118,565

1.30
%
83.07
%

$
62,913,140

2.38
%
78.98
%
$
64,893,475

2.29
%
77.48
%
Over one year through two years

6,413,990

2.07

6.35

7,363,255

1.43

7.45

5,403,935

2.35

6.78

7,555,545

2.38

9.02

Over two years through three years

3,243,110

2.09

3.21

2,462,400

1.91

2.49

2,232,955

2.54

2.80

2,586,325

2.48

3.09

Over three years through four years

1,206,730

2.23

1.19

1,158,595

2.18

1.17

2,123,335

2.37

2.67

2,181,750

2.39

2.60

Over four years through five years

2,006,140

2.36

1.98

1,640,835

2.13

1.66

1,547,035

2.81

1.94

1,435,235

2.73

1.71

Thereafter

4,103,650

3.45

4.06

4,107,500

3.35

4.16

5,439,700

3.44

6.83

5,105,650

3.45

6.10

Total par value

101,069,570

1.98
%
100.00
%
98,851,150

1.44
%
100.00
%

79,660,100

2.47
%
100.00
%
83,757,980

2.39
%
100.00
%

Bond premiums (b)

48,592

54,654

46,545

42,647

Bond discounts (b)

(29,640
)

(27,335
)

(33,459
)

(36,290
)

Hedge valuation basis adjustments (c)

171,573

273,585

304,540

238,150

Hedge basis adjustments on terminated hedges (d)

132,113

134,920

Hedge basis adjustments on de-designated hedges (d)

130,074

131,497

FVO (e) - valuation adjustments and accrued interest

(216
)

1,074

42,064

19,792

Total Consolidated obligation-bonds

$
101,391,992

$
99,288,048

$
80,149,864

$
84,153,776

(a)         Weighted average rate represents the weighted average contractual coupons of bonds, unadjusted for swaps.
(b)         Amortization of CO bond premiums and discounts are recorded in interest expense as yield adjustments.
(c)          Hedge valuation basis adjustments represent changes in the fair values of fixed-rate CO bonds due to changes in ~~LIBOR on fixed-rate bonds~~the designated benchmark rate (primarily LIBOR) in ~~a Fair~~ASC 815 fair value ~~hedge.~~hedges.
(d)         Hedge basis adjustments on ~~terminated~~de-designated hedges represent the unamortized balances of valuation basis of fixed-rate bonds that were previously in a fair value hedging relationship. Generally, when a hedging relationship is de-designated, the valuation basis is no longer adjusted for changes in the valuation of the debt for changes in the benchmark rate; instead, the basis is amortized over the debt’s remaining life, so that at maturity of the debt, the unamortized basis is reversed to zero.
(e)          Valuation adjustments represent changes in the entire fair values of bonds elected under the FVO.
Federal Home Loan Bank of New York
Notes to Financial Statements — Unaudited

Interest Rate Payment Terms

The following table summarizes par amounts of major types of Consolidated obligation bonds issued and outstanding (dollars in thousands):

June 30, 2018

December 31, 2017

Amount

Percentage
of Total

Amount

Percentage
of Total

Fixed-rate, non-callable

$
20,722,570

20.50
%
$
24,080,150

24.36
%
Fixed-rate, callable

3,651,000

3.61

3,658,000

3.70

Step Up, callable

310,000

0.31

253,000

0.26

Single-index floating rate

76,386,000

75.58

70,860,000

71.68

Total par value

101,069,570

100.00
%
98,851,150

100.00
%

Bond premiums

48,592

54,654

Bond discounts

(29,640
)

(27,335
)

Hedge valuation basis adjustments (a)

171,573

273,585

Hedge basis adjustments on terminated hedges (b)

132,113

134,920

FVO (c) - valuation adjustments and accrued interest

(216
)

1,074

Total Consolidated obligation-bonds

$
101,391,992

$
99,288,048

~~(a)~~~~Hedge valuation basis adjustments represent changes in the fair values of fixed-rate CO bonds in a Fair value hedge due to changes in LIBOR.~~
~~(b)~~~~Hedge basis adjustments on terminated hedges represent the unamortized balances of valuation basis of fixed-rate bonds that were previously in a hedging relationship.~~
~~(c)~~~~Valuation adjustments represent changes in the entire fair values of bonds elected under the FVO.~~

March 31, 2019

December 31, 2018

Amount

Percentage
of Total

Amount

Percentage
of Total

Fixed-rate, non-callable

$
22,777,100

28.59
%
$
22,745,980

27.16
%
Fixed-rate, callable

5,705,000

7.16

4,966,000

5.93

Step Up, callable

275,000

0.35

880,000

1.05

Single-index floating rate

50,903,000

63.90

55,166,000

65.86

Total par value

$
79,660,100

100.00
%
$
83,757,980

100.00
%

Discount Notes

Consolidated obligation discount notes are issued to raise short-term funds. Discount notes are Consolidated obligations with original maturities of up to one year. These notes are issued at less than their face amount and redeemed at par when they mature.

The FHLBNY’s outstanding Consolidated obligation discount notes were as follows (dollars in thousands):

June 30, 2018

December 31, 2017

March 31, 2019

December 31, 2018

Par value

$
45,555,456

$
49,685,334

$
53,173,357

$
50,805,481

Amortized cost

$
45,470,462

$
49,610,668

$
53,028,359

$
50,631,066

FVO (a) - valuation adjustments and remaining accretion

—

3,003

7,418

9,172

Total discount notes

$
45,470,462

$
49,613,671

$
53,035,777

$
50,640,238

Weighted average interest rate

1.87
%
1.23
%

2.41
%
2.34
%

(a)         Valuation adjustments represent changes in the entire fair values of discount notes elected under the FVO.
~~Federal Home Loan Bank of New York~~
~~Notes to Financial Statements — Unaudited~~

Note 13.                                                  Affordable Housing Program.

The FHLBNY charges the amount allocated for the Affordable Housing Program (AHP) to income and recognizes it as a liability. The FHLBNY relieves the AHP liability as members use the subsidies. For more information about the Affordable Housing Program and the Bank’s liability, see the Bank’s most recent Form 10-K filed on March ~~22, 2018.~~ 21, 2019.
The following table provides rollforward information with respect to changes in Affordable Housing Program liabilities (in thousands):

Three months ended June 30,

Six months ended June 30,

2018

2017

2018

2017

Three months ended March 31,

2019

2018

Beginning balance

$
137,256

$
117,812

$
131,654

$
125,062

$
161,718

$
131,654

Additions from current period’s assessments

17,274

14,573

31,336

22,347

14,993

14,062

Net disbursements for grants and programs

(5,226
)
(11,103
)
(13,686
)
(26,127
)

(15,582
)
(8,460
)
Ending balance

$
149,304

$
121,282

$
149,304

$
121,282

$
161,129

$
137,256

Federal Home Loan Bank of New York
Notes to Financial Statements — Unaudited

Note 14.                                                  Capital Stock, Mandatorily Redeemable Capital Stock and Restricted Retained Earnings.

The FHLBanks, including the FHLBNY, have a cooperative structure. To access the FHLBNY’s products and services, a financial institution must be approved for membership and purchase capital stock in the FHLBNY. A member’s stock requirement is generally based on its use of FHLBNY products, subject to a minimum membership requirement as prescribed by the FHLBank Act and the FHLBNY’s Capital Plan. FHLBNY stock can be issued, exchanged, redeemed and repurchased only at its stated par value of $100 per share. It is not publicly traded. An option to redeem capital stock that is greater than a member’s minimum requirement is held by both the member and the FHLBNY. The FHLBNY’s Capital Plan offers two sub-classes of Class B capital stock, membership and activity-based capital ~~stock. Membership~~stock, and ~~Activity-based Class B capital stock have the same voting rights and dividend rates. Members~~members can redeem Class B stock by giving five years notice. The FHLBNY’s Class B capital stock issued and outstanding was $5.7 billion at March 31, 2019 and $6.1 billion at December 31, 2018.
Membership and Activity-based Class B capital stocks have the same voting rights and dividend rates. (See Statements of Capital):
·                  Membership stock is issued to meet membership stock purchase requirements. The FHLBNY requires member institutions to maintain membership stock based on a percentage of the member’s mortgage-related assets. Effective August 1, 2017, the FHLBNY reduced the capital stock purchase requirement for membership from 15.0 basis points to 12.5 basis points. In addition, notwithstanding this requirement, the FHLBNY introduced a $100 million cap on membership stock per member effective January 1, 2019.
·                  Activity based stock is issued on a percentage of outstanding balances of advances, MPF loans and certain commitments. The FHLBNY’s current capital plan ~~does not provide for~~requires a stock purchase of 4.5% of the ~~issuance of Class A~~member’s borrowed amount. Excess activity-based capital ~~stock.~~stock is repurchased daily.

The FHLBNY is subject to risk-based capital rules of the Finance Agency, the regulator of the FHLBanks. Specifically, the FHLBNY is subject to three capital requirements under its capital plan. First, the FHLBNY must maintain at all times permanent capital in an amount at least equal to the sum of its credit risk, market risk, and operations risk capital requirements as calculated in accordance with the FHLBNY policy, and rules and regulations of the Finance Agency. Only permanent capital, defined as Class B stock and retained earnings, satisfies this risk-based capital requirement. The capital plan does not provide for the issuance of Class A capital stock. The Finance Agency may require the FHLBNY to maintain an amount of permanent capital greater than what is required by the risk-based capital requirements. Second, the FHLBNY is required to maintain at least a 4.0% total capital-to-asset ratio; and third, the FHLBNY will maintain at least a 5.0% leverage ratio at all times. The FHFA’s regulatory leverage ratio is defined as the sum of permanent capital weighted 1.5 times and non-permanent capital weighted 1.0 times divided by total assets.
The FHLBNY was in compliance with the aforementioned capital rules and requirements for all periods presented, and met the “adequately capitalized” classification, which is the highest rating, under the capital rule. However, the Finance Agency has discretion to reclassify a FHLBank and to modify or add to the corrective action requirements for a particular capital classification. The Director of the Finance Agency has discretion to add to or modify the corrective action requirements for each capital classification other than adequately capitalized if the Director of the Finance Agency determines that such action is necessary to ensure the safe and sound operation of the FHLBank and the FHLBank’s compliance with its risk-based and minimum capital requirements.
If the FHLBNY became classified into a capital classification other than adequately capitalized, the FHLBNY could be adversely impacted by the corrective action requirements for that capital classification.
Federal Home Loan Bank of New York
Notes to Financial Statements — Unaudited

Risk-based Capital — The following table summarizes the FHLBNY’s risk-based capital ratios (dollars in thousands):

June 30, 2018

December 31, 2017

March 31, 2019

December 31, 2018

Required (d)

Actual

Required (d)

Actual

Required (d)

Actual

Required (d)

Actual

Regulatory capital requirements:

Risk-based capital (a)(e)

$
876,266

$
7,919,364

$
912,620

$
8,316,231

$
812,500

$
7,404,515

$
797,783

$
7,765,726

Total capital-to-asset ratio

4.00
%
5.06
%
4.00
%
5.23
%

4.00
%
5.20
%
4.00
%
5.38
%
Total capital (b)

$
6,262,420

$
7,919,364

$
6,356,735

$
8,316,231

$
5,702,995

$
7,404,515

$
5,775,256

$
7,765,726

Leverage ratio

5.00
%
7.59
%
5.00
%
7.85
%

5.00
%
7.79
%
5.00
%
8.07
%
Leverage capital (c)

$
7,828,024

$
11,879,045

$
7,945,919

$
12,474,347

Leverage capital (c )

$
7,128,744

$
11,106,774

$
7,219,070

$
11,648,589

(a)         Actual “Risk-based capital” is capital stock and retained earnings plus mandatorily redeemable capital stock. Section 932.2 of the Finance Agency’s regulations also refers to this amount as “Permanent Capital.”
(b)         Required “Total capital” is 4.0% of total assets.
(c)          The required leverage ratio of total capital to total assets should be at least 5.0%. For the purposes of determining the leverage ratio, total capital shall be computed by multiplying the Bank’s Permanent Capital by 1.5.
(d)         Required minimum.
(e)          Under regulatory guidelines issued by the Finance Agency in August 2011 that was consistent with guidance provided by other federal banking agencies with respect to capital rules, risk weights are maintained at AAA for U.S. Treasury securities and other securities issued or guaranteed by the U.S. Government, government agencies, and government-sponsored entities for purposes of calculating risk-based capital.
~~Federal Home Loan Bank of New York~~
~~Notes to Financial Statements — Unaudited~~

Mandatorily Redeemable Capital Stock

Generally, the FHLBNY’s capital stock is redeemable at the option of either the member or the FHLBNY subject to certain conditions, including the provisions under the accounting guidance for certain financial instruments with characteristics of both liabilities and equity. In accordance with the accounting guidance, the FHLBNY generally reclassifies the stock subject to redemption from equity to a liability once a member irrevocably exercises a written redemption right, gives notice of intent to withdraw from membership, or attains non-member status by merger or acquisition, charter termination, or involuntary termination from membership. Under such circumstances, the member shares will then meet the definition of a mandatorily redeemable financial instrument.
Estimated redemption periods were as follows (in thousands):

June 30, 2018

December 31, 2017

March 31, 2019

December 31, 2018

Redemption less than one year

$
11,799

$
13,672

$
228

$
229

Redemption from one year to less than three years

1,076

1,145

1,065

1,068

Redemption from three years to less than five years

434

445

422

425

Redemption from five years or greater

4,398

4,683

4,040

4,123

Total

$
17,707

$
19,945

$
5,755

$
5,845

The following table provides rollforward information with respect to changes in mandatorily redeemable capital stock liabilities (in thousands):

Three months ended June 30,

Six months ended June 30,

Three months ended March 31,

2018

2017

2018

2017

2019

2018

Beginning balance

$
18,764

$
20,506

$
19,945

$
31,435

$
5,845

$
19,945

Capital stock subject to mandatory redemption reclassified from equity

—

2,794

124

3,009

112

124

Redemption of mandatorily redeemable capital stock (a)

(1,057
)
(2,741
)
(2,362
)
(13,885
)

(202
)
(1,305
)
Ending balance

$
17,707

$
20,559

$
17,707

$
20,559

$
5,755

$
18,764

Accrued interest payable (b)

$
293

$
277

$
293

$
277

$
99

$
308

(a)               Redemption includes repayment of excess stock.
(b)              The annualized accrual rate was 6.90% for the three months ended March 31, 2019 and 6.50% for the three months ended ~~June 30, 2018 and 5.00% for the three months ended June 30, 2017.~~March 31, 2018. Accrual rates are based on estimated dividend rates.
Federal Home Loan Bank of New York
Notes to Financial Statements — Unaudited

Restricted Retained Earnings

Under the FHLBank Joint Capital Enhancement Agreement ~~(“Capital Agreement”)~~(Capital Agreement), each FHLBank is required to set aside 20% of its Net income each quarter to a restricted retained earnings account until the balance of that account equals at least one percent of that FHLBank’s average balance of outstanding Consolidated obligations. The Capital Agreement is intended to enhance the capital position of each FHLBank. These restricted retained earnings will not be available to pay dividends. Retained earnings included ~~$535.5~~$618.2 million and ~~$479.2~~$591.3 million as restricted retained earnings in the FHLBNY’s Total Capital at ~~June 30, 2018~~March 31, 2019 and December 31, ~~2017.~~
~~Federal Home Loan Bank of New York~~
~~Notes to Financial Statements — Unaudited~~2018.

Note 15.                                                  Earnings Per Share of Capital.
The FHLBNY has a single class of capital stock, and earnings per share computation is for the Class B capital stock.

The following table sets forth the computation of earnings per share. Basic and diluted earnings per share of capital are the same. The FHLBNY has no dilutive potential common shares or other common stock equivalents (dollars in thousands except per share amounts):

Three months ended June 30,

Six months ended June 30,

Three months ended March 31,

2018

2017

2018

2017

2019

2018

Net income

$
155,174

$
130,913

$
281,399

$
200,478

$
134,838

$
126,225

Net income available to stockholders

$
155,174

$
130,913

$
281,399

$
200,478

$
134,838

$
126,225

Weighted average shares of capital

61,545

62,315

63,300

62,242

55,951

65,718

Less: Mandatorily redeemable capital stock

(181
)
(222
)
(186
)
(227
)

(58
)
(192
)
Average number of shares of capital used to calculate earnings per share

61,364

62,093

63,114

62,015

55,893

65,526

Basic earnings per share

$
2.53

$
2.11

$
4.46

$
3.23

$
2.41

$
1.93

Note 16.                                                  Employee Retirement Plans.

The FHLBNY participates in the Pentegra Defined Benefit Plan for Financial Institutions ~~(“Pentegra~~(Pentegra DB ~~Plan”)~~Plan), a tax-qualified, defined-benefit multiemployer pension plan that covers all FHLBNY officers and ~~employees of the Bank.~~employees. The ~~Bank~~FHLBNY also participates in the Pentegra Defined Contribution Plan for Financial Institutions, a tax-qualified defined contribution plan. The FHLBNY ~~also~~ offers two non-qualified ~~pension plans~~ — Benefit Equalization ~~Plans.~~Plans, which are retirement plans. The two plans restore defined benefits for those employees who have had their qualified Defined Benefit Plan and their Defined Contribution Plan limited by IRS regulations. The non-qualified BEP that restores benefits to participant’s Defined Contribution Plan was introduced and became effective at January 1, 2017. The two non-qualified Benefit Equalization Plans ~~(“BEP”)~~(BEP) are unfunded.
For more information about employee retirement plans, see Note ~~15.~~16. Employee Retirement Plans in the financial statements included in the most recent Form 10-K filed on March ~~22, 2018.~~21, 2019.

Retirement Plan Expenses — Summary

The following table presents employee retirement plan expenses for the periods ended (in thousands):

Three months ended June 30,

Six months ended June 30,

Three months ended March 31,

2018

2017

2018

2017

2019

2018

Defined Benefit Plan

$
1,875

$
1,875

$
3,750

$
3,750

$
2,494

$
1,875

Benefit Equalization Plans (defined benefit and defined contribution)

1,699

1,384

3,398

2,768

1,932

1,684

Defined Contribution Plans

587

549

1,229

1,088

661

642

Postretirement Health Benefit Plan

(79
)
(123
)
(159
)
(247
)

83

(80
)

Total retirement plan expenses

$
4,082

$
3,685

$
8,218

$
7,359

$
5,170

$
4,121

Federal Home Loan Bank of New York
Notes to Financial Statements — Unaudited

Benefit Equalization Plan (BEP)

The BEP restores defined benefits for those employees who have had their qualified defined benefits limited by IRS regulations. The method for determining the accrual expense and liabilities of the plan is the Projected Unit Credit Accrual Method. Under this method, the liability of the plan is composed mainly of two components, Projected Benefit Obligation (PBO) and Service Cost accruals. The total liability is determined by projecting each person’s expected plan benefits. These projected benefits are then discounted to the measurement date. Finally, the liability is allocated to service already worked (PBO) and service to be worked (Service Cost). There were no plan assets (this is an unfunded plan) that have been designated for the BEP plan.
Components of the net periodic pension cost for the defined benefit component of the BEP were as follows (in thousands):

Three months ended June 30,

Six months ended June 30,

Three months ended March 31,

2018

2017

2018

2017

2019

2018

Service cost

$
274

$
222

$
548

$
444

$
316

$
274

Interest cost

539

523

1,078

1,047

636

539

Amortization of unrecognized net loss

886

639

1,772

1,277

720

886

Net periodic benefit cost -Defined Benefit BEP

1,699

1,384

3,398

2,768

1,672

1,699

Benefit Equalization plans - Thrift and Deferred incentive compensation plans (introduced in 2017)

86

21

70

23

Benefit Equalization plans - Thrift and Deferred incentive compensation plans

260

(15
)
Total

$
1,785

$
1,405

$
3,468

$
2,791

$
1,932

$
1,684

Postretirement Health Benefit Plan
The Retiree Medical Benefit Plan (the Plan) is for retired employees and for employees who are eligible for retirement benefits. The Plan is unfunded. The Plan, as amended, is offered to active employees who have completed 10 years of employment service at the FHLBNY and attained age 55 as of January 1, 2015.

Components of the net periodic benefit cost for the postretirement health benefit plan were as follows (in thousands):

Three months ended June 30,

Six months ended June 30,

Three months ended March 31,

2018

2017

2018

2017

2019

2018

Service cost (benefits attributed to service during the period)

$
27

$
31

$
54

$
61

$
21

$
27

Interest cost on accumulated postretirement health benefit obligation

143

144

285

288

127

142

Amortization of loss/(gain)

191

142

382

283

—

191

Amortization of prior service (credit)/cost

(440
)
(440
)
(880
)
(879
)

(65
)
(440
)

Net periodic postretirement health benefit (income) (a)

$
(79
)
$
(123
)
$
(159
)
$
(247
)

$
83

$
(80
)

(a)         Plan amendments in a prior year reduced plan obligations by $8.8 million, and the resulting gain is being amortized over an actuarially determined period, reducing net periodic benefit costs.
Federal Home Loan Bank of New York
Notes to Financial Statements — Unaudited
Note 17.                                                  Derivatives and Hedging Activities.
~~General~~ — The FHLBNY accounts for its hedging activities in accordance with ASC 815, Derivatives and Hedging (formerly SFAS 133). As a general rule, hedge accounting is permitted where the FHLBNY is exposed to a particular risk, such as interest-rate risk that causes changes in the fair value of an asset or liability or variability in the expected future cash flows of an existing asset, liability or a forecasted transaction that may affect earnings.
Derivative contracts hedging the risks associated with the changes in fair value are referred to as Fair value hedges, while contracts hedging the risks affecting the expected future cash flows are called Cash flow hedges. For more information, see Derivatives in Note 1. Significant Accounting Polices and Estimates and Note 16. Derivatives and Hedging Activities in the Bank’s most recent Form 10-K filed on March 22, 2018.

The FHLBNY, consistent with the Finance Agency’s regulations, may enter into interest-rate swaps, swaptions, and interest-rate cap and floor agreements to manage its interest rate exposure inherent in otherwise unhedged assets and funding positions. We are not a derivatives dealer and do not trade derivatives for short-term profit.

~~Typically, we execute~~The contractual or notional amount of derivatives ~~under three hedging strategies — by designating them~~reflects the involvement of the FHLBNY in the various classes of financial instruments, and serve as a ~~fair value~~basis for calculating periodic interest payments or cash ~~flow hedge~~flows. Notional amount of a derivative does not measure the credit risk exposure, and the maximum credit exposure is substantially less than the notional amount. The maximum credit risk is the estimated cost of replacing interest-rate swaps, forward agreements, mandatory delivery contracts for mortgage loans and purchased caps and floors (derivatives) in a gain position if the counterparty defaults and the related collateral, if any, is of insufficient value to the FHLBNY.
Derivatives are instruments that derive their value from underlying asset prices, indices, reference rates and other inputs, or a combination of these factors. The FHLBNY executes derivatives with swap dealers and financial institution swap counterparties as negotiated contracts, which are usually referred to as over-the-counter (OTC) derivatives.
The majority of OTC derivative contracts at March 31, 2019 and December 31, 2018 were cleared derivatives, which are contracts transacted bilaterally with executing swap counterparties, then cleared and settled through derivative clearing organizations (DCOs) as mandated under the Dodd-Frank Act. When transacting a derivative for clearing, the FHLBNY utilizes a designated clearing agent, the Futures Clearing Merchant (FCM) that acts on behalf of the FHLBNY to clear and settle the interest rate exchange transaction through the DCO. Once the transaction is accepted for clearing by the FCM, acting in the capacity of an ~~underlying financial instrument or a forecasted~~intermediary between the FHLBNY and the DCO, the original transaction ~~that qualifies for hedge accounting treatment;~~between the FHLBNY and the executing swap counterparty is extinguished, and is replaced by ~~acting~~an identical transaction between the FHLBNY and the DCO. The DCO becomes the counterparty to the FHLBNY. However, the FCM remains as ~~an intermediary; or by designating~~the principal operational contact and interacts with the DCO through the life cycle events of the derivative transaction on behalf of the FHLBNY.
The FHLBNY also transacts derivative contracts that are executed and settled bilaterally with counterparties, rather than settling the transaction with a DCO. Such bilateral derivative transactions are not clearable as ~~an asset-liability management hedge (i.e. an “economic hedge”).~~the structures have not yet been mandated for clearing under the Dodd-Frank Act, typically because the transactions are complex and their ongoing pricing and settlement mechanisms have not yet been operationalized by the DCOs.
The following table presents the FHLBNY’s derivative activities based on notional amounts (in thousands):
Derivative Notionals

Hedging Instruments

March 31, 2019

December 31, 2018

Interest rate contracts

Interest rate swaps

$
104,853,705

$
105,280,821

Interest rate caps

803,000

803,000

Mortgage delivery commitments

20,062

12,682

Total interest rate contracts notionals

$
105,676,767

$
106,096,503

Federal Home Loan Bank of New York
Notes to Financial Statements — Unaudited

For fair value hedges, in which derivatives hedge the fair values of assets and liabilities, changes in the fair value of derivatives are recorded in Other income in the Statements of Income, together with fair values of the hedged item related to the hedged risk. These amounts are expected to, and generally do, offset each other.
For cash flow hedges, in which derivatives hedge the variability of cash flows related to floating- and fixed-rate assets, liabilities or forecasted transactions, the accounting treatment depends on the effectiveness of the hedge. To the extent these derivatives are effective in offsetting the variability of hedged cash flows, the effective portion of the changes in the derivatives’ fair values will not be included in current earnings, but is reported in AOCI. These changes in fair value will be included in earnings of future periods when the hedged cash flows impact earnings. To the extent these cash flow hedges are not effective, changes in their fair values are immediately recorded in Other income in the Statements of Income.
When designating a derivative in an economic hedge, it is after considering the operational costs and benefits of executing a hedge that would qualify for hedge accounting. When entering into such hedges that do not qualify for hedge accounting, changes in fair value of the derivatives is recorded in earnings with no offsetting fair value adjustments for the hedged asset, liability, or firm commitment. As a result, an economic hedge introduces the potential for earnings variability. Economic hedges are an acceptable hedging strategy under the FHLBNY’s risk management program, and the strategies comply with the Finance Agency’s regulatory requirements prohibiting speculative use of derivatives.
Credit Risk Due to Non-performance by Counterparties

Derivative transactions are customarily documented by the FHLBNY under industry standard master netting agreements, which provide that following an event of default, the non-defaulting party may promptly terminate all transactions between the parties and determine the net amount due to be paid to, or by, the defaulting party. Obligations under master netting agreements are customarily secured by collateral posted under an industry standard credit support annex to the master netting agreements. The ~~contractual or notional amount~~netting and collateral rights incorporated in the master netting agreements are considered to be legally enforceable if a supportive legal opinion has been obtained from counsel of ~~derivatives reflects~~recognized standing. Based on the ~~involvement~~analysis of the ~~FHLBNY in the various classes of financial instruments,~~rules, and serves as a basis for calculating periodic interest payments or cash flows. Notional amount of a derivative does not measure the credit risk exposure, and the maximum credit exposure is substantially less than the notional amount. The maximum credit risk is the estimated cost of replacing interest-rate swaps, forward agreements, mandatory delivery contracts for mortgage loans and purchased caps and floors (“derivatives”) in a gain position if the counterparty defaults and the related collateral, if any, is of insufficient value to the FHLBNY.
~~Derivatives are instruments that derive their value from underlying asset prices, indices, reference rates and other inputs, or~~ a combination of these factors. The FHLBNY executes derivatives with swap dealers and financial institution swap counterparties as negotiated contracts, which are usually referred to as over-the-counter (“OTC”) derivatives.
The majority of OTC derivative contracts at June 30, 2018 and December 31, 2017 were cleared derivatives. The contracts are transacted bilaterally with executing swap counterparties, then cleared and settled through derivative clearing organizations (“DCOs”) as mandated under the Dodd-Frank Act. When transacting a derivative for clearing,legal analysis obtained, the FHLBNY ~~utilizes~~has made a ~~designated clearing agent,~~determination that it has the ~~Futures Clearing Merchant (“FCM”)~~right of setoff that ~~acts on behalf of the FHLBNY to clear and settle the interest rate exchange transaction through the DCO. Once the transaction~~ is accepted for clearing by the FCM, acting in the capacity of an intermediary between the FHLBNY and the DCO, the original transaction between the FHLBNY and the executing swap counterparty is extinguished, and is replaced by an identical transaction between the FHLBNY and the DCO. The DCO becomes the counterparty to the FHLBNY. However, the FCM remains as the principal operational contact and interacts with the DCO through the life cycle events of the derivative transaction on behalf ~~of the FHLBNY.~~
~~The FHLBNY also transacts derivative contracts~~ ~~that are executed and settled bilaterally with counterparties, rather than settling the transaction with a DCO. Such bilateral derivative transactions have not yet been mandated for clearing~~enforceable under ~~the Dodd-Frank Act, typically because the transactions are complex and their ongoing pricing and settlement mechanisms have not yet been operationalized by the DCOs.~~applicable law.

Credit risk on bilateral OTC — bilateral or uncleared derivative contracts — For derivatives that are not eligible for clearing with a DCO under the Dodd-Frank Act, the FHLBNY is subject to credit risk as a result of non-performance by swap counterparties to the derivative agreements. The FHLBNY enters into master netting arrangements and bilateral security agreements with all active derivative counterparties that provide for delivery of collateral at specified levels to limit the net unsecured credit exposure to these counterparties. The FHLBNY makes
~~Federal Home Loan Bank of New York~~
~~Notes to Financial Statements — Unaudited~~
judgments on each counterparty’s creditworthiness, and makes estimates of the collateral values in analyzing counterparty non-performance credit risk. Bilateral agreements consider the credit risks and the agreement specifies thresholds to post or receive collateral with changes in credit ratings. When the FHLBNY has more than one derivative transaction outstanding with the counterparty, and a legally enforceable master netting agreement exists with the counterparty, the net exposure (less collateral held) represents the appropriate measure of credit risk. The FHLBNY conducts all its bilaterally executed derivative transactions under ISDA master netting agreements.

Credit risk on OTC cleared derivative transactions — The FHLBNY’s derivative transactions that are eligible for clearing are subject to mandatory clearing rules under the Commodity Futures Trading Commission ~~(“CFTC”)~~(CFTC) as provided under the Dodd-Frank Act. If a derivative transaction is listed as eligible for clearing, the FHLBNY must abide by the CFTC rules to clear the transaction through a DCO. The FHLBNY’s cleared derivatives are also initially executed bilaterally with a swap dealer (the executing swap counterparty) in the OTC market. The clearing process requires all parties to the derivative transaction to novate the contracts to a DCO, which then becomes the counterparty to all parties, including the FHLBNY, to the transaction.
~~The enforceability of offsetting rights incorporated in the agreements for the cleared derivative transactions has been analyzed by~~ the FHLBNY to establish the extent to which supportive legal opinion, obtained from counsel of recognized standing, provides the requisite level of certainty regarding the enforceability of these agreements. Further analysis was performed to reach a view that the exercise of rights by the non-defaulting party under these agreements would not be stayed, or avoided under applicable law upon an event of default including bankruptcy, insolvency or similar proceeding involving the DCO or the FHLBNY’s clearing agents or both. Based on the analysis of the rules, and legal analysis obtained, the FHLBNY has made a determination that it has the right of setoff that is enforceable under applicable law that would allow it to net individual derivative contracts executed through a specific clearing agent, the FCM, to a designated DCO, so that a net derivative receivable or payable will be recorded for the DCO; that exposure (less margin held) would be represented by a single amount receivable from the DCO and the appropriate measure of credit risk. This policy election for netting cleared derivatives is consistent with the policy election for netting bilaterally settled derivative transactions under master netting agreements.
For all cleared derivative contracts that have not matured, “Variation margin” is exchanged between the FHLBNY and the FCM, acting as agents on behalf of DCOs. Variation margin is determined by the DCO and fluctuates with the fair values of the open contracts. When the aggregate contract value of open derivatives is “in-the-money” for the FHLBNY (gain position), the FHLBNY would receive variation margin from the DCO. If the value of the open contracts is “out-of-the-money” (liability position), the FHLBNY would post variation margin to the DCO. At June 30, 2018 and December 31, 2017, our analysis concluded that variation margin exchanged with the DCOs - Chicago Mercantile Exchange (“CME”) and London Clearing House (“LCH”) were the daily settlement values of the derivative contracts, and not as collateral, and variation margin is a direct reduction of the fair values of the open contracts.
The FHLBNY is also required to post an initial margin on open derivative contracts to the DCO through an FCM. Initial margin is determined by the DCO and fluctuates with the volatility of the FHLBNY’s portfolio of cleared derivatives; volatility is measured by the speed and severity of market price changes of the portfolio. Initial margin is considered as collateral, and if exchanged in cash, it would be netted against the fair values of open derivative contracts after applying variation margin.
Federal Home Loan Bank of New York
Notes to Financial Statements — Unaudited

Information pertaining to FHLBNY’s derivative activities, based on notional amounts, is presented in the table below. Derivative notional amounts are reference amounts from which contractual payments are derived and do not represent a complete and accurate measure of FHLBNY’s exposure to derivative transactions. Rather, FHLBNY’s derivative exposure arises primarily from market fluctuations (i.e., market risk), counterparty failure (i.e., credit risk) and/or periods of high volatility or financial stress (i.e., liquidity risk), as well as any market valuation adjustments that may be required on the transactions.
Offsetting of Derivative Assets and Derivative Liabilities — Net Presentation

The ~~following~~ table below presents the gross and net derivatives receivables by contract type and amount for those derivatives contracts for which netting is permissible under U.S. GAAP (“as Derivative instruments — ~~Nettable”) (in thousands).~~Nettable. Derivatives receivables have been netted with respect to those receivables as to which the netting requirements have been met, including obtaining a legal analysis with respect to the enforceability of the netting. ~~Where such a legal analysis has not been either sought or obtained, the receivables were not netted, and were reported as Derivative instruments~~ — ~~Not Nettable.~~   The table also presents security collateral, which are not permitted to be offset, but which would be eligible for offsetting to the extent an event of default occurred and a legal opinion supporting enforceability of the netting and collateral rights has been ~~obtained. See footnote (c) to the table.~~obtained (in thousands):

June 30, 2018

December 31, 2017

March 31, 2019

December 31, 2018

Derivative
Assets

Derivative
Liabilities

Derivative
Assets

Derivative
Liabilities

Derivative
Assets

Derivative
Liabilities

Derivative
Assets

Derivative
Liabilities

Derivative instruments - Nettable

Gross recognized amount

Uncleared derivatives

$
276,799

$
101,189

$
207,922

$
103,901

$
223,913

$
206,051

$
246,765

$
162,650

Cleared derivatives

290,248

287,837

672,494

221,976

357,567

333,409

296,677

305,918

Total derivatives fair values

567,047

389,026

880,416

325,877

Variation margin (Note 1)

—

—

(465,803
)
—

Total gross recognized amount

567,047

389,026

414,613

325,877

581,480

539,460

543,442

468,568

Gross amounts of netting adjustments and cash collateral

Uncleared derivatives

(148,959
)
(87,343
)
(95,190
)
(57,594
)

(99,758
)
(193,158
)
(134,413
)
(142,097
)
Cleared derivatives

(287,233
)
(287,233
)
(206,691
)
(206,691
)

(326,967
)
(333,409
)
(295,324
)
(295,324
)
Total gross amounts of netting adjustments and cash collateral

(436,192
)
(374,576
)
(301,881
)
(264,285
)

(426,725
)
(526,567
)
(429,737
)
(437,421
)
Net amounts after offsetting adjustments and cash collateral

$
130,855

$
14,450

$
112,732

$
61,592

$
154,755

$
12,893

$
113,705

$
31,147

Uncleared derivatives

$
127,840

$
13,846

$
112,732

$
46,307

$
124,155

$
12,893

$
112,352

$
20,553

Cleared derivatives

3,015

604

—

15,285

30,600

—

1,353

10,594

Total net amounts after offsetting adjustments and cash collateral

$
130,855

$
14,450

$
112,732

$
61,592

$
154,755

$
12,893

$
113,705

$
31,147

Derivative instruments - Not Nettable

Uncleared derivatives (a)

$
92

$
3

$
10

$
15

$
85

$
5

$
57

$
—

Total derivative assets and total derivative liabilities

Uncleared derivatives

127,932

13,849

112,742

46,322

124,240

12,898

112,409

20,553

Cleared derivatives

3,015

604

—

15,285

30,600

—

1,353

10,594

Total derivative assets and total derivative liabilities presented in the Statements of Condition (b)

$
130,947

$
14,453

$
112,742

$
61,607

$
154,840

$
12,898

$
113,762

$
31,147

Non-cash collateral received or pledged (c)

Can be sold or repledged

Security pledged as initial margin to Derivative Clearing Organization (d)

$
239,034

$
—

$
239,064

$
—

$
220,347

$
—

$
239,813

$
—

Cannot be sold or repledged

Uncleared derivatives securities received

(101,276
)
—

(103,036
)
—

(105,517
)
—

(102,682
)
—

Total net amount of non-cash collateral received or repledged

$
137,758

$
—

$
136,028

$
—

$
114,830

$
—

$
137,131

$
—

Total net exposure cash and non-cash (e)

$
268,705

$
14,453

$
248,770

$
61,607

$
269,670

$
12,898

$
250,893

$
31,147

Net unsecured amount - Represented by:

Uncleared derivatives

$
26,656

$
13,849

$
9,706

$
46,322

$
18,723

$
12,898

$
9,727

$
20,553

Cleared derivatives

242,049

604

239,064

15,285

250,947

—

241,166

10,594

Total net exposure cash and non-cash (e)

$
268,705

$
14,453

$
248,770

$
61,607

$
269,670

$
12,898

$
250,893

$
31,147

(a)         ~~Derivative~~Not nettables derivative instruments are without legal right of offset, ~~were~~and primarily represented synthetic derivatives representing forward mortgage delivery commitments of 45 business days or less. Amounts were not material, and it was operationally not practical to separate receivable from ~~payables, and~~payables; net presentation was adopted. No cash collateral was involved with the mortgage delivery commitments.
(b)         Amounts represented Derivative assets and liabilities that were recorded in the Statements of Conditions. Derivative cash balances ~~are~~were not netted with non-cash collateral received or pledged, since legal ownership of the non-cash collateral remains with the pledging counterparty (see footnote c(c) below).
(c)          Non-cash collateral received or pledged — For ~~bilateral~~certain uncleared derivatives, ~~certain~~ counterparties have pledged U.S. Treasury securities to the FHLBNY as collateral. Amounts also included non-cash mortgage collateral on derivative positions with member counterparties where we acted as an intermediary. For certain cleared derivatives, we ~~may also pledge~~have pledged marketable securities to ~~collateralize~~satisfy initial margin ~~which is required under the CFTC rules.~~or collateral requirements.
(d)         ~~Securities~~Amounts represented securities pledged to Derivative Clearing Organization to fulfill our initial margin obligations on cleared derivatives. Securities pledged may be sold or repledged if the FHLBNY defaults on our obligations under rules established by the CFTC.
(e)          Amounts represented net exposure after applying non-cash collateral pledged to and by the FHLBNY. Since legal ownership and control over the securities are not transferred, the net exposure represented in the table above is for information only and is not reported as such in the Statements of Condition.
~~Note 1~~As discussed previously in this Note 17, variation margin is exchanged daily between the DCOs and the FHLBNY for cleared derivatives, and generally represented daily settlement of mark-to-market gains and losses on the derivative contracts. In the 2018 periods, variation margin was netted as settlements of gross derivative fair values on a category-by-category basis in the table above. At December 31, 2017, $465.8 million in variation margin received by the FHLBNY was netted and reported in aggregate as a reduction of the gross derivative fair values.
Federal Home Loan Bank of New York
Notes to Financial Statements — Unaudited

Fair Value of Derivative Instruments

The following tables represent outstanding notional balances and estimated fair values of the derivatives outstanding at ~~June 30, 2018~~March 31, 2019 and December 31, ~~2017~~2018 (in thousands):

June 30, 2018

March 31, 2019

Notional Amount
of Derivatives

Derivative
Assets

Derivative
Liabilities

Notional Amount
of Derivatives

Derivative
Assets

Derivative
Liabilities

Fair value of derivative instruments (a)

Derivatives designated as hedging instruments

Derivatives designated as hedging instruments under ASC 815

Interest rate swaps

$
67,683,050

$
454,292

$
268,948

$
55,190,350

$
411,677

$
374,492

Total derivatives in hedging relationships

67,683,050

454,292

268,948

Total derivatives in hedging relationships under ASC 815

55,190,350

411,677

374,492

Derivatives not designated as hedging instruments

Interest rate swaps

39,633,086

109,826

110,216

48,897,355

156,688

154,165

Interest rate caps or floors

803,000

1,228

—

Interest rate caps

803,000

297

—

Mortgage delivery commitments

23,433

92

3

20,062

85

5

Other (b)

570,000

1,701

9,862

766,000

12,818

10,803

Total derivatives not designated as hedging instruments

41,029,519

112,847

120,081

50,486,417

169,888

164,973

Total derivatives before netting and collateral adjustments

$
108,712,569

567,139

389,029

$
105,676,767

581,565

539,465

Netting adjustments

(355,102
)
(355,102
)

(392,215
)
(392,215
)
Cash Collateral and related accrued interest

(81,090
)
(19,474
)

(34,510
)
(134,352
)
Total netting adjustments and cash collateral

(436,192
)
(374,576
)

(426,725
)
(526,567
)
Total derivative assets and total derivative liabilities

$
130,947

$
14,453

$
154,840

$
12,898

Security collateral pledged as initial margin to Derivative Clearing Organization ~~(d)~~(c)

$
239,034

$
220,347

Security collateral received from counterparty ~~(d)~~(c)

(101,245
)

(105,517
)

Net security

137,789

114,830

Net exposure

$
268,736

$
269,670

December 31, 2018

December 31, 2017

Notional Amount
of Derivatives

Derivative
Assets

Derivative
Liabilities

Notional Amount
of Derivatives

Derivative
Assets

Derivative
Liabilities

Fair value of derivative instruments (a)

Derivatives designated as hedging instruments
Interest rate swaps

$
71,755,576

$
840,933

$
267,888

Total derivatives in hedging relationships

71,755,576

840,933

267,888

Derivatives designated as hedging instruments under ASC 815

Interest rate swaps

$
60,701,776

$
390,670

$
314,448

Total derivatives in hedging relationships under ASC 815

60,701,776

390,670

314,448

Derivatives not designated as hedging instruments

Interest rate swaps

40,327,013

32,655

52,448

43,913,045

145,726

144,190

Interest rate caps or floors

2,695,000

893

—

Interest rate caps

803,000

644

—

Mortgage delivery commitments

12,952

10

15

12,682

57

—

Other (b)

386,000

5,935

5,541

666,000

6,402

9,930

Total derivatives not designated as hedging instruments

43,420,965

39,493

58,004

45,394,727

152,829

154,120

Total derivatives before netting, collateral adjustments and variation margin

$
115,176,541

880,426

325,892

Variation margin (c)

(465,803
)
—

Total derivatives before netting and collateral adjustments

414,623

325,892

$
106,096,503

543,499

468,568

Netting adjustments

(253,221
)
(253,221
)

(372,917
)
(372,917
)
Cash Collateral and related accrued interest

(48,660
)
(11,064
)

(56,820
)
(64,504
)
Total netting adjustments and cash collateral

(301,881
)
(264,285
)

(429,737
)
(437,421
)
Total derivative assets and total derivative liabilities

$
112,742

$
61,607

$
113,762

$
31,147

Security collateral pledged as initial margin to Derivative Clearing Organization ~~(d)~~(c)

$
239,064

$
239,813

Security collateral received from counterparty ~~(d)~~(c)

(103,036
)

(102,682
)

Net security

136,028

137,131

Net exposure

$
248,770

$
250,893

(a)         All derivative assets and liabilities with swap dealers and counterparties are executed under collateral agreements; derivative instruments executed bilaterally are subject to legal right of offset under master netting agreements.
(b)         The Other category comprised of interest rate swaps intermediated for member, and notional amounts represent purchases by the FHLBNY from dealers and an offsetting purchase from us by the member.
(c)~~Variation margin — See Note 1 in the previous table.~~
~~(d)~~          Non-cash security collateral is not permitted to be offset on the balance sheet, but would be eligible for offsetting in an event of default. Amounts represent U.S. Treasury securities pledged to and received from counterparties as collateral at ~~June 30, 2018~~March 31, 2019 and December 31, ~~2017.~~2018.
Federal Home Loan Bank of New York
Notes to Financial Statements — Unaudited

~~Earnings Impact of Derivatives and~~Accounting for Derivative Hedging ~~Activities~~

The FHLBNY ~~carries all derivative instruments on~~accounts for its hedging activities in accordance with ASC 815, Derivatives and Hedging. As a general rule, hedge accounting is permitted where the ~~Statements of Condition at~~FHLBNY is exposed to a particular risk, typically interest-rate risk that causes changes in the fair value asof an asset or liability or variability in the expected future cash flows of an existing asset, liability or a forecasted transaction that may affect earnings. Derivative ~~Assets and Derivative Liabilities. If derivatives meet~~contracts hedging the ~~hedging criteria under hedge accounting rules, including effectiveness measures,~~risks associated with the changes in fair value are referred to as Fair value hedges, while contracts hedging the risks affecting the expected future cash flows are called Cash flow hedges.
In 2017, the FASB issued ASU 2017-12, Targeted Improvements to Accounting for Hedging Activities (Topic 815), with the primary objective of simplifying and improving the financial reporting of hedging relationships to better portray the economic results of an entity’s risk management activities in its financial statements. We adopted the guidance effective January 1, 2019, and adoption primarily impacted the FHLBNY’s accounting for derivatives designated as cash flow hedges and fair value hedges.
We adopted the ASU and the reporting and disclosure requirements prospectively. The new guidance requires that we report the entire hedging effects of the ~~associated hedged financial instrument attributable to~~hedging instruments in the ~~risk~~ being hedged (benchmark interest-rate risk, which is LIBOR for the FHLBNY) may also be recorded so that some or all of the unrealized fair value gains or losses recognized on the derivatives are offset by corresponding unrealized gains or losses on the associated hedged financial assets and liabilities. The net differential between fair value changes of the derivatives andsame income statement line item as the hedged items represents hedge ineffectiveness. The net ineffectiveness from hedges that qualify under hedge accounting rules is recorded as a Net realized and unrealized gain (loss) on derivatives and hedging activities in Other income (loss)item in the Statements of ~~Income. If~~income. Prior period comparative financial information was not reclassified to conform to current presentation. Certain post-adoption quantitative tabular disclosures required under ASU 2017-12 have been expanded to include the comparative period (see tables below). We believe that the use of post-adoption tabular disclosures to include comparative information is not akin to the adoption of the ASU on a retrospective basis, since it only affects the manner in which previously recorded amounts are disclosed.
The FASB issued ASU 2018-16, Inclusion of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes (Topic 815), which adds the OIS rate based on SOFR as an approved U.S. benchmark rate to facilitate the LIBOR to SOFR transition. The other interest rates in the United States that are eligible benchmarks under Topic 815 are interest rates on direct Treasury obligations of the U.S. government (UST), the London Interbank Offered Rate (LIBOR) swap rate, the Overnight Index Swap (OIS) Rate based on the Fed Funds Effective Rate, and the Securities Industry and Financial Markets Association (SIFMA) Municipal Swap Rate. The FHLBNY’s primary benchmark is LIBOR, and the Fed funds indexed rate is an alternative benchmark. The SOFR rate is expected to be implemented in the fourth quarter of 2019.
Typically, we execute derivatives ~~do not~~under three hedging strategies — by designating them as a fair value or cash flow hedge of an underlying financial instrument or a forecasted transaction that qualifies for hedge accounting treatment; by acting as an intermediary; or by designating the derivative as an asset-liability management hedge (i.e. an “economic hedge”). Derivative contracts hedging the risks associated with changes in fair value are referred to as fair value hedges, while contracts hedging the variability of expected future cash flows are cash flow hedges. To qualify ~~for~~as an accounting hedge under the ~~hedging criteria under~~ hedge accounting rules ~~but~~(versus an economic hedge in which hedge accounting is not applied), a hedging relationship must be highly effective in offsetting the risk designated as being hedged. The hedging relationship must be formally documented at inception, detailing the particular risk management objective and strategy for the hedge. The effectiveness of these hedging relationships is evaluated at hedge inception and on an ongoing basis both on a retrospective and prospective basis.
Fair Value Hedges.
Hedging of Benchmark interest Rate Risk — The FHLBNY’s fair value hedges are ~~executed as economic~~primarily hedges of ~~financial assets or liabilities under a FHLBNY-approved hedge strategy, only the~~fixed-rate Consolidated obligation bonds and fixed-rate advances, and beginning in 2019 we have executed fair value ~~changes~~hedges of the derivatives are recorded as a Net realized and unrealized gain (loss) on derivatives and hedging activities in Other income (loss) in the Statements of Income. The FHLBNY has elected to measure certain debt under the accounting designation for theavailable-for-sale securities. For qualifying fair value ~~option (“FVO”), and has executed~~hedges of interest rate ~~swaps as economic hedges of~~risk, the ~~debt. While~~ changes ~~in fair values of the interest rate swap and the debt elected under the FVO are both recorded in earnings within Other income (loss), they are recorded as separate line items: Changes~~ in the fair value of the ~~swaps are recorded as a Net realized~~derivative and ~~unrealized gain (loss) on derivatives and hedging activities;~~the changes in the fair value of ~~debt~~the hedged item attributable to the hedged risk, either total cash flows or benchmark only cash flows, are presented within Interest income or Interest expense based on whether the hedged item is an asset or a liability. Prior to the adoption of ASU 2017-12, changes to the fair value of the derivative and ~~advances elected under~~ the ~~FVO are recorded as an Unrealized (losses) or gains from Instruments held at fair value.~~
~~Components of net gains/(losses) on Derivatives and hedging activities as~~qualifying hedged item were presented in Other income (loss), a line item below the Net interest income line in the Statements of ~~Income are summarized below (in thousands):~~income.

Three months ended June 30,

2018

2017

Gains (Losses)
on Derivative

Gains (Losses)
on Hedged
Item

Earnings
Impact

Effect of Derivatives
on Net Interest
Income

Gains (Losses)
on Derivative

Gains (Losses)
on Hedged
Item

Earnings
Impact

Effect of Derivatives
on Net Interest
Income

Derivatives designated as hedging instruments

Interest rate swaps

Advances

$
57,129

$
(55,694
)
$
1,435

$
56,942

$
(79,007
)
$
79,247

$
240

$
(42,811
)
Consolidated obligation bonds

(19,148
)
15,727

(3,421
)
(10,954
)
33,584

(35,026
)
(1,442
)
5,026

Net gains (losses) related to fair value hedges

37,981

(39,967
)
(1,986
)
$
45,988

(45,423
)
44,221

(1,202
)
$
(37,785
)
Cash flow hedges

125

125

$
(2,733
)
14

14

$
(7,901
)

Derivatives not designated as hedging instruments

Interest rate swaps

14,299

14,299

3,327

3,327

Caps or floors

(988
)

(988
)

(1,534
)

(1,534
)

Mortgage delivery commitments

38

38

210

210

Swaps economically hedging instruments designated under FVO

253

253

2,099

2,099

Accrued interest on swaps in economic hedging relationships

(14,040
)

(14,040
)

(1,637
)

(1,637
)

Net gains (losses) related to derivatives not designated as hedging instruments

(438
)

(438
)

2,465

2,465

Price alignment interest paid on variation margin

(2,986
)

(2,986
)

(693
)

(693
)

Net gains (losses) on derivatives and hedging activities

$
34,682

$
(39,967
)
$
(5,285
)

$
(43,637
)
$
44,221

$
584

Federal Home Loan Bank of New York
Notes to Financial Statements — Unaudited

Six months ended June 30,

2018

2017

Gains (Losses)
on Derivative

Gains (Losses)
on Hedged
Item

Earnings
Impact

Effect of Derivatives
on Net Interest
Income

Gains (Losses)
on Derivative

Gains (Losses)
on Hedged
Item

Earnings
Impact

Effect of Derivatives
on Net Interest
Income

Derivatives designated as hedging instruments

Interest rate swaps

Advances

$
329,231

$
(328,566
)
$
665

$
67,953

$
10,341

$
(9,590
)
$
751

$
(98,961
)
Consolidated obligation bonds

(103,073
)
102,030

(1,043
)
(13,217
)
10,665

(13,047
)
(2,382
)
15,608

Net gains (losses) related to fair value hedges

226,158

(226,536
)
(378
)
$
54,736

21,006

(22,637
)
(1,631
)
$
(83,353
)
Cash flow hedges

30

30

$
(8,229
)
191

191

$
(16,073
)

Derivatives not designated as hedging instruments

Interest rate swaps

(5,524
)

(5,524
)

7,346

7,346

Caps or floors

320

320

(3,606
)

(3,606
)

Mortgage delivery commitments

(146
)

(146
)

439

439

Swaps economically hedging instruments designated under FVO

317

317

3,745

3,745

Accrued interest on swaps in economic hedging relationships

(13,598
)

(13,598
)

(5,327
)

(5,327
)

Net gains (losses) related to derivatives not designated as hedging instruments

(18,631
)

(18,631
)

2,597

2,597

Price alignment interest paid on variation margin

(5,106
)

(5,106
)

(1,275
)

(1,275
)

Net gains (losses) on derivatives and hedging activities

$
202,451

$
(226,536
)
$
(24,085
)

$
22,519

$
(22,637
)
$
(118
)

~~Cash Flow Hedges~~The two principal fair value hedging activities are summarized below:

·                  Consolidated Obligations — The ~~effect~~FHLBNY may manage the risk arising from changing market prices and volatility of a Consolidated obligation debt by matching the cash inflows on the derivative with the cash outflow on the Consolidated obligation debt and may include early termination features or options. In general, whenever we issue a longer-term fixed-rate debt, or a fixed-rate debt with call or put or other embedded options, we will simultaneously execute a derivative transaction, generally an interest rate ~~swaps in cash flow hedging relationships was as follows~~swap, with terms that offset the terms of the fixed-rate debt, or terms of the debt with embedded put or call options or other options. When a fixed-rate debt is hedged, the combination of the fixed-rate debt and the derivative transaction effectively creates a variable rate liability, indexed to a benchmark interest rate.
·                  Advances — We offer a wide array of advances structures to meet members’ funding needs. These advances may have maturities up to 30 years with fixed or adjustable rates and may include early termination features or options. We may use derivatives to adjust the repricing and/or options characteristics of advances to more closely match the characteristics of its funding liabilities. In general, whenever a member executes a longer term fixed-rate advance, or a fixed-rate advance with call or put or other embedded options, we will simultaneously execute a derivative transaction, generally an interest rate swap, with terms that offset the terms of the fixed-rate advance, or terms of the advance with embedded put or call options or other options. When a fixed-rate advance is hedged, the combination of the fixed-rate advance and the derivative transaction effectively creates a variable rate asset, indexed to a benchmark interest rate.
Fair value hedge gains and losses
Gains and Losses on Fair value hedges under ASC 815 are summarized below (in thousands):

Three months ended June 30,

2018

2017

AOCI

AOCI

Gains/(Losses)

Gains/(Losses)

Recognized in
AOCI (c)

Location:
Reclassified to
Earnings (c)

Amount
Reclassified to
Earnings (c)

Ineffectiveness
Recognized in
Earnings

Recognized in
AOCI (c)

Location:
Reclassified to
Earnings (c)

Amount
Reclassified to
Earnings (c)

Ineffectiveness
Recognized in
Earnings

Consolidated obligation bonds (a)

$
1,225

Interest Expense

$
68

$
125

$
(36
)
Interest Expense

$
(294
)
$
14

Consolidated obligation discount notes (b)

21,932

Interest Expense

—

—

(13,750
)
Interest Expense

—

—

$
23,157

$
68

$
125

$
(13,786
)

$
(294
)
$
14

Gains (Losses) on Fair Value Hedges

Three months ended March 31,

2019

2018

Recorded in
Interest
Income/Expense

Recorded in
Other Income
(Loss)

Recorded in
Interest
Income/Expense

Recorded in
Other Income
(Loss)

Gains (losses) on derivatives in designated and qualifying fair value hedges:

Interest rate hedges

$
(161,584
)
$
—

$
—

$
188,176

Gains (losses) on hedged item in designated and qualifying fair value hedges:

Interest rate hedges

$
160,272

$
—

$
—

$
(186,568
)

Six months ended June 30,

2018

2017

AOCI

AOCI

Gains/(Losses)

Gains/(Losses)

Recognized in
AOCI (c)

Location:
Reclassified to
Earnings (c)

Amount
Reclassified to
Earnings (c)

Ineffectiveness
Recognized in
Earnings

Recognized in
AOCI (c)

Location:
Reclassified to
Earnings (c)

Amount
Reclassified to
Earnings (c)

Ineffectiveness
Recognized in
Earnings

Consolidated obligation bonds (a)

$
834

Interest Expense

$
33

$
30

$
(421
)
Interest Expense

$
(603
)
$
191

Consolidated obligation discount notes (b)

77,061

Interest Expense

—

—

(3,279
)
Interest Expense

—

—

$
77,895

$
33

$
30

$
(3,700
)

$
(603
)
$
191

~~(a)~~~~Cash flow~~Gains/(losses) represent changes in fair values of derivatives and hedged items due to changes in the designated benchmark interest rates. Gains and losses on ASC 815 hedges are recorded in the same line in the Statements of ~~anticipated issuance~~income as the hedged assets and hedged liabilities. Prior to the adoption of ~~Consolidated obligation bonds~~ASU 2017-12 on January 1, 2019, gains and losses on derivatives and hedged items were recorded in Other income (loss).

~~Changes in period recognized in AOCI~~Cumulative Basis Adjustment ~~— Amounts reported typically represent~~
Upon electing to apply ASC 815 fair value ~~gains and losses recorded~~hedge accounting, the carrying value of the hedged item is adjusted to reflect the cumulative impact of changes in ~~AOCI under~~ the ~~CO bond cash flow~~hedged risk. The hedge ~~strategy during~~basis adjustment, whether arising from an active or de-designated hedge relationship, remains with the ~~periods, and including fair values of hedging contracts open at period end dates. Fair values recorded in AOCI are adjusted for any hedge ineffectiveness on~~hedged item until the ~~contracts. When a cash flow hedge~~hedged item is ~~closed,~~derecognized from the ~~fair value~~
balance sheet.
Federal Home Loan Bank of New York
Notes to Financial Statements — Unaudited
The tables below present the carrying amount of FHLBNY’s assets and liabilities under active ASC 815 qualifying fair value hedges at March 31, 2019 and December 31, 2018, as well as the hedged item’s cumulative hedge basis adjustments, which were included in the carrying value of assets and liabilities in active hedges. The tables also present unamortized cumulative basis adjustments from discontinued hedges where the previously hedged item remains on the FHLBNY’s Statement of condition (in thousands):

March 31, 2019

Cumulative Fair Value Hedging
Adjustment Included in the Carrying
Amount of Hedged Items Gains (Losses)

Carrying Amount of
Hedged
Assets/Liabilities (a)

Active Hedging
Relationship

Discontinued
Hedging
Relationship

Assets:

Hedged Advances

$
42,762,489

$
(30,356
)
$
—

Hedged Debt securities - AFS

131,304

(1,893
)
—

De-designated Advances (b)

—

—

388

$
42,893,793

$
(32,249
)
$
388

Liabilities:

Hedged Consolidated obligation bonds

$
9,484,315

$
304,540

$
—

De-designated Consolidated obligation bonds (b)

—

—

130,074

$
9,484,315

$
304,540

$
130,074

December 31, 2018

Cumulative Fair Value Hedging
Adjustment Included in the Carrying
Amount of Hedged Items Gains (Losses)

Carrying Amount of
Hedged
Assets/Liabilities (a)

Active Hedging
Relationship

Discontinued
Hedging
Relationship

Assets:

Hedged Advances

$
45,904,804

$
(255,426
)
$
—

De-designated Advances (b)

—

—

402

$
45,904,804

$
(255,426
)
$
402

Liabilities:

Hedged Consolidated obligation bonds

$
11,664,558

$
238,150

$
—

De-designated Consolidated obligation bonds (b)

—

—

131,497

$
11,664,558

$
238,150

$
131,497

(a)Carrying amounts represent amortized cost adjusted for cumulative fair value hedging basis.
~~gain or loss on~~(b)Carrying amounts of de-designated advances were not material. Carrying amount of CO bonds that were de-designated was $300 million. The carrying amounts of de-designated hedged items were not included in the ~~derivative~~carrying amounts of hedged assets/liabilities as the items were no longer hedged. Fair value hedging adjustments will remain until the items are derecognized from the balance sheet.
Federal Home Loan Bank of New York
Notes to Financial Statements — Unaudited
Cash Flow Hedges
FHLBNY hedges the variability of forecasted cash flows associated primarily with forecasted transactions. Variable cash flows from forecasted liabilities are synthetically converted to fixed-rate cash flows by entering into receive-variable, pay-fixed interest rate swaps and receive-variable, pay-fixed forward-starting interest rate swaps. Prior to the adoption of ASU 2017-12, ASC 815 required the risk being hedged as the risk of overall variability in the hedged cash flows due to changes in the benchmark rate. With the adoption of ASU 2017-12, the FHLBNY may hedge the variability from changes in a contractually specified rate and recognizes the entire change in fair value of the cash flow hedging instruments in Accumulated other comprehensive income (loss) AOCI. Prior to the adoption of ASU 2017-12, to the extent that these derivatives were not fully effective, changes in their fair values in excess of changes in the value of the hedged transactions were immediately included in Other income (loss). With the adoption of ASU 2017-12, such amounts are no longer required to be immediately recognized in income, but instead the full change in the value of the hedging instrument is required to be recorded in AOCI, and then recognized in earnings in the same period that the cash flows impact earnings.
For hedges of forecasted debt issuance, changes in fair value of interest rate swap will remain in AOCI and will be included in the earnings of future periods when the forecasted hedged cash flows impact earnings. However, if it becomes probable that some or all of the hedged forecasted transactions will not occur, any amounts that remain in AOCI related to these transactions must be immediately reflected in Other income (loss).
The two principal cash flow hedging activities for the FHLBNY are summarized below:
·Cash flow hedges of “Anticipated Consolidated Bond Issuance” — The FHLBNY enters into interest-rate swaps to hedge the anticipated issuance of debt, and to “lock in” the interest to be paid for the cost of funding. The swaps are terminated upon issuance of the debt instrument, and gains or losses upon termination are recorded in AOCI. Gains and losses are reclassified to earnings in the periods in which earnings are affected by the variability of the cash flows of the debt that was issued.
·Cash flow hedges of “Rolling Issuance of Discount Notes” — The FHLBNY executes long-term pay-fixed, receive-variable interest rate swaps as hedges of the variable quarterly interest payments on the discount note borrowing program. In this program, we issue a series of discount notes with 91-day terms over periods typically up to 10-15 years. We will continue issuing new 91-day discount notes over the terms of the swaps as each outstanding discount note matures. The interest rate swaps require a settlement every 91 days, and the variable-rate, which is ~~amortized~~based on the 3-month LIBOR, is reset immediately following each payment. The swaps are expected to eliminate the risk of variability of cash flows for each forecasted discount note issuance every 91 days. The fair values of the interest rate swaps are recorded in AOCI.
Cash flow hedge gains and losses
The following tables present derivative instruments used in cash flow hedge accounting relationships and the gains and losses recorded on such derivatives (in thousands):

Derivative Gains (Losses) Recorded in Income and Other Comprehensive Income/Loss

Three months ended March 31, 2019

Amounts Reclassified
from AOCI to Interest
Expense (b)

Amounts Reclassified
from AOCI to Other
Income (Loss)

Amounts
Recorded in
OCI (d)

Total Change
in OCI for
Period

Interest rate contracts (a)

$
(23
)
$
—

$
(42,714
)
$
(42,691
)

Derivative Gains (Losses) Recorded in Income and Other Comprehensive Income/Loss

Three months ended March 31, 2018

Amounts Reclassified
from AOCI to Interest
Expense (b)

Amounts Reclassified
from AOCI to Other
Income (Loss) (c)

Amounts
Recorded in
OCI (d)

Total Change
in OCI for
Period

Interest rate contracts (a)

$
(35
)
$
(95
)
$
(54,808
)
$
(54,773
)
(a)Primarily consists of benchmark interest rate swaps indexed to LIBOR. Post January 1, 2019, the FHLBNY includes the gain and loss on the hedging derivatives in the same line in the Statements of income as the change in cash flows on the hedged item.
(b)Amounts represent amortization of losses related to closed cash flow hedges that were reclassified during the period to interest expense ~~with an offset to the cumulative balance in AOCI.~~
~~Amount Reclassified to Earnings~~ ~~— Amounts represented amortization of unrecognized gains and losses from previously closed CO bond cash flow hedging contracts that were recorded~~ as a yield ~~adjustment to interest expense with an offset to reduce~~adjustment.
(c)Amount represents the ~~unamortized balance in AOCI.~~
~~Ineffectiveness Recognized in Earnings~~ ~~— Amounts represented~~ ineffectiveness ~~primarily arising from CO bond cash flow hedging strategies. Ineffectiveness is~~ recorded in ~~earnings as a gain or loss~~the prior year quarter. Prior to the adoption of ASU 2017-12, hedge ineffectiveness (as defined under ASC 815) was reclassified from ~~derivative activities in~~AOCI to Other income ~~while the effective portion is recorded in AOCI. Amounts recorded in AOCI are subsequently reclassified prospectively as a yield adjustment to debt expense over the term of the debt.~~(loss).
~~(b)~~(d)~~Hedges of discount notes in rolling issuances~~
~~Changes in period recognized in AOCI~~ — Amounts ~~represented period-over-period change~~represent changes in the fair values of open interest rate swap contracts in ~~this CO discount note cash flow hedging strategy (Rolling issuances of discount notes). The~~ cash flow hedges ~~mitigated exposure to~~of CO debt, primarily those hedging the ~~variability in future cash flows over a maximum period~~rolling issuance of ~~14 years.~~CO discount notes.
~~(c)~~~~Ineffectiveness recognized in earnings~~ ~~— The effective portion~~Federal Home Loan Bank of ~~the fair values of open contracts is recorded in AOCI. Ineffectiveness is recorded in Other income as a component of derivatives and hedging gains and losses.~~New York
~~Cash Flow Hedges~~Notes to Financial Statements — ~~Fair Value changes in AOCI Rollforward Analysis (in thousands):~~Unaudited

June 30, 2018

December 31, 2017

Rollover Hedge
Program

Anticipatory Hedge
Program

Rollover Hedge
Program

Anticipatory Hedge
Program

Beginning balance

$
(23,342
)
$
3,465

$
(49,312
)
$
2,294

Changes in fair values

77,061

(8
)
25,970

(1,780
)
Amount reclassified

—

(33
)
—

1,141

Fair Value - closed contract

—

977

—

1,802

Fair Value - open contract

—

(135
)
—

8

Ending balance

$
53,719

$
4,266

$
(23,342
)
$
3,465

Notional amount of swaps outstanding

$
2,559,000

$
20,000

$
2,349,000

$
30,000

In the three months ended March 31, 2019 and 2018, losses reclassified from AOCI to interest expense as yield adjustments were $23 thousand and $35 thousand. Amounts represented amortization of unrecognized cumulative basis adjustments from previously closed contracts of anticipatory hedges of debt. It is expected that over the next 12 months, $0.2 million of the unrecognized losses in AOCI will be recognized as yield adjustments to debt interest expense. There were no ~~material~~ amounts that were reclassified into earnings ~~as a result of the discontinuance~~due to discontinuation of cash flow ~~hedges because~~hedges. Reclassification would occur if it became probable that the original forecasted transactions would not occur by the end of the originally specified time period or within a two-month period thereafter.

ItEconomic Hedges
FHLBNY often uses economic hedges when hedge accounting would be too complex or operationally burdensome. End-user derivatives that are economic hedges are carried at fair value, with changes in value included in Other income (loss), a line item, which is ~~expected~~below Net interest income. For hedges that ~~over~~either do not meet the ~~next 12 months, $0.3 million~~ASC 815 hedging criteria or for which management decides not to apply ASC 815 hedge accounting, the derivative is recorded at fair value on the balance sheet with the associated changes in fair value recorded in earnings, while the “hedged” instrument continues to be carried at amortized cost. Therefore, current earnings are affected by the interest rate shifts and other factors that cause a change in the swap’s value, but for which no offsetting change in value is recorded on the hedged instrument. Economic hedges are an acceptable hedging strategy under the FHLBNY’s risk management program, and the strategies comply with the Finance Agency’s regulatory requirements prohibiting speculative use of derivatives.
The FHLBNY may alternatively elect to account for instruments at fair value under the fair value option. Once the irrevocable election is made upon issuance of the ~~unrecognized gain~~debt or liability, the full change in ~~AOCI will be recognized~~fair value of the debt is reported in earnings. If the instrument is in an economic hedge, changes in fair value of the related interest rate swap are also reflected in earnings, which provides a natural offset to the debt’s fair value change. To the extent that the two amounts differ because the full change in the fair value of the debt includes risks not offset by the interest rate swap, the difference is automatically captured in current earnings. Economic hedges are also employed when the hedged item itself is marked to market through current earnings, such as ~~a yield adjustment~~hedges of commitments to ~~debt~~originate one- to four-family mortgage loans.
Gains and losses on economic hedges are presented below (in thousands):

Gains (losses) on Economic Hedges

Recorded in Other Income (Loss)

Three months ended March 31,

2019

2018

Gains (losses) on derivatives designated in economic hedges

Interest rate hedges (a)

$
(12,135
)
$
(21,437
)
Caps

(342
)
1,308

Mortgage delivery commitments

197

(184
)
Total Gains (losses) on derivatives in economic hedges

$
(12,280
)
$
(20,313
)
(a)Interest rate contracts primarily consisted of swaps hedging basis risk of floating-rate CO bonds that were indexed to other than the 3-month LIBOR benchmark, and interest ~~expense.~~rate swaps hedging the fair value volatility of U.S. Treasury fixed-rate securities.
Federal Home Loan Bank of New York
Notes to Financial Statements — Unaudited

Note 18.                                                  Fair Values of Financial Instruments.

Estimated Fair Values — Summary Tables -— The carrying values, estimated fair values and the levels within the fair value hierarchy were as follows (in thousands):

June 30, 2018

March 31, 2019

Estimated Fair Value

Estimated Fair Value

Netting

Financial Instruments

Carrying Value

Total

Level 1

Level 2

Level 3 (a)

Netting
Adjustment and
Cash Collateral

Carrying
Value

Total

Level 1

Level 2

Level 3 (a)

Adjustment and
Cash Collateral

Assets

Cash and due from banks

$
158,300

$
158,300

$
158,300

$
—

$
—

$
—

$
82,894

$
82,894

$
82,894

$
—

$
—

$
—

Securities purchased under agreements to resell

4,945,000

4,945,029

—

4,945,029

—

—

5,590,000

5,590,032

—

5,590,032

—

—

Federal funds sold

14,887,000

14,887,005

—

14,887,005

—

—

9,137,000

9,137,059

—

9,137,059

—

—

Trading securities

3,766,579

3,766,579

2,989,099

777,480

—

—

7,210,635

7,210,635

7,117,300

93,335

—

—

Equity Investments

50,116

50,116

50,116

—

—

—

53,982

53,982

53,982

—

—

—

Available-for-sale securities

479,954

479,954

479,954

—

—

2,185,968

2,185,968

—

2,185,968

—

—

Held-to-maturity securities

18,139,926

18,058,670

—

16,654,630

1,404,040

—

15,628,971

15,728,719

—

14,426,666

1,302,053

—

Advances

110,782,004

110,833,890

—

110,833,890

—

—

99,132,395

99,186,887

—

99,186,887

—

—

Mortgage loans held-for-portfolio, net

2,887,473

2,796,172

—

2,796,172

—

—

2,941,086

2,915,349

—

2,915,349

—

—

Accrued interest receivable

288,019

288,019

—

288,019

—

—

327,548

327,548

—

327,548

—

—

Derivative assets

130,947

130,947

—

567,139

—

(436,192
)

154,840

154,840

—

581,565

—

(426,725
)
Other financial assets

309

309

—

—

309

—

670

670

—

—

670

—

Liabilities

Deposits

1,191,039

1,191,037

—

1,191,037

—

—

1,356,478

1,356,486

—

1,356,486

—

—

Consolidated obligations

Bonds

101,391,992

101,088,516

—

101,088,516

—

—

80,149,864

80,087,738

—

80,087,738

—

—

Discount notes

45,470,462

45,469,933

—

45,469,933

—

—

53,035,777

53,035,474

—

53,035,474

—

—

Mandatorily redeemable capital stock

17,707

17,707

17,707

—

—

—

5,755

5,755

5,755

—

—

—

Accrued interest payable

198,701

198,701

—

198,701

—

—

213,581

213,581

—

213,581

—

—

Derivative liabilities

14,453

14,453

—

389,029

—

(374,576
)

12,898

12,898

—

539,465

—

(526,567
)
Other financial liabilities

83,453

83,453

83,453

—

—

—

80,330

80,330

80,330

—

—

—

December 31, 2017

December 31, 2018

Estimated Fair Value

Estimated Fair Value

Netting

Financial Instruments

Carrying Value

Total

Level 1

Level 2

Level 3 (a)

Netting
Adjustment and
Cash Collateral

Carrying
Value

Total

Level 1

Level 2

Level 3 (a)

Adjustment and
Cash Collateral

Assets

Cash and due from banks

$
127,403

$
127,403

$
127,403

$
—

$
—

$
—

$
85,406

$
85,406

$
85,406

$
—

$
—

$
—

Securities purchased under agreements to resell

2,700,000

2,700,008

—

2,700,008

—

—

4,095,000

4,095,150

—

4,095,150

—

—

Federal funds sold

10,326,000

10,325,920

—

10,325,920

—

—

7,640,000

7,639,998

—

7,639,998

—

—

Trading securities

1,641,568

1,641,568

1,284,669

356,899

—

—

5,810,512

5,810,512

5,304,329

506,183

—

—

Equity Investments

48,179

48,179

48,179

—

—

—

Available-for-sale securities

577,269

577,269

48,642

528,627

—

—

422,216

422,216

—

422,216

—

—

Held-to-maturity securities

17,824,533

17,906,773

—

16,575,243

1,331,530

—

17,474,826

17,445,756

—

16,126,662

1,319,094

—

Advances

122,447,805

122,401,759

—

122,401,759

—

—

105,178,833

105,137,214

—

105,137,214

—

—

Mortgage loans held-for-portfolio, net

2,896,976

2,886,189

—

2,886,189

—

2,927,230

2,852,611

—

2,852,611

—

—

Loans to other FHLBanks

250,000

250,000

—

250,000

—

—

Accrued interest receivable

226,981

226,981

—

226,981

—

—

275,256

275,256

—

275,256

—

—

Derivative assets

112,742

112,742

—

414,623

—

(301,881
)

113,762

113,762

—

543,499

—

(429,737
)
Other financial assets

682

682

—

—

682

—

767

767

—

—

767

—

Liabilities

Deposits

1,196,055

1,196,027

—

1,196,027

—

—

1,062,637

1,062,625

—

1,062,625

—

—

Consolidated obligations

Bonds

99,288,048

99,130,116

—

99,130,116

—

—

84,153,776

83,912,990

—

83,912,990

—

—

Discount notes

49,613,671

49,609,537

—

49,609,537

—

—

50,640,238

50,638,448

—

50,638,448

—

—

Mandatorily redeemable capital stock

19,945

19,945

19,945

—

—

—

5,845

5,845

5,845

—

—

—

Accrued interest payable

162,176

162,176

—

162,176

—

—

223,570

223,570

—

223,570

—

—

Derivative liabilities

61,607

61,607

—

325,892

—

(264,285
)

31,147

31,147

—

468,568

—

(437,421
)
Other financial liabilities

84,194

84,194

84,194

—

—

—

86,095

86,095

86,095

—

—

—

The fair value amounts recorded on the Statements of Condition or presented in the table above have been determined by the FHLBNY using available market information and our reasonable judgment of appropriate valuation methods.

(a)         Level 3 Instruments — The fair values of non-Agency private-label MBS and housing finance agency bonds were estimated by management based on pricing services. Valuations may have required pricing services to use significant inputs that were subjective because of the current lack of significant market activity; the inputs may not be market based and observable.
Federal Home Loan Bank of New York
Notes to Financial Statements — Unaudited
Fair Value Hierarchy

The FHLBNY records trading securities, equity investments, available-for-sale securities, derivative ~~assets, derivative liabilities,~~instruments, and Consolidated obligations and advances elected under the FVO at fair values on a recurring basis. On a non-recurring basis, when held-to-maturity securities are determined to be OTTI, the securities are written down ~~they are~~and recorded at their fair ~~values,~~values; and, when mortgage loans held-for-portfolio are written down or are foreclosed as Other real estate owned ~~(“REO”~~(REO or ~~“OREO”)~~OREO), they are recorded at the fair values of the real estate collateral supporting the mortgage loans.

The accounting standards under Fair Value Measurement defines fair value, establishes a consistent framework for measuring fair value and requires disclosures about fair value measurements. Fair value is defined 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. Among other things, the standard requires the FHLBNY to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard specifies a hierarchy of inputs based on whether the inputs are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the FHLBNY’s market assumptions.

