Fair Values of Financial Instruments

6 Months Ended

Jun. 30, 2011

Fair Values of Financial Instruments [Abstract]

Note 16. Fair Values of Financial Instruments.

Items Measured at Fair Value on a Recurring Basis

The following table presents for each hierarchy level (see note below) the FHLBNY’s assets and liabilities that were measured at fair value on its Statements of Condition (in thousands):


	June 30, 2011
											Netting
	Total			Level 1		Level 2			Level 3		Adjustments
Assets
Available-for-sale securities
GSE/U.S. agency issued MBS	$	3,527,930		$	—	$	3,527,930		$	—	$	—
Equity and bond funds		10,053			—		10,053			—		—
Derivative assets^(a)
Interest-rate derivatives		32,983			—		920,609			—		(887,626	)
Mortgage delivery commitments		23			—		23			—		—


Total assets at fair value	$	3,570,989		$	—	$	4,458,615		$	—	$	(887,626	)


Liabilities
Consolidated obligations:
Discount notes (to the extent FVO is elected)	$	(736,746	)	$	—	$	(736,746	)	$	—	$	—
Bonds (to the extent FVO is elected) ^(b)		(9,452,247	)		—		(9,452,247	)		—		—
Derivative liabilities^(a)
Interest-rate derivatives		(694,197	)		—		(3,932,587	)		—		3,238,390
Mortgage delivery commitments		(172	)		—		(172	)		—		—


Total liabilities at fair value	$	(10,883,362	)	$	—	$	(14,121,752	)	$	—	$	3,238,390


	December 31, 2010
											Netting
	Total			Level 1		Level 2			Level 3		Adjustments
Assets
Available-for-sale securities
GSE/U.S. agency issued MBS	$	3,980,135		$	—	$	3,980,135		$	—	$	—
Equity and bond funds		9,947			—		9,947			—		—
Derivative assets^(a)
Interest-rate derivatives		22,001			—		1,016,668			—		(994,667	)
Mortgage delivery commitments		9			—		9			—		—


Total assets at fair value	$	4,012,092		$	—	$	5,006,759		$	—	$	(994,667	)


Liabilities
Consolidated obligations:
Discount notes (to the extent FVO is elected)	$	(956,338	)	$	—	$	(956,338	)	$	—	$	—
Bonds (to the extent FVO is elected) ^(b)		(14,281,463	)		—		(14,281,463	)		—		—
Derivative liabilities^(a)
Interest-rate derivatives		(954,375	)		—		(4,679,144	)		—		3,724,769
Mortgage delivery commitments		(523	)		—		(523	)		—		—


Total liabilities at fair value	$	(16,192,699	)	$	—	$	(19,917,468	)	$	—	$	3,724,769


Level 1 —		Quoted prices in active markets for identical assets.

Level 2 —		Significant other observable inputs.

Level 3 —		Significant unobservable inputs.

(a)		Derivative assets and liabilities were interest-rate contracts, including de minimis amount of mortgage delivery contracts. Based on an analysis of the nature of the risk, the presentation of derivatives as a single class is appropriate.

(b)		Based on its analysis of the nature of risks of the FHLBNY’s debt measured at fair value, the FHLBNY has determined that presenting the debt as a single class is appropriate.

Items Measured at Fair Value on a Nonrecurring Basis

Certain assets and liabilities would be measured at fair value on a nonrecurring basis. For the FHLBNY, such items may include mortgage loans in foreclosure, mortgage loans and held-to-maturity securities written down to fair value and real estate owned. At June 30, 2011 and December 31, 2010, the Bank measured and recorded the fair values of HTM securities deemed to be OTTI on a nonrecurring basis; that is, they were not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (for example, when there is evidence of other-than-temporary impairment — OTTI). For Held-to-maturity securities that were previously credit impaired but no additional credit impairment were deemed necessary, the securities were recorded at their carrying values and no re-adjusted to their fair values.

