UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2018

oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 000-51397

Federal Home Loan Bank of New York

(Exact name of registrant as specified in its charter)

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)

(212) 681-6000

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer,  a smaller reporting company or an emerging growth company.  See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes o No x

The number of shares outstanding of the issuer’s common stock as of July 31, 2018 was 64,778,240.

FEDERAL HOME LOAN BANK OF NEW YORK

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2018

Table of Contents

	Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited):
Statements of Condition (Unaudited) as of June 30, 2018 and December 31, 2017	3
Statements of Income (Unaudited) for the Three and Six Months Ended June 30, 2018 and 2017	4
Statements of Comprehensive Income (Unaudited) for the Three and Six Months Ended June 30, 2018 and 2017	5
Statements of Capital (Unaudited) for the Six Months Ended June 30, 2018 and 2017	6
Statements of Cash Flows (Unaudited) for the Six Months Ended June 30, 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
Item 3. Quantitative and Qualitative Disclosures about Market Risk	115
Item 4. Controls and Procedures	119
PART II. OTHER INFORMATION	120
Item 1. Legal Proceedings	120
Item 1A. Risk Factors	120
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	120
Item 3. Defaults upon Senior Securities	120
Item 4. Mine Safety Disclosures	120
Item 5. Other Information	120
Item 6. Exhibits	121

2

Federal Home Loan Bank of New York

Statements of Condition — Unaudited (In Thousands, Except Par Value of Capital Stock)

As of June 30, 2018 and December 31, 2017

	June 30, 2018		December 31, 2017
Assets
Cash and due from banks (Note 3)	$	158,300	$	127,403
Securities purchased under agreements to resell (Note 4)	4,945,000		2,700,000
Federal funds sold (Note 4)	14,887,000		10,326,000
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
Equity Investments (Note 6)	50,116		—
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
Accrued interest receivable	288,019		226,981
Premises, software, and equipment	35,232		29,697
Derivative assets (Note 17)	130,947		112,742
Other assets	9,938		7,398
Total assets	$	156,560,488	$	158,918,372
Liabilities and capital
Liabilities
Deposits (Note 11)
Interest-bearing demand	$	1,130,636	$	1,142,056
Non-interest-bearing demand	20,903		17,999
Term	39,500		36,000
Total deposits	1,191,039		1,196,055
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
Total consolidated obligations	146,862,454		148,901,719
Mandatorily redeemable capital stock (Note 14)	17,707		19,945
Accrued interest payable	198,701		162,176
Affordable Housing Program (Note 13)	149,304		131,654
Derivative liabilities (Note 17)	14,453		61,607
Other liabilities	204,300		204,178
Total liabilities	148,637,958		150,677,334
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
Retained earnings
Unrestricted	1,089,965		1,067,097
Restricted (Note 14)	535,465		479,185
Total retained earnings	1,625,430		1,546,282
Total accumulated other comprehensive income (loss)	20,873		(55,249		)
Total capital	7,922,530		8,241,038
Total liabilities and capital	$	156,560,488	$	158,918,372

The accompanying notes are an integral part of these financial statements.

3

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, 2018 and 2017

	Three months ended June 30,						Six months ended June 30,
	2018			2017			2018			2017
Interest income
Advances, net (Note 9)	$	629,485		$	361,306		$	1,175,945		$	678,077
Interest-bearing deposits	90			46			154			81
Securities purchased under agreements to resell (Note 4)	19,728			5,008			29,837			8,313
Federal funds sold (Note 4)	76,338			35,872			143,856			63,473
Trading securities (Note 5)	13,221			75			22,345			214
Available-for-sale securities (Note 7)	3,082			2,447			5,927			4,698
Held-to-maturity securities (Note 8)	121,916			91,832			232,231			178,251
Mortgage loans held-for-portfolio (Note 10)	24,423			23,399			48,626			46,257
Loans to other FHLBanks (Note 20)	6			12			13			20
Total interest income	888,289			519,997			1,658,934			979,384
Interest expense
Consolidated obligation bonds (Note 12)	450,086			238,932			816,260			445,416
Consolidated obligation discount notes (Note 12)	225,376			101,581			432,756			178,754
Deposits (Note 11)	4,443			3,063			7,948			4,887
Mandatorily redeemable capital stock (Note 14)	293			239			626			643
Cash collateral held and other borrowings	386			68			620			121
Total interest expense	680,584			343,883			1,258,210			629,821
Net interest income before provision for credit losses	207,705			176,114			400,724			349,563
Provision (Reversal) for credit losses on mortgage loans	72			200			(308		)	(101		)
Net interest income after provision for credit losses	207,633			175,914			401,032			349,664
Other income (loss)
Service fees and other	3,973			4,111			7,694			7,363
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		)
Total other income (loss)	(676		)	1,102			(19,269		)	(64,681		)
Other expenses
Operating	11,393			10,698			21,350			19,176
Compensation and benefits	17,489			16,623			36,257			33,989
Finance Agency and Office of Finance	3,641			3,201			7,900			6,977
Other expenses	1,986			1,008			3,521			2,016
Total other expenses	34,509			31,530			69,028			62,158
Income before assessments	172,448			145,486			312,735			222,825
Affordable Housing Program Assessments (Note 13)	17,274			14,573			31,336			22,347
Net income	$	155,174		$	130,913		$	281,399		$	200,478
Basic earnings per share (Note 15)	$	2.53		$	2.11		$	4.46		$	3.23
Cash dividends paid per share	$	1.60		$	1.23		$	3.24		$	2.65

The accompanying notes are an integral part of these financial statements.

4

Federal Home Loan Bank of New York

Statements of Comprehensive Income — Unaudited (In Thousands)

For the Three and Six Months Ended June 30, 2018 and 2017

	Three months ended June 30,						Six months ended June 30,
	2018			2017			2018			2017
Net Income	$	155,174		$	130,913		$	281,399		$	200,478
Other Comprehensive income (loss)
Net change in unrealized gains (losses) on available-for-sale securities	(89		)	2,176			(214		)	4,880
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
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 in pension and postretirement benefits	637			340			1,316			680
Total other comprehensive income (loss)	24,844			(9,702		)	81,046			9,601
Total comprehensive income (loss)	$	180,018		$	121,211		$	362,445		$	210,079

The accompanying notes are an integral part of these financial statements.

5

Federal Home Loan Bank of New York

Statements of Capital — Unaudited (In Thousands, Except Per Share Data)

For the Six Months Ended June 30, 2018 and 2017

														Accumulated
	Capital Stock (a)													Other
	Class B					Retained Earnings								Comprehensive			Total
	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
Adjustments to opening balances (b)	—		—			4,924			—		4,924			(4,924		)	—
Proceeds from issuance of capital stock	41,729		4,172,890			—			—		—			—			4,172,890
Repurchase/redemption of capital stock	(46,466	)	(4,646,544		)	—			—		—			—			(4,646,544		)
Shares reclassified to mandatorily redeemable capital stock	(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
Balance, June 30, 2018	62,762		$	6,276,227		$	1,089,965		$	535,465	$	1,625,430		$	20,873		$	7,922,530

(a)Putable stock

(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.

6

Federal Home Loan Bank of New York

Statements of Cash Flows — Unaudited (In Thousands)

For the Six Months Ended June 30, 2018 and 2017

	Six months ended June 30,
	2018			2017
Operating activities
Net Income	$	281,399		$	200,478
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		)
Concessions on consolidated obligations	1,372			2,140
Premises, software, and equipment	2,535			2,061
Provision (Reversal) for credit losses on mortgage loans	(308		)	(101		)
Credit impairment losses on held-to-maturity securities	141			—
Change in net fair value adjustments on derivatives and hedging activities	145,878			23,748
Net realized and unrealized (gains) losses on trading securities	2,420			64
Change in fair value on Equity Investments	(45		)	—
Change in fair value adjustments on financial instruments held at fair value	362			1,925
Net change in:
Accrued interest receivable	(62,058		)	(22,751		)
Derivative assets due to accrued interest	(80,562		)	(12,038		)
Derivative liabilities due to accrued interest	76,732			4,611
Other assets	(3,065		)	(2,498		)
Affordable Housing Program liability	17,650			(3,780		)
Accrued interest payable	36,525			19,086
Other liabilities	5,238			14,607
Total adjustments	221,090			1,640
Net cash provided by (used in) operating activities	502,489			202,118
Investing activities
Net change in:
Interest-bearing deposits	(8,410		)	6,887
Securities purchased under agreements to resell	(2,245,000		)	1,975,000
Federal funds sold	(4,561,000		)	(4,017,000		)
Deposits with other FHLBanks	156			2
Premises, software, and equipment	(8,071		)	(16,083		)
Trading securities:
Purchased (a)	(2,355,907		)	—
Repayments	240,000			—
Proceeds from sales	—			100,164
Equity Investments (b):
Purchased	(1,809		)	—
Proceeds from sales	902			—
Available-for-sale securities (b):
Purchased	—			(1,819		)
Repayments	48,651			70,478
Proceeds from sales	—			914
Held-to-maturity securities (c):
Long-term securities
Purchased	(1,865,365		)	(2,068,144		)
Repayments	1,541,516			988,927
Advances:
Principal collected	522,899,000			545,626,026
Made	(511,566,922		)	(554,329,189		)
Mortgage loans held-for-portfolio:
Principal collected	128,639			128,510
Purchased	(122,231		)	(233,491		)
Proceeds from sales of REO	1,038			2,507
Net change in loans to other FHLBanks	—			255,000
Net cash provided by (used in) investing activities	2,125,187			(11,511,311		)

The accompanying notes are an integral part of these financial statements.

7

Federal Home Loan Bank of New York

Statements of Cash Flows — Unaudited (In Thousands)

For the Six Months Ended June 30, 2018 and 2017

	Six months ended June 30,
	2018			2017
Financing activities
Net change in:
Deposits and other borrowings	$	26,673		$	670,238
Derivative contracts with financing element	(4,250		)	(10,423		)
Consolidated obligation bonds:
Proceeds from issuance	65,281,661			36,631,175
Payments for maturing and early retirement	(63,060,455		)	(33,854,358		)
Consolidated obligation discount notes:
Proceeds from issuance	611,195,518			565,986,743
Payments for maturing	(615,352,735		)	(558,006,883		)
Capital stock:
Proceeds from issuance of capital stock	4,172,890			2,957,216
Payments for repurchase/redemption of capital stock	(4,646,544		)	(2,505,473		)
Redemption of mandatorily redeemable capital stock	(2,362		)	(13,885		)
Cash dividends paid (d)	(207,175		)	(163,312		)
Net cash provided by (used in) financing activities	(2,596,779		)	11,691,038
Net increase (decrease) in cash and due from banks	30,897			381,845
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
Supplemental disclosures:
Interest paid	$	735,215		$	456,866
Interest paid for Discount Notes (f)	$	403,656		$	151,199
Affordable Housing Program payments (g)	$	13,686		$	26,127
Transfers of mortgage loans to real estate owned	$	227		$	650
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

Notes to Supplemental Disclosure:

Non-cash transactions not included in the Statements of Cash Flows in the six months ended June 30, 2018:

(a)Ambac corporate notes at fair values of $3.6 million were received as non-cash considerations on mortgage-backed securities insured by the Ambac Corporation.  The notes were designated as Trading Securities.

(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)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)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)Interest paid disclosures have been supplemented for the six months ended June 30, 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 is the portion of the cash payments at settlement of zero-coupon Consolidated obligation discount notes.

(g)AHP payments = (beginning accrual - ending accrual) + AHP assessment for the period; payments represent funds released to the Affordable Housing Program.

The accompanying notes are an integral part of these financial statements.

8

Federal Home Loan Bank of New York

Notes to Financial Statements — Unaudited

Background

The Federal Home Loan Bank of New York (“FHLBNY” or “the Bank”) is a federally chartered corporation, and is one of 11 district Federal Home Loan Banks (“FHLBanks”).  The FHLBanks are U.S. government-sponsored enterprises (“GSEs”), organized under the authority of the Federal Home Loan Bank Act of 1932, as amended (“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”) 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”) and with the instructions provided by the Securities and Exchange Commission (“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, which contains a summary of the Bank’s significant accounting policies and estimates.

Recently Adopted Significant Accounting 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.

9

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 FASB issued ASU 2017-12, Targeted Improvements to Accounting for Hedging Activities (Topic 815).  The FASB has issued this ASU with the objective of improving the financial reporting of hedging relationships 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 certain targeted improvements to simplify the application of the hedge accounting guidance in current GAAP.  The amendments in this guidance are effective for fiscal years beginning after December 15, 2018 (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 permitted under the ASU.  Other than changes in disclosures required under the ASU, the FHLBNY does not believe adoption will have a material effect on its financial condition, results of operations, and cash flows.

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”), 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

10

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 the process of evaluating this guidance.  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 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.

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 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 no compensating balance at June 30, 2018.  At December 31, 2017, the compensating balance at Citibank included in Cash and due from banks was $41.1 million.

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 million at June 30, 2018 and $84.2 million at December 31, 2017.  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

11

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 and December 31, 2017, the outstanding balances of Securities purchased under agreements to resell were $4.9 billion and $2.7 billion that 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, 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, market values $5.1 billion and $2.8 billion, were received at BONY to collateralize the overnight investments at June 30, 2018 and December 31, 2017.  No overnight investments had been executed bilaterally with counterparties.  Securities purchased under agreements to resell averaged $4.5 billion and $3.7 billion in the three and six months ended June 30, 2018.  For the same periods in the prior year, transaction balances averaged $2.4 billion. For the three and six months ended June 30, 2018, interest income from securities purchased under agreements to resell were $19.7 million and $29.8 million, compared to interest income of $5.0 million and $8.3 million for the same periods in the prior year.

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 and December 31, 2017 (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.

The carrying values of trading securities included net unrealized fair value losses of $3.3 million at June 30, 2018 and $1.1 million at December 31, 2017.

Trading Securities Pledged

The FHLBNY had pledged marketable securities at fair values of $239.0 million at June 30, 2018 and $239.1 million at December 31, 2017 to derivative clearing organizations to fulfill the FHLBNY’s initial margin requirements as mandated under margin rules of the Commodities Futures Trading Commission (“CFTC”).  The clearing organizations have rights to sell or repledge the collateral securities under certain conditions.

