Supplemental Financial Information

(1) Loans

Loans to Depository Institutions

The Reserve Banks offer primary, secondary, and seasonal loans to eligible borrowers (depository institutions that maintain reservable transaction accounts or nonpersonal time deposits and have established discount window borrowing privileges). The remaining maturity distribution of loans to depository institutions outstanding as of September 30, 2016, and December 31, 2015, was as follows:

Table 1. Loans to depository institutions
(in millions)

	Within 15 days	16 to 90 days	Total
September 30, 2016	$ 126	$ 72	$ 198
December 31, 2015	$ 104	$ 11	$ 115

At September 30, 2016, and December 31, 2015, the Reserve Banks did not have any loans that were impaired, restructured, past due, or on non-accrual status, and no allowance for loan losses was required. There were no impaired loans during the period ended September 30, 2016, and year ended December 31, 2015.

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(2) System Open Market Account (SOMA) Holdings

Treasury securities, government-sponsored enterprise (GSE) debt securities,
and federal agency and GSE mortgage-backed securities (MBS) are reported at amortized cost in the Combined statements of condition. SOMA portfolio holdings at September 30, 2016, and December 31, 2015, were as follows:

Table 2. Domestic SOMA portfolio holdings
(in millions)

	September 30, 2016			December 31, 2015
	Amortized cost	Fair value	Cumulative unrealized gains	Amortized cost	Fair value	Cumulative unrealized gains
Treasury Securities
Notes	$ 1,643,807	$ 1,687,011	$ 43,204	$ 1,649,228	$ 1,669,395	$ 20,167
Bonds	927,182	1,093,225	166,043	931,448	1,006,514	75,066
Total Treasury securities	$ 2,570,989	$ 2,780,236	$ 209,247	$ 2,580,676	$ 2,675,909	$ 95,233
GSE debt securities	21,018	22,246	1,228	33,748	35,165	1,417
Federal agency and GSE MBS	1,790,336	1,837,929	47,593	1,800,449	1,810,256	9,807
Total domestic SOMA portfolio securities holdings	$ 4,382,343	$ 4,640,411	$ 258,068	$ 4,414,873	$ 4,521,330	$ 106,457
Memorandum--Commitments for:
Purchases of Treasury securities	$ --	$ --	$ --	$ --	$ --	$ --
Purchases of federal agency and GSE MBS	40,978	41,085	107	22,187	22,170	(17)
Sales of federal agency and GSE MBS	--	--	--	--	--	--

The following table provides additional information on the amortized cost and fair values of the federal agency and GSE MBS portfolio at September 30, 2016, and December 31, 2015:

Table 3. Detail of federal agency and GSE MBS holdings
(in millions)

Distribution of MBS holdings by coupon rate	September 30, 2016		December 31, 2015
	Amortized cost	Fair value	Amortized cost	Fair value
2.0%	$ 9,947	$ 10,045	$ 11,198	$ 10,993
2.5%	117,879	119,265	116,527	115,018
3.0%	631,405	640,403	554,430	543,270
3.5%	584,691	599,035	579,403	581,940
4.0%	302,321	312,666	361,149	368,576
4.5%	94,044	102,119	115,914	124,043
5.0%	39,688	43,077	48,931	52,523
5.5%	8,947	9,764	11,138	11,989
6.0%	1,239	1,360	1,542	1,666
6.5%	175	195	217	238
Total	$ 1,790,336	$ 1,837,929	$ 1,800,449	$ 1,810,256

The Federal Reserve Bank of New York (FRBNY) may engage in sales of securities under agreements to repurchase with primary dealers and with a set of expanded counterparties that includes banks, savings associations, GSEs, and domestic money market funds (primary dealer and expanded counterparties reverse repurchase agreements). Reverse repurchase transactions may also be executed with foreign official and international account holders as part of a service offering. Financial information related to securities sold under agreements to repurchase at September 30, 2016, and December 31, 2015, was as follows:

Table 4. Reverse Repurchase Agreements
(in millions)