The following table summarizes the fair values of MBS for which a non-recurring change in fair value was recorded (in thousands):


	June 30, 2011
	Fair Value		Level 1		Level 2		Level 3
Held-to-maturity securities
Home equity loans	$	3,492	$	—	$	—	$	3,492

Total	$	3,492	$	—	$	—	$	3,492


	December 31, 2010
	Fair Value		Level 1		Level 2		Level 3
Held-to-maturity securities
Private-label residential mortgage-backed securities	$	15,827	$	—	$	—	$	15,827

Total	$	15,827	$	—	$	—	$	15,827

Estimated fair values — Summary Tables

The carrying values and estimated fair values of the FHLBNY’s financial instruments were as follows (in thousands):


	June 30, 2011				December 31, 2010
	Carrying		Estimated		Carrying		Estimated
Financial Instruments	Value		Fair Value		Value		Fair Value
Assets
Cash and due from banks	$	5,545,092	$	5,545,092	$	660,873	$	660,873
Federal funds sold		4,475,000		4,474,999		4,988,000		4,987,976
Available-for-sale securities		3,537,983		3,537,983		3,990,082		3,990,082
Held-to-maturity securities
Long-term securities		8,399,659		8,544,947		7,761,192		7,898,300
Advances		74,791,153		74,931,627		81,200,336		81,292,598
Mortgage loans held-for-portfolio, net		1,296,251		1,361,883		1,265,804		1,328,787
Accrued interest receivable		236,005		236,005		287,335		287,335
Derivative assets		33,006		33,006		22,010		22,010
Other financial assets		1,837		1,837		3,981		3,981

Liabilities
Deposits		1,902,151		1,902,157		2,454,480		2,454,488
Consolidated obligations:
Bonds		62,815,651		63,025,424		71,742,627		71,926,039
Discount notes		27,013,011		27,014,230		19,391,452		19,391,743
Mandatorily redeemable capital stock		58,221		58,221		63,219		63,219
Accrued interest payable		181,241		181,241		197,266		197,266
Derivative liabilities		694,369		694,369		954,898		954,898
Other financial liabilities		69,586		69,586		58,818		58,818

Fair Value Option Disclosures

The following table summarizes the activity related to consolidated obligation bonds and discount notes for which the Bank elected the Fair Value Option (in thousands):


	Three months ended June 30,												Six months ended June 30,
	2011			2010			2011			2010			2011			2010			2011			2010
	Bonds						Discount notes						Bonds						Discount notes
Balance, beginning of the period	$	(12,605,257	)	$	(6,780,613	)	$	(731,892	)	$	—		$	(14,281,463	)	$	(6,035,741	)	$	(956,338	)	$	—
New transactions elected for fair value option		(4,395,000	)		(6,750,000	)		(636,481	)		(1,752,185	)		(16,645,000	)		(11,170,000	)		(636,481	)		(1,752,185	)
Maturities and terminations		7,550,000			3,775,000			628,949			—			21,476,000			7,460,000			853,397			—
Changes in fair value		(6,270	)		(3,275	)		129			(973	)		(5,953	)		(11,694	)		552			(973	)
Changes in accrued interest/unaccreted balance		4,280			(4,358	)		2,549			(530	)		4,169			(5,811	)		2,124			(530	)

Balance, end of the period	$	(9,452,247	)	$	(9,763,246	)	$	(736,746	)	$	(1,753,688	)	$	(9,452,247	)	$	(9,763,246	)	$	(736,746	)	$	(1,753,688	)

The following table presents the change in fair value included in the Statements of Income for the consolidated obligation bonds and discount notes designated in accordance with the accounting standards on the Fair Value Option for financial assets and liabilities (in thousands):


	Three months ended June 30,
	2011									2010
				Net Gain(Loss)			Total Change in Fair						Net Gain(Loss)			Total Change in Fair
	Interest			Due to Changes in			Value Included in Current			Interest			Due to Changes in			Value Included in Current
	Expense			Fair Value			Period Earnings			Expense			Fair Value			Period Earnings
Consolidated obligations-bonds	$	(8,801	)	$	(6,270	)	$	(15,071	)	$	(10,563	)	$	(3,275	)	$	(13,838	)
Consolidated obligations-discount notes		(437	)		129			(308	)		(530	)		(973	)		(1,503	)