These two types of inputs have created the following fair value hierarchy, and an entity must disclose the level within the fair value hierarchy in which the measurements are classified for all assets and liabilities measured on a recurring or non-recurring basis:

·                  Level 1 Inputs — Quoted prices (unadjusted) for identical assets or liabilities in an active market that the reporting entity can access on the measurement date.
·                  Level 2 Inputs — Inputs other than quoted prices within Level 1 that are observable inputs for the asset or liability, either directly or indirectly. If the asset or liability has a specified (contractual) term, a Level 2 input must be observable for substantially the full term of the asset or liability. Level 2 inputs include the following: (1) quoted prices for similar assets or liabilities in active markets; (2) quoted prices for identical or similar assets or liabilities in markets that are not active; (3) inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates and yield curves that are observable at commonly quoted intervals, and volatilities).
·                  Level 3 Inputs — Inputs that are unobservable and significant to the valuation of the asset or liability.

The inputs are evaluated on an overall level for the fair value measurement to be determined. This overall level is an indication of market observability of the fair value measurement for the asset or liability. Changes in the observability of the valuation inputs may result in a reclassification of certain assets or liabilities. These reclassifications are reported as transfers in/out as of the beginning of the quarter in which the changes occur. There were no such transfers in any periods in this report.

The availability of observable inputs can vary from product to product and is affected by a wide variety of factors including, for example, the characteristics peculiar to the transaction. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by the FHLBNY in determining fair value is greatest for instruments categorized as Level 3. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes the level in the fair value hierarchy within which the fair value measurement falls is determined based on the lowest level input that is significant to the fair value measurement in its entirety.
Federal Home Loan Bank of New York
Notes to Financial Statements — Unaudited

Summary of Valuation Techniques and Primary Inputs

The fair value of a financial instrument that is an asset is defined as the price the FHLBNY would receive to sell the asset in an orderly transaction with market participants. A financial liability’s fair value is defined as the amount that would be paid to transfer the liability to a new obligor, not the amount that would be paid to settle the liability with the creditor. Where available, fair values are based on observable market prices or parameters, or derived from such prices or parameters. Where observable prices are not available, valuation models and inputs are utilized. These valuation techniques involve some level of management estimation and judgment, the degree of which is
~~Federal Home Loan Bank of New York~~
~~Notes to Financial Statements — Unaudited~~
dependent on the price transparency for the instruments or markets and the instruments’ complexity. Because an active secondary market does not exist for a portion of the FHLBNY’s financial instruments, in certain cases, fair values are not subject to precise quantification or verification and may change as economic and market factors and evaluation of those factors change. ~~The fair values of financial~~
For assets and liabilities ~~reported in~~carried at fair value, the ~~tables above are discussed~~FHLBNY measures fair value using the procedures set out below:

~~Investment Debt Securities~~Mortgage-backed securities classified as available-for-sale — The fair value of ~~investment debt~~such securities is estimated by the FHLBNY using pricing primarily from pricing services. The pricing vendors typically use market multiples derived from a set of comparables, including matrix pricing, and other techniques.
~~Mortgage-backed securities~~ — The FHLBNY’s valuation technique incorporates prices from up to three designated third-party pricing services at ~~June 30, 2018~~March 31, 2019 and December 31, ~~2017.~~2018. The FHLBNY’s base investment pricing methodology establishes a median price for each security using a formula that is based on the number of prices received. If three prices are received, the middle price is used; if two prices are received, the average of the two prices is used; and if one price is received, it is used, typically subject to further validation. Vendor prices that are outside of a defined tolerance threshold of the median price are identified as outliers and subject to additional review, including, but not limited to, comparison to prices provided by an additional third-party valuation service, prices for similar securities, and/or non-binding dealer estimates, or use of internal model prices, which are deemed to be reflective of all relevant facts and circumstances that a market participant would consider. Such analysis is also applied in those limited instances where no third-party vendor price or only one third-party vendor price is available in order to arrive at an estimated fair value.

In its analysis, the FHLBNY employs the concept of cluster pricing and cluster tolerances. Once the median prices are computed from the three pricing vendors, the second step is to determine which of the sourced prices fall within the required tolerance level interval to the median price, which forms the “cluster” of prices to be averaged. This average will determine a “default” price for the security. The cluster tolerance guidelines shall be reviewed annually and may be revised as necessary. To be included among the cluster, each price must fall within 7 points of the median price for residential PLMBS (when PLMBS is determined to be OTTI) and within 3 points of the median price for GSE-issued MBS. The final step is to determine the final price of the security based on the cluster average and an evaluation of any outlier prices. If the analysis confirms that an outlier is not representative of fair value and that the average of the vendor prices within the tolerance threshold of the median price is the best estimate, then the average of the vendor prices within the tolerance threshold of the median price is used as the final price. If, on the other hand, an outlier (or some other price identified in the analysis) is determined to be a better estimate of fair value, then the outlier (or the other price as appropriate) is used as the final price. In all cases, the final price is used to determine the fair value of the security.

The FHLBNY has also concluded that the pricing vendors use methods that generally employ, but are not limited to benchmark yields, recent trades, dealer estimates, valuation models, benchmarking of like securities, sector groupings, and/or matrix pricing. To validate vendor prices of PLMBS, the FHLBNY has also adopted a formal process to examine yields as an additional validation method. The FHLBNY calculates an implied yield for each of its PLMBS using estimated fair values derived from cash flows on a bond-by-bond basis. This yield is then compared to the implied yield for comparable securities according to price information from third-party MBS “market surveillance reports”. Significant variances or inconsistencies are evaluated in conjunction with all of the other available pricing information. The objective is to determine whether an adjustment to the fair value estimate is appropriate.

Based on the FHLBNY’s review processes, management has concluded that inputs into the pricing models employed by pricing services for the FHLBNY’s investments in GSE securities classified as available-for-sale are market based and observable and are considered to be within Level 2 of the fair value hierarchy.
Federal Home Loan Bank of New York
Notes to Financial Statements — Unaudited
When a PLMBS is deemed to be OTTI, it is recorded at fair value. The valuation of ~~the private-label securities, all designated as held-to-maturity,~~PLMBS may require pricing services to use significant inputs that are subjective and are considered by management to be within Level 3 of the fair value hierarchy. This determination was made based on management’s view that the private-label instruments may not have an active market because of the specific vintage of the securities as well as inherent conditions surrounding the trading of private-label MBS, so that the inputs may not be market based and observable. At ~~June 30,~~March 31, 2019 and December 31, 2018, ~~one~~no held-to-maturity private-label MBS was deemed ~~OTTI and classified as Level 3 financial instruments on a nonrecurring basis. At December 31, 2017, no held-to-maturity~~
~~Federal Home Loan Bank of New York~~
~~Notes to Financial Statements — Unaudited~~OTTI.

~~private-label MBS was deemed OTTI that would have required the OTTI security to be written down to its fair value.~~
~~Housing finance agency bonds~~ — The fair value of housing finance agency bonds is estimated by management using information primarily from pricing services. Because of the current lack of significant market activity, their fair values were categorized within Level 3 of the fair value hierarchy as inputs into vendor pricing models may not be market based and observable.
Trading Securities — The FHLBNY classifies trading securities as Level 1 of the fair value hierarchy when we use quoted market prices in active markets to determine the fair value of trading securities, such as U.S. government securities. We classify trading securities as Level 2 of the fair value hierarchy when we use quoted market prices in less active markets to determine the fair value of trading securities.

Equity Investments — The FHLBNY has grantor trusts, which invest in money market, equity and fixed income and bond funds. ~~Investments in the trusts were classified as AFS before January 1, 2018.~~ Daily net asset values ~~(“NAVs”)~~(NAVs) are readily available and investments are redeemable at short notice. NAVs are the fair values of the funds in the grantor trusts. Because of the highly liquid nature of the investments at their NAVs, they are categorized as Level 1 financial instruments under the valuation hierarchy.

Advances elected under the FVO — ~~The~~When the FHLBNY ~~has elected~~elects the FVO designation for certain advances, ~~and~~the advances are recorded at their fair values in the Statements of ~~Condition for such advances.~~Condition. The fair values are computed using standard option valuation models. The most significant inputs to the valuation model are (1) Consolidated obligation debt curve ~~(“CO Curve”)~~(CO Curve), published by the Office of Finance and available to the public, and (2) LIBOR swap curves and volatilities. Both these inputs are considered to be market based and observable as they can be directly corroborated by market participants.

The CO Curve is the primary input, which is market based and observable. Inputs to apply spreads, which are FHLBNY specific, were not material. Fair values were classified within Level 2 of the valuation hierarchy.

The FHLBNY determines the fair values of advances elected under the FVO by calculating the present value of expected future cash flows from the advances, a methodology also referred to as the Income approach under the Fair Value Measurement standards. The discount rates used in these calculations are equivalent to the replacement advance rates for advances with similar terms. In accordance with the Finance Agency’s “Advances” regulations, an advance with a maturity or repricing period greater than six months requires a prepayment fee sufficient to make a FHLBank financially indifferent to the borrower’s decision to prepay the advance. Therefore, the fair value of an advance does not assume prepayment risk.

The inputs used to determine fair value of advances elected under the FVO are as follows:

·                              CO Curve. The FHLBNY uses the CO Curve, which represents its cost of funds, as an input to estimate the fair value of advances, and to determine current advance rates. This input is considered market observable and therefore a Level 2 input.
·                              Volatility assumption. To estimate the fair value of advances with optionality, the FHLBNY uses market-based expectations of future interest rate volatility implied from current market prices for similar options. This input is considered a Level 2 input as it is market based and market observable.
·                              Spread adjustment. Adjustments represent the FHLBNY’s mark-up based on its pricing strategy. The input is considered as unobservable, and is classified as a Level 3 input. The spread adjustment is not a significant input to the overall fair value of an advance.
The FHLBNY creates an internal curve, which is interpolated from its advance rates. Advance rates are calculated by applying a spread to an underlying “base curve” derived from the FHLBNY’s cost of funds, which is based on the CO Curve, inputs to which have been determined to be market observable and classified as Level 2. The spreads applied to the base advance pricing curve typically represent the FHLBNY’s mark-ups over the FHLBNY’s cost of funds, and are not market observable inputs, but are based on the FHLBNY’s advance pricing strategy. Such inputs have been classified as a Level 3 input, and were considered as not significant.
Federal Home Loan Bank of New York
Notes to Financial Statements — Unaudited

To determine the appropriate classification of the overall measurement in the fair value hierarchy of an advance, an analysis of the inputs to the entire fair value measurement was performed at June 30, 2018 and December 31, 2017. If the unobservable spread to the FHLBNY’s cost of funds was not significant to the overall fair value, then the measurement was classified as Level 2. Conversely, if the unobservable spread was significant to the overall fair value, then the measurement would be classified as Level 3. The impact of the unobservable input was calculated as the difference in the value determined by discounting an advance’s cash flows using the FHLBNY’s advance curve and the value determined by discounting an advance’s cash flows using the FHLBNY’s cost of funds curve. Given the relatively small mark-ups over the FHLBNY’s cost of funds, the results of the FHLBNY’s quantitative analysis confirmed the FHLBNY’s expectations that the measurement of the FHLBNY’s advances was Level 2. The unobservable mark-up spreads were not significant to the overall fair value of the instrument. A quantitative threshold for the significance factor has been established at 10%, with additional qualitative factors to be considered if the ratio exceeded the threshold.
Consolidated Obligations elected under the FVO — The FHLBNY estimates the fair values of Consolidated obligations elected under the FVO based on the present values of expected future cash flows due on the debt obligations. Calculations are performed by using the FHLBNY’s industry standard option adjusted valuation models. Inputs are based on the cost of comparable term debt. The FHLBNY’s internal valuation models use standard valuation techniques and estimate fair values based on the following inputs:

·                              CO Curve and LIBOR Swap Curve. The Office of Finance constructs an internal curve, referred to as the CO Curve, using the U.S. Treasury Curve as a base curve that is then adjusted by adding indicative spreads obtained from market observable sources. These market indications are generally derived from pricing indications from dealers, historical pricing relationships, recent GSE trades and secondary market activity. The FHLBNY considers the inputs as Level 2 inputs as they are market observable.
·                              Volatility assumption. To estimate the fair values of Consolidated obligations with optionality, the FHLBNY uses market-based expectations of future interest rate volatility implied from current market prices for similar options. These inputs are also considered Level 2 as they are market based and observable.

The CO Curve and volatility assumptions (for debt with call options) were primary inputs, which are market based and observable. Fair values were classified within Level 2 of the valuation hierarchy.

Derivative Assets and Liabilities — The FHLBNY’s derivatives (cleared derivatives and bilaterally executed derivatives) are executed in the over-the-counter market and are valued using internal valuation techniques as no quoted market prices exist for such instruments. Discounted cash flow analysis is the primary methodology employed by the FHLBNY’s valuation models to measure the fair values of interest rate swaps. The valuation technique is considered as an “Income approach”. Interest rate caps and floors are valued under the “Market approach”. Interest rate swaps and interest rate caps and floors, collectively “derivatives”, were valued in industry-standard option adjusted valuation models, which generated fair values. The valuation models employed multiple market inputs including interest rates, prices and indices to create continuous yield or pricing curves and volatility factors. These multiple market inputs were corroborated by management to independent market data, and to relevant benchmark indices. In addition, derivative valuations were compared by management to counterparty valuations received as part of the collateral exchange process. These derivative positions were classified within Level 2 of the valuation hierarchy at ~~June 30, 2018~~March 31, 2019 and December 31, ~~2017.~~2018.

The FHLBNY’s valuation model utilizes a modified Black-Karasinski methodology. Significant market based and observable inputs into the valuation model include volatilities and interest rates. The Bank’s valuation model employs industry standard market-observable inputs (inputs that are actively quoted and can be validated to external sources). Inputs by class of derivative were as follows:

Interest-rate related:

·                              LIBOR Swap Curve.
·                              Volatility assumption. Market-based expectations of future interest rate volatility implied from current market prices for similar options.
·                              Prepayment assumption (if applicable).
·                              Federal funds curve ~~(OIS~~(FFF/OIS curve).
~~Federal Home Loan Bank of New York~~
~~Notes to Financial Statements — Unaudited~~
Mortgage delivery commitments (considered a derivative):
·— TBA security prices are adjusted for differences in coupon, average loan rate and seasoning.
~~OIS~~ — The FHLBNY incorporates the overnight indexed swap ~~(“OIS”)~~(FF/OIS) curves as fair value measurement inputs for the valuation of its derivatives, as the FF/OIS curves reflect the interest rates paid on cash collateral provided against the fair value of these derivatives. The FHLBNY believes using relevant FF/OIS curves as inputs to determine fair value measurements provides a more representative reflection of the fair values of these collateralized interest-rate related derivatives. The FF/OIS curve ~~(federal funds rate curve)~~ is an input to the valuation model. The input for the federal funds curve is obtained from industry standard pricing vendors and the input is available and observable over its entire term structure.
Federal Home Loan Bank of New York
Notes to Financial Statements — Unaudited

Management considers the federal funds curve to be a Level 2 input. The FHLBNY’s valuation model utilizes industry standard OIS methodology. The model generates forecasted cash flows using the FF/OIS calibrated 3-month LIBOR curve. The model then discounts the cash flows by the FF/OIS curve to generate fair values.

Credit risk and credit valuation adjustments —
The FHLBNY is subject to credit risk in derivatives transactions due to the potential non-performance of its derivatives counterparties or a DCO.
To mitigate this risk, the FHLBNY has entered into master netting agreements and credit support agreements with its derivative counterparties for its bilaterally executed derivative contracts that provide for the delivery of collateral at specified levels at least weekly. The computed fair values of the derivatives took into consideration the effects of legally enforceable master netting agreements that allow the FHLBNY to settle positive and negative positions and offset cash collateral with the same counterparty on a net basis.
For derivative transactions executed as a cleared derivative, the transactions are fully collateralized in cash and for the most part exchanged and settled daily with the DCO. The FHLBNY has also established the enforceability of offsetting rights incorporated in the agreements for the cleared derivative transactions.

As a result of these practices and agreements and the FHLBNY’s assessment of any change in its own credit spread, the FHLBNY has concluded that the impact of the credit differential between the FHLBNY and its derivative counterparties and DCO was sufficiently mitigated to an immaterial level that no credit adjustments were deemed necessary to the recorded fair value of Derivative assets and Derivative liabilities in the Statements of Condition at ~~June 30, 2018~~March 31, 2019 and December 31, ~~2017.~~2018.
Federal Home Loan Bank of New York
Notes to Financial Statements — Unaudited

Fair Value Measurement

The tables below present the fair value of those assets and liabilities that are recorded at fair value on a recurring or non-recurring basis at ~~June 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, by level within the fair value hierarchy. The FHLBNY also measures certain held-to-maturity securities at fair value on a non-recurring basis when a credit loss is recognized and the carrying value of the asset is adjusted to fair value. Certain mortgage loans that were partially charged-off were recorded at their collateral values on a non-recurring basis. Other real estate owned ~~(“OREO”)~~(OREO) is measured at fair value when the asset’s fair value less costs to sell is lower than its carrying amount.
~~Federal Home Loan Bank of New York~~
~~Notes to Financial Statements — Unaudited~~

Items Measured at Fair Value on a Recurring Basis (in thousands):

June 30, 2018

March 31, 2019

Total

Level 1

Level 2

Level 3

Netting
Adjustment and
Cash Collateral

Total

Level 1

Level 2

Level 3

Netting
Adjustment and
Cash Collateral

Assets

Trading securities

GSE securities

$
773,828

$
—

$
773,828

$
—

$
—

$
89,941

$
—

$
89,941

$
—

$
—

Corporate notes

3,652

—

3,652

—

—

3,394

—

3,394

—

—

U.S. Treasury securities

2,989,099

2,989,099

—

—

—

7,117,300

7,117,300

—

—

—

Equity Investments

50,116

50,116

—

—

—

53,982

53,982

—

—

—

Available-for-sale securities

GSE/U.S. agency issued MBS

479,954

—

479,954

—

—

2,185,968

—

2,185,968

—

—

Advances (to the extent FVO is elected)

250,532

—

250,532

—

—

Derivative assets (a)

Interest-rate derivatives

130,855

—

567,047

—

(436,192
)

154,755

—

581,480

—

(426,725
)
Mortgage delivery commitments

92

—

92

—

—

85

—

85

—

—

Total recurring fair value measurement - assets

$
4,678,128

$
3,039,215

$
2,075,105

$
—

$
(436,192
)

$
9,605,425

$
7,171,282

$
2,860,868

$
—

$
(426,725
)

Liabilities

Consolidated obligations:

Discount notes (to the extent FVO is elected)

(994,773
)
—

(994,773
)
—

—

Bonds (to the extent FVO is elected) (b)

$
(29,784
)
$
—

$
(29,784
)
$
—

$
—

(7,367,064
)
—

(7,367,064
)
—

—

Derivative liabilities (a)

Interest-rate derivatives

(14,450
)
—

(389,026
)
—

374,576

(12,893
)
—

(539,460
)
—

526,567

Mortgage delivery commitments

(3
)
—

(3
)
—

—

(5
)
—

(5
)
—

—

Total recurring fair value measurement - liabilities

$
(44,237
)
$
—

$
(418,813
)
$
—

$
374,576

$
(8,374,735
)
$
—

$
(8,901,302
)
$
—

$
526,567

December 31, 2017

December 31, 2018

Total

Level 1

Level 2

Level 3

Netting
Adjustment and
Cash Collateral

Total

Level 1

Level 2

Level 3

Netting
Adjustment and
Cash Collateral

Assets

Trading securities

GSE securities

$
356,899

$
—

$
356,899

$
—

$
—

$
502,849

$
—

$
502,849

$
—

$
—

Corporate notes

3,334

—

3,334

—

—

U.S. Treasury securities

1,284,669

1,284,669

—

—

—

5,304,329

5,304,329

—

—

—

Equity Investments

48,179

48,179

—

—

—

Available-for-sale securities

GSE/U.S. agency issued MBS

528,627

—

528,627

—

—

422,216

—

422,216

—

—

Equity and bond funds

48,642

48,642

—

—

—

Advances (to the extent FVO is elected)

2,205,624

—

2,205,624

—

—

Derivative assets (a)

Interest-rate derivatives

112,732

—

414,613

—

(301,881
)

113,705

—

543,442

—

(429,737
)
Mortgage delivery commitments

10

—

10

—

—

57

—

57

—

—

Total recurring fair value measurement - assets

$
4,537,203

$
1,333,311

$
3,505,773

$
—

$
(301,881
)

$
6,394,669

$
5,352,508

$
1,471,898

$
—

$
(429,737
)

Liabilities

Consolidated obligations:

Discount notes (to the extent FVO is elected)

$
(2,312,621
)
$
—

$
(2,312,621
)
$
—

$
—

(3,180,086
)
—

(3,180,086
)
—

—

Bonds (to the extent FVO is elected) (b)

(1,131,074
)
—

(1,131,074
)
—

—

(5,159,792
)
—

(5,159,792
)
—

—

Derivative liabilities (a)

Interest-rate derivatives

(61,592
)
—

(325,877
)
—

264,285

(31,147
)
—

(468,568
)
—

437,421

Mortgage delivery commitments

(15
)
—

(15
)
—

—

Total recurring fair value measurement - liabilities

$
(3,505,302
)
$
—

$
(3,769,587
)
$
—

$
264,285

$
(8,371,025
)
$
—

$
(8,808,446
)
$
—

$
437,421

(a)         Based on analysis of the nature of the risk, the presentation of derivatives as a single class is appropriate.
(b)         Based on analysis of the nature of risks of Consolidated obligation bonds measured at fair value, the FHLBNY has determined that presenting the bonds as a single class is appropriate.
Federal Home Loan Bank of New York
Notes to Financial Statements — Unaudited

Items Measured at Fair Value on a Non-recurring Basis (in thousands):

June 30, 2018

Fair Value

Level 1

Level 2

Level 3

Private-label residential mortgage-backed securities

$
2,085

$
—

$
—

$
2,085

Mortgage loans held-for-portfolio

764

—

764

—

Real estate owned

227

—

—

227

Total non-recurring assets at fair value

$
3,076

$
—

$
764

$
2,312

During the period ended March 31, 2019

Fair Value

Level 1

Level 2

Level 3

Real estate owned

$
173

$
—

$
—

$
173

During the period ended December 31, 2018

December 31, 2017

Fair Value

Level 1

Level 2

Level 3

Fair Value

Level 1

Level 2

Level 3

Mortgage loans held-for-portfolio

$
2,519

$
—

$
2,519

$
—

$
741

$
—

$
741

$
—

Real estate owned

1,071

—

—

1,071

795

—

—

795

Total non-recurring assets at fair value

$
3,590

$
—

$
2,519

$
1,071

$
1,536

$
—

$
741

$
795

Mortgage loans and real estate owned (OREO or REO) — The FHLBNY measured and recorded certain impaired mortgage loans and Real estate owned (foreclosed properties) on a non-recurring basis. These assets were subject to fair value adjustments in certain circumstances at the occurrence of the events during the periods in this report. Impaired loans were primarily loans that were delinquent for 180 days or more, partially charged-off, with the remaining loans recorded at their collateral values at the dates the loans were charged off. Fair value adjustments on the impaired loans and real estate owned assets were based primarily on broker price opinions.
In accordance with disclosure provisions, we have reported changes in fair values of such assets as of the date the fair value adjustments were recorded during the period ended March 31, 2019 and December 31, 2018, and reported fair values were not as of the period end dates.

Fair Value Option Disclosures

The fair value option ~~(“FVO”)~~(FVO) provides an irrevocable option to elect fair value as an alternative measurement for selected financial assets, financial liabilities, unrecognized firm commitments, and written loan commitments not previously carried at fair value. It requires entities to display the fair value of those assets and liabilities for which the entity has chosen to use fair value on the face of the Statements of Condition. Fair value is used for both the initial and subsequent measurement of the designated assets, liabilities and commitments, with the changes in fair value recognized in net income. Interest income and interest expense on advances and Consolidated obligations at fair value are recognized solely on the contractual amount of interest due or unpaid. Any transaction fees or costs are immediately recognized into non-interest income or non-interest expense.

~~The~~From time to time, the FHLBNY ~~has elected~~will elect the FVO for ~~certain~~ advances and ~~certain~~ Consolidated obligations ~~that~~on an instrument-by-instrument basis with changes in fair value reported in earnings. Customarily, the election is made when either the instruments do not qualify for hedge accounting or may be at risk for not meeting hedge effectiveness ~~requirements,~~requirements; the objective is primarily ~~in an effort~~ to mitigate the potential income statement volatility that can arise from economic hedging relationships in which the carrying value of the hedged item is not adjusted for changes in fair value. ~~Advances have~~We may also ~~been elected~~elect advances under the FVO when analysis ~~indicated~~indicates that changes in the fair values of the advance would be an offset to fair value volatility of debt elected under the FVO. The FVO election is made at inception of the contracts for advances and debt obligations.

For instruments for which the fair value option has been elected, the related contractual interest income, contractual interest expense and the discount amortization on fair value option discount notes are recorded as part of net interest income in the Statements of Income. The remaining changes in fair value for instruments for which the fair value option has been elected are recorded as net gains (losses) on financial instruments held under fair value option in the Statements of Income. The change in fair value does not include changes in instrument-specific credit risk. The FHLBNY has determined that no adjustments to the fair values of its instruments recorded under the fair value option for instrument-specific credit risk were necessary at ~~June 30, 2018~~March 31, 2019 and December 31, ~~2017.~~2018.
Federal Home Loan Bank of New York
Notes to Financial Statements — Unaudited

~~Advances~~As with all advances, advances elected under the FVO ~~were short-term in nature, with tenors that were generally less than 24 months. As with all advances, the loans were~~are also fully collateralized through their terms to maturity. We consider our Consolidated obligation ~~bonds~~ ~~and discount notes elected under the FVO are~~debt as high ~~credit quality,~~credit-quality, highly-rated instruments, and changes in fair values ~~were~~are generally related to changes in interest rates and investor preference, including investor asset allocation strategies. The FHLBNY believes the credit-quality of Consolidated obligation debt has remained stable, and changes in fair value attributable to instrument-specific credit risk, if any, were not material given that the debt elected under the FVO had been issued within the past 24 months, and no adverse changes have been observed in their credit characteristics.
~~Federal Home Loan Bank of New York~~
~~Notes to Financial Statements — Unaudited~~No advances elected under the FVO were outstanding in the three months ended March 31, 2019.

The following tables summarize the activity related to financial instruments for which the FHLBNY elected the fair value option (in thousands):

Three months ended June 30,

2018

2017

2018

2017

2018

2017

March 31, 2019

Advances

Bonds

Discount Notes

Bonds

Discount Notes

Balance, beginning of the period

$
751,568

$
4,500,587

$
(129,721
)
$
(1,432,874
)
$
(1,566,028
)
$

(6,847,460
)

$
(5,159,792
)
$
(3,180,086
)

New transactions elected for fair value option

—

—

—

—

—

—

(3,220,000
)
—

Maturities and terminations

(500,000
)
(1,754,712
)
100,000

1,032,020

1,564,375

3,162,012

1,035,000

2,183,559

Net gains (losses) on financial instruments held under fair value option

(632
)
(2,120
)
49

(288
)
274

(1,173
)

(58
)
(406
)

Change in accrued interest/unaccreted balance

(404
)
(1,955
)
(112
)
1,348

1,379

7,596

(22,214
)
2,160

Balance, end of the period

$
250,532

$
2,741,800

$
(29,784
)
$
(399,794
)
$
—

$

(3,679,025
)

$
(7,367,064
)
$
(994,773
)

Six months ended June 30,

2018

2017

2018

2017

2018

2017

December 31, 2018

Advances

Bonds

Discount Notes

Advances

Bonds

Discount Notes

Balance, beginning of the period

$
2,205,624

$
9,873,157

$
(1,131,074
)
$
(2,052,513
)
$
(2,312,621
)
$
(12,228,412
)

$
2,205,624

$
(1,131,074
)
$
(2,312,621
)
New transactions elected for fair value option

—

5,000,000

(115,000
)
—

(1,564,375
)
(3,670,424
)

—

(5,225,000
)
(4,735,290
)
Maturities and terminations

(1,950,000
)
(12,124,489
)
1,215,000

1,650,550

3,873,993

12,204,898

(2,200,000
)
1,215,000

3,873,993

Net gains (losses) on financial instruments held under fair value option

(415
)
(3,552
)
48

199

5

1,491

(590
)
681

118

Change in accrued interest/unaccreted balance

(4,677
)
(3,316
)
1,242

1,970

2,998

13,422

(5,034
)
(19,399
)
(6,286
)

Balance, end of the period

$
250,532

$
2,741,800

$
(29,784
)
$
(399,794
)
$
—

$
(3,679,025
)

$
—

$
(5,159,792
)
$
(3,180,086
)

March 31, 2018

Advances

Bonds

Discount Notes

Balance, beginning of the period

$
2,205,624

$
(1,131,074
)
$
(2,312,621
)
New transactions elected for fair value option

—

(115,000
)
(1,564,375
)
Maturities and terminations

(1,450,000
)
1,115,000

2,309,618

Net gains (losses) on financial instruments held under fair value option

217

(1
)
(269
)
Change in accrued interest/unaccreted balance

(4,273
)
1,354

1,619

Balance, end of the period

$
751,568

$
(129,721
)
$
(1,566,028
)
Federal Home Loan Bank of New York
Notes to Financial Statements — Unaudited

The following tables present the change in fair value included in the Statements of Income for financial instruments for which the fair value option has been elected (in thousands):

Three months ended June 30,

2018

2017

Interest
Income

Net Gains
(Losses) Due to
Changes in Fair
Value

Total Change in Fair
Value Included in
Current Period
Earnings

Interest Income

Net Gains
(Losses) Due to
Changes in Fair
Value

Total Change in Fair
Value Included in
Current Period
Earnings

Advances

$
4,170

$
(632
)
$
3,538

$
11,796

$
(2,120
)
$
9,676

Three months ended

March 31, 2018

Interest
Income

Net Gains
(Losses) Due to
Changes in Fair
Value

Total Change in Fair
Value Included in
Current Period
Earnings

Advances

$
4,631

$
217

$
4,848

Six months ended June 30,

2018

2017

Interest
Income

Net Gains
(Losses) Due to
Changes in Fair
Value

Total Change in Fair
Value Included in
Current Period
Earnings

Interest Income

Net Gains
(Losses) Due to
Changes in Fair
Value

Total Change in Fair
Value Included in
Current Period
Earnings

Advances

$
8,801

$
(415
)
$
8,386

$
34,210

$
(3,552
)
$
30,658

Three months ended

March 31, 2019

Interest Expense

Net Gains
(Losses) Due to
Changes in Fair
Value

Total Change in Fair
Value Included in
Current Period
Earnings

Consolidated obligation bonds

$
(33,481
)
$
(58
)
$
(33,539
)
Consolidated obligation discount notes

(17,281
)
(406
)
(17,687
)

$
(50,762
)
$
(464
)
$
(51,226
)

Three months ended

March 31, 2018

Interest Expense

Net Gains
(Losses) Due to
Changes in Fair
Value

Total Change in Fair
Value Included in
Current Period
Earnings

Consolidated obligation bonds

$
(3,558
)
$
(1
)
$
(3,559
)
Consolidated obligation discount notes

(6,587
)
(269
)
(6,856
)

$
(10,145
)
$
(270
)
$
(10,415
)
Federal Home Loan Bank of New York
Notes to Financial Statements — Unaudited

Three months ended June 30,

2018

2017

Interest Expense

Net Gains
(Losses) Due to
Changes in Fair
Value

Total Change in Fair
Value Included in
Current Period
Earnings

Interest Expense

Net Gains
(Losses) Due to
Changes in Fair
Value

Total Change in Fair
Value Included in
Current Period
Earnings

Consolidated obligation bonds

$
(611
)
$
49

$
(562
)
$
(2,063
)
$
(288
)
$
(2,351
)
Consolidated obligation discount notes

(5,745
)
274

(5,471
)
(7,673
)
(1,173
)
(8,846
)

$
(6,356
)
$
323

$
(6,033
)
$
(9,736
)
$
(1,461
)
$
(11,197
)

Six months ended June 30,

2018

2017

Interest Expense

Net Gains
(Losses) Due to
Changes in Fair
Value

Total Change in Fair
Value Included in
Current Period
Earnings

Interest Expense

Net Gains
(Losses) Due to
Changes in Fair
Value

Total Change in Fair
Value Included in
Current Period
Earnings

Consolidated obligation bonds

$
(4,169
)
$
48

$
(4,121
)
$
(4,657
)
$
199

$
(4,458
)
Consolidated obligation discount notes

(12,332
)
5

(12,327
)
(21,956
)
1,491

(20,465
)

$
(16,501
)
$
53

$
(16,448
)
$
(26,613
)
$
1,690

$
(24,923
)
The following tables compare the aggregate fair value and aggregate remaining contractual principal balance outstanding of financial instruments for which the fair value option has been elected (in thousands):

June 30, 2018

December 31, 2017

March 31, 2019

Aggregate
Unpaid Principal
Balance

Aggregate Fair
Value

Fair Value
Over/(Under)
Aggregate Unpaid
Principal Balance

Aggregate
Unpaid Principal
Balance

Aggregate Fair
Value

Fair Value
Over/(Under)
Aggregate Unpaid
Principal Balance

Advances (a)

$
250,000

$
250,532

$
532

$
2,200,000

$
2,205,624

$
5,624

Aggregate
Unpaid Principal
Balance

Aggregate Fair
Value

Fair Value
Over/(Under)
Aggregate Unpaid
Principal Balance

Consolidated obligation bonds (b)

$
30,000

$
29,784

$
(216
)
$
1,130,000

$
1,131,074

$
1,074

$
7,325,000

$
7,367,064

$
42,064

Consolidated obligation discount notes (c)

—

—

—

2,309,618

2,312,621

3,003

987,355

994,773

7,418

$
30,000

$
29,784

$
(216
)
$
3,439,618

$
3,443,695

$
4,077

$
8,312,355

$
8,361,837

$
49,482

December 31, 2018

Aggregate
Unpaid Principal
Balance

Aggregate Fair
Value

Fair Value
Over/(Under)
Aggregate Unpaid
Principal Balance

Consolidated obligation bonds (b)

$
5,140,000

$
5,159,792

$
19,792

Consolidated obligation discount notes (c)

3,170,915

3,180,086

9,171

$
8,310,915

$
8,339,878

$
28,963

March 31, 2018

Aggregate
Unpaid Principal
Balance

Aggregate Fair
Value

Fair Value
Over/(Under)
Aggregate Unpaid
Principal Balance

Advances (a)

$
750,000

$
751,568

$
1,568

Consolidated obligation bonds (b)

$
130,000

$
129,721

$
(279
)
Consolidated obligation discount notes (c)

1,564,375

1,566,028

1,653

$
1,694,375

$
1,695,749

$
1,374

(a)         Advances — ~~The~~No advances elected under the FVO were outstanding at March 31, 2019 and December 31, 2018. From time to time, the FHLBNY has elected the FVO for ~~certain~~ advances on an instrument by instrument basis on advances that were primarily short- and intermediate-term floating-rate advances. The elections were made primarily as a natural fair value offset to debt elected under the FVO.
(b)         The FHLBNY has elected the FVO for certain short-term CO bonds, primarily fixed-rate shorter-term debt, because management was not able to assert with confidence that the debt would qualify for hedge accounting as such short-term debt may not remain highly effective hedges through the maturity of the bonds.
((c)c)          Discount notes were elected under the FVO because management was not able to assert with confidence that the debt would qualify for hedge accounting as the short-term discount note debt may not remain highly effective hedges through maturity.
Federal Home Loan Bank of New York
Notes to Financial Statements — Unaudited

Note 19.                                                  Commitments and Contingencies.

Consolidated obligations — The FHLBanks have joint and several liability for all the Consolidated obligations issued on their behalf. Accordingly, should one or more of the FHLBanks be unable to repay their participation in the Consolidated obligations, each of the other FHLBanks could be called upon to repay all or part of such obligations, as determined or approved by the Finance Agency. Neither the FHLBNY nor any other FHLBank has ever had to assume or pay the Consolidated obligations of another FHLBank. The FHLBNY does not believe that it will be called upon to pay the Consolidated obligations of another FHLBank in the future. Under the provisions of accounting standards for guarantees, the FHLBNY would have been required to recognize the fair value of the FHLBNY’s joint and several liability for all the Consolidated obligations, as discussed above. However, the FHLBNY considers the joint and several liabilities as similar to a related party guarantee, which meets the scope exception under the accounting standard for guarantees. Accordingly, the FHLBNY has not recognized the fair value of a liability for its joint and several obligations related to other FHLBanks’ Consolidated obligations, which in aggregate were par amounts of ~~$1.1 trillion as of June 30, 2018 and~~ $1.0 trillion as of March 31, 2019 and December 31, ~~2017.~~2018.
MPF Program — Under the MPF program, the FHLBNY was unconditionally obligated to purchase $20.1 million and $12.7 million of mortgage loans at March 31, 2019 and December 31, 2018. Commitments were generally for periods not to exceed 45 business days. Such commitments were recorded as derivatives at their fair values in compliance with the provisions of the accounting standards for derivatives and hedging.
Derivative contracts
·                  When the FHLBNY executes derivatives that are eligible to be cleared, the FHLBNY and the FCMs, acting as agents of Derivative Clearing Organizations or DCOs, would enter into margin agreements. The fair values of open derivative contracts are settled on a daily basis by the exchange of variation margin, which is not considered as collateral, rather as the settlement value of the derivative contract. The FHLBNY posts initial margin to DCOs and the initial margin is considered as collateral.
·                  When the FHLBNY executes derivatives that are not eligible to be cleared under the CFTC rules, the FHLBNY and the swap counterparties enter into bilateral collateral agreements.
On bilateral derivatives, the FHLBNY had posted $127.9 million and $64.5 million in cash to derivative counterparties at March 31, 2019 and December 31, 2018. In addition, for cleared derivatives, the FHLBNY had pledged $220.3 million of marketable securities and posted $6.4 million in cash to fulfill our obligation to pledge initial margin as collateral. At December 31, 2018, we had pledged $239.8 million of marketable securities to Derivative Clearing Organizations. Further information is provided in Note 17. Derivatives and Hedging Activities.
Deposits — The FHLBNY had pledged $4.4 million and $4.5 million of mortgage-backed securities to the FDIC to collateralize deposit placed by the FDIC at March 31, 2019 and December 31, 2018.
Lease contracts — The FHLBNY charged to operating expenses net rental costs of approximately $1.7 million at March 31, 2019 and 2018. Lease agreements for FHLBNY premises generally provide for inflationary increases in the basic rentals resulting from increases in property taxes and maintenance expenses. Additionally, the FHLBNY has a lease agreement for a shared offsite data backup site at a cost estimated to be $1.4 million. Components of the offsite agreement are generally renewable up to three years.
Affordable Housing Program — The 11 FHLBanks are expected to contribute $100 million in aggregate annually to the AHP. If the aggregate assessment is less than $100 million for all the FHLBanks, each FHLBank would be required to assure that the aggregate contributions of the FHLBanks equal $100 million. The proration would be made on the basis of an FHLBank’s income in relation to the income of all FHLBanks for the previous year. There have been no shortfalls in any periods in this report.
Federal Home Loan Bank of New York
Notes to Financial Statements — Unaudited

The following table summarizes ~~significant~~ contractual obligations and contingencies as of ~~June 30, 2018~~March 31, 2019 (in thousands):

June 30, 2018

March 31, 2019

Payments Due or Expiration Terms by Period

Payments Due or Expiration Terms by Period

Greater Than

Greater Than

Greater Than

Greater Than

Less Than

One Year

Three Years

Greater Than

Less Than

One Year

Three Years

Greater Than

One Year

to Three Years

to Five Years

Five Years

Total

One Year

to Three Years

to Five Years

Five Years

Total

Contractual Obligations

Consolidated obligation bonds at par (a)

$
84,095,950

$
9,657,100

$
3,212,870

$
4,103,650

$
101,069,570

$
62,913,140

$
7,636,890

$
3,670,370

$
5,439,700

$
79,660,100

Consolidated obligation discount notes at par

45,555,456

—

—

—

45,555,456

53,173,357

—

—

—

53,173,357

Mandatorily redeemable capital stock (a)

11,799

1,076

434

4,398

17,707

228

1,065

422

4,040

5,755

Premises (lease obligations) (b)

5,029

13,393

14,092

76,055

108,569

5,839

13,769

14,409

70,554

104,571

Remote backup site

1,264

130

—

—

1,394

Other liabilities (c)

123,412

9,407

7,506

63,975

204,300

105,160

9,819

7,922

58,863

181,764

Total contractual obligations

129,791,646

9,680,976

3,234,902

4,248,078

146,955,602

116,198,988

7,661,673

3,693,123

5,573,157

133,126,941

Other commitments

Standby letters of credit(d)

17,089,363

13,357

—

—

17,102,720

19,901,140

130,215

6,597

—

20,037,952

Consolidated obligation bonds/discount notes traded not settled

16,700

—

—

—

16,700

2,948,725

—

—

—

2,948,725

Commitments to fund additional advances

200,000

—

—

—

200,000

210,000

—

—

—

210,000

Commitments to fund pension

9,321

—

—

—

9,321

Open delivery commitments (MPF)

23,433

—

—

—

23,433

20,062

—

—

—

20,062

Total other commitments

17,329,496

13,357

—

—

17,342,853

23,089,248

130,215

6,597

—

23,226,060

Total obligations and commitments

$
147,121,142

$
9,694,333

$
3,234,902

$
4,248,078

$
164,298,455

$
139,288,236

$
7,791,888

$
3,699,720

$
5,573,157

$
156,353,001

(a)         Callable bonds contain an exercise date or a series of exercise dates that may result in a shorter redemption period. Redemption dates of mandatorily redeemable capital stock are assumed to correspond to maturity dates of member advances. Excess capital stock is redeemed at that time, and hence, these dates better represent the related commitments than the put dates associated with capital stock.
(b)         ~~We renewed the lease for the New York City office in June 2017.~~ In ~~addition, our existing office lease in New Jersey expires in~~ the fourth quarter of 2018, ~~and in December 2017, we~~a long-term lease was executed ~~a new lease agreement~~ for ~~new~~our New Jersey operating space. The Bank ~~plans to adopt~~adopted ASU 2016-02, Leases (Topic 842) inon January 1, 2019. Upon adoption, the lease obligations ~~will be~~were recorded in the Statements of Condition. ~~Until then,~~Under legacy pre-ASU GAAP, lease obligations ~~will continue to be~~were reported as ~~commitments under existing GAAP.~~off-balance sheet commitments. Immaterial amounts of equipment ~~leases~~ and ~~shared offsite data backup site~~other leases have been ~~excluded.~~excluded in the table above.
(c)          Includes accounts payable and accrued expenses, liabilities recorded for future settlements of investments, Pass-through reserves due to member institutions held at the FRB, and projected payment obligations for pension plans. Where it was not possible to estimate the exact timing of payment obligations, they were assumed to be duewithin one year; amounts were not material. For more information about employee retirement plans in general, see Note 16. Employee Retirement Plans.
(d)Financial letters of credit — Standby letters of credit are executed for a fee on behalf of members to facilitate residential housing, community lending, and members’ asset/liability management or to provide liquidity. A standby letter of credit is a financing arrangement between the FHLBNY and its member. Members assume an unconditional obligation to reimburse the FHLBNY for value given by the FHLBNY to the beneficiary under the terms of the standby letter of credit. The FHLBNY may, in its discretion, permit the member to finance repayment of their obligation by receiving a collateralized advance.
The FHLBNY does not anticipate any credit losses from its off-balance sheet commitments and accordingly no provision for losses is ~~required.~~required.
Federal Home Loan Bank of New York
Notes to Financial Statements — Unaudited
Operating Lease commitments
Effective January 1, 2019, the FHLBNY adopted new guidance under ASU 2016-02, Leases (Topic 842) that requires lessees to recognize on the balance sheets all leases with lease terms greater than twelve months as a lease liability with a corresponding right-of-use (ROU) asset. Accordingly, the FHLBNY recognized operating lease liabilities of $83.1 million and ROU assets of $70.5 million at March 31, 2019. The adoption of the new lease guidance did not have a material impact on the FHLBNY’s Statements of income. The change in accounting due to the adoption of the new lease guidance did not result in a material change to the future net minimum rental payments/receivables or to the net rental expense when compared to December 31, 2018.
At March 31, 2019, the FHLBNY was obligated under a number of noncancelable leases, predominantly operating leases for premises. These leases generally have terms of 15 years or less that contain escalation clauses that will increase rental payments. Operating leases also include backup datacenters and certain office equipment. Operating lease liabilities and ROU are recognized at the lease commencement date based on the present value of the future minimum lease payments over the lease term. The future lease payments are discounted at a rate that represents the FHLBNY’s borrowing rate for its own debt (Consolidated obligation bonds) of a similar term. ROU includes any lease prepayments made, plus any initial direct costs incurred, less any lease incentives received. Rental expense associated with operating leases is recognized on a straight-line basis over the lease term. Premise rental expense is included in occupancy expense, and datacenter and other lease expenses are included in other operating expense in the Statements of income. ROU and lease liabilities are reported in the Statements of condition.
The following tables provide summarized information on our leases (dollars in thousands):

March 31, 2019

Operating Leases (a)

Right-of-use assets

$
70,450

Lease Liabilities

$
83,094

Three months ended
March 31, 2019

Operating Lease Expense

$
1,817

Operating cash flows - Cash Paid

$
1,533

Weighted Average Discount Rate

3.35
%

Weighted Average Remaining Lease Term

13.95 Years

Remaining maturities through

Operating lease liabilities

March 31, 2019

December 31, 2018

Remainder of 2019

$
5,155

$
6,687

2020

6,927

6,927

2021

6,860

6,860

2022

6,949

6,949

2023

7,282

7,282

Thereafter

72,036

72,036

Total undiscounted lease payments

105,209

$
106,741

Imputed interest

(22,115
)

Total operating lease liabilities

$
83,094

(a)We have elected to exclude immaterial amounts of short-term operating lease liabilities in the Right-of-use assets and lease liabilities.
Federal Home Loan Bank of New York
Notes to Financial Statements — Unaudited

Note 20.                                                  Related Party Transactions.

The FHLBNY is a cooperative and the members own almost all of the stock of the FHLBNY. Stock issued and outstanding that is not owned by members is held by former members. The majority of the members of the Board of Directors of the FHLBNY are elected by and from the membership. The FHLBNY conducts its advances business almost exclusively with members, and considers its transactions with its members and non-member stockholders as related party transactions in addition to transactions with other FHLBanks, the Office of Finance, and the Finance Agency. The FHLBNY conducts all transactions with members and non-members in the ordinary course of business. All transactions with all members, including those whose officers may serve as directors of the FHLBNY, are at terms that are no more favorable than comparable transactions with other members. The FHLBNY may from time to time borrow or sell overnight and term federal funds at market rates to members.

Debt Assumptions and Transfers. When debt is transferred or assumed, the transactions would be executed in the ordinary course of the FHLBNY’s business and at negotiated market pricing.

Debt assumptions — No debt was assumed from another FHLBank in the ~~six~~three months ended ~~June 30, 2018~~March 31, 2019 and in the same period in the prior year.

Debt transfers — No debt was transferred to another FHLBank in the ~~six~~three months ended ~~June 30, 2018~~March 31, 2019 and in the same period in the prior year.

Advances Sold or Transferred

No advances were transferred or sold to the FHLBNY or from the FHLBNY to another FHLBank in any periods in this report. When an advance is transferred or assumed, the transactions would be executed in the ordinary course of the FHLBNY’s business and at negotiated market pricing.

MPF Program

In the MPF program, the FHLBNY may participate to the FHLBank of Chicago portions of its purchases of mortgage loans from its members. Transactions are participated at market rates. Since 2004, the FHLBNY has not shared its purchases with the FHLBank of Chicago. From the inception of the program through 2004, the cumulative share of MPF Chicago’s participation in the FHLBNY’s MPF loans that has remained outstanding was ~~$9.8~~$8.4 million and ~~$11.5~~$8.6 million at ~~June 30, 2018~~March 31, 2019 and December 31, ~~2017.~~2018.

Fees paid to the FHLBank of Chicago for providing MPF program services were approximately $0.6 million ~~and $1.4 million~~ for the three ~~and six~~ months ended ~~June 30, 2018,~~March 31, 2019, compared to ~~$0.6 million and $1.1~~$0.7 million for the same ~~periods~~period in the prior year.

Mortgage-backed Securities

No mortgage-backed securities were acquired from other FHLBanks during the periods in this report.

We pay an annual fee of $6.0 thousand to the FHLBank of Chicago for the use of MBS cash flow models in connection with OTTI analysis performed by the FHLBNY for certain of our private-label MBS.

Intermediation

From time to time, the FHLBNY acts as an intermediary to purchase derivatives to accommodate its smaller members. At ~~June 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, outstanding notional amounts were ~~$285.0~~$383.0 million and ~~$193.0~~ $333.0 million and represented derivative contracts in which the FHLBNY acted as an intermediary to execute derivative contracts with members. Separately, the contracts were offset with contracts purchased from unrelated derivatives dealers. Net fair value exposures of these transactions at ~~June 30, 2018~~March 31, 2019 and December 31, ~~2017~~2018 were not significant. The intermediated derivative transactions with members were fully collateralized.
Federal Home Loan Bank of New York
Notes to Financial Statements — Unaudited

Loans to Other Federal Home Loan Banks

In the three ~~and six~~ months ended ~~June 30,~~March 31, 2019 and 2018, overnight loans extended to other FHLBanks averaged ~~$1.4~~$8.3 million and ~~$1.8 million compared to $5.5 million and $5.6 million in the same periods in the prior year.~~$2.2 million. Generally, loans made to other FHLBanks are uncollateralized. Interest income from such loans was immaterial in the periods in this report.

Borrowings from Other Federal Home Loan Banks

The FHLBNY borrows from other FHLBanks, generally for a period of one day. In the three months ended March 31, 2019, the FHLBNY borrowed a total of $750 million in overnight loans from other FHLBanks. The borrowings averaged $5.6 million on a 3-month basis. Interest expense was immaterial. There were no borrowings from other FHLBanks in the three ~~and six~~ months ended ~~June 30, 2018 and in the same periods of the prior year.~~March 31, 2018.

Cash and Due from Banks

During the ~~six~~three months ended ~~June 30,~~March 31, 2019 and 2018, there was no compensating cash balances held at Citibank. ~~The balance was $41.1 million at December 31, 2017.~~ Citibank is a member and stockholder of the FHLBNY. For more information, see Note 3. Cash and Due from Banks.

The following tables summarize significant balances and transactions with related parties at ~~June 30, 2018~~March 31, 2019 and December 31, ~~2017~~2018 and transactions for the three ~~and six~~ months ended ~~June 30,~~March 31, 2019 and March 31, 2018 ~~and June 30, 2017~~ (in thousands):

Related Party: Outstanding Assets, Liabilities and Capital

June 30, 2018

December 31, 2017

March 31, 2019

December 31, 2018

Related

Related

Related

Related

Assets

Advances

$
110,782,004

$
122,447,805

$
99,132,395

$
105,178,833

Loans to other FHLBanks

—

250,000

Accrued interest receivable

223,047

175,926

224,612

202,404

Liabilities and capital

Deposits

$
1,191,039

$
1,196,055

$
1,356,478

$
1,062,637

Mandatorily redeemable capital stock

17,707

19,945

5,755

5,845

Accrued interest payable

501

443

359

373

Affordable Housing Program (a)

149,304

131,654

161,129

161,718

Other liabilities (b)

83,453

84,194

80,330

86,095

Capital

$
7,922,530

$
8,241,038

$
7,374,538

$
7,746,622

(a)         Represents funds not yet allocated or disbursed to AHP programs.
(b)         Related column includes member pass-through reserves at the Federal Reserve Bank of New York.
Federal Home Loan Bank of New York
Notes to Financial Statements — Unaudited

Related Party: Income and Expense Transactions

Three months ended June 30,

Six months ended June 30,

Three months ended March 31,

2018

2017

2018

2017

2019

2018

Related

Related

Related

Related

Related

Related

Interest income

��

Advances

$
629,485

$
361,306

$
1,175,945

$
678,077

$
691,896

$
546,460

Interest-bearing deposits

1

—

2

—

1

1

Loans to other FHLBanks

6

12

13

20

50

7

Interest expense

Deposits

$
4,443

$
3,063

$
7,948

$
4,887

$
5,965

$
3,505

Mandatorily redeemable capital stock

293

239

626

643

100

333

Cash collateral held and other borrowings

50

—

Service fees and other

$
3,412

$
2,876

$
6,751

$
5,885

$
4,131

$
3,339

Note 21.                                                  Segment Information and Concentration.

The FHLBNY manages its operations as a single business segment. Management and the FHLBNY’s Board of Directors review enterprise-wide financial information in order to make operating decisions and assess performance. Advances to large members constitute a significant percentage of the FHLBNY’s advance portfolio and its source of revenues.

The FHLBNY’s total assets and capital could significantly decrease if one or more large members were to withdraw from membership or decrease business with the FHLBNY. Members might withdraw or reduce their business as a result of consolidating with an institution that was a member of another FHLBank, or for other reasons. The FHLBNY has considered the impact of losing one or more large members. In general, a withdrawing member would be required to repay all indebtedness prior to the redemption of its capital stock. Under current conditions, the FHLBNY does not expect the loss of a large member to impair its operations, since the FHLBank Act, as amended, does not allow the FHLBNY to redeem the capital of an existing member if the redemption would cause the FHLBNY to fall below its capital requirements. Consequently, the loss of a large member should not result in an inadequate capital position for the FHLBNY. However, such an event could reduce the amount of capital that the FHLBNY has available for continued growth. This could have various ramifications for the FHLBNY, including a possible reduction in net income and dividends, and a lower return on capital stock for remaining members.
Federal Home Loan Bank of New York
Notes to Financial Statements — Unaudited

The top ten advance holders at ~~June 30, 2018,~~March 31, 2019, December 31, ~~2017~~2018 and ~~June 30, 2017~~March 31, 2018 and associated interest income for the periods then ended are summarized as follows (dollars in thousands):

~~Interest Income — Principal Sources~~

June 30, 2018

March 31, 2019

Percentage of

Percentage of

Par

Total Par Value

Three Months

Six Months

Par

Total Par Value

Three Months

City

State

Advances

of Advances

Interest Income

Percentage (a)

Interest Income

Percentage (a)

City

State

Advances

of Advances

Interest Income

Percentage (a)

Citibank, N.A.

New York

NY

$
28,995,000

26.03
%
$
161,039

36.92
%
$
333,238

39.54
%

New York

NY

$23,825,000

24.03
%
$133,918

28.84
%
Metropolitan Life Insurance Company

New York

NY

14,245,000

12.79

68,469

15.70

130,803

15.52

New York

NY

14,245,000

14.37

95,236

20.51

New York Community Bancorp, Inc.:

New York Community Bank (b)

Westbury

NY

13,230,600

11.88

59,139

13.56

112,343

13.33

Westbury

NY

11,803,661

11.90

64,525

13.90

New York Commercial Bank (b)

Westbury

NY

3,900

—

12

—

845

0.10

Subtotal New York Community Bancorp, Inc.

13,234,500

11.88

59,151

13.56

113,188

13.43

Sterling National Bank

Montebello

NY

5,065,000

4.55

25,112

5.75

42,856

5.09

Signature Bank

New York

NY

4,795,000

4.31

23,941

5.49

41,988

4.99

New York

NY

5,177,364

5.22

33,098

7.13

Investors Bank (b)

Short Hills

NJ

4,644,867

4.17

24,346

5.58

45,867

5.44

Short Hills

NJ

4,894,587

4.94

28,205

6.07

AXA Equitable Life Insurance Company

New York

NY

3,990,415

4.02

24,943

5.37

New York Life Insurance Company

New York

NY

3,500,000

3.53

21,993

4.74

Sterling National Bank

Montebello

NY

3,258,000

3.29

24,259

5.22

Valley National Bank (b)

Wayne

NJ

4,352,000

3.91

21,199

4.86

37,365

4.43

Wayne

NJ

2,817,000

2.84

19,859

4.28

HSBC Bank USA, National Association (c)

Mc Lean

VA

3,100,000

2.78

19,915

4.57

35,504

4.21

Mc Lean

VA

2,000,000

2.02

18,299

3.94

AXA Equitable Life Insurance Company

New York

NY

3,000,415

2.69

16,954

3.89

32,841

3.90

New York Life Insurance Company

New York

NY

2,950,000

2.65

16,050

3.68

29,069

3.45

Total

$
84,381,782

75.76
%
$
436,176

100.00
%
$
842,719

100.00
%

$75,511,027

76.16
%
$464,335

100.00
%

(a)         Interest income percentage is the member’s interest income from advances as a percentage of the top 10 members.
(b)         At ~~June 30, 2018,~~March 31, 2019, an officer of this member bank also served on the Board of Directors of the FHLBNY.
(c)          For Bank membership purposes, principal place of business is New York, NY.

December 31, 2017

December 31, 2018

Percentage of

Percentage of

Par

Total Par Value

Twelve Months

Par

Total Par Value

Twelve Months

City

State

Advances

of Advances

Interest Income

Percentage (a)

City

State

Advances

of Advances

Interest Income

Percentage (a)

Citibank, N.A.

New York

NY

$
43,100,000

35.12
%
$
450,596

36.83
%

New York

NY

$19,995,000

18.96
%
$644,926

37.66
%
Metropolitan Life Insurance Company

New York

NY

14,445,000

11.77

221,310

18.09

New York

NY

14,245,000

13.51

301,318

17.60

New York Community Bancorp, Inc.:

New York Community Bank

Westbury

NY

11,830,600

9.64

182,103

14.88

New York Commercial Bank

Westbury

NY

273,900

0.22

3,822

0.31

Subtotal New York Community Bancorp, Inc.

12,104,500

9.86

185,925

15.19

Sterling National Bank (b)(d)

Montebello

NY

4,507,000

3.67

58,049

4.74

New York Community Bank (b) (c)

Westbury

NY

13,053,661

12.38

247,973

14.48

Signature Bank

New York

NY

4,970,000

4.71

92,592

5.41

Investors Bank (b)

Short Hills

NJ

4,326,053

3.53

82,894

6.77

Short Hills

NJ

4,925,681

4.67

95,921

5.60

Signature Bank

New York

NY

4,195,000

3.42

36,503

2.98

Goldman Sachs Bank USA

New York

NY

3,390,000

2.76

30,433

2.49

HSBC Bank USA, National Association (c)

Mc Lean

VA

3,100,000

2.53

68,391

5.59

Sterling National Bank

Montebello

NY

4,837,000

4.59

92,835

5.42

Manufacturers and Traders Trust Company

Buffalo

NY

4,774,712

4.53

13,256

0.77

AXA Equitable Life Insurance Company

New York

NY

3,000,415

2.45

52,308

4.27

New York

NY

3,990,415

3.78

72,582

4.24

New York Life Insurance Company

New York

NY

2,625,000

2.14

37,263

3.05

New York

NY

3,575,000

3.39

67,793

3.96

Valley National Bank (b)

Wayne

NJ

3,027,000

2.87

83,172

4.86

Total

$
94,792,968

77.25
%
$
1,223,672

100.00
%

$77,393,469

73.39
%
$1,712,368

100.00
%

(a)         Interest income percentage is the member’s interest income from advances as a percentage of the top 10 members.
(b)         At December 31, ~~2017,~~2018, an officer of this member bank also served on the Board of Directors of the FHLBNY.
(c)          ~~For Bank membership purposes, principal place of business is~~ New York ~~NY.~~
~~(d)~~~~Astoria~~Commercial Bank merged into ~~Sterling National~~New York Community Bank in the fourth quarter ~~2017. Both entities~~2018. Par advances are ~~member banks and are related parties. The par advance balance represents advances outstanding with Sterling, the merged entity.~~for New York Community Bank. Interest income reported in the table ~~represented~~represent interest income received from ~~Astoria~~New York Commercial Bank and ~~Sterling~~New York Community Bank in ~~2017.~~2018.
Federal Home Loan Bank of New York
Notes to Financial Statements — Unaudited

June 30, 2017

March 31, 2018

Percentage of

Percentage of

Par

Total Par Value

Three Months

Six Months

Par

Total Par Value

Three Months

City

State

Advances

of Advances

Interest Income

Percentage (a)

Interest Income

Percentage (a)

City

State

Advances

of Advances

Interest Income

Percentage (a)

Citibank, N.A.

New York

NY

$
35,550,000

30.14
%
$
92,248

32.81
%
$
179,835

33.43
%

New York

NY

$30,995,000

27.49
%
$172,199

42.12
%
Metropolitan Life Insurance Company

New York

NY

14,445,000

12.25

54,143

19.26

104,765

19.48

New York

NY

14,445,000

12.81

62,333

15.25

New York Community Bancorp, Inc.:

New York Community Bank(b)

Westbury

NY

11,280,600

9.56

44,817

15.94

88,787

16.51

Westbury

NY

12,530,600

11.11

53,204

13.01

New York Commercial Bank(b)

Westbury

NY

273,900

0.23

949

0.34

1,903

0.35

Westbury

NY

3,900

—

834

0.21

Subtotal New York Community Bancorp, Inc.

11,554,500

9.79

45,766

16.28

90,690

16.86

12,534,500

11.11

54,038

13.22

Investors Bank (b)

Short Hills

NJ

5,075,960

4.50

21,520

5.26

Sterling National Bank (b)

Montebello

NY

4,447,000

3.94

17,743

4.34

Signature Bank

New York

NY

4,285,000

3.80

18,047

4.41

Valley National Bank (b)

Wayne

NJ

3,322,000

2.95

16,166

3.95

HSBC Bank USA, National Association (c)

Mc Lean

VA

4,900,000

4.15

17,722

6.30

34,527

6.42

Mc Lean

VA

3,100,000

2.75

15,588

3.81

Investors Bank (b)

Short Hills

NJ

4,516,237

3.83

21,527

7.66

41,232

7.67

Morgan Stanley Private Bank, NA

Purchase

NY

3,400,000

2.88

6,069

2.16

6,365

1.18

Valley National Bank (b)

Wayne

NJ

2,907,000

2.46

13,209

4.70

24,059

4.47

AXA Equitable Life Insurance Company

New York

NY

2,620,415

2.22

12,636

4.49

23,587

4.39

New York

NY

3,000,415

2.66

15,887

3.89

Signature Bank

New York

NY

2,600,900

2.21

8,756

3.12

15,772

2.93

New York Life Insurance Company

New York

NY

2,425,000

2.06

9,062

3.22

17,053

3.17

Goldman Sachs Bank USA

New York

NY

2,890,000

2.56

15,324

3.75

Total

$
84,919,052

71.99
%
$
281,138

100.00
%
$
537,885

100.00
%

$84,094,875

74.57
%
$408,845

100.00
%

(a)         Interest income percentage is the member’s interest income from advances as a percentage of the top 10 members.
(b)         At ~~June 30, 2017,~~March 31, 2018, officer of member bank also served on the Board of Directors of the FHLBNY.
(c)          For Bank membership purposes, principal place of business is New York, NY.
Item 2.                                                         Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Forward-Looking Statements

Statements contained in this report, including statements describing the objectives, projections, estimates, or predictions of the Federal Home Loan Bank of New York (“we,” “us,” “our,” “the Bank” or the “FHLBNY”), may be “forward-looking statements.” All statements other than statements of historical fact are statements that could potentially be forward-looking statements. These statements may use forward-looking terminology, such as “anticipates,” “believes,” “could,” “estimates,” “may,” “should,” “will,” or other variations on these terms or their negatives, and include statements related to, among others, gains and losses on derivatives, plans to pay dividends and repurchase excess capital stock, future other-than-temporary impairment charges, future classification of securities, and housing reform legislation. These statements may involve matters pertaining to, but not limited to: projections regarding revenue, income, earnings, capital expenditures, dividends, the capital structure and other financial items; statements of plans or objectives for future operations; expectations of future economic performance; and statements of assumptions underlying certain of the foregoing types of statements.

The Bank cautions that, by their nature, forward-looking statements involve risks or uncertainties, and actual results could differ materially from those expressed or implied in these forward-looking statements or could affect the extent to which a particular objective, projection, estimate, or prediction is realized. As a result, readers are cautioned not to place undue reliance on such statements, which are current only as of the date thereof.   The Bank will not undertake to update any forward-looking statement herein or that may be made from time to time on behalf of the Bank.

These forward-looking statements may not be realized due to a variety of risks and uncertainties including, but not limited to risks and uncertainties relating to economic, competitive, governmental, technological and marketing factors, as well as other factors identified in Part I, Item 1A. Risk Factors in the Bank’s most recent Form 10-K filed on March ~~22, 2018,~~21, 2019, and from time to time in the Bank’s other filings with the SEC, and elsewhere in this report.
Organization of Management’s Discussion and Analysis (“MD&A”).

This MD&A is designed to provide information that will assist the readers in better understanding ~~the FHLBNY’s~~our financial statements, the changes in key items in ~~the Bank’s~~our financial statements from ~~period~~year to ~~period and~~year, the primary factors driving those changes as well as how accounting principles affect ~~the FHLBNY’s~~our financial statements. The MD&A is organized as follows:

Page
Executive Overview
6062
Business Outlook
62
~~Results of Operations~~
66
~~Net Income~~
66
~~Net Interest Income, Margin and Interest Rate Spreads~~
68
~~Interest Income~~
74
~~Interest Expense~~
76
~~Earnings Impact of Derivatives and Hedging Activities~~
81
~~Operating Expense, Compensation and Benefits, and Other Expenses~~
8564
Financial Condition
8767
Advances
9070
Investments
9573
Mortgage Loans Held-for-Portfolio
~~100~~78
Debt Financing Activity and Consolidated Obligations
~~102~~80
Stockholders’ Capital
~~107~~85
Derivative ~~Instruments and Hedging Activities~~Counterparty Credit Ratings
~~109~~88
Liquidity, Short-Term Borrowings and Short-Term Debt
~~110~~89
Results of Operations
92
Net Income
92
Net Interest Income
94
Interest Income
98
Interest Expense
99
Analysis of Non-Interest Income (Loss)
102
Operating Expenses, Compensation and Benefits, and Other Expenses
104
Assessments
104
Legislative and Regulatory Developments
~~114~~105

MD&A TABLE REFERENCE

Table(s)

Description

Page(s)

Selected Financial Data

64 - 65
1.1 - 1.14

Results of Operations

66 - 85
2.1

Assessments

86
3.1

Financial Condition

87
4.1 - 4.7

Advances

91 - 95
5.1 - 5.6

Investments

95 - 99
6.1 - 6.3

Mortgage Loans

100 - 101
7.1 - 7.9

Consolidated Obligations

103 - 107
8.1 - 8.3

Capital

107 - 108
9.1

Derivatives

109
10.1 - 10.3

Liquidity

111
10.4

Short-Term Debt

112
Table(s)

Description

Page(s)

Selected Financial Data

65 - 66
1.1

Financial Condition

67
2.1 - 2.6

Advances

70 -73
3.1 - 3.8

Investments

74 - 78
4.1 - 4.3

Mortgage Loans

79 - 80
5.1 - 5.9

Consolidated Obligations

81 - 85
6.1 - 6.4

Capital

85 - 87
7.1

Derivatives

88
8.1 - 8.3

Liquidity

89 - 90
8.4

Short-Term Debt

91
9.1 - 9.13

Results of Operations

92 - 104
10.1

Assessments

104
Executive Overview

This overview of management’s discussion and analysis highlights selected information and may not contain all of the information that is important to readers of this Form ~~10-Q.~~10-K. For a more complete understanding of events, trends and uncertainties, as well as the liquidity, capital, credit and market risks, and critical accounting estimates, affecting the Federal Home Loan Bank of New York ~~(“FHLBNY”~~(FHLBNY or ~~“Bank”)~~Bank), this Form 10-Q should be read in its entirety and in conjunction with the Bank’s most recent Form 10-K filed on March ~~22, 2018.~~21, 2019.

Cooperative business model. As a cooperative, we seek to maintain a balance between our public policy mission and our ability to provide adequate returns on the capital supplied by our members. We achieve this balance by delivering low-cost financing to members to help them meet the credit needs of their communities and also by paying a dividend on members’ capital stock. Our financial strategies are designed to enable us to expand and contract in response to member credit needs. By investing capital in high-quality, short- and medium-term financial instruments, we maintain sufficient liquidity to satisfy member demand for short- and long-term funds, repay maturing Consolidated obligations, and meet other obligations. The dividends we pay are largely the result of earnings on invested member capital, net earnings on advances to members, mortgage loans and investments, offset in part by operating expenses and assessments. Our Board of Directors and Management determine the pricing of member credit and dividend policies based on the needs of our members and the cooperative.

Business segment. We manage our operations as a single business segment. Advances to members are our primary focus and the principal factor that impacts our operating results.

~~2018~~Financial Performance — ~~Highlights~~ —2019 First Quarter compared to 2018 ~~Second Quarter Compared to 2017 Second~~First Quarter

Net income — ~~For the FHLBNY,~~Our Net income is Net interest income, minus credit losses on mortgage loans, plus Other income (loss), less Other expenses and Assessments set aside for ~~the FHLBNY’s~~our Affordable Housing Program.
~~In the second quarter of 2018,~~ Net income for the current year period was ~~$155.2~~$134.8 million, an increase of ~~$24.3~~$8.6 million, or ~~18.5%~~6.8%, ~~compared to the same period in~~from net income of $126.2 million for the prior ~~year. Summarized below are the primary components of our Net income:~~
~~Net interest income~~ —year period. Net interest income, ~~(“NII”) is typically driven by the volume~~a key measure of ~~earning assets, as measured by average balances of earning assets, and the net interest spread earned~~our earnings declined in the current period. Prepayment fees earned when advances are early terminated by our borrowing members and the impact of cash flows on interest rate swaps that hedge our assets and liabilities could also be significant factors.
~~In the second quarter of 2018,~~ Net interest income was ~~$207.7~~$177.2 million, ~~an increase~~a decrease of ~~$31.6~~$15.8 million, or ~~17.9%,~~8.2% from the same period in the prior year. Other income (loss) reported a gain of $13.2 million, compared to a loss of $18.6 million in the same period in the prior year, the favorable change driven primarily by marked-to-market gains on investments recorded at fair value through earnings. Other expenses, which is comprised primarily of operating expenses and expenses for compensation and benefits, were $40.6 million in the current year period, compared to $34.5 million in the prior year period. Assessments towards our obligations for Affordable Housing Program were $15.0 million in the current year period, compared to $14.1 million in the prior year period.
Net interest income — Net interest income ~~benefited from higher~~decreased by $15.8 million as a result of net interest margin contraction, driven by a number of factors. Increased investments in fixed-rate U.S. treasury securities that yielded relatively lower margins in a rising rate environment; the decline in average earning assets, ~~which grew~~specifically advances, and tighter (unfavorable) funding spreads to ~~$154.1 billion~~LIBOR, our primary benchmark rate. These factors resulted in compression of the Net interest spread in the ~~second quarter~~current year period, which declined period-over-period by 3 basis points to 38 basis points.
Other income (loss) — Other income (loss) reported a gain of ~~2018, up from $143.8 billion~~$13.2 million, compared to a loss of $18.6 million in the same period in the prior year. ~~Average advance balances were $107.7 billion~~Derivative and hedging activities reported a net loss of $12.3 million in the ~~second~~first quarter of ~~2018,~~the current year, compared to ~~$105.9 billion~~a net loss of $18.8 million in the same period in the prior year. InSecurities held for liquidity (classified as trading) reported net gains of $17.1 million in the ~~second~~first quarter of ~~2018, LIBOR-indexed assets, primarily ARC advances and floating-rate investments~~the current year, in mortgage-backed securities, benefited from the rising LIBOR. Overnight and short-term investments in federal funds and overnight repurchase agreements benefited from rising yields for money market investments. Although funding costs were also higher in the rising rate environment, the price/yield for the issuance of shorter-term floating-rate CO bonds continuedcontrast to be at advantageous sub-LIBOR funding spreads. While Net interest income was higher quarter-over-quarter in 2018, Net interest spread remained unchanged at 44 basis points primarily due to higher invested balances in trading and overnight money market assets that yielded lower spreads.
~~Other~~ ~~income (loss)~~ ~~— In the second quarter of 2018, Other income (loss) reported~~ a loss of ~~$0.7~~$3.2 million ~~compared~~in the same period in the prior year. Equity Investments held to fund payments to retirees in non-qualified pension plans reported net gains of $4.2 million in the first quarter of the current year, in contrast to a ~~gain~~net loss of ~~$1.1~~$0.3 million in the same period in the prior year.
Other expenses— were ~~$34.5~~$40.6 million in the ~~second~~first quarter of the current year, compared to ~~$31.5~~$34.5 million in the same period in the prior year. Other expenses are primarily Operating expenses, Compensation and benefits, and our share of expenses of the Office of Finance and the Federal Housing Finance Agency.
· Operating expenses were ~~$11.4~~$12.9 million in the ~~second~~first quarter of ~~2018,~~the current year, up from ~~$10.7~~$10.0 million in the same period in the prior year. ~~Expense increases were primarily due to increase in occupancy expenses due to new long-term lease agreements for our two offices.~~
·Compensation and benefits expenses were ~~$17.5~~$21.4 million in the ~~second~~first quarter of ~~2018,~~the current year, up from ~~$16.6 million in the same period in the prior year.~~
·                  ~~The expenses allocated for our share of the costs to operate the Office of Finance and the Federal Housing Finance Agency were $3.6 million in the second quarter of 2018, compared to $3.2~~$18.8 million in the same period in the prior year.

AHP assessments allocated from Net income were ~~$17.3~~$15.0 million in the ~~second~~first quarter of ~~2018,~~the current year, compared to ~~$14.6~~$14.1 million in the same period in the prior year. Assessments are calculated as a percentage of Net income, and changes in allocations were in parallel with changes in Net income.

Dividend payments — A quarterly cash dividend of ~~$1.60~~$1.74 per share of capital ~~(6.50%~~(6.90% annualized) was paid in the three months ended ~~June 30, 2018,~~March 31, 2019, compared to ~~$1.23~~$1.64 per share of capital stock ~~(5.00%~~(6.50% annualized) paid in the same period in ~~2017.~~2018.

Financial Condition — ~~June 30, 2018~~March 31, 2019 compared to December 31, ~~2017~~2018

~~Total~~Capital ratios — Our capital position remains strong. At March 31, 2019, actual risk-based capital was $7.4 billion, compared to required risk-based capital of $812.5 million. To support $142.6 billion of total assets ~~decreased~~at March 31, 2019, the minimum required total capital was $5.7 billion or 4.0% of assets. Our actual regulatory risk-based capital was $7.4 billion, exceeding required total capital by $1.7 billion. These ratios have remained consistently above the required regulatory ratios through all periods in this report.
Liquidity — Our liquidity position remains strong, and in compliance with all regulatory requirements, and we do not foresee any changes to ~~$156.6~~that position. We are continuing to invest in a liquidity trading portfolio to increase our liquid assets (see note below). In addition to the trading portfolio maintained for liquidity, liquid assets at March 31, 2019 included $80.5 million as demand cash balances at the Federal Reserve Bank of New York, $14.7 billion in short-term and overnight loans in the federal funds and the repo markets, and $2.2 billion of high credit quality GSE-issued available-for-sale securities that are investment quality and readily marketable.
Among other liquidity measures, the Finance Agency requires FHLBanks to maintain sufficient liquidity through short-term investments in an amount at ~~June 30, 2018 from $158.9~~least equal to our anticipated cash outflows under two different scenarios. The first scenario assumes that we cannot access capital markets for 15 days, and during that period members do not renew their maturing, or prepay or exercise their option to call advances that are callable. The second scenario assumes that we cannot access the capital markets for five days, and during that period, members renew maturing advances. We remained in compliance with regulations under both scenarios. We also have other liquidity measures in place, deposit liquidity and operational liquidity, and those liquidity buffers remain in excess of required reserves.
Liquidity Trading portfolio — The objective of the trading portfolio is to meet short-term contingency liquidity needs. The portfolio is invested primarily in highly liquid U.S. Treasury and GSE-issued securities. At March 31, 2019, trading investments were $7.1 billion atin U.S. Treasury securities and $89.9 million in GSE securities. At December 31, ~~2017, a decrease of $2.3~~2018, trading investments were $5.3 billion ~~or 1.5%.~~in U.S. Treasury securities and $502.8 million in GSE securities.

Advances — Par balances decreased at ~~June 30, 2018~~March 31, 2019 to ~~$111.4~~$99.2 billion, compared to ~~$122.7~~$105.4 billion at December 31, ~~2017.~~2018. Short-term fixed-rate advances ~~decreased~~increased by ~~24.6%~~21.6% to ~~$18.0~~$18.2 billion at ~~June 30, 2018, down~~March 31, 2019, up from ~~$23.8~~$15.0 billion at December 31, ~~2017.~~2018. ARC advances, which are adjustable-rate borrowings, decreased by ~~19.2%~~9.2% to ~~$29.9~~$21.2 billion at ~~June 30, 2018,~~March 31, 2019, compared to ~~$37.1~~$23.3 billion at December 31, ~~2017.~~2018. Overnight advances decreased by 63.4% to $2.8 billion at March 31, 2019 compared to $7.7 billion at December 31, 2018.
Long-term investment debt securities — Long-term investment debt securities are designated as available-for-sale ~~(“AFS”)~~(AFS) or held-to-maturity ~~(“HTM”)~~(HTM). The heavy concentration of GSE and ~~Agency-issued (“GSE-issued”)~~Agency issued (GSE-issued) securities, and a declining balance of private-label MBS, ~~(less~~less than 1%), is our investment profile.