	September 30, 2016	December 31, 2015
Primary dealers and expanded counterparties:
Contract amount outstanding, end of period	$ 412,523	$ 474,592
Securities pledged (par value), end of period	374,479	437,961
Securities pledged (fair value), end of period	411,728	475,422
Foreign official and international accounts:
Contract amount outstanding, end of period	$ 252,522	$ 237,809
Securities pledged (par value), end of period	239,401	230,333
Securities pledged (fair value), end of period	252,540	237,825
Total contract amount outstanding, end of period	$ 665,045	$ 712,401

The remaining maturity distribution of Treasury securities, GSE debt securities, federal agency and GSE MBS bought outright, and securities sold under agreements to repurchase at September 30, 2016, and December 31, 2015, was as
follows:

Table 5. Maturity distribution of domestic SOMA portfolio securities and securities sold under agreements to repurchase
(in millions)

	Within 15 days	16 days to 90 days	91 days to 1 year	Over 1 year to 5 years	Over 5 years to 10 years	Over 10 years	Total
September 30, 2016:
Treasury securities (par value)	$ --	$ 30,639	$ 161,684	$ 1,202,709	$ 433,450	$ 634,974	$ 2,463,456
GSE debt securities (par value)	--	4,312	9,423	4,410	--	2,347	20,492
Federal agency and GSE MBS (par value) 1	--	--	--	1,358	11,268	1,724,251	1,736,877
Securities sold under agreements to repurchase (contract amount)	665,045	--	--	--	--	--	665,045
December 31, 2015:
Treasury securities (par value)	$ --	$ 38,619	$ 177,496	$ 1,118,349	$ 489,226	$ 637,862	$ 2,461,552
GSE debt securities (par value)	--	3,687	13,077	13,833	--	2,347	32,944
Federal agency and GSE MBS (par value)1	--	--	--	467	9,014	1,737,980	1,747,461
Securities sold under agreements to repurchase (contract amount)	712,401	--	--	--	--	--	712,401

1. The par amount shown for federal agency and GSE MBS is the remaining principal balance of the securities. Return to table

Federal agency and GSE MBS are reported at stated maturity in table 5 above. The estimated weighted average remaining life of these securities, which differs from the stated maturity in table 5 primarily because it factors in scheduled payments and prepayment assumptions, was approximately 4.6 years and 6.5 years as of September 30, 2016, and December 31, 2015, respectively.

Information about transactions related to Treasury securities, GSE debt securities, and federal agency and GSE MBS during the nine months ended September 30, 2016, and during the year ended December 31, 2015, is summarized as follows:

Table 6. Domestic portfolio transactions of SOMA securities
(in millions)

	Notes	Bonds	Total Treasury securities	GSE debt securities	Federal agency and GSE MBS
Balance December 31, 2014	$ 1,654,901	$ 941,340	$ 2,596,241	$ 39,990	$ 1,789,083
Purchases 1	2,736	761	3,497	--	356,976
Sales1	--	--	--	--	(464)
Realized gains, net 2	--	--	--	--	16
Principal payments and maturities	(2,977)	(543)	(3,520)	(5,733)	(333,441)
Amortization of premiums and accretion of discounts, net	(5,485)	(10,253)	(15,738)	(509)	(11,721)
Inflation adjustment on inflation-indexed securities	53	143	196	--	--
Balance December 31, 2015	$ 1,649,228	$ 931,448	$ 2,580,676	$ 33,748	$ 1,800,449
Purchases1	164,007	10,282	174,289	--	264,070
Sales1	(205)	--	(205)	--	(135)
Realized gains, net2	3	--	3	--	5
Principal payments and maturities	(165,770)	(8,031)	(173,801)	(12,452)	(264,652)
Amortization of premiums and accretion of discounts, net	(3,868)	(7,557)	(11,425)	(278)	(9,401)
Inflation adjustment on inflation-indexed securities	412	1,040	1,452	--	--
Balance September 30, 2016	$ 1,643,807	$ 927,182	$ 2,570,989	$ 21,018	$ 1,790,336
Year ended December 31, 2015
Supplemental information--par value of transactions
Purchases 3	$ 2,747	$ 766	$ 3,513	$ --	$ 344,505
Sales	--	--	--	--	(435)
Nine months ended September 30, 2016
Supplemental information--par value of transactions
Purchases3	$ 164,176	$ 10,277	$ 174,453	$ --	$ 254,194
Sales	(200)	--	(200)	--	(126)