12

Federal Home Loan Bank of New York

Notes to Financial Statements — Unaudited

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.

Note 6.Equity Investments.

The carrying value of Equity Investments equals fair value.  The following table provides types of funds in the grantor trusts owned by the FHLBNY (in thousands):

	June 30, 2018
			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains (b)		Losses (b)			Value (c)
Cash equivalents	$	959	$	—	$	—		$	959
Equity funds	25,878		5,709		(84		)	31,503
Fixed income funds	18,310		4		(660		)	17,654
Total Equity Investments (a)	$	45,147	$	5,713	$	(744	)	$	50,116

(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.

13

Federal Home Loan Bank of New York

Notes to Financial Statements — Unaudited

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

	Three Months Ended		Six Months Ended
	June 30, 2018		June 30, 2018
Net gains (losses) recognized during the period	$	305	$	45
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

Note 7.Available-for-Sale Securities.

The carrying value of an AFS security equals its fair value.  At June 30, 2018 and December 31, 2017, 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
			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains (b)		Losses (b)			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
CMO-Floating	490,249		5,163		—			495,412
CMBS-Floating	33,123		92		—			33,215
Total Available-for-sale securities	$	567,091	$	10,424	$	(246	)	$	577,269

(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 million at June 30, 2018 and $10.2 million at December 31, 2017.

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 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.  Based on the 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.

14

Federal Home Loan Bank of New York

Notes to 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 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
	Amortized Cost (c)		Fair Value		Amortized Cost (c)		Fair Value
Mortgage-backed securities
Due after one year through five years	$	31,490	$	31,565	$	33,123	$	33,215
Due after ten years	443,424		448,389		490,249		495,412
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

(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 discounts of $1.7 million and $1.9 million at June 30, 2018 and December 31, 2017.

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.

15

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
			OTTI					Gross		Gross
	Amortized		Recognized			Carrying		Unrecognized		Unrecognized			Fair
Issued, guaranteed or insured:	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
Freddie Mac	16,035		—			16,035		1,102		—			17,137
Total pools of mortgages	100,734		—			100,734		6,986		—			107,720
Collateralized Mortgage Obligations/Real Estate Mortgage Investment Conduits
Fannie Mae	1,930,553		—			1,930,553		8,824		(9,053		)	1,930,324
Freddie Mac	1,183,357		—			1,183,357		7,408		(2,771		)	1,187,994
Ginnie Mae	12,928		—			12,928		162		—			13,090
Total CMOs/REMICs	3,126,838		—			3,126,838		16,394		(11,824		)	3,131,408
Commercial Mortgage-Backed Securities (b)
Fannie Mae	2,799,752		—			2,799,752		1,981		(57,379		)	2,744,354
Freddie Mac	10,720,573		—			10,720,573		35,630		(85,055		)	10,671,148
Total commercial mortgage-backed securities	13,520,325		—			13,520,325		37,611		(142,434		)	13,415,502
Non-GSE MBS (c)
CMOs/REMICs	7,381		(413		)	6,968		75		(35		)	7,008
Asset-Backed Securities (c)
Manufactured housing (insured)	41,332		—			41,332		2,193		—			43,525
Home equity loans (insured)	75,832		(7,140		)	68,692		29,254		(156		)	97,790
Home equity loans (uninsured)	47,445		(5,168		)	42,277		7,080		(566		)	48,791
Total asset-backed securities	164,609		(12,308		)	152,301		38,527		(722		)	190,106
Total MBS	16,919,887		(12,721		)	16,907,166		99,593		(155,015		)	16,851,744
Other
State and local housing finance agency obligations	1,232,760		—			1,232,760		537		(26,371		)	1,206,926
Total Held-to-maturity securities	$	18,152,647	$	(12,721	)	$	18,139,926	$	100,130	$	(181,386	)	$	18,058,670

16

Federal Home Loan Bank of New York

Notes to Financial Statements — Unaudited

	December 31, 2017
			OTTI					Gross		Gross
	Amortized		Recognized			Carrying		Unrecognized		Unrecognized			Fair
Issued, guaranteed or insured:	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
Freddie Mac	20,160		—			20,160		1,512		—			21,672
Total pools of mortgages	117,739		—			117,739		9,490		—			127,229
Collateralized Mortgage Obligations/Real Estate Mortgage Investment Conduits
Fannie Mae	1,612,543		—			1,612,543		10,716		(662		)	1,622,597
Freddie Mac	960,374		—			960,374		7,485		(404		)	967,455
Ginnie Mae	14,513		—			14,513		175		—			14,688
Total CMOs/REMICs	2,587,430		—			2,587,430		18,376		(1,066		)	2,604,740
Commercial Mortgage-Backed Securities (b)
Fannie Mae	2,955,640		—			2,955,640		8,497		(15,639		)	2,948,498
Freddie Mac	10,834,852		—			10,834,852		76,196		(16,272		)	10,894,776
Total commercial mortgage-backed securities	13,790,492		—			13,790,492		84,693		(31,911		)	13,843,274
Non-GSE MBS (c)
CMOs/REMICs	9,159		(172		)	8,987		85		(385		)	8,687
Asset-Backed Securities (c)
Manufactured housing (insured)	47,660		—			47,660		2,439		(40		)	50,059
Home equity loans (insured)	86,606		(8,746		)	77,860		26,479		(21		)	104,318
Home equity loans (uninsured)	52,740		(5,885		)	46,855		7,847		(973		)	53,729
Total asset-backed securities	187,006		(14,631		)	172,375		36,765		(1,034		)	208,106
Total MBS	16,691,826		(14,803		)	16,677,023		149,409		(34,396		)	16,792,036
Other
State and local housing finance agency obligations	1,147,510		—			1,147,510		204		(32,977		)	1,114,737
Total Held-to-maturity securities	$	17,839,336	$	(14,803	)	$	17,824,533	$	149,613	$	(67,373	)	$	17,906,773

(a)Unrecognized gross holding gains and losses represent the difference between fair value and carrying value.

(b)Commercial mortgage-backed securities (“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.

(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 million at June 30, 2018 and $5.7 million at December 31, 2017, 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.

17

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.

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

	June 30, 2018
	Less than 12 months					12 months or more					Total
	Estimated		Unrealized			Estimated		Unrealized			Estimated		Unrealized
	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	)
MBS Investment Securities
MBS-GSE
Fannie Mae	2,666,448		(49,909		)	292,911		(16,523		)	2,959,359		(66,432		)
Freddie Mac	4,637,399		(78,905		)	400,480		(8,921		)	5,037,879		(87,826		)
Total MBS-GSE	7,303,847		(128,814		)	693,391		(25,444		)	7,997,238		(154,258		)
MBS-Private-Label	703		(4		)	29,069		(1,164		)	29,772		(1,168		)
Total MBS	7,304,550		(128,818		)	722,460		(26,608		)	8,027,010		(155,426		)
Total	$	7,422,289	$	(128,819	)	$	956,020	$	(52,978	)	$	8,378,309	$	(181,797	)

	December 31, 2017
	Less than 12 months					12 months or more					Total
	Estimated		Unrealized			Estimated		Unrealized			Estimated		Unrealized
	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	)
MBS Investment Securities
MBS-GSE
Fannie Mae	1,181,936		(7,047		)	331,845		(9,254		)	1,513,781		(16,301		)
Freddie Mac	2,051,154		(8,968		)	781,211		(7,708		)	2,832,365		(16,676		)
Total MBS-GSE	3,233,090		(16,015		)	1,113,056		(16,962		)	4,346,146		(32,977		)
MBS-Private-Label	10,674		(41		)	31,527		(1,545		)	42,201		(1,586		)
Total MBS	3,243,764		(16,056		)	1,144,583		(18,507		)	4,388,347		(34,563		)
Total	$	3,435,636	$	(16,129	)	$	1,488,374	$	(51,411	)	$	4,924,010	$	(67,540	)

The FHLBNY’s investments in housing finance agency bonds reported gross unrealized losses of $26.4 million at June 30, 2018 and $33.0 million at December 31, 2017.  Management has reviewed the portfolio and has observed that the bonds are performing to their contractual terms, and 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.

18

Federal Home Loan Bank of New York

Notes to Financial Statements — Unaudited

The credit enhancements may include additional support 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 obligation of the State issuing the bond.

Our analyses of the fair values of HFA bonds have concluded that the market is generally pricing the bonds to the “AA municipal sector”.  Based on our review, the FHLBNY expects to recover the entire amortized cost basis of these securities.

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
	Amortized		Estimated		Amortized		Estimated
	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
Due after five years through ten years	27,835		26,693		47,830		45,602
Due after ten years	1,176,710		1,152,177		1,082,495		1,051,892
State and local housing finance agency obligations	1,232,760		1,206,926		1,147,510		1,114,737
Mortgage-backed securities
Due in one year or less	803,315		800,744		880,774		880,780
Due after one year through five years	4,807,315		4,803,750		4,617,456		4,670,742
Due after five years through ten years	7,837,405		7,739,391		8,225,685		8,225,011
Due after ten years	3,471,852		3,507,859		2,967,911		3,015,503
Mortgage-backed securities	16,919,887		16,851,744		16,691,826		16,792,036
Total Held-to-maturity securities	$	18,152,647	$	18,058,670	$	17,839,336	$	17,906,773

(a)Amortized cost is after adjusting for net unamortized premiums of $51.7 million and $51.8 million (net of unamortized discounts) at June 30, 2018 and December 31, 2017.

19

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
	Amortized		Carrying		Amortized		Carrying
	Cost		Value		Cost		Value
Mortgage-backed securities
CMO
Fixed	$	779,155	$	778,742	$	880,842	$	880,671
Floating	2,353,953		2,353,953		1,714,068		1,714,068
Total CMO	3,133,108		3,132,695		2,594,910		2,594,739
CMBS
Fixed	7,739,166		7,739,166		7,310,487		7,310,487
Floating	5,781,159		5,781,159		6,480,005		6,480,005
Total CMBS	13,520,325		13,520,325		13,790,492		13,790,492
Pass Thru (a)
Fixed	229,360		217,052		262,569		248,499
Floating	37,094		37,094		43,855		43,293
Total Pass Thru	266,454		254,146		306,424		291,792
Total MBS	16,919,887		16,907,166		16,691,826		16,677,023
State and local housing finance agency obligations
Fixed	7,390		7,390		8,010		8,010
Floating	1,225,370		1,225,370		1,139,500		1,139,500
Total State and local housing finance agency obligations	1,232,760		1,232,760		1,147,510		1,147,510
Total Held-to-maturity securities	$	18,152,647	$	18,139,926	$	17,839,336	$	17,824,533

(a)Includes MBS supported by pools of mortgages.

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”) 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, was re-impaired.  Credit-related OTTI of $141 thousand was recorded in the second quarter of 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.  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, and has concluded that it will not be required to sell such securities before recovery of the amortized cost basis of the securities.

20

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.

21

Federal Home Loan Bank of New York

Notes to Financial Statements — Unaudited

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
				Weighted (a)							Weighted (a)
				Average		Percentage					Average		Percentage
	Amount			Yield		of Total		Amount			Yield		of Total
Due in one year or less	$	72,501,884		2.12	%	65.10	%	$	85,291,491		1.62	%	69.51	%
Due after one year through two years	20,024,033			2.17		17.98		16,866,935			1.78		13.74
Due after two years through three years	6,415,167			2.19		5.76		9,513,504			1.97		7.75
Due after three years through four years	4,516,435			2.54		4.05		5,173,778			2.18		4.22
Due after four years through five years	1,877,971			2.45		1.69		2,757,648			2.42		2.25
Thereafter	6,039,872			2.47		5.42		3,104,085			2.27		2.53
Total par value	111,375,362			2.18	%	100.00	%	122,707,441			1.72	%	100.00	%
Hedge valuation basis adjustments (b)	(593,890		)					(265,260		)
Fair value option valuation adjustments and accrued interest (c)	532							5,624
Total	$	110,782,004						$	122,447,805

(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, which is the FHLBNY’s benchmark rate in a Fair value hedge.

(c)Valuation adjustments represent changes in the entire fair values of advances elected under the FVO.

Note 10.Mortgage Loans Held-for-Portfolio.

Mortgage Partnership Finance® program loans, or (MPF®), are mortgage loans held-for-portfolio.  The FHLBNY participates in the MPF program by purchasing conventional mortgage loans from its participating members, hereafter referred to as Participating Financial Institutions (“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.

22

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
	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	%
Fixed long-term single-family mortgages	2,627,285			92.42		2,612,315			91.65
Total par value	2,842,891			100.00	%	2,850,372			100.00	%
Unamortized premiums	46,204					48,011
Unamortized discounts	(1,827		)			(1,833		)
Basis adjustment (b)	1,022					1,418
Total mortgage loans held-for-portfolio	2,888,290					2,897,968
Allowance for credit losses	(817		)			(992		)
Total mortgage loans held-for-portfolio, net of allowance for credit losses	$	2,887,473				$	2,896,976

(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”), was estimated at $34.3 million and $33.3 million at June 30, 2018 and December 31, 2017.  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 and for the same periods in the prior year.  These fees were reported as a reduction to mortgage loan interest income.

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”) 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”) 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 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”) 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.

23

Federal Home Loan Bank of New York

Notes to Financial Statements — Unaudited

Allowance Methodology for Loan Losses

Allowance policy — 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

24

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

25

Federal Home Loan Bank of New York

Notes to Financial Statements — Unaudited

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

	June 30, 2018		December 31, 2017
Total Mortgage loans, carrying values net of allowance for credit losses (a)	$	2,887,473	$	2,896,976
Non-performing mortgage loans - Conventional (a)(b)	$	11,102	$	13,272
Insured MPF loans past due 90 days or more and still accruing interest (a)(b)	$	5,382	$	5,582

(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
			Unpaid				Average
	Recorded		Principal		Related		Recorded
	Investment		Balance		Allowance		Investment (d)
Conventional MPF Loans (a)(c)
No related allowance (b)	$	12,825	$	12,737	$	—	$	12,955	$	13,332
With a related allowance	1,139		1,119		280		1,155		1,242
Total individually measured for impairment	$	13,964	$	13,856	$	280	$	14,110	$	14,574

	December 31, 2017
			Unpaid				Average
	Recorded		Principal		Related		Recorded
	Investment		Balance		Allowance		Investment (d)
Conventional MPF Loans (a)(c)
No related allowance (b)	$	14,343	$	14,222	$	—	$	14,386
With a related allowance	1,509		1,494		210		1,393
Total individually measured for impairment	$	15,852	$	15,716	$	210	$	15,779

(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 and the twelve months ended December 31, 2017.