In the AFS portfolio, long-term investments ~~at June~~ ~~30, 2018 were~~of floating-rate GSE-issued mortgage-backed securities were carried on the balance sheet at fair values of ~~$480.0~~$402.3 million ~~compared to $528.6~~at March 31, 2019 and $422.2 million at December 31, ~~2017.~~2018. Long-term investments of fixed-rate GSE-issued mortgage-backed securities were carried on the balance sheet at fair values of $1.8 billion at March 31, 2019. As permitted under the new hedging guidance adopted effective January 1, 2019, we made a one-time transfer of $1.6 billion of fixed-rate MBS from HTM to AFS.

In the HTM portfolio, long-term investments at ~~June~~ ~~30, 2018~~March 31, 2019 were predominantly GSE-issued ~~fixed- and floating-rate~~ mortgage-backed securities and ~~a small portfolio of~~ housing finance agency bonds. Securities in the HTM portfolio are recorded at amortized ~~cost.~~cost, adjusted for any OTTI. Fixed- and floating-rate mortgage-backed securities ~~(“MBS”), including PLMBS,~~in the HTM portfolio, were ~~$16.9~~$14.5 billion at ~~June 30, 2018~~ March 31, 2019 and ~~$16.7~~$16.3 billion at December 31, ~~2017.~~2018. Investments in PLMBS were less than 1% of the HTM portfolio. Housing finance agency bonds, primarily New York and New Jersey, were carried at an amortized cost basis of $1.2 billion at ~~June 30, 2018~~March 31, 2019 and ~~$1.1 billion at~~ December 31, ~~2017.~~2018.

~~Trading securities (liquidity portfolio)~~ — The intent of the trading portfolio is to meet our liquidity objectives. At June 30, 2018, the trading portfolio investments were — $3.0 billion in U.S. Treasury notes, $773.8 million in GSE securities, and $3.7 million in corporate notes. At December 31, 2017, trading investments were $239.1 million in U.S. Treasury bills, $1.0 billion in U.S. Treasury notes and $356.9 million in GSE securities.
~~We will periodically evaluate our liquidity needs and may dispose these liquidity investments as deemed prudent based on liquidity and market conditions.~~ ~~The Finance Agency prohibits speculative trading practices but allows permitted securities to be deemed held for liquidity if invested in a trading portfolio.~~
Mortgage loans held-for-portfolio — Mortgage loans were investments in Mortgage Partnership Finance loans ~~(“MPF” or “MPF Program”)~~(MPF Program). Unpaid principal balance of MPF loans stood at ~~$2.8 billion at June 30, 2018, slightly lower than~~ $2.9 billion at March 31, 2019, an increase of $13.7 million from the balance at December 31, ~~2017.~~2018. Loans are primarily fixed-rate, single-family mortgages acquired through the MPF Program. Credit performance has been strong and delinquency low. Loan origination by members and acceptable pricing are key factors that drive acquisitions. Residential collateral values have remained stable in the New York and New Jersey sectors, the primary geographic concentration for our MPF portfolio, and historical loss experience remains very low.

~~Capital ratios~~ — Our capital position remains strong. At June 30, 2018, actual risk-based capital was $7.9 billion, compared to required risk-based capital of $876.3 million. To support $156.6 billion of total assets at June 30, 2018, the minimum required total capital was $6.3 billion or 4.0% of assets. Our actual regulatory risk-based capital was $7.9 billion, exceeding required total capital by $1.6 billion. These ratios have remained consistently above the required regulatory ratios through all periods in this report. For more information, see financial statements, Note 14. Capital Stock, Mandatorily Redeemable Capital Stock and Restricted Retained Earnings.
~~Liquidity and~~ ~~Debt~~ — Our liquidity position remains strong, and in compliance with all regulatory requirements, and we do not foresee any changes to that position. Our liquidity measures, Deposit liquidity and Operational liquidity, and other liquidity buffers remain in excess of required reserves. For more information about our liquidity measures, see section Liquidity, Cash Flows, Short-Term Borrowings and Short-Term Debt in this MD&A.
~~In addition to the trading portfolio,~~ liquid assets at June 30, 2018 included $156.5 million as demand cash balances at the Federal Reserve Bank of New York (“FRBNY”), $19.8 billion in short-term and overnight loans in the federal funds and the repo markets, and $480.0 million of high credit quality GSE-issued available-for-sale securities that are investment quality, and readily marketable.
During the periods in this report, we maintained continual access to funding and adapted our debt issuance to meet the liquidity needs of our members and our asset/liability risk management objectives.
Business Outlook

The following forward-looking statements are based upon the current beliefs and expectations of the FHLBNY’s management and are subject to risks and uncertainties, which could cause our actual results to differ materially from those set forth in such forward-looking statements.

~~Earnings~~ — Our earnings performance is the result of many factors, among them: the state of the economy; conditions in the capital markets; level and shape of the yield curve; ability of members to source deposits and make loans; and impact of regulations on members’ business. Changes to these and other factors could have significant effects, positive or negative, on the Bank’s financial results. Based on our assumptions for these and other factors, we currently project 2018 Net income to be higher than earned in 2017, benefiting primarily from better than expected funding environment and higher investments.
Advances — We expect ~~a stable~~our book of advance business ~~through 2018, although at levels a little lower than~~to decline somewhat compared to the balance at December 31, ~~2017.~~2018. The pace of balance sheet growth in the prior year was concentrated along short-term borrowing. ~~The~~Additionally, the borrowing activities of a few large members have been the predominant driver of increase or decreases in our book of advance business. WeIn our forecasts for 2019, short-term borrowings will continue to be a significant percentage of our book of advance business. However, we cannot predict if short-term advances will be rolled over, or if advances borrowed by our larger members will be rolled over at maturity or prepaid prior to maturity. At ~~June 30, 2018,~~March 31, 2019, three members’ advance borrowings ~~exceeded 10.0%~~totaled 50.3 % of total par advances ~~outstanding~~ — Citibank, N.A. ~~26.0% (35.1%~~24.0 % (19.0% at
December 31, ~~2017)~~2018), Metropolitan Life Insurance Company ~~12.8% (11.8%~~14.4% (13.5% at December 31, ~~2017)~~2018), and New York Community ~~Bank/New York Commercial~~ Bank 11.9% ~~(9.9%~~(12.4% at December 31, ~~2017)~~2018).
Performance of the FHLBank issued consolidated obligation debt (CO bonds and CO discount notes) — Market demand for FHLBank CO debt, especially demand from money market funds, has remained strong, with good market access for its entire breadth of CO debt funding programs. Generally, funding was guided by the FHLBanks’ needs for refunding, asset/liability management, investor preferences, the interest rate environment and market liquidity. Demand for short-duration (less than 2 years to maturity) CO floaters remains strong.
Floating-rate CO bonds have remained attractive to investors for a number of reasons. In a rising interest rate environment, periodic resets remove much of the interest rate risk for investors in contrast to fixed-rate bonds as the floaters reset to higher yields as prevailing rates go up. The CO floater receives favorable liquidity treatment under the SEC’s Rule 2(a)-7 for money market funds, which deem the security’s weighted average maturity to be the next rate reset date.
CO discount notes have also remained an attractive investment asset for investors who need high quality liquid securities with specific maturity dates. Strong money market fund participation demonstrated the robust support for CO discount notes within the money market fund industry, and the key driver still remains the impact of money market fund reforms implemented by the SEC in late 2016. The robust demand from the money market funds community for discount notes and short duration floaters has also kept CO discount note spreads to Treasuries tight and discount note spread volatility low, benefiting the FHLBNY from a funding perspective.
The SOFR market has developed rapidly and successful issuance of FHLBank SOFR-linked floaters has been an important development for the FHLBank debt, and we expect the trend to accelerate as we position our debt to meet bond investor appetite for LIBOR alternative benchmark debt. We also expect the FHLBank debt system to continue to provide liquidity in the SOFR debt market.
Selected Financial Data (Unaudited).
Statements of Condition

March 31,

December 31,

September 30,

June 30,

March 31,

(dollars in millions)

2019

2018

2018

2018

2018

Investments (a)

$
39,807

$
35,741

$
42,229

$
42,269

$
36,306

Advances

99,132

105,179

100,166

110,782

112,202

Mortgage loans held-for-portfolio, net of allowance for credit losses (b)

2,941

2,927

2,910

2,887

2,880

Total assets

142,575

144,381

145,857

156,560

151,882

Deposits and borrowings

1,356

1,063

936

1,191

1,310

Consolidated obligations, net

Bonds

80,150

84,154

85,910

101,392

85,656

Discount notes

53,036

50,640

50,821

45,470

56,510

Total consolidated obligations

133,186

134,794

136,731

146,862

142,166

Mandatorily redeemable capital stock

6

6

7

18

19

AHP liability

161

162

161

149

137

Capital

Capital stock

5,671

6,066

5,856

6,276

6,311

Retained earnings

Unrestricted

1,110

1,103

1,112

1,090

1,071

Restricted

618

591

567

535

505

Total retained earnings

1,728

1,694

1,679

1,625

1,576

Accumulated other comprehensive income (loss)

(24
)
(13
)
47

21

(4
)
Total capital

7,375

7,747

7,582

7,922

7,883

Equity to asset ratio (c)(j)

5.17
%
5.37
%
5.20
%
5.06
%
5.19
%

Three months ended

Statements of Condition

March 31,

December 31,

September 30,

June 30,

March 31,

Averages (See note below; dollars in millions)

2019

2018

2018

2018

2018

Investments (a)

$
41,583

$
42,264

$
45,246

$
43,591

$
42,360

Advances

97,127

99,409

107,180

107,740

117,764

Mortgage loans held-for-portfolio, net of allowance for credit losses

2,933

2,919

2,903

2,884

2,888

Total assets

142,387

145,215

155,923

154,723

163,508

Interest-bearing deposits and other borrowings

1,052

881

1,076

1,078

1,095

Consolidated obligations, net

Bonds

80,694

88,424

95,245

94,746

95,765

Discount notes

52,404

47,500

50,979

50,420

57,848

Total consolidated obligations

133,098

135,924

146,224

145,166

153,613

Mandatorily redeemable capital stock

6

6

12

18

19

AHP liability

159

160

152

141

132

Capital

Capital stock

5,589

5,821

6,161

6,136

6,552

Retained earnings

Unrestricted

1,088

1,094

1,082

1,068

1,059

Restricted

601

576

547

515

489

Total retained earnings

1,689

1,670

1,629

1,583

1,548

Accumulated other comprehensive income (loss)

(18
)
48

26

11

(21
)
Total capital

7,260

7,539

7,816

7,730

8,079

Note — Average balance calculation. For most components of the average balances, a daily weighted average balance is calculated for the period. When daily weighted average balance information is not available, a simple monthly average balance is calculated.
Operating Results and Other Data

(dollars in millions)

Three months ended

(except earnings and dividends per

March 31,

December 31,

September 30,

June 30,

March 31,

share, and headcount)

2019

2018

2018

2018

2018

Net income

$
135

$
122

$
157

$
155

$
126

Net interest income (d)

177

185

211

208

193

Dividends paid in cash (e)

101

107

103

105

102

AHP expense

15

13

18

17

14

Return on average equity (f)(g)(j)

7.53
%
6.46
%
7.94
%
8.05
%
6.34
%
Return on average assets (g)(j)

0.38
%
0.34
%
0.40
%
0.40
%
0.31
%
Other non-interest income (loss)

13

(5
)
—

—

(19
)
Operating expenses (h)

34

39

31

28

29

Finance Agency and Office of Finance expenses

4

4

4

4

4

Total other expenses (k)

40

44

38

34

35

Operating expenses ratio (g)(i)(j)

0.10
%
0.11
%
0.08
%
0.07
%
0.07
%
Earnings per share

$
2.41

$
2.12

$
2.51

$
2.53

$
1.93

Dividends per share

$
1.74

$
1.74

$
1.68

$
1.60

$
1.64

Headcount (Full/part time)

322

314

308

324

314

(a)
Investments include trading securities, available-for-sale securities, held-to-maturity securities, equity investments in grantor trusts owned by the FHLBNY, securities purchased under agreements to resell, federal funds, loans to other FHLBanks, and other interest-bearing deposits.
(b)
Allowances for credit losses were $0.8 million, $0.8 million, $0.8 million, $0.8 million and $0.7 million for the periods ended March 31, 2019, December 31, 2018, September 30, 2018, June 30, 2018 and March 31, 2018.
(c)
Equity to asset ratio is Capital stock plus Retained earnings and Accumulated other comprehensive income (loss) as a percentage of Total assets.
(d)
Net interest income is net interest income before the provision for credit losses on mortgage loans.
(e)
Excludes dividends accrued to non-members classified as interest expense under the accounting standards for certain financial instruments with characteristics of both liabilities and equity.
(f)
Return on average equity is Net income as a percentage of average Capital Stock plus average retained earnings and average Accumulated other comprehensive income (loss).
(g)
Annualized.
(h)
Operating expenses include Compensation and Benefits.
(i)
Operating expenses as a percentage of Total average assets.
(j)
All percentage calculations are performed using amounts in thousands, and may not agree if calculations are performed using amounts in millions.
(k)
Includes Operating expenses, Compensation and benefits, Finance Agency and Office of Finance expenses and Other expenses.
Financial Condition
Table 1.1:Statements of Condition — Period-Over-Period Comparison

Net change in

Net change in

(Dollars in thousands)

March 31, 2019

December 31, 2018

dollar amount

percentage

Assets

Cash and due from banks

$
82,894

$
85,406

$
(2,512
)
(2.94
)%
Securities purchased under agreements to resell

5,590,000

4,095,000

1,495,000

36.51

Federal funds sold

9,137,000

7,640,000

1,497,000

19.59

Trading securities

7,210,635

5,810,512

1,400,123

24.10

Equity Investments

53,982

48,179

5,803

12.04

Available-for-sale securities

2,185,968

422,216

1,763,752

417.74

Held-to-maturity securities

15,628,971

17,474,826

(1,845,855
)
(10.56
)
Advances

99,132,395

105,178,833

(6,046,438
)
(5.75
)
Mortgage loans held-for-portfolio

2,941,086

2,927,230

13,856

0.47

Loans to other FHLBanks

—

250,000
(a)
(250,000
)
(100.00
)
Accrued interest receivable

327,548

275,256

52,292

19.00

Premises, software, and equipment

52,640

51,572

1,068

2.07

Operating lease right-of-use assets

70,450

—

70,450

NM

Derivative assets

154,840

113,762

41,078

36.11

Other assets

6,469

8,602

(2,133
)
(24.80
)

Total assets

$
142,574,878

$
144,381,394

$
(1,806,516
)
(1.25
)%

Liabilities

Deposits

Interest-bearing demand

$
1,302,893

$
1,002,587

$
300,306

29.95
%
Non-interest-bearing demand

18,085

20,050

(1,965
)
(9.80
)
Term

35,500

40,000

(4,500
)
(11.25
)

Total deposits

1,356,478

1,062,637

293,841

27.65

Consolidated obligations

Bonds

80,149,864

84,153,776

(4,003,912
)
(4.76
)
Discount notes

53,035,777

50,640,238

2,395,539

4.73

Total consolidated obligations

133,185,641

134,794,014

(1,608,373
)
(1.19
)

Mandatorily redeemable capital stock

5,755

5,845

(90
)
(1.54
)

Accrued interest payable

213,581

223,570

(9,989
)
(4.47
)
Affordable Housing Program

161,129

161,718

(589
)
(0.36
)
Derivative liabilities

12,898

31,147

(18,249
)
(58.59
)
Other liabilities

181,764

355,841

(174,077
)
(48.92
)
Operating lease liabilities

83,094

—

83,094

NM

Total liabilities

135,200,340

136,634,772

(1,434,432
)
(1.05
)

Capital

7,374,538

7,746,622

(372,084
)
(4.80
)

Total liabilities and capital

$
142,574,878

$
144,381,394

$
(1,806,516
)
(1.25
)%
(a)Loans to other FHLBanks was inadvertently omitted in the same table presented in the MD&A in the Form 10-K filed on March 21, 2019.
NM — Not meaningful.
Balance Sheet overview March 31, 2019 and December 31, 2018
Total assets decreased to $142.6 billion at March 31, 2019 from $144.4 billion at December 31, 2018, a decrease of $1.8 billion, or 1.3%.
Cash at banks was $82.9 million at March 31, 2019, compared to $85.4 million at December 31, 2018.
Money market investments at March 31, 2019 were $9.1 billion in federal funds sold and $5.6 billion in overnight resale agreements. At December 31, 2018, money market investments were $7.6 billion in federal funds sold and $4.1 billion in overnight resale agreements. The increase was at the quarter-end date, primarily as a result of deployment of excess cash based on market opportunities.
Advances — Par balances decreased at March 31, 2019 to $99.2 billion, compared to $105.4 billion at December 31, 2018. Short-term fixed-rate advances increased by 21.6% to $18.2 billion at March 31, 2019, up from $15.0 billion at December 31, 2018. ARC advances, which are adjustable-rate borrowings, decreased by 9.2% to $21.2 billion at March 31, 2019, compared to $23.3 billion at December 31, 2018.
Long-term investment debt securities — Long-term investment debt securities are designated as available-for-sale (AFS) or held-to-maturity (HTM). The heavy concentration of GSE and Agency issued (GSE-issued) securities, and a declining balance of private-label MBS, less than 1%, is our investment profile.
In the AFS portfolio, long-term investments for floating-rate GSE-issued mortgage-backed securities were carried on the balance sheet at fair values of $402.3 million at March 31, 2019 and $422.2 million at December 31, 2018. Long-term investments for fixed-rate GSE-issued mortgage-backed securities were carried on the balance sheet at fair values of $1.8 billion at March 31, 2019 and $0 at December 31, 2018. As permitted under the new hedging guidance adopted effective January 1, 2019, we made a one-time transfer of $1.6 billion of fixed-rate MBS from HTM to AFS. The transfer is expected to enhance balance sheet management.
In the HTM portfolio, long-term investments at March 31, 2019 were predominantly GSE-issued fixed- and floating-rate mortgage-backed securities and housing finance agency bonds. Securities in the HTM portfolio are recorded at amortized cost, adjusted for any OTTI. Fixed- and floating-rate mortgage-backed securities (MBS), including private-label mortgage-backed securities (PLMBS), in the HTM portfolio were $14.5 billion at March 31, 2019 and $16.3 billion at December 31, 2018. Investments in PLMBS were less than 1% of the HTM portfolio. We acquired $504.6 million of fixed-rate GSE-issued MBS and there were no acquisitions of floating-rate GSE-issued MBS in the first quarter of 2019.
In the HTM portfolio, housing finance agency bonds, primarily New York and New Jersey, were carried at an amortized cost basis of $1.2 billion at March 31, 2019 and December 31, 2018. There were no new acquisitions in the first quarter of 2019 and paydowns were $0.4 million. In 2018, there were no new acquisitions in the first quarter and paydowns were $0.3 million.
Trading securities (liquidity portfolio) — The objective of the trading portfolio is to meet short-term contingency liquidity needs. During the periods in this report, we have invested in highly liquid U.S. Treasury notes, GSE-issued securities and Ambac corporate notes. Trading investments are carried at fair value, with changes recorded through earnings. At March 31, 2019, trading investments were $7.1 billion in U.S. Treasury notes, $89.9 million in GSE securities, and $3.4 million in Ambac corporate notes. We acquired $2.8 billion par amounts of U.S. Treasury notes in the first quarter of 2019. At December 31, 2018, trading investments were $5.3 billion in U.S. Treasury notes, $502.8 million in GSE securities and $3.3 million in Ambac corporate notes.
We will periodically evaluate our liquidity needs and may add to or dispose these liquidity investments as deemed prudent based on liquidity and market conditions. The Finance Agency prohibits speculative trading practices but allows permitted securities to be deemed held for liquidity if invested in a trading portfolio.
Equity Investments — We own grantor trusts that invest in highly-liquid registered mutual funds, which were reclassified as of January 1, 2018 from AFS to Equity Investments. These investments were carried on the balance sheet at fair values of $54.0 million at March 31, 2019 and $48.2 million at December 31, 2018.
Mortgage loans held-for-portfolio — Mortgage loans were investments in Mortgage Partnership Finance loans (MPF or MPF Program). Unpaid principal balance of MPF loans stood at $2.9 billion at March 31, 2019, an increase of $13.7 million from the balance at December 31, 2018. Loans are primarily fixed-rate, single-family mortgages acquired through the MPF Program. Paydowns in the three months of 2019 were $54.3 million, compared to $65.2 million in the prior year same period. Acquisitions in the three months of 2019 were $69.5 million, compared to $49.2 million in the prior year same period. Credit performance has been strong and delinquency low. Loan origination by members and acceptable pricing are key factors that drive acquisitions. Residential collateral values have remained stable in the New York and New Jersey sectors, the primary geographic concentration for our MPF portfolio, and historical loss experience remains very low.
Capital ratios — Our capital position remains strong. At March 31, 2019, actual risk-based capital was $7.4 billion, compared to required risk-based capital of $812.5 million. To support $142.6 billion of total assets at March 31, 2019, the minimum required total capital was $5.7 billion or 4.0% of assets. Our actual regulatory risk-based capital was $7.4 billion, exceeding required total capital by $1.7 billion. These ratios have remained consistently above the required regulatory ratios through all periods in this report. For more information, see financial statements, Note 14. Capital Stock, Mandatorily Redeemable Capital Stock and Restricted Retained Earnings.
Leverage — At March 31, 2019, balance sheet leverage (based on U.S. GAAP) was 19.3 times shareholders’ equity. Balance sheet leverage has generally remained steady over the last several years, although from time to time we have maintained excess liquidity in highly liquid investments, or cash balances at the Federal Reserve Bank of New York (FRBNY) to meet unexpected member demand for funds. Increases or decreases in investments have a direct impact on leverage, but generally growth in or shrinkage of advances does not significantly impact balance sheet leverage under existing capital stock management practices. Members are required to purchase activity-based capital stock to support their borrowings from us, and when activity-based capital stock is in excess of the amount that is required to support advance borrowings, we redeem the excess capital stock immediately. Therefore, stockholders’ capital increases and decreases with members’ advance borrowings, and the capital to asset ratio remains relatively unchanged.
Liquidity — Our liquidity position remains strong, and in compliance with all regulatory requirements, and we do not foresee any changes to that position. In addition to the liquidity trading portfolio discussed previously, liquid assets at March 31, 2019 included $80.5 million as demand cash balances at the Federal Reserve Bank of New York (FRBNY), $14.7 billion in short-term and overnight loans in the federal funds and the repo markets, and $2.2 billion of high credit quality GSE-issued available-for-sale securities that are investment quality, and readily marketable.
Among other liquidity measures, the Finance Agency requires FHLBanks to maintain sufficient liquidity through short-term investments in an amount at least equal to our anticipated cash outflows under two different scenarios. The first scenario assumes that we cannot access capital markets for 15 days, and during that period members do not renew their maturing, or prepay or exercise their option to call advances that are callable. The second scenario assumes that we cannot access the capital markets for five days, and during that period, members renew maturing advances. We remain in compliance with regulations under both scenarios.

We ~~expect continued~~also hold contingency liquidity in an amount sufficient to meet our liquidity needs if we are unable to access the Consolidated obligation debt market for at least 5 days. The actual contingency liquidity under the 5-day scenario in the current year quarter was $29.5 billion, well in excess of the required $3.2 billion.
We also have other liquidity measures in place, deposit liquidity and operational liquidity, and those liquidity buffers remain in excess of required reserves. For more information about our liquidity measures, see section Liquidity, Short-Term Borrowings and Short-Term Debt in this MD&A.
Advances
Our primary business is making collateralized loans to members, referred to as advances. Generally, the growth or decline in advances is reflective of demand by members for both short-term liquidity and term funding. This demand is driven by economic factors such as availability of alternative funding sources that are more attractive, or by the interest rate environment and the outlook for the economy. Members may choose to prepay advances (which may generate prepayment penalty fees) based on their expectations of interest rate changes and demand for ~~variable-rate~~liquidity.
Advance volume is also influenced by merger activity, where members are either acquired by non-members or acquired by members of another FHLBank. When our members are acquired by members of another FHLBank or by non-members, these former members no longer qualify for membership and we may not offer renewals or additional advances to the former members. If maturing advances are not replaced, it will have an impact on business volume.
Interest rate hedging and basis adjustments — A significant percentage of fixed-rate, longer-term advances and all putable advances were designated under an ASC 815 fair value accounting hedge. Also, certain advances were hedged by interest rate swaps in economic hedges. From time to time, we have also elected the fair value option (FVO) on an instrument by instrument basis for certain advances.
Carrying value of advances outstanding at March 31, 2019 was $99.1 billion, compared to $105.2 billion at December 31, 2018. Carrying values included unrealized net fair value hedging basis adjustments recorded on hedges eligible under ASC 815. The cumulative hedging basis adjustment were losses of $30.0 million and $255.0 million at March 31, 2019 and December 31, 2018. No advances elected under the FVO were outstanding at March 31, 2019 and December 31, 2018. For more information about basis adjustments, see Table 2.4 Advances by Maturity and Yield Type in this MD&A.
Table 2.1:Advance Trends
Advance Trends
Member demand for advance products
Par amount of advances outstanding was $99.2 billion at March 31, 2019, compared to $105.4 billion at December 31, 2018. The decrease in amounts outstanding at March 31, 2019, relative to December 31, 2018 has been largely due to maturities and prepayments.
Advances — Product Types
The following table summarizes par values of advances by product type (dollars in thousands):
Table 2.2:Advances by Product Type
For more information about advance product types, see our most recent Form 10-K filed on March 21, 2019.

March 31, 2019

December 31, 2018

Percentage

Percentage

Amounts

of Total

Amounts

of Total

Adjustable Rate Credit - ARCs

$
21,206,467

21.39
%
$
23,346,467

22.14
%
Fixed Rate Advances

49,282,324

49.70

51,612,602

48.96

Short-Term Advances

18,234,275

18.39

14,995,172

14.22

Mortgage Matched Advances

299,556

0.30

320,027

0.30

Overnight & Line of Credit (OLOC) Advances

2,823,256

2.84

7,723,492

7.33

All other categories

7,316,485

7.38

7,436,097

7.05

Total par value

99,162,363

100.00
%
105,433,857

100.00
%

Hedge valuation basis adjustments

(29,968
)

(255,024
)

Total

$
99,132,395

$
105,178,833

Advances — Interest Rate Terms
The following table summarizes interest-rate payment terms for advances (dollars in thousands):
Table 2.3:Advances by Interest-Rate Payment Terms

March 31, 2019

December 31, 2018

Percentage

Percentage

Amount

of Total

Amount

of Total

Fixed-rate (a)

$
77,925,839

78.59
%
$
82,034,884

77.81
%
Variable-rate (b)

21,233,396

21.41

23,391,691

22.19

Variable-rate capped or floored (c)

3,000

—

3,000

—

Overdrawn demand deposit accounts

128

—

4,282

—

Total par value

99,162,363

100.00
%
105,433,857

100.00
%

Hedge valuation basis adjustments

(29,968
)

(255,024
)

Total

$
99,132,395

$
105,178,833

(a)Fixed-rate borrowings remained the largest category of advances borrowed by members, and includes long-term and short-term fixed-rate advances. ~~We expect limited demand for large, intermediate and long-term~~Long-term advances because many members have adequate liquidity. Member banks are also likely to develop liquidity strategies to address regulatory liquidity frameworks, and those strategies may lead certain member banks to prepay advances ahead of their maturities. Becauseremain a small segment of the ~~complex interactions among a number~~portfolio at March 31, 2019, with only 7.2% of ~~factors driving large banking institutions to address regulatory liquidity guidance, we are unable to predict future trends particularly with respect to borrowings by our larger members. When~~advances in the remaining maturity bucket of greater than 5 years (6.7% at December 31, 2018). For more information, see financial statements Note 9. Advances.
(b)Variable-rate advances are ~~prepaid,~~ARC advances, which are typically indexed to LIBOR. The FHLBNY’s larger members are generally borrowers of variable-rate advances.
(c)Category represents ARCs with options that “cap” increase or “floor” decrease in the LIBOR index at predetermined strikes (We have also purchased cap/floor options that mirror the terms of the options embedded in the advances sold to members, offsetting our exposure on the advance).
~~we receive prepayment penalty fees to make us economically whole,~~The following table summarizes maturity and ~~the FHLBNY’s earnings may not be adversely impacted~~yield characteristics of advances (dollars in ~~the periods when prepayments occur, but may impact revenue streams in future periods.~~thousands):

~~Demand~~Table 2.4:Advances by Maturity and Yield Type

March 31, 2019

December 31, 2018

Percentage

Percentage

Amount

of Total

Amount

of Total

Fixed-rate

Due in one year or less

$
52,235,093

52.68
%
$
52,416,990

49.72
%
Due after one year

25,690,746

25.91

29,617,894

28.09

Total Fixed-rate

77,925,839

78.59

82,034,884

77.81

Variable-rate

Due in one year or less

17,675,057

17.82

15,892,506

15.07

Due after one year

3,561,467

3.59

7,506,467

7.12

Total Variable-rate

21,236,524

21.41

23,398,973

22.19

Total par value

99,162,363

100.00
%
105,433,857

100.00
%

Hedge valuation basis adjustments (a)

(29,968
)

(255,024
)

Total

$
99,132,395

$
105,178,833

Fair value basis and valuation adjustments — Key determinants of valuation adjustments are factors such as advance run offs and new transactions designated in hedging relationships.
(a)Hedging valuation basis adjustments — The reported carrying values of hedged advances are adjusted for ~~FHLBank debt~~changes in their fair values (fair value basis adjustments or fair value) that are attributable to changes in the benchmark risk being hedged. LIBOR is our primary benchmark. In the current year quarter we adopted FF/OIS as another benchmark. The chosen benchmark becomes the discounting basis under ASC 815 for computing changes in fair values for hedged advances. Table 2.5 Hedged Advances by Type discloses notional amounts of advances hedged. The application of ASC 815 accounting methodology resulted in the recognition of net unrealized hedge valuation basis losses of $30.0 million and $255.0 million at March 31, 2019 and December 31, 2018. The forward LIBOR yield curve declined steeply at March 31, 2019. As hedge valuation basis of fixed-rate advances move inversely with the rise and fall of the forward interest rates, the sharp decline of the swap curve largely reversed previously reported cumulative basis losses. Generally, hedge valuation basis gains and losses are unrealized and will reverse to zero if the advance is held to maturity or is put or called on the early option exercise dates.
Hedge volume — We hedge putable advances and certain “bullet” fixed-rate advances under the hedge accounting provisions when they qualify under those standards and as economic hedges when the hedge accounting provisions are operationally difficult to establish or a high degree of hedge effectiveness cannot be asserted.
The following table summarizes hedged advances by type of option feature (in thousands):
Table 2.5:               ~~Relative~~Hedged Advances by Type
Par Amount

March 31, 2019

December 31, 2018

Qualifying Hedges

Fixed-rate bullets (a)

$
37,788,050

$
41,122,372

Fixed-rate putable (b)

4,926,750

4,734,750

Fixed-rate callable

16,575

16,575

Fixed-rate with embedded cap

30,000

30,000

Total Qualifying Hedges

$
42,761,375

$
45,903,697

Aggregate par amount of advances hedged (c)

$
42,764,375

$
45,919,697

Fair value basis (Qualifying hedging adjustments)

$
(29,968
)
$
(255,024
)
(a)Generally, non-callable fixed-rate medium- and longer term advances are hedged to mitigate the risk in fixed-rate lending.
(b)Putable advances are hedged by cancellable swaps, and the paired long put and short call options mitigate the put/call option risks; additionally, fixed-rate is synthetically converted to LIBOR, ~~favorable funding conditions, specifically~~mitigating the risk in fixed-rate lending for ~~discount notes~~the FHLBNY. In a rising rate environment, swap dealers would likely exercise their call option, and ~~short-maturity variable-rate bonds have continued through~~ the ~~first six months~~FHLBNY will exercise its put option with the member and both instruments terminate at par. Members may borrow new advances at the then prevailing rate.
(c)Represents par values of ~~2018.~~ advances in ASC 815 qualifying hedge relationships. Typically, the longer term fixed-rate advances and advances with optionality are hedged.
The ~~LIBOR index is a widely applied benchmark~~following table summarizes par amounts of advances that were still putable or callable, with one or more pre-determined option exercise dates remaining (in thousands):
Table 2.6:Putable and Callable Advances

Advances

Par Amount

March 31, 2019

December 31, 2018

Putable/callable (a)

$
4,943,325

$
4,751,325

No-longer putable/callable

$
645,000

$
640,000

(a)Putable advances were typically long-term advances with one or more put options exercisable by the FHLBNY. The increase primarily represents one member’s borrowing.
Investments
We ~~expect similar favorable~~maintain long-term investment portfolios of debt securities, which are principally mortgage-backed securities issued by GSEs and U.S. Agency (GSE-issued). Investments include a small portfolio of MBS issued by private enterprises, and bonds issued by state or local housing finance agencies. We also maintain short-term investments for our liquidity resources, for funding daily stock repurchases and redemptions, for ensuring the availability of funds to meet the credit needs of our members, and to provide additional earnings. We also invest in a liquidity trading portfolio, the purpose of which is to augment our liquidity needs. Investments in the trading portfolio were U.S Treasury securities and GSE-issued securities, all carried at their fair values. The Finance Agency prohibits speculative investments, but allows the designation of a trading portfolio for liquidity purposes. We may dispose such investments if liquidity needs are met and market conditions deem the sale as advantageous.
We are subject to ~~exist through~~credit risk on our investments, generally transacted with GSEs and large financial institutions that are considered to be investment quality. The Finance Agency defines investment quality as a security with adequate financial backing so that full and timely payment of principal and interest on such security is expected and there is minimal risk that the ~~remainder~~timely payment of ~~2018, although we may experience some volatility~~principal and interest would not occur because of adverse changes in ~~funding~~economic and financial conditions ~~especially leading up~~during the projected life of the security. For more information about investment policies, restrictions and practices, see the most recent Form 10-K filed on March 21, 2019.
The following table summarizes changes in investments by categories: Money market investments, Trading securities, Equity investments in Grantor trusts, Available-for-sale securities and Held-to-maturity securities (Carrying values, dollars in thousands):
Table 3.1:Investments by Categories

March 31,

December 31,

Dollar

Percentage

2019

2018

Variance

Variance

State and local housing finance agency obligations (a)

$
1,168,000

$
1,168,350

$
(350
)
(0.03
)%
Trading securities (b)

7,210,635

5,810,512

1,400,123

24.10

Mortgage-backed securities

Available-for-sale securities, at fair value (c)

2,185,968

422,216

1,763,752

417.74

Held-to-maturity securities, at carrying value (c)

14,460,971

16,306,476

(1,845,505
)
(11.32
)
Total securities

25,025,574

23,707,554

1,318,020

5.56

Equity investments in Grantor trusts (d)

53,982

48,179

5,803

12.04

Securities purchased under agreements to resell

5,590,000

4,095,000

1,495,000

36.51

Federal funds sold

9,137,000

7,640,000

1,497,000

19.59

Total Investments

$
39,806,556

$
35,490,733

$
4,315,823

12.16
%
(a)State and local housing finance agency bonds were designated as HTM and were carried at amortized cost. There were no new acquisitions in the first quarter of 2019 and paydowns were $0.4 million.
(b)Trading securities were U.S. Treasury securities, GSE securities and corporate notes. Trading portfolio is for liquidity and not for speculative purposes. We acquired par amounts of $2.8 billion of U.S. Treasury notes in the first quarter of 2019.
(c)Mortgage-backed securities classified as AFS includes $1.6 billion of Fixed-rate CMBS transferred at January 1, 2019 from the HTM category; $150.0 million was acquired and designated as AFS in the first three months of 2019. AFS securities outstanding are all GSE and U.S. Agency issued MBS and carried at fair value. Mortgage-backed securities classified as HTM — $504.6 million of GSE-issued MBS were acquired in the first quarter of 2019 and designated as HTM. MBS in the HTM portfolio are predominantly GSE-issued, and less than 1% are PLMBS (private-label MBS).
(d)Funds in the grantor trusts were designated as equity investments at January 1, 2018. In the first quarter of 2019, investments made were $1.9 million and payouts to retirees were $0.5 million. Trust fund balances represent investments in registered mutual funds and ~~around Federal Open Market Committee meeting dates.~~other fixed-income and equity funds. Funds are highly liquid and readily redeemable at their NAVs, which are the fair values of the investments. The funds are owned by the FHLBNY, and the intent is to utilize investments to fund current and potential future payment obligations of the non-qualified Benefit Equalization Pension plans. For more information about the pension plans, see financial statements, Note 16. Employee Retirement Plans in the Bank’s most recent Form 10-K filed on March 21, 2019.
Mortgage-Backed Securities — By Issuer

The following table summarizes our investment debt securities issuer concentration (dollars in thousands):
Table 3.2:Investment Debt Securities Issuer Concentration

March 31, 2019

December 31, 2018

Carrying value as a

Carrying value as a

Carrying (a)

Percentage

Carrying (a)

Percentage

Long Term Investment (c)

Value

Fair Value

of Capital

Value

Fair Value

of Capital

MBS

Fannie Mae

$
4,475,893

$
4,476,620

60.69
%
$
4,692,639

$
4,658,771

60.58
%
Freddie Mac

12,022,956

12,113,987

163.03

11,870,521

11,867,028

153.23

Ginnie Mae

21,860

22,027

0.30

22,898

23,079

0.30

All Others - PLMBS

126,230

156,530

1.71

142,634

174,749

1.84

Non-MBS (b)

1,168,000

1,145,523

15.84

1,168,350

1,144,345

15.08

Total Investment Debt Securities

$
17,814,939

$
17,914,687

241.57
%
$
17,897,042

$
17,867,972

231.03
%

Categorized as:

Available-for-Sale Securities

$
2,185,968

$
2,185,968

$
422,216

$
422,216

Held-to-Maturity Securities

$
15,628,971

$
15,728,719

$
17,474,826

$
17,445,756

(a)Carrying values include fair values for AFS securities.
(b)Non-MBS — Includes Housing finance agency bonds.
(c)Excludes Trading portfolio.
External rating information of the held-to-maturity portfolio was as follows (carrying values in thousands):
Table 3.3:External Rating of the Held-to-Maturity Portfolio

March 31, 2019

AAA-rated (a)

AA-rated (b)

A-rated

BBB-rated

Below
Investment
Grade

Total

Mortgage-backed securities

$
892

$
14,336,058

$
81,306

$
8,948

$
33,767

$
14,460,971

State and local housing finance agency obligations

25,000

1,121,710

5,575

15,715

—

1,168,000

Total Long-term securities

$
25,892

$
15,457,768

$
86,881

$
24,663

$
33,767

$
15,628,971

December 31, 2018

AAA-rated (a)

AA-rated (b)

A-rated

BBB-rated

Below
Investment
Grade

Total

Mortgage-backed securities

$
2,543

$
16,165,160

$
95,760

$
9,117

$
33,896

$
16,306,476

State and local housing finance agency obligations

25,000

1,122,060

5,575

15,715

—

1,168,350

Total Long-term securities

$
27,543

$
17,287,220

$
101,335

$
24,832

$
33,896

$
17,474,826

See footnotes (a) and (b) under Table 3.4.
External rating information of the AFS portfolio was as follows (the carrying values of AFS investments are at fair values; in thousands):
Table 3.4:External Rating of the Available-for-Sale Portfolio

March 31, 2019

December 31, 2018

AA-rated (b)

Unrated

Total

AA-rated (b)

Unrated

Total

Available-for-sale securities

Mortgage-backed securities

$
2,185,968

$
—

$
2,185,968

$
422,216

$
—

$
422,216

Footnotes to Table 3.3 and Table 3.4.
(a)Certain PLMBS and housing finance bonds have been assigned AAA, based on the ratings by S&P and Moody’s.
(b)We have assigned GSE-issued MBS a rating of AA+ based on the credit rating assigned to long-term senior debt issued by Fannie Mae, Freddie Mac and U.S. Agency. The debt ratings are based on S&P’s rating of AA+ for the GSE Senior long-term debt and AA+ for the debt issued by the U.S. government; Moody’s debt rating is Aaa for the GSE Senior long-term debt and the U.S. government.
External credit rating information has been provided in Table 3.3 and Table 3.4 as the information is used as another data point to supplement our credit quality indicators, and they serve as a useful indicator when analyzing the degree of credit risk to which we are exposed. Significant changes in credit ratings classifications of our investment debt securities portfolio could indicate increased credit risk for us that could be accompanied by a reduction in the fair values of our investment debt securities portfolio.
Fair Value Levels of Investment Debt Securities, and Unrecognized and Unrealized Holding Losses
To compute fair values, multiple vendor prices were received for substantially all of our MBS holdings, and substantially all of those prices fell within specified thresholds. The relative proximity of the prices received from the multiple vendors supported our conclusion that the final computed prices were reasonable estimates of fair values. GSE securities priced under such a valuation technique using the market approach are typically classified within Level 2 of the valuation hierarchy. For a comparison of carrying values and fair values of investment debt securities, see financial statements, Note 5. Trading securities, Note 7. Available-for-Sale Securities and Note 8. Held-to-Maturity Securities. For more information about the corroboration and other analytical procedures performed, see Note 18. Fair Values of Financial Instruments.
Weighted average rates — Mortgage-backed securities (HTM and AFS) — The following table summarizes weighted average rates and amortized cost by contractual maturities (dollars in thousands):
Table 3.5:Mortgage-Backed Securities Weighted Average Rates by Contractual Maturities

March 31, 2019

December 31, 2018

Amortized

Weighted

Amortized

Weighted

Cost

Average Rate

Cost

Average Rate

Mortgage-backed securities

Due in one year or less

$
318,755

3.17
%
$
369,989

2.03
%
Due after one year through five years

4,403,458

3.15

4,602,651

3.16

Due after five years through ten years

8,477,477

3.18

8,201,200

3.07

Due after ten years

3,421,311

3.12

3,561,879

3.11

Total mortgage-backed securities

$
16,621,001

3.16
%
$
16,735,719

3.08
%
A significant portion of ~~FHLBank~~the MBS portfolio consists of floating-rate securities and the weighted average rates will change in parallel with changes in the LIBOR rate.
Fair Value Hedges of Fixed-rate Available-for-sale Mortgage-backed Securities
The adoption of ASU 2017-12 provided a new approach, called the last-of-layer method for hedging prepayable assets in a closed portfolio of prepayable fixed-rate instruments. The approach incorporates new measurement elections by using benchmark rate components of contractual coupon cash flows in a partial-term hedge of a prepayable asset. The following table summarizes key data in last-of-layer fair value hedge under the ASU (in thousands):
Table 3.6:Fair Value Hedges of Fixed-Rate Prepayable CMBS

Fair Value Hedges of
Fixed-Rate Prepayable
CMBS

March 31, 2019

Current face value of hedged CMBS

$
150,000

Last-of-layer face value of hedged CMBS

$
127,500

Cumulative basis adjustment (Loss)

$
(1,893
)
Interest rate swap contracts (par)

$
127,500

OTTI — Base Case and Adverse Case Scenario
We evaluated our PLMBS under a base case (or best estimate) scenario by performing a cash flow analysis for each security under assumptions that forecasted increased credit default rates or loss severities, or both. The stress test scenario and associated results do not represent our current expectations and therefore should not be construed as a prediction of future results, market conditions or the actual performance of these securities. Cash flow analysis in the first quarter of 2019 identified no OTTI on previously impaired private-label MBS or in the same quarter in 2018.
Short-term investments
We typically maintain substantial investments in high quality short- and intermediate-term financial instruments such as secured overnight transactions collateralized by securities, and unsecured overnight and term federal funds sold to highly-rated financial institutions who also satisfy other credit quality factors. These investments provide the liquidity necessary to meet members’ credit needs. Short-term investments also provide a flexible means of implementing the asset/liability management decisions to adjust liquidity. We also invest in a liquidity trading portfolio with the objective of expanding our choice of investing for liquidity.
Monitoring — We actively monitor our credit exposures and the credit quality of our counterparties, including an assessment of each counterparty’s financial performance, capital adequacy, and sovereign support as well as related market signals, and actively limit or suspend existing exposures, as appropriate. In addition, we are required to manage our unsecured portfolio subject to regulatory limits, prescribed by the Finance Agency, our regulator. The Finance Agency regulations include limits on the amount of unsecured credit that may be extended to a counterparty or a group of affiliated counterparties, based upon a percentage of eligible regulatory capital and the counterparty’s overall credit rating. Under these regulations, the level of eligible regulatory capital is determined as the lesser of our regulatory capital or the eligible amount of regulatory capital of the counterparty determined in accordance with Finance Agency regulations.
The Finance Agency regulations also permit us to extend additional unsecured credit, which could be comprised of overnight extensions and sales of federal funds subject to continuing contract. Our total unsecured overnight exposure to a single counterparty may not exceed twice the regulatory limit for term exposures. We are prohibited by Finance Agency regulation from investing in financial instruments issued by non-U.S. entities other than those issued by U.S. branches and agency offices of foreign commercial banks, and we did not own any financial instruments issued by foreign sovereign governments, including those countries that are members of the European Union in any periods in this report. For more information about our policies and practices, see the most recent Form 10-K filed on March 21, 2019.
Securities purchased under agreements to resell — As part of our banking activities with counterparties, we have entered into secured financing transactions that mature overnight, and can be extended only at our discretion. These transactions involve the lending of cash against securities, which are accepted as collateral. The balance outstanding under such agreements was $5.6 billion at March 31, 2019 and $4.1 billion at December 31, 2018. For more information, see financial statements, Note 4. Federal Funds Sold and Securities Purchased under Agreements to Resell.
Federal funds sold — Federal funds sold was $9.1 billion at March 31, 2019 and $7.6 billion at December 31, 2018, representing unsecured lending to major banks and financial institutions. We are a major lender in this market, particularly in the overnight market. The amount of unsecured credit risk that may be extended to individual counterparties is commensurate with the counterparty’s credit quality as assessed by our management, and the assessment would include reviews of credit ratings of counterparty’s debt securities or deposits as reported by NRSROs. Overnight and short-term federal funds allow us to warehouse funds and provide balance sheet liquidity to meet unexpected member borrowing demands.
The following table summarizes par value, amortized cost and the carrying value (fair value) of the trading portfolio (in thousands):
Table 3.7:Trading Securities

Trading Securities

March 31, 2019

December 31, 2018

Par value

$
7,243,133

$
5,692,263

Amortized cost

$
7,190,942

$
5,807,889

Carrying/Fair value

$
7,210,635

$
5,810,512

The Finance Agency prohibits speculative investments but allows permitted securities to be deemed held for liquidity if invested in a trading portfolio. We may dispose such investments if liquidity needs are met and market conditions deem the sale as advantageous. For more information about fair values of securities in the trading portfolio, see Note 5. Trading Securities in the Notes to the Financial Statements.
The following table summarizes economic hedges of fixed-rate trading securities held for liquidity (in thousands):
Table 3.8:Economic Hedges of Fixed-rate Liquidity Trading Securities

Economic Hedges of Fixed-Rate Trading Securities

March 31, 2019

December 31, 2018

Par amount of securities hedged

$
7,240,000

$
5,839,130

Par amount of interest rate swaps

$
7,240,000

$
5,839,130

Mortgage Loans Held-for-Portfolio
Mortgage loans are carried in the Statements of Condition at amortized cost, less allowance for credit losses. The outstanding unpaid principal balance was $2.9 billion at March 31, 2019, an increase of $13.7 million (net of acquisitions and paydowns) from the balance at December 31, 2018. Mortgage loans were investments in Mortgage Partnership Finance loans (MPF or MPF Program).
Mortgage Partnership Finance Program —- We invest in mortgage loans through the MPF Program, which is a secondary mortgage market structure under which eligible mortgage loans are purchased or funded from or through members who are Participating Financial Institutions (PFI). We may also acquire MPF loans through participations with other FHLBanks, although our current acquisition strategy is to limit acquisitions through our PFIs. MPF loans are conforming conventional and Government i.e., insured or guaranteed by the Federal Housing Administration (FHA), the Department of Veterans Affairs (VA) or the Rural Housing Service of the Department of Agriculture (RHS), fixed-rate mortgage loans secured primarily by single-family residential properties with maturities ranging from five to 30 years or participations in such mortgage loans. The FHLBank of Chicago (MPF Provider) developed the MPF Program in order to help fulfill the housing mission and to provide an additional source of liquidity to FHLBank members that choose to sell mortgage loans into the secondary market rather than holding them in their own portfolios. Finance Agency regulations define the acquisition of Acquired Member Assets (AMA) as a core mission activity of the FHLBanks. In order for MPF loans to meet the AMA requirements, the purchase and funding are structured so that the credit risk associated with MPF loans is shared with PFIs. For more information about the MPF program, see Mortgage Loans Held-for-Portfolio in the MD&A in the Bank’s most recent Form 10-K filed on March 21, 2019.
We provide this product to members as another alternative for them to sell their mortgage production. Loan origination by members and acceptable pricing are key ~~driver~~factors that drive growth.
Mortgage loans — Conventional and Insured Loans — The following table classifies mortgage loans between conventional loans and loans insured by FHA/VA (in thousands):
Table 4.1:MPF by Conventional and Insured Loans

March 31, 2019

December 31, 2018

Federal Housing Administration and Veteran Administration insured loans

$
223,921

$
227,268

Conventional loans

2,673,205

2,656,149

Total par MPF loans

$
2,897,126

$
2,883,417

Mortgage Loans — Loss Sharing and the Credit Enhancement Waterfall — For all loans acquired prior to June 1, 2017, the credit enhancement was computed as the amount that would bring an uninsured loan to “Double A” credit risk. For loans acquired after June 1, 2017, the credit enhancement is computed to a “Single A” credit risk. In the credit enhancement waterfall, we are responsible for the first loss layer. The second loss layer is the credit obligation of ~~profitability,~~the PFI. We assume all residual risk. Also, see financial statements, Note 10. Mortgage Loans Held-for-Portfolio.
Loan and ~~we expect~~PFI Concentration — Loan concentration was in New York State, which is to be ~~able to issue CO bonds~~expected since the largest PFIs are located in New York. The tables below summarize concentrations — Geographic and ~~discount notes~~PFI:
Table 4.2:Geographic Concentration of MPF Loans

March 31, 2019

December 31, 2018

Number of
loans %

Amounts
outstanding %

Number of
loans %

Amounts
outstanding %

New York State

68.8
%
60.6
%
68.8
%
60.4
%
Table 4.3:Top Five Participating Financial Institutions — Concentration (par value, dollars in thousands)

March 31, 2019

Mortgage

Percent of Total

Loans

Mortgage Loans

Bethpage Federal Credit Union

$
270,908

9.35
%
New York Community Bank

253,807

8.76

Investors Bank

244,701

8.45

Sterling National Bank

234,398

8.09

Teachers Federal Credit Union

184,354

6.36

All Others

1,708,958

58.99

Total

$
2,897,126

100.00
%

December 31, 2018

Mortgage

Percent of Total

Loans

Mortgage Loans

Bethpage Federal Credit Union

$
260,593

9.04
%
New York Community Bank

256,992

8.91

Investors Bank

242,164

8.40

Sterling National Bank

238,840

8.28

Teachers Federal Credit Union

183,052

6.35

All Others

1,701,776

59.02

Total

$
2,883,417

100.00
%
Accrued interest receivable
Other assets
Accrued interest receivable was $327.5 million at ~~reasonable spreads to yields earned~~March 31, 2019 and $275.3 million at December 31, 2018, and represented interest receivable primarily from advances and investments. Changes in balances would represent the timing of coupons receivable from advances and investments at the balance sheet dates.
Other assets, including prepayments and miscellaneous receivables, were $6.5 million and $8.6 million at March 31, 2019 and December 31, 2018.
Debt Financing Activity and Consolidated Obligations
Our primary source of funds continues to be the issuance of Consolidated obligation bonds and discount notes.
Consolidated obligation bonds — The carrying value of Consolidated obligation bonds (CO bonds or Consolidated obligation bonds) was $80.1 billion (par, $79.7 billion) at March 31, 2019, compared to $84.2 billion (par, $83.8 billion) at December 31, 2018. The carrying value of Consolidated obligation discount notes outstanding was $53.0 billion at March 31, 2019 and ~~floating-rate notes~~$50.6 billion at December 31, 2018.
Interest rate hedging — Significant amounts of CO bonds have been designated under an ASC 815 fair value accounting hedge. Also, certain CO bonds were hedged by interest rate swaps in ~~demand by investors,~~economic hedges. From time-to-time, we have also hedged the anticipatory issuance of fixed-rate CO bonds in a cash flow hedge under ASC 815. Certain CO bonds were elected under the FVO. As a result of hedging elections under ASC 815 and ~~pricing~~the elections under the FVO, carrying values of CO bonds included valuation basis adjustments. For more information about valuation basis adjustments on CO bonds, see Table 5.1.
No discount notes had been hedged under an ASC 815 fair value accounting hedge at March 31, 2019 and ~~yields~~December 31, 2018, although from time to time we have ~~been attractive, specifically relative to LIBOR. Our business plans~~designated the instruments in economic hedges during the periods in this report. Certain discount notes were hedged under an ASC 815 cash flow accounting hedge, and ~~funding strategies~~ are ~~predicated~~discussed in financial statements, Note 17. Derivatives and Hedging Activities. Certain discount notes were elected under the FVO. Carrying values included valuation basis adjustments on discount notes elected under the ~~expectation that investor demand will continue.~~FVO. For more information about valuation basis adjustments on discount notes, see Table 5.7 Discount Notes Outstanding.

~~However, our~~Debt Ratings — A FHLBank’s ability to ~~obtain funds through the issuance of Consolidated obligations depends in part on prevailing conditions in~~access the capital markets which are beyond our control. 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. The pricing of our longer-term debt remains at levels that are still unfavorable. To the extent we receive sub-optimal funding, our member institutions in turn may experience higher costs for advance borrowings. To the extent the FHLBanks may not be able to issue ~~long-term~~ debt, ~~at economical spreads to the 3-month LIBOR, borrowing choices may also be less economical for~~as well as our ~~members, potentially affecting their demand for advances.~~
cost of funds, is dependent on credit ratings from Nationally Recognized Statistical Rating ~~— The U.S. Government’s credit is rated by Moody’s as Aaa with the outlook as stable, and AA+ and stable by Standard & Poor’s (“S&P”).~~Organizations. Consolidated obligations of FHLBanks are rated Aaa/P-1 by Moody’s, and AA+/A-1+ by S& P. Any rating actions on the US Government would likely result in all individual FHLBanks’ long-term deposit ratings and the FHLBank System long-term bond rating moving in lock step with any US sovereign rating action.
Joint and Several Liability — Although we are primarily liable for our portion of Consolidated obligations (i.e. those issued on our behalf), we are also jointly and severally liable with the other FHLBanks for the payment of principal and interest on the Consolidated obligations of all the FHLBanks. For more information, see financial statements, Note 19. Commitments and Contingencies.
~~Selected Financial Data (Unaudited).~~Consolidated obligation bonds

Statements of Condition

June 30,

March 31,

December 31,

September 30,

June 30,

(dollars in millions)

2018

2018

2017

2017

2017

Investments (a)

$
42,269

$
36,306

$
33,069

$
31,796

$
33,647

Advances

110,782

112,202

122,448

113,081

117,934

Mortgage loans held-for-portfolio, net of allowance for credit losses (b)

2,887

2,880

2,897

2,881

2,848

Total assets

156,560

151,882

158,918

148,349

155,529

Deposits and borrowings

1,191

1,310

1,196

1,441

1,928

Consolidated obligations, net

Bonds

101,392

85,656

99,288

100,893

87,559

Discount notes

45,470

56,510

49,614

37,681

57,331

Total consolidated obligations

146,862

142,166

148,902

138,574

144,890

Mandatorily redeemable capital stock

18

19

20

20

21

AHP liability

149

137

132

126

121

Capital

Capital stock

6,276

6,311

6,750

6,318

6,757

Retained earnings

Unrestricted

1,090

1,071

1,067

1,048

1,026

Restricted

535

505

479

450

423

Total retained earnings

1,625

1,576

1,546

1,498

1,449

Accumulated other comprehensive income (loss)

21

(4
)
(55
)
(78
)
(86
)
Total capital

7,922

7,883

8,241

7,738

8,120

Equity to asset ratio (c)(j)

5.06
%
5.19
%
5.19
%
5.22
%
5.22
%
The following table summarizes types of Consolidated obligation bonds (CO Bonds) issued and outstanding (dollars in thousands):

Three months ended

Six months ended

Statements of Condition

June 30,

March 31,

December 31,

September 30,

June 30,

June 30,

June 30,

Averages (See note below; dollars in millions)

2018

2018

2017

2017

2017

2018

2017

Investments (a)

$
43,591

$
42,360

$
37,661

$
39,268

$
35,051

$
42,979

$
35,179

Advances

107,740

117,764

111,127

113,185

105,880

112,724

106,170

Mortgage loans held-for-portfolio, net of allowance for credit losses

2,884

2,888

2,894

2,867

2,819

2,886

2,794

Total assets

154,723

163,508

152,167

155,951

144,693

159,091

145,057

Interest-bearing deposits and other borrowings

1,078

1,095

1,634

2,437

1,542

1,087

1,497

Consolidated obligations, net

Bonds

94,746

95,765

100,680

98,178

88,006

95,253

87,174

Discount notes

50,420

57,848

41,376

46,664

46,526

54,113

47,802

Total consolidated obligations

145,166

153,613

142,056

144,842

134,532

149,366

134,976

Mandatorily redeemable capital stock

18

19

20

20

22

19

23

AHP liability

141

132

128

122

119

137

120

Capital

Capital stock

6,136

6,552

6,235

6,394

6,209

6,343

6,201

Retained earnings

Unrestricted

1,068

1,059

1,041

1,020

993

1,064

1,007

Restricted

515

489

461

433

407

502

400

Total retained earnings

1,583

1,548

1,502

1,453

1,400

1,566

1,407

Accumulated other comprehensive income (loss)

11

(21
)
(65
)
(95
)
(92
)
(5
)
(92
)
Total capital

7,730

8,079

7,672

7,752

7,517

7,904

7,516

Table 5.1:CO Bonds by Type

March 31, 2019

December 31, 2018

Amount

Percentage
of Total

Amount

Percentage
of Total

Fixed-rate, non-callable

$
22,777,100

28.59
%
$
22,745,980

27.16
%
Fixed-rate, callable

5,705,000

7.16

4,966,000

5.93

Step Up, callable

275,000

0.35

880,000

1.05

Single-index floating rate

50,903,000

63.90

55,166,000

65.86

Total par value

79,660,100

100.00
%
83,757,980

100.00
%

Bond premiums

46,545

42,647

Bond discounts

(33,459
)

(36,290
)

Hedge valuation basis adjustments (a)

304,540

238,150

Hedge basis adjustments on de-designated hedges (b)

130,074

131,497

FVO (c) - valuation adjustments and accrued interest

42,064

19,792

Total Consolidated obligation-bonds

$
80,149,864

$
84,153,776

Fair value basis and valuation adjustments — Key determinants are factors such as run offs and new transactions designated under an ASC 815 hedge or elected under the FVO, the forward swap curve, the volatility of the swap rates, the remaining duration to maturity, and for bonds elected under the FVO, the changes in the spread between the swap rate and the Consolidated obligation debt yields, and changes in interest payable, which is a component of the entire fair value of FVO bonds.
(a)Hedging valuation basis adjustments — The reported carrying values of hedged CO bonds are adjusted for changes in their fair values (fair value basis adjustments or fair value) that are attributable to changes in the benchmark risk being hedged. LIBOR is our primary benchmark. In the current year quarter we adopted FF/OIS as another benchmark. The chosen benchmark becomes the discounting basis under ASC 815 for computing changes in fair values for hedged CO bonds. Table 5.2 CO Bonds Hedged under Qualifying Fair Value Hedges discloses notional amounts of CO bonds hedged. The application of ASC 815 accounting methodology resulted in the recognition of net unrealized hedge valuation basis losses of $304.5 million and $238.2 million at March 31, 2019 and December 31, 2018. The forward LIBOR yield curve declined steeply at March 31, 2019. As hedge valuation basis of fixed-rate CO liabilities move with the rise and fall of the forward LIBOR curve, the sharp decline of the swap curve caused valuation losses to increase. Generally, hedge valuation basis gains and losses are unrealized and will reverse to zero if the CO bonds are held to maturity or are called on the early option exercise dates.
(b)Valuation basis of terminated hedges — Represents unamortized cumulative valuation basis of certain CO bonds that were no longer in fair value hedge relationships. When hedging relationships for the debt were de-designated, the net unrealized cumulative losses at the hedge termination dates were no longer adjusted for changes in the benchmark rate. Instead, the valuation basis are being amortized on a level yield method, and the net amortization is recorded as a reduction of Interest expense. If the CO bonds are held to maturity, the basis losses will be fully amortized as interest expense.
(c)FVO valuation adjustments — Valuation basis adjustments and accrued interest payable are recorded to recognize changes in the entire fair value (the full fair value) of CO bonds elected under the FVO. Table 5.3 CO Bonds Elected under the Fair Value Option (FVO) discloses par amounts of CO bonds elected under the FVO. Valuation adjustments at March 31, 2019 and December 31, 2018 were largely the accumulation of semi-annual accrued unpaid interest included in the full fair value of the debt.

~~Note — Average balance calculation.~~The discounting basis for computing the change in fair value basis of bonds elected under the FVO is the observable (FHLBank) CO bond yield curve. All FVO bonds were short- and medium-term, and fluctuations in their “clean prices” (without accumulated unpaid interest) valuations were not significant as the bonds re-priced relatively frequently to market indices, keeping valuations near to par, although inter-period valuation volatility is likely.
We have elected the FVO on an instrument-by-instrument basis. For ~~most components~~bonds elected under the FVO, it was not necessary to estimate changes attributable to instrument-specific credit risk, as we consider the credit worthiness of the ~~average balances,~~FHLBanks to be secure and credit related adjustments unnecessary. More information about debt elected under the FVO is provided in financial statements, Note 18. Fair Values of Financial Instruments (See Fair Value Option Disclosures).
Hedge volume — Tables 5.2 - 5.4 provide information with respect to par amounts of CO bonds based on accounting designation: (1) under hedge qualifying rules, (2) under the FVO, and (3) as an economic hedge (in thousands):
Table 5.2:CO Bonds Hedged under Qualifying Fair Value Hedges
Qualifying hedges — Generally, fixed-rate (bullet and callable) medium and long-term Consolidated obligation bonds are hedged in a ~~daily weighted average~~Fair value ASC 815 qualifying hedge.

Consolidated Obligation Bonds

Par Amount

March 31, 2019

December 31, 2018

Qualifying Hedges

Fixed-rate bullet bonds

$
6,669,475

$
8,300,080

Fixed-rate callable bonds

2,823,000

3,373,000

$
9,492,475

$
11,673,080

Table 5.3:CO Bonds Elected under the Fair Value Option (FVO)
CO bonds elected under the FVO — If at inception of a hedge we do not believe that a hedge would be highly effective in offsetting fair value changes between the derivative and the debt (hedged item), we may designate the debt under the FVO if operationally practical. We would record fair value changes of the FVO debt through earnings, and to the extent the debt is economically hedged, record changes of the fair values of the interest rate swap through earnings. The recorded balance ~~is calculated~~sheet value of debt under the FVO would include the fair value basis adjustments, so that the debt’s balance sheet carrying values would be its full fair value.

Consolidated Obligation Bonds

Par Amount

March 31, 2019

December 31, 2018

Bonds designated under FVO

$
7,325,000

$
5,140,000

CO bonds elected under the FVO were generally in economic hedges by the execution of interest rate swaps that converted the fixed-rate bonds to a variable-rate instrument. We elected to account for the ~~period. When daily weighted average balance~~bonds under the FVO when we were generally unable to assert with confidence that the short- and intermediate-term bonds, or callable bonds, with short lock-out periods to the exercise of call options, would remain effective hedges as required under hedge accounting rules. Designation of CO bonds under the FVO is an asset-liability management decision. For more information, ~~is not available, a simple monthly average balance is calculated.~~see financial statements, Fair Value Option Disclosures in Note 18. Fair Values of Financial Instruments.
Operating Results and Other Data

(dollars in millions)

Three months ended

Six months ended

(except earnings and dividends per

June 30,

March 31,

December 31

September 30,

June 30,

June 30,

June 30,

share, and headcount)

2018

2018

2017

2017

2017

2018

2017

Net income

$
155

$
126

$
145

$
134

$
131

$
281

$
201

Net interest income (d)

208

193

191

181

176

401

350

Dividends paid in cash (e)

105

102

97

84

77

207

164

AHP expense

17

14

16

15

14

31

22

Return on average equity (f)(g)(j)

8.05
%
6.34
%
7.51
%
6.84
%
6.99
%
7.18
%
5.38
%
Return on average assets (g)(j)

0.40
%
0.31
%
0.38
%
0.34
%
0.36
%
0.36
%
0.28
%
Other non-interest income (loss)

—

(19
)
6

1

1

(19
)
(65
)
Operating expenses (h)(k)

28

29

31

28

28

57

53

Finance Agency and Office of Finance expenses

4

4

4

4

3

8

7

Other expenses (k)

2

2

1

1

1

4

2

Total other expenses

34

35

36

33

32

69

62

Operating expenses ratio (g)(i)(j)

0.07
%
0.07
%
0.08
%
0.07
%
0.08
%
0.07
%
0.07
%(k)
Earnings per share

$
2.53

$
1.93

$
2.33

$
2.09

$
2.11

$
4.46

$
3.23

Dividends per share

$
1.60

$
1.64

$
1.51

$
1.37

$
1.23

$
3.24

$
2.65

Headcount (Full/part time)

324

314

308

308

308

324

308

Table 5.4:Economic Hedges of CO Bonds (Excludes CO Bonds Elected under the FVO and Designated in Economic Hedges)
Economic hedges of CO bonds — We also issue variable-rate debt with coupons that are not indexed to the 3-month LIBOR, our preferred funding base. During the periods in this report, we issued variable-rate bonds indexed to the 1-month LIBOR. To mitigate the economic risk of a change in the variable-rate basis between the 3-month LIBOR and the 1-month LIBOR, we have executed basis rate swaps that have synthetically created 3-month LIBOR debt. The operational cost of designating the debt instruments in an ASC 815 qualifying hedge outweighed the accounting benefits of marking the debt and the swap to fair values. We opted instead to designate the hedging basis swaps as standalone derivatives, and recorded changes in their fair values through earnings. The carrying value of the debt would not include fair value basis since the debt is recorded at amortized cost.

