Consolidated Obligations

6 Months Ended

Jun. 30, 2011

Note 10. Consolidated Obligations.

Consolidated obligations, consisting of consolidated obligation bonds and discount notes, are jointly issued by the FHLBanks through the Office of Finance, which serves as the FHLBanks’ fiscal agent. As provided by the FHLBank Act or by regulations governing the operations of the FHLBanks, all FHLBanks have joint and several liability for all FHLBank consolidated obligations. In connection with each debt issuance, each FHLBank specifies the type, term and amount of debt it requests to have issued on its behalf. The Office of Finance tracks the amount of debt issued on behalf of each FHLBank. In addition, the FHLBNY separately tracks and records as a liability its specific portion of the consolidated obligations issued and is the primary obligor for that portion of the consolidated obligations issued. The Federal Housing Finance Agency (Finance Agency), and the U.S. Secretary of the Treasury have oversight over the issuance of FHLBank debt through the Office of Finance.

Finance Agency regulations require the FHLBanks to maintain, in the aggregate, unpledged qualifying assets equal to the consolidated obligations outstanding. The FHLBNY met the qualifying unpledged asset requirements as follows:


	June 30, 2011			December 31, 2010
Percentage of unpledged qualifying assets to consolidated obligations		109	%		110	%

The following summarizes consolidated obligations issued by the FHLBNY and outstanding at June 30, 2011 and December 31, 2010 (in thousands):


	June 30, 2011		December 31, 2010
Consolidated obligation bonds-amortized cost	$	62,135,810	$	71,114,070
Fair value basis adjustments		672,001		622,593
Fair value basis on terminated hedges		593		501
FVO ^(a)-valuation adjustments and accrued interest		7,247		5,463


Total Consolidated obligation-bonds	$	62,815,651	$	71,742,627


Discount notes-amortized cost	$	27,012,552	$	19,388,317
FVO ^(a)-valuation adjustments and remaining accretion		459		3,135


Total Consolidated obligation-discount notes	$	27,013,011	$	19,391,452

Redemption Terms of consolidated obligation bonds

The following is a summary of consolidated bonds outstanding by year of maturity (dollars in thousands):


	June 30, 2011									December 31, 2010
				Weighted									Weighted
				Average			Percentage						Average			Percentage
Maturity	Amount			Rate ¹			of Total			Amount			Rate ¹			of Total
One year or less	$	31,936,145			0.77	%		51.51	%	$	33,302,200			0.91	%		46.91	%
Over one year through two years		9,761,130			1.82			15.74			17,037,375			1.12			24.00
Over two years through three years		8,893,550			2.10			14.35			9,529,950			2.21			13.43
Over three years through four years		3,832,405			2.46			6.18			3,689,355			2.82			5.20
Over four years through five years		3,666,125			2.07			5.91			4,001,400			2.36			5.64
Over five years through six years		577,700			2.07			0.94			462,500			3.34			0.65
Thereafter		3,329,465			3.85			5.37			2,959,200			4.04			4.17


		61,996,520			1.48	%		100.00	%		70,981,980			1.46	%		100.00	%


Bond premiums		170,248									163,830
Bond discounts		(30,958	)								(31,740	)
Fair value basis adjustments		672,001									622,593
Fair value basis adjustments on terminated hedges		593									501
FVO ^(a)-valuation adjustments and accrued interest		7,247									5,463


	$	62,815,651								$	71,742,627


*(a)*		Accounted under the Fair Value Option rules.


¹		Weighted average rate represents the weighted average coupons of bonds, unadjusted for swaps. The weighted average coupon of bonds outstanding at June 30, 2011 and December 31, 2010 represent contractual coupons payable to investors.

Amortization of bond premiums and discounts resulted in net reduction of interest expense of $13.5 million and $26.2 million for the three and six months ended June 30, 2011, and $7.2 million and $14.4 million for the same periods in 2010. Amortization of basis adjustments from terminated hedges were $1.0 million and $2.0 million, and were recorded as an expense for the three and six months ended June 30, 2011, and $1.6 million and $3.2 million for the same periods in 2010.

In the three months ended June 30, 2011 and the same period in 2010, the Bank transferred and retired $26.2 million and $250.0 million of consolidated obligation bonds, resulting in a charge to Net income of $3.4 million and a gain of $44.4 thousand. In the six months ended June 30, 2011 and the same period in 2010, the Bank transferred and retired $504.7 million and $250.0 million of consolidated obligation bonds, resulting in a charge to Net income of $55.2 million and a gain of $44.4 thousand. The transfers and retirements were at negotiated market rates.

Discount Notes

Consolidated 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 discount notes were as follows (dollars in thousands):


	June 30, 2011			December 31, 2010
Par value	$	27,015,724		$	19,394,503

Amortized cost	$	27,012,552		$	19,388,317
Fair value option valuation adjustments		459			3,135


Total	$	27,013,011		$	19,391,452

Weighted average interest rate		0.06	%		0.16	%