1. Purchases and sales may include payments and receipts related to principal, premiums, discounts, and inflation compensation adjustments to the basis of inflation-indexed securities. The amount reported as sales includes the realized gains and losses on such transactions. Purchases and sales exclude MBS TBA transactions that are settled on a net basis. Return to table

2. Realized gains, net offset the amount of realized gains and losses included in the reported sales amount. Return to table

3. Includes inflation compensation. Return to table

Information about foreign currency denominated investments valued at amortized cost and foreign currency market exchange rates at September 30, 2016, and December 31, 2015, was as follows:

Table 7. Foreign currency denominated investments
(in millions)

	September 30, 2016	December 31, 2015
Euro:
Foreign currency deposits	$ 7,071	$ 6,218
German government debt instruments	2,050	2,261
French government debt instruments	3,095	3,325
Japanese yen:
Foreign currency deposits	4,707	2,568
Japanese government debt instruments	4,522	5,195
Total	$ 21,445	$ 19,567

The remaining maturity distribution of foreign currency denominated investments at September 30, 2016, and December 31, 2015, was as follows:

Table 8. Maturity distribution of foreign currency denominated investments
(in millions)

	Within 15 days	16 days to 90 days	91 days to 1 year	Over 1 year to 5 years	Over 5 years to 10 years	Total
September 30, 2016:
Euro	$ 3,239	$ 4,065	$ 1,319	$ 2,752	$ 841	$ 12,216
Japanese yen	4,929	455	1,832	2,013	--	9,229
Total	$ 8,168	$ 4,520	$ 3,151	$ 4,765	$ 841	$ 21,445
December 31, 2015:
Euro	$ 2,136	$ 4,440	$ 1,051	$ 3,824	$ 353	$ 11,804
Japanese yen	2,734	350	1,604	3,075	--	7,763
Total	$ 4,870	$ 4,790	$ 2,655	$ 6,899	$ 353	$ 19,567

At September 30, 2016, and December 31, 2015, the fair value of foreign currency denominated investments was $21,558 million and $19,630 million, respectively.

Because of the global character of bank funding markets, the Federal Reserve has at times coordinated with other central banks to provide liquidity. The Federal Open Market Committee (FOMC) authorized and directed the FRBNY to establish U.S. dollar liquidity and reciprocal foreign currency swap lines with the Bank of Canada, the Bank of England, the European Central Bank, the Bank of Japan, and the Swiss National Bank. The FRBNY holds amounts outstanding under these swap lines in the SOMA. These swap lines, which were originally established as temporary arrangements, were converted to standing arrangements on October 31, 2013, and will remain in place until further notice.

The remaining maturity distribution of U.S. dollar liquidity swaps at September 30, 2016, and December 31, 2015, was as follows:

Table 9. Maturity distribution of liquidity swaps
(in millions)

	September 30, 2016 Within 15 days	December 31, 2015 Within 15 days
Euro	$ 6,348	$ 925
Japanese yen	655	72
Total	$ 7,003	$ 997

The following table presents the realized gains and the change in the cumulative unrealized gains (losses) related to SOMA domestic securities holdings during the periods ended September 30, 2016, and September 30, 2015:

Table 10. Realized gains and change in unrealized gain position
(in millions)

	Nine months ended September 30, 2016		Nine months ended September 30, 2015
	Realized gains 1	Change in cumulative unrealized gains (losses) 2	Realized gains1	Change in cumulative unrealized gains (losses)2
Treasury securities	$ 3	$ 114,014	$ --	$ (4,632)
GSE debt securities	--	(189)	--	(677)
Federal agency and GSE MBS	19	37,786	46	(3,480)
Total	$ 22	$ 151,611	$ 46	$ (8,789)

1. Realized gains are reported in "Non-interest income: System Open Market Account: Federal agency and government-sponsored enterprise mortgage-backed securities gains, net" in the Combined statements of income and comprehensive income. Return to table

2. Because SOMA securities are recorded at amortized cost, the change in the cumulative unrealized gains (losses) are not reported in the Combined statements of income and comprehensive income. Fair value amounts are presented solely for informational purposes and are determined using pricing services. Return to table

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(3) Consolidated Variable Interest Entities (VIEs)

The combined financial statements include the accounts and results of operations of a limited liability company (LLC), Maiden Lane LLC (ML), which is consolidated by the FRBNY. Intercompany balances and transactions are eliminated in consolidation.