Consolidated Obligation Bonds

Par Amount

March 31, 2019

December 31, 2018

Bonds designated as economically hedged

Floating-rate bonds (a)

$
33,345,000

$
29,735,000

Fixed-rate bonds (b)

—

15,000

$
33,345,000

$
29,750,000

(a)         ~~Investments include trading securities, available-for-sale securities, held-to-maturity securities, equity investments~~Floating-rate debt — Floating-rate bonds were typically indexed to 1-month LIBOR. With the execution of basis hedges, certain floating-rate bonds were swapped in ~~grantor trusts owned by~~economic hedges to 3-month LIBOR, mitigating the ~~FHLBNY, securities purchased under agreements to resell, federal funds, loans to other FHLBanks,~~basis risk between the 1-month LIBOR and ~~other interest-bearing deposits.~~the 3-month LIBOR, which is our primary benchmark rate.
(b)         Fixed-rate debt — Bonds that were previously hedged and have fallen out of effectiveness.
~~Allowances~~CO Bonds — Maturity or Next Call Date (a)
Callable bonds contain an exercise date or a series of exercise dates that may result in a shorter redemption period. The following table summarizes par amounts of Consolidated bonds outstanding by years to maturity or next call date (dollars in thousands):
Table 5.5:CO Bonds — Maturity or Next Call Date

March 31, 2019

December 31, 2018

Amount

Percentage
of Total

Amount

Percentage
of Total

Year of maturity or next call date

Due or callable in one year or less

$
66,364,140

83.31
%
$
69,699,475

83.22
%
Due or callable after one year through two years

4,033,935

5.06

5,700,545

6.81

Due or callable after two years through three years

2,050,955

2.58

1,661,325

1.98

Due or callable after three years through four years

1,330,335

1.67

1,383,750

1.65

Due or callable after four years through five years

1,238,035

1.55

955,235

1.14

Thereafter

4,642,700

5.83

4,357,650

5.20

Total par value

$
79,660,100

100.00
%
$
83,757,980

100.00
%
(a)Contrasting Consolidated obligation bonds by contractual maturity dates (see financial statements, Note 12. Consolidated Obligations — Redemption Terms of Consolidated Obligation Bonds) with potential call dates (as reported in table above) illustrates the impact of hedging on the effective duration of the bond. With a callable bond, we have purchased the option to terminate debt at agreed upon dates from investors. The call options are exercisable as either a one-time option or quarterly. Our current practice is to exercise our option to call a bond when the swap counterparty exercises its option to call the cancellable swap hedging the callable bond. Thus, issuance of a callable bond with an associated callable swap significantly alters the contractual maturity characteristics of the original bond and introduces the possibility of an exercise call date that is significantly shorter than the contractual maturity.
The following table summarizes callable bonds versus non-callable CO bonds outstanding (par amounts, in thousands):
Table 5.6:Outstanding Callable CO Bonds versus Non-callable CO bonds

March 31, 2019

December 31, 2018

Callable

$
5,980,000

$
5,846,000

Non-Callable

$
73,680,100

$
77,911,980

CO Discount Notes
The following table summarizes discount notes issued and outstanding (dollars in thousands):
Table 5.7:Discount Notes Outstanding

March 31, 2019

December 31, 2018

Par value

$
53,173,357

$
50,805,481

Amortized cost

$
53,028,359

$
50,631,066

FVO (a) - valuation adjustments and remaining accretion

7,418

9,172

Total discount notes

$
53,035,777

$
50,640,238

Weighted average interest rate

2.41
%
2.34
%
(a)Valuation basis adjustment losses are recorded to recognize changes in the entire or full fair values of CO discount notes elected under the FVO. The full fair values include unaccreted discounts. The discounting basis for ~~credit~~computing changes in fair values of discount notes elected under the FVO is the observable FHLBank discount note yield curve. Valuation losses were ~~$0.8 million, $0.7 million, $1.0 million, $0.9 million~~largely liability balances representing unaccreted discounts. Other than unaccreted discount, changes in the valuation adjustments represent fair value changes due to changes in the term structure of interest rates, the shape of the yield curve at the measurement dates, and ~~$1.0 million~~the growth or decline in volume of hedged discount notes. When held to maturity, unaccreted discounts will be fully accreted to par, and unrealized fair value gains and losses will sum to zero over the term to maturity.
The following table summarizes discount notes under the FVO (in thousands):
Table 5.8:Discount Notes under the Fair Value Option (FVO)

Consolidated Obligation Discount Notes

Par Amount

March 31, 2019

December 31, 2018

Discount notes designated under FVO (a)

$
987,355

$
3,170,915

(a)When we have elected discount notes under the FVO, it has not been necessary to estimate changes attributable to instrument-specific credit risk, as we consider the credit worthiness of the FHLBanks to be secured and credit related adjustments unnecessary.
CO Discount notes elected under the FVO were generally in economic hedges with the execution of interest rate swaps that converted the fixed-rate notes to a variable-rate instrument. We elected to account for the discount notes under the FVO when we were generally unable to assert with confidence that the discount notes would remain effective hedges as required under hedge accounting rules. See financial statements, Fair Value Option Disclosures in Note 18. Fair Values of Financial Instruments.
The following table summarizes Cash flow hedges of discount notes (in thousands):
Table 5.9:Cash Flow Hedges of Discount Notes

Consolidated Obligation Discount Notes

Principal Amount

March 31, 2019

December 31, 2018

Discount notes hedged under qualifying hedge (a)

$
2,664,000

$
2,664,000

(a)Amounts represent discounts notes issued in cash flow “rollover” hedge strategies that hedged the variability of 91-day discount notes issued in sequence. The original maturities of the interest rate swaps typically ranged from 10-15 years. In this strategy, the discount note expense, which resets every 91 days, is synthetically converted to fixed cash flows over the hedge periods, ~~ended June 30, 2018,~~thereby achieving hedge objectives. For more information, see financial statements, Cash Flow Hedges in Note 17. Derivatives and Hedging Activities.
Accrued interest payable
Accrued interest payable — Amounts outstanding were $213.6 million at March 31, ~~2018,~~2019 and $223.6 million at December 31, ~~2017, September 30, 2017~~2018. Accrued interest payable was comprised primarily of interest due and ~~June 30, 2017.~~unpaid on CO bonds, which are generally payable on a semi-annual basis. Fluctuations in unpaid interest balances on bonds are due to the timing of semi-annual coupon accruals and payments at the balance sheet dates.
Other Liabilities
Other liabilities — Amounts outstanding were $181.8 million at March 31, 2019 and $355.8 million at December 31, 2018. Other liabilities comprised of unfunded pension liabilities, Federal Reserve pass-through reserves held on behalf of members, and miscellaneous payables.
Stockholders’ Capital
The following table summarizes the components of Stockholders’ capital (in thousands):
Table 6.1:Stockholders’ Capital

March 31, 2019

December 31, 2018

Capital Stock (a)

$
5,671,075

$
6,065,799

Unrestricted retained earnings (b)

1,109,437

1,102,801

Restricted retained earnings (c)

618,248

591,281

Accumulated Other Comprehensive Income (Loss)

(24,222
)
(13,259
)
Total Capital

$
7,374,538

$
7,746,622

(a)Stockholders’ Capital — Capital stock decreased in line with the decrease in advances borrowed. When an advance matures or is prepaid, the excess capital stock is repurchased by the FHLBNY. When an advance is borrowed or a member joins the FHLBNY’s membership, the member is required to purchase capital stock. For more information about activity and membership stock, see Note 14. Capital Stock, Mandatorily Redeemable Capital Stock and Restricted Retained Earnings in the FHLBNY’s most recent Form 10-K filed on March 21, 2019.
(b)Unrestricted retained earnings — Net income is added to this balance. Dividends are paid out of this balance. Funds are transferred to Restricted retained earnings balances that are determined in line with the approved provisions of the conduct of restricted retained earnings account.
(c)          ~~Equity~~Restricted retained earnings — Restricted retained earnings balance at March 31, 2019 has grown to ~~asset ratio is Capital stock plus Retained~~$618.2 million from the time the provisions were implemented in the third quarter of 2011 when the FHLBanks, including the FHLBNY agreed to set up a restricted retained earnings ~~and~~ account. The FHLBNY will allocate at least 20% of its net income to the FHLBNY’s Restricted retained earnings account until the balance of the account equals at least 1% of FHLBNY’s average balance of outstanding Consolidated Obligations for the previous quarter.
The following table summarizes the components of AOCI (in thousands):
Table 6.2:Accumulated ~~other comprehensive income (loss)~~Other Comprehensive Income (Loss) (AOCI)

March 31, 2019

December 31, 2018

Accumulated other comprehensive income (loss)

Non-credit portion of OTTI on held-to-maturity securities, net of accretion (a)

$
(10,204
)
$
(11,061
)
Net unrealized gains (losses) on available-for-sale securities (b)

36,142

4,034

Net unrealized gains (losses) on hedging activities (c)

(27,825
)
16,759

Employee supplemental retirement plans (d)

(22,335
)
(22,991
)
Total Accumulated other comprehensive income (loss)

$
(24,222
)
$
(13,259
)
(a)OTTI — Non-credit OTTI losses in AOCI have declined at March 31, 2019, primarily due to accretion recorded as a ~~percentage~~reduction in AOCI (and a corresponding increase in the balance sheet carrying values of ~~Total assets.~~the OTTI securities).
(b)Fair values of available-for-sale securities — balance represents net unrealized fair value basis gains of MBS securities. Effective January 1, 2019, we transferred $1.6 billion fixed-rate CMBS to the AFS category from HTM. Increase in unrealized gains represents increase in the portfolio due to the transfer and increase in market pricing of the fixed-rate AFS securities.
(c)Hedging activity balances in AOCI were primarily cash flow hedge valuation gains (losses) and balances from a fair value hedge of mortgage-backed securities in a closed AFS portfolio. See Table 6.3: AOCI Rollforward due to ASC 815 Hedging Programs.
(d)         Employee supplemental plans — Balances represent actuarially determined supplemental pension and postretirement health benefit liabilities that were not recognized through earnings. Amounts are amortized as an expense through Compensation and benefits over an actuarially determined period. For more information, see financial statements, Note 16. Employee Retirement Plans in the FHLBNY’s most recent Form 10-K filed on March 21, 2019.
~~Net~~Table 6.3:AOCI Rollforward due to ASC 815 Hedging Programs.
The following table presents amounts recognized in and reclassified out of AOCI due to cash flow and fair value hedges. Increases/(decreases) are in thousands:

Three months ended March 31,

2019

2018

Cash Flow Hedges

Fair Value Hedges

Cash Flow Hedges

Rollover Hedge
Program

Anticipatory
Hedge Program

Last-of-layer AFS
Hedge

Rollover Hedge
Program

Anticipatory
Hedge Program

Beginning balance

$
17,412

$
(653
)
$
—

$
(23,342
)
$
3,465

Changes in fair values (a)

(40,910
)
1,864

(1,893
)
55,129

(8
)
Amount reclassified

—

23

—

—

35

Fair Value - closed contract

—

(3,668
)
—

—

(383
)
Ending balance

$
(23,498
)
$
(2,434
)
$
(1,893
)
$
31,787

$
3,109

Notional amount of swaps outstanding

$
2,664,000

$
145,000

$
127,500

$
2,414,000

$
65,000

(a)Represents fair value changes of open swap contracts in cash flow hedges in the three months ended March 31, 2019 and March 31, 2018. For more information see, Note 17 Derivatives and Hedging Activities.
Dividends — By Finance Agency regulation, dividends may be paid out of current earnings or if certain conditions are met, may be paid out of previously retained earnings. We may be restricted from paying dividends if we do not comply with any of the Finance Agency’s minimum capital requirements or if payment would cause us to fail to meet any of the minimum capital requirements, including our Retained earnings target as established by the Board of Directors of the FHLBNY. In addition, we may not pay dividends if any principal or interest ~~income is net interest income before the provision~~due on any Consolidated obligations has not been paid in full, or if we fail to satisfy certain liquidity requirements under applicable Finance Agency regulations. None of these restrictions applied for ~~credit losses on mortgage loans.~~any period presented.
The following table summarizes dividends paid and payout ratios:
Table 6.4:Dividends Paid and Payout Ratios

Three months ended

March 31, 2019

March 31, 2018

Cash dividends paid per share

$
1.74

$
1.64

Dividends paid (a) (c)

$
101,235

$
102,154

Pay-out ratio (b)

75.08
%
80.93
%
(a)In thousands.
~~(e)~~(b)         ~~Excludes dividends accrued to non-members classified as interest expense under~~Dividend paid during the ~~accounting standards~~period divided by net income for ~~certain financial instruments with characteristics of both liabilities and equity.~~the period.
~~(f)~~(c)          Does not include dividend paid to non-member; for accounting purposes, such dividends are recorded as interest expense.
~~Return on average equity~~Derivatives Counterparty Credit Ratings
For information, and an analysis of our exposure due to non-performance of swap counterparties, see Table “Offsetting of Derivative Assets and Derivative Liabilities — Net Presentation” in Note 17. Derivatives and Hedging Activities to financial statements. For information about the methodologies adopted for the fair value measurement of derivatives, see financial statements, Note 18. Fair Values of Financial Instruments.
The following tables summarize notional amounts and fair values for the FHLBNY’s derivative exposures as represented by derivatives in fair value gain positions (in thousands):
Table 7.1:Derivatives Counterparty Credit Ratings

March 31, 2019

Credit Rating

Notional
Amount

Net Derivatives
Fair Value
Before
Collateral

Cash Collateral
Pledged To
(From)
Counterparties (a)

Balance
Sheet Net
Credit
Exposure

Non-Cash
Collateral Pledged
To (From)
Counterparties (b)

Net Credit
Exposure to
Counterparties

Non-member counterparties

Asset positions with credit exposure

Uncleared derivatives

Single A asset (c)

$
2,785,000

$
135,536

$
(17,500
)
$
118,036

$
(104,136
)
$
13,900

Cleared derivatives assets (d)

89,517,528

24,158

6,442

30,600

220,347

250,947

92,302,528

159,694

(11,058
)
148,636

116,211

264,847

Liability positions with credit exposure

Uncleared derivatives

Double A liability (c)

105,000

(119
)
590

471

—

471

Single A liability (c)

1,177,263

(10,998
)
12,480

1,482

—

1,482

Triple B Liability (c)

3,923,183

(59,880
)
62,750

2,870

—

2,870

5,205,446

(70,997
)
75,820

4,823

—

4,823

Total derivative positions with non-member counterparties to which the Bank had credit exposure

97,507,974

88,697

64,762

153,459

116,211

269,670

Member institutions

Derivative positions with member counterparties to which the Bank had credit exposure

338,000

1,301

—

1,301

(1,301
)
—

Delivery Commitments

Derivative position with delivery commitments

20,062

80

—

80

(80
)
—

Total derivative position with members

358,062

1,381

—

1,381

(1,381
)
—

Total

$
97,866,036

$
90,078

$
64,762

$
154,840

$
114,830

$
269,670

Derivative positions without credit exposure

7,810,731

Total notional

$
105,676,767

December 31, 2018

Credit Rating

Notional
Amount

Net Derivatives
Fair Value
Before
Collateral

Cash Collateral
Pledged To
(From)
Counterparties (a)

Balance
Sheet Net
Credit
Exposure

Non-Cash
Collateral Pledged
To (From)
Counterparties (b)

Net Credit
Exposure to
Counterparties

Non-member counterparties

Asset positions with credit exposure

Uncleared derivatives

Single A asset (c)

$
3,125,000

$
155,264

$
(44,970
)
$
110,294

$
(102,262
)
$
8,032

Cleared derivatives assets (d)

20,448,476

1,353

—

1,353

—

1,353

23,573,476

156,617

(44,970
)
111,647

(102,262
)
9,385

Liability positions with credit exposure

Uncleared derivatives

Single A liability (c)

3,414,264

(7,469
)
9,164

1,695

—

1,695

Cleared derivatives liability (d)

70,236,929

—

—

—

239,813

239,813

73,651,193

(7,469
)
9,164

1,695

239,813

241,508

Total derivative positions with non-member counterparties to which the Bank had credit exposure

97,224,669

149,148

(35,806
)
113,342

137,551

250,893

Member institutions

Derivative positions with member counterparties to which the Bank had credit exposure

28,000

363

—

363

(363
)
—

Delivery Commitments

Derivative position with delivery commitments

12,682

57

—

57

(57
)
—

Total derivative position with members

40,682

420

—

420

(420
)
—

Total

$
97,265,351

$
149,568

$
(35,806
)
$
113,762

$
137,131

$
250,893

Derivative positions without credit exposure

8,831,152

Total notional

$
106,096,503

(a)When collateral is ~~Net income~~posted to counterparties in excess of fair value liabilities that are due to counterparties, the excess collateral is classified as a ~~percentage~~component of ~~average Capital Stock plus average retained earnings~~derivative assets, as the excess represents a receivable and ~~average Accumulated other comprehensive income (loss).~~an exposure for the FHLBNY.
~~(g)~~(b)         ~~Annualized.~~Non-cash collateral securities. Non-cash collateral was not deducted from net derivative assets on the balance sheet as control over the securities was not transferred.
~~(h)~~(c)          ~~Operating expenses include Compensation and Benefits.~~NRSRO Ratings.
~~(i)~~(d)         ~~Operating expenses~~On cleared derivatives, we are required to pledge initial margin (collateral) to Derivative Clearing Organizations (DCOs) in cash or securities. At March 31, 2019, we had pledged $220.3 million in marketable securities and $6.4 million in cash to fulfill our obligation to pledge initial margin as collateral. At December 31, 2018, we had pledged $239.8 million in marketable securities to fulfill our obligation to pledge initial margin as collateral.
Liquidity, Short-Term Borrowings and Short-Term Debt
Our primary source of liquidity is the issuance of Consolidated obligation bonds and discount notes. To refinance maturing Consolidated obligations, we rely on the willingness of our investors to purchase new issuances. We have access to the discount note market, and the efficiency of issuing discount notes is an important source of liquidity, since discount notes can be issued any time and in a ~~percentage~~variety of ~~Total~~amounts and maturities. Member deposits and capital stock purchased by members are another source of funds. Short-term unsecured borrowings from other FHLBanks and in the federal funds market provide additional sources of liquidity. In addition, the Secretary of the Treasury is authorized to purchase up to $4.0 billion of Consolidated obligations from the FHLBanks. Our liquidity position remains in compliance with all regulatory requirements and management does not foresee any changes to that position.
Finance Agency Regulations — Liquidity
Regulatory requirements are specified in Parts 932, 1239 and 1270 of the Finance Agency regulations and Advisory Bulletin 2018-07. Each FHLBank shall at all times have at least an amount of liquidity equal to the current deposits received from its members that may be invested in: (1) Obligations of the United States; (2) Deposits in banks or trust companies; or (3) Advances with a remaining maturity not to exceed five years that are made to members in conformity with part 1266. (4) required to hold positive cash flow assuming no access to capital markets and assuming renewal of all maturing advances for a period of between ten to thirty calendar days; (5) maintain liquidity limits to reduce the risks associated with a mismatch in asset and liability maturities, including an undue reliance on short-term debt funding.
In addition, each FHLBank shall provide for contingency liquidity, which is defined as the sources of cash a FHLBank may use to meet its operational requirements when its access to the capital markets is impeded. We met our contingency liquidity requirements during all periods in this report. Liquidity in excess of requirements is summarized in the table titled Contingency Liquidity. Violations of the liquidity requirements would result in non-compliance penalties under discretionary powers given to the Finance Agency under applicable regulations, which include other corrective actions. Advisory Bulletin 2018-07 was partially implemented on December 31, 2018, with further implementation to take place on March 31, 2019 and full implementation on December 31, 2019.
Liquidity Management
We actively manage our liquidity position to maintain stable, reliable, and cost-effective sources of funds while taking into account market conditions, member demand and the maturity profile of our assets and liabilities. We recognize that managing liquidity is critical to achieving our statutory mission of providing low-cost funding to our members. In managing liquidity risk, we are required to maintain certain liquidity measures in accordance with the FHLBank Act and policies developed by management and approved by our Board of Directors. The applicable liquidity requirements are described in the next four sections.
Deposit Liquidity. We are required to invest an aggregate amount at least equal to the amount of current deposits received from members in: (1) Obligations of the United States; (2) Deposits in banks or trust companies; or (3) Advances with a remaining maturity not to exceed five years that are made to members in conformity with part 1266. In addition to accepting deposits from our members, we may accept deposits from other FHLBanks or from any other governmental instrumentality. We met these requirements at all times. Quarterly average ~~assets.~~reserves and actual reserves are summarized below (in millions):
Table 8.1:Deposit Liquidity

Average Deposit

Average Actual

For the Quarters Ended

Reserve Required

Deposit Liquidity

Excess

March 31, 2019

$
1,065

$
90,100

$
89,035

December 31, 2018

904

93,526

92,622

Operational Liquidity. We must be able to fund our activities as our balance sheet changes from day-to-day. We maintain the capacity to fund balance sheet growth through regular money market and capital market funding and investment activities. We monitor our operational liquidity needs by regularly comparing our demonstrated funding capacity with potential balance sheet growth. We take such actions as may be necessary to maintain adequate sources of funding for such growth. Operational liquidity is measured daily. We met these requirements at all times.
The following table summarizes excess operational liquidity (in millions):
Table 8.2:Operational Liquidity

Average Balance Sheet

Average Actual

For the Quarters Ended

Liquidity Requirement

Operational Liquidity

Excess

March 31, 2019

$
10,912

$
33,899

$
22,987

December 31, 2018

10,091

36,478

26,387

Contingency Liquidity. We are required by Finance Agency regulations to hold “contingency liquidity” in an amount sufficient to meet our liquidity needs if we are unable to access the Consolidated obligation debt markets for at least five business days. Contingency liquidity includes (1) marketable assets with a maturity of one year or less; (2) self-liquidating assets with a maturity of one year or less; (3) assets that are generally acceptable as collateral in the repurchase market; and (4) irrevocable lines of credit from financial institutions receiving not less than the second-highest credit rating from a NRSRO. We consistently exceeded the regulatory minimum requirements for contingency liquidity. Contingency liquidity is measured daily. We met these requirements at all times.
The following table summarizes excess contingency liquidity (in millions):
Table 8.3:Contingency Liquidity

Average Five Day

Average Actual

For the Quarters Ended

Requirement

Contingency Liquidity

Excess

March 31, 2019

$
3,169

$
29,509

$
26,340

December 31, 2018

3,649

32,494

28,845

The standards in our risk management policy address our day-to-day operational and contingency liquidity needs. These standards enumerate the specific types of investments to be held to satisfy such liquidity needs and are outlined above. These standards also establish the methodology to be used in determining our operational and contingency needs. We continually monitor and project our cash needs, daily debt issuance capacity, and the amount and value of investments available for use in the market for repurchase agreements. We use this information to determine our liquidity needs and to develop appropriate liquidity plans.
Advance “Roll-Off” and “Roll-Over” Liquidity Guidelines. The Finance Agency’s Minimum Liquidity Requirement Guidelines measure liquidity under two scenarios: Advance “Roll-Over” and “Roll-Off” scenarios. Each FHLBank, including the FHLBNY, must have positive cash balances to be able to maintain positive cash flows for 15 days under the Roll-Off scenario, and for 5 days under the Roll-Over scenario. The Roll-Off scenario assumes that advances maturing under their contractual terms would mature, and in that scenario we would maintain positive cash flows for a minimum of 15 days on a daily basis. The Roll-Over scenario assumes that maturing advances borrowed by members with assets below $100 billion would be rolled over, and in that scenario we would maintain positive cash flows for a minimum of 5 days on a daily basis. We calculate the amount of cash flows under each scenario on a daily basis and have been in compliance with these guidelines. The Finance Agency’s Liquidity Advisory Bulletin 2018-07 becomes effective April 1, 2019. Under the new guidance, the above Roll-Off scenario is no longer required and the Roll-Over daily requirement is extended from 5 days to 10 days to include all advances. An additional requirement to hold 1% of the notional of all Letters of Credit as liquidity also comes into effect.
Other Liquidity Contingencies. As discussed more fully under the section Debt Financing Activity and Consolidated Obligations, we are primarily liable for Consolidated obligations issued on our behalf. We are also jointly and severally liable with the other FHLBanks for the payment of principal and interest on the Consolidated obligations of all the FHLBanks. If the principal or interest on any Consolidated obligation issued on our behalf is not paid in full when due, we may not pay dividends, redeem or repurchase shares of stock of any member or non-member stockholder until the Finance Agency approves our Consolidated obligation payment plan or other remedy and until we pay all the interest or principal currently due on all our Consolidated obligations. The Finance Agency, at its discretion, may require any FHLBank to make principal or interest payments due on any Consolidated obligations.
Finance Agency regulations also state that the FHLBanks must maintain, free from any lien or pledge, the following types of assets in an amount at least equal to the amount of Consolidated obligations outstanding: Cash; Obligations of, or fully guaranteed by, the United States; Secured advances; Mortgages that have any guaranty, insurance, or commitment from the United States or any agency of the United States; and investments described in section 16(a) of the FHLBank Act, including securities that a fiduciary or trust fund may purchase under the laws of the state in which the FHLBank is located.
Short-term Borrowings and Short-term Debt
Our primary source of funds is the issuance of FHLBank debt. Consolidated obligation discount notes are issued with maturities up to one year and provide us with short-term funds. Discount notes are principally used in funding short-term advances, some long-term advances, as well as money market instruments. We also issue short-term Consolidated obligation bonds as part of our asset-liability management strategy. We may also borrow from another FHLBank, generally for a period of one day. Such borrowings have been historically insignificant.
The following table summarizes short-term debt and their key characteristics (dollars in thousands):
Table 8.4:Short-term Debt

Consolidated Obligations-Discount Notes

Consolidated Obligations-Bonds With
Original Maturities of One Year or Less

March 31, 2019

December 31, 2018

March 31, 2019

December 31, 2018

Outstanding at end of the period (a)

$
53,035,777

$
50,640,238

$
51,149,700

$
53,593,000

Weighted-average rate at end of the period (b)

2.41
%
2.34
%
2.44
%
2.37
%
Average outstanding for the period (a)

$
52,403,657

$
51,656,594

$
50,859,074

$
59,411,703

Weighted-average rate for the period

2.39
%
1.79
%
2.44
%
1.86
%
Highest outstanding at any month-end (a)

$
53,035,777

$
59,769,950

$
51,728,000

$
70,377,100

(a)Outstanding balances represent the carrying value of discount notes and par value of bonds (one year or less) issued and outstanding at the reported dates.
~~(j)~~(b)         Weighted-average rate is calculated on outstanding balances at period-end.
~~All percentage calculations~~Off-Balance Sheet Arrangements, Guarantees, and Other Commitments — In accordance with regulations governing the operations of the FHLBanks, each FHLBank, including the FHLBNY, is jointly and severally liable for the FHLBank System’s Consolidated obligations issued under sections 11(a) and 11(c) of the FHLBank Act. The joint and several liability regulation authorizes the Finance Agency to require any FHLBank to repay all or a portion of the principal or interest on Consolidated obligations for which another FHLBank is the primary obligor.
In addition, in the ordinary course of business, the FHLBNY engages in financial transactions that, in accordance with U.S. GAAP, are ~~performed using~~not recorded on the FHLBNY’s balance sheet or may be recorded on the FHLBNY’s balance sheet in amounts ~~in thousands,~~that are different from the full contract or notional amount of the transactions. For example, the Bank routinely enters into commitments to purchase MPF loans from PFIs, and issues standby letters of credit. These commitments may ~~not agree if calculations are performed using amounts in millions.~~
~~(k)~~~~Previously reported comparative numbers have been reclassified to conform to~~represent future cash requirements of the ~~retrospective adoption~~Bank, although the standby letters of ~~ASU 2017-07 Compensation — Retirement Benefits (Topic 715). The ASU requires only the service cost component of Net periodic benefit cost of pension expenses to be included in compensation costs.~~credit usually expire without being drawn upon. For more information about contractual obligations and commitments, see financial statements, Note 19. Commitments and Contingencies.
Results of Operations

The following section provides a comparative discussion of the FHLBNY’s results of operations for the ~~three~~first quarter of 2019 and ~~six months ended June 30, 2018 compared to~~ the same ~~periods~~period in the prior year. For a discussion of the significant accounting estimates used by the FHLBNY that affect the results of operations, see financial statements, Note 1. Significant Accounting Policies and Estimates in the most recent Form 10-K filed on March ~~22, 2018.~~21, 2019.

Net Income

Interest income from advances is the principal source of revenue. Other sources of revenue are interest income from investment debt securities, trading securities, mortgage loans in the MPF portfolio, securities purchased under agreements to resell and federal funds sold. The primary expense is interest paid on Consolidated obligation debt. Other expenses are Compensation and benefits, Operating expenses, our share of operating expenses of the Office of Finance and the FHFA, and affordable housing program assessments on Net income. Other significant factors affecting our Net income include the volume and timing of investments in mortgage-backed securities, prepayments of advances, charges due to debt repurchased, gains and losses from derivatives and hedging activities, and earnings from investing our shareholders’ capital.

Summarized below are the principal components of Net income (in thousands):

Table ~~1.1:~~9.1:               Principal Components of Net Income

Three months ended June 30,

Six months ended June 30,

2018

2017

2018

2017

Three months ended March 31,

2019

2018

Total interest income

$
888,289

$
519,997

$
1,658,934

$
979,384

$
997,534

$
770,645

Total interest expense

680,584

343,883

1,258,210

629,821

820,318

577,626

Net interest income before provision for credit losses

207,705

176,114

400,724

349,563

177,216

193,019

Provision (Reversal) for credit losses on mortgage loans

72

200

(308
)
(101
)

(17
)
(380
)
Net interest income after provision for credit losses

207,633

175,914

401,032

349,664

177,233

193,399

Total other income (loss)

(676
)
1,102

(19,269
)
(64,681
)

13,178

(18,593
)
Total other expenses

34,509

31,530

69,028

62,158

40,580

34,519

Income before assessments

172,448

145,486

312,735

222,825

149,831

140,287

Affordable Housing Program Assessments

17,274

14,573

31,336

22,347

14,993

14,062

Net income

$
155,174

$
130,913

$
281,399

$
200,478

$
134,838

$
126,225

~~2018 Second~~Net Income — 2019 First Quarter Compared to ~~2017 Second~~2018 First Quarter

Net income — For the FHLBNY, Net income is Net interest income, minus credit losses on mortgage loans, plus Other income (loss), less Other expenses and Assessments set aside for the FHLBNY’s Affordable Housing Program.

In the ~~second~~first quarter of ~~2018,~~the current year, Net income was ~~$155.2~~$134.8 million, an increase of ~~$24.3~~$8.6 million, or ~~18.5%~~6.8%, compared to the same period in the prior year. Summarized below are the primary components of our Net income:

Net interest income — Net interest income ~~(“NII”)~~(NII) is typically driven by the volume of earning assets, as measured by average balances of earning assets, and by the net interest spread earned in the period. ~~Prepayment~~Other significant drivers would be prepayment fees earned when advances are early terminated by our borrowing members, and the impact ~~of cash flows~~ on interest ~~rate~~income and expense by the execution of swaps that hedge our assets and ~~liabilities could~~liabilities. Swap interest accruals are a significant component of Net interest income. Fair values changes of derivatives and hedged items in hedges under ASC 815 are also ~~be significant factors.~~recorded in Net interest income beginning in 2019 with the adoption of ASU 2017-12. The impact was not material.
In the ~~second~~first quarter of ~~2018,~~the current year, Net interest income was ~~$207.7~~$177.2 million, ~~an increase~~a decrease of ~~$31.6~~$15.8 million, or ~~17.9%~~8.2%, from the same period in the prior year. ~~Net interest income benefited from higher average earning~~Lower earnings were driven primarily by lower balances of advances. Another factor was investments in liquid assets ~~which grew to $154.1 billion~~that yielded relatively lower margins. To enhance our liquidity position under FHFA guidelines, we have invested in a significant portfolio of liquid assets - short-term highly-rated securities, primarily U.S. treasury obligations, and overnight lending in the ~~second~~federal funds and repurchase markets. The net yields earned on such assets have been typically lower relative to longer-term earning assets. While funding costs remain attractive for the FHLBank issued CO debt, costing yields were not as favorable in the current year period, relative to the prior year period. Because of these conditions, net interest spread declined to 38 basis points in the first quarter of ~~2018, up from $143.8 billion in~~ the ~~same period~~
~~in the prior year. Average advance balances were $107.7 billion in the second quarter of 2018,~~current year, compared to ~~$105.9 billion~~41 basis points in the same period in the prior year. In the second quarter of 2018, yields earned on LIBOR-indexed assets, primarily ARC advances and floating-rate mortgage-backed securities, benefited from the rising LIBOR. Overnight and short-term investments in the federal funds and the overnight repurchase agreements benefited from rising yields for money market investments. Although funding costs were also higher in the rising rate environment, the price/yield for the issuance of shorter-term floating-rate CO bonds continued to be at advantageous sub-LIBOR funding spreads. Net interest spread was 44 basis points in the second quarter of 2018, flat from the same period in the prior year due to increase in liquid assets that yielded lower margins.

Other income (loss) — In the ~~second~~first quarter of ~~2018,~~the current year, Other income (loss) reported a ~~loss~~gain of ~~$0.7~~$13.2 million, compared to a ~~gain~~loss of ~~$1.1~~$18.6 million in the same period in the prior year. Primary components are noted below:

·                  Service fees and otherare primarily correspondent banking fees and fee revenues from financial letters of credit. Such revenues were ~~$4.0~~$4.6 million in the ~~second~~first quarter of the current year, compared to ~~$4.1~~$3.7 million in the same period in the prior year.
·~~Financial~~ ~~instruments carried at fair values~~ reported a net valuation loss of $0.3 million in the second quarter of the current year, compared to a net loss of $3.6 million in the same period in the prior year. For more information, see financial statements, Fair Value Option Disclosures in Note 18. Fair Values of Financial Instruments. Also see, Table 1.10 Other Income (Loss) and accompanying discussions in this MD&A.
·                  Derivative and hedging activities reported a net loss of ~~$5.3~~$12.3 million in the ~~second~~first quarter of the current year, compared to a net ~~gain~~loss of ~~$0.6~~$18.8 million in the same period in the prior year. ~~For more information, see financial statements, Earnings Impact~~
·Securities held for liquidity (classified as trading) reported net gains of ~~Derivatives and Hedging Activities disclosures~~$17.1 million in ~~Note 17. Derivatives and Hedging Activities. Also see Table 1.12 Earnings Impact~~the first quarter of ~~Derivatives and Hedging Activities and accompanying discussions~~the current year, in ~~this MD&A.~~contrast to a loss of $3.2 million in the same period in the prior year.
·Equity Investments held to fund payments to retirees in non-qualified pension plans reported net gains of $4.2 million in the first quarter of the current year, in contrast to a net loss of $0.3 million in the same period in the prior year.

Other expenses were ~~$34.5~~$40.6 million in the ~~second~~first quarter of the current year, compared to ~~$31.5~~$34.5 million in the same period in the prior year. Other expenses are primarily Operating expenses, Compensation and benefits, and our share of expenses of the Office of Finance and the Federal Housing Finance Agency.

·                  Operating expenses were ~~$11.4~~$12.9 million in the ~~second~~first quarter of the current year, up from ~~$10.7~~$10.0 million in the same period in the prior year. ~~Expense increases were primarily due to new long-term lease agreements executed in the second half of the prior year.~~
·                  Compensation and benefits expenses were ~~$17.5~~$21.4 million in the ~~second~~first quarter of the current year, up from ~~$16.6~~$18.8 million in the same period in the prior year.
·                  The expenses allocated for our share of the costs to operate the Office of Finance and the Federal Housing Finance Agency were ~~$3.6~~$3.9 million in the ~~second~~first quarter of the current year, compared to ~~$3.2~~$4.3 million in the same period in the prior year.

·                  Other expenses were $2.4 million in the current year, up from $1.5 million in the same period in the prior year. Expense increase was primarily due to contributions towards disaster relief programs and the non-service costs of employer sponsored pension programs.
AHP assessments allocated from Net income were ~~$17.3~~$15.0 million in the ~~second~~first quarter of the current year, compared to ~~$14.6~~$14.1 million in the same period in the prior year. Assessments are calculated as a percentage of Net income, and changes in allocations were in parallel with changes in Net income.
~~Year-to-Date Period Ended June 30, 2018 Compared to June 30, 2017~~
In the first six months of the current year, Net income was $281.4 million, an increase of $80.9 million, or 40.4%, compared to the same period in the prior year. Summarized below are the primary components of our Net income:
~~In the first six months of the current year,~~ Net interest income was $400.7 million, an increase of $51.1 million, or 14.6%, from the same period in the prior year. Net interest income benefited from higher average earning assets, which grew to $158.5 billion in the first six months of the current year, up from $144.2 billion in the same period in the prior year. Average advance balances were $112.7 billion in the first six months of the current year, compared to $106.2 billion in the same period in the prior year.
~~Net interest spread was 42 basis points in the~~ ~~first six months of the current year, compared to 44 basis points in the same period in the prior year. The two basis points decline in interest spread was due to higher balances of~~
~~overnight investments and liquidity portfolio assets in the~~ ~~first six months of the current year that typically earn lower interest spreads.~~
~~Other~~ ~~income (loss)~~ — In the first six months of the current year, Other income (loss) reported a loss of $19.3 million, compared to a loss of $64.7 million in the same period in the prior year. In the prior year period, a $70.0 million legal charge was recorded on the Lehman settlement matter. For more information about the Lehman settlement, see Note 18. Commitments and Contingencies in the FHLBNY’s most recent Form 10-K filed on March 22, 2018.
·~~Service fees and other~~ ~~were $7.7 million in the first six months of the current year, compared to $7.4 million in the same period in the prior year.~~
·~~Financial~~ ~~instruments carried at fair values~~ ~~reported a net valuation loss of $0.4 million in the first six months of the current year, compared to a net loss of $1.9 million in the same period in the prior year.~~
·~~Derivative and hedging activities~~ ~~reported a net loss of $24.1 million in the first six months of the current year, compared to a net loss of $0.1 million in the same period in the prior year.~~
~~Other~~ ~~expenses~~ ~~were $69.0 million in the first six months of the current year, compared to $62.2 million in the same period in the prior year.~~
·                  ~~Operating expenses were $21.4 million in the first six months of the current year, up from $19.2 million in the same period in the prior year.~~
·                  ~~Compensation and benefits expenses were $36.3 million in the first six months of the current year, up from $34.0 million in the same period in the prior year.~~
·                  The expenses allocated for our share of the costs to operate the Office of Finance and the Federal Housing Finance Agency were $7.9 million in the first six months of the current year, compared to $7.0 million in the same period in the prior year.
~~AHP assessments~~ ~~allocated from Net income were $31.3 million in the first six months of the current year, compared to $22.3 million in the same period in the prior year.~~
Net Interest Income, Margin and Interest Rate Spreads — ~~2018 Periods~~2019 First Quarter Compared to ~~2017 Periods~~2018 First Quarter

Net interest income is our principal source of Net income. It represents the difference between income on interest-earning assets and expense on interest-bearing liabilities.

Period-over-period changes in Net interest income are typically driven by changes in the volume of earning assets, as measured by average balances of earning assets, and the impact of market interest rates on earnings assets and funding costs. Interest income and expense accruals on interest rate swaps that qualified under the ASC 815 hedge accounting rules may impact period-over-period ~~changes.~~changes, as would fair value hedging effects. Shareholders’ capital stock and retained earnings are also factors that impact net interest income as they provide interest free funding. In a period when members prepay advances, the prepayment fees, which we receive may cause period-over-period fluctuations in income. For more information about factors that impact Interest income and Interest expense, see Table ~~1.3~~9.3 Net Interest Adjustments from Hedge Qualifying Interest Rate Swaps and discussions thereto. Also, see Table ~~1.4~~9.4 Spread and Yield Analysis, and Table ~~1.5~~9.5 Rate and Volume Analysis.
The following table summarizes Net interest income (dollars in thousands):

Table ~~1.2:~~9.2:               Net Interest Income

Three months ended June 30,

Six months ended June 30,

Three months ended March 31,

Percentage

Percentage

Percentage

2018

2017

Change

2018

2017

Change

2019

2018

Change

Total interest income (a)

$
888,289

$
519,997

70.83
%
$
1,658,934

$
979,384

69.39
%

$
997,534

$
770,645

29.44
%
Total interest expense (a)

680,584

343,883

(97.91
)
1,258,210

629,821

(99.77
)

820,318

577,626

(42.02
)
Net interest income before provision for credit losses ~~(c)~~

$
207,705

$
176,114

17.94
%
$
400,724

$
349,563

14.64
%

$
177,216

$
193,019

(8.19
)%

(a)         Total Interest Income and Total Interest Expense — See Tables ~~1.6~~9.6 and ~~1.8~~9.8 and accompanying ~~discussions.~~discussions

~~(b)~~2019 First Quarter vs. 2018 First Quarter ~~2018~~ ~~second quarter~~— Net interest income ~~was $207.7~~declined by $15.8 million, ~~compared to $176.1 million in the 2017 period. Several factors explain the changes in Net interest income and Net interest spread.~~
Average business volume in the second quarter of 2018 increased by $10.3 billion to $154.1 billion in average earning assets, compared to $143.8 billion in the 2017 period. Advance volume of business was up quarter-over-quarter, averaging $107.7 billion in the 2018 period, compared to $105.9 billion in the 2017 period.
Market yields improved quarter-over-quarter for investments in federal funds and overnight repos and U.S. Treasury securities, contributing to Net interest income while allowing us to meet higher liquidity targets. Net interest income also benefited from a rising LIBOR at a time when LIBOR-indexed advances were in demand. Higher LIBOR also benefited yields from a growing book of floating-rate LIBOR-indexed GSE-issued MBS.
Interest rate swaps in ASC 815 qualifying fair value hedges generated net positive cash flows (and positive interest accruals), which directly improved Net interest income. The rising LIBOR has driven up the LIBOR-indexed cash flows we received such that in the 2018 periods, the cash flows we received exceeded the payment we made on the interest rate swap contracts. The excess cash flows and the amortization effects of basis adjustments taken together contributed $43.3 million to Net interest income in the second quarter of 2018, in contrast to an expense of $45.7 million in the same period in 2017.
Funding conditions have remained favorable. The price/yield environment for the issuance of shorter-term floating-rate CO bonds continued to be at advantageous sub-LIBOR funding, benefiting Net interest margin in general and directly when the synthetic sub-LIBOR cost of debt was utilized to fund LIBOR-indexed assets, primarily variable-rate ARC advances and floating-rate mortgage-backed securities.
or 8.2% period-over-period. Net interest spread, which is the yield from earning assets minus interest paid to fund earning assets, was 4438 basis points in the ~~2018 second quarter, unchanged from the 2017 period. Although Net interest income has increased quarter-over-quarter, interest spread has remained flat due~~current year period, compared to the increase in the liquidity portfolios that typically invests in lower-yielding assets. Net interest margin, a measure of margin efficiency, which is calculated as Net interest income divided by average earning assets, was 5441 basis points in the ~~2018 second quarter, compared~~prior year period. Lower earnings and margin were primarily due to ~~49 basis points in the 2017 period.~~
~~On a year-to-date basis, Net interest income was $400.7 million in the 2018 period, compared~~lower average interest-earning assets, which declined by $21.3 billion to ~~$349.6 million in the 2017 period. Average business volume increased to $158.5~~$141.6 billion in the ~~2018~~current year period down from ~~$144.2~~$162.9 billion in the ~~2017 period. Advance balances averaged $112.7 billion~~prior year period; we attribute the decline to lower advance volume.
To enhance our liquidity position, we have invested in portfolios of liquid assets, consisting of short-term highly-rated securities, primarily U.S. treasury obligations, and overnight lending in the ~~2018 period, compared~~federal funds and repurchase markets. The net yields earned on such assets have been typically lower, relative to ~~$106.2 billion in the 2017 period. Net~~longer-term earning assets, and that too has unfavorably impacted our interest spread was 42 basis points in the 2018 period, compared to 44 basis points in the 2017 period, and the decline was due to higher investment balances in the liquidity portfolios that earned lower spreads.margins.

~~(c)~~The impact on Net interest income from ~~investing member capital.~~hedging under ASC 815 has been a favorable factor in a rising rate environment. Certain fixed-rate advances and fixed-rate debt are designated in qualifying hedges by the execution of interest rate swaps. The rising benchmark rate, primarily LIBOR, has driven up the benchmark-indexed cash flows we received on swaps hedging fixed-rate advances, such that the cash flows we received exceeded the fixed-rate cash flows paid. While the rising LIBOR had an adverse cash flow impact on qualifying hedges of CO debt, the negative impact was not as significant. Hedging effects, primarily cash flows from interest rate swaps in fair value and cash flows hedges made a favorable contribution of $62.5 million to interest accruals in the three months ended March 31, 2019, compared to a lower contribution of $1.9 million in the prior year period. The fair value hedging impact was not significant to Net interest income as hedges were highly effective with changes in the fair values of the hedging derivatives largely offsetting changes in the fair values of the hedged items.
We earn interest income from investing our members’ capital to fund interest-earning assets. Such earnings are sensitive to the changes in short-term interest rates (Rate effects), and changes in the average outstanding capital and non-interest bearing liabilities (Volume effects). Typically, we invest capital and net non-interest costing liabilities to fund short-term investment assets that yield money market rates. In the periods in this report, market yields for investments in the federal funds and repo markets have improved and the contribution to interest margin from member capital has also improved. Member capital is retained earnings and capital stock, which increases or decreases in parallel with the volume of advances borrowed by members. Average capital was ~~a little higher in the second quarter of 2018, $7.7~~$7.3 billion in the ~~2018~~current year period, compared to ~~$7.6~~$8.1 billion in the 2017 period; the increase in average capital was generally in line with the increase in average advances borrowed by members. On a year-to-date basis, average capital was $7.9 billion in the 2018 period, compared to $7.6 billion in the 2017prior year period.
Impact of Qualifying Hedges on Net Interest Income — ~~2018~~ ~~Periods~~2019 First Quarter Compared to ~~2017 Periods~~2018 First Quarter

The following table summarizes the impact of net interest adjustments from hedge qualifying interest-rate swaps (in thousands):

Table ~~1.3:~~9.3:               Net Interest Adjustments from Hedge Qualifying Interest Rate Swaps

Three months ended June 30,

Six months ended June 30,

2018

2017

2018

2017

Interest Income

$
831,347

$
562,808

$
1,590,981

$
1,078,345

Net interest adjustment from interest rate swaps

56,942

(42,811
)
67,953

(98,961
)
Reported interest income

888,289

519,997

1,658,934

979,384

Interest Expense

666,897

341,008

1,236,764

629,356

Net interest adjustment from interest rate swaps and basis amortization

13,687

2,875

21,446

465

Reported interest expense

680,584

343,883

1,258,210

629,821

Net interest income

$
207,705

$
176,114

$
400,724

$
349,563

Net interest adjustment - interest rate swaps

$
43,255

$
(45,686
)
$
46,507

$
(99,426
)
~~See Table 1.12 Earning~~s ~~Impact of Derivatives and Hedging Activities in this MD&A for discussions and analysis.~~

Three months ended March 31,

2019

2018

Interest Income

$
926,216

$
759,634

Fair value hedging effects

759

—

Amortization of basis

(14
)
(31
)
Interest rate swap accruals

70,573

11,042

Reported interest income

997,534

770,645

Interest Expense

811,652

569,867

Fair value hedging effects

2,071

—

Amortization of basis

(1,444
)
(1,345
)
Interest rate swap accruals

8,039

9,104

Reported interest expense

820,318

577,626

Net interest income

$
177,216

$
193,019

Net interest adjustment - interest rate swaps

$
62,652

$
3,252

Spread and Yield Analysis — ~~2018 Periods~~2019 First Quarter Compared to ~~2017 Periods~~2018 First Quarter

Table ~~1.4:~~9.4:               Spread and Yield Analysis

Three months ended June 30,

2018

2017

Interest

Interest

Average

Income/

Average

Income/

(Dollars in thousands)

Balance

Expense

Rate (a)

Balance

Expense

Rate (a)

Earning Assets:

Advances

$
107,739,858

$
629,485

2.34
%
$
105,880,072

$
361,306

1.37
%
Interest bearing deposits and others

20,002

90

1.80

242,171

46

0.08

Federal funds sold and other overnight funds

21,905,099

96,066

1.76

17,272,670

40,880

0.95

Investments

Trading securities

2,798,617

13,221

1.89

30,939

75

0.95

Mortgage-backed securities

Fixed

8,636,250

64,110

2.98

7,797,964

57,899

2.98

Floating

8,905,678

52,875

2.38

8,613,257

31,937

1.49

State and local housing finance agency obligations

1,217,688

8,013

2.64

1,115,570

4,443

1.60

Mortgage loans held-for-portfolio

2,884,332

24,423

3.40

2,819,258

23,399

3.33

Loans to other FHLBanks

1,374

6

1.71

5,495

12

0.92

Total interest-earning assets

$
154,108,898

$
888,289

2.31
%
$
143,777,396

$
519,997

1.45
%

Funded By:

Consolidated obligation bonds

Fixed

$
26,157,786

$
135,750

2.08
%
$
33,562,220

$
115,821

1.38
%
Floating

68,587,743

314,336

1.84

54,443,497

123,111

0.91

Consolidated obligation discount notes

50,420,015

225,376

1.79

46,526,012

101,581

0.88

Interest-bearing deposits and other borrowings

1,083,689

4,829

1.79

1,543,728

3,131

0.81

Mandatorily redeemable capital stock

18,057

293

6.50

22,204

239

4.32

Total interest-bearing liabilities

146,267,290

680,584

1.87
%
136,097,661

343,883

1.01
%

Other non-interest-bearing funds

122,271

—

71,091

—

Capital

7,719,337

—

7,608,644

—

Total Funding

$
154,108,898

$
680,584

$
143,777,396

$
343,883

Net Interest Income/Spread

$
207,705

0.44
%

$
176,114

0.44
%

Net Interest Margin

(Net interest income/Earning Assets)

0.54
%

0.49
%

Six months ended June 30,

Three months ended March 31,

2018

2017

2019

2018

Interest

Interest

Interest

Interest

Average

Income/

Average

Income/

Average

Income/

Average

Income/

(Dollars in thousands)

Balance

Expense

Rate (a)

Balance

Expense

Rate (a)

Balance

Expense

Rate (a)

Balance

Expense

Rate (a)

Earning Assets:

Advances

$
112,724,479

$
1,175,945

2.10
%
$
106,169,951

$
678,077

1.29
%

$
97,126,653

$
691,896

2.89
%
$
117,764,485

$
546,460

1.88
%
Interest bearing deposits and others

18,557

154

1.67

238,794

81

0.07

62,356

383

2.49

17,096

64

1.51

Federal funds sold and other overnight funds

21,724,028

173,693

1.61

17,693,685

71,786

0.82

17,136,844

103,811

2.46

21,540,944

77,627

1.46

Investments

Trading securities

2,482,032

22,345

1.82

44,761

214

0.96

6,529,297

40,873

2.54

2,161,929

9,124

1.71

Mortgage-backed securities

Fixed

8,499,374

125,439

2.98

7,696,749

116,035

3.04

9,301,522

72,588

3.17

8,360,978

61,329

2.97

Floating

8,948,180

98,689

2.22

8,454,016

58,721

1.40

7,286,246

53,638

2.99

8,991,155

45,814

2.07

State and local housing finance agency obligations

1,182,688

14,030

2.39

1,089,408

8,193

1.52

1,168,124

9,115

3.16

1,147,300

6,017

2.13

Mortgage loans held-for-portfolio

2,886,161

48,626

3.40

2,794,439

46,257

3.34

2,932,945

25,180

3.48

2,888,010

24,203

3.40

Loans to other FHLBanks

1,796

13

1.49

5,580

20

0.72

8,333

50

2.43

2,222

7

1.36

Total interest-earning assets

$
158,467,295

$
1,658,934

2.11
%
$
144,187,383

$
979,384

1.37
%

$
141,552,320

$
997,534

2.86
%
$
162,874,119

$
770,645

1.92
%

Funded By:

Consolidated obligation bonds

Fixed

$
27,210,740

$
258,334

1.91
%
$
34,065,851

$
223,927

1.33
%

$
28,697,070

$
182,065

2.57
%
$
28,275,394

$
122,584

1.76
%
Floating

68,041,681

557,926

1.65

53,107,869

221,489

0.84

51,997,529

316,530

2.47

67,489,552

243,590

1.46

Consolidated obligation discount notes

54,113,390

432,756

1.61

47,802,095

178,754

0.75

52,403,657

315,316

2.44

57,847,802

207,380

1.45

Interest-bearing deposits and other borrowings

1,088,593

8,568

1.59

1,499,520

5,008

0.67

1,056,965

6,307

2.42

1,093,551

3,739

1.39

Mandatorily redeemable capital stock

18,624

626

6.78

22,750

643

5.70

5,847

100

6.90

19,196

333

7.04

Total interest-bearing liabilities

150,473,028

1,258,210

1.69
%
136,498,085

629,821

0.93
%

134,161,068

820,318

2.48
%
154,725,495

577,626

1.51
%

Other non-interest-bearing funds

85,527

—

81,499

—

112,698

—

48,376

—

Capital

7,908,740

—

7,607,799

—

7,278,554

—

8,100,248

—

Total Funding

$
158,467,295

$
1,258,210

$
144,187,383

$
629,821

$
141,552,320

$
820,318

$
162,874,119

$
577,626

Net Interest Income/Spread

$
400,724

0.42
%

$
349,563

0.44
%

$
177,216

0.38
%

$
193,019

0.41
%

Net Interest Margin

(Net interest income/Earning Assets)

0.51
%

0.49
%

0.51
%

0.48
%

(a)         Reported yields with respect to advances and Consolidated obligations may not necessarily equal the coupons on the instruments as derivatives are extensively used to change the yield and optionality characteristics of the underlying hedged items. When we issue fixed-rate debt that is hedged with an interest rate swap, the hedge effectively converts the debt into a simple floating-rate bond. Similarly, we make fixed-rate advances to members and hedge the advances with a pay-fixed and receive-variable interest rate swap that effectively converts the fixed-rate asset to one that floats with prevailing LIBOR rates. Average balance sheet information is presented, as it is more representative of activity throughout the periods presented. For most components of the average balances, a daily weighted average balance is calculated for the period. When daily weighted average balance information is not available, a simple monthly average balance is calculated. Average yields are derived by dividing income by the average balances of the related assets, and average costs are derived by dividing expenses by the average balances of the related liabilities. Yields and spreads are annualized.
Rate and Volume Analysis — ~~2018 Periods~~2019 First Quarter Compared to ~~2017 Periods~~2018 First Quarter

The Rate and Volume Analysis presents changes in interest income, interest expense and net interest income that are due to changes in both interest rates and the volume of interest-earning assets and interest-bearing liabilities, and their impact on interest income and interest expense (in thousands):

Table ~~1.5:~~9.5:               Rate and Volume Analysis

For the three months ended

June 30, 2018 vs. June 30, 2017

Increase (Decrease)

Volume

Rate

Total

Interest Income

Advances

$
6,455

$
261,724

$
268,179

Interest bearing deposits and others

(79
)
123

44

Federal funds sold and other overnight funds

13,201

41,985

55,186

Investments

Trading securities

13,004

142

13,146

Mortgage-backed securities

Fixed

6,224

(13
)
6,211

Floating

1,119

19,819

20,938

State and local housing finance agency obligations

439

3,131

3,570

Other investments

Mortgage loans held-for-portfolio

546

478

1,024

Loans to other FHLBanks

(12
)
6

(6
)

Total interest income

40,897

327,395

368,292

Interest Expense

Consolidated obligation bonds

Fixed

(29,473
)
49,402

19,929

Floating

38,615

152,610

191,225

Consolidated obligation discount notes

9,161

114,634

123,795

Deposits and borrowings

(1,151
)
2,849

1,698

Mandatorily redeemable capital stock

(51
)
105

54

Total interest expense

17,101

319,600

336,701

Changes in Net Interest Income

$
23,796

$
7,795

$
31,591

For the six months ended

For the three months ended

June 30, 2018 vs. June 30, 2017

March 31, 2019 vs. March 31, 2018

Increase (Decrease)

Increase (Decrease)

Volume

Rate

Total

Volume

Rate

Total

Interest Income

Advances

$
44,217

$
453,651

$
497,868

$
(108,408
)
$
253,844

$
145,436

Interest bearing deposits and others

(140
)
213

73

256

63

319

Federal funds sold and other overnight funds

19,368

82,539

101,907

(18,367
)
44,551

26,184

Investments

Trading securities

21,776

355

22,131

25,620

6,129

31,749

Mortgage-backed securities

Fixed

11,888

(2,484
)
9,404

7,181

4,078

11,259

Floating

3,615

36,353

39,968

(9,842
)
17,666

7,824

State and local housing finance agency obligations

754

5,083

5,837

111

2,987

3,098

Other investments

Mortgage loans held-for-portfolio

1,536

833

2,369

380

597

977

Loans to other FHLBanks

(20
)
13

(7
)

33

10

43

Total interest income

102,994

576,556

679,550

(103,036
)
329,925

226,889

Interest Expense

Consolidated obligation bonds

Fixed

(51,302
)
85,709

34,407

1,855

57,626

59,481

Floating

75,847

260,590

336,437

(65,535
)
138,475

72,940

Consolidated obligation discount notes

26,393

227,609

254,002

(21,130
)
129,066

107,936

Deposits and borrowings

(1,679
)
5,239

3,560

(129
)
2,697

2,568

Mandatorily redeemable capital stock

(127
)
110

(17
)

(227
)
(6
)
(233
)

Total interest expense

49,132

579,257

628,389

(85,166
)
327,858

242,692

Changes in Net Interest Income

$
53,862

$
(2,701
)
$
51,161

$
(17,870
)
$
2,067

$
(15,803
)
Interest Income — ~~2018 Periods~~2019 First Quarter Compared to ~~2017 Periods~~2018 First Quarter

Interest income from advances, investments in mortgage-backed securities and MPF loans, federal funds and repurchase agreements are our principal sources of income. Changes in both rate and intermediation volume (average interest-yielding assets) explain the change in the current year period from the prior year period. Reported interest income is net of the impact of cash flows associated with interest rate swaps hedging certain fixed-rate advances that were converted to floating-rate generally indexed to short-term LIBOR.

The principal categories of Interest Income are summarized below (dollars in thousands):

Table ~~1.6:~~9.6:               Interest Income — Principal Sources

Three months ended June 30,

Six months ended June 30,

Three months ended March 31,

Percentage

Percentage

Percentage

2018

2017

Change

2018

2017

Change

2019

2018

Change

Interest Income

Advances ~~(a)~~

$
629,485

$
361,306

74.22
%
$
1,175,945

$
678,077

73.42
%

$
691,896

$
546,460

26.61
%
Interest-bearing deposits

90

46

95.65

154

81

90.12

383

64

498.44

Securities purchased under agreements to resell ~~(b)~~

19,728

5,008

293.93

29,837

8,313

258.92

29,922

10,109

195.99

Federal funds sold ~~(b)~~

76,338

35,872

112.81

143,856

63,473

126.64

73,889

67,518

9.44

Trading securities ~~(c)~~

13,221

75

17,528.00

22,345

214

10,341.59

40,873

9,124

347.97

Mortgage-backed securities ~~(d)~~

Fixed

64,110

57,899

10.73

125,439

116,035

8.10

72,588

61,329

18.36

Floating

52,875

31,937

65.56

98,689

58,721

68.06

53,638

45,814

17.08

State and local housing finance agency obligations

8,013

4,443

80.35

14,030

8,193

71.24

9,115

6,017

51.49

Mortgage loans held-for-portfolio

24,423

23,399

4.38

48,626

46,257

5.12

25,180

24,203

4.04

Loans to other FHLBanks

6

12

(50.00
)
13

20

(35.00
)

50

7

614.29

Total interest income

$
888,289

$
519,997

70.83
%
$
1,658,934

$
979,384

69.39
%

$
997,534

$
770,645

29.44
%

Interest income in the ~~second quarter of 2018~~current year period grew to ~~$888.3~~$997.5 million, yielding ~~231~~286 basis points, compared to ~~$520.0~~$770.6 million yielding ~~145~~192 basis points in the ~~2017~~prior year period. ~~By way~~In a rising rate environment, short-term and overnight assets repriced to higher rates when interest-yielding assets were rolled over. Our advance portfolio includes significant amounts of ~~context, the average 3-month LIBOR was 234 basis points~~LIBOR-indexed floating-rate advances, overnight advances and short-term fixed-rate advances, and yields have benefited in a rising rate environment. Our liquidity portfolios of overnight federal fund sold and securities purchased under agreements to resell have reset to higher yields. Our investments in LIBOR-indexed mortgage-backed securities have likewise benefited from a rising rate environment.
Higher interest revenues from higher rates were partly offset by lower advance volume in the ~~2018 period, compared to 121 basis points in the 2017~~current year period.

OnWe have continued to benefit from favorable interest income accruals as a ~~year-to-date basis, Interest income in 2018 was $1.7 billion, yielding 211 basis points, compared to $979.4 million in~~result of applying fair value hedges of advances. Certain fixed-rate advances are hedged by the ~~2017 period, yielding 137 basis points. The year-to-date average 3 month LIBOR was 213 basis points in the 2018 period, higher than 114 basis points in the 2017 period.~~
~~Primary factors driving changes period-over-period in Interest income are summarized below:~~
~~(a)~~~~Interest income~~ ~~from Advances~~
~~Interest income from advances grew to~~ $~~629.5 million~~~~, yield~~~~ing 234~~ ~~basis points in~~ ~~the second quarter~~execution of ~~2018~~~~, compared to $~~~~361.3~~ ~~million,~~ ~~yielding 137~~ ~~basis points~~ ~~in the same period in the prior year. On a year-to-date basis,~~ ~~Interest income from advances grew to~~ $~~1.2 billion~~~~, yield~~~~ing 210~~ ~~basis points~~ ~~in 2018~~~~, compared to $~~~~678.1~~ ~~million, yield~~~~ing 129~~ ~~basis points~~ ~~in the same period in the prior year.~~
~~The~~ ~~higher~~ interest rate ~~environment~~swaps that create synthetic floaters. The interest rate swaps are structured to pay out fixed-rate cash flows and receive variable-rate benchmark indexed cash flows. Historically, the fixed-rate cash flows paid to swap dealers on swaps hedging advances have been greater than the LIBOR-indexed cash flows received from swap dealers, resulting in 2018, specifically LIBOR, was the primary driver for the significant increase in interest income. The quarterly average 3-month LIBOR was 234 basis points in the second quarter of 2018, compared to 121 basis points in the same period in the prior year. On a ~~year-to-date basis, the average 3-month LIBOR was 213 basis points in 2018, compared to 114 basis points in the same period in the prior year.~~
~~Variable-rate advances, short-term fixed rate and overnight Advance borrowings by members have remained significant in~~negative income accrual. In the periods in this report, ~~and~~our interest income benefited ~~from higher~~in a rising LIBOR environment as the cash interest accruals received exceeded fixed-rate payments to swap dealers. These market ~~interest rates during each successive quarter. Variable-rate borrowings re-price typically at monthly intervals and coupons continued~~conditions resulted in a net favorable accrual of $70.6 million to benefit from an increasing LIBOR yield curve. Short-term fixed-rate and overnight advances re-priced at their maturities at frequent intervals (when rolled over by borrowing members), and benefited from higher coupons along an upwardly sloping yield curve at each successive re-pricing period.
Higher transaction volume, as measured by average outstanding advances, was another factor that contributed to period-over-period increase in interest income. Average outstanding balances grew to $107.7 billionadvance income in the ~~second quarter of 2018, compared to $105.9 billion in the same~~
~~period in the prior year. On a year-to-date basis, average outstanding balances grew to $112.7 billion in the 2018~~current year period, compared to ~~$106.2 billion~~net favorable accrual of $11.0 million in the prior year period. Fair value hedging impact of changes in fair values of hedged items minus fair values of hedging instruments was not material. For more information, see Table ~~1.4 Spread and Yield Analysis.~~
The rising LIBOR also contributed to favorable changes in interest cash flows exchanged with swap dealers on swaps qualifying under ASC 815 hedging rules that hedged fixed-rate advances. The cash flows exchanged in the interest rate swaps are recorded directly as adjustments to interest income from advances, impacting the period-over-period comparisons of interest income. Net interest accruals from ASC 815 qualifying interest rate swaps are pay fixed-rate in exchange for receive floating-rate cash flows. Typically, the interest rate exchanges have resulted in a net accrual expense that reduces interest income from hedged advances. In the current rising rate environment for the 3-month LIBOR, the swap accruals were a net benefit of $56.9 million in the current year second quarter, in contrast to a net charge of $42.8 million in the prior year period, a favorable quarter-over-quarter change in interest income of $99.7 million. On a year-to-date basis, the swap accruals resulted in a net benefit of $68.0 million in the 2018 period, in contrast to a net charge of $99.0 million in the prior year period, a period-over-period favorable change of $167.0 million. For more information, see Table 1.79.7 Impact of Interest Rate Swaps on Interest Income Earned from Advances.
~~(b)~~~~Federal funds and Securities purchased under agreements to resell~~
Interest income from federal funds and repurchase agreements increased in parallel with higher investments, which have grown in line with our liquidity objectives. Investment yields were higher as market yields have improved.
In the second quarter of 2018, average outstanding balance was $21.9 billion, up from $17.3 billion in the same period in 2017. Yields grew to 176 basis points in the current year quarter, compared to 95 basis points in the same period in 2017.
In the year-to-date period ended June 30, average outstanding balance was $21.7 billion in 2018, up from $17.7 billion in the same period in 2017. Yields grew to 161 basis points in the current year period, compared to 82 basis points in the same period in 2017.
~~(c)~~~~Trading securities~~
Portfolios comprised of shorter-term, highly liquid U.S. Treasury and GSE securities that were available to enhance and comply with our liquidity objectives; securities were not acquired for speculative purpose. Interest income grew significantly in the 2018 periods primarily due to higher volume of acquisitions to meet our liquidity objectives. Securities were marked-to-market, and gains and losses were recorded in Other income, below the margin. For more information, see financial statements Note 5. Trading Securities.
~~(d)~~~~Mortgage-backed securities~~ — ~~Investment yields and interest income~~
~~Interest income from investment~~~~s in mortgage-backed securities (“MBS”) were generated by~~ ~~fixed- and floating-rate securities~~ ~~in our held-to-maturity and available-for-sale portfolios.~~
~~2018 second quarter vs 2017 second quarter~~ — ~~Interest income was $117.0 million in the 2018 period, compared to $89.8 million in the 2017 period.~~
·~~Fixed-rate MBS yielded 298 basis points, or $64.1 million in the 2018 period, compared to a yield of 298 basis points, or $57.9 million in the 2017 period.~~ Reported yields are a blend of accretable yields on OTTI securities and yields based on amortized cost on all other MBS securities. Interest income has increased, driven by higher investment balances, which averaged $8.6 billion in the 2018 period, up from $7.8 billion in the 2017 period.
·~~Floating-rate MBS yielded 238 basis points, or $52.9 million in 2018, compared to a yield of 149 basis points, or $31.9 million in 2017.~~ ~~Contributing factors were higher 1-month LIBOR and higher invested balances. The floating-rate portfolio re-priced in line with the rising 1- month~~ ~~LIBOR, which is the primary index on the floating-rate securities~~. ~~The average 1-month LIBOR was 197 basis points in 2018, compared to 106 basis points in 2017. Investment volume~~ ~~averaged $8.9 billion in 2018, up from $8.6 billion in 2017.~~
~~Year-to-~~~~date June~~ ~~2018 vs. Year-to-date June 2017~~ — ~~Interest income was $224.1 million in the 2018 period, compared to $174.8 million in the 2017 period.~~
·~~Fixed-rate MBS yielded 298 basis points, or $125.4 million in the 2018 year-to-date period, compared to a yield of 304 basis points, or $116.0 million in the 2017 period.~~ Interest income has increased, driven by higher investment balances, which averaged $8.5 billion in the 2018 period, up from $7.7 billion in the 2017 period. High-yielding vintage MBS have continued to pay down, impacting yields.
·~~Floating-rate MBS yielded 222 basis points, or $98.7 million in the 2018 year-to-date period, compared to a yield of 140 basis points, or $58.7 million in the 2017 period.~~ ~~Contributing factors were higher 1-month LIBOR and higher invested balances. The floating-rate portfolio re-priced in line with the rising 1- month~~ ~~LIBOR, which is the primary index on the floating-rate securities~~. ~~The average 1- month LIBOR was 181 basis points in the 2018 year-to-date period, compared to 94 basis points in the 2017 period. Investment volume~~ ~~averaged $8.9 billion in the 2018 period, up from $8.5 billion in the 2017 period.~~
Impact of hedging on Interest income from advances — ~~2018 Periods~~2019 First Quarter Compared to ~~2017 Periods~~2018 First Quarter

We have executed interest rate swaps to modify the effective interest rate terms of many of our fixed-rate advance products and typically all of our putable advances, effectively converting a fixed-rate stream of cash flows from fixed-rate advances to a floating-rate stream of cash flows, typically indexed to LIBOR. The cash flow patterns achieved our interest rate risk management practices of synthetically converting much of our fixed-rate interest exposures to a LIBOR exposure.

The table below summarizes interest income earned from advances and the impact of interest rate derivatives (in thousands):

Table ~~1.7:~~9.7:               Impact of Interest Rate Swaps on Interest Income Earned from Advances

Three months ended June 30,

Six months ended June 30,

Three months ended March 31,

2018

2017

2018

2017

2019

2018

Advance Interest Income

Advance interest income before adjustment for interest rate swaps

$
572,543

$
404,117

$
1,107,992

$
777,038

$
620,573

$
535,449

Net interest adjustment from interest rate swaps (a)

56,942

(42,811
)
67,953

(98,961
)
Fair value hedging effects (a)

777

—

Amortization of basis

(14
)
(31
)
Interest rate swap accruals

70,560

11,042

Total Advance interest income reported

$
629,485

$
361,306

$
1,175,945

$
678,077

$
691,896

$
546,460

(a)In ~~a Fair value hedge under ASC 815, certain fixed-rate advances are hedged by~~ the ~~execution~~period prior to the adoption of ~~interest rate swaps that have created synthetic floaters. A~~ASU 2017-12 on January 1, 2019, fair value ~~hedge of an advance is accomplished by the execution of an~~hedging effects were recorded in Other income (loss) and not in Advance interest rate swap in which we pay fixed-rate cash flows and receive LIBOR-indexed variable rate cash flows. The difference between the two cash exchanges determines the net interest adjustments under ASC 815. Historically, the fixed-rate paid to swap dealers on swaps hedging longer-term advances have been greater than the LIBOR indexed cash flows we receive from swap dealers, resulting in a net interest expense, a charge that reduces interest income from hedged advances, nonetheless assuring the hedging objectives. That differential, between fixed-rate payments and variable-rate income, has narrowed. The higher LIBOR cash flows we have received in the 2018 periods have reversed or have narrowed the typical unfavorable expense adjustments. The cash flows exchanged resulted in net benefits to advance income in the 2018 periods, compared to net charges in the 2017 periods.income.

Interest Expense — ~~2018 Periods~~2019 First Quarter Compared to ~~2017 Periods~~2018 First Quarter

Our primary source of funding is through the issuance of Consolidated obligation bonds and discount notes in the global debt markets. Consolidated obligation bonds are generally medium- and long-term bonds, while discount notes are short-term instruments. To fund our assets, our management considers our interest rate risk and liquidity requirements in conjunction with consolidated obligation buyers’ preferences and capital market conditions when determining the characteristics of debt to be issued. Typically, we have used fixed-rate callable and non-callable CO bonds to fund mortgage-related assets and advances. CO discount notes are generally issued to fund advances and investments with shorter interest rate reset characteristics.

Changes in rate and intermediation volume (average interest-costing liabilities), the mix of debt issuances between CO bonds and CO discount notes, and the impact of hedging strategies explain the changes in interest expense. Reported Interest expense is net of the impact of ASC 815 hedge strategies. The primary hedging strategy is the Fair value hedge that creates LIBOR-indexed ~~funding.~~funding, the primary benchmark rate for the FHLBNY. We also use the Cash Flow hedge strategy that creates long-term fixed-rate funding to lock in future net interest margin. In a Fair value hedge strategy of a bond or discount note, we generally pay variable-rate LIBOR-indexed cash flows to swap counterparties. In exchange, we receive fixed-rate cash flows, which typically mirror the fixed-rate coupon payments to investors holding the FHLBank debt. This exchange effectively converts fixed-rate coupons to floating-rate coupons indexed to the 3-month LIBOR. The primary cash flow hedge strategy is designed to eliminate the variability of cash flows attributable to changes in the primary benchmark interest rate (3-month LIBOR), hedging long-term issuances of consolidated obligation discount notes and create long-term fixed-rate funding.

Certain floating-rate CO bonds were designated in economic hedges, primarily basis hedges that converted a contractual variable index to a preferred funding variable index, typically the 3-month LIBOR. Interest rate swaps designated in an economic hedge do not qualify as an ASC 815 hedge, and interest accrual is not recorded as an adjustment to debt interest expense (as would a swap that qualified); swap accruals together with changes in the fair
values of the swaps in economic hedges are reported in Other income (below net interest income) as an impact of derivative and hedging activities in the Statements of income.
The principal categories of Interest expense are summarized below (dollars in thousands):

Table ~~1.8:~~9.8:               Interest Expenses — Principal Categories

Three months ended June 30,

Six months ended June 30,

Three months ended March 31,

Percentage

Percentage

Percentage

2018

2017

Change

2018

2017

Change

2019

2018

Change

Interest Expense ~~(a)~~

Consolidated obligations bonds ~~(b)~~

Fixed

$
135,750

$
115,821

(17.21
)%
$
258,334

$
223,927

(15.37
)%

$
182,065

$
122,584

(48.52
)%
Floating

314,336

123,111

(155.33
)
557,926

221,489

(151.90
)

316,530

243,590

(29.94
)
Consolidated obligations discount notes ~~(b)~~

225,376

101,581

(121.87
)
432,756

178,754

(142.10
)

315,316

207,380

(52.05
)
Deposits

4,443

3,063

(45.05
)
7,948

4,887

(62.64
)

5,965

3,505

(70.19
)
Mandatorily redeemable capital stock

293

239

(22.59
)
626

643

2.64

100

333

69.97

Cash collateral held and other borrowings

386

68

(467.65
)
620

121

(412.40
)

342

234

(46.15
)

Total interest expense

$
680,584

$
343,883

(97.91
)%
$
1,258,210

$
629,821

(99.77
)%

$
820,318

$
577,626

(42.02
)%

~~(a)~~Interest expense in the ~~second quarter of 2018 was $680.6~~current year period grew to $820.3 million, at a costing yield of ~~187~~248 basis points, compared to ~~$343.9~~$577.6 million at a costing yield of ~~101~~151 basis points in the ~~same period in the~~ prior ~~year. On a year-to-date basis, Interest expense was $1.3 billion, at a cost~~year period.   Our funding portfolios include significant issuances of ~~169 basis points in the 2018 period, compared to $629.8 million at a cost of 93 basis points in the 2017 period.~~
~~(b)~~~~Consolidated obligation bonds and~~LIBOR-indexed floating-rate CO debt, shorter-term discount notes — ~~While interest expense on debt (CO bonds~~ and CO discount notes) has increased in a rising rate environment, shorter maturity CO floating-rate bonds indexed to LIBOR continued to be in demand at relatively attractive sub-LIBOR pricing. CO discount note issuances have also been in demand by investors and the sub-LIBOR coupons have remained attractive.
Our funding mix in the 2018 periods, between the use of floating-rate debt and fixed-rate debt, has continued in the direction of greater utilization of floating-rate bonds to fund our growing book of variable-rate LIBOR-indexed assets and also short-term fixed-rate advances, which tend to re-price at frequent intervals when rolled over.
~~Generally, the longer-term fixed-rate CO bonds and bonds with call options are hedged under ASC 815, i.e. cash flows are swapped from fixed-rate to LIBOR-indexed variable-rate cash flows.~~ ~~Historically, swapping fixed-rate~~ short- and medium-term CO bonds ~~to a floating-rate LIBOR indexed cash flows has benefited interest expense by synthetically converting the fixed-rate expense to a sub-LIBOR level.~~
·~~Fixed-rate Consolidated obligation bonds —~~ ~~In a rising rate environment, interest expense on CO bonds has also increased. In the second quarter of 2018, interest expense~~ ~~was $~~~~135.8~~ ~~million at a funding cost of~~ ~~208~~ ~~basis points, compared to $~~~~115.8~~ ~~million at a funding cost of~~ ~~138~~ ~~basis points in~~ ~~the same period in 2017. The usage of fixed-rate funding has declined quarter-over-quarter in 2018 in line with a growing book of variable-rate and short-term assets~~ that re-price frequently. A significant percentage of long-term fixed-rate CO bonds are hedged under ASC 815 and reported interest expense includes the effect of cash flow exchanges on interest rate swaps, the hedging instruments. Historically, the exchange has benefited interest expense by synthetically converting the fixed-rate expense to a sub-LIBOR level. In a rising interest rate environment for LIBOR, the historical favorable cash flows have narrowed between the fixed-rate cash flows that we receive in exchange for LIBOR-indexed that we pay to swap dealers. The 3-month LIBOR was higher in the 2018 period; on average it was 234 basis points in the current year quarter, compared to 121 basis points in the same quarter in the prior year. Interest rate swap designated in an ASC 815 hedge recorded an increase in debt interest accrual expense of $11.0 million in the second quarter of 2018, in contrast to a net reduction of $5.0 million in debt interest expense in the prior year period.
~~In the year-to-date period ending June 30, i~~~~nterest expense~~ ~~was $~~~~258.3~~ ~~million at a funding cost of~~ ~~191~~ ~~basis points~~ ~~in the 2018 period~~~~, compared to $~~~~223.9~~ ~~million at a funding cost of~~ ~~133~~ ~~basis points in~~ the same period in 2017. The usage of fixed-rate funding declined in the current year period. Interest accruals on swaps in ASC 815 hedges recorded net increase of $13.2 million in debt interest expense in the current year period, in contrast to a net reduction of $15.6 million in the same period in the prior year.
·~~Floating-~~~~rate Consolidated obligation~~ ~~bonds~~ — ~~In the current year second quarter,~~ ~~interest expense on~~ ~~floating-rate~~ ~~CO bond~~s ~~was $~~~~314.3~~ ~~million at a funding cost of~~ ~~184~~ ~~basis points, compared to $~~~~123.1~~ ~~million at a funding cost of~~ 91 ~~basis points in~~ ~~the same quarter in 2017.~~~~The average~~ ~~outstanding~~ ~~balance~~ ~~grew to $~~~~68.6~~ ~~billion~~ ~~in current year quarter~~~~, up from $~~~~54.4~~ ~~billion~~ ~~in the same quarter in the prior year~~~~. Variable-rate~~ ~~balance sheet assets have increased~~~~, driving up~~ ~~the need~~ ~~for variable~~-~~rate funding.~~ ~~Floating-rate bonds were typically indexed to the 1-month LIBOR, and higher yields paid in the 2018 period were primarily in line with a rising LIBOR.~~ The average 1-month LIBOR was 197 basis points in the second quarter of 2018, compared to 106 basis points in the same period in 2017. Certain 1-month LIBOR indexed CO bonds were converted to 3-month LIBOR by the execution of basis swaps, which were ~~designated as economic hedges~~
of the 1-month LIBOR indexed CO bonds. In compliance with hedge accounting rules for economic hedges, interest accruals on the basis swaps were not recorded as adjustments to the cost of funds, rather they were recorded in Other income as gains and losses from derivatives and hedging activities. For more information about the impact of economic hedging and accruals, see Table 1.12 Earnings Impact of Derivatives and Hedging Activities-By Financial Instrument Type.
~~In the year-to-date period ending June 30, i~~~~nterest expense~~ ~~was $~~~~557.9~~ ~~million at a funding cost of~~ ~~165~~ ~~basis points~~~~in the 2018 period~~~~, compared to $~~~~221.5~~ ~~million at a funding cost of~~ 84 ~~basis points in~~ ~~the same period in 2017.~~ ~~The increase was primarily due to two factors.~~ ~~The average 1- month LIBOR was 181 basis points in the 2018 period, compared to 94 basis points in the 2017 period.~~ ~~The usage of floating-rate funding increased in the year-to-date period in 2018, compared to the same period in 2017.~~
·~~Consolidated obligation discount notes (“CO discount notes” or “discount notes”) —~~ ~~In a rising rate environment, costing yields on CO discount notes have also increased.~~ ~~Interest~~ ~~expense~~ on discount notes, including the impact of cash flow hedging strategies, was $225.4 million at a funding cost of 179 basis points in the second quarter of 2018, compared to $101.6 million at a cost of 88 basis points in the 2017 period. Increase in interest expense was primarily rate related since discount notes are short-term and re-pricedrepriced to higher ~~coupons~~rates in a rising rate environment when new discount notes were issued to replace maturing debt. Increase in interest expense was also in line with the increased utilization of discount notes (volume effects) as measured by average balances outstanding.environment.

Fair value hedges have been executed to convert fixed-rate CO bonds to benchmark-indexed floating-rate. Cash flow ~~hedging~~ ~~programs under ASC 815~~hedges have ~~synthetically converted the 91-day variability of cash flows on $2.6 billion~~been executed to hedge rolling-issuances of discount notes to long-term fixed-rate interest expense. The cash flows exchanged in the two hedging strategies resulted in net interest adjustments that impacted interest expense.
In a fair value hedge of CO bonds, the interest rate swaps are structured to receive fixed-rate cash flows and pay benchmark-indexed variable cash flows, creating synthetic floating-rate cash flows. The cash flows exchanged between the receive-leg and pay-leg determine the net interest adjustments. Historically, in a fair value hedge of our debt, the fixed-rate cash flows received from swap ~~yields. The~~dealers on swaps hedging ~~strategy increased~~CO bonds have been greater than the LIBOR indexed cash flows we pay to swap dealers, typically resulting in favorable sub-LIBOR cash flows. In the periods in this report, the higher LIBOR-indexed cash flows paid have reversed the typical favorable interest adjustment to interest expense, ~~by $2.7~~so that a net unfavorable adjustment of $8.5 million ~~in the second quarter of 2018, compared to an increase of $7.9 million in the same period in 2017. However, the hedge strategy assured us of long-term funding at predictable rates.~~
~~In the year-to-date period ended June 30, 2018, interest income on discount notes~~ was ~~$432.8 million, compared to $178.8 million in the same period in 2017. While utilization was higher~~recorded in the current year period, compared to an unfavorable adjustment of $3.6 million in the prior year period. Fair value hedging impact resulting from changes in fair values of ~~higher rates~~hedged items minus hedging instruments was ~~the primary factor.~~not material.

No discount notes were hedged under a fair value hedge under ASC 815. Cash flow hedges under ASC 815 have been designated to hedge future issuances of designated CO discount notes. In this strategy, long-term interest rate swaps have been executed that have created synthetic fixed-rate cash flows. The swaps are structured to pay fixed-rate cash flows and receive LIBOR-indexed variable rate cash flows. The pay fixed-rate cash flows are typically based on long-term swap rates, which are generally higher than the 3-month LIBOR that we receive in exchange. Although the cash flow exchanged in the hedge have resulted in net interest expense, the strategy has achieved our hedging objective of a stable and predictable long-term funding expense. The cash flows exchanged in the hedging strategy resulted in net favorable interest accruals of $0.5 million in the three months ended March 31, 2019 as the 3-month LIBOR has continued to rise, benefiting swap cash flows received. In the prior year period, we recorded net unfavorable interest expense accrual of $5.5 million.
For more information about hedging effects, see Table 9.9. Impact of Interest Rate Swaps on Consolidated Obligations Interest Expense.
Impact of Hedging on Interest Expense on Debt — ~~2018 Periods~~2019 First Quarter Compared to ~~2017 Periods~~2018 First Quarter

Derivative strategies are primarily used to manage the interest rate risk inherent in fixed-rate debt by converting the fixed-rate funding to floating-rate debt that is indexed to 3-month LIBOR, our preferred funding base. The strategies are designed to protect future interest margins. A significant percentage of non-callable fixed-rate debt is swapped to plain vanilla 3-month LIBOR indexed cash flows. We also issue fixed-rate callable debt that is typically issued with the simultaneous execution of cancellable interest rate swaps to modify the effective interest rate terms and the effective durations of our fixed-rate callable debt. The cash flow objectives are accomplished by utilizing a Fair value hedging strategy, benefiting us in two principal ways. First, the issuances of fixed-rate debt and the simultaneous execution of interest rate swaps convert the debt to an adjustable-rate instrument tied to the 3-month LIBOR. Second, fixed-rate callable bonds issued in conjunction with the execution of interest rate swaps containing a call feature (that mirrors the option embedded in the callable bond), enables us to meet our funding needs at yields not otherwise directly attainable through the issuance of callable debt. We may also issue floating rate debt indexed to other than the 3-month LIBOR (Prime, federal funds rate and 1-month LIBOR). Typically, we would then execute interest rate swaps that would convert the cash flows to the 3-month LIBOR, and designate the hedge as an economic hedge.
We have also created synthetic long-term fixed rate funding to fund long-term investments, utilizing a Cash Flow hedging strategy that converted forecasted long-term discount note variable-rate funding to fixed-rate funding by the use of long-term swaps. For such discount notes, the recorded interest expense is equivalent to long-term fixed rate coupons. Cash Flow hedging strategies are also discussed under Table 1.13 Accumulated Other Comprehensive Income (loss) to Current Period Income from Cash Flow Hedges.
The table below summarizes interest expense paid on Consolidated obligation bonds and discount notes and the impact of interest rate swaps (in thousands):

Table ~~1.9:~~9.9:               Impact of Interest Rate Swaps on Consolidated Obligations Interest Expense

Three months ended June 30,

Six months ended June 30,

Three months ended March 31,

2018

2017

2018

2017

2019

2018

Bonds and discount notes-Interest expense

Bonds-Interest expense before adjustment for swaps

$
439,131

$
243,958

$
803,042

$
461,024

$
489,446

$
363,911

Discount notes-Interest expense before adjustment for swaps

222,644

93,680

424,528

162,681

315,799

201,884

Amortization of basis adjustments

(1,477
)
(1,081
)
(2,822
)
(2,118
)
Net interest adjustment for interest rate swaps (a)

15,164

3,956

24,268

2,583

Fair value hedging effect on CO bonds (a)

2,071

—

Amortization of basis adjustments on discount notes

(1,444
)
(1,345
)
Net interest adjustment for swaps hedging CO bonds

8,523

3,609

Net interest adjustment for swaps hedging discount notes

(484
)
5,495

Total bonds and discount notes-Interest expense

$
675,462

$
340,513

$
1,249,016

$
624,170

$
813,911

$
573,554

(a)~~CO bond and discount note hedging —~~ ~~Fair value and cash flow hedges under ASC 815 have been executed~~ In the period prior to ~~hedge certain fixed-rate CO bonds and discount notes. The cash flows exchanged in~~ the ~~two hedging strategies resulted in Net interest adjustments (also referred to as interest accruals) as noted in the table above and discussed below:~~
·Aadoption of ASU 2017-12 on January 1, 2019, fair value ~~hedge of Consolidated obligation bonds is accomplished by the execution of~~hedging effects were recorded in Other income (loss) and not in CO debt interest rate swaps in which we receive fixed-rate cash flows, and pay LIBOR-indexed variable cash flows, creating synthetic floating-rate cash flows. The cash flows exchanged between the receive-leg and pay-leg of the cash determine the net interest adjustments. Historically, in a fair value hedge, the fixed-rate cash flows received from swap dealers on swaps hedging CO bonds have been greater than the LIBOR indexed cash flows we pay to swap dealers, and has typically resulted in favorable sub-LIBOR cash flows. However, in a rising rate environment for LIBOR, that favorable differential associated with swap cash flows has been narrowing and in 2018 and 2017, the cash exchanges have resulted in net interest expense.
·Cash flow hedges under ASC 815 have been executed to hedge future issuances of designated CO discount notes. Long-term interest rate swaps have been executed that have created synthetic fixed-rate cash flows — we pay fixed-rate cash flows and receive LIBOR-indexed variable rate cash flows. The pay fixed-rate cash flows are typically based on long-term swap rates, which have remained significantly higher than the 3-month LIBOR that we receive in exchange. Although the cash flow exchanged in the hedge results in a net interest expense, it achieves our hedging objective of a stable and predictable long-term funding expense.
~~For further information, see Table 1.8 Interest Expenses and accompanying discussions.~~

Allowance for Credit Losses — ~~2018 Periods~~2019 First Quarter Compared to ~~2017 Periods~~2018 First Quarter

·                  Mortgage loans held-for-portfolio — Credit quality continues to be strong, delinquencies low, and allowance for credit losses have remained insignificant.