26

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
			Unpaid				Average
	Recorded		Principal		Related		Recorded
	Investment		Balance		Allowance		Investment (a)
Collectively measured for impairment
Insured loans	$	237,412	$	231,343	$	—	$	238,109	$	239,441
Uninsured loans	2,651,162		2,597,692		537		2,646,961		2,645,164
Total loans collectively measured for impairment	$	2,888,574	$	2,829,035	$	537	$	2,885,070	$	2,884,605

	December 31, 2017
			Unpaid				Average
	Recorded		Principal		Related		Recorded
	Investment		Balance		Allowance		Investment (a)
Collectively measured for impairment
Insured loans	$	241,575	$	235,232	$	—	$	238,661
Uninsured loans	2,654,882		2,599,424		782		2,602,298
Total loans collectively measured for impairment	$	2,896,457	$	2,834,656	$	782	$	2,840,959

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

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
	Conventional			Insured			Conventional			Insured
	MPF Loans			Loans			MPF Loans			Loans
Mortgage loans:
Past due 30 - 59 days	$	12,170		$	10,186		$	18,216		$	12,561
Past due 60 - 89 days	2,770			2,154			3,914			2,712
Past due 90 - 179 days	2,930			1,574			3,860			2,545
Past due 180 days or more	8,207			4,169			9,464			3,378
Total past due	26,077			18,083			35,454			21,196
Total current loans	2,639,049			219,329			2,635,280			220,379
Total mortgage loans	$	2,665,126		$	237,412		$	2,670,734		$	241,575
Other delinquency statistics:
Loans in process of foreclosure, included above	$	6,997		$	2,879		$	6,191		$	2,524
Number of foreclosures outstanding at period end	52			23			48			23
Serious delinquency rate (a)	0.42		%	2.42		%	0.50		%	2.45		%
Serious delinquent loans total used in calculation of serious delinquency rate	$	11,179		$	5,743		$	13,324		$	5,923
Past due 90 days or more and still accruing interest	$	—		$	5,743		$	—		$	5,923
Loans on non-accrual status	$	11,137		$	—		$	13,324		$	—
Troubled debt restructurings:
Loans discharged from bankruptcy (b)	$	7,824		$	862		$	8,772		$	648
Modified loans under MPF® program	$	1,510		$	—		$	1,144		$	—
Real estate owned	$	309					$	682

(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.

27

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
Interest-bearing deposits
Interest-bearing demand	$	1,130,636	$	1,142,056
Term (a)	39,500		36,000
Total interest-bearing deposits	1,170,136		1,178,056
Non-interest-bearing demand	20,903		17,999
Total deposits (b)	$	1,191,039	$	1,196,055

(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
	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	%
Non-interest-bearing deposits	20,903				17,999
Total deposits	$	1,191,039			$	1,196,055

(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 joint and several obligations of the FHLBanks, and 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” or “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 discount notes”, “Discount notes”, or “Consolidated discount 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.

28

Federal Home Loan Bank of New York

Notes to Financial Statements — Unaudited

The following table summarizes Consolidated obligations issued by the FHLBNY and outstanding at June 30, 2018 and December 31, 2017 (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.

Redemption Terms of Consolidated Obligation Bonds

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

	June 30, 2018							December 31, 2017
				Weighted							Weighted
				Average		Percentage					Average		Percentage
Maturity	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	%
Over one year through two years	6,413,990			2.07		6.35		7,363,255			1.43		7.45
Over two years through three years	3,243,110			2.09		3.21		2,462,400			1.91		2.49
Over three years through four years	1,206,730			2.23		1.19		1,158,595			2.18		1.17
Over four years through five years	2,006,140			2.36		1.98		1,640,835			2.13		1.66
Thereafter	4,103,650			3.45		4.06		4,107,500			3.35		4.16
Total par value	101,069,570			1.98	%	100.00	%	98,851,150			1.44	%	100.00	%
Bond premiums (b)	48,592							54,654
Bond discounts (b)	(29,640		)					(27,335		)
Hedge valuation basis adjustments (c)	171,573							273,585
Hedge basis adjustments on terminated hedges (d)	132,113							134,920
FVO (e) - valuation adjustments and accrued interest	(216		)					1,074
Total Consolidated obligation-bonds	$	101,391,992						$	99,288,048

(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 due to changes in LIBOR on fixed-rate bonds in a Fair value hedge.

(d)Hedge basis adjustments on terminated 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.

29

Federal Home Loan Bank of New York

Notes to Financial Statements — Unaudited

Interest Rate Payment Terms

The following table summarizes 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.

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
Par value	$	45,555,456		$	49,685,334
Amortized cost	$	45,470,462		$	49,610,668
FVO (a) - valuation adjustments and remaining accretion	—			3,003
Total discount notes	$	45,470,462		$	49,613,671
Weighted average interest rate	1.87		%	1.23		%

(a)Valuation adjustments represent changes in the entire fair values of discount notes elected under the FVO.

30

Federal Home Loan Bank of New York

Notes to Financial Statements — Unaudited

Note 13.Affordable Housing Program.

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.  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
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

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 and Activity-based Class B capital stock have the same voting rights and dividend rates.  Members can redeem Class B stock by giving five years notice.  The FHLBNY’s capital plan does not provide for the issuance of Class A capital stock.

The FHLBNY is subject to risk-based capital rules of the Finance Agency, the regulator of the FHLBanks.

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

	June 30, 2018						December 31, 2017
	Required (d)			Actual			Required (d)			Actual
Regulatory capital requirements:
Risk-based capital (a)(e)	$	876,266		$	7,919,364		$	912,620		$	8,316,231
Total capital-to-asset ratio	4.00		%	5.06		%	4.00		%	5.23		%
Total capital (b)	$	6,262,420		$	7,919,364		$	6,356,735		$	8,316,231
Leverage ratio	5.00		%	7.59		%	5.00		%	7.85		%
Leverage capital (c)	$	7,828,024		$	11,879,045		$	7,945,919		$	12,474,347

(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.

31

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
Redemption less than one year	$	11,799	$	13,672
Redemption from one year to less than three years	1,076		1,145
Redemption from three years to less than five years	434		445
Redemption from five years or greater	4,398		4,683
Total	$	17,707	$	19,945

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,
	2018			2017			2018			2017
Beginning balance	$	18,764		$	20,506		$	19,945		$	31,435
Capital stock subject to mandatory redemption reclassified from equity	—			2,794			124			3,009
Redemption of mandatorily redeemable capital stock (a)	(1,057		)	(2,741		)	(2,362		)	(13,885		)
Ending balance	$	17,707		$	20,559		$	17,707		$	20,559
Accrued interest payable (b)	$	293		$	277		$	293		$	277

(a)Redemption includes repayment of excess stock.

(b)The annualized accrual rate was 6.50% for the three months ended June 30, 2018 and 5.00% for the three months ended June 30, 2017.  Accrual rates are based on estimated dividend rates.

Restricted Retained Earnings

Under the FHLBank Joint Capital Enhancement 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 million and $479.2 million as restricted retained earnings in the FHLBNY’s Total Capital at June 30, 2018 and December 31, 2017.

32

Federal Home Loan Bank of New York

Notes to Financial Statements — Unaudited

Note 15.                 Earnings Per Share of Capital.

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,
	2018			2017			2018			2017
Net income	$	155,174		$	130,913		$	281,399		$	200,478
Net income available to stockholders	$	155,174		$	130,913		$	281,399		$	200,478
Weighted average shares of capital	61,545			62,315			63,300			62,242
Less: Mandatorily redeemable capital stock	(181		)	(222		)	(186		)	(227		)
Average number of shares of capital used to calculate earnings per share	61,364			62,093			63,114			62,015
Basic earnings per share	$	2.53		$	2.11		$	4.46		$	3.23

Note 16.                 Employee Retirement Plans.

The FHLBNY participates in the Pentegra Defined Benefit Plan for Financial Institutions (“Pentegra DB Plan”), a tax-qualified, defined-benefit multiemployer pension plan that covers all officers and employees of the Bank.  The Bank 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.  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 effective at January 1, 2017.  The two non-qualified Benefit Equalization Plans (“BEP”) are unfunded.

For more information about employee retirement plans, see Note 15. Employee Retirement Plans in the financial statements included in the most recent Form 10-K filed on March 22, 2018.

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,
	2018			2017			2018			2017
Defined Benefit Plan	$	1,875		$	1,875		$	3,750		$	3,750
Benefit Equalization Plans (defined benefit and defined contribution)	1,699			1,384			3,398			2,768
Defined Contribution Plans	587			549			1,229			1,088
Postretirement Health Benefit Plan	(79		)	(123		)	(159		)	(247		)
Total retirement plan expenses	$	4,082		$	3,685		$	8,218		$	7,359

33

Federal Home Loan Bank of New York

Notes to Financial Statements — Unaudited

Benefit Equalization Plan (BEP)

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,
	2018		2017		2018		2017
Service cost	$	274	$	222	$	548	$	444
Interest cost	539		523		1,078		1,047
Amortization of unrecognized net loss	886		639		1,772		1,277
Net periodic benefit cost -Defined Benefit BEP	1,699		1,384		3,398		2,768
Benefit Equalization plans - Thrift and Deferred incentive compensation plans (introduced in 2017)	86		21		70		23
Total	$	1,785	$	1,405	$	3,468	$	2,791

Postretirement Health Benefit Plan

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,
	2018			2017			2018			2017
Service cost (benefits attributed to service during the period)	$	27		$	31		$	54		$	61
Interest cost on accumulated postretirement health benefit obligation	143			144			285			288
Amortization of loss/(gain)	191			142			382			283
Amortization of prior service (credit)/cost	(440		)	(440		)	(880		)	(879		)
Net periodic postretirement health benefit (income) (a)	$	(79	)	$	(123	)	$	(159	)	$	(247	)

(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.

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 derivatives 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”).

34

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

The contractual or notional amount of derivatives reflects the involvement of the FHLBNY in the various classes of financial instruments, 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, 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 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 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.

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

35

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”) 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.

36

Federal Home Loan Bank of New York

Notes to Financial Statements — Unaudited

Offsetting of Derivative Assets and Derivative Liabilities — Net Presentation

The following table 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 (“Derivative instruments — Nettable”) (in thousands).  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.

	June 30, 2018						December 31, 2017
	Derivative Assets			Derivative Liabilities			Derivative Assets			Derivative  Liabilities
Derivative instruments - Nettable
Gross recognized amount
Uncleared derivatives	$	276,799		$	101,189		$	207,922		$	103,901
Cleared derivatives	290,248			287,837			672,494			221,976
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
Gross amounts of netting adjustments and cash collateral
Uncleared derivatives	(148,959		)	(87,343		)	(95,190		)	(57,594		)
Cleared derivatives	(287,233		)	(287,233		)	(206,691		)	(206,691		)
Total gross amounts of netting adjustments and cash collateral	(436,192		)	(374,576		)	(301,881		)	(264,285		)
Net amounts after offsetting adjustments and cash collateral	$	130,855		$	14,450		$	112,732		$	61,592
Uncleared derivatives	$	127,840		$	13,846		$	112,732		$	46,307
Cleared derivatives	3,015			604			—			15,285
Total net amounts after offsetting adjustments and cash collateral	$	130,855		$	14,450		$	112,732		$	61,592
Derivative instruments - Not Nettable
Uncleared derivatives (a)	$	92		$	3		$	10		$	15
Total derivative assets and total derivative liabilities
Uncleared derivatives	127,932			13,849			112,742			46,322
Cleared derivatives	3,015			604			—			15,285
Total derivative assets and total derivative liabilities presented in the Statements of Condition (b)	$	130,947		$	14,453		$	112,742		$	61,607
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		$	—
Cannot be sold or repledged
Uncleared derivatives securities received	(101,276		)	—			(103,036		)	—
Total net amount of non-cash collateral received or repledged	$	137,758		$	—		$	136,028		$	—
Total net exposure cash and non-cash (e)	$	268,705		$	14,453		$	248,770		$	61,607
Net unsecured amount - Represented by:
Uncleared derivatives	$	26,656		$	13,849		$	9,706		$	46,322
Cleared derivatives	242,049			604			239,064			15,285
Total net exposure cash and non-cash (e)	$	268,705		$	14,453		$	248,770		$	61,607

(a)Derivative instruments without legal right of offset were 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 net presentation was adopted.  No cash collateral was involved with the mortgage delivery commitments.

(b)Amounts represented Derivative assets and liabilities recorded in the Statements of Conditions.  Derivative balances are 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 below).

(c)Non-cash collateral received or pledged — For bilateral 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 cleared derivatives, we may also pledge marketable securities to collateralize initial margin, which is required under the CFTC rules.

(d)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 1As 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.