	$	(9,238	)	$	(6,141	)	$	(15,379	)	$	(11,093	)	$	(4,248	)	$	(15,341	)


	Six months ended June 30,
	2011									2010
				Net Gain(Loss)			Total Change in Fair						Net Gain(Loss)			Total Change in Fair
	Interest			Due to Changes in			Value Included in Current			Interest			Due to Changes in			Value Included in Current
	Expense			Fair Value			Period Earnings			Expense			Fair Value			Period Earnings
Consolidated obligations-bonds	$	(22,639	)	$	(5,953	)	$	(28,592	)	$	(19,085	)	$	(11,694	)	$	(30,779	)
Consolidated obligations-discount notes		(1,418	)		552			(866	)		(530	)		(973	)		(1,503	)

	$	(24,057	)	$	(5,401	)	$	(29,458	)	$	(19,615	)	$	(12,667	)	$	(32,282	)

The following table compares the aggregate fair value, the aggregate remaining contractual fair value and aggregate remaining contractual principal balance outstanding of consolidated obligation bonds and discount notes for which the Fair Value Option has been elected (in thousands):


	June 30, 2011
	Principal Balance		Fair Value		Fair Value Over/(Under)
Consolidated obligations-bonds	$	9,445,000	$	9,452,247	$	7,247
Consolidated obligations-discount notes		736,287		736,746		459

	$	10,181,287	$	10,188,993	$	7,706


	December 31, 2010
	Principal Balance		Fair Value		Fair Value Over/(Under)
Consolidated obligations-bonds	$	14,276,000	$	14,281,463	$	5,463
Consolidated obligations-discount notes		953,203		956,338		3,135

	$	15,229,203	$	15,237,801	$	8,598


	June 30, 2010
	Principal Balance		Fair Value		Fair Value Over/(Under)
Consolidated obligations-bonds	$	9,750,000	$	9,763,246	$	13,246
Consolidated obligations-discount notes		1,752,185		1,753,688		1,503

	$	11,502,185	$	11,516,934	$	14,749

Notes to Estimated Fair Values of Financial Instruments

The fair value of a financial instrument that is an asset is defined as the price FHLBNY would receive to sell an asset in an orderly transaction between market participants at the measurement date. 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 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.

There were no significant changes to fair value measurement processes from those described in the audited financial statements included in the FHLBNY’s most recent Form 10-K, filed on March 25, 2011.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 820
-SubTopic 10
-Section 50
-Paragraph 5
-URI http://asc.fasb.org/extlink&oid=6925170&loc=d3e19296-110258

Reference 2: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 159
-Paragraph 17-22, 27, 28
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 3: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 825
-SubTopic 10
-Section 50
-Paragraph 10
-URI http://asc.fasb.org/extlink&oid=6947722&loc=d3e13433-108611

Reference 4: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 107
-Paragraph 15C, 15D
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 5: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 825
-SubTopic 10
-Section 50
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-URI http://asc.fasb.org/extlink&oid=6957238&loc=d3e14064-108612

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-Publisher FASB
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-URI http://asc.fasb.org/extlink&oid=6947722&loc=d3e13504-108611

Reference 7: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 107
-Paragraph 15A
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-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 8: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 825
-SubTopic 10
-Section 50
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-URI http://asc.fasb.org/extlink&oid=6947722&loc=d3e13537-108611

Reference 9: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 133
-Paragraph 44A, 44B
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 10: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 820
-SubTopic 10
-Section 50
-Paragraph 2
-URI http://asc.fasb.org/extlink&oid=6925170&loc=d3e19207-110258

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-Publisher FASB
-Name Accounting Standards Codification
-Topic 825
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Reference 12: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 107
-Paragraph 3, 10, 14, 15
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 13: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 107
-Paragraph 15B
-Subparagraph a, b
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 14: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 157
-Paragraph 32, 33, 34
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

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