We recorded a net ~~provision~~reversal of ~~$72~~$17 thousand in the ~~current year quarter, compared to a net provision of $0.2 million in the same period in the prior year.~~
~~On a year-to-date basis, we recorded a net recovery of $0.3 million in the current year~~2019 period, compared to a net ~~recovery~~reversal of ~~$0.1 million~~$380 thousand in the ~~same period in the prior year.~~2018 period.

We evaluate impaired conventional mortgage loans on an individual (loan-by-loan) basis, and compare the fair values of collateral (net of liquidation costs) to recorded investment values in order to calculate/measure credit losses on impaired loans. Loans are considered impaired when they are seriously delinquent (typically 90 days or more) or in bankruptcy or foreclosure, and loan loss allowances are computed at that point. When a loan is seriously delinquent, we believe it is probable that we will be unable to collect all contractual interest and principal in accordance with the terms of the loan agreement. We also perform a loss migration analysis to collectively measure impairment of loans that have not already been individually evaluated for impairment. FHA/VA (Insured mortgage loans) guaranteed loans are also evaluated collectively for impairment based on the credit worthiness of the PFI.

The ~~low~~immaterial amounts of reserves for credit losses are consistent with our historical experience with foreclosures or losses. Additionally, collateral values of impaired loans have continued to remain steady and have improved in the New York and New Jersey sectors, and the low loan loss reserves were reflective of the stability in home
prices in our residential loan markets. For more information, see financial statements Note 10. Mortgage Loans Held-for-Portfolio.

·                  Advances — Based on the collateral held as security and prior repayment history, no allowance for losses was currently deemed necessary. Our credit risk from advances was concentrated in commercial banks, savings institutions and insurance companies. All advances were fully collateralized during their entire term. In addition, borrowing members pledged their stock in the FHLBNY as additional collateral for advances.
Analysis of Non-Interest Income (Loss) — ~~2018 Periods~~2019 First Quarter Compared to ~~2017 Periods~~2018 First Quarter

The principal components of non-interest income (loss) are summarized below (in thousands):

Table ~~1.10:~~9.10:        Other Income (Loss)

Three months ended June 30,

Six months ended June 30,

2018

2017

2018

2017

Other income (loss):

Service fees and other (a)

$
3,973

$
4,111

$
7,694

$
7,363

Instruments held at fair value - Unrealized gains (losses) (b)

(309
)
(3,581
)
(362
)
(1,862
)
Total OTTI losses

(398
)
—

(398
)
—

Net amount of impairment losses reclassified to (from) Accumulated other comprehensive income (loss)

257

—

257

—

Net impairment losses recognized in earnings

(141
)
—

(141
)
—

Net realized and unrealized gains (losses) on derivatives and hedging activities (c)

(5,285
)
584

(24,085
)
(118
)
Net gains (losses) on Trading securities

781

(12
)
(2,420
)
(64
)
Fair value gains (losses) on Equity Investments

305

—

45

—

Provision for litigation settlement on derivative contracts (d)

—

—

—

(70,000
)
Total other income (loss)

$
(676
)
$
1,102

$
(19,269
)
$
(64,681
)

Three months ended March 31,

2019

2018

Other income (loss):

Service fees and other (a)

$
4,642

$
3,721

Instruments held under the fair value option - Unrealized gains (losses) (b)

(464
)
(53
)

Derivative gains (losses) (c)

(12,280
)
(18,800
)
Trading securities gains (losses) (d)

17,070

(3,201
)
Equity investments gains (losses) (e)

4,210

(260
)
Total other income (loss)

$
13,178

$
(18,593
)

(a)         Service fees and other — Service fees are derived primarily from providing correspondent banking services to members ~~and~~ , typically fees earned on standby financial letters of credit issued by the FHLBNY on behalf of members. Fee income earned on financial letters of credit ~~are typically the largest component of Service fees, and~~ were $~~3.5~~4.4 million and ~~$2.9~~$3.5 million in the ~~second~~first quarter of the current year and in thesame period in the prior year. Letters of credit are primarily issued on behalf of members to units of state and local governments to collateralize their deposits at member banks.
~~On a year-to-date basis, Service fees were $7.0 million in the current year, compared to $5.9 million in the same period in the prior year.~~
(b)         Changes in fair values on ~~advances and debt~~instruments elected under the FVO were not material in the ~~2018~~ periods in ~~parallel with the decline in new elections to replace run offs.~~this report.
(c)          ~~Net~~ ~~realized~~ ~~and unrealized gains (losses) on derivatives and hedging activities~~ — ~~Hedging activities~~ Derivatives in standalone economic hedges reported ~~a net loss~~losses of ~~$5.3~~$12.3 million in the three months ended ~~June 30, 2018,~~March 31, 2019, compared to ~~a net gain~~losses of ~~$0.6~~$18.8 million in the ~~same~~prior year period. Derivative losses in the current year period were primarily due to swaps in economic hedges of the liquidity trading portfolio of fixed-rate U.S Treasury securities. Derivative losses in the prior ~~year. On a year-to-date~~year period was primarily due to standalone basis ~~hedging activities reported a net loss of $24.1 million~~swaps in ~~the 2018 periods, compared~~economic hedges that synthetically converted floating-rate CO bonds indexed to ~~a net loss of $0.1 million in the same period in the prior year.~~ 1-month LIBOR to 3-month LIBOR. See Table ~~1.12~~9.12 Other Income (Loss) ~~Earnings~~— Impact of ~~Derivatives~~Derivative Gains and ~~Hedging Activities~~Losses.
(d)   Net gains (losses) on Trading securities — We have invested in short- and medium-term fixed-rate U.S Treasury obligations, which reported unrealized fair value gains in a sharply declining rate environment at March 31, 2019. The securities are not held for ~~more information.~~speculative trading and are held for liquidity in compliance with FHFA regulatory requirements.
(e)   Fair value gains (losses) on Equity Investments — Our investments in grantor trusts classified as equity investments reported unrealized fair value gains in a rising equity market in the U.S at March 31, 2019. The grantor trusts are owned by us with the objective of providing liquidity to pay for pension benefits to retirees vested in non-qualified pension plans. The grantor trusts are invested in equity and bond funds. .

~~(d)~~~~Litigation settlement~~ — ~~In the first quarter of 2017, w~~~~e took a charge of $70.0 million and settled the long-standing dispute with Lehman Brothers Special Financing Inc. (“Lehman”) in a Chapter 11 bankruptcy proceeding.~~
The following table summarizes unrealized and realized gains (losses) in the trading portfolio ~~at June 30, 2018 and December 31, 2017~~ (in thousands):

Table ~~1.11:~~9.11:        Net Gains (Losses) on Trading Securities (a)

Three months ended
June 30,

Six months ended
June 30,

Three months ended
March 31,

2018

2017

2018

2017

2019

2018

Net unrealized gains (losses) on Trading securities held at period-end

$
739

$
(12
)
$
(2,535
)
$
(51
)

$
16,294

$
(3,201
)
Net unrealized and realized gains (losses) on Trading securities sold/matured during the period

42

—

115

(13
)

776

—

Net gains (losses) on Trading securities

$
781

$
(12
)
$
(2,420
)
$
(64
)

$
17,070

$
(3,201
)

(a)         Securities classified as trading are held for liquidity ~~purposes~~objectives and carried at fair ~~value.~~values. We record changes in the fair value of these investments through Other income as net unrealized gains (losses) on trading securities. FHFA regulations prohibit trading in or the speculative use of financial instruments.
~~Earnings Impact of~~Other income (loss) — Derivatives and Hedging Activities recorded —in the three months ended March 31, 2019 and 2018. ~~2018 Periods Compared to 2017 Periods~~

~~We may designate a derivative as either a hedge~~With the adoption of ~~(1)~~ASU 2017-12 effective January 1, 2019, we report the fair value ~~changes of a recognized fixed-rate asset (Advance) or liability (Consolidated obligation debt), or an unrecognized firm commitment; (2) a forecasted transaction; or (3)~~hedging effects in qualifying hedges within interest income and interest expense together with the ~~variability of future cash flows of a floating-rate asset or liability (Cash flow hedge). We may also designate a derivative as an economic hedge, which does not qualify for hedge accounting under~~hedged item. Prior to the ~~accounting standards.~~
~~Derivative fair values are driven largely by the rise and fall~~adoption of the forward swap curve, which determines forward cash flows, and by changes in the OIS curve, which is the discounting basis. Hedged advances and debt fair values are also driven largely by the rise and fall of the LIBOR curve, which is the discounting basis of hedged advances and bonds in aASU, fair value ~~hedge.~~impact of qualifying hedges and standalone derivatives were both reported in Other ~~market factors include interest rate spreads and interest rate volatility. The volume~~income (loss). Comparative information for the prior year period has not been reclassified to conform to post-adoption standards as the adoption of ~~derivatives and their duration to maturity are factors that are also key drivers of changes in fair values.~~
ASU 2017-12 permitted prospective adoption. For derivatives that are not designated in a hedging relationship (i.e. in an economic hedge), the derivatives are considered as a “standalone” instrument and fair value changes are recorded ~~as net unrealized gains or losses,~~in Other income (loss), without the offset of a hedged item. ~~Net~~Gains and losses recorded in Other income (loss) on standalone derivatives include net interest ~~accruals on such “standalone” derivative instruments in economic hedges may also have a significant impact on reported derivatives gains and losses.~~accruals.

Generally for the FHLBNY, derivative and hedging gains and losses are primarily from two sources. Hedge ineffectiveness from hedges that qualify under hedge accounting rules (fair value effects of derivatives, net of the fair value effects of hedged items), andThe table presents fair value changes of ~~standalone~~ derivatives in economic hedges (i.e. not in an ~~economic hedge (fair value changes of derivatives without~~ASC 815 qualifying hedge) in Other income (loss) in the ~~offsetting fair value changes~~three months ended March 31, 2019 (post ASU 2017-12). In the three months ended March 31, 2018, prior to the adoption of the ~~hedged items). Typically,~~ASU, the ~~largest source~~table presents the aggregate impact of ~~gains or losses from derivative~~all derivatives and hedging activities, ~~arise from derivatives designated as standalone derivatives. For~~including hedges that qualified under ASC 815. Prior period comparatives have not been recast to conform to the FHLBNY, standalone derivatives have typically comprised of swaps in economic hedges of debt elected under the FVO, interest rate caps in economic hedges of capped floating-rate MBS, and basis swaps hedging floating-rate debt indexed to other than the 3-month LIBOR. For both categories, derivatives that are standalone, and derivatives and hedged items that qualify under hedge accounting rules, fair value gains and losses are unrealized and sum to zero if held to maturity. Interest accruals on standalone derivatives are considered as hedging gains or losses on standalone hedges, and realized at the periodic accrual settlement dates.
~~Summarized below is the impact of hedging activities on earnings, and a description of where the primary components of expenses and income are reported in the Statements of income (in thousands):~~post ASU presentation.

Table ~~1.12:~~9.12:        ~~Earnings~~Other Income (Loss) — Impact of ~~Derivatives~~Derivative Gains and ~~Hedging Activities — By Financial Instrument Type~~Losses (in thousands)

Three months ended June 30, 2018

Consolidated

Consolidated

MPF

Obligation

Obligation

Balance

Intermediary

Earnings Impact

Advances

Investments

Loans

Bonds

Discount Notes

Sheet

Positions

Other

Total

Amortization/accretion/interest accruals of hedging activities reported in net interest income

$
56,942

$
—

$
(65
)
$
(10,954
)
$
(2,733
)
$
—

$
—

$
—

$
43,190

Net realized and unrealized gains (losses) on derivatives and hedging activities

Gains (losses) on fair value hedges

1,435

—

—

(3,421
)
—

—

—

—

(1,986
)
Gains (losses) on cash flow hedges

—

—

—

125

—

—

—

—

125

Net fair value gains (losses) and interest income on swaps in economic hedges of FVO instruments

—

—

—

(33
)
174

—

—

—

141

Net gains (losses) on swaps and caps in other economic hedges

19

812

39

(631
)
—

(985
)
167

—

(579
)
Price alignment interest paid on variation margin

—

—

—

—

—

—

—

(2,986
)
(2,986
)
Net realized and unrealized gains (losses) on derivatives and hedging activities (a)

1,454

812

39

(3,960
)
174

(985
)
167

(2,986
)
(5,285
)

Total earnings impact

$
58,396

$
812

$
(26
)
$
(14,914
)
$
(2,559
)
$
(985
)
$
167

$
(2,986
)
$
37,905

Three months ended June 30, 2017

Consolidated

Consolidated

MPF

Obligation

Obligation

Balance

Intermediary

Earnings Impact

Advances

Investments

Loans

Bonds

Discount Notes

Sheet

Positions

Other

Total

Amortization/accretion/interest accruals of hedging activities reported in net interest income

$
(42,811
)
$
—

$
(86
)
$
5,026

$
(7,901
)
$
—

$
—

$
—

$
(45,772
)
Net realized and unrealized gains (losses) on derivatives and hedging activities

Gains (losses) on fair value hedges

240

—

—

(1,442
)
—

—

—

—

(1,202
)
Gains (losses) on cash flow hedges

—

—

—

14

—

—

—

—

14

Net fair value gains (losses) and interest income on swaps in economic hedges of FVO instruments

—

—

—

145

53

—

—

—

198

Net gains (losses) on swaps and caps in other economic hedges

(45
)
9

210

3,562

10

(1,529
)
50

—

2,267

Price alignment interest paid on variation margin

—

—

—

—

—

—

—

(693
)
(693
)
Net realized and unrealized gains (losses) on derivatives and hedging activities (a)

195

9

210

2,279

63

(1,529
)
50

(693
)
584

Total earnings impact

$
(42,616
)
$
9

$
124

$
7,305

$
(7,838
)
$
(1,529
)
$
50

$
(693
)
$
(45,188
)

Impact on Other Income (loss)

Three months ended March 31,

2019

2018

Derivatives designated as hedging instruments under ASC 815

Interest rate swaps

Advances

$
(770
)
Consolidated obligation bonds

2,378

Net gains (losses) related to fair value hedges

1,608

Cash flow hedges

(95
)
ASC 815 Hedging impact

$
1,513

Derivatives not designated as hedging instruments

Interest rate swaps (a)

$
(10,890
)
$
(19,823
)
Caps or floors

(345
)
1,308

Mortgage delivery commitments

197

(184
)
Swaps economically hedging instruments designated under FVO

747

64

Accrued interest on swaps in economic hedging relationships

(1,989
)
442

Net gains (losses) related to derivatives not designated as hedging instruments

$
(12,280
)
$
(18,193
)
Price alignment interest paid on variation margin

—

(2,120
)
Net gains (losses) on derivatives and hedging activities

$
(12,280
)
$
(18,800
)

(a)         ~~Net realized and unrealized gains and~~In the 2019 period, losses on derivatives and hedging activities in the second quarter of 2018 recorded a net loss $5.3 million, compared to a net gain of $0.6 million in the same period in 2017. The primary components were : Price alignment interest(“PAI”)”, the interest expense paid on variation margin, was $3.0 million in the current year second quarter, compared to $0.7 million in the same period in 2017; hedging under ASC 815 recorded a netprimarily represented fair value ~~loss of $2.0 million in the current year second quarter, compared to a net fair value loss of $1.2 million in the same period in 2017; standalone derivatives~~changes on swaps executed in economic hedges ~~recorded a net loss of $0.6 million in the current year second quarter, compared~~ to ~~a net gain of $2.3 million in the same period in 2017.~~

Six months ended June 30, 2018

Consolidated

Consolidated

MPF

Obligation

Obligation

Balance

Intermediary

Earnings Impact

Advances

Investments

Loans

Bonds

Discount Notes

Sheet

Positions

Other

Total

Amortization/accretion/interest accruals of hedging activities reported in net interest income

$
67,953

$
—

$
(159
)
$
(13,217
)
$
(8,229
)
$
—

$
—

$
—

$
46,348

Net realized and unrealized gains (losses) on derivatives and hedging activities

Gains (losses) on fair value hedges

665

—

—

(1,043
)
—

—

—

—

(378
)
Gains (losses) on cash flow hedges

—

—

—

30

—

—

—

—

30

Net fair value gains (losses) and interest income on swaps in economic hedges of FVO instruments

—

—

—

(149
)
(12
)
—

—

—

(161
)
Net gains (losses) on swaps and caps in other economic hedges

248

2,831

(145
)
(21,924
)
—

326

194

—

(18,470
)
Price alignment interest paid on variation margin

—

—

—

—

—

—

—

(5,106
)
(5,106
)
Net realized and unrealized gains (losses) on derivatives and hedging activities (b)

913

2,831

(145
)
(23,086
)
(12
)
326

194

(5,106
)
(24,085
)

Total earnings impact

$
68,866

$
2,831

$
(304
)
$
(36,303
)
$
(8,241
)
$
326

$
194

$
(5,106
)
$
22,263

Six months ended June 30, 2017

Consolidated

Consolidated

MPF

Obligation

Obligation

Balance

Intermediary

Earnings Impact

Advances

Investments

Loans

Bonds

Discount Notes

Sheet

Positions

Other

Total

Amortization/accretion/interest accruals of hedging activities reported in net interest income

$
(98,961
)
$
—

$
(171
)
$
15,608

$
(16,073
)
$
—

$
—

$
—

$
(99,597
)
Net realized and unrealized gains (losses) on derivatives and hedging activities

Gains (losses) on fair value hedges

751

—

—

(2,382
)
—

—

—

—

(1,631
)
Gains (losses) on cash flow hedges

—

—

—

191

—

—

—

—

191

Net fair value gains (losses) and interest income on swaps in economic hedges of FVO instruments

11

—

—

(126
)
(858
)
—

—

—

(973
)
Net gains (losses) on swaps and caps in other economic hedges

52

61

439

6,568

(63
)
(3,595
)
108

—

3,570

Price alignment interest paid on variation margin

—

—

—

—

—

—

—

(1,275
)
(1,275
)
Net realized and unrealized gains (losses) on derivatives and hedging activities (b)

814

61

439

4,251

(921
)
(3,595
)
108

(1,275
)
(118
)

Total earnings impact

$
(98,147
)
$
61

$
268

$
19,859

$
(16,994
)
$
(3,595
)
$
108

$
(1,275
)
$
(99,715
)
~~(b)~~~~Net realized and unrealized gains and losses on derivatives and hedging activities in the year-to-date period ended June 30, 2018 recorded a net loss of $24.1 million, compared~~offset earnings volatility due to a net loss of $0.1 million in the same period in 2017. The primary components were: PAI expense was $5.1 million in the current year period, compared to $1.3 million in the same period in 2017; hedging under ASC 815 recorded a net fair value loss of $0.4 million in the current year period, compared to a net fair value loss of $1.6 million in the same period in 2017;standalone derivatives in economic hedges recorded a net loss of $18.5 million (primarily on interest rate basis swaps in economic hedges of floating-rate CO bonds indexed to the 1-month LIBOR), compared to a net fair value gain of $3.6 million in the same period in 2017.
~~Impact of Cash flow hedging on earnings and AOCI and Derivative gains and losses reclassified from AOCI to income.~~
~~The following table summarizes changes in derivative gains and (losses), including reclassifications into earnings from AOCI in the Statements of Condition (in thousands):~~
~~Table 1.13:~~~~Accumulated Other Comprehensive Income (Loss) to Current Period Income from Cash Flow Hedges~~

Three months ended June 30,

Six months ended June 30,

2018

2017

2018

2017

Accumulated other comprehensive income (loss) from cash flow hedges

Beginning of period

$
34,896

$
(36,623
)
$
(19,877
)
$
(47,018
)
Net hedging transactions (a)

23,157

(13,786
)
77,895

(3,700
)
Reclassified into earnings

(68
)
294

(33
)
603

End of period (b)

$
57,985

$
(50,115
)
$
57,985

$
(50,115
)
~~(a)~~Net hedging transactions represented changes in valuations recorded through AOCI. At June 30, 2018, valuation gains represented changes in fair values in the three and six months ended on that date. Valuation gains were unrealized and were consistent with higher long-term swap rates at June 30, 2018. At June 30, 2017, the valuation losses were in line with declining long-term swap rates.
Valuation changes recorded in AOCI were associated with the two cash flow programs described below, but primarily represented changes in fair values of swaps in the discount note cash flow hedging program. In this program, valuation changes are typically determined by changes in long-term swap rates; and generally, valuation gains will be recorded when long-term swap rates rise, and valuation losses will be recorded with decline in long-term swap rates.
~~(b)~~End of period balances represent effective portions of fair values of contracts that were open at period end. Ineffectiveness, if any associated with the open contracts were de minimis and were recorded through earnings. For more information, see table: Cash Flow hedges — Fair Value changes in AOCI Rollforward Analysis in financial statements Note 17. Derivatives and Hedging Activities.
~~The two Cash Flow hedging strategies were:~~
~~Hedges of anticipated issuances of Consolidated obligation bonds~~ — From time to time, we execute interest rate swaps on the anticipated issuance of debt to “lock-in” a spread between the earning asset that is expected to settle in a future period and the cost of funding. The swaps are structured to pay fixed-rate, receive LIBOR indexed cash flows. Open swap contracts are valued at the end of each reporting period and fair values are recorded in the balance sheet as a derivative asset or a liability, with an offset to AOCI. The effective portion of changesfluctuations in the fair values of fixed-rate trading securities. In the ~~swaps is recorded in AOCI. Ineffectiveness, if any, is recorded through earnings. In this program, the swap is typically terminated upon issuance of the debt instrument. The termination~~2018 period, losses primarily represented fair value ~~is recorded~~changes of basis swaps executed in ~~AOCI and reclassified~~economic hedges to ~~earnings in~~offset the ~~periods in which earnings are affected by the variability~~basis risk of ~~the cash flows of the~~floating-rate CO bonds. The basis swaps synthetically converted CO debt ~~that was issued. The maximum period of time that we typically hedge our exposure~~indexed to the ~~variability~~1-month LIBOR to 3-month LIBOR, a strategy that provided economic benefit in ~~future cash flows (for forecasted transactions to issue Consolidated obligation bonds) is between three and six months.~~
~~Hedges of discount note issuances~~managing our balance sheet. —In the ~~“rollover” cash flow hedge strategy,~~2018 period, the spread between the 1-month LIBOR and the 3-month LIBOR had widened unfavorably and adversely impacted fair values ~~of derivatives are recorded as a derivative asset or a liability in the balance sheet,~~ and ~~the effective portion is recorded as an offset to AOCI. The ineffective portion is recorded in earnings. The objective of this~~ cash flow strategy is to hedge the long-term issuances of Consolidated obligation discount notes, to eliminate the variability of cash flows attributable to changes in the benchmark interest rate (3-month LIBOR), and to create predictable long-term fixed-rate funding.
~~For more information about cash flow strategies, see financial statements, Note 17. Derivatives and Hedging Activities.~~flows.
Operating Expenses, Compensation and Benefits, and Other Expenses — ~~2018 Periods~~2019 First Quarter Compared to ~~2017 Periods~~2018 First Quarter

The following table sets forth the major categories of operating expenses (dollars in thousands):

Table ~~1.14:~~9.13:        Operating Expenses, and Compensation and Benefits

Three months ended June 30,

2018

Percentage of
Total

2017

Percentage of
Total

Operating Expenses (a)

Occupancy

$
2,229

19.56
%
$
1,394

13.03
%
Depreciation and leasehold amortization

1,249

10.96

1,150

10.75

All others (b)

7,915

69.48

8,154

76.22

Total Operating Expenses

$
11,393

100.00
%
$
10,698

100.00
%

Total Compensation and Benefits

$
17,489

$
16,623

Finance Agency and Office of Finance (c)

$
3,641

$
3,201

Other expenses (d)

$
1,986

$
1,008

Six months ended June 30,

Three months ended March 31,

2018

Percentage of
Total

2017

Percentage of
Total

2019

Percentage of
Total

2018

Percentage of
Total

Operating Expenses (a)

Occupancy

$
4,079

19.11
%
$
2,429

12.67
%

$
1,843

14.34
%
$
1,850

18.58
%
Depreciation and leasehold amortization

2,535

11.87

2,061

10.75

1,961

15.26

1,286

12.92

All others (b)

14,736

69.02

14,686

76.58

9,046

70.40

6,821

68.50

Total Operating Expenses

$
21,350

100.00
%
$
19,176

100.00
%

$
12,850

100.00
%
$
9,957

100.00
%

Total Compensation and Benefits(c)

$
36,257

$
33,989

$
21,438

$
18,768

Finance Agency and Office of Finance ~~(c)~~(d)

$
7,900

$
6,977

$
3,942

$
4,259

Other expenses ~~(d)~~(e)

$
3,521

$
2,016

$
2,350

$
1,535

(a)         Operating expenses included the administrative and overhead costs of operating the FHLBNY, as well as the operating costs of providing advances and managing collateral associated with the advances, managing the investment portfolios, and providing correspondent banking services to members. ~~Occupancy expense has increased in line with new long-term lease agreements effective beginning in the second half of 2017.~~
(b)         The category “All others” included temporary workers, computer service agreements, contractual services, professional and legal fees, audit fees, director fees and expenses, insurance and telecommunications. Expenses ~~decreased~~increased in ~~the second quarter of~~ the current year periods primarily due to ~~decline in legal fees. In the year-to-date period in 2018,~~consulting expenses ~~increased due~~ to ~~increases in expenditures on computer service agreements and contractual services.~~begin implementation of a multi-year technology enhancement plan.
(c)Compensation expense increased driven by investments in headcount.
(d)         We are also assessed for our share of the operating expenses for the Finance Agency and the Office of Finance. The FHLBanks and two other GSEs share the entire cost of the Finance Agency. Expenses are allocated by the Finance Agency and the Office of Finance.
~~(d)~~(e)          The category Other expenses included contributions to homeowners and small businesses under a newly established hurricane relief grant program, the non-service elements of Net periodic pension benefit ~~costs.~~costs, and derivative clearing fees.
Assessments — ~~2018 Periods~~2019 First Quarter Compared to ~~2017 Periods~~2018 First Quarter

For more information about assessments, see Affordable Housing Program and Other Mission Related Programs and Assessments under Part I Item 1 Business in the most recent Form 10-K filed on March ~~22, 2018.~~21, 2019.

The following table provides rollforward information with respect to changes in ~~AHP~~Affordable Housing Program liabilities (in thousands):

Table ~~2.1:~~10.1:        ~~Affordable Housing Program Liabilities~~Advance Trends

Three months ended June 30,

Six months ended June 30,

2018

2017

2018

2017

Beginning balance

$
137,256

$
117,812

$
131,654

$
125,062

Additions from current period’s assessments

17,274

14,573

31,336

22,347

Net disbursements for grants and programs

(5,226
)
(11,103
)
(13,686
)
(26,127
)
Ending balance

$
149,304

$
121,282

$
149,304

$
121,282

Advance Trends

AHP assessments allocated from net income totaled $17.3 million for the quarter ended June 30, 2018, compared to $14.6 million for the same period in the prior year. On a year-to-date basis, AHP assessments allocated from net income totaled $31.3 million for the 2018 period, compared to $22.3 million for the prior year period. Assessments are calculated as a percentage of Net income, and the changes in allocations were in parallel with changes in Net income.
~~Financial Condition~~Member demand for advance products
Par amount of advances outstanding was $99.2 billion at March 31, 2019, compared to $105.4 billion at December 31, 2018. The decrease in amounts outstanding at March 31, 2019, relative to December 31, 2018 has been largely due to maturities and prepayments.
Advances — Product Types
The following table summarizes par values of advances by product type (dollars in thousands):
Table 2.2:Advances by Product Type
For more information about advance product types, see our most recent Form 10-K filed on March 21, 2019.

March 31, 2019

December 31, 2018

Percentage

Percentage

Amounts

of Total

Amounts

of Total

Adjustable Rate Credit - ARCs

$
21,206,467

21.39
%
$
23,346,467

22.14
%
Fixed Rate Advances

49,282,324

49.70

51,612,602

48.96

Short-Term Advances

18,234,275

18.39

14,995,172

14.22

Mortgage Matched Advances

299,556

0.30

320,027

0.30

Overnight & Line of Credit (OLOC) Advances

2,823,256

2.84

7,723,492

7.33

All other categories

7,316,485

7.38

7,436,097

7.05

Total par value

99,162,363

100.00
%
105,433,857

100.00
%

Hedge valuation basis adjustments

(29,968
)

(255,024
)

Total

$
99,132,395

$
105,178,833

Advances — Interest Rate Terms
The following table summarizes interest-rate payment terms for advances (dollars in thousands):
Table 2.3:Advances by Interest-Rate Payment Terms

March 31, 2019

December 31, 2018

Percentage

Percentage

Amount

of Total

Amount

of Total

Fixed-rate (a)

$
77,925,839

78.59
%
$
82,034,884

77.81
%
Variable-rate (b)

21,233,396

21.41

23,391,691

22.19

Variable-rate capped or floored (c)

3,000

—

3,000

—

Overdrawn demand deposit accounts

128

—

4,282

—

Total par value

99,162,363

100.00
%
105,433,857

100.00
%

Hedge valuation basis adjustments

(29,968
)

(255,024
)

Total

$
99,132,395

$
105,178,833

(a)Fixed-rate borrowings remained the largest category of advances borrowed by members, and includes long-term and short-term fixed-rate advances. Long-term advances remain a small segment of the portfolio at March 31, 2019, with only 7.2% of advances in the remaining maturity bucket of greater than 5 years (6.7% at December 31, 2018). For more information, see financial statements Note 9. Advances.
(b)Variable-rate advances are ARC advances, which are typically indexed to LIBOR. The FHLBNY’s larger members are generally borrowers of variable-rate advances.
(c)Category represents ARCs with options that “cap” increase or “floor” decrease in the LIBOR index at predetermined strikes (We have also purchased cap/floor options that mirror the terms of the options embedded in the advances sold to members, offsetting our exposure on the advance).
The following table summarizes maturity and yield characteristics of advances (dollars in thousands):
Table 2.4:Advances by Maturity and Yield Type

March 31, 2019

December 31, 2018

Percentage

Percentage

Amount

of Total

Amount

of Total

Fixed-rate

Due in one year or less

$
52,235,093

52.68
%
$
52,416,990

49.72
%
Due after one year

25,690,746

25.91

29,617,894

28.09

Total Fixed-rate

77,925,839

78.59

82,034,884

77.81

Variable-rate

Due in one year or less

17,675,057

17.82

15,892,506

15.07

Due after one year

3,561,467

3.59

7,506,467

7.12

Total Variable-rate

21,236,524

21.41

23,398,973

22.19

Total par value

99,162,363

100.00
%
105,433,857

100.00
%

Hedge valuation basis adjustments (a)

(29,968
)

(255,024
)

Total

$
99,132,395

$
105,178,833

Fair value basis and valuation adjustments — Key determinants of valuation adjustments are factors such as advance run offs and new transactions designated in hedging relationships.
(a)Hedging valuation basis adjustments — The reported carrying values of hedged advances are adjusted for changes in their fair values (fair value basis adjustments or fair value) that are attributable to changes in the benchmark risk being hedged. LIBOR is our primary benchmark. In the current year quarter we adopted FF/OIS as another benchmark. The chosen benchmark becomes the discounting basis under ASC 815 for computing changes in fair values for hedged advances. Table 2.5 Hedged Advances by Type discloses notional amounts of advances hedged. The application of ASC 815 accounting methodology resulted in the recognition of net unrealized hedge valuation basis losses of $30.0 million and $255.0 million at March 31, 2019 and December 31, 2018. The forward LIBOR yield curve declined steeply at March 31, 2019. As hedge valuation basis of fixed-rate advances move inversely with the rise and fall of the forward interest rates, the sharp decline of the swap curve largely reversed previously reported cumulative basis losses. Generally, hedge valuation basis gains and losses are unrealized and will reverse to zero if the advance is held to maturity or is put or called on the early option exercise dates.
Hedge volume — We hedge putable advances and certain “bullet” fixed-rate advances under the hedge accounting provisions when they qualify under those standards and as economic hedges when the hedge accounting provisions are operationally difficult to establish or a high degree of hedge effectiveness cannot be asserted.
The following table summarizes hedged advances by type of option feature (in thousands):
Table 2.5:Hedged Advances by Type
Par Amount

March 31, 2019

December 31, 2018

Qualifying Hedges

Fixed-rate bullets (a)

$
37,788,050

$
41,122,372

Fixed-rate putable (b)

4,926,750

4,734,750

Fixed-rate callable

16,575

16,575

Fixed-rate with embedded cap

30,000

30,000

Total Qualifying Hedges

$
42,761,375

$
45,903,697

Aggregate par amount of advances hedged (c)

$
42,764,375

$
45,919,697

Fair value basis (Qualifying hedging adjustments)

$
(29,968
)
$
(255,024
)
(a)Generally, non-callable fixed-rate medium- and longer term advances are hedged to mitigate the risk in fixed-rate lending.
(b)Putable advances are hedged by cancellable swaps, and the paired long put and short call options mitigate the put/call option risks; additionally, fixed-rate is synthetically converted to LIBOR, mitigating the risk in fixed-rate lending for the FHLBNY. In a rising rate environment, swap dealers would likely exercise their call option, and the FHLBNY will exercise its put option with the member and both instruments terminate at par. Members may borrow new advances at the then prevailing rate.
(c)Represents par values of advances in ASC 815 qualifying hedge relationships. Typically, the longer term fixed-rate advances and advances with optionality are hedged.
The following table summarizes par amounts of advances that were still putable or callable, with one or more pre-determined option exercise dates remaining (in thousands):
Table 2.6:Putable and Callable Advances

Advances

Par Amount

March 31, 2019

December 31, 2018

Putable/callable (a)

$
4,943,325

$
4,751,325

No-longer putable/callable

$
645,000

$
640,000

(a)Putable advances were typically long-term advances with one or more put options exercisable by the FHLBNY. The increase primarily represents one member’s borrowing.
Investments
We maintain long-term investment portfolios of debt securities, which are principally mortgage-backed securities issued by GSEs and U.S. Agency (GSE-issued). Investments include a small portfolio of MBS issued by private enterprises, and bonds issued by state or local housing finance agencies. We also maintain short-term investments for our liquidity resources, for funding daily stock repurchases and redemptions, for ensuring the availability of funds to meet the credit needs of our members, and to provide additional earnings. We also invest in a liquidity trading portfolio, the purpose of which is to augment our liquidity needs. Investments in the trading portfolio were U.S Treasury securities and GSE-issued securities, all carried at their fair values. The Finance Agency prohibits speculative investments, but allows the designation of a trading portfolio for liquidity purposes. We may dispose such investments if liquidity needs are met and market conditions deem the sale as advantageous.
We are subject to credit risk on our investments, generally transacted with GSEs and large financial institutions that are considered to be investment quality. The Finance Agency defines investment quality as a security with adequate financial backing so that full and timely payment of principal and interest on such security is expected and there is minimal risk that the timely payment of principal and interest would not occur because of adverse changes in economic and financial conditions during the projected life of the security. For more information about investment policies, restrictions and practices, see the most recent Form 10-K filed on March 21, 2019.
The following table summarizes changes in investments by categories: Money market investments, Trading securities, Equity investments in Grantor trusts, Available-for-sale securities and Held-to-maturity securities (Carrying values, dollars in thousands):

Table 3.1:               ~~Statements of Condition — Period-Over-Period Comparison~~Investments by Categories

Net change in

Net change in

(Dollars in thousands)

June 30, 2018

December 31, 2017

dollar amount

percentage

Assets

Cash and due from banks

$
158,300

$
127,403

$
30,897

24.25
%
Securities purchased under agreements to resell

4,945,000

2,700,000

2,245,000

83.15

Federal funds sold

14,887,000

10,326,000

4,561,000

44.17

Trading securities

3,766,579

1,641,568

2,125,011

129.45

Equity Investments

50,116

—

50,116

NM

Available-for-sale securities

479,954

577,269

(97,315
)
(16.86
)
Held-to-maturity securities

18,139,926

17,824,533

315,393

1.77

Advances

110,782,004

122,447,805

(11,665,801
)
(9.53
)
Mortgage loans held-for-portfolio

2,887,473

2,896,976

(9,503
)
(0.33
)
Accrued interest receivable

288,019

226,981

61,038

26.89

Premises, software, and equipment

35,232

29,697

5,535

18.64

Derivative assets

130,947

112,742

18,205

16.15

Other assets

9,938

7,398

2,540

34.33

Total assets

$
156,560,488

$
158,918,372

$
(2,357,884
)
(1.48
)%

Liabilities

Deposits

Interest-bearing demand

$
1,130,636

$
1,142,056

$
(11,420
)
(1.00
)%
Non-interest-bearing demand

20,903

17,999

2,904

16.13

Term

39,500

36,000

3,500

9.72

Total deposits

1,191,039

1,196,055

(5,016
)
(0.42
)

Consolidated obligations

Bonds

101,391,992

99,288,048

2,103,944

2.12

Discount notes

45,470,462

49,613,671

(4,143,209
)
(8.35
)
Total consolidated obligations

146,862,454

148,901,719

(2,039,265
)
(1.37
)

Mandatorily redeemable capital stock

17,707

19,945

(2,238
)
(11.22
)

Accrued interest payable

198,701

162,176

36,525

22.52

Affordable Housing Program

149,304

131,654

17,650

13.41

Derivative liabilities

14,453

61,607

(47,154
)
(76.54
)
Other liabilities

204,300

204,178

122

0.06

Total liabilities

148,637,958

150,677,334

(2,039,376
)
(1.35
)

Capital

7,922,530

8,241,038

(318,508
)
(3.86
)

Total liabilities and capital

$
156,560,488

$
158,918,372

$
(2,357,884
)
(1.48
)%

March 31,

December 31,

Dollar

Percentage

2019

2018

Variance

Variance

State and local housing finance agency obligations (a)

$
1,168,000

$
1,168,350

$
(350
)
(0.03
)%
Trading securities (b)

7,210,635

5,810,512

1,400,123

24.10

Mortgage-backed securities

Available-for-sale securities, at fair value (c)

2,185,968

422,216

1,763,752

417.74

Held-to-maturity securities, at carrying value (c)

14,460,971

16,306,476

(1,845,505
)
(11.32
)
Total securities

25,025,574

23,707,554

1,318,020

5.56

Equity investments in Grantor trusts (d)

53,982

48,179

5,803

12.04

Securities purchased under agreements to resell

5,590,000

4,095,000

1,495,000

36.51

Federal funds sold

9,137,000

7,640,000

1,497,000

19.59

Total Investments

$
39,806,556

$
35,490,733

$
4,315,823

12.16
%

~~NM — Not meaningful.~~(a)
~~Balance Sheet overview June 30, 2018~~State and ~~December 31, 2017~~
~~Total assets decreased to $156.6 billion at June 30, 2018 from $158.9 billion at December 31, 2017, a decrease of $2.3 billion, or 1.5%.~~
~~Cash at banks was $158.3 million at June 30, 2018, compared to~~ ~~$127.4 million at December 31, 2017.~~
~~Money market investments at June~~ 30, 2018 were $14.9 billion in federal funds sold and $4.9 billion in overnight resale agreements. At December 31, 2017, money market investments were $10.3 billion in federal funds sold and $2.7 billion in overnight resale agreements. Market yields for overnight and term money market investments have improved, creating opportunities for earning a positive margin, and at the same time fulfilling our liquidity targets.
~~Advances~~ — Par balances decreased at June 30, 2018 to $111.4 billion, compared to $122.7 billion at December 31, 2017. Short-term fixed-rate advances decreased by 24.6% to $18.0 billion at June 30, 2018, down from $23.8 billion at December 31, 2017. ARC advances, which are adjustable-rate borrowings, decreased by 19.2% to $29.9 billion at June 30, 2018, compared to $37.1 billion at December 31, 2017.
~~Long-term investment debt securities~~ — Long-term investment debt securities are designated as available-for-sale (“AFS”) or held-to-maturity (“HTM”). The heavy concentration of GSE and Agency issued (“GSE-issued”) securities, and a declining balance of private-label MBS, less than 1%, is our investment profile.
~~In the AFS portfolio, long-term investments at June~~ ~~30, 2018 were floating-rate GSE-issued mortgage-backed securities carried on the balance sheet at fair values of $480.0 million, compared to $528.6 million at December 31, 2017.~~
~~In the HTM portfolio, long-term investments at June~~ ~~30, 2018 were predominantly GSE-issued fixed- and floating-rate mortgage-backed securities and~~local housing finance agency ~~bonds. Securities~~bonds were designated as HTM and were carried at amortized cost. There were no new acquisitions in the first quarter of 2019 and paydowns were $0.4 million.
(b)Trading securities were U.S. Treasury securities, GSE securities and corporate notes. Trading portfolio is for liquidity and not for speculative purposes. We acquired par amounts of $2.8 billion of U.S. Treasury notes in the first quarter of 2019.
(c)Mortgage-backed securities classified as AFS includes $1.6 billion of Fixed-rate CMBS transferred at January 1, 2019 from the HTM category; $150.0 million was acquired and designated as AFS in the first three months of 2019. AFS securities outstanding are all GSE and U.S. Agency issued MBS and carried at fair value. Mortgage-backed securities classified as HTM — $504.6 million of GSE-issued MBS were acquired in the first quarter of 2019 and designated as HTM. MBS in the HTM portfolio are ~~recorded~~predominantly GSE-issued, and less than 1% are PLMBS (private-label MBS).
(d)Funds in the grantor trusts were designated as equity investments at January 1, 2018. In the first quarter of 2019, investments made were $1.9 million and payouts to retirees were $0.5 million. Trust fund balances represent investments in registered mutual funds and other fixed-income and equity funds. Funds are highly liquid and readily redeemable at their NAVs, which are the fair values of the investments. The funds are owned by the FHLBNY, and the intent is to utilize investments to fund current and potential future payment obligations of the non-qualified Benefit Equalization Pension plans. For more information about the pension plans, see financial statements, Note 16. Employee Retirement Plans in the Bank’s most recent Form 10-K filed on March 21, 2019.
Mortgage-Backed Securities — By Issuer
The following table summarizes our investment debt securities issuer concentration (dollars in thousands):
Table 3.2:Investment Debt Securities Issuer Concentration

March 31, 2019

December 31, 2018

Carrying value as a

Carrying value as a

Carrying (a)

Percentage

Carrying (a)

Percentage

Long Term Investment (c)

Value

Fair Value

of Capital

Value

Fair Value

of Capital

MBS

Fannie Mae

$
4,475,893

$
4,476,620

60.69
%
$
4,692,639

$
4,658,771

60.58
%
Freddie Mac

12,022,956

12,113,987

163.03

11,870,521

11,867,028

153.23

Ginnie Mae

21,860

22,027

0.30

22,898

23,079

0.30

All Others - PLMBS

126,230

156,530

1.71

142,634

174,749

1.84

Non-MBS (b)

1,168,000

1,145,523

15.84

1,168,350

1,144,345

15.08

Total Investment Debt Securities

$
17,814,939

$
17,914,687

241.57
%
$
17,897,042

$
17,867,972

231.03
%

Categorized as:

Available-for-Sale Securities

$
2,185,968

$
2,185,968

$
422,216

$
422,216

Held-to-Maturity Securities

$
15,628,971

$
15,728,719

$
17,474,826

$
17,445,756

(a)Carrying values include fair values for AFS securities.
(b)Non-MBS — Includes Housing finance agency bonds.
(c)Excludes Trading portfolio.
External rating information of the held-to-maturity portfolio was as follows (carrying values in thousands):
Table 3.3:External Rating of the Held-to-Maturity Portfolio

March 31, 2019

AAA-rated (a)

AA-rated (b)

A-rated

BBB-rated

Below
Investment
Grade

Total

Mortgage-backed securities

$
892

$
14,336,058

$
81,306

$
8,948

$
33,767

$
14,460,971

State and local housing finance agency obligations

25,000

1,121,710

5,575

15,715

—

1,168,000

Total Long-term securities

$
25,892

$
15,457,768

$
86,881

$
24,663

$
33,767

$
15,628,971

December 31, 2018

AAA-rated (a)

AA-rated (b)

A-rated

BBB-rated

Below
Investment
Grade

Total

Mortgage-backed securities

$
2,543

$
16,165,160

$
95,760

$
9,117

$
33,896

$
16,306,476

State and local housing finance agency obligations

25,000

1,122,060

5,575

15,715

—

1,168,350

Total Long-term securities

$
27,543

$
17,287,220

$
101,335

$
24,832

$
33,896

$
17,474,826

See footnotes (a) and (b) under Table 3.4.
External rating information of the AFS portfolio was as follows (the carrying values of AFS investments are at fair values; in thousands):
Table 3.4:External Rating of the Available-for-Sale Portfolio

March 31, 2019

December 31, 2018

AA-rated (b)

Unrated

Total

AA-rated (b)

Unrated

Total

Available-for-sale securities

Mortgage-backed securities

$
2,185,968

$
—

$
2,185,968

$
422,216

$
—

$
422,216

Footnotes to Table 3.3 and Table 3.4.
(a)Certain PLMBS and housing finance bonds have been assigned AAA, based on the ratings by S&P and Moody’s.
(b)We have assigned GSE-issued MBS a rating of AA+ based on the credit rating assigned to long-term senior debt issued by Fannie Mae, Freddie Mac and U.S. Agency. The debt ratings are based on S&P’s rating of AA+ for the GSE Senior long-term debt and AA+ for the debt issued by the U.S. government; Moody’s debt rating is Aaa for the GSE Senior long-term debt and the U.S. government.
External credit rating information has been provided in Table 3.3 and Table 3.4 as the information is used as another data point to supplement our credit quality indicators, and they serve as a useful indicator when analyzing the degree of credit risk to which we are exposed. Significant changes in credit ratings classifications of our investment debt securities portfolio could indicate increased credit risk for us that could be accompanied by a reduction in the fair values of our investment debt securities portfolio.
Fair Value Levels of Investment Debt Securities, and Unrecognized and Unrealized Holding Losses
To compute fair values, multiple vendor prices were received for substantially all of our MBS holdings, and substantially all of those prices fell within specified thresholds. The relative proximity of the prices received from the multiple vendors supported our conclusion that the final computed prices were reasonable estimates of fair values. GSE securities priced under such a valuation technique using the market approach are typically classified within Level 2 of the valuation hierarchy. For a comparison of carrying values and fair values of investment debt securities, see financial statements, Note 5. Trading securities, Note 7. Available-for-Sale Securities and Note 8. Held-to-Maturity Securities. For more information about the corroboration and other analytical procedures performed, see Note 18. Fair Values of Financial Instruments.
Weighted average rates — Mortgage-backed securities (HTM and AFS) — The following table summarizes weighted average rates and amortized cost ~~adjusted for any OTTI. Fixed-~~by contractual maturities (dollars in thousands):
Table 3.5:Mortgage-Backed Securities Weighted Average Rates by Contractual Maturities

March 31, 2019

December 31, 2018

Amortized

Weighted

Amortized

Weighted

Cost

Average Rate

Cost

Average Rate

Mortgage-backed securities

Due in one year or less

$
318,755

3.17
%
$
369,989

2.03
%
Due after one year through five years

4,403,458

3.15

4,602,651

3.16

Due after five years through ten years

8,477,477

3.18

8,201,200

3.07

Due after ten years

3,421,311

3.12

3,561,879

3.11

Total mortgage-backed securities

$
16,621,001

3.16
%
$
16,735,719

3.08
%
A significant portion of the MBS portfolio consists of floating-rate securities and ~~floating-rate mortgage-backed securities (“MBS”), including PLMBS,~~the weighted average rates will change in parallel with changes in the ~~HTM~~LIBOR rate.
Fair Value Hedges of Fixed-rate Available-for-sale Mortgage-backed Securities
The adoption of ASU 2017-12 provided a new approach, called the last-of-layer method for hedging prepayable assets in a closed portfolio ~~were $16.9~~of prepayable fixed-rate instruments. The approach incorporates new measurement elections by using benchmark rate components of contractual coupon cash flows in a partial-term hedge of a prepayable asset. The following table summarizes key data in last-of-layer fair value hedge under the ASU (in thousands):
Table 3.6:Fair Value Hedges of Fixed-Rate Prepayable CMBS

Fair Value Hedges of
Fixed-Rate Prepayable
CMBS

March 31, 2019

Current face value of hedged CMBS

$
150,000

Last-of-layer face value of hedged CMBS

$
127,500

Cumulative basis adjustment (Loss)

$
(1,893
)
Interest rate swap contracts (par)

$
127,500

OTTI — Base Case and Adverse Case Scenario
We evaluated our PLMBS under a base case (or best estimate) scenario by performing a cash flow analysis for each security under assumptions that forecasted increased credit default rates or loss severities, or both. The stress test scenario and associated results do not represent our current expectations and therefore should not be construed as a prediction of future results, market conditions or the actual performance of these securities. Cash flow analysis in the first quarter of 2019 identified no OTTI on previously impaired private-label MBS or in the same quarter in 2018.
Short-term investments
We typically maintain substantial investments in high quality short- and intermediate-term financial instruments such as secured overnight transactions collateralized by securities, and unsecured overnight and term federal funds sold to highly-rated financial institutions who also satisfy other credit quality factors. These investments provide the liquidity necessary to meet members’ credit needs. Short-term investments also provide a flexible means of implementing the asset/liability management decisions to adjust liquidity. We also invest in a liquidity trading portfolio with the objective of expanding our choice of investing for liquidity.
Monitoring — We actively monitor our credit exposures and the credit quality of our counterparties, including an assessment of each counterparty’s financial performance, capital adequacy, and sovereign support as well as related market signals, and actively limit or suspend existing exposures, as appropriate. In addition, we are required to manage our unsecured portfolio subject to regulatory limits, prescribed by the Finance Agency, our regulator. The Finance Agency regulations include limits on the amount of unsecured credit that may be extended to a counterparty or a group of affiliated counterparties, based upon a percentage of eligible regulatory capital and the counterparty’s overall credit rating. Under these regulations, the level of eligible regulatory capital is determined as the lesser of our regulatory capital or the eligible amount of regulatory capital of the counterparty determined in accordance with Finance Agency regulations.
The Finance Agency regulations also permit us to extend additional unsecured credit, which could be comprised of overnight extensions and sales of federal funds subject to continuing contract. Our total unsecured overnight exposure to a single counterparty may not exceed twice the regulatory limit for term exposures. We are prohibited by Finance Agency regulation from investing in financial instruments issued by non-U.S. entities other than those issued by U.S. branches and agency offices of foreign commercial banks, and we did not own any financial instruments issued by foreign sovereign governments, including those countries that are members of the European Union in any periods in this report. For more information about our policies and practices, see the most recent Form 10-K filed on March 21, 2019.
Securities purchased under agreements to resell — As part of our banking activities with counterparties, we have entered into secured financing transactions that mature overnight, and can be extended only at our discretion. These transactions involve the lending of cash against securities, which are accepted as collateral. The balance outstanding under such agreements was $5.6 billion at ~~June 30, 2018~~March 31, 2019 and ~~$16.7~~$4.1 billion at December 31, ~~2017. Investments in PLMBS were less than 1% of the HTM portfolio. We acquired $820.2 million of fixed-rate GSE-issued MBS~~2018. For more information, see financial statements, Note 4. Federal Funds Sold and ~~$938.3 million of floating-rate GSE-issued MBS in the six months of 2018.~~Securities Purchased under Agreements to Resell.

~~In the HTM portfolio,~~Federal funds sold ~~housing finance agency bonds, primarily New York and New Jersey, were carried at an amortized cost basis of $1.2~~— Federal funds sold was $9.1 billion at ~~June 30, 2018~~March 31, 2019 and ~~$1.1~~$7.6 billion at December 31, ~~2017.~~2018, representing unsecured lending to major banks and financial institutions. We ~~acquired $100.0 million~~are a major lender in this market, particularly in the ~~first six months~~overnight market. The amount of ~~2018~~unsecured credit risk that may be extended to individual counterparties is commensurate with the counterparty’s credit quality as assessed by our management, and ~~paydowns were $14.8 million. In~~ the ~~same period in 2017, we acquired $61.5 million in housing finance bonds~~assessment would include reviews of credit ratings of counterparty’s debt securities or deposits as reported by NRSROs. Overnight and ~~paydowns were $9.8 million.~~short-term federal funds allow us to warehouse funds and provide balance sheet liquidity to meet unexpected member borrowing demands.

~~Trading securities (liquidity portfolio)~~ — The ~~objective~~following table summarizes par value, amortized cost and the carrying value (fair value) of the trading portfolio is to meet short-term contingency liquidity needs. We invested in highly liquid U.S. Treasury bills, U.S. Treasury notes and GSE-issued securities. Trading investments are carried at fair value, with changes recorded through earnings. At June 30, 2018, trading investments were, $3.0 billion in U.S. Treasury notes, $773.8 million in GSE securities, and $3.7 million in Ambac corporate notes. We acquired $2.0 billion of U.S. Treasury notes, and $421.7 million in GSE securities in the first six months of 2018. Ambac corporate notes par $3.4 million were received from the Ambac Corporation as consideration for insurance claims on certain PLMBS. At December 31, 2017, trading investments were $239.1 million in U.S. Treasury bills, $1.0 billion in U.S. Treasury notes and $356.9 million in GSE securities.(in thousands):

~~We will periodically evaluate our liquidity needs and may dispose these liquidity investments as deemed prudent based on liquidity and market conditions.~~ Table 3.7:Trading Securities

Trading Securities

March 31, 2019

December 31, 2018

Par value

$
7,243,133

$
5,692,263

Amortized cost

$
7,190,942

$
5,807,889

Carrying/Fair value

$
7,210,635

$
5,810,512

The Finance Agency prohibits speculative ~~trading practices~~investments but allows permitted securities to be deemed held for liquidity if invested in a trading portfolio. We may dispose such investments if liquidity needs are met and market conditions deem the sale as advantageous. For more information about fair values of securities in the trading portfolio, see Note 5. Trading Securities in the Notes to the Financial Statements.
The following table summarizes economic hedges of fixed-rate trading securities held for liquidity (in thousands):

~~Equity Investments~~ Table 3.8:~~— We own grantor trusts that invest~~Economic Hedges of Fixed-rate Liquidity Trading Securities

Economic Hedges of Fixed-Rate Trading Securities

March 31, 2019

December 31, 2018

Par amount of securities hedged

$
7,240,000

$
5,839,130

Par amount of interest rate swaps

$
7,240,000

$
5,839,130

Mortgage Loans Held-for-Portfolio
Mortgage loans are carried in ~~highly-liquid registered mutual funds, which were reclassified as~~the Statements of ~~January 1, 2018~~Condition at amortized cost, less allowance for credit losses. The outstanding unpaid principal balance was $2.9 billion at March 31, 2019, an increase of $13.7 million (net of acquisitions and paydowns) from ~~AFS to Equity Investments. These investments were carried on~~ the balance ~~sheet~~ at ~~fair values of $50.1 million at June 30, 2018. At~~ December 31, ~~2017, the funds were classified as AFS and carried at fair values of $48.6 million.~~
~~Mortgage loans held-for-portfolio~~ —2018. Mortgage loans were investments in Mortgage Partnership Finance loans ~~(“MPF”~~(MPF or ~~“MPF Program”). Unpaid principal balance of~~ MPF Program).
Mortgage Partnership Finance Program —- We invest in mortgage loans ~~stood at $2.8 billion at June 30, 2018, slightly lower than $2.9 billion at December 31, 2017. Loans are primarily fixed-rate, single-family mortgages acquired~~ through the MPF ~~Program. Paydowns~~Program, which is a secondary mortgage market structure under which eligible mortgage loans are purchased or funded from or through members who are Participating Financial Institutions (PFI). We may also acquire MPF loans through participations with other FHLBanks, although our current acquisition strategy is to limit acquisitions through our PFIs. MPF loans are conforming conventional and Government i.e., insured or guaranteed by the Federal Housing Administration (FHA), the Department of Veterans Affairs (VA) or the Rural Housing Service of the Department of Agriculture (RHS), fixed-rate mortgage loans secured primarily by single-family residential properties with maturities ranging from five to 30 years or participations in such mortgage loans. The FHLBank of Chicago (MPF Provider) developed the MPF Program in order to help fulfill the housing mission and to provide an additional source of liquidity to FHLBank members that choose to sell mortgage loans into the secondary market rather than holding them in their own portfolios. Finance Agency regulations define the acquisition of Acquired Member Assets (AMA) as a core mission activity of the FHLBanks. In order for MPF loans to meet the AMA requirements, the purchase and funding are structured so that the credit risk associated with MPF loans is shared with PFIs. For more information about the MPF program, see Mortgage Loans Held-for-Portfolio in the ~~six months of 2018 were $128.6 million, compared to $128.5 million~~MD&A in the ~~prior year same period. Acquisitions in the six months of 2018 were $122.2 million, compared~~Bank’s most recent Form 10-K filed on March 21, 2019.
We provide this product to ~~$233.5 million in the prior year same period. Credit performance has been strong and delinquency low.~~members as another alternative for them to sell their mortgage production. Loan origination by members and acceptable pricing are key factors that drive ~~acquisitions. Residential collateral values have remained stable~~growth.
Mortgage loans — Conventional and Insured Loans — The following table classifies mortgage loans between conventional loans and loans insured by FHA/VA (in thousands):
Table 4.1:MPF by Conventional and Insured Loans

March 31, 2019

December 31, 2018

Federal Housing Administration and Veteran Administration insured loans

$
223,921

$
227,268

Conventional loans

2,673,205

2,656,149

Total par MPF loans

$
2,897,126

$
2,883,417

Mortgage Loans — Loss Sharing and the Credit Enhancement Waterfall — For all loans acquired prior to June 1, 2017, the credit enhancement was computed as the amount that would bring an uninsured loan to “Double A” credit risk. For loans acquired after June 1, 2017, the credit enhancement is computed to a “Single A” credit risk. In the credit enhancement waterfall, we are responsible for the first loss layer. The second loss layer is the credit obligation of the PFI. We assume all residual risk. Also, see financial statements, Note 10. Mortgage Loans Held-for-Portfolio.
Loan and PFI Concentration — Loan concentration was in ~~the~~ New York State, which is to be expected since the largest PFIs are located in New York. The tables below summarize concentrations — Geographic and ~~New Jersey sectors, the primary geographic concentration for our~~PFI:
Table 4.2:Geographic Concentration of MPF ~~portfolio, and historical loss experience remains very low.~~Loans

March 31, 2019

December 31, 2018

Number of
loans %

Amounts
outstanding %

Number of
loans %

Amounts
outstanding %

New York State

68.8
%
60.6
%
68.8
%
60.4
%
Table 4.3:Top Five Participating Financial Institutions — Concentration (par value, dollars in thousands)

March 31, 2019

Mortgage

Percent of Total

Loans

Mortgage Loans

Bethpage Federal Credit Union

$
270,908

9.35
%
New York Community Bank

253,807

8.76

Investors Bank

244,701

8.45

Sterling National Bank

234,398

8.09

Teachers Federal Credit Union

184,354

6.36

All Others

1,708,958

58.99

Total

$
2,897,126

100.00
%

December 31, 2018

Mortgage

Percent of Total

Loans

Mortgage Loans

Bethpage Federal Credit Union

$
260,593

9.04
%
New York Community Bank

256,992

8.91

Investors Bank

242,164

8.40

Sterling National Bank

238,840

8.28

Teachers Federal Credit Union

183,052

6.35

All Others

1,701,776

59.02

Total

$
2,883,417

100.00
%
Accrued interest receivable
Other assets
Accrued interest receivable was $327.5 million at March 31, 2019 and $275.3 million at December 31, 2018, and represented interest receivable primarily from advances and investments. Changes in balances would represent the timing of coupons receivable from advances and investments at the balance sheet dates.
Other assets, including prepayments and miscellaneous receivables, were $6.5 million and $8.6 million at March 31, 2019 and December 31, 2018.
Debt Financing Activity and Consolidated Obligations
Our primary source of funds continues to be the issuance of Consolidated obligation bonds and discount notes.
Consolidated obligation bonds — The carrying value of Consolidated obligation bonds (CO bonds or Consolidated obligation bonds) was $80.1 billion (par, $79.7 billion) at March 31, 2019, compared to $84.2 billion (par, $83.8 billion) at December 31, 2018. The carrying value of Consolidated obligation discount notes outstanding was $53.0 billion at March 31, 2019 and $50.6 billion at December 31, 2018.

~~Stress test results~~ Interest rate hedging —~~— Pursuant to~~ Significant amounts of CO bonds have been designated under an ASC 815 fair value accounting hedge. Also, certain CO bonds were hedged by interest rate swaps in economic hedges. From time-to-time, we have also hedged the ~~Dodd-Frank Act,~~anticipatory issuance of fixed-rate CO bonds in a cash flow hedge under ASC 815. Certain CO bonds were elected under the FHFA, regulator of the Federal Home Loan Banks (FHLBanks), has adopted supervisory stress tests for the FHLBanks. The FHFA requires the annual stress testing for the FHLBanks based on the FHFA’s scenarios, summary instructions and guidance. The tests are designed to determine whether the FHLBanks have the capital to absorb losses asFVO. As a result of ~~adverse economic conditions. The FHFA rules require that~~hedging elections under ASC 815 and the FHLBanks consider the results of the annual stress test into account in making any changes, as appropriate, to its capital structure (including the level and composition of capital); its exposure, concentration, and risk positions; any plans for recovery and resolution; and to improve overall risk management. Consultation with FHFA supervisory staff is expected in making such improvements. In accordance with these rules, the FHLBNY executed its third annual stress test, and publicly disclosed the stress test results on November 16, 2017 on our website (www.fhlbny.com).

~~The stress test results in all scenarios, including the scenario run~~elections under the ~~FHFA’s severely adverse~~FVO, carrying values of CO bonds included valuation basis adjustments. For more information about valuation basis adjustments on CO bonds, see Table 5.1.

No discount notes had been hedged under an ASC 815 fair value accounting hedge at March 31, 2019 and December 31, 2018, although from time to time we have designated the instruments in economic ~~scenario, demonstrated capital adequacy.~~

~~Capital ratios~~ — Our capital position remains strong. At June 30, 2018, actual risk-based capital was $7.9 billion, compared to required risk-based capital of $876.3 million. To support $156.6 billion of total assets at June 30, 2018,hedges during the minimum required total capital was $6.3 billion or 4.0% of assets. Our actual regulatory risk-based capital was $7.9 billion, exceeding required total capital by $1.6 billion. These ratios have remained consistently above the required regulatory ratios through all periods in this report. Certain discount notes were hedged under an ASC 815 cash flow accounting hedge, and are discussed in financial statements, Note 17. Derivatives and Hedging Activities. Certain discount notes were elected under the FVO. Carrying values included valuation basis adjustments on discount notes elected under the FVO. For more information about valuation basis adjustments on discount notes, see Table 5.7 Discount Notes Outstanding.

Debt Ratings — A FHLBank’s ability to access the capital markets to issue debt, as well as our cost of funds, is dependent on credit ratings from Nationally Recognized Statistical Rating Organizations. Consolidated obligations of FHLBanks are rated Aaa/P-1 by Moody’s, and AA+/A-1+ by S& P. Any rating actions on the US Government would likely result in all individual FHLBanks’ long-term deposit ratings and the FHLBank System long-term bond rating moving in lock step with any US sovereign rating action.

Joint and Several Liability — Although we are primarily liable for our portion of Consolidated obligations (i.e. those issued on our behalf), we are also jointly and severally liable with the other FHLBanks for the payment of principal and interest on the Consolidated obligations of all the FHLBanks. For more information, see financial statements, Note 19. Commitments and Contingencies.

Consolidated obligation bonds

The following table summarizes types of Consolidated obligation bonds (CO Bonds) issued and outstanding (dollars in thousands):

Table 5.1:CO Bonds by Type

	March 31, 2019					December 31, 2018
	Amount			Percentage of Total		Amount			Percentage of Total

Fixed-rate, non-callable	$	22,777,100		28.59	%	$	22,745,980		27.16	%
Fixed-rate, callable	5,705,000			7.16		4,966,000			5.93
Step Up, callable	275,000			0.35		880,000			1.05
Single-index floating rate	50,903,000			63.90		55,166,000			65.86

Total par value	79,660,100			100.00	%	83,757,980			100.00	%

Bond premiums	46,545					42,647
Bond discounts	(33,459		)			(36,290		)
Hedge valuation basis adjustments (a)	304,540					238,150
Hedge basis adjustments on de-designated hedges (b)	130,074					131,497
FVO (c) - valuation adjustments and accrued interest	42,064					19,792

Total Consolidated obligation-bonds	$	80,149,864				$	84,153,776

Fair value basis and valuation adjustments — Key determinants are factors such as run offs and new transactions designated under an ASC 815 hedge or elected under the FVO, the forward swap curve, the volatility of the swap rates, the remaining duration to maturity, and for bonds elected under the FVO, the changes in the spread between the swap rate and the Consolidated obligation debt yields, and changes in interest payable, which is a component of the entire fair value of FVO bonds.

(a)Hedging valuation basis adjustments — The reported carrying values of hedged CO bonds are adjusted for changes in their fair values (fair value basis adjustments or fair value) that are attributable to changes in the benchmark risk being hedged. LIBOR is our primary benchmark. In the current year quarter we adopted FF/OIS as another benchmark. The chosen benchmark becomes the discounting basis under ASC 815 for computing changes in fair values for hedged CO bonds. Table 5.2 CO Bonds Hedged under Qualifying Fair Value Hedges discloses notional amounts of CO bonds hedged. The application of ASC 815 accounting methodology resulted in the recognition of net unrealized hedge valuation basis losses of $304.5 million and $238.2 million at March 31, 2019 and December 31, 2018. The forward LIBOR yield curve declined steeply at March 31, 2019. As hedge valuation basis of fixed-rate CO liabilities move with the rise and fall of the forward LIBOR curve, the sharp decline of the swap curve caused valuation losses to increase. Generally, hedge valuation basis gains and losses are unrealized and will reverse to zero if the CO bonds are held to maturity or are called on the early option exercise dates.

(b)Valuation basis of terminated hedges — Represents unamortized cumulative valuation basis of certain CO bonds that were no longer in fair value hedge relationships. When hedging relationships for the debt were de-designated, the net unrealized cumulative losses at the hedge termination dates were no longer adjusted for changes in the benchmark rate. Instead, the valuation basis are being amortized on a level yield method, and the net amortization is recorded as a reduction of Interest expense. If the CO bonds are held to maturity, the basis losses will be fully amortized as interest expense.

(c)FVO valuation adjustments — Valuation basis adjustments and accrued interest payable are recorded to recognize changes in the entire fair value (the full fair value) of CO bonds elected under the FVO. Table 5.3 CO Bonds Elected under the Fair Value Option (FVO) discloses par amounts of CO bonds elected under the FVO. Valuation adjustments at March 31, 2019 and December 31, 2018 were largely the accumulation of semi-annual accrued unpaid interest included in the full fair value of the debt.

The discounting basis for computing the change in fair value basis of bonds elected under the FVO is the observable (FHLBank) CO bond yield curve. All FVO bonds were short- and medium-term, and fluctuations in their “clean prices” (without accumulated unpaid interest) valuations were not significant as the bonds re-priced relatively frequently to market indices, keeping valuations near to par, although inter-period valuation volatility is likely.

We have elected the FVO on an instrument-by-instrument basis. For bonds elected under the FVO, it was not necessary to estimate changes attributable to instrument-specific credit risk, as we consider the credit worthiness of the FHLBanks to be secure and credit related adjustments unnecessary. More information about debt elected under the FVO is provided in financial statements, Note 18. Fair Values of Financial Instruments (See Fair Value Option Disclosures).

Hedge volume — Tables 5.2 - 5.4 provide information with respect to par amounts of CO bonds based on accounting designation: (1) under hedge qualifying rules, (2) under the FVO, and (3) as an economic hedge (in thousands):

Table 5.2:CO Bonds Hedged under Qualifying Fair Value Hedges

Qualifying hedges — Generally, fixed-rate (bullet and callable) medium and long-term Consolidated obligation bonds are hedged in a Fair value ASC 815 qualifying hedge.

	Consolidated Obligation Bonds
Par Amount	March 31, 2019		December 31, 2018
Qualifying Hedges
Fixed-rate bullet bonds	$	6,669,475	$	8,300,080
Fixed-rate callable bonds	2,823,000		3,373,000
	$	9,492,475	$	11,673,080

Table 5.3:CO Bonds Elected under the Fair Value Option (FVO)

CO bonds elected under the FVO — If at inception of a hedge we do not believe that a hedge would be highly effective in offsetting fair value changes between the derivative and the debt (hedged item), we may designate the debt under the FVO if operationally practical. We would record fair value changes of the FVO debt through earnings, and to the extent the debt is economically hedged, record changes of the fair values of the interest rate swap through earnings. The recorded balance sheet value of debt under the FVO would include the fair value basis adjustments, so that the debt’s balance sheet carrying values would be its full fair value.

	Consolidated Obligation Bonds
Par Amount	March 31, 2019		December 31, 2018
Bonds designated under FVO	$	7,325,000	$	5,140,000

CO bonds elected under the FVO were generally in economic hedges by the execution of interest rate swaps that converted the fixed-rate bonds to a variable-rate instrument. We elected to account for the bonds under the FVO when we were generally unable to assert with confidence that the short- and intermediate-term bonds, or callable bonds, with short lock-out periods to the exercise of call options, would remain effective hedges as required under hedge accounting rules. Designation of CO bonds under the FVO is an asset-liability management decision. For more information, see financial statements, Fair Value Option Disclosures in Note 18. Fair Values of Financial Instruments.

Table 5.4:Economic Hedges of CO Bonds (Excludes CO Bonds Elected under the FVO and Designated in Economic Hedges)

Economic hedges of CO bonds — We also issue variable-rate debt with coupons that are not indexed to the 3-month LIBOR, our preferred funding base. During the periods in this report, we issued variable-rate bonds indexed to the 1-month LIBOR. To mitigate the economic risk of a change in the variable-rate basis between the 3-month LIBOR and the 1-month LIBOR, we have executed basis rate swaps that have synthetically created 3-month LIBOR debt. The operational cost of designating the debt instruments in an ASC 815 qualifying hedge outweighed the accounting benefits of marking the debt and the swap to fair values. We opted instead to designate the hedging basis swaps as standalone derivatives, and recorded changes in their fair values through earnings. The carrying value of the debt would not include fair value basis since the debt is recorded at amortized cost.

	Consolidated Obligation Bonds
Par Amount	March 31, 2019		December 31, 2018
Bonds designated as economically hedged
Floating-rate bonds (a)	$	33,345,000	$	29,735,000
Fixed-rate bonds (b)	—		15,000
	$	33,345,000	$	29,750,000

(a)Floating-rate debt — Floating-rate bonds were typically indexed to 1-month LIBOR. With the execution of basis hedges, certain floating-rate bonds were swapped in economic hedges to 3-month LIBOR, mitigating the basis risk between the 1-month LIBOR and the 3-month LIBOR, which is our primary benchmark rate.

(b)Fixed-rate debt — Bonds that were previously hedged and have fallen out of effectiveness.

CO Bonds — Maturity or Next Call Date (a)

Callable bonds contain an exercise date or a series of exercise dates that may result in a shorter redemption period. The following table summarizes par amounts of Consolidated bonds outstanding by years to maturity or next call date (dollars in thousands):

Table 5.5:CO Bonds — Maturity or Next Call Date

	March 31, 2019				December 31, 2018
	Amount		Percentage of Total		Amount		Percentage of Total
Year of maturity or next call date
Due or callable in one year or less	$	66,364,140	83.31	%	$	69,699,475	83.22	%
Due or callable after one year through two years	4,033,935		5.06		5,700,545		6.81
Due or callable after two years through three years	2,050,955		2.58		1,661,325		1.98
Due or callable after three years through four years	1,330,335		1.67		1,383,750		1.65
Due or callable after four years through five years	1,238,035		1.55		955,235		1.14
Thereafter	4,642,700		5.83		4,357,650		5.20

Total par value	$	79,660,100	100.00	%	$	83,757,980	100.00	%

(a)Contrasting Consolidated obligation bonds by contractual maturity dates (see financial statements, Note 12. Consolidated Obligations — Redemption Terms of Consolidated Obligation Bonds) with potential call dates (as reported in table above) illustrates the impact of hedging on the effective duration of the bond. With a callable bond, we have purchased the option to terminate debt at agreed upon dates from investors. The call options are exercisable as either a one-time option or quarterly. Our current practice is to exercise our option to call a bond when the swap counterparty exercises its option to call the cancellable swap hedging the callable bond. Thus, issuance of a callable bond with an associated callable swap significantly alters the contractual maturity characteristics of the original bond and introduces the possibility of an exercise call date that is significantly shorter than the contractual maturity.

The following table summarizes callable bonds versus non-callable CO bonds outstanding (par amounts, in thousands):

Table 5.6:Outstanding Callable CO Bonds versus Non-callable CO bonds

	March 31, 2019		December 31, 2018
Callable	$	5,980,000	$	5,846,000
Non-Callable	$	73,680,100	$	77,911,980

CO Discount Notes

The following table summarizes discount notes issued and outstanding (dollars in thousands):

Table 5.7:Discount Notes Outstanding

	March 31, 2019			December 31, 2018
Par value	$	53,173,357		$	50,805,481
Amortized cost	$	53,028,359		$	50,631,066
FVO (a) - valuation adjustments and remaining accretion	7,418			9,172
Total discount notes	$	53,035,777		$	50,640,238
Weighted average interest rate	2.41		%	2.34		%

(a)Valuation basis adjustment losses are recorded to recognize changes in the entire or full fair values of CO discount notes elected under the FVO. The full fair values include unaccreted discounts. The discounting basis for computing changes in fair values of discount notes elected under the FVO is the observable FHLBank discount note yield curve. Valuation losses were largely liability balances representing unaccreted discounts. Other than unaccreted discount, changes in the valuation adjustments represent fair value changes due to changes in the term structure of interest rates, the shape of the yield curve at the measurement dates, and the growth or decline in volume of hedged discount notes. When held to maturity, unaccreted discounts will be fully accreted to par, and unrealized fair value gains and losses will sum to zero over the term to maturity.

The following table summarizes discount notes under the FVO (in thousands):

Table 5.8:Discount Notes under the Fair Value Option (FVO)

	Consolidated Obligation Discount Notes
Par Amount	March 31, 2019		December 31, 2018
Discount notes designated under FVO (a)	$	987,355	$	3,170,915

(a)When we have elected discount notes under the FVO, it has not been necessary to estimate changes attributable to instrument-specific credit risk, as we consider the credit worthiness of the FHLBanks to be secured and credit related adjustments unnecessary.

CO Discount notes elected under the FVO were generally in economic hedges with the execution of interest rate swaps that converted the fixed-rate notes to a variable-rate instrument. We elected to account for the discount notes under the FVO when we were generally unable to assert with confidence that the discount notes would remain effective hedges as required under hedge accounting rules. See financial statements, Fair Value Option Disclosures in Note 18. Fair Values of Financial Instruments.

The following table summarizes Cash flow hedges of discount notes (in thousands):

Table 5.9:Cash Flow Hedges of Discount Notes

	Consolidated Obligation Discount Notes
Principal Amount	March 31, 2019		December 31, 2018
Discount notes hedged under qualifying hedge (a)	$	2,664,000	$	2,664,000

(a)Amounts represent discounts notes issued in cash flow “rollover” hedge strategies that hedged the variability of 91-day discount notes issued in sequence. The original maturities of the interest rate swaps typically ranged from 10-15 years. In this strategy, the discount note expense, which resets every 91 days, is synthetically converted to fixed cash flows over the hedge periods, thereby achieving hedge objectives. For more information, see financial statements, Cash Flow Hedges in Note 17. Derivatives and Hedging Activities.

Accrued interest payable

Accrued interest payable — Amounts outstanding were $213.6 million at March 31, 2019 and $223.6 million at December 31, 2018. Accrued interest payable was comprised primarily of interest due and unpaid on CO bonds, which are generally payable on a semi-annual basis. Fluctuations in unpaid interest balances on bonds are due to the timing of semi-annual coupon accruals and payments at the balance sheet dates.

Other Liabilities

Other liabilities — Amounts outstanding were $181.8 million at March 31, 2019 and $355.8 million at December 31, 2018. Other liabilities comprised of unfunded pension liabilities, Federal Reserve pass-through reserves held on behalf of members, and miscellaneous payables.

Stockholders’ Capital

The following table summarizes the components of Stockholders’ capital (in thousands):

Table 6.1:Stockholders’ Capital

	March 31, 2019			December 31, 2018
Capital Stock (a)	$	5,671,075		$	6,065,799
Unrestricted retained earnings (b)	1,109,437			1,102,801
Restricted retained earnings (c)	618,248			591,281
Accumulated Other Comprehensive Income (Loss)	(24,222		)	(13,259		)
Total Capital	$	7,374,538		$	7,746,622

(a)Stockholders’ Capital — Capital stock decreased in line with the decrease in advances borrowed. When an advance matures or is prepaid, the excess capital stock is repurchased by the FHLBNY. When an advance is borrowed or a member joins the FHLBNY’s membership, the member is required to purchase capital stock. For more information about activity and membership stock, see Note 14. Capital Stock, Mandatorily Redeemable Capital Stock and Restricted Retained ~~Earnings.~~Earnings in the FHLBNY’s most recent Form 10-K filed on March 21, 2019.

(b)Unrestricted retained earnings — Net income is added to this balance. Dividends are paid out of this balance. Funds are transferred to Restricted retained earnings balances that are determined in line with the approved provisions of the conduct of restricted retained earnings account.