37

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 and December 31, 2017 (in thousands):

	June 30, 2018
	Notional Amount of Derivatives		Derivative Assets			Derivative Liabilities
Fair value of derivative instruments (a)
Derivatives designated as hedging instruments
Interest rate swaps	$	67,683,050	$	454,292		$	268,948
Total derivatives in hedging relationships	67,683,050		454,292			268,948
Derivatives not designated as hedging instruments
Interest rate swaps	39,633,086		109,826			110,216
Interest rate caps or floors	803,000		1,228			—
Mortgage delivery commitments	23,433		92			3
Other (b)	570,000		1,701			9,862
Total derivatives not designated as hedging instruments	41,029,519		112,847			120,081
Total derivatives before netting and collateral adjustments	$	108,712,569	567,139			389,029
Netting adjustments			(355,102		)	(355,102		)
Cash Collateral and related accrued interest			(81,090		)	(19,474		)
Total netting adjustments and cash collateral			(436,192		)	(374,576		)
Total derivative assets and total derivative liabilities			$	130,947		$	14,453
Security collateral pledged as initial margin to Derivative Clearing Organization (d)			$	239,034
Security collateral received from counterparty (d)			(101,245		)
Net security			137,789
Net exposure			$	268,736

	December 31, 2017
	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 not designated as hedging instruments
Interest rate swaps	40,327,013		32,655			52,448
Interest rate caps or floors	2,695,000		893			—
Mortgage delivery commitments	12,952		10			15
Other (b)	386,000		5,935			5,541
Total derivatives not designated as hedging instruments	43,420,965		39,493			58,004
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
Netting adjustments			(253,221		)	(253,221		)
Cash Collateral and related accrued interest			(48,660		)	(11,064		)
Total netting adjustments and cash collateral			(301,881		)	(264,285		)
Total derivative assets and total derivative liabilities			$	112,742		$	61,607
Security collateral pledged as initial margin to Derivative Clearing Organization (d)			$	239,064
Security collateral received from counterparty (d)			(103,036		)
Net security			136,028
Net exposure			$	248,770

(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 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 and December 31, 2017.

38

Federal Home Loan Bank of New York

Notes to Financial Statements — Unaudited

Earnings Impact of Derivatives and Hedging Activities

The FHLBNY carries all derivative instruments on the Statements of Condition at fair value as Derivative Assets and Derivative Liabilities.  If derivatives meet the hedging criteria under hedge accounting rules, including effectiveness measures, changes in fair value of the associated hedged financial instrument attributable to 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 and 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) in the Statements of Income.  If derivatives do not qualify for the hedging criteria under hedge accounting rules, but are executed as economic hedges of financial assets or liabilities under a FHLBNY-approved hedge strategy, only the fair value changes 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 the fair value option (“FVO”), and has executed interest rate swaps as economic hedges of 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 and unrealized gain (loss) on derivatives and hedging activities; changes in the fair value of debt 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 presented in the Statements of Income are summarized below (in thousands):

	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

39

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 effect of interest rate swaps in cash flow hedging relationships was as follows (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

	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 hedges of anticipated issuance of Consolidated obligation bonds

Changes in period recognized in AOCI — Amounts reported typically represent fair value gains and losses recorded in AOCI under the CO bond cash flow hedge strategy during 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 the contracts.  When a cash flow hedge is closed, the fair value

40

Federal Home Loan Bank of New York

Notes to Financial Statements — Unaudited

gain or loss on the derivative is recorded in AOCI, and is amortized and reclassified 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 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 from derivative activities in 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.

(b)          Hedges of discount notes in rolling issuances

Changes in period recognized in AOCI — Amounts represented period-over-period change in the fair values of open swap contracts in this CO discount note cash flow hedging strategy (Rolling issuances of discount notes).  The cash flow hedges mitigated exposure to the variability in future cash flows over a maximum period of 14 years.

(c)         Ineffectiveness recognized in earnings — The effective portion 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.

Cash Flow Hedges — Fair Value changes in AOCI Rollforward Analysis (in thousands):

	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

There were no material amounts that were reclassified into earnings as a result of the discontinuance of cash flow hedges because 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.

It is expected that over the next 12 months, $0.3 million of the unrecognized gain in AOCI will be recognized as a yield adjustment to debt interest expense.

41

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
			Estimated Fair Value
Financial Instruments	Carrying Value		Total		Level 1		Level 2		Level 3 (a)		Netting Adjustment and  Cash Collateral
Assets
Cash and due from banks	$	158,300	$	158,300	$	158,300	$	—	$	—	$	—
Securities purchased under agreements to resell	4,945,000		4,945,029		—		4,945,029		—		—
Federal funds sold	14,887,000		14,887,005		—		14,887,005		—		—
Trading securities	3,766,579		3,766,579		2,989,099		777,480		—		—
Equity Investments	50,116		50,116		50,116		—		—		—
Available-for-sale securities	479,954		479,954				479,954		—		—
Held-to-maturity securities	18,139,926		18,058,670		—		16,654,630		1,404,040		—
Advances	110,782,004		110,833,890		—		110,833,890		—		—
Mortgage loans held-for-portfolio, net	2,887,473		2,796,172		—		2,796,172		—		—
Accrued interest receivable	288,019		288,019		—		288,019		—		—
Derivative assets	130,947		130,947		—		567,139		—		(436,192		)
Other financial assets	309		309		—		—		309		—
Liabilities
Deposits	1,191,039		1,191,037		—		1,191,037		—		—
Consolidated obligations
Bonds	101,391,992		101,088,516		—		101,088,516		—		—
Discount notes	45,470,462		45,469,933		—		45,469,933		—		—
Mandatorily redeemable capital stock	17,707		17,707		17,707		—		—		—
Accrued interest payable	198,701		198,701		—		198,701		—		—
Derivative liabilities	14,453		14,453		—		389,029		—		(374,576		)
Other financial liabilities	83,453		83,453		83,453		—		—		—

	December 31, 2017
			Estimated Fair Value
Financial Instruments	Carrying Value		Total		Level 1		Level 2		Level 3 (a)		Netting Adjustment and  Cash Collateral
Assets
Cash and due from banks	$	127,403	$	127,403	$	127,403	$	—	$	—	$	—
Securities purchased under agreements to resell	2,700,000		2,700,008		—		2,700,008		—		—
Federal funds sold	10,326,000		10,325,920		—		10,325,920		—		—
Trading securities	1,641,568		1,641,568		1,284,669		356,899		—		—
Available-for-sale securities	577,269		577,269		48,642		528,627		—		—
Held-to-maturity securities	17,824,533		17,906,773		—		16,575,243		1,331,530		—
Advances	122,447,805		122,401,759		—		122,401,759		—		—
Mortgage loans held-for-portfolio, net	2,896,976		2,886,189		—		2,886,189		—
Accrued interest receivable	226,981		226,981		—		226,981		—		—
Derivative assets	112,742		112,742		—		414,623		—		(301,881		)
Other financial assets	682		682		—		—		682		—
Liabilities
Deposits	1,196,055		1,196,027		—		1,196,027		—		—
Consolidated obligations
Bonds	99,288,048		99,130,116		—		99,130,116		—		—
Discount notes	49,613,671		49,609,537		—		49,609,537		—		—
Mandatorily redeemable capital stock	19,945		19,945		19,945		—		—		—
Accrued interest payable	162,176		162,176		—		162,176		—		—
Derivative liabilities	61,607		61,607		—		325,892		—		(264,285		)
Other financial liabilities	84,194		84,194		84,194		—		—		—

The fair value amounts recorded on the Statements of Condition or presented 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.

42

Federal Home Loan Bank of New York

Notes to Financial Statements — Unaudited

Fair Value Hierarchy

The FHLBNY records trading securities, available-for-sale securities, derivative assets, derivative liabilities, 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 recorded at their fair values, and when mortgage loans held-for-portfolio are written down or are foreclosed as Other real estate owned (“REO” or “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.

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

43

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 assets and liabilities reported in the tables above are discussed below:

Investment Debt Securities — The fair value of investment debt 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 and December 31, 2017.  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 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 are market based and observable and are considered to be within Level 2 of the fair value hierarchy.  The valuation of the private-label securities, all designated as held-to-maturity, may require pricing services to use significant inputs that are subjective and are considered 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, 2018, one 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

44

Federal Home Loan Bank of New York

Notes to Financial Statements — Unaudited

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”) 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 — The FHLBNY has elected the FVO designation for certain advances and recorded their fair values in the Statements of Condition for such advances.  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”), 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.

45

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 — 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 and December 31, 2017.

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 curve).

46

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”) curves as fair value measurement inputs for the valuation of its derivatives, as the OIS curves reflect the interest rates paid on cash collateral provided against the fair value of these derivatives.  The FHLBNY believes using relevant 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 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.

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 OIS calibrated 3-month LIBOR curve.  The model then discounts the cash flows by the 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 and December 31, 2017.

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 and December 31, 2017, 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”) is measured at fair value when the asset’s fair value less costs to sell is lower than its carrying amount.

47

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
	Total			Level 1		Level 2			Level 3		Netting Adjustment and  Cash Collateral
Assets
Trading securities
GSE securities	$	773,828		$	—	$	773,828		$	—	$	—
Corporate notes	3,652			—		3,652			—		—
U.S. Treasury securities	2,989,099			2,989,099		—			—		—
Equity Investments	50,116			50,116		—			—		—
Available-for-sale securities
GSE/U.S. agency issued MBS	479,954			—		479,954			—		—
Advances (to the extent FVO is elected)	250,532			—		250,532			—		—
Derivative assets (a)
Interest-rate derivatives	130,855			—		567,047			—		(436,192		)
Mortgage delivery commitments	92			—		92			—		—
Total recurring fair value measurement - assets	$	4,678,128		$	3,039,215	$	2,075,105		$	—	$	(436,192	)
Liabilities
Bonds (to the extent FVO is elected) (b)	$	(29,784	)	$	—	$	(29,784	)	$	—	$	—
Derivative liabilities (a)
Interest-rate derivatives	(14,450		)	—		(389,026		)	—		374,576
Mortgage delivery commitments	(3		)	—		(3		)	—		—
Total recurring fair value measurement - liabilities	$	(44,237	)	$	—	$	(418,813	)	$	—	$	374,576

	December 31, 2017
	Total			Level 1		Level 2			Level 3		Netting Adjustment and  Cash Collateral
Assets
Trading securities
GSE securities	$	356,899		$	—	$	356,899		$	—	$	—
U.S. Treasury securities	1,284,669			1,284,669		—			—		—
Available-for-sale securities
GSE/U.S. agency issued MBS	528,627			—		528,627			—		—
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		)
Mortgage delivery commitments	10			—		10			—		—
Total recurring fair value measurement - assets	$	4,537,203		$	1,333,311	$	3,505,773		$	—	$	(301,881	)
Liabilities
Consolidated obligations:
Discount notes (to the extent FVO is elected)	$	(2,312,621	)	$	—	$	(2,312,621	)	$	—	$	—
Bonds (to the extent FVO is elected) (b)	(1,131,074		)	—		(1,131,074		)	—		—
Derivative liabilities (a)
Interest-rate derivatives	(61,592		)	—		(325,877		)	—		264,285
Mortgage delivery commitments	(15		)	—		(15		)	—		—
Total recurring fair value measurement - liabilities	$	(3,505,302	)	$	—	$	(3,769,587	)	$	—	$	264,285

(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.

48

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

	December 31, 2017
	Fair Value		Level 1		Level 2		Level 3
Mortgage loans held-for-portfolio	$	2,519	$	—	$	2,519	$	—
Real estate owned	1,071		—		—		1,071
Total non-recurring assets at fair value	$	3,590	$	—	$	2,519	$	1,071

Fair Value Option Disclosures

The fair value option (“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 FHLBNY has elected the FVO for certain advances and certain Consolidated obligations that either do not qualify for hedge accounting or may be at risk for not meeting hedge effectiveness requirements, 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 also been elected under the FVO when analysis indicated 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 and December 31, 2017.

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 fully collateralized through their terms to maturity.  Consolidated obligation bonds and discount notes elected under the FVO are high credit quality, highly-rated instruments, and changes in fair values were 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.

49

Federal Home Loan Bank of New York

Notes to Financial Statements — Unaudited

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
	Advances						Bonds						Discount Notes
Balance, beginning of the period	$	751,568		$	4,500,587		$	(129,721	)	$	(1,432,874	)	$	(1,566,028	)	$	(6,847,460	)
New transactions elected for fair value option	—			—			—			—			—			—
Maturities and terminations	(500,000		)	(1,754,712		)	100,000			1,032,020			1,564,375			3,162,012
Net gains (losses) on financial instruments held under fair value option	(632		)	(2,120		)	49			(288		)	274			(1,173		)
Change in accrued interest/unaccreted balance	(404		)	(1,955		)	(112		)	1,348			1,379			7,596
Balance, end of the period	$	250,532		$	2,741,800		$	(29,784	)	$	(399,794	)	$	—		$	(3,679,025	)

	Six months ended June 30,
	2018			2017			2018			2017			2018			2017
	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	)
New transactions elected for fair value option	—			5,000,000			(115,000		)	—			(1,564,375		)	(3,670,424		)
Maturities and terminations	(1,950,000		)	(12,124,489		)	1,215,000			1,650,550			3,873,993			12,204,898
Net gains (losses) on financial instruments held under fair value option	(415		)	(3,552		)	48			199			5			1,491
Change in accrued interest/unaccreted balance	(4,677		)	(3,316		)	1,242			1,970			2,998			13,422
Balance, end of the period	$	250,532		$	2,741,800		$	(29,784	)	$	(399,794	)	$	—		$	(3,679,025	)

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

	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

50

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
	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
Consolidated obligation bonds (b)	$	30,000	$	29,784	$	(216	)	$	1,130,000	$	1,131,074	$	1,074
Consolidated obligation discount notes (c)	—		—		—			2,309,618		2,312,621		3,003
	$	30,000	$	29,784	$	(216	)	$	3,439,618	$	3,443,695	$	4,077

(a)Advances — The FHLBNY has elected the FVO for certain advances, 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)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.

51

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 December 31, 2017.