The classification of significant assets and liabilities of ML at September 30, 2016, and December 31, 2015, is summarized in the following table:

Table 11. Assets and liabilities of consolidated VIEs
(in millions)

	Maiden Lane LLC
	September 30, 2016	December 31, 2015
Assets
Short-term investments	$ 1,595	$ 1,496
Swap contracts	31	56
Other investments	15	13
Subtotal	1,641	$ 1,565
Cash, cash equivalents, accrued interest receivable, and other receivables	97	213
Total investments held by consolidated VIEs	$ 1,738	$ 1,778
Liabilities
Swap contracts	$ 24	$ 21
Cash collateral on swap contracts	7	36
Other liabilities	2	--
Total liabilities held by consolidated VIEs	$ 33	$ 57

ML incurred net losses of $16 million and net income of $30 million for the nine months ended September 30, 2016, and September 30, 2015, respectively.

The FRBNY will continue to sell the remaining assets from the ML portfolio as market conditions warrant and if the sales represent good value for the public. In accordance with the ML agreements, proceeds from future asset sales will be distributed to the FRBNY as contingent interest after all derivative instruments in ML have been terminated and paid or sold from the portfolio.

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(4) Federal Reserve Notes

Federal Reserve notes are the circulating currency of the United States. These notes, which are identified as issued to a specific Reserve Bank, must be fully collateralized. All of the Reserve Banks' assets are eligible to be pledged as collateral. At September 30, 2016, and December 31, 2015, all Federal Reserve notes were fully collateralized.

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(5) Depository Institution Deposits

Depository institution deposits are primarily comprised of required reserve balances and excess reserve balances. Required reserve balances are those that a depository institution must hold to satisfy its reserve requirement. Reserve requirements are the amounts of funds that a depository institution must hold in reserve against specified deposit liabilities. Excess reserves are those held by the depository institutions in excess of their required reserve balances.

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(6) Treasury Deposits

The Treasury holds deposits at the Reserve Banks in a general account pursuant the Reserve Banks' role as fiscal agent and depositary of the United States.

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(7) Capital and Surplus

The Federal Reserve Act (FRA) requires that each member bank subscribe to the capital stock of the Reserve Bank in an amount equal to 6 percent of the capital and surplus of the member bank. These shares are nonvoting with a par value of $100 and may not be transferred or hypothecated. Currently, only one-half of the subscription is paid in and the remainder is subject to call. A member bank is liable for Reserve Bank liabilities up to twice the par value of stock subscribed by it.

The Fixing America's Surface Transportation Act (FAST Act), which was enacted on December 4, 2015, amended section 7 of the FRA related to Reserve Bank surplus and the semiannual payment of dividends to member banks.

Previously, by law, each Reserve Bank was required to pay each member bank an annual dividend of 6 percent on the paid-in capital stock. The FAST Act changed the dividend rate for member banks with more than $10 billion of consolidated assets, effective January 1, 2016, to the smaller of 6 percent or the rate equal to the high yield of the 10-year Treasury note auctioned at the last auction held prior to the payment of the dividend. The FAST Act did not change the 6 percent dividend rate for member banks with $10 billion or less of total consolidated assets.

Before the enactment of the FAST Act, the Board of Governors required the Reserve Banks to maintain a surplus equal to the amount of capital paid-in. On a daily basis, surplus was adjusted to equate the balance to capital paid-in. Effective December 4, 2015, the FAST Act limited aggregate Reserve Bank surplus to $10 billion.

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(8) Income and Expense

(A) Loans

Interest income on primary, secondary, and seasonal credit is accrued using the applicable rate established at least every 14 days by the Reserve Banks' boards of directors, subject to review and determination by the Board of Governors. For the nine months ended September 30, 2016 and 2015, primary, secondary, and season credit average daily balances were $113 million and $119 million, respectively, and average interest rates were 0.61 percent and 0.26 percent, respectively.