(c)Restricted retained earnings — Restricted retained earnings balance at March 31, 2019 has grown to $618.2 million from the time the provisions were implemented in the third quarter of 2011 when the FHLBanks, including the FHLBNY agreed to set up a restricted retained earnings account. The FHLBNY will allocate at least 20% of its net income to the FHLBNY’s Restricted retained earnings account until the balance of the account equals at least 1% of FHLBNY’s average balance of outstanding Consolidated Obligations for the previous quarter.

The following table summarizes the components of AOCI (in thousands):

Table 6.2:Accumulated Other Comprehensive Income (Loss) (AOCI)

	March 31, 2019			December 31, 2018
Accumulated other comprehensive income (loss)
Non-credit portion of OTTI on held-to-maturity securities, net of accretion (a)	$	(10,204	)	$	(11,061	)
Net unrealized gains (losses) on available-for-sale securities (b)	36,142			4,034
Net unrealized gains (losses) on hedging activities (c)	(27,825		)	16,759
Employee supplemental retirement plans (d)	(22,335		)	(22,991		)
Total Accumulated other comprehensive income (loss)	$	(24,222	)	$	(13,259	)

~~Leverage~~(a)OTTI — Non-credit OTTI losses in AOCI have declined at March 31, 2019, primarily due to accretion recorded as a reduction in AOCI (and a corresponding increase in the balance sheet carrying values of the OTTI securities).

(b)Fair values of available-for-sale securities — balance represents net unrealized fair value basis gains of MBS securities. Effective January 1, 2019, we transferred $1.6 billion fixed-rate CMBS to the AFS category from HTM. Increase in unrealized gains represents increase in the portfolio due to the transfer and increase in market pricing of the fixed-rate AFS securities.

(c)Hedging activity balances in AOCI were primarily cash flow hedge valuation gains (losses) and balances from a fair value hedge of mortgage-backed securities in a closed AFS portfolio. See Table 6.3: AOCI Rollforward due to ASC 815 Hedging Programs.

(d)Employee supplemental plans — Balances represent actuarially determined supplemental pension and postretirement health benefit liabilities that were not recognized through earnings. Amounts are amortized as an expense through Compensation and benefits over an actuarially determined period. For more information, see financial statements, Note 16. Employee Retirement Plans in the FHLBNY’s most recent Form 10-K filed on March 21, 2019.

Table 6.3:AOCI Rollforward due to ASC 815 Hedging Programs.

The following table presents amounts recognized in and reclassified out of AOCI due to cash flow and fair value hedges. Increases/(decreases) are in thousands:

	Three months ended March 31,
	2019									2018
	Cash Flow Hedges						Fair Value Hedges			Cash Flow Hedges
	Rollover Hedge Program			Anticipatory Hedge Program			Last-of-layer AFS Hedge			Rollover Hedge Program			Anticipatory Hedge Program
Beginning balance	$	17,412		$	(653	)	$	—		$	(23,342	)	$	3,465
Changes in fair values (a)	(40,910		)	1,864			(1,893		)	55,129			(8		)
Amount reclassified	—			23			—			—			35
Fair Value - closed contract	—			(3,668		)	—			—			(383		)
Ending balance	$	(23,498	)	$	(2,434	)	$	(1,893	)	$	31,787		$	3,109
Notional amount of swaps outstanding	$	2,664,000		$	145,000		$	127,500		$	2,414,000		$	65,000

(a)Represents fair value changes of open swap contracts in cash flow hedges in the three months ended March 31, 2019 and March 31, 2018. For more information see, Note 17 Derivatives and Hedging Activities.

Dividends — ~~At June 30, 2018,~~By Finance Agency regulation, dividends may be paid out of current earnings or if certain conditions are met, may be paid out of previously retained earnings. We may be restricted from paying dividends if we do not comply with any of the Finance Agency’s minimum capital requirements or if payment would cause us to fail to meet any of the minimum capital requirements, including our Retained earnings target as established by the Board of Directors of the FHLBNY. In addition, we may not pay dividends if any principal or interest due on any Consolidated obligations has not been paid in full, or if we fail to satisfy certain liquidity requirements under applicable Finance Agency regulations. None of these restrictions applied for any period presented.

The following table summarizes dividends paid and payout ratios:

Table 6.4:Dividends Paid and Payout Ratios

	Three months ended
	March 31, 2019			March 31, 2018
Cash dividends paid per share	$	1.74		$	1.64
Dividends paid (a) (c)	$	101,235		$	102,154
Pay-out ratio (b)	75.08		%	80.93		%

(a)In thousands.

(b)Dividend paid during the period divided by net income for the period.

(c)Does not include dividend paid to non-member; for accounting purposes, such dividends are recorded as interest expense.

Derivatives Counterparty Credit Ratings

For information, and an analysis of our exposure due to non-performance of swap counterparties, see Table “Offsetting of Derivative Assets and Derivative Liabilities — Net Presentation” in Note 17. Derivatives and Hedging Activities to financial statements. For information about the methodologies adopted for the fair value measurement of derivatives, see financial statements, Note 18. Fair Values of Financial Instruments.

The following tables summarize notional amounts and fair values for the FHLBNY’s derivative exposures as represented by derivatives in fair value gain positions (in thousands):

Table 7.1:Derivatives Counterparty Credit Ratings

	March 31, 2019
Credit Rating	Notional Amount		Net Derivatives Fair Value Before Collateral			Cash Collateral Pledged To (From) Counterparties (a)			Balance Sheet Net Credit Exposure		Non-Cash Collateral Pledged To (From) Counterparties (b)			Net Credit Exposure to Counterparties
Non-member counterparties
Asset positions with credit exposure
Uncleared derivatives
Single A asset (c)	$	2,785,000	$	135,536		$	(17,500	)	$	118,036	$	(104,136	)	$	13,900
Cleared derivatives assets (d)	89,517,528		24,158			6,442			30,600		220,347			250,947
	92,302,528		159,694			(11,058		)	148,636		116,211			264,847
Liability positions with credit exposure
Uncleared derivatives
Double A liability (c)	105,000		(119		)	590			471		—			471
Single A liability (c)	1,177,263		(10,998		)	12,480			1,482		—			1,482
Triple B Liability (c)	3,923,183		(59,880		)	62,750			2,870		—			2,870
	5,205,446		(70,997		)	75,820			4,823		—			4,823
Total derivative positions with non-member counterparties to which the Bank had credit exposure	97,507,974		88,697			64,762			153,459		116,211			269,670
Member institutions
Derivative positions with member counterparties to which the Bank had credit exposure	338,000		1,301			—			1,301		(1,301		)	—
Delivery Commitments
Derivative position with delivery commitments	20,062		80			—			80		(80		)	—
Total derivative position with members	358,062		1,381			—			1,381		(1,381		)	—
Total	$	97,866,036	$	90,078		$	64,762		$	154,840	$	114,830		$	269,670
Derivative positions without credit exposure	7,810,731
Total notional	$	105,676,767

	December 31, 2018
Credit Rating	Notional Amount		Net Derivatives Fair Value Before Collateral			Cash Collateral Pledged To (From) Counterparties (a)			Balance Sheet Net Credit Exposure		Non-Cash Collateral Pledged To (From) Counterparties (b)			Net Credit Exposure to Counterparties
Non-member counterparties
Asset positions with credit exposure
Uncleared derivatives
Single A asset (c)	$	3,125,000	$	155,264		$	(44,970	)	$	110,294	$	(102,262	)	$	8,032
Cleared derivatives assets (d)	20,448,476		1,353			—			1,353		—			1,353
	23,573,476		156,617			(44,970		)	111,647		(102,262		)	9,385
Liability positions with credit exposure
Uncleared derivatives
Single A liability (c)	3,414,264		(7,469		)	9,164			1,695		—			1,695
Cleared derivatives liability (d)	70,236,929		—			—			—		239,813			239,813
	73,651,193		(7,469		)	9,164			1,695		239,813			241,508
Total derivative positions with non-member counterparties to which the Bank had credit exposure	97,224,669		149,148			(35,806		)	113,342		137,551			250,893
Member institutions
Derivative positions with member counterparties to which the Bank had credit exposure	28,000		363			—			363		(363		)	—
Delivery Commitments
Derivative position with delivery commitments	12,682		57			—			57		(57		)	—
Total derivative position with members	40,682		420			—			420		(420		)	—
Total	$	97,265,351	$	149,568		$	(35,806	)	$	113,762	$	137,131		$	250,893
Derivative positions without credit exposure	8,831,152
Total notional	$	106,096,503

(a)When collateral is posted to counterparties in excess of fair value liabilities that are due to counterparties, the excess collateral is classified as a component of derivative assets, as the excess represents a receivable and an exposure for the FHLBNY.

(b)Non-cash collateral securities. Non-cash collateral was not deducted from net derivative assets on the balance sheet ~~leverage (based on U.S. GAAP) was 19.8 times shareholders’ equity. Balance sheet leverage has generally remained steady~~as control over the ~~last several years, although from time to time~~securities was not transferred.

(c)NRSRO Ratings.

(d)On cleared derivatives, we have maintained excess liquidity in highly liquid investments, or cash balances at the Federal Reserve Bank of New York (“FRBNY”) to meet unexpected member demand for funds. Increases or decreases in investments have a direct impact on leverage, but generally growth in or shrinkage of advances does not significantly impact balance sheet leverage under existing capital stock management practices. Members are required to pledge initial margin (collateral) to Derivative Clearing Organizations (DCOs) in cash or securities. At March 31, 2019, we had pledged $220.3 million in marketable securities and $6.4 million in cash to fulfill our obligation to pledge initial margin as collateral. At December 31, 2018, we had pledged $239.8 million in marketable securities to fulfill our obligation to pledge initial margin as collateral.

Liquidity, Short-Term Borrowings and Short-Term Debt

Our primary source of liquidity is the issuance of Consolidated obligation bonds and discount notes. To refinance maturing Consolidated obligations, we rely on the willingness of our investors to purchase ~~activity-based~~new issuances. We have access to the discount note market, and the efficiency of issuing discount notes is an important source of liquidity, since discount notes can be issued any time and in a variety of amounts and maturities. Member deposits and capital stock ~~to support their~~purchased by members are another source of funds. Short-term unsecured borrowings from ~~us,~~other FHLBanks and when activity-based capital stock is in excess of the amount that is required to support advance borrowings, we redeem the excess capital stock immediately. Therefore, stockholders’ capital increases and decreases with members’ advance borrowings, and the capital to asset ratio remains relatively unchanged.

~~Liquidity and~~ ~~Debt~~ — In addition to the trading portfolio maintained for liquidity, liquid assets at June 30, 2018 included $156.5 million as demand cash balances at the Federal Reserve Bank of New York (“FRBNY”), $19.8 billion in short-term and overnight loans in the federal funds ~~and~~market provide additional sources of liquidity. In addition, the ~~repo markets, and $480.0 million~~Secretary of ~~high credit quality GSE-issued available-for-sale securities that are investment quality, and readily marketable. In December 2016, we established a trading portfolio with~~ the ~~primary objective~~Treasury is authorized to purchase up to $4.0 billion of ~~increasing our liquidity. The trading portfolio is invested in highly-liquid U.S. Treasury bonds and GSE-issued securities.~~Consolidated obligations from the FHLBanks. Our liquidity position remains ~~strong, and~~ in compliance with all regulatory requirements and ~~we do~~management does not foresee any changes to that position.

~~The primary source~~Finance Agency Regulations — Liquidity

Regulatory requirements are specified in Parts 932, 1239 and 1270 of ~~our funds is~~ the ~~issuance~~Finance Agency regulations and Advisory Bulletin 2018-07. Each FHLBank shall at all times have at least an amount of ~~Consolidated obligation bonds and discount notes~~liquidity equal to the ~~public. Our GSE status enables~~current deposits received from its members that may be invested in: (1) Obligations of the ~~FHLBanks~~United States; (2) Deposits in banks or trust companies; or (3) Advances with a remaining maturity not to ~~raise funds at rates~~exceed five years that are ~~typically at~~made to members in conformity with part 1266. (4) required to hold positive cash flow assuming no access to capital markets and assuming renewal of all maturing advances for a ~~small~~period of between ten to ~~moderate spread above U.S. Treasury security yields. Our ability~~thirty calendar days; (5) maintain liquidity limits to reduce the risks associated with a mismatch in asset and liability maturities, including an undue reliance on short-term debt funding.

In addition, each FHLBank shall provide for contingency liquidity, which is defined as the sources of cash a FHLBank may use to meet its operational requirements when its access to the capital markets ~~which has a direct impact on~~is impeded. We met our ~~cost~~contingency liquidity requirements during all periods in this report. Liquidity in excess of ~~funds,~~requirements is ~~dependent to a degree on our credit ratings from~~summarized in the ~~major ratings organizations. The FHLBank debt performance has withstood the impact~~table titled Contingency Liquidity. Violations of the ~~controversy surrounding~~liquidity requirements would result in non-compliance penalties under discretionary powers given to the ~~debt ceiling in the recent past. However, we cannot say~~Finance Agency under applicable regulations, which include other corrective actions. Advisory Bulletin 2018-07 was partially implemented on December 31, 2018, with ~~certainty the long-term impact of such actions~~further implementation to take place on March 31, 2019 and full implementation on December 31, 2019.

Liquidity Management

We actively manage our liquidity position ~~which could be adversely affected by many causes both internal~~to maintain stable, reliable, and ~~external~~cost-effective sources of funds while taking into account market conditions, member demand and the maturity profile of our assets and liabilities. We recognize that managing liquidity is critical to achieving our statutory mission of providing low-cost funding to our ~~business.~~members. In managing liquidity risk, we are required to maintain certain liquidity measures in accordance with the FHLBank Act and policies developed by management and approved by our Board of Directors. The applicable liquidity requirements are described in the next four sections.

~~During the periods in this report, we maintained continual access~~Deposit Liquidity. We are required to funding and adapted our debt issuance to meet the liquidity needs of our members and our asset/liability risk management objectives. Our short-term funding was largely driven by member demand for short-term advances and was achieved through the issuance of Consolidated discount notes and short-term Consolidated bonds. Access to short-term debt markets has been reliable. Investor demand has been strong, partly due to the money market fund reform and partly due to investors’ preference for liquidity. Investors have sought the FHLBank’s short-term debt asinvest an ~~asset of choice, and that has led to advantageous funding opportunities and increased utilization of shorter-term debt.~~

There are inherent risks in utilizing short-term funding and we may be exposed to refinancing and investor concentration risks or market access risk. Market access risk includes the risk that we would be unable to issue Consolidated obligations in the event of disruptions in the capital markets. Refinancing risk includes the risk that we could have difficulty rolling over short-term obligations when market conditions become unfavorable for debt issuance.

~~We measure and monitor interest rate-risk with commonly used methods, which include the calculations of market value of equity, duration of equity, and duration gap.~~

~~Among other liquidity measures, the Finance Agency requires FHLBanks to maintain sufficient liquidity through short-term investments in an~~aggregate amount at least equal to ~~our anticipated cash outflows under two different scenarios. The first scenario assumes that we cannot access capital markets for 15 days, and during that period~~the amount of current deposits received from members doin: (1) Obligations of the United States; (2) Deposits in banks or trust companies; or (3) Advances with a remaining maturity not ~~renew their maturing, or prepay or exercise their option~~ to ~~call advances~~exceed five years that are ~~callable. The second scenario assumes that~~made to members in conformity with part 1266. In addition to accepting deposits from our members, we ~~cannot access the capital markets for five days,~~may accept deposits from other FHLBanks or from any other governmental instrumentality. We met these requirements at all times. Quarterly average reserves and ~~during that period, members renew maturing advances. We remain in compliance with regulations under both scenarios.~~actual reserves are summarized below (in millions):

Table 8.1:Deposit Liquidity

	Average Deposit		Average Actual
For the Quarters Ended	Reserve Required		Deposit Liquidity		Excess
March 31, 2019	$	1,065	$	90,100	$	89,035
December 31, 2018	904		93,526		92,622

Operational Liquidity. We ~~also~~must be able to fund our activities as our balance sheet changes from day-to-day. We maintain the capacity to fund balance sheet growth through regular money market and capital market funding and investment activities. We monitor our operational liquidity needs by regularly comparing our demonstrated funding capacity with potential balance sheet growth. We take such actions as may be necessary to maintain adequate sources of funding for such growth. Operational liquidity is measured daily. We met these requirements at all times.

The following table summarizes excess operational liquidity (in millions):

Table 8.2:Operational Liquidity

	Average Balance Sheet		Average Actual
For the Quarters Ended	Liquidity Requirement		Operational Liquidity		Excess
March 31, 2019	$	10,912	$	33,899	$	22,987
December 31, 2018	10,091		36,478		26,387

Contingency Liquidity. We are required by Finance Agency regulations to hold ~~contingency liquidity~~“contingency liquidity” in an amount sufficient to meet our liquidity needs if we are unable to access the Consolidated obligation debt ~~market~~markets for at least 5five business days. Contingency liquidity includes (1) marketable assets with a maturity of one year or less; (2) self-liquidating assets with a maturity of one year or less; (3) assets that are generally acceptable as collateral in the repurchase market; and (4) irrevocable lines of credit from financial institutions receiving not less than the second-highest credit rating from a NRSRO. We consistently exceeded the regulatory minimum requirements for contingency liquidity. Contingency liquidity is measured daily. We met these requirements at all times.

The ~~actual~~following table summarizes excess contingency liquidity (in millions):

Table 8.3:Contingency Liquidity

	Average Five Day		Average Actual
For the Quarters Ended	Requirement		Contingency Liquidity		Excess
March 31, 2019	$	3,169	$	29,509	$	26,340
December 31, 2018	3,649		32,494		28,845

The standards in our risk management policy address our day-to-day operational and contingency liquidity needs. These standards enumerate the specific types of investments to be held to satisfy such liquidity needs and are outlined above. These standards also establish the methodology to be used in determining our operational and contingency needs. We continually monitor and project our cash needs, daily debt issuance capacity, and the amount and value of investments available for use in the market for repurchase agreements. We use this information to determine our liquidity needs and to develop appropriate liquidity plans.

Advance “Roll-Off” and “Roll-Over” Liquidity Guidelines. The Finance Agency’s Minimum Liquidity Requirement Guidelines measure liquidity under two scenarios: Advance “Roll-Over” and “Roll-Off” scenarios. Each FHLBank, including the FHLBNY, must have positive cash balances to be able to maintain positive cash flows for 15 days under the ~~5-day~~Roll-Off scenario, and for 5 days under the Roll-Over scenario. The Roll-Off scenario assumes that advances maturing under their contractual terms would mature, and in that scenario we would maintain positive cash flows for a minimum of 15 days on a daily basis. The Roll-Over scenario assumes that maturing advances borrowed by members with assets below $100 billion would be rolled over, and in that scenario we would maintain positive cash flows for a minimum of 5 days on a daily basis. We calculate the amount of cash flows under each scenario on a daily basis and have been in compliance with these guidelines. The Finance Agency’s Liquidity Advisory Bulletin 2018-07 becomes effective April 1, 2019. Under the new guidance, the above Roll-Off scenario is no longer required and the Roll-Over daily requirement is extended from 5 days to 10 days to include all advances. An additional requirement to hold 1% of the notional of all Letters of Credit as liquidity also comes into effect.

Other Liquidity Contingencies. As discussed more fully under the section Debt Financing Activity and Consolidated Obligations, we are primarily liable for Consolidated obligations issued on our behalf. We are also jointly and severally liable with the other FHLBanks for the payment of principal and interest on the Consolidated obligations of all the FHLBanks. If the principal or interest on any Consolidated obligation issued on our behalf is not paid in full when due, we may not pay dividends, redeem or repurchase shares of stock of any member or non-member stockholder until the Finance Agency approves our Consolidated obligation payment plan or other remedy and until we pay all the interest or principal currently due on all our Consolidated obligations. The Finance Agency, at its discretion, may require any FHLBank to make principal or interest payments due on any Consolidated obligations.

Finance Agency regulations also state that the FHLBanks must maintain, free from any lien or pledge, the following types of assets in an amount at least equal to the amount of Consolidated obligations outstanding: Cash; Obligations of, or fully guaranteed by, the United States; Secured advances; Mortgages that have any guaranty, insurance, or commitment from the United States or any agency of the United States; and investments described in section 16(a) of the FHLBank Act, including securities that a fiduciary or trust fund may purchase under the laws of the state in which the FHLBank is located.

Short-term Borrowings and Short-term Debt

Our primary source of funds is the issuance of FHLBank debt. Consolidated obligation discount notes are issued with maturities up to one year and provide us with short-term funds. Discount notes are principally used in funding short-term advances, some long-term advances, as well as money market instruments. We also issue short-term Consolidated obligation bonds as part of our asset-liability management strategy. We may also borrow from another FHLBank, generally for a period of one day. Such borrowings have been historically insignificant.

The following table summarizes short-term debt and their key characteristics (dollars in thousands):

Table 8.4:Short-term Debt

	Consolidated Obligations-Discount Notes						Consolidated Obligations-Bonds With Original Maturities of One Year or Less
	March 31, 2019			December 31, 2018			March 31, 2019			December 31, 2018
Outstanding at end of the period (a)	$	53,035,777		$	50,640,238		$	51,149,700		$	53,593,000
Weighted-average rate at end of the period (b)	2.41		%	2.34		%	2.44		%	2.37		%
Average outstanding for the period (a)	$	52,403,657		$	51,656,594		$	50,859,074		$	59,411,703
Weighted-average rate for the period	2.39		%	1.79		%	2.44		%	1.86		%
Highest outstanding at any month-end (a)	$	53,035,777		$	59,769,950		$	51,728,000		$	70,377,100

(a)Outstanding balances represent the carrying value of discount notes and par value of bonds (one year or less) issued and outstanding at the reported dates.

(b)Weighted-average rate is calculated on outstanding balances at period-end.

Off-Balance Sheet Arrangements, Guarantees, and Other Commitments — In accordance with regulations governing the operations of the FHLBanks, each FHLBank, including the FHLBNY, is jointly and severally liable for the FHLBank System’s Consolidated obligations issued under sections 11(a) and 11(c) of the FHLBank Act. The joint and several liability regulation authorizes the Finance Agency to require any FHLBank to repay all or a portion of the principal or interest on Consolidated obligations for which another FHLBank is the primary obligor.

In addition, in the ordinary course of business, the FHLBNY engages in financial transactions that, in accordance with U.S. GAAP, are not recorded on the FHLBNY’s balance sheet or may be recorded on the FHLBNY’s balance sheet in amounts that are different from the full contract or notional amount of the transactions. For example, the Bank routinely enters into commitments to purchase MPF loans from PFIs, and issues standby letters of credit. These commitments may represent future cash requirements of the Bank, although the standby letters of credit usually expire without being drawn upon. For more information about contractual obligations and commitments, see financial statements, Note 19. Commitments and Contingencies.

Results of Operations

The following section provides a comparative discussion of the FHLBNY’s results of operations for the first quarter of 2019 and the same period in the prior year. For a discussion of the significant accounting estimates used by the FHLBNY that affect the results of operations, see financial statements, Note 1. Significant Accounting Policies and Estimates in the most recent Form 10-K filed on March 21, 2019.

Net Income

Interest income from advances is the principal source of revenue. Other sources of revenue are interest income from investment debt securities, trading securities, mortgage loans in the MPF portfolio, securities purchased under agreements to resell and federal funds sold. The primary expense is interest paid on Consolidated obligation debt. Other expenses are Compensation and benefits, Operating expenses, our share of operating expenses of the Office of Finance and the FHFA, and affordable housing program assessments on Net income. Other significant factors affecting our Net income include the volume and timing of investments in mortgage-backed securities, prepayments of advances, charges due to debt repurchased, gains and losses from derivatives and hedging activities, and earnings from investing our shareholders’ capital.

Summarized below are the principal components of Net income (in thousands):

Table 9.1:Principal Components of Net Income

	Three months ended March 31,
	2019			2018
Total interest income	$	997,534		$	770,645
Total interest expense	820,318			577,626
Net interest income before provision for credit losses	177,216			193,019
Provision (Reversal) for credit losses on mortgage loans	(17		)	(380		)
Net interest income after provision for credit losses	177,233			193,399
Total other income (loss)	13,178			(18,593		)
Total other expenses	40,580			34,519
Income before assessments	149,831			140,287
Affordable Housing Program Assessments	14,993			14,062
Net income	$	134,838		$	126,225

Net Income — 2019 First Quarter Compared to 2018 First Quarter

Net income — For the FHLBNY, Net income is Net interest income, minus credit losses on mortgage loans, plus Other income (loss), less Other expenses and Assessments set aside for the FHLBNY’s Affordable Housing Program.

In the first quarter of the current year, Net income was $134.8 million, an increase of $8.6 million, or 6.8%, compared to the same period in the prior year. Summarized below are the primary components of our Net income:

Net interest income — Net interest income (NII) is typically driven by the volume of earning assets, as measured by average balances of earning assets, and by the net interest spread earned in the period. Other significant drivers would be prepayment fees earned when advances are early terminated by our borrowing members, and the impact on interest income and expense by the execution of swaps that hedge our assets and liabilities. Swap interest accruals are a significant component of Net interest income. Fair values changes of derivatives and hedged items in hedges under ASC 815 are also recorded in Net interest income beginning in 2019 with the adoption of ASU 2017-12. The impact was not material.

In the first quarter of the current year, Net interest income was $177.2 million, a decrease of $15.8 million, or 8.2%, from the same period in the prior year. Lower earnings were driven primarily by lower balances of advances. Another factor was investments in liquid assets that yielded relatively lower margins. To enhance our liquidity position under FHFA guidelines, we have invested in a significant portfolio of liquid assets - short-term highly-rated securities, primarily U.S. treasury obligations, and overnight lending in the federal funds and repurchase markets. The net yields earned on such assets have been typically lower relative to longer-term earning assets. While funding costs remain attractive for the FHLBank issued CO debt, costing yields were not as favorable in the current year ~~quarter was $33.8 billion, well~~period, relative to the prior year period. Because of these conditions, net interest spread declined to 38 basis points in ~~excess~~the first quarter of the ~~required $3.3 billion.~~current year, compared to 41 basis points in the same period in the prior year.

WeOther income (loss) — In the first quarter of the current year, Other income (loss) reported a gain of $13.2 million, compared to a loss of $18.6 million in the same period in the prior year. Primary components are noted below:

·Service fees and other are primarily correspondent banking fees and fee revenues from financial letters of credit. Such revenues were $4.6 million in the first quarter of the current year, compared to $3.7 million in the same period in the prior year.

·Derivative and hedging activities reported a net loss of $12.3 million in the first quarter of the current year, compared to a net loss of $18.8 million in the same period in the prior year.

·Securities held for liquidity (classified as trading) reported net gains of $17.1 million in the first quarter of the current year, in contrast to a loss of $3.2 million in the same period in the prior year.

·Equity Investments held to fund payments to retirees in non-qualified pension plans reported net gains of $4.2 million in the first quarter of the current year, in contrast to a net loss of $0.3 million in the same period in the prior year.

Other expenses were $40.6 million in the first quarter of the current year, compared to $34.5 million in the same period in the prior year. Other expenses are primarily Operating expenses, Compensation and benefits, and our share of expenses of the Office of Finance and the Federal Housing Finance Agency.

· Operating expenses were $12.9 million in the first quarter of the current year, up from $10.0 million in the same period in the prior year.

· Compensation and benefits expenses were $21.4 million in the first quarter of the current year, up from $18.8 million in the same period in the prior year.

· The expenses allocated for our share of the costs to operate the Office of Finance and the Federal Housing Finance Agency were $3.9 million in the first quarter of the current year, compared to $4.3 million in the same period in the prior year.

· Other expenses were $2.4 million in the current year, up from $1.5 million in the same period in the prior year. Expense increase was primarily due to contributions towards disaster relief programs and the non-service costs of employer sponsored pension programs.

AHP assessments allocated from Net income were $15.0 million in the first quarter of the current year, compared to $14.1 million in the same period in the prior year. Assessments are calculated as a percentage of Net income, and changes in allocations were in parallel with changes in Net income.

Net Interest Income, Margin and Interest Rate Spreads — 2019 First Quarter Compared to 2018 First Quarter

Net interest income is our principal source of Net income. It represents the difference between income on interest-earning assets and expense on interest-bearing liabilities.

Period-over-period changes in Net interest income are typically driven by changes in the volume of earning assets, as measured by average balances of earning assets, and the impact of market interest rates on earnings assets and funding costs. Interest income and expense accruals on interest rate swaps that qualified under the ASC 815 hedge accounting rules may impact period-over-period changes, as would fair value hedging effects. Shareholders’ capital stock and retained earnings are also ~~have other liquidity measures~~factors that impact net interest income as they provide interest free funding. In a period when members prepay advances, the prepayment fees, which we receive may cause period-over-period fluctuations in ~~place, deposit liquidity and operational liquidity, and those liquidity buffers remain in excess of required reserves.~~income. For more information about ~~our liquidity measures, please~~factors that impact Interest income and Interest expense, see ~~section Liquidity, Cash Flows, Short-Term Borrowings~~Table 9.3 Net Interest Adjustments from Hedge Qualifying Interest Rate Swaps and ~~Short-Term Debt~~discussions thereto. Also, see Table 9.4 Spread and Yield Analysis, and Table 9.5 Rate and Volume Analysis.

The following table summarizes Net interest income (dollars in ~~this MD&A.~~thousands):

Table 9.2:Net Interest Income

	Three months ended March 31,
					Percentage
	2019		2018		Change
Total interest income (a)	$	997,534	$	770,645	29.44	%
Total interest expense (a)	820,318		577,626		(42.02	)
Net interest income before provision for credit losses	$	177,216	$	193,019	(8.19	)%

(a)Total Interest Income and Total Interest Expense — See Tables 9.6 and 9.8 and accompanying discussions

2019 First Quarter vs. 2018 First Quarter — Net interest income declined by $15.8 million, or 8.2% period-over-period. Net interest spread, which is the yield from earning assets minus interest paid to fund earning assets, was 38 basis points in the current year period, compared to 41 basis points in the prior year period. Lower earnings and margin were primarily due to lower average interest-earning assets, which declined by $21.3 billion to $141.6 billion in the current year period down from $162.9 billion in the prior year period; we attribute the decline to lower advance volume.

To enhance our liquidity position, we have invested in portfolios of liquid assets, consisting of short-term highly-rated securities, primarily U.S. treasury obligations, and overnight lending in the federal funds and repurchase markets. The net yields earned on such assets have been typically lower, relative to longer-term earning assets, and that too has unfavorably impacted our interest margins.

The impact on Net interest income from hedging under ASC 815 has been a favorable factor in a rising rate environment. Certain fixed-rate advances and fixed-rate debt are designated in qualifying hedges by the execution of interest rate swaps. The rising benchmark rate, primarily LIBOR, has driven up the benchmark-indexed cash flows we received on swaps hedging fixed-rate advances, such that the cash flows we received exceeded the fixed-rate cash flows paid. While the rising LIBOR had an adverse cash flow impact on qualifying hedges of CO debt, the negative impact was not as significant. Hedging effects, primarily cash flows from interest rate swaps in fair value and cash flows hedges made a favorable contribution of $62.5 million to interest accruals in the three months ended March 31, 2019, compared to a lower contribution of $1.9 million in the prior year period. The fair value hedging impact was not significant to Net interest income as hedges were highly effective with changes in the fair values of the hedging derivatives largely offsetting changes in the fair values of the hedged items.

We earn interest income from investing our members’ capital to fund interest-earning assets. Such earnings are sensitive to the changes in short-term interest rates (Rate effects), and changes in the average outstanding capital and non-interest bearing liabilities (Volume effects). Typically, we invest capital and net non-interest costing liabilities to fund short-term investment assets that yield money market rates. In the periods in this report, market yields for investments in the federal funds and repo markets have improved and the contribution to interest margin from member capital has also improved. Member capital is retained earnings and capital stock, which increases or decreases in parallel with the volume of advances borrowed by members. Average capital was $7.3 billion in the current year period, compared to $8.1 billion in the prior year period.

Impact of Qualifying Hedges on Net Interest Income — 2019 First Quarter Compared to 2018 First Quarter

The following table summarizes the impact of net interest adjustments from hedge qualifying interest-rate swaps (in thousands):

Table 9.3:Net Interest Adjustments from Hedge Qualifying Interest Rate Swaps

	Three months ended March 31,
	2019			2018

Interest Income	$	926,216		$	759,634
Fair value hedging effects	759			—
Amortization of basis	(14		)	(31		)
Interest rate swap accruals	70,573			11,042
Reported interest income	997,534			770,645

Interest Expense	811,652			569,867
Fair value hedging effects	2,071			—
Amortization of basis	(1,444		)	(1,345		)
Interest rate swap accruals	8,039			9,104
Reported interest expense	820,318			577,626
Net interest income	$	177,216		$	193,019

Net interest adjustment - interest rate swaps	$	62,652		$	3,252

Spread and Yield Analysis — 2019 First Quarter Compared to 2018 First Quarter

Table 9.4:Spread and Yield Analysis

	Three months ended March 31,
	2019						2018
			Interest						Interest
	Average		Income/				Average		Income/
(Dollars in thousands)	Balance		Expense		Rate (a)		Balance		Expense		Rate (a)
Earning Assets:
Advances	$	97,126,653	$	691,896	2.89	%	$	117,764,485	$	546,460	1.88	%
Interest bearing deposits and others	62,356		383		2.49		17,096		64		1.51
Federal funds sold and other overnight funds	17,136,844		103,811		2.46		21,540,944		77,627		1.46
Investments
Trading securities	6,529,297		40,873		2.54		2,161,929		9,124		1.71
Mortgage-backed securities
Fixed	9,301,522		72,588		3.17		8,360,978		61,329		2.97
Floating	7,286,246		53,638		2.99		8,991,155		45,814		2.07
State and local housing finance agency obligations	1,168,124		9,115		3.16		1,147,300		6,017		2.13
Mortgage loans held-for-portfolio	2,932,945		25,180		3.48		2,888,010		24,203		3.40
Loans to other FHLBanks	8,333		50		2.43		2,222		7		1.36

Total interest-earning assets	$	141,552,320	$	997,534	2.86	%	$	162,874,119	$	770,645	1.92	%

Funded By:
Consolidated obligation bonds
Fixed	$	28,697,070	$	182,065	2.57	%	$	28,275,394	$	122,584	1.76	%
Floating	51,997,529		316,530		2.47		67,489,552		243,590		1.46
Consolidated obligation discount notes	52,403,657		315,316		2.44		57,847,802		207,380		1.45
Interest-bearing deposits and other borrowings	1,056,965		6,307		2.42		1,093,551		3,739		1.39
Mandatorily redeemable capital stock	5,847		100		6.90		19,196		333		7.04

Total interest-bearing liabilities	134,161,068		820,318		2.48	%	154,725,495		577,626		1.51	%

Other non-interest-bearing funds	112,698		—				48,376		—
Capital	7,278,554		—				8,100,248		—

Total Funding	$	141,552,320	$	820,318			$	162,874,119	$	577,626

Net Interest Income/Spread			$	177,216	0.38	%			$	193,019	0.41	%

Net Interest Margin
(Net interest income/Earning Assets)					0.51	%					0.48	%

(a)Reported yields with respect to advances and Consolidated obligations may not necessarily equal the coupons on the instruments as derivatives are extensively used to change the yield and optionality characteristics of the underlying hedged items. When we issue fixed-rate debt that is hedged with an interest rate swap, the hedge effectively converts the debt into a simple floating-rate bond. Similarly, we make fixed-rate advances to members and hedge the advances with a pay-fixed and receive-variable interest rate swap that effectively converts the fixed-rate asset to one that floats with prevailing LIBOR rates. Average balance sheet information is presented, as it is more representative of activity throughout the periods presented. For most components of the average balances, a daily weighted average balance is calculated for the period. When daily weighted average balance information is not available, a simple monthly average balance is calculated. Average yields are derived by dividing income by the average balances of the related assets, and average costs are derived by dividing expenses by the average balances of the related liabilities. Yields and spreads are annualized.

Rate and Volume Analysis — 2019 First Quarter Compared to 2018 First Quarter

The Rate and Volume Analysis presents changes in interest income, interest expense and net interest income that are due to changes in both interest rates and the volume of interest-earning assets and interest-bearing liabilities, and their impact on interest income and interest expense (in thousands):

Table 9.5:Rate and Volume Analysis

	For the three months ended
	March 31, 2019 vs. March 31, 2018
	Increase (Decrease)
	Volume			Rate			Total
Interest Income
Advances	$	(108,408	)	$	253,844		$	145,436
Interest bearing deposits and others	256			63			319
Federal funds sold and other overnight funds	(18,367		)	44,551			26,184
Investments
Trading securities	25,620			6,129			31,749
Mortgage-backed securities
Fixed	7,181			4,078			11,259
Floating	(9,842		)	17,666			7,824
State and local housing finance agency obligations	111			2,987			3,098
Other investments
Mortgage loans held-for-portfolio	380			597			977
Loans to other FHLBanks	33			10			43

Total interest income	(103,036		)	329,925			226,889

Interest Expense
Consolidated obligation bonds
Fixed	1,855			57,626			59,481
Floating	(65,535		)	138,475			72,940
Consolidated obligation discount notes	(21,130		)	129,066			107,936
Deposits and borrowings	(129		)	2,697			2,568
Mandatorily redeemable capital stock	(227		)	(6		)	(233		)

Total interest expense	(85,166		)	327,858			242,692

Changes in Net Interest Income	$	(17,870	)	$	2,067		$	(15,803	)

Interest Income — 2019 First Quarter Compared to 2018 First Quarter

Interest income from advances, investments in mortgage-backed securities and MPF loans, federal funds and repurchase agreements are our principal sources of income. Changes in both rate and intermediation volume (average interest-yielding assets) explain the change in the current year period from the prior year period. Reported interest income is net of the impact of cash flows associated with interest rate swaps hedging certain fixed-rate advances that were converted to floating-rate generally indexed to short-term LIBOR.

The principal categories of Interest Income are summarized below (dollars in thousands):

Table 9.6:Interest Income — Principal Sources

	Three months ended March 31,
					Percentage
	2019		2018		Change
Interest Income
Advances	$	691,896	$	546,460	26.61	%
Interest-bearing deposits	383		64		498.44
Securities purchased under agreements to resell	29,922		10,109		195.99
Federal funds sold	73,889		67,518		9.44
Trading securities	40,873		9,124		347.97
Mortgage-backed securities
Fixed	72,588		61,329		18.36
Floating	53,638		45,814		17.08
State and local housing finance agency obligations	9,115		6,017		51.49
Mortgage loans held-for-portfolio	25,180		24,203		4.04
Loans to other FHLBanks	50		7		614.29

Total interest income	$	997,534	$	770,645	29.44	%

Interest income in the current year period grew to $997.5 million, yielding 286 basis points, compared to $770.6 million yielding 192 basis points in the prior year period. In a rising rate environment, short-term and overnight assets repriced to higher rates when interest-yielding assets were rolled over. Our advance portfolio includes significant amounts of LIBOR-indexed floating-rate advances, overnight advances and short-term fixed-rate advances, and yields have benefited in a rising rate environment. Our liquidity portfolios of overnight federal fund sold and securities purchased under agreements to resell have reset to higher yields. Our investments in LIBOR-indexed mortgage-backed securities have likewise benefited from a rising rate environment.

Higher interest revenues from higher rates were partly offset by lower advance volume in the current year period.

We have continued to benefit from favorable interest income accruals as a result of applying fair value hedges of advances. Certain fixed-rate advances are hedged by the execution of interest rate swaps that create synthetic floaters. The interest rate swaps are structured to pay out fixed-rate cash flows and receive variable-rate benchmark indexed cash flows. Historically, the fixed-rate cash flows paid to swap dealers on swaps hedging advances have been greater than the LIBOR-indexed cash flows received from swap dealers, resulting in a negative income accrual. In the periods in this report, our interest income benefited in a rising LIBOR environment as the cash interest accruals received exceeded fixed-rate payments to swap dealers. These market conditions resulted in a net favorable accrual of $70.6 million to advance income in the current year period, compared to net favorable accrual of $11.0 million in the prior year period. Fair value hedging impact of changes in fair values of hedged items minus fair values of hedging instruments was not material. For more information, see Table 9.7 Impact of Interest Rate Swaps on Interest Income Earned from Advances.

Impact of hedging on Interest income from advances — 2019 First Quarter Compared to 2018 First Quarter

We have executed interest rate swaps to modify the effective interest rate terms of many of our fixed-rate advance products and typically all of our putable advances, effectively converting a fixed-rate stream of cash flows from fixed-rate advances to a floating-rate stream of cash flows, typically indexed to LIBOR. The cash flow patterns achieved our interest rate risk management practices of synthetically converting much of our fixed-rate interest exposures to a LIBOR exposure.

The table below summarizes interest income earned from advances and the impact of interest rate derivatives (in thousands):

Table 9.7:Impact of Interest Rate Swaps on Interest Income Earned from Advances

	Three months ended March 31,
	2019			2018
Advance Interest Income
Advance interest income before adjustment for interest rate swaps	$	620,573		$	535,449
Fair value hedging effects (a)	777			—
Amortization of basis	(14		)	(31		)
Interest rate swap accruals	70,560			11,042
Total Advance interest income reported	$	691,896		$	546,460

(a) In the period prior to the adoption of ASU 2017-12 on January 1, 2019, fair value hedging effects were recorded in Other income (loss) and not in Advance interest income.

Interest Expense — 2019 First Quarter Compared to 2018 First Quarter

Our primary ~~business~~source of funding is ~~making collateralized loans to members, referred to as advances. Generally,~~through the ~~growth or decline~~issuance of Consolidated obligation bonds and discount notes in ~~advances is reflective of demand by members for both~~the global debt markets. Consolidated obligation bonds are generally medium- and long-term bonds, while discount notes are short-term ~~liquidity and term funding. This demand is driven by economic factors such as availability of alternative funding sources that are more attractive, or by the~~instruments. To fund our assets, our management considers our interest rate ~~environment~~risk and liquidity requirements in conjunction with consolidated obligation buyers’ preferences and capital market conditions when determining the characteristics of debt to be issued. Typically, we have used fixed-rate callable and non-callable CO bonds to fund mortgage-related assets and advances. CO discount notes are generally issued to fund advances and investments with shorter interest rate reset characteristics.

Changes in rate and intermediation volume (average interest-costing liabilities), the mix of debt issuances between CO bonds and CO discount notes, and the ~~outlook~~impact of hedging strategies explain the changes in interest expense. Reported Interest expense is net of the impact of ASC 815 hedge strategies. The primary hedging strategy is the Fair value hedge that creates LIBOR-indexed funding, the primary benchmark rate for the ~~economy. Members may choose~~FHLBNY. We also use the Cash Flow hedge strategy that creates long-term fixed-rate funding to ~~prepay advances (which may generate prepayment penalty fees) based on their expectations~~lock in future net interest margin. In a Fair value hedge strategy of a bond or discount note, we generally pay variable-rate LIBOR-indexed cash flows to swap counterparties. In exchange, we receive fixed-rate cash flows, which typically mirror the fixed-rate coupon payments to investors holding the FHLBank debt. This exchange effectively converts fixed-rate coupons to floating-rate coupons indexed to the 3-month LIBOR. The primary cash flow hedge strategy is designed to eliminate the variability of cash flows attributable to changes in the primary benchmark interest rate ~~changes~~(3-month LIBOR), hedging long-term issuances of consolidated obligation discount notes and ~~demand for liquidity.~~create long-term fixed-rate funding.

~~Advance volume~~Certain floating-rate CO bonds were designated in economic hedges, primarily basis hedges that converted a contractual variable index to a preferred funding variable index, typically the 3-month LIBOR. Interest rate swaps designated in an economic hedge do not qualify as an ASC 815 hedge, and interest accrual is ~~also influenced by merger activity, where members~~not recorded as an adjustment to debt interest expense (as would a swap that qualified); swap accruals together with changes in the fair values of the swaps in economic hedges are either acquired by non-members or acquired by members of another FHLBank. When our members are acquired by members of another FHLBank or by non-members, these former members no longer qualify for membership and we may not offer renewals or additional advances to the former members. If maturing advances are not replaced, it will havereported in Other income (below net interest income) as an impact ~~on business volume. Period-end advance balances were lower at June 30, 2018, compared to December 31, 2017, primarily due to run-offs~~ of ~~adjustable-rate advances (“ARC”) near the quarter-end. On a period-over-period basis, volume of advance business, as measured by average balances, was higher~~derivative and hedging activities in the ~~six months~~Statements of ~~2018 compared to the 2017 period.~~income.

~~Member demand for advance products~~The principal categories of Interest expense are summarized below (dollars in thousands):

Table ~~4.1:~~9.8: Interest Expenses — Principal Categories

	Three months ended March 31,
					Percentage
	2019		2018		Change
Interest Expense
Consolidated obligations bonds
Fixed	$	182,065	$	122,584	(48.52	)%
Floating	316,530		243,590		(29.94	)
Consolidated obligations discount notes	315,316		207,380		(52.05	)
Deposits	5,965		3,505		(70.19	)
Mandatorily redeemable capital stock	100		333		69.97
Cash collateral held and other borrowings	342		234		(46.15	)

Total interest expense	$	820,318	$	577,626	(42.02	)%

Interest expense in the current year period grew to $820.3 million, at a costing yield of 248 basis points, compared to $577.6 million at a costing yield of 151 basis points in the prior year period. Our funding portfolios include significant issuances of LIBOR-indexed floating-rate CO debt, shorter-term discount notes and short- and medium-term CO bonds that repriced to higher rates in a rising rate environment.

Fair value hedges have been executed to convert fixed-rate CO bonds to benchmark-indexed floating-rate. Cash flow hedges have been executed to hedge rolling-issuances of discount notes to long-term fixed-rate interest expense. The cash flows exchanged in the two hedging strategies resulted in net interest adjustments that impacted interest expense.

In a fair value hedge of CO bonds, the interest rate swaps are structured to receive fixed-rate cash flows and pay benchmark-indexed variable cash flows, creating synthetic floating-rate cash flows. The cash flows exchanged between the receive-leg and pay-leg determine the net interest adjustments. Historically, in a fair value hedge of our debt, the fixed-rate cash flows received from swap dealers on swaps hedging CO bonds have been greater than the LIBOR indexed cash flows we pay to swap dealers, typically resulting in favorable sub-LIBOR cash flows. In the periods in this report, the higher LIBOR-indexed cash flows paid have reversed the typical favorable interest adjustment to interest expense, so that a net unfavorable adjustment of $8.5 million was recorded in the current year period, compared to an unfavorable adjustment of $3.6 million in the prior year period. Fair value hedging impact resulting from changes in fair values of hedged items minus hedging instruments was not material.

No discount notes were hedged under a fair value hedge under ASC 815. Cash flow hedges under ASC 815 have been designated to hedge future issuances of designated CO discount notes. In this strategy, long-term interest rate swaps have been executed that have created synthetic fixed-rate cash flows. The swaps are structured to pay fixed-rate cash flows and receive LIBOR-indexed variable rate cash flows. The pay fixed-rate cash flows are typically based on long-term swap rates, which are generally higher than the 3-month LIBOR that we receive in exchange. Although the cash flow exchanged in the hedge have resulted in net interest expense, the strategy has achieved our hedging objective of a stable and predictable long-term funding expense. The cash flows exchanged in the hedging strategy resulted in net favorable interest accruals of $0.5 million in the three months ended March 31, 2019 as the 3-month LIBOR has continued to rise, benefiting swap cash flows received. In the prior year period, we recorded net unfavorable interest expense accrual of $5.5 million.

For more information about hedging effects, see Table 9.9. Impact of Interest Rate Swaps on Consolidated Obligations Interest Expense.

Impact of Hedging on Interest Expense on Debt — 2019 First Quarter Compared to 2018 First Quarter

The table below summarizes interest expense paid on Consolidated obligation bonds and discount notes and the impact of interest rate swaps (in thousands):

Table 9.9:Impact of Interest Rate Swaps on Consolidated Obligations Interest Expense

	Three months ended March 31,
	2019			2018
Bonds and discount notes-Interest expense
Bonds-Interest expense before adjustment for swaps	$	489,446		$	363,911
Discount notes-Interest expense before adjustment for swaps	315,799			201,884
Fair value hedging effect on CO bonds (a)	2,071			—
Amortization of basis adjustments on discount notes	(1,444		)	(1,345		)
Net interest adjustment for swaps hedging CO bonds	8,523			3,609
Net interest adjustment for swaps hedging discount notes	(484		)	5,495
Total bonds and discount notes-Interest expense	$	813,911		$	573,554

(a) In the period prior to the adoption of ASU 2017-12 on January 1, 2019, fair value hedging effects were recorded in Other income (loss) and not in CO debt interest expense.

Allowance for Credit Losses — 2019 First Quarter Compared to 2018 First Quarter

·Mortgage loans held-for-portfolio — Credit quality continues to be strong, delinquencies low, and allowance for credit losses have remained insignificant.

We recorded a net reversal of $17 thousand in the 2019 period, compared to a net reversal of $380 thousand in the 2018 period.

We evaluate impaired conventional mortgage loans on an individual (loan-by-loan) basis, and compare the fair values of collateral (net of liquidation costs) to recorded investment values in order to calculate/measure credit losses on impaired loans. Loans are considered impaired when they are seriously delinquent (typically 90 days or more) or in bankruptcy or foreclosure, and loan loss allowances are computed at that point. When a loan is seriously delinquent, we believe it is probable that we will be unable to collect all contractual interest and principal in accordance with the terms of the loan agreement. We also perform a loss migration analysis to collectively measure impairment of loans that have not already been individually evaluated for impairment. FHA/VA (Insured mortgage loans) guaranteed loans are also evaluated collectively for impairment based on the credit worthiness of the PFI.

The immaterial amounts of reserves for credit losses are consistent with our historical experience with foreclosures or losses. Additionally, collateral values of impaired loans have continued to remain steady and have improved in the New York and New Jersey sectors, and the low loan loss reserves were reflective of the stability in home prices in our residential loan markets. For more information, see financial statements Note 10. Mortgage Loans Held-for-Portfolio.

·Advances — Based on the collateral held as security and prior repayment history, no allowance for losses was currently deemed necessary. Our credit risk from advances was concentrated in commercial banks, savings institutions and insurance companies. All advances were fully collateralized during their entire term. In addition, borrowing members pledged their stock in the FHLBNY as additional collateral for advances.

Analysis of Non-Interest Income (Loss) — 2019 First Quarter Compared to 2018 First Quarter

The principal components of non-interest income (loss) are summarized below (in thousands):

Table 9.10:Other Income (Loss)

	Three months ended March 31,
	2019			2018
Other income (loss):
Service fees and other (a)	$	4,642		$	3,721
Instruments held under the fair value option - Unrealized gains (losses) (b)	(464		)	(53		)

Derivative gains (losses) (c)	(12,280		)	(18,800		)
Trading securities gains (losses) (d)	17,070			(3,201		)
Equity investments gains (losses) (e)	4,210			(260		)
Total other income (loss)	$	13,178		$	(18,593	)

(a)Service fees and other — Service fees are derived primarily from providing correspondent banking services to members, typically fees earned on standby financial letters of credit issued by the FHLBNY on behalf of members. Fee income earned on financial letters of credit were $4.4 million and $3.5 million in the first quarter of the current year and in the same period in the prior year. Letters of credit are primarily issued on behalf of members to units of state and local governments to collateralize their deposits at member banks.

(b)Changes in fair values on instruments elected under the FVO were not material in the periods in this report.

(c)Derivatives in standalone economic hedges reported losses of $12.3 million in the three months ended March 31, 2019, compared to losses of $18.8 million in the prior year period. Derivative losses in the current year period were primarily due to swaps in economic hedges of the liquidity trading portfolio of fixed-rate U.S Treasury securities. Derivative losses in the prior year period was primarily due to standalone basis swaps in economic hedges that synthetically converted floating-rate CO bonds indexed to 1-month LIBOR to 3-month LIBOR. See Table 9.12 Other Income (Loss) — Impact of Derivative Gains and Losses.

(d) Net gains (losses) on Trading securities — We have invested in short- and medium-term fixed-rate U.S Treasury obligations, which reported unrealized fair value gains in a sharply declining rate environment at March 31, 2019. The securities are not held for speculative trading and are held for liquidity in compliance with FHFA regulatory requirements.

(e) Fair value gains (losses) on Equity Investments — Our investments in grantor trusts classified as equity investments reported unrealized fair value gains in a rising equity market in the U.S at March 31, 2019. The grantor trusts are owned by us with the objective of providing liquidity to pay for pension benefits to retirees vested in non-qualified pension plans. The grantor trusts are invested in equity and bond funds. .

The following table summarizes unrealized and realized gains (losses) in the trading portfolio (in thousands):

Table 9.11:Net Gains (Losses) on Trading Securities (a)

	Three months ended March 31,
	2019		2018
Net unrealized gains (losses) on Trading securities held at period-end	$	16,294	$	(3,201	)
Net unrealized and realized gains (losses) on Trading securities sold/matured during the period	776		—
Net gains (losses) on Trading securities	$	17,070	$	(3,201	)

(a)Securities classified as trading are held for liquidity objectives and carried at fair values. We record changes in the fair value of these investments through Other income as net unrealized gains (losses) on trading securities. FHFA regulations prohibit trading in or the speculative use of financial instruments.

Other income (loss) — Derivatives and Hedging Activities recorded in the three months ended March 31, 2019 and 2018.

With the adoption of ASU 2017-12 effective January 1, 2019, we report the fair value hedging effects in qualifying hedges within interest income and interest expense together with the hedged item. Prior to the adoption of the ASU, fair value impact of qualifying hedges and standalone derivatives were both reported in Other income (loss). Comparative information for the prior year period has not been reclassified to conform to post-adoption standards as the adoption of ASU 2017-12 permitted prospective adoption. For derivatives that are not designated in a hedging relationship (i.e. in an economic hedge), the derivatives are considered as a “standalone” instrument and fair value changes are recorded in Other income (loss), without the offset of a hedged item. Gains and losses recorded in Other income (loss) on standalone derivatives include net interest accruals.

The table presents fair value changes of derivatives in economic hedges (i.e. not in an ASC 815 qualifying hedge) in Other income (loss) in the three months ended March 31, 2019 (post ASU 2017-12). In the three months ended March 31, 2018, prior to the adoption of the ASU, the table presents the aggregate impact of all derivatives and hedging activities, including hedges that qualified under ASC 815. Prior period comparatives have not been recast to conform to the post ASU presentation.

Table 9.12:Other Income (Loss) — Impact of Derivative Gains and Losses (in thousands)

	Impact on Other Income (loss)
	Three months ended March 31,
	2019			2018

Derivatives designated as hedging instruments under ASC 815
Interest rate swaps
Advances				$	(770	)
Consolidated obligation bonds				2,378
Net gains (losses) related to fair value hedges				1,608
Cash flow hedges				(95		)
ASC 815 Hedging impact				$	1,513

Derivatives not designated as hedging instruments
Interest rate swaps (a)	$	(10,890	)	$	(19,823	)
Caps or floors	(345		)	1,308
Mortgage delivery commitments	197			(184		)
Swaps economically hedging instruments designated under FVO	747			64
Accrued interest on swaps in economic hedging relationships	(1,989		)	442
Net gains (losses) related to derivatives not designated as hedging instruments	$	(12,280	)	$	(18,193	)
Price alignment interest paid on variation margin	—			(2,120		)
Net gains (losses) on derivatives and hedging activities	$	(12,280	)	$	(18,800	)

(a)In the 2019 period, losses primarily represented fair value changes on swaps executed in economic hedges to offset earnings volatility due to fluctuations in the fair values of fixed-rate trading securities. In the 2018 period, losses primarily represented fair value changes of basis swaps executed in economic hedges to offset the basis risk of floating-rate CO bonds. The basis swaps synthetically converted CO debt indexed to the 1-month LIBOR to 3-month LIBOR, a strategy that provided economic benefit in managing our balance sheet. In the 2018 period, the spread between the 1-month LIBOR and the 3-month LIBOR had widened unfavorably and adversely impacted fair values and cash flows.

Operating Expenses, Compensation and Benefits, and Other Expenses — 2019 First Quarter Compared to 2018 First Quarter

The following table sets forth the major categories of operating expenses (dollars in thousands):

Table 9.13:Operating Expenses, and Compensation and Benefits

	Three months ended March 31,
	2019		Percentage of Total		2018		Percentage of Total
Operating Expenses (a)
Occupancy	$	1,843	14.34	%	$	1,850	18.58	%
Depreciation and leasehold amortization	1,961		15.26		1,286		12.92
All others (b)	9,046		70.40		6,821		68.50
Total Operating Expenses	$	12,850	100.00	%	$	9,957	100.00	%

Total Compensation and Benefits (c)	$	21,438			$	18,768
Finance Agency and Office of Finance (d)	$	3,942			$	4,259
Other expenses (e)	$	2,350			$	1,535

(a)Operating expenses included the administrative and overhead costs of operating the FHLBNY, as well as the operating costs of providing advances and managing collateral associated with the advances, managing the investment portfolios, and providing correspondent banking services to members.

(b)The category “All others” included temporary workers, computer service agreements, contractual services, professional and legal fees, audit fees, director fees and expenses, insurance and telecommunications. Expenses increased in the current year periods primarily due to consulting expenses to begin implementation of a multi-year technology enhancement plan.

(c)Compensation expense increased driven by investments in headcount.

(d)We are also assessed for our share of the operating expenses for the Finance Agency and the Office of Finance. The FHLBanks and two other GSEs share the entire cost of the Finance Agency. Expenses are allocated by the Finance Agency and the Office of Finance.

(e)The category Other expenses included contributions to homeowners and small businesses under a newly established hurricane relief grant program, the non-service elements of Net periodic pension benefit costs, and derivative clearing fees.

Assessments — 2019 First Quarter Compared to 2018 First Quarter

For more information about assessments, see Affordable Housing Program and Other Mission Related Programs and Assessments under Part I Item 1 Business in the most recent Form 10-K filed on March 21, 2019.

The following table provides rollforward information with respect to changes in Affordable Housing Program liabilities (in thousands):

Table 10.1:Advance Trends

Advance Trends

Member demand for advance products

Par amount of advances outstanding was ~~$111.4~~$99.2 billion at ~~June 30, 2018,~~March 31, 2019, compared to ~~$122.7~~$105.4 billion at December 31, ~~2017.~~2018. The decrease in amounts outstanding at March 31, 2019, relative to December 31, 2018 has been largely due to maturities and prepayments.

Carrying value of advances outstanding at June 30, 2018 was $110.8 billion, compared to $122.4 billion at December 31, 2017. Carrying values included unrealized net fair value hedging basis adjustments recorded on hedges eligible under ASC 815, and basis adjustments recorded on advances elected under the fair value option (“FVO”). For advances hedged under the ASC 815 qualifying hedging rules, the basis adjustment was a fair value net loss of $593.9 million at June 30, 2018 and a fair value loss of $265.3 million at December 31, 2017. For advances elected under the fair value option (“FVO”), the basis adjustments were valuation gains of $0.5 million at June 30, 2018 and $5.6 million at December 31, 2017. For more information about basis adjustments, see Table 4.4 Advances by Maturity and Yield Type in this MD&A.

Advances — Product Types

The following table summarizes par values of advances by product type (dollars in thousands):

Table ~~4.2:~~2.2: Advances by Product Type

June 30, 2018

December 31, 2017

Percentage

Percentage

Amounts

of Total

Amounts

of Total

Adjustable Rate Credit - ARCs

$
29,930,467

26.87
%
$
37,060,467

30.20
%
Fixed Rate Advances

51,105,901

45.89

50,517,644

41.17

Short-Term Advances

17,951,051

16.12

23,818,181

19.41

Mortgage Matched Advances

348,907

0.31

352,859

0.29

Overnight & Line of Credit (OLOC) Advances

4,496,178

4.04

3,748,677

3.05

All other categories

7,542,858

6.77

7,209,613

5.88

Total par value

111,375,362

100.00
%
122,707,441

100.00
%

Hedge valuation basis adjustments

(593,890
)

(265,260
)

Fair value option valuation adjustments and accrued interest

532

5,624

Total

$
110,782,004

$
122,447,805

For more information about advance product types, see our most recent Form 10-K filed on March ~~22, 2018.~~21, 2019.

	March 31, 2019					December 31, 2018
				Percentage					Percentage
	Amounts			of Total		Amounts			of Total

Adjustable Rate Credit - ARCs	$	21,206,467		21.39	%	$	23,346,467		22.14	%
Fixed Rate Advances	49,282,324			49.70		51,612,602			48.96
Short-Term Advances	18,234,275			18.39		14,995,172			14.22
Mortgage Matched Advances	299,556			0.30		320,027			0.30
Overnight & Line of Credit (OLOC) Advances	2,823,256			2.84		7,723,492			7.33
All other categories	7,316,485			7.38		7,436,097			7.05

Total par value	99,162,363			100.00	%	105,433,857			100.00	%

Hedge valuation basis adjustments	(29,968		)			(255,024		)

Total	$	99,132,395				$	105,178,833

Advances — Interest Rate Terms

The following table summarizes interest-rate payment terms for advances (dollars in thousands):

Table ~~4.3:~~2.3: Advances by Interest-Rate Payment Terms

	June 30, 2018					December 31, 2017					March 31, 2019					December 31, 2018
				Percentage					Percentage					Percentage					Percentage
	Amount			of Total		Amount			of Total		Amount			of Total		Amount			of Total

Fixed-rate (a)	$	81,391,007		73.08	%	$	85,587,792		69.75	%	$	77,925,839		78.59	%	$	82,034,884		77.81	%
Variable-rate (b)	29,981,355			26.92		37,116,649			30.25		21,233,396			21.41		23,391,691			22.19
Variable-rate capped or floored (c)	3,000			—		3,000			—		3,000			—		3,000			—
Overdrawn demand deposit accounts											128			—		4,282			—

Total par value	111,375,362			100.00	%	122,707,441			100.00	%	99,162,363			100.00	%	105,433,857			100.00	%

Hedge valuation basis adjustments	(593,890		)			(265,260		)			(29,968		)			(255,024		)
Fair value option valuation adjustments and accrued interest	532					5,624

Total	$	110,782,004				$	122,447,805				$	99,132,395				$	105,178,833

(a) Fixed-rate borrowings remained the largest category of advances borrowed by ~~members. The presentation above~~members, and includes long-term and short-term fixed-rate advances. Long-term advances remain a small segment of the portfolio at ~~June 30, 2018,~~March 31, 2019, with only ~~5.4%~~7.2% of advancesin the remaining maturity bucket of greater than 5 years ~~(2.5%~~(6.7% at December 31, ~~2017)~~2018). For more information, see financial statements Note 9. Advances.

(b) Variable-rate advances are ARC advances, which are typically indexed to LIBOR. The FHLBNY’s larger members are generally borrowers of variable-rate advances.

(c) Category represents ARCs with options that “cap” increase or “floor” decrease in the LIBOR index at predetermined strikes (We have also purchased cap/floor options that mirror the terms of the options embedded in the advances sold to members, offsetting our exposure on the advance).

The following table summarizes maturity and yield characteristics of advances (dollars in thousands):

Table ~~4.4:~~2.4: Advances by Maturity and Yield Type

	June 30, 2018					December 31, 2017					March 31, 2019					December 31, 2018
				Percentage					Percentage					Percentage					Percentage
	Amount			of Total		Amount			of Total		Amount			of Total		Amount			of Total

Fixed-rate
Due in one year or less	$	51,630,426		46.36	%	$	54,923,033		44.76	%	$	52,235,093		52.68	%	$	52,416,990		49.72	%
Due after one year	29,760,581			26.72		30,664,759			24.99		25,690,746			25.91		29,617,894			28.09

Total Fixed-rate	81,391,007			73.08		85,587,792			69.75		77,925,839			78.59		82,034,884			77.81

Variable-rate
Due in one year or less	20,871,458			18.74		30,368,458			24.75		17,675,057			17.82		15,892,506			15.07
Due after one year	9,112,897			8.18		6,751,191			5.50		3,561,467			3.59		7,506,467			7.12

Total Variable-rate	29,984,355			26.92		37,119,649			30.25		21,236,524			21.41		23,398,973			22.19
Total par value	111,375,362			100.00	%	122,707,441			100.00	%	99,162,363			100.00	%	105,433,857			100.00	%

Hedge valuation basis adjustments (a)	(593,890		)			(265,260		)			(29,968		)			(255,024		)
Fair value option valuation adjustments and accrued interest (b)	532					5,624
Total	$	110,782,004				$	122,447,805				$	99,132,395				$	105,178,833

Fair value basis and valuation adjustments — Key determinants of valuation adjustments are factors such as advance run offs and new transactions designated in hedging relationships or elected under the FVO, the forward swap curve, the volatility of the swap rates, the remaining duration to maturity, and for advances elected under the FVO, the changes in the spread between the swap rate and the Consolidated obligation debt yields. For FVO advances change in interest receivable is also a factor as it is a component of the entire fair value of FVO advances.relationships.

(a) Hedging valuation basis adjustments — The reported carrying values of hedged advances are adjusted for changes in their fair values (fair value basis adjustments or fair value) that are attributable to changes in the benchmark risk being ~~hedged, which~~hedged. LIBOR is ~~LIBOR for~~our primary benchmark. In the ~~FHLBNY, and is~~current year quarter we adopted FF/OIS as another benchmark. The chosen benchmark becomes the discounting basis under ASC 815 for computing changes in fair values for hedged advances. ~~The~~Table 2.5 Hedged Advances by Type discloses notional ~~amount~~amounts of advances ~~hedged under ASC 815 was $51.5 billion at June 30, 2018 and $53.6 billion at December 31, 2017.~~hedged. The application of ~~this~~ASC 815 accounting methodology resulted in the recognition of net unrealized hedge valuation basis losses of $30.0 million and $255.0 million at ~~the two dates.~~March 31, 2019 and December 31, 2018. The forward LIBOR yield curve ~~which is the~~declined steeply at March 31, 2019. As hedge valuation basis ~~for hedged advances under ASC 815, has continued to rise. Valuations~~ of fixed-rate ~~LIBOR benchmark hedge~~ advances move inversely with the ~~LIBOR curve,~~rise and the net cumulative basis losses were consistent with the upward-sloping LIBOR yield curve at June 30, 2018 and December 31, 2017. Valuation basis losses increased at June 30, 2018 in line with the significant steepeningfall of the forward ~~LIBOR discounting~~interest rates, the sharp decline of the swap curve ~~at June 30, 2018.~~

largely reversed previously reported cumulative basis losses. Generally, hedge valuation basis gains and losses are unrealized and will reverse to zero if the advance is held to maturity or is put or called on the early option exercise dates.

~~For more information, see Table 1.12: Earnings Impact of Derivatives and Hedging Activities~~ ~~— By Financial Instrument Type~~.

~~(b)~~~~FVO fair values~~ — Valuation basis adjustments are recorded to recognize changes in the entire fair values of advances elected under the FVO, including changes in accrued interest receivable. The discounting basis for computing fair values of FVO advances is the Advance pricing curve, which is primarily derived from the FHLBNY’s cost of funds (yields paid on Consolidated obligation debt). Fair value basis of a FVO advance reflects changes in the term structure and shape of the Advance pricing curve at the measurement dates.

Valuation adjustments and interest accrued receivable taken together reported net basis gains at June 30, 2018 and December 31, 2017. Advances elected under the FVO are typically variable-rate LIBOR indexed advances, which re-priced frequently to market indices or are fixed-rate advances with short remaining durations. As a result, valuation basis remained near to par. The notional amount of the FVO advance portfolio declined to $0.3 billion at June 30, 2018, compared to $2.2 billion at December 31, 2017. Run-offs of advances elected under the FVO were not replaced by new transactions.

We have elected the FVO on an instrument-by-instrument basis. With respect to credit risk, we have concluded that it was not necessary to estimate changes attributable to instrument-specific credit risk, as we consider our advances to remain fully collateralized through to maturity. For more information, see financial statements, Fair Value Option Disclosures in Note 18 Fair Values of Financial Instruments.

Hedge volume — We hedge putable advances and certain “bullet” fixed-rate advances under the hedge accounting provisions when they qualify under those standards and as economic hedges when the hedge accounting provisions are operationally difficult to establish or a high degree of hedge effectiveness cannot be asserted.

The following table summarizes hedged advances by type of option feature (in thousands):

Table ~~4.5:~~2.5: Hedged Advances by Type

Par Amount	June 30, 2018			December 31, 2017			March 31, 2019			December 31, 2018
Qualifying Hedges
Fixed-rate bullets (a)	$	47,943,200		$	52,983,896		$	37,788,050		$	41,122,372
Fixed-rate putable (b)	3,524,250			567,000			4,926,750			4,734,750
Fixed-rate callable	16,575			16,575			16,575			16,575
Fixed-rate with embedded cap	30,000			30,000			30,000			30,000

Total Qualifying Hedges	$	51,514,025		$	53,597,471		$	42,761,375		$	45,903,697

Aggregate par amount of advances hedged (c)	$	51,680,025		$	53,674,759		$	42,764,375		$	45,919,697
Fair value basis (Qualifying hedging adjustments)	$	(593,890	)	$	(265,260	)	$	(29,968	)	$	(255,024	)

(a) Generally, non-callable fixed-rate medium- and longer term advances are hedged to mitigate the risk in fixed-rate lending.

(b) Putable advances are hedged by cancellable swaps, and the paired long put and short call options mitigate the put/call option risks; additionally, fixed-rate is synthetically converted to LIBOR, mitigating the risk in fixed-rate lending for the FHLBNY. In a rising rate environment, swap dealers would likely exercise their call option, and the FHLBNY will exercise its put option with the member and both instruments terminate at par. Members may borrow new advances at the then prevailing rate.

(c) Represents par values of advances in ASC 815 qualifying hedge relationships. Typically, the longer term fixed-rate advances and advances with optionality are hedged.

~~Advances elected~~ ~~under~~ ~~the FVO~~ — Advances elected under the FVO at June 30, 2018 and December 31, 2017 were shorter-term adjustable-rate (“ARCs”). By electing the FVO for an asset instrument (the advance), the objective is to offset some of the volatility in earnings due to the designation of debt (liability) under the FVO. Changes in the fair values of the advance were recorded through earnings, and the offset was recorded as a fair value basis adjustment to the carrying values of the advances.

~~The following table summarizes par amounts of advances elected under the FVO (in thousands):~~

~~Table 4.6:~~~~Advances under the Fair Value Option (FVO)~~

Advances

Par Amount

June 30, 2018

December 31, 2017

Advances designated under FVO (a)

$
250,000

$
2,200,000

~~(a)~~ ~~Notional amounts of~~ ~~advances elected under the FVO have decreased as run-offs were not replaced.~~

The following table summarizes par amounts of advances that were still putable or callable, with one or more pre-determined option exercise dates remaining (in thousands):

Table ~~4.7:~~2.6: Putable and Callable Advances

	Advances				Advances
Par Amount	June 30, 2018		December 31, 2017		March 31, 2019		December 31, 2018
Putable/callable(a)	$	3,540,825	$	597,825	$	4,943,325	$	4,751,325
No-longer putable/callable	$	878,500	$	1,020,500	$	645,000	$	640,000

(a)Putable advances were typically long-term advances with one or more put options exercisable by the FHLBNY. The increase primarily represents one member’s borrowing.

Investments

We maintain long-term investment portfolios of debt securities, which are principally mortgage-backed securities issued by GSEs and U.S. Agency ~~(“GSE-issued”)~~(GSE-issued). Investments include a small portfolio of MBS issued by private enterprises, and bonds issued by state or local housing finance agencies. We also maintain short-term investments for our liquidity resources, for funding daily stock repurchases and redemptions, for ensuring the availability of funds to meet the credit needs of our members, and to provide additional earnings. ~~In December 2016, management approved~~We also invest in a liquidity trading portfolio, the purpose of which is to augment our liquidity needs. Investments in the trading portfolio were U.S Treasury securities and GSE-issued securities, all carried at their fair values. The Finance Agency prohibits speculative investments, but allows the designation of a trading portfolio for liquidity purposes. We may dispose such investments if liquidity needs are met and market conditions deem the sale as advantageous.

We are subject to credit risk on our investments, generally transacted with GSEs and large financial institutions that are considered to be investment quality. The Finance Agency defines investment quality as a security with adequate financial backing so that full and timely payment of principal and interest on such security is expected and there is minimal risk that the timely payment of principal and interest would not occur because of adverse changes in economic and financial conditions during the projected life of the security. For more information about investment policies, restrictions and practices, see the most recent Form 10-K filed on March ~~22, 2018.~~21, 2019.

The following table summarizes changes in investments by categories: Money market investments, Trading securities, Equity investments in Grantor trusts, Available-for-sale securities and Held-to-maturity securities ~~Equity Investments in Grantor Trusts and money market investments~~ (Carrying values, dollars in thousands):

Table ~~5.1:~~3.1: Investments by Categories

	June 30,		December 31,		Dollar			Percentage		March 31,		December 31,		Dollar			Percentage
	2018		2017		Variance			Variance		2019		2018		Variance			Variance

State and local housing finance agency obligations (a)	$	1,232,760	$	1,147,510	$	85,250		7.43	%	$	1,168,000	$	1,168,350	$	(350	)	(0.03	)%
Trading securities (b)	3,766,579		1,641,568		2,125,011			129.45		7,210,635		5,810,512		1,400,123			24.10

Mortgage-backed securities
Available-for-sale securities, at fair value (c)	479,954		528,627		(48,673		)	(9.21	)	2,185,968		422,216		1,763,752			417.74
Held-to-maturity securities, at carrying value (c)	16,907,166		16,677,023		230,143			1.38		14,460,971		16,306,476		(1,845,505		)	(11.32	)
Total securities	22,386,459		19,994,728		2,391,731			11.96		25,025,574		23,707,554		1,318,020			5.56

Equity investments in Grantor trusts (d)	50,116		48,642		1,474			3.03		53,982		48,179		5,803			12.04
Securities purchased under agreements to resell	4,945,000		2,700,000		2,245,000			83.15		5,590,000		4,095,000		1,495,000			36.51
Federal funds sold	14,887,000		10,326,000		4,561,000			44.17		9,137,000		7,640,000		1,497,000			19.59

Total investments	$	42,268,575	$	33,069,370	$	9,199,205		27.82	%
Total Investments										$	39,806,556	$	35,490,733	$	4,315,823		12.16	%

(a) State and local housing finance agency bonds were designated as HTM and were carried at amortized cost. ~~We acquired $100.0 million~~There were no new acquisitions in the first ~~six months~~quarter of ~~2018~~2019 and paydowns were ~~$14.8~~$0.4 million.

(b) Trading securities were U.S. Treasury securities, GSE securities and corporate notes. Trading portfolio is for liquidity and not for speculative purposes. We acquired par amounts of ~~$2.0~~$2.8 billion of U.S. Treasury notes ~~and $421.7 million of GSE securities~~ in the first ~~six~~

~~months~~quarter of ~~2018. We received par amounts of $3.4 million of Ambac corporate notes from the insurer Ambac Corporation as consideration for insurance claims on certain insured private-label MBS.~~2019.

(c) Mortgage-backed securities classified as ~~AFS. No acquisitions were~~AFS includes $1.6 billion of Fixed-rate CMBS transferred at January 1, 2019 from the HTM category; $150.0 million was acquired and designated as AFS in the first ~~six~~three months of ~~2018.~~2019. AFS securities outstanding are all GSE and U.S. Agency issued ~~floating-rate~~ MBS and carried at fair value. Mortgage-backed securities classified as HTM — ~~$1.8 billion~~$504.6 million of GSE-issued MBS were acquired in ~~2018~~the first quarter of 2019 and designated as HTM. MBS in the HTM portfolio are predominantly GSE-issued, and less than 1% are ~~PLMBS.~~PLMBS (private-label MBS).

(d) Funds in the grantor trusts were designated as ~~Equity Investments~~equity investments at January 1, 2018. ~~Prior to January 1, 2018, the funds were classified as AFS.~~ In the first ~~six months~~quarter of ~~2018, we invested $1.8~~2019, investments made were $1.9 million ~~in cash,~~ and payouts to retirees were ~~$0.9~~$0.5 million. Trust fund balances represent investments in registered mutual funds and other fixed-income and equity funds. Funds are highly liquid and readily redeemable at their NAVs, which are the fair values of the investments. The funds are owned by the FHLBNY, and the intent is to utilize investments to fund current and potential future payment obligations of the non-qualified Benefit Equalization Pension plans. For more information about the pension plans, see financial statements, Note ~~15.~~16. Employee Retirement Plans in the Bank’s most recent Form 10-K filed on March ~~22, 2018.~~21, 2019.

Mortgage-Backed Securities — By Issuer

The following table summarizes our investment debt securities issuer concentration (dollars in thousands):

Table ~~5.2:~~3.2: Investment Debt Securities Issuer Concentration

	June 30, 2018						December 31, 2017						March 31, 2019						December 31, 2018
					Carrying value as a						Carrying value as a						Carrying value as a						Carrying value as a
	Carrying (a)				Percentage		Carrying (a)				Percentage		Carrying (a)				Percentage		Carrying (a)				Percentage
Long Term Investment (c)	Value		Fair Value		of Capital		Value		Fair Value		of Capital		Value		Fair Value		of Capital		Value		Fair Value		of Capital

MBS
Fannie Mae	$	5,126,168	$	5,076,423	64.70	%	$	5,009,067	$	5,019,957	60.78	%	$	4,475,893	$	4,476,620	60.69	%	$	4,692,639	$	4,658,771	60.58	%
Freddie Mac	12,076,298		12,032,614		152.43		11,986,984		12,055,501		145.45		12,022,956		12,113,987		163.03		11,870,521		11,867,028		153.23
Ginnie Mae	25,385		25,547		0.32		28,237		28,412		0.34		21,860		22,027		0.30		22,898		23,079		0.30
All Others - PLMBS	159,269		197,114		2.01		181,362		216,793		2.20		126,230		156,530		1.71		142,634		174,749		1.84
Non-MBS (b)	1,232,760		1,206,926		15.56		1,196,152		1,163,379		14.51		1,168,000		1,145,523		15.84		1,168,350		1,144,345		15.08

Total Investment Debt Securities	$	18,619,880	$	18,538,624	235.02	%	$	18,401,802	$	18,484,042	223.28	%	$	17,814,939	$	17,914,687	241.57	%	$	17,897,042	$	17,867,972	231.03	%


Categorized as:

Available-for-Sale Securities	$	479,954	$	479,954			$	577,269	$	577,269			$	2,185,968	$	2,185,968			$	422,216	$	422,216

Held-to-Maturity Securities	$	18,139,926	$	18,058,670			$	17,824,533	$	17,906,773			$	15,628,971	$	15,728,719			$	17,474,826	$	17,445,756

(a) Carrying values include fair values for AFS securities.