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

	June 30, 2018
	Payments Due or Expiration Terms by Period
			Greater Than		Greater Than
	Less Than		One Year		Three Years		Greater Than
	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
Consolidated obligation discount notes at par	45,555,456		—		—		—		45,555,456
Mandatorily redeemable capital stock (a)	11,799		1,076		434		4,398		17,707
Premises (lease obligations) (b)	5,029		13,393		14,092		76,055		108,569
Other liabilities (c)	123,412		9,407		7,506		63,975		204,300
Total contractual obligations	129,791,646		9,680,976		3,234,902		4,248,078		146,955,602
Other commitments
Standby letters of credit	17,089,363		13,357		—		—		17,102,720
Consolidated obligation bonds/discount notes traded not settled	16,700		—		—		—		16,700
Commitments to fund additional advances	200,000		—		—		—		200,000
Open delivery commitments (MPF)	23,433		—		—		—		23,433
Total other commitments	17,329,496		13,357		—		—		17,342,853
Total obligations and commitments	$	147,121,142	$	9,694,333	$	3,234,902	$	4,248,078	$	164,298,455

(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 executed a new lease agreement for new space.  The Bank plans to adopt ASU 2016-02, Leases (Topic 842) in 2019.  Upon adoption the lease obligations will be recorded in the Statements of Condition.  Until then, lease obligations will continue to be reported as commitments under existing GAAP.  Immaterial amounts of equipment leases and shared offsite data backup site have been excluded.

(c)Includes accounts payable and accrued expenses, 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 due within one year; amounts were not material.  For more information about employee retirement plans in general, see Note 16. Employee Retirement Plans.

The FHLBNY does not anticipate any credit losses from its off-balance sheet commitments and accordingly no provision for losses is required.

52

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 months ended June 30, 2018 and in the same period in the prior year.

Debt transfers — No debt was transferred to another FHLBank in the six months ended June 30, 2018 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 million and $11.5 million at June 30, 2018 and December 31, 2017.

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, compared to $0.6 million and $1.1 million for the same periods 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 and December 31, 2017, outstanding notional amounts were $285.0 million and $193.0 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 and December 31, 2017 were not significant.  The intermediated derivative transactions with members were fully collateralized.

53

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, 2018, overnight loans extended to other FHLBanks averaged $1.4 million and $1.8 million compared to $5.5 million and $5.6 million in the same periods in the prior year.  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.  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.

Cash and Due from Banks

During the six months ended June 30, 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 and December 31, 2017 and transactions for the three and six months ended June 30, 2018 and June 30, 2017 (in thousands):

Related Party:  Outstanding Assets, Liabilities and Capital

	June 30, 2018		December 31, 2017
	Related		Related
Assets
Advances	$	110,782,004	$	122,447,805
Accrued interest receivable	223,047		175,926
Liabilities and capital
Deposits	$	1,191,039	$	1,196,055
Mandatorily redeemable capital stock	17,707		19,945
Accrued interest payable	501		443
Affordable Housing Program (a)	149,304		131,654
Other liabilities (b)	83,453		84,194
Capital	$	7,922,530	$	8,241,038

(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.

54

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,
	2018		2017		2018		2017
	Related		Related		Related		Related
Interest income
Advances	$	629,485	$	361,306	$	1,175,945	$	678,077
Interest-bearing deposits	1		—		2		—
Loans to other FHLBanks	6		12		13		20
Interest expense
Deposits	$	4,443	$	3,063	$	7,948	$	4,887
Mandatorily redeemable capital stock	293		239		626		643
Service fees and other	$	3,412	$	2,876	$	6,751	$	5,885

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 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.

55

Federal Home Loan Bank of New York

Notes to Financial Statements — Unaudited

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

Interest Income — Principal Sources

	June 30, 2018
					Percentage of
			Par		Total Par Value		Three Months				Six Months
	City	State	Advances		of Advances		Interest Income		Percentage (a)		Interest Income		Percentage (a)
Citibank, N.A.	New York	NY	$	28,995,000	26.03	%	$	161,039	36.92	%	$	333,238	39.54	%
Metropolitan Life Insurance Company	New York	NY	14,245,000		12.79		68,469		15.70		130,803		15.52
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
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
Investors Bank (b)	Short Hills	NJ	4,644,867		4.17		24,346		5.58		45,867		5.44
Valley National Bank (b)	Wayne	NJ	4,352,000		3.91		21,199		4.86		37,365		4.43
HSBC Bank USA, National Association (c)	Mc Lean	VA	3,100,000		2.78		19,915		4.57		35,504		4.21
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	%

(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, 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
					Percentage of
			Par		Total Par Value		Twelve Months
	City	State	Advances		of Advances		Interest Income		Percentage (a)
Citibank, N.A.	New York	NY	$	43,100,000	35.12	%	$	450,596	36.83	%
Metropolitan Life Insurance Company	New York	NY	14,445,000		11.77		221,310		18.09
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
Investors Bank (b)	Short Hills	NJ	4,326,053		3.53		82,894		6.77
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
AXA Equitable Life Insurance Company	New York	NY	3,000,415		2.45		52,308		4.27
New York Life Insurance Company	New York	NY	2,625,000		2.14		37,263		3.05
Total			$	94,792,968	77.25	%	$	1,223,672	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, 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.

(d)Astoria Bank merged into Sterling National Bank in the fourth quarter 2017.  Both entities are member banks and are related parties.  The par advance balance represents advances outstanding with Sterling, the merged entity.  Interest income reported in the table represented interest income received from Astoria and Sterling in 2017.

56

Federal Home Loan Bank of New York

Notes to Financial Statements — Unaudited

	June 30, 2017
					Percentage of
			Par		Total Par Value		Three Months				Six Months
	City	State	Advances		of Advances		Interest Income		Percentage (a)		Interest Income		Percentage (a)
Citibank, N.A.	New York	NY	$	35,550,000	30.14	%	$	92,248	32.81	%	$	179,835	33.43	%
Metropolitan Life Insurance Company	New York	NY	14,445,000		12.25		54,143		19.26		104,765		19.48
New York Community Bancorp, Inc.:
New York Community Bank	Westbury	NY	11,280,600		9.56		44,817		15.94		88,787		16.51
New York Commercial Bank	Westbury	NY	273,900		0.23		949		0.34		1,903		0.35
Subtotal New York Community Bancorp, Inc.			11,554,500		9.79		45,766		16.28		90,690		16.86
HSBC Bank USA, National Association (c)	Mc Lean	VA	4,900,000		4.15		17,722		6.30		34,527		6.42
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
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
Total			$	84,919,052	71.99	%	$	281,138	100.00	%	$	537,885	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, 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.

57

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, and from time to time in the Bank’s other filings with the SEC, and elsewhere in this report.

58

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 financial statements, the changes in key items in the Bank’s financial statements from period to period and the primary factors driving those changes as well as how accounting principles affect the FHLBNY’s financial statements.  The MD&A is organized as follows:

	Page
Executive Overview	60
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	85
Financial Condition	87
Advances	90
Investments	95
Mortgage Loans Held-for-Portfolio	100
Debt Financing Activity and Consolidated Obligations	102
Stockholders’ Capital	107
Derivative Instruments and Hedging Activities	109
Liquidity, Short-Term Borrowings and Short-Term Debt	110
Legislative and Regulatory Developments	114

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

59

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.  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” or “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.

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 Highlights — 2018 Second Quarter Compared to 2017 Second 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 quarter of 2018, Net income was $155.2 million, an increase of $24.3 million, or 18.5%, 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 the net interest spread earned in the 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 million, an increase of $31.6 million, or 17.9%, from the same period in the prior year.  Net interest income benefited from higher average earning assets, which grew to $154.1 billion in the second 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, compared to $105.9 billion in the same period in the prior year.  In the second quarter of 2018, LIBOR-indexed assets, primarily ARC advances and floating-rate investments 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 continued 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 million, compared to a gain of $1.1 million in the same period in the prior year.

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Other expenses were $34.5 million in the second quarter of the current year, compared to $31.5 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 million in the second quarter of 2018, up from $10.7 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 million in the second quarter of 2018, 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 million in the same period in the prior year.

AHP assessments allocated from Net income were $17.3 million in the second quarter of 2018, compared to $14.6 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 per share of capital (6.50% annualized) was paid in the three months ended June 30, 2018, compared to $1.23 per share of capital stock (5.00% annualized) paid in the same period in 2017.

Financial Condition — June 30, 2018 compared to 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%.

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 a small portfolio of housing finance agency bonds.  Securities in the HTM portfolio are recorded at amortized cost.  Fixed- and floating-rate mortgage-backed securities (“MBS”), including PLMBS, were $16.9 billion at June 30, 2018 and $16.7 billion at December 31, 2017.  Housing finance agency bonds, primarily New York and New Jersey, were $1.2 billion at June 30, 2018 and $1.1 billion at December 31, 2017.

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.

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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 $2.8 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.  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 book of advance business through 2018, although at levels a little lower than at December 31, 2017.  The pace of balance sheet growth in the prior year was concentrated along short-term borrowing.  The borrowing activities of a few large members have been the predominant driver of our book of advance business.  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, three members’ advance borrowings exceeded 10.0% of total advances outstanding — Citibank, N.A. 26.0% (35.1% at

December 31, 2017), Metropolitan Life Insurance Company 12.8% (11.8% at December 31, 2017), and New York Community Bank/New York Commercial Bank 11.9% (9.9% at December 31, 2017).

We expect continued demand for variable-rate advances and short-term fixed-rate advances.  We expect limited demand for large, intermediate and 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.  Because of the complex interactions among a number 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 are prepaid,

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we receive prepayment penalty fees to make us economically whole, and the FHLBNY’s earnings may not be adversely impacted in the periods when prepayments occur, but may impact revenue streams in future periods.

Demand for FHLBank debt — Relative to LIBOR, favorable funding conditions, specifically for discount notes and short-maturity variable-rate bonds have continued through the first six months of 2018.  The LIBOR index is a widely applied benchmark by the FHLBNY.  We expect similar favorable funding conditions to exist through the remainder of 2018, although we may experience some volatility in funding conditions, especially leading up to and around Federal Open Market Committee meeting dates.

The cost of FHLBank debt is a key driver of profitability, and we expect to be able to issue CO bonds and discount notes at reasonable spreads to yields earned from advances and investments.  Consolidated obligation discount notes and floating-rate notes have been in demand by investors, and pricing and yields have been attractive, specifically relative to LIBOR.  Our business plans and funding strategies are predicated on the expectation that investor demand will continue.

However, our ability to obtain funds through the issuance of Consolidated obligations depends in part on prevailing conditions in 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 our members, potentially affecting their demand for advances.

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”).  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.

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Selected Financial Data (Unaudited).

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		%

	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

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.

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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

(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, $0.7 million, $1.0 million, $0.9 million and $1.0 million for the periods ended June 30, 2018, March 31, 2018, December 31, 2017, September 30, 2017 and June 30, 2017.

(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)Previously reported comparative numbers have been reclassified to conform to the retrospective adoption 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.

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Results of Operations

The following section provides a comparative discussion of the FHLBNY’s results of operations for the three and six months ended June 30, 2018 compared to the same periods 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.

Net Income

Interest income from advances is the principal source of revenue.  Other sources of revenue are interest income from investment debt 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:Principal Components of Net Income

	Three months ended June 30,					Six months ended June 30,
	2018			2017		2018			2017
Total interest income	$	888,289		$	519,997	$	1,658,934		$	979,384
Total interest expense	680,584			343,883		1,258,210			629,821
Net interest income before provision for credit losses	207,705			176,114		400,724			349,563
Provision (Reversal) for credit losses on mortgage loans	72			200		(308		)	(101		)
Net interest income after provision for credit losses	207,633			175,914		401,032			349,664
Total other income (loss)	(676		)	1,102		(19,269		)	(64,681		)
Total other expenses	34,509			31,530		69,028			62,158
Income before assessments	172,448			145,486		312,735			222,825
Affordable Housing Program Assessments	17,274			14,573		31,336			22,347
Net income	$	155,174		$	130,913	$	281,399		$	200,478

2018 Second Quarter Compared to 2017 Second 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 quarter of 2018, Net income was $155.2 million, an increase of $24.3 million, or 18.5%, 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 the net interest spread earned in the 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 million, an increase of $31.6 million, or 17.9%, from the same period in the prior year.  Net interest income benefited from higher average earning assets, which grew to $154.1 billion in the second quarter of 2018, up from $143.8 billion in the same period

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in the prior year.  Average advance balances were $107.7 billion in the second quarter of 2018, compared to $105.9 billion 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 quarter of 2018, Other income (loss) reported a loss of $0.7 million, compared to a gain of $1.1 million in the same period in the prior year.

·Service fees and other are primarily correspondent banking fees and fee revenues from financial letters of credit.  Such revenues were $4.0 million in the second quarter of the current year, compared to $4.1 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 million in the second quarter of the current year, compared to a net gain of $0.6 million in the same period in the prior year.  For more information, see financial statements, Earnings Impact of Derivatives and Hedging Activities disclosures in Note 17.  Derivatives and Hedging Activities.  Also see Table 1.12 Earnings Impact of Derivatives and Hedging Activities and accompanying discussions in this MD&A.

Other expenses were $34.5 million in the second quarter of the current year, compared to $31.5 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 million in the second quarter of the current year, up from $10.7 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 million in the second quarter of 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 the current year, compared to $3.2 million in the same period in the prior year.

AHP assessments allocated from Net income were $17.3 million in the second quarter of the current year, compared to $14.6 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

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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 Compared to 2017 Periods

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.  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 Net Interest Adjustments from Hedge Qualifying Interest Rate Swaps and discussions thereto.  Also, see Table 1.4 Spread and Yield Analysis, and Table 1.5 Rate and Volume Analysis.

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The following table summarizes Net interest income (dollars in thousands):

Table 1.2:Net Interest Income

	Three months ended June 30,						Six months ended June 30,
					Percentage						Percentage
	2018		2017		Change		2018		2017		Change
Total interest income (a)	$	888,289	$	519,997	70.83	%	$	1,658,934	$	979,384	69.39	%
Total interest expense (a)	680,584		343,883		(97.91	)	1,258,210		629,821		(99.77	)
Net interest income before provision for credit losses (b)(c)	$	207,705	$	176,114	17.94	%	$	400,724	$	349,563	14.64	%

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

(b)2018 second quarter Net interest income was $207.7 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.

Net interest spread, which is the yield from earning assets minus interest paid to fund earning assets, was 44 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 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 54 basis points in the 2018 second quarter, compared 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 to $349.6 million in the 2017 period.  Average business volume increased to $158.5 billion in the 2018 period from $144.2 billion in the 2017 period.  Advance balances averaged $112.7 billion in the 2018 period, compared to $106.2 billion in the 2017 period.  Net 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.