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(B) SOMA Holdings

The amount reported as interest income on SOMA portfolio holdings includes the amortization of premiums and discounts. Supplemental information on interest income on SOMA portfolio holdings is as follows:

Table 12. Interest income on SOMA portfolio
(in millions)

	Nine months ended September 30, 2016	Nine months ended September 30, 2015
Interest income:
Treasury securities, net	$ 47,996	$ 47,899
GSE debt securities, net	775	1,013
Federal agency and GSE MBS, net	35,618	36,282
Foreign currency denominated investments, net 1	(3)	26
Central bank liquidity swaps	3	1
Total interest income	$ 84,389	$ 85,221
Average daily balance:
Treasury securities, net 2	$ 2,572,618	$ 2,589,864
GSE debt securities, net2	27,431	37,324
Federal agency and GSE MBS, net 3	1,803,642	1,790,877
Foreign currency denominated investments, net 4	20,836	19,906
Central bank liquidity swaps 5	453	187
Average interest rate:
Treasury securities, net	2.49%	2.47%
GSE debt securities, net	3.77%	3.62%
Federal agency and GSE MBS, net	2.63%	2.70%
Foreign currency denominated investments, net	-0.02%	0.17%
Central bank liquidity swaps	0.88%	0.64%

1. As a result of negative interest rates on certain foreign currency denominated investments held in the SOMA, interest income on foreign currency denominated investments, net contains negative interest of $23 million and $8 million for the nine months ended September 30, 2016 and 2015, respectively. Return to table

2. Face value, net of unamortized premiums and discounts. Return to table

3. Guaranteed by Fannie Mae, Freddie Mac, and Ginnie Mae. Current face value of the securities, which is the remaining principal balance of the securities, net of premiums and discounts. Return to table

4. Foreign currency denominated investments are revalued daily at market exchange rates. Return to table

5. Dollar value of foreign currency held under these agreements valued at the exchange rate to be used when the foreign currency is returned to the foreign central bank. This exchange rate equals the market exchange rate used when the foreign currency was acquired from the foreign central bank. Return to table

Supplemental information on interest expense on securities sold under agreement to repurchase (reverse repurchase agreements) is as follows:

Table 13. Interest expense on securities sold under agreement to repurchase
(in millions)

	Nine months ended September 30, 2016	Nine months ended September 30, 2015
Interest expense:
Primary dealers and expanded counterparties 1	$ 146	$ 52
Foreign official and international accounts 2	607	102
Total interest expense	$ 753	$ 154
Average daily balance:
Primary dealers and expanded counterparties1	$ 77,021	$ 125,615
Foreign official and international accounts2	241,418	146,285
Average interest rate:
Primary dealers and expanded counterparties1	0.25%	0.06%
Foreign official and international accounts2	0.34%	0.09%

1. Overnight and term reverse repurchase transactions arranged as open market operations are settled through a set of expanded counterparties that includes banks, savings associations, GSEs, and domestic money market funds. Return to table

2. Reverse repurchase transactions are executed with foreign official and international account holders as part of a service offering. Return to table

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(C) Depository Institution Deposits

The Reserve Banks pay interest to depository institutions on qualifying balances held at the Reserve Banks. The interest rates paid on required reserve balances and excess balances are determined by the Board of Governors, based on a FOMC-established target range for the effective federal funds rate.

In May 2010, the Reserve Banks commenced the auction of term deposits to be offered through its Term Deposit Facility. The interest rate paid on these deposits is determined by auction.

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(D) Operating Expenses

The Federal Reserve Banks have established procedures for budgetary control and monitoring of operating expenses as part of their efforts to ensure appropriate stewardship and accountability. Reserve Bank and Board governance bodies provide budget guidance for major functional areas for the upcoming budget year. The Board's Committee on Federal Reserve Bank Affairs (BAC) reviews the Banks' budgets and the BAC chair submits the budgets to Board members for review and final action. Throughout the year, Reserve Bank and Board staffs monitor actual performance and compare it with approved budgets and forecasts.

Additional information regarding Reserve Bank operating expenses is available each year in the Annual Report of the Board of Governors of the Federal Reserve System at www.federalreserve.gov/publications/annual-report/default.htm, and on the Audit webpage of the Board's public website at www.federalreserve.gov/newsevents/reform_audit.htm.

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