(b) Non-MBS ~~consists of housing~~— Includes Housing finance agency ~~bonds at June 30, 2018; at December 31, 2017 the line also included funds in grantor trusts.~~bonds.

(c) Excludes Trading portfolio.

External rating information of the held-to-maturity portfolio was as follows (carrying values in thousands):

Table ~~5.3:~~3.3: External Rating of the Held-to-Maturity Portfolio

	June 30, 2018												March 31, 2019
	AAA-rated (a)		AA-rated (b)		A-rated		BBB-rated		Below Investment Grade		Total		AAA-rated (a)		AA-rated (b)		A-rated		BBB-rated		Below Investment Grade		Total

Mortgage-backed securities	$	869	$	16,749,337	$	112,288	$	9,184	$	35,488	$	16,907,166	$	892	$	14,336,058	$	81,306	$	8,948	$	33,767	$	14,460,971
State and local housing finance agency obligations	30,700		1,178,835		5,895		17,330		—		1,232,760		25,000		1,121,710		5,575		15,715		—		1,168,000

Total Long-term securities	$	31,569	$	17,928,172	$	118,183	$	26,514	$	35,488	$	18,139,926	$	25,892	$	15,457,768	$	86,881	$	24,663	$	33,767	$	15,628,971

	December 31, 2017
	AAA-rated (a)		AA-rated (b)		A-rated		BBB-rated		Below Investment Grade		Total		December 31, 2018
													AAA-rated (a)		AA-rated (b)		A-rated		BBB-rated		Below Investment Grade		Total
Mortgage-backed securities	$	989	$	16,497,280	$	114,833	$	19,637	$	44,284	$	16,677,023	$	2,543	$	16,165,160	$	95,760	$	9,117	$	33,896	$	16,306,476
State and local housing finance agency obligations	36,400		1,085,220		25,890		—		—		1,147,510		25,000		1,122,060		5,575		15,715		—		1,168,350

Total Long-term securities	$	37,389	$	17,582,500	$	140,723	$	19,637	$	44,284	$	17,824,533	$	27,543	$	17,287,220	$	101,335	$	24,832	$	33,896	$	17,474,826

See footnotes (a) and (b) under Table ~~5.4.~~3.4.

External rating information of the AFS portfolio was as follows (the carrying values of AFS investments are at fair values; in thousands):

Table ~~5.4:~~3.4: External Rating of the Available-for-Sale Portfolio

	June 30, 2018						December 31, 2017						March 31, 2019						December 31, 2018
	AA-rated (b)		Unrated		Total		AA-rated (b)		Unrated		Total		AA-rated (b)		Unrated		Total		AA-rated (b)		Unrated		Total

Available-for-sale securities
Mortgage-backed securities	$	479,954	$	—	$	479,954	$	528,627	$	—	$	528,627	$	2,185,968	$	—	$	2,185,968	$	422,216	$	—	$	422,216
Other - Grantor trust	—		—		—		—		48,642		48,642

Total Available-for-sale securities	$	479,954	$	—	$	479,954	$	528,627	$	48,642	$	577,269

Footnotes to Table ~~5.3~~3.3 and Table ~~5.4.~~3.4.

(a) Certain PLMBS and housing finance bonds have been assigned AAA, based on the ratings by S&P and Moody’s.

(b) We have assigned GSE-issued MBS a rating of AA+ based on the credit rating assigned to long-term senior debt issued by Fannie Mae, Freddie Mac and U.S. Agency. The debt ratings are based on S&P’s rating of AA+ for the GSE Senior long-term debt and AA+ for the debt issued by the U.S. government; Moody’s debt rating is Aaa for the GSE Senior long-term debt and the U.S. government.

External credit rating information has been provided in Table ~~5.3~~3.3 and Table ~~5.4~~3.4 as the information is used as another data point to supplement our credit quality indicators, and they serve as a useful indicator when analyzing the degree of credit risk to which we are exposed. Significant changes in credit ratings classifications of our investment debt securities portfolio could indicate increased credit risk for us that could be accompanied by a reduction in the fair values of our investment debt securities portfolio.

Fair Value Levels of Investment Debt Securities, and Unrecognized and Unrealized Holding Losses

To compute fair values, ~~at June 30, 2018 and~~ ~~December 31, 2017,~~ multiple vendor prices were received for substantially all of our MBS holdings, and substantially all of those prices fell within specified thresholds. The relative proximity of the prices received from the multiple vendors supported our conclusion that the final computed prices were reasonable estimates of fair values. GSE securities priced under such a valuation technique using the market approach are typically classified within Level 2 of the valuation hierarchy.

For a comparison of carrying values and fair values of investment debt securities, see financial statements, Note 5. Trading securities, Note 7. Available-for-Sale Securities and Note 8. Held-to-Maturity Securities. For more information about the corroboration and other analytical procedures performed, see Note 18. Fair Values of Financial Instruments.

Weighted average rates — Mortgage-backed securities (HTM and AFS) —

The following table summarizes weighted average rates and amortized cost by contractual ~~maturities. A significant portion of the MBS portfolio consisted of floating-rate securities and the weighted average rates will change in parallel with changes in the LIBOR rate~~maturities (dollars in thousands):

Table ~~5.5:~~3.5: Mortgage-Backed Securities Weighted Average Rates by Contractual Maturities

	June 30, 2018				December 31, 2017				March 31, 2019				December 31, 2018
	Amortized		Weighted		Amortized		Weighted		Amortized		Weighted		Amortized		Weighted
	Cost		Average Rate		Cost		Average Rate		Cost		Average Rate		Cost		Average Rate
Mortgage-backed securities
Due in one year or less	$	803,315	2.24	%	$	880,774	2.45	%	$	318,755	3.17	%	$	369,989	2.03	%
Due after one year through five years	4,838,805		2.99		4,650,579		2.78		4,403,458		3.15		4,602,651		3.16
Due after five years through ten years	7,837,405		2.72		8,225,685		2.23		8,477,477		3.18		8,201,200		3.07
Due after ten years	3,915,276		2.83		3,458,160		2.57		3,421,311		3.12		3,561,879		3.11

Total mortgage-backed securities	$	17,394,801	2.80	%	$	17,215,198	2.46	%	$	16,621,001	3.16	%	$	16,735,719	3.08	%

A significant portion of the MBS portfolio consists of floating-rate securities and the weighted average rates will change in parallel with changes in the LIBOR rate.

Fair Value Hedges of Fixed-rate Available-for-sale Mortgage-backed Securities

The adoption of ASU 2017-12 provided a new approach, called the last-of-layer method for hedging prepayable assets in a closed portfolio of prepayable fixed-rate instruments. The approach incorporates new measurement elections by using benchmark rate components of contractual coupon cash flows in a partial-term hedge of a prepayable asset. The following table summarizes key data in last-of-layer fair value hedge under the ASU (in thousands):

Table 3.6:Fair Value Hedges of Fixed-Rate Prepayable CMBS

	Fair Value Hedges of Fixed-Rate Prepayable CMBS
	March 31, 2019
Current face value of hedged CMBS	$	150,000
Last-of-layer face value of hedged CMBS	$	127,500
Cumulative basis adjustment (Loss)	$	(1,893	)
Interest rate swap contracts (par)	$	127,500

OTTI — Base Case and Adverse Case Scenario

We evaluated our PLMBS under a base case (or best estimate) scenario by performing a cash flow analysis for each security under assumptions that forecasted increased credit default rates or loss severities, or both. The stress test scenario and associated results do not represent our current expectations and therefore should not be construed as a prediction of future results, market conditions or the actual performance of these securities. Cash flow analysis in the ~~six months ended June 30, 2018~~first quarter of 2019 identified ~~de minimis deterioration in the performance parameters of~~no OTTI on previously impaired private-label ~~MBS. Credit OTTI charged to earnings was $141 thousand in the second quarter of 2018 and no OTTI was charged~~MBS or in the same ~~period~~quarter in ~~2017.~~2018.

Short-term investments

We typically maintain substantial investments in high quality short- and intermediate-term financial instruments such as secured overnight transactions collateralized by securities, and unsecured overnight and term federal funds sold to highly-rated financial institutions who also satisfy other credit quality factors. These investments provide the liquidity necessary to meet members’ credit needs. Short-term investments also provide a flexible means of implementing the asset/liability management decisions to adjust liquidity. ~~In December 2016,~~We also invest in a liquidity trading portfolio ~~was established~~ with the objective of expanding our choice of investing for liquidity.

Monitoring — We actively monitor our credit exposures and the credit quality of our counterparties, including an assessment of each counterparty’s financial performance, capital adequacy, and sovereign support as well as related market signals, and actively limit or suspend existing exposures, as appropriate. In addition, we are required to manage our unsecured portfolio subject to regulatory limits, prescribed by the Finance Agency, our regulator. The Finance Agency regulations include limits on the amount of unsecured credit that may be extended to a counterparty or a group of affiliated counterparties, based upon a percentage of eligible regulatory capital and the counterparty’s overall credit rating. Under these regulations, the level of eligible regulatory capital is determined as the lesser of our regulatory capital or the eligible amount of regulatory capital of the counterparty determined in accordance with Finance Agency regulations.

The Finance Agency regulations also permit us to extend additional unsecured credit, which could be comprised of overnight extensions and sales of federal funds subject to continuing contract. Our total unsecured overnight exposure to a single counterparty may not exceed twice the regulatory limit for term exposures. We are prohibited by Finance Agency regulation from investing in financial instruments issued by non-U.S. entities other than those issued by U.S. branches and agency offices of foreign commercial banks, and we did not own any financial instruments issued by foreign sovereign governments, including those countries that are members of the European Union in any periods in this report. For more information about our policies and practices, see the most recent Form 10-K filed on March ~~22, 2018.~~21, 2019.

Securities purchased under agreements to resell — As part of our banking activities with counterparties, we have entered into secured financing transactions that mature overnight, and can be extended only at our discretion. These transactions involve the lending of cash against securities, which are accepted as collateral. The balance outstanding under such agreements was ~~$4.9~~$5.6 billion at ~~June 30, 2018~~March 31, 2019 and ~~$2.7~~$4.1 billion at December 31, ~~2017.~~2018. For more information, see financial statements, Note 4. Federal Funds Sold and Securities Purchased under Agreements to Resell.

Federal funds sold — Federal funds sold was ~~$14.9~~$9.1 billion at ~~June 30, 2018~~March 31, 2019 and ~~$10.3~~$7.6 billion at December 31, ~~2017,~~2018, representing unsecured lending to major banks and financial institutions. We are a major lender in this market, particularly in the overnight market. The amount of unsecured credit risk that may be extended to individual counterparties is commensurate with the counterparty’s credit quality as assessed by our management, and the assessment would include reviews of credit ratings of counterparty’s debt securities or deposits as reported by NRSROs. Overnight and short-term federal funds allow us to warehouse funds and provide balance sheet liquidity to meet unexpected member borrowing demands.

The following table summarizes par value, amortized cost and the carrying value (fair value) of the trading portfolio (in thousands):

Table ~~5.6:~~3.7: Trading Securities

	Trading Securities				Trading Securities
	June 30, 2018		December 31, 2017		March 31, 2019		December 31, 2018
Par value	$	3,793,500	$	1,648,377	$	7,243,133	$	5,692,263
Amortized cost	$	3,769,859	$	1,642,637	$	7,190,942	$	5,807,889
Carrying/Fair value	$	3,766,579	$	1,641,568	$	7,210,635	$	5,810,512

The Finance Agency prohibits speculative investments but allows permitted securities to be deemed held for liquidity if invested in a trading portfolio. We may dispose such investments if liquidity needs are met and market conditions deem the sale as advantageous. For more information about fair values of securities in the trading portfolio, see Note 5. Trading Securities in the Notes to the Financial Statements.

The following table summarizes economic hedges of fixed-rate trading securities held for liquidity (in thousands):

Table 3.8:Economic Hedges of Fixed-rate Liquidity Trading Securities

	Economic Hedges of Fixed-Rate Trading Securities
	March 31, 2019		December 31, 2018

Par amount of securities hedged	$	7,240,000	$	5,839,130
Par amount of interest rate swaps	$	7,240,000	$	5,839,130

Mortgage Loans Held-for-Portfolio

Mortgage loans are carried in the Statements of Condition at amortized cost, less allowance for credit losses. The outstanding unpaid principal balance was ~~$2.8~~$2.9 billion at ~~June 30, 2018, a decrease~~March 31, 2019, an increase of ~~$7.5~~$13.7 million (net of acquisitions and paydowns) from the balance at December 31, ~~2017.~~2018. Mortgage loans were investments in Mortgage Partnership Finance loans ~~(“MPF”~~(MPF or ~~“MPF Program”)~~MPF Program).

Mortgage Partnership Finance Program

—- We invest in mortgage loans through the MPF Program, which is a secondary mortgage market structure under which eligible mortgage loans are purchased or funded from or through members who are Participating Financial Institutions ~~(“PFI”)~~(PFI). We may also acquire MPF loans through participations with other FHLBanks, although our current acquisition strategy is to limit acquisitions through our PFIs. MPF loans are conforming conventional and Government i.e., insured or guaranteed by the Federal Housing Administration ~~(“FHA”)~~(FHA), the Department of Veterans Affairs ~~(“VA”)~~(VA) or the Rural Housing Service of the Department of Agriculture ~~(“RHS”)~~(RHS), fixed-rate mortgage loans secured primarily by single-family residential properties with maturities ranging from five to 30 years or participations in such mortgage loans. The FHLBank of Chicago ~~(“MPF Provider”)~~(MPF Provider) developed the MPF Program in order to help fulfill the housing mission and to provide an additional source of liquidity to FHLBank members that choose to sell mortgage loans into the secondary market rather than holding them in their own portfolios. Finance Agency regulations define the acquisition of Acquired Member Assets ~~(“AMA”)~~(AMA) as a core mission activity of the FHLBanks. In order for MPF loans to meet the AMA requirements, the purchase and funding are structured so that the credit risk associated with MPF loans is shared with PFIs. For more information about the MPF program, see Mortgage Loans Held-for-Portfolio in the MD&A in the Bank’s most recent Form 10-K filed on March ~~22, 2018.~~21, 2019.

We provide this product to members as another alternative for them to sell their mortgage production. Loan origination by members and acceptable pricing are key factors that drive growth. ~~MPF loans are fixed-rate mortgage loans secured primarily by single-family residential properties with maturities ranging from five to 30 years.~~

Mortgage loans — Conventional and Insured Loans —

The following table classifies mortgage loans between conventional loans and loans insured by FHA/VA (in thousands):

Table ~~6.1:~~4.1: MPF by Conventional and Insured Loans

	June 30, 2018		December 31, 2017		March 31, 2019		December 31, 2018

Federal Housing Administration and Veteran Administration insured loans	$	231,343	$	235,232	$	223,921	$	227,268
Conventional loans	2,611,548		2,615,140		2,673,205		2,656,149

Total par MPF loans	$	2,842,891	$	2,850,372	$	2,897,126	$	2,883,417

Mortgage Loans — Loss Sharing and the Credit Enhancement Waterfall —

For all loans acquired prior to June 1, 2017, the credit enhancement was computed as the amount that would bring an uninsured loan to “Double A” credit risk. For loans acquired after June 1, 2017, the credit enhancement is computed to a “Single A” credit risk. In the credit enhancement waterfall, we are responsible for the first loss layer. The second loss layer is the credit obligation of the PFI. We assume all residual risk. Also, see financial statements, Note 10. Mortgage Loans Held-for-Portfolio.

Loan and PFI Concentration — Loan concentration was in New York State, which is to be expected since the largest PFIs are located in New York. The tables below summarize concentrations — Geographic and PFI:

Table ~~6.2:~~4.2: Geographic Concentration of MPF Loans

June 30, 2018

December 31, 2017

Number of
loans %

Amounts
outstanding %

Number of
loans %

Amounts
outstanding %

New York State

69.2
%
60.2
%
69.1
%
59.5
%

March 31, 2019

December 31, 2018

Number of
loans %

Amounts
outstanding %

Number of
loans %

Amounts
outstanding %

New York State

68.8
%
60.6
%
68.8
%
60.4
%
Table ~~6.3:~~4.3:               Top Five Participating Financial Institutions — Concentration (par value, dollars in thousands)

June 30, 2018

March 31, 2019

Mortgage

Percent of Total

Mortgage

Percent of Total

Loans

Mortgage Loans

Loans

Mortgage Loans

New York Community Bank (a)

$
264,602

9.31
%
Sterling National Bank (b)

250,719

8.82

Bethpage Federal Credit Union

217,585

7.65

$
270,908

9.35
%
New York Community Bank

253,807

8.76

Investors Bank

244,701

8.45

Sterling National Bank

234,398

8.09

Teachers Federal Credit Union

184,603

6.49

184,354

6.36

Investors Bank

176,664

6.21

All Others

1,748,718

61.52

1,708,958

58.99

Total

$
2,842,891

100.00
%

$
2,897,126

100.00
%

December 31, 2017

December 31, 2018

Mortgage

Percent of Total

Mortgage

Percent of Total

Loans

Mortgage Loans

Loans

Mortgage Loans

New York Community Bank (a)

$
273,060

9.58
%
Sterling National Bank (b)

265,526

9.32

Bethpage Federal Credit Union

189,025

6.63

$
260,593

9.04
%
New York Community Bank

256,992

8.91

Investors Bank

186,397

6.54

242,164

8.40

Sterling National Bank

238,840

8.28

Teachers Federal Credit Union

177,230

6.22

183,052

6.35

All Others

1,759,134

61.71

1,701,776

59.02

Total

$
2,850,372

100.00
%

$
2,883,417

100.00
%

~~(a)~~Accrued interest receivable~~New York Community Bancorp, Inc., parent~~
Other assets
Accrued interest receivable was $327.5 million at March 31, 2019 and $275.3 million at December 31, 2018, and represented interest receivable primarily from advances and investments. Changes in balances would represent the timing of ~~New York Community Bank, sold its mortgage banking business in June 2017 to Freedom Mortgage Corporation, a non-member.~~coupons receivable from advances and investments at the balance sheet dates.
~~(b)~~Other assets, including prepayments and miscellaneous receivables, were $6.5 million and $8.6 million at ~~Sterling National Bank, a member of the FHLBNY, acquired Astoria Bank in October 2017.~~March 31, 2019 and December 31, 2018.
Debt Financing Activity and Consolidated Obligations

Our primary source of funds continues to be the issuance of Consolidated obligation bonds and discount notes.

Consolidated obligation bonds — The carrying value of Consolidated obligation bonds ~~(“CO bonds”~~(CO bonds or ~~“Consolidated~~Consolidated obligation ~~bonds”)~~bonds) was ~~$101.4~~$80.1 billion (par, ~~$101.1~~$79.7 billion) at ~~June 30, 2018,~~March 31, 2019, compared to ~~$99.3~~$84.2 billion (par, ~~$98.9~~$83.8 billion) at December 31, ~~2017. On average, CO bonds funded 60.1%~~2018. The carrying value of Consolidated obligation discount notes outstanding was $53.0 billion at March 31, 2019 and ~~60.5% of earning assets in the six months ended June 30, 2018 and in the same period in the prior year.~~$50.6 billion at December 31, 2018.

~~A significant percentage~~Interest rate hedging — Significant amounts of CO bonds ~~was~~have been designated under an ASC 815 fair value accounting hedge. Also, certain CO bonds were hedged by interest rate swaps in economic hedges. ~~We may~~From time-to-time, we have also ~~hedge~~hedged the anticipatory issuance of fixed-rate CO bonds in a ~~cashflow~~cash flow hedge under ASC 815. Certain CO bonds were elected under the FVO. ~~Carrying~~As a result of hedging elections under ASC 815 and the elections under the FVO, carrying values of CO bonds included valuation basis ~~adjustments on bonds hedged under ASC 815, and on CO bonds elected under the FVO.~~adjustments. For more information about valuation basis adjustments on CO bonds, see Table ~~7.1 Consolidated Obligation Bonds by Type.~~5.1.
~~Consolidated obligation discount notes~~ — The carrying value of Consolidated obligation discount notes outstanding was $45.5 billion at June 30, 2018 and $49.6 billion at December 31, 2017. On average, discount notes funded 34.1% of earning assets in the six months ended June 30, 2018, compared to 33.2% in the same period in the prior year. No discount notes had been hedged under an ASC 815 fair value accounting hedge at ~~June 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, although from time to time we have designated the instruments in economic hedges during the periods in this report. Certain discount notes were hedged under an ASC 815 cash flow accounting hedge, and are discussed in financial statements, Note 17. Derivatives and Hedging Activities. Certain discount notes were elected under the FVO. Carrying values included valuation basis adjustments on discount notes elected under the FVO. For more information about valuation basis adjustments on discount notes, see Table ~~7.7~~5.7 Discount Notes Outstanding.

Debt Ratings —A FHLBank’s ability to access the capital markets to issue debt, as well as our cost of funds, is dependent on credit ratings from Nationally Recognized Statistical Rating Organizations. Consolidated obligations of FHLBanks are rated Aaa/P-1 by Moody’s, and AA+/A-1+ by S& P. Any rating actions on the US Government would likely result in all individual FHLBanks’ long-term deposit ratings and the FHLBank System long-term bond rating moving in lock step with any US sovereign rating action.

The issuance and servicing of Consolidated obligation debt is performed by the Office of Finance, a joint office of the FHLBanks established by the Finance Agency. Each FHLBank independently determines its participation in each issuance of Consolidated obligations based on, among other factors, its own funding and operating requirements, maturities, interest rates and other terms available for Consolidated obligations in the market place. The two major debt programs offered by the Office of Finance are the Global Debt Program and the TAP issue programs. We participate in both programs. For more information about these programs, see our most recent Form 10-K filed on March 22, 2018.
Joint and Several Liability —
Although we are primarily liable for our portion of Consolidated obligations (i.e. those issued on our behalf), we are also jointly and severally liable with the other FHLBanks for the payment of principal and interest on the Consolidated obligations of all the FHLBanks. For more information, see financial statements, Note 19. Commitments and Contingencies.
Consolidated obligation bonds

The following table summarizes types of Consolidated obligation bonds (CO Bonds) issued and outstanding (dollars in thousands):

Table ~~7.1:~~5.1:               ~~Consolidated Obligation~~CO Bonds by Type

June 30, 2018

December 31, 2017

March 31, 2019

December 31, 2018

Amount

Percentage
of Total

Amount

Percentage
of Total

Amount

Percentage
of Total

Amount

Percentage
of Total

Fixed-rate, non-callable

$
20,722,570

20.50
%
$
24,080,150

24.36
%

$
22,777,100

28.59
%
$
22,745,980

27.16
%
Fixed-rate, callable

3,651,000

3.61

3,658,000

3.70

5,705,000

7.16

4,966,000

5.93

Step Up, callable

310,000

0.31

253,000

0.26

275,000

0.35

880,000

1.05

Single-index floating rate

76,386,000

75.58

70,860,000

71.68

50,903,000

63.90

55,166,000

65.86

Total par value

101,069,570

100.00
%
98,851,150

100.00
%

79,660,100

100.00
%
83,757,980

100.00
%

Bond premiums

48,592

54,654

46,545

42,647

Bond discounts

(29,640
)

(27,335
)

(33,459
)

(36,290
)

Hedge valuation basis adjustments (a)

171,573

273,585

304,540

238,150

Hedge basis adjustments on terminated hedges (b)

132,113

134,920

Hedge basis adjustments on de-designated hedges (b)

130,074

131,497

FVO (c) - valuation adjustments and accrued interest

(216
)

1,074

42,064

19,792

Total Consolidated obligation-bonds

$
101,391,992

$
99,288,048

$
80,149,864

$
84,153,776

Fair value basis and valuation adjustments — Key determinants are factors such as run offs and new transactions designated under an ASC 815 hedge or elected under the FVO, the forward swap curve, the volatility of the swap rates, the remaining duration to maturity, and for bonds elected under the FVO, the changes in the spread between the swap rate and the Consolidated obligation debt yields, and changes in interest payable, which is a component of the entire fair value of FVO bonds.

(a)         ~~Hedge~~Hedging valuation basis adjustments — The reported carrying values of hedged ~~Consolidated~~CO bonds are adjusted for changes toin their fair values (fair value basis adjustments or fair value) that are attributable to changes in the benchmark risk being ~~hedged, which~~hedged. LIBOR is ~~LIBOR for~~our primary benchmark. In the ~~FHLBNY, and is~~current year quarter we adopted FF/OIS as another benchmark. The chosen benchmark becomes the discounting basis under ASC 815 for computing changes in fair values ~~basis~~ for hedged debt. The LIBOR discounting curve has continued to increase and has generated period-over-period valuation gains. Coupon rates on vintage hedged debt is another factor that would impact valuation gains and losses. NotionalCO bonds. Table 5.2 CO Bonds Hedged under Qualifying Fair Value Hedges discloses notional amounts ~~of hedged debt will also impact period-end valuations. The notional amount~~ of CO bonds ~~hedged under the fair value hedging standards under ASC 815 was $13.6 billion at June 30, 2018 and $15.8 billion at December 31, 2017.~~
hedged. The application of ~~the valuation and~~ASC 815 accounting methodology resulted in the recognition of net unrealized hedge valuation basis losses of $304.5 million and $238.2 million at March 31, 2019 and December 31, 2018. The forward LIBOR yield curve declined steeply at March 31, 2019. As hedge valuation basis of fixed-rate CO liabilities move with the ~~two balance sheet dates. Vintage long-term bonds, which had been issued in a then prevailing higher interest rate environment, generated~~rise and fall of the forward LIBOR curve, the sharp decline of the swap curve caused valuation ~~losses. The remaining hedged bonds - short and medium-term fixed-rate debt, which had been issued in recent years at coupons lower than the prevailing yields, generated~~losses to increase. Generally, hedge valuation basis gains ~~partly offsetting the valuation basis~~and losses on the vintage hedged debt. The period-over-period decline in unrealized valuation losses were consistent with the sharp steepening of the swap yield curve at June 30, 2018. Generally, hedge valuation basis are unrealized and will reverse to zero if ~~hedged debt~~the CO bonds are held to ~~their~~ maturity or ~~to their call~~are called on the early option exercise dates. ~~Also, see Table 7.2 Bonds Hedged under Qualifying Fair Value Hedges.~~
(b)         Valuation basis of terminated hedges — Represents unamortized cumulative valuation basis of certain CO bonds that were no longer in fair value hedge relationships. When hedging relationships for the debt were de-designated, the net unrealized cumulative losses at the hedge termination dates were no longer adjusted for changes in the benchmark rate. Instead, the valuation basis are being amortized on a level yield method, and the net amortization is recorded as a reduction of Interest expense. If the CO bonds are held to maturity, the basis losses will be fully amortized as an interest expense.
(c)          FVO valuation adjustments — Valuation basis adjustments and accrued interest payable are recorded to recognize changes in the entire fair value (the full fair value) of CO bonds elected under the FVO. ~~The notional~~Table 5.3 CO Bonds Elected under the Fair Value Option (FVO) discloses par amounts of CO bonds elected under the ~~FVO were $30.0 million~~FVO. Valuation adjustments at ~~June 30, 2018~~March 31, 2019 and ~~$1.1 billion at~~ December 31, ~~2017. Run-offs~~2018 were largely the accumulation of ~~bonds elected under the FVO were not replaced by new transactions, explaining the decline~~semi-annual accrued unpaid interest included in the ~~valuation basis.~~full fair value of the debt.

The discounting basis for computing the change in fair value basis of bonds elected under the FVO is the observable (FHLBank) CO bond yield curve. All FVO bonds were short- and medium-term, and fluctuations in their “clean prices” (without accumulated unpaid interest) valuations were not significant as the bonds re-priced relatively frequently to market indices, ~~remaining~~keeping valuations near to par, although inter-period valuation volatility is likely.

We have elected the FVO on an instrument-by-instrument basis. For bonds elected under the FVO, it was not necessary to estimate changes attributable to instrument-specific credit risk, as we consider the credit worthiness of the FHLBanks to be secure and credit related adjustments unnecessary. More information about debt elected under the FVO is provided in financial statements, Note 18. Fair Values of Financial Instruments (See Fair Value Option Disclosures).
Hedge volume — Tables ~~7.2 — 7.4~~5.2 - 5.4 provide information with respect to par amounts of CO bonds based on accounting designation: (1) under hedge qualifying rules, (2) under the FVO, and (3) as an economic hedge (in thousands):

Table ~~7.2:~~5.2:               CO Bonds Hedged under Qualifying Fair Value Hedges

Qualifying hedges — Generally, fixed-rate (bullet and callable) medium and long-term Consolidated obligation bonds are hedged in a Fair value ASC 815 qualifying hedge. Decline in ASC 815 fair value hedges of fixed-rate debt reflects an asset-liability management decision to replace maturing fixed-rate CO bonds with floating-rate CO bonds, which are typically hedged on an economic basis.

Consolidated Obligation Bonds

Consolidated Obligation Bonds

Par Amount

June 30, 2018

December 31, 2017

March 31, 2019

December 31, 2018

Qualifying Hedges

Fixed-rate bullet bonds

$
11,057,025

$
14,326,105

$
6,669,475

$
8,300,080

Fixed-rate callable bonds

2,533,000

1,453,000

2,823,000

3,373,000

$
13,590,025

$
15,779,105

$
9,492,475

$
11,673,080

Table ~~7.3:~~5.3:               CO Bonds Elected under the Fair Value Option (FVO)

CO bonds elected under the FVO — If at inception of a hedge we do not believe that a hedge would be highly effective in offsetting fair value changes between the derivative and the debt (hedged item), we may designate the debt under the FVO if operationally practical. We would record fair value changes of the FVO debt through earnings, and to the extent the debt is economically hedged, record changes of the fair values of the interest rate swap through earnings. The recorded balance sheet value of debt under the FVO would include the fair value basis adjustments, so that the debt’s balance sheet carrying values would be its full fair value.

Consolidated Obligation Bonds

Consolidated Obligation Bonds

Par Amount

June 30, 2018

December 31, 2017

March 31, 2019

December 31, 2018

Bonds designated under FVO

$
30,000

$
1,130,000

$
7,325,000

$
5,140,000

CO bonds elected under the FVO were generally in economic hedges by the execution of interest rate swaps that converted the fixed-rate bonds to a variable-rate instrument. We elected to account for the bonds under the FVO when we were generally unable to assert with confidence that the short- and intermediate-term bonds, or callable bonds, with short lock-out periods to the exercise of call options, would remain effective hedges as required under hedge accounting rules. ~~Issuances of fixed-rate CO bonds have generally declined and run offs~~Designation of CO bonds ~~elected~~ under the FVO ~~were not replaced in~~is an asset-liability management decision. ~~See~~For more information, see financial statements, Fair Value Option Disclosures in Note 18. Fair Values of Financial Instruments.
Table ~~7.4:~~5.4:               Economic ~~Hedged~~Hedges of CO Bonds (Excludes CO ~~bonds elected~~Bonds Elected under the FVO and ~~designated~~Designated in ~~an economic hedge)~~Economic Hedges)

~~Economically hedged~~Economic hedges of CO bonds — We also issue variable-rate debt with coupons that are not indexed to the 3-month LIBOR, our preferred funding base. During the periods in this report, we issued variable-rate bonds indexed to the 1-month LIBOR. To mitigate the economic risk of a change in the variable-rate basis between the 3-month LIBOR and the 1-month LIBOR, we have executed basis rate swaps that have synthetically created 3-month LIBOR debt. The operational cost of designating the debt instruments in an ASC 815 qualifying hedge outweighed the accounting benefits of marking the debt and the swap to fair values. We opted instead to designate the hedging basis swaps as standalone derivatives, and recorded changes in their fair values through earnings. The carrying value of the debt would not include fair value basis since the debt is recorded at amortized cost.

Consolidated Obligation Bonds

Consolidated Obligation Bonds

Par Amount

June 30, 2018

December 31, 2017

March 31, 2019

December 31, 2018

Bonds designated as economically hedged

Floating-rate bonds (a)

$
35,620,000

$
35,390,000

$
33,345,000

$
29,735,000

Fixed-rate bonds (b)

30,000

15,000

—

15,000

$
35,650,000

$
35,405,000

$
33,345,000

$
29,750,000

(a)         Floating-rate debt — Floating-rate bonds were typically indexed to 1-month LIBOR. With the execution of basis hedges, ~~the~~certain floating-rate bonds were swapped in economic hedges to 3-month LIBOR, mitigating the basis risk between the 1-month LIBOR and the 3-month LIBOR, which is our primary benchmark rate. ~~We have made greater use of the 1-month LIBOR indexed floating rate CO bonds as pricing was relatively favorable, driving down the synthetic cost of funding utilizing interest rate swaps.~~
(b)         Fixed-rate debt — Bonds that were previously hedged and have fallen out of effectiveness. ~~The unamortized basis was not significant.~~

~~Consolidated obligation bonds~~CO Bonds — ~~maturity~~Maturity or ~~next call date~~Next Call Date (a)

Callable bonds contain an exercise date or a series of exercise dates that may result in a shorter redemption period. The following table summarizes par amounts of Consolidated bonds outstanding by years to maturity or next call date (dollars in thousands):

Table ~~7.5:~~5.5:               ~~Consolidated Obligation~~CO Bonds — Maturity or Next Call Date

June 30, 2018

December 31, 2017

March 31, 2019

December 31, 2018

Amount

Percentage
of Total

Amount

Percentage
of Total

Amount

Percentage
of Total

Amount

Percentage
of Total

Year of maturity or next call date

Due or callable in one year or less

$
87,587,950

86.66
%
$
84,436,565

85.42
%

$
66,364,140

83.31
%
$
69,699,475

83.22
%
Due or callable after one year through two years

5,932,990

5.87

7,266,255

7.35

4,033,935

5.06

5,700,545

6.81

Due or callable after two years through three years

2,168,110

2.14

1,917,400

1.94

2,050,955

2.58

1,661,325

1.98

Due or callable after three years through four years

1,026,730

1.02

973,595

0.98

1,330,335

1.67

1,383,750

1.65

Due or callable after four years through five years

928,140

0.92

947,835

0.96

1,238,035

1.55

955,235

1.14

Thereafter

3,425,650

3.39

3,309,500

3.35

4,642,700

5.83

4,357,650

5.20

Total par value

101,069,570

100.00
%
98,851,150

100.00
%

$
79,660,100

100.00
%
$
83,757,980

100.00
%

Bond premiums

48,592

54,654

Bond discounts

(29,640
)

(27,335
)

Hedge valuation basis adjustments

171,573

273,585

Hedge basis adjustments on terminated hedges

132,113

134,920

FVO - valuation adjustments and accrued interest

(216
)

1,074

Total bonds

$
101,391,992

$
99,288,048

(a)         Contrasting Consolidated obligation bonds by contractual maturity dates (see financial statements, Note 12. Consolidated Obligations — Redemption Terms of Consolidated Obligation Bonds) with potential call dates (as reported in table above) illustrates the impact of hedging on the effective duration of the bond. With a callable bond, we have purchased the option to terminate debt at agreed upon dates from investors. ~~Call~~The call options are exercisable as either as a one-time option or as quarterly. Our current practice is to exercise our option to call a bond when the swap counterparty exercises its option to call the cancellable swap hedging the callable bond. Thus, issuance of a callable bond with an associated callable swap significantly alters the contractual maturity characteristics of the original bond and introduces the possibility of an exercise call date that is significantly shorter than the contractual maturity.
The following table summarizes callable bonds versus non-callable CO bonds outstanding (par amounts, in thousands):

Table ~~7.6:~~5.6:               Outstanding Callable CO Bonds versus Non-callable CO bonds

June 30, 2018

December 31, 2017

March 31, 2019

December 31, 2018

Callable

$
3,961,000

$
3,911,000

$
5,980,000

$
5,846,000

Non-Callable

$
97,108,570

$
94,940,150

$
73,680,100

$
77,911,980

CO Discount Notes

The following table summarizes discount notes issued and outstanding (dollars in thousands):

Table ~~7.7:~~5.7:               Discount Notes Outstanding

June 30, 2018

December 31, 2017

March 31, 2019

December 31, 2018

Par value

$
45,555,456

$
49,685,334

$
53,173,357

$
50,805,481

Amortized cost

$
45,470,462

$
49,610,668

$
53,028,359

$
50,631,066

FVO (a) - valuation adjustments and remaining accretion

—

3,003

7,418

9,172

Total discount notes

$
45,470,462

$
49,613,671

$
53,035,777

$
50,640,238

Weighted average interest rate

1.87
%
1.23
%

2.41
%
2.34
%

(a)         Valuation basis adjustment losses ~~including unaccreted discounts, were~~are recorded to recognize changes in the entire or full fair values of CO discount notes elected under the FVO. The full fair values ~~included~~include unaccreted discounts. ~~Discount notes elected under the FVO matured in the second quarter of 2018 and were not replaced.~~ The discounting basis for computing changes in fair values of discount notes elected under the FVO is the observable FHLBank discount note yield curve. ~~Changes~~Valuation losses were largely liability balances representing unaccreted discounts. Other than unaccreted discount, changes in the valuation adjustments represent fair value ~~basis reflect~~changes due to changes in the term structure of interest rates, the shape of the yield curve at the measurement dates, and the growth or decline in ~~volume. If~~volume of hedged discount notes. When held to maturity, unaccreted discounts will be fully accreted to par, and unrealized fair value gains and losses will sum to zero over the term to maturity.

The following table summarizes discount notes under the FVO (in thousands):

Table ~~7.8:~~5.8:                                                               Discount Notes under the Fair Value Option (FVO)

Consolidated Obligation Discount Notes

Consolidated Obligation Discount Notes

Par Amount

June 30, 2018

December 31, 2017

March 31, 2019

December 31, 2018

Discount notes designated under FVO (a)

$
—

$
2,309,618

$
987,355

$
3,170,915

(a)When we have elected discount notes under the FVO, it has not been necessary to estimate changes attributable to instrument-specific credit risk, as we consider the credit worthiness of the FHLBanks to be secured and credit related adjustments unnecessary.

CO Discount notes elected under the FVO were generally in economic hedges with the execution of interest rate swaps that converted the fixed-rate notes to a variable-rate instrument. We elected to account for the discount notes under the FVO when we were generally unable to assert with confidence that the discount notes would remain effective hedges as required under hedge accounting rules. See financial statements, Fair Value Option Disclosures in Note 18. Fair Values of Financial Instruments.
~~(a)~~~~We elect the FVO for the discount notes to partly offset the volatility of floating-rate advances elected under the FVO.~~ Decline in CO discount notes elected under the FVO was generally in line with the decline in advances elected under the FVO. For discount notes that we elect under the FVO, it is not necessary to estimate changes attributable to instrument-specific credit risk, as we consider the credit worthiness of the FHLBanks to be secured and credit related adjustments unnecessary.
The following table summarizes Cash flow hedges of discount notes (in thousands):

Table ~~7.9:~~5.9:               Cash Flow Hedges of Discount Notes

Consolidated Obligation Discount Notes

Consolidated Obligation Discount Notes

Principal Amount

June 30, 2018

December 31, 2017

March 31, 2019

December 31, 2018

Discount notes hedged under qualifying hedge (a)

$
2,559,000

$
2,349,000

$
2,664,000

$
2,664,000

(a)         ~~Par amounts~~Amounts represent discounts notes issued in cash flow “rollover” hedge strategies that hedged the variability of 91-day discount notes issued in ~~sequence~~sequence. The original maturities of the interest rate swaps typically ~~for periods up to 14~~ranged from 10-15 years. In this strategy, the discount note expense, which resets every 91 days, is synthetically converted to fixed cash flows over the hedge periods, thereby achieving hedge objectives. For more information, see financial statements, Cash Flow Hedges in Note 17. Derivatives and Hedging Activities.

Accrued interest payable
Accrued interest payable — Amounts outstanding were $213.6 million at March 31, 2019 and $223.6 million at December 31, 2018. Accrued interest payable was comprised primarily of interest due and unpaid on CO bonds, which are generally payable on a semi-annual basis. Fluctuations in unpaid interest balances on bonds are due to the timing of semi-annual coupon accruals and payments at the balance sheet dates.
Other Liabilities
Other liabilities — Amounts outstanding were $181.8 million at March 31, 2019 and $355.8 million at December 31, 2018. Other liabilities comprised of unfunded pension liabilities, Federal Reserve pass-through reserves held on behalf of members, and miscellaneous payables.
Stockholders’ Capital

The following table summarizes the components of Stockholders’ capital (in thousands):

Table ~~8.1:~~6.1:               Stockholders’ Capital

June 30, 2018

December 31, 2017

March 31, 2019

December 31, 2018

Capital Stock (a)

$
6,276,227

$
6,750,005

$
5,671,075

$
6,065,799

Unrestricted retained earnings (b)

1,089,965

1,067,097

1,109,437

1,102,801

Restricted retained earnings (c)

535,465

479,185

618,248

591,281

Accumulated Other Comprehensive Income (Loss)

20,873

(55,249
)

(24,222
)
(13,259
)
Total Capital

$
7,922,530

$
8,241,038

$
7,374,538

$
7,746,622

(a)         Stockholders’ Capital — Capital stock decreased in line with the decrease in advances borrowed. When an advance matures or is prepaid, the excess capital stock is repurchased by the FHLBNY. When an advance is borrowed or a member joins the FHLBNY’s membership, the member is required to purchase capital stock. For more information about activity and membership stock, see Note ~~13.~~14. Capital Stock, Mandatorily Redeemable Capital Stock and Restricted Retained Earnings in the FHLBNY’s most recent Form 10-K filed on March ~~22, 2018.~~21, 2019.
(b)         Unrestricted retained earnings — Net ~~Income for the six months ended June 30, 2018 was $281.4 million; $4.9 million of a cumulative adjustment from adoption of ASU 2016-01 at January 1, 2018 was~~income is added to ~~Unrestricted retained earnings; $56.3 million was set aside towards~~this balance. Dividends are paid out of this balance. Funds are transferred to Restricted retained ~~earnings. From~~earnings balances that are determined in line with the ~~remaining amount, we paid $207.2 million to members as dividends in~~approved provisions of the ~~six months ended June 30, 2018. As a result, Unrestricted~~conduct of restricted retained earnings ~~increased by $22.8 million to $1.1 billion at June 30, 2018.~~account.
(c)          Restricted retained earnings — Restricted retained earnings balance at ~~June 30, 2018~~March 31, 2019 has grown to ~~$535.5~~$618.2 million from the time the provisions were implemented in the third quarter of 2011 when the FHLBanks, including the FHLBNY agreed to set up a restricted retained earnings account. The FHLBNY will allocate at least 20% of its net income to the FHLBNY’s Restricted retained earnings account until the balance of the account equals at least 1% of FHLBNY’s average balance of outstanding Consolidated Obligations for the previous quarter.
The following table summarizes the components of AOCI (in thousands):

Table ~~8.2:~~6.2:               Accumulated Other Comprehensive Income (Loss) ~~(“AOCI”)~~(AOCI)

June 30, 2018

December 31, 2017

March 31, 2019

December 31, 2018

Accumulated other comprehensive income (loss)

Non-credit portion of OTTI on held-to-maturity securities, net of accretion (a)

$
(12,721
)
$
(14,803
)

$
(10,204
)
$
(11,061
)
Net unrealized gains (losses) on available-for-sale securities (b)

5,040

10,178

36,142

4,034

Net unrealized gains (losses) on hedging activities (c)

57,985

(19,877
)

(27,825
)
16,759

Employee supplemental retirement plans (d)

(29,431
)
(30,747
)

(22,335
)
(22,991
)
Total Accumulated other comprehensive income (loss)

$
20,873

$
(55,249
)

$
(24,222
)
$
(13,259
)

(a)         OTTI — Non-credit OTTI losses in AOCI have declined at ~~June 30, 2018,~~March 31, 2019, primarily due to accretion recorded as a reduction in AOCI (and a corresponding increase in the balance sheet carrying values of the OTTI securities)~~; non-credit adjustments recorded in AOCI in the second quarter of 2018 were not material.~~.
(b)         Fair values of available-for-sale securities — ~~Balance~~balance represents net unrealized fair value basis gains of MBS ~~securities; at December 31, 2017,~~securities. Effective January 1, 2019, we transferred $1.6 billion fixed-rate CMBS to the ~~balance also included grantor trust funds, which had then been designated as available-for-sale.~~AFS category from HTM. Increase in unrealized gains represents increase in the portfolio due to the transfer and increase in market pricing of the fixed-rate AFS securities.
(c)          ~~Cash~~Hedging activity balances in AOCI were primarily cash flow hedge valuation ~~losses~~ ~~— Balances represented cumulative~~gains (losses) and balances from a fair value ~~basis on the two cash flow hedging strategies at the balance sheet dates. Financial statements, Note 17. Derivatives and~~hedge of mortgage-backed securities in a closed AFS portfolio. See Table 6.3: AOCI Rollforward due to ASC 815 Hedging ~~Activities, includes a rollforward analysis, which provides more information with respect to changes in AOCI.~~Programs.
(d)         Employee supplemental plans — Balances represent actuarially determined supplemental pension and postretirement health benefit liabilities that were not recognized through earnings. Amounts are amortized as an expense through Compensation and benefits over an actuarially determined period. For more information, see financial statements, Note ~~15.~~16. Employee Retirement Plans in the FHLBNY’s most recent Form 10-K filed on March ~~22, 2018.~~21, 2019.

Table 6.3:AOCI Rollforward due to ASC 815 Hedging Programs.
The following table presents amounts recognized in and reclassified out of AOCI due to cash flow and fair value hedges. Increases/(decreases) are in thousands:

Three months ended March 31,

2019

2018

Cash Flow Hedges

Fair Value Hedges

Cash Flow Hedges

Rollover Hedge
Program

Anticipatory
Hedge Program

Last-of-layer AFS
Hedge

Rollover Hedge
Program

Anticipatory
Hedge Program

Beginning balance

$
17,412

$
(653
)
$
—

$
(23,342
)
$
3,465

Changes in fair values (a)

(40,910
)
1,864

(1,893
)
55,129

(8
)
Amount reclassified

—

23

—

—

35

Fair Value - closed contract

—

(3,668
)
—

—

(383
)
Ending balance

$
(23,498
)
$
(2,434
)
$
(1,893
)
$
31,787

$
3,109

Notional amount of swaps outstanding

$
2,664,000

$
145,000

$
127,500

$
2,414,000

$
65,000

(a)Represents fair value changes of open swap contracts in cash flow hedges in the three months ended March 31, 2019 and March 31, 2018. For more information see, Note 17 Derivatives and Hedging Activities.
Dividends — By Finance Agency regulation, dividends may be paid out of current earnings or if certain conditions are met, may be paid out of previously retained earnings. We may be restricted from paying dividends if we do not comply with any of the Finance Agency’s minimum capital requirements or if payment would cause us to fail to meet any of the minimum capital requirements, including our Retained earnings target as established by the Board of Directors of the FHLBNY. In addition, we may not pay dividends if any principal or interest due on any Consolidated obligations has not been paid in full, or if we fail to satisfy certain liquidity requirements under applicable Finance Agency regulations. None of these restrictions applied for any period presented.

The following table summarizes dividends paid and payout ratios:

Table ~~8.3:~~6.4:               Dividends Paid and Payout Ratios

Six months ended

Three months ended

June 30, 2018

June 30, 2017

March 31, 2019

March 31, 2018

Cash dividends paid per share

$
3.24

$
2.65

$
1.74

$
1.64

Dividends paid (a) (c)

$
207,175

$
163,312

$
101,235

$
102,154

Pay-out ratio (b)

73.62
%
81.46
%

75.08
%
80.93
%

(a)         In thousands.
(b)         Dividend paid during the period divided by net income for the period.
(c)          Does not include dividend paid to non-member; for accounting purposes, such dividends are recorded as interest expense.
~~Derivative Instruments and Hedging Activities~~Derivatives Counterparty Credit Ratings

~~Interest rate swaps, swaptions, cap~~For information, and ~~floor agreements (collectively, derivatives) enable us to manage~~an analysis of our exposure due to ~~changes~~non-performance of swap counterparties, see Table “Offsetting of Derivative Assets and Derivative Liabilities — Net Presentation” in ~~interest rates by adjusting the effective maturity, repricing frequency, or option characteristics of~~Note 17. Derivatives and Hedging Activities to financial instruments. To a limited extent, we also use interest rate swaps to hedge changes in interest rates prior to debt issuance and essentially lock in funding costs. Finance Agency regulations prohibit the speculative use of derivatives.statements. For ~~additional~~ information about the methodologies adopted for the fair value measurement of derivatives, see financial statements, Note 18. Fair Values of Financial Instruments.

~~Derivative Credit Risk Exposure and Concentration~~
In addition to market risk, we are subject to credit risk in derivative transactions because of the potential for non-performance by the counterparties, which could result in the FHLBNY having to acquire a replacement derivative from a different counterparty at a cost that may exceed its recorded fair values. We are also subject to operational risks in the execution and servicing of derivative transactions. The degree of counterparty credit risk may depend on, among other factors, the extent to which netting procedures and/or the provision of collateral are used to mitigate the risk.   For more information about our risk measurement and risk mitigation processes, see Note 16. Derivatives and Hedging Activities in the most recent Form 10-K filed on March 22, 2018.
The following tables summarize notional amounts and fair values for the FHLBNY’s derivative exposures as represented by derivatives in fair value gain ~~positions. For derivatives where the FHLBNY was in a liability position and counterparties were in gain~~ positions ~~the fair values and notional amounts were grouped together~~ (in thousands):

Table ~~9.1:~~7.1:               Derivatives Counterparty Credit Ratings

June 30, 2018

March 31, 2019

Credit Rating

Notional
Amount

Net Derivatives Fair
Value Before
Collateral

Cash Collateral
Pledged To (From)
Counterparties (a)

Balance Sheet
Net Credit
Exposure

Non-Cash Collateral
Pledged To (From)
Counterparties (b)

Net Credit
Exposure to
Counterparties

Notional
Amount

Net Derivatives
Fair Value
Before
Collateral

Cash Collateral
Pledged To
(From)
Counterparties (a)

Balance
Sheet Net
Credit
Exposure

Non-Cash
Collateral Pledged
To (From)
Counterparties (b)

Net Credit
Exposure to
Counterparties

Non-member counterparties

Asset positions with credit exposure

Uncleared derivatives

Single A asset (c)

$
6,741,368

$
204,327

$
(76,840
)
$
127,487

$
(101,245
)
$
26,242

$
2,785,000

$
135,536

$
(17,500
)
$
118,036

$
(104,136
)
$
13,900

Cleared derivatives assets (d)

27,572,955

3,015

—

3,015

—

3,015

89,517,528

24,158

6,442

30,600

220,347

250,947

34,314,323

207,342

(76,840
)
130,502

(101,245
)
29,257

92,302,528

159,694

(11,058
)
148,636

116,211

264,847

Liability positions with credit exposure

Uncleared derivatives

Double A liability (c)

105,000

(119
)
590

471

—

471

Single A liability (c)

1,473,739

(10,169
)
10,494

325

—

325

1,177,263

(10,998
)
12,480

1,482

—

1,482

Cleared derivatives liability (d)

68,498,827

—

—

—

239,034

239,034

Triple B Liability (c)

3,923,183

(59,880
)
62,750

2,870

—

2,870

69,972,566

(10,169
)
10,494

325

239,034

239,359

5,205,446

(70,997
)
75,820

4,823

—

4,823

Total derivative positions with non-member counterparties to which the Bank had credit exposure

104,286,889

197,173

(66,346
)
130,827

137,789

268,616

97,507,974

88,697

64,762

153,459

116,211

269,670

Member institutions

Derivative positions with member counterparties to which the Bank had credit exposure

25,000

31

—

31

(31
)
—

338,000

1,301

—

1,301

(1,301
)
—

Delivery Commitments

Derivative position with delivery commitments

23,433

89

—

89

(89
)
—

20,062

80

—

80

(80
)
—

Total derivative position with members

48,433

120

—

120

(120
)
—

358,062

1,381

—

1,381

(1,381
)
—

Total

$
104,335,322

$
197,293

$
(66,346
)
$
130,947

$
137,669

$
268,616

$
97,866,036

$
90,078

$
64,762

$
154,840

$
114,830

$
269,670

Derivative positions without credit exposure

4,377,247

7,810,731

Total notional

$
108,712,569

$
105,676,767

December 31, 2017

December 31, 2018

Credit Rating

Notional
Amount

Net Derivatives Fair
Value Before
Collateral

Cash Collateral
Pledged To (From)
Counterparties (a)

Balance Sheet
Net Credit
Exposure

Non-Cash Collateral
Pledged To (From)
Counterparties (b)

Net Credit
Exposure to
Counterparties

Notional
Amount

Net Derivatives
Fair Value
Before
Collateral

Cash Collateral
Pledged To
(From)
Counterparties (a)

Balance
Sheet Net
Credit
Exposure

Non-Cash
Collateral Pledged
To (From)
Counterparties (b)

Net Credit
Exposure to
Counterparties

Non-member counterparties

Asset positions with credit exposure

Uncleared derivatives

Single A asset (c)

$
2,430,433

$
157,922

$
(45,180
)
$
112,742

$
(103,036
)
$
9,706

$
3,125,000

$
155,264

$
(44,970
)
$
110,294

$
(102,262
)
$
8,032

Cleared derivatives assets (d)

20,448,476

1,353

—

1,353

—

1,353

23,573,476

156,617

(44,970
)
111,647

(102,262
)
9,385

Liability positions with credit exposure

Uncleared derivatives

Single A liability (c)

3,414,264

(7,469
)
9,164

1,695

—

1,695

Cleared derivatives liability (d)

103,391,947

—

—

—

239,064

239,064

70,236,929

—

—

—

239,813

239,813

73,651,193

(7,469
)
9,164

1,695

239,813

241,508

Total derivative positions with non-member counterparties to which the Bank had credit exposure

105,822,380

157,922

(45,180
)
112,742

136,028

248,770

97,224,669

149,148

(35,806
)
113,342

137,551

250,893

Member institutions

Derivative positions with member counterparties to which the Bank had credit exposure

28,000

363

—

363

(363
)
—

Delivery Commitments

Derivative position with delivery commitments

12,682

57

—

57

(57
)
—

Total derivative position with members

40,682

420

—

420

(420
)
—

Total

$
105,822,380

$
157,922

$
(45,180
)
$
112,742

$
136,028

$
248,770

$
97,265,351

$
149,568

$
(35,806
)
$
113,762

$
137,131

$
250,893

Derivative positions without credit exposure

9,354,161

8,831,152

Total notional

$
115,176,541

$
106,096,503

(a)         ~~Includes~~When collateral is posted to counterparties ~~margins~~ in excess of fair ~~values~~value liabilities that ~~were posted~~are due to counterparties, ~~and were~~the excess collateral is classified as a component of derivative assets, as ~~they represented~~the excess represents a receivable and an exposure for the FHLBNY.
(b)         Non-cash collateral securities. Non-cash collateral iswas not deducted from net derivative assets on the balance sheet as control over the securities ~~are~~was not transferred.
(c)          NRSRO Ratings.
(d)         On ~~Cleared~~cleared derivatives, we are required to pledge initial margin (collateral) to Derivative Clearing Organizations ~~(“DCOs”).~~(DCOs) in cash or securities. At ~~June 30, 2018 and December~~March 31, ~~2017,~~2019, we had pledged ~~$239.0~~$220.3 million in marketable securities and ~~$239.1~~$6.4 million in cash to fulfill our obligation to pledge initial margin as collateral. At December 31, 2018, we had pledged $239.8 million in marketable securities to fulfill our obligation to pledge initial margin as collateral.
~~For additional information, and an analysis of our exposure due to non-performance of swap counterparties, see Table “Offsetting of Derivative Assets and Derivative Liabilities~~ — ~~Net Presentation” in Note 17. Derivatives and Hedging Activities to financial statements.~~
Liquidity, Short-Term Borrowings and Short-Term Debt

Our primary source of liquidity is the issuance of Consolidated obligation bonds and discount notes. To refinance maturing Consolidated obligations, we rely on the willingness of our investors to purchase new issuances. We have access to the discount note market, and the efficiency of issuing discount notes is an important source of liquidity, since discount notes can be issued any time and in a variety of amounts and maturities. Member deposits and capital stock purchased by members are another source of funds. Short-term unsecured borrowings from other FHLBanks and in the federal funds market provide additional sources of liquidity. In addition, the Secretary of the Treasury is authorized to purchase up to $4.0 billion of Consolidated obligations from the FHLBanks. Our liquidity position remains in compliance with all regulatory requirements and management does not foresee any changes to that position.

Finance Agency Regulations — Liquidity

Regulatory requirements are specified in Parts 932, 1239 and 1270 of the Finance Agency ~~regulations.~~regulations and Advisory Bulletin 2018-07. Each FHLBank shall at all times have at least an amount of liquidity equal to the current deposits received from its members that may be invested in: (1) Obligations of the United States; (2) Deposits in banks or trust companies; or (3) Advances with a remaining maturity not to exceed five years that are made to members in conformity with part 1266. (4) required to hold positive cash flow assuming no access to capital markets and assuming renewal of all maturing advances for a period of between ten to thirty calendar days; (5) maintain liquidity limits to reduce the risks associated with a mismatch in asset and liability maturities, including an undue reliance on short-term debt funding.

In addition, each FHLBank shall provide for contingency liquidity, which is defined as the sources of cash a FHLBank may use to meet its operational requirements when its access to the capital markets is impeded. We met our contingency liquidity requirements during all periods in this report. Liquidity in excess of requirements is summarized in the table titled Contingency Liquidity. Violations of the liquidity requirements would result in non-compliance penalties under discretionary powers given to the Finance Agency under applicable regulations, which include other corrective actions. Advisory Bulletin 2018-07 was partially implemented on December 31, 2018, with further implementation to take place on March 31, 2019 and full implementation on December 31, 2019.

Liquidity Management

We actively manage our liquidity position to maintain stable, reliable, and cost-effective sources of funds while taking into account market conditions, member demand and the maturity profile of our assets and liabilities. We recognize that managing liquidity is critical to achieving our statutory mission of providing low-cost funding to our members. In managing liquidity risk, we are required to maintain certain liquidity measures in accordance with the FHLBank Act and policies developed by management and approved by our Board of Directors. The applicable liquidity requirements are described in the next four sections.
Deposit Liquidity. We are required to invest an aggregate amount at least equal to the amount of current deposits received from members in: (1) Obligations of the United States; (2) Deposits in banks or trust companies; or (3) Advances with a remaining maturity not to exceed five years that are made to members in conformity with part 1266. In addition to accepting deposits from our members, we may accept deposits from other FHLBanks or from any other governmental instrumentality. We met these requirements at all times. Quarterly average reserves and actual reserves are summarized below (in millions):

Table ~~10.1:~~8.1:               Deposit Liquidity

Average Deposit

Average Actual

For the Quarters Ended

Reserve Required

Deposit Liquidity

Excess

June 30, 2018

$
1,102

$
103,651

$
102,549

March 31, 2018

1,115

114,922

113,807

December 31, 2017

1,654

108,241

106,587

Average Deposit

Average Actual

For the Quarters Ended

Reserve Required

Deposit Liquidity

Excess

March 31, 2019

$
1,065

$
90,100

$
89,035

December 31, 2018

904

93,526

92,622

Operational Liquidity. We must be able to fund our activities as our balance sheet changes from day-to-day. We maintain the capacity to fund balance sheet growth through regular money market and capital market funding and investment activities. We monitor our operational liquidity needs by regularly comparing our demonstrated funding capacity with potential balance sheet growth. We take such actions as may be necessary to maintain adequate sources of funding for such growth. Operational liquidity is measured daily. We met these requirements at all times.

The following table summarizes excess operational liquidity (in millions):

Table ~~10.2:~~8.2:               Operational Liquidity

Average Balance Sheet

Average Actual

For the Quarters Ended

Liquidity Requirement

Operational Liquidity

Excess

June 30, 2018

$
10,059

$
38,398

$
28,339

March 31, 2018

7,941

38,370

30,429

December 31, 2017

9,705

33,398

23,693

Average Balance Sheet

Average Actual

For the Quarters Ended

Liquidity Requirement

Operational Liquidity

Excess

March 31, 2019

$
10,912

$
33,899

$
22,987

December 31, 2018

10,091

36,478

26,387

Contingency Liquidity. We are required by Finance Agency regulations to hold “contingency liquidity” in an amount sufficient to meet our liquidity needs if we are unable to access the Consolidated obligation debt markets for at least five business days. Contingency liquidity includes (1) marketable assets with a maturity of one year or less; (2) self-liquidating assets with a maturity of one year or less; (3) assets that are generally acceptable as collateral in the repurchase market; and (4) irrevocable lines of credit from financial institutions receiving not less than the second-highest credit rating from a NRSRO. We consistently exceeded the regulatory minimum requirements for contingency liquidity. Contingency liquidity is measured daily. We met these requirements at all times.

The following table summarizes excess contingency liquidity (in millions):

Table ~~10.3:~~8.3:               Contingency Liquidity

Average Five Day

Average Actual

For the Quarters Ended

Requirement

Contingency Liquidity

Excess

June 30, 2018

$
3,320

$
33,846

$
30,526

March 31, 2018

4,040

33,494

29,454

December 31, 2017

2,276

29,131

26,855

Average Five Day

Average Actual

For the Quarters Ended

Requirement

Contingency Liquidity

Excess

March 31, 2019

$
3,169

$
29,509

$
26,340

December 31, 2018

3,649

32,494

28,845

The standards in our risk management policy address our day-to-day operational and contingency liquidity needs. These standards enumerate the specific types of investments to be held to satisfy such liquidity needs and are outlined above. These standards also establish the methodology to be used in determining our operational and contingency needs. We continually monitor and project our cash needs, daily debt issuance capacity, and the amount and value of investments available for use in the market for repurchase agreements. We use this information to determine our liquidity needs and to develop appropriate liquidity plans.
Advance “Roll-Off” and “Roll-Over” Liquidity Guidelines. The Finance Agency’s Minimum Liquidity Requirement Guidelines ~~expanded the existing~~measure liquidity ~~requirements to include additional cash flow requirements~~ under two scenarios: Advance “Roll-Over” and “Roll-Off” scenarios. Each FHLBank, including the FHLBNY, must have positive cash balances to be able to maintain positive cash flows for 15 days under the Roll-Off scenario, and for 5 days under the Roll-Over scenario. The Roll-Off scenario assumes that advances maturing under their contractual terms would mature, and in that scenario we would maintain positive cash flows for a minimum of 15 days on a daily basis. The Roll-Over scenario assumes that maturing advances borrowed by members with assets below $100 billion would be rolled over, and in that scenario we would maintain positive cash flows for a minimum of 5 days on a daily basis. We calculate the amount of cash flows under each scenario on a daily basis and have been in compliance with these guidelines. The Finance Agency’s Liquidity Advisory Bulletin 2018-07 becomes effective April 1, 2019. Under the new guidance, the above Roll-Off scenario is no longer required and the Roll-Over daily requirement is extended from 5 days to 10 days to include all advances. An additional requirement to hold 1% of the notional of all Letters of Credit as liquidity also comes into effect.
Other Liquidity Contingencies. As discussed more fully under the section Debt Financing Activity and Consolidated Obligations, we are primarily liable for Consolidated obligations issued on our behalf. We are also jointly and severally liable with the other FHLBanks for the payment of principal and interest on the Consolidated obligations of all the FHLBanks. If the principal or interest on any Consolidated obligation issued on our behalf is not paid in full when due, we may not pay dividends, redeem or repurchase shares of stock of any member or non-member stockholder until the Finance Agency approves our Consolidated obligation payment plan or other remedy and until we pay all the interest or principal currently due on all our Consolidated obligations. The Finance Agency, at its discretion, may require any FHLBank to make principal or interest payments due on any Consolidated obligations.

Finance Agency regulations also state that the FHLBanks must maintain, free from any lien or pledge, the following types of assets in an amount at least equal to the amount of Consolidated obligations outstanding: Cash; Obligations of, or fully guaranteed by, the United States; Secured advances; Mortgages that have any guaranty, insurance, or commitment from the United States or any agency of the United States; and investments described in section 16(a) of the FHLBank Act, including securities that a fiduciary or trust fund may purchase under the laws of the state in which the FHLBank is located.

Short-term Borrowings and Short-term Debt

Our primary source of funds is the issuance of FHLBank debt. Consolidated obligation discount notes are issued with maturities up to one year and provide us with short-term funds. Discount notes are principally used in funding short-term advances, some long-term advances, as well as money market instruments. We also issue short-term Consolidated obligation bonds as part of our asset-liability management strategy. We may also borrow from another FHLBank, generally for a period of one day. Such borrowings have been ~~insignificant historically.~~historically insignificant.

The following table summarizes short-term debt and their key characteristics (dollars in thousands):

Table ~~10.4:~~8.4:               Short-term Debt

Consolidated Obligations-Discount Notes

Consolidated Obligations-Bonds With
Original Maturities of One Year or Less

June 30, 2018

December 31, 2017

June 30, 2018

December 31, 2017

Consolidated Obligations-Discount Notes

Consolidated Obligations-Bonds With
Original Maturities of One Year or Less

March 31, 2019

December 31, 2018

March 31, 2019

December 31, 2018

Outstanding at end of the period (a)

$
45,470,462

$
49,613,671

$
70,377,100

$
56,494,100

$
53,035,777

$
50,640,238

$
51,149,700

$
53,593,000

Weighted-average rate at end of the period (b)

1.87
%
1.23
%
1.94
%
1.31
%

2.41
%
2.34
%
2.44
%
2.37
%
Average outstanding for the period (a)

$
54,113,390

$
45,895,662

$
57,604,531

$
39,454,853

$
52,403,657

$
51,656,594

$
50,859,074

$
59,411,703

Weighted-average rate for the period (b)

1.54
%
0.85
%
1.63
%
0.96
%
Weighted-average rate for the period

2.39
%
1.79
%
2.44
%
1.86
%
Highest outstanding at any month-end (a)

$
59,769,950

$
57,330,972

$
70,377,100

$
56,494,100

$
53,035,777

$
59,769,950

$
51,728,000

$
70,377,100

(a)         Outstanding balances represent the carrying value of discount notes and par value of bonds (one year or less) issued and outstanding at the reported dates.
(b)         Weighted-average rate is calculated on outstanding balances at period-end.
Off-Balance Sheet Arrangements, Guarantees, and Other Commitments — In accordance with regulations governing the operations of the FHLBanks, each FHLBank, including the FHLBNY, is jointly and severally liable for the FHLBank System’s Consolidated obligations issued under sections 11(a) and 11(c) of the FHLBank Act. The joint and several liability regulation authorizes the Finance Agency to require any FHLBank to repay all or a portion of the principal or interest on Consolidated obligations for which another FHLBank is the primary obligor.