(c)Net interest income from investing member capital.

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 billion in the 2018 period, compared to $7.6 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 2017 period.

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Impact of Qualifying Hedges on Net Interest Income — 2018 Periods Compared to 2017 Periods

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

Table 1.3: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 Earnings Impact of Derivatives and Hedging Activities in this MD&A for discussions and analysis.

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Spread and Yield Analysis — 2018 Periods Compared to 2017 Periods

Table 1.4: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	%

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	Six 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	$	112,724,479	$	1,175,945	2.10	%	$	106,169,951	$	678,077	1.29	%
Interest bearing deposits and others	18,557		154		1.67		238,794		81		0.07
Federal funds sold and other overnight funds	21,724,028		173,693		1.61		17,693,685		71,786		0.82
Investments
Trading securities	2,482,032		22,345		1.82		44,761		214		0.96
Mortgage-backed securities
Fixed	8,499,374		125,439		2.98		7,696,749		116,035		3.04
Floating	8,948,180		98,689		2.22		8,454,016		58,721		1.40
State and local housing finance agency obligations	1,182,688		14,030		2.39		1,089,408		8,193		1.52
Mortgage loans held-for-portfolio	2,886,161		48,626		3.40		2,794,439		46,257		3.34
Loans to other FHLBanks	1,796		13		1.49		5,580		20		0.72
Total interest-earning assets	$	158,467,295	$	1,658,934	2.11	%	$	144,187,383	$	979,384	1.37	%
Funded By:
Consolidated obligation bonds
Fixed	$	27,210,740	$	258,334	1.91	%	$	34,065,851	$	223,927	1.33	%
Floating	68,041,681		557,926		1.65		53,107,869		221,489		0.84
Consolidated obligation discount notes	54,113,390		432,756		1.61		47,802,095		178,754		0.75
Interest-bearing deposits and other borrowings	1,088,593		8,568		1.59		1,499,520		5,008		0.67
Mandatorily redeemable capital stock	18,624		626		6.78		22,750		643		5.70
Total interest-bearing liabilities	150,473,028		1,258,210		1.69	%	136,498,085		629,821		0.93	%
Other non-interest-bearing funds	85,527		—				81,499		—
Capital	7,908,740		—				7,607,799		—
Total Funding	$	158,467,295	$	1,258,210			$	144,187,383	$	629,821
Net Interest Income/Spread			$	400,724	0.42	%			$	349,563	0.44	%
Net Interest Margin
(Net interest income/Earning Assets)					0.51	%					0.49	%

(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.

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Rate and Volume Analysis — 2018 Periods Compared to 2017 Periods

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: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
	June 30, 2018 vs. June 30, 2017
	Increase (Decrease)
	Volume			Rate			Total
Interest Income
Advances	$	44,217		$	453,651		$	497,868
Interest bearing deposits and others	(140		)	213			73
Federal funds sold and other overnight funds	19,368			82,539			101,907
Investments
Trading securities	21,776			355			22,131
Mortgage-backed securities
Fixed	11,888			(2,484		)	9,404
Floating	3,615			36,353			39,968
State and local housing finance agency obligations	754			5,083			5,837
Mortgage loans held-for-portfolio	1,536			833			2,369
Loans to other FHLBanks	(20		)	13			(7		)
Total interest income	102,994			576,556			679,550
Interest Expense
Consolidated obligation bonds
Fixed	(51,302		)	85,709			34,407
Floating	75,847			260,590			336,437
Consolidated obligation discount notes	26,393			227,609			254,002
Deposits and borrowings	(1,679		)	5,239			3,560
Mandatorily redeemable capital stock	(127		)	110			(17		)
Total interest expense	49,132			579,257			628,389
Changes in Net Interest Income	$	53,862		$	(2,701	)	$	51,161

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Interest Income — 2018 Periods Compared to 2017 Periods

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:Interest Income — Principal Sources

	Three months ended June 30,						Six months ended June 30,
					Percentage						Percentage
	2018		2017		Change		2018		2017		Change
Interest Income
Advances (a)	$	629,485	$	361,306	74.22	%	$	1,175,945	$	678,077	73.42	%
Interest-bearing deposits	90		46		95.65		154		81		90.12
Securities purchased under agreements to resell (b)	19,728		5,008		293.93		29,837		8,313		258.92
Federal funds sold (b)	76,338		35,872		112.81		143,856		63,473		126.64
Trading securities (c)	13,221		75		17,528.00		22,345		214		10,341.59
Mortgage-backed securities (d)
Fixed	64,110		57,899		10.73		125,439		116,035		8.10
Floating	52,875		31,937		65.56		98,689		58,721		68.06
State and local housing finance agency obligations	8,013		4,443		80.35		14,030		8,193		71.24
Mortgage loans held-for-portfolio	24,423		23,399		4.38		48,626		46,257		5.12
Loans to other FHLBanks	6		12		(50.00	)	13		20		(35.00	)
Total interest income	$	888,289	$	519,997	70.83	%	$	1,658,934	$	979,384	69.39	%

Interest income in the second quarter of 2018 grew to $888.3 million, yielding 231 basis points, compared to $520.0 million yielding 145 basis points in the 2017 period.  By way of context, the average 3-month LIBOR was 234 basis points in the 2018 period, compared to 121 basis points in the 2017 period.

On a year-to-date basis, Interest income in 2018 was $1.7 billion, yielding 211 basis points, compared to $979.4 million in 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, yielding 234 basis points in the second quarter 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, yielding 210 basis points in 2018, compared to $678.1 million, yielding 129 basis points in the same period in the prior year.

The higher interest rate environment 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 the periods in this report and benefited from higher market interest rates during each successive quarter.  Variable-rate borrowings re-price typically at monthly intervals and coupons continued 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 billion in the second quarter of 2018, compared to $105.9 billion in the same

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period in the prior year.  On a year-to-date basis, average outstanding balances grew to $112.7 billion in the 2018 period, compared to $106.2 billion in the prior year period.  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 1.7 Impact of Interest Rate Swaps on Interest 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 investments 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.

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Impact of hedging on Interest income from advances — 2018 Periods Compared to 2017 Periods

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:Impact of Interest Rate Swaps on Interest Income Earned from Advances

	Three months ended June 30,					Six months ended June 30,
	2018		2017			2018		2017
Advance Interest Income
Advance interest income before adjustment for interest rate swaps	$	572,543	$	404,117		$	1,107,992	$	777,038
Net interest adjustment from interest rate swaps (a)	56,942		(42,811		)	67,953		(98,961		)
Total Advance interest income reported	$	629,485	$	361,306		$	1,175,945	$	678,077

(a)In a Fair value hedge under ASC 815, certain fixed-rate advances are hedged by the execution of interest rate swaps that have created synthetic floaters.  A fair value hedge of an advance is accomplished by the execution of an 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.

Interest Expense — 2018 Periods Compared to 2017 Periods

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 hedge strategies.  The primary hedging strategy is the Fair value hedge that creates LIBOR-indexed funding.  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 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

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values of the swaps 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:Interest Expenses — Principal Categories

	Three months ended June 30,						Six months ended June 30,
					Percentage						Percentage
	2018		2017		Change		2018		2017		Change
Interest Expense (a)
Consolidated obligations bonds (b)
Fixed	$	135,750	$	115,821	(17.21	)%	$	258,334	$	223,927	(15.37	)%
Floating	314,336		123,111		(155.33	)	557,926		221,489		(151.90	)
Consolidated obligations discount notes (b)	225,376		101,581		(121.87	)	432,756		178,754		(142.10	)
Deposits	4,443		3,063		(45.05	)	7,948		4,887		(62.64	)
Mandatorily redeemable capital stock	293		239		(22.59	)	626		643		2.64
Cash collateral held and other borrowings	386		68		(467.65	)	620		121		(412.40	)
Total interest expense	$	680,584	$	343,883	(97.91	)%	$	1,258,210	$	629,821	(99.77	)%

(a)Interest expense in the second quarter of 2018 was $680.6 million, at a costing yield of 187 basis points, compared to $343.9 million at a costing yield of 101 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 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 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, interest 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 bonds 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

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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, interest 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-priced to higher coupons 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.

Cash flow hedging programs under ASC 815 have synthetically converted the 91-day variability of cash flows on $2.6 billion of discount notes to long-term fixed-rate swap yields.  The hedging strategy increased interest expense by $2.7 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 in the current year period, the impact of higher rates was the primary factor.

Impact of Hedging on Interest Expense on Debt — 2018 Periods Compared to 2017 Periods

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.

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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:Impact of Interest Rate Swaps on Consolidated Obligations Interest Expense

	Three months ended June 30,						Six months ended June 30,
	2018			2017			2018			2017
Bonds and discount notes-Interest expense
Bonds-Interest expense before adjustment for swaps	$	439,131		$	243,958		$	803,042		$	461,024
Discount notes-Interest expense before adjustment for swaps	222,644			93,680			424,528			162,681
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
Total bonds and discount notes-Interest expense	$	675,462		$	340,513		$	1,249,016		$	624,170

(a)CO bond and discount note hedging — Fair value and cash flow hedges under ASC 815 have been executed 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:

·A fair value hedge of Consolidated obligation bonds is accomplished by the execution of 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 Compared to 2017 Periods

·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 of $72 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 period, compared to a net recovery of $0.1 million in the same period in the prior year.

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 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

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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 Compared to 2017 Periods

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

Table 1.10: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	)

(a)Service fees and other — Service fees are derived primarily from providing correspondent banking services to members and 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 million and $2.9 million in the second quarter of the current year and 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.

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 elected under the FVO were not material in the 2018 periods in parallel with the decline in new elections to replace run offs.

(c)Net realized and unrealized gains (losses) on derivatives and hedging activities — Hedging activities reported a net loss of $5.3 million in the three months ended June 30, 2018, compared to a net gain of $0.6 million in the same period in the prior year.  On a year-to-date basis, hedging activities reported a net loss of $24.1 million in the 2018 periods, compared to a net loss of $0.1 million in the same period in the prior year.  See Table 1.12 Earnings Impact of Derivatives and Hedging Activities for more information.

(d)Litigation settlement — In the first quarter of 2017, we 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.

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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:Net Gains (Losses) on Trading Securities (a)

	Three months ended June 30,					Six months ended June 30,
	2018		2017			2018			2017
Net unrealized gains (losses) on Trading securities held at period-end	$	739	$	(12	)	$	(2,535	)	$	(51	)
Net unrealized and realized gains (losses) on Trading securities sold/matured during the period	42		—			115			(13		)
Net gains (losses) on Trading securities	$	781	$	(12	)	$	(2,420	)	$	(64	)

(a)Securities classified as trading are held for liquidity purposes and carried at fair value.  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 Derivatives and Hedging Activities — 2018 Periods Compared to 2017 Periods

We may designate a derivative as either a hedge of (1) 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) 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 the accounting standards.

Derivative fair values are driven largely by the rise and fall 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 a fair value hedge.  Other market factors include interest rate spreads and interest rate volatility.  The volume of derivatives and their duration to maturity are factors that are also key drivers of changes in fair values.

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, without the offset of a hedged item.  Net interest accruals on such “standalone” derivative instruments in economic hedges may also have a significant impact on reported derivatives gains and losses.

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), and fair value changes of standalone derivatives in an economic hedge (fair value changes of derivatives without the offsetting fair value changes of the hedged items).  Typically, the largest source of gains or losses from derivative and hedging activities arise from derivatives designated as standalone derivatives.  For 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.

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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):

Table 1.12:Earnings Impact of Derivatives and Hedging Activities — By Financial Instrument Type

	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	)

(a)Net realized and unrealized gains and 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 net 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 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.

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	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 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.

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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 changes in the fair values of 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 fair value is recorded in AOCI and reclassified to earnings in the periods in which earnings are affected by the variability of the cash flows of the debt that was issued.  The maximum period of time that we typically hedge our exposure to the variability in future cash flows (for forecasted transactions to issue Consolidated obligation bonds) is between three and six months.

Hedges of discount note issuances — In the “rollover” cash flow hedge strategy, 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.

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Operating Expenses, Compensation and Benefits, and Other Expenses — 2018 Periods Compared to 2017 Periods

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

Table 1.14: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,
	2018		Percentage of Total		2017		Percentage of Total
Operating Expenses (a)
Occupancy	$	4,079	19.11	%	$	2,429	12.67	%
Depreciation and leasehold amortization	2,535		11.87		2,061		10.75
All others (b)	14,736		69.02		14,686		76.58
Total Operating Expenses	$	21,350	100.00	%	$	19,176	100.00	%
Total Compensation and Benefits	$	36,257			$	33,989
Finance Agency and Office of Finance (c)	$	7,900			$	6,977
Other expenses (d)	$	3,521			$	2,016

(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 in the second quarter of the current year due to decline in legal fees.  In the year-to-date period in 2018, expenses increased due to increases in expenditures on computer service agreements and contractual services.

(c)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)The category Other expenses included the non-service elements of Net periodic pension benefit costs.

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Assessments — 2018 Periods Compared to 2017 Periods

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.

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

Table 2.1:Affordable Housing Program Liabilities

	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

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.

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Financial Condition

Table 3.1:Statements of Condition — Period-Over-Period Comparison

					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	)%

NM — Not meaningful.

Balance Sheet overview June 30, 2018 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.

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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 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 PLMBS, in the HTM portfolio, were $16.9 billion at June 30, 2018 and $16.7 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 and $938.3 million of floating-rate GSE-issued MBS in the six months of 2018.

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 June 30, 2018 and $1.1 billion at December 31, 2017.  We acquired $100.0 million in the first six months of 2018 and paydowns were $14.8 million.  In the same period in 2017, we acquired $61.5 million in housing finance bonds and paydowns were $9.8 million.

Trading securities (liquidity portfolio) — The objective 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.

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.

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 $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 — Mortgage loans were investments in Mortgage Partnership Finance loans (“MPF” or “MPF Program”).  Unpaid principal balance of MPF 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 in the six months of 2018 were $128.6 million, compared to $128.5 million in the prior year same period.  Acquisitions in the six months of 2018 were $122.2 million, compared to $233.5 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.