In addition, in the ordinary course of business, the FHLBNY engages in financial transactions that, in accordance with U.S. GAAP, are not recorded on the FHLBNY’s balance sheet or may be recorded on the FHLBNY’s balance sheet in amounts that are different from the full contract or notional amount of the transactions. For example, the Bank routinely enters into commitments to purchase MPF loans from PFIs, and issues standby letters of credit. These commitments may represent future cash requirements of the Bank, although the standby letters of credit usually expire without being drawn upon. For more information about contractual obligations and commitments, see financial statements, Note 19. Commitments and Contingencies.
Results of Operations
The following section provides a comparative discussion of the FHLBNY’s results of operations for the first quarter of 2019 and the same period in the prior year. For a discussion of the significant accounting estimates used by the FHLBNY that affect the results of operations, see financial statements, Note 1. Significant Accounting Policies and Estimates in the most recent Form 10-K filed on March 21, 2019.
Net Income
Interest income from advances is the principal source of revenue. Other sources of revenue are interest income from investment debt securities, trading securities, mortgage loans in the MPF portfolio, securities purchased under agreements to resell and federal funds sold. The primary expense is interest paid on Consolidated obligation debt. Other expenses are Compensation and benefits, Operating expenses, our share of operating expenses of the Office of Finance and the FHFA, and affordable housing program assessments on Net income. Other significant factors affecting our Net income include the volume and timing of investments in mortgage-backed securities, prepayments of advances, charges due to debt repurchased, gains and losses from derivatives and hedging activities, and earnings from investing our shareholders’ capital.
Summarized below are the principal components of Net income (in thousands):
Table 9.1:Principal Components of Net Income

Three months ended March 31,

2019

2018

Total interest income

$
997,534

$
770,645

Total interest expense

820,318

577,626

Net interest income before provision for credit losses

177,216

193,019

Provision (Reversal) for credit losses on mortgage loans

(17
)
(380
)
Net interest income after provision for credit losses

177,233

193,399

Total other income (loss)

13,178

(18,593
)
Total other expenses

40,580

34,519

Income before assessments

149,831

140,287

Affordable Housing Program Assessments

14,993

14,062

Net income

$
134,838

$
126,225

Net Income — 2019 First Quarter Compared to 2018 First Quarter
Net income — For the FHLBNY, Net income is Net interest income, minus credit losses on mortgage loans, plus Other income (loss), less Other expenses and Assessments set aside for the FHLBNY’s Affordable Housing Program.
In the first quarter of the current year, Net income was $134.8 million, an increase of $8.6 million, or 6.8%, compared to the same period in the prior year. Summarized below are the primary components of our Net income:
Net interest income — Net interest income (NII) is typically driven by the volume of earning assets, as measured by average balances of earning assets, and by the net interest spread earned in the period. Other significant drivers would be prepayment fees earned when advances are early terminated by our borrowing members, and the impact on interest income and expense by the execution of swaps that hedge our assets and liabilities. Swap interest accruals are a significant component of Net interest income. Fair values changes of derivatives and hedged items in hedges under ASC 815 are also recorded in Net interest income beginning in 2019 with the adoption of ASU 2017-12. The impact was not material.
In the first quarter of the current year, Net interest income was $177.2 million, a decrease of $15.8 million, or 8.2%, from the same period in the prior year. Lower earnings were driven primarily by lower balances of advances. Another factor was investments in liquid assets that yielded relatively lower margins. To enhance our liquidity position under FHFA guidelines, we have invested in a significant portfolio of liquid assets - short-term highly-rated securities, primarily U.S. treasury obligations, and overnight lending in the federal funds and repurchase markets. The net yields earned on such assets have been typically lower relative to longer-term earning assets. While funding costs remain attractive for the FHLBank issued CO debt, costing yields were not as favorable in the current year period, relative to the prior year period. Because of these conditions, net interest spread declined to 38 basis points in the first quarter of the current year, compared to 41 basis points in the same period in the prior year.
Other income (loss) — In the first quarter of the current year, Other income (loss) reported a gain of $13.2 million, compared to a loss of $18.6 million in the same period in the prior year. Primary components are noted below:
·Service fees and other are primarily correspondent banking fees and fee revenues from financial letters of credit. Such revenues were $4.6 million in the first quarter of the current year, compared to $3.7 million in the same period in the prior year.
·Derivative and hedging activities reported a net loss of $12.3 million in the first quarter of the current year, compared to a net loss of $18.8 million in the same period in the prior year.
·Securities held for liquidity (classified as trading) reported net gains of $17.1 million in the first quarter of the current year, in contrast to a loss of $3.2 million in the same period in the prior year.
·Equity Investments held to fund payments to retirees in non-qualified pension plans reported net gains of $4.2 million in the first quarter of the current year, in contrast to a net loss of $0.3 million in the same period in the prior year.
Other expenses were $40.6 million in the first quarter of the current year, compared to $34.5 million in the same period in the prior year. Other expenses are primarily Operating expenses, Compensation and benefits, and our share of expenses of the Office of Finance and the Federal Housing Finance Agency.
·                  Operating expenses were $12.9 million in the first quarter of the current year, up from $10.0 million in the same period in the prior year.
·                  Compensation and benefits expenses were $21.4 million in the first quarter of the current year, up from $18.8 million in the same period in the prior year.
·                  The expenses allocated for our share of the costs to operate the Office of Finance and the Federal Housing Finance Agency were $3.9 million in the first quarter of the current year, compared to $4.3 million in the same period in the prior year.
·                  Other expenses were $2.4 million in the current year, up from $1.5 million in the same period in the prior year. Expense increase was primarily due to contributions towards disaster relief programs and the non-service costs of employer sponsored pension programs.
AHP assessments allocated from Net income were $15.0 million in the first quarter of the current year, compared to $14.1 million in the same period in the prior year. Assessments are calculated as a percentage of Net income, and changes in allocations were in parallel with changes in Net income.
Net Interest Income, Margin and Interest Rate Spreads — 2019 First Quarter Compared to 2018 First Quarter
Net interest income is our principal source of Net income. It represents the difference between income on interest-earning assets and expense on interest-bearing liabilities.
Period-over-period changes in Net interest income are typically driven by changes in the volume of earning assets, as measured by average balances of earning assets, and the impact of market interest rates on earnings assets and funding costs. Interest income and expense accruals on interest rate swaps that qualified under the ASC 815 hedge accounting rules may impact period-over-period changes, as would fair value hedging effects. Shareholders’ capital stock and retained earnings are also factors that impact net interest income as they provide interest free funding. In a period when members prepay advances, the prepayment fees, which we receive may cause period-over-period fluctuations in income. For more information about factors that impact Interest income and Interest expense, see Table 9.3 Net Interest Adjustments from Hedge Qualifying Interest Rate Swaps and discussions thereto. Also, see Table 9.4 Spread and Yield Analysis, and Table 9.5 Rate and Volume Analysis.
The following table summarizes Net interest income (dollars in thousands):
Table 9.2:Net Interest Income

Three months ended March 31,

Percentage

2019

2018

Change

Total interest income (a)

$
997,534

$
770,645

29.44
%
Total interest expense (a)

820,318

577,626

(42.02
)
Net interest income before provision for credit losses

$
177,216

$
193,019

(8.19
)%
(a)Total Interest Income and Total Interest Expense — See Tables 9.6 and 9.8 and accompanying discussions
2019 First Quarter vs. 2018 First Quarter — Net interest income declined by $15.8 million, or 8.2% period-over-period. Net interest spread, which is the yield from earning assets minus interest paid to fund earning assets, was 38 basis points in the current year period, compared to 41 basis points in the prior year period. Lower earnings and margin were primarily due to lower average interest-earning assets, which declined by $21.3 billion to $141.6 billion in the current year period down from $162.9 billion in the prior year period; we attribute the decline to lower advance volume.
To enhance our liquidity position, we have invested in portfolios of liquid assets, consisting of short-term highly-rated securities, primarily U.S. treasury obligations, and overnight lending in the federal funds and repurchase markets. The net yields earned on such assets have been typically lower, relative to longer-term earning assets, and that too has unfavorably impacted our interest margins.
The impact on Net interest income from hedging under ASC 815 has been a favorable factor in a rising rate environment. Certain fixed-rate advances and fixed-rate debt are designated in qualifying hedges by the execution of interest rate swaps. The rising benchmark rate, primarily LIBOR, has driven up the benchmark-indexed cash flows we received on swaps hedging fixed-rate advances, such that the cash flows we received exceeded the fixed-rate cash flows paid. While the rising LIBOR had an adverse cash flow impact on qualifying hedges of CO debt, the negative impact was not as significant. Hedging effects, primarily cash flows from interest rate swaps in fair value and cash flows hedges made a favorable contribution of $62.5 million to interest accruals in the three months ended March 31, 2019, compared to a lower contribution of $1.9 million in the prior year period. The fair value hedging impact was not significant to Net interest income as hedges were highly effective with changes in the fair values of the hedging derivatives largely offsetting changes in the fair values of the hedged items.
We earn interest income from investing our members’ capital to fund interest-earning assets. Such earnings are sensitive to the changes in short-term interest rates (Rate effects), and changes in the average outstanding capital and non-interest bearing liabilities (Volume effects). Typically, we invest capital and net non-interest costing liabilities to fund short-term investment assets that yield money market rates. In the periods in this report, market yields for investments in the federal funds and repo markets have improved and the contribution to interest margin from member capital has also improved. Member capital is retained earnings and capital stock, which increases or decreases in parallel with the volume of advances borrowed by members. Average capital was $7.3 billion in the current year period, compared to $8.1 billion in the prior year period.
Impact of Qualifying Hedges on Net Interest Income — 2019 First Quarter Compared to 2018 First Quarter
The following table summarizes the impact of net interest adjustments from hedge qualifying interest-rate swaps (in thousands):
Table 9.3:Net Interest Adjustments from Hedge Qualifying Interest Rate Swaps

Three months ended March 31,

2019

2018

Interest Income

$
926,216

$
759,634

Fair value hedging effects

759

—

Amortization of basis

(14
)
(31
)
Interest rate swap accruals

70,573

11,042

Reported interest income

997,534

770,645

Interest Expense

811,652

569,867

Fair value hedging effects

2,071

—

Amortization of basis

(1,444
)
(1,345
)
Interest rate swap accruals

8,039

9,104

Reported interest expense

820,318

577,626

Net interest income

$
177,216

$
193,019

Net interest adjustment - interest rate swaps

$
62,652

$
3,252

Spread and Yield Analysis — 2019 First Quarter Compared to 2018 First Quarter
Table 9.4:Spread and Yield Analysis

Three months ended March 31,

2019

2018

Interest

Interest

Average

Income/

Average

Income/

(Dollars in thousands)

Balance

Expense

Rate (a)

Balance

Expense

Rate (a)

Earning Assets:

Advances

$
97,126,653

$
691,896

2.89
%
$
117,764,485

$
546,460

1.88
%
Interest bearing deposits and others

62,356

383

2.49

17,096

64

1.51

Federal funds sold and other overnight funds

17,136,844

103,811

2.46

21,540,944

77,627

1.46

Investments

Trading securities

6,529,297

40,873

2.54

2,161,929

9,124

1.71

Mortgage-backed securities

Fixed

9,301,522

72,588

3.17

8,360,978

61,329

2.97

Floating

7,286,246

53,638

2.99

8,991,155

45,814

2.07

State and local housing finance agency obligations

1,168,124

9,115

3.16

1,147,300

6,017

2.13

Mortgage loans held-for-portfolio

2,932,945

25,180

3.48

2,888,010

24,203

3.40

Loans to other FHLBanks

8,333

50

2.43

2,222

7

1.36

Total interest-earning assets

$
141,552,320

$
997,534

2.86
%
$
162,874,119

$
770,645

1.92
%

Funded By:

Consolidated obligation bonds

Fixed

$
28,697,070

$
182,065

2.57
%
$
28,275,394

$
122,584

1.76
%
Floating

51,997,529

316,530

2.47

67,489,552

243,590

1.46

Consolidated obligation discount notes

52,403,657

315,316

2.44

57,847,802

207,380

1.45

Interest-bearing deposits and other borrowings

1,056,965

6,307

2.42

1,093,551

3,739

1.39

Mandatorily redeemable capital stock

5,847

100

6.90

19,196

333

7.04

Total interest-bearing liabilities

134,161,068

820,318

2.48
%
154,725,495

577,626

1.51
%

Other non-interest-bearing funds

112,698

—

48,376

—

Capital

7,278,554

—

8,100,248

—

Total Funding

$
141,552,320

$
820,318

$
162,874,119

$
577,626

Net Interest Income/Spread

$
177,216

0.38
%

$
193,019

0.41
%

Net Interest Margin

(Net interest income/Earning Assets)

0.51
%

0.48
%
(a)Reported yields with respect to advances and Consolidated obligations may not necessarily equal the coupons on the instruments as derivatives are extensively used to change the yield and optionality characteristics of the underlying hedged items. When we issue fixed-rate debt that is hedged with an interest rate swap, the hedge effectively converts the debt into a simple floating-rate bond. Similarly, we make fixed-rate advances to members and hedge the advances with a pay-fixed and receive-variable interest rate swap that effectively converts the fixed-rate asset to one that floats with prevailing LIBOR rates. Average balance sheet information is presented, as it is more representative of activity throughout the periods presented. For most components of the average balances, a daily weighted average balance is calculated for the period. When daily weighted average balance information is not available, a simple monthly average balance is calculated. Average yields are derived by dividing income by the average balances of the related assets, and average costs are derived by dividing expenses by the average balances of the related liabilities. Yields and spreads are annualized.
Rate and Volume Analysis — 2019 First Quarter Compared to 2018 First Quarter
The Rate and Volume Analysis presents changes in interest income, interest expense and net interest income that are due to changes in both interest rates and the volume of interest-earning assets and interest-bearing liabilities, and their impact on interest income and interest expense (in thousands):
Table 9.5:Rate and Volume Analysis

For the three months ended

March 31, 2019 vs. March 31, 2018

Increase (Decrease)

Volume

Rate

Total

Interest Income

Advances

$
(108,408
)
$
253,844

$
145,436

Interest bearing deposits and others

256

63

319

Federal funds sold and other overnight funds

(18,367
)
44,551

26,184

Investments

Trading securities

25,620

6,129

31,749

Mortgage-backed securities

Fixed

7,181

4,078

11,259

Floating

(9,842
)
17,666

7,824

State and local housing finance agency obligations

111

2,987

3,098

Other investments

Mortgage loans held-for-portfolio

380

597

977

Loans to other FHLBanks

33

10

43

Total interest income

(103,036
)
329,925

226,889

Interest Expense

Consolidated obligation bonds

Fixed

1,855

57,626

59,481

Floating

(65,535
)
138,475

72,940

Consolidated obligation discount notes

(21,130
)
129,066

107,936

Deposits and borrowings

(129
)
2,697

2,568

Mandatorily redeemable capital stock

(227
)
(6
)
(233
)

Total interest expense

(85,166
)
327,858

242,692

Changes in Net Interest Income

$
(17,870
)
$
2,067

$
(15,803
)
Interest Income — 2019 First Quarter Compared to 2018 First Quarter
Interest income from advances, investments in mortgage-backed securities and MPF loans, federal funds and repurchase agreements are our principal sources of income. Changes in both rate and intermediation volume (average interest-yielding assets) explain the change in the current year period from the prior year period. Reported interest income is net of the impact of cash flows associated with interest rate swaps hedging certain fixed-rate advances that were converted to floating-rate generally indexed to short-term LIBOR.
The principal categories of Interest Income are summarized below (dollars in thousands):
Table 9.6:Interest Income — Principal Sources

Three months ended March 31,

Percentage

2019

2018

Change

Interest Income

Advances

$
691,896

$
546,460

26.61
%
Interest-bearing deposits

383

64

498.44

Securities purchased under agreements to resell

29,922

10,109

195.99

Federal funds sold

73,889

67,518

9.44

Trading securities

40,873

9,124

347.97

Mortgage-backed securities

Fixed

72,588

61,329

18.36

Floating

53,638

45,814

17.08

State and local housing finance agency obligations

9,115

6,017

51.49

Mortgage loans held-for-portfolio

25,180

24,203

4.04

Loans to other FHLBanks

50

7

614.29

Total interest income

$
997,534

$
770,645

29.44
%
Interest income in the current year period grew to $997.5 million, yielding 286 basis points, compared to $770.6 million yielding 192 basis points in the prior year period. In a rising rate environment, short-term and overnight assets repriced to higher rates when interest-yielding assets were rolled over. Our advance portfolio includes significant amounts of LIBOR-indexed floating-rate advances, overnight advances and short-term fixed-rate advances, and yields have benefited in a rising rate environment. Our liquidity portfolios of overnight federal fund sold and securities purchased under agreements to resell have reset to higher yields. Our investments in LIBOR-indexed mortgage-backed securities have likewise benefited from a rising rate environment.
Higher interest revenues from higher rates were partly offset by lower advance volume in the current year period.
We have continued to benefit from favorable interest income accruals as a result of applying fair value hedges of advances. Certain fixed-rate advances are hedged by the execution of interest rate swaps that create synthetic floaters. The interest rate swaps are structured to pay out fixed-rate cash flows and receive variable-rate benchmark indexed cash flows. Historically, the fixed-rate cash flows paid to swap dealers on swaps hedging advances have been greater than the LIBOR-indexed cash flows received from swap dealers, resulting in a negative income accrual. In the periods in this report, our interest income benefited in a rising LIBOR environment as the cash interest accruals received exceeded fixed-rate payments to swap dealers. These market conditions resulted in a net favorable accrual of $70.6 million to advance income in the current year period, compared to net favorable accrual of $11.0 million in the prior year period. Fair value hedging impact of changes in fair values of hedged items minus fair values of hedging instruments was not material. For more information, see Table 9.7 Impact of Interest Rate Swaps on Interest Income Earned from Advances.
Impact of hedging on Interest income from advances — 2019 First Quarter Compared to 2018 First Quarter
We have executed interest rate swaps to modify the effective interest rate terms of many of our fixed-rate advance products and typically all of our putable advances, effectively converting a fixed-rate stream of cash flows from fixed-rate advances to a floating-rate stream of cash flows, typically indexed to LIBOR. The cash flow patterns achieved our interest rate risk management practices of synthetically converting much of our fixed-rate interest exposures to a LIBOR exposure.
The table below summarizes interest income earned from advances and the impact of interest rate derivatives (in thousands):
Table 9.7:Impact of Interest Rate Swaps on Interest Income Earned from Advances

Three months ended March 31,

2019

2018

Advance Interest Income

Advance interest income before adjustment for interest rate swaps

$
620,573

$
535,449

Fair value hedging effects (a)

777

—

Amortization of basis

(14
)
(31
)
Interest rate swap accruals

70,560

11,042

Total Advance interest income reported

$
691,896

$
546,460

(a) In the period prior to the adoption of ASU 2017-12 on January 1, 2019, fair value hedging effects were recorded in Other income (loss) and not in Advance interest income.
Interest Expense — 2019 First Quarter Compared to 2018 First Quarter
Our primary source of funding is through the issuance of Consolidated obligation bonds and discount notes in the global debt markets. Consolidated obligation bonds are generally medium- and long-term bonds, while discount notes are short-term instruments. To fund our assets, our management considers our interest rate risk and liquidity requirements in conjunction with consolidated obligation buyers’ preferences and capital market conditions when determining the characteristics of debt to be issued. Typically, we have used fixed-rate callable and non-callable CO bonds to fund mortgage-related assets and advances. CO discount notes are generally issued to fund advances and investments with shorter interest rate reset characteristics.
Changes in rate and intermediation volume (average interest-costing liabilities), the mix of debt issuances between CO bonds and CO discount notes, and the impact of hedging strategies explain the changes in interest expense. Reported Interest expense is net of the impact of ASC 815 hedge strategies. The primary hedging strategy is the Fair value hedge that creates LIBOR-indexed funding, the primary benchmark rate for the FHLBNY. We also use the Cash Flow hedge strategy that creates long-term fixed-rate funding to lock in future net interest margin. In a Fair value hedge strategy of a bond or discount note, we generally pay variable-rate LIBOR-indexed cash flows to swap counterparties. In exchange, we receive fixed-rate cash flows, which typically mirror the fixed-rate coupon payments to investors holding the FHLBank debt. This exchange effectively converts fixed-rate coupons to floating-rate coupons indexed to the 3-month LIBOR. The primary cash flow hedge strategy is designed to eliminate the variability of cash flows attributable to changes in the primary benchmark interest rate (3-month LIBOR), hedging long-term issuances of consolidated obligation discount notes and create long-term fixed-rate funding.
Certain floating-rate CO bonds were designated in economic hedges, primarily basis hedges that converted a contractual variable index to a preferred funding variable index, typically the 3-month LIBOR. Interest rate swaps designated in an economic hedge do not qualify as an ASC 815 hedge, and interest accrual is not recorded as an adjustment to debt interest expense (as would a swap that qualified); swap accruals together with changes in the fair values of the swaps in economic hedges are reported in Other income (below net interest income) as an impact of derivative and hedging activities in the Statements of income.
The principal categories of Interest expense are summarized below (dollars in thousands):
Table 9.8:Interest Expenses — Principal Categories

Three months ended March 31,

Percentage

2019

2018

Change

Interest Expense

Consolidated obligations bonds

Fixed

$
182,065

$
122,584

(48.52
)%
Floating

316,530

243,590

(29.94
)
Consolidated obligations discount notes

315,316

207,380

(52.05
)
Deposits

5,965

3,505

(70.19
)
Mandatorily redeemable capital stock

100

333

69.97

Cash collateral held and other borrowings

342

234

(46.15
)

Total interest expense

$
820,318

$
577,626

(42.02
)%
Interest expense in the current year period grew to $820.3 million, at a costing yield of 248 basis points, compared to $577.6 million at a costing yield of 151 basis points in the prior year period.   Our funding portfolios include significant issuances of LIBOR-indexed floating-rate CO debt, shorter-term discount notes and short- and medium-term CO bonds that repriced to higher rates in a rising rate environment.
Fair value hedges have been executed to convert fixed-rate CO bonds to benchmark-indexed floating-rate. Cash flow hedges have been executed to hedge rolling-issuances of discount notes to long-term fixed-rate interest expense. The cash flows exchanged in the two hedging strategies resulted in net interest adjustments that impacted interest expense.
In a fair value hedge of CO bonds, the interest rate swaps are structured to receive fixed-rate cash flows and pay benchmark-indexed variable cash flows, creating synthetic floating-rate cash flows. The cash flows exchanged between the receive-leg and pay-leg determine the net interest adjustments. Historically, in a fair value hedge of our debt, the fixed-rate cash flows received from swap dealers on swaps hedging CO bonds have been greater than the LIBOR indexed cash flows we pay to swap dealers, typically resulting in favorable sub-LIBOR cash flows. In the periods in this report, the higher LIBOR-indexed cash flows paid have reversed the typical favorable interest adjustment to interest expense, so that a net unfavorable adjustment of $8.5 million was recorded in the current year period, compared to an unfavorable adjustment of $3.6 million in the prior year period. Fair value hedging impact resulting from changes in fair values of hedged items minus hedging instruments was not material.
No discount notes were hedged under a fair value hedge under ASC 815. Cash flow hedges under ASC 815 have been designated to hedge future issuances of designated CO discount notes. In this strategy, long-term interest rate swaps have been executed that have created synthetic fixed-rate cash flows. The swaps are structured to pay fixed-rate cash flows and receive LIBOR-indexed variable rate cash flows. The pay fixed-rate cash flows are typically based on long-term swap rates, which are generally higher than the 3-month LIBOR that we receive in exchange. Although the cash flow exchanged in the hedge have resulted in net interest expense, the strategy has achieved our hedging objective of a stable and predictable long-term funding expense. The cash flows exchanged in the hedging strategy resulted in net favorable interest accruals of $0.5 million in the three months ended March 31, 2019 as the 3-month LIBOR has continued to rise, benefiting swap cash flows received. In the prior year period, we recorded net unfavorable interest expense accrual of $5.5 million.
For more information about hedging effects, see Table 9.9. Impact of Interest Rate Swaps on Consolidated Obligations Interest Expense.
Impact of Hedging on Interest Expense on Debt — 2019 First Quarter Compared to 2018 First Quarter
The table below summarizes interest expense paid on Consolidated obligation bonds and discount notes and the impact of interest rate swaps (in thousands):
Table 9.9:Impact of Interest Rate Swaps on Consolidated Obligations Interest Expense

Three months ended March 31,

2019

2018

Bonds and discount notes-Interest expense

Bonds-Interest expense before adjustment for swaps

$
489,446

$
363,911

Discount notes-Interest expense before adjustment for swaps

315,799

201,884

Fair value hedging effect on CO bonds (a)

2,071

—

Amortization of basis adjustments on discount notes

(1,444
)
(1,345
)
Net interest adjustment for swaps hedging CO bonds

8,523

3,609

Net interest adjustment for swaps hedging discount notes

(484
)
5,495

Total bonds and discount notes-Interest expense

$
813,911

$
573,554

(a) In the period prior to the adoption of ASU 2017-12 on January 1, 2019, fair value hedging effects were recorded in Other income (loss) and not in CO debt interest expense.
Allowance for Credit Losses — 2019 First Quarter Compared to 2018 First Quarter
·Mortgage loans held-for-portfolio — Credit quality continues to be strong, delinquencies low, and allowance for credit losses have remained insignificant.
We recorded a net reversal of $17 thousand in the 2019 period, compared to a net reversal of $380 thousand in the 2018 period.
We evaluate impaired conventional mortgage loans on an individual (loan-by-loan) basis, and compare the fair values of collateral (net of liquidation costs) to recorded investment values in order to calculate/measure credit losses on impaired loans. Loans are considered impaired when they are seriously delinquent (typically 90 days or more) or in bankruptcy or foreclosure, and loan loss allowances are computed at that point. When a loan is seriously delinquent, we believe it is probable that we will be unable to collect all contractual interest and principal in accordance with the terms of the loan agreement. We also perform a loss migration analysis to collectively measure impairment of loans that have not already been individually evaluated for impairment. FHA/VA (Insured mortgage loans) guaranteed loans are also evaluated collectively for impairment based on the credit worthiness of the PFI.
The immaterial amounts of reserves for credit losses are consistent with our historical experience with foreclosures or losses. Additionally, collateral values of impaired loans have continued to remain steady and have improved in the New York and New Jersey sectors, and the low loan loss reserves were reflective of the stability in home prices in our residential loan markets. For more information, see financial statements Note 10. Mortgage Loans Held-for-Portfolio.
·Advances — Based on the collateral held as security and prior repayment history, no allowance for losses was currently deemed necessary. Our credit risk from advances was concentrated in commercial banks, savings institutions and insurance companies. All advances were fully collateralized during their entire term. In addition, borrowing members pledged their stock in the FHLBNY as additional collateral for advances.
Analysis of Non-Interest Income (Loss) — 2019 First Quarter Compared to 2018 First Quarter
The principal components of non-interest income (loss) are summarized below (in thousands):
Table 9.10:Other Income (Loss)

Three months ended March 31,

2019

2018

Other income (loss):

Service fees and other (a)

$
4,642

$
3,721

Instruments held under the fair value option - Unrealized gains (losses) (b)

(464
)
(53
)

Derivative gains (losses) (c)

(12,280
)
(18,800
)
Trading securities gains (losses) (d)

17,070

(3,201
)
Equity investments gains (losses) (e)

4,210

(260
)
Total other income (loss)

$
13,178

$
(18,593
)
(a)Service fees and other — Service fees are derived primarily from providing correspondent banking services to members, typically fees earned on standby financial letters of credit issued by the FHLBNY on behalf of members. Fee income earned on financial letters of credit were $4.4 million and $3.5 million in the first quarter of the current year and in the same period in the prior year. Letters of credit are primarily issued on behalf of members to units of state and local governments to collateralize their deposits at member banks.
(b)Changes in fair values on instruments elected under the FVO were not material in the periods in this report.
(c)Derivatives in standalone economic hedges reported losses of $12.3 million in the three months ended March 31, 2019, compared to losses of $18.8 million in the prior year period. Derivative losses in the current year period were primarily due to swaps in economic hedges of the liquidity trading portfolio of fixed-rate U.S Treasury securities. Derivative losses in the prior year period was primarily due to standalone basis swaps in economic hedges that synthetically converted floating-rate CO bonds indexed to 1-month LIBOR to 3-month LIBOR. See Table 9.12 Other Income (Loss) — Impact of Derivative Gains and Losses.
(d)   Net gains (losses) on Trading securities — We have invested in short- and medium-term fixed-rate U.S Treasury obligations, which reported unrealized fair value gains in a sharply declining rate environment at March 31, 2019. The securities are not held for speculative trading and are held for liquidity in compliance with FHFA regulatory requirements.
(e)   Fair value gains (losses) on Equity Investments — Our investments in grantor trusts classified as equity investments reported unrealized fair value gains in a rising equity market in the U.S at March 31, 2019. The grantor trusts are owned by us with the objective of providing liquidity to pay for pension benefits to retirees vested in non-qualified pension plans. The grantor trusts are invested in equity and bond funds. .
The following table summarizes unrealized and realized gains (losses) in the trading portfolio (in thousands):
Table 9.11:Net Gains (Losses) on Trading Securities (a)

Three months ended
March 31,

2019

2018

Net unrealized gains (losses) on Trading securities held at period-end

$
16,294

$
(3,201
)
Net unrealized and realized gains (losses) on Trading securities sold/matured during the period

776

—

Net gains (losses) on Trading securities

$
17,070

$
(3,201
)
(a)Securities classified as trading are held for liquidity objectives and carried at fair values. We record changes in the fair value of these investments through Other income as net unrealized gains (losses) on trading securities. FHFA regulations prohibit trading in or the speculative use of financial instruments.
Other income (loss) — Derivatives and Hedging Activities recorded in the three months ended March 31, 2019 and 2018.
With the adoption of ASU 2017-12 effective January 1, 2019, we report the fair value hedging effects in qualifying hedges within interest income and interest expense together with the hedged item. Prior to the adoption of the ASU, fair value impact of qualifying hedges and standalone derivatives were both reported in Other income (loss). Comparative information for the prior year period has not been reclassified to conform to post-adoption standards as the adoption of ASU 2017-12 permitted prospective adoption. For derivatives that are not designated in a hedging relationship (i.e. in an economic hedge), the derivatives are considered as a “standalone” instrument and fair value changes are recorded in Other income (loss), without the offset of a hedged item. Gains and losses recorded in Other income (loss) on standalone derivatives include net interest accruals.
The table presents fair value changes of derivatives in economic hedges (i.e. not in an ASC 815 qualifying hedge) in Other income (loss) in the three months ended March 31, 2019 (post ASU 2017-12). In the three months ended March 31, 2018, prior to the adoption of the ASU, the table presents the aggregate impact of all derivatives and hedging activities, including hedges that qualified under ASC 815. Prior period comparatives have not been recast to conform to the post ASU presentation.
Table 9.12:Other Income (Loss) — Impact of Derivative Gains and Losses (in thousands)

Impact on Other Income (loss)

Three months ended March 31,

2019

2018

Derivatives designated as hedging instruments under ASC 815

Interest rate swaps

Advances

$
(770
)
Consolidated obligation bonds

2,378

Net gains (losses) related to fair value hedges

1,608

Cash flow hedges

(95
)
ASC 815 Hedging impact

$
1,513

Derivatives not designated as hedging instruments

Interest rate swaps (a)

$
(10,890
)
$
(19,823
)
Caps or floors

(345
)
1,308

Mortgage delivery commitments

197

(184
)
Swaps economically hedging instruments designated under FVO

747

64

Accrued interest on swaps in economic hedging relationships

(1,989
)
442

Net gains (losses) related to derivatives not designated as hedging instruments

$
(12,280
)
$
(18,193
)
Price alignment interest paid on variation margin

—

(2,120
)
Net gains (losses) on derivatives and hedging activities

$
(12,280
)
$
(18,800
)
(a)In the 2019 period, losses primarily represented fair value changes on swaps executed in economic hedges to offset earnings volatility due to fluctuations in the fair values of fixed-rate trading securities. In the 2018 period, losses primarily represented fair value changes of basis swaps executed in economic hedges to offset the basis risk of floating-rate CO bonds. The basis swaps synthetically converted CO debt indexed to the 1-month LIBOR to 3-month LIBOR, a strategy that provided economic benefit in managing our balance sheet. In the 2018 period, the spread between the 1-month LIBOR and the 3-month LIBOR had widened unfavorably and adversely impacted fair values and cash flows.
Operating Expenses, Compensation and Benefits, and Other Expenses — 2019 First Quarter Compared to 2018 First Quarter
The following table sets forth the major categories of operating expenses (dollars in thousands):
Table 9.13:Operating Expenses, and Compensation and Benefits

Three months ended March 31,

2019

Percentage of
Total

2018

Percentage of
Total

Operating Expenses (a)

Occupancy

$
1,843

14.34
%
$
1,850

18.58
%
Depreciation and leasehold amortization

1,961

15.26

1,286

12.92

All others (b)

9,046

70.40

6,821

68.50

Total Operating Expenses

$
12,850

100.00
%
$
9,957

100.00
%

Total Compensation and Benefits (c)

$
21,438

$
18,768

Finance Agency and Office of Finance (d)

$
3,942

$
4,259

Other expenses (e)

$
2,350

$
1,535

(a)Operating expenses included the administrative and overhead costs of operating the FHLBNY, as well as the operating costs of providing advances and managing collateral associated with the advances, managing the investment portfolios, and providing correspondent banking services to members.
(b)The category “All others” included temporary workers, computer service agreements, contractual services, professional and legal fees, audit fees, director fees and expenses, insurance and telecommunications. Expenses increased in the current year periods primarily due to consulting expenses to begin implementation of a multi-year technology enhancement plan.
(c)Compensation expense increased driven by investments in headcount.
(d)We are also assessed for our share of the operating expenses for the Finance Agency and the Office of Finance. The FHLBanks and two other GSEs share the entire cost of the Finance Agency. Expenses are allocated by the Finance Agency and the Office of Finance.
(e)The category Other expenses included contributions to homeowners and small businesses under a newly established hurricane relief grant program, the non-service elements of Net periodic pension benefit costs, and derivative clearing fees.
Assessments — 2019 First Quarter Compared to 2018 First Quarter
For more information about assessments, see Affordable Housing Program and Other Mission Related Programs and Assessments under Part I Item 1 Business in the most recent Form 10-K filed on March 21, 2019.
The following table provides rollforward information with respect to changes in Affordable Housing Program liabilities (in thousands):
Table 10.1:Affordable Housing Program Liabilities

Three months ended March 31,

2019

2018

Beginning balance

$
161,718

$
131,654

Additions from current period’s assessments

14,993

14,062

Net disbursements for grants and programs

(15,582
)
(8,460
)
Ending balance

$
161,129

$
137,256

AHP assessments allocated from net income totaled $15.0 million for the quarter ended March 31, 2019 compared to $14.1 million for the same period in the prior year. Assessments are calculated as a percentage of Net income, and the changes in allocations were in parallel with changes in Net income.
Legislative and Regulatory Developments

~~Certain~~A significant regulatory ~~developments~~development for the period covered by this report ~~are~~and not previously disclosed in the Bank’s most recent Form 10-K filed on March 21, 2019 is summarized below.

~~Adoption~~Interim Final Rule on Margin and Capital Requirements for Covered Swap Entities. On March 19, 2019, the Office of ~~Single-Counterparty Credit Limits for Bank Holding Companies and Foreign Banking Organizations by Board~~the Comptroller of ~~Governors of~~the Currency, the Federal Reserve ~~System.~~ ~~On August 6, 2018,~~Board, the ~~Board~~Federal Deposit Insurance Corporation, the Farm Credit Administration and the FHFA (collectively, the Agencies) jointly adopted interim final rules (the Interim Rule) amending the Agencies’ regulations that established minimum margin and capital requirements (the Margin Rules) for registered swap dealers, major swap participants, security-based swap dealers, and major security-based swap participants (Covered Swap Entities) under the jurisdiction of ~~Governors~~one of the ~~Federal Reserve System published~~Agencies. The Interim Rule was adopted to assist Covered Swap Entities and their counterparties upon the expected withdrawal, currently delayed until October 31, 2019, of the United Kingdom (UK) from the European Union (EU), commonly referred to as “Brexit.” If the UK withdraws from the EU without a negotiated agreement between the UK and the EU, Covered Swap Entities located within the UK may not be authorized to continue providing certain financial services to swap counterparties that are located in the ~~Federal Register~~EU. The Interim Rule would permit Covered Swap Entities located within the UK to transfer their non-cleared swap portfolios to affiliates or other related entities located within the EU or the United States without subjecting legacy swaps (those swaps entered into before the compliance date of the Margin Rules) to the margin requirements of the Margin Rules, provided that the transfer is made within a ~~final rule, effective October 6, 2018, establishing single-counterparty credit limits applicable~~year of a non-negotiated Brexit and there are no other amendments to ~~bank holding companies and foreign banking organizations~~the transactions.
We have UK-based non-cleared swap counterparties that may choose to transfer their non-cleared swap portfolios, including any such swaps with ~~total consolidated assets of $250 billion~~us, to a related entity in the EU or ~~more, including global systemically important bank holding companies (“GSIBs”) in~~ the United States. ~~These entities~~If any of our legacy non-cleared swaps are ~~considered to be “covered companies”~~transferred in accordance with the Interim Rule, those swaps will retain legacy status under the rule. The Federal Home Loan Banks (“FHLBanks”) are themselves exempt from the limits and reporting requirements contained in this rule. However, credit exposure to individual FHLBanks must be monitored, and reported on as required, by any entity that is a covered company under this rule.Margin Rules.

~~Under~~On April 1, 2019, the ~~final rule, a covered company and~~Commodity Futures Trading Commission (CFTC) adopted its ~~subsidiaries may not have aggregate net credit exposure to an FHLBank and (in certain cases) economically interdependent entities in excess of 25%~~own version of the company’s tier 1 capital. Such credit exposure does not include advances from an FHLBank, but generally includes collateral pledged to an FHLBank in excess of a covered company’s outstanding advances. Also included towards a covered company’s net credit exposureInterim Rule, which is its investment in FHLBank capital stock and debt instruments; deposits with an FHLBank; FHLBank-issued letters of credit where a covered company is the named beneficiary; and other obligations to an FHLBank, including repurchase or reverse repurchase transactions net of collateral that create a credit exposure to an FHLBank. Intra-day exposures are exempt from the final rule.
~~With respect~~substantially similar to the ~~FHLBanks’ consolidated obligations held by a covered company,~~Agencies’ Interim Rule, but which applies to Covered Swap Entities that are not subject to the company must monitor, and report on as required, its credit exposure for such obligations. It is not clear if the Federal Reserve will require consolidated obligations to be aggregated with other exposures to an FHLBank or the FHLBank System.
~~The final rule gives major covered companies (i.e., the GSIBs) until January 1, 2020 to comply; all other covered companies will have until July 1, 2020 to comply.~~
~~The Bank is continuing to study the overall effect~~jurisdiction of one of the ~~final rule.~~Agencies. Comments on the Interim Rule were due April 18, 2019 and are due on the CFTC’s version of the Interim Rule on May 31, 2019. We do not expect the Interim Rule to materially affect our financial condition or results of operations.
Item 3.                                                         Quantitative and Qualitative Disclosures about Market Risk.

Market Risk Management. Market risk or interest rate risk ~~(“IRR”)~~(IRR) is the risk of change to market value or future earnings due to a change in the interest rate environment. IRR arises from the Banks operation due to maturity mismatches between interest rate sensitive cash-flows of assets and liabilities. As the maturity mismatch increases so does the level of IRR. The Bank has opted to retain a modest level of IRR which allows for the preservation of capital value while generating steady and predictable income. Accordingly, 90% of the balance sheet consists of predominantly short-term and LIBOR-based assets and liabilities. A conservative and limited maturity gap profile of asset and liability positions protect our capital from changes in value arising from interest and rate volatility environment.

The desired risk profile is primarily affected by the use of interest rate exchange agreements ~~(“Swaps”)~~(Swaps). All the LIBOR-based advances and long-term advances are swapped to 1- or 3-month LIBOR. Advances with adjustable rates are tailored to reset to a LIBOR index while long-term consolidated obligations are swapped to 1- or 3-month LIBOR. These features create a relatively steady income that changes in concert with prevailing interest rate changes to maintain a spread to short-term rates.

Although the Bank maintains a conservative IRR profile, income variability does arise from structural aspects in our portfolio. These include: embedded prepayment rights, basis risk on asset and liability positions, yield curve risk, and liquidity and funding needs. These varied risks are controlled by monitoring IRR measures including re-pricing gaps, duration of equity ~~(“DOE”)~~(DOE), value at risk ~~(“VaR”)~~(VaR), net interest income ~~(“NII”)~~(NII) at risk, key rate durations ~~(“KRD”)~~(KRD) and forecasted dividend rates.

Risk Measurements. Our Risk Management Policy assigns comprehensive risk limits which we calculate on a regular basis. The risk limits are as follows:

·                  The option-adjusted DOE is limited to a range of +2.0 years to -3.5 years in the rates unchanged case, and to a range of +/-5.0 years in the +/-200bps shock cases.
·                  The one-year cumulative re-pricing gap is limited to 10 percent of total assets.
·                  The sensitivity of expected net interest income over a one-year period is limited to a -15 percent change under ~~both~~ the ~~+/-200bps shocks~~+200bps shock compared to the rates in the unchanged case.
The sensitivity of expected net interest income over a one-year period is limited to a -40 percent change under the -200bps shock compared to the rates in the unchanged case. This limit was re-established and made consistent with current market conditions and reflective of updated modelling assumptions.
·                  The potential decline in the market value of equity is limited to a 10 percent change under the +/-200bps shocks.
·                  KRD exposure at any of nine term points (3-month, 1-year, 2-year, 3-year, 5-year, 7-year, 10-year, 15-year, and 30-year) is limited to between +/-12 months through the 3-year term point and a cumulative limit of +/-30 months from the 5-year through 30-year term points.

Our portfolio, including derivatives, is tracked and the overall mismatch between assets and liabilities is summarized by using a DOE measure. Our last five quarterly DOE results are shown in years in the table below (due to the on-going low interest rate environment, there was no down 200bps measurement presented between the second quarter of 2017 and the fourth quarter of 2017. However, the Bank has presented a down 100bps measurement beginning in the fourth quarter of 2017 and a down 200bps in 2018):below:

Base Case DOE

-200bps DOE

-100bps DOE

+200bps DOE

June 30, 2018

0.00

-1.99

-0.62

0.44

March 31, 2018

-0.15

-1.75

-0.75

0.40

December 31, 2017

-0.37

N/A

-0.95

0.36

September 30, 2017

-0.38

N/A

N/A

0.54

June 30, 2017

-0.24

N/A

N/A

0.53

Base Case DOE

-200bps DOE

-100bps DOE

+200bps DOE

March 31, 2019

-0.19

0.72

-1.04

0.42

December 31, 2018

-0.05

-0.76

-0.79

0.31

September 30, 2018

0.10

-1.58

-0.46

0.43

June 30, 2018

0.00

-1.99

-0.62

0.44

March 31, 2018

-0.15

-1.75

-0.75

0.40

The DOE has remained within policy limits. Duration indicates any cumulative re-pricing/maturity imbalance in the portfolio’s financial assets and liabilities. A positive DOE indicates that, on average, the liabilities will re-price or mature sooner than the assets, while a negative DOE indicates that, on average, the assets will re-price or mature earlier than the liabilities. We measure DOE using software that incorporates optionality within our portfolio using well-known and tested financial pricing theoretical models.

We do not solely rely on the DOE measure as a mismatch measure between assets and liabilities. We analyze open key rate duration exposure across maturity buckets while also performing a more traditional gap measure that subtracts re-pricing/maturing liabilities from re-pricing/maturing assets over time. We observe the differences over various horizons, but have set a 10 percent of assets limit on cumulative re-pricings at the one-year point. This quarterly observation of the one-year cumulative re-pricing gap is provided in the table below and all values are below 10 percent of assets, well within the limit:

One Year
Re-pricing Gap

March 31, 2019
$
6.053 Billion
December 31, 2018
$
6.418 Billion
September 30, 2018
$
6.363 Billion
June 30, 2018

$
6.527 Billion

March 31, 2018

$
6.738 ~~Billion~~
~~December 31, 2017~~
$
~~7.592 Billion~~
~~September 30, 2017~~
$
~~6.496 Billion~~
~~June 30, 2017~~
$
~~6.372~~ Billion

Our review of potential interest rate risk issues also includes the effect of changes in interest rates on expected net income. We project asset and liability volumes and spreads over a one-year horizon and then simulate expected income and expenses from those volumes and other inputs. The effects of changes in interest rates are measured to test whether the portfolio has too much exposure in its net interest income over the coming 12-month period. To measure the effect, ~~the change to the spread in the shocks~~a parallel shift of +200bps is calculated and compared against the base case and subjected to a -15 percent limit. The ~~quarterly~~ sensitivity of ~~our~~ expected net interest income over a one-year period is limited to a -40 percent change under ~~both +/~~the -200bps ~~shocks over~~shock compared to the ~~next 12 months is provided~~rates in the ~~table below (due to the ongoing low interest rate environment, the down 200bps measurement~~unchanged case. This limit was ~~not presented between the second quarter~~re-established and made consistent with current market conditions and reflective of ~~2017 and the second quarter of 2018 however, the Bank has presented a down 100bps measurement beginning the fourth quarter of 2017):~~updated modelling assumptions.

Sensitivity in
the -200bps
Shock

Sensitivity in
the -100bps
Shock

Sensitivity in
the +200bps
Shock

June 30, 2018

N/A

-3.16
%
5.53
%
March 31, 2018

N/A

-2.69
%
3.98
%
December 31, 2017

N/A

-3.14
%
7.02
%
September 30, 2017

N/A

N/A

3.19
%
June 30, 2017

N/A

N/A

5.28
%

Sensitivity in
the -200bps
Shock

Sensitivity in
the -100bps
Shock

Sensitivity in
the +200bps
Shock

March 31, 2019

-12.91
%
-6.44
%
9.61
%
December 31, 2018

N/A

-5.86
%
12.26
%
September 30, 2018

N/A

-6.56
%
13.14
%
June 30, 2018

N/A

-3.16
%
5.53
%
March 31, 2018

N/A

-2.69
%
3.98
%
Aside from net interest income, the other significant impact on changes in the interest rate environment is the potential impact on the value of the portfolio. These calculated and quoted market values are estimated based upon their financial attributes (including optionality) and then re-estimated under the assumption that interest rates suddenly rise or fall by 200bps. The worst effect, whether it is the up or the down shock, is compared to the internal limit of 10 percent. The quarterly potential maximum decline in the market value of equity under these 200bps shocks is provided below (due to the ongoing low interest rate environment, the down 200bps measurement was not presented between the second quarter of 2017 to the fourth quarter of 2017; however, the Bank has presented a down 100bps measurement beginning the fourth quarter of 2017 and a down 200bps in 2018):below:

-200bps Change
in MVE

-100bps Change
in MVE

+200bps Change
in MVE

June 30, 2018

-1.13
%
-0.24
%
-0.57
%
March 31, 2018

-1.69
%
-0.52
%
-0.40
%
December 31, 2017

N/A

-0.81
%
-0.20
%
September 30, 2017

N/A

N/A

-0.39
%
June 30, 2017

N/A

N/A

-0.48
%

-200bps Change
in MVE

-100bps Change
in MVE

+200bps Change
in MVE

March 31, 2019

-1.61
%
-0.51
%
-0.81
%
December 31, 2018

-1.63
%
-0.41
%
-0.50
%
September 30, 2018

-1.12
%
-0.20
%
-0.58
%
June 30, 2018

-1.13
%
-0.24
%
-0.57
%
March 31, 2018

-1.69
%
-0.52
%
-0.40
%

As noted, the potential declines under these shocks are within our limits of a maximum 10 percent.
The following tables display the portfolio’s maturity/re-pricing gaps as of ~~June 30, 2018~~March 31, 2019 and December 31, ~~2017~~2018 (in millions):

Interest Rate Sensitivity

Interest Rate Sensitivity

March 31, 2019

June 30, 2018

More Than

More Than

More Than

More Than

More Than

More Than

Six Months

Six Months to

One Year to

Three Years to

More Than

Six Months

Six Months to

One Year to

Three Years to

More Than

or Less

One Year

Three Years

Five Years

Five Years

or Less

One Year

Three Years

Five Years

Five Years

Interest-earning assets:

Non-MBS investments

$
21,079

$
130

$
509

$
428

$
1,962

$
16,137

$
155

$
572

$
440

$
1,612

MBS investments

9,302

481

2,370

1,897

3,368

7,300

368

2,350

1,249

5,372

Swaps hedging MBS

128

—

—

—

(128
)
Adjustable-rate loans and advances

29,984

—

—

—

—

21,236

—

—

—

—

Net unswapped

60,365

611

2,879

2,325

5,330

44,801

523

2,922

1,689

6,856

Liquidity trading portfolio

1,324

1,704

739

3

—

1,086

2,659

3,099

347

—

Swaps hedging investments

2,464

(1,714
)
(750
)
—

—

6,150

(2,675
)
(3,125
)
(350
)
—

Net liquidity trading portfolio

3,788

(10
)
(11
)
3

—

7,236

(16
)
(26
)
(3
)
—

Fixed-rate loans and advances

41,479

10,220

18,750

6,063

4,881

41,333

10,867

14,731

4,887

6,109

Swaps hedging advances

37,419

(9,517
)
(17,325
)
(5,730
)
(4,847
)

33,283

(10,206
)
(13,359
)
(3,665
)
(6,053
)
Net fixed-rate loans and advances

78,898

703

1,425

333

34

74,616

661

1,372

1,222

56

Total interest-earning assets

$
143,051

$
1,304

$
4,293

$
2,661

$
5,364

$
126,653

$
1,168

$
4,268

$
2,908

$
6,912

Interest-bearing liabilities:

Deposits

$
1,167

$
3

$
—

$
—

$
—

$
1,338

$
—

$
—

$
—

$
—

Discount notes

45,232

239

—

—

—

52,993

42

—

—

—

Swapped discount notes

(2,529
)
—

858

198

1,473

(2,664
)
—

1,056

—

1,608

Net discount notes

42,703

239

858

198

1,473

50,329

42

1,056

—

1,608

Consolidated Obligation Bonds

FHLBank bonds

78,515

7,518

8,861

2,853

3,483

51,485

13,287

7,085

3,259

4,693

Swaps hedging bonds

14,096

(6,413
)
(6,020
)
(913
)
(750
)

17,616

(12,329
)
(3,797
)
(740
)
(750
)
Net FHLBank bonds

92,611

1,105

2,841

1,940

2,733

69,101

958

3,288

2,519

3,943

Total interest-bearing liabilities

$
136,481

$
1,347

$
3,699

$
2,138

$
4,206

$
120,768

$
1,000

$
4,344

$
2,519

$
5,551

Post hedge gaps (a):

Periodic gap

$
6,570

$
(43
)
$
594

$
523

$
1,158

$
5,885

$
168

$
(76
)
$
389

$
1,361

Cumulative gaps

$
6,570

$
6,527

$
7,121

$
7,644

$
8,802

$
5,885

$
6,053

$
5,977

$
6,366

$
7,727

Interest Rate Sensitivity

Interest Rate Sensitivity

December 31, 2018

December 31, 2017

More Than

More Than

More Than

More Than

More Than

More Than

Six Months

Six Months to

One Year to

Three Years to

More Than

Six Months

Six Months to

One Year to

Three Years to

More Than

or Less

One Year

Three Years

Five Years

Five Years

or Less

One Year

Three Years

Five Years

Five Years

Interest-earning assets:

Non-MBS investments

$
14,238

$
159

$
545

$
442

$
1,771

$
12,881

$
143

$
514

$
424

$
1,952

MBS investments

9,291

855

2,059

1,979

3,055

7,900

536

2,546

1,343

4,431

Adjustable-rate loans and advances

37,120

—

—

—

—

23,395

—

—

—

—

Net unswapped

60,649

1,014

2,604

2,421

4,826

44,176

679

3,060

1,767

6,383

Liquidity trading portfolio

239

1,256

147

—

—

1,712

1,963

1,980

3

—

Swaps hedging investments

1,408

(1,261
)
(147
)
—

—

3,975

(1,975
)
(2,000
)
—

—

Net liquidity trading portfolio

1,647

(5
)
—

—

—

5,687

(12
)
(20
)
3

—

Fixed-rate loans and advances

43,147

11,835

21,227

7,438

1,940

42,055

10,332

18,246

5,416

5,991

Swaps hedging advances

39,629

(10,719
)
(19,886
)
(7,127
)
(1,897
)

36,400

(9,276
)
(16,931
)
(4,255
)
(5,938
)
Net fixed-rate loans and advances

82,776

1,116

1,341

311

43

78,455

1,056

1,315

1,161

53

Loans to other FHLBanks

250

—

—

—

—

Total interest-earning assets

$
145,072

$
2,125

$
3,945

$
2,732

$
4,869

$
128,568

$
1,723

$
4,355

$
2,931

$
6,436

Interest-bearing liabilities:

Deposits

$
1,166

$
12

$
—

$
—

$
—

$
1,038

$
5

$
—

$
—

$
—

Discount notes

49,424

189

—

—

—

50,230

410

—

—

—

Swapped discount notes

(2,349
)
—

525

531

1,293

(2,664
)
—

971

85

1,608

Net discount notes

47,075

189

525

531

1,293

47,566

410

971

85

1,608

Consolidated Obligation Bonds

FHLBank bonds

65,519

18,199

9,250

2,545

3,509

50,615

16,007

9,579

3,296

4,406

Swaps hedging bonds

24,199

(16,754
)
(6,057
)
(638
)
(750
)

23,556

(15,324
)
(6,490
)
(992
)
(750
)
Net FHLBank bonds

89,718

1,445

3,193

1,907

2,759

74,171

683

3,089

2,304

3,656

Total interest-bearing liabilities

$
137,959

$
1,646

$
3,718

$
2,438

$
4,052

$
122,775

$
1,098

$
4,060

$
2,389

$
5,264

Post hedge gaps (a):

Periodic gap

$
7,113

$
479

$
227

$
294

$
817

$
5,793

$
625

$
295

$
542

$
1,172

Cumulative gaps

$
7,113

$
7,592

$
7,819

$
8,113

$
8,930

$
5,793

$
6,418

$
6,713

$
7,255

$
8,427

(a)         Re-pricing gaps are estimated at the scheduled rate reset dates for floating rate instruments, and at maturity for fixed rate instruments. For callable instruments, the re-pricing period is estimated by the earlier of the estimated call date under the current interest rate environment or the instrument’s contractual maturity.
ITEM 4.                                                CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures: An evaluation of the Bank’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Act”)) was carried out under the supervision and with the participation of the Bank’s President and Chief Executive Officer, José R. González, and Senior Vice President and Chief Financial Officer, Kevin M. Neylan, as of ~~June 30, 2018.~~March 31, 2019. Based on this evaluation, they concluded that as of ~~June 30, 2018,~~March 31, 2019, the Bank’s disclosure controls and procedures were effective, at a reasonable level of assurance, in ensuring that the information required to be disclosed by the Bank in the reports it files or submits under the Act is (i) accumulated and communicated to the Bank’s management (including the President and Chief Executive Officer and Senior Vice President and Chief Financial Officer) in a timely manner, and (ii) recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.

Changes in Internal Control Over Financial Reporting: There were no changes in the Bank’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Act) during the Bank’s last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Bank’s internal control over financial reporting.
Part II.Other Information.

Item 1. Legal Proceedings

The Bank is not aware of any legal proceedings that are expected to have a material effect on its financial condition or results of operations or that are otherwise material to the Bank.

Item 1A. Risk Factors

There have been no material changes from the risk factors previously disclosed in Part I, Item 1A of the FHLBNY’s Annual Report on Form 10-K for the fiscal year ended December 31, ~~2017.~~2018.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Not applicable.

Item 3. Defaults upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

There were no material changes to the disclosures relating to Rule 2-01(c)(1)(ii)(A) of Regulation S-X included in Part II, Item 9B of the FHLBNY’s Annual Report on Form 10-K for the fiscal year ended December 31, ~~2017~~2018 filed on March ~~22, 2018.~~21, 2019.
Item 6.                                      Exhibits

No.

Exhibit
Description

Filed with this
Form 10-Q

~~Form~~Form*

Date Filed

~~31.01~~3.1
Restated Organization Certificate of the Federal Home Loan Bank of New York (“Bank”)
8-K
12/1/2005
3.2
Amended and Restated Bylaws of the Bank
8-K
3/21/2019
4.1
Amended and Restated Capital Plan of the Bank
8-K
1/8/2018
31.1

Certification of the President and Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

X

~~31.02~~31.2

Certification of the Senior Vice President and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

X

~~32.01~~32.1

Certification of the President and Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

X

~~32.02~~32.2

Certification of the Senior Vice President and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

X

101.INS

XBRL Instance Document

X

101.SCH

XBRL Taxonomy Extension Schema Document

X

101.CAL

XBRL Taxonomy Extension Calculation Linkbase Document

X

101.LAB

XBRL Taxonomy Extension Label Linkbase Document

X

101.PRE

XBRL Taxonomy Extension Presentation Linkbase Document

X

101.DEF

XBRL Taxonomy Extension Definition Linkbase Document

X

Notes:
* Means that this exhibit is incorporated by reference from the named Form; the filing date of such named Form is listed in the next column.
SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Federal Home Loan Bank of New York

(Registrant)

/s/ Kevin M. Neylan

Kevin M. Neylan

Senior Vice President and Chief Financial Officer

Federal Home Loan Bank of New York (on behalf of the Registrant and as the Principal Financial Officer)

Date: ~~August~~May 9, ~~2018~~2019

~~122~~113

Federally chartered corporation		13-6400946
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

101 Park Avenue, New York, N.Y.		10178
(Address of principal executive offices)		(Zip Code)

Large accelerated filer o		Accelerated filer o
Non-accelerated filer x		Smaller reporting company o
~~(Do not check if a smaller reporting company)~~		Emerging growth company o

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
None		N/A		N/A

	Three months ended June 30,						Six months ended June 30,						Three months ended March 31,
	2018			2017			2018			2017			2019			2018
Interest income
Advances, net (Note 9)	$	629,485		$	361,306		$	1,175,945		$	678,077		$	691,896		$	546,460
Interest-bearing deposits	90			46			154			81			383			64
Securities purchased under agreements to resell (Note 4)	19,728			5,008			29,837			8,313			29,922			10,109
Federal funds sold (Note 4)	76,338			35,872			143,856			63,473			73,889			67,518
Trading securities (Note 5)	13,221			75			22,345			214			40,873			9,124
Available-for-sale securities (Note 7)	3,082			2,447			5,927			4,698			15,183			2,845
Held-to-maturity securities (Note 8)	121,916			91,832			232,231			178,251			120,158			110,315
Mortgage loans held-for-portfolio (Note 10)	24,423			23,399			48,626			46,257			25,180			24,203
Loans to other FHLBanks (Note 20)	6			12			13			20			50			7

Total interest income	888,289			519,997			1,658,934			979,384			997,534			770,645

Interest expense
Consolidated obligation bonds (Note 12)	450,086			238,932			816,260			445,416			498,595			366,174
Consolidated obligation discount notes (Note 12)	225,376			101,581			432,756			178,754			315,316			207,380
Deposits (Note 11)	4,443			3,063			7,948			4,887			5,965			3,505
Mandatorily redeemable capital stock (Note 14)	293			239			626			643			100			333
Cash collateral held and other borrowings	386			68			620			121			342			234

Total interest expense	680,584			343,883			1,258,210			629,821			820,318			577,626

Net interest income before provision for credit losses	207,705			176,114			400,724			349,563			177,216			193,019

Provision (Reversal) for credit losses on mortgage loans	72			200			(308		)	(101		)	(17		)	(380		)

Net interest income after provision for credit losses	207,633			175,914			401,032			349,664			177,233			193,399

Other income (loss)
Service fees and other	3,973			4,111			7,694			7,363			4,642			3,721
Instruments held at fair value - Unrealized gains (losses) (Note 18)	(309		)	(3,581		)	(362		)	(1,862		)

Total OTTI losses	(398		)	—			(398		)	—
Net amount of impairment losses reclassified to (from) Accumulated other comprehensive income (loss)	257			—			257			—
Net impairment losses recognized in earnings	(141		)	—			(141		)	—

Net realized and unrealized gains (losses) on derivatives and hedging activities (Note 17)	(5,285		)	584			(24,085		)	(118		)
Net gains (losses) on Trading securities	781			(12		)	(2,420		)	(64		)
Fair value gains (losses) on Equity Investments (Note 6)	305			—			45			—
Provision for litigation settlement on derivative contracts	—			—			—			(70,000		)
Instruments held under the fair value option gains (losses) (Note 18)													(464		)	(53		)
Derivative gains (losses) (Note 17)													(12,280		)	(18,800		)
Trading securities gains (losses) (Note 5)													17,070			(3,201		)
Equity investments gains (losses) (Note 6)													4,210			(260		)

Total other income (loss)	(676		)	1,102			(19,269		)	(64,681		)	13,178			(18,593		)

Other expenses
Operating	11,393			10,698			21,350			19,176			12,850			9,957
Compensation and benefits	17,489			16,623			36,257			33,989			21,438			18,768
Finance Agency and Office of Finance	3,641			3,201			7,900			6,977			3,942			4,259
Other expenses	1,986			1,008			3,521			2,016			2,350			1,535
Total other expenses	34,509			31,530			69,028			62,158			40,580			34,519

Income before assessments	172,448			145,486			312,735			222,825			149,831			140,287

Affordable Housing Program Assessments (Note 13)	17,274			14,573			31,336			22,347			14,993			14,062

Net income	$	155,174		$	130,913		$	281,399		$	200,478		$	134,838		$	126,225

Basic earnings per share (Note 15)	$	2.53		$	2.11		$	4.46		$	3.23		$	2.41		$	1.93

Cash dividends paid per share	$	1.60		$	1.23		$	3.24		$	2.65

													Three months ended March 31,
	Three months ended June 30,						Six months ended June 30,						2019			2018
	2018			2017			2018			2017
Net Income	$	155,174		$	130,913		$	281,399		$	200,478		$	134,838		$	126,225
Other Comprehensive income (loss)
Net change in unrealized gains (losses) on available-for-sale securities	(89		)	2,176			(214		)	4,880			32,108			(125		)
Net change in non-credit portion of other-than-temporary impairment losses on held-to-maturity securities
Non-credit portion of other-than-temporary impairment gains (losses)	(257		)	—			(257		)	—
Accretion of non-credit portion of OTTI	1,464			1,274			2,339			7,138			857			875
Total net change in non-credit portion of other-than-temporary impairment losses on held-to-maturity securities	1,207			1,274			2,082			7,138
Net change in unrealized gains (losses) relating to hedging activities
Unrealized gains (losses)	23,157			(13,786		)	77,895			(3,700		)
Reclassification of (gains) losses included in net income	(68		)	294			(33		)	603
Total net change in unrealized gains (losses) relating to hedging activities	23,089			(13,492		)	77,862			(3,097		)
Net change due to hedging activities
Cash flow hedges (a)													(42,691		)	54,773
Fair value hedges (b)													(1,893		)	—
Total net change due to hedging activities													(44,584		)	54,773
Net change in pension and postretirement benefits	637			340			1,316			680			656			679
Total other comprehensive income (loss)	24,844			(9,702		)	81,046			9,601			(10,963		)	56,202
Total comprehensive income (loss)	$	180,018		$	121,211		$	362,445		$	210,079		$	123,875		$	182,427

														Accumulated																			Accumulated
	Capital Stock (a)													Other						Capital Stock (a)													Other
	Class B					Retained Earnings								Comprehensive			Total			Class B					Retained Earnings								Comprehensive			Total
	Shares		Par Value			Unrestricted			Restricted		Total			Income (Loss)			Capital			Shares		Par Value			Unrestricted			Restricted		Total			Income (Loss)			Capital
Balance, December 31, 2016	63,077		$	6,307,766		$	1,028,674		$	383,291	$	1,411,965		$	(95,650	)	$	7,624,081

Proceeds from issuance of capital stock	29,572		2,957,216			—			—		—			—			2,957,216
Repurchase/redemption of capital stock	(25,054	)	(2,505,473		)	—			—		—			—			(2,505,473		)
Shares reclassified to mandatorily redeemable capital stock	(30	)	(3,009		)	—			—		—			—			(3,009		)
Cash dividends ($2.65 per share) on capital stock	—		—			(163,312		)	—		(163,312		)	—			(163,312		)
Comprehensive income	—		—			160,382			40,096		200,478			9,601			210,079

Balance, June 30, 2017	67,565		$	6,756,500		$	1,025,744		$	423,387	$	1,449,131		$	(86,049	)	$	8,119,582

Balance, December 31, 2017	67,500		$	6,750,005		$	1,067,097		$	479,185	$	1,546,282		$	(55,249	)	$	8,241,038		67,500		$	6,750,005		$	1,067,097		$	479,185	$	1,546,282		$	(55,249	)	$	8,241,038

Adjustments to opening balances (b)	—		—			4,924			—		4,924			(4,924		)	—			—		—			4,924			—		4,924			(4,924		)	—
Proceeds from issuance of capital stock	41,729		4,172,890			—			—		—			—			4,172,890			18,716		1,871,635			—			—		—			—			1,871,635
Repurchase/redemption of capital stock	(46,466	)	(4,646,544		)	—			—		—			—			(4,646,544		)	(23,101	)	(2,310,120		)	—			—		—			—			(2,310,120		)
Shares reclassified to mandatorily redeemable capital stock	(1	)	(124		)	—			—		—			—			(124		)	(1	)	(124		)	—			—		—			—			(124		)
Cash dividends ($3.24 per share) on capital stock	—		—			(207,175		)	—		(207,175		)	—			(207,175		)
Comprehensive income	—		—			225,119			56,280		281,399			81,046			362,445
Cash dividends ($1.64 per share) on capital stock																				—		—			(102,154		)	—		(102,154		)	—			— (102,154		)
Comprehensive income (loss)																				—		—			100,980			25,245		126,225			56,202			182,427

Balance, June 30, 2018	62,762		$	6,276,227		$	1,089,965		$	535,465	$	1,625,430		$	20,873		$	7,922,530
Balance, March 31, 2018																				63,114		$	6,311,396		$	1,070,847		$	504,430	$	1,575,277		$	(3,971	)	$	7,882,702

Balance, December 31, 2018																				60,658		$	6,065,799		$	1,102,801		$	591,281	$	1,694,082		$	(13,259	)	$	7,746,622

Proceeds from issuance of capital stock																				16,495		1,649,529			—			—		—			—			1,649,529
Repurchase/redemption of capital stock																				(20,441	)	(2,044,141		)	—			—		—			—			(2,044,141		)
Shares reclassified to mandatorily redeemable capital stock																				(1	)	(112		)	—			—		—			—			(112		)
Cash dividends ($1.74 per share) on capital stock																				—		—			(101,235		)	—		(101,235		)	—			(101,235		)
Comprehensive income (loss)																				—		—			107,871			26,967		134,838			(10,963		)	123,875

Balance, March 31, 2019																				56,711		$	5,671,075		$	1,109,437		$	618,248	$	1,727,685		$	(24,222	)	$	7,374,538

	June 30, 2018
	Due in one year or less			Due after one year through five years			Total Fair Value
GSE securities	$	773,828		$	—		$	773,828
Corporate notes	—			3,652			3,652
U.S. Treasury notes	2,249,851			739,248			2,989,099
Total Trading securities	$	3,023,679		$	742,900		$	3,766,579
Yield on Trading securities	1.80		%	1.85		%

	March 31, 2019
	Due in one year or less			Due after one year through five years			Total Fair Value
GSE securities	$	89,941		$	—		$	89,941
Corporate notes	—			3,394			3,394
U.S. Treasury notes	3,660,913			3,456,387			7,117,300
Total Trading securities	$	3,750,854		$	3,459,781		$	7,210,635
Yield on Trading securities	2.53		%	2.56		%

	December 31, 2018
	Due in one year or less			Due after one year through five years			Total Fair Value
GSE securities	$	502,849		$	—		$	502,849
Corporate notes	—			3,334			3,334
U.S. Treasury notes	3,171,130			2,133,199			5,304,329
Total Trading securities	$	3,673,979		$	2,136,533		$	5,810,512
Yield on Trading securities	2.05		%	2.14		%

										March 31, 2019
	June 30, 2018											Gross		Gross
			Gross		Gross					Amortized		Unrealized		Unrealized			Fair
	Amortized		Unrealized		Unrealized			Fair		Cost		Gains (b)		Losses (b)			Value (c)
	Cost		Gains (b)		Losses (b)			Value (c)
Cash equivalents	$	959	$	—	$	—		$	959	$	1,318	$	—	$	—		$	1,318
Equity funds	25,878		5,709		(84		)	31,503		26,912		4,996		(446		)	31,462
Fixed income funds	18,310		4		(660		)	17,654		21,437		30		(265		)	21,202
Total Equity Investments (a)	$	45,147	$	5,713	$	(744	)	$	50,116	$	49,667	$	5,026	$	(711	)	$	53,982

										December 31, 2018
												Gross		Gross
										Amortized		Unrealized		Unrealized			Fair
										Cost		Gains (b)		Losses (b)			Value (c)

Cash equivalents										$	1,250	$	—	$	—		$	1,250
Equity funds										25,788		2,481		(1,674		)	26,595
Fixed income funds										21,036		7		(709		)	20,334
Total Equity Investments (a)										$	48,074	$	2,488	$	(2,383	)	$	48,179

	Three Months Ended		Six Months Ended		Three Months Ended March 31,
	June 30, 2018		June 30, 2018		2019		2018
Net gains (losses) recognized during the period	$	305	$	45	$	4,210	$	(260	)
Less: Net gains (losses) recognized during the period on equity investments sold during the period	—		—
Less: Net (gains) losses recognized during the period on equity investments sold during the period					—		—
Unrealized gains (losses) recognized during the reporting period on equity investments still held at the reporting date	$	305	$	45	$	4,210	$	(260	)

	March 31, 2019
	Less than 12 months					12 months or more					Total
	Estimated		Unrealized			Estimated		Unrealized			Estimated		Unrealized
	Fair Value		Losses			Fair Value		Losses			Fair Value		Losses
MBS Investment Securities
MBS-GSE
Fannie Mae-CMO	$	13,624	$	(55	)	$	—	$	—		$	13,624	$	(55	)
Fannie Mae-CMBS	—		—			313,926		(8,083		)	313,926		(8,083		)
Freddie Mac-CMO	1,137		(1		)	—		—			1,137		(1		)
Freddie Mac-CMBS	—		—			89,043		(2,625		)	89,043		(2,625		)
Total	$	14,761	$	(56	)	$	402,969	$	(10,708	)	$	417,730	$	(10,764	)

	June 30, 2018				December 31, 2017
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Mortgage-backed securities
CMO floating - LIBOR	$	443,424	$	448,389	$	490,249	$	495,412
CMBS floating - LIBOR	31,490		31,565		33,123		33,215

Total Mortgage-backed securities (a)	$	474,914	$	479,954	$	523,372	$	528,627

	June 30, 2018														March 31, 2019
			OTTI					Gross		Gross							OTTI					Gross		Gross
	Amortized		Recognized			Carrying		Unrecognized		Unrecognized			Fair		Amortized		Recognized			Carrying		Unrecognized		Unrecognized			Fair
Issued, guaranteed or insured:	Cost (d)		in AOCI			Value		Holding Gains (a)		Holding Losses (a)			Value		Cost (d)		in AOCI			Value		Holding Gains (a)		Holding Losses (a)			Value
Pools of Mortgages
Fannie Mae	$	84,699	$	—		$	84,699	$	5,884	$	—		$	90,583	$	71,552	$	—		$	71,552	$	5,432	$	—		$	76,984
Freddie Mac	16,035		—			16,035		1,102		—			17,137		13,094		—			13,094		1,051		—			14,145
Total pools of mortgages	100,734		—			100,734		6,986		—			107,720		84,646		—			84,646		6,483		—			91,129

Collateralized Mortgage Obligations/Real Estate Mortgage Investment Conduits
Fannie Mae	1,930,553		—			1,930,553		8,824		(9,053		)	1,930,324		1,686,999		—			1,686,999		3,360		(5,694		)	1,684,665
Freddie Mac	1,183,357		—			1,183,357		7,408		(2,771		)	1,187,994		1,040,232		—			1,040,232		3,948		(2,782		)	1,041,398
Ginnie Mae	12,928		—			12,928		162		—			13,090		10,985		—			10,985		167		—			11,152
Total CMOs/REMICs	3,126,838		—			3,126,838		16,394		(11,824		)	3,131,408		2,738,216		—			2,738,216		7,475		(8,476		)	2,737,215

Commercial Mortgage-Backed Securities (b)
Fannie Mae	2,799,752		—			2,799,752		1,981		(57,379		)	2,744,354		1,971,448		—			1,971,448		2,866		(5,236		)	1,969,078
Freddie Mac	10,720,573		—			10,720,573		35,630		(85,055		)	10,671,148		9,540,431		—			9,540,431		102,739		(13,926		)	9,629,244
Total commercial mortgage-backed securities	13,520,325		—			13,520,325		37,611		(142,434		)	13,415,502		11,511,879		—			11,511,879		105,605		(19,162		)	11,598,322

Non-GSE MBS (c)
CMOs/REMICs	7,381		(413		)	6,968		75		(35		)	7,008		5,785		(364		)	5,421		268		(27		)	5,662

Asset-Backed Securities (c)
Manufactured housing (insured)	41,332		—			41,332		2,193		—			43,525		32,939		—			32,939		1,405		—			34,344
Home equity loans (insured)	75,832		(7,140		)	68,692		29,254		(156		)	97,790		68,317		(5,712		)	62,605		23,356		(15		)	85,946
Home equity loans (uninsured)	47,445		(5,168		)	42,277		7,080		(566		)	48,791		29,393		(4,128		)	25,265		5,485		(172		)	30,578
Total asset-backed securities	164,609		(12,308		)	152,301		38,527		(722		)	190,106		130,649		(9,840		)	120,809		30,246		(187		)	150,868

Total MBS	16,919,887		(12,721		)	16,907,166		99,593		(155,015		)	16,851,744		14,471,175		(10,204		)	14,460,971		150,077		(27,852		)	14,583,196

Other
State and local housing finance agency obligations	1,232,760		—			1,232,760		537		(26,371		)	1,206,926		1,168,000		—			1,168,000		392		(22,869		)	1,145,523

Total Held-to-maturity securities	$	18,152,647	$	(12,721	)	$	18,139,926	$	100,130	$	(181,386	)	$	18,058,670	$	15,639,175	$	(10,204	)	$	15,628,971	$	150,469	$	(50,721	)	$	15,728,719

	June 30, 2018		December 31, 2017
Ending balance, individually evaluated for impairment	$	280	$	210
Ending balance, collectively evaluated for impairment	537		782
Total Allowance for credit losses	$	817	$	992

	December 31, 2017								December 31, 2018
			Unpaid				Average				Unpaid				Average
	Recorded		Principal		Related		Recorded		Recorded		Principal		Related		Recorded
	Investment		Balance		Allowance		Investment (d)		Investment		Balance		Allowance		Investment (d)
Conventional MPF Loans (a)(c)
No related allowance (b)	$	14,343	$	14,222	$	—	$	14,386	$	10,507	$	10,443	$	—	$	12,681
With a related allowance	1,509		1,494		210		1,393		993		974		238		1,161
Total individually measured for impairment	$	15,852	$	15,716	$	210	$	15,779	$	11,500	$	11,417	$	238	$	13,842

	June 30, 2018			December 31, 2017
Consolidated obligation bonds-amortized cost	$	101,088,522		$	98,878,469
Hedge valuation basis adjustments (a)	171,573			273,585
Hedge basis adjustments on terminated hedges (b)	132,113			134,920
FVO (c) - valuation adjustments and accrued interest	(216		)	1,074

Total Consolidated obligation bonds	$	101,391,992		$	99,288,048

Discount notes-amortized cost	$	45,470,462		$	49,610,668
FVO (c) - valuation adjustments and remaining accretion	—			3,003

Total Consolidated obligation discount notes	$	45,470,462		$	49,613,671

	Hedging Instruments
	March 31, 2019		December 31, 2018
Interest rate contracts
Interest rate swaps	$	104,853,705	$	105,280,821
Interest rate caps	803,000		803,000
Mortgage delivery commitments	20,062		12,682
Total interest rate contracts notionals	$	105,676,767	$	106,096,503

	June 30, 2018								March 31, 2019
	Notional Amount of Derivatives		Derivative Assets			Derivative Liabilities			Notional Amount of Derivatives		Derivative Assets			Derivative Liabilities
Fair value of derivative instruments (a)
Derivatives designated as hedging instruments
Derivatives designated as hedging instruments under ASC 815
Interest rate swaps	$	67,683,050	$	454,292		$	268,948		$	55,190,350	$	411,677		$	374,492
Total derivatives in hedging relationships	67,683,050		454,292			268,948
Total derivatives in hedging relationships under ASC 815									55,190,350		411,677			374,492

Derivatives not designated as hedging instruments
Interest rate swaps	39,633,086		109,826			110,216			48,897,355		156,688			154,165
Interest rate caps or floors	803,000		1,228			—
Interest rate caps									803,000		297			—
Mortgage delivery commitments	23,433		92			3			20,062		85			5
Other (b)	570,000		1,701			9,862			766,000		12,818			10,803
Total derivatives not designated as hedging instruments	41,029,519		112,847			120,081			50,486,417		169,888			164,973

Total derivatives before netting and collateral adjustments	$	108,712,569	567,139			389,029			$	105,676,767	581,565			539,465
Netting adjustments			(355,102		)	(355,102		)			(392,215		)	(392,215		)
Cash Collateral and related accrued interest			(81,090		)	(19,474		)			(34,510		)	(134,352		)
Total netting adjustments and cash collateral			(436,192		)	(374,576		)			(426,725		)	(526,567		)
Total derivative assets and total derivative liabilities			$	130,947		$	14,453				$	154,840		$	12,898
Security collateral pledged as initial margin to Derivative Clearing Organization ~~(d)~~(c)			$	239,034							$	220,347
Security collateral received from counterparty ~~(d)~~(c)			(101,245		)						(105,517		)
Net security			137,789								114,830
Net exposure			$	268,736							$	269,670

	Gains (Losses) on Fair Value Hedges
	Three months ended March 31,
	2019					2018
	Recorded in Interest Income/Expense			Recorded in Other Income (Loss)		Recorded in Interest Income/Expense		Recorded in Other Income (Loss)
Gains (losses) on derivatives in designated and qualifying fair value hedges:
Interest rate hedges	$	(161,584	)	$	—	$	—	$	188,176

Gains (losses) on hedged item in designated and qualifying fair value hedges:
Interest rate hedges	$	160,272		$	—	$	—	$	(186,568	)

	March 31, 2019
			Cumulative Fair Value Hedging Adjustment Included in the Carrying Amount of Hedged Items Gains (Losses)
	Carrying Amount of Hedged Assets/Liabilities (a)		Active Hedging Relationship			Discontinued Hedging Relationship
Assets:
Hedged Advances	$	42,762,489	$	(30,356	)	$	—
Hedged Debt securities - AFS	131,304		(1,893		)	—
De-designated Advances (b)	—		—			388
	$	42,893,793	$	(32,249	)	$	388

Liabilities:
Hedged Consolidated obligation bonds	$	9,484,315	$	304,540		$	—
De-designated Consolidated obligation bonds (b)	—		—			130,074
	$	9,484,315	$	304,540		$	130,074

	Derivative Gains (Losses) Recorded in Income and Other Comprehensive Income/Loss
	Three months ended March 31, 2019
	Amounts Reclassified from AOCI to Interest Expense (b)			Amounts Reclassified from AOCI to Other Income (Loss)		Amounts Recorded in OCI (d)			Total Change in OCI for Period
Interest rate contracts (a)	$	(23	)	$	—	$	(42,714	)	$	(42,691	)

	Derivative Gains (Losses) Recorded in Income and Other Comprehensive Income/Loss
	Three months ended March 31, 2018
	Amounts Reclassified from AOCI to Interest Expense (b)			Amounts Reclassified from AOCI to Other Income (Loss) (c)			Amounts Recorded in OCI (d)			Total Change in OCI for Period
Interest rate contracts (a)	$	(35	)	$	(95	)	$	(54,808	)	$	(54,773	)

	Gains (losses) on Economic Hedges
	Recorded in Other Income (Loss)
	Three months ended March 31,
	2019			2018
Gains (losses) on derivatives designated in economic hedges
Interest rate hedges (a)	$	(12,135	)	$	(21,437	)
Caps	(342		)	1,308
Mortgage delivery commitments	197			(184		)
Total Gains (losses) on derivatives in economic hedges	$	(12,280	)	$	(20,313	)

	June 30, 2018													March 31, 2019
			Estimated Fair Value													Estimated Fair Value								Netting
Financial Instruments	Carrying Value		Total		Level 1		Level 2		Level 3 (a)		Netting Adjustment and Cash Collateral			Carrying Value		Total		Level 1		Level 2		Level 3 (a)		Adjustment and Cash Collateral
Assets
Cash and due from banks	$	158,300	$	158,300	$	158,300	$	—	$	—	$	—		$	82,894	$	82,894	$	82,894	$	—	$	—	$	—
Securities purchased under agreements to resell	4,945,000		4,945,029		—		4,945,029		—		—			5,590,000		5,590,032		—		5,590,032		—		—
Federal funds sold	14,887,000		14,887,005		—		14,887,005		—		—			9,137,000		9,137,059		—		9,137,059		—		—
Trading securities	3,766,579		3,766,579		2,989,099		777,480		—		—			7,210,635		7,210,635		7,117,300		93,335		—		—
Equity Investments	50,116		50,116		50,116		—		—		—			53,982		53,982		53,982		—		—		—
Available-for-sale securities	479,954		479,954				479,954		—		—			2,185,968		2,185,968		—		2,185,968		—		—
Held-to-maturity securities	18,139,926		18,058,670		—		16,654,630		1,404,040		—			15,628,971		15,728,719		—		14,426,666		1,302,053		—
Advances	110,782,004		110,833,890		—		110,833,890		—		—			99,132,395		99,186,887		—		99,186,887		—		—
Mortgage loans held-for-portfolio, net	2,887,473		2,796,172		—		2,796,172		—		—			2,941,086		2,915,349		—		2,915,349		—		—
Accrued interest receivable	288,019		288,019		—		288,019		—		—			327,548		327,548		—		327,548		—		—
Derivative assets	130,947		130,947		—		567,139		—		(436,192		)	154,840		154,840		—		581,565		—		(426,725		)
Other financial assets	309		309		—		—		309		—			670		670		—		—		670		—

Liabilities
Deposits	1,191,039		1,191,037		—		1,191,037		—		—			1,356,478		1,356,486		—		1,356,486		—		—
Consolidated obligations
Bonds	101,391,992		101,088,516		—		101,088,516		—		—			80,149,864		80,087,738		—		80,087,738		—		—
Discount notes	45,470,462		45,469,933		—		45,469,933		—		—			53,035,777		53,035,474		—		53,035,474		—		—
Mandatorily redeemable capital stock	17,707		17,707		17,707		—		—		—			5,755		5,755		5,755		—		—		—
Accrued interest payable	198,701		198,701		—		198,701		—		—			213,581		213,581		—		213,581		—		—
Derivative liabilities	14,453		14,453		—		389,029		—		(374,576		)	12,898		12,898		—		539,465		—		(526,567		)
Other financial liabilities	83,453		83,453		83,453		—		—		—			80,330		80,330		80,330		—		—		—

	During the period ended March 31, 2019
	Fair Value		Level 1		Level 2		Level 3

Real estate owned	$	173	$	—	$	—	$	173

									During the period ended December 31, 2018
	December 31, 2017								Fair Value		Level 1		Level 2		Level 3
	Fair Value		Level 1		Level 2		Level 3
Mortgage loans held-for-portfolio	$	2,519	$	—	$	2,519	$	—	$	741	$	—	$	741	$	—
Real estate owned	1,071		—		—		1,071		795		—		—		795
Total non-recurring assets at fair value	$	3,590	$	—	$	2,519	$	1,071	$	1,536	$	—	$	741	$	795

	March 31, 2018
	Advances			Bonds			Discount Notes
Balance, beginning of the period	$	2,205,624		$	(1,131,074	)	$	(2,312,621	)
New transactions elected for fair value option	—			(115,000		)	(1,564,375		)
Maturities and terminations	(1,450,000		)	1,115,000			2,309,618
Net gains (losses) on financial instruments held under fair value option	217			(1		)	(269		)
Change in accrued interest/unaccreted balance	(4,273		)	1,354			1,619

Balance, end of the period	$	751,568		$	(129,721	)	$	(1,566,028	)

	Three months ended
	March 31, 2018
	Interest Income		Net Gains (Losses) Due to Changes in Fair Value		Total Change in Fair Value Included in Current Period Earnings
Advances	$	4,631	$	217	$	4,848

	December 31, 2018
	Aggregate Unpaid Principal Balance		Aggregate Fair Value		Fair Value Over/(Under) Aggregate Unpaid Principal Balance
Consolidated obligation bonds (b)	$	5,140,000	$	5,159,792	$	19,792
Consolidated obligation discount notes (c)	3,170,915		3,180,086		9,171
	$	8,310,915	$	8,339,878	$	28,963

	June 30, 2018										March 31, 2019
	Payments Due or Expiration Terms by Period										Payments Due or Expiration Terms by Period
			Greater Than		Greater Than								Greater Than		Greater Than
	Less Than		One Year		Three Years		Greater Than				Less Than		One Year		Three Years		Greater Than
	One Year		to Three Years		to Five Years		Five Years		Total		One Year		to Three Years		to Five Years		Five Years		Total
Contractual Obligations
Consolidated obligation bonds at par (a)	$	84,095,950	$	9,657,100	$	3,212,870	$	4,103,650	$	101,069,570	$	62,913,140	$	7,636,890	$	3,670,370	$	5,439,700	$	79,660,100
Consolidated obligation discount notes at par	45,555,456		—		—		—		45,555,456		53,173,357		—		—		—		53,173,357
Mandatorily redeemable capital stock (a)	11,799		1,076		434		4,398		17,707		228		1,065		422		4,040		5,755
Premises (lease obligations) (b)	5,029		13,393		14,092		76,055		108,569		5,839		13,769		14,409		70,554		104,571
Remote backup site											1,264		130		—		—		1,394
Other liabilities (c)	123,412		9,407		7,506		63,975		204,300		105,160		9,819		7,922		58,863		181,764

Total contractual obligations	129,791,646		9,680,976		3,234,902		4,248,078		146,955,602		116,198,988		7,661,673		3,693,123		5,573,157		133,126,941

Other commitments
Standby letters of credit(d)	17,089,363		13,357		—		—		17,102,720		19,901,140		130,215		6,597		—		20,037,952
Consolidated obligation bonds/discount notes traded not settled	16,700		—		—		—		16,700		2,948,725		—		—		—		2,948,725
Commitments to fund additional advances	200,000		—		—		—		200,000		210,000		—		—		—		210,000
Commitments to fund pension											9,321		—		—		—		9,321
Open delivery commitments (MPF)	23,433		—		—		—		23,433		20,062		—		—		—		20,062

Total other commitments	17,329,496		13,357		—		—		17,342,853		23,089,248		130,215		6,597		—		23,226,060

Total obligations and commitments	$	147,121,142	$	9,694,333	$	3,234,902	$	4,248,078	$	164,298,455	$	139,288,236	$	7,791,888	$	3,699,720	$	5,573,157	$	156,353,001

March 31, 2019

Operating Leases (a)

Right-of-use assets

Lease Liabilities