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Stress test results — Pursuant to the Dodd-Frank Act, 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 as a result of adverse economic conditions.  The FHFA rules require that 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 under the FHFA’s severely adverse 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, 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.

Leverage — At June 30, 2018, balance sheet leverage (based on U.S. GAAP) was 19.8 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 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 the repo markets, and $480.0 million 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 of increasing our liquidity.  The trading portfolio is invested in highly-liquid U.S. Treasury bonds and GSE-issued securities.  Our liquidity position remains strong, and in compliance with all regulatory requirements, and we do not foresee any changes to that position.

The primary source of our funds is the issuance of Consolidated obligation bonds and discount notes to the public.  Our GSE status enables the FHLBanks to raise funds at rates that are typically at a small to moderate spread above U.S. Treasury security yields.  Our ability to access the capital markets, which has a direct impact on our cost of funds, is dependent to a degree on our credit ratings from the major ratings organizations.  The FHLBank debt performance has withstood the impact of the controversy surrounding the debt ceiling in the recent past.  However, we cannot say with certainty the long-term impact of such actions on our liquidity position, which could be adversely affected by many causes both internal and external to our business.

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.  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 as an asset of choice, and that has led to advantageous funding opportunities and increased utilization of shorter-term debt.

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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 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 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 $33.8 billion, well in excess of the required $3.3 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, please see section Liquidity, Cash Flows, 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 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.  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 in the six months of 2018 compared to the 2017 period.

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Member demand for advance products

Table 4.1:Advance Trends

Par amount of advances outstanding was $111.4 billion at June 30, 2018, compared to $122.7 billion at December 31, 2017.

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.

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Advances — Product Types

The following table summarizes par values of advances by product type (dollars in thousands):

Table 4.2: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.

Advances — Interest Rate Terms

The following table summarizes interest-rate payment terms for advances (dollars in thousands):

Table 4.3:Advances by Interest-Rate Payment Terms

	June 30, 2018					December 31, 2017
				Percentage					Percentage
	Amount			of Total		Amount			of Total
Fixed-rate (a)	$	81,391,007		73.08	%	$	85,587,792		69.75	%
Variable-rate (b)	29,981,355			26.92		37,116,649			30.25
Variable-rate capped or floored (c)	3,000			—		3,000			—
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

(a)Fixed-rate borrowings remained the largest category of advances borrowed by members.  The presentation above includes long-term and short-term fixed-rate advances.  Long-term advances remain a small segment of the portfolio at June 30, 2018, with only 5.4% of advances in the remaining maturity bucket of greater than 5 years (2.5% at December 31, 2017).  For more information, see financial statements Note 9. Advances.

(b)ARC advances 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).

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The following table summarizes maturity and yield characteristics of advances (dollars in thousands):

Table 4.4:Advances by Maturity and Yield Type

	June 30, 2018					December 31, 2017
				Percentage					Percentage
	Amount			of Total		Amount			of Total
Fixed-rate
Due in one year or less	$	51,630,426		46.36	%	$	54,923,033		44.76	%
Due after one year	29,760,581			26.72		30,664,759			24.99
Total Fixed-rate	81,391,007			73.08		85,587,792			69.75
Variable-rate
Due in one year or less	20,871,458			18.74		30,368,458			24.75
Due after one year	9,112,897			8.18		6,751,191			5.50
Total Variable-rate	29,984,355			26.92		37,119,649			30.25
Total par value	111,375,362			100.00	%	122,707,441			100.00	%
Hedge valuation basis adjustments (a)	(593,890		)			(265,260		)
Fair value option valuation adjustments and accrued interest (b)	532					5,624
Total	$	110,782,004				$	122,447,805

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.

(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 the risk being hedged, which is LIBOR for the FHLBNY, and is the discounting basis for computing changes in fair values for hedged advances.  The notional amount of advances hedged under ASC 815 was $51.5 billion at June 30, 2018 and $53.6 billion at December 31, 2017.  The application of this accounting methodology resulted in the recognition of net unrealized hedge valuation basis losses at the two dates.  The LIBOR curve, which is the 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, 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 steepening of the forward LIBOR discounting curve at June 30, 2018.

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.

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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:Hedged Advances by Type

Par Amount	June 30, 2018			December 31, 2017
Qualifying Hedges
Fixed-rate bullets (a)	$	47,943,200		$	52,983,896
Fixed-rate putable (b)	3,524,250			567,000
Fixed-rate callable	16,575			16,575
Fixed-rate with embedded cap	30,000			30,000
Total Qualifying Hedges	$	51,514,025		$	53,597,471
Aggregate par amount of advances hedged (c)	$	51,680,025		$	53,674,759
Fair value basis (Qualifying hedging adjustments)	$	(593,890	)	$	(265,260	)

(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.

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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:Putable and Callable Advances

	Advances
Par Amount	June 30, 2018		December 31, 2017
Putable/callable	$	3,540,825	$	597,825
No-longer putable/callable	$	878,500	$	1,020,500

Investments

We maintain long-term investment portfolios, 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.  In December 2016, management approved a 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.

The following table summarizes changes in investments by categories: Trading securities, Available-for-sale securities, Held-to-maturity securities, Equity Investments in Grantor Trusts and money market investments (Carrying values, dollars in thousands):

Table 5.1:Investments by Categories

	June 30,		December 31,		Dollar			Percentage
	2018		2017		Variance			Variance
State and local housing finance agency obligations (a)	$	1,232,760	$	1,147,510	$	85,250		7.43	%
Trading securities (b)	3,766,579		1,641,568		2,125,011			129.45
Mortgage-backed securities
Available-for-sale securities, at fair value (c)	479,954		528,627		(48,673		)	(9.21	)
Held-to-maturity securities, at carrying value (c)	16,907,166		16,677,023		230,143			1.38
Total securities	22,386,459		19,994,728		2,391,731			11.96
Equity investments in Grantor trusts (d)	50,116		48,642		1,474			3.03
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
Total investments	$	42,268,575	$	33,069,370	$	9,199,205		27.82	%

(a)State and local housing finance agency bonds were designated as HTM and were carried at amortized cost.  We acquired $100.0 million in the first six months of 2018 and paydowns were $14.8 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 billion of U.S. Treasury notes and $421.7 million of GSE securities in the first six

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months 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.

(c)Mortgage-backed securities classified as AFS.  No acquisitions were designated as AFS in the first six months of 2018.  AFS securities outstanding are all GSE and U.S. Agency issued floating-rate MBS carried at fair value.  Mortgage-backed securities classified as HTM — $1.8 billion of GSE-issued MBS were acquired in 2018 and designated as HTM.  MBS in the HTM portfolio are predominantly GSE-issued, and less than 1% are PLMBS.

(d)Funds in the grantor trusts were designated as Equity Investments at January 1, 2018.  Prior to January 1, 2018, the funds were classified as AFS.  In the first six months of 2018, we invested $1.8 million in cash, and payouts to retirees were $0.9 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. Employee Retirement Plans in the Bank’s most recent Form 10-K filed on March 22, 2018.

Mortgage-Backed Securities — By Issuer

The following table summarizes our investment debt securities issuer concentration (dollars in thousands):

Table 5.2:Investment Debt Securities Issuer Concentration

	June 30, 2018						December 31, 2017
					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	$	5,126,168	$	5,076,423	64.70	%	$	5,009,067	$	5,019,957	60.78	%
Freddie Mac	12,076,298		12,032,614		152.43		11,986,984		12,055,501		145.45
Ginnie Mae	25,385		25,547		0.32		28,237		28,412		0.34
All Others - PLMBS	159,269		197,114		2.01		181,362		216,793		2.20
Non-MBS (b)	1,232,760		1,206,926		15.56		1,196,152		1,163,379		14.51
Total Investment Debt Securities	$	18,619,880	$	18,538,624	235.02	%	$	18,401,802	$	18,484,042	223.28	%
Categorized as:
Available-for-Sale Securities	$	479,954	$	479,954			$	577,269	$	577,269
Held-to-Maturity Securities	$	18,139,926	$	18,058,670			$	17,824,533	$	17,906,773

(a)Carrying values include fair values for AFS securities.

(b)Non-MBS consists of housing finance agency bonds at June 30, 2018; at December 31, 2017 the line also included funds in grantor trusts.

(c)Excludes Trading portfolio.

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External rating information of the held-to-maturity portfolio was as follows (carrying values in thousands):

Table 5.3:External Rating of the Held-to-Maturity Portfolio

	June 30, 2018
	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
State and local housing finance agency obligations	30,700		1,178,835		5,895		17,330		—		1,232,760
Total Long-term securities	$	31,569	$	17,928,172	$	118,183	$	26,514	$	35,488	$	18,139,926

	December 31, 2017
	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
State and local housing finance agency obligations	36,400		1,085,220		25,890		—		—		1,147,510
Total Long-term securities	$	37,389	$	17,582,500	$	140,723	$	19,637	$	44,284	$	17,824,533

See footnotes (a) and (b) under Table 5.4.

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:External Rating of the Available-for-Sale Portfolio

	June 30, 2018						December 31, 2017
	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
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 and Table 5.4.

(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 and Table 5.4 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.

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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 (dollars in thousands):

Table 5.5:Mortgage-Backed Securities Weighted Average Rates by Contractual Maturities

	June 30, 2018				December 31, 2017
	Amortized		Weighted		Amortized		Weighted
	Cost		Average Rate		Cost		Average Rate
Mortgage-backed securities
Due in one year or less	$	803,315	2.24	%	$	880,774	2.45	%
Due after one year through five years	4,838,805		2.99		4,650,579		2.78
Due after five years through ten years	7,837,405		2.72		8,225,685		2.23
Due after ten years	3,915,276		2.83		3,458,160		2.57
Total mortgage-backed securities	$	17,394,801	2.80	%	$	17,215,198	2.46	%

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 identified de minimis deterioration in the performance parameters of previously impaired private-label MBS.  Credit OTTI charged to earnings was $141 thousand in the second quarter of 2018 and no OTTI was charged in the same period in 2017.

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, a trading portfolio was established with the objective of expanding our choice of investing for liquidity.

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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.

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 billion at June 30, 2018 and $2.7 billion at December 31, 2017.  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 billion at June 30, 2018 and $10.3 billion at December 31, 2017, 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:Trading Securities

	Trading Securities
	June 30, 2018		December 31, 2017
Par value	$	3,793,500	$	1,648,377
Amortized cost	$	3,769,859	$	1,642,637
Carrying/Fair value	$	3,766,579	$	1,641,568

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.

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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 billion at June 30, 2018, a decrease of $7.5 million (net of acquisitions and paydowns) from the balance at December 31, 2017.  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 22, 2018.

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:MPF by Conventional and Insured Loans

	June 30, 2018		December 31, 2017
Federal Housing Administration and Veteran Administration insured loans	$	231,343	$	235,232
Conventional loans	2,611,548		2,615,140
Total par MPF loans	$	2,842,891	$	2,850,372

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.

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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: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	%

Table 6.3:Top Five Participating Financial Institutions — Concentration (par value, dollars in thousands)

	June 30, 2018
	Mortgage		Percent of Total
	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
Teachers Federal Credit Union	184,603		6.49
Investors Bank	176,664		6.21
All Others	1,748,718		61.52
Total	$	2,842,891	100.00	%

	December 31, 2017
	Mortgage		Percent of Total
	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
Investors Bank	186,397		6.54
Teachers Federal Credit Union	177,230		6.22
All Others	1,759,134		61.71
Total	$	2,850,372	100.00	%

(a)New York Community Bancorp, Inc., parent of New York Community Bank, sold its mortgage banking business in June 2017 to Freedom Mortgage Corporation, a non-member.

(b)Sterling National Bank, a member of the FHLBNY, acquired Astoria Bank in October 2017.

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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 $101.4 billion (par, $101.1 billion) at June 30, 2018, compared to $99.3 billion (par, $98.9 billion) at December 31, 2017.  On average, CO bonds funded 60.1% and 60.5% of earning assets in the six months ended June 30, 2018 and in the same period in the prior year.

A significant percentage of CO bonds was designated under an ASC 815 fair value accounting hedge.  Also, certain CO bonds were hedged by interest rate swaps in economic hedges.  We may also hedge the anticipatory issuance of fixed-rate CO bonds in a cashflow hedge under ASC 815.  Certain CO bonds were elected 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.  For more information about valuation basis adjustments, see Table 7.1 Consolidated Obligation Bonds by Type.

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 and December 31, 2017, 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, see Table 7.7 Discount Notes Outstanding.

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.

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Consolidated obligation bonds

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

Table 7.1:Consolidated Obligation Bonds by Type

	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

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 valuation basis — The reported carrying values of hedged Consolidated bonds are adjusted for changes to their fair values (fair value basis adjustments or fair value) that are attributable to the risk being hedged, which is LIBOR for the FHLBNY, and is the discounting basis 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.  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.

The application of the valuation and accounting methodology resulted in the recognition of net unrealized hedge valuation basis losses at the two balance sheet dates.  Vintage long-term bonds, which had been issued in a then prevailing higher interest rate environment, generated 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 valuation basis gains, partly offsetting the valuation basis 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 are held to their maturity or to their call 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 amounts of CO bonds elected under the FVO were $30.0 million at June 30, 2018 and $1.1 billion at December 31, 2017.  Run-offs of bonds elected under the FVO were not replaced by new transactions, explaining the decline in the valuation basis.

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 valuations were not significant as the bonds re-priced relatively frequently to market indices, remaining near to par, although inter-period 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).

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Hedge volume — Tables 7.2 — 7.4 provide information with respect to par amounts of 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: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
Par Amount	June 30, 2018		December 31, 2017
Qualifying Hedges
Fixed-rate bullet bonds	$	11,057,025	$	14,326,105
Fixed-rate callable bonds	2,533,000		1,453,000
	$	13,590,025	$	15,779,105

Table 7.3: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	June 30, 2018		December 31, 2017
Bonds designated under FVO	$	30,000	$	1,130,000

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 of CO bonds elected under the FVO were not replaced in an asset-liability management decision.  See financial statements, Fair Value Option Disclosures in Note 18.  Fair Values of Financial Instruments.

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Table 7.4:Economic Hedged Bonds (Excludes CO bonds elected under the FVO and designated in an economic hedge)

Economically hedged 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	June 30, 2018		December 31, 2017
Bonds designated as economically hedged
Floating-rate bonds (a)	$	35,620,000	$	35,390,000
Fixed-rate bonds (b)	30,000		15,000
	$	35,650,000	$	35,405,000

(a)Floating-rate debt — Floating-rate bonds were typically indexed to 1-month LIBOR.  With the execution of basis hedges, the 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 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 — 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 Consolidated bonds outstanding by years to maturity or next call date (dollars in thousands):

Table 7.5:Consolidated Obligation Bonds — Maturity or Next Call Date

	June 30, 2018					December 31, 2017
	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	%
Due or callable after one year through two years	5,932,990			5.87		7,266,255			7.35
Due or callable after two years through three years	2,168,110			2.14		1,917,400			1.94
Due or callable after three years through four years	1,026,730			1.02		973,595			0.98
Due or callable after four years through five years	928,140			0.92		947,835			0.96
Thereafter	3,425,650			3.39		3,309,500			3.35
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	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 options are exercisable 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.

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

Table 7.6:Outstanding Callable CO Bonds versus Non-callable CO bonds

	June 30, 2018		December 31, 2017
Callable	$	3,961,000	$	3,911,000
Non-Callable	$	97,108,570	$	94,940,150

Discount Notes

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

Table 7.7:Discount Notes Outstanding

	June 30, 2018			December 31, 2017
Par value	$	45,555,456		$	49,685,334
Amortized cost	$	45,470,462		$	49,610,668
FVO (a) - valuation adjustments and remaining accretion	—			3,003
Total discount notes	$	45,470,462		$	49,613,671
Weighted average interest rate	1.87		%	1.23		%

(a)Valuation basis adjustment losses, including unaccreted discounts, were recorded to recognize changes in the entire or full fair values of CO discount notes elected under the FVO.  The full fair values included 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 in fair value basis reflect 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 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:Discount Notes under the Fair Value Option (FVO)

	Consolidated Obligation Discount Notes
Par Amount	June 30, 2018		December 31, 2017
Discount notes designated under FVO (a)	$	—	$	2,309,618

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.

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

Table 7.9:Cash Flow Hedges of Discount Notes

	Consolidated Obligation Discount Notes
Principal Amount	June 30, 2018		December 31, 2017
Discount notes hedged under qualifying hedge (a)	$	2,559,000	$	2,349,000

(a)Par amounts represent discounts notes issued in cash flow “rollover” hedge strategies that hedged the variability of 91-day discount notes issued in sequence typically for periods up to 14 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.

Stockholders’ Capital

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

Table 8.1:Stockholders’ Capital

	June 30, 2018		December 31, 2017
Capital Stock (a)	$	6,276,227	$	6,750,005
Unrestricted retained earnings (b)	1,089,965		1,067,097
Restricted retained earnings (c)	535,465		479,185
Accumulated Other Comprehensive Income (Loss)	20,873		(55,249		)
Total Capital	$	7,922,530	$	8,241,038

(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. Capital Stock, Mandatorily Redeemable Capital Stock and Restricted Retained Earnings in the FHLBNY’s most recent Form 10-K filed on March 22, 2018.

(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 added to Unrestricted retained earnings; $56.3 million was set aside towards Restricted retained earnings.  From the remaining amount, we paid $207.2 million to members as dividends in the six months ended June 30, 2018.  As a result, Unrestricted retained earnings increased by $22.8 million to $1.1 billion at June 30, 2018.

(c)Restricted retained earnings — Restricted retained earnings balance at June 30, 2018 has grown to $535.5 million from 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.

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

Table 8.2:Accumulated Other Comprehensive Income (Loss) (“AOCI”)

	June 30, 2018			December 31, 2017
Accumulated other comprehensive income (loss)
Non-credit portion of OTTI on held-to-maturity securities, net of accretion (a)	$	(12,721	)	$	(14,803	)
Net unrealized gains (losses) on available-for-sale securities (b)	5,040			10,178
Net unrealized gains (losses) on hedging activities (c)	57,985			(19,877		)
Employee supplemental retirement plans (d)	(29,431		)	(30,747		)
Total Accumulated other comprehensive income (loss)	$	20,873		$	(55,249	)

(a)OTTI — Non-credit OTTI losses in AOCI have declined at June 30, 2018, 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 represents net unrealized fair value basis of MBS securities; at December 31, 2017, the balance also included grantor trust funds, which had then been designated as available-for-sale.

(c)Cash flow hedge valuation losses — Balances represented cumulative fair value basis on the two cash flow hedging strategies at the balance sheet dates.  Financial statements, Note 17.  Derivatives and Hedging Activities, includes a rollforward analysis, which provides more information with respect to changes in AOCI.

(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.  Employee Retirement Plans in the FHLBNY’s most recent Form 10-K filed on March 22, 2018.

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:Dividends Paid and Payout Ratios

	Six months ended
	June 30, 2018			June 30, 2017
Cash dividends paid per share	$	3.24		$	2.65
Dividends paid (a) (c)	$	207,175		$	163,312
Pay-out ratio (b)	73.62		%	81.46		%

(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.

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Derivative Instruments and Hedging Activities

Interest rate swaps, swaptions, cap and floor agreements (collectively, derivatives) enable us to manage our exposure to changes in interest rates by adjusting the effective maturity, repricing frequency, or option characteristics of 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.  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:Derivatives Counterparty Credit Ratings

	June 30, 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)	$	6,741,368	$	204,327		$	(76,840	)	$	127,487	$	(101,245	)	$	26,242
Cleared derivatives assets (d)	27,572,955		3,015			—			3,015		—			3,015
	34,314,323		207,342			(76,840		)	130,502		(101,245		)	29,257
Liability positions with credit exposure
Uncleared derivatives
Single A liability (c)	1,473,739		(10,169		)	10,494			325		—			325
Cleared derivatives liability (d)	68,498,827		—			—			—		239,034			239,034
	69,972,566		(10,169		)	10,494			325		239,034			239,359
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
Member institutions
Derivative positions with member counterparties to which the Bank had credit exposure	25,000		31			—			31		(31		)	—
Delivery Commitments
Derivative position with delivery commitments	23,433		89			—			89		(89		)	—
Total derivative position with members	48,433		120			—			120		(120		)	—
Total	$	104,335,322	$	197,293		$	(66,346	)	$	130,947	$	137,669		$	268,616
Derivative positions without credit exposure	4,377,247
Total notional	$	108,712,569

	December 31, 2017
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)	$	2,430,433	$	157,922	$	(45,180	)	$	112,742	$	(103,036	)	$	9,706
Liability positions with credit exposure
Cleared derivatives liability (d)	103,391,947		—		—			—		239,064			239,064
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
Total	$	105,822,380	$	157,922	$	(45,180	)	$	112,742	$	136,028		$	248,770
Derivative positions without credit exposure	9,354,161
Total notional	$	115,176,541

(a)Includes margins in excess of fair values that were posted to counterparties, and were classified as a component of derivative assets, as they represented a receivable and an exposure for the FHLBNY.

(b)Non-cash collateral securities.  Non-cash collateral is not deducted from net derivative assets on the balance sheet as control over the securities are not transferred.

(c)NRSRO Ratings.

(d)On Cleared derivatives, we are required to pledge initial margin to Derivative Clearing Organizations (“DCOs”).  At June 30, 2018 and December 31, 2017, we had pledged $239.0 million and $239.1 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.

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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.  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.

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.

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.

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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: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

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: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

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: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

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.

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Advance “Roll-Off” and “Roll-Over” Liquidity Guidelines.  The Finance Agency’s Minimum Liquidity Requirement Guidelines expanded the existing 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.

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.

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

Table 10.4: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
Outstanding at end of the period (a)	$	45,470,462		$	49,613,671		$	70,377,100		$	56,494,100
Weighted-average rate at end of the period (b)	1.87		%	1.23		%	1.94		%	1.31		%
Average outstanding for the period (a)	$	54,113,390		$	45,895,662		$	57,604,531		$	39,454,853
Weighted-average rate for the period (b)	1.54		%	0.85		%	1.63		%	0.96		%
Highest outstanding at any month-end (a)	$	59,769,950		$	57,330,972		$	70,377,100		$	56,494,100

(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.

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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.

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Legislative and Regulatory Developments

Certain regulatory developments for the period covered by this report are summarized below.

Adoption of Single-Counterparty Credit Limits for Bank Holding Companies and Foreign Banking Organizations by Board of Governors of the Federal Reserve System.  On August 6, 2018, the Board of Governors of the Federal Reserve System published in the Federal Register a final rule, effective October 6, 2018, establishing single-counterparty credit limits applicable to bank holding companies and foreign banking organizations with total consolidated assets of $250 billion or more, including global systemically important bank holding companies (“GSIBs”) in the United States.   These entities are considered to be “covered companies” 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.

Under the final rule, a covered company and its subsidiaries may not have aggregate net credit exposure to an FHLBank and (in certain cases) economically interdependent entities in excess of 25% 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 exposure 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 to the FHLBanks’ consolidated obligations held by a covered company, 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 of the final rule.

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Item 3.Quantitative and Qualitative Disclosures about Market Risk.

Market Risk Management.  Market risk or interest rate risk (“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”).  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”), value at risk (“VaR”), net interest income (“NII”) at risk, key rate durations (“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 compared to the rates in the unchanged case.

·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):

	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

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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
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 is calculated and compared against the base case and subjected to a -15 percent limit.  The quarterly sensitivity of our expected net interest income under both +/-200bps shocks over the next 12 months is provided in the table below (due to the ongoing low interest rate environment, the down 200bps measurement was not presented between the second quarter of 2017 and the second quarter of 2018 however, the Bank has presented a down 100bps measurement beginning the fourth quarter of 2017):

	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	%

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):

	-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	%

As noted, the potential declines under these shocks are within our limits of a maximum 10 percent.

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The following tables display the portfolio’s maturity/re-pricing gaps as of June 30, 2018 and December 31, 2017 (in millions):

	Interest Rate Sensitivity
	June 30, 2018
				More Than			More Than			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
Interest-earning assets:
Non-MBS investments	$	21,079		$	130		$	509		$	428		$	1,962
MBS investments	9,302			481			2,370			1,897			3,368
Adjustable-rate loans and advances	29,984			—			—			—			—
Net unswapped	60,365			611			2,879			2,325			5,330
Liquidity trading portfolio	1,324			1,704			739			3			—
Swaps hedging investments	2,464			(1,714		)	(750		)	—			—
Net liquidity trading portfolio	3,788			(10		)	(11		)	3			—
Fixed-rate loans and advances	41,479			10,220			18,750			6,063			4,881
Swaps hedging advances	37,419			(9,517		)	(17,325		)	(5,730		)	(4,847		)
Net fixed-rate loans and advances	78,898			703			1,425			333			34
Total interest-earning assets	$	143,051		$	1,304		$	4,293		$	2,661		$	5,364
Interest-bearing liabilities:
Deposits	$	1,167		$	3		$	—		$	—		$	—
Discount notes	45,232			239			—			—			—
Swapped discount notes	(2,529		)	—			858			198			1,473
Net discount notes	42,703			239			858			198			1,473
Consolidated Obligation Bonds
FHLBank bonds	78,515			7,518			8,861			2,853			3,483
Swaps hedging bonds	14,096			(6,413		)	(6,020		)	(913		)	(750		)
Net FHLBank bonds	92,611			1,105			2,841			1,940			2,733
Total interest-bearing liabilities	$	136,481		$	1,347		$	3,699		$	2,138		$	4,206
Post hedge gaps (a):
Periodic gap	$	6,570		$	(43	)	$	594		$	523		$	1,158
Cumulative gaps	$	6,570		$	6,527		$	7,121		$	7,644		$	8,802

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	Interest Rate Sensitivity
	December 31, 2017
				More Than			More Than			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
Interest-earning assets:
Non-MBS investments	$	14,238		$	159		$	545		$	442		$	1,771
MBS investments	9,291			855			2,059			1,979			3,055
Adjustable-rate loans and advances	37,120			—			—			—			—
Net unswapped	60,649			1,014			2,604			2,421			4,826
Liquidity trading portfolio	239			1,256			147			—			—
Swaps hedging investments	1,408			(1,261		)	(147		)	—			—
Net liquidity trading portfolio	1,647			(5		)	—			—			—
Fixed-rate loans and advances	43,147			11,835			21,227			7,438			1,940
Swaps hedging advances	39,629			(10,719		)	(19,886		)	(7,127		)	(1,897		)
Net fixed-rate loans and advances	82,776			1,116			1,341			311			43
Total interest-earning assets	$	145,072		$	2,125		$	3,945		$	2,732		$	4,869
Interest-bearing liabilities:
Deposits	$	1,166		$	12		$	—		$	—		$	—
Discount notes	49,424			189			—			—			—
Swapped discount notes	(2,349		)	—			525			531			1,293
Net discount notes	47,075			189			525			531			1,293
Consolidated Obligation Bonds
FHLBank bonds	65,519			18,199			9,250			2,545			3,509
Swaps hedging bonds	24,199			(16,754		)	(6,057		)	(638		)	(750		)
Net FHLBank bonds	89,718			1,445			3,193			1,907			2,759
Total interest-bearing liabilities	$	137,959		$	1,646		$	3,718		$	2,438		$	4,052
Post hedge gaps (a):
Periodic gap	$	7,113		$	479		$	227		$	294		$	817
Cumulative gaps	$	7,113		$	7,592		$	7,819		$	8,113		$	8,930

(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.

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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.  Based on this evaluation, they concluded that as of June 30, 2018, 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.

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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.

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 filed on March 22, 2018.

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Item 6.Exhibits

No.	Exhibit Description	Filed with this Form 10-Q	Form	Date Filed
31.01	Certification of the President and Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	X
31.02	Certification of the Senior Vice President and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	X
32.01	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	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

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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 9, 2018

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